SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 2002
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from ___________________ to ______________________
Commission File Number: 0-25165
GREENE COUNTY BANCORP, INC.
(Name of Small Business Issuer in its Charter)
United States 14-1809721
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
302 Main Street, Catskill, New York 12414
(Address of Principal Executive Office) (Zip Code)
(518) 943-2600
(Issuer's Telephone Number including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
None
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Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $0.10 per share
(Title of Class)
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 past
twelve 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 / NO
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendments to this Form 10-KSB. [X] The Registrant's revenues for the
fiscal year ended June 30, 2002 were $14,389,771.
As of September 16, 2002, there were issued and outstanding 2,024,835
shares of the Registrant's common stock of which 872,519 were shares of voting
stock held by non-affiliates of the Registrant. Computed by reference to the
closing price of Common Stock of $17.60 on such date, the aggregate value of
stock held by non-affiliates was $15,356,334.
DOCUMENTS INCORPORATED BY REFERENCE
1. Sections of Annual Report to Shareholders for the fiscal year ended June
30, 2002 (Part II).
2. Proxy Statement for the 2002 Annual Meeting of Shareholders (Part III)
GREENE COUNTY BANCORP, INC. AND SUBSIDIARY
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FORM 10-KSB
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Index
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Page
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Part I
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Item 1. Description of Business.................................................................................1
Item 2. Description of Properties..............................................................................29
Item 3. Legal Proceedings......................................................................................29
Item 4. Submissions of Matters to a Vote of Security Holders...................................................30
Part II
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Item 5. Market for Common Equity and Related Stockholder Matters...............................................30
Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations..................30
Item 7. Financial Statements...................................................................................30
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures..................30
Part III
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Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a)
of the Exchange Act..................................................................................30
Item 10. Executive Compensation.................................................................................30
Item 11. Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder
Matters..............................................................................................30
Item 12. Certain Relationships And Related Transactions.........................................................31
Item 13. Exhibits, Financial Statements Schedules And Reports On Form 8-K.......................................31
Part IV
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Signatures
Certifications
PART I
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ITEM 1. Description of Business
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General
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Greene County Bancorp, Inc. operates as the federally chartered holding
company of The Bank of Greene County, a New York-chartered savings bank. A
majority of Greene County Bancorp, Inc.'s common stock (53.5%) is held by Greene
County Bancorp, MHC, a federally chartered mutual holding company. The remaining
shares of Greene County Bancorp, Inc. are owned by public stockholders and The
Bank of Greene County's Employee Stock Ownership Plan.
Greene County Bancorp, Inc.
---------------------------
Greene County Bancorp, Inc. was organized in December of 1998 at the
direction of the Board of Trustees of The Bank of Greene County (formerly Greene
County Savings Bank) for the purpose of acting as the holding company of The
Bank of Greene County. In 2001, Greene County Bancorp, Inc. converted its
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. At June 30, 2002,
Greene County Bancorp, Inc.'s assets consisted primarily of the outstanding
capital stock of The Bank of Greene County and cash and investments of $4.5
million. At June 30, 2002, 872,519 shares of Greene County Bancorp, Inc.'s
common stock, par value $0.10 per share, were held by the public, 128,000 shares
were held as Treasury stock and 1,152,316 shares were held by Greene County
Bancorp, MHC, Greene County Bancorp, Inc.'s mutual holding company. Greene
County Bancorp, Inc.'s principal business is overseeing and directing the
business of The Bank of Greene County and various Greene County Bancorp, Inc.
investment securities.
At June 30, 2002, Greene County Bancorp, Inc. had consolidated total assets
of $220.2 million, consolidatedtotal deposits of $183.7 million, consolidated
borrowings from Federal Home Loan Bank of $9.0 million and consolidated total
equity of $26.4 million.
Greene County Bancorp, Inc.'s administrative office is located at 302 Main
Street, Catskill, New York 12414-1317. Its telephone number is (518) 943-2600.
The Bank of Greene County
The Bank of Greene County was organized in 1889 as The Building and Loan
Association of Catskill, a New York-chartered savings and loan association. In
1974, The Bank of Greene County converted to a New York mutual savings bank
under the name Greene County Savings Bank. In conjunction with the
reorganization and the offering completed in December 1998, which resulted in
the organization of Greene County Bancorp, Inc., Greene County Savings Bank
changed its name to The Bank of Greene County. The Bank of Greene County's
deposits are insured by the Bank Insurance Fund, as administered by the Federal
Deposit Insurance Corporation, up to the maximum amount permitted by law. The
Bank of Greene County's principal business consists of attracting retail
deposits from the general public in the areas surrounding its branches and
investing those deposits, together with funds generated from operations and
borrowings, primarily in one- to four-family residential mortgage loans,
commercial real estate loans, consumer loans, home equity loans and commercial
business loans. In addition, The Bank of Greene County invests a significant
portion of its assets in investment securities and mortgage- and asset-backed
securities. The Bank of Greene County's revenues are derived principally from
interest on its residential mortgages, and to a lesser extent, from interest on
consumer and commercial loans and securities, as well as from servicing fees &
services charges and other fees collected on its deposit accounts. The Bank of
Greene County's primary sources of funds are deposits, and principal and
interest payments on loans and investment securities and mortgage- and
asset-backed securities. At June 30, 2002, The Bank of Greene County had
borrowed $9.0 million from the Federal Home Loan Bank.
The Bank of Greene County's administrative office is located at 302 Main
Street, Catskill, New York 12414-1317. Its telephone number is (518) 943-2600.
Greene County Bancorp, MHC
Greene County Bancorp, MHC was formed in December 1998 as part of The Bank
of Greene County's mutual holding company reorganization. In 2001, Greene County
Bancorp, MHC converted from a state to a federal charter. The Office of Thrift
Supervision under the new charter currently regulates Greene County Bancorp,
MHC. Greene County Bancorp, MHC owns 53.5% of the common stock of Greene County
Bancorp, Inc.. Greene County Bancorp, MHC does not engage in any business
activity other than to hold Greene County Bancorp, Inc.'s common stock and to
invest any liquid assets of Greene County Bancorp, MHC, which amounted to
$166,000 in cash and cash equivalents at June 30, 2002.
Greene County Bancorp, MHC's administrative office is located at 302 Main
Street, Catskill, New York 12414-1317, and its telephone number at that address
is (518) 943-2600.
Market Area
The Bank of Greene County has been, and intends to continue to be, a
community-oriented bank offering a variety of financial services to meet the
needs of the communities it serves. The Bank of Greene County currently operates
six full-service banking offices in Greene County and southern Albany County,
New York. The Bank of Greene County's primary market area is currently
concentrated around the areas within Greene County and southern Albany County
where its full-service banking offices are located, namely the towns of
Catskill, Cairo, Coxsackie, Greenville, Tannersville and Westerlo.
As of the 2000 census estimates, the Greene County population was 48,300
persons, indicating an overall increase in the population level of 8.0% since
the last census conducted in 1990. Greene County is primarily rural and the
major industry consists of tourism associated with the several ski facilities
and festivals located in the Catskill Mountains. The County has no
concentrations of manufacturing industry. Greene County is contiguous to the
Albany-Schenectady-Troy metropolitan statistical area. The close proximity of
Greene County to the city of Albany has made it a "bedroom" community for
persons working in the Albany capital area. Greene County and the Coxsackie
Correctional Facilities are the largest employers in the County. Other large
employers include the Hunter Mountain and Ski Windham resort areas, the
Catskill, Cairo-Durham, Greenville and Coxsackie-Athens Central School Districts
and Stiefel Labs, Inc.
Competition
The Bank of Greene County faces significant competition both in making
loans and in attracting deposits. The Bank of Greene County's market area has a
high density of financial institutions, many of which are branches of
significantly larger institutions that have greater financial resources than The
Bank of Greene County, and all of which are competitors of The Bank of Greene
County to varying degrees. The Bank of Greene County's competition for loans
comes principally from commercial banks, savings banks, savings and loan
associations, mortgage-banking companies, credit unions, insurance companies and
other financial service companies. Its most direct competition for deposits has
historically come from commercial banks, savings banks, savings and loan
associations and credit unions. The Bank of Greene County faces additional
competition for deposits from non-depository competitors such as the mutual fund
industry, securities and brokerage firms and insurance companies. Competition
may also increase as a result of the lifting of restrictions on the interstate
operations of financial institutions.
Competition is likely to increase as a result of the enactment of the
Gramm-Leach-Bliley Act of 1999, which eases restrictions on entry into the
financial services market by insurance companies and securities firms. Moreover,
to the extent that these changes permit banks, securities firms and insurance
companies to affiliate, the financial services industry could experience further
consolidation. This could result in a growing number of larger financial
institutions competing in The Bank of Greene County's primary market area that
offer a wider variety of financial services than The Bank of Greene County
currently offers. Competition for deposits, for the origination of loans and the
provision of other financial services may limit The Bank of Greene County's
growth and adversely impact its profitability in the future.
Lending Activities
General. The principal lending activity of The Bank of Greene County is
the origination, for retention in its portfolio, of fixed-rate and
adjustable-rate mortgage loans collateralized by one- to four-family residential
real estate located within its primary market area. To a lesser extent, The Bank
of Greene County also originates commercial real estate loans, home equity
loans, consumer loans and commercial business loans. The Bank of Greene County
also offers a variety of line of credit products.
In an effort to manage the interest rate risk associated with its
predominantly fixed-rate loan portfolio, The Bank of Greene County maintains
high levels of liquidity. Cash, cash equivalents and securities available for
sale comprised 38.1% of total assets at June 30, 2002, all of which can be used
for liquidity. In addition, where possible, The Bank of Greene County
corresponds the funding of fixed-rate residential mortgages with FHLB advances.
Finally, The Bank of Greene County seeks to attract checking and other
transaction accounts that generally have lower interest rate costs and tend to
be less interest rate sensitive when interest rates rise.
Loan Portfolio Composition. Set forth below is selected information
concerning the composition of The Bank of Greene County's loan portfolio in
dollar amounts and in percentages (before deductions for deferred fees and
costs, unearned discounts and allowances for losses) as of the dates indicated.
At June 30,
2002 2001 2000
Amount Percent Amount Percent Amount Percent
------------- ----------- ------------- ----------- ------------ -----------
(Dollars in thousands) Real estate loans:
One- to four-family $98,834 76.19% $86,336 77.84% $80,696 81.54%
Commercial 8,764 6.76 5,239 4.72 4,702 4.75
Construction and land 3,003 2.31 1,979 1.78 616 0.62
Multi-family 1,657 1.28 1,213 1.09 1,253 1.27
------------- ----------- ------------- ----------- ------------ -----------
Total real estate loans 112,258 86.54 94,767 85.43 87,267 88.18
Consumer loans
Installment (1) 5,611 4.32 6,128 5.53 4,865 4.92
Home equity 6,957 5.36 6,138 5.53 4,631 4.68
Passbook 545 0.42 596 0.54 490 0.50
------------- ----------- ------------- ----------- ------------ -----------
Total consumer loans 13,113 10.10 12,862 11.60 9,986 10.10
Commercial business loans 4,356 3.36 3,291 2.97 1,707 1.72
------------- ----------- ------------- ----------- ------------ -----------
Total consumer loans and
commercial business loans 17,469 13.46 16,153 14.57 11,693 11.82
------------- ----------- ------------- ----------- ------------ -----------
Total gross loans 129,727 100.00% 110,920 100.00% 98,960 100.00%
------------- ------------- ------------
Less:
Deferred fees and discounts (285) (277) (275)
Allowance for loan losses (1,069) (886) (866)
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Total loans receivable, net $128,373 $109,757 $97,819
============= ============= ============
(1) Includes direct automobile loans (on both new and used automobiles) and
personal loans.
At June 30,
2002 2001 2000
Amount Percent Amount Percent Amount Percent
------------- ----------- ------------ ----------- ---------- ----------
(Dollars in thousands) Fixed-rate loans:
Real estate loans:
One- to four-family $91,586 70.60% $77,852 70.19% $69,360 70.08%
Commercial 6,587 5.08 3,589 3.23 2,840 2.87
Construction and land 2,554 1.97 1,979 1.78 616 0.62
Multi-family 1,442 1.11 1,175 1.06 1,124 1.14
------------- ----------- ----------- ---------- -------------- -----------
Total fixed-rate real estate loans 102,169 78.76 84,595 76.26 73,940 74.71
Consumer loans
Installment (1) 5,611 4.32 6,128 5.53 4,865 4.92
Home equity 6,957 5.36 6,138 5.53 4,631 4.68
Passbook 545 0.42 596 0.54 490 0.50
Commercial business loans 4,356 3.36 3,291 2.97 1,707 1.72
------------- ----------- ----------- ---------- -------------- -----------
Total fixed-rate loans 119,638 92.22 100,748 90.83 85,633 86.53
------------- ----------- ---------- ---------- -------------- -----------
Adjustable-rate loans
Real estate loans:
One- to four-family 7,248 5.59 8,484 7.65 11,336 11.46
Commercial real estate 2,177 1.68 1,650 1.49 1,862 1.88
Construction and land 449 0.34 --- --- 129 ---
Multi-family 215 0.17 38 0.03 129 0.13
------------ ----------- ------------ ----------- -------------- -----------
Total adjustable-rate loans 10,089 7.78 10,172 9.17 13,327 13.47
Total gross loans 129,727 100.00% 110,920 100.00% 98,960 100.00%
------------ ----------- ----------- ----------- -------------- -----------
Less:
Deferred fees and discounts (285) (277) (275)
Allowance for loan losses (1,069) (886) (866)
------------ ------------- --------------
Total loans receivable, net $128,373 $109,757 $97,819
============== ============ ===============
(1) Includes direct automobile loans (on both new and used automobiles) and
personal loans.
One- to Four-Family Residential Loans. The Bank of Greene County's primary
lending activity is the origination of one- to four-family residential mortgage
loans collateralized by property located in The Bank of Greene Countys primary
market area. One- to four-family residential mortgage loans refer to loans
collateralized by single-family residences; by contrast, multi-family loans
refer to loans secured by multi-family units, such as apartment buildings.
Generally, one- to four-family residential mortgage loans are made in amounts up
to 89.9% of the appraised value of the property. However, The Bank of Greene
County will originate one- to four-family residential mortgage loans with
loan-to-value ratios of up to 95%, with private mortgage insurance. For the year
ended June 30, 2002, less than one percent of the one- to four-family mortgage
loans originated by The Bank of Greene County were originated with loan-to-value
ratios over 89.9%. For the year ended June 30, 2002, The Bank of Greene County
originated 75%to 80% in one- to four-family residential mortgage loans with
loan-to-value ratios of 80% or more but without private mortgage insurance.
Generally, residential mortgage loans are originated for terms of up to 30
years, though in recent years The Bank of Greene County has been successful in
marketing and originating such loans with 15-year terms. One- to four-family
fixed-rate loans are offered with both a monthly and bi-weekly payment feature.
The Bank of Greene County generally requires fire and casualty insurance, the
establishment of a mortgage escrow account for the payment of real estate taxes,
hazard and flood insurance, as well as title insurance on all properties
collateralizing real estate loans made by The Bank of Greene County.
At June 30, 2002, virtually all of The Bank of Greene County's one- to
four-family residential mortgage loans were conforming loans and, accordingly,
were eligible for sale in the secondary mortgage market. However, generally the
one- to four-family residential mortgage loans originated by The Bank of Greene
County are retained in its portfolio and are not sold into the secondary
mortgage market. To the extent fixed rate one- to four-family residential
mortgage loans are retained by The Bank of Greene County, it is exposed to
increases in market interest rates, since the yields earned on such fixed-rate
assets would be lower than the rates paid by The Bank of Greene County for
deposits and borrowings, which could result in lower net interest income.
The Bank of Greene County currently offers one- to four-family residential
mortgage loans with fixed and adjustable interest rates. Originations of
fixed-rate loans versus adjustable-rate loans are monitored on an ongoing basis
and are affected significantly by the level of market interest rates, customer
preference, The Bank of Greene County's interest rate gap position, and loan
products offered by The Bank of Greene County's competitors. Particularly, in a
relatively low interest rate environment, borrowers may prefer fixed-rate loans
to adjustable-rate loans. Single-family residential real estate loans often
remain outstanding for significantly shorter periods than their contractual
terms because borrowers may refinance or prepay loans at their option. The
average length of time that The Bank of Greene County's single-family
residential mortgage loans remain outstanding varies significantly depending
upon trends in market interest rates and other factors.
The Bank of Greene County's adjustable-rate mortgage ("ARM") loans
currently provide for maximum rate adjustments of 150 basis points per year and
600 basis points over the term of the loan. The Bank of Greene County offers ARM
loans with initial interest rates that are below market, referred to as "teaser
rates." However, in underwriting such loans, borrowers are qualified at the full
index rate. Generally, The Bank of Greene County's ARM loans adjust every year.
After origination, the interest rate on such ARM loans is reset based upon a
contractual spread or margin above the average yield on one-year United States
Treasury securities, adjusted to a constant maturity, as published weekly by the
Federal Reserve Board.
ARM loans decrease the risk associated with changes in market interest
rates by periodically re-pricing, but involve other risks because as interest
rates increase, the underlying payments by the borrower increase, thus
increasing the potential for default by the borrower. At the same time, the
marketability of the underlying collateral may be adversely affected by higher
interest rates. Upward adjustment of the contractual interest rate is also
limited by the maximum periodic and lifetime interest rate adjustment permitted
by the terms of the ARM loans, and, therefore, is potentially limited in
effectiveness during periods of rapidly rising interest rates. At June 30, 2002,
$7.2 million, or 5.59% of The Bank of Greene County's loan portfolio consisted
of one- to four-family residential loans with adjustable interest rates,
compared to $91.6 million, or 70.6% of the loan portfolio comprised of one- to
four-family residential loans with fixed interest rates. The Bank of Greene
County's willingness and capacity to originate and hold in portfolio fixed rate
one- to four-family residential mortgage loans has enabled it to generate
various loan fees and expand customer relationships in the current low interest
rate environment where borrowers have generally preferred fixed rate mortgage
loans. However, as noted above, to the extent The Bank of Greene County retains
fixed rate one- to four-family residential mortgage loans in its portfolio, it
is exposed to increases in market interest rates, since the yields earned on
such fixed rate assets would be lower than the rates paid by The Bank of Greene
County for deposits and borrowings, which could result in lower net interest
income.
The Bank of Greene County originates construction to permanent loans to
homeowners for the purpose of construction of primary and secondary residences.
The Bank of Greene County issues a commitment and has one closing which
encompasses both the construction phase and permanent financing. The
construction phase is a maximum term of six months and the interest charged is
the rate as stated in the commitment, with loan-to-value ratios of up to 89.9%
(or up to 95% with private mortgage insurance), of the completed project. The
Bank of Greene County began offering loans collateralized by undeveloped land
during fiscal year 2001. The acreage associated with such loans is limited.
These land loans generally are intended for future sites of primary or secondary
residences.
Construction lending generally involves a greater degree of risk than other
one- to four-family mortgage lending. The repayment of the construction loan is,
to a great degree, dependent upon the successful and timely completion of the
construction of the subject property. Construction delays may further impair the
borrower's ability to repay the loan.
The Bank of Greene County's residential mortgage loan originations are
generally obtained from The Bank of Greene County's loan representatives
operating in its branch offices through their contacts with existing or past
loan customers, depositors of The Bank of Greene County, attorneys and
accountants who refer loan applications from the general public, and local
realtors. The Bank of Greene County has hired a loan originator who calls upon
customers during non-banking hours and at locations convenient to the customer.
All one- to four-family residential mortgage loans originated by The Bank
of Greene County include "due-on-sale" clauses, which give The Bank of Greene
County the right to declare a loan immediately due and payable in the event
that, among other things, the borrower sells or otherwise disposes of the real
property subject to the mortgage and the loan is not repaid.
At June 30, 2002, $98.8 million, or 76.19% of The Bank of Greene County's
loan portfolio, consisted of one- to four-family residential mortgage loans.
Approximately $314,000 of such loans (representing seven loans) were included in
nonperforming loans as of that date.
Commercial Real Estate and Multifamily Loans. At June 30, 2002, $ 8.8
million, or 6.76%, of the total loan portfolio consisted of commercial real
estate loans. Office buildings, mixed-use properties and other commercial
properties collateralize commercial real estate loans. The Bank of Greene County
originates fixed- and adjustable-rate commercial mortgage loans with maximum
terms of up to 20 years. The maximum loan-to-value ratio of commercial real
estate loans is generally 75%. At June 30, 2002, the largest commercial mortgage
loan had a principal balance of $861,900 and was a construction to permanent
loan for a firehouse. There were no commercial real estate loans included in
nonperforming loans.
In underwriting commercial real estate loans, The Bank of Greene County
reviews the expected net operating income generated by the real estate to ensure
that it is generally at least 110% of the amount of the monthly debt service;
the age and condition of the collateral; the financial resources and income
level of the borrower; and the borrower's business experience. The Bank of
Greene County's policy is to require personal guarantees from all commercial
real estate borrowers.
Loans collateralized by commercial real estate generally are larger than
one- to four-family residential loans and involve a greater degree of risk.
Commercial mortgage loans often involve large loan balances to single borrowers
or groups of related borrowers. Payments on these loans depend to a large degree
on the results of operations and management of the properties or underlying
businesses, and may be affected to a greater extent by adverse conditions in the
real estate market or the economy in general. Accordingly, the nature of
commercial real estate loans makes them more difficult for Bank management to
monitor and evaluate.
The Bank of Greene County originates a limited number of multi-family
loans, which totaled $1.7 million, or 1.28% of The Bank of Greene County's total
loans at June 30, 2002. Multi-family loans are generally collateralized by
apartment buildings located in The Bank of Greene County's primary market area.
There were no multi-family loans included in nonperforming loans. The Bank of
Greene County's underwriting practices and the risks associated with
multi-family loans do not differ substantially from that of commercial real
estate loans.
Consumer Loans.
The Bank of Greene County's consumer loans consist of direct loans on new
and used automobiles, personal loans (either secured or unsecured), home equity
loans, and other consumer installment loans (consisting of passbook loans,
unsecured home improvement loans and recreational vehicle loans). Consumer loans
(other than home equity loans) are originated at fixed rates with terms to
maturity of one to five years. At June 30, 2002 consumer loans totaled $13.1
million, or 10.10% of the total loan portfolio. Approximately $18,886 of such
loans (representing five loans) were included in nonperforming loans as of that
date.
Consumer loans generally have shorter terms and higher interest rates than
one- to four-family mortgage loans. In addition, consumer loans expand the
products and services offered by The Bank of Greene County to better meet the
financial services needs of its customers. Consumer loans generally involve
greater credit risk than residential mortgage loans because of the difference in
the underlying collateral. Repossessed collateral for a defaulted consumer loan
may not provide an adequate source of repayment of the outstanding loan balance
because of the greater likelihood of damage, loss or depreciation in the
underlying collateral. The remaining deficiency often does not warrant further
substantial collection efforts against the borrower beyond obtaining a
deficiency judgment. In addition, consumer loan collections depend on the
borrower's personal financial stability. Furthermore, the application of various
federal and state laws, including federal and state bankruptcy and insolvency
laws, may limit the amount that can be recovered on such loans.
The Bank of Greene County's underwriting procedures for consumer loans
includes an assessment of the applicant's credit history and an assessment of
the applicant's ability to meet existing and proposed debt obligations. Although
the applicant's creditworthiness is the primary consideration, the underwriting
process also includes a comparison of the value of the collateral to the
proposed loan amount. The Bank of Greene County underwrites its consumer loans
internally, which The Bank of Greene County believes limits its exposure to
credit risks associated with loans underwritten or purchased from brokers and
other external sources. At this time, The Bank of Greene County does not
purchase loans from any external sources.
The Bank of Greene County offers fixed and adjustable-rate home equity
loans that are collateralized by the borrower's residence. Home equity loans are
generally underwritten with terms not to exceed 15 years and under the same
criteria that The Bank of Greene County uses to underwrite one- to four-family
fixed rate loans. Home equity loans may be underwritten with terms not to exceed
15 years and with a loan to value ratio of 80% when combined with the principal
balance of the existing mortgage loan. The maximum amount of a home equity loan
may not exceed $50,000 unless approved by the Board of Directors. The Bank of
Greene County appraises the property collateralizing the loan at the time of the
loan application (but not thereafter) in order to determine the value of the
property collateralizing the home equity loans. At June 30, 2002, the
outstanding balance of home equity loans totaled $7.0 million, or 5.36% of The
Bank of Greene County's total loan portfolio. There were no home equity loans
included in nonperforming loans.
Commercial Business Loans. The Bank of Greene County also originates
commercial business loans up to 10 years at fixed and adjustable-rates. The Bank
of Greene County attributes growth in this portfolio to its ability to offer
borrowers senior management attention as well as timely and local
decision-making on commercial loan applications. The decision to grant a
commercial business loan depends primarily on the creditworthiness and cash flow
of the borrower (and any guarantors) and secondarily on the value of and ability
to liquidate the collateral which may consist of receivables, inventory and
equipment. The Bank of Greene County generally requires annual financial
statements, tax returns and personal guarantees from the commercial business
borrowers. The Bank of Greene County also generally requires an appraisal of any
real estate that collateralizes the loan. At June 30, 2002, The Bank of Greene
County had $4.4 million of commercial business loans representing 3.36% of the
total loan portfolio. On such date, the average balance of The Bank of Greene
Countys commercial business loans was approximately $36,300. The largest
commercial business loan had a balance of $560,000 and represented a fire truck
loan for a local fire district. At June 30, 2002, The Bank of Greene County's
commercial loan portfolio included 121 loans collateralized by real estate, fire
trucks, or other equipment. There were no commercial business loans included in
nonperforming loans.
Commercial business lending generally involves greater risk than
residential mortgage lending and involves risks that are different from those
associated with residential and commercial real estate lending. Real estate
lending is generally considered to be collateral based, with loan amounts based
on fixed-rate loan-to-collateral values, and liquidation of the underlying real
estate collateral is viewed as the primary source of repayment in the event of
borrower default. Although commercial business loans may be collateralized by
equipment or other business assets, the liquidation of collateral in the event
of a borrower default is often an insufficient source of repayment because
equipment and other business assets may be obsolete or of limited use, among
other things. Accordingly, the repayment of a commercial business loan depends
primarily on the creditworthiness of the borrower (and any guarantors), while
liquidation of collateral is a secondary and often insufficient source of
repayment.
Loan Maturity Schedule. The following table sets forth certain information
as of June 30, 2002 regarding the amount of loans maturing or re-pricing in The
Bank of Greene County's portfolio.Adjustable-rate loans are included in the
period in which interest rates are next scheduled to adjust rather than the
period in which they contractually mature, and fixed-rate loans are included in
the period in which the final contractual repayment is due. Lines of credit with
no specified maturity date are included in the category "within one year".
The following table illustrates the future maturities of such loans at June
30, 2002.
1 Year 3 Years 5 Years
Within Through Through Through Beyond
1 Year 3 Years 5 Years 10 Years 10 Years Total
-------- --------- ----------- ----------- ---------- ------
(Dollars in thousands) Real estate loans:
One- to four-family $6,844 $1,504 $2,911 $10,258 $77,317 $98,834
Commercial 1,693 332 149 1,137 5,453 8,764
Construction and land --- --- --- 80 2,923 3,003
Multi-family 236 33 59 --- 1,329 1,657
-------- ---------- ---------- ------------- -------- -----------
Total real estate loans 8,773 1,869 3,119 11,475 87,022 112,258
Consumer loans 1,229 2,797 3,319 2,439 3,329 13,113
Commercial business loans 804 550 1,321 623 1,058 4,356
-------- ---------- ---------- ------------- -------- -----------
Total loan portfolio $10,806 $5,216 $7,759 $14,537 $91,409 $129,727
======== ========== ========== =========== ========== ==========
The total amount of the above loans due after June 30, 2003 which have
fixed-rate interest rates is $117.1 million while the total amount of loans due
after such date which have adjustable interest rates is $1.8 million. The
interest rate risk implications of Greene County Bancorp's substantial
preponderance of fixed-rate loans is discussed in detail on pages 7-11 of Greene
County Bancorp, Inc.'s 2002 Annual Report to Shareholders, which discussion is
incorporated herein by reference.
The following table sets forth the loan origination and repayment
activities of The Bank of Greene County for the periods indicated. The Bank of
Greene County did not purchase or sell any loans during the periods presented.
For the Years Ended June 30,
2002 2001 2000
--------- ---------- ---------
(Dollars in thousands) Originations by type:
Adjustable rate loans
One- to four-family $466 $409 $541
Commercial real estate 1,398 252 51
Construction and land 449 --- ---
Multi-family 185 10 17
--------- ---------- ---------
Total adjustable rate loans 2,498 671 609
Fixed rate loans
One- to four-family 27,589 17,123 15,910
Commercial real estate 5,496 1,485 1,682
Construction and land 3,871 4,405 4,512
Multi-family 701 145 483
Installment 4,354 5,630 4,317
Home equity 3,800 3,311 1,610
Passbook 415 431 450
Commercial business 4,099 3,286 2,235
--------- ---------- ---------
Total fixed rate loans 50,325 35,816 31,199
Total loans originated 52,823 $36,487 $31,808
--------- ---------- ---------
Repayments:
One- to four-family 15,557 11,892 9,900
Commercial real estate 3,369 1,200 1,016
Construction and land 3,296 3,042 5,550
Multi-family 442 195 88
Installment 4,871 4,367 4,213
Home equity 2,981 1,804 1,668
Passbook 466 325 485
Commercial business 3,034 1,702 1,758
--------- ---------- ---------
Total repayments 34,016 24,527 24,678
--------- ---------- ---------
Net increase in loans $18,807 $11,960 $7,130
========= ========== =========
Loan Approval Procedures and Authority. The Board of Directors establishes
the lending policies and loan approval limits of The Bank of Greene County. Loan
officers generally have the authority to originate mortgage loans, consumer
loans and commercial business loans up to amounts established for each lending
officer. The Executive Committee or the full Board of Directors must approve all
residential loans over $200,000.
The Board annually approves independent appraisers used by The Bank of
Greene County. For larger loans, The Bank of Greene County may require an
environmental site assessment to be performed by an independent professional for
all non-residential mortgage loans. It is The Bank of Greene County's policy to
require hazard insurance on all mortgage loans.
Loan Origination Fees and Other Income. In addition to interest earned on
loans, The Bank of Greene County receives loan origination fees. Such fees and
costs vary with the volume and type of loans and commitments made and purchased,
principal repayments, and competitive conditions in the mortgage markets, which
in turn respond to the demand and availability of money.
In addition to loan origination fees, The Bank of Greene County also
receives other income that consists primarily of deposit accountservice charges,
ATM fees and loan payment late charges. The Bank of Greene County also installs,
maintains and services merchant bankcard equipment for local retailers and is
paid a percentage of the transactions processed using such equipment.
Loans to One Borrower. Savings banks are subject to the same loans to one
borrower limits as those applicable to national banks, which under current
regulations restrict loans to one borrower to an amount equal to 15% of
unimpaired capital and unimpaired surplus on an unsecured basis, and an
additional amount equal to 10% of unimpaired capital and unimpaired surplus if
the loan is secured by readily marketable collateral (generally, financial
instruments and bullion, but not real estate). The Bank of Greene County's
policy provides that loans to one borrower (or related borrowers) should not
exceed 10% of The Bank of Greene County's capital and reserves.
At June 30, 2002, the largest aggregate amount loaned by The Bank of Greene
County to one borrower consisted of a commercial real estate loan of $861,000
for the construction of a firehouse.The loan comprising the lending relationship
was performing in accordance with its terms as of June 30, 2002.
Delinquencies and Classified Assets
Collection Procedures. A computer generated late notice is sent and a 2%
late charge is assessed when a payment is 15 days late. A second notice will be
incorporated in the next month's billing notice, approximately 21 days after the
due date of the first late payment. Accounts thirty days or more past due will
be reviewed by the collection manager and receive individual attention as
required, including collection letters and telephone calls. The collection
manager in order to avoid further deterioration will closely monitor accounts
that have a history of consistent late or delinquent payments. Accounts two or
more payments past due are reported to the Board of Directors for consideration
of foreclosure action. With respect to consumer loans, a late notice is sent and
a late charge is assessed 10 days (or, in the case of home equity loans, 15
days) after payment is due. A second notice is sent 15 days (in the case of home
equity loans, 25 days) thereafter. The collection manager reviews loans 30 days
or more past due individually, following up with collection letters and
telephone calls. Accounts three or more payments past due are reported to the
Board of Directors and are subject to legal action and repossession of
collateral.
Loans Past Due and Non-performing Assets. Loans are reviewed on a regular
basis. Management determines that a loan is impaired or non-performing 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 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 90 days or more 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 non-performing.
Interest on nonaccrual loans is recognized on a cash basis until such time as
the borrower has brought the loan to performing status. Other real estate owned
is included in non-performing assets. At June 30, 2002, The Bank of Greene
County had non-performing loans of $332,867 and a ratio of non-performing loans
to total loans of 0.26%.
Real estate acquired as a result of foreclosure or by deed in lieu of
foreclosure is classified as other real estate owned ("OREO") until such time as
it is sold. When real estate is acquired through foreclosure or by deed in lieu
of foreclosure, it is recorded at its fair value, less estimated costs of
disposal. If the value of the property is less than the loan, less any related
specific loan loss provisions, the difference is charged against the allowance
for loan losses. Any subsequent write-down of OREO is charged against earnings.
At June 30, 2002, The Bank of Greene County's OREO totaled $30,229 and its ratio
of non-performing assets to total assets was 0.16%.
The following table sets forth delinquencies in The Bank of Greene County's
loan portfolio at June 30, 2002. When a loan is delinquent 90 days or more, The
Bank of Greene County fully reverses all accrued interest thereon and ceases to
accrue interest thereafter. A loan is not removed from nonaccrual status until
the loan is current and evidence supports the borrower's ability to maintain a
current status. The Bank of Greene County also had a single one- to four-family
real estate loan that amounted to $51,599 classified as nonaccrual which was in
the 60 to 89 days delinquent category at June 30, 2002. For all the dates
indicated, The Bank of Greene County did not have any material restructured
loans.
Percentage
Dollar of loan
Number amount category
------------ ----------- -----------
60 to 89 days delinquent
Real estate:
One- to four-family 9 $547,209 80.1%
Commercial 1 33,551 4.9
Construction and land --- --- ---
Multi-family --- --- ---
Installment 7 20,140 3.0
Home equity 2 82,037 12.0
Commercial business --- --- ---
---------- ---------- ------------
Total loan delinquency 60 to 89 days 19 682,937 100.0
90 days and over delinquent
Real estate:
One- to four-family 6 262,382 93.3
Commercial --- --- ---
Construction and land --- --- ---
Multi-family --- --- ---
Installment 5 18,886 6.7
Home equity --- --- ---
Commercial business --- --- ---
---------- ----------- ------------
Total loan delinquency 90 days and over 11 281,268 100.0
Total loans delinquent over 60 days Real estate:
One- to four-family 15 809,591 84.0
Commercial 1 33,551 3.5
Construction and land --- --- ---
Multi-family --- --- ---
Installment 12 39,026 4.0
Home equity 2 82,037 8.5
Commercial business --- --- ---
---------- ----------- ------------
Total loans delinquent over 60 days 30 $964,205 100.0%
========== =========== ============
Nonaccrual Loans and Nonperforming Assets. The following table sets forth
information regarding nonaccrual loans and other non-performing assets at the
dates indicated. The Bank of Greene County had no accruing loans delinquent
more than 90 days at June 30, 2002, 2001, and 2000.
At June 30,
2002 2001 2000
---------- ----------- ----------
Nonaccruing loans:
Real estate loans
One- to four-family $313,981 $660,607 $495,909
Commercial real estate --- 71,711 155,002
Installment and home equity 18,886 11,150 20,801
Commercial business --- --- ---
--------- ----------- ----------
Total nonaccruing loans 332,867 743,468 671,712
Real estate owned:
Real estate loans
One- to four-family --- --- 42,133
Commercial real estate 30,229 30,229 ---
Commercial business --- --- 109,000
--------- ----------- ----------
Total real estate owned 30,229 30,229 151,133
--------- ----------- ----------
Total non-performing assets $363,096 $773,697 $822,845
========= =========== ==========
Total as a percentage of total assets 0.16% 0.42% 0.49%
During the year ended June 30, 2002, gross interest income of $9,700 would
have been recorded on nonaccrual loans under their original terms if the loans
had been current throughout the period. No interest income was recorded on
nonaccrual loans or on accruing loans more than 90 days delinquent during the
year ended June 30, 2002.
Classification of Assets. Consistent with regulatory guidelines, The Bank
of Greene County provides for the classification of loans and other assets
considered to be of lesser quality. Such ratings coincide with the
"Substandard", "Doubtful" and "Loss" classifications used by federal regulators
in their examination of financial institutions. Generally, an asset is
considered Substandard if it is inadequately protected by the current net worth
and paying capacity of the obligors and/or the collateral pledged. Substandard
assets include those characterized by the distinct possibility that the insured
financial institution will sustain some loss if the deficiencies are not
corrected. Assets classified as Doubtful have all the weaknesses inherent in
assets classified Substandard with the added characteristic that the weaknesses
present make collection or liquidation in full, on the basis of currently
existing facts, highly questionable and improbable. Assets classified as Loss
are those considered uncollectible and of such little value that their
continuance as assets without the establishment of a specific loss reserve
and/or charge-off is not warranted. Assets that do not currently expose the
insured financial institutions to sufficient risk to warrant classification in
one of the aforementioned categories but otherwise possess weaknesses are
designated "Special Mention."
When The Bank of Greene County classifies problem assets as either
Substandard or Doubtful, it establishes a valuation allowances or "loss
reserves" in an amount deemed prudent by management. General allowances
represent loss allowances that have been established to recognize the inherent
risk associated with lending activities, but which, unlike specific allowances,
have not been allocated to particular problem assets. When The Bank of Greene
County classifies problem assets as "Loss," it is required either to establish a
specific allowance for losses equal to 100% of the amount of assets so
classified, or to charge-off such amount. The Bank of Greene County's
determination as to the classification of its assets and the amount of its
valuation allowance is subject to review by its regulatory agencies, which can
order the establishment of additional general or specific loss allowances. The
Bank of Greene County reviews its portfolio monthly to determine whether any
assets require classification in accordance with applicable regulations. At June
30, 2002, The Bank of Greene County had $74,000 in loans classified as
substandard and no other classified assets.
Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the
losses 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 the loan loss allowance. In addition, various regulatory agencies,
as an integral part of their examination process, periodically review The Bank
of Greene Count's allowance for loan losses and valuation of OREO. Such agencies
may require The Bank of Greene County 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 noninterest expense) and is reduced by net
charge-offs. At June 30, 2002, the total allowance was $1,068,734, which
amounted to 0.83% of total net loans receivable and 321.07% of nonperforming
loans. Management will continue to monitor and modify the level of the allowance
for loan losses. For the year ended June 30, 2002, The Bank of Greene County's
charge-offs amounted to $52,257. For the years ended June 30, 2001 and 2000, The
Bank of Greene County's charge-offs amounted to $76,915 and $65,557,
respectively.
The Bank of Greene County may require an environmental site assessment to
be performed by an independent professional for non-residential mortgage loans.
It is also The Bank of Greene County's policy to require title and hazard
insurance on all mortgage loans. In addition, The Bank of Greene County may
require borrowers to make payments to a mortgage escrow account for the payment
of property taxes. Any exceptions to The Bank of Greene County's loan policies
must be made in accordance with the limitations set out in each policy.
Typically, the exception authority ranges from the Chief Lending Officer to the
Board of Directors, depending on the size and type of loan involved.
Analysis of the Allowance For Loan Losses. The following table sets forth
the analysis of the allowance for loan losses for the periods indicated.
For the Years Ended June 30,
2002 2001 2000
------------- ----------- ------------
Balance at the beginning of period $886,081 $866,443 $791,897
Charge-offs:
One- to four-family real estate --- --- ---
Commercial real estate --- 26,432 ---
Installment 49,877 50,483 65,557
Home equity 2,380 --- ---
Commercial business --- --- ---
----------- ----------- -----------
Total charge-offs 52,257 76,915 65,557
Recoveries:
One- to four-family real estate --- --- ---
Installment 16,010 36,553 5,103
----------- ----------- -----------
Total recoveries 16,010 36,553 5,103
Net charge-offs 36,247 40,362 60,454
----------- ----------- -----------
Additions charged to operations 218,900 60,000 135,000
----------- ----------- -----------
Balance at end of period $1,068,734 $886,081 $866,443
=========== =========== ===========
Ratio of net charge-offs to average loans outstanding 0.03% 0.04% 0.06%
Ratio of net charge-offs to nonperforming assets 9.98% 5.22% 7.35%
Allowance for loan loss to nonperforming loans 321.07% 119.18% 128.99%
Allowance for loan loss to net loans 0.83% 0.81% 0.89%
Allocation of Allowance for Loan Losses. The following table sets forth the
allocation of the allowance for loan losses by loan category for at the dates
indicated. The allowance is allocated to each loan category based on historical
loss experience and economic conditions. The unallocated portions of the
allowance represent reserves for unused lines of credit and losses inherent in
the loan portfolio.
June 30, 2002 June 30, 2001 June 30, 2000
Percent Percent Percent
of of loans of
loans loans
Loan in each Loan in each Loan in each
Amount amounts category Amount amounts category Amount amounts category
of of of
loan loss by to total loan loss by to total loan loss by to total
allowance category loans allowance category loans allowance category loans
(Dollars in thousands)
One- to four-family $488 $98,834 76.2% $467 $86,336 77.8% $442 $80,696 81.5%
Commercial real 182 8,764 6.8 120 5,239 4.7 105 4,702 4.8
estate
Construction and land 7 3,003 2.3 13 1,979 1.8 4 616 0.6
Multi-family 18 1,657 1.3 10 1,213 1.1 22 1,253 1.3
Installment 92 5,611 4.3 100 6,128 5.5 121 4,865 4.9
Home equity 38 6,957 5.4 32 6,138 5.5 1 4,631 4.7
Passbook 1 545 0.4 1 596 0.6 1 490 0.5
Commercial business 191 4,356 3.3 136 3,291 3.0 72 1,707 1.7
Specific 24 --- --- --- --- --- --- --- ---
Unallocated 28 --- --- 7 --- --- 98 ---- ---
--------- --------- -------- ---------- --------- --------- ----------- -------- --------
Totals $1,069 $129,727 100.0% $886 $110,920 100.0% $866 $98,960 100.0%
========= ========= ======== ========== ========= ========= =========== ======== ========
Securities Investment Activities
Given The Bank of Greene County's substantial portfolio of fixed-rate
residential mortgage loans, The Bank of Greene County maintains high balances of
liquid investments for the purpose of mitigating interest rate risk. The Board
of Directors establishes the securities investment policy. This policy dictates
that investment decisions will be made based on the safety of the investment,
liquidity requirements, potential returns, cash flow targets, and desired risk
parameters. In pursuing these objectives, management considers the ability of an
investment to provide earnings consistent with factors of quality, maturity,
marketability and risk diversification.
The Bank of Greene County's current policies generally limit securities
investments to U.S. Government and agency securities, federal funds sold,
municipal bonds, corporate debt obligations and certain mutual funds. In
addition, The Bank of Greene County's policy permits investments in
mortgage-backed securities, including securities issued and guaranteed by Fannie
Mae, Freddie Mac, and GNMA, and collateralized mortgage obligations. The Bank of
Greene County's current securities investment strategy utilizes a risk
management approach of diversified investing among three categories: short-,
intermediate- and long-term. The emphasis of this approach is to increase
overall investment securities yields while managing interest rate risk. The Bank
of Greene County will only invest in securities rated "A" or higher by at least
one nationally recognized rating agency (or securities attaining such rating as
a result of guarantees by insurance companies), with the exception of occasional
investments in smaller non-rated local bonds. The Bank of Greene County does not
engage in any derivative or hedging transactions, such as interest rate swaps or
caps.
At June 30, 2002, The Bank of Greene County had $66.1 million in investment
securities, or 30.0% of total assets. SFAS No. 115 requires The Bank of Greene
County to designate its securities as held to maturity, available for sale, or
trading, depending on The Bank of Greene County's ability and intent regarding
its investments. As of June 30, 2002, the entire investment securities portfolio
was classified as available for sale. At June 30, 2002, The Bank of Greene
County's mortgage-backed securities portfolio totaled $19.6 million, or 8.9% of
total assets and The Bank of Greene County's asset-backed securities portfolio
totaled $0.8 million, or 0.4% of total assets.
Book Value of Investment Securities. The following table sets forth certain
information regarding the investment securities and other interest earning
assets as of the dates indicated.
At June 30,
2001 2000 1999
Book Percent Book Percent Book Percent
value of total value of total value of total
--------- ----------- ------------ ---------- ----------- ---------
(Dollars in Thousands)
Investment securities, AFS
U.S. Treasuries $--- ---% $1,005 2.1% $4,684 10.4%
U.S. Government agencies 14,862 22.5 1,794 3.7 5,190 11.6
State and political subdivisions 8,811 13.3 9,420 19.3 9,904 22.1
Mortgage-backed securities 19,564 29.6 8,783 18.0 6,000 13.4
Asset-backed securities 818 1.3 3,300 6.7 4,915 11.0
Corporate debt securities 20,760 31.4 23,432 47.9 12,812 28.6
Equity securities and other 1,274 1.9 1,141 2.3 1,303 2.9
--------- ----------- ------------- ----------- ----------- ----------
Total investment securities, AFS $66,089 100.0% $48,875 100.0% $44,808 100.0%
========= =========== ============= =========== =========== ==========
A discussion of management's decisions with respect to shifting investments
among the various investment portfolios described above is set forth in
Management's Discussion and Analysis on pages 13 and 14 of Greene County
Bancorp, Inc.'s Annual Report to Shareholders, which discussion is incorporated
herein by reference.
Mortgage-Backed and Asset-Backed Securities. The Bank of Greene County
purchases mortgage-backed securities in order to: (i) generate positive interest
rate spreads with minimal administrative expense; (ii) lower The Bank of Greene
County's credit risk as a result of the guarantees provided by Freddie Mac,
Fannie Mae, and GNMA; and (iii) increase liquidity. At June 30, 2002,
mortgage-backed securities (including CMOs) totaled $19.6 million or 8.9% of
total assets, all of which were classified as available for sale. At June 30,
2002, $15.2 million of the mortgage-backed securities were adjustable rate and
$4.4 million were fixed rate. The mortgage-backed securities portfolio had
coupon rates ranging from 4.00% to 7.00%, a weighted average yield of 4.02% and
a weighted average life (including pre-payment assumptions) of 2.5 years at June
30, 2002. The estimated market value of The Bank of Greene County's
mortgage-backed securities at June 30, 2002 was $19.6 million, which was
$204,760 more than cost.
The pooling of mortgages and the issuance of a security with an interest
rate that is based on the interest rate on the underlying mortgages create
mortgage-backed securities. Mortgage-backed securities typically represent a
participation interest in a pool of single-family or multi-family mortgages,
although The Bank of Greene County focuses its investments on mortgage-backed
securities backed by single-family mortgages. The issuers of such securities
(generally U.S. Government agencies and government sponsored enterprises,
including Fannie Mae, Freddie Mac and GNMA) pool and resell the participation
interests in the form of securities to investors, such as The Bank of Greene
County, and guarantee the payment of principal and interest to these investors.
Mortgage-backed securities generally yield less than the loans that underlie
such securities because of the cost of payment guarantees and credit
enhancements. In addition, mortgage-backed securities are usually more liquid
than individual mortgage loans and may be used to collateralize certain
liabilities and obligations of The Bank of Greene County.
Investments in mortgage-backed securities involve a risk that actual
prepayments will be greater than estimated over the life of the security, which
may require adjustments to the amortization of any premium or accretion of any
discount relating to such instruments thereby altering the net yield on such
securities. There is also reinvestment risk associated with the cash flows from
such securities or in the event such securities are prepaid. In addition, the
market value of such securities may be adversely affected by changes in interest
rates.
Management reviews prepayment estimates periodically to ensure that
prepayment assumptions are reasonable considering the underlying collateral for
the securities at issue and current interest rates and to determine the yield
and estimated maturity of The Bank of Greene County's mortgage-backed securities
portfolio. Of The Bank of Greene County's $19.6 million mortgage-backed
securities portfolio at June 30, 2002, $1.4 million with a weighted average
yield of 6.08% had contractual maturities within five years, $2.9 million with a
weighted average yield of 5.40% had contractual maturities of five to ten years
and the remaining $15.3 million with a weighted average yield of 3.57% had
contractual maturities more than 10 years. However, the actual maturity of a
security may be less than its stated maturity due to prepayments of the
underlying mortgages. Prepayments that are faster than anticipated may shorten
the life of the security and may result in a loss of any premiums paid and
thereby reduce the net yield on such securities. Although prepayments of
underlying mortgages depend on many factors, the difference between the interest
rates on the underlying mortgages and the prevailing mortgage interest rates
generally is the most significant determinant of the rate of prepayments. During
periods of declining mortgage interest rates, refinancing generally increases
and accelerates the prepayment of the underlying mortgages and the related
security. Under such circumstances, The Bank of Greene County may be subject to
reinvestment risk because, to the extent that The Bank of Greene County's
securities prepay faster than anticipated, The Bank of Greene County may not be
able to reinvest the proceeds of such repayments and prepayments at a comparable
rate of return. Conversely, in a rising interest rate environment prepayments
may decline, thereby extending the estimated life of the security and depriving
The Bank of Greene County of the ability to reinvest cash flows at the increased
rates of interest.
At June 30, 2002, The Bank of Greene County's portfolio of asset-backed
securities totaled $0.8 million, or 0.4% of total assets, all of which were
classified as available for sale. At June 30, 2002, all of the asset-backed
securities were fixed rate. The portfolio had coupon rates ranging from 6.10% to
6.85%, a weighted average yield of 5.23% and a weighted average life (including
prepayment assumptions) of 3.0 years at June 30, 2002. The estimated market
value of The Bank of Greene County's asset-backed securities portfolio at June
30, 2002 was $0.8 million, which was $13,311 more than cost at such date.
Asset-backed securities are a type of debt security collateralized by
various loans and assets including: automobile loans, equipment leases, credit
card receivables, home equity and improvement loans, manufactured housing,
student loans and other consumer loans. In the case of The Bank of Greene
County, its asset-backed securities are collateralized by automobile loans and
second-mortgage loans.
Asset-backed securities provide The Bank of Greene County with a broad
selection of fixed-income alternatives, most with higher credit ratings and less
downgrade risk than corporate bonds and more stable cash flows than mortgage
related securities.Prepayments and structure risk of asset-backed securities are
less of a concern than CMO securities due to the shorter maturities of the
underlying collateral promoting greater stability of payments.
Of The Bank of Greene County's $0.8 million portfolio of asset-backed
securities at June 30, 2002, $0.1 million with a weighted average yield of 5.76%
had contractual maturities within 5 years, no asset-backed securities held in
the portfolio had contractual maturities of 5 to 10 years, and the remaining
$0.7 million with a weighted average yield of 5.17% had contractual maturities
of more than 10 years.
Mortgage Servicing Rights. In October 1999, The Bank of Greene County
acquired for $1.2 million the mortgage servicing rights for one- to four-family
mortgage loans with outstanding balances aggregating $179.2 million. A
third-party provider performed the servicing associated with these loans. The
Bank of Greene County purchased the mortgage servicing rights for the purpose of
increasing its servicing fee income. In general, the market value of purchased
mortgage servicing rights increases as interest rates rise and decreases as
interest rates fall, primarily because the estimated life of the loan and the
estimated income from idle funds both increase as interest rates increase and
decrease as interest rates decrease. Market interest rates declined in the
period following The Bank of Greene County's purchase of the mortgage servicing
rates and The Bank of Greene County elected to sell the mortgage servicing
rights at a loss of $39,000 in August 2000. At June 30, 2002, The Bank of Greene
County had no investments in mortgage servicing rights and The Bank of Greene
County currently does not expect to invest in mortgage servicing rights in
future periods.
Sources of Funds
General. Deposits, repayments and prepayments of loans and securities,
proceeds from sales of securities, and proceeds from maturing securities and
cash flows from operations are the primary sources of The Bank of Greene
County's funds for use in lending, investing and for other general purposes.
Deposits. The Bank of Greene County offers a variety of deposit accounts
with a range of interest rates and terms. The Bank of Greene County's deposit
accounts consist of savings, NOW accounts, money market accounts, certificates
of deposit and non-interest bearing checking accounts. The Bank of Greene County
also offers IRAs.
At June 30, 2002, deposits totaled $183.7 million. At June 30, 2002, The
Bank of Greene County had a total of $62.6 million in certificates of deposit,
of which $49.1 million had maturities of one year or less. Although The Bank of
Greene County has a significant portion of its deposits in shorter-term
certificates of deposit, management monitors activity on these accounts and,
based on historical experience and The Bank of Greene County's current pricing
strategy, believes it will retain a large portion of such accounts upon
maturity.
The flow of deposits is influenced significantly by general economic
conditions, changes in money market rates, prevailing interest rates and
competition. Deposits are obtained predominantly from the areas in which The
Bank of Greene County's branch offices are located. The Bank of Greene County
relies primarily on competitive pricing of its deposit products and customer
service and long-standing relationships with customers to attract and retain
these deposits; however, market interest rates and rates offered by competing
financial institutions significantly affect The Bank of Greene County's ability
to attract and retain deposits. The Bank of Greene County uses traditional means
of advertising its deposit products, including radio, television, and print
media. It generally does not solicit deposits from outside its market area.
While The Bank of Greene County accepts certificates of deposit in excess of
$100,000, they are not subject to preferential rates. The Bank of Greene County
does not actively solicit such deposits, as they are more difficult to retain
than core deposits. Historically, The Bank of Greene County has not used brokers
to obtain deposits.
The following table sets forth the deposit activities of The Bank of
Greene County for the periods indicated.
For the Years Ended June 30,
2002 2001 2000
----------- --------------- ---------------
(Dollars in thousands)
Opening balance $154,192 $133,460 $127,999
Deposits 664,399 512,785 333,442
Withdrawals 641,720 496,480 332,441
Interest credited 6,843 4,427 4,460
Ending balance 183,714 154,192 133,460
----------- --------------- ---------------
Net increase $29,522 $20,732 $5,461
=========== =============== ===============
Percent increase 19.15% 15.53% 4.27%
The following tables set forth information, by various rate categories,
regarding the balance of deposits by types of deposit as of the dates indicated.
At June 30,
2002 2001 2000
Amount Percent Amount Percent Amount Percent
-------- ---------- ---------- ---------- ----------- ---------
(Dollars in thousands)
Transaction and savings deposits
Demand deposits $22,067 12.0% $18,418 11.9% $12,344 9.3%
Savings deposits 70,825 38.5 57,021 37.0 53,892 40.4
NOW deposits 14,294 7.8 11,446 7.4 9,090 6.8
Money market deposits 13,883 7.6 9,194 6.0 6,189 4.6
---------- ---------- --------- ----------- ----------- ----------
Total non-certificates of deposit 121,069 65.9% 96,079 62.3 81,515 61.1
---------- ---------- --------- ----------- ----------- ----------
Certificate of deposit
0.00 - 2.99% 26,024 14.2 100 0.1 --- ---
3.00 - 3.99% 16,369 8.9 430 0.3 77 0.1
4.00 - 5.99% 20,252 11.0 57,583 37.3 51,868 38.8
6.00 - 7.99% --- --- --- --- --- ---
8.00 - and over --- --- --- --- --- ---
---------- ---------- --------- ----------- ----------- ----------
Total certificates of deposit 62,645 34.1 58,113 37.7 51,945 38.9
---------- ---------- --------- ----------- ----------- ---------
Total deposits $183,714 100.0% $154,192 100.0% $133,460 100.0%
========== ========== ========= =========== =========== =========
The following table sets forth the amount and remaining maturities of The
Bank of Greene County's certificates of deposit accounts at June 30, 2002.
0.00- 3.00- 4.00- 6.00% or Percent of
2.99% 3.99% 5.99% Greater Total Total
--------- ---------- --------- ----------- --------- ------------
(Dollars in thousands)
Certificates of deposit
Maturity in quarter ended:
September 30, 2002 $7,319 $2,136 $7,600 $--- $17,055 27.2%
December 31, 2002 9,553 3,063 4,398 --- 17,014 27.2
March 31, 2003 3,640 2,399 2,734 --- 8,773 14.0
June 30, 2003 2,973 1,207 2,103 --- 6,283 10.0
September 30, 2003 1,741 1,326 462 --- 3,529 5.6
December 31, 2003 747 2,220 286 --- 3,253 5.2
March 31, 2004 28 1,685 254 --- 1,967 3.2
June 30, 2004 23 432 493 --- 948 1.5
September 30, 2004 --- 352 242 --- 594 1.0
December 31, 2004 --- 1,074 298 --- 1,372 2.2
March 31, 2005 --- 36 352 --- 388 0.6
June 30, 2005 --- 206 185 --- 391 0.6
Thereafter --- 233 845 --- 1,078 1.7
--------- ---------- --------- ----------- --------- ------------
Total $26,024 $16,369 $20,252 $--- $62,645 100.0%
========= ========== ========= =========== ========= ============
Percent of total 41.6% 26.1% 32.3% ---% 100.0%
Borrowed Funds. In the event that The Bank of Greene County requires funds
beyond its ability to generate them internally, additional sources of funds are
available through Federal Home Loan Bank ("FHLB"). At June 30, 2002 The Bank of
Greene County had available an Overnight Line of Credit and a One-Month
Overnight Repricing Line of Credit, each in the amount of $8,512,800 with the
FHLB. Residential mortgages are pledged by The Bank of Greene County as
collateral to secure The Bank of Greene County's line of credit and term
borrowing. Interest on the line is determined at the time of borrowing. In
addition to the overnight line of credit program, The Bank of Greene County also
has access to the FHLB's Term Advance Program under which it can borrow at
various terms and interest rates. The advances are collateralized by all of The
Bank of Greene County's stock and deposits in the FHLB and a general lien on
one- to four-family mortgage loans, certain multi-family loans and U.S.
Government Agency obligations in an aggregate amount equal up to 133% of
outstanding advances. The maximum amount that the FHLB will advance to member
institutions, including The Bank of Greene County, fluctuates from time to time
in accordance with policies of the FHLB.
The following table set forth certain information regarding borrowed funds.
Balance Outstanding at June 30, 2002:
Maturity
Amount Rate date
------------- --------------- ------------
$4,000,000 2.19% - fixed 01/14/2003
2,500,000 6.82% - fixed 09/02/2004
2,500,000 6.80% - fixed 10/04/2005
-------------
$9,000,000
=============
Average daily balance outstanding: $6,841,096
Maximum amount outstanding during the year $9,000,000
Weighted average interest rate during the year 5.57%
Weighted average interest at end of year 4.76%
Personnel
As of June 30, 2002, The Bank of Greene County had 74 full-time employees
and 12 part-time employees. Greene County Bancorp, Inc. has no employees who are
not also Bank employees. A collective bargaining unit does not represent the
employees and The Bank of Greene County considers its relationship with its
employees to be good.
FEDERAL AND STATE TAXATION
Federal Taxation
General. Greene County Bancorp, MHC, Greene County Bancorp, Inc. and The
Bank of Greene County are subject to federal income taxation in the same general
manner as other corporations, with some exceptions discussed below. The
following discussion of federal taxation is intended only to summarize certain
pertinent federal income tax matters and is not a comprehensive description of
the tax rules applicable to these entities.
Method of Accounting. For federal income tax purposes, Greene County
Bancorp, Inc. and The Bank of Greene County currently report income and expenses
on the accrual method of accounting and use a tax year ending June 30 for filing
consolidated federal income tax returns.The Small Business Protection Act of
1996 (the "1996 Act") eliminated the use of the reserve method of accounting for
bad debt reserves by savings institutions, effective for taxable years beginning
after 1995.
Bad Debt Reserves. Prior to the 1996 Act, The Bank of Greene County was
permitted to establish a reserve for bad debts and to make annual additions to
the reserve. These additions could, within specified formula limits, be deducted
in arriving at The Bank of Greene County's taxable income. As a result of the
1996 Act, The Bank of Greene County must use the specific charge off method in
computing its bad debt deduction beginning with its 1996 federal tax return.
Taxable Distributions and Recapture. Prior to the 1996 Act, bad debt
reserves created prior to January 1, 1988 were subject to recapture into taxable
income should The Bank of Greene County fail to meet certain thrift asset and
definitional tests. New federal legislation eliminated these thrift related
recapture rules. However, under current law, pre-1988 reserves remain subject to
recapture should The Bank of Greene County redeem its common stock, pay
dividends or make distributions in excess of earnings and profits.
At June 30, 2002, The Bank of Greene County's total federal pre-1988
reserve was approximately $2.1 million. This reserve reflects the cumulative
effects of federal tax deductions by The Bank of Greene County for which no
federal income tax provision has been made. A deferred tax liability has not
been provided on this amount as management does not intend to redeem stock, make
distributions or take other actions that would result in recapture of the
reserve.
Minimum Tax. The Code imposes an alternative minimum tax ("AMT") at a rate
of 20% on a base of regular taxable income plus certain tax preferences
("alternative minimum taxable income" or "AMTI"). The AMT is payable to the
extent such AMTI is in excess of an exemption amount. For all loss years except
those originating in 2001 and 2002, net operating losses can offset no more than
90% of AMTI. For loss years originating in 2001 and 2002, you can offset 100% of
AMTI. Certain payments of alternative minimum tax may be used as credits against
regular tax liabilities in future years. Greene County Bancorp, Inc. and The
Bank of Greene County have not been subject to the alternative minimum tax and
has no such amounts available as credits for carryover.
Net Operating Loss Carryovers. A financial institution may carry back net
operating losses to the preceding five taxable years and forward to the
succeeding 20 taxable years.At June 30, 2002, The Bank of Greene County had no
net operating loss carry forward for federal income tax purposes.
Corporate Dividends-Received Deduction. Greene County Bancorp, Inc. may
exclude from its income 100% of dividends received from The Bank of Greene
County as a member of the same affiliated group of corporations. Greene County
Bancorp, MHC owns less than 80% of the outstanding Common Stock of Greene County
Bancorp, Inc.. As such, Greene County Bancorp, MHC is not permitted to file a
consolidated federal income tax return with Greene County Bancorp, Inc. and The
Bank of Greene County. The corporate dividends-received deduction is 80% in the
case of dividends received from corporations with which a corporate recipient
does not file a consolidated return, and corporations which own less than 20% of
the stock of a corporation distributing a dividend may deduct only 70% of
dividends received or accrued on their behalf.
State Taxation
New York State Taxation - General. Greene County Bancorp, Inc. and The Bank
of Greene County report income on a combined fiscal year basis to New York
State. The New York State franchise tax on banking corporations is imposed in an
amount equal to the greater of (a) 8.0% "entire net income" allocable to New
York State (b) 3.0% of "alternative entire net income" allocable to New York
State (c) 0.01% of the average value of assets allocable to New York State or
(d) $250. Entire net income is based on federal taxable income, subject to
certain modifications. Alternative entire net income is equal to entire net
income without certain modifications. Greene County Bancorp, MHC files a
separate New York State franchise tax return.
Bad Debt Reserves. The Bank of Greene County is allowed to utilize the
reserve method of accounting for New York State franchise tax purposes and is
required to maintain two reserve accounts: the Reserve for Losses on
Nonqualifying Loans (the "NY NQL Reserve") and the Reserve for Losses on
Qualifying Real Property Loans (the "NY QRPL Reserve"). The addition to the NY
NQL Reserve must be computed under the "experience method". The addition to the
NY QRPL Reserve may be computed under either the experience method or the
"percentage of taxable income method" (the "PTI method"). The deduction under
the PTI method is equal to 32.0% of entire net income (before the deduction for
the bad debt reserve addition), which must first be allocated to the NY NQL
Reserve. The balance, if any, is the allowable addition to the NY QRPL reserve,
subject to a limitation based upon 6.0% of Qualifying Real Property Loans
("QRPL").
Recapture of New York State Bad Debt Reserves. If The Bank of Greene County
ceases to qualify as a "thrift institution" (as defined in the New York State
tax law), or fails to hold at least 60.0% of its assets in "Qualifying Assets",
it will no longer be entitled to use the reserve method and must recapture into
entire net income a portion of its NY QRPL Reserve. The amount subject to
recapture is generally equal to the excess of the NY QRPL Reserve over the
federal QRPL Reserve as of December 31, 1995. The amount of The Bank of Greene
County's NY QRPL Reserve subject to recapture is approximately $1.8 million.
Since it is The Bank of Greene County's intention to continue to qualify as a
thrift institution and to meet the 60.0% Qualifying Asset test, a deferred tax
liability has not been established for the $153,000 New York State tax that
would result from such failure.
Net Operating Loss Deductions. For New York State franchise tax purposes,
The Bank of Greene County is not entitled to carry back or forward net operating
losses ("NOLs") incurred in taxable years ending before January 1, 2001. NOLs
incurred in taxable years beginning on or after January 1, 2001 can be carried
forward to the succeeding 20 taxable years and carried back to the five
preceding years, however there is a $10,000 limitation on carry-backs.
Corporate Dividends-Received Deduction. Similar to the federal rules,
Greene County Bancorp, Inc. and The Bank of Greene County file a combined New
York State franchise tax report and inter-company dividends will be eliminated.
However, Greene County Bancorp, MHC does not own the requisite percentage
(generally 80.0% or more) of the common stock of Greene County Bancorp, Inc.
necessary to file on a combined basis with Greene County Bancorp, Inc.. As long
as Greene County Bancorp, MHC owns more than 50.0% of the common stock of Greene
County Bancorp, Inc., it is entitled to a full exclusion from taxation of
dividend income related to subsidiary capital. Greene County Bancorp, MHC is
entitled to a 50.0% dividends-received deduction if it owns 50.0% or less of the
common stock of Greene County Bancorp, Inc..
REGULATION
General
The Bank of Greene County is a New York-chartered savings bank and the
Federal Deposit Insurance Corporation through the Bank Insurance Fund ("BIF")
insures its deposit accounts up to applicable limits. The Bank of Greene County
is subject to extensive regulation by the New York State Banking Department (the
"Department"), as its chartering agency, and by the Federal Deposit Insurance
Corporation, as its deposit insurer. The Bank of Greene County is required to
file reports with, and is periodically examined by, the Federal Deposit
Insurance Corporation and the New York Superintendent of Banking concerning its
activities and financial condition and must obtain regulatory approvals prior to
entering into certain transactions, including, but not limited to, mergers with
or acquisitions of other banking institutions. The Bank of Greene County is a
member of the FHLB of New York and is subject to certain regulations by the
Federal Home Loan Bank System. Both Greene County Bancorp, Inc. and Greene
County Bancorp, MHC, as mutual savings and loan holding companies, are subject
to regulation by the Office of Thrift Supervision and are required to file
reports with the Office of Thrift Supervision. Any change in such regulations,
whether by the Department, the Federal Deposit Insurance Corporation, or the
Office of Thrift Supervision could have a material adverse impact on The Bank of
Greene County, Greene County Bancorp, Inc., or Greene County Bancorp, MHC.
Certain of the regulatory requirements applicable to The Bank of Greene
County, Greene County Bancorp, Inc. and Greene County Bancorp, MHC are referred
to below or elsewhere herein.
New York Bank Regulation
Federal Deposit Insurance Corporation regulations and other federal law and
regulations limit the exercise by a Federal Deposit Insurance
Corporation-insured savings bank of the lending and investment powers under the
New York State Banking Law. In particular, the applicable provisions of New York
State Banking Law and regulations governing the investment authority and
activities of an Federal Deposit Insurance Corporation insured state-chartered
savings bank have been substantially limited by the Federal Deposit Insurance
Corporation Improvement Act of 1991 and the Federal Deposit Insurance
Corporation regulations issued pursuant thereto.
The Bank of Greene County derives its lending, investment and other
authority primarily from the applicable provisions of New York State Banking Law
and the regulations of the Department, as limited by Federal Deposit Insurance
Corporation regulations. Under these laws and regulations, savings banks,
including The Bank of Greene County, may invest in real estate mortgages,
consumer and commercial loans, certain types of debt securities, including
certain corporate debt securities and obligations of federal, state and local
governments and agencies, certain types of corporate equity securities and
certain other assets. Under the statutory authority for investing in equity
securities, a savings bank may invest up to 7.5% of its assets in corporate
stock, with an overall limit of 5% of its assets invested in common stock.
Investment in the stock of a single corporation is limited to the lesser of 2%
of the outstanding stock of such corporation or 1% of the savings bank's assets,
except as set forth below. Such equity securities must meet certain earnings
ratios and other tests of financial performance. A savings bank's lending powers
are not subject to percentage of assets limitations, although there are limits
applicable to single borrowers. A savings bank may also, pursuant to the
"leeway" power, make investments not otherwise permitted under the New York
State Banking Law. This power permits investments in otherwise impermissible
investments of up to 1% of assets in any single investment, subject to certain
restrictions and to an aggregate limit for all such investments of up to 5% of
assets. Additionally, in lieu of investing in such securities in accordance with
and reliance upon the specific investment authority set forth in the New York
State Banking Law, savings banks are authorized to elect to invest under a
"prudent person" standard in a wider range of investment securities as compared
to the types of investments permissible under such specific investment
authority. However, in the event a savings bank elects to utilize the "prudent
person" standard, it will be unable to avail itself of the other provisions of
the New York State Banking Law and regulations, which set forth specific
investment authority. The Bank of Greene County has not elected to conduct its
investment activities under the "prudent person" standard. A savings bank may
also exercise trust powers upon approval of the Department.
New York State chartered savings banks may also invest in subsidiaries
under their service corporation investment authority. A savings bank may use
this power to invest in corporations that engage in various activities
authorized for savings banks, plus any additional activities which may be
authorized by the Department. Investment by a savings bank in the stock, capital
notes and debentures of its service corporations is limited to 3% of the bank's
assets, and such investments, together with the bank's loans to its service
corporations, may not exceed 10% of the savings bank's assets. Furthermore, New
York banking regulations impose requirements on loans which a bank may make to
its executive officers and directors and to certain corporations or partnerships
in which such persons have equity interests. These requirements include, but are
not limited to, requirements that (i)-certain loans must be approved in advance
by a majority of the entire board of directors and the interested party must
abstain from participating directly or indirectly in the voting on such loan,
(ii)-the loan must be on terms that are not more favorable than those offered to
unaffiliated third parties, and (iii)-the loan must not involve more than a
normal risk of repayment or present other unfavorable features.
Insurance of Accounts and Regulationby the Federal Deposit Insurance
Corporation
The Bank of Greene County is a member of the Bank Insurance Fund, which is
administered by the Federal Deposit Insurance Corporation. The Federal Deposit
Insurance Corporation insures deposits up to applicable limits and such
insurance is backed by the full faith and credit of the U.S. Government. As
insurer, the Federal Deposit Insurance Corporation imposes deposit insurance
premiums and is authorized to conduct examinations of and to require reporting
by Federal Deposit Insurance Corporation-insured institutions. It also may
prohibit any Federal Deposit Insurance Corporation-insured institution from
engaging in any activity the Federal Deposit Insurance Corporation determines by
regulation or order to pose a serious risk to the Federal Deposit Insurance
Corporation. The Federal Deposit Insurance Corporation also has the authority to
initiate enforcement actions against savings banks, after giving the
Superintendent an opportunity to take such action, and may terminate the deposit
insurance if it determines that the institution has engaged or is engaging in
unsafe or unsound practices, or is in an unsafe or unsound condition.
Regulatory Capital Requirements
The Federal Deposit Insurance Corporation has adopted risk-based capital
guidelines for banks under their supervision. The guidelines establish a
systematic analytical framework that makes regulatory capital requirements more
sensitive to differences in risk profiles among banking organizations. The Bank
of Greene County is required to maintain certain levels of regulatory capital in
relation to regulatory risk-weighted assets. The ratio of such regulatory
capital to regulatory risk-weighted assets is referred to as The Bank of Greene
County's "risk-based capital ratio". Risk-based capital ratios are determined by
allocating assets and specified off-balance sheet items to four risk-weighted
categories ranging from 0% to 100%, with higher levels of capital being required
for the categories perceived as representing greater risk.
These guidelines divide Bank's capital into two tiers. The first tier
("Tier I") includes common equity, retained earnings, certain non-cumulative
perpetual preferred stock (excluding auction rate issues) and minority interests
in equity accounts of consolidated subsidiaries, less goodwill and other
intangible assets (except mortgage servicing rights and purchased credit card
relationships subject to certain limitations). Supplementary ("Tier II") capital
includes, among other items, cumulative perpetual and long-term limited-life
preferred stock, mandatory convertible securities, certain hybrid capital
instruments, term subordinated debt and the allowance for loan and lease losses,
subject to certain limitations, less required deductions. Savings banks are
required to maintain a total risk-based capital ratio of 8%, of which at least
4% must be Tier I capital.
In addition, the Federal Deposit Insurance Corporation has established
regulations prescribing a minimum Tier I leverage ratio (Tier I capital to
adjusted total assets as specified in the regulations). These regulations
provide for a minimum Tier I leverage ratio of 3% for banks that meet certain
specified criteria, including that they have the highest examination rating and
are not experiencing or anticipating significant growth. All other banks are
required to maintain a Tier I leverage ratio of 3% plus an additional cushion of
at least 100 to 200 basis points. The Federal Deposit Insurance Corporation may,
however, set higher leverage and risk-based capital requirements on individual
institutions when particular circumstances warrant. Savings banks experiencing
or anticipating significant growth are expected to maintain capital ratios,
including tangible capital positions, well above the minimum levels.
At June 30, 2002, The Bank of Greene County exceeded all regulatory capital
requirements.
Standards for Safety and Soundness
The federal banking agencies have adopted a final regulation and
Interagency Guidelines Prescribing Standards for Safety and Soundness
("Guidelines") to implement the safety and soundness standards required under
federal law. The Guidelines set forth the safety and soundness standards that
the federal banking agencies use to identify and address problems at insured
depository institutions before capital becomes impaired. The standards set forth
in the Guidelines address internal controls and information systems; internal
audit system; credit underwriting; loan documentation; interest rate risk
exposure; asset growth; compensation; fees and benefits. The agencies also
adopted additions to the Guidelines, which require institutions to examine asset
quality and earnings standards. If the appropriate federal banking agency
determines that an institution fails to meet any standard prescribed by the
Guidelines, the agency may require the institution to submit to the agency an
acceptable plan to achieve compliance with the standard, as required by federal
law. The final regulations establish deadlines for the submission and review of
such safety and soundness compliance plans.
Limitations on Dividends and Other Capital Distributions
The Federal Deposit Insurance Corporation has the authority to use its
enforcement powers to prohibit a savings bank from paying dividends if, in its
opinion, the payment of dividends would constitute an unsafe or unsound
practice. Federal law also prohibits the payment of dividends by a bank that
will result in the bank failing to meet its applicable capital requirements on a
pro forma basis. New York law restricts The Bank of Greene County from declaring
a dividend, which would reduce its capital below (i) the amount required to be
maintained by state and federal law and regulations, or (ii) the amount of The
Bank of Greene County's liquidation account established in connection with the
December 1998 Reorganization. New York law also prescribes that dividends
declared by a stock savings bank in any calendar year shall not exceed the total
of its net profits for that year combined with its retained net profits of the
preceding two years, plus any required transfer to surplus or for the retirement
of any preferred stock, unless approved by the Superintendent.
Prompt Corrective Action
The federal banking agencies have promulgated regulations to implement the
system of prompt corrective action required by federal law. Under the
regulations, a bank shall be deemed to be (i) "well capitalized" if it has total
risk-based capital of 10.0% or more, has a Tier I risk-based capital ratio of
6.0% or more, has a Tier I leverage capital ratio of 5.0% or more and is not
subject to any written capital order or directive; (ii) "adequately capitalized"
if it has a total risk-based capital ratio of 8.0% or more, a Tier I risk-based
capital ratio of 4.0% or more and a Tier I leverage capital ratio of 4.0% or
more (3.0% under certain circumstances) and does not meet the definition of
"well capitalized"; (iii) "undercapitalized" if it has a total risk-based
capital ratio that is less than 8.0%, a Tier I risk-based capital ratio that is
less than 4.0% or a Tier I leverage capital ratio that is less than 4.0% (3.0%
under certain circumstances); (iv) "significantly undercapitalized" if it has a
total risk-based capital ratio that is less than 6.0%, a Tier I risk-based
capital ratio that is less than 3.0% or a Tier I leverage capital ratio that is
less than 3.0%; and (v) "critically undercapitalized" if it has a ratio of
tangible equity to total assets that is equal to or less than 2.0%. Federal law
and regulations also specify circumstances under which a federal banking agency
may reclassify a well capitalized institution as adequately capitalized and may
require an adequately capitalized institution to comply with supervisory actions
as if it were in the next lower category (except that the Federal Deposit
Insurance Corporation may not reclassify a significantly undercapitalized
institution as critically undercapitalized).
Based on the foregoing, The Bank of Greene County is currently classified
as a "well capitalized" savings institution.
Activities and Investments of Insured State-Chartered Banks
Federal law generally limits the activities and equity investments of
Federal Deposit Insurance Corporation-insured, state-chartered banks to those
that are permissible for national banks, notwithstanding state laws.Under
regulations dealing with equity investments, an insured state bank generally may
not, directly or indirectly, acquire or retain any equity investment of a type,
or in an amount, that is not permissible for a national bank. An insured state
bank is not prohibited from, among other things, (i) acquiring or retaining a
majority interest in a subsidiary; (ii) investing as a limited partner in a
partnership the sole purpose of which is the direct or indirect investment in
the acquisition, rehabilitation, or new construction of a qualified housing
project, provided that such limited partnership investments may not exceed 2% of
the bank's total assets; (iii) acquiring up to 10% of the voting stock of a
company that solely provides or reinsures directors', trustees', and officers'
liability insurance coverage or bankers' blanket bond group insurance coverage
for insured depository institutions; and (iv) acquiring or retaining the voting
shares of a depository institution if certain requirements are met.
Federal law and Federal Deposit Insurance Corporation regulations permit
certain exceptions to the foregoing limitation. For example, certain
state-chartered banks, such as The Bank of Greene County, may continue to invest
in common or preferred stock listed on a National Securities Exchange or the
National Market System of NASDAQ, and in the shares of an investment company
registered under the Investment Company Act of 1940, as amended. As of June 30,
2002, The Bank of Greene County had no securities pursuant to this exception.
Transactions with Affiliates
Under current federal law, transactions between depository institutions and
their affiliates are governed by Sections 23A and 23B of the Federal Reserve
Act. An affiliate of a savings bank is any company or entity that controls, is
controlled by, or is under common control with the savings bank, other than a
subsidiary. In a holding company context, at a minimum, the parent holding
companies of a savings bank and any companies that are controlled by such parent
holding company are affiliates of the savings bank. Generally, Section 23A
limits the extent to which the savings bank or its subsidiaries may engage in
"covered transactions" with any one affiliate to an amount equal to 10% of such
savings bank's capital stock and surplus, and contains an aggregate limit on all
such transactions with all affiliates to an amount equal to 20% of such capital
stock and surplus. The term "covered transaction" includes the making of loans
or other extensions of credit to an affiliate; the purchase of assets from an
affiliate, the purchase of, or an investment in, the securities of an affiliate;
the acceptance of securities of an affiliate as collateral for a loan or
extension of credit to any person; or issuance of a guarantee, acceptance, or
letter of credit on behalf of an affiliate. Section 23A also establishes
specific collateral requirements for loans or extensions of credit to, or
guarantees, acceptances on letters of credit issued on behalf of an affiliate.
Section 23B requires that covered transactions and a broad list of other
specified transactions be on terms substantially the same, or no less favorable,
to the savings bank or its subsidiary as similar transactions with
nonaffiliates.
Further, Section 22(h) of the Federal Reserve Act restricts a savings bank
with respect to loans to directors, executive officers, and principal
stockholders. Under Section 22(h), loans to directors, executive officers and
stockholders who control, directly or indirectly, 10% or more of voting
securities of a savings bank, and certain related interests of any of the
foregoing, may not exceed, together with all other outstanding loans to such
persons and affiliated entities, the savings bank's total capital and surplus.
Section 22(h) also prohibits loans above amounts prescribed by the appropriate
federal banking agency to directors, executive officers, and stockholders who
control 10% or more of voting securities of a stock savings bank, and their
respective related interests, unless such loan is approved in advance by a
majority of the board of directors of the savings bank. Any "interested"
director may not participate in the voting. The loan amount (which includes all
other outstanding loans to such person) as to which such prior board of director
approval is required, is the greater of $25,000 or 5% of capital and surplus or
any loans over $500,000. Further, pursuant to Section 22(h), loans to directors,
executive officers and principal stockholders must generally be made on terms
substantially the same as offered in comparable transactions to other persons.
Section 22(g) of the Federal Reserve Act places additional limitations on loans
to executive officers.
Holding Company Regulation
Generally. Federal law allows a state savings bank, such as The Bank of
Greene County that qualifies as a "Qualified Thrift Lender" discussed below, to
elect to be treated as a savings association for purposes of the savings and
loan holding company provisions of the Home Owners' Loan Act (the "HOLA"). Such
election results in its holding company being regulated as a savings and loan
holding company by the Office of Thrift Supervision rather than as a bank
holding company by the Federal Reserve Board. Greene County Bancorp, Inc. and
Greene County Bancorp, MHC have made such election by converting from a Delaware
corporation and a New York mutual holding company to a federal corporation and
federal mutual holding company, respectively, effective May 15, 2001. Greene
County Bancorp, Inc. and Greene County Bancorp, MHC savings and loan holding
companies are within the meaning of HOLA. As such, Greene County Bancorp, Inc.
and Greene County Bancorp, MHC are registered with the Office of Thrift
Supervision and are subject to the Office of Thrift Supervision regulations,
examinations, supervisions and reporting requirements. In addition, the Office
of Thrift Supervision has enforcement authority over Greene County Bancorp, Inc.
and Greene County Bancorp, MHC and any nonsavings institution subsidiaries.
Among other things, this authority permits the Office of Thrift Supervision to
restrict or prohibit activities that are determined to be a serious risk to the
subsidiary savings institution. As federal corporations, Greene County Bancorp,
Inc. and Greene County Bancorp, MHC are generally not subject to state business
organization law.
Permissible Activities. Under the HOLA and Office of Thrift Supervision
regulations and policies, a federal mid-tier holding company such as Greene
County Bancorp, Inc. is permitted to, among other things: (i) own a savings
association or savings bank; (ii) acquire a mutual institution; (iii) merge with
or acquire another mutual holding company, one of whose subsidiaries is a
savings institution; (iv) acquire non-controlling amounts of the stock of
savings institutions and savings institution holding companies, subject to
certain restrictions; (v) invest in any corporation that a savings association
may invest in under federal law or under the law of any state where the savings
association has its home office; (vi) furnish or perform management services for
a savings institution subsidiary; (vii) hold, manage or liquidate assets owned
or acquired from a savings institution subsidiary of such company; (viii) hold
or manage properties used or occupied by a savings institution subsidiary of
such company; and (ix) act as trustee under deed or trust. In addition, a
federal mutual holding company may engage in any other activity that is
permissible for bank holding companies under the Bank Holding Company Act, or in
which multiple savings and loan companies may engage. Finally, under recently
enacted financial modernization legislation, federal mutual holding companies
may engage in any activity in which a financial holding company may engage,
including maintaining an insurance agency, escrow business and underwriting
securities and insurance. Moreover, a federal mutual holding company may engage
in the activities of a financial holding company without having to make
financial holding company election that is applicable to bank holding companies.
If a mutual holding company acquires or merges with another holding company, the
holding company acquired or the holding company resulting from such merger or
acquisition may only invest in assets and engage in activities listed-above, and
has a period of two years to cease any nonconforming activities and divest of
any nonconforming investments.
Holding Company Regulatory Capital Requirements. Greene County Bancorp,
Inc., as a mutual savings and loan holding company, does not have any regulatory
capital requirements.
Mergers and Acquisitions. The Home Owners' Loan Act prohibits a savings and
loan holding company, including Greene County Bancorp, Inc. and Mutual Holding
Company, directly or indirectly, or through one or more subsidiaries, from
acquiring another savings institution or holding company thereof, without prior
written approval of the Office of Thrift Supervision. The Home Owners' Loan Act
also prohibits a savings and loan holding company from, directly or indirectly,
acquiring more than 5% of the voting stock of another savings association or
savings and loan holding company, or from acquiring such an institution or
company by merger, consolidation, or purchase or its assets, without the prior
written approval of the Office of Thrift Supervision. In evaluating applications
by holding companies to acquire other financial institutions, the Office of
Thrift Supervision considers the financial and managerial resources and future
prospects of the acquiror and the merging institution, the convenience and needs
of the community and competitive factors.
The Office of Thrift Supervision is prohibited from approving any
acquisitions that would result in multiple savings and loan holding companies
controlling savings institutions in more than one state, subject to two
exceptions: (i) the approval of interstate supervisory acquisitions by savings
and loan holding companies, and (ii) the acquisition of a savings institution in
another state if the laws of the state or target savings institution
specifically permit such acquisitions.The states vary in the extent to which
they permit interstate savings and loan holding company acquisitions.
Payment of Cash Dividends. Office of Thrift Supervision regulations
generally do not restrict the ability of a savings and loan holding company to
pay dividends. However, federal and state law do impose certain limitations on
the payment by The Bank of Greene County, Greene County Bancorp, Inc.'s
principal operating subsidiary, of cash dividends to Greene County Bancorp, Inc.
(described herein).
Waivers of Dividends by Greene County Bancorp, MHC. Office of Thrift
Supervision regulations require Greene County Bancorp, MHC to notify the Office
of Thrift Supervision of any proposed waiver of its right to receive dividends.
The Office of Thrift Supervision reviews dividend waiver notices on a
case-by-case basis, and, in general, does not object to any such waiver if: (i)
the mutual holding company's board of directors determines that such waiver is
consistent with such director's fiduciary duties to the mutual holding company's
members; (ii) for as long as the savings association subsidiary is controlled by
the mutual holding company, the dollar amount of dividends waived by the mutual
holding company are considered as a restriction to the retained earnings of the
savings association, which restriction, if material is disclosed in the public
financial statements of the savings association as a note to the financial
statements; (iii) the amount of any dividend waived by the mutual holding
company is available for declaration as a dividend solely to the mutual holding
company, and, in accordance with SFAS 5, where the savings association
determines that the payment of such dividend to the mutual holding company is
probable, an appropriate dollar amount is recorded as a liability; and (iv) the
amount of any waived dividend is considered as having been paid by the savings
association in evaluating any proposed dividend under Office of Thrift
Supervision capital distribution regulations.
Conversion of Greene County Bancorp, MHC to Stock Form. Office of Thrift
Supervision regulations permit Greene County Bancorp, MHC to convert from the
mutual to the stock form of ownership (a "Conversion Transaction"). There can be
no assurance when, if ever, a Conversion Transaction will occur, and the Board
of Directors has no current intention to plan to undertake a Conversion
Transaction. In a Conversion Transaction a new holding company would be formed
as the successor to Greene County Bancorp, Inc. (the "New Holding Company"), the
Mutual Holding Company's corporate existence would end, and certain depositors
of The Bank of Greene County would receive the right to subscribe for additional
shares of the New Holding Company. Based upon the current Office of Thrift
Supervision policy, in a Conversion Transaction, each share of Common Stock held
by Greene County Bancorp, Inc.'s public stockholders ("Minority Shareholders")
would be automatically converted into a number of shares of common stock of the
New Holding Company determined pursuant an exchange ratio that ensures that
after the Conversion Transaction, subject to any adjustment to reflect the
receipt of cash in lieu of fractional shares, the percentage of the to-be
outstanding shares of the New Holding Company issued to Minority Shareholders in
exchange for their Common Stock would be equal to the percentage of the
outstanding shares of Common Stock held by Minority Shareholders immediately
prior to the Conversion Transaction. The total number of shares held by Minority
Stockholders after the Conversion Transaction would also be affected by any
purchases by such persons in the offering that would be conducted as part of the
Conversion Transaction.
Stock Repurchases. The Office of Thrift Supervision imposes no restrictions
on stock repurchases by Greene County Bancorp, Inc..
Qualified Thrift Lender Test. In order for Greene County Bancorp, Inc. to
be regulated as a savings and loan holding company by the Office of Thrift
Supervision (rather than as a bank holding company by the Federal Reserve
Board), The Bank of Greene County must qualify as a "qualified thrift lender"
under Office of Thrift Supervision regulations or satisfy the "domestic building
and loan association" test under the Internal Revenue Code. Under the qualified
thrift lender test, a savings institution is required to maintain at least 65%
of its "portfolio assets" (total assets less: (i) specified liquid assets up to
20% of total assets; (ii) intangible, including goodwill; and (iii) the value of
property used to conduct business) in certain "qualified thrift investments"
(primarily residential mortgages and related investments, including certain
mortgage-backed and related securities) in at least nine out of each 12 month
period. The Bank of Greene County currently maintains the majority of its
portfolio assets in qualified thrift investments and has met the qualified
thrift lender test in each of the last 12 months.
Federal Securities Law
The common stock of Greene County Bancorp, Inc. is registered with the SEC
under the Securities Exchange Act of 1934. Greene County Bancorp, Inc. is
subject to the information, proxy solicitation, insider trading restrictions and
other requirements of the SEC under the Exchange Act.
Greene County Bancorp, Inc. common stock held by persons who are affiliates
(generally officers, directors and principal shareholders) of Greene County
Bancorp, Inc. may not be resold without registration or unless sold in
accordance with certain resale restrictions. If Greene County Bancorp, Inc.
meets specified current public information requirements, each affiliate of
Greene County Bancorp, Inc. is able to sell in the public market, without
registration, a limited number of shares in any three-month period.
Sarbanes-Oxley Act of 2002
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of
2002. The Sarbanes-Oxley Act represents a comprehensive revision of laws
affecting corporate governance, accounting obligations and corporate reporting.
The Sarbanes-Oxley Act is applicable to all companies with equity or debt
securities registered under the Securities Exchange Act of 1934. In particular,
the Sarbanes-Oxley Act establishes: (i) new requirements for audit committees,
including independence, expertise, and responsibilities; (ii) additional
responsibilities regarding financial statements for the Chief Executive Officer
and Chief Financial Officer of the reporting company; (iii) new standards for
auditors and regulation of audits; (iv) increased disclosure and reporting
obligations for the reporting company and their directors and executive
officers; and (v) new and increased civil and criminal penalties for violation
of the securities laws. Many of the provisions became effective immediately
while other provisions become effective over a period of 30 to 270 days and are
subject to rulemaking by the Securities and Exchange Commission. Although we
anticipate that we will incur additional expense in complying with the
provisions of the Sarbanes-Oxley Act and the resulting regulations, management
does not expect that such compliance will have a material impact on our results
of operations or financial condition.
Community Reinvestment Act
Under the Community Reinvestment Act, as amended, as implemented by Federal
Deposit Insurance Corporation regulations, a savings bank has a continuing and
affirmative obligation, consistent with its safe and sound operation, to help
meet the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA requires the Federal Deposit Insurance Corporation, in
connection with its examination of a savings institution to assess the
institution's record of meeting the credit needs of its community and to take
such record into account in its evaluation of certain applications by such
institution. The Bank of Greene County's latest CRA rating was "outstanding".
The Bank of Greene County is also subject to provisions of the New York
State Banking Law which impose continuing and affirmative obligations upon
banking institutions organized in New York State to serve the credit needs of
its local community which are substantially similar to those imposed by the CRA.
The NYCRA also requires the Superintendent to consider a bank's NYCRA rating
when reviewing a bank's application to engage in certain transactions, including
mergers, asset purchases and the establishment of branch offices or automated
teller machines, and provides that such assessment may serve as a basis for the
denial of any such application.
The Bank of Greene County's NYCRA rating as of its latest examination was
"outstanding".
Federal Home Loan Bank System
The Bank of Greene County is a member of the Federal Home Loan Bank of New
York, which is one of 12 regional FHLBs, that administers the home financing
credit function of savings institutions. Each FHLB serves as a reserve or
central bank for its members within its assigned region. It is funded primarily
from proceeds derived from the sale of consolidated obligations of the FHLB
System. It makes loans to members (i.e., advances) in accordance with policies
and procedures established by the board of directors of the FHLB. These policies
and procedures are subject to the regulation and oversight of the Federal
Housing Finance Board. All advances from the FHLB are required to be fully
secured by sufficient collateral as determined by the FHLB. In addition, all
long-term advances are required to provide funds for residential home financing.
As a member, The Bank of Greene County is required to purchase and maintain
stock in the FHLB of New York. At June 30, 2002, The Bank of Greene County had
$1,121,100 of FHLB stock. The dividend rate from FHLB stock was 3.67% at June
30, 2002. No assurance can be given that such dividends will continue in the
future at such levels.
Under federal law, the FHLBs are required to provide funds for the
resolution of troubled savings institutions and to contribute to low and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future. These contributions
could also have an adverse effect on the value of FHLB stock in the future. A
reduction in value of The Bank of Greene County's FHLB stock may result in a
corresponding reduction in The Bank of Greene County's capital.
Reports to Security Holders
Greene County Bancorp, Inc. files annual and quarterly reports with the SEC
on Forms 10-KSB and 10-QSB, respectively. Greene County Bancorp, Inc. also files
current reports on the Form 8-K with the SEC. Finally, Greene County Bancorp,
Inc. files preliminary and definitive proxy materials with the SEC.
The public may read and copy any materials filed by Greene County Bancorp,
Inc. with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. Greene County
Bancorp, Inc. is an electronic filer. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The address of the site
is http://www.sec.gov.
ITEM 2. Description of Properties
------
The Bank of Greene County currently conducts its business through six
full-service banking offices. Both Greene County Bancorp, Inc. and The Bank of
Greene County maintain their executive offices at the Operations Center, 302
Main Street, Catskill, New York. The following table sets forth The Bank of
Greene County's offices as of June 30, 2002. The Bank of Greene County's current
facilities are considered by management to be adequate for the needs of The Bank
of Greene County and Greene County Bancorp, Inc. in the foreseeable future.
Original Net Book Value
Leased Year Date of Of Property or
or Leased or Lease Leasehold
Location Owned Acquired Expiration Improvements
----------------- ------- --------- ---------------- ---------------
(Dollars in thousands)
Main Office (1)
Main & Church Streets
Catskill, NY 12414 Owned 1963 --- $245
Full Service Branches
Coxsackie Branch
Route 385
West Coxsackie, NY 12051 Owned 1974 --- $111
Cairo Branch
Main Street
Cairo, NY 12413 Owned 1988 --- $360
Greeneville Branch
Route 32
Greeneville, NY 12083 Owned 1997 --- $1,012
Tannersville Branch
Main Street
Tannersville, NY 12485 Owned 2000 --- $1,298
Westerlo Branch
Routes 141 & 143
Westerlo, NY 12193 Leased 2001 November 30, 2005 $100
Operations Center
302 Main Street
Catskill, NY 12414 Owned 1999 --- $554
(1) Includes adjacent parking lot
ITEM 3. Legal Proceedings
------
Greene County Bancorp, Inc. is not involved in any pending legal
proceedings other than routine legal proceedings occurring in the ordinary
course of business which, in the aggregate, involve amounts which are believed
by management to be immaterial to the financial condition and results of
operations of Greene County Bancorp, Inc.
ITEM 4. Submission of Matters to a Vote of Security Holders
------
No matters were submitted to a vote of shareholders during the fourth quarter of
the fiscal year under report.
PART II
ITEM 5. Market for Common Equity and Related Security Holder Matters
------
The "Common Stock and Related Matters" section on pages 23-24 of Greene
County Bancorp, Inc.'s Annual Report to Shareholders is incorporated herein by
reference.
ITEM 6.
______ Management's Discussion and Analysis of Financial Condition and
Results of Operations
The "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section on pages 7-23 of Greene County Bancorp, Inc.'s
Annual Report to Shareholders is incorporated herein by reference.
ITEM 7. Financial Statements
------
The selected financial information for the year ended June 30, 2002 is
filed as part of Greene County Bancorp, Inc.'s Annual Report to Shareholders on
pages 5-6, and is incorporated by reference.
ITEM 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure _______
None.
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons;
______ Compliance With Section 16(a) of the Exchange Act
The "Proposal I - Election of Directors" section on pages 5-7 of Greene
County Bancorp, Inc.'s definitive Proxy Statement for Greene County Bancorp,
Inc.'s 2002 Annual Meeting of Shareholders (the "2002 Proxy Statement") is
incorporated herein by reference.
ITEM 10. Executive Compensation
--------
The "Proposal I - Election of Directors" section on pages 8-9 of Greene
County Bancorp, Inc.'s 2002 Proxy Statement is incorporated herein by reference.
ITEM 11.
-------
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
The "Proposal I - Election of Directors" section on page 5 of Greene County
Bancorp, Inc.'s 2002 Proxy Statement is incorporated herein by reference.
ITEM 12. Certain Relationships and Related Transactions
-------
The "Transactions with Certain Related Persons" section on page 13 of
Greene County Bancorp, Inc.'s 2002 Proxy Statement is incorporated herein by
reference.
ITEM 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
--------
(a)(1) Financial Statements
--------------------
The exhibits and financial statement schedules filed as a part of this Form
10-KSB are as follows, all of which are included in the Annual Report to
Shareholders (Exhibit 13):
(A) Report of Independent Accountants - page 26
(B) Consolidated Statements of Condition - page 27
(C) Consolidated Statements of Income - page 28
(D) Consolidated Statements of Comprehensive Income - page 29
(E) Consolidated Statements of Changes in Shareholders' Equity - page 30
(F) Consolidated Statements of Cash Flows - page 31
(G) Notes to Consolidated Financial Statements - pages 32-47
(a)(2) Financial Statement Schedules
-----------------------------
All financial statement schedules have been omitted as the required
information is inapplicable or has been included in the Notes to Consolidated
Financial Statements. The remaining information appearing in the Annual Report
to Shareholders for the year ended June 30, 2002 is not deemed to be filed as
part of this report except as expressly provided herein.
(b) Reports on Form 8-K
None
(c) Exhibits
3.1 Certification of Incorporation of Greene County Bancorp, Inc.
(incorporated herein by reference to Greene County Bancorp, Inc.'s Registration
statement on SB-2, file No. 333-63681 (the "SB-2").
3.2 Bylaws of Greene County Bancorp, Inc. (incorporated herein by reference
to Greene County Bancorp, Inc.'s SB-2)
4.0 Form of Stock Certificate of Greene County Bancorp, Inc. (incorporated
herein by reference to the Form SB-2)
10.1 Employment Agreement with J. Bruce Whittaker (incorporated herein by
reference to Greene County Bancorp, Inc.'s SB-2)
10.2 Employee Stock Ownership Plan (incorporated herein by reference to
Greene County Bancorp, Inc.'s SB-2)
13.0 Annual Report to Shareholders
21.0 Subsidiaries of Greene County Bancorp, Inc.
23.0 Consent of Experts
99.1 Additional Exhibit
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
GREENE COUNTY BANCORP, INC.
Date: April 16, 2003 By: /s/ J. Bruce Whittaker
__________________________
President and Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
By: /s/ Michelle Plummer
---------------------
Chief Financial Officer and Treasurer
Date: April 16, 2003
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 annual report on Form 10-KSB of Greene County Bancorp,
Inc.;
(2) Based on my knowledge, this annual 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 annual
report;
(3) Based on my knowledge, the financial statements and other financial
information included in this annual 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 annual 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 annual 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
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions 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
annual 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 April 16, 2003 J. Bruce Whittaker
President and Chief Executive Officer
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Michelle Plummer, Chief Financial Officer, certify that:
(7) I have reviewed this annual report on Form 10-KSB of Green County Bancorp,
Inc.;
(8) Based on my knowledge, this annual 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 annual
report;
(9) Based on my knowledge, the financial statements and other financial
information included in this annual 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 annual report;
(10) 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 annual 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
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
(11) 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
(12) The registrant's other certifying officers and I have indicated in this
annual 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 April 16, 2003 Michelle Plummer
Chief Financial Officer
EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
EXHIBIT 21
SUBSIDIARIES OF GREENE COUNTY BANCORP, INC.
Company Percent Owned
________ ______________
The Bank of Greene County 100.0% owned by Greene County Bancorp, Inc.
EXHIBIT 23
CONSENT OF EXPERTS
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-51538) of Greene County Bancorp, Inc. of our
report dated July 26, 2002 except for Note 18, for which the date is April 16,
2003 relating to the financial statements of Greene County Bancorp, Inc., which
appears in the Annual Report to Shareholders, which is included in this Form
10-KSB/A.
/s/ PricewaterhouseCoopers LLP
Albany, New York
April 16, 2003
EXHIBIT 99.1
Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
J. Bruce Whittaker, Chief Executive Officer and President and Michelle
Plummer, Chief Financial Officer and Treasurer of Greene County Bancorp, Inc.
each certify in his/her capacity as an officer of Greene County Bancorp, Inc.
that he has reviewed the annual report on Form 10-KSB for the fiscal year ended
June 30, 2002 and that to the best of his/her knowledge:
1. the report fully complies with the requirements of Sections 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the report fairly presents, in all material
respects, the financial condition and results of operations of Greene County
Bancorp, Inc..
Date: April 16, 2003 /s/ J. Bruce Whittaker
_______________________
Chief Executive Officer and President
Date: April 16, 2003 /s/ Michelle Plummer
_____________________
Chief Financial Officer and Treasurer