U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE
ACT
GREENE COUNTY BANCORP, INC.
(Exact name of small business issuer as specified in its charter)
Commission file number 0-25165
Delaware 14-1809721
------------------------------- -------------------------------------
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification Number)
302 Main Street, Catskill, New York 12414
---------------------------------------- ------------------
(Address of principal executive office) (Zip code)
518-943-2600
(Registrant's telephone number, including area code)
Check whether the registrant: (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 November 6,2000, 2,152,835 shares of the registrant's common stock,
$.10 par value, were issued and 2,045,253 were outstanding.
<PAGE>
Greene County Bancorp, Inc.
Index
Part I. Financial Information Page
Item 1. Financial Statements
Consolidated Statements of Financial Condition 1
Consolidated Statements of Income 2
Consolidated Statements of Comprehensive Income 3
Consolidated Statements of Changes in Shareholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-11
Item 3. Market Risk 11-12
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature Page
<PAGE>
<TABLE>
<CAPTION>
Greene County Bancorp, Inc.
Consolidated Statements of Financial Condition
As of September 30, 2000 and June 30, 2000
September 30, 2000 June 30, 2000
(Unaudited)
<S> <C> <C>
Assets:
Cash and due from banks $ 1,975,342 $ 6,013,605
Federal funds sold 5,900,000 9,800,000
--------- ------------
Total cash and cash equivalents 7,875,342 15,813,605
Investment securities, at fair value 52,506,780 44,807,624
Federal Home Loan Bank stock, at cost 879,100 879,100
Loans 100,061,260 98,960,189
Less: Allowance for loan losses (883,689) (866,443)
Unearned origination fees and cost, net (263,749) (275,118)
--------- ----------
Net loans receivable 98,913,822 97,818,628
Purchased mortgage servicing rights --- 1,105,599
Premises and equipment 5,059,915 5,113,620
Accrued interest receivable 1,260,382 1,164,735
Prepaid expenses and other assets 589,161 880,632
Other real estate owned 151,133 151,133
Total assets $167,235,635 $167,734,676
============ ===========
Liabilities and shareholders' equity:
Non-interest bearing deposits $13,777,839 $ 12,344,344
Interest bearing deposits 118,971,629 121,115,904
----------- -----------
Total deposits 132,749,468 133,460,248
Borrowings from FHLB 10,000,000 10,000,000
Accrued interest and other liabilities 336,595 455,912
Accrued income taxes 306,623 224,567
Total liabilities $143,392,686 $144,140,727
Shareholders' equity
Common stock, par value $.10 per share;
authorized 4,000,000;
issued 2,152,835; outstanding 2,045,235 215,284 215,284
Additional paid-in capital 10,319,091 10,319,859
Retained earnings 15,489,880 15,526,092
Accumulated other comprehensive income (loss) (278,810) (524,546)
Less: Treasury stock - 107,600 shares at cost (1,019,976) (1,019,976)
Unearned stock-based compensation (315,814) (333,690)
Unearned ESOP shares - 68,508 shares at cost (566,706) (589,074)
------------ ------------
Total shareholders' equity 23,842,949 23,593,949
Total liabilities and shareholders' equity $167,235,635 $167,734,676
============ ============
</TABLE>
See notes to consolidated financial statements
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statements of Income
For the Three Months Ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Interest income:
Loans $1,872,727 $1,747,258
Investment securities 523,453 613,260
Mortgage-backed securities 110,742 74,480
Tax free securities 114,550 85,610
Interest bearing deposits and federal funds sold 176,487 60,426
---------- ----------
Total interest income 2,797,959 2,581,034
Interest expense:
Interest on deposits 1,202,099 1,136,848
Interest on borrowings 167,475 13,547
---------- ----------
Total interest expense 1,369,574 1,150,395
Net interest income 1,428,385 1,430,639
---------- ----------
Less: Provision for loan losses 15,000 45,000
---------- ----------
Net interest income after provision for loan losses 1,413,385 1,385,639
Noninterest income:
Service charges on deposit accounts 122,791 82,920
Other operating income 128,066 76,270
---------- ----------
Total noninterest income 250,857 159,190
Noninterest expense:
Salaries and employee benefits 703,930 563,891
Occupancy expense 91,543 74,249
Equipment and furniture expense 77,714 70,240
Service fees 126,530 142,016
Office supplies 23,786 28,769
Other 380,417 303,532
---------- ----------
Total noninterest expense 1,403,920 1,182,697
---------- ----------
Income before provision for income taxes 260,322 362,132
Provision for income taxes 48,658 138,907
---------- ----------
Net income $ 211,664 $ 223,225
========== ==========
Per Share Data:
Basic earnings per share $0.11 $0.11
Diluted earnings per share $0.11 $0.11
</TABLE>
See notes to consolidated financial statements
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statements of Comprehensive Income
For the Three Months Ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Net income $211,664 $ 223,225
Other comprehensive income (loss):
Reclassification adjustment, net of income
tax expense($6,325) 8,384 ---
Unrealized holding gain (loss) arising during the
three months ended September 30, 2000 and
1999, net of tax (expense) benefit of ($185,380)
and $139,691,respectively.
237,352 (201,385)
-------- --------
Total other comprehensive income (loss) 245,736 (201,385)
-------- ---------
Comprehensive income $457,400 $21,840
======== =========
</TABLE>
See notes to consolidated financial statements
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statements of Changes in Shareholders' Equity
For the Three Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
Accumulated
Additional Other Unearned Unearned Total
Capital Paid-In Retained Comprehensive Stock-based Treasury ESOP Shareholders'
Stock Capital Earnings Income Compensation Stock Shares Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
June 30, 1999 $195,706 $8,202,655 $16,354,339 ($118,394) $ ---- $ --- ($712,440) $23,921,866
Stock dividend 19,578 1,766,896 (1,786,474) ---
ESOP shares earned (1,251) 16,680 15,429
Treasury stock
repurchased (639,626) (639,626)
Net income 223,225 223,225
Change unrealized
gain (loss) net (201,385) (201,385)
Balance at
September 30, 1999 $ 215,284 $9,968,300 $ 14,791,090 ($319,779) $ --- ($639,626) ($695,760) $23,319,509
======== =========== =========== ========= ========== =========== =========== ==============
Balance at $215,284 $10,319,859 $15,526,092 ($524,546) ($333,690) ($1,019,976) ($589,074) $23,593,949
June 30, 2000
ESOP shares earned (768) 22,368 21,600
Stock-based
compensation
earned 17,876 17,876
Dividends paid (247,876) (247,876)
Net income 211,664 211,664
Change unrealized
gain (loss) net 245,736 245,736
Balance at
September 30, 2000 $ 215,284 $ 10,319,091 $ 15,489,880 ($278,810) ($315,814) ($1,019,976) ($566,706) $ 23,842,949
======== =========== =========== ========== ========== ============ =========== =============
</TABLE>
See notes to consolidated financial statements
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statements of Cash Flows
For the Three Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
--------- ----------
<S>
Cash flows from operating activities: <C> <C>
Net Income $211,664 $223,225
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation 88,000 33,000
Net amortization (accertion) of premiums (discounts) (5,474) 12,612
Provision for loan losses 15,000 45,000
ESOP and other stock-based compensation earned 40,244 16,680
Loss on sale of investments 54,037 ---
Loss on sale of other real estate --- 7,107
Provision (benefit) for deferred income taxes --- 9,484
Net increase in accrued income taxes 82,056 86,813
Net change in unearned loan fees and costs (11,369) 5,619
Net (increase)in accrued interest receivable (95,647) (47,730)
Net decrease (increase)in prepaid and other assets 106,090 (63,537)
Net (decrease) in other liabilities (101,440) (26,344)
--------- ---------
Net cash provided by operating activities 383,160 301,928
Cash flows from investing activities:
Proceeds from maturities of securities 1,289,950 500,000
Proceeds from sale of securities and mortgage servicing rights 2,226,765 ---
Purchases of securities and other investments (8,267,772) (2,294,897)
Principal payments on securities 978,642 1,105,736
Principal payments on mortgage-backed securities 525,967 309,771
Purchases of mortgage-backed securities (2,980,953) ---
Proceeds from sale of other real estate --- 46,195
Net increase in loans receivable (1,101,071) (3,629,744)
Purchases of premises and equipment (34,295) (192,875)
---------- ----------
Net cash used by investing activities (7,362,768) 4,155,814)
Cash flows from financing activities:
Borrowings from FHLB --- 2,500,000
Dividends paid (247,876) ---
Purchase of unallocated ESOP shares --- (639,626)
Net (decrease) in deposits (710,780) (106,745)
---------- ----------
Net cash provided by financing activities (958,656) 1,753,629
Net (decrease)used in cash and cash equivalents (7,938,263) (2,100,256)
Cash and cash equivalents at beginning of period 15,813,605 6,135,746
---------- ----------
Cash and cash equivalents at end of period $7,875,342 $4,035,490
========== ==========
</TABLE>
See notes to consolidated financial statements
<PAGE>
Greene County Bancorp, Inc.
Notes to Financial Statements
As of and for the Three Months Ended September 30, 2000 and 1999
(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, 2000, such information and footnotes have not been duplicated herein. In the
opinion of management, all adjustments (consisting of only normal recurring
items) necessary for a fair presentation of the financial position and results
of operations and cash flows for the periods presented have been included. All
material inter-company accounts and transactions have been eliminated in the
consolidation. The results of operations and other data for the three months
ended September 30, 2000 are not necessarily indicative of results that may be
expected for the entire fiscal year ending June 30, 2001.
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) Nature of Operations
The Bank has five full service offices and an operations center located in
its market area consisting of Greene County, New York. The Bank is primarily
engaged in the business of attracting deposits from the general public in the
Bank's market area, and investing such deposits, together with other sources of
funds in loans and investment securities.
(3) 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 capital stock form of organization
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. 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 Greene County
Bancorp, MHC, the Company's mutual holding company, 871,082 shares (44.5%) of
which were sold to eligible depositors of the Bank or issued to the Bank's ESOP
and 38,415 shares (2%) of which were issued to The Bank of Greene County Char-
itable Foundation, at $10.00 per share. Costs related to the offering,
primarily marketing fees paid to investment banking firms,professional fees,
registration fees, and printing and mailing costs, were $694,211: the net
proceeds of the offering excluding these cost amounted to $8,016,709.
The Bank's ESOP acquired 36,380 shares at issuance and an additional 36,380
shares were purchased by the ESOP in the open market after the initial offering.
The Bank established a liquidation account, as of the date of the conversion,in
the amount of $15.7 million, equal to its net worth as of the date of the latest
consolidated statements of financial condition appearing in the final prospectus
The liquidation account is maintained for the benefit of eligibl pre-conversion
account holders who continue to maintain their accounts at the Bank after the
date of conversion. The liquidation account will be reduced annually to the
extent that eligible account holders have reduced their qualifying deposits as
of each anniversary date. Subsequent increases will not restore an eligible
account holder's interest in the liquidation account. In the event of a complete
liquidation, each eligible account holder will be entitled, under New York
State Law, to receive a distribution from the liquidation account in an amount
equal to their current adjusted account balances for all such depositors then
holding qualifying deposits in the Bank.
(4) Earnings Per Share
Basic earnings per share ("EPS") on common stock is computed by dividing the
net income by the weighted average number of shares of common stock outstanding
for the period. Diluted EPS is computed using the same method as Basic EPS, but
reflects potential dilution of common stock equivalents.
In calculating the weighted average number of shares outstanding, the results 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 who would have received a
fractional share as a result of the dividend were rounded up to the next whole
number. The effect of the stock dividend has been given retroactive treatment in
the calculation of EPS for all periods presented. During January 2000, the
repurchase program was completed and the Company had repurchased 107,600 shares
for $1,019,976 at an average cost of $9.48. At September 30, 2000, 11,528 shares
of the 80,036 shares of common stock in the ESOP were outstanding and allocated
to employees leaving 68,508 unallocated, and excluded from the calculation for
the number of shares outstanding.
Weighted Average
Number of Shares
Three Months Ended Net Income Outstanding Earnings Per Share
September 30, 2000: $211,664
Basic EPS $1,976,727 $0.11
Diluted EPS $1,984,976 $0.11
September 30, 1999: $223,225
Basic EPS $2,058,454 $0.11
Diluted EPS $2,058,454 $0.11
(5) Dividends
The Board of Directors approved a semi-annual $0.12 cash dividend on July 18,
2000, for shareholders of record August 1, 2000, payable August 15, 2000.
(6) Impact of New Accounting Standards
FASB Statement on Derivatives and Hedging Activities. In June 1999, 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. 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, was adopted by the Company in the fiscal year beginning on July
1, 2000. The Company has not engagedin derivatives and hedging activities cov-
ered by the new standard, and does not expect to begin such activities.
Accordingly, the adoption of SFAS No. 133 has no impact on the Company's
consolidated financial statements.
FASB Statement on Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities. In September 2000, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") 140. This Statement replaces FASB Statement No. 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
It revises the standards for accounting for securitizations and other transfers
of financial assets and collateral and requires certain disclosures, but it
carries over most of Statement 125s' provisions without reconsideration. This
Statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. Those
standards are based on consistent application of a financial-components approach
that focuses on control. This Statement is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
March 31, 2001. This Statement is effective for recognition and
reclassification of collateral and for disclosures relating to securitization
transactions and collateral for fiscal years ending after December 15, 2000.
Accordingly, this Statement will be adopted by the Company during the quarter
ending June 30, 2001. Management has not yet evaluated the impact the adoption
of SFAS 140 will have on the Companys' consolidated financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
General
The Company's results of operations depend primarily on its net interest income,
which is the difference between the income earned on the Company's loan and
securities portfolios and its cost of funds, consisting of the interest paid on
deposits and borrowings. Results of operations are also affected by the
Company's provision for loan losses, income and expense pertaining to other real
estate owned, gains and losses from sales of securities, noninterest income and
noninterest expense. Noninterest income consists primarily of fees and service
charges. The Company's noninterest expenses consist principally of compensation
and employee benefits, occupancy, equipment and data processing, and other
operating expenses. Results of operations are also significantly affected by
general economic and competitive conditions, changes in interest rates, as well
as government policies and actions of regulatory authorities. Additionally,
future changes in applicable law, regulations or government policies may
materially affect the Company.
Special Note Regarding Forward-Looking Statements
This report contains certain "forward-looking statements". The Company desires
to take advantage of the "safe harbor" provisions of the Private Securities
Litigation Reform of 1995 and is including this statement for the express
purpose of availing itself of the protections of the safe harbor with respect to
all such forward-looking statements. These forward-looking statements, which are
included in this Management's Discussion and Analysis, describe future plans or
strategies and include the Company's expectations of future financial results.
The words "believe," "expect," "anticipate," "project," and similar expressions
identify forward-looking statements. The Company's ability to predict results or
the effect of future plans or strategies or qualitative or quantitative changes
based on market risk exposure is inherently uncertain. Factors which could
affect actual results include but are not limited to (a) change in general
market interest rates, (b) general economic conditions, (c) legislative and
regulatory changes, (d) monetary and fiscal policies of the U.S. Treasury and
the Federal Reserve, (e) changes in the quality or composition of the Company's
loan and investment portfolios, (f) deposit flows, (g) competition, and (h)
demand for financial services in the Company's market area. These factors should
be considered in evaluating the forward-looking statements, and undue reliance
should not be placed on such statements, since results in future periods may
differ materially from those currently expected because of various risks and
uncertainties.
Comparison of Financial Condition as of September 30, 2000 and June 30, 2000
Total assets decreased to $167.2 million at September 30, 2000 from $167.7
million at June 30, 2000, a decrease of $0.5 million, or 0.3%. The mix of assets
shifted between the quarters ended September 30, 2000 and June 30, 2000. Cash
and cash equivalents decreased from 9.4% of assets to 4.7% of assets. Investment
securities increased from 26.7% of assets to 31.4% of assets between September
30 and June 30 2000. Management took advantage of being able to invest in higher
yielding investment alternatives rather than cash. Net loans increased from
$97.8 million to $98.9 million between June 30 and September 30, 2000.
Management also sold its investment in purchased mortgage servicing rights
during the quarter ended September 30, 2000.
Cash and cash equivalents decreased to $7.9 million at September 30, 2000 from
$15.8 million at June 30, 2000, a decrease of $7.9 million or 50.0%.
The primary reason for the decrease in cash and cash equivalents was due to
purchases of investments and an increased loan portfolio.
Investment securities increased $7.7 million, or 17.2% to $52.5 million at
September 30, 2000 as compared to $44.8 million at June 30, 2000. Purchases of
securities other than mortgage-backed securities amounted to $8.3 million and
mortgage-backed securities purchases amounted to $3.0 million between June 30
and September 30, 2000. These purchases were offset by maturities that amounted
to $1.3 million for the quarter ended September 30, 2000. Principal payments on
securities and mortgage-backed securities amounted to $1.5 million further
offsetting the purchases for the quarter. Management also liquidated its' entire
position in a mutual fund,that invested primarily in adjustable mortgages, that
amounted to $1.2 million, recording a loss of approximately $15,000. The pro-
ceeds from the sale were invested in higher yielding investments, as management
attempted to take advantage of the higher interest rate environment.As a result
of these purchases there was a shift in the investment portfolio mix.
Corporate securities represented 37.4% or $19.6 million of the portfolio at
September 30, 2000 as compared to 26.0% or 12.8 million at June 30, 2000. The
increase in corporate debt securities amounted to $6.8 million or 53.1%.
Treasury securities represented 10.5% or $4.7 million at June 30, 2000 and 7.1%
or $3.7 million of the portfolio at September 30, 2000, a decrease of $1.0
million or 20.8%. The decrease in treasury securities resulted from maturities.
Investments in mortgage-backed securities increased $2.0 million or 33.4% to
$8.0 million at September 30, 2000 from $6.0 million at June 30, 2000.
Mortgage-backed securities represented approximately 13.1% of the investment
portfolios at both September and June 30,2000.
Net loans receivable increased to $98.9 million at September 30, 2000 from $97.8
million at June 30, 2000, an increase of $1.1 million or 1.1%. The following net
increases occurred in the loan portfolio: installment loans $0.4 million, home
equity loans $0.2 million, commercial loans $0.2 million and residential loans
$0.2 million. The shift from increases in residential loans seen in previous
quarters to other loan types was a result of marketing efforts of these products
and decreases in residential loan demand because of increasing interest rates.
<PAGE>
Nonaccrual Loans and Nonperforming Assets
At September 30, 2000 At June 30, 2000
(Dollars in Thousands)
Nonaccruing loans:
One- to four-family $ 775 $ 496
Commercial real estate 265 155
Consumer 15 21
Commercial business --- ---
------- ------
Total non-accruing loans $ 1,055 $ 672
------- ------
Real Estate Owned:
One- to four-family 42 42
Non-farm, nonresidential properties 109 109
------- ------
Total real estate owned $ 151 $ 151
------- ------
Total non-performing assets $ 1,206 $ 823
======= ======
Total non-performing assets
as a percentage of total assets 0.72% 0.49%
Purchased mortgage servicing rights were sold during the quarter ended September
30, 2000 at a loss of approximately $39,000. Management was not satisfied with
the level of return of the investment compared to the risk involved in the
asset.
Total deposits decreased slightly by $0.8 million, from $133.5 million at June
30, 2000 to $132.7 million at September 30, 2000. However, it should be noted
that decreases of $2.1 million occurred in interest bearing deposit accounts
as a result of escrow payments that were made. This decrease was offset by an
increase in non-interest bearing deposits of $1.3 million, partially a result
of the Banks' new branch which opened in Tannersville, New York.
The Bank rolled over the $5.0 million short-term borrowing with the FHLB at a
rate of 6.64% until October 29, 2000. The Bank intends to continue to roll the
borrowing and take advantage of spread opportunities between the cost of the
borrowed money and loans.
The changes in retained earnings were a result of net income of $211,664 and
dividends paid to shareholders of $247,876. The Board of Directors approved a
semi-annual $0.12 cash dividend on July 18, 2000, for shareholders of record
August 1, 2000, payable August 15, 2000.
Comparison of Operating Results For the Three Months Ended
September 30, 2000 and 1999
General
The earnings of the Company depend primarily on its level of net interest
income, which is the difference between interest earned on the Company's
interest-earning assets, consisting primarily of residential and commercial real
estate loans, consumer loans and securities available for sale, and the interest
paid on interest-bearing liabilities consisting of deposits and borrowings from
the Federal Home Loan Bank. 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-bearing
assets as compared to interest-bearing liabilities. The Company's earnings are
also affected by its fees, service charges, gains or losses on sales of
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.
Interest Income
Total interest income increased $217,000 when comparing the three months ended
September 30, 1999 and 2000. The overall increase was affected by increases in
average balances of loans and federal funds. The average balance of net loans
receivable increased approximately $7.7 million and the average yield on loan
balances also increased approximately 14 basis points. However, these increases
were partially offset by increases in nonaccrual loans. Increases in the average
balance of federal funds of approximately $5.8 million and a 50 basis point
increase in the yield on such balances caused the increase in federal funds and
other interest bearing deposits interest to increase from $60,000 to $176,000.
Interest Expense
Total interest expense increased $220,000 from $1,150,000 for the three-month
period ended September 30, 1999 to $1,370,000 for the three-month period ended
September 30, 2000. The most significant factor affecting the increase was the
borrowing from FHLB for $10.0 million for which the balance was outstanding the
entire three-month period as compared to $2.5 million for approximately three
weeks during the three-month period ended September 30, 1999. Consequently,
interest on borrowings amounted to approximately $167,500 for the period ended
September 30, 2000 as compared to $13,500 for the period ended September 30,
1999. Increasing average balances in saving and escrow accounts as well as
increasing interest rates of 35 basis points offered on certificate of deposit
accounts affected interest on deposit accounts. The increase in rates on
certificate of deposit accounts was a result of the overall higher interest
rate environment stimulated by Federal Reserve interest rate hikes which
occurred during the last calendar quarter of 1999 and throughout 2000. Also,
contributing to a higher certificate of deposit rate was a deposit special that
was offered in association with the new branch opening in Tannersville, New
York.
Net interest margin for the three-month period ended September 30, 2000 amounted
to 3.61% as compared to 3.86% for the three-month period ended September 30,
1999. The decrease in margin of 25 basis points is a result of the increased
levels of borrowings and the overall increased interest rate environment. These
same factors also affected the interest rate spread which decreased to 3.26% for
the three-month period ended September 30, 2000 from 3.45% for the three-month
period ended September 30, 1999.
Provisions For Loan Losses
The Bank establishes provisions for loan losses, which are charged to
operations, in order to maintain the allowance for losses at a level deemed
appropriate to absorb future charge-offs and loans deemed uncollectible. In
determining the appropriate levels of 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
levels of non-performing and other loans. The allowance is based on estimates
and the ultimate losses may vary from such estimates. Management of the Company
assesses the allowance for loan losses on a quarterly basis and makes provisions
for loan losses in order to maintain the adequacy of the allowance.
Provision for loan losses amounted to $15,000 for the three-months ended
September 30, 2000 as compared to $45,000 for the three-months ended September
30, 1999. The allowance for loan loss was $884,000 or approximately 0.89% of
total loans at September 30, 2000.
Noninterest Income
Noninterest income increased to $251,000 for the three months ended September
30, 2000 as compared to $159,000 for the three-months ended September 30, 1999.
The increase of $92,000 resulted from increased service charges for such
services as insufficient funds presentments and an increase in the overall
number of transaction accounts. Other operating income also increased
$52,000 to $128,000 for the three-month period ende September 30, 2000 compared
to $76,000 for the three-month period ended September 30, 1999. The increase
resulted from increases in ATM transaction charges, debit card fee income,
and merchant credit card processing fees.
Noninterest expense increased $221,000 to $1,404,000 for the three months ended
September 30, 2000 as compared to $1,183,000 for the three months ended
September 30, 1999. Salaries increased $140,000 to $704,000 for the three-months
ended September 30, 2000 as compared to $564,000 for the three months ended
September 30, 1999. The increases were partially a result of the increased
staffing levels associated with the new Tannersville branch and additional MIS
staff. Another item affecting salaries and employee benefits was non-cash
expense associated with the Management Recognition Plans, and ESOP Plans. The
increased staff levels have also increased expenses associated with employee
retirement plans such as the 401K Plan and the multi-employer defined benefit
plan.
Occupancy and equipment and furniture expenses such as depreciation increased as
a result of the new branch and upgraded computer systems.
Contributing to the increases in other noninterest expense were losses
associated with the sale of a mutual fund interest and sale of the
participation in purchase mortgage servicing rights. These losses amounted to
$54,000 for the sales.
Increases in noninterest expense have adversely affected the efficiency ratio
that increased to 83.6% for the quarter ended September 30, 2000 as compared to
74.39% for the quarter ended September 30, 1999. Several items are contributing
the to higher ratios including expanded branching facilities and an operations
center, staff for positions created as a result of expansion efforts and
losses on sales of two investments.
Income Taxes
Provisions for income taxes were affected by the losses associated with the
sales of the aforementioned two investments and a cash refund received in
association with a rehabilitation tax credit.
Item 3. Market Risk
The Company's primary sources of funds are deposits and proceeds from principal
and interest payments on loans, mortgage-backed securities and debt securities,
with lines of credit available through the Federal Home Loan Bank as needed.
While maturities and scheduled amortization of loans and securities are
predictable sources of funds, deposit outflows, mortgage prepayments, and
lending activities are greatly influenced by general interest rates, economic
conditions and competition.
During the past few months the higher interest rate environment has resulted
in decreased loan demand levels than has been seen in the past few years of
relatively low interest rates. Based on historic deposit trends, its current
pricing strategy, and the impending merger of a local competitor with an
out-of-area bank management expects to retain a large portion of its existing
deposit base and perhaps attract new deposits' from customers preferring the
local community bank. The Company experienced insignificant changes in the
overall level of deposits when comparing September 30, 2000 to September 30,
1999.
Loan commitments totaled $2.6 million at September 30, 2000. The Company
anticipates that it will have sufficient funds available to meet current loan
commitments.
The Company's most liquid assets include cash and federal funds sold. At
September 30, 2000 such assets amounted to $7.8 million, or 4.7% of 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.
Stockholders' equity increased to $23.8 million at September 30, 2000 as
compared to $23.6 million at June 30, 2000. The increase was primarily a result
of reduced unrealized losses on the available-for-sale portfolio associated with
accumulated other comprehensive income which amounted to unrealized losses of
approximately $279,000 at September 30, 2000 as compared to $525,000 at
June 30, 2000. Other items affecting stockholders' equity were net income of
$211,664 and cash dividend payments amounting to $247,876.
Stockholders' equity represented 14.3% of total assets at September 30,
2000. The Bank met all capital requirements to be considered a well-capitalized
institution.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
The Company is not engaged in any material legal
proceedings at the present time.
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Not applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
Greene County Bancorp, Inc.
Date: November 14, 2000
By: /s/ J. Bruce Whittaker
J. Bruce Whittaker
President and Chief Executive Officer
Date: November 14, 2000
By: /s/ Michelle Plummer
Michelle Plummer
Chief Financial Officer
