U.S. Securities and Exchange Commission
Washington, D.C. 20549
-----------------------------------
Form 10-QSb
[X] Quarterly Report Under Section 13 of 15(D) of the
Securities and Exchange Act of 1934
for the Quarter Ended September 30, 2001
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
United States 14-1809721
-------------------- ----------
(State or Other Jurisdiction
of Incorporation or Organization) (I.R.S. Employer Identification Number)
302 Main Street, Catskill, New York 12414
----------------------------------- ----------
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code: (518) 943-2600
Check Whether the Registrant: (1) has Filed All Reports Required to be Filed by
Section 13 or 15(D) of the Securities Exchange Act of 1934 During the Preceding
12 Months (Or for Such Shorter Period That the Registrant was Required to File
Such Reports) and (2) has Been Subject to Such Filing Requirements for the Past
90 Days.
Yes X No
__________ ________
As of November 12, 2001, the Registrant Had 2,152,835 shares of common stock
issued At $ .10 par value, and 2,002,855 were outstanding.
GREENE COUNTY BANCORP, INC.
INDEX
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements
* Consolidated Statements of Financial Condition 3
* Consolidated Statements of Income 4
* Consolidated Statements of Comprehensive Income 5
* Consolidated Statements of Changes in Shareholders' Equity 6
* Consolidated Statements of Cash Flows 7
* Notes to Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10-17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
Greene County Bancorp, Inc.
Consolidated Statements of Financial Condition
As of September 30, 2001 and June 30, 2001
September 30, 2001 June 30, 2001
------------ ----------
(Unaudited)
ASSETS
Cash and due from banks $4,044,731 $5,336,195
Federal funds sold 15,289,168 13,468,163
--------------- -------------
Total cash and cash equivalents 19,333,899 18,804,358
Investment securities, at fair value 48,621,850 48,875,229
Federal Home Loan Bank stock, at cost 939,600 939,600
Loans 116,909,867 110,920,369
Less: Allowance for loan losses (903,479) (886,081)
Unearned origination fees and costs, net (271,916) (277,277)
--------------- ---------------
Net loans receivable 115,734,472 109,757,011
Premises and equipment 4,972,325 5,052,208
Accrued interest receivable 1,333,246 1,357,239
Prepaid expenses and other assets 331,207 288,914
Other real estate owned 30,229 30,229
--------------- ---------------
Total assets $191,296,828 $185,104,788
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing deposits $18,006,475 $18,418,308
Interest bearing deposits 141,647,483 135,774,206
--------------- ---------------
Total deposits 159,653,958 154,192,514
Borrowings from FHLB 5,000,000 5,000,000
Accrued expenses and other liabilities 987,680 623,038
Accrued income taxes 324,839 195,646
--------------- ---------------
Total liabilities 165,966,477 160,011,198
Shareholders' equity
Preferred stock,
Authorized 1,000,000 at September 30,
and June 30, 2001; ---- ---
Common stock, par value $.10 per share;
Authorized: 12,000,000 at September 30,
and June 30, 2001;
Issued: 2,152,835 at September 30,
and June 30, 2001;
Outstanding: 2,014,055 at September 30, 2001;
2,040,355 at June 30, 2001 215,284 215,284
Additional paid-in capital 10,193,008 10,188,573
Retained earnings 16,106,172 15,993,025
Accumulated other comprehensive income 955,041 499,022
Less: Treasury stock, 138,780 at September 30, 2001;
112,480 at June 30, 2001, shares at cost (1,449,438) (1,075,923)
Unearned stock-based compensation (214,436) (229,753)
Unearned ESOP shares 56,395 at September 30, 2001;
58,516 at June 30, 2001,shares at cost (475,280) (496,638)
--------------- ---------------
Total shareholders' equity 25,330,351 25,093,590
--------------- ---------------
Total liabilities and shareholders' equity $191,296,828 $185,104,788
=============== ===============
See notes to consolidated financial statements.
Greene County Bancorp, Inc.
Consolidated Statements of Income
For the Three Months Ended September 30, 2001 and 2000
(Unaudited)
2001 2000
---- ----
Interest income:
Loans $2,187,944 $1,872,727
Investment securities 565,665 523,453
Mortgage-backed securities 104,126 110,742
Tax free securities 107,573 114,550
Interest bearing deposits and federal funds sold 143,278 176,487
----------- -----------
Total interest income 3,108,586 2,797,959
Interest expense:
Interest on deposits 1,255,590 1,202,099
Interest on borrowings 85,825 167,475
----------- -----------
Total interest expense 1,341,415 1,369,574
Net interest income 1,767,171 1,428,385
Less: Provision for loan losses 30,000 15,000
----------- -----------
Net interest income after provision for loan losses 1,737,171 1,413,385
----------- -----------
Noninterest income:
Service charges on deposit accounts 186,525 122,791
Other operating income 165,772 128,066
----------- -----------
Total noninterest income 352,297 250,857
Noninterest expense:
Salaries and employee benefits 791,901 703,930
Occupancy expense 82,967 91,543
Equipment and furniture expense 110,212 77,714
Service and data processing fees 152,654 126,530
Office supplies 40,069 23,786
Other 438,711 380,417
----------- -----------
Total noninterest expense 1,616,514 1,403,920
Income before provision for income taxes 472,954 260,322
Provision for income taxes 129,000 48,658
----------- -----------
Net income $343,954 $211,664
=========== ===========
Weighted average EPS $0.17 $0.11
Weighted average shares outstanding 1,973,879 1,976,727
Diluted EPS $0.17 $0.11
Diluted average shares outstanding 2,018,551 1,984,976
See notes to consolidated financial statements.
Greene County Bancorp, Inc.
Consolidated Statements of Comprehensive Income
For the Three Months Ended September 30, 2001 and 2000
(Unaudited)
2001 2000
Net income $343,954 $211,664
Other comprehensive income (loss):
Reclassification adjustment, net of income tax expense ($6,325) --- 8,384
Unrealized holding gain arising during the three months
ended September 30, 2001 and 2000, net of tax expense of
($304,012) and ($185,380), respectively. 456,019 237,352
-------------- ------------
Total other comprehensive income 456,019 245,736
-------------- ------------
Comprehensive income $799,973 $457,400
============== ============
See notes to consolidated financial statements.
Greene County Bancorp, Inc.
Consolidated Statements of Changes in Shareholders' Equity
For the Three Months Ended September 30, 2001 and 2000
Accumulated
Additional Other
Capital Paid - In Retained Comprehensive
Stock Capital Earnings Income
Balance at
June 30, 2000 $215,284 $10,319,859 $15,526,092 ($524,546)
ESOP shares earned (768)
Stock-based
compensation
earned
Dividends paid (247,876)
Net income 211,664
Change in unrealized
gain (loss) net 245,736
----
--------------- ----------------- ---------------- --------------
Balance at
September 30, 2000 $215,284 $10,319,091 $15,489,880 ($278,810)
=============== ================= ================ ==============
Balance at
June 30, 2001 $215,284 $10,188,573 $15,993,025 $499,022
ESOP shares earned 4,435
Stock-based
compensation
earned
Treasury stock
repurchased
Net income 343,954
Dividends paid (230,807)
Change in unrealized
gain, net 456,019
Balance at --------------- ----------------- ---------------- --------------
September 30, 2001 $215,284 $10,193,008 $16,106,172 $955,041
=============== ================== ================ ==============
Unearned Unearned Total
Stock-based Treasury ESOP Shareholders'
Compensation Stock Shares Equity
Balance at
June 30, 2000 ($333,690) ($1,019,976) ($589,074) $23,593,949
ESOP shares earned 22,368 21,600
Stock-based
compensation
earned 17,876 17,876
Dividends paid (247,876)
Net income 211,664
Change in unrealized
gain (loss) net 245,736
-------------- ----------- ------------- -------------
Balance at
September 30, 2000 ($315,814) ($1,019,976) ($566,706) $23,842,949
============== =========== ============= =============
Balance at
June 30, 2001 ($229,753) ($1,075,923) ($496,638) $25,093,590
ESOP shares earned 21,358 25,793
Stock-based
compensation
earned 15,317 15,317
Treasury stock
repurchased (373,515) (373,515)
Net income 343,954
Dividends paid (230,807)
Change in unrealized
gain, net 456,019
Balance at
-------------- ------------- ------------- -------------
September 30, 2001 ($214,436) ($1,449,438) ($475,280) $25,330,351
============== ============= ============= ===============
See notes to consolidated financial statements.
Greene County Bancorp, Inc.
Consolidated Statements of Cash Flows
For the Three Months Ended September 30, 2001 and 2000
2001 2000
------ ------
Cash flows from operating activities:
Net Income $343,954 $211,664
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation 108,675 88,000
Net amortization (accretion) of premiums (discounts) 33,881 (5,474)
Provision for loan losses 30,000 15,000
ESOP and other stock-based compensation earned 36,675 40,244
Loss on sale of investments --- 54,037
Net increase in accrued income taxes 129,193 82,056
Net decrease (increase) in accrued interest receivable 23,993 (95,647)
Net decrease (increase) in prepaid and other assets (42,293) 106,090
Net increase (decrease) in other liabilities 102,231 (101,440)
---------- ------------
Net cash provided by operating activities 766,309 394,530
Cash flows from investing activities:
Proceeds from maturities of securities 2,420,123 1,289,950
Proceeds from sale of securities and other investments --- 2,226,765
Purchases of securities and other investments (269,304) (8,267,772)
Principal payments on securities 819,459 978,642
Principal payments on mortgage-backed securities 1,135,427 525,967
Purchases of mortgage-backed securities (3,141,191) (2,980,953)
Net (increase) in loans receivable (6,007,461) (1,112,441)
Purchases of premises and equipment (50,943) (34,295)
---------- ------------
Net cash used in investing activities (5,093,890) (7,374,137)
Cash flows from financing activities:
Dividends paid (230,807) (247,876)
Purchase of treasury stock (373,515) ---
Net increase (decrease) in deposits 5,461,444 (710,780)
----------- ----------
Net cash provided by (used in) financing activities 4,857,122 (958,656)
Net increase (decrease) in cash and cash equivalents 529,541 (7,938,263)
Cash and cash equivalents at beginning of period 18,804,358 15,813,605
---------- ----------
Cash and cash equivalents at end of period $19,333,899 $7,875,342
============ =============
See notes to consolidated financial statements.
Greene County Bancorp, Inc.
Notes to Financial Statements
As of and for the Three Months Ended September 30, 2001 and 2000
(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, 2001, such information and footnotes have not been duplicated herein. In the
opinion of management, all adjustments (consisting of only normal recurring
items) necessary for a fair presentation of the financial position and results
of operations and cash flows for the periods presented have been included. All
material inter-company accounts and transactions have been eliminated in the
consolidation. The results of operations and other data for the three months
ended September 30, 2001 are not necessarily indicative of results that may be
expected for the entire fiscal year ending June 30, 2002.
(2) Nature of Operations
The Bank has six full service offices and an operations center located in its
market area consisting of Greene County and southern Albany County, New York.
The Bank is primarily engaged in the business of attracting deposits from the
general public in the Bank's market area, and investing such deposits, together
with other sources of funds in loans and investment securities.
(3) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Material estimates that are
particularly susceptible to significant change in the near term related to the
determination of the allowance for loan losses and valuation of other real
estate owned ("OREO").
While management uses available information to recognize losses on loans and
OREO future additions to the allowance for loan losses (the "Allowance"), or
OREO write-downs, may be necessary based on changes in economic conditions,
asset quality or other factors. In addition, various regulatory authorities, as
an integral part of their examination process, periodically review the Company's
Allowance and the carrying value of OREO and other assets. Such authorities may
require the Company to recognize additions to the Allowance and/or write down
the carrying value of OREO or other assets based on their judgments of
information available to them at the time of their examination.
(4) Charter Conversion
On August 15, 2000, the Board of Directors of the Company unanimously approved a
plan to convert the Company's charter from a Delaware corporation regulated by
the New York Superintendent of Banks and the Board of Governors of the Federal
Reserve System to a Federal corporation regulated by the Office of Thrift
Supervision (the "OTS"). On April 2, 2001, the OTS approved the charter
conversion, which was approved by the stockholders of the Company on November
27, 2000. The mutual holding company (the "MHC") of the Company also received
OTS approval of its conversion from a state to federal charter on that date.
Among other things, the charter conversions will permit the MHC to waive the
receipt of dividends paid by the Company without causing dilution to the
ownership interest of the Company's minority stockholders in the event of a
conversion of the MHC to stock form. The waiving of dividends will increase
Company resources available for stock repurchases, payment of dividends to
minority stockholders, and investments.
As a financial institution subsidiary of the Company following the charter
conversion, the Bank must maintain at least 65% of its "portfolio assets" (total
assets minus goodwill and other intangible assets, office property and specified
liquid investments up to 20% of total assets) in certain "qualified thrift
investments" (primarily loans to purchase, refinance, construct, improve or
repair domestic residential housing, home equity loans, securities backed by or
representing an interest in mortgages on domestic residential housing, and
Federal Home Loan Bank stock) in at least 9 months out of every 12 month period.
A savings institution that fails the qualified thrift lender test is subject to
certain operating restrictions and may be required to convert to a bank charter.
At September 30, 2001, the Bank maintained 75.4% of its portfolio assets in
qualified thrift investments.
(5) Earnings Per Share
Basic earnings per share ("EPS") on common stock are computed by dividing net
income by the weighted average number of shares of common stock outstanding for
the period. Shares of restricted stock are not considered outstanding for the
calculation of basic earnings per share until they become fully vested. Diluted
earnings per share are computed in a manner similar to that of basic earnings
per share except that the weighted-average number of common shares outstanding
is increased to include the number of incremental common shares that would have
been outstanding under the treasury stock method if all potentially dilutive
common (such as stock options and unvested restricted stock) issued became
vested during the period. Unallocated common shares held by the ESOP are not
included in the weighted-average number of common shares outstanding for either
the basic or diluted earnings per share calculations.
Weighted Average
Number of Shares
Three Months Ended Net Income Outstanding Earnings Per Share
September 30, 2001: $343,954
Basic EPS 1,973,879 $0.17
Diluted EPS 2,018,551 $0.17
September 30, 2000: $211,664
Basic EPS 1,976,727 $0.11
Diluted EPS 1,984,976 $0.11
(6) Dividends
The Board of Directors approved a semi-annual $0.25 cash dividend on July 18,
2001, for shareholders of record August 15, 2001, payable September 1, 2001. The
dividend reflected an annual cash dividend rate of $0.50 per share, which
represents an increase from the previous annual cash dividend rate of $0.24 per
share. The increase in the dividend paid out is a result of the MHC waiving
receipt of dividends for the current period.
Impact of Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board issued Statement No. 141,
"Business Combinations", which requires all business combinations to be
accounted for under the purchase method of accounting, thus eliminating the
pooling of interest method of accounting. The adoption of this statement in
fiscal 2003 will have no impact on the Company's consolidated financial
statements.
In July 2001, the Financial Accounting Standards Board issued Statement No. 142,
"Goodwill and Other Intangible Assets", which requires acquired intangible
assets (other than goodwill) to be amortized over their useful economic life,
while goodwill and any acquired intangible assets with an indefinite useful
economic life would not be amortized, but would be reviewed for impairment on an
annual basis based upon guidelines specified by the Statement. The adoption of
this statement in fiscal 2003 will have no impact on the Company's consolidated
financial statements.
In August 2001, the Financial Accounting Standards Board issued Statement No.
143, "Accounting for Asset Retirement Obligations", which requires the fair
value of a liability for an asset retirement obligation to be recognized in the
period in which it is incurred if a reasonable estimate of fair value can be
made. The associated asset retirement costs are capitalized as part of the
carrying amount of long-lived assets. SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. The Company is currently reviewing this statement
to determine its effect on the Company's financial statements.
In August 2001, the Financial Accounting Standards Board issued Statement No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of", and the accounting and reporting
provisions of APB No. 30. SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and is effective
for fiscal years beginning after December 15, 2001, and interim periods within
those fiscal years. The Company is currently reviewing this statement to
determine its effect on the Company's financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
General
The Company's results of operations depend primarily on its net interest income,
which is the difference between the income earned on the Company's loan and
securities portfolios and its cost of funds, consisting of the interest paid on
deposits and borrowings. Results of operations are also affected by the
Company's provision for loan losses, income and expense pertaining to other real
estate owned, gains and losses from sales of securities, noninterest income and
noninterest expense. Noninterest income consists primarily of fees and service
charges. The Company's noninterest expense consists principally of compensation
and employee benefits, occupancy, equipment and data processing, and other
operating expenses. Results of operations are also significantly affected by
general economic and competitive conditions, changes in interest rates, as well
as government policies and actions of regulatory authorities. Additionally,
future changes in applicable law, regulations or government policies may
materially affect the Company.
Special Note Regarding Forward Looking Statements
This annual report 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. These forward-looking statements, which are
included in this Management's Discussion and Analysis and elsewhere in this
quartely report, describe future plans or strategies and include the Company's
expectations of future financial results. The words "believe," "expect,"
"anticipate," "project," and similar expressions identify forward-looking
statements. The Company's ability to predict results or the effect of future
plans or strategies or qualitative or quantitative changes based on market risk
exposure is inherently uncertain. Factors that could affect actual results
include but are not limited to:
(a) changes in general market interest rates,
(b) general economic conditions,
(c) legislative and regulatory changes,
(d) monetary and fiscal policies of the U.S. Treasury and the Federal Reserve,
(e) changes in the quality or composition of the Company's loan and investment portfolios,
(f) deposit flows,
(g) competition, and
(h) demand for financial services in the Company's market area.
These factors should be considered in evaluating the forward-looking statements,
and undue reliance should not be placed on such statements, since results in
future periods may differ materially from those currently expected because of
various risks and uncertainties.
Comparison of Financial Condition as of September 30, 2001 and June 30, 2001
ASSETS. Total assets increased to $191.3 million at September 30, 2001 from
$185.1 million at June 30, 2001, an increase of $6.2 million, or 3.3%. The
increase in assets was primarily due to loan growth that was funded by increases
in interest-bearing deposits. The merger of a local competitor with an out-of-
area institution has helped in efforts to promote the Bank's lending and deposit
products.
CASH AND CASH EQUIVALENTS. Cash and due from banks decreased to $4.0 million at
September 30, 2001 from $5.3 million at June 30, 2001, a decrease of $1.3
million, or 24.5% as a result of fluctuations due to normal deposit account
clearing activities and vault cash needs, based on customer cash needs. Federal
funds sold increased to $15.3 million at September 30, 2001 from $13.5 million
at June 30, 2001 an increase of $1.8 million, or 13.3%. Federal funds sold are
also a function of account clearing needs and deposit levels, which can
fluctuate significantly on a daily basis.
INVESTMENT SECURITIES. Investment securities decreased to $48.6 million at
September 30, 2001 as compared to $48.9 million at June 30, 2001, a
decrease of $0.3 million, or 0.6%. Despite the relatively insignificant
change in the level of investment securities a shift in the portfolio mix
did occur between September 30, 2001 and June 30, 2001. At September 30,
2001, the Company no longer had a position in U.S. Treasury securities
compared to $1.0 million or 2.1% of the investment portfolio at June 30,
2001. Mortgage-backed securities represented $10.5 million or 21.6% of the
investment portfolio at September 30, 2001, as compared to $8.8 million or
18.0% of the investment portfolio at June 30, 2001. The increase in
mortgage-backed securities of $1.7 million or 19.3% was a result of
purchases of $3.0 million, offset by principle payments of $1.1 million,
maturities of $0.7 million and net premium and discount accretion or
amortization. A decrease in asset-backed securities of $0.8 million or
24.2% to $2.5 million or 5.2% of investments at September 30, 2001 from
$3.3 million or 6.8% at June 30, 2001 was due to principal payments.
(Rounded to nearest thousand) Market value at Percentage Market value at Percentage
Sept. 30, 2001 of portfolio June 30, 2001 of portfolio
U.S. Treasuries $--- 0.0% $1,005 2.0%
U.S. government agencies 1,380 2.8% 1,794 3.7%
State and political subdivisions 9,668 19.9% 9,420 19.3%
Mortgage-backed securities 10,488 21.6% 8,783 18.0%
Asset-backed securities 2,514 5.2% 3,300 6.8%
Corporate debt securities 23,347 48.0% 23,432 47.9%
----------------- ------------- ---------------- ------------
Total debt securities 47,397 97.5% 47,734 97.7%
Equity securities and other 1,225 2.5% 1,141 2.3%
----------------- ------------- ---------------- -------------
Total available-for-sale securities $48,622 100.0% $48,875 100.0%
================= ============= ================ =============
LOANS. Net loans receivable increased to $115.7 million at September 30, 2001
from $109.8 million at June 30, 2001, an increase of $5.9 million, or 5.4%. The
increase in loans was a result of the generally decreasing market interest rate
environment which increased customer demand, particularly for fixed-rate
residential mortgage loans. Another factor contributing to the increase in the
Bank's market share of the local lending demand was resulting from a merger of a
former competitor with an out-of-area institution. The opening of two additional
branches in Tannersville and Westerlo, New York within the last eighteen months
has also enhanced loan demand. Growth primarily occurred in residential real
estate mortgages of $4.7 million, or 5.2% to $94.2 million at September 30,
2001, including an increase of $1.8 million to $3.8 million in construction
loans, and an increase of $1.3 million, or 25.2% to $6.6 million in commercial
real estate mortgages.
(Rounded to nearest thousand) At Percentage At Percentage
Sept. 30, 2001 of portfolio June 30, 2001 of portfolio
Real estate mortgages
Residential $94,181 80.6% $89,528 80.7%
Commercial 6,560 5.6% 5,239 4.7%
Home equity loans 6,346 5.4% 6,138 5.6%
Commercial loans 3,152 2.7% 3,291 3.0%
Installment loans 6,060 5.2% 6,128 5.5%
Passbook loans 611 0.5% 596 0.5%
---------------- ------------- --------------- --------
Total loans $116,910 100.0% $110,920 100.0%
================ ============= =============== ========
ALLOWANCE FOR LOAN LOSS. The allowance for loan loss is established through a
provision for loan losses based on management's evaluation of the risk inherent
in the loan portfolio, the composition of the loan portfolio, specific impaired
loans and current economic conditions. Such evaluation, which includes a review
of all loans on which full collectibility may not be reasonably assured,
considers among other matters, the estimated net realizable value or the fair
value of the underlying collateral, economic conditions, historical loan loss
experience and other factors that warrant recognition in providing for an
adequate loan loss allowance. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Bank's
allowance for loan losses and valuation of OREO. Such agencies may require the
Bank to recognize additions to the allowance based on their judgment about
information available to them at the time of their examination. The allowance
for loan losses is increased by a provision for loan losses (which results in a
charge to expense) and is reduced by net charge-offs. Management will continue
to monitor and modify the level of the allowance for loan losses in order to
maintain it at a level which management considers adequate to provide for
potential loan losses.
Analysis of the Allowance for Loan Losses
_________________________________________
September 30, 2001 June 30, 2001
Balance at the beginning of the period $886,081 $866,443
Charge-offs:
Commercial real estate mortgage loans --- 26,432
Installment loans to individuals 14,793 50,483
------------- ----------
Total loans charged off 14,793 76,915
Recoveries:
Installment loans to individuals 2,191 36,553
-------------- ----------
Total recoveries 2,191 36,553
------------- ----------
Net charge-offs 12,602 40,362
Provisions charged to operations 30,000 60,000
-------------- ----------
Balance at the end of the period $903,479 $886,081
============== ==========
Ratio of net charge-offs to average loans outstanding 0.01% 0.04%
Ratio of net charge-offs to nonperforming assets 1.88% 5.22%
Allowance for loan loss to nonperforming loans 140.84% 119.18%
Allowance for loan loss to net loans 0.78% 0.81%
Nonaccrual Loans and Nonperforming Assets
_________________________________________
Loans are reviewed on a regular basis. Management determines that a loan is
impaired or nonperforming when it is probable at least a portion of the loan
will not be collected due to an irreversible deterioration in the financial
condition of the borrower or the value of the underlying collateral. When a loan
is determined to be impaired, the measurement of the loan is based on the
present value of estimated future cash flows, except that all
collateral-dependent loans are measured for impairment based on the fair value
of the collateral. Management places loans on nonaccrual status once the loans
have become over 90 days delinquent. Nonaccrual is defined as a loan in which
collectibility is questionable and therefore interest on the loan will no longer
be recognized on an accrual basis. A loan does not have to be 90 days delinquent
in order to be classified as nonperforming. Other real estate owned is
considered nonperforming. The Bank had no accruing loans delinquent more than 90
days at September 30, 2001 or June 30, 2001.
Analysis of Nonaccrual Loans and Nonperforming Assets
_____________________________________________________
At September 30, 2001 At June 30, 2001
Nonaccruing loans:
Real estate mortgage loans
Residential mortgages loans (one- to four-family) $618,513 $660,607
Commercial mortgage loans --- 71,711
Home equity 15,004 2,380
Installment loans to individuals 7,981 8,770
------------- -- ------------
Total nonaccruing loans 641,498 743,468
Real Estate Owned:
Commercial mortgage loans 30,229 30,229
------------- ---------------
Total real estate owned 30,229 30,229
------------- ---------------
Total nonperforming assets $671,727 $773,697
============= ===============
Total nonperforming assets
as a percentage of total assets 0.35% 0.42%
Total nonperforming loans to total loans 0.55% 0.67%
DEPOSITS. Total deposits increased to $159.7 million at September 30, 2001 from
$154.2 million at June 20, 2001, an increase of $5.5 million or 3.6%. The most
significant change in deposits occurred with certificates of deposit that
increased $3.3 million or 5.7%, to $61.4 million at September 30, 2001. The Bank
has attempted to emphasize higher rate specials on the longer-term certificates
of deposits in order to attract long-term funding during the low market interest
rate environment. Decreases occurred in non-interest bearing accounts such as
checking accounts and certain savings accounts. Non-interest bearing accounts
decreased $0.4 million, or 2.2%, to $18.0 million at September 30, 2001 as
compared to $18.4 million at June 30, 2001. Savings accounts decreased $1.2
million, or 2.1%, to $55.8 million at September 30, 2001 as compared to $57.0
million at June 30, 2001. Management believes the decreases in these categories
resulted from customers paying local school and property taxes at the end of the
September 2001. Money market account balances continued to increase $2.7
million, or 29.4%, to $11.9 million at September 30, 2001 as compared to $9.2
million at June 30, 2001. Customers appear to be attracted to the slightly
higher rate offered on the money market accounts as compared to the standard
savings accounts. The money market accounts also offer more flexibility than a
certificate of deposit resulting in a lower rate. A shift in the level of
investment in the stock market to more conservative cash accounts also appears
to have enhanced deposit growth.
(Rounded to nearest thousand) At Percentage At Percent
September 30, 2001 of June 30, 2000 of
portfolio portfolio
Noninterest bearing deposits $18,006 11.3% $18,418 11.9%
Certificates of deposit 61,376 38.5% 58,113 37.7%
Savings deposits 55,769 34.9% 57,021 37.0%
Money market deposits 11,867 7.4% 9,194 6.0%
NOW deposits 12,636 7.9% 11,446 7.4%
---------------- ------------ -------------- ------------
Total deposits $159,654 100.0% $154,192 100.0%
================ ============ ============== ============
BORROWINGS FROM FHLB. There was no change in the borrowing between
June 30, 2001 and September 30, 2001.
At September 30 and June 30, 2001, the Bank had the following borrowings:
Amount Rate Maturity Date
$2,500,000 6.82% -Fixed 09/02/2004
2,500,000 6.80% -Fixed 10/04/2005
------------------
$5,000,000
==================
ACCRUED EXPENSES AND OTHER LIABILITIES. At September 30, 2001, accrued expenses
and other liabilities amounted to approximately $1.0 million as compared to $0.6
million at June 30, 2001, an increase of $0.4 million. The increase was
primarily due to increased deferred taxes associated with unrealized gains on
available for sale securities. Another reason for the increase was due to an
increase in accrued expenses associated with data processing that result from a
change in the billing cycle of the processor creating a longer lag period
between the date of service and the billing date requiring a higher accrual.
EQUITY. The primary changes in equity included changes in retained earnings,
accumulated comprehensive income and treasury stock. Retained earnings increased
$113,147 due to net income of $343,954 offset by dividends paid of $230,807.
Unrealized gains on investment securities caused accumulated other comprehensive
income to increase by $456,019 to $955,041 at September 30, 2001. Treasury stock
increased $373,515 to $1,449,438 due to the repurchase of 26,300 shares of
common stock at an average cost of $14.20. The remaining changes in equity were
due to amortization of compensation expense associated with the Employee Stock
Ownership Plan ("ESOP") and stock-based compensation expense associated with the
Management Recognition and Retention Plan.
Comparison of Operating Results for the Three Months Ended
September 30, 2001 and 2000
INTEREST INCOME. Total interest income increased by $310,627, or 11.1%, to
$3,108,586 for the quarter-ended September 30, 2001 as compared to $2,797,959
for the quarter ended September 30, 2000. Interest income on loans amounted to
$2,187,944 for the quarter ended September 30, 2001 as compared to $1,872,727
for the quarter-ended September 30, 2000, an increase of $315,217, or 16.8%. The
change was attributable to the change in loan volume. Average loans receivable
for the quarter-ended September 30, 2001 amounted to $114.4 million as compared
to $98.0 million for the quarter-ended September 30, 2000, an increase of $16.4
million or 16.7%. The average yield on such loans remained relatively consistent
at 7.64% for the quarter-ended September 30, 2001 compared to 7.65% for the
quarter-ended September 30, 2000. Total interest on investment securities
including mortgage-backed securities and tax-free securities increased to
$777,364 for the quarter-ended September 30, 2001 as compared to $748,745 for
the quarter-ended September 30, 2000, an increase of $28,619 or 3.8%. However,
average investment securities decreased to $48.0 million for the three-month
period ended September 30, 2001 from $50.3 million for the three-month period
ended September 30, 2000, a decrease of $2.3 million or 4.6%. The decrease in
average balance was offset by an increase in yield on investments of 52 basis
points to 6.35% for the quarter-ended September 30, 2001 as compared to 5.83%
for the quarter-ended September 30, 2000. The primary reason for the increase in
yield was due to the purchase of higher yielding corporate securities between
September 30, 2000 and December 31, 2000. A significant number of purchases were
made during this timeframe, which preceded most of the Federal Reserve interest
rate cuts. Interest earned on interest bearing deposits and federal funds sold
decreased by $33,209 and was primarily affected by the decrease in the federal
funds rate, which was 6.60% at September 30, 2000 as compared to 2.75% at
September 30, 2001.
INTEREST EXPENSE. Total interest expense amounted to $1,341,415 for the
quarter-ended September 30, 2001, as compared to $1,369,574 for the
quarter-ended September 30, 2000, a decrease of $28,159, or 2.1%. Interest
expense on deposits increased $53,491 or 4.5%, to $1,255,590 for the
quarter-ended September 30, 2001, as compared to $1,202,099 for the
quarter-ended September 30, 2000. The increase in expense was a result of
increased average deposits, but was offset by average rate decreases. Average
deposits increased $23.6 million or 17.6% to $157.6 million for the
quarter-ended September 30, 2001 as compared to $134.0 million for the
quarter-ended September 30, 2000. The average rate for the three-month period
ended September 30, 2001 amounted to 3.19% as compared to 3.59% for the
three-month period ended September 30, 2000, a decrease of 40 basis points.
Interest expense on borrowings amounted to $85,825 for the quarter-ended
September 30, 2001, and $167,475 for the quarter-ended September 30, 2000, a
decrease of $81,650, or 48.8%. As a result of growth in deposits the level of
borrowings was decreased resulting in the lower interest expense.
NET INTEREST INCOME. Net interest income is a function of interest income and
interest expense. As a result of changes in interest-earning assets and
interest-bearing liabilities, net interest spread increased to 3.58% for the
three-month period ended September 30, 2001 as compared to 3.26% for the
three-month period ended September 30, 2000, an improvement of 32 basis points.
Also, net interest margin increased to 3.91% for the three-month period ended
September 30, 2001 as compared to 3.61% for the three-month period ending
September 30, 2000, an improvement of 30 basis points. The improvement in net
interest income was the primary reason for the overall improvement in net
income.
PROVISIONS 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 to absorb future charge-offs and
loans deemed uncollectible. 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 assesses the allowance
for loan losses on a quarterly basis and makes provisions for loan losses in
order to maintain the adequacy of the allowance.
Provisions for loan losses for the quarter-ended September 30, 2001 amounted to
$30,000 as compared to $15,000 for the quarter-ended September 30, 2000.
NONINTEREST INCOME. Noninterest income amounted to $352,297 for the
quarter-ended September 30, 2001, as compared to $250,857 for the quarter-ended
September 30, 2000, an increase of $101,440, or 40.4%. A component of
noninterest income is service charges on deposit accounts that amounted to
$186,525 for the quarter-ended September 30, 2001 as compared to $122,791 for
the quarter-ended September 30, 2000, an increase of 63,734, or 51.9%. The
reason for the increase in service charges was slightly higher fees and growth
in the number of accounts. Other operating income, including fees associated
with ATMs, debit cards and merchant credit card processing products, has
continued to improve as the Company expanded. Other operating income increased
$37,706, or 29.4% to $165,772 for the quarter-ended September 30, 2001, as
compared to $128,066 for the quarter-ended September 30, 2000.
NONINTEREST EXPENSE. Total noninterest expense amounted to $1,616,514 for the
quarter-ended September 30, 2001, and $1,403,920 for the quarter-ended September
30, 2000, an increase of $212,594, or 15.1%. The overall increase in
non-interest expense can be attributed to the opening of new branches and
expenses associated with increase volume of loans and deposit accounts.
Compensation expenses increased $87,971, or 12.5% as a result of growth in
staffing levels associated with the new branch in Westerlo, New York. The
completion of several projects at the branches contributed to lower occupancy
costs. Equipment and furniture expense increased $32,498, or 41.8% and was
associated with opening of the branch in Westerlo and some upgrades in computer
processing equipment. Items contributing to an increase of $58,293, or 15.3% in
other operating expenses include additional telephone, postage, and courier
services due to the increase in volume and number of deposit and loans.
INCOME TAXES. The provision for income taxes directly reflects the expected tax
associated with the revenue generated for the given year and certain regulatory
requirements. Income taxes amounted to $129,000 for the quarter-ended September
30, 2001 and $48,658 for the quarter-ended September 30, 2000, an increase of
$80,342, or 165.1%. The effective tax rate increased to 27.3% for the quarter
ended September 30, 2001, as compared to 18.7% for the quarter ended September
30, 2000 in anticipation of the effective rate required for the fiscal year
ending June 30, 2002. A major reason for the change in effective rate is due to
the expected change as a percentage of total income that municipal securities
are expected to contribute during the fiscal year.
Item 3. Market Risk
Market risk is the risk of loss in a financial instrument arising from adverse
changes in market rates or prices such as interest rates, foreign currency
exchange rates, commodity prices, and equity prices. The Company's most
significant form of market risk is interest rate risk since the majority of the
Company's assets and liabilities are sensitive to changes in interest rates. The
Company's primary sources of funds are deposits and proceeds from principal and
interest payments on loans, mortgage-backed securities and debt securities, with
lines of credit available through the Federal Home Loan Bank as needed. While
maturities and scheduled amortization of loans and securities are predictable
sources of funds, deposit outflows, mortgage prepayments, and lending activities
are greatly influenced by general interest rates, economic conditions and
competition.
During the last year the declining market interest rate environment has helped
to improve the net interest spread and margin; however, an increasing market
interest rate environment may have the reverse effect.
Mortgage loan commitments totaled $3.8 million at September 30, 2001. The unused
portion of overdraft lines of credit amounted to $0.8 million, the unused
portion of home equity lines of credit amounted to $0.5 million, and the unused
portion of commercial lines of credit amounted to $1.1 million at September 30,
2001. The Company anticipates that it will have sufficient funds available to
meet current loan commitments based on the level of cash and cash equivalents as
well as the available for sale investment portfolio.
The Bank met all capital regulatory at September 30, 2001 and 2000.
Shareholders' equity represented 13.2% of total assets at September 30, 2001 and
13.6% of total assets of September 30, 2000.
Part II. Other Information
Item 1. Legal Proceedings
The Company is not engaged in any material legal proceedings
at the present time.
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Not applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
Greene County Bancorp, Inc.
Date: November 14, 2001
By: /s/ J. Bruce Whittaker
J. Bruce Whittaker
President and Chief Executive Officer
Date: November 14, 2001
By: /s/ Michelle Plummer
Michelle Plummer
Chief Financial Officer