Edgar Filing: GREENE COUNTY BANCORP INC

10qsb 12312003

U.S. SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549 

----------------------------------- 

FORM 10-QSB 

[x] QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2003 

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT 

GREENE COUNTY BANCORP, INC. 

(Exact name of small business issuer as specified in its charter) 

Commission file number 0-25165 

     United States                    14-1809721 

(State or other jurisdiction of incorporation or organization)    (I.R.S. Employer Identification Number) 

302 Main Street, Catskill, New York    12414 

(Address of principal executive office)           (Zip code) 

Registrant's telephone number, including area code: (518) 943-2600 

Check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. 

Yes:     X          No:                           

As of January 23, 2004, the registrant had 2,152,835 shares of common stock issued at $ .10 par value, and 2,044,898 were outstanding. 

Transitional Small Business Disclosure 

Format: Yes:                                   No:     X         

	GREENE COUNTY BANCORP, INC.



INDEX



PART I.	FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements
	* Consolidated Statements of Financial Condition	3
	* Consolidated Statements of Income	4-5
	* Consolidated Statements of Comprehensive Income	6
	* Consolidated Statements of Changes in Shareholders’ Equity	7
	* Consolidated Statements of Cash Flows	8
	* Notes to Consolidated Financial Statements	9-12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	12-24

Item 3.	Controls and Procedures	24

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	25

Item 2.	Changes in Securities and Use of Proceeds	25

Item 3.	Defaults Upon Senior Securities	25

Item 4.	Submission of Matters to a Vote of Security Holders	25

Item 5.	Other Information	25

Item 6.	Exhibits and Reports on Form 8-K	25-26

	Signatures	27-31
	Exhibit 31.1 302 Certification of Chief Executive Officer Exhibit 31.2 302 Certification of Chief Financial Officer Exhibit 32.1 906 Statement of Chief Executive Officer Exhibit 32.2 906 Statement of Chief Financial Officer	28 29 30 31

Greene County Bancorp, Inc. 

Consolidated Statements of Financial Condition 

As of December 31, 2003 and June 30, 2003 

(Unaudited) 

ASSETS		December 31, 2003			June 30, 2003

Cash and due from banks	$	11,127,360		$	10,078,827
Federal funds sold		5,751,439			6,839,439

Total cash and cash equivalents		16,878,799			16,918,266

Investment securities, at fair value		105,438,371			99,831,070
Federal Home Loan Bank stock, at cost		1,360,600			1,360,600

Loans		142,166,589			133,711,021
Less: Allowance for loan losses		(1,200,176	)		(1,163,825	)
Unearned origination fees and costs, net		(339,474	)		(337,122	)

Net loans receivable		140,626,939			132,210,074

Premises and equipment		5,027,380			4,697,653
Accrued interest receivable		1,623,060			1,573,825
Prepaid expenses and other assets		871,382			318,495
Other real estate owned		---			55,125

Total assets	$	271,826,531		$	256,965,108


LIABILITIES AND SHAREHOLDERS’ EQUITY
Non-interest bearing deposits	$	29,107,947		$	25,443,349
Interest bearing deposits		198,475,970			192,601,576

Total deposits		227,583,917			218,044,925

Borrowings from FHLB		13,000,000			8,000,000
Accrued expenses and other liabilities		1,576,543			1,722,294
Accrued income taxes		219,991			73,024

Total liabilities		242,380,451			227,840,243

Shareholders’ equity
Preferred stock,
Authorized 1,000,000 at December 31, 2003 and June 30, 2003;		---			---
Common stock, par value $.10 per share;
Authorized: 12,000,000 at December 31, 2003 and June 30, 2003;
Issued: 2,152,835 at December 31, 2003 and June 30, 2003;
Outstanding: 2,042,738 at December 31, 2003
and 2,041,543 at June 30, 2003;		215,284			215,284
Additional paid-in capital		10,170,571			10,092,353
Retained earnings		19,894,023			18,777,623
Accumulated other comprehensive income		713,413			1,664,585
Less: Treasury stock (shares at cost) 110,097 at December 31, 2003,
and 111,292 at June 30, 2003		(1,179,737	)		(1,192,535	)
Unearned stock-based compensation		(68,434	)		(96,941	)
Unearned ESOP shares (at cost) 33,038 at December 31, 2003,
and 40,853 at June 30, 2003		(299,040	)		(335,504	)

Total shareholders’ equity		29,446,080			29,124,865

Total liabilities and shareholders’ equity	$	271,826,531		$	256,965,108


See notes to consolidated financial statements.

Greene County Bancorp, Inc. 

Consolidated Statements of Income 

For the Three Months Ended December 31, 2003 and 2002 

(Unaudited) 


		2003		2002

Interest income:
Loans	$	2,306,146	$	2,332,422
Investment securities		300,005		458,349
Mortgage-backed securities		518,391		299,140
Tax free securities		170,562		116,911
Interest bearing deposits and federal funds sold		31,925		39,945

Total interest income		3,327,029		3,246,767

Interest expense:
Interest on deposits		724,672		1,010,724
Interest on borrowings		132,429		107,904

Total interest expense		857,101		1,118,628

Net interest income		2,469,928		2,128,139

Less: Provision for loan losses		---		30,000


Net interest income after provision for loan losses		2,469,928		2,098,139


Noninterest income:
Service charges on deposit accounts		443,632		412,490
Other operating income		241,776		182,817

Total noninterest income		685,408		595,307

Noninterest expense:
Salaries and employee benefits		1,079,038		917,594
Occupancy expense		103,349		96,062
Equipment and furniture expense		140,727		145,796
Service and data processing fees		258,947		242,944
Office supplies		28,996		31,548
Other		478,843		454,356

Total noninterest expense		2,089,900		1,888,300

Income before provision for income taxes		1,065,436		805,146

Provision for income taxes		311,100		261,400


Net income	$	754,336	$	543,746


Basic EPS	$	0.38	$	0.27
Basic shares outstanding		2,003,134		1,977,943

Diluted EPS	$	0.37	$	0.27
Diluted average shares outstanding		2,061,379		2,031,937

See notes to consolidated financial statements.

Greene County Bancorp, Inc. 

Consolidated Statements of Income 

For the Six Months Ended December 31, 2003 and 2002 

(Unaudited) 


		2003		2002

Interest income:
Loans	$	4,606,839	$	4,732,329
Investment securities		635,024		943,242
Mortgage-backed securities		902,122		543,390
Tax free securities		309,014		218,682
Interest bearing deposits and federal funds sold		62,845		104,956

Total interest income		6,515,844		6,542,599

Interest expense:
Interest on deposits		1,495,879		2,070,763
Interest on borrowings		229,974		215,809

Total interest expense		1,725,853		2,286,572

Net interest income		4,789,991		4,256,027

Less: Provision for loan losses		45,000		30,000


Net interest income after provision for loan losses		4,744,991		4,226,027


Noninterest income:
Service charges on deposit accounts		848,795		795,289
Other operating income		562,551		435,355

Total noninterest income		1,411,346		1,230,644

Noninterest expense:
Salaries and employee benefits		2,121,981		1,799,225
Occupancy expense		210,632		194,840
Equipment and furniture expense		280,845		286,775
Service and data processing fees		489,584		490,887
Office supplies		49,535		65,515
Other		920,012		904,676

Total noninterest expense		4,072,589		3,741,918

Income before provision for income taxes		2,083,748		1,714,753

Provision for income taxes		642,100		529,900


Net income	$	1,441,648	$	1,184,853


Basic EPS	$	0.72	$	0.60
Basic shares outstanding		2,001,796		1,976,780

Diluted EPS	$	0.70	$	0.58
Diluted average shares outstanding		2,058,327		2,030,034

See notes to consolidated financial statements.

Greene County Bancorp, Inc. 

Consolidated Statements of Comprehensive Income 

For the Three Months Ended December 31, 2003 and 2002 

(Unaudited) 

		2003			2002

Net income	$	754,336		$	543,746

Other comprehensive income (loss):

Unrealized holding (loss)/gain arising during the three months
ended December 31, 2003 and 2002, net of
tax (benefit)/expense of ($150,177) and $20,585, respectively.		(285,266	)		54,351


Total other comprehensive income (loss)		(285,266	)		54,351


Comprehensive income	$	469,070		$	598,097

Greene County Bancorp, Inc. 

Consolidated Statements of Comprehensive Income 

For the Six Months Ended December 31, 2003 and 2002 

(Unaudited) 

		2003			2002

Net income	$	1,441,648		$	1,184,853

Other comprehensive income (loss):

Unrealized holding (loss)/gain arising during the six months
ended December 31, 2003 and 2002, net of tax (benefit)/expense
of ($634,115) and $310,366 respectively.		(951,172	)		489,021


Total other comprehensive income (loss)		(951,172	)		489,021


Comprehensive income	$	490,476		$	1,673,874

See notes to consolidated financial statements. 

Greene County Bancorp, Inc. 

Consolidated Statements of Changes in Shareholders’ Equity 

For the Six Months Ended December 31, 2003 and 2002 

(Unaudited) 

				Accumulated
		Additional		Other	Unearned		Unearned	Total
	Capital	Paid – In	Retained	Comprehensive	Stock-based	Treasury	ESOP	Shareholders’
	Stock	Capital	Earnings	Income	Compensation	Stock	Shares	Equity

Balance at
June 30, 2002	$215,284	$10,084,621	$17,164,403	$880,401	($156,791)	($1,371,527)	($415,685)	$26,400,706


ESOP shares earned		62,396					37,294	99,690

Options exercised		(3,437)				12,949		9,512

Stock-based compensation earned					28,507			28,507

Dividends paid			(286,378)					(286,378)

Net income			1,184,853					1,184,853

Change in unrealized gain, net				489,021				489,021

Balance at
December 31, 2002	$215,284	$10,143,580	$18,062,878	$1,369,422	($128,284)	($1,358,578)	($378,391)	$27,925,911


Balance at
June 30, 2003	$215,284	$10,092,353	$18,777,623	$1,664,585	($96,941)	($1,192,535)	($335,504)	$29,124,865

ESOP shares earned		78,975					36,464	115,439

Options exercised		(757)				12,798		12,041

Stock-based compensation earned					28,507			28,507


Dividends paid			(325,248)					(325,248)

Net income			1,441,648					1,441,648

Change in unrealized gain, net				(951,172)				(951,172)


Balance at
December 31, 2003	$215,284	$10,170,571	$19,894,023	$713,413	($68,434)	($1,179,737)	($299,040)	$29,446,080

See notes to consolidated financial statements. 

Greene County Bancorp, Inc. 

Consolidated Statements of Cash Flows 

For the Six Months Ended December 31, 2003 and 2002 

(Unaudited) 

		2003			2002

Cash flows from operating activities:
Net Income	$	1,441,648		$	1,184,853
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		259,600			277,800
Net amortization of premium		677,230			171,304
Provision for loan losses		45,000			30,000
ESOP and other stock-based compensation earned		143,946			128,197
Gain on sale of other real estate		(1,535	)		(59,770	)
Net increase (decreased ) in accrued income taxes		147,219			(29,540	)
Net increase in accrued interest receivable		(49,235	)		(76,230	)
Net increase in prepaid and other assets		(552,887	)		(20,476	)
Net increase in other liabilities		488,364			150,017

Net cash provided by operating activities		2,599,350			1,756,155

Cash flows from investing activities:
Proceeds from maturities and calls of securities		6,340,528			7,269,854
Purchases of securities and other investments		(7,770,628	)		(3,727,224	)
Principal payments on securities		691,467			755,936
Principal payments on mortgage-backed securities		8,066,435			3,807,962
Purchases of mortgage-backed securities		(15,197,872	)		(18,999,057	)
Net increase in loans receivable		(8,461,865	)		(3,136,644	)
Proceeds from the sale of other real estate		56,660			90,000
Purchases of premises and equipment		(589,327	)		(184,254	)

Net cash used in investing activities		(16,864,602	)		(14,123,427	)

Cash flows from financing activities:
Borrowings from FHLB		5,000,000			---
Dividends paid		(325,248	)		(286,378	)
Proceeds from issuance of stock options		12,041			9,512
Net increase in deposits		9,538,992			14,275,551

Net cash provided by financing activities		14,225,785			13,998,685

Net (decrease) increase in cash and cash equivalents		(39,467	)		1,631,413

Cash and cash equivalents at beginning of period		16,918,266			17,832,021


Cash and cash equivalents at end of period	$	16,878,799		$	19,463,434

See notes to consolidated financial statements. 

Greene County Bancorp, Inc. 

Notes to Consolidated Financial Statements 

As of and for the Three and Six months Ended December 31, 2003 and 2002 

Basis (1) Basis of Presentation

The accompanying consolidated balance sheet information as of June 30, 2003 was derived from the audited consolidated financial statements of Greene County Bancorp, Inc. (the "Company") and its wholly owned subsidiary, The Bank of Greene County (the "Bank") at June 30, 2003. The consolidated financial statements at and for the three and six months ended December 31, 2003 and 2002 are unaudited. 

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. To the extent that information and footnotes required by GAAP for complete financial statements are contained in or are consistent with the audited financial statements incorporated by reference to Greene County Bancorp, Inc.’s Annual Report on Form 10-KSB for the year ended June 30, 2003, such information and footnotes have not been duplicated herein. In the opinion of management, all adjustments (consisting of only normal recurring items) necessary for a fair presentation of the financial position and results of operations and cash flows at and for the periods presented have been included. Amounts in the prior year’s consolidated financial statements have been reclassified whenever necessary to conform to the current year’s presentation. These reclassifications had no effect on net income or retained earnings as previously reported. All material inter-company accounts and transactions have been eliminated in the consolidation. The results of operations and other data for the three and six months ended December 31, 2003 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2004. 

CRITICAL ACCOUNTING POLICY 

Greene County Bancorp, Inc.’s critical accounting policy relates to the allowance for loan losses (the "Allowance"). It is based on management’s opinion of an amount that is intended to absorb losses in the existing portfolio. The allowance for loan losses is established through a provision for losses based on management’s evaluation of the risk inherent in the loan portfolio, the composition of the portfolio, specific impaired loans and current economic conditions. Such evaluation, which includes a review of all loans for which full collectibility may not be reasonably assured, considers among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, historical loan loss experience, management’s estimate of probable credit losses and other factors that warrant recognition in providing for the allowance for loan losses. However, this evaluation involves a high degree of complexity and requires management to make subjective judgments that often require assumptions or estimates about highly uncertain matters. This critical accounting policy and its application are periodically reviewed with the Audit Committee and the Board of Directors. 

(2)     Nature of Operations 

The Bank of Greene County has six full-service offices and an operations center located in its market area consisting of Greene County and southern Albany County, New York. The Bank of Greene County is primarily engaged in the business of attracting deposits from the general public in The Bank of Greene County’s market area, and investing such deposits, together with other sources of funds in loans and investment securities. 

(3)     Use of Estimates 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and valuation of other real estate owned ("OREO"). 

While management uses available information to recognize losses on loans and OREO, future additions to the Allowance, or OREO write-downs, may be necessary based on changes in economic conditions, asset quality or other factors. In addition, various regulatory authorities, as an integral part of their examination process, periodically review The Bank of Greene County’s Allowance and the carrying value of OREO and other assets. Such authorities may require The Bank of Greene County to recognize additions to the Allowance and/or write down the carrying value of OREO or other assets based on their judgments of information available to them at the time of their examination. 

(4)     Earnings Per Share 

Basic earnings per share ("EPS") on common stock are computed by dividing net income by the weighted average number of shares of common stock outstanding for the period. Shares of restricted stock are not considered outstanding for the calculation of basic earnings per share until they become fully vested. Diluted earnings per share are computed in a manner similar to that of basic earnings per share except that the weighted average number of common shares outstanding is increased to include the number of incremental common shares that would have been outstanding under the treasury stock method if all potentially dilutive instruments (such as stock options and unvested restricted stock) became vested and (in the case of stock options) exercised during the period. Unallocated common shares held by the ESOP are not included in the weighted average number of common shares outstanding for either the basic or diluted earnings per share calculations. 

		Net Income	Weighted Average Number of Shares Outstanding		Earnings Per Share
Three Months Ended

December 31, 2003:	$	754,336
Basic EPS			2,003,134	$	0.38
Diluted EPS			2,061,379	$	0.37


December 31, 2002:	$	543,746
Basic EPS			1,977,943	$	0.27
Diluted EPS			2,031,937	$	0.27

Six Months Ended

December 31, 2003:	$	1,441,648
Basic EPS			2,001,796	$	0.72
Diluted EPS			2,058,327	$	0.70


December 31, 2002:	$	1,184,853
Basic EPS			1,976,780	$	0.60
Diluted EPS			2,030,034	$	0.58

(5)     Dividends 

The Board of Directors declared a semi-annual $0.36 per share cash dividend on July 16, 2003, for shareholders of record August 15, 2003, payable September 1, 2003. The dividend reflected an annual cash dividend rate of $0.72 per share, which represented an increase from the previous annual cash dividend rate of $0.68 per share. The increase in the dividend paid out was a result of improved earnings as well as the waiver of such dividends by Greene County Bancorp, MHC, Greene County Bancorp, Inc.’s mutual holding company. Please refer to the subsequent events section for details of the January 2004 dividend declaration. 

(6)     Impact of Inflation and Changing Prices 

The consolidated financial statements of Greene County Bancorp, Inc. and notes thereto, presented elsewhere herein, have been prepared in accordance with U.S. generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time and due to inflation. The impact of inflation is reflected in the increased cost of Greene County Bancorp, Inc.’s operations. Unlike most industrial companies, nearly all the assets and liabilities of Greene County Bancorp, Inc. are monetary. As a result, interest rates have a greater impact on Greene County Bancorp, Inc.’s performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the price of goods and services. 

(7)      Impact of Recent Accounting Pronouncements 

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46"). FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both.  FIN 46 also requires disclosures about variable interest entities that a company is not required to consolidate but in which it has a significant variable interest. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to existing entities in the first fiscal year or interim period ending after December 15, 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. The adoption of the Standard, effective October 1, 2003, had no impact on the Company’s consolidated financial statements and related disclosures because there are no variable interest entities. 

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with characteristics of both Liabilities and Equity, to establish standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.  An issuer is required to classify a financial instrument that is within such standard’s scope as a liability (or an asset in some circumstances).  The requirements of this Statement apply to freestanding financial instruments, including those that comprise more than one option or forward contract.  This Statement does not apply to features that are embedded in a financial instrument that is not a derivative in its entirety.  This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003.  The adoption of this Statement, effective July 1, 2003, had no impact on the Company’s consolidated financial statements. 

(8)     Stock-Based Compensation 

At December 31, 2003, Greene County Bancorp, Inc. had two stock-based compensation plans, which are described more fully in Note 9 of the financial statements and notes thereto for the year ended June 30, 2003. SFAS No. 123, Accounting for Stock-Based Compensation , requires the measurement of the fair value of stock options or warrants granted to employees to be included in the statement of operations or, alternatively, disclosed in the notes to consolidated financial statements.  The Company accounts for stock-based compensation of employees under the intrinsic value method of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees , and related Interpretations and has elected the disclosure-only alternative under SFAS No. 123.  No stock-based compensation cost is reflected in net income, as all options granted under the plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of FASB Statement No. 123,  Accounting for Stock-Based Compensation, to stock-based employee compensation. 

	Six Months Ended				Three Months Ended

	December 31,				December 31,

		2003		2002		2003		2002

Net income, as reported	$	1,441,648	$	1,184,853	$	754,336	$	543,746



Deduct: Total stock-based compensation

expense determined under fair value

based method for all awards, net of

related tax effects		17,077		16,953		8,736		8,280



Pro forma net income	$	1,424,571	$	1,167,900	$	745,600	$	535,466



Earnings per share:



Basic – as reported	$	0.72	$	0.60	$	0.38	$	0.27

Basic – pro forma	$	0.71	$	0.59	$	0.37	$	0.27



Diluted – as reported	$	0.70	$	0.58	$	0.37	$	0.27

Diluted – pro forma	$	0.69	$	0.58	$	0.36	$	0.26

The fair value of each option grant has been estimated using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in all periods presented: dividend yield of 3.0%, expected volatility of 29.54%, risk free interest rate of 4.78%, and expected term of 5 years.

(9)     Subsequent Event 

On January 21, 2004, the Board of Directors declared a semi-annual cash dividend of  $0.40 per share of the Company's common stock.  The dividend reflects an annual cash dividend rate of  $0.80 per share, which represented an increase from the current annual cash dividend rate of $0.72 per share.  The dividend will be payable to stockholders of record as of February 15, 2004, and will be paid on March 1, 2004.  The Company's mutual holding company has waived receipt of the cash dividend.

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operation 

General 

Greene County Bancorp, Inc.’s results of operations depend primarily on its net interest income, which is the difference between the income earned on Greene County Bancorp, Inc.’s loan and securities portfolios and its cost of funds, consisting of the interest paid on deposits and borrowings. Results of operations are also affected by Greene County Bancorp, Inc.’s provision for loan losses, income and expense pertaining to other real estate owned, gains and losses from sales of securities, noninterest income and noninterest expense. Noninterest income consists primarily of fees and service charges. Greene County Bancorp, Inc.’s noninterest expense consists principally of compensation and employee benefits, occupancy, equipment and data processing, and other operating expenses. Results of operations are also significantly affected by general economic and competitive conditions, changes in interest rates, as well as government policies and actions of regulatory authorities. Additionally, future changes in applicable law, regulations or government policies may materially affect Greene County Bancorp, Inc. 

Special Note Regarding Forward Looking Statements 

This quarterly report contains forward-looking statements. Greene County Bancorp, Inc. desires to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and is including this statement for the express purpose of availing itself of the protections of the safe harbor with respect to all such forward-looking statements. These forward-looking statements, which are included in this Management’s Discussion and Analysis and elsewhere in this quarterly report, describe future plans or strategies and include Greene County Bancorp, Inc.’s expectations of future financial results. The words "believe," "expect," "anticipate," "project," and similar expressions identify forward-looking statements. Greene County Bancorp, Inc.’s ability to predict results or the effect of future plans or strategies or qualitative or quantitative changes based on market risk exposure is inherently uncertain. Factors that could affect actual results include but are not limited to: 

     (a)   changes in general market interest rates,

     (b)   general economic conditions, 

     (c)   legislative and regulatory changes, 

     (d)   monetary and fiscal policies of the U.S. Treasury and the Federal Reserve, 

     (e)   changes in the quality or composition of The Bank of Greene County’s loan portfolio or the 

             consolidated investment portfolios of The Bank of Greene County and Greene County Bancorp, Inc., 

     (f)   deposit flows,

     (g)   competition, and

     (h)   demand for financial services in Greene County Bancorp, Inc.’s market area. 

These factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements, since results in future periods may differ materially from those currently expected because of various risks and uncertainties. 

Comparison of Financial Condition as of December 31, 2003 and June 30, 2003 

ASSETS 

Total assets increased to $271.8 million at December 31, 2003 from $257.0 million at June 30, 2003, an increase of $14.8 million, or 5.8%. The growth in assets occurred in loans and investments. The growth in loans was funded by deposit growth and the investment growth was funded by increased borrowings from the FHLB. 

CASH AND CASH EQUIVALENTS 

Total cash and cash equivalents remained constant at $16.9 million between December 31, 2003 and June 30, 2003. The level of federal funds decreased by $1.0 million and cash increased by $1.0 million between December 31, 2003 and June 30, 2003 due to a fluctuation in cash and check clearing activities. 

INVESTMENT SECURITIES 

Investment securities increased to $105.4 million at December 31, 2003 as compared to $99.8 million at June 30, 2003, an increase of $5.6 million, or 5.6%. The increase in investments was primarily the result of the purchase of over $5.0 million in tax-free securities of state and political subdivisions funded by an advance of $5.0 million from the FHLB. There has been significant other activity in the investment portfolio including the purchase of $15.2 million in mortgage-backed securities. Management continued to invest in the nonstandard mortgage-backed securities which offer yield maintenance provisions and tend to have final maturities significantly shorter than standard mortgage-backed securities, which tend to extend as interest rates rise. These nonstandard mortgage-backed securities were discussed further in the June 30, 2003 Annual Report in the investment section. These purchases offset maturities of $6.3 million and principle pay downs of $8.1 million of mortgage-backed securities. Net unrealized gains on the investment portfolio amounted to $1.2 million at December 31, 2003 as compared to $2.7 million at June 30, 2003, a decrease of $1.5 million. The decrease in the market value of the portfolio was primarily the result of the interest rate environment and the maturity of, and principle payments on, the often higher yielding investments within the portfolio. See the discussion of interest income and net interest income below for further detail of this transition. 

(Dollars rounded to nearest thousand)		Market value at Dec. 31, 2003	Percentage of portfolio			Market value at June 30, 2003	Percentage of portfolio
		Market value at Dec. 31, 2003	Percentage of portfolio			Market value at June 30, 2003	Percentage of portfolio

U.S. government agencies	$	7,209	6.9	%	$	9,659	9.7	%
State and political subdivisions		20,986	19.9			14,655	14.6
Mortgage-backed securities		62,965	59.7			57,581	57.7
Asset-backed securities		219	0.2			288	0.3
Corporate debt securities		12,742	12.1			16,283	16.3

Total debt securities		104,121	98.8			98,466	98.6

Equity securities and other		1,317	1.2			1,365	1.4


Total available-for-sale securities	$	105,438	100.0	%	$	99,831	100.0	%

LOANS 

Net loans receivable increased to $140.6 million at December 31, 2003 from $132.2 million at June 30, 2003, an increase of $8.4 million, or 6.4%. The continued low interest rate environment and strong customer satisfaction from personal service continued to enhance loan growth. Loan modifications and refinancing were still significant, but demand for such appeared to have peaked. The Company has been able to retain a significant amount of refinanced mortgages and other loans. The historically low interest rate environment and competitors who continue to aggressively price residential mortgages and commercial real estate loans continue to affect the market. As a result of these changes, the residential mortgage portfolio increased by $6.1 million and the home equity portfolio increased by $1.3 million in the six month period. It appears consumers continue to use the equity in their homes to fund financing needs for some activities where in the past an installment loan may have been the choice. The low financing options from auto makers continues to cut into the Bank’s automobile loan generation. 

(Dollars rounded to nearest thousand)		At Dec. 31, 2003		Percentage of portfolio			At June 30, 2003		Percentage of portfolio
		At Dec. 31, 2003		Percentage of portfolio			At June 30, 2003		Percentage of portfolio
Real estate mortgages
Residential	$	108,832		76.5	%	$	102,726		76.8	%
Commercial		12,786		9.0			11,481		8.6
Home equity loans		9,142		6.4			7,821		5.8
Commercial loans		6,823		4.8			6,576		4.9
Installment loans		3,917		2.8			4,360		3.3
Passbook loans		667		0.5			747		0.6

Total loans	$	142,167		100.0	%	$	133,711		100.0	%
Less: Allowance for loan losses		(1,200	)				(1,164	)
Unearned origination fees and costs, net		(339	)				(337	)

Net loans receivable	$	140,628				$	132,210

ALLOWANCE FOR LOAN LOSSES 

The allowance for loan losses is established through a provision for loan losses based on management’s evaluation of the risk inherent in the loan portfolio, the composition of the loan portfolio, specific impaired loans and current economic conditions. Such evaluation, which includes a review of all loans on which full collectibility may not be reasonably assured, considers among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, historical loan loss experience and other factors that warrant recognition in providing for an allowance for loan losses. 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 valuation of OREO. Such agencies may require The Bank of Greene County to recognize additions to the allowance based on their judgment about information available to them at the time of their examination. The allowance for loan losses is increased by a provision for loan losses (which results in a charge to expense) and is reduced by net charge-offs. During the six months ended December 31, 2003 and 2002, the level of the allowance for loan losses was affected most significantly by the level of recoveries, as in both periods a relatively large recovery was made. The decision to reduce the provision for loan losses to zero for the quarter ended December 31, 2003 was the result of the low level of non-performing loans to total loans of 0.17% and the relatively high ratio of the allowance for loan loss to nonperforming loans of 546.20% at September 30, 2003. Any future increase in the allowance for loan losses or loan charge-offs could have a material adverse effect on Greene County Bancorp, Inc.’s results of operations and financial condition. 

Allowance for loan losses		Six months ended			Six months ended
		December 31, 2003			December 31, 2002
Balance at the beginning of the period	$	1,163,825		$	1,068,734
Charge-offs:
Commercial loans		---			13,319
Installment loans to individuals		36,863			26,032

Total loans charged off		36,863			39,351

Recoveries:
Home equity		2,791			---
Commercial loans		---			24,093
Installment loans to individuals		25,423			18,165

Total recoveries		28,214			42,258


Net charge-offs		8,649			(2,907	)

Provisions charged to operations		45,000			30,000

Balance at the end of the period	$	1,200,176		$	1,101,641


Ratio of net charge-offs to average loans outstanding		0.01	%		(0.00)	%
Ratio of net charge-offs to nonperforming assets		1.94	%		(0.95)	%
Allowance for loan loss to nonperforming loans		268.56	%		359.28	%
Allowance for loan loss to net loans receivable		0.85	%		0.84	%

Nonaccrual Loans and Nonperforming Assets 

Loans are reviewed on a regular basis. Management determines that a loan is impaired or nonperforming when it is probable at least a portion of the loan will not be collected in accordance with its contractual terms due to an irreversible deterioration in the financial condition of the borrower or the value of the underlying collateral. When a loan is determined to be impaired, the measurement of the loan is based on the present value of estimated future cash flows, except that all collateral-dependent loans are measured for impairment based on the fair value of the collateral. Management places loans on nonaccrual status once the loans have become over 90 days delinquent. Nonaccrual is defined as a loan in which collectibility is questionable and therefore interest on the loan will no longer be recognized on an accrual basis. A loan does not have to be 90 days delinquent in order to be classified as nonperforming. Other real estate owned is considered nonperforming. The Bank of Greene County had no accruing loans delinquent more than 90 days at December 31, 2003 or June 30, 2003. 

Analysis of Nonaccrual Loans and Nonperforming Assets 

		At Dec. 31, 2003			At June 30, 2003


Nonaccruing loans:
Real estate mortgage loans:
Residential mortgages loans (one- to four-family)	$	373,960		$	211,074
Commercial mortgage loans		---			---
Home equity		67,683			2,104
Commercial loans		---			---
Installment loans to individuals		5,251			7,183


Total nonaccruing loans		446,894			220,361

Real Estate Owned:
Residential mortgages loans (one- to four-family)		---			55,125


Total real estate owned		---			55,125


Total nonperforming assets	$	446,894		$	275,486


Total nonperforming assets as a percentage of total assets		0.16	%		0.11	%

Total nonperforming loans to total loans		0.32	%		0.16	%

At December 31, 2003, gross interest income of $19,100 would have been recorded on nonaccrual loans under their original terms if the loans had been current throughout the period. No interest income was recorded on nonaccrual loans or on accruing loans more than 90 days delinquent at December 31, 2003. 

DEPOSITS 

Total deposits increased to $227.6 million at December 31, 2003 from $218.0 million at June 30, 2003, an increase of $9.6 million, or 4.4%. Increases are generally the result of the Company’s continued focus on expanded commercial services, including commercial deposits, and core deposit attraction. General economic conditions resulted in more customers moving funds from time deposits to demand accounts and other savings products over the last several quarters. Also a local competitor is preparing for a merger with an out of area institution and the Bank has seen some new deposit relationships as a result of this merger. 

(Dollars rounded to nearest thousand)		At Dec. 31, 2003	Percentage of portfolio			At June 30, 2003	Percentage of portfolio
		At Dec. 31, 2003	Percentage of portfolio			At June 30, 2003	Percentage of portfolio

Noninterest bearing deposits	$	29,108	12.8	%	$	25,443	11.7	%
Certificates of deposit		60,352	26.5			62,074	28.5
Savings deposits		90,123	39.6			87,699	40.2
Money market deposits		28,493	12.5			26,364	12.1
NOW deposits		19,508	8.6			16,465	7.5

Total deposits	$	227,584	100.0	%	$	218,045	100.0	%

BORROWINGS 

At December 31, 2003, The Bank of Greene County had the following borrowings: 

Amount	Rate	Maturity Date
$5,000,000	3.64% -Fixed two years, convertible thereafter	10/24/2013
$3,000,000	1.55% -Fixed	1/14/2004
2,500,000	6.82% -Fixed	09/02/2004
2,500,000	6.80% -Fixed	10/04/2005

$13,000,000

EQUITY 

The primary changes in equity included changes in retained earnings and accumulated comprehensive income. Retained earnings was affected by net income of $1.4 million and partially offset by dividends paid of $325,000. A decrease in net unrealized gains associated with the available-for-sale investment portfolio caused accumulated other comprehensive income to decrease by approximately $1.0 million, net of tax. The remaining changes in equity were due to amortization of compensation expense associated with the Employee Stock Ownership Plan ("ESOP") and stock-based compensation expense associated with the Management Recognition and Retention Plan as well as 1,145 options exercised. 

Comparison of Operating Results for the Six and Three Months Ended December 31, 2003 and 2002 

Average Balance Sheet 

The following table sets forth certain information relating to Greene County Bancorp, Inc. for the six months and quarter ended December 31, 2003 and 2002. For the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, are expressed both in dollars and rates. No tax equivalent adjustments were made. For the six months and quarter ended December 31, 2003, average balances were based on daily averages. For the six months and quarter ended December 31, 2002, average balances are average monthly balances, except for federal funds for which a daily average was calculated and the interest-bearing bank balance for which a weekly balance was available. Interest and balances of nonaccrual loans and certain deferred origination fees have been excluded from the average loan balances and yield calculations in these tables. 

	Six Months
(Dollars in thousands)		2003		2002		2003		2002	2003		2002
		Average		Average		Interest		Interest	Average		Average
		Outstanding		Outstanding		Earned/		Earned/	Yield/		Yield/
		Balance		Balance		Paid		Paid	Rate		Rate
Interest-earning assets:
Loans receivable, net ¹	$	135,163	$	130,427	$	4,607	$	4,733	6.82	%	7.26	%
Investment securities ²		102,795		74,732		1,846		1,677	3.59		4.49
Federal funds		10,690		10,625		52		98	0.97		1.84
Interest-bearing bank balances		1,564		371		11		7	1.41		3.77
FHLB stock		1,361		1,121		---		28	---		5.00

Total interest-earning assets		251,573		217,276		6,516		6,543	5.18		6.02


Interest-bearing liabilities:
Savings and money market deposits		117,512		92,903		674		941	1.15		2.03
Demand and NOW deposits		45,866		36,763		44		73	0.19		0.40
Certificates of deposit		61,103		64,279		778		1,057	2.55		3.29
Borrowings		9,882		9,000		230		216	4.65		4.80

Total interest-bearing liabilities	$	234,363	$	202,945	$	1,726	$	2,287	1.47	%	2.25	%


Net interest income					$	4,790	$	4,256

Net interest spread									3.71	%	3.77	%

Net interest margin									3.81	%	3.92	%

Average interest-earning assets to
average interest-bearing liabilities									107.34	%	107.06	%

	Three Months
(Dollars in thousands)		2003		2002		2003		2002	2003		2002
		Average		Average		Interest		Interest	Average		Average
		Outstanding		Outstanding		Earned/		Earned/	Yield/		Yield/
		Balance		Balance		Paid		Paid	Rate		Rate
Interest-earning assets:
Loans receivable, net ¹	$	137,246	$	130,866	$	2,306	$	2,332	6.72	%	7.13	%
Investment securities ²		102,335		77,692		989		854	3.87		4.40
Federal funds		10,274		9,452		25		37	0.97		1.57
Interest-bearing bank balances		1,901		375		7		3	1.48		3.20
FHLB stock		1,361		1,121		---		20	---		7.14

Total interest-earning assets		253,117		219,506		3,327		3,246	5.26		5.92


Interest-bearing liabilities:
Savings and money market deposits		118,461		94,816		332		468	1.12		1.97
Demand and NOW deposits		46,934		36,913		22		32	0.19		0.35
Certificates of deposit		60,635		64,019		371		510	2.45		3.19
Borrowings		11,763		9,000		132		108	4.49		4.80

Total interest-bearing liabilities	$	237,793	$	204,748	$	857	$	1,118	1.44	%	2.18	%


Net interest income					$	2,470	$	2,128

Net interest spread									3.82	%	3.74	%

Net interest margin									3.90	%	3.88	%

Average interest-earning assets to
average interest-bearing liabilities									106.44	%	107.21	%

1 Calculated net of deferred loan fees, loan discounts, loans in process and loan loss reserves. 

2 Includes tax-free securities, mortgage-backed securities and asset-backed securities. 

Rate / Volume Analysis 

The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected Greene County Bancorp, Inc.’s interest income and interest expense during the periods indicated. Information is provided in each category with respect to: 

     (i)    Change attributable to changes in volume (changes in volume multiplied by prior rate); 

     (ii)   Change attributable to changes in rate (changes in rate multiplied by prior volume); and 

     (iii)  The net change. 

The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate. 

	Six Months
(Dollars in thousands)	2003 versus 2002

	Increase/(Decrease)							Total
	Due to							Increase/
Interest-earning assets:		Volume			Rate			(Decrease)
Loans receivable, net ¹	$	188		$	(314	)	$	(126	)
Investment securities ²		362			(193	)		169
Federal funds		1			(47	)		(46	)
Interest-bearing bank balances		5			(1	)		4
FHLB stock		8			(36	)		(28	)

Total interest-earning assets		564			(591	)		(27	)


Interest-bearing liabilities:
Savings deposits		419			(686	)		(267	)
Demand and NOW deposits		26			(55	)		(29	)
Certificates of deposit		(50	)		(229	)		(279	)
Borrowings		21			(7	)		14

Total interest-bearing liabilities		416			(977	)		(561	)

Net interest income	$	148		$	386		$	534

	Three Months
(Dollars in thousands)	2003 versus 2002

	Increase/(Decrease)							Total
	Due to							Increase/
Interest-earning assets:		Volume			Rate			(Decrease)
Loans receivable, net ¹	$	145		$	(171	)	$	(26	)
Investment securities ²		218			(83	)		135
Federal funds		4			(16	)		(12	)
Interest-bearing bank balances		5			(1	)		4
FHLB stock		5			(25	)		(20	)

Total interest-earning assets		377			(296	)		81


Interest-bearing liabilities:
Savings deposits		186			(322	)		(136	)
Demand and NOW deposits		15			(25	)		(10	)
Certificates of deposit		(26	)		(113	)		(139	)
Borrowings		30			(6	)		24

Total interest-bearing liabilities		205			(466	)		(261	)

Net interest income	$	172		$	170		$	342

1 Calculated net of deferred loan fees, loan discounts, loans in process and loan loss reserves. 

2 Includes tax-free securities, mortgage-backed securities and asset-backed securities. 

GENERAL 

Return on average assets and return on average equity are common methods of measuring operating results. Return on average assets increased to 1.09% for the six months ended December 31, 2003 as compared to 1.03% for the six months ended December 31, 2002. Return on average assets increased to 1.13% for the quarter ended December 31, 2003 as compared to 0.93% for the quarter ended December 31, 2002. Return on average equity increased to 10.02% for the six months ended December 31, 2003 as compared to 8.75% for the six months ended December 31, 2002. Return on average equity increased to 10.41% for the quarter ended December 31, 2003 as compared to 7.92% for the quarter ended December 31, 2002. The improvement in return on average assets and return on average equity is primarily the result of improved earnings. Net income increased $257,000, or 21.7% when comparing the six month periods ended December 31, 2003 and 2002; and $211,000, or 38.8% when comparing the quarters ended December 31, 2003 and 2002. Average assets increased $34.0 million, or 14.8% to $264.0 million for the six months ended December 31, 2003 as compared $230.0 million for the six months ended December 31, 2002. Average assets increased $33.0 million, or 14.1% to $266.9 million for the quarter ended December 31, 2003 as compared $233.9 million for the six months ended December 31, 2002. Average equity increased $1.7 million, or 6.3% to $28.8 million for the six months ended December 31, 2003 as compared $27.1 million for the six months ended December 31, 2002. Average equity increased $1.5 million, or 5.5% to $29.0 million for the quarter ended December 31, 2003 as compared $27.5 million for the quarter ended December 31, 2002. As illustrated, net income increased more significantly than average assets causing the improvement in return on average assets. Correspondingly, net income also improved more significantly than average equity increased causing the improvement in return on average equity. 

INTEREST INCOME 

Total interest income remained relatively consistent at $6.5 million for the six-months and  $3.3 million for the quarters ended December 31, 2003 and 2002. The primary reason for the relatively flat level of interest income despite an increase in average interest-earning assets of $34.3 million when comparing the six-months ended December 31, 2003 and 2002 was due to the declining yield on such assets of 84 basis points to 5.18% for the six-months ended December 31, 2003 from 6.02% for the six-months ended December 31, 2002. Due to the continued low interest rate environment, as assets mature, investments pay-down and new funds are invested, the yield on such assets has been lower when comparing the six-months and quarter ended December 2003 to the six months and the quarter ended December 2002. This trend is expected to continue as interest rates remain low and essentially flat. As demonstrated in the rate/volume tables above, the decreases in loan yields had the most significant effect on the overall decrease in interest income. However, the increase in investment securities volume offset the corresponding decreases in yield on such investments and contributed to offsetting further decreases in interest income. Included in interest income have been earnings on Federal Home Loan Bank of New York (FHLBNY) stock. As a member of FHLBNY the Bank is required to own stock. During the six months ended December 31, 2003, FHLBNY did not pay dividends on the stock due to a loss that was taken on several investments, further contributing to the overall declining yield on interest-earning assets. 

INTEREST EXPENSE 

Total interest expense decreased to $1.7 million for the six months ended December 31, 2003 as compared to $2.3 million for the six months ended September 30, 2002, a decrease of $0.6 million, or 26.1%. Total interest expense decreased to $0.9 million for the quarter ended December 31, 2003 as compared to $1.1 million for the quarter ended December 30, 2002, a decrease of $0.2 million, or 18.2%. As demonstrated in the rate/volume table above, the decrease in rates paid on certificates of deposit and savings accounts had the largest impact on the overall decrease in average rate paid on total interest-bearing liabilities. 

The rate on interest-bearing liabilities decreased by 78 basis points to 1.47% for the six months ended December 31, 2003 as compared to 2.25% for the six months ended December 31, 2002. This decrease in average rate offset the increase in average interest-bearing liabilities of $31.4 million when comparing the six months ended December 2003 and 2002. The overall rate on interest-bearing liabilities decreased by 74 basis points to 1.44% for the quarter ended December 31, 2003 as compared to 2.18% for the quarter ended December 31, 2002. This decrease in average rate offset the increase in average interest-bearing liabilities of $33.1 million when comparing the quarters ended December 2003 and 2002. In early July 2003, the largest decrease in rate of 50 basis points on core deposit accounts was implemented by the Bank. Correspondingly money market and certificate of deposit rates were also adjusted downward although not necessarily to the same extent. It should be noted however, that further core deposit rate cuts will be difficult given the low rates currently being paid. 

NET INTEREST INCOME 

Net interest income increased to $4.8 million for the six months and $2.5 million for the quarter ended December 31, 2003 as compared to $4.3 million for the six months and $2.1 million for the quarter ended December 31, 2002, improvements of $0.5 million and $0.4 million, or 11.6% and 19.0%, respectively. Net interest spread decreased to 3.71% as compared to 3.77% and net interest margin decreased to 3.81% as compared to 3.92% when comparing the six month periods ended December 31, 2003 to 2002. These changes were the result of a continued low interest rate environment. As assets mature or the yield on such assets adjust they have frequently been replaced with lower yielding assets resulting in the lower net interest spread and margin when comparing the six-month periods. Net interest spread increased to 3.82% as compared to 3.74% and net interest margin increased to 3.90% as compared to 3.88% when comparing the quarters ended December 31, 2003 to 2002. When comparing both the three and six months periods ended December 31, 2003 and 2002, net interest income was favorably impacted by growth in net interest earning assets. The improvement in net interest income contributed to the overall improvement in net income. In a rising or flat interest rate environment The Bank of Greene County’s net interest margin and spread would be more likely to shrink than in a declining rate environment, which could ultimately negatively impact net income. 

PROVISION FOR LOAN LOSSES 

The provision for loan losses increased to $45,000 for the six-months ended December 31, 2003 as compared to $30,000 for the six-months ended December 31, 2002. During the quarter ended December 31, 2003, no provision for loan losses was recorded as compared to $30,000 for the quarter ended December 31, 2002. The decision to reduce the provision for loan losses to zero for the quarter ended December 31, 2003 was the result of the low level of nonperforming loans to total loans and the relatively high ratio of the allowance for loan loss to nonperforming loans at September 30, 2003. 

NONINTEREST INCOME 

Noninterest income increased to $1.4 million for the six months ended December 31, 2003 as compared to $1.2 million for the six months ended December 31, 2002, an increase of $0.2 million or 16.7%. Noninterest income increased to $685,000 for the quarter ended December 31, 2003 as compared to $595,000 for the quarter ended December 31, 2002, an increase of $90,000 or 15.1%. A significant item affecting noninterest income was fee income in connection with mortgage refinancing activities whereby previously deferred income was recognized immediately as a result of refinancing. An increase in the volumes associated with e-commerce and debit cards also contributed to higher non-interest income for the given periods. These increased expenses were partially due to an increase in the volume of accounts. During the six months ended December 31, 2002, a gain of $67,000 due to sales of real estate owned affected earnings; such income amounted to $1,500 during the six months ended December 31, 2003. 

NONINTEREST EXPENSE 

Noninterest expense increased to $4.1 million from $3.7 million, an increase of $0.4 million or 10.8% when comparing the six months ended December 31, 2003 and 2002. Noninterest expense increased to $2.1 million from $1.9 million, an increase of $0.2 million or 10.5% when comparing the quarters ended December 31, 2003 and 2002. Annual salary increases and higher benefit costs, particularly those associated with retirement plans, contributed $323,000 to the overall increase in noninterest expense when comparing the six months ended December 31, 2003 to 2002. The increases in occupancy has resulted from an increase in routine maintenance and repair activities during the six months ended December 31, 2003. Equipment and furniture expense was primarily depreciation expense and remained relatively consistent when comparing the six months ended December 31, 2003 and 2002. Service and data processing fees have primarily increased due to an increase in the volume of accounts being serviced. Office supply expenses have declined primarily due to some technology enhancements that have made the printing of certain forms less expensive as well as an emphasis on cost savings. The primary item contributing to the increase in other noninterest expense was expenses incurred in setting up the new limited purpose Commercial Bank subsidiary of The Bank of Greene County.  These expenses amounted to $34,000. 
During the quarter ended December 31, 2002, consultants were paid approximately $88,000 for their services in establishing the overdraft privilege program;  no such fees were paid during the six months ended December 31, 2003.

INCOME TAXES 

The provision for income taxes directly reflects the expected tax associated with the revenue generated for the given year and certain regulatory requirements. The effective tax rate remained relatively consistent at 30.8% for the six months ended December 31, 2003, as compared to 30.9% for the six months ended December 31, 2002. There were no significant changes in activity that would affect the overall tax rate between periods. 

LIQUIDITY AND CAPITAL RESOURCES 

Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates or prices such as interest rates, foreign currency exchange rates, commodity prices, and equity prices. Greene County Bancorp, Inc.’s most significant form of market risk is interest rate risk since the majority of Greene County Bancorp, Inc.’s assets and liabilities are sensitive to changes in interest rates. Greene County Bancorp, Inc.’s primary sources of funds are deposits and proceeds from principal and interest payments on loans, mortgage-backed securities and debt securities, with lines of credit available through the Federal Home Loan Bank as needed. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit outflows, mortgage prepayments, and lending activities are greatly influenced by general interest rates, economic conditions and competition. 

The low market interest rate environment had helped to improve the net interest spread and margin in recent quarters; however, an increasing or flat market interest rate environment is expected to have the reverse effect. 

Mortgage loan commitments totaled $4.9 million at December 31, 2003. The unused portion of overdraft lines of credit amounted to $0.7 million, the unused portion of home equity lines of credit amounted to $2.8 million, and the unused portion of commercial lines of credit amounted to $2.3 million at December 31, 2003. Greene County Bancorp, Inc. anticipates that it will have sufficient funds available to meet current loan commitments based on the level of cash and cash equivalents as well as the available for sale investment portfolio and borrowing capacity from FHLBNY. 

The Bank of Greene County met all regulatory capital requirements at December 31, 2003 and June 30, 2003. Consolidated shareholders’ equity represented 10.85 % of total assets at December 31, 2003 and 11.33% of total assets of June 30, 2003. 

Item 3.    Controls and Procedures 

Under the supervision and with the participation of the Company's management, including its Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. 

There has been no change in the Company's internal control over financial reporting in connection with the quarterly evaluation that occurred during the Company's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 

Part II.   Other Information 

Item 1.   Legal Proceedings 

            Greene County Bancorp, Inc. is not engaged in any material legal proceedings 

            at the present time. 

Item 2.   Changes in Securities and Use of Proceeds 

            Not applicable 

Item 3.   Defaults Upon Senior Securities 

            Not applicable 

Item 4.   Submission of Matters to a Vote of Security Holders 

            On October 29, 2003, the Company held an annual meeting of shareholders. At the meeting, proposals to (1) elect J. Bruce Whittaker and Charles H. Schaefer to serve as director for three-year terms and until their successors have been elected and qualified, and (2) ratify the engagement of PricewaterhouseCoopers LLP, to be the Company’s auditors for the June 30, 2004 fiscal year were approved. There were no broker non-votes. The votes cast for and against there proposals were as follows: 

Election to the Board of Directors            For      Withheld 

J. Bruce Whittaker                                1,949,140                 275 

Charles H. Schaefer                                        1,948,973                      442 

Ratification of PricewaterhouseCoopers LLP             For                  Against   Abstain 

Number of votes                1,910,167         6,235                     1,388 

Item 5.   Other Information 

            Not applicable 

Item 6.   Exhibits and Reports on Form 8-K 

                 (a)   Exhibits 

31.1 Certification of Chief Executive Officer, adopted pursuant to Rule 13a-14(a)/15d-14(a) 

31.2 Certification of Chief Financial Officer, adopted pursuant to Rule 13a-14(a)/15d-14(a) 

32.1 Statement of Chief Executive Officer, furnished pursuant to U.S.C. section 1350 

32.2 Statement of Chief Financial Officer, furnished pursuant to U.S.C. section 1350                                                     

(b)   Reports on Form 8-K 

-A current report on Form 8-K was filed with the SEC on July 16, 2003 announcing the declaration of the semi-annual dividend to be paid on September 1, 2003. 

-A current report on Form 8-K was filed with the SEC on July 31, 2003 announcing June 30, 2003 fiscal year end earnings. 

-A current report on Form 8-K was filed with the SEC on September 15, 2003 announcing the application filed with the State of New York requesting the establishment of a limited purpose commercial bank. 

SIGNATURES 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned thereunto duly authorized. 

Greene County Bancorp, Inc. 

Date: February 13, 2004 

By: /s/ J. Bruce Whittaker 

J. Bruce Whittaker 

President and Chief Executive Officer 

Date: February 13, 2004 

By: /s/ Michelle Plummer 

Michelle Plummer 

Chief Financial Officer and Treasurer 

EXHIBIT 31.1 

Certification of Chief Executive Officer Pursuant to 

 Section 302 of the Sarbanes-Oxley Act of 2002 

I, J. Bruce Whittaker, President and Chief Executive Officer, certify that: 

1.            I have reviewed this quarterly report on Form 10-QSB of Greene County Bancorp, Inc.; 

2.           Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.            Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 

4.            The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: 

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

b) evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

c) d isclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and 

5.            The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors: 

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and 

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting. 

 Date:  February 13, 2004                                                                      /s/ J. Bruce Whittaker                    

                                                                                      J. Bruce Whittaker, President and 

  Chief Executive Officer 

EXHIBIT 31.2 

Certification of Chief Financial Officer Pursuant to 

Section 302 of the Sarbanes-Oxley Act of 2002 

I, Michelle M. Plummer, Chief Financial Officer, certify that: 

1.            I have reviewed this quarterly report on Form 10-QSB of Greene County Bancorp, Inc.; 

2.            Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.            Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 

4.            The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: 

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

b) evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

c) d isclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and 

5.            The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors: 

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and 

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting. 

Date:  February 13,  2004                                                                    /s/ Michelle Plummer 

                                                                                                                Michelle M. Plummer, 

                                                                                    Chief Financial Officer 

                                                                                                            EXHIBIT 32.1 

Statement of Chief Executive Officer 

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 

J. Bruce Whittaker, President and Chief Executive Officer, of Greene County Bancorp, Inc. (the "Company") certifies in his capacity as an officer of the Company that he has reviewed the Quarterly Report of the Company on Form 10-QSB for the quarter ended December 31, 2003 and that to the best of his knowledge: 

     1.     the report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

       2.       the information contained in the report fairly presents, in all material respects, the financial condition and results of   

                 operations of the Company as of the dates and for the periods covered by the report. 

This statement is authorized to be attached as an exhibit to the report so that this statement will accompany the report at such time as the report is filed with the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 USC 1350. It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934, as amended. 

Date: February 13, 2004                                                    /s/ J. Bruce Whittaker

              J. Bruce Whittaker, President and  

                                                                                                               Chief Executive Officer 

EXHIBIT 32.2 

Statement of Chief Financial Officer 

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 

Michelle M. Plummer, Chief Financial Officer, of Greene County Bancorp, Inc. (the "Company") certifies in her capacity as an officer of the Company that he or she has reviewed the Quarterly Report of the Company on Form 10-QSB for the quarter ended December 31, 2003 and that to the best of her knowledge: 

     1.     the report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 

       2.       the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of 

                 the Company as of the dates and for the periods covered by the report. 

This statement is authorized to be attached as an exhibit to the report so that this statement will accompany the report at such time as the report is filed with the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 USC 1350. It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934, as amended. 

Date:  February 13, 2004                                                                      /s/ Michelle Plummer                                                                                       Michelle M. Plummer,                                                                     

 Chief Financial Officer 