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 MARCH 31, 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 (I.R.S. Employer
incorporation or organization) Identification Number)
302 Main Street, Catskill, New York 12414
- ----------------------------------- -----
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (518)943-2600
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the past
90 days.
YES |X| NO |_|
As of May 12, 2000, there were 2,045,235 shares of the registrant's common stock
outstanding with a par value of $0.10 per share.
<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 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signature Page 18
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statements of Financial Condition
As of March 31, 2000 and June 30, 1999
<TABLE>
<CAPTION>
March 31, 2000 June 30, 1999
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $4,417,178 $2,784,524
Federal funds sold 7,429,788 3,351,222
------------- -------------
Total cash and cash equivalents 11,846,966 6,135,746
Investment securities, at fair value 44,066,781 49,662,206
Federal Home Loan Bank stock, at cost 879,100 765,600
Loans 98,615,241 91,829,423
Less: Allowance for possible loan losses (856,448) (791,897)
Less: Unearned origination fees and costs, net (274,419) (239,717)
------------- -------------
Net loans receivable 97,484,374 90,797,809
Purchased mortgage servicing rights 1,152,981 --
Premises and equipment 4,605,573 3,513,906
Accrued interest receivable 1,135,576 1,130,744
Prepaid expenses and other assets 836,306 461,162
Other real estate owned 180,128 176,850
------------- -------------
Total Assets $162,187,785 $152,644,023
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing deposits $11,111,949 $9,468,291
Interest bearing deposits 117,293,491 118,531,180
------------- -------------
Total deposits 128,405,440 127,999,471
Borrowings FHLB 10,000,000 --
Accrued interest and other liabilities 240,495 436,874
Accrued income taxes 294,764 285,812
------------- -------------
Total Liabilities 138,940,699 128,722,157
------------- -------------
Shareholders' Equity
Common stock, par value $.10 per share; authorized 4,000,000;
Issued and outstanding: 2,045,235 at March 31, 2000,
and 1,957,057 at June 30, 1999 215,284 195,706
Additional Paid-In Capital 9,964,741 8,202,655
Retained Earnings 15,307,856 16,354,339
Accumulated Other Comprehensive Income (Loss) (586,742) (118,394)
Less: Treasury Stock, 107,600 shares at cost (1,019,976) --
Less: Unearned ESOP shares, 68,508 shares at cost (634,077) (712,440)
------------- -------------
Total shareholders' equity 23,247,086 23,921,866
Total liabilities and shareholders' equity $162,187,785 $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 Nine Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Loans $1,836,035 $1,655,388 $5,392,531 $4,947,832
Investment securities 506,842 556,007 1,616,287 1,707,321
Mortgage-backed securities 63,566 63,292 206,387 189,067
Tax free securities 125,201 100,128 373,898 295,534
Interest bearing deposits and fed funds 94,913 118,762 232,936 286,845
---------- ---------- ---------- ----------
Total interest income 2,626,557 2,493,577 7,822,039 7,426,599
Interest expense:
Interest on deposits 1,108,408 1,156,523 3,358,820 3,728,719
Interest on borrowings 159,106 -- 310,866 --
---------- ---------- ---------- ----------
Total interest expense 1,267,514 1,156,523 3,669,686 3,728,719
Net interest income 1,359,043 1,337,054 4,152,353 3,697,880
---------- ---------- ---------- ----------
Less: provision for loan losses 30,000 45,000 105,000 135,000
---------- ---------- ---------- ----------
Net interest income after provision
for loan losses 1,329,043 1,292,054 4,047,353 3,562,880
---------- ---------- ---------- ----------
Noninterest income:
Service charges on deposit accounts 96,428 71,754 272,754 223,890
Other operating income 126,384 63,080 343,315 156,652
---------- ---------- ---------- ----------
Total other income 222,812 134,834 616,069 380,542
Noninterest expense:
Salaries and employee benefits 628,050 445,074 1,791,213 1,347,098
Contribution expense -- -- -- 484,150
Occupancy expense 57,017 67,431 207,348 199,900
Equipment and furniture expense 55,031 63,054 189,241 168,197
Service and data processing fees 134,707 121,191 405,372 314,324
Office supplies 32,399 26,099 96,606 76,689
Other operating expense 320,200 225,284 945,788 647,791
---------- ---------- ---------- ----------
Total noninterest expense 1,227,404 948,133 3,635,568 3,238,149
Income before tax provision 324,451 478,755 1,027,854 705,273
Total provision for taxes 61,818 162,828 288,863 234,373
---------- ---------- ---------- ----------
Net Income $262,633 $315,927 $738,991 $470,900
========== ========== ========== ==========
Earnings Per Share
Basic $0.13 N/A $0.37 N/A
Diluted $0.13 N/A $0.37 N/A
Number of shares outstanding
Basic 1,977,945 2,008,331
Diluted 1,978,204 2,008,590
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statement of Comprehensive Income
(Unaudited)
For the Three Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Net income $262,633 $315,927
Other comprehensive loss
Unrealized holding gain(loss) arising during the three months
ended March 31, 2000 and 1999, net of tax benefit of
$86,545 and $86,250, respectively (114,724) (128,300)
--------- ---------
Total other comprehensive income (loss) (114,724) (128,300)
Comprehensive income (loss) $147,909 $187,627
========= =========
</TABLE>
Greene County Bancorp, Inc.
Consolidated Statement of Comprehensive Income
(Unaudited)
For the Nine Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Net income $738,991 $470,900
Other comprehensive income (loss)
Reclassification adjustment, net of income tax benefit $13,600 -- 20,400
Unrealized holding gain(loss) arising during the nine months
ended March 31, 2000 and 1999, net of tax benefit
(liability) of $341,083 and ($25,933), respectively (468,348) 38,900
--------- ---------
Total other comprehensive income (loss) (468,348) 59,300
Comprehensive income $270,643 $530,200
========= =========
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
For the Nine Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
Accumulated
Additional Other
Capital Paid - In Retained Comprehensive Treasury
Stock Capital Earnings Income Stock
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1998 $15,487,825 $242,400
Net proceeds from sale of
Common stock $191,864 $8,022,362
Issuance of common stock to
Charitable Foundation 3,842 380,308
Capital contribution to
Greene County Bancorp, MHC (1,000)
ESOP shares acquired
Net income 470,900
Change in unrealized gain on
securities available for
sale, net of applicable
deferred income taxes 59,300
-----------------------------------------------------------------------------------
Balance at March 31, 1999 $195,706 $8,402,670 $15,957,725 $301,700 $ --
===================================================================================
Balance at June 30, 1999 $195,706 $8,202,655 $16,355,339 ($118,394) $
Stock dividend 19,578 1,766,896 (1,786,474)
ESOP shares earned (4,810)
Treasury stock repurchased (1,019,976)
Net income 738,991
Change in unrealized gain(loss)
on securities available
for sale, net of applicable
deferred income taxes (468,348)
-----------------------------------------------------------------------------------
Balance at March 31, 2000 $215,284 $9,964,741 $15,307,856 ($586,742) ($1,019,976)
===================================================================================
<CAPTION>
Unearned Total
ESOP Shareholders'
Shares Equity
<S> <C> <C>
Balance at June 30, 1998 $15,730,225
Net proceeds from sale of
Common stock 8,214,226
Issuance of common stock to
Charitable Foundation 384,150
Capital contribution to
Greene County Bancorp, MHC (1,000)
ESOP shares acquired (745,790) (745,790)
Net income 470,900
Change in unrealized gain on
securities available for
sale, net of applicable
deferred income taxes 59,300
-----------------------------
Balance at March 31, 1999 ($745,790) $24,112,011
=============================
Balance at June 30, 1999 ($712,440) $23,922,866
Stock dividend --
ESOP shares earned 78,363 73,553
Treasury stock repurchased (1,019,976)
Net income 738,991
Change in unrealized gain(loss)
on securities available
for sale, net of applicable
deferred income taxes (468,348)
-----------------------------
Balance at March 31, 2000 ($634,077) $23,247,086
=============================
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
Greene County Bancorp, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net Income $738,991 $470,900
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation 180,000 148,500
Net (accretion) amortization of premiums and discounts 42,458 (52,513)
Provisions for loan losses 105,000 135,000
Contribution expense -- 384,150
ESOP compensation expense 73,743 --
Loss on sale of investments -- 34,298
Loss on sale of other real estate 14,548 --
Provision (benefit) for deferred income taxes 6,536 (322,733)
Net change in unearned loan fees and costs 34,702 (11,317)
Net increase in accrued income taxes 8,952 --
Net (increase) decrease in accrued interest receivable (4,832) 11,262
Net (increase) decrease in prepaid and other assets (53,504) (108,124)
Net increase (decrease) in other liabilities (196,379) 428,159
------------ ------------
Net cash provided by operating activities 950,215 1,117,582
Cash flows from investing activities:
Proceeds from maturities of securities 3,359,774 12,167,026
Purchases of securities and mortgage servicing rights (3,847,690) (12,628,001)
Principal payments on securities 3,157,220 2,312,638
Principal payments on mortgage-backed securities 703,335 1,062,075
Purchases of mortgage-backed securities -- (2,991,230)
Proceeds from sale of other real estate 59,858 27,788
Net increase in loans receivable (6,785,818) (8,311,568)
Purchases of premises and equipment (1,271,667) (512,926)
------------ ------------
Net cash used by investing activities (4,624,988) (8,874,198)
Cash flows from financing activities:
Borrowings from FHLB 10,000,000 --
Purchases of treasury stock (1,019,976) --
Proceeds from issuance of common stock -- 8,184,000
Purchase of unallocated ESOP shares -- (745,790)
Net increase in deposits 405,969 2,015,896
------------ ------------
Net cash provided by financing activities 9,385,993 9,454,206
Net increase in cash and cash equivalents 5,711,220 1,697,590
Cash and cash equivalents at beginning of period 6,135,746 8,272,083
------------ ------------
Cash and cash equivalents at end of period $11,846,966 $9,969,673
============ ============
Cash paid during period for:
Interest $3,662,544 $1,697,590
Income taxes $279,911 $149,064
Non-cash investing activities:
Foreclosed loans transferred to other real estate $71,128 $126,969
Net change unreal. gain(loss) on available-for-sale securities ($809,431) $104,000
</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 Nine Months Ended March 31, 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,
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 nine months ended March 31,
2000 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 2.0% 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 to the Bank's ESOP at $10.00 per share, and 38,415 shares (2.0%)
of which were issued to the Foundation. 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
Basic earnings per share ("EPS") on common stock are computed by dividing
the net income by the weighted average number of shares of common stock
outstanding for the period. Diluted EPS are computed using the same method
as basic EPS, but reflects potential dilution of common stock equivalents.
The Company adopted Financial Accounting Standard No. 128 for the three
and nine months ended March 31, 2000. EPS is not presented for periods in
which the Company was not public for the entire period as such information
would not be meaningful.
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. 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 March 31, 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.
Net Income Number of Shares Earnings Per Share
---------- ---------------- ------------------
Three-month $262,633
Basic 1,977,945 $0.13
Diluted 1,978,204 $0.13
Nine-month $738,991
Basic 2,008,331 $0.37
Diluted 2,008,590 $0.37
(4) LOAN SERVICING RIGHTS
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. The Bank will
receive revenue based on a percentage of the unpaid principal of the loan
portfolio to be serviced. This investment is amortized using a method that
approximates the interest method. A third-party provider performs the
servicing associated with the loans.
(5) STOCK OPTION AND STOCK RECOGNITION AND RETENTION PLANS
On March 28, 2000, shareholders approved Greene County Bancorp, Inc. 2000
Stock Option Plan ("Option Plan") and Greene County Bancorp, Inc.
Recognition and Retention Plan ("Recognition Plan"). On March 28, 2000,
the Board of Directors granted 90,940 options to buy stock under the
Option Plan at an exercise price of $7.875, the fair market value of the
stock on that date. The Board of Directors granted 45,400 shares under the
Recognition Plan. The vesting period for both plans is five years. The
first awards and options will vest on March 28, 2001.
The Company will apply provisions of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees"("APB 25") and financial
statement disclosures of Statement of Financial Accounting Standards
("SFAS") No.123 "Accounting for Stock-Based Compensation". Since the
exercise price is equal to the fair market value on the day of grant no
compensation expense needs to be recognized for the Option Plan until
participants exercise their options per the guidance of APB 25. Expense
for the Recognition Plan will be recognized based on the exercise price,
or fair value on day of grant, over the service period of the award, which
is the five-year vesting period.
(6) IMPACT OF NEW ACCOUNTING STANDARDS
7
<PAGE>
In June 1999, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133 that 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.
8
<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 March 31, 2000 and June 30, 1999
Total assets increased to $162.2 million at March 31, 2000 from
$152.6 at June 30, 1999, an increase of $9.6 million, or 6.3%. 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 primarily funded with borrowings from the Federal Home Loan
Bank.
The net loan portfolio amounted to $97.5 million at March 31, 2000,
as compared to $90.8 million at June 30, 1999, an increase of $6.7 million
or 7.4%. The most significant growth was in the conventional fixed rate
real estate mortgage portfolio that increased by $7.1 million to $64.1
million at March 31, 2000 as compared to $57.0 million at June 30, 1999.
Increases in bi-weekly fixed rate mortgages of $1.2 million and fixed rate
commercial mortgages of $1.4 million offset decreases in the adjustable
rate mortgages of $2.1 million for the period between June 30,1999 and
March 31, 2000, reflecting the overall decreased demand for adjustable
rate loan products in the current low but rising interest rate
environment. The addition of a mortgage originator has contributed to the
continued strength in loan originations despite the rising rate
environment.
Total cash and cash equivalents including federal funds sold
amounted to $11.8 million at March 31, 2000, an increase of $5.7 million
or 93.1% over the $6.1 million at June 30, 1999. The Bank held the
additional cash for liquidity purposes in order to support expected loan
portfolio funding requirements and potential investment opportunities.
The investment portfolio totaled $44.1 million at March 31, 2000 as
compared to $49.7 at June 30, 1999, representing a $5.6 million, or 11.3%,
decrease. The decrease is a net result of principal payments of $3.9
million, maturities of $3.4 million, purchases of $2.6 million and an
increase in unrealized losses of $0.9 million as well as accretion and
amortization. The portfolio mix remained consistent with US Treasuries and
government agencies representing 24.6%, state and political subdivisions
representing 23.8%, asset-backed securities representing 13.0%, and
corporate debt representing 26.3% of the portfolio at March 31, 2000. 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
investment is amortized using a method that approximates the interest
method. A third-party provider performs the servicing associated with the
loans.
9
<PAGE>
Premises and equipment increased from $3.5 million at June 30, 1999,
to $4.6 million at March 31, 2000, an increase of $1.1 million, or 31.4%.
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 early June 2000. Approximately
$276,000 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 $128.4 million at March 31, 2000 only
slightly higher than the $128.0 million at June 30, 1999. There was a
shift from interest bearing to noninterest bearing deposits of
approximately $1.6 million, between June 30, 1999, and March 31, 2000. At
March 31, 2000, non-interest bearing deposits represent 8.6% or $11.1
million of total deposits as compared to 7.3% or $9.5 million of total
deposits at June 30, 1999. Certificate accounts represented $51.4 million
and $51.6 million, respectively, or approximately 40.0% of the deposit
base at March 31, 2000 and June 30, 1000, respectively.
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. Another $2.5 million was borrowed from the Federal Home Loan Bank in
October 1999, at a rate of 6.80%, scheduled to mature in October 2005. On
February 29, 2000, the Bank extended its $5.0 million short-term borrowing
from the Federal Home Loan Bank to August 29, 2000, at a rate of 6.29%.
These additional funds were used to support loan demand, expenditures
related to the new building and to provide additional liquidity.
Stockholders' equity decreased from $23.9 million at June 30, 1999
to $23.2 million at March 31, 2000 representing a decrease of $0.7 million
or 2.9%. The decrease was primarily the result of the repurchase of
107,600 shares of treasury stock at a cost of $1,019,976. Net income of
$739,000 for the nine-month period was offset by unrealized losses
associated with the investment portfolio. The unrealized losses amounted
to $587,000 at March 31, 2000, compared to the unrealized losses of
$118,394 at June 30, 1999. Management has the ability and intent to hold
these securities until maturity and believes these losses will continue to
be unrealized. The decrease in Retained Earnings and the corresponding
increase in Additional Paid-In Capital of $1,764,293 reflected the
Company's stock dividend.
10
<PAGE>
Non-Accrual Loans and Non-Performing Assets
The following table sets forth information regarding non-accrual loans and
non-performing assets:
At March 31, 2000 At June 30, 1999
(Dollars in Thousands)
Nonaccruing loans:
One- to four- family $462 $487
Commercial real estate 128 166
Consumer 34 15
Commercial business -- --
Total 624 668
Foreclosed assets:
One- to four-family 71 53
Multi-family -- --
Nonfarm, nonresidential properties 109 124
Total $180 $177
Total non-performing assets $804 $845
Total as a percentage of total assets 0.49% 0.56%
During the nine months ended March 31, 2000, there were $44,300 in
charge-offs and $3,300 in recoveries of loans previously charged-off. As a
result of these charge-offs and recoveries, and provisions to the loan
loss reserve, the balance of the allowance for loan losses at March 31,
2000 increased to $856,000 from $792,000 at June 30, 1999. The ratio of
the net charge-offs to average loans outstanding during the nine months
ended March 31, 2000, 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.
11
<PAGE>
Comparison of Operating Results for the Three Months Ended March 31, 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, 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 $262,633 for the three months
ended March 31, 2000, compared to $315,927 for the three months ended
March 31, 1999. The basic and diluted EPS amounted to $0.13 based on the
number of shares outstanding of 1,977,945 and 1,978,204, respectively for
the three-month period ended March 31,2000.
INTEREST INCOME. Total interest income increased to $2,627,557 for
the three months ended March 31, 2000 from $2,493,577 for the three months
ended March 31, 1999, an increase of $133,980 or 5.4%. The increase was
due primarily to an increase of $2.2 million, or 1.5%, in the average
balance of interest earning assets for the three months ended March 31,
2000 as compared to March 31, 1999. Also, contributing to the increase for
the three-month period was an increase of 11 basis points in the average
yield on such assets to 6.86% for the period from 6.75% for the
earlier-year period. The increased yields on such assets reflected the
increasing market interest rate environment since summer 1999. The
Company's interest rate spread (the difference between yields earned on
interest-earning assets and rates paid on deposits and borrowings)
increased to 3.15% for the three months ended March 31, 2000 from 3.06%
for the three months ended March 31, 1999. This was a result of deposit
portfolio shift from certificate accounts to demand and NOW accounts.
However, the net interest margin decreased from 3.63% to 3.48% for the
three-month period ended March 1999 as compared to March 2000, primarily
as a result of interest expenses incurred on borrowings initiated
beginning in September 1999.
INTEREST EXPENSE. Total interest expense increased to $1,267,514 for
the three months ended March 31, 2000 from $1,156,523 for the three months
ended March 31, 1999, an increase of $110,991 or 9.6%. The increase is the
result of interest expense associated with the borrowings from FHLB, which
amounted to $159,106 for the quarter-end March 2000. There were no
borrowings for the quarter-end March 1999. An offsetting factor to the
overall increase was a decrease in the average balance in certificate
accounts of $3.0 million when comparing the three-month period ended March
2000 to the three-month period ended March 1999; additionally, the average
rate during this period decreased 23 basis points.
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 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 March 31, 2000, as compared to $45,000 for
the three-month period ended March 31, 1999.
NON-INTEREST INCOME. Non-interest income consists of fee income for
Bank services and revenues generated from an investment in purchased
mortgage servicing rights. Non-interest income increased to $222,812 for
the three months ended March 31, 2000, from $134,834 for the three months
ended March 31, 1999, an increase of $87,978 or 65.3%. Contributing to the
increase were increased service charges on
12
<PAGE>
various deposits amounting to approximately $20,000 in additional income.
Merchant card income increased approximately $6,000 for the three-month
period ended March 31, 2000 as compared to the same period in 1999. ATM
surcharges to non-customer users of the Bank ATM machines amounted to
approximately $8,500 for the three months ended March 31, 2000. During
1999 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 that contributed approximately $52,000 to non-interest income
for the three-month period ended March 31, 2000.
NON-INTEREST EXPENSE. Total non-interest expense amounted to
$1,227,404 for the three months ended March 31, 2000 as compared to
$948,133 for the three months ended March 31, 1999 for an increase of
$279,271. Increases in salaries and other employee benefits contributed
approximately $183,000 to the increase in noninterest expense. The number
of full-time equivalent positions increased 9 positions to 61 from 52 for
March 2000 and March 1999, respectively. 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
representatives. Also, charges associated with the new ESOP Plan affected
the compensation expense. The service fees associated with bank processing
increased by $13,516 for the three-month period ended March 31, 2000 as
compared to March 31, 1999. These service fees and data processing fees
increased as a result of new services such as Telebank 24/7, debit cards
and internet-banking products being offered to Bank customers.
Amortization of the purchased mortgage servicing rights for the
three-month period ended March 31, 2000 amounted to approximately $47,000
contributing to the increase in non-interest expense.
INCOME TAXES. The Company reported a tax expense of $61,818 for
federal and franchise taxes for the three months ended March 31, 2000, as
compared to $162,828 associated with the same period ended March 1999. One
factor affecting the income tax provision for the quarter ended March 31,
2000, was a federal tax refund.
Comparison of Operating Results for the Nine Months Ended March 31, 2000
and 1999
GENERAL. The Company reported net income of $738,991 for the nine
months ended March 31, 2000 compared to net income of $470,900 for the
nine months ended March 31, 1999. Basic and diluted earnings per share for
the nine-month period ended March 31, 2000 amounted to $0.37 based on the
number of shares outstanding of 2,008,331 and 2,008,590, respectively. EPS
has been adjusted to reflect stock repurchases of 107,600 throughout the
nine-month period, unallocated ESOP shares, and the 10% stock dividend
effective August 9, 1999.
INTEREST INCOME. Total interest income increased to $7,822,039 for
the nine-month period ended March 31, 2000 as compared to $7,426,599 for
the nine-month period ended March 31, 1999, representing an increase of
$395,440 or 5.3%. Interest income on loans increased to $5,392,531 for the
nine months ended March 31, 2000, compared to $4,947,832 for the nine
months ended March 31, 1999, an increase of $444,699 or 8.9%. The increase
in interest income can be attributed to an increase of approximately $10.9
million, or 12.9% in average loan balances from $87.5 million for the
nine-month period ended March 31, 1999, to $97.2 million for the same
period ended March 31, 2000. The effect of the increase in the average
loan balances was partially offset by a 27 basis points decrease in the
average yield. The decrease in yield was a result of a lowering interest
rate environment experienced during most of 1999. The average balance and
yield of total investments including investment securities,
mortgage-backed securities, and tax-free securities remained relatively
consistent for the nine-month periods ended March 2000 and 1999.
INTEREST EXPENSE. Total interest expense decreased to $3,669,686 for
the nine months ended March 31, 2000, from $3,728,719 for the nine months
ended March 31, 1999, despite $310,866 in interest expense associated with
the new FHLB borrowings. The decrease in overall interest expense
reflected a decrease of 34 basis points in the average rate paid on
interest bearing liabilities despite an increase of $9.9 million or 7.9%
in the average balance of such interest bearing liabilities for the
nine-month period ended March 31, 2000 as
13
<PAGE>
compared to March 31, 1999. The most significant component of the increase
in the average balance of interest bearing liabilities was the borrowings
from FHLB. The average balance of savings and escrow accounts increased by
$3.2 million, from $54.4 million for the period ended March 1999 to $57.6
million for the period ended March 2000, but was accompanied by a decrease
in the rate paid of 20 basis points. Demand and NOW account average
balances increased $2.6 million for the nine-month period ended March 31,
2000, as compared to the same period in 1999. The average rate paid on
these accounts was consistent when comparing the nine-month periods ended
March 31, 2000 and 1999. The average balance on certificate accounts
decreased from $55.0 million for the nine-month period ended March 31,
1999, to $52.2 million for the nine-month period ended March 31, 2000. The
decrease in the average balance of certificate accounts was accompanied by
a decrease in the average yield of 65 basis points.
NET INTEREST INCOME. Net interest income increased $454,473, or
12.3%, for the nine-month period ending March 31, 2000, as compared to the
same period in 1999. The interest rate spread was 3.04% for the nine
months ended March 31, 1999 as compared to 3.35% for the nine months ended
March 31, 2000, helping to enhance the increase in net interest income for
the period.
PROVISION FOR LOAN LOSS. The Company's provision for loan losses was
decreased to $105,000 for the nine-month period ended March 31, 2000, as
compared to $135,000 for the nine-month period ended March 31, 1999.
NON-INTEREST INCOME. Non-interest income consists of fee income for
Bank services and other operating income. Non-interest income increased to
$616,069 for the nine months ended March 31, 2000, from $380,542 for the
nine months ended March 31, 1999, an increase of $235,527or 61.9%.
Contributing to the increase were increased service charges on various
deposit accounts amounting to approximately $49,000 in additional income,
a 21.8% increase. Other operating income increased $187,000 or 120.0% for
the nine-month period ended March 31, 2000. The major contributor to the
increase in other operating income was approximately $106,000 earned from
the participation in purchased mortgage servicing rights.
NON-INTEREST EXPENSE. Total non-interest expense amounted to
$3,635,568 for the nine months ended March 31, 2000 as compared to
$3,238,148 for the nine months ended March 31, 1999 for an increase of
$397,420. However, it should be noted that during the nine months ended
March 31, 1999, $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 nine-month period was $2,753,999 representing an increased of
$881,569 for the nine-month period ended March 31, 2000 as compared to
March 31, 1999. Increases in salaries and other employee benefits
contributed $444,115 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 $91,048 for the nine-month
period ended March 31, 2000 as compared to the same period ended March 31,
1999. The service fees charged by the Bank's computer provider increased
as a result of new services such as Telebank 24/7, debit cards, Internet
banking abilities and testing associated with Y2K. Occupancy and equipment
expenses increased for the nine month period ended March 31, 2000 as
compared to the same period during 1999 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
were 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 of approximately $79,000 was another new item in the
non-interest expense category.
INCOME TAXES. The Company reported a tax expense of $288,863 for
federal and franchise taxes for the nine months ended March 31, 2000,
compared to $234,373 for the nine months ended March 31, 1999. A primary
item contributing to a difference in the income tax expense was the tax
benefit gained as a result of making the contribution to the Charitable
Foundation during the nine-month period ended March 1999.
14
<PAGE>
Liquidity and Capital
The Company's primary sources of funds are deposits, federal funds,
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 March 31, 1999 to March 31,
2000.
Loan commitments totaled $1.2 million at March 31, 2000. The Company
anticipates that it will have sufficient funds available to meet current
loan commitments.
The Company's most liquid assets are cash and due from banks and
federal funds sold. At March 31, 2000, such assets amounted to $11.8
million, or 7.3% 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.
Management has increased liquidity levels in efforts to meet
expected loan demand and funding requirements for the new Tannersville
branch.
Stockholders' equity decreased from $23.9 million at June 30, 1999
to $23.2 million at March 31, 2000 representing a decrease of $0.7 million
or 3.0%. The decrease in equity is a result of stock repurchases and
unrealized loss increases which occurred during the period. 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 March 31, 2000, the Company had total capital of $23.5 million or
25.6% of risk-weighted assets, Tier I Capital of $22.6 million or 24.7% of
risk-weighted assets, and Tier I Capital of $22.6 million or 14.3% of
average assets. At March 31, 2000, the Company exceeded all regulatory
capital requirements.
The Company's ability to pay dividends is dependent on the Bank's
ability to pay dividends to the Company. There are certain restrictions on
the payment of dividends and other payments by the Bank to the Company.
Under New York law, the Bank is prohibited from declaring a cash dividend
on its common stock except from its net earnings for the current year and
retained net profits for the preceding two years.
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 months of 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 March 28, 2000, the Company held a special shareholders meeting
to vote on the following:
(1) the approval of the Greene County Bancorp, Inc. 2000 Stock
Option Plan; and
(2) the approval of the Greene County Bancorp, Inc. 2000
Recognition and Retention Plan.
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:
<TABLE>
<CAPTION>
For Against Abstain
--------- ------- -------
<S> <C> <C> <C>
2000 Stock Option Plan 1,650,162 78,095 6,141
2000 Recognition and Retention Plan 1,630,330 97,690 6,378
</TABLE>
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Not applicable
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
Greene County Bancorp, Inc.
Date: May 15, 2000
By: /s/ J. Bruce Whittaker
J. Bruce Whittaker
President and Chief Executive Officer
Date: May 15, 2000
By: /s/ Michelle Plummer
Michelle Plummer
Chief Financial Officer
17
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 11,846,966
<INT-BEARING-DEPOSITS> 649,633
<FED-FUNDS-SOLD> 7,429,788
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 44,066,781
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 98,615,241
<ALLOWANCE> 856,448
<TOTAL-ASSETS> 162,187,785
<DEPOSITS> 128,405,440
<SHORT-TERM> 5,000,000
<LIABILITIES-OTHER> 535,259
<LONG-TERM> 5,000,000
0
0
<COMMON> 215,284
<OTHER-SE> 23,031,802
<TOTAL-LIABILITIES-AND-EQUITY> 162,187,785
<INTEREST-LOAN> 5,392,531
<INTEREST-INVEST> 2,196,572
<INTEREST-OTHER> 232,936
<INTEREST-TOTAL> 7,822,039
<INTEREST-DEPOSIT> 3,358,820
<INTEREST-EXPENSE> 3,669,686
<INTEREST-INCOME-NET> 4,152,353
<LOAN-LOSSES> 105,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,635,568
<INCOME-PRETAX> 1,027,854
<INCOME-PRE-EXTRAORDINARY> 1,027,854
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 738,991
<EPS-BASIC> 0.37
<EPS-DILUTED> 0.37
<YIELD-ACTUAL> 3.70
<LOANS-NON> 624,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 792,000
<CHARGE-OFFS> 44,300
<RECOVERIES> 3,300
<ALLOWANCE-CLOSE> 856,448
<ALLOWANCE-DOMESTIC> 856,448
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 856,448
</TABLE>
