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 QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
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 (I.R.S. Employer Identification Number)
of incorporation or organization)
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 14, 2002, the registrant had 2,152,835 shares of common stock
issued at $ .10 par value, and 2,025,535 were outstanding.
Transitional Small Business Disclosure
Format: Yes: No: X
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 8-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-18
Item 3. Controls and Procedures 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20-24
Greene County Bancorp, Inc.
Consolidated Statements of Financial Condition
As of September 30, 2002 and June 30, 2002
September 30, 2002 June 30, 2002
(Unaudited)
ASSETS
Cash and due from banks $7,329,750 $7,408,150
Federal funds sold 11,829,264 10,423,871
---------------------- ----------------
Total cash and cash equivalents 19,159,014 17,832,021
Investment securities, at fair value 72,601,889 66,088,530
Federal Home Loan Bank stock, at cost 1,121,100 1,121,100
Loans 131,844,626 129,727,150
Less: Allowance for loan losses (1,085,701) (1,068,734)
Unearned origination fees and costs, net (273,113) (285,132)
---------------------- ----------------
Net loans receivable 130,485,812 128,373,284
Premises and equipment 4,919,460 4,963,621
Accrued interest receivable 1,526,042 1,452,104
Prepaid expenses and other assets 220,670 296,691
Other real estate owned --- 30,229
Total assets ---------------------- --------------
$230,033,987 $220,157,580
====================== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing deposits $21,699,930 $22,067,347
Interest bearing deposits 170,424,180 161,646,281
----------------------- ----------------
Total deposits 192,124,110 183,713,628
Borrowings from FHLB 9,000,000 9,000,000
Accrued expenses and other liabilities 1,470,337 911,959
Accrued income taxes 198,226 131,287
----------------------- ----------------
Total liabilities 202,792,673 193,756,874
Shareholders' equity
Preferred stock,
Authorized 1,000,000 at September 30, and June 30, 2002; --- ---
Common stock, par value $.10 per share;
Authorized: 12,000,000 at September 30, and June 30, 2002;
Issued: 2,152,835 at September 30, and June 30, 2002;
Outstanding: 2,025,535 at September 30, 2002;
2,024,835 at June 30, 2002 215,284 215,284
Additional paid-in capital 10,095,835 10,084,621
Retained earnings 17,519,132 17,164,403
Accumulated other comprehensive income 1,315,071 880,401
Less: Treasury stock, 127,300 at September 30, 2002;
128,000 at June 30, 2002, shares at cost (1,364,023) (1,371,527)
cost
Unearned stock-based compensation (142,537) (156,791)
Unearned ESOP shares 49,972 at September 30, 2002;
and June 30, 2002, shares at cost (397,448) (415,685)
---------------------- ----------------
Total shareholders' equity 27,241,314 26,400,706
---------------------- ----------------
Total liabilities and shareholders' equity $230,033,987 $220,157,580
====================== ================
See notes to consolidated financial statements.
Greene County Bancorp, Inc.
Consolidated Statements of Income
For the Three Months Ended September 30, 2002 and 2001
(Unaudited)
2002 2001
Interest income:
Loans $2,399,907 $2,187,944
Investment securities 484,893 544,209
Mortgage-backed securities 244,250 103,668
Tax free securities 101,771 101,783
Interest bearing deposits and federal funds sold 65,011 143,278
----------------- ---------------
Total interest income 3,295,832 3,080,882
Interest expense:
Interest on deposits 1,060,039 1,255,590
Interest on borrowings 107,905 85,825
----------------- ---------------
Total interest expense 1,167,944 1,341,415
Net interest income 2,127,888 1,739,467
Less: Provision for loan losses --- 30,000
----------------- ---------------
Net interest income after provision for loan losses 2,127,888 1,709,467
----------------- ---------------
Noninterest income:
Service charges on deposit accounts 399,601 186,525
Other operating income 263,191 165,772
----------------- ---------------
Total noninterest income 662,792 352,297
Noninterest expense:
Salaries and employee benefits 883,684 791,901
Occupancy expense 98,778 82,967
Equipment and furniture expense 140,979 110,212
Service and data processing fees 179,203 152,654
Office supplies 28,455 40,069
Other 549,974 411,007
----------------- ---------------
Total noninterest expense 1,881,073 1,588,810
Income before provision for income taxes 909,907 472,954
Provision for income taxes 268,500 129,000
----------------- ---------------
Net income $641,107 $343,954
================= ===============
Basic EPS $0.32 $0.17
Basic shares outstanding 1,976,296 1,973,879
Diluted EPS $0.32 $0.17
Diluted average shares outstanding 2,028,691 2,018,551
See notes to consolidated financial statements.
Greene County Bancorp, Inc.
Consolidated Statements of Comprehensive Income
For the Three Months Ended September 30, 2002 and 2001
(Unaudited)
2002 2001
Net income $641,107 $343,954
Other comprehensive income:
Unrealized holding gain arising during the three months ended September 30, 2002
and 2001, net of tax expense
of ($289,781) and ($304,012), respectively. 434,670 456,019
---------------------- ------------
Total other comprehensive income 434,670 456,019
---------------------- -------------
Comprehensive income $1,075,777 $799,973
====================== =============
See notes to consolidated financial statements.
Greene County Bancorp, Inc.
Consolidated Statements of Changes in Shareholders' Equity
For the Three Months Ended September 30, 2002 and 2001
(Unaudited)
Accumulated
Additional Other
Capital Paid - In Retained Comprehensive
Stock Capital Earnings Income
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
purchased
Dividends paid (230,807)
Net income 343,954
Change in unrealized
gain, net 456,019
----------- ----------------- -------------- --------------
Balance at
September 30, 2001 $215,284 $10,193,008 $16,106,172 $955,041
=========== ================= ============== ==============
Balance at
June 30, 2002 $215,284 $10,084,621 $17,164,403 $880,401
ESOP shares earned 13,206
Stock-based
compensation
earned
Options exercised (1,992)
Dividends paid (286,378)
Net income
641,107
Change in unrealized
gain, net 434,670
----------- ----------------- -------------- --------------
Balance at
September 30, 2002 $215,284 $10,095,835 $17,519,132 $1,315,071
=========== ================= ============== ==============
Unearned Unearned Total
Stock-based Treasury ESOP Shareholders'
Compensation Stock Shares Equity
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
purchased (373,515) (373,515)
Dividends paid (230,807)
Net income 343,954
Change in unrealized
gain, net 456,019
------------ ----------------- ------------- -------------
Balance at
September 30, 2001 ($214,436) ($1,449,438) ($475,280) $25,330,351
============ ================= ============= =============
Balance at
June 30, 2002 ($156,791) ($1,371,527) ($415,685) $26,400,706
ESOP shares earned 18,237 31,443
Stock-based
compensation
earned 14,254 14,254
Options exercised 7,504 5,512
Dividends paid (286,378)
Net income 641,107
Change in unrealized
gain, net 434,670
----------- ---------------- -------------- -------------
Balance at
September 30, 2002 ($142,537) ($1,364,023) ($397,448) $27,241,314
=========== =============== ============= =============
See notes to consolidated financial statements.
Greene County Bancorp, Inc.
Consolidated Statements of Cash Flows
For the Three Months Ended September 30, 2002 and 2001
(Unaudited)
2002 2001
Cash flows from operating activities:
Net Income $641,107 $343,954
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation 134,800 108,675
Net amortization (accretion) of premiums (discounts) (65,716) 33,881
Provision for loan losses --- 30,000
ESOP and other stock-based compensation earned 45,697 36,675
Gain on sale of other real estate (59,770) ---
Net increase in accrued income taxes 66,939 129,193
Net (increase) decrease in accrued interest receivable (73,938) 23,993
Net decrease (increase) in prepaid and other assets 76,021 (42,293)
Net increase (decrease) in other liabilities 268,597 102,231
------------- ------------
Net cash provided by operating activities 1,033,737 766,309
Cash flows from investing activities:
Proceeds from maturities of securities 5,009,854 2,420,123
Purchases of securities and other investments (1,605,169) (269,304)
Principal payments on securities 370,542 819,459
Principal payments on mortgage-backed securities 1,735,597 1,135,427
Purchases of mortgage-backed securities (11,234,018) (3,141,191)
Net increase in loans receivable (2,112,528) (6,007,461)
Proceeds from the sale of other real estate 90,000 ---
Purchases of premises and equipment (90,639) (50,943)
-------------- ------------
Net cash used in investing activities (7,836,361) (5,093,890)
Cash flows from financing activities:
Dividends paid (286,378) (230,807)
Purchase of treasury stock --- (373,515)
Proceeds from issuance of stock options 5,512 ---
Net increase (decrease) in deposits 8,410,483 5,461,444
------------- -----------
Net cash provided by financing activities 8,129,617 4,857,122
Net increase in cash and cash equivalents 1,326,993 529,541
Cash and cash equivalents at beginning of period 17,832,021 18,804,358
------------- -----------
Cash and cash equivalents at end of period $19,159,014 $19,333,899
============= ===========
See notes to consolidated financial statements.
Greene County Bancorp, Inc.
Notes to Financial Statements
As of and for the Three Months Ended September 30, 2002 and 2001
(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 accounting principles generally accepted
in the United States (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 GAAP 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, 2002,
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 at and for the periods presented have been included.
Amounts in the prior year's consolidated financial statements have been
reclassified whenever necessary to conform to the current year's presentation.
These reclassifications had no effect on net income or retained earnings as
previously reported. 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, 2002 are not necessarily indicative of
results that may be expected for the entire fiscal year ending June 30, 2003.
The Company's critical accounting policy relates to the allowance for loan
losses (the "Allowance"). It is based on management's opinion of an amount that
is intended to absorb losses in the existing portfolio. The allowance for loan
losses is established through a provision for loss based on management's
evaluation of the risk inherent in the loan portfolio, the composition of the
portfolio, specific impaired loans and current economic conditions. Such
evaluation, which includes a review of all loans for 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, management's estimate of probable
credit losses and other factors that warrant recognition in providing for the
allowance for loan losses. However, this evaluation involves a high degree of
complexity and requires management to make subjective judgments that often
require assumptions or estimates about highly uncertain matters. This critical
accounting policy and its application are periodically reviewed with the Audit
Committee and the Board of Directors.
(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 accounting principles
generally accepted in the United State of America 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, 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) 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
instruments (such as stock options and unvested restricted stock) issued became
vested, (and in the case of stock options) exercised 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, 2002: $641,107
Basic EPS 1,976,296 $0.32
Diluted EPS 2,028,691 $0.32
September 30, 2001: $343,954
Basic EPS 1,973,879 $0.17
Diluted EPS 2,018,551 $0.17
(5) Dividends
The Board of Directors approved a semi-annual $0.32 per share cash dividend on
July 19, 2002, for shareholders of record August 15, 2002, payable September 1,
2002. The dividend reflected an annual cash dividend rate of $0.64 per share,
which represents an increase from the previous annual cash dividend rate of
$0.56 per share. The increase in the dividend paid out is a result of improved
earnings as well as the waiver of such dividends by Greene County Bancorp, MHC,
the Company's mutual holding company.
Impact of Inflation and Changing Prices
The consolidated financial statements of the Company and notes thereto,
presented elsewhere herein, have been prepared in accordance with U.S. generally
accepted accounting principles, which requires the measurement of financial
position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time and
due to inflation. The impact of inflation is reflected in the increased cost of
the Company's operations. Unlike most industrial companies, nearly all the
assets and liabilities of the Company are monetary. As a result, interest rates
have a greater impact on the Company's performance than do the effects of
general levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the price of goods and services.
Impact of Recent Accounting Pronouncements
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 lives,
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 is expected to have no impact on the Company's
consolidated financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which replaces Emerging Issues Task Force
("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring)." Under SFAS No. 146, liabilities for costs associated with
an exit or disposal activity are to be recognized when the liability is
incurred. Under EITF Issue No. 94-3, liabilities related to exit or disposal
activities were recognized when an entity committed to an exit plan. In
addition, Statement No. 146 establishes that the objective for the initial
measurement of the liability is fair value. Statement No. 146 is effective for
exit and disposal activities initiated after December 31, 2002. The Company is
currently evaluating the impact the adoption of this statement will have on its
financial statements but does not believe it will be material.
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 quarterly 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, 2002 and June 30, 2002
ASSETS
Total assets increased to $230.0 million at September 30, 2002 from $220.2
million at June 30, 2002, an increase of $9.8 million, or 4.5%. Growth was most
significant in the cash and investments portfolios as well as to a lesser extent
in the loan portfolio. Deposit growth funded the asset growth and appeared to be
the result of continued reduced investment in the equity markets. Investors
appeared to continue to be conservative in their investment options.
CASH AND CASH EQUIVALENTS
Total cash and cash equivalents increased to $19.2 million at September 30, 2002
from $17.8 million at June 30, 2002, an increase of $1.4 million, or 7.9%. The
increase occurred primarily in federal funds sold and was a result of continued
deposit inflows. Each year at the end of September, the Bank has significant
cash needs for escrow payments to various localities and municipalities as well
as Christmas Club payouts. The Bank typically has a deposit outflow at the end
of September and beginning of October of each year.
INVESTMENT SECURITIES
Investment securities increased to $72.6 million at September 30, 2002 as
compared to $66.1 million at June 30, 2002, an increase of $6.5 million, or
9.8%. During the quarter ended September 30, 2002, the investment portfolio
shifted toward mortgage-backed securities and state and political subdivision
securities representing 34.8% and 14.5% of the portfolio, respectively, at
September 30, 2002 as compared to 29.6% and 13.3% of the portfolio,
respectively, at June 30, 2002. A shift away from corporate debt securities as a
percentage of the total portfolio occurred between June 30, 2002 and September
30, 2002. Due to the potential credit problems of some corporations the Company
has focused more heavily on debt with some form of guarantee such as a U.S.
agency guarantee. The Company has also shifted the portfolio toward more
adjustable rate securities than in the past in an effort to provide some future
interest rate risk protection in a rising rate environment. Investment
securities represent 31.6% of total assets at September 30, 2002 as compared to
30.0% at June 30, 2002. The shift is partially a result of loan demand being
slightly lower than inflows of deposits.
(Rounded to nearest thousand) Market value at Percentage Market value at Percentage
Sept. 30, 2002 of portfolio June 30, 2002 of portfolio
(Rounded to nearest thousand)
U.S. government agencies $15,045 20.7% $14,862 22.5%
State and political subdivisions 10,510 14.5 8,811 13.3
Mortgage-backed securities 25,288 34.8 19,564 29.6
Asset-backed securities 467 0.6 818 1.3
Corporate debt securities 20,024 27.6 20,760 31.4
----------------- ----------------- ---------------- ---------------
Total debt securities 71,334 98.2 64,815 98.1
Equity securities and other 1,268 1.8 1,274 1.9
----------------- ----------------- ---------------- ---------------
Total available-for-sale securities $72,602 100.0% $66,089 100.0%
================= ================= ================ ===============
LOANS
Net loans receivable increased to $130.5 million at September 30, 2002 from
$128.4 million at June 30, 2002, an increase of $2.1 million, or 1.6%. The
continued low interest rate environment and strong customer satisfaction from
personal service has continued to enhance loan growth. Commercial real estate
mortgages increased $1.2 million, or 13.6%, to $10.0 million at September 30,
2002 as compared to $8.8 million at June 30, 2002. The slight decreases in
residential real estate mortgages and installment loans were the result of
principal pay-down in excess of net new loan balances. The extraordinary loan
demand experienced during fiscal 2002 appears to have slowed slightly during the
first fiscal quarter ended September 30, 2002.
(Rounded to nearest thousand) At Percentage At Percentage
Sept. 30, 2002 of portfolio June 30, 2002 of portfolio
Real estate mortgages
Residential $103,140 78.2% $103,494 79.8%
Commercial 10,007 7.6 8,764 6.8
Home equity loans 7,612 5.8 6,957 5.4
Commercial loans 5,153 3.9 4,356 3.3
Installment loans 5,393 4.1 5,611 4.3
Passbook loans 540 0.4 545 0.4
-------------- -------------- ------------- ------------
Total loans $131,845 100.0% $129,727 100.0%
Less: Allowance for loan losses (1,086) (1,069)
Unearned origination fees and costs, net (273) (285)
-------------- -------------
Net loans receivable $130,486 $128,373
============== =============
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses 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 allowance for loan losses. 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.
During the fiscal year ended June 30, 2002, and the quarter ended September 30,
2002 the level of provision was affected by the growth of the loan portfolio and
composition of the portfolio shifting to more commercial loans. These types of
loans generally possess a higher degree of credit risk than traditional
one-to-four family residential mortgage loans. Management also implemented
improved procedures for pursuing delinquent and previously charged-off accounts
during fiscal year 2002, which appears to have helped reduce the effect of
credit quality deterioration due to current economic weakness in the overall
economy. Any increase in the allowance for loan losses or loan charge-offs could
have a material adverse effect on our results of operations and financial
condition.
Three months ended Three months ended
September 30, 2002 September 30, 2001
Balance at the beginning of the period $1,068,734 $886,081
Charge-offs:
Commercial real estate mortgage loans --- ---
Home equity --- 2,380
Installment loans to individuals 12,396 12,413
---------------- -----------------
Total loans charged off 12,396 14,793
Recoveries:
Commercial loans 24,093 ---
Installment loans to individuals 5,270 2,191
---------------- -----------------
Total recoveries 29,363 2,191
---------------- -----------------
Net (recoveries) charge-offs (16,967) 12,602
Provisions charged to operations --- 30,000
---------------- -----------------
Balance at the end of the period $1,085,701 $903,479
================ =================
Ratio of net charge-offs to average loans outstanding (0.01%) 0.01%
Ratio of net charge-offs to nonperforming assets (4.38%) 1.88%
Allowance for loan loss to nonperforming loans 280.16% 140.84%
Allowance for loan loss to net loans receivable 0.83% 0.78%
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 in accordance with its contractual terms 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, 2002 or June 30,
2002.
Analysis of Nonaccrual Loans and Nonperforming Assets
At September 30, 2002 At June 30, 2002
Nonaccruing loans:
Real estate mortgage loans:
Residential mortgages loans (one- to four-family) $303,682 $313,981
Commercial mortgage loans --- ---
Home equity 70,003 ---
Installment loans to individuals 13,849 18,886
----------- ------------
Total nonaccruing loans 387,534 332,867
Real Estate Owned:
Commercial mortgage loans --- 30,229
----------- ------------
Total real estate owned --- 30,229
----------- ------------
Total nonperforming assets $387,534 $363,096
=========== ============
Total nonperforming assets
as a percentage of total assets 0.17% 0.16%
Total nonperforming loans to net loans receivable 0.29% 0.26%
DEPOSITS
Total deposits increased to $192.1 million at September 30, 2002 from $183.7
million at June 30, 2002, an increase of $8.4 million, or 4.6%. Money market
accounts experienced the most significant growth between June 30, 2002, and
September 30, 2002, increasing $3.6 million, or 25.9%, to $17.5 million at
September 30, 2002 from $13.9 million at June 30, 2002. Due to the continued
poor returns in the equity market and doubt about the credibility of corporate
America, investors appear to continue to prefer to invest their funds in safer,
more liquid accounts such as money market deposits and savings deposits. Savings
deposits increased to $73.1 million at September 30, 2002 as compared to $70.8
million at June 30, 2002, an increase of $2.3 million, or 3.2%. The conservative
nature of current consumers also has led them to more heavily weight their
portfolios with certificates of the deposit despite lower interest rates.
Certificates of deposit increased to $65.3 million at September 30, 2002 as
compared to $62.6 million at June 30, 2002, an increase of $2.7 million, or
4.3%. Noninterest bearing deposits decreased slightly to $21.7 million at
September 30, 2002 as compared to $22.1 million at June 30, 2002, a decrease of
$0.4 million, or 1.8%. The decrease occurred in personnel checking accounts and
can be attributed to the payment of local property taxes. This type of decrease
is typical at the end of September of each year.
At Percentage At Percentage
September 30, 2002 of portfolio June 30, 2002 of
portfolio
(Rounded to nearest thousand)
Noninterest bearing deposits $21,700 11.3% $22,067 12.0%
Certificates of deposit 65,259 34.0 62,645 34.1
Savings deposits 73,114 38.0 70,825 38.5
Money market deposits 17,483 9.1 13,883 7.6
NOW deposits 14,568 7.6 14,294 7.8
----------------- ------------ ------------- ----------
Total deposits $192,124 100.0% $183,714 100.0%
================= ============ ============= ===========
BORROWINGS
There was no change in the borrowings from the Federal Home Loan Bank between
June 30, 2002 and September 30, 2002.
At September 30, 2002 and June 30, 2002, the Bank had the following borrowings:
Amount Rate Maturity Date
$4,000,000 2.19% -Fixed 1/14/2003
2,500,000 6.82% -Fixed 09/02/2004
2,500,000 6.80% -Fixed 10/04/2005
------------------
$9,000,000
==================
ACCRUED EXPENSES AND OTHER LIABILITIES
At September 30, 2002, accrued expenses and other liabilities amounted to
approximately $1.5 million as compared to $0.9 million at June 30, 2002, an
increase of $0.6 million. The increase was primarily due to increased deferred
taxes associated with unrealized gains on available-for-sale securities.
EQUITY
The primary changes in equity included changes in retained earnings and
accumulated comprehensive income. Retained earnings was affected by net income
of $641,107 and partially offset by dividends paid of $286,378. Treasury stock
decreased by $7,504 due to the exercise of 700 options under the 2000 Stock
Option Plan reducing the number of shares held in treasury to 127,300.
Unrealized gains associated with investment securities caused accumulated other
comprehensive income to increase by approximately $435,000. The change in
accumulated other comprehensive income was a result of the change in the equity
portion of marking to market the available-for-sale investment portfolio. The
remaining changes in equity are 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, 2002 and 2001
INTEREST INCOME
Total interest income increased to $3.3 million for the quarter ended September
30, 2002 as compared to $3.1 million for the quarter ended September 30, 2001,
an increase of $0.2 million, or 6.5%. Interest income on loans increased to $2.4
million for the quarter ended September 30, 2002 as compared to $2.2 million for
the quarter ended September 30, 2001. The increase was primarily due to an
increase in average loans outstanding to $130.0 million for the quarter ended
September 30, 2002 as compared to $114.4 million for the quarter ended September
30, 2001, an increase of $15.6 million. However, this increase in average
balance was partially offset by a decrease of 26 basis points in the average
yield on such loans. The average yield on loans was 7.39% for the quarter ended
September 30, 2002 as compared to 7.65% for the quarter ended September 30,
2001. Interest earned on federal funds and interest bearing balances decreased
$78,000 to $65,000 for the quarter ended September 30,2002 as compared to
$143,000 for the quarter ended September 30, 2001. The decrease was a result of
both a lower average balance in federal funds and lower interest rate. The
average federal funds balance decreased $4.9 million to $11.8 for the quarter
ended September 30, 2002 as compared to $16.7 million for the quarter ended
September 30, 2001. The average yield on such federal funds decreased 124 basis
points from 3.31% for the quarter ended September 30, 2002 to 2.07% for the
quarter ended September 30, 2002. Increases in average balance of total
investment securities, including tax-free and mortgage-backed securities, offset
a decrease in average yield on such investments. The average balance of total
investment securities for the quarter ended September 30, 2002 was $71.8 million
as compared to $48.0 million for the quarter ended September 30, 2001, an
increase of $23.8 million. However, the average rate on such investments
decreased 156 basis points to 4.59% for the quarter ended September 30, 2002 as
compared to 6.15% for the quarter ended September 30, 2001. The overall lower
interest rate environment had a significant impact on the level of interest
income.
INTEREST EXPENSE
Total interest expense amounted to $1.2 million for the quarter ended September
30, 2002, as compared to $1.3 million for the quarter ended September 30, 2001,
a decrease of $0.1 million, or 7.7%. Interest expense on deposits decreased $0.2
million or 15.4%, to $1.1 million for the quarter ended September 30, 2002, as
compared to $1.3 million for the quarter ended September 30, 2001. Average
deposits increased $32.6 million or 20.4% to $192.1 million for the quarter
ended September 30, 2002 as compared to $159.5 million for the quarter ended
September 30, 2001. The average rate for the three-month period ended September
30, 2002 amounted to 2.21% as compared to 3.15% for the three-month period ended
September 30, 2001, a decrease of 94 basis points. The decrease in average rate
was also the result of a lower interest rate environment for the quarter ended
September 30, 2002 as compared to the quarter ended September 30, 2001.
Interest expense on borrowings amounted to $108,000 for the quarter ended
September 30, 2002, and $86,000 for the quarter ended September 30, 2001, an
increase of $22,000 or 25.6%. The average rate on such borrowings decreased 207
basis points to 4.80% for the quarter ended September 30, 2002 as compared to
6.87% for the quarter ended September 30, 2001. However, the average balance of
such borrowings increased $4.0 million to $9.0 million for the quarter ended
September 30, 2002 as compared to $5.0 million for the quarter ended September
30, 2001.
NET INTEREST INCOME
Net interest income, a function of interest income and interest expense,
increased to $2.1 million for the quarter ended September 30, 2002 as compared
to $1.7 million for the quarter ended September 30, 2001, an increase of $0.4
million, or 23.5%. As a result of changes in interest-earning assets and
interest-bearing liabilities, as well as changes in the yield and rate on such
assets and liabilities, net interest spread increased to 3.81% for the
three-month period ended September 30, 2002 as compared to 3.56% for the
three-month period ended September 30, 2001, an improvement of 25 basis points.
Also, net interest margin increased to 3.96% for the three-month period ended
September 30, 2002 as compared to 3.85% for the three-month period ended
September 30, 2001, an improvement of 11 basis points. The improvement in net
interest income contributed to the overall improvement in net income. In a
rising rate environment net interest margin and spread would be more likely to
shrink than in a declining rate environment.
PROVISION FOR LOAN LOSSES
The provision for loan loss is the method for maintaining the allowance for loan
losses. The provision for loan losses for the quarter ended September 30, 2002
was zero as compared to $30,000 for the quarter ended September 30, 2001. There
were several factors contributing to a decrease in the provision during the
quarter ended September 30, 2002, including the receipt of a large recovery of a
portion of a previously charged-off loan, the continued low level of nonaccrual
loans and delinquent assets relative to the size of the loan portfolio, and the
relatively low level of charge-offs experienced during the last several
quarters.
NONINTEREST INCOME
Total noninterest income amounted to $663,000 for the quarter ended September
30, 2002 as compared to $352,000 for the quarter ended September 30, 2001, an
increase of $311,000, or 88.4%. Service charges on deposit accounts amounted to
$400,000 for the quarter ended September 30, 2002 as compared to $187,000 for
the quarter ended September 30, 2001, an increase of $213,000, or 113.9%. The
primary item contributing to these service charges was the introduction of the
Carefree Overdraft Privilege program which was initiated during October 2001 and
has proven to be well liked by customers of the Bank. The same fee that would
apply to a check drawn on insufficient funds or an uncollected item is charged
when the overdraft privilege is used; however, in this case the customers' check
is not returned, but paid and the fee is collected. The increase in the overall
volume of deposit accounts also contributed to the increase in charges on such
accounts for items such as a monthly service charge on accounts which fall below
certain minimum balance levels. Other operating income increased to $263,000 for
the quarter ended September 30, 2002 as compared to $166,000 for the quarter
ended September 30, 2001, an increase of $97,000, or 58.4%. The most significant
factor contributing to the increase in other operating income was profit on the
sale of REO properties which amounted to approximately $67,000. The Bank
continues to have success in its marketing of merchant credit card processing
and upgrading checking account products for existing customers which enhances
the profit margin on such checking products.
NONINTEREST EXPENSE
Noninterest expense increased to $1,881,000 for the quarter ended September 30,
2002 from $1,589,000 for the quarter ended September 30, 2001, an increase of
$292,000, or 18.4%. The increase in salaries and employee benefits was a result
of annual salary increases, increased expenses associated with medical benefits
and retirement plans as well as some additional staffing. The increase in
occupancy expense of approximately $16,000 was primarily due to routine repairs
and maintenance conducted at several branches. A portion of the increase in
equipment and furniture was attributed to this routine maintenance. The increase
in service and data processing fees was primarily a result of an increase in the
volume of loan and deposit accounts. The decrease in office supplies was largely
based on needed supplies. Other noninterest expense items which contributed to
the increase of $139,000 included a commission of $62,000 paid to the consultant
which helped coordinate the kick-off of the overdraft privilege program,
additional advertising associated with several programs the Bank is promoting
and additional or increased computer licensing fees and other computer security
expenses. Some expenses have increased as a result of the overdraft privilege
program including the charge-off of uncollected balances on overdrawn accounts.
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 $268,500 for the quarter ended September
30, 2002 and $129,000 for the quarter ended September 30, 2001, an increase of
$139,500, or 108.1%. The effective tax rate increased to 29.5% for the quarter
ended September 30, 2002, as compared to 27.3% for the quarter ended September
30, 2001 in anticipation of the effective rate required for the fiscal year
ending June 30, 2003. A major reason for the change in effective rate was due to
the expected decrease in the percentage of total income that municipal
securities and other tax free investments are expected to contribute to total
income during the current fiscal year.
Item 3. Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer have
concluded, based on their evaluation within 90 days prior to the filing date of
this report, that the Company's disclosure controls and procedures (as defined
in Securities Exchange Act Rules 13a-14 (c ) and 15d-14( c )) are effective to
ensure that information required to be disclosed in the reports that the Company
files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. There have been no
significant changes in the Company's internal controls or other factors that
could significantly affect these controls subsequent to the date of the
foregoing evaluation.
Item 4. 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 will have the reverse effect.
Mortgage loan commitments totaled $3.8 million at September 30, 2002. The unused
portion of overdraft lines of credit amounted to $0.8 million, the unused
portion of home equity lines of credit amounted to $1.5 million, and the unused
portion of commercial lines of credit amounted to $1.9 million at September 30,
2002. 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 regulatory capital requirements at September 30, 2002 and 2001.
Consolidated shareholders' equity represented 11.8% of total assets at September
30, 2002 and 12.0% of total assets of June 30, 2002.
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
(a) Exhibits
Exhibit 99.1 - Written Statement of Chief Executive Officer furnished pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U. S.C. Section 1350.
Exhibit 99.2 - Written Statement of Chief Financial Officer
furnished pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350.
(b) No Form 8-K reports were filed during the quarter ended
September 30, 2002.
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, 2002
By: /s/ J. Bruce Whittaker
J. Bruce Whittaker
President and Chief Executive Officer
Date: November 14, 2002
By: /s/ Michelle Plummer
Michelle Plummer
Chief Financial Officer and Treasurer
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, J. Bruce Whittaker, President and Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Greene County
Bancorp, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusion about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and b)
any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002 /s/ J. Bruce Whittaker
President and Chief Executive Officer
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Michelle Plummer, Chief Financial Officer and Treasurer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Greene County
Bancorp, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusion about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002 /s/ Michelle Plummer
Chief Financial Officer and Treasurer
EXHIBIT 99.1
STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002, 18 U.S.C SECTION 1350
The undersigned, J. Bruce Whittaker, is the President and Chief Executive
Officer of Greene County Bancorp, Inc. (the "Company").
This statement is being furnished in connection with the filing by the
Company of the Company's Quarterly Report on Form 10-QSB for the quarter
ended September 30, 2002 (the "Report").
By execution of this statement, I certify that:
A) the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d))
and
B) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company
as of the dates and for the periods covered by the Report.
This statement is authorized to be attached as an exhibit to the Report so
that this statement will accompany the Report at such time as the Report is
filed with the Securities and Exchange Commission pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. 18 U.S.C. Section 1350. It is not
intended that this statement be deemed to be filed for purposes of the
Securities Exchange Act of 1934, as amended.
November 14, 2002 /s/ J. Bruce Whittaker
Dated J. Bruce Whittaker
EXHIBIT 99.1
STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002, 18 U.S.C SECTION 1350
The undersigned, Michelle Plummer, is the Chief Financial Officer and
Treasurer of Greene County Bancorp, Inc. (the "Company").
This statement is being furnished in connection with the filing by the
Company of the Company's Quarterly Report on Form 10-QSB for the quarter
ended September 30, 2002 (the "Report").
By execution of this statement, I certify that:
A) the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d))
and
B) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company
as of the dates and for the periods covered by the Report.
This statement is authorized to be attached as an exhibit to the Report so
that this statement will accompany the Report at such time as the Report is
filed with the Securities and Exchange Commission pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. 18 U.S.C. Section 1350. It is not
intended that this statement be deemed to be filed for purposes of the
Securities Exchange Act of 1934, as amended.
November 14, 2002 /s/ Michelle Plummer
Dated Michelle Plummer