<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
For Quarter ended June 30, 1997 Commission File Number
0-14289
GREENE COUNTY BANCSHARES, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Tennessee 62-1222567
- ------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporated or organization) Number)
Main & Depot Street
Greeneville, Tennessee 37743
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 423-639-5111
------------
Indicate by check mark 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
--- ---
Indicate the number or shares outstanding of each of the Issuers classes of
common stock as of the latest practicable date: 451,500.
1
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited condensed consolidated financial statements of the Registrant
and its wholly-owned subsidiaries are as follows:
Condensed Consolidated Balance Sheets - June 30, 1997 and
December 31, 1996.
Condensed Consolidated Statements of Earnings - For the three
and six months ended June 30, 1997 and 1996.
Condensed Consolidated Statement of Stockholders' Equity- For
the six months ended June 30, 1997.
Condensed Consolidated Statements of Cash Flows - For the
six months ended June 30, 1997 and 1996.
Notes to Condensed Consolidated Financial Statements.
2
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GREENE COUNTY BANCSHARES,INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996*
-------- ------------
(In Thousands)
<S> <C> <C>
ASSETS
------
Cash and Due from Banks $20,335 $21,332
Federal Funds sold 716 -
Securities available-for-sale 38,208 42,925
Securities held-to-maturity (with a market
value of $8,192 on June 30, 1997
and $9,418 on December 31, 1996) 8,214 9,456
Loans 438,358 388,603
Less: Allowance for Loan Losses 8,244 7,331
-------- --------
Net Loans 430,114 381,272
-------- --------
Bank Premises and Equipment, Net of
Accumulated Depreciation 9,752 9,839
Other Assets 14,225 13,224
-------- --------
Total Assets $521,564 $478,048
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Deposits $442,995 $408,722
Securities Sold under Repurchase Agreements
and Short-Term Borrowed Funds 8,951 3,272
Other Borrowings 13,062 15,805
Other Liabilities 7,216 4,524
-------- --------
Total Liabilities 472,224 432,323
-------- --------
SHAREHOLDERS' EQUITY
--------------------
Common Stock, par value $10, authorized
1,000,000 shares; issued and outstanding
451,500 and 451,485 shares at June 30, 1997
and December 31, 1996, respectively 4,514 4,514
Paid in Capital 4,136 4,133
Retained Earnings 40,590 37,133
Net unrealized holding gains/(losses) on
available-for-sale securities 100 (55)
-------- --------
Total Shareholders' Equity 49,340 45,725
-------- --------
$521,564 $478,048
======== ========
</TABLE>
* Condensed from Audited Financial Statements.
See accompanying notes to Condensed Consolidated Financial Statements(Unaudited)
3
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GREENE COUNTY BANCSHARES,INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Dollars in thousands except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Month Six Months
Ended Ended
June 30 June 30
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest Income:
Interest and Fees on Loans $11,116 $8,535 $21,448 $16,566
Interest on Securities 744 909 1,505 1,987
Interest on Federal Funds Sold 40 118 75 414
------- ------- ------- -------
Total Interest Income 11,900 9,562 23,028 18,967
Interest Expense:
Interest on Deposits 4,363 3,687 8,421 7,552
Interest on Short Term Borrowings 291 150 551 262
------- ------- ------- -------
Total Interest Expense 4,654 3,837 8,972 7,814
------- ------- ------- -------
Net Interest Income 7,246 5,725 14,056 11,153
Provision for Loan Losses 803 239 1,224 404
------- ------- ------- -------
Net Interest Income after
Provision for Loan Losses 6,443 5,486 12,832 10,749
------- ------- ------- -------
Noninterest Income:
Income from Fiduciary Activities 7 7 18 25
Service Charges and Other Fees 744 791 1,415 1,300
Security Gains(Losses) 2 (2) 2 (2)
Other Income 96 323 523 648
------- ------- ------- -------
849 1,119 1,958 1,971
Noninterest Expense:
Salaries and Employee Benefits 2,265 1,930 4,320 3,711
Occupancy and Furniture and Equipment Expense 596 530 1,199 1,073
Other Expenses 1,063 905 1,900 1,665
------- ------- ------- -------
3,924 3,365 7,419 6,449
------- ------- ------- -------
Earnings Before Income Taxes 3,368 3,240 7,371 6,271
Income Taxes 1,270 1,312 2,785 2,377
------- ------- ------- -------
Net income $2,098 $1,928 $4,586 $3,894
======= ======= ======= =======
Average Number of Shares Outstanding 452,582 447,911 452,581 446,270
Per Share of Common Stock:
Net Earnings $4.64 $4.30 $10.13 $8.73
======= ======= ======= =======
Dividends $1.25 $1.12 $2.50 $2.24
======= ======= ======= =======
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
(Unaudited).
4
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GREENE COUNTY BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Net
Unrealized
Appreciation
on Available
Common Paid in Retained for Sale
Stock Capital Earnings Securities Total
------- ------- -------- ------------- -------
<S> <C> <C> <C> <C> <C>
January 1, 1997 $4,514 $4,133 $37,133 ($55) $45,725
Net income - - 4,586 - 4,586
Change in unrealized
appreciation, net of tax - - - 155 155
Dividends paid - - (1,129) - (1,129)
Exercise of incentive
stock options - 3 - - 3
------- ------- -------- ------------- -------
June 30, 1997 $4,514 $4,136 $40,590 $100 $49,340
======= ======= ======== ============= =======
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements(Unaudited)
5
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GREENE COUNTY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(In Thousands)
<TABLE>
<CAPTION>
June 30, June 30,
1997 1996
---------- ----------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net Income $ 4,586 $ 3,894
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 1,224 404
Provision for depreciation and amortization 581 570
Amortization of investment security premiums,
net of accretion 202 261
Decrease in interest receivable 212 58
Increase in unearned income 1,139 186
Increase in other assets, net of intangibles (1,466) (899)
Increase in accrued interest payable
and other 1,921 23
-------- --------
Net cash provided by operating activities 8,399 4,497
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in investment securities
and federal funds 5,243 38,021
Net increase in loans (50,894) (32,255)
Decrease (increase) in other real
estate owned and other, net 119 (55)
Recoveries of loan losses 240 350
Fixed asset additions (187) (1,282)
-------- --------
Net cash used by investing activities (45,479) 4,779
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW,
money market and savings accounts 34,273 (4,233)
Cash dividends paid (1,129) (1,011)
Exercise of stock options 3 436
Increase (decrease) in securities sold under
agreements to repurchase 5,679 (1,411)
Decrease in other borrowings, net (2,743) (1,207)
Cash acquired in acquisition of subsidiary bank - 1,730
Professional fees related to stock rescission offer - (58)
Acceptances of stock rescission offer - (14)
-------- --------
Net cash provided by financing activities 36,083 (5,768)
-------- --------
NET INCREASE (DECREASE) IN CASH (997) 3,508
-------- --------
CASH AT BEGINNING OF YEAR 21,332 13,723
-------- --------
CASH AT END OF QUARTER $ 20,335 $ 17,231
======== ========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements(Unaudited)
6
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GREENE COUNTY BANCSHARES, INC.
Notes To Condensed Consolidated Financial Statements
----------------------------------------------------
1-Principles of Consolidation
- -----------------------------
The accompanying unaudited consolidated financial statements of Greene County
Bancshares, Inc. (the "Company") and its wholly owned subsidiaries, Greene
County Bank ("GCB") and Premier Bank of East Tennessee ("PBET"), have been
prepared in accordance with generally accepted accounting principles for interim
information and in accordance with the instructions to Form 10-Q and Article 10
of Regulation S-X as promulgated by the Securities and Exchange Commission.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments(consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. All
interim amounts are subject to year-end audit and the results of operations for
the interim period herein are not necessarily indicative of the results that may
be expected for the year ending December 31, 1997. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.
2-Allowance for Loan Losses
- ---------------------------
Transactions in the Allowance for Loan Losses for the six months ended June 30,
1997 were as follows:
(In Thousands)
--------------
Balance, January 1, 1997 $7,331
Add(Deduct):
Charge-offs (551)
Recoveries 240
Provision 1,224
------
Balance, June 30, 1997 $8,244
======
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
GENERAL
Greene County Bancshares, Inc. (the "Company") is the bank holding
company for Greene County Bank ("GCB") and Premier Bank of East
Tennessee ("PBET"), and collectively referred to as the "Banks", which are
Tennessee-chartered commercial banks that conduct the principal business of the
Company. The Company also wholly owned American Fidelity Bank, whose assets were
combined with Greene County Bank during 1996. In addition, Greene County Bank
wholly owns a finance company, a mortgage company and an acceptance corporation.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY. Liquidity refers to the ability or the financial flexibility
to manage future cash flows to meet the needs of depositors and borrowers and
fund operations. Maintaining appropriate levels of liquidity allows the Company
to have sufficient funds available for reserve requirements, customer demand for
loans, withdrawal of deposit balances and maturities of deposits and other
liabilities. The Company's primary source of liquidity is dividends paid by the
Banks. Applicable Tennessee statutes and regulations impose restrictions on the
amount of dividends that may be declared by the subsidiary Banks. Further, any
dividend payments are subject to the continuing ability of each of the Banks to
maintain their respective compliance with minimum federal regulatory capital
requirements and to retain their characterization under federal regulations as
"well-capitalized" institutions. In addition, the Company maintains a line of
credit of $20 million with the Federal Home Loan Bank of Cincinnati.
The Company's liquid assets include investment securities, federal funds
sold, and cash and due from banks. These assets represented 14.5% of the total
liquidity base at June 30, 1997, as compared to 17.2% at December 31, 1996. The
liquidity base is generally defined to include deposits, securities sold under
repurchase agreements and short-term borrowed funds and other borrowings.
For the six months ended June 30, 1997, operating activities of the
Company provided $8,399,000 of cash flows. Net income of $4,586,000, adjusted
for non-cash operating activities, including $1,224,000 in provision for loan
losses and amortization and depreciation of $581,000, provided the majority of
the cash generated from operations.
Investing activities, including lending, used $45,479,000 of the
Company's cash flow during the six months ended June 30, 1997.
8
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Loans originated net of principal collected used $50,894,000 in funds. The
Company's decrease in investment securities and federal funds sold provided
$5,243,000 in cash flows.
Net additional cash inflows of $36,083,000 were provided by financing
activities during the six months ended June 30, 1997. Net deposit growth
accounted for $34,273,000 of the increase. Other increases arose from an
increase in securities sold under agreements to repurchase in the amount of
$5,679,000. Offsetting these increases were a net decrease in other borrowings
of $2,743,000 and cash dividends paid to shareholders of $1,129,000.
CAPITAL RESOURCES. The Company's capital position is reflected in its
shareholders' equity, subject to certain adjustments for regulatory purposes.
Shareholders' equity, or capital, is a measure of the Company's net worth,
soundness and viability. The Company continues to exhibit a strong capital
position while consistently paying dividends to its stockholders. Further, the
capital base of the Company allows it to take advantage of business
opportunities while maintaining the level of resources deemed appropriate by
management of the Company to address business risks inherent in the Company's
daily operations.
Shareholders' equity on June 30, 1997 was $49,340,000, an increase of
$3,615,000 or 7.91%, from $45,725,000 on December 31, 1996. The increase in
shareholders' equity reflects net income for the six months ended June 30, 1997
of $4,586,000 ($10.13 per share), the increase in equity associated with the
increase in the value of securities available for sale of $155,000 and proceeds
from the exercise of stock options during the six months ended June 30, 1997
totaling $3,000. This increase was offset by quarterly dividend payments during
the six months ended June 30, 1997 totaling $1,129,000 ($2.24 per share).
Risk-based capital regulations adopted by the Board of Governors of the
Federal Reserve Board (the "FRB") and the Federal Deposit Insurance Corporation
require bank holding companies and banks, respectively, to achieve and maintain
specified ratios of capital to risk-weighted assets. The risk-based capital
rules are designed to measure Tier 1 Capital and Total Capital in relation to
the credit risk of both on- and off-balance sheet items. Under the guidelines,
one of four risk weights is applied to the different on-balance sheet items.
Off-balance sheet items, such as loan commitments, are also subject to risk-
weighting after conversion to balance sheet equivalent amounts. At June 30,
1997, the Company and the Banks each satisfied their respective minimum
regulatory capital requirements, and each of the Banks was "well-capitalized"
within the meaning of federal regulatory requirements.
9
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================================================================================
Capital Ratios at June 30, 1997
-------------------------------------
Required
Minimum
Ratio Company GCB PBET
-------- ------- ------ ------
Tier 1 risk-based capital 4.00% 11.06% 11.43% 10.96%
Total risk-based capital 8.00% 12.32% 12.69% 12.21%
Leverage Ratio 4.00% 9.47% 9.78% 8.63%
================================================================================
CHANGES IN RESULTS OF OPERATIONS
NET INCOME. Net income for the three and six months ended June 30, 1997
was $2,098,000 and $4,586,000, respectively, an increase of $170,000, or 8.8%
and $692,000, or 17.8%, as compared to net income of $1,928,000 and $3,894,000,
respectively, for the same periods in 1996.
The increase for the three months ended June 30, 1997 resulted primarily
from an increase in net interest income of $1,521,000, or 26.6%, to $7,246,000
for the three months ended June 30, 1997 from $5,725,000 for the same period in
1996. The increase in net interest income reflects the Company's continued
growth in loan production through its expanding branch network, primarily
through increases in commercial and other real estate loans, and in consumer
loans. These increases were offset in part by the $161,000 or 15.9% decrease in
non-interest income to $849,000 for the three months ended June 30, 1997 from
$1,119,000 for the same period in 1996, attributable primarily to reductions in
gains on sale of other real estate owned and computer fees. Further offsetting
the increase in net interest income was the $559,000, or 16.6%, increase in
non-interest expense to $3,924,000 for the three months ended June 30, 1997
from $3,365,000 for the same period in 1996, attributable primarily to
increasing compensation and fixed asset expenses associated with the growth of
the Company's branch network. In addition, the Company increased its provision
for loan losses by $564,000, or 136%, to $803,000 for the three months ended
June 30, 1997 compared to $239,000 for the same period in 1996.
The increase for the six months ended June 30, 1997 resulted primarily
from an increase in net interest income of $2,903,000, or 26.0%, to $14,056,000
for the six months ended June 30, 1997 from $11,153,000 for the same period in
1996. This increase reflects the same basic trends in existence during the three
months ended June 30, 1997. These increases were offset in part by the $970,000,
or 15.0%, increase in non-interest expense to $7,419,000 for the six months
ended June 30, 1997 from $6,449,000 for the same period in 1996, again primarily
attributable to increasing compensation and
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fixed asset expenses associated with the growth of the Company's branch network.
Further, the Company increased its provision for loan losses by $820,000, or
103%, to $1,224,000 for the six months ended June 30, 1997 from $404,000 for the
same period in 1996.
NET INTEREST INCOME. The largest source of earnings for the Company is
net interest income, which is the difference between interest income on
interest-earning assets and interest paid on deposits and other interest-bearing
liabilities. The primary factors which affect net interest income are changes in
volume and yields of earning assets and interest-bearing liabilities, which are
affected in part by management's responses to changes in interest rates through
asset/liability management. During the three and six months ended June 30, 1997,
net interest income, before provision for loan losses, was $7,246,000 and
$14,056,000, respectively, as compared to $5,725,000 and $11,153,000 for the
same periods in 1996, representing increases of 26.6% and 26.0%, respectively.
With respect to the three months ended June 30, 1997, this increase was due
primarily to an increase in volume and yield of interest-earning assets, offset
by increased costs and balances of interest-bearing liabilities. With respect to
the six months ended June 30, 1997, this increase was due primarily to an
increase in volume and yield of interest-earning assets, offset primarily by
increased balances of interest-bearing liabilities.
PROVISION FOR LOAN LOSSES. During the three and six month periods ended
June 30, 1997, loan charge-offs were $288,000 and $551,000, and recoveries of
charged-off loans were $113,000 and $240,000, respectively. The Company's
provision for loan losses increased to $803,000 and $1,224,000 for the three and
six month periods ended June 30, 1997, respectively, from $239,000 and $404,000
for the respective periods in 1996. Further, the Company's allowance for loan
losses increased to $8,244,000 at June 30, 1997 from $7,331,000 at December 31,
1996. Management attributes the increase in both the provision for loan losses
and the allowance for loan losses to several factors, including a)the increasing
consumer loan portfolio in Greene County Bank's consumer finance subsidiary, as
consumer loans are generally considered to carry a higher risk of loss than
commercial and housing loans, b)an anticipated downturn in the business cycle
and attendant increases in net charge-offs, c)the Company's more aggressive
identification of potential problem loans and the inclusion of the risk
associated with such loans in the determination of the Company's allowance for
loan losses, and d)the perceived risk associated with commercial loans
originated by the Company which tend to have higher individual balances and
which management believes are more susceptible to delinquency than mortgage
installment and installment real estate loans. The ratio of the allowance for
loan losses to nonperforming assets was 403.64% and 315.27% at June 30, 1997 and
December 31, 1996, respectively, and the ratio of nonperforming assets to total
assets was .39% and .49% at June 30, 1997 and December 31, 1996, respectively.
11
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NON-INTEREST INCOME. Income that is not related to interest-earning
assets, consisting primarily of service charges, commissions and fees, has
become an important supplement to the traditional method of earning income
through interest rate spreads.
Total non-interest income for the three and six month periods ended June
30, 1997 was $849,000 and $1,958,000, respectively, as compared to $1,119,000
and $1,971,000 for the same periods in 1996. The largest component of non-
interest income is service charges and other fees, which totaled $744,000 and
$1,415,000, respectively, for the three and six month periods ended June 30,
1997, as compared to $791,000 and $1,300,000, respectively, for the same periods
in 1996. The $47,000, or 5.9%, decrease for the three months ended June 30, 1997
compared to the same period in 1996, reflecting principally a decline in
appraisal fees and certain insurance commissions. Service charges and fees for
the six months ended June 30, 1997 increased $115,000, or 8.85%, from the same
period in 1996, reflective of management's focus on the generation of fee income
through implementation of additional fees and increasing existing fees.
Other income for the three and six month periods ended June 30, 1997 was
$96,000 and $523,000, respectively, as compared to $323,000 and $648,000 for the
same periods in 1996. With respect to the three months ended June 30, 1997, the
decrease of $227,000 is primarily explained by a)approximately $180,000 in gains
on sales of other real estate owned generated in the three months ended June 30,
1996, and b)approximately $68,000 in revenue from a minority ownership position
in an insurance company recorded in the three months ended June 30, 1996 as
opposed to being recorded in the first quarter of 1997.
The $125,000 decrease in other income for the six months ended June 30,
1997 as compared to the same period in 1996 is explained primarily by a)an
approximate $324,000 decrease in gains on sales of other real estate owned for
the six months ended June 30, 1997 vs. the same period in 1996, and b)an
approximate $191,000 gain on the sale of GCB's Sullivan County Walmart branch in
connection with the Company's continuous review of branch operations and market
strategy.
NON-INTEREST EXPENSE. Control of non-interest expense also is an
important aspect in managing net income. Non-interest expense includes
personnel, occupancy, and other expenses such as data processing, printing and
supplies, legal and professional fees, postage, Federal Deposit Insurance
Corporation assessment, etc. Total non-interest expense increased to
$3,924,000 and $7,419,000 for the three and six month periods ended June 30,
1997, respectively, as compared to $3,365,000 and $6,449,000 for the same
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periods in 1996. These increases totaled $559,000, or 16.6%, and $970,000, or
15.0%, for the three and six month periods ended June 30, 1997, respectively.
Despite the increase in non-interest expense, the Company experienced an
improvement in its efficiency ratio which declined from 49.14% at June 30, 1996
to 46.33% at June 30, 1997. The efficiency ratio illustrates how much it costs
the Company to generate revenue; for example, it cost the Company 46.33 cents to
generate one dollar of revenue for the six months ended June 30, 1997.
Personnel costs are the primary element of the Company's non-interest
expenses. For the three and six month periods ended June 30, 1997, salaries and
benefits represented $2,265,000, or 57.7%, and $4,320,000, or 58.2%, of total
noninterest expenses, respectively. This was an increase of $335,000, or 17.4%,
and $609,000, or 16.4%, over the $1,930,000 and $3,711,000 for the three and six
month periods ended June 30, 1996. At June 30, 1996, salaries and benefits
represented 57.5% of total noninterest expenses. These increases were due to
opening new branches requiring increased staff at varying experience and
compensation levels and increased employee benefit costs. Overall, the number of
full-time equivalent employees at June 30, 1997 was 250 versus 240 at June 30,
1996, an increase of 4.2%.
Occupancy and furniture and equipment expense also increased during the
three and six month periods ended June 30, 1997 compared to the same periods in
1996 as the Company increased its size to 29 branches at June 30, 1997,
including two offices of a GCB finance company subsidiary which opened effective
July 1, 1997, from 25 branches at June 30, 1996.
Other expenses for the three and six month periods ended June 30, 1997
were $1,063,000 and $1,900,000, increases of $158,000, or 17.5%, and $235,000,
or 14.1%, respectively, from the same periods in 1996. These increases are
reflective of the Company's new branches which required additional advertising,
postage, telephone and other expenses.
CHANGES IN FINANCIAL CONDITION
Total assets at June 30, 1997 were $521.6 million, an increase of $43.6
million, or 9.1%, over 1996's year end total assets of $478.0 million. Asset
growth was funded primarily by increases in deposits.
At June 30, 1997, loans, net of unearned income and allowance for loan
losses, were $430.1 million compared to $381.3 million at December 31, 1996 and
$340.0 million at June 30, 1996. Net loans increased $90.1 million, or 26.5% and
$48.8 million, or 12.8%, from June 30, 1996 and December 31, 1996, respectively.
The increases are primarily due to increases in commercial and other real estate
13
<PAGE>
lending, as well as additional consumer loans in the six months ended June 30,
1997.
Non-performing loans include non-accrual and classified loans. The
Company has a policy of placing loans 90 days delinquent in non-accrual status
and charging them off at 120 days past due. Other loans past due that are well
secured and in the process of collection continue to be carried on the Company's
balance sheet. The Company has aggressive collection practices in which senior
management is much involved. Nonaccrual loans increased by $12,000, or 1.9%,
during the six months ended June 30, 1997, while net loans increased 12.8%
during the same period.
The Company maintains an investment portfolio to provide liquidity and
earnings. Investments at June 30, 1997 had an amortized cost of $46.3 million
and a market value of $46.4 million. At year end 1996, investments with an
amortized cost of $52.5 million had a market value of $52.3 million. This
decrease, resulting from normal maturing of securities and the sale of one
security by PBET for liquidity reasons, was used to fund increases in the loan
portfolio.
The funds to support the Company's asset growth have been provided
mainly by increased deposits, which were $443.0 million at June 30, 1997. This
represents an 8.7% increase from the deposits at year end 1996 of $408.7
million. The increase is primarily the result of the Company's aggressive
efforts to attract new deposit customers, including the offering and advertising
of highly competitive CD rates in selected regions of the Company's market area.
EFFECT OF NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement of Accounting Standards ("SFAS") No. 128, Earnings Per Share," which
(i) replaces the presentation of primary earnings per share ("EPS") with a
presentation of basic EPS; (ii) requires dual representation of basic and
diluted EPS on the face of the consolidated statements of income regardless of
whether basic and diluted EPS are the same; and (iii) requires a reconciliation
of the numerator and denominator used in computing basic and diluted EPS. Basic
EPS excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted EPS is computed similarly to fully
diluted EPS pursuant to Accounting Principles Board Opinion No. 15. SFAS No. 128
is effective for financial statements issued for periods ending after December
15, 1997,
14
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including interim periods. Earlier application is not permitted. SFAS
No. 128 requires restatement of all prior-period EPS data presented. The Company
does not anticipate that adoption of SFAS No. 128 will have any material effect
on the Company's financial condition or the results of its operations.
15
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
16
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiaries are involved in various claims and
legal actions arising in the ordinary course of business. Management
currently is not aware of any material legal proceedings to which the
Company or any of its subsidiaries is a party or to which any of their
property is subject.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The 1997 Annual Meeting of Shareholders of the Company was held on
April 22, 1997.
(b) Not applicable.
(c) All current directors were re-elected for one-year terms by
shareholders at the Annual Meeting. There were 296,672 shares
represented at the Annual Meeting, either in person or by proxy, and
there were no dissenting votes. All such shares were voted for
election of each of the Company's directors. The names of the
directors are as follows:
Phil M. Bachman Jerald K. Jaynes
Charles S. Brooks Terry Leonard
Ralph T. Brown Harrison Lamons
W.T. Daniels Patrick A. Norris
J.W. Douthat R. Stan Puckett
James A. Emory Davis Stroud
Helen Horner
Item 5. Other Information
None.
17
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule(for SEC use only)
(b) Reports on Form 8-K
None
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: 8/8/97 Greene County Bancshares, Inc.
------ ------------------------------
Registrant
Date: 8/8/97 /s/
------ ------------------------------
R. Stan Puckett
President and CEO
(Duly authorized officer)
Date: 8/8/97 /s/
------ ------------------------------
William F. Richmond
Sr. Vice President and Chief
Financial Officer
(Principal financial and
accounting officer)
19
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