form10ksbjune302007.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB
[X]
|
ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the Fiscal Year Ended June 30, 2007
OR
[ ]
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the
transaction period from ___________________ to
______________________
Commission
File Number: 0-25165
GREENE
COUNTY BANCORP, INC.
(Name
of
Small Business Issuer in its Charter)
United
States 14-1809721
(State
or Other Jurisdiction of
Incorporation or
Organization)
(I.R.S. Employer
Identification No.)
302
Main Street, Catskill, New
York 12414
(Address
of Principal Executive Office)
(Zip
Code)
(518)
943-2600
(Issuer’s
Telephone
Number including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title
of each
class Name
of exchange on which registered
Common
Stock, par value $0.10
per
share
The Nasdaq Stock Market LLC
Securities
Registered Pursuant to Section 12(g) of the Act:
None
(Title
of
Class)
Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act. [ ]
Check
whether the Registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past twelve months
(or for such shorter period that the Registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past
90
days.
YES X
NO
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained,
to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendments to this Form 10-KSB. [x]
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
YES NO
X
The
Registrant’s revenues for the fiscal year ended June 30, 2007 were
$20,926,000.
As
of
September 21, 2007, there were issued and outstanding 4,151,566 shares of the
Registrant's common stock of which 1,477,815 were shares of voting stock held
by
non-affiliates of the Registrant. Computed by reference to the closing price
of
Common Stock of $13.36 on such date, the aggregate value of stock held by
non-affiliates was $19,744,000.
DOCUMENTS INCORPORATED BY REFERENCE
1. Sections
of Annual Report to Shareholders for the fiscal year ended June 30, 2007 (Part
II).
2. Proxy
Statement for the 2007 Annual Meeting of Shareholders (Part II and
III)
Transitional
Small Business Disclosure
Formant Yes No X
GREENE
COUNTY BANCORP, INC. AND SUBSIDIARY
FORM
10-KSB
|
Index
|
Page
|
Part
I
|
|
|
Item
1.
|
Description
of Business
|
|
|
|
|
Item
2.
|
Description
of Properties
|
|
|
|
|
Item
3.
|
Legal
Proceedings
|
|
|
|
|
Item
4.
|
Submissions
of Matters to a Vote of Security Holders
|
|
Part
II
|
|
|
Item
5.
|
Market
for Common Equity, Related Stockholder Matters and Small Business
Issuer
Purchases of Equity Securities
|
|
|
|
|
Item
6.
|
Management’s
Discussion and Analysis or Plan of Operation
|
|
|
|
|
Item
7.
|
Financial
Statements
|
|
|
|
|
Item
8.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
|
|
|
|
Item
8A.
|
Controls
and Procedures
|
|
|
|
|
Item
8B.
|
Other
Information
|
|
|
|
|
Part
III
|
|
|
Item
9.
|
Directors,
Executive Officers, Promoters, Control Persons and Corporate Governance;
Compliance with Section 16(a) of the Exchange Act
|
|
|
|
|
Item
10.
|
Executive
Compensation
|
|
|
|
|
Item
11.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
|
|
|
|
Item
12.
|
Certain
Relationships and Related Transactions and Director
Independence
|
|
|
|
|
Item
13.
|
Exhibits
|
|
|
|
|
Item
14.
|
Principal
Accountant Fees and Services
|
|
|
|
|
Signatures
|
|
|
|
|
|
Exhibit
13
|
Annual
Report to Shareholders
|
|
|
|
|
Exhibit
21
|
Subsidiaries
of Greene County Bancorp, Inc.
|
|
|
|
|
Exhibit
23
|
Consent
of Independent Registered Public Accounting Firm
|
|
|
|
|
Exhibit
31.1
|
Certification
of Chief Executive Officer Pursuant to
Section
302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
Exhibit
31.2
|
Certification
of Chief Financial Officer Pursuant to
Section
302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
Exhibit
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer
Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
PART
I
SPECIAL
NOTE REGARDING FORWARD LOOKING STATEMENTS
This
annual 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 annual 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 Greene County Bancorp, Inc.’s loan and
investment portfolios,
|
(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.
General
Greene
County Bancorp, Inc. operates as the federally chartered holding company of
The
Bank of Greene County, a federally-chartered savings bank. A majority
of Greene County Bancorp, Inc.’s issued and outstanding common stock (55.5%) is
held by Greene County Bancorp, MHC, a federally chartered mutual holding
company. The remaining shares of Greene County Bancorp, Inc. are
owned by public stockholders and The Bank of Greene County’s Employee Stock
Ownership Plan. In June 2004, The Bank of Greene County opened a new
limited-purpose subsidiary, Greene County Commercial Bank. The
purpose of Greene County Commercial Bank is to serve local municipalities’
banking needs.
Greene
County Bancorp, Inc.
Greene
County Bancorp, Inc. was organized in December of 1998 at the direction of
the
Board of Trustees of The Bank of Greene County (formerly Greene County Savings
Bank) for the purpose of acting as the holding company of The Bank of Greene
County. In 2001, Greene County Bancorp, Inc. converted its charter
from a Delaware corporation regulated by the New York Superintendent of Banks
and the Board of Governors of the Federal Reserve System to a federal
corporation regulated by the Office of Thrift Supervision. At June
30, 2007, Greene County Bancorp, Inc.’s assets consisted primarily of its
investment in The Bank of Greene County and cash and securities totaling $4.5
million. At June 30, 2007, 1,846,434 shares of Greene County Bancorp,
Inc.’s common stock, par value $0.10 per share, were held by the public,
including executive officers and directors, 154,604 shares were held as Treasury
stock and 2,304,632 shares were held by Greene County Bancorp, MHC, Greene
County Bancorp, Inc.’s mutual holding company. Greene County Bancorp,
Inc.’s principal business is overseeing and directing the business of The Bank
of Greene County and various Greene County Bancorp, Inc. investment
securities.
At
June
30, 2007, Greene County Bancorp, Inc. had consolidated total assets of $325.8
million, consolidated total deposits of $284.2 million, consolidated borrowings
from the Federal Home Loan Bank of New York of $5.0 million and consolidated
total equity of $35.4 million.
Greene
County Bancorp, Inc.’s administrative office is located at 302 Main Street,
Catskill, New York 12414-1317. Its telephone number is (518)
943-2600.
The
Bank of Greene County
The
Bank
of Greene County was organized in 1889 as The Building and Loan Association
of
Catskill, a New York-chartered savings and loan association. In 1974,
The Bank of Greene County converted to a New York mutual savings bank under
the
name Greene County Savings Bank. In conjunction with the
reorganization and the offering completed in December 1998, which resulted
in
the organization of Greene County Bancorp, Inc., Greene County Savings Bank
changed its name to The Bank of Greene County. In November 2006, the
Bank of Greene County converted its charter to a federal savings bank
charter. The Bank of Greene County’s deposits are insured by the
Deposit Insurance Fund, as administered by the Federal Deposit Insurance
Corporation, up to the maximum amount permitted by law.
The
Bank
of Greene County's principal business consists of attracting retail deposits
from the general public in the areas surrounding its branches and investing
those deposits, together with funds generated from operations and borrowings,
primarily in one to four-family residential mortgage loans, commercial real
estate loans, consumer loans, home equity loans and commercial business
loans. In addition, The Bank of Greene County invests a significant
portion of its assets in investment securities, mortgage-backed and asset-backed
securities. The Bank of Greene County's revenues are derived
principally from the interest on its residential mortgages, and to a lesser
extent, from interest on consumer and commercial loans and securities, as well
as from servicing fees and service charges and other fees collected on its
deposit accounts. The Bank of Greene County’s affiliation with Fenimore Asset
Management and with Essex Corporation offer investment alternatives for
customers and also contribute to revenues. The Bank of Greene
County's primary sources of funds are deposits, and principal and interest
payments on loans and securities. At June 30, 2007, The Bank of
Greene County had outstanding borrowings of $5.0 million from the Federal Home
Loan Bank of New York.
The
Bank
of Greene County’s administrative office is located at 302 Main Street,
Catskill, New York 12414-1317. Its telephone number is (518)
943-2600.
Greene
County Commercial Bank
Greene
County Commercial Bank was
formed in January 2004 as a New York State-chartered limited purpose commercial
bank. Greene County Commercial Bank has the power to receive deposits
only to the extent of accepting for deposit the funds of the United States
and
the State of New York and their respective agents, authorities and
instrumentalities, and local governments as defined in Section 10(a)(1) of
the
General Municipal Law. At June 30, 2007, Greene County Commercial
Bank had $35.8 million in assets, $30.8 million in total deposits, and $5.0
million in total equity.
Greene
County Commercial Bank’s
County’s administrative office is located at 302 Main Street, Catskill, New York
12414-1317. Its telephone number is (518) 943-2600.
Greene
County Bancorp, MHC
Greene
County Bancorp, MHC was formed in December 1998 as part of The Bank of Greene
County's mutual holding company reorganization. In 2001, Greene County Bancorp,
MHC converted from a state to a federal charter. The Office of Thrift
Supervision regulates Greene County Bancorp, MHC. Greene County
Bancorp, MHC owns 55.5% of the common stock issued and outstanding of Greene
County Bancorp, Inc. Greene County Bancorp, MHC does not engage in
any business activity other than to hold Greene County Bancorp, Inc.’s common
stock and to invest any liquid assets of Greene County Bancorp, MHC, which
amounted to $179,000, in cash and cash equivalents at June 30,
2007.
Greene
County Bancorp, MHC’s administrative office is located at 302 Main Street,
Catskill, New York 12414-1317, and its telephone number at that address is
(518)
943-2600.
Market
Area
The
Bank
of Greene County has been, and intends to continue to be, a community-oriented
bank offering a variety of financial services to meet the needs of the
communities it serves. The Bank of Greene County currently operates
nine full-service banking offices in Greene County, Columbia County and southern
Albany County, New York. The Bank of Greene County's primary market
area is currently concentrated around the areas within Greene County, Columbia
County and southern Albany County where its full-service banking offices are
located, namely the towns of Catskill, Cairo, Coxsackie, Greenville, Hunter,
Tannersville and Westerlo. In March 2007, The Bank of Greene County
further expanded into the Columbia County market by opening a full service
branch in the Town of Greenport, just outside the City of Hudson.
Our
current business development plans include further expansion into the Columbia
County market, and construction is currently underway for a full service branch
to be located in the Town of Ghent, just outside the Village of Chatham in
Columbia County.
Due
to
the expansion projects and growth experienced over the last several years,
the
Company relocated its deposit and lending operations groups to a newly renovated
building during fiscal 2007. This new building is located near
the Administration building and was the former Greene County Legislature and
County Treasurer’s building.
As
of the
2000 census estimates, the Greene County population was 48,300 persons,
indicating an overall increase in the population level of 8.0% since the last
census conducted in 1990. Greene County is primarily rural and the
major industry consists of tourism associated with the several ski facilities
and festivals located in the Catskill Mountains. The county has no
concentrations of manufacturing industry. Greene County is contiguous
to the Albany-Schenectady-Troy metropolitan statistical area. The
close proximity of Greene County to the city of Albany has made it a "bedroom"
community for persons working in the Albany capital area. Greene County
government and the Coxsackie Correctional Facilities are the largest employers
in the County. Other large employers include the Hunter Mountain and
Ski Windham resort areas, the Catskill, Cairo-Durham, Greenville and
Coxsackie-Athens Central School Districts and Stiefel Labs, Inc.
Competition
The
Bank
of Greene County faces significant competition both in making loans and in
attracting deposits. The Bank of Greene County’s subsidiary Greene
County Commercial Bank faces similar competition in attracting municipal
deposits. The Bank of Greene County’s market area has a high density
of financial institutions, many of which are branches of significantly larger
institutions that have greater financial resources than The Bank of Greene
County, and all of which are competitors of The Bank of Greene County to varying
degrees. The Bank of Greene County's competition for loans comes
principally from commercial banks, savings banks, savings and loan associations,
mortgage-banking companies, credit unions, insurance companies and other
financial service companies. The Bank of Greene County faces
additional competition for deposits from non-depository competitors such as
the
mutual fund industry, securities and brokerage firms and insurance
companies. Competition has also increased as a result of the lifting
of restrictions on the interstate operations of financial
institutions.
Competition
has increased as a result of the enactment of the Gramm-Leach-Bliley Act of
1999, which eased restrictions on entry into the financial services market
by
insurance companies and securities firms. Moreover, because this
legislation permits banks, securities firms and insurance companies to
affiliate, the financial services industry could experience further
consolidation. This could result in a growing number of larger
financial institutions competing in The Bank of Greene County’s primary market
area that offer a wider variety of financial services than The Bank of Greene
County currently offers. In recent years, the internet has also
become a significant competitive factor for The Bank of Greene County and the
overall financial services industry. Competition for deposits, for
the origination of loans and the provision of other financial services may
limit
The Bank of Greene County’s growth and adversely impact its profitability in the
future.
Lending
Activities
General. The
principal lending activity of The Bank of Greene County is the origination,
for
retention in its portfolio, of fixed-rate and adjustable-rate mortgage loans
collateralized by one-to-four family residential real estate located within
its
primary market area. To a lesser extent, The Bank of Greene County
also originates commercial real estate loans, home equity loans, consumer loans
and commercial business loans. The Bank of Greene County also offers
a variety of line of credit products.
In
an
effort to manage the interest rate risk associated with its predominantly
fixed-rate loan portfolio, The Bank of Greene County maintains high levels
of
liquidity. Cash, cash equivalents and securities available for sale
comprised 31.1% of total assets at June 30, 2007, all of which can be used
for
liquidity needs. The Bank of Greene County seeks to attract checking
and other transaction accounts that generally have lower interest rate costs
and
tend to be less interest rate sensitive when interest rates rise to fund
fixed-rate residential mortgages. Additionally, The Bank of
Greene County originates shorter-term consumer loans and other adjustable-rate
loans in order to help mitigate interest rate risk.
Loan
Portfolio Composition. Set forth below is selected
information concerning the composition of The Bank of Greene County’s loan
portfolio in dollar amounts and in percentages (before deductions for deferred
fees and costs, unearned discounts and allowances for losses) as of the dates
indicated.
|
At
June 30,
|
|
2007
|
2006
|
2005
|
|
Amount
|
Percent
|
Amount
|
Percent
|
Amount
|
Percent
|
(Dollars
in thousands)
|
|
Real
estate loans:
|
|
|
|
|
|
|
One-to-four
family
|
$140,901
|
67.51%
|
$131,010
|
68.44%
|
$117,207
|
70.74%
|
Commercial
real estate
|
24,357
|
11.67
|
22,599
|
11.81
|
18,077
|
10.91
|
Construction
and land
|
9,619
|
4.61
|
8,728
|
4.55
|
5,255
|
3.17
|
Multi-family
|
1,078
|
0.52
|
1,200
|
0.63
|
1,477
|
0.89
|
Total
real estate loans
|
175,955
|
84.31
|
163,537
|
85.43
|
142,016
|
85.71
|
|
|
|
|
|
|
|
Consumer
loans
|
|
|
|
|
|
|
Installment
(1)
|
4,057
|
1.94
|
3,384
|
1.77
|
3,466
|
2.09
|
Home
equity
|
19,719
|
9.45
|
16,486
|
8.61
|
12,607
|
7.61
|
Passbook
|
583
|
0.28
|
632
|
0.33
|
742
|
0.45
|
Total
consumer loans
|
24,359
|
11.67
|
20,502
|
10.71
|
16,815
|
10.15
|
|
|
|
|
|
|
|
Commercial
business loans
|
8,391
|
4.02
|
7,390
|
3.86
|
6,860
|
4.14
|
|
|
|
|
|
|
|
Total
consumer loans and
|
|
|
|
|
|
|
commercial
business loans
|
32,750
|
15.69
|
27,892
|
14.57
|
23,675
|
14.29
|
|
|
|
|
|
|
|
Total
gross loans
|
208,705
|
100.00%
|
191,429
|
100.00%
|
165,691
|
100.00%
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
Deferred
fees and costs
|
61
|
|
(22)
|
|
(163)
|
|
Allowance
for loan losses
|
(1,486)
|
|
(1,314)
|
|
(1,236)
|
|
|
|
|
|
|
|
|
Total
loans receivable, net
|
$207,280
|
|
$190,093
|
|
$164,292
|
|
(1)
Includes direct automobile
loans (on both new and used automobiles) and personal
loans.
|
At
June 30,
|
|
2007
|
2006
|
2005
|
|
Amount
|
Percent
|
Amount
|
Percent
|
Amount
|
Percent
|
(Dollars
in thousands)
|
|
Fixed-rate
loans
|
|
|
|
|
|
|
Real
estate loans
|
|
|
|
|
|
|
One-to-four
family
|
$134,474
|
64.43%
|
$124,310
|
64.94%
|
$112,970
|
68.18%
|
Commercial
real estate
|
16,181
|
7.75
|
17,337
|
9.06
|
13,039
|
7.87
|
Construction
and land
|
8,735
|
4.19
|
7,438
|
3.88
|
5,105
|
3.08
|
Multi-family
|
1,078
|
0.52
|
1,200
|
0.63
|
1,401
|
0.85
|
Total
fixed-rate real estate loans
|
160,468
|
76.89
|
150,285
|
78.51
|
132,515
|
79.98
|
|
|
|
|
|
|
|
Consumer
loans
|
|
|
|
|
|
|
Installment
(1)
|
4,057
|
1.94
|
3,384
|
1.77
|
3,466
|
2.09
|
Home
equity
|
10,829
|
5.19
|
8,222
|
4.29
|
5,397
|
3.26
|
Passbook
|
583
|
0.28
|
632
|
0.33
|
742
|
0.45
|
Commercial
business loans
|
5,113
|
2.45
|
5,512
|
2.88
|
5,043
|
3.04
|
Total
fixed-rate loans
|
181,050
|
86.75
|
168,035
|
87.78
|
147,163
|
88.82
|
|
|
|
|
|
|
|
Adjustable-rate
loans
|
|
|
|
|
|
|
Real
estate loans:
|
|
|
|
|
|
|
One-to-four
family
|
6,427
|
3.08
|
6,700
|
3.50
|
4,237
|
2.56
|
Commercial
real estate
|
8,176
|
3.92
|
5,262
|
2.75
|
5,038
|
3.03
|
Construction
and land
|
884
|
0.42
|
1,290
|
0.67
|
150
|
0.09
|
Multi-family
|
--
|
---
|
--
|
---
|
76
|
0.05
|
Total
adjustable-rate real estate loans
|
15,487
|
7.42
|
13,252
|
6.92
|
9,501
|
5.83
|
|
|
|
|
|
|
|
Consumer
loans
|
|
|
|
|
|
|
Home
Equity
|
8,890
|
4.26
|
8,264
|
4.32
|
7,210
|
4.35
|
Commercial
business loans
|
3,278
|
1.57
|
1,878
|
0.98
|
1,817
|
1.10
|
Total
adjustable-rate loans
|
27,655
|
13.25
|
23,394
|
12.22
|
18,528
|
11.18
|
|
|
|
|
|
|
|
Total
gross loans
|
208,705
|
100.00%
|
191,429
|
100.00%
|
165,691
|
100.00%
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
Deferred
fees and costs
|
61
|
|
(22)
|
|
(163)
|
|
Allowance
for loan losses
|
(1,486)
|
|
(1,314)
|
|
(1,236)
|
|
|
|
|
|
|
|
|
Total
loans receivable, net
|
$207,280
|
|
$190,093
|
|
$164,292
|
|
(1)
Includes direct automobile
loans (on both new and used automobiles) and personal
loans.
One-to-Four
Family Residential and Construction and Land
Loans. The Bank of Greene County's primary lending
activity is the origination of one-to-four family residential mortgage loans
collateralized by property located in The Bank of Greene County’s primary market
area. One-to-four family residential mortgage loans refer to loans
collateralized by residences; by contrast, multi-family loans refer to loans
collateralized by multi-family units, such as apartment
buildings. Generally, one to four-family residential mortgage loans
are made in amounts up to 85.0% of the appraised value of the
property. However, The Bank of Greene County will originate
one-to-four family residential mortgage loans with loan-to-value ratios of
up to
95%, with private mortgage insurance. For the year ended June 30,
2007, less than one percent of the one-to-four family mortgage loans originated
by The Bank of Greene County were originated with loan-to-value ratios over
85.0%. For the year ended June 30, 2007, The Bank of Greene County
originated between 70% to 75% in one-to-four family residential mortgage loans
with loan-to-value ratios of 80% or less but without private mortgage
insurance. Generally, residential mortgage loans are originated for
terms of up to 30 years, though in recent years The Bank of Greene County has
been successful in marketing and originating such loans with 15-year
terms. One-to-four family fixed-rate loans are offered with monthly
payment features. The Bank of Greene County generally requires fire
and casualty insurance, the establishment of a mortgage escrow account for
the
payment of real estate taxes, hazard and flood insurance, as well as title
insurance on most properties collateralizing real estate loans made by The
Bank
of Greene County.
At
June
30, 2007, virtually all of The Bank of Greene County’s one-to-four family
residential mortgage loans were conforming loans and, accordingly, were eligible
for sale in the secondary mortgage market. However, generally the
one-to-four family residential mortgage loans originated by The Bank of Greene
County are retained in its portfolio and are not sold into the secondary
mortgage market. To the extent fixed rate one-to-four family
residential mortgage loans are retained by The Bank of Greene County, it is
exposed to increases in market interest rates, since the yields earned on such
fixed-rate assets would remain fixed, while the rates paid by The Bank of Greene
County for deposits and borrowings may increase, which could result in lower
net
interest income.
The
Bank
of Greene County currently offers one-to-four family residential mortgage loans
with fixed and adjustable interest rates. Originations of fixed-rate
loans versus adjustable-rate loans are monitored on an ongoing basis and are
affected significantly by the level of market interest rates, customer
preference, The Bank of Greene County's interest rate gap position, and loan
products offered by The Bank of Greene County's
competitors. Particularly, in a relatively low interest rate
environment, borrowers may prefer fixed-rate loans to adjustable-rate
loans. Single-family residential real estate loans often remain
outstanding for significantly shorter periods than their contractual terms
because borrowers may refinance or prepay loans at their option. The
average length of time that The Bank of Greene County's single-family
residential mortgage loans remain outstanding varies significantly depending
upon trends in market interest rates and other factors.
The
Bank
of Greene County's adjustable-rate mortgage (“ARM”) loans currently provide for
maximum rate adjustments of 150 basis points per year and 600 basis points
over
the term of the loan. The Bank of Greene County offers ARM loans with
initial interest rates that are below market, referred to as “teaser rates.”
However, in underwriting such loans, borrowers are qualified at the full index
rate. Generally, The Bank of Greene County's ARM loans adjust
annually. After origination, the interest rate on such ARM loans is
reset based upon a contractual spread or margin above the average yield on
one-year United States Treasury securities, adjusted to a constant maturity,
as
published weekly by the Federal Reserve Board.
ARM
loans
decrease the risk associated with changes in market interest rates by
periodically re-pricing, but involve other risks because as interest rates
increase, the underlying payments by the borrower increase, thus increasing
the
potential for default by the borrower. At the same time, the marketability
of
the underlying collateral may be adversely affected by higher interest rates.
Upward adjustment of the contractual interest rate is also limited by the
maximum periodic and lifetime interest rate adjustment permitted by the terms
of
the ARM loans, and, therefore, is potentially limited in effectiveness during
periods of rapidly rising interest rates. At June 30, 2007, $6.4 million, or
3.08%, of The Bank of Greene County's loan portfolio consisted of one-to-four
family residential loans with adjustable interest rates, compared to $134.5
million, or 64.43%, of the loan portfolio comprised of one-to-four family
residential loans with fixed interest rates. The Bank of Greene
County’s willingness and capacity to originate and hold in portfolio fixed rate
one-to-four family residential mortgage loans has enabled it to expand customer
relationships in the current relatively low long-term interest rate environment
where borrowers have generally preferred fixed rate mortgage
loans. However, as noted above, to the extent The Bank of Greene
County retains fixed rate one-to-four family residential mortgage loans in
its
portfolio, it is exposed to increases in market interest rates, since the yields
earned on such fixed rate assets would remain fixed while the rates paid by
The
Bank of Greene County for deposits and borrowings may increase, which could
result in lower net interest income.
The
Bank
of Greene County's residential mortgage loan originations are generally obtained
from The Bank of Greene County's loan representatives operating in its branch
offices through their contacts with existing or past loan customers, depositors
of The Bank of Greene County, attorneys and accountants who refer loan
applications from the general public, and local realtors. The Bank of
Greene County has loan originators who call upon customers during non-banking
hours and at locations convenient to the customer.
All
one-to-four family residential mortgage loans originated by The Bank of Greene
County include "due-on-sale" clauses, which give The Bank of Greene County
the
right to declare a loan immediately due and payable in the event that, among
other things, the borrower sells or otherwise disposes of the real property
subject to the mortgage and the loan is not repaid.
At
June
30, 2007, $140.9 million, or 67.51%, of The Bank of Greene County's loan
portfolio consisted of one-to-four family residential mortgage loans.
Approximately $451,000 of such loans (consisting of four loans) were included
in
nonperforming loans as of that date.
The
Bank
of Greene County originates construction-to-permanent loans to homeowners for
the purpose of construction of primary and secondary residences. The
Bank of Greene County issues a commitment and has one closing which encompasses
both the construction phase and permanent financing. The construction
phase is a maximum term of six months and the interest charged is the rate
as
stated in the commitment, with loan-to-value ratios of up to 85.0% (or up to
95%
with private mortgage insurance), of the completed project. The Bank
of Greene County also offers loans collateralized by undeveloped
land. The acreage associated with such loans is
limited. These land loans generally are intended for future sites of
primary or secondary residences. The terms of vacant land loans
generally have a ten-year amortization and a five-year balloon
payment.
At
June
30, 2007, $9.6 million or 4.61% of the Bank of Greene County’s loan portfolio
consisted of construction and land lending. Construction lending
generally involves a greater degree of risk than other one-to-four family
mortgage lending. The repayment of the construction loan is, to a
great degree, dependent upon the successful and timely completion of the
construction of the subject property. Construction delays may further
impair the borrower's ability to repay the loan.
Commercial
Real Estate and Multifamily Loans. At June 30, 2007, $24.4
million, or 11.67%, of the total loan portfolio consisted of commercial real
estate loans. Office buildings, mixed-use properties and other
commercial properties collateralize commercial real estate loans. The Bank
of
Greene County originates fixed- and adjustable-rate commercial mortgage loans
with maximum terms of up to 20 years. The maximum loan-to-value ratio
of commercial real estate loans is generally 75%. At June 30, 2007,
the largest commercial mortgage loan had a principal balance of $1.5 million
and
was performing in accordance with its terms. Commercial real estate
loans included in nonperforming loans totaled $111,000 (consisting of one loan)
at June 30, 2007.
In
underwriting commercial real estate loans, The Bank of Greene County reviews
the
expected net operating income generated by the real estate to ensure that it
is
generally at least 110% of the amount of the monthly debt service; the age
and
condition of the collateral; the financial resources and income level of the
borrower; and the borrower’s business experience. The Bank of Greene
County’s policy is to require personal guarantees from all commercial real
estate borrowers.
The
Bank
of Greene County may require an environmental site assessment to be performed
by
an independent professional for non-residential mortgage loans. It is
also The Bank of Greene County’s policy to require title and hazard insurance on
all mortgage loans. In addition, The Bank of Greene County may
require borrowers to make payments to a mortgage escrow account for the payment
of property taxes. Any exceptions to The Bank of Greene County’s loan
policies must be made in accordance with the limitations set out in each
policy. Typically, the exception authority ranges from the Chief
Lending Officer to the Board of Directors, depending on the size and type of
loan involved.
Loans
collateralized by commercial real estate generally are larger than one-to-four
family residential loans and involve a greater degree of risk. Commercial
mortgage loans often involve large loan balances to single borrowers or groups
of related borrowers. Payments on these loans depend to a large degree on the
results of operations and management of the properties or underlying businesses,
and may be affected to a greater extent by adverse conditions in the real estate
market or the economy in general. Accordingly, the nature of commercial real
estate loans makes them more difficult for management to monitor and
evaluate.
The
Bank
of Greene County originates a limited number of multi-family loans, which
totaled $1.1 million, or 0.52%, of The Bank of Greene County’s total loans at
June 30, 2007. Multi-family loans are generally collateralized by apartment
buildings located in The Bank of Greene County’s primary market
area. There were no multi-family loans included in nonperforming
loans at June 30, 2007. The Bank of Greene County’s underwriting
practices and the risks associated with multi-family loans do not differ
substantially from that of commercial real estate loans.
Consumer
Loans. The Bank of Greene County’s consumer loans consist of
direct loans on new and used automobiles, personal loans (either secured or
unsecured), home equity loans, and other consumer installment loans (consisting
of passbook loans, unsecured home improvement loans and recreational vehicle
loans). Consumer loans (other than home equity loans) are originated
at fixed rates with terms to maturity of one to five years. At June
30, 2007, consumer loans totaled $24.4 million, or 11.67%, of the total loan
portfolio. Installment loans totaling $10,000 were included in
nonperforming loans as of that date.
Consumer
loans generally have shorter terms and higher interest rates than one-to-four
family mortgage loans. In addition, consumer loans expand the products and
services offered by The Bank of Greene County to better meet the financial
services needs of its customers. Consumer loans generally involve
greater credit risk than residential mortgage loans because of the difference
in
the underlying collateral. Repossessed collateral for a defaulted
consumer loan may not provide an adequate source of repayment of the outstanding
loan balance because of the greater likelihood of damage, loss or depreciation
in the underlying collateral. The remaining deficiency often does not warrant
further substantial collection efforts against the borrower beyond obtaining
a
deficiency judgment. In addition, consumer loan collections depend on the
borrower's personal financial stability. Furthermore, the application
of various federal and state laws, including federal and state bankruptcy and
insolvency laws, may limit the amount that can be recovered on such
loans.
The
Bank
of Greene County’s underwriting procedures for consumer loans includes an
assessment of the applicant's credit history and an assessment of the
applicant’s ability to meet existing and proposed debt obligations. Although the
applicant's creditworthiness is the primary consideration, the underwriting
process also includes a comparison of the value of the collateral to the
proposed loan amount. The Bank of Greene County underwrites its consumer loans
internally, which The Bank of Greene County believes limits its exposure to
credit risks associated with loans underwritten or purchased from brokers and
other external sources. At this time, The Bank of Greene County does
not purchase loans from any external sources.
The
Bank
of Greene County offers fixed- and adjustable-rate home equity loans that are
collateralized by the borrower’s residence. Home equity loans are
generally underwritten with terms not to exceed 15 years and under the same
criteria that The Bank of Greene County uses to underwrite one-to-four family
fixed rate loans. Home equity loans may be underwritten with terms
not to exceed 15 years and with a loan to value ratio of 85% when combined
with
the principal balance of the existing mortgage loan. The Bank of
Greene County appraises the property collateralizing the loan at the time of
the
loan application (but not thereafter) in order to determine the value of the
property collateralizing the home equity loans. At June 30, 2007, the
outstanding balance of home equity loans totaled $19.7 million, or 9.45%, of
The
Bank of Greene County’s total loan portfolio. There was one home
equity loan included in nonperforming loans totaling $110,000 at June 30,
2007.
Commercial
Business Loans. The Bank of Greene County also
originates commercial business loans up to 10 years at fixed and adjustable
rates. The Bank of Greene County attributes growth in this portfolio
to its ability to offer borrowers senior management attention as well as timely
and local decision-making on commercial loan applications. The
decision to grant a commercial business loan depends primarily on the
creditworthiness and cash flow of the borrower (and any guarantors) and
secondarily on the value of and ability to liquidate the collateral, which
may
consist of receivables, inventory and equipment. A mortgage may also
be taken for additional collateral purposes, but is considered secondary to
the
other collateral for commercial business loans. The Bank of Greene
County generally requires annual financial statements, tax returns and personal
guarantees from the commercial business borrowers. The Bank of Greene
County also generally requires an appraisal of any real estate that
collateralizes the loan. At June 30, 2007, The Bank of Greene County
had $8.4 million of commercial business loans representing 4.02% of the total
loan portfolio. On such date, the average balance of The Bank of
Greene County’s commercial business loans was approximately
$39,800. The largest commercial business loan had a balance of
$360,000 and represented a loan to a local fire department. At June
30, 2007, The Bank of Greene County’s commercial loan portfolio included 212
loans collateralized by inventory, fire trucks, other equipment, or real
estate. There were no commercial business loans included in
nonperforming loans at June 30, 2007.
Commercial
business lending generally involves greater risk than residential mortgage
lending and involves risks that are different from those associated with
residential and commercial real estate lending. Real estate lending is generally
considered to be collateral based, with loan amounts based on fixed-rate
loan-to-collateral values, and liquidation of the underlying real estate
collateral is viewed as the primary source of repayment in the event of borrower
default. Although commercial business loans may be collateralized by equipment
or other business assets, the liquidation of collateral in the event of a
borrower default is often an insufficient source of repayment because equipment
and other business assets may be obsolete or of limited use, among other things.
Accordingly, the repayment of a commercial business loan depends primarily
on
the creditworthiness of the borrower (and any guarantors), while liquidation
of
collateral is a secondary and often insufficient source of
repayment.
Loan
Maturity Schedule. The following table sets forth
certain information as of June 30, 2007 regarding the amount of loans maturing
or re-pricing in The Bank of Greene County's
portfolio. Adjustable-rate loans are included in the period in which
interest rates are next scheduled to adjust rather than the period in which
they
contractually mature, and fixed-rate loans are included in the period in which
the final contractual repayment is due. Lines of credit with no
specified maturity date are included in the category “within one
year.”
The
following table illustrates the future maturities of such loans at June 30,
2007.
|
|
1
Year
|
3
Years
|
5
Years
|
|
|
|
Within
|
Through
|
Through
|
Through
|
Beyond
|
|
|
1
Year
|
3
Years
|
5
Years
|
10
Years
|
10
Years
|
Total
|
(Dollars
in thousands)
|
|
|
|
|
|
|
Real
estate loans:
|
|
|
|
|
|
|
One-to-four
family
|
$5,656
|
$1,325
|
$1,411
|
$14,286
|
$118,223
|
$140,901
|
Commercial
|
6,909
|
1,158
|
704
|
3,720
|
11,866
|
24,357
|
Construction
and land
|
7,142
|
839
|
563
|
---
|
1,075
|
9,619
|
Multi-family
|
---
|
---
|
---
|
263
|
815
|
1,078
|
Total
real estate loans
|
19,707
|
3,322
|
2,678
|
18,269
|
131,979
|
175,955
|
|
|
|
|
|
|
|
Consumer
loans
|
10,025
|
1,569
|
3,967
|
3,993
|
4,805
|
24,359
|
|
|
|
|
|
|
|
Commercial
business loans
|
3,438
|
859
|
2,024
|
1,614
|
456
|
8,391
|
|
|
|
|
|
|
|
Total
loan portfolio
|
$33,170
|
$5,750
|
$8,669
|
$23,876
|
$137,240
|
$208,705
|
The
total
amount of the above loans that mature or are due after June 30, 2008 that have
fixed interest rates is $173.4 million while the total amount of loans that
mature or are due after such date that have adjustable interest rates is $2.1
million. The interest rate risk implications of The Bank of Greene
County’s substantial preponderance of fixed-rate loans is discussed in detail on
pages 8-9 of Greene County Bancorp, Inc.’s 2007 Annual Report to Shareholders,
which discussion is incorporated herein by reference.
Loan
Approval Procedures
and Authority. The Board of Directors establishes the
lending policies and loan approval limits of The Bank of Greene
County. Loan officers generally have the authority to originate
mortgage loans, consumer loans and commercial business loans up to amounts
established for each lending officer. The Executive Committee or the
full Board of Directors must approve all residential loans over
$750,000.
The
Board
annually approves independent appraisers used by The Bank of Greene
County. For larger loans, The Bank of Greene County may require an
environmental site assessment to be performed by an independent professional
for
all non-residential mortgage loans. It is The Bank of Greene County’s
policy to require hazard insurance on all mortgage loans.
Loan
Origination Fees and Other Income. In
addition to interest earned on loans, The Bank of Greene County receives loan
origination fees. Such fees and costs vary with the volume and type
of loans and commitments made and purchased, principal repayments, and
competitive conditions in the mortgage markets, which in turn respond to the
demand and availability of money.
In
addition to loan origination fees, The Bank of Greene County also receives
other
income that consists primarily of deposit account service charges, ATM fees,
debit card fees and loan payment late charges. The Bank of Greene
County also installs, maintains and services merchant bankcard equipment for
local retailers and is paid a percentage of the transactions processed using
such equipment.
Loans
to One Borrower. Savings banks are subject to the same
loans to one borrower limits as those applicable to national banks, which under
current regulations restrict loans to one borrower to an amount equal to 15%
of
unimpaired capital and unimpaired surplus on an unsecured basis, and an
additional amount equal to 10% of unimpaired capital and unimpaired surplus
if
the loan is collateralized by readily marketable collateral (generally,
financial instruments and bullion, but not real estate). The Bank of
Greene County's policy provides that loans to one borrower (or related
borrowers) should not exceed 10% of The Bank of Greene County’s capital and
reserves.
At
June
30, 2007, the largest aggregate amount loaned by The Bank of Greene County
to
one borrower consisted of a commercial mortgage to purchase a local golf course
and restaurant; the total outstanding balance of this loan was $1.5 million,
and
the loan was performing in accordance with its terms at June 30,
2007.
Delinquencies
and Classified Assets
Collection
Procedures. A computer generated late notice is sent
and a 2% late charge is assessed when a payment is 15 days late. A
second notice will be incorporated in the next month's billing notice,
approximately 21 days after the due date of the first late
payment. Accounts thirty days or more past due will be reviewed by
the collection manager and receive individual attention as required, including
collection letters and telephone calls. The collection manager, in
order to avoid further deterioration, will closely monitor accounts that have
a
history of consistent late or delinquent payments. Accounts two or
more payments past due are reported to the Board of Directors for consideration
of foreclosure action. With respect to consumer loans, a late notice
is sent and a late charge is assessed 10 days (or, in the case of home equity
loans, 15 days) after payment is due. A second notice is sent 15 days
(in the case of home equity loans, 25 days) thereafter. The
collection manager reviews loans 30 days or more past due individually,
following up with collection letters and telephone calls. Accounts
three or more payments past due are reported to the Board of Directors and
are
subject to legal action and repossession of collateral.
Loans
Past Due and Non-performing
Assets. Loans are reviewed on a
regular basis. Management determines that a loan is impaired or
non-performing when it is probable at least a portion of the loan will not
be
collected due to an irreversible deterioration in the financial condition of
the
borrower or the value of the underlying collateral. When a loan is
determined to be impaired, the measurement of the loan is based on present
value
of estimated future cash flows, except that all collateral-dependent loans
are
measured for impairment based on the fair value of the
collateral. Management places loans on nonaccrual status once the
loans have become 90 days or more delinquent. Nonaccrual is defined
as a loan in which collectibility is questionable and therefore interest on
the
loan will no longer be recognized on an accrual basis. A loan does
not have to be 90 days delinquent in order to be classified as
non-performing. Interest on nonaccrual loans is recognized on a
cash basis until such time as the borrower has brought the loan to performing
status. Other real estate owned is included in non-performing
assets. At June 30, 2007, The Bank of Greene County had
non-performing loans of $682,000 and a ratio of non-performing loans to total
loans of 0.33%.
Real
estate acquired as a result of foreclosure or by deed in lieu of foreclosure
is
classified as other real estate owned (“OREO”) until such time as it is
sold. When real estate is acquired through foreclosure or by deed in
lieu of foreclosure, it is recorded at its fair value, less estimated costs
of
disposal. If the value of the property is less than the loan, less
any related specific loan loss provisions, the difference is charged against
the
allowance for loan losses. Any subsequent write-down of OREO is
charged against earnings. At June 30, 2007, The Bank of Greene County
had no OREO and its ratio of non-performing assets to total assets was
0.21%.
The
following table sets forth delinquencies in The Bank of Greene County's loan
portfolio at June 30, 2007. When a loan is delinquent 90 days or
more, The Bank of Greene County fully reverses all accrued interest thereon
and
ceases to accrue interest or other deferred origination fees or costs
thereafter. A loan is not removed from nonaccrual status until the
loan is current and evidence supports the borrower’s ability to maintain a
current status. The Bank of Greene County had no nonaccrual loans in
the 60 to 89 days delinquent category at June 30, 2007 and June 30,
2006. For all the dates indicated, The Bank of Greene County did not
have any material restructured loans. The following table is as of
June 30, 2007.
|
|
|
|
|
Percentage
of
loan
delinquency
category
|
(dollars
in thousands)
|
|
|
Dollar
amount
|
|
|
Number
|
|
|
60
to 89 days delinquent
|
|
|
|
|
|
Real
estate:
|
|
|
|
|
|
One-to-four
family
|
4
|
|
$136
|
|
8.84%
|
Commercial
|
6
|
|
970
|
|
63.07
|
Construction
and land
|
2
|
|
93
|
|
6.05
|
Installment
|
11
|
|
77
|
|
5.01
|
Home
equity
|
4
|
|
262
|
|
17.03
|
Commercial
business
|
---
|
|
---
|
|
---
|
Total
loan delinquency 60 to 89 days
|
27
|
|
$1,538
|
|
100.00%
|
|
|
|
|
|
|
90
days and over delinquent
|
|
|
|
|
|
Real
estate:
|
|
|
|
|
|
One-to-four
family
|
3
|
|
$408
|
|
59.82%
|
Commercial
|
1
|
|
111
|
|
16.27
|
Construction
and land
|
1
|
|
43
|
|
6.31
|
Installment
|
6
|
|
10
|
|
1.47
|
Home
equity
|
1
|
|
110
|
|
16.13
|
Commercial
business
|
---
|
|
---
|
|
---
|
Total
loan delinquency 90 days and over
|
12
|
|
$682
|
|
100.00%
|
|
|
|
|
|
|
Total
loans delinquent over 60 days
|
|
|
|
|
|
Real
estate:
|
|
|
|
|
|
One-to-four
family
|
7
|
|
$544
|
|
24.51%
|
Commercial
|
7
|
|
1,081
|
|
48.69
|
Construction
and land
|
3
|
|
136
|
|
6.12
|
Installment
|
17
|
|
87
|
|
3.92
|
Home
equity
|
5
|
|
372
|
|
16.76
|
Commercial
business
|
---
|
|
---
|
|
---
|
Total
loans delinquent over 60 days
|
39
|
|
$2,220
|
|
100.00%
|
Nonaccrual
Loans and Nonperforming Assets. The following table
sets forth information regarding nonaccrual loans and other non-performing
assets at the dates indicated. The Bank of Greene County had no
accruing loans delinquent more than 90 days at June 30, 2007, 2006, and
2005.
(dollars
in thousands)
|
|
At
June 30,
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Nonaccruing
loans:
|
|
|
|
|
|
|
Real
estate loans
|
|
|
|
|
|
|
One-to-four
family
|
|
$408
|
|
$3
|
|
$126
|
Commercial
|
|
111
|
|
---
|
|
50
|
Constrution
and land
|
|
43
|
|
---
|
|
---
|
Installment
|
|
10
|
|
4
|
|
51
|
Home
equity
|
|
110
|
|
---
|
|
96
|
Commercial
business
|
|
---
|
|
---
|
|
25
|
Total
nonaccruing loans
|
|
682
|
|
7
|
|
348
|
|
|
|
|
|
|
|
Real
estate owned:
|
|
|
|
|
|
|
Real
estate loans
|
|
|
|
|
|
|
One-to-four
family
|
|
---
|
|
---
|
|
---
|
Commercial
real estate
|
|
---
|
|
---
|
|
---
|
Total
real estate owned
|
|
---
|
|
---
|
|
---
|
|
|
|
|
|
|
|
Total
non-performing assets
|
|
$682
|
|
$7
|
|
$348
|
|
|
|
|
|
|
|
Total
as a percentage of total assets
|
|
0.21%
|
|
0.00%
|
|
0.12%
|
During
the year ended June 30, 2007, gross interest income of $52,000 would have been
recorded on nonaccrual loans under their original terms if the loans had been
current throughout the period. Interest income of $32,000 was
recorded on nonaccrual loans during the year ended June 30, 2007.
Classification
of Assets. Consistent with regulatory
guidelines, The Bank of Greene County provides for the classification of loans
and other assets considered being of lesser quality. Such ratings
coincide with the "Substandard", "Doubtful" and "Loss" classifications used
by
federal regulators in their examination of financial institutions. Generally,
an
asset is considered Substandard if it is inadequately protected by the current
net worth and paying capacity of the obligors and/or the collateral pledged.
Substandard assets include those characterized by the distinct possibility
that
the insured financial institution will sustain some loss if the deficiencies
are
not corrected. Assets classified as Doubtful have all the weaknesses inherent
in
assets classified Substandard with the added characteristic that the weaknesses
present make collection or liquidation in full, on the basis of currently
existing facts, highly questionable and improbable. Assets classified as Loss
are those considered uncollectible and of such little value that their
continuance as assets without the establishment of a full loss reserve and/or
charge-off is not warranted. Assets that do not currently expose the insured
financial institutions to sufficient risk to warrant classification in one
of
the aforementioned categories but otherwise possess weaknesses are designated
"Special Mention."
When
The
Bank of Greene County classifies problem assets as either Substandard or
Doubtful, it establishes a valuation allowance or "loss reserve" in an amount
deemed prudent by management. General allowances represent loss
allowances that have been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When The Bank of Greene
County classifies problem assets as "Loss," it is required either to establish
a
specific allowance for losses equal to 100% of the amount of assets so
classified, or to charge-off such amount. The Bank of Greene County's
determination as to the classification of its assets and the amount of its
valuation allowance is subject to review by its regulatory agencies, which
can
order the establishment of additional general or specific loss
allowances. The Bank of Greene County reviews its portfolio monthly
to determine whether any assets require classification in accordance with
applicable regulations. At June 30, 2007, The Bank of Greene County
had seven loans that amounted to $408,000 classified as substandard, one loan
that amounted to $230,000 classified as special mention and no other classified
assets.
Allowance
for Loan Losses. The allowance for
loan losses is established through a provision for loan losses based on
management’s evaluation of the losses inherent in the loan portfolio, the
composition of the loan portfolio, specific impaired loans and current economic
conditions. Such evaluation, which includes a review of all loans on
which full collectibility may not be reasonably assured, considers among other
matters, the estimated net realizable value or the fair value of the underlying
collateral, economic conditions, historical loan loss experience and other
factors that warrant recognition in providing for the loan loss
allowance. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review The Bank of Greene
County’s allowance for loan losses and its valuation of OREO. Such
agencies may require The Bank of Greene County to recognize additions to the
allowance based on their judgment about information available to them at the
time of their examination. The allowance for loan losses is increased
by a provision for loan losses and recoveries of previously charged off loans
and is reduced by loans charged-off. At June 30, 2007, the total
allowance was $1.5 million, which amounted to 0.71% of total loans receivable
and 217.89% of nonperforming loans. Management will continue to
monitor and modify the level of the allowance for loan losses. For
the year ended June 30, 2007, The Bank of Greene County’s charge-offs amounted
to $193,000. For the years ended June 30, 2006 and 2005, The Bank of
Greene County’s charge-offs amounted to $187,000 and $122,000,
respectively.
Analysis
of the Allowance For Loan Losses. The
following table sets forth the analysis of the allowance for loan losses for
the
periods indicated.
(dollars
in thousands)
|
|
For
the Years Ended June 30,
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Balance
at the beginning of period
|
|
$1,314
|
|
$1,236
|
|
$1,241
|
|
|
|
|
|
|
|
Charge-offs:
|
|
|
|
|
|
|
Home
equity
|
|
---
|
|
---
|
|
27
|
Installment
|
|
34
|
|
99
|
|
38
|
Overdraft
protection account
|
|
146
|
|
88
|
|
56
|
Commercial
business
|
|
13
|
|
---
|
|
1
|
Total
charge-offs
|
|
193
|
|
187
|
|
122
|
|
|
|
|
|
|
|
Recoveries:
|
|
|
|
|
|
|
Home
equity
|
|
---
|
|
---
|
|
---
|
Installment
|
|
31
|
|
30
|
|
22
|
Overdraft
protection account
|
|
48
|
|
35
|
|
24
|
Commercial
business
|
|
7
|
|
---
|
|
---
|
Total
recoveries
|
|
86
|
|
65
|
|
46
|
|
|
|
|
|
|
|
Net
charge-offs
|
|
107
|
|
122
|
|
76
|
Additions
charged to operations
|
|
279
|
|
200
|
|
71
|
Balance
at end of period
|
|
$1,486
|
|
$1,314
|
|
$1,236
|
|
|
|
|
|
|
|
Ratio
of net charge-offs to average loans outstanding
|
|
0.05%
|
|
0.07%
|
|
0.05%
|
Ratio
of net charge-offs to nonperforming assets
|
|
15.69%
|
|
1,742.86%
|
|
21.84%
|
Allowance
for loan losses to nonperforming loans
|
|
217.89%
|
|
18,771.43%
|
|
355,17%
|
Allowance
for loan losses to total loans
|
|
0.71%
|
|
0.69%
|
|
0.75%
|
Allocation
of Allowance for Loan Losses. The
following table sets forth the allocation of the allowance for loan losses
by
loan category at the dates indicated. The allowance is allocated to
each loan category based on historical loss experience and economic
conditions.
|
June
30, 2007
|
June
30, 2006
|
June
30, 2005
|
|
|
|
Percent
|
|
|
Percent
|
|
|
Percent
|
|
|
|
of
loans
|
|
|
of
loans
|
|
|
of
loans
|
|
|
Loan
|
in
each
|
|
Loan
|
in
each
|
|
Loan
|
in
each
|
|
Amount
of
|
Amounts
|
category
|
Amount
of
|
Amounts
|
category
|
Amount
of
|
Amounts
|
category
|
|
loan
loss
|
By
|
to
total
|
loan
loss
|
By
|
to
total
|
Loan
loss
|
By
|
to
total
|
|
allowance
|
Category
|
loans
|
allowance
|
Category
|
loans
|
allowance
|
Category
|
loans
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
$499
|
$140,901
|
67.5%
|
$519
|
$131,010
|
68.4%
|
$501
|
$117,207
|
70.7%
|
Commercial
real estate
|
499
|
24,357
|
11.7
|
457
|
22,599
|
11.8
|
413
|
18,077
|
10.9
|
Construction
and land
|
64
|
9,619
|
4.6
|
46
|
8,728
|
4.6
|
23
|
5,255
|
3.2
|
Multi-family
|
4
|
1,078
|
0.5
|
4
|
1,200
|
0.6
|
2
|
1,477
|
0.9
|
Installment
|
58
|
3,901
|
1.9
|
48
|
3,287
|
1.7
|
85
|
3,411
|
2.1
|
Home
equity
|
127
|
19,719
|
9.4
|
83
|
16,486
|
8.6
|
64
|
12,607
|
7.6
|
Passbook
|
---
|
583
|
0.3
|
---
|
632
|
0.3
|
---
|
742
|
0.5
|
Commercial
business
|
220
|
8,391
|
4.0
|
137
|
7,390
|
3.9
|
128
|
6,860
|
4.1
|
Overdraft
Privilege
|
15
|
156
|
0.1
|
20
|
97
|
0.1
|
20
|
55
|
---
|
Specific
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
Unallocated
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
Totals
|
$1,486
|
$208,705
|
100.0%
|
$1,314
|
$191,429
|
100.0%
|
$1,236
|
$165,691
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
Securities
Investment Activities
Given
The
Bank of Greene County’s substantial portfolio of fixed-rate residential mortgage
loans, The Bank of Greene County maintains high balances of liquid investments
for the purpose of mitigating interest rate risk. The Board of
Directors establishes the securities investment policy. This policy
dictates that investment decisions will be made based on the safety of the
investment, liquidity requirements, potential returns, cash flow targets, and
desired risk parameters. In pursuing these objectives, management
considers the ability of an investment to provide earnings consistent with
factors of quality, maturity, marketability and risk
diversification.
The
Bank
of Greene County's current policies generally limit securities investments
to
U.S. Government and agency securities, federal funds sold, municipal bonds,
corporate debt obligations and certain mutual funds. In addition, The
Bank of Greene County’s policy permits investments in mortgage-backed
securities, including securities issued and guaranteed by Fannie Mae, Freddie
Mac, and GNMA, and collateralized mortgage obligations. The Bank of
Greene County's current securities investment strategy utilizes a risk
management approach of diversified investing among three categories: short-,
intermediate- and long-term. The emphasis of this approach is to increase
overall investment securities yields while managing interest rate
risk. The Bank of Greene County will only invest in securities rated
“A” or higher by at least one nationally recognized rating agency (or securities
attaining such rating as a result of guarantees by insurance companies), with
the exception of investments in smaller non-rated local bonds. The
Bank of Greene County does not engage in any derivative or hedging transactions,
such as interest rate swaps or caps.
At
June
30, 2007, The Bank of Greene County had $87.2 million in investment securities,
or 26.8% of total assets. SFAS No. 115 requires The Bank of Greene
County to designate its securities as held to maturity, available for sale,
or
trading, depending on The Bank of Greene County's ability and intent regarding
its investments. As of June 30, 2007, the entire securities portfolio
was classified as available for sale. At June 30, 2007, The Bank of
Greene County's securities portfolio included mortgage-backed securities
totaling $38.2 million, or 11.7% of total assets.
Book
Value of Investment Securities. The following table
sets forth certain information regarding the investment securities and other
interest earning assets as of the dates indicated.
|
At
June 30,
|
|
2007
|
2006
|
2005
|
|
Book
|
Percent
|
Book
|
Percent
|
Book
|
Percent
|
|
Value
|
of
total
|
Value
|
of
total
|
Value
|
of
total
|
(Dollars
in Thousands)
|
|
Investment
securities, AFS
|
|
|
|
|
|
|
U.S.
Government agencies
|
$19,628
|
22.5%
|
$10,990
|
12.6%
|
$3,889
|
3.9%
|
State
and political subdivisions
|
29,034
|
33.3
|
29,939
|
34.3
|
26,086
|
26.4
|
Mortgage-backed
securities
|
38,157
|
43.8
|
45,490
|
52.1
|
62,158
|
62.9
|
Asset-backed
securities
|
76
|
0.1
|
93
|
0.1
|
144
|
0.2
|
Corporate
debt securities
|
---
|
---
|
501
|
0.6
|
5,056
|
5.1
|
Equity
securities and other
|
289
|
0.3
|
254
|
0.3
|
1,518
|
1.5
|
Total
investment securities, AFS
|
$87,184
|
100.0%
|
$87,267
|
100.0%
|
$98,851
|
100.0%
|
The
estimated fair values of debt securities at June 30, 2007 by contractual
maturity are shown below. Expected maturities may differ from
contractual maturities, because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.
|
|
After
|
After
|
|
|
|
In
|
One
Year
|
Five
Years
|
|
|
|
One
Year
|
Through
|
Through
|
After
|
|
|
Or
Less
|
Five
Years
|
Ten
Years
|
Ten
Years
|
Total
|
(in
thousands)
|
|
|
|
|
|
U.S.
Government agencies
|
$ 2,996
|
$
16,350
|
$
282
|
$ --
|
$19,628
|
State
and political subdivisions
|
6,224
|
11,843
|
7,667
|
3,300
|
29,034
|
Mortgage-backed
securities
|
1,976
|
15,571
|
9,315
|
11,295
|
38,157
|
Asset-backed
securities
|
---
|
---
|
---
|
76
|
76
|
Total
debt securities
|
$11,196
|
$43,764
|
$17,264
|
$14,671
|
86,895
|
Equity
securities and other
|
|
|
|
|
289
|
Total
securities available-for-sale
|
|
|
|
|
$87,184
|
Weighted
average yield
|
4.36%
|
4.01%
|
4.18%
|
4.54%
|
4.18%
|
Additional discussion
of management’s decisions with respect to shifting investments among the various
investment portfolios described above and the level of mortgage-backed
securities is set forth in Management’s Discussion and Analysis on page 12 of
Greene County Bancorp, Inc.’s Annual Report to Shareholders, which discussion is
incorporated herein by reference.
Mortgage-Backed
and Asset-Backed Securities. The Bank of Greene County
purchases mortgage-backed securities in order to: (i) generate positive interest
rate spreads with minimal administrative expense; (ii) lower The Bank of Greene
County's credit risk as a result of the guarantees provided by Freddie Mac,
Fannie Mae, and GNMA or other government sponsored agency; and (iii) increase
liquidity. At June 30, 2007, mortgage-backed securities (including
CMOs) totaled $38.2 million or 11.7% of total assets, all of which were
classified as available for sale. CMOs or collateralized mortgage
obligations as well as other mortgage-backed securities generally are a type
of
mortgage-backed bond secured by the cash flow of a pool of
mortgages. CMOs have regular principal and interest payments made by
borrowers separated into different payment streams, creating several bonds
that
repay invested capital at different rates. The CMO bond may pay the
investor at a different rate than the underlying mortgage pool.
Often
bonds classified as mortgage-backed securities are considered pass-through
securities and payments include principal and interest in a manner that makes
them self-amortizing, as a result there is no final lump-sum payment at
maturity. The Company does not invest in private label
mortgage-backed securities due to the potential for a higher level of credit
risk. Below is further discussion of mortgage-backed
securities. At June 30, 2007, $4.5 million of the mortgage-backed
securities were adjustable rate and $33.7 million were fixed
rate. The mortgage-backed securities portfolio had coupon rates
ranging from 3.50% to 7.37%, a weighted average yield of 4.21% and a weighted
average life (including pre-payment assumptions) of 3.2 years at June 30, 2007.
The estimated market value of The Bank of Greene County's mortgage-backed
securities at June 30, 2007 was $38.2 million, which was $299,000 less than
amortized cost.
The
pooling of mortgages and the issuance of a security with an interest rate that
is based on the interest rate on the underlying mortgages creates
mortgage-backed securities. Mortgage-backed securities typically
represent a participation interest in a pool of single-family or multi-family
mortgages. The issuers of such securities (generally U.S. Government agencies
and government sponsored enterprises, including Fannie Mae, Freddie Mac and
GNMA) pool and resell the participation interests in the form of securities
to
investors, such as The Bank of Greene County, and guarantee the payment of
principal and interest to these investors. Mortgage-backed securities generally
yield less than the loans that underlie such securities because of the cost
of
payment guarantees and credit enhancements. In addition, mortgage-backed
securities are usually more liquid than individual mortgage loans and may be
used to collateralize certain liabilities and obligations of The Bank of Greene
County and its subsidiary Greene County Commercial Bank.
Investments
in mortgage-backed securities involve a risk that actual prepayments will be
greater than estimated over the life of the security, which may require
adjustments to the amortization of any premium or accretion of any discount
relating to such instruments thereby altering the net yield on such securities.
There is also reinvestment risk associated with the cash flows from such
securities or in the event such securities are prepaid. In addition, the market
value of such securities may be adversely affected by changes in interest
rates. The Company has attempted to mitigate credit risk by limiting
purchases of mortgage-backed securities to those offered by various government
agencies or other sponsored enterprises.
Management
reviews prepayment estimates periodically to ensure that prepayment assumptions
are reasonable considering the underlying collateral for the securities at
issue
and current interest rates and to determine the yield and estimated maturity
of
The Bank of Greene County's mortgage-backed securities portfolio. The
Bank of Greene County's $38.2 million mortgage-backed securities portfolio
at
June 30, 2007 consisted of $17.6 million with contractual maturities within
five
years, $9.3 million with contractual maturities of five to ten years and the
remaining $11.3 million with contractual maturities more than 10
years. However, the actual maturity of a security may be less than
its stated maturity due to prepayments of the underlying mortgages. Prepayments
that are faster than anticipated may shorten the life of the security and
thereby reduce or increase the net yield on such securities. Although
prepayments of underlying mortgages depend on many factors, the difference
between the interest rates on the underlying mortgages and the prevailing
mortgage interest rates generally is the most significant determinant of the
rate of prepayments. During periods of declining mortgage interest rates,
refinancing generally increases and accelerates the prepayment of the underlying
mortgages and the related security. Under such circumstances, The Bank of Greene
County may be subject to reinvestment risk because, to the extent that The
Bank
of Greene County's securities prepay faster than anticipated, The Bank of Greene
County may not be able to reinvest the proceeds of such repayments and
prepayments at a comparable rate of return. Conversely, in a rising
interest rate environment prepayments may decline, thereby extending the
estimated life of the security and depriving The Bank of Greene County of the
ability to reinvest cash flows at the increased rates of interest.
At
June
30, 2007, The Bank of Greene County’s portfolio of asset-backed securities
contained one investment which amounted to $76,000, or less than 0.1% of total
assets, which was classified as available for sale. The security had
a fixed coupon at 6.68%, a yield to maturity of 6.68%, and a remaining
contractual maturity of over 10 years at June 30, 2007. The estimated
market value of the asset-backed security at June 30, 2007 was $76,000, which
was approximately the same as amortized cost at such date.
Asset-backed
securities are a type of debt security collateralized by various loans and
assets including: automobile loans, equipment leases, credit card receivables,
home equity and improvement loans, manufactured housing, student loans and
other
consumer loans. In the case of The Bank of Greene County, its
asset-backed security was collateralized by home equity loans.
Asset-backed
securities provide The Bank of Greene County with a broad selection of
fixed-income alternatives, most with higher credit ratings and less downgrade
risk than corporate bonds and more stable cash flows than mortgage related
securities. Prepayments and structure risk of asset-backed securities are less
of a concern than CMO securities due to the shorter maturities of the underlying
collateral promoting greater stability of payments.
Mortgage
Servicing Rights. The Bank of Greene County had no
mortgage servicing rights at June 30, 2007 or 2006 and does not expect to
purchase in mortgage servicing rights in future periods nor sell mortgages
with
servicing retained.
Sources
of Funds
General. Deposits,
repayments and prepayments of loans and securities, proceeds from sales of
securities, and proceeds from maturing securities and cash flows from operations
are the primary sources of The Bank of Greene County's funds for use in lending,
investing and for other general purposes.
Deposits. The
Bank of Greene County and Greene County Commercial Bank offer a variety of
deposit accounts with a range of interest rates and terms. The Bank
of Greene County's deposit accounts consist of savings, NOW accounts, money
market accounts, certificates of deposit and non-interest bearing checking
accounts. The Bank of Greene County also offers IRAs or Individual
Retirement Accounts. Greene County Commercial Bank offers money market accounts,
certificates of deposit and non-interest bearing checking accounts and NOW
accounts.
At
June
30, 2007, consolidated deposits totaled $284.2 million. At June 30,
2007, the Company had a total of $74.6 million in certificates of deposit,
of
which $59.6 million had maturities of one year or less. Although a
significant portion of our deposits were in shorter-term certificates of
deposit, management monitors activity on these accounts and, based on historical
experience and our current pricing strategy, believes a large portion of such
accounts will be retained upon maturity.
The
flow
of deposits is influenced significantly by general economic conditions, changes
in money market rates, prevailing interest rates and
competition. Deposits are obtained predominantly from the areas in
which The Bank of Greene County's branch offices are located. The
Bank of Greene County relies primarily on competitive pricing of its deposit
products and customer service and long-standing relationships with customers
to
attract and retain these deposits; however, market interest rates and rates
offered by competing financial institutions significantly affect The Bank of
Greene County's ability to attract and retain deposits. The Bank of
Greene County uses traditional means of advertising its deposit products,
including radio, television, and print media. It generally does not solicit
deposits from outside its market area. While The Bank of Greene
County accepts certificates of deposit in excess of $100,000, they are not
subject to preferential rates. The Bank of Greene County does not
actively solicit such deposits, as they are more difficult to retain than core
deposits. Historically, The Bank of Greene County has not used
brokers to obtain deposits. Greene County Commercial Bank’s purpose
is to attract deposits from local municipalities. Greene County
Commercial Bank had $14.5 million in money market deposits at June 30,
2007.
The
following tables set forth information, by various rate categories, regarding
the balance of deposits by types of deposit as of the dates
indicated.
|
|
At
June 30,
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
Amount
|
Percent
|
|
Amount
|
Percent
|
|
Amount
|
Percent
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
Transaction
and savings deposits:
|
|
|
|
|
|
|
|
|
|
Non-interest
bearing deposits
|
$44,020
|
15.5%
|
|
$41,503
|
15.5%
|
|
$37,591
|
14.9%
|
|
Savings
deposits
|
71,830
|
25.3
|
|
87,776
|
32.7
|
|
97,759
|
38.6
|
|
NOW
deposits
|
56,053
|
19.7
|
|
32,253
|
12.0
|
|
23,130
|
9.1
|
|
Money
market deposits
|
37,710
|
13.3
|
|
45,348
|
16.9
|
|
40,766
|
16.1
|
|
Total
non-certificates of deposit
|
209,613
|
73.8%
|
|
206,880
|
77.1%
|
|
199,246
|
78.7%
|
|
|
|
|
|
|
|
|
|
|
|
Certificate
of deposit:
|
|
|
|
|
|
|
|
|
|
0.00
– 1.99%
|
---
|
---
|
|
27
|
0.0
|
|
19,197
|
7.6
|
|
2.00
– 2.99%
|
1,321
|
0.4
|
|
20,354
|
7.6
|
|
24,205
|
9.5
|
|
3.00
– 3.99%
|
24,064
|
8.5
|
|
26,400
|
9.9
|
|
8,106
|
3.2
|
|
4.00
– 4.99%
|
49,178
|
17.3
|
|
14,589
|
5.4
|
|
2,483
|
1.0
|
|
Total
certificates of deposit
|
74,563
|
26.2
|
|
61,370
|
22.9
|
|
53,991
|
21.3
|
|
Total
deposits
|
$284,176
|
100.0%
|
|
$268,250
|
100.0%
|
|
$253,237
|
100.0%
|
The
following indicates the amount of certificates of deposit by time remaining
to
maturity as of June 30, 2007 and June 30, 2006.
(Dollars
in thousands)
|
3
months
|
3
to 6
|
7
to 12
|
Over
12
|
|
|
Or
less
|
Months
|
Months
|
Months
|
Total
|
|
|
|
|
|
|
As
of June 30, 2007:
|
|
|
|
|
|
Certificates
of deposit less than $100,000
|
$21,791
|
$18,630
|
$7,732
|
$12,488
|
$60,641
|
Certificates
of deposit $100,000 or more
|
5,105
|
3,986
|
2,371
|
2,460
|
13,922
|
Total
certificates of deposit
|
$26,896
|
$22,616
|
$10,103
|
$14,948
|
$74,563
|
|
|
|
|
|
|
As
of June 30, 2006:
|
|
|
|
|
|
Certificates
of deposit less than $100,000
|
$9,345
|
$12,287
|
$17,462
|
$11,660
|
$50,754
|
Certificates
of deposit $100,000 or more
|
4,040
|
1,428
|
2,659
|
2,489
|
10,616
|
Total
certificates of deposit
|
$13,385
|
$13,715
|
$20,121
|
$14,149
|
$61,370
|
The
following table sets forth the amount and remaining maturities of certificates
of deposit accounts at June 30, 2007.
|
|
2.00-
|
|
3.00-
|
|
4.00-
|
|
|
|
Percent
of
|
|
|
2.99%
|
|
3.99%
|
|
4.99%
|
|
Total
|
|
Total
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
Certificates
of deposit
|
|
|
|
|
|
|
|
|
|
|
Maturity
in quarter ended:
|
|
|
|
|
|
|
|
|
|
|
September
30, 2007
|
|
$389
|
|
$7,792
|
|
$18,715
|
|
$26,896
|
|
36.1%
|
December
31, 2007
|
|
311
|
|
6,842
|
|
15,463
|
|
22,616
|
|
30.3
|
March
31, 2008
|
|
411
|
|
2,433
|
|
4,654
|
|
7,498
|
|
10.1
|
June
30, 2008
|
|
23
|
|
1,014
|
|
1,568
|
|
2,605
|
|
3.5
|
September
30, 2008
|
|
34
|
|
848
|
|
1,809
|
|
2,691
|
|
3.6
|
December
31, 2008
|
|
88
|
|
2,984
|
|
4,554
|
|
7,626
|
|
10.2
|
March
31, 2009
|
|
17
|
|
668
|
|
150
|
|
835
|
|
1.1
|
June
30, 2009
|
|
---
|
|
371
|
|
85
|
|
456
|
|
0.6
|
September
30, 2009
|
|
25
|
|
679
|
|
48
|
|
752
|
|
1.0
|
December
31, 2009
|
|
19
|
|
420
|
|
169
|
|
608
|
|
0.8
|
March
31, 2010
|
|
---
|
|
---
|
|
448
|
|
448
|
|
0.6
|
June
30, 2010
|
|
---
|
|
---
|
|
204
|
|
204
|
|
0.3
|
Thereafter
|
|
4
|
|
13
|
|
1,311
|
|
1,328
|
|
1.8
|
Total
|
|
$1,321
|
|
$24,064
|
|
$49,178
|
|
$74,563
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
Percent
of total
|
|
1.8%
|
|
32.3%
|
|
65.9%
|
|
100.0%
|
|
|
Borrowed
Funds. In the event that The Bank of Greene County
requires funds beyond its ability to generate them internally, additional
sources of funds are available through the Federal Home Loan Bank
(“FHLB”). At June 30, 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 $29.6 million with the FHLB. Residential
mortgages are pledged by The Bank of Greene County as collateral to secure
The
Bank of Greene County’s line of credit and term borrowing. Interest
on the line is determined at the time of borrowing. In addition to
the overnight line of credit program, The Bank of Greene County also has access
to the FHLB’s Term Advance Program under which it can borrow at various terms
and interest rates. The advances are collateralized by all of The
Bank of Greene County’s stock and deposits in the FHLB and a general lien on
one-to-four family mortgage loans, certain multi-family loans and U.S.
Government Agency obligations in an aggregate amount equal up to 133% of
outstanding advances. The maximum amount that the FHLB will advance
to member institutions, including The Bank of Greene County, fluctuates from
time to time in accordance with policies of the FHLB.
The
following table set forth certain information regarding borrowed
funds.
At
June 30, 2007:
|
|
Amount
|
|
Rate
|
|
Maturity
Date
|
|
$5,000,000
|
|
3.64%
- convertible
|
|
10/24/2013
|
|
$5,000,000
|
|
|
|
|
|
|
|
|
|
|
Average
daily balance
outstanding: $5,001,000
Maximum
amount outstanding during the
year $5,200,000
Weighted
average interest rate during the
year 3.70%
Weighted
average interest at end of
year 3.64%
Personnel
As
of
June 30, 2007, The Bank of Greene County had 107 full-time employees and 11
part-time employees. Greene County Bancorp, Inc. has no employees who
are not also Bank employees. A collective bargaining group does not
represent the employees and The Bank of Greene County considers its relationship
with its employees to be good.
FEDERAL
AND STATE TAXATION
Federal
Taxation
General. Greene
County Bancorp, Inc., The Bank of Greene County and Greene County Commercial
Bank are subject to federal income taxation in the same general manner as other
corporations, with some exceptions discussed below. The following
discussion of federal taxation is intended only to summarize certain pertinent
federal income tax matters and is not a comprehensive description of the tax
rules applicable to these entities.
Method
of Accounting. For federal income tax
purposes, Greene County Bancorp, Inc., The Bank of Greene County and Greene
County Commercial Bank currently report income and expenses on the accrual
method of accounting and use a tax year ending June 30 for filing consolidated
federal income tax returns. The Small Business Protection Act of 1996
(the “1996 Act”) eliminated the use of the reserve method of accounting for bad
debt reserves by savings institutions, effective for taxable years beginning
after 1995.
Bad
Debt Reserves. Prior to the 1996 Act,
The Bank of Greene County was permitted to establish a reserve for bad debts
and
to make annual additions to the reserve. These additions could,
within specified formula limits, be deducted in arriving at The Bank of Greene
County’s taxable income. As a result of the 1996 Act, The Bank of
Greene County must use the specific charge off method in computing its bad
debt
deduction beginning with its 1996 federal tax return. Greene County
Commercial Bank may opt for the reserve method of accounting for bad debts
since
it is not a thrift institution and the assets of the consolidated group are
less
than $500 million. Greene County Commercial Bank had no reserve
established as of June 30, 2007 since it held no loans at that
date.
Taxable
Distributions and Recapture. Prior to
the 1996 Act, bad debt reserves created prior to January 1, 1988 were subject
to
recapture into taxable income should The Bank of Greene County fail to meet
certain thrift asset and definitional tests. New federal legislation
eliminated these thrift related recapture rules. However, under
current law, pre-1988 reserves remain subject to recapture should The Bank
of
Greene County redeem its common stock, pay dividends or make distributions
in
excess of earnings and profits.
At
June
30, 2007, The Bank of Greene County’s total federal pre-1988 reserve was
approximately $1.8 million. This reserve reflects the cumulative
effects of federal tax deductions by The Bank of Greene County for which no
federal income tax provision has been made. A deferred tax liability
has not been provided on this amount as management does not intend to redeem
stock, make distributions or take other actions that would result in recapture
of the reserve.
Minimum
Tax. The Code imposes an alternative minimum tax
(“AMT”) at a rate of 20% on a base of regular taxable income plus certain tax
preferences (“alternative minimum taxable income” or “AMTI”). The AMT
is payable to the extent such AMTI is in excess of an exemption
amount. For all loss years except those originating in 2001 and 2002,
net operating losses can offset no more than 90% of AMTI. For loss
years originating in 2001 and 2002, an offset 100% of AMTI is
permissible. Certain payments of alternative minimum tax may be used
as credits against regular tax liabilities in future years. Greene County
Bancorp, Inc., The Bank of Greene County and Greene County Commercial Bank
have
not been subject to the alternative minimum tax and have no such amounts
available as credits for carryover.
Net
Operating Loss Carryovers. A financial
institution may carry back net operating losses to the preceding two taxable
years and forward to the succeeding 20 taxable years. At June 30,
2007, Greene County Bancorp, Inc. and its subsidiaries had no net operating
loss
carry forward for federal income tax purposes.
Corporate
Dividends-Received
Deduction. Greene County
Bancorp, Inc. may exclude from its income 100% of dividends received from The
Bank of Greene County as a member of the same affiliated group of
corporations. Greene County Bancorp, MHC owns less than 80% of the
outstanding Common Stock of Greene County Bancorp, Inc. As such,
Greene County Bancorp, MHC is not permitted to file a consolidated federal
income tax return with Greene County Bancorp, Inc., The Bank of Greene County
and Greene County Commercial Bank. The corporate dividends-received
deduction is 80% in the case of dividends received from corporations with which
a corporate recipient does not file a consolidated return, and corporations
which own less than 20% of the stock of a corporation distributing a dividend
may deduct only 70% of dividends received or accrued on their
behalf.
State
Taxation
New
York State Taxation - General. Greene County Bancorp,
Inc., The Bank of Greene County and Greene County Commercial Bank report income
on a combined fiscal year basis to New York State. The New York State
franchise tax on banking corporations is imposed in an amount equal to the
greater of (a) 7.5% of the "entire net income" allocable to New York State,
(b)
3.0% of the "alternative entire net income" allocable to New York State, (c)
0.01% of the average value of assets allocable to New York State, or (d)
$250. Entire net income is based on federal taxable income, subject
to certain modifications. Alternative entire net income is equal to
entire net income without certain modifications. Greene County
Bancorp, MHC files a separate New York State franchise tax return.
Bad
Debt Reserves. The Bank of Greene County and Greene
County Commercial Bank are allowed to utilize the reserve method of accounting
for New York State franchise tax purposes and are required to maintain two
reserve accounts: the Reserve for Losses on Nonqualifying Loans (the “NY NQL
Reserve”) and the Reserve for Losses on Qualifying Real Property Loans (the “NY
QRPL Reserve”). The addition to the NY NQL Reserve must be computed
under the “experience method”. The addition to the NY QRPL Reserve
may be computed under either the experience method or the “percentage of taxable
income method” (the “PTI method”). The deduction under the PTI method
is equal to 32.0% of entire net income (before the deduction for the bad debt
reserve addition), which must first be allocated to the NY NQL
Reserve. The balance, if any, is the allowable addition to the NY
QRPL reserve, subject to a limitation based upon 6.0% of Qualifying Real
Property Loans (“QRPL”).
Recapture
of New York State Bad Debt Reserves. If The Bank of
Greene County ceases to qualify as a “thrift institution” (as defined in the New
York State tax law), or fails to hold at least 60.0% of its assets in
“Qualifying Assets”, it will no longer be entitled to use the reserve method and
must recapture into entire net income a portion of its NY QRPL
Reserve. The amount subject to recapture is generally equal to the
excess of the NY QRPL Reserve over the federal QRPL Reserve as of December
31,
1995. The amount of The Bank of Greene County’s NY QRPL Reserve
subject to recapture was approximately $1.8 million at June 30,
2007. Since it is The Bank of Greene County’s intention to continue
to qualify as a thrift institution and to meet the 60.0% Qualifying Asset test,
a deferred tax liability has not been established for the New York State tax
that would result from such failure.
Net
Operating Loss Deductions. For New
York State franchise tax purposes, Greene County Bancorp, Inc. and its
subsidiaries are not entitled to carry back or forward net operating losses
(“NOLs”) incurred in taxable years ending before January 1,
2001. NOLs incurred in taxable years beginning on or after January 1,
2001, of which there are none as of June 30, 2007, can be carried forward to
the
succeeding 20 taxable years and can not be carried back.
Corporate
Dividends-Received Deduction. Similar to the federal
rules, Greene County Bancorp, Inc., The Bank of Greene County and Greene County
Commercial Bank file a combined New York State franchise tax report and
inter-company dividends will be eliminated. However, Greene County
Bancorp, MHC does not own the requisite percentage (generally 80.0% or more)
of
the common stock of Greene County Bancorp, Inc. necessary to file on a combined
basis with Greene County Bancorp, Inc. As long as Greene County
Bancorp, MHC owns more than 50.0% of the common stock of Greene County Bancorp,
Inc., it is entitled to a full exclusion from taxation of dividend income
related to subsidiary capital. Greene County Bancorp, MHC is entitled
to a 50.0% dividends-received deduction if it owns 50.0% or less of the common
stock of Greene County Bancorp, Inc.
REGULATION
General
The
Bank
of Greene County is a federally chartered bank and Greene County Commercial
Bank
is a New York-chartered bank. The Federal Deposit Insurance
Corporation through the DIF (“Deposit Insurance Fund”) insures their deposit
accounts up to applicable limits. The Bank of Greene County and
Greene County Commercial Bank are subject to extensive regulation by the Office
of Thrift Supervision (“OTS”) and the New York State Banking Department (the
“Department”), respectively, as its chartering agency, and by the Federal
Deposit Insurance Corporation, as its deposit insurer. The Bank of
Greene County and Greene County Commercial Bank are required to file reports
with, and are periodically examined by the OTS and the Department, respectively,
as well as the Federal Deposit Insurance Corporation concerning their activities
and financial condition and must obtain regulatory approvals prior to entering
into certain transactions, including, but not limited to, mergers with or
acquisitions of other banking institutions. The Bank of Greene County
is a member of the FHLB of New York and is subject to certain regulations by
the
Federal Home Loan Bank System. Both Greene County Bancorp, Inc. and
Greene County Bancorp, MHC, as mutual savings and loan holding companies, are
subject to regulation by the Office of Thrift Supervision and are required
to
file reports with the Office of Thrift Supervision. Any change in
such regulations, whether by the Department, the Federal Deposit Insurance
Corporation, or the Office of Thrift Supervision could have a material adverse
impact on The Bank of Greene County, Greene County Commercial Bank, or Greene
County Bancorp, Inc., or Greene County Bancorp, MHC.
Certain
of the regulatory requirements applicable to The Bank of Greene County, Greene
County Commercial Bank, Greene County Bancorp, Inc. and Greene County Bancorp,
MHC are referred to below or elsewhere herein.
Federal
Banking Regulation
Business
Activities. A federal savings association derives its lending and
investment powers from the Home Owners’ Loan Act, as amended, and the
regulations of the Office of Thrift Supervision. Under these laws and
regulations, The Bank of Greene County may invest in mortgage loans secured
by
residential real estate without limitations as a percentage of assets and
non-residential real estate loans which may not in the aggregate exceed 400%
of
capital, commercial business loans up to 20% of assets in the aggregate and
consumer loans up to 35% of assets in the aggregate, certain types of debt
securities and certain other assets. The Bank of Greene County also may
establish subsidiaries that may engage in activities not otherwise permissible
for The Bank of Greene County, including real estate investment and securities
and insurance brokerage.
Capital
Requirements. Office of Thrift Supervision regulations require
savings associations to meet three minimum capital standards: a 1.5% tangible
capital ratio, a 4% leverage ratio (3% for associations receiving the highest
rating on the CAMELS rating system) and an 8% risk-based capital ratio. The
prompt corrective action standards discussed below, in effect, establish a
minimum 2% tangible capital standard.
The
risk-based capital standard for savings associations requires the maintenance
of
Tier 1 (core) and total capital (which is defined as core capital and
supplementary capital) to risk-weighted assets of at least 4% and 8%,
respectively. In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet assets, are multiplied by a risk-weight
factor of 0% to 100%, assigned by the Office of Thrift Supervision based on
the
risks believed inherent in the type of asset. Core capital is defined as common
stockholders’ equity (including retained earnings), certain noncumulative
perpetual preferred stock and related surplus and minority interests in equity
accounts of consolidated subsidiaries, less intangibles other than certain
mortgage servicing rights and credit card relationships. The components of
supplementary capital currently include cumulative preferred stock, long-term
perpetual preferred stock, mandatory convertible securities, subordinated debt
and intermediate preferred stock, the allowance for loan and lease losses
limited to a maximum of 1.25% of risk-weighted assets and up to 45% of net
unrealized gains on available-for-sale equity securities with readily
determinable fair market values. Overall, the amount of supplementary capital
included as part of total capital cannot exceed 100% of core capital.
Additionally, a savings association that retains credit risk in connection
with
an asset sale may be required to maintain additional regulatory capital because
of the recourse back to the savings association. The Bank of Greene County
does
not typically engage in asset sales.
At
June 30, 2007, The Bank of Greene County’s capital exceeded all applicable
requirements.
Loans-to-One
Borrower. A federal savings association generally may not make a
loan or extend credit to a single or related group of borrowers in excess of
15%
of unimpaired capital and surplus. An additional amount may be loaned, equal
to
10% of unimpaired capital and surplus, if the loan is secured by readily
marketable collateral, which generally does not include real estate. As of
June 30, 2007, The Bank of Greene County was in compliance with the
loans-to-one borrower limitations.
Qualified
Thrift Lender Test. As a federal savings association, The Bank of
Greene County must satisfy the qualified thrift lender, or “QTL”, test. Under
the QTL test, The Bank of Greene County must maintain at least 65% of its
“portfolio assets” in “qualified thrift investments” in at least nine of the
most recent 12-month period. “Portfolio assets” generally means total assets of
a savings institution, less the sum of specified liquid assets up to 20% of
total assets, goodwill and other intangible assets, and the value of property
used in the conduct of the savings association’s business.
“Qualified
thrift investments” include various types of loans made for residential and
housing purposes, investments related to such purposes, including certain
mortgage-backed and related securities, and loans for personal, family,
household and certain other purposes up to a limit of 20% of portfolio assets.
“Qualified thrift investments” also include 100% of an institution’s credit card
loans, education loans and small business loans. The Bank of Greene County
also
may satisfy the QTL test by qualifying as a “domestic building and loan
association” as defined in the Internal Revenue Code.
A
savings
association that fails the qualified thrift lender test must either convert
to a
bank charter or operate under specified restrictions. At June 30, 2007, The
Bank of Greene County satisfied this test.
Capital
Distributions. Office of Thrift Supervision regulations govern
capital distributions by a federal savings association, which include cash
dividends, stock repurchases and other transactions charged to the capital
account. A savings association must file an application for approval of a
capital distribution if:
• the
total capital distributions for the applicable calendar year exceed the sum
of
the association’s net income for that year to date plus the association’s
retained net income for the preceding two years;
• the
association would not be at least adequately capitalized following the
distribution;
• the
distribution would violate any applicable statute, regulation, agreement or
Office of Thrift Supervision-imposed condition; or
• the
association is not eligible for expedited treatment of its filings.
Even
if
an application is not otherwise required, every savings association that is
a
subsidiary of a holding company must still file a notice with the Office of
Thrift Supervision at least 30 days before the Board of Directors declares
a
dividend or approves a capital distribution.
The
Office of Thrift Supervision may disapprove a notice or application
if:
• the
association would be undercapitalized following the distribution;
• the
proposed capital distribution raises safety and soundness concerns;
or
• the
capital distribution would violate a prohibition contained in any statute,
regulation or agreement.
In
addition, the Federal Deposit Insurance Act provides that an insured depository
institution shall not make any capital distribution, if after making such
distribution the institution would be undercapitalized.
Liquidity.
A federal savings association is required to maintain a sufficient amount of
liquid assets to ensure its safe and sound operation.
Community
Reinvestment Act and Fair Lending Laws. All savings associations
have a responsibility under the Community Reinvestment Act and related
regulations of the Office of Thrift Supervision to help meet the credit needs
of
their communities, including low- and moderate-income neighborhoods. In
connection with its examination of a federal savings association, the Office
of
Thrift Supervision is required to assess the association’s record of compliance
with the Community Reinvestment Act. In addition, the Equal Credit Opportunity
Act and the Fair Housing Act prohibit lenders from discriminating in their
lending practices on the basis of characteristics specified in those statutes.
An association’s failure to comply with the provisions of the Community
Reinvestment Act could, at a minimum, result in denial of certain corporate
applications, such as branches or mergers, or in restrictions on its activities.
The failure to comply with the Equal Credit Opportunity Act and the Fair Housing
Act could result in enforcement actions by the Office of Thrift Supervision,
as
well as other federal regulatory agencies and the Department of Justice. The
Bank of Greene County received an “outstanding” Community Reinvestment Act
rating in its most recent federal examination.
Privacy
Standards. Effective July 2001, financial institutions,
including The Bank of Greene County, became subject to FDIC regulations
implementing the privacy protection provisions of the Gramm-Leach-Bliley Act.
These regulations require The Bank of Greene County to disclose its privacy
policy, including identifying with whom it shares “non-public personal
information” to customers at the time of establishing the customer relationship
and annually thereafter.
The
regulations also require The Bank of Greene County to provide its customers
with
initial and annual notices that accurately reflect its privacy policies and
practices. In addition, The Bank of Greene County is required to provide its
customers with the ability to “opt-out” of having The Bank of Greene County
share their non-public personal information with unaffiliated third parties
before it can disclose such information, subject to certain exceptions. The
implementation of these regulations did not have a material adverse effect
on
Greene County Bancorp, Inc. or The Bank of Greene County.
Transactions
with Related Parties. A federal savings association’s authority to
engage in transactions with its “affiliates” is limited by Office of Thrift
Supervision regulations and by Sections 23A and 23B of the Federal Reserve
Act
(the “FRA”). The term “affiliates” for these purposes generally means any
company that controls, is controlled by, or is under common control with an
institution. Greene County Bancorp, Inc. is an affiliate of The Bank of Greene
County. In general, transactions with affiliates must be on terms that are
as
favorable to the association as comparable transactions with non-affiliates.
In
addition, certain types of these transactions are restricted to an aggregate
percentage of the association’s capital. Collateral in specified amounts must
usually be provided by affiliates in order to receive loans from the
association. In addition, Office of Thrift Supervision regulations prohibit
a
savings association from lending to any of its affiliates that are engaged
in
activities that are not permissible for bank holding companies and from
purchasing the securities of any affiliate, other than a
subsidiary.
The
Bank
of Greene County’s authority to extend credit to its directors, executive
officers and 10% shareholders, as well as to entities controlled by such
persons, is currently governed by the requirements of
Sections 22(g) and 22(h) of the FRA and Regulation O of the
Federal Reserve Board. Among other things, these provisions require that
extensions of credit to insiders (i) be made on terms that are
substantially the same as, and follow credit underwriting procedures that are
not less stringent than, those prevailing for comparable transactions with
unaffiliated persons and that do not involve more than the normal risk of
repayment or present other unfavorable features, and (ii) not exceed
certain limitations on the amount of credit extended to such persons,
individually and in the aggregate, which limits are based, in part, on the
amount of The Bank of Greene County’s capital. In addition, extensions of credit
in excess of certain limits must be approved by The Bank of Greene County’s
Board of Directors.
Enforcement.
The Office of Thrift Supervision has primary enforcement responsibility over
federal savings institutions and has the authority to bring enforcement action
against all “institution-affiliated parties,” including stockholders, and
attorneys, appraisers and accountants who knowingly or recklessly participate
in
wrongful action likely to have an adverse effect on an insured institution.
Formal enforcement action by the Office of Thrift Supervision may range from
the
issuance of a capital directive or cease and desist order, to removal of
officers and/or directors of the institution and the appointment of a receiver
or conservator. Civil penalties cover a wide range of violations and actions,
and range up to $25,000 per day, unless a finding of reckless disregard is
made,
in which case penalties may be as high as $1 million per day. The Federal
Deposit Insurance Corporation also has the authority to terminate deposit
insurance or to recommend to the Director of the Office of Thrift Supervision
that enforcement action be taken with respect to a particular savings
institution. If action is not taken by the Director, the Federal Deposit
Insurance Corporation has authority to take action under specified
circumstances.
Standards
for Safety and Soundness. Federal law requires each federal
banking agency to prescribe certain standards for all insured depository
institutions. These standards relate to, among other things, internal controls,
information systems and audit systems, loan documentation, credit underwriting,
interest rate risk exposure, asset growth, compensation, and other operational
and managerial standards as the agency deems appropriate. The federal banking
agencies adopted Interagency Guidelines Prescribing Standards for Safety and
Soundness to implement the safety and soundness standards required under federal
law. The guidelines set forth the safety and soundness standards that the
federal banking agencies use to identify and address problems at insured
depository institutions before capital becomes impaired. The guidelines address
internal controls and information systems, internal audit systems, credit
underwriting, loan documentation, interest rate risk exposure, asset growth,
compensation, fees and benefits. If the appropriate federal banking agency
determines that an institution fails to meet any standard prescribed by the
guidelines, the agency may require the institution to submit to the agency
an
acceptable plan to achieve compliance with the standard. If an institution
fails
to meet these standards, the appropriate federal banking agency may require
the
institution to submit a compliance plan.
Prompt
Corrective Action Regulations. Under the prompt
corrective action regulations, the Office of Thrift Supervision is required
and
authorized to take supervisory actions against undercapitalized savings
associations. For this purpose, a savings association is placed in one of the
following five categories based on the association’s capital:
• well-capitalized
(at least 5% leverage capital, 6% Tier 1 risk-based capital and 10% total
risk-based capital);
• adequately
capitalized (at least 4% leverage capital, 4% Tier 1 risk-based capital and
8% total risk-based capital);
• undercapitalized
(less than 8% total risk-based capital, 4% Tier 1 risk-based capital or 3%
leverage capital);
• significantly
undercapitalized (less than 6% total risk-based capital, 3% Tier 1
risk-based capital or 3% leverage capital); and
• critically
undercapitalized (less than 2% tangible capital).
Generally,
the banking regulator is required to appoint a receiver or conservator for
an
association that is “critically undercapitalized” within specific time frames.
The regulations also provide that a capital restoration plan must be filed
with
the Office of Thrift Supervision within 45 days of the date an association
receives notice that it is “undercapitalized”, “significantly undercapitalized”
or “critically undercapitalized”. The criteria for an acceptable capital
restoration plan include, among other things, the establishment of the
methodology and assumptions for attaining adequately capitalized status on
an
annual basis, procedures for ensuring compliance with restrictions imposed
by
applicable federal regulations, the identification of the types and levels
of
activities the savings association will engage in while the capital restoration
plan is in effect, and assurances that the capital restoration plan will not
appreciably increase the current risk profile of the savings association. Any
holding company for the savings association required to submit a capital
restoration plan must guarantee the lesser of: an amount equal to 5% of the
savings association’s assets at the time it was notified or deemed to be
undercapitalized by the Office of Thrift Supervision, or the amount necessary
to
restore the savings association to adequately capitalized status. This guarantee
remains in place until the Office of Thrift Supervision notifies the savings
association that it has maintained adequately capitalized status for each of
four consecutive calendar quarters, and the Office of Thrift Supervision has
the
authority to require payment and collect payment under the guarantee. Failure
by
a holding company to provide the required guarantee will result in certain
operating restrictions on the savings association, such as restrictions on
the
ability to declare and pay dividends, pay executive compensation and management
fees, and increase assets or expand operations. The Office of Thrift Supervision
may also take any one of a number of discretionary supervisory actions against
undercapitalized associations, including the issuance of a capital directive
and
the replacement of senior executive officers and directors.
At
June 30, 2007, The Bank of Greene County met the criteria for being
considered “well-capitalized”.
Insurance
of Deposit Accounts. Deposit accounts in The Bank of
Greene County are insured by the Federal Deposit Insurance Corporation,
generally up to a maximum of $100,000 per separately insured depositor and
up to
a maximum of $250,000 for self-directed retirement accounts. The Bank
of Greene County’s deposits, therefore, are subject to Federal Deposit Insurance
Corporation deposit insurance assessments. Recent legislation, among other
things, has increased the amount of federal deposit insurance coverage for
certain types of accounts while preserving the $100,000 coverage limit for
individual accounts and municipal deposits. The legislation also gives the
Federal Deposit Insurance Corporation discretion to adjust insurance coverage
for inflation, beginning in 2010. The legislation also gives the Federal Deposit
Insurance Corporation flexibility to adjust the insurance fund reserve ratio
between 1.15% and 1.50% of estimated insured deposits, depending on projected
losses, economic changes and assessment ratios at the end of a calendar year,
and allows for dividends to insured institutions whenever reserve ratios exceed
specified levels.
On
November 2, 2006, the Federal Deposit Insurance Corporation adopted final
regulations that assess insurance premiums based on risk. As a
result, the new regulation will enable the Federal Deposit Insurance Corporation
to more closely tie each financial institution’s deposit insurance premiums to
the risk it poses to the deposit insurance fund. Under the new
risk-based assessment system, the Federal Deposit Insurance Corporation will
evaluate the risk of each financial institution based on its supervisory rating,
its financial ratios, and its long-term debt issuer rating for larger
institutions. The new rates for nearly all of the financial
institutions industry vary between five and seven cents for every $100 of
domestic deposits. At the same time, the Federal Deposit Insurance Corporation
adopted final regulations designating the reserve ratio for the deposit
insurance fund during 2007 at 1.25% of estimated insured deposits.
Effective
March 31, 2006, the Federal Deposit Insurance Corporation merged the Bank
Insurance Fund (“BIF”) and the Savings Association Insurance Fund (“SAIF”) into
a single fund called the Deposit Insurance Fund. As a result of the
merger, the BIF and the SAIF were abolished. The merger of the BIF
and the SAIF into the Deposit Insurance Fund does not affect the authority
of
the Financing Corporation (“FICO”) to impose and collect, with the approval of
the Federal Deposit Insurance Corporation, assessments for anticipated payments,
issuance costs and custodial fees on bonds issued by the FICO in the 1980s
to
recapitalize the former Federal Savings and Loan Insurance
Corporation. The bonds issued by the FICO are due to mature in 2017
through 2019. For the quarter ended June 30, 2007, the annualized
FICO assessment was equal to 1.22 basis points for each $100 in domestic
deposits maintained at an institution.
Prohibitions
Against Tying Arrangements. Federal savings
associations are prohibited, subject to some exceptions, from extending credit
to or offering any other service, or fixing or varying the consideration for
such extension of credit or service, on the condition that the customer obtain
some additional service from the institution or its affiliates or not obtain
services of a competitor of the institution.
Federal
Home Loan Bank System. The Bank of Greene County is a member of
the Federal Home Loan Bank System, which consists of 12 regional Federal Home
Loan Banks. The Federal Home Loan Bank System provides a central credit facility
primarily for member institutions. As a member of the Federal Home Loan Bank
of
New York, The Bank of Greene County is required to acquire and hold shares
of
capital stock in the Federal Home Loan Bank in an amount at least equal to
1% of
the aggregate principal amount of its unpaid residential mortgage loans and
similar obligations at the beginning of each year, or 1/20 of its borrowings
from the Federal Home Loan Bank, whichever is greater. As of June 30, 2007,
The Bank of Greene County was in compliance with this requirement.
Federal
Reserve System. The Federal Reserve Board
regulations require savings associations to maintain noninterest-earning
reserves against their transaction accounts, such as negotiable order of
withdrawal and regular checking accounts. At June 30, 2007, The Bank of
Greene County was in compliance with these reserve requirements.
The
USA PATRIOT Act
The
USA
PATRIOT Act gives the federal government new powers to address terrorist threats
through enhanced domestic security measures, expanded surveillance powers,
increased information sharing and broadened anti-money laundering requirements.
Certain provisions of the act impose affirmative obligations on a broad range
of
financial institutions, including savings banks, like The Bank of Greene County.
These obligations include enhanced anti-money laundering programs, customer
identification programs and regulations relating to private banking accounts
or
correspondence accounts in the United States for non-United States persons
or
their representatives (including foreign individuals visiting the United
States).
The
federal banking agencies have begun to propose and implement regulations
pursuant to the USA PATRIOT Act. These proposed and interim regulations would
require financial institutions to adopt the policies and procedures contemplated
by the USA PATRIOT Act.
Sarbanes-Oxley
Act of 2002
The
Sarbanes-Oxley Act of 2002 was enacted in response to public concerns regarding
corporate accountability in connection with certain accounting scandals. The
stated goals of the Sarbanes-Oxley Act are to increase corporate responsibility,
to provide for enhanced penalties for accounting and auditing improprieties
at
publicly traded companies, and to protect investors by improving the accuracy
and reliability of corporate disclosures pursuant to the securities laws. The
Sarbanes-Oxley Act generally applies to all companies that file or are required
to file periodic reports with the Securities and Exchange Commission, under
the
Securities Exchange Act of 1934.
The
Sarbanes-Oxley Act includes very specific additional disclosure requirements
and
new corporate governance rules requiring the Securities and Exchange
Commission and national securities exchanges to adopt extensive additional
disclosure, corporate governance and other related rules, and mandates further
studies of certain issues by the Securities and Exchange Commission. The
Sarbanes-Oxley Act represents significant federal involvement in matters
traditionally left to state regulatory systems, such as the regulation of the
accounting profession, and to state corporate law, such as the relationship
between a board of directors and management and between a board of directors
and
its committees.
Holding
Company Regulation
General.
Greene County Bancorp, MHC and Greene County Bancorp, Inc. are nondiversified
savings and loan holding companies within the meaning of the Home Owners’ Loan
Act. As such, Greene County Bancorp, MHC and Greene County Bancorp, Inc. are
registered with the Office of Thrift Supervision and are subject to Office
of
Thrift Supervision regulations, examinations, supervision and reporting
requirements. In addition, the Office of Thrift Supervision has enforcement
authority over Greene County Bancorp, Inc. and Greene County Bancorp, MHC,
and
their subsidiaries. Among other things, this authority permits the Office of
Thrift Supervision to restrict or prohibit activities that are determined to
be
a serious risk to the subsidiary savings institution. As federal corporations,
Greene County Bancorp, Inc. and Greene County Bancorp, MHC are generally not
subject to state business organization laws.
Permitted
Activities. Pursuant to
Section 10(o) of the Home Owners’ Loan Act and Office of Thrift
Supervision regulations and policy, a mutual holding company and a federally
chartered mid-tier holding company such as Greene County Bancorp, Inc. may
engage in the following activities: (i) investing in the stock of a savings
association; (ii) acquiring a mutual association through the merger of such
association into a savings association subsidiary of such holding company or
an
interim savings association subsidiary of such holding company;
(iii) merging with or acquiring another holding company, one of whose
subsidiaries is a savings association; (iv) investing in a corporation, the
capital stock of which is available for purchase by a savings association under
federal law or under the law of any state where the subsidiary savings
association or associations share their home offices; (v) furnishing or
performing management services for a savings association subsidiary of such
company; (vi) holding, managing or liquidating assets owned or acquired
from a savings subsidiary of such company; (vii) holding or managing
properties used or occupied by a savings association subsidiary of such company;
(viii) acting as trustee under deeds of trust; (ix) any other activity
(A) that the Federal Reserve Board, by regulation, has determined to be
permissible for bank holding companies under Section 4(c) of the Bank
Holding Company Act of 1956, unless the Director of the Office of Thrift
Supervision, by regulation, prohibits or limits any such activity for savings
and loan holding companies; or (B) in which multiple savings and loan
holding companies were authorized (by regulation) to directly engage on
March 5, 1987; (x) any activity permissible for financial holding
companies under Section 4(k) of the Bank Holding Company Act,
including securities and insurance underwriting; and (xi) purchasing,
holding, or disposing of stock acquired in connection with a qualified stock
issuance if the purchase of such stock by such savings and loan holding company
is approved by the Director. If a mutual holding company acquires or merges
with
another holding company, the holding company acquired or the holding company
resulting from such merger or acquisition may only invest in assets and engage
in activities listed in (i) through (xi) above, and has a period of
two years to cease any nonconforming activities and divest any nonconforming
investments.
The
Home
Owners’ Loan Act prohibits a savings and loan holding company, including Greene
County Bancorp, Inc. and Greene County Bancorp, MHC, directly or indirectly,
or
through one or more subsidiaries, from acquiring more than 5% of another savings
institution or holding company thereof, without prior written approval of the
Office of Thrift Supervision. It also prohibits the acquisition or retention
of,
with certain exceptions, more than 5% of a nonsubsidiary company engaged in
activities other than those permitted by the Home Owners’ Loan Act, or acquiring
or retaining control of an institution that is not federally insured. In
evaluating applications by holding companies to acquire savings institutions,
the Office of Thrift Supervision must consider the financial and managerial
resources, future prospects of the company and institution involved, the effect
of the acquisition on the risk to the federal deposit insurance fund, the
convenience and needs of the community and competitive factors.
The
Office of Thrift Supervision is prohibited from approving any acquisition that
would result in a multiple savings and loan holding company controlling savings
institutions in more than one state, subject to two exceptions: (i) the
approval of interstate supervisory acquisitions by savings and loan holding
companies; and (ii) the acquisition of a savings institution in another
state if the laws of the state of the target savings institution specifically
permit such acquisitions. The states vary in the extent to which they permit
interstate savings and loan holding company acquisitions.
Waivers
of Dividends by Greene County Bancorp, MHC.
Office of Thrift Supervision regulations requires Greene County Bancorp, MHC
to
notify the Office of Thrift Supervision of any proposed waiver of its receipt
of
dividends from Greene County Bancorp, Inc. The Office of Thrift Supervision
reviews dividend waiver notices on a case-by-case basis, and, in general, does
not object to any such waiver if the mutual holding company’s board of
directors determines that such waiver is consistent with such directors’
fiduciary duties to the mutual holding company’s members. Greene County
Bancorp, MHC has waived all dividends paid by Greene County Bancorp, Inc. and
is
expected to do so in the future.
Conversion
of Greene County Bancorp, MHC to Stock Form.
Office of Thrift Supervision regulations permit Greene County Bancorp, MHC
to
convert from the mutual form of organization to the capital stock form of
organization (a “Conversion Transaction”). There can be no assurance when, if
ever, a Conversion Transaction will occur, and the Board of Directors has no
current intention or plan to undertake a Conversion Transaction. In a Conversion
Transaction a new stock holding company would be formed as the successor to
Greene County Bancorp, Inc. (the “New Holding Company”), Greene County Bancorp,
MHC’s corporate existence would end, and certain depositors of The Bank of
Greene County would receive the right to subscribe for additional shares of
the
New Holding Company. In a Conversion Transaction, each share of common stock
held by stockholders other than Greene County Bancorp, MHC (“Minority
Stockholders”) would be automatically converted into a number of shares of
common stock of the New Holding Company determined pursuant to an exchange
ratio
that ensures that Minority Stockholders own the same percentage of common stock
in the New Holding Company as they owned in Greene County Bancorp, Inc.
immediately prior to the Conversion Transaction. Under Office of Thrift
Supervision regulations, Minority Stockholders would not be diluted because
of
any dividends waived by Greene County Bancorp, MHC (and waived dividends would
not be considered in determining an appropriate exchange ratio), in the event
Greene County Bancorp, MHC converts to stock form. The total number of shares
held by Minority Stockholders after a Conversion Transaction also would be
increased by any purchases by Minority Stockholders in the stock offering
conducted as part of the Conversion Transaction.
Federal
Securities Laws
Greene
County Bancorp, Inc. common stock is registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934. Greene County Bancorp,
Inc. is subject to the information, proxy solicitation, insider trading
restrictions and other requirements under the Securities Exchange Act of
1934.
Greene
County Bancorp, Inc. common stock held by persons who are affiliates (generally
officers, directors and principal shareholders) of Greene County Bancorp, Inc.
may not be resold without registration or unless sold in accordance with certain
resale restrictions. If Greene County Bancorp, Inc. meets specified current
public information requirements, each affiliate of Greene County Bancorp, Inc.
is able to sell in the public market, without registration, a limited number
of
shares in any three-month period.
Reports
to Security Holders
Greene
County Bancorp, Inc. files annual and quarterly reports with the SEC on Forms
10-KSB and 10-QSB, respectively. Greene County Bancorp, Inc. also files current
reports on the Form 8-K with the SEC. Finally, Greene County Bancorp, Inc.
files
preliminary and definitive proxy materials with the SEC.
The
public may read and copy any materials filed by Greene County Bancorp, Inc.
with
the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington,
D.C. 20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. Greene County Bancorp,
Inc.
is an electronic filer. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC. The address of the site is
http://www.sec.gov.
The
Bank
of Greene County currently conducts its business through nine full-service
banking offices. Both Greene County Bancorp, Inc. and The Bank of
Greene County maintain their executive offices at the Administration Center,
302
Main Street, Catskill, New York. The following table sets forth The
Bank of Greene County's offices as of June 30, 2007.
|
|
Original
|
|
Net
Book Value
|
|
Leased
|
Year
|
Date
of
|
Of
Property or
|
|
Or
|
Leased
or
|
Lease
|
Leasehold
|
Location
|
Owned
|
Acquired
|
Expiration
|
Improvements
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
Main
Office (1)
|
|
|
|
|
Main
& Church Streets
|
|
|
|
|
Catskill,
NY 12414
|
Owned
|
1963
|
---
|
$268
|
|
|
|
|
|
Full
Service Branches
|
|
|
|
|
Coxsackie
Branch
|
|
|
|
|
2
Technology Drive
|
|
|
|
|
West
Coxsackie, NY 12192
|
Owned
|
2005
|
---
|
$2,043
|
|
|
|
|
|
Cairo
Branch
|
|
|
|
|
230
Matthew Simons Road
|
|
|
|
|
Cairo,
NY 12413
|
Owned
|
2005
|
---
|
$2,105
|
|
|
|
|
|
Chatham
Branch
|
|
|
|
|
Route
66
|
|
|
|
|
Chatham,
NY 12037
|
Owned
|
2006
|
---
|
$710
|
|
|
|
|
|
Greenville
Branch
|
|
|
|
|
Route
32
|
|
|
|
|
Greeneville,
NY 12083
|
Owned
|
1997
|
---
|
$861
|
|
|
|
|
|
Greenport
Branch
|
|
|
|
|
160
Fairview Avenue
|
|
|
|
|
Hudson,
NY 12534
|
Leased
|
2006
|
July
31, 2011
|
$608
|
|
|
|
|
|
Hudson
Branch
|
|
|
|
|
21
North 7th
Street
|
|
|
|
|
Hudson,
NY 12534
|
Leased
|
2004
|
October
31, 2008
|
$---
|
|
|
|
|
|
Tannersville
Branch
|
|
|
|
|
Main
Street
|
|
|
|
|
Tannersville,
NY 12485
|
Owned
|
2000
|
---
|
$1,163
|
|
|
|
|
|
Westerlo
Branch
|
|
|
|
|
Routes
141 & 143
|
|
|
|
|
Westerlo,
NY 12193
|
Leased
|
2001
|
November
30, 2010
|
$87
|
|
|
|
|
|
West
Side Branch
|
|
|
|
|
100
Catskill Commons
|
|
|
|
|
Catskill,
NY 12414
|
Owned
|
2006
|
---
|
$2,073
|
|
|
|
|
|
Administration
Office (1)
|
|
|
|
|
302
Main Street
|
|
|
|
|
Catskill,
NY 12414
|
Owned
|
1999
|
---
|
$577
|
|
|
|
|
|
Operations
Center
|
|
|
|
|
288
Main Street
|
|
|
|
|
Catskill,
NY 12414
|
Owned
|
2006
|
---
|
$1,533
|
|
|
|
|
|
|
|
|
|
|
(1)
Includes adjacent parking lot
Greene
County Bancorp, Inc. and its subsidiaries are not involved in any pending legal
proceedings other than routine legal proceedings occurring in the ordinary
course of business that, in the aggregate, involve amounts that are believed
by
management to be immaterial to the consolidated financial condition and
consolidated results of operations of Greene County Bancorp, Inc.
No
matters were submitted to a vote of shareholders during the fourth quarter
of
the fiscal year under report.
PART
II
|
Market
for Common Equity, Related StockHolder Matters and Small Business
Issuer
Purchases of Equity
Securities
|
The
“Common Stock and Related Matters” section on page 19 of Greene County Bancorp,
Inc.’s Annual Report to Shareholders is incorporated herein by
reference.
There
were no sales of unregistered securities during fiscal 2007. There
were no repurchases of shares by Greene County Bancorp, Inc. during fiscal
year
2007.
The
Company has adopted three equity-based compensation plans: the 2000 Stock Option
Plan, the 2000 Recognition and Retention Plan and the ESOP. The 2000
Stock Option Plan and the 2000 Recognition and Retention Plan have been approved
by stockholders of the Company and, except for the ESOP, the Company has not
implemented any equity-based compensation program that has not been approved
by
Company stockholders.
Set
forth
below is certain information as of June 30, 2007 regarding equity-based
compensation plans for directors and executive officers of the Company that
have
been approved by stockholders.
Plan
|
Number
of securities to be issued upon exercise of outstanding options and
rights
|
Weighted
average exercise price
|
Number
of securities remaining available for issuance
under
plan
|
2000
Stock Option Plan
|
72,664
|
$4.55
|
0
|
2000
Recognition and Retention Plan
|
—
|
—
|
0
|
Total
|
72,664
|
$4.55
|
0
|
ITEM
6. Management's
Discussion and Analysis or Plan of Operation
The
“Management's Discussion and Analysis of Financial Condition and Results of
Operations” section on pages 7-19 of Greene County Bancorp, Inc.’s Annual Report
to Shareholders is incorporated herein by reference.
The
audited consolidated financial statements for the year ended June 30, 2007
is
filed as part of Greene County Bancorp, Inc.’s Annual Report to Shareholders on
pages 20-36, and is incorporated herein by reference.
ITEM
8. Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
Under
the
supervision and with the participation of management, including our Chief
Executive Officer and Chief Financial Officer, we evaluated the effectiveness
of
the design and operation of our disclosure controls and procedures (as defined
in Rule 13a-15(e) and 15d – 15(e) under the Securities Exchange Act of 1934) at
the end of the period covered by the 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, our disclosure
controls and procedures are effective to ensure that information required to
be
disclosed in the reports that the Company files or submits under the Securities
Exchange Act of 1934, is recorded, processed, summarized and reported, within
the time periods specified in the SEC’s rules and forms. There has
been no change in the Company’s internal control over financial reporting during
the Company’s fourth quarter of fiscal year 2007 that has materially affected,
or is reasonably likely to materially affect, the Company’s internal control
over financial reporting.
Not
applicable.
PART
III
|
Directors,
Executive Officers, Promoters, Control Persons and Corporate Governance;
Compliance With Section 16(a) of the Exchange
Act
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The
“Proposal I - Election of Directors” section on pages 3-17 of Greene County
Bancorp, Inc.’s definitive Proxy Statement for Greene County Bancorp, Inc.’s
2007 Annual Meeting of Shareholders (the “2007 Proxy Statement”) is incorporated
herein by reference.
The
Company has adopted a Code of Ethics that is applicable to the Company’s
officers, directors and employees, including its principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. The Code of Ethics is available
on the Company’s website at www.tbogc.com. Amendments to and
waivers from the Code of Ethics will also be disclosed on the Company’s
website.
The
“Proposal I - Election of Directors” section on pages 3-17 of Greene County
Bancorp, Inc.’s 2007 Proxy Statement is incorporated herein by
reference.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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The
“Proposal I - Election of Directors” section on page 3-17 of Greene County
Bancorp, Inc.’s 2007 Proxy Statement is incorporated herein by
reference.
ITEM
12. Certain
Relationships and Related Transactions and Director
Independence
The
“Transactions with Certain Related Persons” section on page 18 of Greene County
Bancorp, Inc.’s 2007 Proxy Statement is incorporated herein by
reference.
3.1
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Certification
of Incorporation of Greene County Bancorp, Inc. (incorporated herein
by
reference to Greene County Bancorp, Inc.’s Registration statement on SB-2,
file No. 333-63681 (the “SB-2”)).
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3.2
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Bylaws
of Greene County Bancorp, Inc. (incorporated herein by reference
to Greene
County Bancorp, Inc.’s SB-2)
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4.0
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Form
of Stock Certificate of Greene County Bancorp, Inc. (incorporated
herein
by reference to the Form SB-2)
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10.1
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Employment
Agreement with J. Bruce Whittaker (incorporated herein by reference
to
Greene County Bancorp, Inc.’s SB-2)
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10.2
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Employee
Stock Ownership Plan (incorporated herein by reference to Greene
County
Bancorp, Inc.’s SB-2)
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13.0
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Annual
Report to Shareholders
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21.0
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Subsidiaries
of Greene County Bancorp, Inc.
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23.1
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Consent
of Beard Miller Company LLP
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31.1
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Certification
of Chief Executive Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
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31.2
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Certification
of Chief Financial Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
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32.0
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Certification
of Executive Officer and Chief Financial Officer Pursuant to Section
906
of the Sarbanes-Oxley Act of 2002
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99.0
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Report
of Independent Registered Public Accounting
Firm
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ITEM
14. Principal
Accountant Fees and Services
The
“Proposal
2-Ratification of
Appointment of Auditors” section on pages 18-19 Greene County Bancorp, Inc.’s
2007 Proxy Statement is incorporated herein by reference.
In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GREENE
COUNTY BANCORP,
INC.
Date:
September 28,
2007 By:
/s/ Donald E. Gibson
Donald
E. Gibson
President
and Chief Executive
Officer
In
accordance with the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
By: /s/
Michelle Plummer
By: /s/
Walter H. Ingalls
Michelle
Plummer Walter
H. Ingalls
Executive
Vice
President,
Director
Chief Operating Officer and Chief Financial Officer
Date: September
28,
2007 Date: September
28, 2007
By: /s/
Charles
Schaefer
By:
/s/ J. Bruce Whittaker
Charles
Schaefer
J. Bruce Whittaker
Director
Director
Date: September
28,
2007
Date: September 28, 2007
By: /s/
Paul
Slutzky By:
/s/ David H. Jenkins
Paul
Slutzky David
H. Jenkins, DVM
Director
Director
Date: September
28,
2007 Date: September
28, 2007
By: /s/
Dennis R.
O’Grady
By: /s/ Martin C. Smith
Dennis
R.
O’Grady
Martin C. Smith
Director
Chairman of the Board
Date: September
28,
2007 Date: September
28, 2007
By: /s/
Arthur
Place
Arthur
Place
Director
Date: September
28, 2007
EXHIBIT
13
ANNUAL
REPORT TO SHAREHOLDERS
SUBSIDIARIES
OF GREENE COUNTY BANCORP, INC.
Company
Percent Owned
The
Bank
of Greene
County 100.0%
owned by Greene County Bancorp, Inc.
Greene
County Commercial
Bank 100.0%
owned by The Bank of Greene County
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
hereby
consent to the incorporation by reference in the Registration Statement on
Form
S-8 (No. 333-51538) of Greene County Bancorp, Inc. (the “Company”) of our report
dated August 22, 2007, relating to the Company’s consolidated financial
statements as of and for the years ended June 30, 2007 and 2006, which report
appears in the Annual Report to Shareholders included as exhibit 13.0 in this
Form 10-KSB.
/s/
Beard Miller Company LLP
Beard
Miller Company, LLP
Pine
Brook, New Jersey
September
28, 2007
Certification
of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I,
Donald
E. Gibson, certify that:
1.
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I
have reviewed this annual report on Form 10-KSB of Greene County
Bancorp,
Inc.;
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2.
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Based
on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
annual report;
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3.
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Based
on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects
the financial condition, results of operations and cash flows of
the small
business issuer as of, and for, the periods presented in this annual
report;
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4.
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The
small business issuer’s other certifying officers 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:
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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 annual report is being
prepared;
b)
evaluated the effectiveness of the small business issuer’s disclosure controls
and procedures and presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this annual report based on such evaluation; and
c)
disclosed in this annual 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.
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The
small business issuer’s other certifying officers 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:
September 28,
2007 /s/
Donald E.
Gibson
Donald
E. Gibson
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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 annual report on Form 10-KSB of Greene County
Bancorp,
Inc.;
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2.
|
Based
on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
annual report;
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3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects
the financial condition, results of operations and cash flows of
the small
business issuer as of, and for, the periods presented in this annual
report;
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4.
|
The
small business issuer’s other certifying officers 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 annual report is being
prepared;
b)
evaluated the effectiveness of the small business issuer’s disclosure controls
and procedures and presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this annual report based on such evaluation; and
c)
disclosed in this annual 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.
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The
small business issuer’s other certifying officers 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
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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:
September 28,
2007 /s/
Michelle
Plummer
Michelle M. Plummer, Executive Vice President
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Chief
Operating Officer and Chief Financial
Officer
|
Certification
of Chief Executive Officer and Chief Financial Officer
Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
Donald
E.
Gibson, President and Chief Executive Officer, and Michelle M. Plummer,
Executive Vice President, Chief Operating Officer and Chief Financial Officer,
of Greene County Bancorp, Inc. (the “Company”) each certify in his or her
capacity as an officer of the Company that he or she has reviewed the Annual
Report of the Company on Form 10-KSB for the year ended June 30, 2007 and that
to the best of his or her knowledge:
1.
|
the
report fully complies with the requirements of Section 13(a) 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.
|
The
purpose of this statement is solely to comply with Title 18, Chapter 63, Section
1350 of the United States Code, as amended by Section 906 of the Sarbanes-Oxley
Act of 2002.
Date:
September 28,
2007 /s/
Donald E. Gibson
Donald
E. Gibson
President
and Chief Executive
Officer
Date:
September 28,
2007 /s/
Michelle M. Plummer
Michelle
M. Plummer
Executive Vice President, Chief
Operating Officer and Chief Financial Officer