U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF15(d) OF THE SECURITIES
EXCHANGE ACT
GREENE COUNTY BANCORP, INC.
(Exact name of small business issuer as specified in its charter)
Commission file number 0-25165
United States 14-1809721
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification Number)
302 Main Street, Catskill, New York 12414
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (518) 943-2600
Check whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the past
90 days.
YES X NO________
As of May 10, 2002, the registrant had 2,152,835 shares of common stock issued
at $ .10 par value, and 2,022,135 were outstanding.
GREENE COUNTY BANCORP, INC.
INDEX
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements
* Consolidated Statements of Financial Condition 3
* Consolidated Statements of Income 4-5
* Consolidated Statements of Comprehensive Income 6
* Consolidated Statements of Changes in Shareholders' Equity 7
* Consolidated Statements of Cash Flows 8
* Notes to Consolidated Financial Statements 9-11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12-21
Item 3. Market Risk 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
Greene County Bancorp, Inc.
Consolidated Statements of Financial Condition
As of March 31, 2002 and June 30, 2001
ASSETS March 31, 2002 June 30, 2001
(Unaudited)
ASSETS
Cash and due from banks $ 6,078,926 $ 5,336,195
Federal funds sold 10,934,357 13,468,163
------------- -------------
Total cash and cash equivalents 17,013,283 18,804,358
Investment securities, at fair value 60,479,375 48,875,229
Federal Home Loan Bank stock, at cost 1,121,100 939,600
Loans 126,784,566 110,920,369
Less: Allowance for loan losses (1,028,731) (886,081)
Unearned origination fees and costs, net (277,377) (277,277)
------------- -------------
Net loans receivable 125,478,458 109,757,011
Premises and equipment 5,028,613 5,052,208
Accrued interest receivable 1,394,710 1,357,239
Prepaid expenses and other assets 347,863 288,914
Other real estate owned 30,229 30,229
------------- -------------
Total assets $210,893,631 $185,104,788
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing deposits $20,062,136 $18,418,308
Interest bearing deposits 155,611,055 135,774,206
------------- -------------
Total deposits 175,673,191 154,192,514
Borrowings from FHLB 9,000,000 5,000,000
Accrued expenses and other liabilities 650,819 623,038
Accrued income taxes 123,680 195,646
------------- -------------
Total liabilities 185,447,690 160,011,198
Shareholders' equity
Preferred stock,
Authorized:1,000,000 shares at March 31,2002 and June 30, 2001; --- ---
Common stock, par value $.10 per share;
Authorized:12,000,000 shares at March 31, 2002 and June 30, 2001;
Issued: 2,152,835 shares at March 31, 2002 and June 30, 2001;
Outstanding: 2,022,135 shares at March 31, 2002;
2,040,355 shares at June 30, 2001 215,284 215,284
Additional paid-in capital 10,085,762 10,188,573
Retained earnings 16,704,774 15,993,025
Accumulated other comprehensive income 447,414 499,022
Less: Treasury stock, at cost 130,700 shares at March 31, 2002; and
112,480 shares at June 30, 2001, (1,400,444) (1,075,923)
Unearned stock-based compensation (171,045) (229,753)
Unearned ESOP shares at cost, 49,972 shares at March 31, 2002;and
58,516 shares at June 30, 2001, (435,804) (496,638)
------------- -------------
Total shareholders' equity 25,445,941 25,093,590
-------------- --------------
Total liabilities and shareholders' equity $210,893,631 $185,104,788
============= =============
See notes to consolidated financial statements.
Greene County Bancorp, Inc.
Consolidated Statements of Income
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
Interest income:
Loans $2,298,935 $2,000,082
Investment securities 455,109 567,583
Mortgage-backed securities 212,168 100,036
Tax free securities 108,100 116,506
Interest bearing deposits and federal funds sold 56,805 123,757
------------- ------------
Total interest income 3,131,117 2,907,964
Interest expense:
Interest on deposits 1,085,708 1,209,706
Interest on borrowings 102,439 162,090
------------- -------------
Total interest expense 1,188,147 1,371,796
Net interest income 1,942,970 1,536,168
Less: Provision for loan losses 60,000 15,000
------------- -------------
Net interest income after provision for loan losses 1,882,970 1,521,168
-------------- -------------
Non-interest income:
Service charges on deposit accounts 297,633 125,638
Other operating income 197,486 108,304
------------- -------------
Total non-interest income 495,119 233,942
Non-interest expense:
Salaries and employee benefits 831,563 755,621
Occupancy expense 94,588 98,284
Equipment and furniture expense 117,343 110,732
Service and data processing fees 160,133 131,988
Office supplies 33,126 33,526
Other 533,109 376,679
------------- -------------
Total non-interest expense 1,769,862 1,506,830
Income before provision for income taxes 608,227 248,280
Provision for income taxes 140,500 35,700
------------- -------------
Net income $467,727 $212,580
============== =============
Basic EPS $0.24 $0.11
Basic average shares outstanding 1,955,078 1,974,262
Diluted EPS $0.23 $0.11
Diluted average shares outstanding 2,013,215 2,000,924
See notes to consolidated financial statements.
Greene County Bancorp, Inc.
Consolidated Statements of Income
For the Nine Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
Interest income:
Loans $6,736,453 $5,827,525
Investment securities 1,474,842 1,657,332
Mortgage-backed securities 510,405 335,025
Tax free securities 325,388 345,270
Interest bearing deposits and federal funds sold 275,448 391,548
------------- -------------
Total interest income 9,322,536 8,556,700
Interest expense:
Interest on deposits 3,493,245 3,620,351
Interest on borrowings 274,088 500,053
------------- -------------
Total interest expense 3,767,333 4,120,404
Net interest income 5,555,203 4,436,296
Less: Provision for loan losses 158,900 45,000
------------- -------------
Net interest income after provision for loan losses 5,396,303 4,391,296
------------- -------------
Non-interest income:
Service charges on deposit accounts 786,531 383,971
Other operating income 524,794 401,775
------------- -------------
Total non-interest income 1,311,325 785,746
Non-interest expense:
Salaries and employee benefits 2,460,858 2,185,547
Occupancy expense 274,203 249,706
Equipment and furniture expense 335,422 309,541
Service and data processing fees 468,698 385,188
Office supplies 109,737 89,330
Other 1,447,727 1,075,998
------------- -------------
Total non-interest expense 5,096,645 4,295,310
Income before provision for income taxes 1,610,983 881,732
Provision for income taxes 417,900 207,866
------------- -------------
Net income $1,193,083 $673,866
============= =============
Basic EPS $0.61 $0.34
Basic average shares outstanding 1,959,546 1,977,255
Diluted EPS $0.59 $0.34
Diluted average shares outstanding 2,012,285 1,994,882
See notes to consolidated financial statements.
Greene County Bancorp, Inc.
Consolidated Statements of Comprehensive Income
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
Net income $467,727 $212,580
----------- -------------
Other comprehensive (loss) / income:
Unrealized holding (loss) / gain arising during the three months
ended March 31, 2002 and 2001, net of tax benefit / (expense)
of $196,712 and ($298,179), respectively. (295,069) 447,042
------------- -------------
Total other comprehensive (loss) / income (295,069) 447,042
------------- -------------
Comprehensive (loss)/ income $172,658 $659,622
============= =============
Greene County Bancorp, Inc.
Consolidated Statements of Comprehensive Income
For the Nine Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
Net income $1,193,083 $673,866
------------- -------------
Other comprehensive income:
Reclassification adjustment, net of income tax expense ($12,712) --- (16,851)
Unrealized holding (loss)/ gain arising during the nine months
ended March 31, 2002 and 2001, net of tax benefit / (expense)
of $34,407 and ($743,008), respectively. (51,608) 1,074,040
------------- -------------
Total other comprehensive (loss)/ income (51,608) 1,057,189
-------------- -------------
Comprehensive income $1,141,475 $1,731,055
============= =============
See notes to consolidated financial statements.
Greene County Bancorp, Inc.
Consolidated Statements of Changes in Shareholders' Equity
For the Nine Months Ended March 31, 2002 and 2001
Accumulated Total
Additional Other Unearned Unearned Shareholders'
Capital Paid - In Retained Comprehensive Treasury Stock-based ESOP Equity
Stock Capital Earnings Income Stock Compensation Shares
Balance at
June 30, 2000 $215,284 $10,319,859 $15,526,092 ($524,546) ($1,019,976) ($333,690) ($589,074) $23,593,949
ESOP shares earned 58 68,586 68,644
Stock-based
compensation
earned 53,629 53,629
MRP shares issued (115,928) 115,928 ---
Treasury stock
repurchased (171,875) (171,875)
Dividends paid (493,305) (493,305)
Net income 673,866 673,866
Change in unrealized
gain, net 1,057,189 1,057,189
Balance at
March 31, 2001 $215,284 $10,203,989 $15,706,653 $532,643 ($1,075,923) ($280,061) ($520,488) $24,782,097
============================================================================================================
Balance at
June 30, 2001 $215,284 $10,188,573 $15,993,025 $499,022 ($1,075,923) ($229,753) ($496,638) $25,093,590
ESOP shares earned 25,988 60,834 86,822
Options exercised (28,125) 105,930 77,805
MRP shares issued (100,674) 100,674 ---
Stock-based
compensation
earned 58,708 58,708
Treasury stock
repurchased (531,125) (531,125)
Dividends paid (481,334) (481,334)
Net income 1,193,083 1,193,083
Change in unrealized
(loss), net (51,608) (51,608)
Balance at
------------------------------------------------------------------------------------------------------------
March 31, 2002 $215,284 $10,085,762 $16,704,774 $447,414 ($1,400,444) ($171,045) ($435,804) $25,445,941
============================================================================================================
See notes to consolidated financial statements.
Greene County Bancorp, Inc.
Consolidated Statements of Cash Flows
For the Nine Months Ended March 31, 2002 and 2001
2002 2001
Cash flows from operating activities:
Net Income $1,193,083 $673,866
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation 340,175 296,000
Net, accretion of discounts (2,774) (2,137)
Provision for loan losses 158,900 45,000
ESOP and other stock-based compensation earned 145,530 122,273
Loss on sale of investments --- 9,437
Net gain on sale of other real estate (22,945) (6,158)
Net (decrease)increase in accrued income taxes (71,966) 80,893
Net increase in accrued interest receivable (37,471) (67,138)
Net increase in prepaid and other assets (58,949) (27,131)
Net increase (decrease) in other liabilities 62,188 (67,421)
-------------------- -----------------
Net cash provided by operating activities 1,705,771 1,057,484
Cash flows from investing activities:
Proceeds from maturities of securities 4,155,123 7,616,469
Proceeds from sale of securities and other investments --- 2,966,765
Purchases of securities and other investments (8,736,012) (11,287,785)
Principal payments on securities 2,611,077 1,426,402
Principal payments on mortgage-backed securities 3,297,436 2,138,789
Purchases of mortgage-backed securities (13,209,625) (2,980,841)
Proceeds from sale of other real estate 110,144 157,291
Net increase in loans receivable (15,967,546) (6,162,952)
Purchases of premises and equipment (303,466) (303,953)
-------------------- -----------------
Net cash used in investing activities (28,042,869) (6,429,815)
Cash flows from financing activities:
(Payments to)/ borrowings from FHLB 4,000,000 (2,500,000)
Dividends paid (481,334) (493,305)
Repurchase of common stock (531,125) (171,875)
Proceeds from exercised options 77,805 ---
Net increase in deposits 21,480,677 7,494,300
-------------------- -----------------
Net cash provided by financing activities 24,546,023 4,329,120
Net decrease in cash and cash equivalents (1,791,075) (1,043,211)
Cash and cash equivalents at beginning of period 18,804,358 15,813,605
-------------------- -----------------
Cash and cash equivalents at end of period $17,013,283 $14,770,394
==================== =================
See notes to consolidated financial statements.
Greene County Bancorp, Inc. Notes to Financial Statements As of and for the
Three and Nine Months Ended March 30, 2002 and 2001
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements include the
accounts of Greene County Bancorp, Inc. (the "Company") and its wholly owned
subsidiary, The Bank of Greene County (the "Bank"). The financial statements
have been prepared in accordance with Generally Accepted Accounting Principles
(GAAP) for interim financial information and with the instructions to Form
10-QSB and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by GAAP for complete financial
statements. To the extent that information and footnotes required by GAAP for
complete financial statements are contained in or are consistent with the
audited financial statements incorporated by reference to the Company's Annual
Report on Form 10-KSB for the year ended June 30, 2001, such information and
footnotes have not been duplicated herein. In the opinion of management, all
adjustments (consisting of only normal recurring items) necessary for a fair
presentation of the financial position and results of operations and cash flows
at and for the periods presented have been included. Amounts in the prior year's
consolidated financial statements have been reclassified whenever necessary to
conform to the current year's presentation. These reclassifications had no
effect on net income or retained earnings as previously reported. All material
inter-company accounts and transactions have been eliminated in the
consolidation. The results of operations and other data for the three and nine
months ended March 31, 2002 are not necessarily indicative of results that may
be expected for the entire fiscal year ending June 30, 2002.
The Company's critical accounting policy relates to the allowance for losses on
loans. It is based on management's opinion of an amount that is intended to
absorb losses in the existing portfolio. The allowance for losses on loans is
established through a provision for loss based on management's evaluation of the
risk inherent in the loan portfolio, the composition of the portfolio, specific
impaired loans and current economic conditions. Such evaluation, which includes
a review of all loans of which full collectability may not be reasonably
assured, considers among other matters, the estimated net realizable value or
the fair value of the underlying collateral, economic conditions, historical
loan loss experience, management's estimate of probable credit losses and other
factors that warrant recognition in providing for the loan loss
allowance.
(2) Nature of Operations
The Bank has six full service offices and an operations center located in its
market area consisting of Greene County and southern Albany County, New York.
The Bank is primarily engaged in the business of attracting deposits from the
general public in the Bank's market area, and investing such deposits, together
with other sources of funds, in loans and investment securities.
(3) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Material estimates that are
particularly susceptible to significant change in the near term related to the
determination of the allowance for loan losses and valuation of other real
estate owned ("OREO").
While management uses available information to recognize losses on loans and
OREO, future additions to the allowance for loan losses (the "Allowance"), or
OREO write-downs, may be necessary based on changes in economic conditions,
asset quality or other factors. In addition, various regulatory authorities, as
an integral part of their examination process, periodically review the Company's
Allowance and the carrying value of OREO and other assets. Such authorities may
require the Company to recognize additions to the Allowance and/or write down
the carrying value of OREO or other assets based on their judgments of
information available to them at the time of their examination.
(4) Charter Conversion
On August 15, 2000, the Board of Directors of the Company unanimously approved a
plan to convert the Company from a Delaware corporation regulated by the New
York Superintendent of Banks and the Board of Governors of the Federal Reserve
System to a Federal corporation regulated by the Office of Thrift Supervision
(the "OTS"). On April 2, 2001, the OTS approved the charter conversion, which
was approved by the shareholders of the Company on November 27, 2000. The
Charter conversion was completed on May 15, 2001. The mutual holding company
(the "MHC") of the Company also converted from a state to federal charter on
that date.
Among other things, the charter conversions permit the MHC to waive the receipt
of dividends paid by the Company without causing dilution to the ownership
interest of the Company's shareholders other then the MHC ("Minority
Shareholders") in the event of a conversion of the MHC to stock form. The
waiving of dividends will increase Company resources available for stock
repurchases, payment of dividends to Minority Shareholders, and investments.
As a financial institution subsidiary of the Company following the charter
conversion, the Bank must maintain at least 65% of its "portfolio assets" (total
assets minus goodwill and other intangible assets, office property and specified
liquid investments up to 20% of total assets) in certain "qualified thrift
investments" (primarily loans to purchase, refinance, construct, improve or
repair domestic residential housing, home equity loans, securities backed by or
representing an interest in mortgages on domestic residential housing, and
Federal Home Loan Bank stock) in at least 9 months out of every 12 month period.
A savings institution that fails the qualified thrift lender test is subject to
certain operating restrictions and may be required to convert to a bank charter.
At March 31, 2002, the Bank maintained 74.5% of its portfolio assets in
qualified thrift investments.
(5) Earnings Per Share
Basic earnings per share ("EPS") on common stock are computed by dividing net
income by the weighted average number of shares of common stock outstanding for
the period. Shares of restricted stock are not considered outstanding for the
calculation of basic earnings per share until they become fully vested. Diluted
earnings per share are computed in a manner similar to that of basic earnings
per share except that the weighted-average number of common shares outstanding
is increased to include the number of incremental common shares that would have
been outstanding under the treasury stock method if all potentially dilutive
common stock (such as stock options and unvested restricted stock) issued became
vested during the period. Unallocated common shares held by the ESOP are not
included in the weighted-average number of common shares outstanding for either
the basic or diluted earnings per share calculations.
Weighted Average
Number of Shares
Net Income Outstanding Earnings Per Share
Three Months Ended
March 31, 2002: $467,727
Basic EPS 1,955,078 $0.24
Diluted EPS 2,013,215 $0.23
March 31, 2001: $212,580
Basic EPS 1,974,262 $0.11
Diluted EPS 2,000,924 $0.11
Nine Months Ended
March 31, 2002: $1,193,083
Basic EPS 1,959,546 $0.61
Diluted EPS 2,012,285 $0.59
March 31, 2001: $673,866
Basic EPS 1,977,255 $0.34
Diluted EPS 1,994,882 $0.34
(6) Dividends
The Board of Directors approved a semi-annual $0.25 cash dividend on July 18,
2001, for shareholders of record August 15, 2001, payable September 1, 2001. In
addition, on January 15, 2002, the Board of Directors declared a semi-annual
cash dividend of $0.28 per share of the Company's common stock. The dividend
reflects an annual cash dividend rate of $0.56 per share, which represents an
increase from the previous annual cash dividend rate of $.50 per share. The
dividend was payable to shareholders of record as of February 15, 2002, and paid
on March 1, 2002.
(7) Impact of Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board issued Statement No. 141,
"Business Combinations", which requires all business combinations to be
accounted for under the purchase method of accounting, thus eliminating the
pooling of interest method of accounting. The adoption of this statement in
fiscal 2002 will have no impact on the Company's consolidated financial
statements.
In July 2001, the Financial Accounting Standards Board issued Statement No. 142,
"Goodwill and Other Intangible Assets", which requires acquired intangible
assets (other than goodwill) to be amortized over their useful economic lives,
while goodwill and any acquired intangible assets with an indefinite useful
economic life would not be amortized, but would be reviewed for impairment on an
annual basis based upon guidelines specified by the statement. The adoption of
this statement in fiscal 2003 will have no impact on the Company's consolidated
financial statements.
In August 2001, the Financial Accounting Standards Board issued Statement No.
143, "Accounting for Asset Retirement Obligations", which requires the fair
value of a liability for an asset retirement obligation to be recognized in the
period in which it is incurred if a reasonable estimate of fair value can be
made. The associated asset retirement costs are capitalized as part of the
carrying amount of long-lived assets. SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. The Company is currently reviewing this statement
to determine its effect on the Company's financial statements.
In August 2001, the Financial Accounting Standards Board issued Statement No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of", and the accounting and reporting
provisions of APB No. 30. SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and is effective
for fiscal years beginning after December 15, 2001, and interim periods within
those fiscal years. The Company is currently reviewing this statement to
determine its effect on the Company's consolidated financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
General
The Company's results of operations depend primarily on its net interest income,
which is the difference between the income earned on the Company's loan and
securities portfolios and its cost of funds, consisting of the interest paid on
deposits and borrowings. Results of operations are also affected by the
Company's provision for loan losses, income and expense pertaining to other real
estate owned, gains and losses from sales of securities, non-interest income and
non-interest expense. Non-interest income consists primarily of fees and service
charges. The Company's non-interest expense consists principally of compensation
and employee benefits, occupancy, equipment and data processing, and other
operating expenses. Results of operations are also significantly affected by
general economic and competitive conditions, changes in interest rates, as well
as government policies and actions of regulatory authorities. Additionally,
future changes in applicable law, regulations or government policies may
materially affect the Company.
Special Note Regarding Forward Looking Statements
This quarterly report contains forward-looking statements. The Company desires
to take advantage of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 and is including this statement for the express
purpose of availing itself of the protections of the safe harbor with respect to
all such forward-looking statements. These forward-looking statements, which are
included in this Management's Discussion and Analysis and elsewhere in this
quarterly report, describe future plans or strategies and include the Company's
expectations of future financial results. The words "believe," "expect,"
"anticipate," "project," and similar expressions identify forward-looking
statements. The Company's ability to predict results or the effect of future
plans or strategies or qualitative or quantitative changes based on market risk
exposure is inherently uncertain. Factors that could affect actual results
include but are not limited to:
(a) changes in general market interest rates,
(b) general economic conditions,
(c) legislative and regulatory changes,
(d) monetary and fiscal policies of the U.S. Treasury and the Federal Reserve,
(e) changes in the quality or composition of the Company's loan and investment portfolios,
(f) deposit flows,
(g) competition, and
(h) demand for financial services in the Company's market area.
These factors should be considered in evaluating the forward-looking statements,
and undue reliance should not be placed on such statements, since results in
future periods may differ materially from those currently expected because of
various risks and uncertainties.
Comparison of Financial Condition as of March 31, 2002 and June 30, 2001
ASSETS. Total assets increased to $210.9 million at March 31, 2002 from $185.1
million at June 30, 2001, an increase of $25.8 million, or 13.9%. The increase
in assets was primarily due to loan and investment growth that was funded by
increases in interest-bearing deposits, decreases in federal funds holdings and
additional borrowings from the FHLB. The merger of a local competitor with an
out-of-area institution has continued to help in efforts to promote the Bank's
lending and deposit products.
CASH AND CASH EQUIVALENTS. Cash and due from banks decreased $1.8 million, or
9.6%, to $17.0 million at March 31, 2002 from $18.8 million at June 30, 2001.
The level of cash and due from banks results from fluctuations due to normal
deposit account clearing activities and vault cash needs, based on customer cash
needs. Federal funds sold decreased to $10.9 million at March 31, 2002 from
$13.5 million at June 30, 2001, a decrease of $2.6 million, or 19.3%. Federal
funds sold are partially a function of account clearing needs and deposit
levels, which can fluctuate significantly on a daily basis. However, during the
nine month period ended March 31, 2002, management attempted to invest in higher
yielding investment securities while maintaining adequate liquidity to fund loan
growth.
INVESTMENT SECURITIES. Investment securities increased to $60.5 million at March
31, 2002 from $48.9 million at June 30, 2001, an increase of $11.6 million, or
23.7%. Purchases were made of $21.9 million of investment securities as follows;
$13.2 million of U.S. agency mortgage-backed securities; $8.0 million of
callable U.S. agency securities and the remaining $700,000 of various other
types of investment securities. These purchases were offset by maturities and
principal pay-downs. Maturities amounted to $4.1 million and pay-downs amounted
to $5.9 million during the nine-month period ended March 31, 2002. Net premium
and discount and changes in the market value of the investments represented the
remainder of the changes. As a result of these activities the investment
portfolio mix shifted. Mortgage-backed securities represented $18.1 million, or
29.9%, of the investment portfolio at March 31, 2002, as compared to $8.8
million, or 18.0%, of the portfolio at June 30, 2001. Corporate securities
represented $21.5 million, or 35.7%, of the portfolio at March 31, 2002 as
compared to $23.4 million, or 47.9%, of the portfolio at June 30, 2001. U.S.
government agencies represented $8.9 million, or 14.7%, of the portfolio at
March 31, 2002, as compared to $1.8 million, or 3.7%, as of June 30, 2001.
Change in the interest rate environment and economic conditions, as well as the
availability of securities contributed to the decisions to shift the portfolio
mix.
During the nine months ended March 31, 2002, the Bank pledged $200,000 of state
and political securities as required by a local community organization that
occasionally maintains more than $100,000 in deposits that would be insured by
FDIC insurance.
(Dollars Rounded to nearest thousand)
Market value at Percentage Market value at Percentage
Mar. 31, 2002 of portfolio June 30, 2001 of portfolio
U.S. Treasuries $--- 0.0% $1,005 2.0%
U.S. Government Agencies 8,890 14.7% 1,794 3.7%
State and political subdivisions 9,329 15.4% 9,420 19.3%
Mortgage-backed securities 18,098 29.9% 8,783 18.0%
Asset-backed securities 1,411 2.3% 3,300 6.8%
Corporate debt securities 21,549 35.7% 23,432 47.9%
------------------------------------------------------------
Total debt securities 59,277 98.0% 47,734 97.7%
Equity securities and other 1,202 2.0% 1,141 2.3%
------------------------------------------------------------
Total available-for-sale securities $60,479 100.0% $48,875 100.0%
============================================================
LOANS. Net loans receivable increased to $125.5 million at March 31, 2002 from
$109.8 million at June 30, 2001, an increase of $15.7 million, or 14.3%. The
increase in loans was a result of the generally decreasing market interest rate
environment that increased customer demand, particularly for fixed-rate
residential mortgage loans. There has been a decrease in demand for consumer
installment loans since the tragedy of September 11, 2001, as such installment
loans which represented 4.5%, or $5.6 million of the portfolio at March 31, 2002
as compared to 5.5%, or $6.1 million at June 30, 2001. A factor contributing to
the increase in the Bank's market share of the local lending demand was a merger
of a former competitor with an out-of-area institution. Growth primarily
occurred in commercial real estate mortgages and residential real estate
mortgages, which includes construction loans. Residential real estate mortgages
increased to $101.2 million at March 31, 2002, an increase of $11.7 million, or
13.0%. The majority of the increase in residential real estate occurred in the
conventional fixed rate product which increased $10.4 million, or 14.1%, to
$83.9 million over the nine-month period ended March 31, 2002. Construction
loans for residential real estate also increased $1.9 million to $3.9 million at
March 31, 2002. These increases were partially offset by a decrease in variable
rate residential mortgages. The Bank has experienced some increase in
refinancing activity particularly in the quarter ended March 31, 2002. Fixed
rate commercial real estate loans also increased $2.5 million, or 81.4%, to $5.5
million at March 31, 2002 as compared to $3.0 million at June 30, 2001. This
increase in fixed rate commercial mortgages influenced the shift in the
portfolio composition and mix more than any other fluctuation. Commercial real
estate represented 4.7% for the loan portfolio at June 30, 2001, and has grown
to represent 6.4% of the portfolio at March 31, 2002. This shift was due in part
to business development efforts to attract commercial customers to the various
products and services offered by the Bank.
(Dollars Rounded to nearest thousand)
At Percentage At Percentage
Mar. 31, 2002 Of portfolio June 30, 2001 of portfolio
Real estate mortgages
Residential $101,191 79.8% $89,528 80.7%
Commercial 8,143 6.4% 5,239 4.7%
Home equity loans 6,793 5.4% 6,138 5.6%
Commercial loans 4,470 3.5% 3,291 3.0%
Installment loans 5,633 4.5% 6,128 5.5%
Passbook loans 554 0.4% 596 0.5%
------------- ----------- ------------ -------------
Total loans $126,784 100.0% $110,920 100.0%
============= =========== ============ =============
ALLOWANCE FOR LOAN LOSS. The allowance for loan loss is established through a
provision for loan losses based on management's evaluation of the known losses
or inherent losses in the loan portfolio that are both probable and reasonable
to estimate. 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's allowance for loan losses and valuation of OREO.
Such agencies may require the Bank to recognize additions to the allowance based
on their judgment about information available to them at the time of their
examination. The allowance for loan losses is increased by a provision for loan
losses (which results in a charge to expense) and is reduced by net charge-offs.
Management will continue to monitor and modify the level of the allowance for
loan losses in order to maintain it at a level which management intends to
provide for potential loan losses. The level of allowance for loan losses has
been affected by the growth in the overall loan portfolio as well as growth in
the commercial- type loans.
In October 2001, the Bank offered a new
product called Carefree Overdraft Protection, which permits the overdrawing of
checking accounts to various levels based on the account type, and customer
history. Consequently, the Bank extended more credit on checking and NOW
accounts than in the past and an increase in the allowance for loan losses was
established of $23,900, which contributed to the overall increase in the size of
the provision and the allowance itself.
Nine-Months Ended Fiscal Year Ended
March 31, 2002 June 30, 2001
Balance at the beginning of the period $886,081 $866,443
Charge-offs:
Commercial real estate mortgage loans --- 26,432
Home equity loans 2,380 ---
Installment loans to individuals 27,774 50,483
--------------------- --------------------
Total loans charged off 30,154 76,915
Recoveries:
Installment loans to individuals 13,904 36,553
--------------------- --------------------
Total recoveries 13,904 36,553
--------------------- --------------------
Net charge-offs 16,250 40,362
Provisions charged to operations 158,900 60,000
--------------------- --------------------
Balance at the end of the period $1,028,731 $886,081
===================== ====================
Ratio of net charge-offs to average loans outstanding 0.01% 0.04%
Ratio of net charge-offs to nonperforming assets 12.15% 5.22%
Allowance for loan loss to nonperforming loans 994.18% 119.18%
Allowance for loan loss to net loans 0.82% 0.81%
Nonaccrual Loans and Nonperforming Assets Loans are reviewed on a regular basis.
Management determines that a loan is impaired or nonperforming when it is
probable at least a portion of the loan will not be collected due to an
irreversible deterioration in the financial condition of the borrower or the
value of the underlying collateral. When a loan is determined to be impaired,
the measurement of the loan is based on the present value of estimated future
cash flows, except that all collateral-dependent loans are measured for
impairment based on the fair value of the collateral. Management places loans on
nonaccrual status once the loans have become over 90 days delinquent. Nonaccrual
is defined as a loan in which collectibility is questionable and therefore
interest on the loan will no longer be recognized on an accrual basis. A loan
does not have to be 90 days delinquent in order to be classified as
nonperforming. OREO is considered nonperforming. The Bank had no accruing loans
delinquent more than 90 days at March 31, 2002 or June 30, 2001. The relatively
low level of nonaccrual loans at March 31, 2002 was not considered to be
sustainable or truly representative of the level of losses inherent in the
portfolio as such management did not feel an adjustment to the level of
allowance for loan loss or provision was prudent at this time.
Analysis of Nonaccrual Loans and Nonperforming Assets
At March 31, 2002 At June 30, 2001
Nonaccruing loans:
Real estate mortgage loans
Residential mortgages loans (one- to four-family) $59,267 $660,607
Commercial mortgage loans --- 71,711
Home equity --- 2,380
Installment loans to individuals 44,208 8,770
-------------------- ------------------
Total nonaccruing loans 103,475 743,468
Real Estate Owned:
Residential mortgages loans (one- to four-family) --- ---
Commercial mortgage loans 30,229 30,229
-------------------- ------------------
Total real estate owned 30,229 30,229
-------------------- ------------------
Total nonperforming assets $133,704 $773,697
==================== ==================
Total nonperforming assets
as a percentage of total assets 0.06% 0.42%
Total nonperforming loans to total gross loans 0.08% 0.67%
DEPOSITS. Total deposits increased to $175.7 million at March 31, 2002 from
$154.2 million at June 30, 2001, an increase of $21.5 million, or 13.9%. Growth
has occurred in all deposit products during the nine month period ended March
31, 2002. Savings accounts increased most significantly to $65.4 million at
March 31, 2002 as compared to $57.0 million at June 30, 2001, an increase of
$8.4 million, or 14.7%. Certificates of deposit accounts also increased
significantly to $63.5 million at March 31, 2002 from $58.1 million at June 30,
2002, an increase of $5.4 million, or 9.3%. It should be noted that the relative
mix of the deposit base remained relatively consistent between March 31, 2002
and June 30, 2001. There were no significant shifts between product types.
However, it appears that the length of maturity of the average certificate of
deposit has shortened to one year or less. This was a result of the declining
and relatively low interest rate environment experienced during this time frame.
Management was able to widen net interest margins and spreads as a result of the
lower interest rate environment. The Bank has been successful in marketing its
products and services to local commercial accounts which has contributed to
growth in money market and checking accounts. A shift in the level of investment
in the stock market to more conservative investment alternatives such as cash
accounts appears to have enhanced deposit growth.
(Dollars Rounded to nearest thousand)
At Percentage At Percentage
March 31, 2002 of portfolio June 30, 2001 of portfolio
Non-interest bearing deposits $20,062 11.4% $18,418 11.9%
Certificates of deposit 63,486 36.1% 58,113 37.7%
Savings deposits 65,428 37.3% 57,021 37.0%
Money market deposits 13,315 7.6% 9,194 6.0%
NOW deposits 13,382 7.6% 11,446 7.4%
----------------- ------------- ----------- --------
Total deposits $175,673 100.0% $154,192 100.0%
================= ============= =========== ==========
BORROWINGS FROM FHLB. The Bank borrowed an additional $4.0 million from FHLB
during the quarter ended March 31, 2002, which brought total borrowings to $9.0
million. The proceeds from the additional borrowing were used to fund an
investment security purchase.
At March 31, 2002, the Bank had the following borrowings:
Amount Rate Maturity Date
$4,000,000 2.19% -Fixed 1/14/2003
2,500,000 6.82% -Fixed 09/02/2004
2,500,000 6.80% -Fixed 10/04/2005
------------------
$9,000,000
==================
ACCRUED EXPENSES AND OTHER LIABILITIES. At March 31, 2002 and June 30, 2001
accrued expenses and other liabilities amounted to approximately $0.6 million.
There were no significant fluctuations in these categories. Deferred tax
liabilities associated with unrealized gains on the available-for-sale
investment portfolio represent the largest portion of accrued expenses and other
liabilities.
SHAREHOLDERS' EQUITY. Shareholders' equity increased by $352,000, or 1.4%, due
to net income of $1.2 million, which was partially offset by dividends paid of
$481,000. Treasury stock increased to $1,400,444 due to repurchases of 37,500
shares of common stock at an average cost of $14.16 per share at an aggregate
cost of $531,000. These purchases were offset by 9,880 options being exercised
during the nine month period ended March 31, 2002. Also, 9,400 common stock
shares vested in association with the 2000 Recognition and Retention Plan
further offsetting stock repurchases. The issuance of the shares in association
with the stock compensation plans also caused corresponding changes in
additional paid-in capital. The remaining changes in equity are due to
amortization of compensation expense associated with the Employee Stock
Ownership Plan ("ESOP").
Comparison of Operating Results for the Three and Nine Months Ended March 31,
2002 and 2001
INTEREST INCOME. Total Interest income increased by $766,000, or 9.0%, to $9.3
million for the nine months ended March 31, 2002 as compared to $8.6 million for
the nine months ended March 31, 2001. Total interest income increased by
$223,000, or 7.7%, to $3.1 million for the quarter ended March 31, 2002 as
compared to $2.9 million for the quarter ended March 31, 2001. For the
nine-month period ended March 31, 2002, as compared to the nine-month period
ended March 31, 2001 the most significant factor contributing to the increase in
interest income was the increase in the average balance of loans outstanding
during the nine-month period. The average balance of loans for the nine-month
period ended March 31, 2002, amounted to $119.0 million as compared to $100.5
million for the nine-month period ended March 31, 2001, an increase of $18.5
million. The increase in average balance of loans was partially offset by
decreases in the yield on such loans by 18 basis points to 7.55% for the
nine-month period ended March 31, 2002 as compared to 7.73% for the nine-month
period ended March 31, 2001. The average balance of loans increased during the
quarter-ended March 31, 2002 to $123.7 million as compared to $103.2 million for
the quarter-ended March 31, 2001. The average rate on such loans decreased 32
basis points for the quarter-ended March 31, 2002 to 7.43% as compared to 7.75%
for the quarter-ended March 31, 2001.
The increases in interest income from loans for the quarter and nine-month
period ended March 31, 2002 of $299,000 and $909,000, respectively, were offset
by decreases in interest income on investment securities, except mortgage-backed
securities, and interest-bearing deposits and federal funds sold. Decreases in
the federal funds rate most significantly effected the overall decrease in
interest income. The average yield on federal funds balances decreased 383 basis
points when comparing the nine-month periods ended March 31, 2002 and 2001.
Correspondingly, the average yield on federal funds balances decreased 323 basis
points when comparing the quarters ended March 31, 2002 and 2001. The yield on
investment securities also decreased; however, these decreases were partially
offset by increases in the overall investment portfolio size. The average
balance of investment securities increased to $52.4 million for the nine-month
period ended March 31, 2002 as compared to $49.6 million for the nine-month
period ended March 31, 2001, an increase of $2.8 million, or 5.6%. The yield on
such investments decreased 34 basis points to 5.81% for the nine months ended
March 31, 2002 as compared to 6.15% for the nine months ended March 31, 2001.
When comparing the quarter ended March 31, 2002 to March 31, 2001 the average
balance of investment securities increased $8.7 million to $57.5 million. This
increase in average balance of investment securities was offset by a decrease in
yield of 92 basis points to 5.33%.
The decreases in yield on the various types of interest-earning assets discussed
above were primarily a result of the generally declining interest rate
environment experienced between March 31, 2001 and March 31, 2002. The lower
interest rate environment was a result of the Federal Reserve Board's actions
aimed to address the generally slowing U.S. economy.
INTEREST EXPENSE. Interest expense decreased by $353,000, or 8.6%, to $3.8
million for the nine month period ended March 31, 2002 as compared to $4.1
million for the nine month period ended March 31, 2001. Total interest expense
decreased $184,000 or 13.4% to $1.2 million for the quarter ended March 31, 2002
as compared to $1.4 million for the quarter ended March 31, 2001.
The most significant factor contributing to the decrease in interest expense on
borrowings of $226,000 was a $3.7 million decrease in average borrowing
outstanding to $6.3 million for the nine month period ended March 31, 2002 as
compared to $10.0 million for the nine month period ended March 31, 2001. The
average rate paid on such borrowings decreased 90 basis points to 5.77% for the
nine months ended March 31, 2002 as compared to 6.67% for the nine months ended
March 31, 2001. Interest expense associated with borrowings decreased by $60,000
when comparing the quarter ended March 31, 2002 as compared to the quarter ended
March 31, 2001. The decrease in expense associated with such borrowings was
primarily the result of a decrease in the average balance outstanding to $9.0
million for the quarter ended March 31, 2002 as compared to $10.0 million for
the quarter ended March 31, 2001. Also, affecting the quarter end interest
related to borrowings was a decrease of 193 basis points to 4.55% for the
quarter ended March 31, 2002 as compared to 6.48% for the quarter ended March
31, 2001.
Interest expense was also affected by the change in volume and rate associated
with savings accounts. The average balance of all savings account types
increased to $71.0 million for the nine months ended March 31, 2002 as compared
to $59.8 million for the nine months ended March 31, 2001, an increase of $11.2
million, or 18.7%. The average rate on these savings accounts decreased 78 basis
points when comparing the nine months ended March 31, 2002 to March 31, 2001 at
2.40% and 3.18%, respectively. Changes in volume and rate also contributed to
the decrease in overall interest expense on deposits for the quarter ended March
31, 2002 as compared to the quarter ended March 31, 2001. The average balance on
savings accounts increased $14.8 million, to $74.6 million for the quarter ended
March 31, 2002 as compared to $59.8 million for the quarter ended March 31,
2001. The increase due to increased volume was offset by a 87 basis point
decrease in rate to 2.23% for the quarter ended March 31, 2002 as compared to
3.10% for the quarter ended March 31, 2001.
Changes in volume and rates associated with certificates of deposit also
affected the overall change in interest expense for the nine months ended March
31, 2002 when compared to the nine months ended March 31, 2001. The average
balance of certificates of deposit increased to $62.3 million for the nine
months ended March, 31, 2002 as compared to $52.0 million for the nine months
ended March 31, 2001, a increase of $10.3 million. The decrease in rate of 81
basis points to 4.47% for the nine months ended March 31, 2002 from 5.28% for
the nine months ended March 31, 2001 partially offset the effect of the increase
in volume. Correspondingly, the decrease in rate on certificates of deposit of
128 basis points to 3.98% for the quarter ended March 31, 2002 as compared to
5.25% for the quarter ended March 31, 2001 contributed to the overall decrease
in interest expense when comparing quarters ended March 31, 2002 to March 31,
2001.
Interest expense associated with NOW and demand accounts had little affect on
the overall interest expense when comparing both the nine months and quarters
ended March 31, 2002 and 2001. The volume of NOW and demand accounts increased
$8.4 million, to $31.7 million, when comparing the nine months ended March 31,
2002 to March 31, 2001 and $8.3 million, to $33.0 million, when comparing the
quarters ended March 31, 2002 to March 31, 2001. These increases in volume were
offset by corresponding decreases in the average rate paid for such periods. The
average rate on NOW and demand accounts decreased 23 basis points when comparing
the nine months ended March 31, 2002 to March 31, 2001. Correspondingly, the
average rate on NOW and demand accounts decreased 26 basis points when comparing
quarters ended March 31, 2002 and 2001.
The above mentioned changes in rate were primarily affected by the general
overall lower interest rate environment experienced during the nine months and
quarters ended March 31, 2002 as compared to March 31, 2001. The changes in
volume were associated with the changes in investor confidence in the stock
market, the competitive environment in which the Bank operates and overall
changes in economic conditions in the Bank's market area.
NET INTEREST INCOME. Net interest income is a function of interest income and
interest expense. As a result of changes in interest-earning assets and
interest-bearing liabilities and the corresponding yield and rates on such, net
interest spread increased to 3.74% for the nine months ended March 31, 2002 as
compared to 3.39% for the nine-months ended March 31, 2001, an improvement of 35
basis points. Also, net interest margin increased to 3.97% for the nine-month
period ended March 31, 2002 as compared to 3.70% for the nine-month period ended
March 31, 2001, an improvement of 27 basis points. Net interest spread increased
to 3.79% for the quarter ended March 31, 2002 as compared to 3.43% for the
quarter ended March 31, 2001, an improvement of 36 basis points. Also, net
interest margin increased to 3.99% for the quarter ended March 31, 2002 as
compared to 3.75% for the quarter ended March 31, 2001, an improvement of 24
basis points. The improvement in net interest income was one of the primary
reasons for the overall improvement in net income.
PROVISIONS FOR LOAN LOSSES. The Company establishes provisions for loan losses,
which are charged to operations, in order to maintain the allowance for loan
losses at a level that is intended to absorb future charge-offs and loans deemed
uncollectible. In determining the intended level of the allowance for loan
losses, management considers past and anticipated loss experience, collateral
values, current and anticipated economic conditions, volume and type of lending
activities and the level of non-performing and other classified loans.
Management has also added a component to the allocation of the allowance for
loan losses to correspond to the estimated potential risk involved in the new
Carefree Overdraft Privilege facility offered to various customers of the Bank.
The allowance is based on estimates and the ultimate losses may vary from such
estimates. Management of the Company assesses the allowance for loan losses on a
quarterly basis and makes provisions for loan losses in order to maintain the
intended level of the allowance to reflect known and inherent losses that are
both probable and reasonable to estimate.
Provisions for loan losses for the nine-month period ended March 31, 2002
amounted to $158,900 as compared to $45,000 for the nine-month period ended
March 31, 2001. Provisions for loan losses for the quarter ended March 31, 2002
amounted to $60,000 as compared to $15,000 for the quarter ended March 31, 2001.
The reasons for the change in provision included the additional risk assessment
associated with the new Carefree Overdraft Privilege product, the changes
required because of a shift in the loan portfolio to more commercial real estate
mortgages and commercial loans than in prior periods as well as requirements due
to the growth of the overall loan portfolio. Management recognizes the decrease
in non-performing loans to an all time low for the quarter ended March 31, 2002,
but does not believe that this level is indicative of the potential risk of loss
in the portfolio. However, management will continue to monitor the level of
delinquency and will make adjustments to the level of allowance for loan loss if
it is required. Management has made a concerted effort to monitor delinquency
during this down turn in the national economy.
NON-INTEREST INCOME. Non-interest income amounted to $1.3 million for the nine
month period ended March 31, 2002 as compared to $786,000 for the prior year
nine month period ended March 31, 2001, an increase of $526,000 or 66.9%.
Non-interest income was $495,000 for the quarter ended March 31, 2002 as
compared to $234,000 for the prior year quarter ended March 31, 2001, an
increase of $261,000 or 111.5%. One item which impacted both the nine month
period and quarter ended March 31, 2002 was the introduction of the Carefree
Overdraft Privilege product, in October 2001. The same fee that would apply to a
check drawn on insufficient funds or an uncollected item is charged when the
overdraft privilege is used; however, in this case the customers' check is not
returned, but paid and a fee is collected. The product has proven to be
successful in terms of increased non-interest income and customer satisfaction.
Fees associated with and revenue produced from charging for non-customer use of
the Bank's ATM machines, merchant debit card processing and various fees
continue to grow as the Bank's customer base grows and new branches begin to
prosper. During the prior year quarter ended March 31, 2001, an item
contributing to the level of other income was a gain on the sale of an
investment security of $44,000, as well as a gain of $17,000 recognized on a
sale of REO property. Another gain of approximately $21,000 was recognized
during the quarter ended March 31, 2002 on the sale of REO property. The
associated REO property disposed of during the quarter ended March 31, 2002 had
been acquired since fiscal year end June 30, 2001.
NON-INTEREST EXPENSE. Non-interest expense increased to $5.1 million for the
nine month period ended March 31, 2002 as compared to $4.3 million for the nine
month period ended March 31, 2001, an increase of $0.8 million, or 18.6%.
Non-interest expense amounted to $1.8 million for the quarter ended March 31,
2002 as compared to $1.5 million for the quarter ended March 31, 2001, an
increase of $263,000, or 17.4%. Salaries and employee benefits increased
$275,000, or 12.6%, for the nine-month period ended March 31, 2002 and $76,000,
or 10.0%, for the quarter ended March 31, 2002 as compared to the prior year
same nine-month period and quarter, as a result of annual raises and increased
costs of health care and retirement plan coverage. Some additional expenses for
vesting in certain stock compensation benefits were recognized in association
with the retirement of the former Treasurer of the Bank. Increased expenses
associated with service fees and data processing and a portion of the other
operating expenses are directly related to the increase in the volume of loan
and deposit accounts at the Bank. It should be noted that the Bank's data
processing provider recently merged with another entity, which could potentially
impact the level and rate of expenses associated with these core processing
functions in the future. Some items contributing to the category of other
non-interest expense include telephone, postage, courier and insurance and are
directly related to the growth in the institution. Other non-interest expense
include such items as professional and consulting fees which fluctuate depending
upon the various projects being undertaken by the institution. A consultant was
used to assist in the development and implementation of the Carefree Overdraft
Privilege product which has received and will continue to receive remuneration
based on the success of the product over the year-long implementation phase.
INCOME TAXES. The provision for income taxes directly reflects the expected tax
associated with the revenue generated for the given year and certain regulatory
requirements. Income tax expense for the nine month period ended March 31, 2002
was $418,000 which represented an effective rate of 25.9% as compared to
$208,000 which represented an effective rate of 23.6% for the same nine month
period the prior year.
NET INCOME. Net income increased to $1.2 million of the nine months ended March
31, 2002 as compared to $674,000 for the nine months ended March 31, 2001, an
increase of $519,000 or 77.0%. As a result of the changes in net income
annualized return on average assets increased to 0.80% for the nine months ended
March 31, 2002 as compared to 0.53% for the nine months ended March 31, 2001.
Annualized return on average equity also improved to 6.26% for the nine months
ended March 31, 2002 as compared to 3.45% for the nine months ended March 31,
2001.
Net income for the quarter ended March 31, 2002, amounted to $468,000 as
compared to $213,000 for the quarter ended March 31, 2001, an increase of
$255,000 or 119.7%. As a result of the changes in net income annualized return
on average assets increased to 0.90% for the quarter ended March 31, 2002 as
compared to 0.49% for the quarter ended March 31, 2001. Annualized return on
average equity also improved to 7.35% for the quarter ended March 31, 2002 as
compared to 3.45% for the quarter ended March 31, 2001.
Item 3. Market Risk
Market risk is the risk of loss in a financial instrument arising from adverse
changes in market rates or prices such as interest rates, foreign currency
exchange rates, commodity prices, and equity prices. The Company's most
significant form of market risk is interest rate risk since the majority of the
Company's assets and liabilities are sensitive to changes in interest rates. The
Company's primary sources of funds are deposits and proceeds from principal and
interest payments on loans, mortgage-backed securities and debt securities, with
lines of credit available through the Federal Home Loan Bank as needed. While
maturities and scheduled amortization of loans and securities are predictable
sources of funds, deposit outflows, mortgage prepayments, and lending activities
are greatly influenced by general interest rates, economic conditions and
competition.
During the last year the declining market interest rate environment has helped
to improve the net interest spread and margin; however, an increasing market
interest rate environment may have the reverse effect.
Mortgage loan commitments totaled $2.4 million and loans in process amounted to
$1.6 million at March 31, 2002. The unused portion of overdraft lines of credit
amounted to $0.8 million, the unused portion of home equity lines of credit
amounted to $1.0 million, and the unused portion of commercial lines of credit
amounted to $1.4 million at March 31, 2002. The Company anticipates that it will
have sufficient funds available to meet current loan commitments based on the
level of cash and cash equivalents as well as the available for sale investment
portfolio and ability to borrow from the FHLB.
The Bank met all capital regulatory at March 31, 2002 and 2001. Shareholders'
equity represented 12.1% of total assets at March 31, 2002 and 13.6% of total
assets at June 30, 2001.
Part II. Other Information
Item 1. Legal Proceedings
The Company is not engaged in any material legal proceedings
at the present time.
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Not applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
Greene County Bancorp, Inc.
Date: May 14, 2002
By: /s/ J. Bruce Whittaker
J. Bruce Whittaker
President and Chief Executive Officer
Date: May 14, 2002
By: /s/ Michelle Plummer
Michelle Plummer
Chief Financial Officer