form10qsb123107.htm
U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
-----------------------------------
FORM
10-QSB
[x]
QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES AND EXCHANGE ACT
OF
1934
FOR
THE QUARTERLY PERIOD ENDED DECEMBER 31, 2007
OR
[
]
TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE
ACT
GREENE
COUNTY BANCORP, INC.
(Exact
name of small business issuer as specified in its charter)
Commission
file number 0-25165
United
States
14-1809721
(State
or
other jurisdiction of incorporation or
organization)
(I.R.S. Employer Identification Number)
302
Main Street, Catskill,
New York
12414
(Address
of principal executive
office)
(Zip code)
Registrant's
telephone number, including area code: (518) 943-2600
Check
whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the
past
90 days.
Yes:
X
No:
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.
Yes:
No: X
As
of
February 12, 2008, the registrant had 4,305,670 shares of common stock issued
at
$ 0.10 par value, and 4,137,138 shares were outstanding.
Transitional
Small Business Disclosure
Format:
Yes:
No: X
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GREENE
COUNTY BANCORP, INC.
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PART
I.
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FINANCIAL
INFORMATION
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Page
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Item
1.
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Financial
Statements
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* Consolidated
Statements of Financial Condition
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* Consolidated
Statements of Income
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* Consolidated
Statements of Comprehensive Income
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* Consolidated
Statements of Changes in Shareholders’ Equity
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* Consolidated
Statements of Cash Flows
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* Notes
to Consolidated Financial Statements
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Item
2.
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Management’s
Discussion and Analysis or Plan of Operation
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Item
3.
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Controls
and Procedures
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PART
II.
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OTHER
INFORMATION
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Item
1.
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Legal
Proceedings
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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Item
3.
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Defaults
Upon Senior Securities
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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Item
5.
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Other
Information
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Item
6.
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Exhibits
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Signatures
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Exhibit
31.1 302 Certification of Chief Executive Officer
Exhibit
31.2 302 Certification of Chief Financial Officer
Exhibit
32.1 906 Statement of Chief Executive Officer
Exhibit
32.2 906 Statement of Chief Financial Officer
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Part
I. Item 1.
Consolidated
Statements of Financial Condition
As
of December 31, 2007 and June 30, 2007
(Unaudited)
(In
thousands, except share and per share amounts)
ASSETS
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December
31, 2007
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June
30, 2007
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Cash
and due from banks
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$ |
8,115 |
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$ |
11,127 |
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Federal
funds sold
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916 |
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2,899 |
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Total
cash and cash equivalents
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9,031 |
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14,026 |
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Securities
available for sale, at fair value
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78,619 |
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87,184 |
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Securities
held to maturity, at amortized cost
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16,385 |
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--- |
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Federal
Home Loan Bank stock, at cost
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837 |
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657 |
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Loans
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224,045 |
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208,705 |
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Less:
Allowance for loan losses
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(1,694 |
) |
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(1,486 |
) |
Unearned
origination fees and costs, net
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111 |
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61 |
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Net
loans receivable
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222,462 |
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207,280 |
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Premises
and equipment
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14,228 |
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13,712 |
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Accrued
interest receivable
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1,989 |
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1,955 |
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Prepaid
expenses and other assets
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444 |
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1,012 |
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Total
assets
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$ |
343,995 |
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$ |
325,826 |
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LIABILITIES
AND SHAREHOLDERS’ EQUITY
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Noninterest
bearing deposits
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$ |
40,912 |
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$ |
44,020 |
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Interest
bearing deposits
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256,279 |
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240,156 |
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Total
deposits
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297,191 |
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284,176 |
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Borrowings
from FHLB
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9,000 |
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5,000 |
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Accrued
expenses and other liabilities
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1,298 |
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1,235 |
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Total
liabilities
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307,489 |
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290,411 |
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SHAREHOLDERS’
EQUITY
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Preferred
stock,
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Authorized
1,000,000 shares; none issued
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--- |
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--- |
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Common
stock, par value $.10 per share;
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Authorized:12,000,000
shares
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Issued:
4,305,670 shares
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Outstanding: 4,144,454
shares at December 31, 2007
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and
4,151,066 shares at June 30, 2007;
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431 |
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431 |
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Additional
paid-in capital
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10,368 |
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10,319 |
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Retained
earnings
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26,219 |
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25,962 |
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Accumulated
other comprehensive income (loss)
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477 |
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(400 |
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Treasury
stock, at cost 161,216 shares at December 31,
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2007,
and 154,604 shares at June 30, 2007
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(950 |
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(828 |
) |
Unearned
ESOP shares, at cost
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(39 |
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(69 |
) |
Total
shareholders’ equity
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36,506 |
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35,415 |
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Total
liabilities and shareholders’ equity
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$ |
343,995 |
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$ |
325,826 |
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See
notes to consolidated financial statements.
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Consolidated
Statements of Income
For
the Six Months Ended December 31, 2007 and 2006
(Unaudited)
(In
thousands, except share and per share amounts)
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2007
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2006
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Interest
income:
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Loans
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$ |
7,214 |
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$ |
6,482 |
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Investment
securities – taxable
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504 |
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320 |
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Mortgage-backed
securities
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868 |
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751 |
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Tax
exempt securities
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539 |
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551 |
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Interest
bearing deposits and federal funds sold
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256 |
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|
190 |
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Total
interest income
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9,381 |
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8,294 |
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Interest
expense:
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Interest
on deposits
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3,726 |
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2,922 |
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Interest
on borrowings
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93 |
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|
93 |
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Total
interest expense
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3,819 |
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3,015 |
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Net
interest income
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5,562 |
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5,279 |
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Provision
for loan losses
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278 |
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111 |
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Net
interest income after provision for loan losses
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5,284 |
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5,168 |
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Noninterest
income:
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Service
charges on deposit accounts
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1,327 |
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1,057 |
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Debit
card fees
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387 |
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290 |
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Investment
services
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187 |
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163 |
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Gain
on sale of premises and equipment
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--- |
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257 |
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Other
operating income
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|
355 |
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|
327 |
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Total
noninterest income
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2,256 |
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2,094 |
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Noninterest
expense:
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Salaries
and employee benefits
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3,108 |
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2,790 |
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Occupancy
expense
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|
458 |
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|
353 |
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Equipment
and furniture expense
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|
424 |
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|
396 |
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Service
and data processing fees
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|
525 |
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|
474 |
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Computer
supplies and support
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|
158 |
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|
118 |
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Office
supplies
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|
84 |
|
|
|
80 |
|
Other
|
|
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|
1,097 |
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|
|
883 |
|
Total
noninterest expense
|
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|
5,854 |
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|
5,094 |
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Income
before provision for income taxes
|
|
|
|
1,686 |
|
|
|
2,168 |
|
Provision
for income taxes
|
|
|
|
491 |
|
|
|
657 |
|
Net
income
|
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|
$ |
1,195 |
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$ |
1,511 |
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Basic
EPS
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$ |
0.29 |
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$ |
0.37 |
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Basic
shares outstanding
|
|
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|
4,137,088 |
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4,119,836 |
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Diluted
EPS
|
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$ |
0.29 |
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$ |
0.36 |
|
Diluted
average shares outstanding
|
|
|
|
4,182,920 |
|
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|
4,190,163 |
|
Dividends
per share
|
|
|
$ |
0.39 |
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|
$ |
0.23 |
|
See
notes to consolidated financial statements.
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Greene
County Bancorp, Inc.
Consolidated
Statements of Income
For
the Three Months Ended December 31, 2007 and 2006
(Unaudited)
(Dollars
in thousands, except share and per share amounts)
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2007
|
|
|
2006
|
|
Interest
income:
|
|
|
|
|
|
|
|
Loans
|
|
|
$ |
3,656 |
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$ |
3,303 |
|
Investment
securities – taxable
|
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|
|
248 |
|
|
|
159 |
|
Mortgage-backed
securities
|
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|
|
475 |
|
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|
391 |
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Tax
exempt securities
|
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|
|
264 |
|
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|
282 |
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Interest
bearing deposits and federal funds sold
|
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|
129 |
|
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|
88 |
|
Total
interest income
|
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|
4,772 |
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|
4,223 |
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Interest
expense:
|
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|
|
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Interest
on deposits
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1,924 |
|
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1,546 |
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Interest
on borrowings
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|
47 |
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|
47 |
|
Total
interest expense
|
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|
1,971 |
|
|
|
1,593 |
|
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|
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|
|
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Net
interest income
|
|
|
|
2,801 |
|
|
|
2,630 |
|
|
|
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|
|
|
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|
|
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|
Provision
for loan losses
|
|
|
|
135 |
|
|
|
66 |
|
|
|
|
|
|
|
|
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|
Net
interest income after provision for loan losses
|
|
|
|
2,666 |
|
|
|
2,564 |
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|
|
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|
|
|
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|
Noninterest
income:
|
|
|
|
|
|
|
|
|
|
Service
charges on deposit accounts
|
|
|
|
696 |
|
|
|
586 |
|
Debit
card fees
|
|
|
|
204 |
|
|
|
151 |
|
Investment
services
|
|
|
|
95 |
|
|
|
72 |
|
Gain
on sale of premises and equipment
|
|
|
|
--- |
|
|
|
257 |
|
Other
operating income
|
|
|
|
165 |
|
|
|
137 |
|
Total
noninterest income
|
|
|
|
1,160 |
|
|
|
1,203 |
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
expense:
|
|
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
|
|
|
1,588 |
|
|
|
1,412 |
|
Occupancy
expense
|
|
|
|
238 |
|
|
|
196 |
|
Equipment
and furniture expense
|
|
|
|
210 |
|
|
|
200 |
|
Service
and data processing fees
|
|
|
|
268 |
|
|
|
257 |
|
Computer
supplies and support
|
|
|
|
78 |
|
|
|
62 |
|
Office
supplies
|
|
|
|
42 |
|
|
|
52 |
|
Other
|
|
|
|
525 |
|
|
|
482 |
|
Total
noninterest expense
|
|
|
|
2,949 |
|
|
|
2,661 |
|
|
|
|
|
|
|
|
|
|
|
|
Income
before provision for income taxes
|
|
|
|
877 |
|
|
|
1,106 |
|
Provision
for income taxes
|
|
|
|
251 |
|
|
|
349 |
|
Net
income
|
|
|
$ |
626 |
|
|
$ |
757 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS
|
|
|
$ |
0.15 |
|
|
$ |
0.18 |
|
Basic
shares outstanding
|
|
|
|
4,136,620 |
|
|
|
4,122,029 |
|
Diluted
EPS
|
|
|
$ |
0.15 |
|
|
$ |
0.18 |
|
Diluted
average shares outstanding
|
|
|
|
4,180,155 |
|
|
|
4,192,392 |
|
Dividends
per share
|
|
|
$ |
0.14 |
|
|
|
--- |
|
See
notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Comprehensive Income
For
the Six Months Ended December 31, 2007 and 2006
(Unaudited)
(In
thousands)
|
2007
|
|
2006
|
|
|
|
|
Net
income
|
$1,195
|
|
$1,511
|
|
|
|
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
Unrealized
holding gain arising during the six months
|
|
|
|
ended
December 31, 2007 and 2006, net of income
|
|
|
|
tax
expense of $560 and $329, respectively.
|
877
|
|
516
|
|
|
|
|
|
|
|
|
Total
other comprehensive income
|
877
|
|
516
|
|
|
|
|
Comprehensive
income
|
$2,072
|
|
$2,027
|
|
|
|
|
Greene
County Bancorp, Inc.
Consolidated
Statements of Comprehensive Income
For
the Three Months Ended December 31, 2007 and 2006
(Unaudited)
(In
thousands)
|
2007
|
|
2006
|
|
|
|
|
Net
income
|
$626
|
|
$757
|
|
|
|
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
Unrealized
holding gain arising during the three months
|
|
|
|
ended
December 31, 2007 and 2006, net of income
|
|
|
|
tax
expense of $269 and $34, respectively.
|
422
|
|
53
|
|
|
|
|
|
|
|
|
Total
other comprehensive income
|
422
|
|
53
|
|
|
|
|
Comprehensive
income
|
$1,048
|
|
$810
|
|
|
|
|
See
notes to consolidated financial statements.
Consolidated
Statements of Changes in Shareholders’ Equity
For
the Six Months Ended December 31, 2007 and 2006
(Unaudited)
(Dollars
in thousands)
|
|
|
|
Accumulated
|
|
|
|
|
|
Additional
|
|
Other
|
|
Unearned
|
Total
|
|
Capital
|
Paid
– In
|
Retained
|
Comprehensive
|
Treasury
|
ESOP
|
Shareholders’
|
|
Stock
|
Capital
|
Earnings
|
Income
|
Stock
|
Shares
|
Equity
|
|
|
|
|
(loss)
|
|
|
|
Balance
at
|
|
|
|
|
|
|
|
June
30, 2006
|
$431
|
$10,300
|
$24,588
|
($747)
|
($860)
|
($131)
|
$33,581
|
|
|
|
|
|
|
|
|
ESOP
shares earned
|
|
76
|
|
|
|
32
|
108
|
|
|
|
|
|
|
|
|
Options
exercised
|
|
(2)
|
|
|
9
|
|
7
|
|
|
|
|
|
|
|
|
Dividends
declared
|
|
|
(424)
|
|
|
|
(424)
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
1,511
|
|
|
|
1,511
|
|
|
|
|
|
|
|
|
Unrealized
gain on securities, net
|
|
|
|
516
|
|
|
516
|
|
|
|
|
|
|
|
|
Balance
at
|
|
|
|
|
|
|
|
December
31, 2006
|
$431
|
$10,374
|
$25,675
|
($231)
|
($851)
|
($99)
|
$35,299
|
|
|
|
|
|
|
|
|
Balance
at
|
|
|
|
|
|
|
|
June
30, 2007
|
$431
|
$10,319
|
$25,962
|
($400)
|
($828)
|
($69)
|
$35,415
|
|
|
|
|
|
|
|
|
ESOP
shares earned
|
|
55
|
|
|
|
30
|
85
|
|
|
|
|
|
|
|
|
Options
exercised
|
|
(9)
|
|
|
31
|
|
22
|
|
|
|
|
|
|
|
|
Tax
effect, Options
|
|
3
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
Shares
repurchased
|
|
|
|
|
(153)
|
|
(153)
|
|
|
|
|
|
|
|
|
Dividends
declared
|
|
|
(720)
|
|
|
|
(720)
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
1,195
|
|
|
|
1,195
|
|
|
|
|
|
|
|
|
Adoption
of FIN 48
|
|
|
(218)
|
|
|
|
(218)
|
|
|
|
|
|
|
|
|
Unrealized
gain on securities, net
|
|
|
|
877
|
|
|
877
|
|
|
|
|
|
|
|
|
Balance
at
|
|
|
|
|
|
|
|
December
31, 2007
|
$431
|
$10,368
|
$26,219
|
$477
|
($950)
|
($39)
|
$36,506
|
See
notes to consolidated financial statements.
Consolidated
Statements of Cash Flows
For
the Six Months Ended December 31, 2007and 2006
(Unaudited)
(In
thousands)
|
|
|
|
2007
|
|
|
2006
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
Income
|
|
|
$ |
1,195 |
|
|
$ |
1,511 |
|
Adjustments
to reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
509 |
|
|
|
452 |
|
Net
amortization of security premiums and discounts
|
|
|
|
139 |
|
|
|
448 |
|
Provision
for loan losses
|
|
|
|
278 |
|
|
|
111 |
|
ESOP
compensation earned
|
|
|
|
85 |
|
|
|
108 |
|
Gain
on sale of premises and equipment
|
|
|
|
--- |
|
|
|
(257 |
) |
Net
decrease in accrued income taxes
|
|
|
|
(122 |
) |
|
|
(127 |
) |
Net
increase in accrued interest receivable
|
|
|
|
(34 |
) |
|
|
(74 |
) |
Net
decrease in prepaid and other assets
|
|
|
|
104 |
|
|
|
25 |
|
Net
(decrease) increase in other liabilities
|
|
|
|
(126 |
) |
|
|
165 |
|
Net
cash provided by operating activities
|
|
|
|
2,028 |
|
|
|
2,362 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Available
for sale
securities:
|
|
|
|
|
|
|
|
|
|
Proceeds
from maturities and calls of securities
|
|
|
|
5,652 |
|
|
|
2,980 |
|
Purchases
of securities
|
|
|
|
(18,235 |
) |
|
|
(3,823 |
) |
Principal
payments on securities
|
|
|
|
5,731 |
|
|
|
9,404 |
|
Held
to maturity
securities:
|
|
|
|
|
|
|
|
|
|
Proceeds
from maturities and calls of securities
|
|
|
|
130 |
|
|
|
--- |
|
Principal
payments on securities
|
|
|
|
20 |
|
|
|
--- |
|
Net
increase in loans receivable
|
|
|
|
(15,460 |
) |
|
|
(12,131 |
) |
Proceeds
from sale of premises and equipment
|
|
|
|
2 |
|
|
|
350 |
|
Purchases
of premises and equipment
|
|
|
|
(1,027 |
) |
|
|
(3,059 |
) |
Net
cash used in investing activities
|
|
|
|
(23,187 |
) |
|
|
(6,279 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds
of FHLB borrowings
|
|
|
|
4,000 |
|
|
|
--- |
|
Dividends
paid
|
|
|
|
(720 |
) |
|
|
(424 |
) |
Proceeds
from exercise of stock options
|
|
|
|
22 |
|
|
|
7 |
|
Repurchase
of stock
|
|
|
|
(153 |
) |
|
|
--- |
|
Net
increase in deposits
|
|
|
|
13,015 |
|
|
|
2,870 |
|
Net
cash provided by financing activities
|
|
|
|
16,164 |
|
|
|
2,453 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
|
(4,995 |
) |
|
|
(1,464 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
|
14,026 |
|
|
|
15,852 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
|
$ |
9,031 |
|
|
$ |
14,388 |
|
See
notes to consolidated financial statements.
|
|
|
|
Notes
to Consolidated Financial Statements
As
of and for the Six Months and Three Months Ended December 31, 2007 and
2006
(1) Basis
of Presentation
The
accompanying consolidated balance sheet information as of June 30, 2007 was
derived from the audited consolidated financial statements of Greene County
Bancorp, Inc. (the “Company”) and its wholly owned subsidiary, The Bank of
Greene County (the “Bank”) and the Bank’s wholly owned subsidiary, Greene County
Commercial Bank. The consolidated financial statements at and for the
three and six months ended December 31, 2007 and 2006 are unaudited.
The
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (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 Greene County
Bancorp, Inc.’s Annual Report on Form 10-KSB for the year ended June 30, 2007,
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 six
month periods ended December 31, 2007 are not necessarily indicative of results
that may be expected for the entire fiscal year ending June 30, 2008.
CRITICAL
ACCOUNTING POLICY
Greene
County Bancorp, Inc.’s most critical accounting policy relates to the allowance
for loan losses. It is based on management’s estimation of an amount
that is intended to absorb losses in the existing portfolio. The
allowance for loan losses is established through a provision for losses based
on
management’s evaluation of the risk inherent in the loan portfolio, the
composition of the portfolio, specific impaired loans and current economic
conditions. Such evaluation, which includes a review of all loans for
which full collectibility may not be reasonably assured, considers among other
matters, the estimated net realizable value or the fair value of the underlying
collateral, economic conditions, historical loan loss experience, management’s
estimate of probable credit losses and other factors that warrant recognition
in
providing for the allowance of loan losses. However, this evaluation
involves a high degree of complexity and requires management to make subjective
judgments that often require assumptions or estimates about highly uncertain
matters. This critical accounting policy and its application are
periodically reviewed with the Audit Committee and the Board of
Directors.
Statement
of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain
Investments in Debt and Equity Securities,” and Staff Accounting Bulletin 59,
“Noncurrent Marketable Equity Securities,” require companies to perform periodic
reviews of individual securities in their investment portfolios to determine
whether decline in the value of a security is other than
temporary. Greene County Bancorp, Inc. makes an assessment to
determine whether there have been any events or economic circumstances to
indicate that a security on which there is an unrealized loss is impaired on
an
other-than-temporary basis. The Company considers many factors
including the severity and duration of the impairment; the intent and ability
of
the Company to hold the security for a period of time sufficient for a recovery
in value; recent events specific to the issuer or industry; and for debt
securities, external credit ratings and recent downgrades. Securities
on which there is an unrealized loss that is deemed to be other-than-temporary
are written down to fair value with the write-down recorded as a realized
loss.
(2) Nature
of Operations
Greene
County Bancorp, Inc.’s primary business is the ownership and operation of its
subsidiaries. The Bank of Greene County has ten full-service offices
and an operations center located in its market area consisting of Greene County,
Columbia County and southern Albany County, New York. The
Bank of Greene County is primarily engaged in the business of attracting
deposits from the general public in The Bank of Greene County’s market area, and
investing such deposits, together with other sources of funds, in loans and
investment securities. Greene County Commercial Bank’s primary
business is to attract deposits from and provide banking services to local
municipalities.
(3) Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Material estimates that are particularly susceptible to
significant change in the near term relate to the determination of the allowance
for loan losses and the assessment of other-than-temporary security
impairment.
While
management uses available information to recognize losses on loans, future
additions to the allowance for loan losses (the “Allowance”) 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 our
Allowance. Such authorities may require us to recognize additions to
the Allowance based on their judgments of information available to them at
the
time of their examination.
Greene
County Bancorp, Inc. makes an assessment to determine whether there have been
any events or economic circumstances to indicate that a security on which there
is an unrealized loss is impaired on an other-than-temporary
basis. The Company considers many factors including the severity and
duration of the impairment; the intent and ability of the Company to hold the
security for a period of time sufficient for a recovery in value; recent events
specific to the issuer or industry; and for debt securities, external credit
ratings and recent downgrades. Securities on which there is an
unrealized loss that is deemed to be other-than-temporary are written down
to
fair value with the write-down recorded as a realized loss.
(4) Earnings
Per Share
Basic
earnings per share (“EPS”) is computed by dividing net income by the weighted
average number of common shares outstanding during the
period. Diluted earnings per share is 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 shares (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.
|
Net
Income
|
Weighted
Average Number of Shares
Outstanding
|
Earnings
Per Share
|
Six
Months Ended
|
|
|
|
|
|
|
|
December
31, 2007:
|
$1,195,000
|
|
|
Basic
|
|
4,137,088
|
$0.29
|
Effect
of dilutive stock options
|
|
|
|
and
unearned restricted stock
|
|
45,832
|
(0.00)
|
Diluted
|
|
4,182,920
|
$0.29
|
|
|
|
|
December
31, 2006:
|
$1,511,000
|
|
|
Basic
|
|
4,119,836
|
$0.37
|
Effect
of dilutive stock options
|
|
|
|
and
unearned restricted stock
|
|
70,327
|
(0.01)
|
Diluted
|
|
4,190,163
|
$0.36
|
|
|
|
|
|
|
|
|
|
Net
Income
|
Weighted
Average Number of Shares
Outstanding
|
Earnings
Per Share
|
Three
Months Ended
|
|
|
|
|
|
|
|
December
31, 2007:
|
$626,000
|
|
|
Basic
|
|
4,136,620
|
$0.15
|
Effect
of dilutive stock options
|
|
|
|
and
unearned restricted stock
|
|
43,535
|
(0.00)
|
Diluted
|
|
4,180,155
|
$0.15
|
|
|
|
|
December
31, 2006:
|
$757,000
|
|
|
Basic
|
|
4,122,029
|
$0.18
|
Effect
of dilutive stock options
|
|
|
|
and
unearned restricted stock
|
|
70,363
|
(0.00)
|
Diluted
|
|
4,192,392
|
$0.18
|
(5) Dividends
On
October 16, 2007, the Board of Directors declared a quarterly cash dividend
of
$0.14 per share of Greene County Bancorp, Inc.’s common stock. The
dividend reflected an annual cash dividend rate of $0.56 per share, which
represented an increase from the previous annual dividend rate of $0.50 per
share. The dividend was payable to stockholders of record as of
November 15, 2007, and paid on December 1, 2007. It should be noted
that Greene County Bancorp, Inc.’s mutual holding company continued to waive
receipt of dividends on the 2,304,632 shares of Company common stock it owns
for
the current period. The Company also changed its policy of paying
dividends quarterly, rather than semi-annually, effective December 1,
2007.
(6)
Impact of Inflation and Changing Prices
The
consolidated financial statements of Greene County Bancorp, Inc. and notes
thereto, presented elsewhere herein, have been prepared in accordance with
generally accepted accounting principles in the United States of America, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the change in the relative purchasing
power of money over time and due to inflation. The impact of
inflation is reflected in the increased cost of Greene County Bancorp, Inc.’s
operations. Unlike most industrial companies, nearly all the assets
and liabilities of Greene County Bancorp, Inc. are monetary. As a
result, interest rates have a greater impact on Greene County Bancorp, Inc.’s
performance than do the effects of general levels of
inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the price of goods and services.
(7)
Impact of Recent Accounting Pronouncements
In
September 2006, the Financial Accounting
Standards Board (“FASB”)
issued SFAS No. 157,
“Fair
Value Measurements”,
which defines fair value, establishes
a framework for measuring fair value under GAAP, and expands disclosures
about
fair value
measurements. SFASNo. 157 applies to other
accounting
pronouncements that require or permit fair value measurements. The new guidance
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and for interim periods within those fiscal
years. The
Company is currently
evaluating the potential impact, if any, of the adoption of SFAS
No. 157 on itsconsolidated
financial position, results
of operations and cash flows.
In
December 2007, the FASB issued
proposed FASB Staff Position (FSP) 157-b, “Effective Date of FASB Statement
No. 157,” that would permit a one-year deferral in applying the measurement provisions
of
Statement No. 157 to
non-financial assets and non-financial liabilities (non-financial items) that
are not recognized or disclosed at fair value in an entity’s financial
statements on a recurring basis (at least annually). Therefore, if the change
in
fair value of a non-financial item is not required to be recognized or disclosed
in the financial statements on an annual basis or more frequently, the effective
date of application of Statement 157 to that item is deferred until fiscal
years
beginning after November 15, 2008 and interim periods within those fiscal
years. This deferral does not apply, however, to an entity that applies
Statement 157 in interim or annual financial statements before proposed FSP
157-b is finalized. The
Company is currently evaluating the impact, if any, that the adoption of FSP
157-b will have on the
Company’s financial statements.
In
February 2007, the FASB issued SFAS
No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities-Including an amendment of FASB Statement No. 115” SFAS
No. 159 permits entities to choose to measure many financial instruments
and
certain other items at fair value. Unrealized gains and losses on
items for which the fair value option has been elected will be recognized
in
earnings at each subsequent reporting date. SFAS No. 159 is effective
for the Company beginning July 1, 2008. The Company is evaluating the
impact, if any, the adoption of SFAS No. 159 will have on its consolidated
financial position, results of operations and cash flows.
In
March 2007, the FASB ratified
Emerging Issues Task Force (“EITF”) Issue No. 06-11 “Accounting for Income Tax
Benefits of Dividends on Share-Based Payment Awards.” EITF 06-11
requires companies to recognize the income tax benefit realized from dividends
or dividend equivalents that are charged to retained earnings and paid to
employees for non-vested equity-classified employee share-based payment awards
as an increase to additional paid-in capital. EITF 06-11 is effective
for fiscal years beginning after September 15, 2007. The Company does
not expect EITF 06-11 will have a material impact on its consolidated financial
statements.
In
December 2007, the FASB issued
statement
No. 141 (R) “Business Combinations”.
This Statement establishes principles
and requirements for how the acquirer of a business recognizes and measures
in
its financial statements the identifiable assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree. The Statement also
provides guidance for recognizing and measuring the goodwill acquired in the
business combination and determines what information to disclose to enable
users
of the financial statements to evaluate the nature and financial effects of
the
business combination. The guidance will become effective as of the beginning
of
a company’s fiscal year beginning after December 15, 2008. The Company, based on current
circumstances,believes
that this new pronouncement willnothave
a material
impact on the Company’s
financial
statements.
In
December 2007, the FASB issued
statement
No. 160 “Noncontrolling
Interests in Consolidated Financial Statements—an amendment of ARB No. 51”. This
Statement establishes accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a subsidiary. The
guidance will become effective as of the beginning of a company’s fiscal year
beginning after December 15, 2008. The Company believes that this new
pronouncement willnothave
a material impact on the Company’s
financial
statements.
Staff
Accounting Bulletin No. 110
(SAB 110) amends and replaces Question 6 of Section D.2 of Topic 14,“Share-Based
Payment,”of the Staff Accounting
Bulletin series.
Question 6 of Section D.2 of Topic 14 expresses the views of the staff regarding
the use of the “simplified” method in developing an estimate of expected term of
“plain vanilla” share options and allows usage of the “simplified” method for
share option grants prior to December 31, 2007. SAB 110 allows public
companies which do not have historically sufficient experience to provide a
reasonable estimate to continue use of the “simplified” method for estimating
the expected term of “plain vanilla” share option grants after December 31,
2007. SAB 110 is effective January 1, 2008. The
Company does not expect SAB 109 to
have a material impact on its financial statements.
Staff
Accounting Bulletin No. 109 (SAB
109), "Written Loan Commitments Recorded at Fair Value Through Earnings"
expresses the views of the staff regarding written loan commitments that are
accounted for at fair value through earnings under generally accepted accounting
principles. To make the staff's views consistent with current authoritative
accounting guidance, the SAB revises and rescinds portions of SAB No. 105,
"Application of Accounting Principles to Loan
Commitments." Specifically, the SAB revises the SEC staff's views on
incorporating expected net future cash flows related to loan servicing
activities in the fair value measurement of a written loan commitment. The
SAB
retains the staff's views on incorporating expected net future cash flows
related to internally-developed intangible assets in the fair value measurement
of a written loan commitment. The staff expects registrants to apply the views
in Question 1 of SAB 109 on a prospective basis to derivative loan commitments
issued or modified in fiscal quarters beginning after December 15, 2007. The
Company does not expect SAB 109 to have a material impact on its financial
statements.
(8)
Stock-Based Compensation
At
December 31, 2007, Greene County Bancorp, Inc. had two stock-based compensation
plans, which are described more fully in Note 9 of the consolidated financial
statements and notes thereto for the year ended June 30, 2007. The
Company adopted SFAS 123(R), “Share-Based Payments” effective July 1,
2006. SFAS No. 123 (R) requires compensation costs related to
share-based payment transactions to be recognized in the financial statements
over the period that the employees provide service in exchange for the
award. Public companies were required to adopt the standard using a
modified prospective method and they were given the option to elect to restate
prior periods using the modified retrospective method. Under the
modified prospective method, companies are required to record compensation
cost
for new and modified awards over the related vesting period of such awards
prospectively and record compensation cost prospectively for the unvested
portion, at the date of adoption of previously issued and outstanding awards
over the remaining vesting period of such awards. Greene County
Bancorp, Inc. chose the modified prospective method. However, since
all outstanding options vested prior to July 1, 2006, there was no stock-based
compensation expense to be recorded during the quarters and six months ended
December 31, 2007 and 2006, and, therefore, no effect on net income or earnings
per share; consequently, no table illustrating the impact of share-based
compensation on earnings for the quarters and six months ended December 31,
2007
or 2006 is included.
A
summary
of the Company’s stock option activity and related information for its option
plan for the six months ended December 31, 2007 and 2006 is as follows:
|
2007
|
|
2006
|
|
|
|
Weighted
average
|
|
|
|
Weighted
average
|
|
|
|
Exercise
|
|
|
|
Exercise
|
|
|
|
Price
|
|
|
|
Price
|
|
Shares
|
|
Per
Share
|
|
Shares
|
|
Per
Share
|
Outstanding
at beginning of period
|
72,664
|
|
$4.55
|
|
100,084
|
|
$4.38
|
Shares
granted
|
---
|
|
---
|
|
---
|
|
---
|
Exercised
|
(5,580)
|
|
$3.94
|
|
(1,580)
|
|
$3.94
|
Forfeited
|
---
|
|
---
|
|
---
|
|
---
|
Outstanding
at period end
|
67,084
|
|
$4.60
|
|
98,504
|
|
$4.39
|
Exercisable
at period end
|
67,084
|
|
$4.60
|
|
98,504
|
|
$4.39
|
The
following table presents stock options outstanding and exercisable at December
30, 2007:
Options
Outstanding and Exercisable
|
Exercise
Prices
|
Number
Outstanding
|
Weighted
Average Remaining Contractual Life
|
Weighted
Average Exercise Price
|
$3.94
|
58,584
|
2.25
|
$3.94
|
$9.20
|
8,500
|
4.25
|
$9.20
|
|
67,084
|
2.50
|
$4.60
|
The
total
intrinsic value of the options exercised during the six and three months ended
December 31, 2007, was approximately $48,000 and $43,000,
respectively. The total intrinsic value of the options outstanding
and exercisable at December 31, 2007, was approximately
$499,000. There were no stock options granted during the six and
three months ended December 31, 2007 and 2006. The Company had no
non-vested options outstanding at or during the six months ended December 31,
2007 and 2006.
(9) Stock
Repurchase Program
On
August
22, 2007, the Board of Directors authorized a stock repurchase program pursuant
to which the Company intends to repurchase up to 5% of its outstanding shares
(excluding shares held by Greene County Bancorp, MHC, the Company’s mutual
holding company), or up to 92,346 shares. As of December 31, 2007,
the Company had repurchased 12,192 shares pursuant to this program at an average
cost of $12.53 per share.
(10) Income
Taxes
In
July
2006, the Financial Accounting Standards Board (“FASB”) released Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB
Statement 109” (“FIN 48”). Effective for fiscal years beginning after December
15, 2006, FIN 48 provides guidance on the financial statement recognition and
measurement for income tax positions that the Company has taken or expects
to
take in its income tax returns. It also provides related guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. The Company adopted the provisions of
FIN
48 on July 1, 2007. The adoption required the Company to recognize a $218,000
increase in our liability for unrecognized tax benefit.
As
of
July 1, 2007, the Company had a liability for unrecognized tax benefits of
$186,000. The Company recognizes penalties and accrued interest related to
unrecognized tax benefits in tax expense. As of July 1, 2007, the Company had
a
liability of approximately $32,000 for penalties and interest.
Actual
income taxes paid may vary from estimates depending upon changes in income
tax
laws, actual results of operations, and the final audit of tax returns by taxing
authorities. Tax assessments may arise several years after tax returns have
been
filed. The Company reviews its tax balances quarterly and as new information
becomes available, the balances are adjusted, as appropriate. The Company is
currently under examination by the Internal Revenue Service for fiscal years
ended June 30, 2004 through June 30, 2006. The Company is no longer
subject to federal and state income tax examinations by tax authorities for
years before June 30, 2004.
(11)
Subsequent Event
On
January 16, 2008, the Board of Directors declared a quarterly cash dividend
of
$0.15 per share of Greene County Bancorp, Inc. common stock. The
dividend reflected an annual cash dividend rate of $0.60 cents per share, which
represented an increase from the annual cash dividend rate of $0.56 per
share. The dividend will be payable to stockholders of record as of
February 15, 2008, and will be paid on March 1, 2008. It should be
noted that Greene County Bancorp, Inc.’s mutual holding company continued to
waive receipt of dividends on the 2,304,632 shares of Company common stock
it
owns for the current period.
Item
2. Management’s Discussion and Analysis of
Financial Condition and Results of Operation
Overview
of the Company’s Activities and Risks
Greene
County Bancorp, Inc.’s results of operations depend primarily on its net
interest income, which is the difference between the income earned on Greene
County Bancorp, Inc.’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 Greene County Bancorp, Inc.’s provision for loan
losses, gains and losses from sales of securities, noninterest income and
noninterest expense. Noninterest income consists primarily of fees
and service charges. Greene County Bancorp, Inc.’s noninterest
expense consists principally of compensation and employee benefits, occupancy,
equipment and data processing, and other operating expenses. Results of
operations are also significantly affected by general economic and competitive
conditions, changes in interest rates, as well as government policies and
actions of regulatory authorities. Additionally, future changes in applicable
law, regulations or government policies may materially affect Greene County
Bancorp, Inc.
To
operate successfully, the Company must manage various types of risk, including
but not limited to, market or interest rate risk, credit risk, transaction
risk,
liquidity risk, security risk, strategic risk, reputation risk and compliance
risk. While all of these risks are important, the risks of greatest
significance to the Company relate to market or interest rate risk and credit
risk.
Market
risk is the risk of loss from adverse changes in market prices and/or interest
rates. Since net interest income (the difference between interest
earned on loans and investments and interest paid on deposits and borrowings)
is
the Company’s primary source of revenue, interest rate risk is the most
significant non-credit related market risk to which the Company is
exposed. Net interest income is affected by changes in interest rates
as well as fluctuations in the level and duration of the Company’s assets and
liabilities.
Interest
rate risk is the exposure of the Company’s net interest income to adverse
movements in interest rates. In addition to directly impacting net
interest income, changes in interest rates can also affect the amount of new
loan originations, the ability of borrowers and debt issuers to repay loans
and
debt securities, the volume of loan repayments and refinancings, and the flow
and mix of deposits.
Credit
risk is the risk to the Company’s earnings and shareholders’ equity that results
from customers, to whom loans have been made and to the issuers of debt
securities in which the Company has invested, failing to repay their
obligations. The magnitude of risk depends on the capacity and
willingness of borrowers and debt issuers to repay and the sufficiency of the
value of collateral obtained to secure the loans made or investments
purchased.
Special
Note Regarding Forward Looking Statements
This
quarterly report contains forward-looking statements. Greene County
Bancorp, Inc. 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 Greene County Bancorp, Inc.’s expectations of future
financial results. The words “believe,” “expect,” “anticipate,”
“project,” and similar expressions identify forward-looking
statements. Greene County Bancorp, Inc.’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 Bank of Greene County’s loan
portfolio or the consolidated investment portfolios of The Bank of
Greene
County, Greene County Commercial Bank and Greene County Bancorp,
Inc.,
|
(h)
|
demand
for financial services in Greene County Bancorp, Inc.’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 December 31, 2007 and June 30, 2007
ASSETS
Total
assets of the Company increased to $344.0 million at December 31, 2007 from
$325.8 million at
June 30, 2007. The asset composition shifted toward loans, which
amounted to $222.5 million, or 64.7% of total assets at December 31, 2007,
as
compared to $207.3 million, or 63.6% of total assets at June 30,
2007. Securities, including both available for sale and held to
maturity investments, also increased during the six months ended December 31,
2007, and represented $95.0 million or 27.6% of total assets at December 31,
2007 as compared to $87.2 million or 26.8% of total assets at June 30,
2007.
SECURITIES
AVAILABLE FOR SALE
Securities
available for sale decreased to $78.6 million at December 31, 2007 as compared
to $87.2 million at June 30, 2007, a decrease of $8.6 million, or
9.9%. The decline in the available for sale portfolio was the result
of the reclassification of $16.5 million of local state and political
subdivision securities to held-to- maturity securities. This decline
was partially offset by securities purchases of $18.2 million during the six
months ended December 31, 2007 less maturities and principal repayments of
$11.4
million. Repayments and maturities consisted of $5.0 million in
mortgage-backed securities, and $4.4 million in state and political subdivision
securities and $2.0 million in U.S. government agency
securities. Purchases of $18.2 million consisted of $11.1
million in mortgage-backed securities, $4.4 million in state and political
subdivision or tax-free securities, $1.5 million in corporate debt securities,
$1.0 million in U.S. government agency securities, and $200,000 in FHLB
stock. Additionally, during the six months ended December 31,
2007, available for sale securities increased from an unrealized loss of
$655,000 to an unrealized gain of $782,000.
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value at
Dec.
31, 2007
|
|
|
Percentage
of
portfolio
|
|
|
Fair
value at
June
30, 2007
|
|
|
Percentage
of
portfolio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
government agencies
|
|
$ |
19,053 |
|
|
|
24.2 |
% |
|
$ |
19,628 |
|
|
|
22.5 |
% |
State
and political subdivisions
|
|
|
12,928 |
|
|
|
16.4 |
|
|
|
29,034 |
|
|
|
33.3 |
|
Mortgage-backed
securities
|
|
|
44,797 |
|
|
|
57.0 |
|
|
|
38,157 |
|
|
|
43.8 |
|
Asset-backed
securities
|
|
|
67 |
|
|
|
0.1 |
|
|
|
76 |
|
|
|
0.1 |
|
Corporate
debt securities
|
|
|
1,485 |
|
|
|
1.9 |
|
|
|
--- |
|
|
|
--- |
|
Total
debt securities
|
|
|
78,330 |
|
|
|
99.6 |
|
|
|
86,895 |
|
|
|
99.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
securities and other
|
|
|
289 |
|
|
|
0.4 |
|
|
|
289 |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
securities available-for-sale
|
|
$ |
78,619 |
|
|
|
100.0 |
% |
|
$ |
87,184 |
|
|
|
100.0 |
% |
HELD-TO-MATURITY
SECURITIES
At
December 1, 2007, Greene County Bancorp, Inc. reclassified $16.5 million in
local, state and political subdivision securities from available-for-sale
securities to held-to-maturity securities. The Company has the
ability and intent to hold these securities until maturity. The
issues transferred consisted of local municipal bonds which are considered
illiquid and have no quoted market values. Management estimated that
the aggregate fair value of these securities at the time of transfer was equal
to their aggregate amortized cost. These securities will continue to
be recorded at amortized cost. The balance of these securities
decreased by $150,000 due to maturities and principal repayments for the
six-month period ended December 31, 2007. Greene County
Bancorp, Inc. held 30.8% of the securities portfolio, including both
available-for-sale and held-to-maturity securities, at December 31, 2007 in
state and political subdivision securities to take advantage of tax savings
and
to promote Greene County Bancorp, Inc.’s participation in the communities in
which it operates.
LOANS
Net
loans
receivable increased to $222.5 million at December 31, 2007 from $207.3 million
at June 30, 2007, an increase of $15.2 million, or 7.3%. The loan
growth experienced during the six months primarily consisted of $10.2 million
in
residential mortgages, $3.5 million in home equity loans, and $1.2 million
in
commercial real estate loans. The continued low interest rate
environment and strong customer satisfaction from personal service continued
to
enhance loan growth. If long term rates begin to rise, the Company
anticipates some slow down in new loan demand as well as refinancing
activities. It appears consumers continue to use the equity in their
homes and credit cards to fund financing needs for some activities, where in
the
past an installment loan may have been the choice. The low financing
options from auto makers continued to cut into the Bank’s automobile loan
generation.
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
Dec.
31, 2007
|
|
|
Percentage
of
portfolio
|
|
|
At
June
30, 2007
|
|
|
Percentage
of
portfolio
|
|
Real
estate mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$ |
160,398 |
|
|
|
71.6 |
% |
|
$ |
150,215 |
|
|
|
72.0 |
% |
Commercial
|
|
|
26,917 |
|
|
|
12.0 |
|
|
|
25,740 |
|
|
|
12.3 |
|
Home
equity loans
|
|
|
23,259 |
|
|
|
10.4 |
|
|
|
19,719 |
|
|
|
9.5 |
|
Commercial
loans
|
|
|
8,747 |
|
|
|
3.9 |
|
|
|
8,391 |
|
|
|
4.0 |
|
Installment
loans
|
|
|
4,214 |
|
|
|
1.9 |
|
|
|
4,057 |
|
|
|
1.9 |
|
Passbook
loans
|
|
|
510 |
|
|
|
0.2 |
|
|
|
583 |
|
|
|
0.3 |
|
Total
loans
|
|
$ |
224,045 |
|
|
|
100.0 |
% |
|
$ |
208,705 |
|
|
|
100.0 |
% |
Less:
Allowance for loan losses
|
|
|
(1,694 |
) |
|
|
|
|
|
|
(1,486 |
) |
|
|
|
|
Unearned
origination fees and costs, net
|
|
|
111 |
|
|
|
|
|
|
|
61 |
|
|
|
|
|
Net
loans receivable
|
|
$ |
222,462 |
|
|
|
|
|
|
$ |
207,280 |
|
|
|
|
|
ALLOWANCE
FOR LOAN LOSSES
The
allowance for loan losses is established through a provision for loan losses
based on management’s evaluation of the risk inherent in the loan portfolio, the
composition of the loan portfolio, specific impaired loans and current economic
conditions. Such evaluation, which includes a review of all loans on
which full collectibility may not be reasonably assured, considers among other
matters, the estimated net realizable value or the fair value of the underlying
collateral, economic conditions, historical loan loss experience and other
factors that warrant recognition in providing for an allowance for loan
loss. In addition, various regulatory agencies, as an integral part
of their examination process, periodically review The Bank of Greene County’s
allowance for loan losses. 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 expense) and recoveries
of loans previously charged off and is reduced by net
charge-offs. The level of the provision for the six months ended
December 31, 2007, was driven by the continued good asset
quality. Any future increase in the allowance for loan losses or loan
charge-offs could have a material adverse effect on Greene County Bancorp,
Inc.’s results of operations and financial condition.
Analysis
of allowance for
loan losses activity
(Dollars
in thousands)
|
|
Six
months ended
|
|
|
|
December
31, 2007
|
|
|
December
31, 2006
|
|
|
|
|
|
|
|
|
Balance
at the beginning of the period
|
|
$ |
1,486 |
|
|
$ |
1,314 |
|
Charge-offs:
|
|
|
|
|
|
|
|
|
Commercial
loan
|
|
|
15 |
|
|
|
7 |
|
Installment
loans to individuals
|
|
|
16 |
|
|
|
15 |
|
Overdraft
protection
|
|
|
115 |
|
|
|
68 |
|
Total
loans charged off
|
|
|
146 |
|
|
|
90 |
|
|
|
|
|
|
|
|
|
|
Recoveries:
|
|
|
|
|
|
|
|
|
Residential
mortgage
|
|
|
27 |
|
|
|
--- |
|
Installment
loans to individuals
|
|
|
19 |
|
|
|
15 |
|
Overdraft
protection
|
|
|
30 |
|
|
|
18 |
|
Total
recoveries
|
|
|
76 |
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
Net
charge-offs
|
|
|
70 |
|
|
|
57 |
|
|
|
|
|
|
|
|
|
|
Provisions
charged to operations
|
|
|
278 |
|
|
|
111 |
|
Balance
at the end of the period
|
|
$ |
1,694 |
|
|
$ |
1,368 |
|
|
|
|
|
|
|
|
|
|
Ratio
of net charge-offs to average loans outstanding, annualized
|
|
|
0.06 |
% |
|
|
0.06 |
% |
Ratio
of net charge-offs to nonperforming assets, annualized
|
|
|
7.93 |
% |
|
|
28.57 |
% |
Allowance
for loan loss to nonperforming loans
|
|
|
95.92 |
% |
|
|
342.86 |
% |
Allowance
for loan loss to total loans receivable
|
|
|
0.76 |
% |
|
|
0.67 |
% |
Nonaccrual
Loans and
Nonperforming Assets
Loans
are
reviewed on a regular basis. Management determines that a loan is
impaired or nonperforming when it is probable at least a portion of the loan
will not be collected in accordance with its contractual terms due to an
irreversible deterioration in the financial condition of the borrower or the
value of the underlying collateral. When a loan is determined to be
impaired, the measurement of the loan impairment 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 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
nonperforming. Foreclosed real estate is considered
nonperforming. The Bank of Greene County had no accruing loans
delinquent 90 days or more at December 31, 2007 or June 30, 2007.
Analysis
of Nonaccrual Loans
and Nonperforming Assets
(Dollars
in thousands)
|
|
At
December 31, 2007
|
|
|
At
June 30, 2007
|
|
Nonaccruing
loans:
|
|
|
|
|
|
|
Real
estate mortgage loans:
|
|
|
|
|
|
|
Residential
mortgages loans (one- to four-family)
|
|
$ |
686 |
|
|
$ |
451 |
|
Commercial
mortgage loans
|
|
|
442 |
|
|
|
111 |
|
Multifamily
mortgage loans
|
|
|
28 |
|
|
|
--- |
|
Home
equity
|
|
|
302 |
|
|
|
110 |
|
Commercial
loans
|
|
|
251 |
|
|
|
--- |
|
Installment
loans to individuals
|
|
|
57 |
|
|
|
10 |
|
Total
nonaccruing loans
|
|
|
1,766 |
|
|
|
682 |
|
|
|
|
|
|
|
|
|
|
Foreclosed
real estate
|
|
|
--- |
|
|
|
--- |
|
Total
nonperforming assets
|
|
$ |
1,766 |
|
|
$ |
682 |
|
|
|
|
|
|
|
|
|
|
Total
nonperforming assets
as
a percentage of total assets
|
|
|
0.51 |
% |
|
|
0.21 |
% |
|
|
|
|
|
|
|
|
|
Total
nonperforming loans to total loans
|
|
|
0.79 |
% |
|
|
0.33 |
% |
|
|
|
|
|
|
|
|
|
During
the six months ended December 31, 2007 and 2006, The Bank of Greene County
had
no impaired loans. Accordingly, no specific valuation allowance for
impaired loans was recorded. Interest income related to nonaccrual
loans was not material in the quarters and six month periods ended December
31,
2007 and 2006.
DEPOSITS
Total
deposits increased to $297.2 million at December 31, 2007 from $284.2 million
at
June 30, 2007, an increase of $13.0 million, or 4.6%. The net growth
in deposits was primarily due to a $10.8 million increase in municipal deposits
at Greene County Commercial Bank. The Company has seen a shift from savings
and
money market deposits to NOW deposits as customers try to shop for the best
rates while still maintaining liquidity. The Company continues to try
to encourage customers to open noninterest bearing deposit accounts through
various marketing strategies, including gifts.
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
Dec.
31, 2007
|
|
|
Percentage
of
portfolio
|
|
|
At
June
30, 2007
|
|
|
Percentage
of
portfolio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
bearing deposits
|
|
$ |
40,912 |
|
|
|
13.8 |
% |
|
$ |
44,020 |
|
|
|
15.5 |
% |
Certificates
of deposit
|
|
|
81,939 |
|
|
|
27.6 |
|
|
|
74,563 |
|
|
|
26.2 |
|
Savings
deposits
|
|
|
66,697 |
|
|
|
22.4 |
|
|
|
71,830 |
|
|
|
25.3 |
|
Money
market deposits
|
|
|
31,335 |
|
|
|
10.5 |
|
|
|
37,710 |
|
|
|
13.3 |
|
NOW
deposits
|
|
|
76,308 |
|
|
|
25.7 |
|
|
|
56,053 |
|
|
|
19.7 |
|
Total
deposits
|
|
$ |
297,191 |
|
|
|
100.0 |
% |
|
$ |
284,176 |
|
|
|
100.0 |
% |
BORROWINGS
At
December 31, 2007, 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
$31.8 million with the Federal Home Loan Bank. The Bank of
Greene County had $4.0 million outstanding on the overnight line of credit
at
December
31, 2007.
At
December 31, 2007, The Bank of Greene County had the following term borrowings
from the FHLB:
Amount
|
Rate
|
Maturity
Date
|
$5,000,000
|
3.64%
- convertible
|
10/24/2013
|
The
$5.0
million borrowing, which carried a 3.64% interest rate at December 31, 2007,
is
convertible by FHLB under certain market interest rate scenarios, including
three-month LIBOR at or above 7.5%. FHLB has the option to convert
existing advances into replacement advances for the same or lesser principal
amount based on the then current market rates. If the Bank chooses
not to replace the funding, the Bank must repay this convertible advance,
including any accrued interest, on the interest payment date.
EQUITY
Shareholders’
equity increased to $36.5 million at December 31, 2007 from $35.4 million at
June 30, 2007, as net income of $1.2 million was partially offset by dividends
declared and paid of $720,000. An improvement of $877,000 in the fair value
of
the available-for-sale investment portfolio, net of tax, resulted in accumulated
other comprehensive income of $477,000 at December 31, 2007 compared to
accumulated other comprehensive loss of $400,000 at June 30,
2007. The Company recorded an adjustment, effective July 1, 2007,
reducing retained earnings by $218,000 as a result of implementing FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an
interpretation of FASB Statement No. 109”. Other changes in equity,
totaling a $110,000 increase, were the result of activities associated with
the
various stock-based compensation plans of the Company including the 2000 Stock
Option Plan and ESOP Plan. 5,580 options were exercised during the
six months ended December 31, 2007. On August 22, 2007, the
Board of Directors authorized a stock repurchase program pursuant to which
the
Company intends to repurchase up to 5% of its outstanding shares (excluding
shares held by Greene County Bancorp, MHC, the Company’s mutual holding
company), or up to 92,346 shares. During the six months ended
December 31, 2007, the Company repurchased 12,192 shares. As a result
of this stock repurchase and the exercise of stock options during the period,
treasury shares were increased to 161,216.
Comparison
of Operating Results for the Six Months and Quarter Ended December 31, 2007
and
2006
Average
Balance Sheet
The
following table sets forth certain information relating to Greene County
Bancorp, Inc. for the six months and quarters ended December 31, 2007 and
2006. For the periods indicated, the total dollar amount of interest
income from average interest earning assets and the resultant yields, as well
as
the interest expense on average interest bearing liabilities, are expressed
both
in dollars and rates. No tax equivalent adjustments were
made. Average balances were based on daily averages for the quarters
and six months ended December 31, 2007 and 2006. Average loan
balances include non-performing loans. The loan yields include net
amortization of certain deferred fees and costs that are considered adjustments
to yields.
Six
Months Ended December 31, 2007 and 2006
(Dollars
in thousands)
|
2007
|
2007
|
2007
|
2006
|
2006
|
2006
|
|
Average
|
Interest
|
Average
|
Average
|
Interest
|
Average
|
|
Outstanding
|
Earned/
|
Yield/
|
Outstanding
|
Earned/
|
Yield/
|
|
Balance
|
Paid
|
Rate
|
Balance
|
Paid
|
Rate
|
Interest
earning assets:
|
|
|
|
|
|
|
Loans
receivable, net1
|
$217,494
|
$7,214
|
6.63%
|
$197,153
|
$6,482
|
6.58%
|
Securities,
available for sale2
|
86,569
|
1,833
|
4.23
|
84,611
|
1,601
|
3.78
|
Securities,
held to maturity3
|
2,761
|
52
|
3.77
|
---
|
---
|
---
|
Federal
funds
|
7,147
|
172
|
4.81
|
5,122
|
134
|
5.23
|
Interest
bearing bank balances
|
3,888
|
84
|
4.32
|
2,597
|
56
|
4.31
|
FHLB
stock
|
663
|
26
|
7.84
|
643
|
21
|
6.53
|
Total
interest earning assets
|
318,522
|
9,381
|
5.89%
|
290,126
|
8,294
|
5.72%
|
Cash
and due from banks
|
5,508
|
|
|
6,639
|
|
|
Allowance
for loan losses
|
(1,564)
|
|
|
(1,322)
|
|
|
Other
non-interest earning assets
|
15,071
|
|
|
13,898
|
|
|
Total
assets
|
$337,537
|
|
|
$309,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
bearing liabilities:
|
|
|
|
|
|
|
Savings
and money market deposits
|
$108,192
|
$1,054
|
1.95%
|
$124,697
|
$1,240
|
1.99%
|
NOW
deposits
|
67,566
|
922
|
2.73
|
42,209
|
521
|
2.47
|
Certificates
of deposit
|
79,694
|
1,750
|
4.39
|
62,403
|
1,161
|
3.72
|
Borrowings
|
5,130
|
93
|
3.63
|
5,001
|
93
|
3.72
|
Total
interest bearing liabilities
|
260,582
|
3,819
|
2.93%
|
234,310
|
3,015
|
2.57%
|
Non-interest
bearing deposits
|
40,760
|
|
|
40,036
|
|
|
Other
non-interest bearing liabilities
|
314
|
|
|
609
|
|
|
Shareholders’
equity
|
35,881
|
|
|
34,386
|
|
|
Total
liabilities and equity
|
$337,537
|
|
|
$309,341
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
$5,562
|
|
|
$5,279
|
|
|
|
|
|
|
|
|
Net
interest rate spread
|
|
|
2.96%
|
|
|
3.15%
|
|
|
|
|
|
|
|
Net
interest margin
|
|
|
3.49%
|
|
|
3.64%
|
|
|
|
|
|
|
|
Average
interest earning assets to
|
|
|
|
|
|
|
average
interest bearing liabilities
|
|
|
122.23%
|
|
|
123.82%
|
1
Calculated
net of deferred loan fees
and costs, loan discounts, and loans in process.
2
Includes
tax-free securities,
mortgage-backed securities and asset-backed securities.
3
Held
to
maturity securities include only tax-free municipal issues.
Rate
/ Volume Analysis
The
following Rate / Volume tables present the extent to which changes in interest
rates and changes in the volume of interest-earning assets and interest-bearing
liabilities have affected Greene County Bancorp, Inc.’s interest income and
interest expense during the periods indicated. Information is
provided in each category with respect to:
(i)
|
change
attributable to changes in volume (changes in volume multiplied by
prior
rate);
|
(ii)
|
change
attributable to changes in rate (changes in rate multiplied by prior
volume); and
|
The
changes attributable to the combined impact of volume and rate have been
allocated proportionately to the changes due to volume and the changes due
to
rate.
|
|
|
|
Six
Months
Ended
December 31,
|
|
(Dollars
in thousands)
|
|
|
2007
versus 2006
|
|
|
|
|
|
Increase/(Decrease)
|
|
|
Total
|
|
|
|
|
|
Due
to
|
|
|
Increase/
|
|
Interest-earning
assets:
|
|
|
Volume
|
|
|
Rate
|
|
|
(Decrease)
|
|
Loans
receivable, net1
|
|
|
$ |
682 |
|
|
$ |
50 |
|
|
$ |
732 |
|
Securities,
available for sale2
|
|
|
|
38 |
|
|
|
194 |
|
|
|
232 |
|
Securities,
held to maturity3
|
|
|
|
52 |
|
|
|
--- |
|
|
|
52 |
|
Federal
funds
|
|
|
|
49 |
|
|
|
(11 |
) |
|
|
38 |
|
Interest-bearing
bank balances
|
|
|
|
28 |
|
|
|
--- |
|
|
|
28 |
|
FHLB
stock
|
|
|
|
1 |
|
|
|
4 |
|
|
|
5 |
|
Total
interest-earning assets
|
|
|
|
850 |
|
|
|
237 |
|
|
|
1,087 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
deposits
|
|
|
|
(161 |
) |
|
|
(25 |
) |
|
|
(186 |
) |
NOW
deposits
|
|
|
|
341 |
|
|
|
60 |
|
|
|
401 |
|
Certificates
of deposit
|
|
|
|
357 |
|
|
|
232 |
|
|
|
589 |
|
Borrowings
|
|
|
|
2 |
|
|
|
(2 |
) |
|
|
-- |
|
Total
interest-bearing liabilities
|
|
|
|
539 |
|
|
|
265 |
|
|
|
804 |
|
Net
interest income
|
|
|
$ |
311 |
|
|
$ |
(28 |
) |
|
$ |
283 |
|
1
Calculated net of deferred loan fees, loan discounts, loans in process and
loan
loss reserves.
2
Includes
tax-free securities, mortgage-backed securities and asset-backed
securities.
3
Held
to
maturity securities include only tax-free municipal issues.
Quarter
Ended December 31,
2007 and 2006
(Dollars
in thousands)
|
2007
|
2007
|
2007
|
2006
|
2006
|
2006
|
|
Average
|
Interest
|
Average
|
Average
|
Interest
|
Average
|
|
Outstanding
|
Earned/
|
Yield/
|
Outstanding
|
Earned/
|
Yield/
|
|
Balance
|
Paid
|
Rate
|
Balance
|
Paid
|
Rate
|
Interest
earning assets:
|
|
|
|
|
|
|
Loans
receivable, net1
|
$221,451
|
$3,656
|
6.60%
|
$199,941
|
$3,303
|
6.61%
|
Securities,
available for sale2
|
85,887
|
921
|
4.29
|
83,576
|
821
|
3.93
|
Securities,
held to maturity3
|
5,521
|
52
|
3.77
|
---
|
---
|
---
|
Federal
funds
|
8,335
|
97
|
4.66
|
4,765
|
62
|
5.20
|
Interest
bearing bank balances
|
3,212
|
32
|
3.99
|
2,388
|
26
|
4.36
|
FHLB
stock
|
669
|
14
|
8.37
|
643
|
11
|
6.84
|
Total
interest earning assets
|
325,075
|
4,772
|
5.87%
|
291,313
|
4,223
|
5.80%
|
Cash
and due from banks
|
5,298
|
|
|
6,650
|
|
|
Allowance
for loan losses
|
(1,619)
|
|
|
(1,331)
|
|
|
Other
non-interest earning assets
|
14,730
|
|
|
14,474
|
|
|
Total
assets
|
$343,484
|
|
|
$311,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
bearing liabilities:
|
|
|
|
|
|
|
Savings
and money market deposits
|
$104,455
|
$496
|
1.90%
|
$118,631
|
$591
|
1.99%
|
NOW
deposits
|
75,863
|
540
|
2.85
|
49,115
|
345
|
2.81
|
Certificates
of deposit
|
81,651
|
888
|
4.35
|
62,946
|
610
|
3.88
|
Borrowings
|
5,261
|
47
|
3.57
|
5,000
|
47
|
3.76
|
Total
interest bearing liabilities
|
267,230
|
1,971
|
2.95%
|
235,692
|
1,593
|
2.70%
|
Non-interest
bearing deposits
|
39,997
|
|
|
39,839
|
|
|
Other
non-interest bearing liabilities
|
73
|
|
|
674
|
|
|
Shareholders’
equity
|
36,184
|
|
|
34,901
|
|
|
Total
liabilities and equity
|
$343,484
|
|
|
$311,106
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
$2,801
|
|
|
$2,630
|
|
|
|
|
|
|
|
|
Net
interest rate spread
|
|
|
2.92%
|
|
|
3.10%
|
|
|
|
|
|
|
|
Net
interest margin
|
|
|
3.45%
|
|
|
3.61%
|
|
|
|
|
|
|
|
Average
interest earning assets to
|
|
|
|
|
|
|
average
interest bearing liabilities
|
|
|
121.65%
|
|
|
123.60%
|
1
Calculated
net of deferred loan fees
and costs, loan discounts, and loans in process.
2
Includes
tax-free securities,
mortgage-backed securities and asset-backed securities.
3
Held
to maturity securities include
only tax-free municipal issues.
|
|
|
|
Three
Months
Ended
December 31,
|
|
(Dollars
in thousands)
|
|
|
2007
versus 2006
|
|
|
|
|
|
Increase/(Decrease)
|
|
|
Total
|
|
|
|
|
|
Due
to
|
|
|
Increase/
|
|
Interest-earning
assets:
|
|
|
Volume
|
|
|
Rate
|
|
|
(Decrease)
|
|
Loans
receivable, net1
|
|
|
$ |
358 |
|
|
$ |
(5 |
) |
|
$ |
353 |
|
Securities,
available for sale2
|
|
|
|
23 |
|
|
|
77 |
|
|
|
100 |
|
Securities,
held to maturity3
|
|
|
|
52 |
|
|
|
--- |
|
|
|
52 |
|
Federal
funds
|
|
|
|
42 |
|
|
|
(7 |
) |
|
|
35 |
|
Interest-bearing
bank balances
|
|
|
|
8 |
|
|
|
(2 |
) |
|
|
6 |
|
FHLB
stock
|
|
|
|
--- |
|
|
|
3 |
|
|
|
3 |
|
Total
interest-earning assets
|
|
|
|
483 |
|
|
|
66 |
|
|
|
549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
deposits
|
|
|
|
(69 |
) |
|
|
(26 |
) |
|
|
(95 |
) |
NOW
deposits
|
|
|
|
190 |
|
|
|
5 |
|
|
|
195 |
|
Certificates
of deposit
|
|
|
|
197 |
|
|
|
81 |
|
|
|
278 |
|
Borrowings
|
|
|
|
2 |
|
|
|
(2 |
) |
|
|
--- |
|
Total
interest-bearing liabilities
|
|
|
|
320 |
|
|
|
58 |
|
|
|
378 |
|
Net
interest income
|
|
|
$ |
163 |
|
|
$ |
8 |
|
|
$ |
171 |
|
1
Calculated net of deferred loan fees, loan discounts, loans in process and
loan
loss reserves.
2
Includes
tax-free securities, mortgage-backed securities and asset-backed
securities.
3
Held
to
maturity securities include only tax-free municipal issues.
OVERVIEW
Annualized
return on average assets and return on average equity are common methods of
measuring operating results. Annualized return on average assets
decreased to 0.71% for the six months and 0.73% for the quarter ended December
31, 2007, as compared to 0.98% for the six months and 0.97% for the quarter
ended December 31, 2006. Annualized return on average equity
decreased to 6.66% for the six months and 6.91% for the quarter ended December
31, 2007 as compared to 8.79% for the six months and 8.68% for the quarter
ended
December 31, 2006. The year to date decrease in return on average
assets and return on average equity was primarily the result of higher
noninterest expenses, partially offset by higher noninterest income and net
interest income. Net income amounted to $1.2 million and $1.5 million
for the six months ended December 31, 2007 and 2006, respectively, a decrease
of
$316,000 or 20.9% and amounted to $626,000 and $757,000 for the quarters ended
December 31, 2007 and 2006, respectively, a decrease of $131,000 or
17.3%. Average assets amounted to $337.5 million for the six month
period ended December 31, 2007 as compared to $309.3 million for the same period
ended December 31, 2006, an increase of $28.2 million or
9.1%. Average assets amounted to $343.5 million for the quarter ended
December 31, 2007 as compared to $311.1 million for the quarter ended December
31, 2006, an increase of $32.4 million or 10.4%. Average equity
amounted to $35.9 million for the six month period ended December 31, 2007
as
compared to $34.4 million for the same period ended December 31, 2006, an
increase of $1.5 million or 4.4%. Average equity amounted to $36.2
million for the quarter ended December 31, 2007 as compared to $34.9 million
for
the quarter ended December 31, 2006, an increase of $1.3 million or 3.7%.
INTEREST
INCOME
Interest
income amounted to $9.4 million for the six months ended December 31, 2007
as
compared to $8.3 million for the six months ended December 31, 2006, an increase
of $1.1 million or 13.3%. Interest income amounted to $4.8 million
for the quarter ended December 31, 2007 as compared to $4.2 million for the
quarter ended December 31, 2006, an increase of $549,000 or
13.0%. The increase in loan volume complemented by an increase in the
yield on interest earning assets had the greatest impact on interest income
when
comparing the six months and quarters ended December 31, 2007 and
2006. Average loan balances increased $20.3 million for the six
months ended December 31, 2007 as compared to December 31, 2006 and the yield
increased by 5 basis points when comparing the same periods. Average
loan balances increased $21.5 million for the quarter ended December 31, 2007
as
compared to the quarter ended December 31, 2006 and the yield decreased by
one
basis point when comparing the same periods. The overall impact on
interest income from securities available for sale was positive with an increase
in average balances of $2.0 million which was complemented by a 45 basis point
increase in yield when comparing the six months ended December 31, 2007 and
2006
and a $2.3 million increase in average balances and a 36 basis point increase
in
yield when comparing the quarters ended December 31, 2007 and
2006. For the six months and quarter ended December 31, 2007,
average securities held to maturity totaled $2.8 million and $5.5 million,
respectively, as a result of a reclassification from the available-for-sale
portfolio. The average yield on these investments was 3.77% for the
current quarter and six month period ended December 31, 2007. The
reclassification of securities which were tax free securities out of
available-for-sale to held-to-maturity contributed to the improvement in yield
on securities available-for-sale. No tax effective adjustments were
made. Average balances on short term investments such as interest
bearing bank balances and federal funds sold increased $3.3 million and $4.4
million when comparing the six months and quarters ended December 31, 2007
and
2006. Most of the increase in income from short term investments was
offset by a lower yield on such investments, primarily as a result of the
short-term interest rate decreases implemented by the Federal Open Market
Committee during the latter part of calendar 2007. Although the
Federal Open Market Committee increased short-term rates several times during
calendar 2006, the long-term rates continued to remain relatively unchanged
and
low.
INTEREST
EXPENSE
Interest
expense amounted to $3.8 million for the six months ended December 31, 2007,
as
compared to $3.0 million for the six months ended December 31, 2006, an increase
of $804,000. Interest expense amounted to $2.0 million for the
quarter ended December 31, 2007, as compared to $1.6 million for the quarter
ended December 31, 2006, an increase of $378,000. Increases in
average balances on interest-bearing liabilities had the greatest impact on
overall interest expense. The average balance of interest bearing
liabilities amounted to $260.6 million and the average rate increased to 2.93%
for the six months ended December 31, 2007 as compared to an average balance
of
$234.3 million with an average rate of 2.57% for the six months ended December
31, 2006, an increase in average interest bearing liabilities of $26.3 million
and an increase in average rate of 36 basis points. The average
balance of interest bearing liabilities amounted to $267.2 million and the
average rate increased to 2.95% for the quarter ended December 31, 2007 as
compared to an average balance of $235.7 million with an average rate of 2.70%
for the quarter ended December 31, 2006, an increase in average interest bearing
liabilities of $31.5 million and an increase in average rate of 25 basis
points. The average rate paid on NOW deposits increased 26 basis
points and 4 basis points, respectively, when comparing the six months and
quarters ended December 31, 2007 and 2006, and the average balance of such
accounts grew by $25.4 million and $26.7 million, respectively, when comparing
the same periods, contributing to the overall increase in interest
expense. The average balance of certificates of deposit grew by $17.3
million and the average rate paid increased by 67 basis points when comparing
the six months ended December 31, 2007 and 2006. The average balance
of certificates of deposit grew by $18.7 million and the average rate paid
increased by 47 basis points when comparing the quarters ended December 31,
2007
and 2006. The average balance of savings and money market deposits
fell by $16.5 million and $14.2 million when comparing the six months and
quarters ended December 31, 2007 and 2006. The average rate paid on
savings and money markets decreased 4 basis points and 9 basis points when
comparing the same periods. Interest paid on borrowings remained
consistent when comparing the six months and quarters ended December 31, 2007
and 2006 due to the fact that increases in average borrowings were offset by
lower rates paid on those borrowings.
NET
INTEREST INCOME
Net
interest income increased $283,000 to $5.6 million for the six months ended
December 31, 2007 compared to December 31, 2006 and increased $171,000 to $2.8
million for the quarter ended December 31, 2007 compared to December 31,
2006. Net interest spread decreased 19 basis points
to 2.96% for the six months ended December 31, 2007 from 3.15% for the six
months ended December 31, 2006, and 18 basis points to 2.92% for the quarter
ended December 31, 2007 as compared to 3.10% for the quarter ended December
31,
2006. Net interest margin decreased 15 basis points to 3.49% for the
six months ended December 31, 2007 from 3.64% for the six months ended December
31, 2006, and 16 basis points to 3.45% for the quarter ended December 31, 2007
as compared to 3.61% for the quarter ended December 31, 2006. The
tightening of the net interest spread and margin hindered net interest income
growth when comparing the six months and quarters ended December 31, 2007 and
2006.
Due
to
the large portion of fixed rate residential mortgages in the Company’s asset
portfolio, interest rate risk is a concern and the Company will continue to
monitor the situation and attempt to adjust the asset and liability mix as
much
as possible to take advantage of the benefits and reduce the risks or potential
negative effects of a rising rate environment. Management attempts to
mitigate the interest rate risk through balance sheet
composition. Several strategies are used to help manage interest rate
risk such as maintaining a high level of liquid assets such as short-term
federal funds sold and various investment securities and maintaining a high
concentration of less interest-rate sensitive and lower-costing core
deposits.
PROVISION
FOR LOAN LOSSES
The
provision for loan losses amounted to $278,000 and $111,000 for the six months
ended December 31, 2007 and 2006, respectively, an increase of
$167,000. The provision for loan losses amounted to $135,000 and
$66,000 for the quarters ended December 31, 2007 and 2006, respectively, an
increase of $69,000. The increase in the level of provision was
primarily a result of growth in the loan portfolio, an increase in nonperforming
loans and an increase in the amount of loan charge-offs, which were
predominently associated with the overdraft protection program. Net
charge-offs associated with the overdraft protection program increased $35,000,
or 70.0% when comparing the six months ended December 31, 2007 and 2006.
NONINTEREST
INCOME
Noninterest
income amounted to $2.3 million for the six months ended December 31, 2007
as
compared to $2.1 million for the six months ended December 31, 2006, an increase
of $162,000 or 7.7%. Noninterest income amounted to $1.2 million for
both the quarters ended December 31, 2007 and 2006. During the
six months and quarter ended December 31, 2006, a pretax gain of approximately
$257,000 related to the sale of the former Coxsackie branch building was
recognized in noninterest income. There were no significant sales of
assets during the six months and quarter ended December 31,
2007. Service charges on deposit accounts increased $270,000 and
$110,000 for the six months and quarter ended December 31, 2007, respectively,
due to higher levels of insufficient funds charges as a result of changes
implemented in the Overdraft Privilege Program. Debit card fees
increased $97,000 and $53,000, respectively, for the same periods primarily
due
to a higher volume of transactions.
NONINTEREST
EXPENSE
Noninterest
expense amounted to $5.9 million for the six months ended December 31, 2007
as
compared to $5.1 million for the six months ended December 31, 2006, an increase
of $760,000 or 14.9%. Noninterest expense amounted to $2.9 million
for the quarter ended December 31, 2007 as compared to $2.7 million for the
quarter ended December 31, 2006, an increase of $288,000 or
10.8%. Salaries and employee benefits increased $318,000 when
comparing the six months ended December 31, 2007 and 2006; and $176,000 when
comparing the quarters ended December 31, 2007 and 2006. These
increases were primarily due to an increase in the number of employees resulting
from the addition of three new branches (two branches which opened in the third
quarter of fiscal 2007 and one branch which has opened in January 2008) and
expansion of the commercial lending department, as well as a $75,000 payment
associated with the retirement of a senior officer. These salary
increases were partially offset by a decrease of $65,000 in retirement expense
associated with the Defined Benefit Pension Plan, partially offset by an
increase in 401(k) contribution expense of $20,000 resulting from increases
in
employer match during fiscal 2007. Occupancy expense and equipment
and furniture expense, in the aggregate, increased approximately $133,000 and
$52,000 when comparing the six months and quarters ended December 31, 2007
and
2006 due to higher utility costs, building maintenance and increased
depreciation expense associated with the opening of the new operations center
in
Catskill and the opening of two new branches in Catskill and
Greenport. All other noninterest expenses, in the aggregate,
increased approximately $309,000 and $60,000 when comparing the six months
and
quarters ended December 31, 2007 and 2006 due to increased costs related to
debit card transactions and the loyalty program, marketing costs related to
deposit product promotions, and increased assessments resulting from the
conversion of the Bank from a New York State chartered financial institution
to
a Federally chartered institution.
INCOME
TAXES
The
provision for income taxes reflected the expected tax associated with the
revenue generated for the given period and certain regulatory
requirements. The effective tax rate was 29.1% for the six months
ended December 31, 2007, compared to 30.3% for the six months ended December
31,
2006. The effective tax rate was 28.6% for the quarter ended December
31, 2007, compared to 31.6% for the quarter ended December 31,
2006. The decreases in effective rates for the periods ended December
31, 2007 were the result of decreased pre-tax income and the resultant increased
percentage of tax exempt interest earned in total taxable income.
LIQUIDITY
AND CAPITAL RESOURCES
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. Greene County Bancorp,
Inc.’s most significant form of market risk is interest rate risk since the
majority of Greene County Bancorp, Inc.’s assets and liabilities are sensitive
to changes in interest rates. Greene County Bancorp, Inc.’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.
Mortgage
loan commitments totaled $7.4 million at December 31, 2007. The
unused portion of overdraft lines of credit amounted to $8.6 million, the unused
portion of home equity lines of credit amounted to $6.5 million, and the unused
portion of commercial lines of credit amounted to $3.9 million at December
31,
2007. Greene County Bancorp, Inc. 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 borrowing capacity from Federal Home Loan Bank of New York.
During
the current fiscal year, The Bank of Greene County expects to open one new
branch location located in Chatham, New York. It is expected that
this branch will be opened during the third quarter of fiscal
2008. It is expected that the Company will have sufficient cash
or other means of liquidity to fund this project.
The
Bank
of Greene County and Greene County Commercial Bank met all regulatory capital
requirements at December 31, 2007 and June 30, 2007. The Company’s
consolidated shareholder’s equity represented 10.6% of total assets at December
31, 2007 and 10.9% of total assets of June 30, 2007.
Under
the
supervision and with the participation of the Company's management,
including its Chief Executive Officer and Chief Financial
Officer, the Company evaluated the effectiveness of the design and
operation of its disclosure controls and procedures (as defined in Rule
13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the
period covered by this report. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that, as of the end of the period
covered by this report, the Company's disclosure controls and
procedures were effective to ensure that information required to be disclosed
in
the reports that the Company files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms and in timely
altering them to material information relating to the Company (or its
consolidated subsidiaries) required to be filed in its periodic SEC
filings.
There
has
been no change in the Company's internal control over financial reporting in
connection with the quarterly evaluation that occurred during the Company's
last
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial
reporting.
Part
II. Other Information
Greene
County Bancorp, Inc. and its subsidiaries are not engaged in any material
legal
proceedings at the present time.
Item
2. Unregistered Sales of
Equity Securities and Use of Proceeds
c.)
|
The
following table presents a summary of the Company’s shares repurchased
during the quarter ended December 31,
2007
|
Period
|
Total
Number of Shares Purchased
|
Average
Price Paid Per Share
|
Total
Number of Shares Purchased as Part of Publicly Announced Program
(1)
|
Maximum
Number of Shares That May yet be Purchased Under the Program (1)
|
October
1 – October 31, 2007
|
3,100
|
$12.36
|
3,380
|
88,966
|
November
1 – November 30, 2007
|
3,948
|
$11.84
|
7,328
|
85,018
|
December
1 - December 31, 2007
|
4,864
|
$13.18
|
12,192
|
80,154
|
(1)
On
August 22, 2007, the Board of Directors authorized a stock repurchase program
pursuant to which the Company intends to repurchase up to 5% of its outstanding
shares (excluding shares held by Greene County Bancorp, MHC, the Company’s
mutual holding company), or up to 92,346 shares. As of December 31,
2007, the Company had repurchased 12,192 shares in accordance with the stock
repurchase program.
Item
3. Defaults Upon
Senior Securities
Not
applicable
Item
4. Submission of
Matters to a Vote of Security Holders
On
October 24, 2007, the Company held an annual meeting of
shareholders. At the meeting, proposals to (1) elect Donald Gibson,
Paul Slutzky and David H. Jenkins, to serve as directors of the Company for
terms of three years and until their respective successors have been elected,
and (2) ratify the engagement of Beard Miller Company LLP, to be the Company’s
auditors for the June 30, 2008 fiscal year were approved. There were
no broker non-votes. The votes cast for and against these proposals
were as follows:
Election
to the Board of
Directors For
Withheld
Donald
Gibson
3,813,573
40,506
David
H.
Jenkins
3,842,381
11,657
Paul
Slutzky
3,841,356
12,682
Ratification
of Appointment
of Beard Miller Company LLP
For
Against
Abstain
Number
of
votes
3,844,976
269
8,834
The
Board
of Directors consists of the following members: Donald E. Gibson,
David H. Jenkins, Dennis O’Grady, Arthur Place, Charles Schaefer, Paul Slutzky
Martin C. Smith, and J. Bruce Whittaker.
|
(b)
|
There
were no material changes to the procedures by which security holders
may
recommend nominees to the Company’s Board of Directors during the period
covered by the Form 10-QSB.
|
31.1
Certification of Chief Executive Officer, adopted pursuant to Rule
13a-14(a)/15d-14(a)
31.2
Certification of Chief Financial Officer, adopted pursuant to Rule
13a-14(a)/15d-14(a)
32.1
Statement of Chief Executive Officer, furnished pursuant to U.S.C. section
1350
32.2
Statement of Chief Financial Officer, furnished pursuant to U.S.C. section
1350
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: February
14, 2008
By:
/s/ Donald E.
Gibson
Donald
E.
Gibson
President
and Chief Executive Officer
Date: February
14, 2008
By:
/s/ Michelle
Plummer
Michelle
Plummer
Executive
Vice President, Chief Financial Officer and Chief Operating Officer
Certification
of Chief Executive Officer
Pursuant
to Section 302 of
the Sarbanes-Oxley Act of 2002
I,
Donald
E. Gibson, certify that:
1.
|
I
have reviewed this quarterly report on Form 10-QSB of Greene County
Bancorp, Inc.;
|
2.
|
Based
on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to
make the statements made, in light of the circumstances under which
such
statements were made, not misleading with respect to the period covered
by
this report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material
respects
the financial condition, results of operations and cash flows of
the small
business issuer as of, and for, the periods presented in this report;
|
4.
|
The
small business issuer’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
business issuer and have:
|
a)
designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the small business issuer, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b)
evaluated the effectiveness of the small business issuer’s disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c)
disclosed in this report any
change in
the small business issuer’s internal control over financial reporting that
occurred during the small business issuer’s most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the small
business issuer’s internal control over financial reporting; and
5.
|
The
small business issuer’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer’s auditors and the audit committee
of the small business issuer’s board of directors:
|
a)
all
significant deficiencies and material weaknesses in the design or operation
of
internal control over financial reporting which are reasonably likely to
adversely affect the small business issuer’s ability to record, process,
summarize and report financial information; and
b)
any
fraud, whether or not material, that involves management or other employees
who
have a significant role in the small business issuer’s internal control over
financial reporting.
Date:
February 14, 2008
/s/ Donald
E.
Gibson
Donald
E.
Gibson
|
President
and Chief Executive Officer
|
Certification
of Chief Financial Officer
Pursuant
to Section 302 of
the Sarbanes-Oxley Act of 2002
I,
Michelle M. Plummer, certify that:
1.
|
I
have reviewed this quarterly report on Form 10-QSB of Greene County
Bancorp, Inc.;
|
2.
|
Based
on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to
make the statements made, in light of the circumstances under which
such
statements were made, not misleading with respect to the period covered
by
this report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material
respects
the financial condition, results of operations and cash flows of
the small
business issuer as of, and for, the periods presented in this report;
|
4.
|
The
small business issuer’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
business issuer and have:
|
a)
designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the small business issuer, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b)
evaluated the effectiveness of the small business issuer’s disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c)
disclosed in this report any
change in
the small business issuer’s internal control over financial reporting that
occurred during the small business issuer’s most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the small
business issuer’s internal control over financial reporting; and
5.
|
The
small business issuer’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer’s auditors and the audit committee
of the small business issuer’s board of directors:
|
a)
all
significant deficiencies and material weaknesses in the design or operation
of
internal control over financial reporting which are reasonably likely to
adversely affect the small business issuer’s ability to record, process,
summarize and report financial information; and
b)
any
fraud, whether or not material, that involves management or other employees
who
have a significant role in the small business issuer’s internal control over
financial reporting.
Date:
February 14,
2008 /s/
Michelle
Plummer
Michelle
M.
Plummer
|
Executive
Vice President, Chief Financial Officer and Chief Operating Officer
|
Statement
of Chief Executive Officer
Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
Donald
E.
Gibson, President and Chief Executive Officer, of Greene County Bancorp, Inc.
(the “Company”) certifies in his capacity as an officer of the Company that he
has reviewed the Quarterly Report of the Company on Form 10-QSB for the quarter
ended December 31, 2007 and that to the best of his knowledge:
1.
|
the
report fully complies with the requirements of Section 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 the
Company
as of the dates and for the periods covered by the
report.
|
This
statement is authorized to be attached as an exhibit to the report so that
this
statement will accompany the report at such time as the report is filed with
the
Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 USC 1350. It is not intended that this statement be
deemed to be filed for purposes of the Securities Exchange Act of 1934, as
amended.
Date:
February 14, 2008 /s/ Donald
E.
Gibson
Donald
E.
Gibson
|
President
and Chief Executive Officer
|
Statement
of Chief Financial Officer
Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
Michelle
M. Plummer, Chief Financial Officer, of Greene County Bancorp, Inc. (the
“Company”) certifies in her capacity as an officer of the Company that he or she
has reviewed the Quarterly Report of the Company on Form 10-QSB for the quarter
ended December 31, 2007 and that to the best of her knowledge:
1.
|
the
report fully complies with the requirements of Section 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 the
Company
as of the dates and for the periods covered by the
report.
|
This
statement is authorized to be attached as an exhibit to the report so that
this
statement will accompany the report at such time as the report is filed with
the
Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 USC 1350. It is not intended that this statement be
deemed to be filed for purposes of the Securities Exchange Act of 1934, as
amended.
Date:
February 14, 2008
/s/
Michelle Plummer
Michelle
M.
Plummer
|
Executive
Vice President, Chief Financial Officer and Chief Operating Officer
|