<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
For Quarter ended March 31, 1998 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 (Zip Code)
executive offices)
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: 1,354,878.
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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 - March 31, 1998 and December
31, 1997.
Condensed Consolidated Statements of Income - For the three months
ended March 31, 1998 and 1997.
Consolidated Statements of Comprehensive Income-For the three months
ended March 31, 1998 and 1997.
Condensed Consolidated Statement of Stockholders' Equity- For the
three months ended March 31, 1998.
Condensed Consolidated Statements of Cash Flows - For the three months
ended March 31, 1998 and 1997.
Notes to Condensed Consolidated Financial Statements.
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GREENE COUNTY BANCSHARES,INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
(UNAUDITED)
March 31, December 31,
1998 1997*
----------- -------------
(In Thousands)
ASSETS
------
<S> <C> <C>
Cash and Due from Banks $15,688 $20,687
Federal Funds Sold and Other Interest-earning Deposits 19,535 5,500
Securities available-for-sale 31,610 33,852
Securities held-to-maturity (with a market value of $6,596
on March 31, 1998 and $7,638 on December 31, 1997). 6,641 7,627
Loans 441,737 450,544
Less: Allowance for Loan Losses 9,239 9,154
----- -----
Net Loans 432,498 441,390
------- -------
Bank Premises and Equipment, Net of
Accumulated Depreciation 9,948 9,803
Other Assets 14,519 15,242
------ ------
Total Assets $530,439 $534,101
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Deposits $464,293 $461,729
Securities Sold under Repurchase Agreements
and Short-Term Borrowed Funds 1,510 1,414
Other Borrowings 7,367 15,487
Other Liabilities 5,310 5,359
----- -----
Total Liabilities 478,480 483,989
------- -------
SHAREHOLDERS' EQUITY
--------------------
Common Stock, par value $10, authorized 3,000,000 shares;
issued and outstanding 1,354,878 and 1,354,500 shares at
March 31, 1998 and December 31, 1997, respectively 13,549 13,545
Paid in Capital 4,158 4,135
Retained Earnings 34,165 32,332
Accumulated Other Comprehensive Income 87 100
-- ---
Total Shareholders' Equity 51,959 50,112
------ ------
$530,439 $534,101
======== ========
</TABLE>
* Condensed from Audited Financial Statements.
See accompanying notes to Condensed Consolidated Financial Statements(Unaudited)
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GREENE COUNTY BANCSHARES,INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1998 1997
---- ----
(in thousands except per share data)
<S> <C> <C>
Interest Income:
Interest and Fees on Loans $11,920 $10,332
Interest on Investment Securities 621 761
Interest on Federal Funds Sold and Other
Interest-earning Deposits 133 35
---- ----
Total Interest Income 12,674 11,128
Interest Expense:
Interest on Deposits 4,663 4,058
Interest on Borrowings 177 260
---- ----
Total Interest Expense 4,840 4,318
----- -----
Net Interest Income 7,834 6,810
Provision for Loan Losses 337 421
---- ----
Net Interest Income after
Provision for Loan Losses 7,497 6,389
---- ----
Noninterest Income:
Service Charges, Commissions and Fees 708 682
Other Income 252 427
---- ----
960 1,109
Noninterest Expense:
Salaries and Benefits 2,644 2,055
Occupancy and Furniture and Equipment Expense 619 603
Other Expenses 1,161 837
----- ---
4,424 3,495
----- -----
Earnings Before Income Taxes 4,033 4,003
Income Taxes 1,523 1,515
----- -----
Net income $2,510 $2,488
====== ======
Average Number of Shares, Assuming Dilution 1,361,970 1,357,554
Per Share of Common Stock:
Net Income $1.85 $1.84
===== =====
Net Income, Assuming Dilution $1.84 $1.83
===== =====
Dividends $0.50 $0.42
===== =====
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements(Unaudited)
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GREENE COUNTY BANCSHARES,INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1998 1997
---- ----
(in thousands except per share data)
<S> <C> <C>
Net Income $2,510 $2,488
Other Comprehensive Income (Loss), net of tax:
Unrealized Gains (Losses) on Securities (13) 121
---- ---
Other Comprehensive Income (Loss) (13) 121
---- ---
Comprehensive Income $2,497 $2,609
====== ======
Average Number of Shares, Assuming Dilution 1,361,970 1,357,554
Per Share of Common Stock:
Comprehensive Income $1.84 $1.93
===== =====
Comprehensive Income, Assuming Dilution $1.83 $1.92
===== =====
Dividends $0.50 $0.42
===== =====
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements(Unaudited)
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GREENE COUNTY BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(In Thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Common Paid in Retained Comprehensive
Stock Capital Earnings Income Total
----- ------- -------- ------ -----
<S> <C> <C> <C> <C> <C>
January 1, 1998 $13,545 $4,135 $32,332 $100 $50,112
Comprehensive income
Net income - - 2,510 - 2,510
Other comprehensive income (loss),
net of tax
Unrealized losses on securities - - - - (13)
----
Other comprehensive income(loss) - - - (13) (13)
----
Comprehensive income - - - - 2,497
-----
Dividends paid - - (677) - (677)
Exercise of stock options 4 16 - - 20
Tax benefit from exercise
of stock options - 7 - - 7
--------- --------- --------- --------- ----------
March 31, 1998 $13,549 $4,158 $34,165 $87 $51,959
========= ========= ========= ========= ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements(Unaudited)
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GREENE COUNTY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(In Thousands)
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
--------- ----------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net Income $2,510 $2,488
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 337 421
Provision for depreciation and amortization 283 222
Amortization of investment security premiums,
net of accretion 79 112
Decrease (increase) in interest receivable 312 (88)
Increase in unearned income 536 470
Decrease (increase) in other assets, net of intangibles 344 (232)
(Decrease) increase in accrued interest payable
and other (713) 2,721
--------- ----------
Net cash provided by operating activities 3,688 6,114
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in investment securities,
federal funds and other interest-earning deposits (10,807) (5,113)
Net decrease (increase) in loans 8,270 (17,137)
Improvements in other real
estate owned and other, net (58) (121)
Recoveries of loan losses 379 127
Fixed asset additions (356) (93)
--------- ----------
Net cash used by investing activities (2,572) (22,337)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW,
money market and savings accounts 2,565 13,918
Cash dividends paid (677) (564)
Exercise of stock options 20 3
Increase in securities sold under
agreements to repurchase 96 2,126
Decrease in other borrowings, net (8,119) (2,676)
--------- ----------
Net cash (used) provided by financing activities (6,115) 12,807
--------- ----------
NET INCREASE (DECREASE) IN CASH (4,999) (3,416)
--------- ----------
CASH AT BEGINNING OF QUARTER 20,687 21,332
--------- ----------
CASH AT END OF QUARTER $15,688 $17,916
========= ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements(Unaudited)
7
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GREENE COUNTY BANCSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1-PRINCIPLES OF CONSOLIDATION
The accompanying unaudited condensed 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, 1998. 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, 1997.
2-ALLOWANCE FOR LOAN LOSSES
Transactions in the Allowance for Loan Losses for the three months ended March
31, 1998 were as follows:
<TABLE>
<CAPTION>
(In Thousands)
--------------
<S> <C>
Balance, January 1, 1998 $9,154
Add(Deduct):
Charge-offs (631)
Recoveries 379
Provision 337
-----
Balance, March 31, 1998 $9,239
======
</TABLE>
8
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3-NET INCOME PER SHARE OF COMMON STOCK
Net income per share of common stock is computed by dividing net income by the
weighted average number of common shares and common stock equivalents
outstanding during the period. Stock options are regarded as common stock
equivalents. Common stock equivalents are computed using the treasury stock
method.
The following is a reconciliation of the numerators and denominators used in
the basic and diluted earnings per share computations for the three months
ended March 31, 1998 and 1997:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1998 1997
-------------------------------- --------------------------------------
(DOLLAR AMOUNTS IN THOUSANDS)
INCOME SHARES INCOME SHARES
(NUMERATOR) (DENOMINATOR) (NUMERATOR) (DENOMINATOR)
<S> <C> <C> <C> <C>
BASIC EPS
Income available to
common shareholders $2,510 1,354,597 $2,488 1,354,491
EFFECT OF DILUTIVE SECURITIES
Stock options outstanding - 7,373 - 3,063
----------------------------------------------------------------------
DILUTED EPS
Income available to common
shareholders plus assumed
conversions $2,510 1,361,970 $2,488 1,357,554
======================================================================
</TABLE>
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
THIS QUARTERLY REPORT ON FORM 10-Q, INCLUDING ALL DOCUMENTS
INCORPORATED HEREIN BY REFERENCE, CONTAINS FORWARD-LOOKING STATEMENTS.
ADDITIONAL WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS MAY BE MADE BY THE
COMPANY FROM TIME TO TIME IN FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION OR OTHERWISE. THE WORDS "BELIEVE", "EXPECT", "SEEK", AND "INTEND"
AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY
AS OF THE DATE THE STATEMENT IS MADE. SUCH FORWARD-LOOKING STATEMENTS ARE
WITHIN THE MEANING OF THAT TERM IN SECTION 27A OF THE SECURITIES ACT OF 1933,
AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
SUCH STATEMENTS MAY INCLUDE, BUT ARE NOT LIMITED TO, PROJECTIONS OF INCOME OR
LOSS, EXPENDITURES, ACQUISITIONS, PLANS FOR FUTURE OPERATIONS, FINANCING NEEDS
OR PLANS RELATING TO SERVICES OF THE COMPANY, AS WELL AS ASSUMPTIONS RELATING
TO THE FOREGOING. FORWARD-LOOKING STATEMENTS ARE INHERENTLY SUBJECT TO RISKS
AND UNCERTAINTIES, SOME OF WHICH CANNOT BE PREDICTED OR QUANTIFIED. FUTURE
EVENTS AND ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN,
CONTEMPLATED BY OR UNDERLYING THE FORWARD-LOOKING STATEMENTS.
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. In addition to its commercial banking operations, GCB conducts
separate businesses through its three wholly-owned subsidiaries: Superior
Financial Services, Inc. ("Superior Financial"), a consumer finance company;
Superior Mortgage Company ("Superior Mortgage"), a mortgage banking company;
and GCB Acceptance Corporation ("GCB Acceptance"), a subprime automobile
lending company.
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
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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 and three federal funds lines of credit totaling $20 million
at three correspondent banks.
The Company's liquid assets include investment securities available
for sale, federal funds sold and other interest-earning deposits, and cash and
due from banks. These assets represented 14.1% of the total liquidity base at
March 31, 1998, as compared to 12.5% at December 31, 1997. The liquidity base
is generally defined to include deposits, securities sold under repurchase
agreements and short-term borrowed funds and other borrowings.
For the three months ended March 31, 1998, operating activities of the
Company provided $3,688,000 of cash flows. Net income of $2,510,000, adjusted
for non-cash operating activities, including $337,000 in provision for loan
losses and amortization and depreciation of $362,000, provided the majority of
the cash generated from operations.
Investing activities, including lending, used $2,572,000 of the
Company's cash flow during the three months ended March 31, 1998. The
Company's increase in investment securities, federal funds sold and other
interest-earning deposits used $10,807,000 in cash flows, while the net
decrease in loans originated net of principal collected provided $8,270,000 in
cash inflows.
Financing activities used $6,115,000 of the Company's cash flow during
the three months ended March 31, 1998. Net deposit growth provided $2,565,000
in cash inflows, while the net decrease in other borrowings used $8,119,000 in
cash flows. Cash dividends paid to shareholders used an additional $677,000 in
cash flows.
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
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inherent in the Company's daily operations.
Shareholders' equity on March 31, 1998 was $51,959,000 an increase of
$1,847,000 or 3.69%, from $50,112,000 on December 31, 1997. The increase in
shareholders' equity reflects net income for the three months ended March 31,
1998 of $2,510,000 ($1.84 per share, assuming dilution) and proceeds from the
exercise of stock options during the three months ended March 31, 1998 totaling
$20,000. This increase was offset by quarterly dividend payments during the
three months ended March 31, 1998 totaling $677,000 ($.50 per share) and the
reduction in equity associated with the decrease in the value of securities
available for sale of $13,000.
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. All bank holding companies and banks must maintain a minimum total
capital to total risk-weighted assets ratio of 8.00%, at least half of which
must be in the form of core, or Tier 1, capital (consisting of stockholders'
equity, less goodwill). At March 31, 1998, 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.
<TABLE>
<CAPTION>
=============================================================================================================
Capital Ratios at March 31, 1998
- -------------------------------------------------------------------------------------------------------------
Required
Minimum Company GCB PBET
Ratio
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tier 1 risk-based capital 4.00% 11.82% 12.34% 10.54%
- -------------------------------------------------------------------------------------------------------------
Total risk-based capital 8.00% 13.08% 13.60% 11.80%
- -------------------------------------------------------------------------------------------------------------
Leverage Ratio 4.00% 9.33% 9.86% 7.33%
=============================================================================================================
</TABLE>
CHANGES IN RESULTS OF OPERATIONS
NET INCOME. Net income for the three months ended March 31, 1998 was
$2,510,000, an increase of $22,000 or 0.9% as compared to net income of
$2,488,000 for the same period in 1997. The increase
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resulted primarily from an increase in net interest income of $1,024,000, or
15.0%, to $7,834,000 for the three months ended March 31, 1998 from $6,810,000
for the same period in 1997. The increase in net interest income reflects the
Company's continued growth in loan production for the three months ended March
31, 1998, as compared to the same period in 1997, through its expanding branch
network, primarily through increases in real estate and consumer loans. These
increases were offset in part by the $929,000 or 26.6% increase in non-interest
expense to $4,424,000 for the three months ended March 31, 1998 from $3,495,000
for the same period in 1997, attributable primarily to increasing compensation
and occupancy and furniture and equipment expenses associated with the growth
of the Company's branch network.
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 interest-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 months ended March 31, 1998, net interest income was
$7,834,000 as compared to $6,810,000 for the same period in 1997, an increase
of 15.0%. This increase was due primarily to an increase in volume of and yield
on average interest-earning assets, offset by increased balances of and rates
paid on average interest-bearing liabilities.
PROVISION FOR LOAN LOSSES. During the three month period ended March
31, 1998, loan charge-offs were $631,000 and recoveries of charged-off loans
were $379,000. The Company's provision for loan losses decreased to $337,000
for the three months ended March 31, 1998, from $421,000 for the same period in
1997. As a result, the Company's allowance for loan losses increased by $85,000
to $9,239,000 at March 31, 1998 from $9,154,000 at December 31, 1997. The
ratio of the allowance for loan losses to nonperforming assets was 194.83% and
210.15% at March 31, 1998 and December 31, 1997, respectively, and the ratio of
nonperforming assets to total assets was .89% and .81% at March 31, 1998 and
December 31, 1997, respectively.
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 months ended March 31, 1998
was $960,000 as compared to $1,109,000 for the same period in 1997, a decrease
of $149,000, or 13.4%. The largest component of non-interest income is service
charges, commissions and fees, which totaled $708,000 for the three months
ended March 31, 1998 as
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compared to $682,000 for the same period in 1997. This increase of 3.8%
reflects management's continued focus on the generation of fee income through
implementation of additional fees and increasing existing fees.
Other income for the three months ended March 31, 1998 declined
$175,000, or 41.0%, to $252,000 from $427,000 for the same period in 1997. This
decline is due principally to the nonrecurring $191,000 gain, recognized in the
three months ended March 31, 1997, 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 was $4,424,000 for the
three months ended March 31, 1998 compared to $3,495,000 for the same period in
1997.
Personnel costs are the primary element of the Company's non-interest
expenses. For the three months ended March 31, 1998, salaries and benefits
represented $2,644,000 or 59.8% of total noninterest expenses. This was an
increase of $589,000 or 28.7% over the $2,055,000 for the three months ended
March 31, 1997. At March 31, 1997, salaries and benefits represented 58.8% of
total noninterest expenses. These increases were due to opening new branches
and strengthening certain operational areas, which required increased staff at
varying experience and compensation levels and increased employee benefit
costs. Overall, the number of full-time equivalent employees at March 31, 1998
was 272 versus 248 at March 31, 1997, an increase of 9.7%.
Occupancy and furniture and equipment expense also increased during
the three months ended March 31, 1998 compared to the same period in 1997 as
the Company increased its size to 29 branches at March 31, 1998 from 27
branches at March 31, 1997.
Other expenses increased by $324,000, or 38.7%, from the three months
ended March 31, 1997 to the same period in 1998. This increase is reflective of
the Company's new branches which required additional advertising, postage,
telephone and other expenses, as well as increased expenses related to new
programs for customer product delivery.
CHANGES IN FINANCIAL CONDITION
Total assets at March 31, 1998 were $530.4 million, a decrease of $3.7
million, or 0.7%, over 1997's year end total assets of
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$534.1 million. The slight reduction in assets was centered principally in
interest-earning assets as a result of the use of cash to reduce other
borrowings, as further described below.
At March 31, 1998, loans, net of unearned income and allowance for
loan losses, were $432.5 million compared to $441.4 million at December 31,
1997, a decrease of $8.9 million, or 2.0% from December 31, 1997. The decrease
in loans during the first quarter of 1998 is primarily due to payoffs of
certain commercial and commercial real estate loans, as well as a softening in
loan demand in certain markets.
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 heavily involved. Nonaccrual loans increased by
$92,000 during the three month period ended March 31, 1998.
The Company maintains an investment portfolio to provide liquidity and
earnings. Investments at March 31, 1998 with an amortized cost of $38.1 million
had a market value of $38.2 million. At year end 1997, investments with an
amortized cost of $41.3 million had a market value of $41.5 million. This
decrease, resulting from normal maturing of securities, was principally used to
fund part of the decrease in other borrowings.
In view of the softening of loan demand in certain markets during the
quarter ended March 31, 1998, the company elected to deploy some of its
liquidity toward the reduction of its other borrowings. Accordingly, other
borrowings were reduced approximately $8.1 million. Most of the reduction took
place in the Company's advances with the Federal Home Loan Bank of Cincinnati,
which were costing more than the earnings being generated on federal funds
sold. The funding mechanism for the Company's assets consists primarily of
deposits, which were $464.3 million at March 31, 1998. This represents a $2.6
million, or 0.6%, increase from the deposits at year end 1997 of $461.7
million, with most of the increase occurring in lower-costing transaction
accounts. With the softening of loan demand in certain markets, the Company has
not aggressively sought new time deposits during the three months ended March
31, 1998.
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
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<PAGE> 16
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 was effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods. Adoption of this new standard did not have a material impact on the
disclosure of earnings per share in the financial statements of the Company.
In June, 1997, the FASB issued SFAS No. 130, "Reporting of
Comprehensive Income," which establishes standards for reporting and display of
comprehensive income and its components(revenues, expenses, gains and losses)
in a complete set of financial statements. This statement also requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. This
statement is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods for comparative
purposes is required. Adoption of this new standard did not have a material
effect on the Company's financial condition or the results of its operations.
Also in June, 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which establishes standards
for reporting by public companies of operating segments in annual financial
statements and requires that those enterprises also report selected information
about operating segments in interim financial reports issued to shareholders.
This statement also establishes standards for related disclosures about
products and services, geographic areas and major customers. This statement
requires the reporting of financial and descriptive information about an
enterprise's reportable operating segments. This statement is effective for
periods beginning after December 15, 1997. In the initial year of application,
comparative information for earlier years must be restated. The Company is
evaluating SFAS No. 131 to determine the impact, if any, on the Company's
reporting and disclosure requirements. The Company intends to adopt the
reporting requirements of SFAS No. 131 as of December 31, 1998.
During February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Post-retirement Benefits." The
16
<PAGE> 17
statement revises employers' disclosures about pension and other
post-retirement benefit plans. It does not change the measurement or
recognition of those plans. The statement is effective for fiscal years
beginning after December 15, 1997. Restatement of disclosures for earlier
periods for comparative purposes is required. The Company is evaluating SFAS
No. 132 to determine the impact on the Company's reporting and disclosure
requirements.
17
<PAGE> 18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
18
<PAGE> 19
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
None
Item 5. Other Information
None.
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
19
<PAGE> 20
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: 5/8/98 Greene County Bancshares, Inc.
------------- ------------------------------
Registrant
Date: 5/8/98 /s/
------- --------------------------------------
R. Stan Puckett
President and CEO
(Duly authorized officer)
Date: 5/8/98 /s/
------- --------------------------------------
William F. Richmond
Sr. Vice President and Chief
Financial Officer
(Principal financial and accounting officer)
20
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