FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
For Quarter ended September 30, 1997 Commission File Number
0-14289
GREENE COUNTY BANCSHARES, INC.
------------------------------
(Exact name of Registrant as specified in its charter)
Tennessee 62-1222567
------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporated or organization) Number)
Main & Depot Street
Greeneville, Tennessee 37743
------------------------------ --------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code 423-639-5111
---------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number or shares outstanding of each of the Issuers classes of
common stock as of the latest practicable date: 1,354,500.
1
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
The unaudited condensed consolidated financial statements of the Registrant and
its wholly-owned subsidiaries are as follows:
Condensed Consolidated Balance Sheets - September 30, 1997 and December
31, 1996.
Condensed Consolidated Statements of Earnings - For the three and nine
months ended September 30, 1997 and 1996.
Condensed Consolidated Statement of Stockholders' Equity- For the nine
months ended September 30, 1997.
Condensed Consolidated Statements of Cash Flows - For the nine months
ended September 30, 1997 and 1996.
Notes to Condensed Consolidated Financial Statements.
2
GREENE COUNTY BANCSHARES,INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, 1997 and December 31, 1996
(UNAUDITED)
September 30, December 31,
1997 1996*
----------- -----------
(In Thousands)
ASSETS
------
Cash and Due from Banks $16,883 $21,332
Federal Funds sold 219 -
Securities available-for-sale 36,435 42,925
Securities held-to-maturity (with a market value of $7,711
on September 30, 1997 and $9,418 on December 31, 1996). 7,726 9,456
Loans 452,564 388,603
Less: Allowance for Loan Losses 9,026 7,331
Net Loans 443,538 381,272
Bank Premises and Equipment, Net of
Accumulated Depreciation 9,785 9,839
Other Assets 14,219 13,224
Total Assets $528,805 $478,048
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Deposits $455,294 $408,722
Securities Sold under Repurchase Agreements
and Short-Term Borrowed Funds 1,599 3,272
Other Borrowings 12,994 15,805
Other Liabilities 8,235 4,524
Total Liabilities 478,122 432,323
---------- ----------
SHAREHOLDERS' EQUITY
--------------------
Common Stock, par value $10, authorized 3,000,000 shares;
issued and outstanding 1,354,500 and 1,354,455 shares at
September 30, 1997 and December 31, 1996, respectively 13,544 4,514
Paid in Capital 4,136 4,133
Retained Earnings 32,890 37,133
Net unrealized holding gains/(losses) on
available-for-sale securities 113 (55)
---------- ----------
Total Shareholders' Equity 50,683 45,725
---------- ----------
$528,805 $478,048
---------- ----------
* Condensed from Audited Financial Statements.
See accompanying notes to Condensed Consolidated Financial Statements(Unaudited)
3
GREENE COUNTY BANCSHARES,INC.
Condensed Consolidated Statements of Earnings
Three and Nine Months Ended September 30, 1997 and 1996
(Dollars in thousands except per share data)
--------------------------------------------
(UNAUDITED)
Three Months Nine Months
Ended Ended
September 30 September 30
1997 1996 1997 1996
-------- -------- -------- --------
Interest Income:
Interest and Fees on Loans $11,908 $9,024 $33,356 $25,590
Interest on Securities 751 769 2,256 2,756
Interest on Federal Funds Sold 19 82 94 496
-------- -------- -------- -------
Total Interest Income 12,678 9,875 35,706 28,842
Interest Expense:
Interest on Deposits 4,734 3,727 13,155 11,279
Interest on Short Term Borrowings 242 181 793 443
-------- -------- -------- -------
Total Interest Expense 4,976 3,908 13,948 11,722
-------- -------- -------- -------
Net Interest Income 7,702 5,967 21,758 17,120
Provision for Loan Losses 1,183 409 2,407 813
-------- -------- -------- -------
Net Interest Income after
Provision for Loan Losses 6,519 5,558 19,351 16,307
-------- -------- -------- -------
Noninterest Income:
Income from Fiduciary Activities 8 11 26 36
Service Charges and Other Fees 873 688 2,288 1,988
Security Gains(Losses) 0 0 2 (2)
Other Income 81 190 604 838
-------- -------- -------- -------
962 889 2,920 2,860
Noninterest Expense:
Salaries and Employee Benefits 2,520 1,942 6,840 5,653
Occupancy and Furniture and Equipment Expense 653 561 1,852 1,634
Other Expenses 1,204 1,011 3,104 2,676
-------- -------- -------- -------
4,377 3,514 11,796 9,963
-------- -------- -------- -------
Earnings Before Income Taxes 3,104 2,933 10,475 9,204
Income Taxes 1,210 1,095 3,995 3,472
-------- -------- -------- -------
Net income $1,894 $1,838 $6,480 $5,732
======== ======== ======== =======
Average Number of Shares Outstanding 1,358,345 1,355,589 1,357,980 1,344,483
Per Share of Common Stock:
Net Earnings $1.39 $1.36 $4.77 $4.26
======== ======== ======== =======
Dividends $0.42 $0.37 $1.25 $1.12
======== ======== ======== =======
See accompanying notes to Condensed Consolidated Financial Statements
(Unaudited).
4
GREENE COUNTY BANCSHARES, INC.
Condensed Consolidated Statement of Shareholders' Equity
For the Nine Months Ended September 30, 1997
(In Thousands)
(UNAUDITED)
Net
Unrealized
Appreciation
on Available
Common Paid in Retained for Sale
Stock Capital Earnings Securities Total
-------- ------- -------- ---------- -------
December 31, 1996 $4,514 $4,133 $37,133 ($55) $45,725
Net income - - 6,480 - 6,480
3-for-1 stock split, effected as
200% stock dividend 9,030 - (9,030) - -
Change in unrealized
appreciation, net of tax - - - 168 168
Dividends paid - - (1,693) (1,693)
Exercise of incentive
stock options - 3 - - 3
-------- ------- -------- --------- --------
September 30, 1997 $13,544 $4,136 $32,890 $113 $50,683
======== ======= ======== ========= =======
See accompanying notes to Condensed Consolidated Financial Statements(Unaudited)
5
GREENE COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Nine Months Ended September 30, 1997 and 1996
(In Thousands)
(UNAUDITED)
September 30, September 30,
1997 1996
------------ ------------
Net Cash Provided By Operating Activities:
Net Income $ 6,480 $ 5,732
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 2,407 813
Provision for depreciation and amortization 893 874
Amortization of investment security premiums,
net of accretion 298 418
Increase in interest receivable (519) (181)
Increase in unearned income 1,719 183
Increase in other assets, net of intangibles (798) (1,089)
Increase (decrease) in accrued interest payable
and other 2,273 (1,204)
--------- ---------
Net cash provided by operating activities 12,753 5,546
--------- ---------
Cash Flows From Investing Activities:
Net decrease in investment securities
and federal funds 8,001 42,998
Net increase in loans (65,680) (50,341)
Decrease (increase) in other real
estate owned and other, net 121 (74)
Recoveries of loan losses 408 615
Fixed asset additions (450) (1,346)
--------- ---------
Net cash used by investing activities (57,600) (8,148)
--------- ---------
Cash Flows From Financing Activities:
Net increase in demand deposits, NOW,
money market and savings accounts 46,572 2,331
Cash dividends paid (1,693) (1,516)
Exercise of stock options 3 484
(Decrease) increase in securities sold under
agreements to repurchase (1,673) 1,093
(Decrease) increase in other borrowings, net (2,811) 3,429
Cash acquired in acquisition of subsidiary bank - 1,730
Professional fees related to stock rescission offer - (66)
Acceptances of stock rescission offer - (14)
--------- ---------
Net cash provided by financing activities 40,398 7,471
--------- ---------
Net Increase (Decrease) in Cash (4,449) 4,869
--------- ---------
Cash at beginning of period 21,332 13,723
--------- ---------
Cash at end of quarter $16,883 $ 18,592
========= =========
See accompanying notes to Condensed Consolidated Financial Statements
(Unaudited)
6
GREENE COUNTY BANCSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1-PRINCIPLES OF CONSOLIDATION
- -----------------------------
The accompanying unaudited condensed consolidated financial statements of Greene
County Bancshares, Inc. (the "Company") and its wholly owned subsidiaries,
Greene County Bank ("GCB") and Premier Bank of East Tennessee("PBET"), have been
prepared in accordance with generally accepted accounting principles for interim
information and in accordance with the instructions to Form 10-Q and Article 10
of Regulation S-X as promulgated by the Securities and Exchange Commission.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments(consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. All
interim amounts are subject to year-end audit and the results of operations for
the interim period herein are not necessarily indicative of the results that may
be expected for the year ending December 31, 1997. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.
2-ALLOWANCE FOR LOAN LOSSES
- ---------------------------
Transactions in the Allowance for Loan Losses for the nine months ended
September 30, 1997 were as follows:
(In Thousands)
--------------
Balance, January 1, 1997 $ 7,331
Add(Deduct):
Charge-offs (1,120)
Recoveries 408
Provision 2,407
-------
Balance, September 30, 1997 $ 9,026
=======
3-STOCK SPLIT
- -------------
On September 5, 1997, the Company announced a 3-for-1 stock split effected in
the form of a 200% stock dividend, payable on October 3, 1997 to shareholders of
record as of September 19, 1997. All references to the outstanding number of
shares and earnings/dividends per share have been restated to reflect the split.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS THAT COULD CAUSE THE
COMPANY'S ACTUAL RESULTS TO DIFFER FROM THOSE PROJECTED IN FORWARD LOOKING
STATEMENTS
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, readers of this document are advised that the
document contains both statements of historical facts and forward looking
statements. Forward looking statements are subject to various risks and
uncertainties, which could cause actual results to differ materially from those
indicated from the statements. Examples of forward looking statements include
but are not limited to (i) projections of revenues, income or loss, earnings per
share, capital expenditures, capital structure and other financial items, (ii)
statements of the plans and objectives of the Company or its management or Board
of Directors, including the introduction of new products or methodology or
predictions of actions by customers, suppliers, or competitors, (iii) statements
of future economic performance, and (iv) statements of assumptions underlying
other statements and statements about the Company and its business.
This document also identifies important factors which could cause actual
results to differ materially from those indicated by the forward looking
statements. These risks and uncertainties include the Company's ability to
increase yield and to reduce product unit costs, price competition, other
actions of competitors, infringement of intellectual property rights of the
Company or others, the effects of government regulation, both foreign and
domestic, possible delays in the introduction of new products, customer
acceptance of products or services and other factors.
The cautionary statements made pursuant to the Private Securities
Litigation Reform Act of 1995 above and elsewhere by the Company should not be
construed as exhaustive or as any admission regarding the adequacy of
disclosures made by the Company prior to the effective date of such Act. Forward
looking statements are beyond the ability of the Company to control and in many
cases the Company cannot predict what factors would cause actual results to
differ materially from those indicated by the forward looking statements.
GENERAL
Greene County Bancshares, Inc. (the "Company") is the bank holding company
for Greene County Bank("GCB") and Premier Bank of East Tennessee("PBET"), and
collectively referred to as the "Banks",
8
which are Tennessee-chartered commercial banks that conduct the principal
business of the Company. In addition, Greene County Bank wholly owns a finance
company, a mortgage company and an acceptance corporation.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY. Liquidity refers to the ability or the financial flexibility to
manage future cash flows to meet the needs of depositors and borrowers and fund
operations. Maintaining appropriate levels of liquidity allows the Company to
have sufficient funds available for reserve requirements, customer demand for
loans, withdrawal of deposit balances and maturities of deposits and other
liabilities. The Company's primary source of liquidity is dividends paid by the
Banks. Applicable Tennessee statutes and regulations impose restrictions on the
amount of dividends that may be declared by the subsidiary Banks. Further, any
dividend payments are subject to the continuing ability of each of the Banks to
maintain their respective compliance with minimum federal regulatory capital
requirements and to retain their characterization under federal regulations as
"well-capitalized" institutions. In addition, the Company maintains a line of
credit of $20 million with the Federal Home Loan Bank of Cincinnati, all of
which was available at September 30, 1997.
The Company's liquid assets include investment securities, federal funds
sold, and cash and due from banks. These assets represented 9.4% of the total
liquidity base at September 30, 1997, as compared to 17.2% at December 31, 1996.
The liquidity base is generally defined to include deposits, securities sold
under repurchase agreements and short-term borrowed funds and other borrowings.
For the nine months ended September 30, 1997, operating activities of the
Company provided $12,753,000 of cash flows. Net income of $6,480,000, adjusted
for non-cash operating activities, including $2,407,000 in provision for loan
losses and amortization and depreciation of $893,000, provided the majority of
the cash generated from operations.
Investing activities, including lending, used $57,600,000 of the Company's
cash flow during the nine months ended September 30, 1997. Loans originated net
of principal collected used $65,680,000 in funds. The Company's decrease in
investment securities and federal funds sold provided $8,001,000 in cash flows.
Net additional cash flows of $40,398,000 were provided by financing
activities during the nine months ended September 30, 1997. Net deposit growth
accounted for $46,572,000 of the increase. Offsetting this increase were net
decreases in securities sold under agreements to repurchase and other borrowings
of $1,673,000
9
and $2,811,000, respectively. Cash dividends paid to shareholders of $1,693,000
constituted an additional reduction in cash flows from financing activities.
CAPITAL RESOURCES. The Company's capital position is reflected in its
shareholders' equity, subject to certain adjustments for regulatory purposes.
Shareholders' equity, or capital, is a measure of the Company's net worth,
soundness and viability. The Company continues to exhibit a strong capital
position while consistently paying dividends to its stockholders. Further, the
capital base of the Company allows it to take advantage of business
opportunities while maintaining the level of resources deemed appropriate by
management of the Company to address business risks inherent in the Company's
daily operations.
Shareholders' equity on September 30, 1997 was $50,683,000, an increase of
$4,958,000 or 10.84%, from $45,725,000 on December 31, 1996. The increase in
shareholders' equity reflects net income for the nine months ended September 30,
1997 of $6,480,000 ($4.77 per share), the increase in equity associated with the
increase in the value of securities available for sale of $168,000 and proceeds
from the exercise of stock options during the nine months ended September 30,
1997 totaling $3,000. This increase was offset by quarterly dividend payments
during the nine months ended September 30, 1997 totaling $1,693,000 ($1.25 per
share).
Risk-based capital regulations adopted by the Board of Governors of the
Federal Reserve Board (the "FRB") and the Federal Deposit Insurance Corporation
require bank holding companies and banks, respectively, to achieve and maintain
specified ratios of capital to risk-weighted assets. The risk-based capital
rules are designed to measure Tier 1 Capital and Total Capital in relation to
the credit risk of both on- and off-balance sheet items. Under the guidelines,
one of four risk weights is applied to the different on-balance sheet items.
Off-balance sheet items, such as loan commitments, are also subject to risk-
weighting after conversion to balance sheet equivalent amounts. At September 30,
1997, the Company and the Banks each satisfied their respective minimum
regulatory capital requirements, and each of the Banks was "well-capitalized"
within the meaning of federal regulatory requirements.
Capital Ratios at September 30, 1997
- ---------------------------------------------------------------
Required
Minimum Company GCB PBET
Ratio
- -------------------------------------- -------- ------ -----
Tier 1 risk-based capital 4.00% 11.17% 11.50% 11.13%
- -------------------------------------- -------- ------ -----
Total risk-based capital 8.00% 12.43% 12.76% 12.39%
- -------------------------------------- -------- ------ -----
Leverage Ratio 4.00% 9.53% 9.86% 8.71%
- -------------------------------------- -------- ------ -----
10
CHANGES IN RESULTS OF OPERATIONS
NET INCOME. Net income for the three and nine months ended September 30,
1997 was $1,894,000 and $6,480,000, respectively, an increase of $56,000, or
3.0% and $748,000, or 13.0%, as compared to net income of $1,838,000 and
$5,732,000, respectively, for the same periods in 1996.
The increase for the three months ended September 30, 1997 resulted
primarily from an increase in net interest income of $1,735,000, or 29.1%, to
$7,702,000 for the three months ended September 30, 1997 from $5,967,000 for the
same period in 1996. The increase in net interest income reflects the Company's
continued growth in loan production through its expanding branch network,
primarily through increases in consumer and other real estate loans. These
increases were offset in part by the increase in non-interest expense to
$4,377,000 for the three months ended September 30, 1997 from $3,514,000 for the
same period in 1996, attributable primarily to increasing compensation and fixed
asset expenses associated with the growth of the Company's branch network. In
addition, the Company increased its provision for loan losses by $774,000, or
189.2%, to $1,183,000 for the three months ended September 30, 1997 compared to
$409,000 for the same period in 1996.
The increase for the nine months ended September 30, 1997 resulted
primarily from an increase in net interest income of $4,638,000, or 27.1%, to
$21,758,000 for the nine months ended September 30, 1997 from $17,120,000 for
the same period in 1996. This increase reflects the same basic trends in
existence during the three months ended June 30, 1997. These increases were
offset in part by the $1,833,000, or 18.4%, increase in non-interest expense to
$11,796,000 for the nine months ended September 30, 1997 from $9,963,000 for the
same period in 1996, again primarily attributable to increasing compensation and
fixed asset expenses associated with the growth of the Company's branch network.
Further, the Company increased its provision for loan losses by $1,594,000, or
196.1%, to $2,407,000 for the nine months ended September 30, 1997 from $813,000
for the same period in 1996.
NET INTEREST INCOME. The largest source of earnings for the Company is net
interest income, which is the difference between interest income on interest-
earning assets and interest paid on deposits and other interest-bearing
liabilities. The primary factors which affect net interest income are changes in
volume and yields of earning assets and interest-bearing liabilities, which are
affected in part by management's responses to changes in interest rates through
asset/liability management. During the three and nine months ended September 30,
1997, net interest income, before provision for loan losses, was $7,702,000 and
$21,758,000, respectively, as compared to $5,967,000 and $17,120,000 for the
same periods in 1996, representing increases of 29.1% and 27.1%, respectively.
With respect to the three and nine months ended September 30, 1997, this
increase was due primarily to an increase in volume and yield of interest-
earning assets, offset
11
by increased costs and balances of interest-bearing liabilities.
PROVISION FOR LOAN LOSSES. During the three and nine month periods ended
September 30, 1997, loan charge-offs were $569,000 and $1,120,000, and
recoveries of charged-off loans were $168,000 and $408,000, respectively. The
Company's provision for loan losses increased to $1,183,000 and $2,407,000 for
the three and nine month periods ended September 30, 1997, respectively, from
$409,000 and $813,000 for the respective periods in 1996. Further, the Company's
allowance for loan losses increased to $9,026,000 at September 30, 1997 from
$7,331,000 at December 31, 1996. Management attributes the increase in both the
provision for loan losses and the allowance for loan losses to several factors,
including a)the increasing consumer loan portfolio in Greene County Bank's
consumer finance subsidiary, as consumer loans are generally considered to carry
a higher risk of loss than commercial and housing loans, b)an anticipated
downturn in the business cycle and attendant increases in net charge-offs, c)the
Company's more aggressive identification of potential problem loans and the
inclusion of the risk associated with such loans in the determination of the
Company's allowance for loan losses, and d)the perceived risk associated with
commercial loans originated by the Company which tend to have higher individual
balances and which management believes are more susceptible to delinquency than
mortgage installment and installment real estate loans. The ratio of the
allowance for loan losses to nonperforming assets was 304.73% and 315.27% at
September 30, 1997 and December 31, 1996, respectively, and the ratio of
nonperforming assets to total assets was .56% and .49% at September 30, 1997 and
December 31, 1996, respectively.
NON-INTEREST INCOME. Income that is not related to interest-earning assets,
consisting primarily of service charges, commissions and fees, has become an
important supplement to the traditional method of earning income through
interest rate spreads.
Total non-interest income for the three and nine month periods ended
September 30, 1997 was $962,000 and $2,920,000, respectively, as compared to
$889,000 and $2,860,000 for the same periods in 1996. The largest component of
non-interest income is service charges and other fees, which totaled $873,000
and $2,288,000, respectively, for the three and nine month periods ended
September 30, 1997, as compared to $688,000 and $1,988,000, respectively, for
the same periods in 1996. The $73,000, or 8.2%, and $60,000, or 2.1%, increases
for the three and nine months ended September 30, 1997, respectively, compared
to the same periods in 1996 reflect management's focus on the generation of fee
income through implementation of additional fees and increasing existing fees.
Other income for the three and nine month periods ended September 30, 1997
was $81,000 and $604,000, respectively, as compared to $190,000 and $838,000 for
the same periods in 1996. With respect to the three months and nine months ended
September 30, 1997, the decreases of $109,000 and $234,000, respectively, are
primarily due to reductions in gains on sales of other real estate owned and in
data processing fees. With respect to the reduction in
12
data processing fees, management does not anticipate the loss in revenue to be
material when coupled with the attendant reduction in operating personnel.
NON-INTEREST EXPENSE. Control of non-interest expense also is an important
aspect in managing net income. Non-interest expense includes personnel,
occupancy, and other expenses such as data processing, printing and supplies,
legal and professional fees, postage, Federal Deposit Insurance Corporation
assessment, etc. Total non-interest expense increased to $4,377,000 and
$11,796,000 for the three and nine month periods ended September 30, 1997,
respectively, as compared to $3,514,000 and $9,963,000 for the same periods in
1996. These increases totaled $863,000, or 24.6%, and $1,833,000, or 18.4%, for
the three and nine month periods ended September 30, 1997, respectively. The
increase in non-interest expense was more than offset by the Company's related
increase in revenue, as reflected in the improvement in the Company's efficiency
ratio from 49.86% at September 30, 1996 to 47.80% at September 30, 1997. The
efficiency ratio illustrates how much it costs the Company to generate revenue;
for example, it cost the Company 47.80 cents to generate one dollar of revenue
for the nine months ended September 30, 1997, as compared to 49.86 cents during
the same period in 1996.
Personnel costs are the primary element of the Company's non-interest
expenses. For the three and nine month periods ended September 30, 1997,
salaries and benefits represented $2,520,000, or 57.6%, and $6,840,000, or
58.0%, of total noninterest expenses, respectively. This was an increase of
$578,000, or 29.8%, and $1,187,000, or 21.0%, over the $1,942,000 and $5,653,000
for the three and nine month periods ended September 30, 1996. At September 30,
1996, salaries and benefits represented 56.7% of total noninterest expenses.
These increases were due to opening new branches requiring increased staff at
varying experience and compensation levels and increased employee benefit costs.
Overall, the number of full-time equivalent employees at September 30, 1997 was
266 versus 242 at September 30, 1996, an increase of 9.9%.
Occupancy and furniture and equipment expense also increased during the
three and nine month periods ended September 30, 1997 compared to the same
periods in 1996 as the Company increased its size to 29 branches at September
30, 1997, from 26 branches at September 30, 1996.
Other expenses for the three and nine month periods ended September 30,
1997 were $1,204,000 and $3,104,000, increases of $193,000, or 19.1%, and
$428,000, or 16.0%, respectively, from the same periods in 1996. These increases
are reflective of the Company's new branches which required additional
advertising, postage, telephone and other expenses.
CHANGES IN FINANCIAL CONDITION
Total assets at September 30, 1997 were $528.8 million, an increase of
$50.8 million, or 10.6%, over 1996's year end total
13
assets of $478.0 million. Asset growth was funded primarily by increases in
deposits.
At September 30, 1997, loans, net of unearned income and allowance for loan
losses, were $443.5 million compared to $381.3 million at December 31, 1996. Net
loans increased $62.2 million, or 16.3%, from December 31, 1996. The increase is
primarily due to increases in commercial and other real estate lending, as well
as additional consumer loans in the nine months ended September 30, 1997.
Non-performing loans include non-accrual and classified loans. The Company
has a policy of placing loans 90 days delinquent in non-accrual status and
charging them off at 120 days past due. Other loans past due that are well
secured and in the process of collection continue to be carried on the Company's
balance sheet. The Company has aggressive collection practices in which senior
management is actively involved. Nonaccrual loans increased by $210,000, or
34.1%, during the nine months ended September 30, 1997, representing only .34%
of the increase in net loans of $62.2 million during the same period.
The Company maintains an investment portfolio to provide liquidity and
earnings. Investments at September 30, 1997 had both an amortized cost and
market value of $ 44.1 million. At year end 1996, investments with an amortized
cost of $52.5 million had a market value of $52.3 million. This decrease,
resulting from normal maturing of securities and the sale of one security by
PBET for liquidity reasons, was used to fund increases in the loan portfolio.
The funds to support the Company's asset growth have been provided mainly
by increased deposits, which were $455.3 million at September 30, 1997. This
represents an 11.4% increase from the deposits at year end 1996 of $408.7
million. The increase is primarily the result of the Company's aggressive
efforts to attract new deposit customers, including the offering and advertising
of highly competitive CD rates in selected regions of the Company's market area.
EFFECT OF NEW ACCOUNTING STANDARDS
In February, 1997, the financial Accounting standards Board issued
statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128") which (i) replaces the presentation of primary earnings per share ("EPS")
with a presentation of basic EPS; (ii) requires dual presentation of basic and
diluted EPS on the face of the consolidated statements of income regardless of
whether basic and diluted EPS are the same; and (iii) requires a reconciliation
of the numerator and denominator used in computing basic and diluted EPS. Basic
EPS excludes dilution and is computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue
14
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity. Diluted
EPS is computed similarly to fully diluted EPS pursuant to Accounting Principles
Board Opinion No. 15. SFAS 128 is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods. Earlier
application is not permitted. SFAS 128 requires restatement of all prior-period
EPS data presented. The Company does not anticipate that adoption of SFAS 128
will have any material effect on its financial condition or the results of its
operations.
In June, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting of Comprehensive Income"
("SFAS 130"), which establishes standards for reporting and display of
comprehensive income and its components(revenues, expenses, gains and losses) in
a full set of financial statements. This statement also requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. This statement is effective
for fiscal years beginning after December 15, 1997. Earlier application is
permitted. Reclassification of financial statements for earlier periods for
comparative purposes is required. The Company does not anticipate that adoption
of SFAS 130 will have any material effect on its financial condition or the
results of its operations.
Also in June, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131"), which establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. This statement also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. This statement requires the reporting of financial and
descriptive information about an enterprise's reportable operating segments.
This statement is effective for periods beginning after December 15, 1997. In
the initial year of application, comparative information for earlier years is to
be restated. The Company is currently evaluating the impact, if any, that the
adoption of SFAS 131 will have on its disclosures regarding operating
activities.
15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
Not applicable.
16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiaries are involved in various claims and
legal actions arising in the ordinary course of business. Management
currently is not aware of any material legal proceedings to which the
Company or any of its subsidiaries is a party or to which any of their
property is subject.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
On September 5, 1997, the Company announced a 3-for-1 stock split
effected in the form of a 200% stock dividend, payable on October 3,
1997 to shareholders of record as of September 19, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule(for SEC use only)
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements 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.
Date: 11/7/97 Greene County Bancshares, Inc.
--------- ------------------------------
Registrant
Date: 11/7/97 /s/ R. Stan Puckett
--------- -------------------------------
R. Stan Puckett
President and CEO
(Duly authorized officer)
Date: 11/7/97 /s/ William F. Richmond
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William F. Richmond
Sr. Vice President and Chief
Financial Officer
(Principal financial and
accounting officer)
18