SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For Quarter Ended September 30, 1997 Commission file number 0-16213
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GBC BANCORP
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(Exact name of registrant as specified in its charter)
California 95-3586596
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(State or other jurisdiction of (I.R.S. Employee Identification No.)
incorporation or organization)
800 West 6th Street, Los Angeles, California 90017
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 213/972-4172
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Former name address and former fiscal year, if changed since last report.
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
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Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of the close of the
period covered by this report.
Common stock, no par value, 6,984,369 shares issued and
outstanding as of September 30, 1997.
TABLE OF CONTENTS
-----------------
PART I - FINANCIAL INFORMATION......................................... 3
Item 1. Financial Statements.......................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 7
PART II - OTHER INFORMATION............................................ 28
Item 1. Legal Proceedings.............................................. 29
Item 2. Changes In Securities.......................................... 29
Item 3. Default Upon Senior Securities................................. 29
Item 4. Submission Of Matters To A Vote Of Securities Holders ........ 29
Item 5. Other Information............................................. 29
Item 6. Exhibits And Reports On Form 8-K.............................. 29
PART III - SIGNATURES................................................. 30
PART I - FINANCIAL INFORMATION
GBC Bancorp and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September30, December 31,
(Dollars In Thousands) 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and Due From Banks $ 39,778 $ 46,809
Federal Funds Sold and Securities
Purchased Under Agreements to Resell 122,200 140,200
Securities Available for Sale at Fair Value (Amortized Cost of $623,262
and $518,701 at September 30, 1997 and December 31, 1996, Respectively) 626,065 519,821
Securities Held to Maturity (Fair Value of $50,146 and $12,463 at
September 30,1997 and December 31, 1996, Respectively) 50,005 12,274
Loans and Leases 611,578 602,354
Less: Allowance for Credit Losses (14,962) (16,209)
Deferred Loan Fees (3,834) (3,638)
---------------- -----------------
Loans and Leases, Net 592,782 582,507
Bank Premises and Equipment, Net 5,650 5,806
Other Real Estate Owned, Net 14,891 12,988
Due From Customers on Acceptances 9,815 6,535
Real Estate Held for Investment 8,692 9,686
Accrued Interest Receivable and Other Assets 17,473 15,489
--------------- -----------------
Total Assets $ 1,487,351 $ 1,352,115
=============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand $ 171,024 $ 158,728
Interest Bearing Demand 232,923 213,697
Savings 108,348 119,315
Time Certificates of Deposit of $100,000 or More 562,030 545,578
Other Time Deposits 208,961 164,195
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Total Deposits 1,283,286 1,201,513
Subordinated Debt 38,712 15,000
Acceptances Outstanding 9,815 6,535
Accrued Expenses and Other Liabilities 16,645 12,431
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Total Liabilities 1,348,458 1,235,479
Stockholders' Equity:
Common Stock, No Par or Stated Value;
20,000,000 Shares Authorized; 6,984,369 and
6,766,469 Shares Outstanding at September 30,
1997 and December 31, 1996, Respectively $ 52,967 $ 47,281
Securities Valuation Allowance, Net of Tax 1,624 646
Retained Earnings 84,310 68,716
Foreign Currency Translation Adjustments (8) (7)
---------------- ----------------
Total Stockholders' Equity 138,893 116,636
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Total Liabilities and Stockholders' Equity $ 1,487,351 $ 1,352,115
================ ================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
GBC Bancorp and Subsidiaries
Consolidated Statements of Income
Three Months Ended Nine Months Ended
September 30, September 30,
(In Thousands, Except Per Share Data) 1997 1996 1997 1996
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<S> <C> <C> <C> <C>
INTEREST INCOME
Loans and Leases, Including Fees $ 15,951 $ 13,245 $ 46,921 $ 38,513
Securities Available for Sale 9,505 8,834 26,594 26,159
Securities Held to Maturity 917 354 1,681 1,579
Federal Funds Sold and Securities
Purchased under Agreements to Resell 1,812 1,756 5,882 5,717
Other 4 - 4 -
------------ ----------- ------------ ------------
Total Interest Income 28,189 24,189 81,082 71,968
INTEREST EXPENSE
Interest Bearing Demand 1,379 1,094 3,856 3,349
Savings 747 882 2,310 2,763
Time Deposits of $100,000 or More 7,528 6,227 21,616 18,164
Other Time Deposits 2,373 1,958 6,444 6,276
Federal Funds Purchased and Securities
Sold under Repurchase Agreements 10 333 12 1,002
Subordinated Debt 886 399 1,684 1,197
------------ ----------- ------------ ------------
Total Interest Expense 12,923 10,893 35,922 32,751
Net Interest Income 15,266 13,296 45,160 39,217
Provision for Credit Losses - 1,000 1,000 3,500
------------ ----------- ------------ ------------
Net Interest Income after Provision
for Credit Losses 15,266 12,296 44,160 35,717
NON-INTEREST INCOME
Service Charges and Commissions 1,532 1,351 4,298 4,156
Gain on Sale of Loans, Net 56 20 130 121
Gain on Sale of Fixed Assets 21 5 21 13
Gain on Sale of Real Estate Investment - - - 101
Other 166 180 451 399
------------ ----------- ------------ ------------
Total Non-Interest Income 1,775 1,556 4,900 4,790
NON-INTEREST EXPENSE
Salaries and Employee Benefits 4,238 3,376 12,039 10,202
Occupancy Expense 701 704 2,109 2,066
Furniture and Equipment Expense 464 459 1,337 1,250
Net Other Real Estate Owned Expense (Income) 481 (310) 960 596
Other 1,409 2,059 4,460 5,505
------------- ----------- ------------ ------------
Total Non-Interest Expense 7,293 6,288 20,905 19,619
Income before Income Taxes and Extraordinary Item 9,748 7,564 28,155 20,888
Provision for Income Taxes 3,402 2,584 9,605 6,937
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Income before Extraordinary Item 6,346 4,980 18,550 13,951
Extraordinary Item:
Early Extinguishment of Debt, Net of Taxes of $353,000 (488) - (488) -
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Net Income $ 5,858 $ 4,980 $ 18,062 $ 13,951
============= =========== ============ ============
Earnings Per Share:
Net Income before Extraordinary Item $ 0.89 $ 0.70 $ 2.63 $ 1.96
Extraordinary Item (0.07) - (0.07) -
------------- ----------- ------------ ------------
Earnings Per Share $ 0.82 $ 0.70 $ 2.56 $ 1.96
============= =========== ============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
GBC Bancorp and subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Nine Months Ended September 30
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(In Thousands, Except Per Share Data) 1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 18,062 $ 13,951
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 890 839
Net Accretion of Discounts on Securities (196) (1,093)
Accretion of Discount on Subordinated Notes 22 -
Writedown on Real Estate Held for Investment 994 1,092
Provision for Credit Losses 1,000 3,500
Provision for Losses on Other Real Estate Owned 150 554
Amortization of Deferred Loan Fees (1,676) (2,289)
Gain on Sale of Loans, Net (130) (121)
Gain on Sale of Real Estate Investment - (101)
Gain on Sale of Other Real Estate Owned (126) (491)
Gain on Sale of Fixed Assets (21) (13)
Loans Originated for Sale (30,479) (26,617)
Proceeds from Sales of Loans Originated for Sale 27,562 26,718
Net Increase in Accrued Interest Receivable and Other Assets (18) (422)
Net Increase/ (Decrease) in Accrued Expenses and Other Liabilities 4,053 (1,951)
Other, Net (2) -
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 20,085 $ 13,556
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INVESTING ACTIVITIES:
Purchases of Securities Available for Sale (404,880) (585,635)
Proceeds from Maturities of Securities Available for Sale 300,446 527,475
Purchases of Securities Held to Maturity (48,947) -
Proceeds from Maturities of Securities Held to Maturity 11,285 18,088
Net Increase in Loans and Leases (9,897) (104,301)
Proceeds from Sales of Other Real Estate Owned 1,786 3,868
Capitalized Costs of Other Real Estate Owned (368) (702)
Proceeds from Sales of Real Estate Investments - 1,134
Purchases of Premises and Equipment (734) (689)
Proceeds from Sales of Premises and Equipment 21 23
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NET CASH USED BY INVESTING ACTIVITIES $ (151,288) $ (140,739)
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FINANCING ACTIVITIES:
Net (Decrease)/Increase in Demand, Interest Bearing Demand and Savings Deposits 20,555 (3,870)
Net Increase in Time Certificates of Deposits 61,218 92,833
Proceeds from Issuance of Subordinated Notes 38,690 -
Redemption of Subordinated Note (15,000) -
Cash Dividend Paid (2,306) (1,747)
Proceeds from Exercise of Stock Options 3,015 1,188
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NET CASH PROVIDED BY FINANCING ACTIVITIES $ 106,172 $ 88,404
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NET CHANGE IN CASH AND CASH EQUIVALENTS (25,031) (38,779)
Cash and Cash Equivalents at Beginning of Period 187,009 163,837
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Cash and Cash Equivalents at End of Period $ 161,978 $ 125,058
============= =============
Supplemental Disclosures of Cash Flow Information:
Cash Paid During This Period
Interest $ 35,932 $ 33,373
Income Taxes 3,780 7,647
============= ============
Noncash Investing Activities:
Loans Transferred to Other Real Estate Owned at Fair Value $ 4,060 $ 12,209
Loans to Facilitate the Sale of Other Real Estate Owned 715 2,705
============= ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
GBC Bancorp and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
- ------------------------------------------------------
In the opinion of management, the consolidated
financial statements of GBC Bancorp and its subsidiaries
(the "Company") as of September 30, 1997 and the three and
nine months ended September 30, 1997 and 1996, reflect all
adjustments (which consist only of normal recurring
adjustments) necessary for a fair presentation. In the
opinion of management, the aforementioned consolidated
financial statements are in conformity with generally
accepted accounting principles.
Earnings Per Share
- ------------------
Earnings per share are computed based on the weighted
average shares outstanding including common stock
equivalents for the periods disclosed.
Consolidated Statements of Cash Flows
- -------------------------------------
Cash and cash equivalents consist of cash and due from
banks, and federal funds sold and securities purchased under
agreements to resell.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
OVERVIEW
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Net income for the third quarter of 1997 was
$5,858,000, or $0.82 per share, compared to $4,980,000 or
$0.70 per share, for the corresponding period of 1996. The
current quarter included an after tax extraordinary charge
of $488,000 incurred upon an early extinguishment of debt.
Excluding the extraordinary charge, net income was
$6,346,000, or $0.89 per share. The increase in net income
was primarily due to an increase in net interest income and
a reduced provision for credit losses, partially offset by
an increase in non-interest expense.
For the nine months ended September 30, 1997, net
income totaled $18,062,000, an increase of $4,111,000, or
29.5%, from the $13,951,000 earned during the corresponding
period of 1996. Earnings per share for the nine months
ended September 30, 1997 were $2.56 compared to $1.96 for
the same period of 1996. Excluding the extraordinary charge
discussed above, net income was $18,550,000, or $2.63 per
share. The increase in net income was primarily due to an
increase in net interest income and a lower provision for
credit losses. The increase in net interest income is due
to an increase in the net interest spread and an increase in
average interest earning assets. The decline in the
provision for credit losses in 1997 primarily reflects a
reduction in non-accrual loans. Non-accrual loans decreased
to $8.7 million as of September 30, 1997, compared to $24.1
million as of September 30, 1996. The decline in non-
accrual loans is a reflection of the improvement of the
Southern California economy, in general, and the quality of
the Bank's real estate loan portfolio, in particular.
For the quarter ended September 30, 1997 and 1996, the
return on average assets ("ROA") was 1.60% and 1.51%,
respectively, and the return on average stockholders' equity
("ROE") was 17.53% and 18.57%, respectively.
For the nine months ended September 30, 1997 and 1996,
the ROA was 1.73% and 1.43%, respectively. For the nine
months ended September 30, 1997 and 1996, the ROE was 19.37%
and 17.94%, respectively. The improvement of these ratios
is as explained above.
Recent Developments
- -------------------
In the fourth quarter of 1997, there have been
significant disruptions to certain financial markets in
Asia. Although the Company engages in significant
international trade financing, the majority of the business
involves imports and is U.S. dollar denominated. At this
time, management does not believe that there will be a
significant impact on the Company.
RESULTS OF OPERATIONS
- ---------------------
Net Interest Income
- -------------------
For the quarters ended September 30, 1997 and 1996, net
interest income before the provision for credit losses was
$15,266,000 and $13,296,000, respectively, representing an
increase of $1,970,000, or 14.8%. The components explaining
this increase are discussed below.
Total interest income for the quarter ended September
30, 1997 was $28,189,000, representing a $4,000,000, or
16.5%, increase over the corresponding quarter of a year
ago. The increase was due to a growth of $142.9 million, or
11.5%, of average interest earning assets, and a 32 basis
point increase on the yield on average interest earning
assets. For the quarters ended September 30, 1997 and 1996,
the yield on average interest earning assets was 8.09% and
7.77%, respectively. The yield increase reflects an
improvement in the percentage of the balance of average
accruing loans to average interest earning assets, a decline
in non-accrual loans, and an increase in the yield on
securities. For the quarter ended September 30, 1997,
average accruing loans and leases to average interest
earning assets was 44%, average nonaccrual loans were $9
million, and the yield on securities was 6.57%, compared to
41%, $21 million, and 6.33%, respectively, for the quarter
ended September 30, 1996.
Total interest expense for the quarter ended September
30, 1997 was $12,923,000, representing a $2,030,000, or
18.6%, increase over the corresponding quarter of a year
ago. The increase was due to a growth of $96.7 million of
interest bearing liabilities, and an increased cost of
funds. On July 30, 1997, the Company issued $40 million of
8.375% subordinated notes and on September 2, 1997, retired
the $15 million of 10.52% subordinated debt. The cost of
funds for the quarter ended September 30, 1997 was 4.47%
compared to 4.12% for the corresponding ago period. The
increase is mainly due to an increase of rates paid on
interest bearing deposits to 4.30% from 3.99%. This
increase was due to a shift in the composition of deposits
from interest bearing demand and savings to time deposits
and rates were increased on all deposit categories. For the
quarters ended as indicated, average balance and rates paid
for the deposit categories were as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
Sept. 30, 1997 Sept.30, 1996
-------------- -------------
<S> <C> <C>
Interest bearing demand - Average balance $235,425 $205,213
Rate 2.32% 2.12%
Savings - Average balance $108,894 $130,432
Rate 2.72% 2.69%
Time certificates of deposit
of $100,000 or more - Average balance $574,270 $506,566
Rate 5.20% 4.89%
Other time deposits - Average balance $192,097 $170,278
Rate 4.90% 4.57%
</TABLE>
Average interest bearing deposits increased $98.2
million with $89.5 million of the growth in the higher cost
time deposits.
For the nine months ended September 30, 1997, net
interest income before the provision for credit losses was
$45,160,000, an increase of $5,943,000, or 15.2%, compared
to the corresponding period of 1996. The components
explaining this increase are discussed below.
Total interest income for the nine months ended
September 30, 1997 was $81,082,000 compared to $71,968,000
for the corresponding period of a year ago. The $9,114,000,
or 12.7%, increase is primarily the result of both an
increase in the balance of average interest earning assets
and in the yield on average interest earning assets.
Average interest earning assets increased to $1,322.5
million for the nine months ended September 30, 1997 from
$1,233.0 million for the corresponding period of a year ago,
representing an $89.5 million, or 7.3%, increase. The
growth was primarily reflected in the average balance of
gross loans and leases which increased by $100.5 million, or
20.0%, to $602.7 million for the nine months ended September
30, 1997 from $502.2 million for the corresponding period of
a year ago.
The yield on average interest earning assets increased
to 8.20% for the nine months ended September 30, 1997 from
7.80% for the corresponding period of a year ago. The
following mainly contributed to the 40 basis point increase
of the yield on interest earning assets:
- - Increased percentage of average accruing loans and
leases to average interest earning assets. For the nine
months ended September 30, 1997 and 1996, these percentages
were 44% and 38%, respectively.
- - A decline in average non-accrual loans. For the nine
months ended September 30, 1997 and 1996, average non-
accrual loans were $10 million and $30 million,
respectively.
- - A 24 basis point increase in the yield on the balance
of average securities. For the nine months ended September
30, 1997 and 1996, the yields were 6.57% and 6.33%,
respectively.
Total interest expense for the nine months ended
September 30, 1997, was $35,922,000 compared to $32,751,000
for the corresponding period of a year ago. The increase of
$3,171,000, or 9.7%, was due to an increase in the average
balance of interest bearing deposits and an increase in the
cost of funds. For the nine months ended September 30, 1997
and 1996, the balance of average interest bearing deposits
was $1,086.4 million and $1,010.2 million, respectively, an
increase of $76.2 million, or 7.5%. The cost of funds
increased to 4.33% for the nine month period ending
September 30, 1997 from 4.17% for the corresponding period
of a year ago. The 16 basis point increase was due
primarily to increased rates paid on interest bearing
deposit to 4.21% from 4.04%. This increase was due to
higher rates paid on time deposits and deposit product
composition. For the nine months ending September 30, 1997
and 1996, average time deposits represented 68.6% and 65.3%
of average total interest-bearing deposits, respectively.
Further the highest costing deposit product, average time
certificates of deposit of $100,000 or more, represented
52.0% of average interest bearing deposits compared to 47.8%
for the nine months ended September 30, 1997 and 1996,
respectively.
The net interest spread is defined as the yield on
interest earning assets less the rates paid on interest
bearing liabilities. For the nine months ended September
30, 1997 and 1996, the net interest spread was 3.87% and
3.63%, respectively. The increase in the spread is due to
the reasons explained above.
The net interest margin is defined as the annualized
difference between interest income and interest expense
divided by average interest earning assets. For the nine
months ended September 30, 1997 and 1996, the net interest
margin was 4.57% and 4.25%, respectively.
Provision for Credit Losses
- ---------------------------
For the quarter ended September 30, 1997, there was no
provision for credit losses compared to $1,000,000 for the
corresponding period a year ago.
For the nine months ended September 30, 1997, the
provision for credit losses was $1,000,000, compared to
$3,500,000 for the same period of 1996, a decrease of
$2,500,000, or 71.4%.
The decline in the provision for credit losses
primarily reflects the reduction in non-accrual loans. As
of September 30, 1997, non-accrual loans totaled $8.7
million compared to $11.7 million and $24.1 million as of
December 31, 1996 and September 30, 1996, respectively. The
combination of repayments and transfers to OREO
significantly impacted the reduction of non-accrual loans
for the nine months ended September 30, 1997. The decline
in non-accrual loans and the corresponding decrease in the
provision is also a reflection of the continued improvement
of the Southern California economy, in general, and the
quality of the Bank's real estate loan portfolio, in
particular. It also reflects management's emphasis on the
successful resolution of problem credits.
The amount of the provision for credit losses is
determined by management and is based upon the quality of
the loan portfolio, management's assessment of the economic
environment, evaluations made by regulatory authorities,
historical loan loss experience, collateral values,
assessment of borrowers' ability to repay, and estimates of
potential future losses. Please refer to the discussion
"Allowance for Credit Losses", following.
Non-Interest Income
- -------------------
Non-interest income for the quarter ended September 30,
1997 totaled $1,775,000, representing a $219,000, or 14.1%,
increase compared to $1,556,000 for the quarter ended
September 30, 1996. The increase was primarily the result
of a $181,000 increase in service charges and commissions
due in large measure to increased commissions earned by the
Bank's International Department.
For the nine months ended September 30, 1997, non-
interest income totaled $4,900,000 representing a $110,000,
or 2.3%, increase compared to $4,790,000 for the nine months
ended September 30, 1996. The net increase was due to
growth in various fee accounts, increased commissions earned
by the Bank's International Department, and increased
service charges on deposit accounts. Non-interest income
for 1996 included the receipt of a $400,000 one time fee.
Non-Interest Expense
- --------------------
For the three months ended September 30, 1997, non-
interest expense was $7,293,000, representing a $1,005,000,
or 16.0%, increase over $6,288,000 for the corresponding
period of a year ago.
The increase was primarily due to an increase of
$862,000 in salaries and employee benefits. Over half of
this increase is attributable to the profit sharing accrual
caused by a higher level of income before taxes and
extraordinary item.
A $791,000 increase in net other real estate owned
expense (income) was caused primarily by a reduced net gain
on sales of OREO, the recording of a $150,000 valuation
allowance and renovation expenses incurred on a multi-family
condominium property for the three months ended September
30, 1997. The $791,000 increase was partially offset by a
$650,000 decline in other expenses, representing various
categories of non-interest expenses.
For the nine months ended September 30, 1997, non-
interest expense was $20,905,000, representing a $1,286,000,
or 6.6%, increase over $19,619,000 reported for the
corresponding period of a year ago. The increase was caused
mainly by a $1,837,000 increase in salaries and employee
benefits. Of this increase, $999,000 was due to the
increased bonus accrual which is based on income before
income taxes and extraordinary item. Salaries, excluding
bonus accrual, increased $668,000 due to salary raises
effective in 1997 and an increase in total employees.
The increase in non-interest expense was partially
offset by a $1,045,000 decrease of other expense, comprised
mainly of a $707,000 reduction in legal fees. The reduced
legal fees reflect the decrease of problem loans.
For the nine months ended September 30, 1997, the
Company's efficiency ratio, defined as non-interest expense
divided by the sum of net interest income plus non-interest
income, declined to 41.8%, comparing favorably to 44.6% for
the corresponding period of 1996.
Provision for Income Taxes
- --------------------------
For the quarter ended September 30, 1997 and 1996, the
provision for income taxes was $3,402,000 and $2,584,000,
respectively, representing effective tax rates of 34.9% and
34.2%.
For the nine months ended September 30, 1997, the
provision for income taxes was $9,605,000, representing
34.1% of pre-tax income. The provision for the nine months
ended September 30, 1996, was $6,937,000, representing 33.2%
of pre-tax income. The lower effective tax rate compared to
the statutory rate is primarily due to the low income
housing tax credit that the Bank obtains from its holdings
in qualified low income housing projects.
Extraordinary Item
- ------------------
During the quarter ended September 30, 1997, the
Company incurred an $841,000 prepayment for the early
extinguishment of debt. This amount, net of taxes of
$353,000, is included in the consolidated statements of
income as an extraordinary item for the three and nine
months ended September 30, 1997.
FINANCIAL CONDITION
- -------------------
Total assets as of September 30, 1997 were $1,487.4
million, an increase of $135.3 million from total assets of
$1,352.1 million as of December 31, 1996. The increase was
due to a $81.8 million growth of deposits that was invested
primarily in investment securities. As of September 30,
1997 and December 31, 1996, total deposits were $1,283.3
million and $1,201.5 million, respectively.
Loans
- -----
As of September 30, 1997, loans and leases totaled
$611.6 million, representing a $9.2 million, or 1.5%,
increase from the balance of $602.4 million as of December
31, 1996. Growth in the commercial loan portfolio
representing $49.1 million was the result of growth in the
trade-financing area which increased $58.0 million. The
growth of this category of loan reflects the growth in
international trade and new customer relationships. In
addition, there was an increase of $15.4 million of real
estate - construction. Partially offsetting the above was a
decrease of $50.0 million of term federal funds sold and a
$7.3 million decrease in real estate-conventional loans.
The following table sets forth the amount of loans and
leases outstanding by category and the percentage of each
category to the total loans and leases outstanding:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
(DOLLARS THOUSANDS) Amount Percentage Amount Percentage
<S> <C> <C> <C> <C>
Commercial $232,388 38.00% $183,268 30.43%
Real Estate - Construction 81,958 13.40% 66,572 11.05%
Real Estate - Conventional 265,780 43.46% 273,081 45.34%
Other Loans 23,734 3.88% 22,447 3.72%
Leveraged Leases 7,718 1.26% 6,986 1.16%
Term Fed Funds Sold 0 0.00% 50,000 8.30%
-------- ------- -------- -------
Total $611,578 100.00% $602,354 100.00%
======== ======= ======== =======
</TABLE>
Non-Performing Assets
- ---------------------
A certain degree of risk is inherent in the extension
of credit. Management has credit policies in place to
minimize the level of loan losses and non-performing loans.
The Company performs a quarterly assessment of the credit
portfolio to determine the appropriate level of the
allowance. Included in the assessment is the identification
of loan impairment. A loan is identified as impaired when
it is probable that interest and principal will not be
collected according to the contractual terms of the loan
agreement. Loan impairment is measured by estimating the
expected future cash flows and discounting them at the
respective effective interest rate or by valuing the
underlying collateral.
The Company has a policy of classifying loans
(including an impaired loan) which are 90 days past due as
to principal and/or interest as non-accrual loans unless
management determines that the fair value of underlying
collateral is substantially in excess of the loan amount or
other circumstances justify treating the loan as fully
collectible. After a loan is placed on non-accrual status,
any interest previously accrued, but not yet collected, is
reversed against current income. A loan is returned to
accrual status only when the borrower has demonstrated the
ability to make future payments of principal and interest as
scheduled, and the borrower has demonstrated a sustained
period of repayment performance in accordance with the
contractual terms. Interest received on non-accrual loans
generally is either applied as principal reduction or
reported as recoveries on amounts previously charged-off,
according to management's judgment as to the collectability
of principal.
The following table provides information with respect
to the Company's past due loans, non-accrual loans,
restructured loans and other real estate owned, net, as of
the dates indicated:
<TABLE>
<CAPTION>
(IN THOUSANDS) September 30, 1997 December 31, 1996
<S> <C> <C>
Loans 90 Days or More Past Due
and Still Accruing $2,541 $6,779
Non-accrual Loans 8,712 11,719
Total Past Due Loans 11,253 18,498
Restructured Loans 22,481 23,125
Total Non-performing Loans 33,734 41,623
Other Real Estate Owned, Net 14,891 12,988
------- -------
Total Non-Performing Assets $48,625 $54,611
======= =======
</TABLE>
Total non-performing assets decreased to $48.6 million,
as of September 30, 1997, from $54.6 million, as of December
31, 1996, representing an $6.0 million, or 11.0%, reduction.
The net decrease was due to reductions in all categories of
non-performing loans, partially offset by an increase of
other real estate owned, net.
The $2.5 million of loans 90 days or more past due and
still accruing are comprised of 4 loans. A $1.5 million
construction credit is expected to be repaid within a 2 week
period from the date of this filing. A second loan of
$700,000 has a current loan to value of 33%. A third loan
of $95,000 was paid in full subsequent to quarter-end. The
final loan of $200,000 continues paying principal and
interest current. The past due status of the loan resulted
due to the late processing of the renewal.
Non-accrual loans declined to $8.7 million as of
September 30, 1997, from $11.7 million, as of December 31,
1996, a reduction of $3.0 million, or 25.6%.
The following table analyzes the decline in non-accrual
loans during the nine months ended September 30, 1997:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Balance, December 31, 1996 $11,719
Add: Loans placed on non-accrual 10,873
Less: Charge-offs (2,666)
Returned to accrual status (2,447)
Repayments (4,750)
Transfer to OREO (4,017)
-------
Balance, September 30, 1997 $8,712
=======
</TABLE>
The following table breaks out the Company's non-
accrual loans by category as of September 30, 1997 and
December 31, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS) September 30, 1997 December 31, 1996
<S> <C> <C>
Commercial $4,578 $3,219
Real Estate-Construction 455 477
Real Estate-Conventional 3,669 8,023
Other Loans 10 -
------ -------
Total $8,712 $11,719
====== =======
</TABLE>
The balance of restructured loans as of September 30,
1997 was $22.5 million compared to $23.1 million as of
December 31, 1996, representing a $600,000, or 2.6%,
decrease. A loan is categorized as restructured if the
original interest rate on such loan, the repayment terms, or
both, are modified due to a deterioration in the financial
condition of the borrower. Restructured loans may also be
put on a non-accrual status in keeping with the Bank's
policy of classifying loans which are 90 days past due as to
principal and/or interest. Restructured loans which are non-
accrual loans are not included in the balance of
restructured loans. As of September 30, 1997, restructured
loans consisted of fifteen real estate credits, and one
commercial loan secured by a junior lien. As of December 31,
1996, restructured loans consisted of sixteen real estate
credits. As of September 30, 1997, all restructured loans
were on accrual status. The weighted average yield of these
restructured loans as of September 30, 1997, was 10.16%.
All restructured loans are performing pursuant to the terms
and conditions of the restructuring.
The following table breaks out the restructured loans
by accrual status as of the dates indicated:
<TABLE>
<CAPTION>
(IN THOUSANDS) September 30, 1997 December 31, 1996
<S> <C> <C>
On Accrual Status $22,481 $23,125
On Non-accrual Status 0 2,820
------- -------
Total $22,481 $25,945
======= =======
</TABLE>
There are no commitments to lend additional funds on
any of the restructured loans.
As of September 30, 1997, other real estate owned
("OREO"), net of valuation allowance of $1.6 million,
totaled $14.9 million, representing an increase of $1.9
million, or 14.6%, from the net balance of $13.0 million,
net of valuation allowance of $1.8 million, as of December
31, 1996. As of September 30, 1997 and December 31, 1996,
OREO consisted of 25 properties and 26 properties,
respectively.
The outstanding OREO properties are all included in the
Bank's market area. They include single family residences,
condominiums, commercial buildings, and land both for
commercial and residential improvement and agricultural
purposes. Seven properties comprise the land category of
OREO. The Company does not intend to develop these
properties; rather, it will sell the land undeveloped.
The following table sets forth OREO by property type
for the dates as indicated:
<TABLE>
<CAPTION>
(IN THOUSANDS) September 30, 1997 December 31, 1996
PROPERTY TYPE
<S> <C> <C>
Single-Family Residential $701 $901
Condominium 3,852 6,284
Multi-Family Residential 220 -
Warehouse 148 -
Land for Residential 3,715 1,413
Land for Commercial 735 735
Land for Agriculture 15 -
Retail Facilities 7,155 5,228
Office - 250
Less: Valuation Allowance (1,650) (1,823)
-------- --------
Total $14,891 $12,988
======== ========
</TABLE>
A loan is identified as impaired when it is probable
that interest and principal will not be collected according
to the contractual terms of the loan agreement. Loan
impairment is measured by estimating the expected future
cash flows and discounting them at the respective effective
interest rate, or by valuing the underlying collateral. Of
the $20.8 million of impaired loans, as of September 30,
1997, $13.5 million are included in the balance of
restructured loans.
The following table discloses pertinent information as
it relates to the Company's impaired loans as of the dates
indicated:
<TABLE>
<CAPTION>
(IN THOUSANDS) Sept. 30, 1997 Dec. 31, 1996
<S> <C> <C>
Recorded Investment with Related Allowance $16,167 $21,210
Recorded Investment with no Related Allowance 4,654 2,303
Total Recorded Investment 20,821 23,513
Specific Allowance on Impaired Loans 1,394 2,011
</TABLE>
The average balance of gross impaired loans was $23.5
million for the nine months ended September 30, 1997 and
$35.7 million for the twelve months ended December 31, 1996.
Income recognition on impaired loans uses methods
existing for non-accrual loans but can include the accrual
of interest. While a loan is in non-accrual status, some or
all of the cash payments received may be treated as interest
income on a cash basis as long as the remaining book balance
of the loan (i.e. after charge-off of identified losses, if
any) is deemed to be fully collectible. The Bank's
determination as to the ultimate collectibility of the
loan's remaining book balance must be supported by a
current, well documented credit evaluation of the borrower's
financial condition and prospects for repayment, including
consideration of the borrower's historical repayment
performance and other relevant factors. For the nine months
ended September 30, 1997 and 1996, interest income
recognized on impaired loans was $1,304,000 and $1,696,000,
respectively. Of the amount of interest income recognized
during the nine months ended September 30, 1997 and 1996, no
interest was recognized under the cash basis method.
Management cannot predict the extent to which the
current economic environment, including the real estate
market, may improve or worsen, or the full impact such
environment may have on the Bank's loan portfolio.
Furthermore, as the Bank's primary regulators review the
loan portfolio as part of their routine, periodic
examinations of the Bank, their assessment of specific
credits may affect the level of the Bank's non-performing
loans. Accordingly, there can be no assurance that other
loans will not be placed on non-accrual, become 90 days or
more past due, have terms modified in the future, or become
OREO.
Allowance for Credit Losses
- ---------------------------
As of September 30, 1997, the balance of the allowance
for credit losses was $15.0 million, representing 2.45% of
outstanding loans and leases. This compares to an allowance
for credit losses of $16.2 million as of December 31, 1996,
and $16.9 million as of September 30, 1996, representing
2.69% and 2.98% of outstanding loans and leases,
respectively. The reduced percentage reflects the reduction
of non-accrual loans and improvement in the quality of the
outstanding loan portfolio.
The table below summarizes the activity in the total
allowance for credit losses (which amount includes the
specific allowance on impaired loans) for the nine month
periods ended as indicated:
<TABLE>
<CAPTION>
(IN THOUSANDS) September 30, 1997 September 30, 1996
<S> <C> <C>
Balance, Beginning of Period $16,209 $16,674
Provision for Credit Losses 1,000 3,500
Charge-offs (4,207) (5,077)
Recoveries 1,960 1,765
Net Charge-offs (2,247) (3,312)
Balance, End of Period $14,962 $16,862
</TABLE>
As of September 30, 1997, the allowance represents
44.4% and 172% of non-performing loans and of non-accrual
loans, respectively. As of December 31, 1996, the allowance
represented 38.9% and 138% of non-performing loans and of
non-accrual loans, respectively.
Management believes that the allowance for credit
losses is adequate to cover known and inherent losses
related to loans and leases outstanding as of September 30,
1997.
Securities
- ----------
The Company classifies its securities as held to
maturity or available for sale. Securities classified as
held to maturity are those that the Company has the positive
intent and ability to hold until maturity. These securities
are carried at amortized cost.
Securities that could be sold in response to changes in
interest rates, increased loan demand, liquidity needs,
capital requirements or other similar factors, are
classified as securities available for sale. These
securities are carried at fair value, with unrealized gains
or losses reflected net of tax in stockholders' equity.
As of September 30, 1997, the Company recorded gross
unrealized gains of $2,803,000 on its available-for-sale
portfolio and the inclusion as a separate component of
stockholders' equity of $1,624,000, representing the
unrealized holding gain, net of tax.
The amortized cost, gross unrealized gains, gross
unrealized losses and fair value of securities at September
30, 1997 and December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Gross Gross
(In Thousands) Amortized Unrealized Unrealized Fair
September 30, 1997 Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities Held to Maturity
- ---------------------------
State and Municipal Securities $ 988 $ 3 $ - $ 991
U.S. Government Agencies 48,970 138 - 49,108
Collateralized Mortgage Obligations 47 - - 47
------------------------------------------------------------
Total Securities Held to Maturity $ 50,005 $ 141 $ - $ 50,146
============================================================
Securities Available for Sale
- -----------------------------
U.S. Treasuries $ 6,897 $ 11 $ - $ 6,908
U.S. Government Agencies 175,699 327 - 176,026
Mortgage Backed Securities 60,620 138 - 60,758
Corporate Notes 16,007 265 - 16,272
Collateralized Mortgage Obligations 204,116 486 - 204,602
Asset Backed Securities 128,328 1,576 - 129,904
Auction Preferred Stock 26,000 - - 26,000
Other Securities 5,595 - - 5,595
------------------------------------------------------------
Total Securities Available for Sale $ 623,262 $ 2,803 $ - $ 626,065
============================================================
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
(In Thousands) Amortized Unrealized Unrealized Fair
December 31, 1996 Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities Held to Maturity
- ---------------------------
State and Municipal Securities $ 2,222 $ 28 $ - $ 2,250
Collateralized Mortgage Obligations 56 6 - 62
Asset Backed Securities 9,996 155 - 10,151
------------------------------------------------------------
Total Securities Held to Maturity $ 12,274 $ 189 $ - $ 12,463
============================================================
Securities Available for Sale
- -----------------------------
U.S. Treasuries $ 1,918 $ - $ (27) $ 1,891
U.S. Government Agencies 160,718 - (52) 160,666
Mortgage Backed Securities 51,503 - (247) 51,256
Corporate Notes 19,014 580 - 19,594
Collateralized Mortgage Obligations 165,517 281 - 165,798
Asset Backed Securities 37,474 460 - 37,934
Auction Preferred Stock 72,450 - - 72,450
Other Securities 10,107 125 - 10,232
-----------------------------------------------------------
Total Securities Available for Sale $ 518,701 $ 1,446 $ (326) $ 519,821
===========================================================
</TABLE>
There were no sales of securities available for sale or
held to maturity during the nine months ended September 30,
1997 and 1996.
Deposits
- --------
The Company's deposits totaled $1,283.3 million as of
September 30, 1997, representing an $81.8 million, or 6.8%,
increase from total deposits of $1,201.5 million as of
December 31, 1996. The growth for the nine months ended
September 30, 1997, was primarily due to increases in time
deposits, which grew $61.2 million, or 8.6%. Also, interest
bearing demand reflected an increase of $19.3 million, or
9.0%. During this same period savings decreased $11.0
million, or 9.2%.
There are no brokered deposits outstanding. The
Company believes that the majority of its deposit customers
have strong ties to the Bank. Although the Company has a
significant amount of time deposits of $100,000 or more
having maturities of one year or less, historically, the
depositors have generally renewed their deposits upon
maturity. Accordingly, the Company believes its deposit
source to be stable.
The maturity schedule of time certificates of deposit
of $100,000 or more, as of September 30, 1997, is as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
3 Months or Less $273,430
Over 3 Months Through One Year 287,160
Over One Year through 5 Years 1,440
--------
Total $562,030
========
</TABLE>
Other Borrowings
- ----------------
As previously reported, on July 30, 1997, the Company
issued, through a public offering, $40 million of 8.375%
subordinated notes due August 1, 2007. On September 2,
1997, the Company prepaid the $15 million of 10.52%
subordinated debentures that had been issued through private
placement. The prepayment premium for the early
extinguishment of the debt was $841,000 pre-tax and is
included as an extraordinary item, net of taxes of $353,000.
The 8.375% subordinated notes Indenture (the "Indenture")
dated as of July 30, 1997, between the Company and BNY
Western Trust Company contains certain terms, provisions and
conditions. As of September 30, 1997, in the opinion of
management, the Company was in compliance with all the
terms, conditions and provisions of the Indenture.
The $40 million notes add to Tier 2 capital and further
contribute to the capital strength of the Company.
Capital Resources
- -----------------
As of September 30, 1997, stockholders' equity totaled
$138.9 million, an increase of $22.3 million, or 19.1%, from
$116.6 million as of December 31, 1996. The increase was
due to net income of $18.1 million, less cash dividends
declared to stockholders of $2.5 million, plus the net
change in the securities valuation allowance, net of tax, of
$1.0 million, plus the exercise of stock options and related
tax benefits of $5.7 million, for the nine months ended
September 30, 1997.
Capital ratios for the Company and for the Bank were as
follows as of the dates indicated:
<TABLE>
<CAPTION>
Well-Capitalized Sept. 30, December 31,
Standards 1997 1996
<S> <C> <C> <C>
GBC Bancorp
Tier 1 Leverage Ratio 5% 9.42% 8.74%
Tier 1 Risk-Based Capital Ratio 6% 13.19% 11.97%
Total Risk-Based Capital Ratio 10% 18.18% 13.69%
General Bank
Tier 1 Leverage Ratio 5% 8.80% 8.61%
Tier 1 Risk-Based Capital Ratio 6% 12.06% 11.81%
Total Risk-Based Capital Ratio 10% 13.31% 13.06%
</TABLE>
Liquidity and Interest Rate Sensitivity
- ---------------------------------------
Liquidity measures the ability of the Company to meet
fluctuations in deposit levels, to fund its operations and
to provide for customers' credit needs. Asset liquidity is
provided by cash and short-term financial instruments which
include federal funds sold and securities purchased under
agreements to resell, unpledged securities held to maturity
maturing within one year and unpledged securities available
for sale. These sources of liquidity amounted to $771.5
million, or 51.9% of total assets, as of September 30, 1997,
compared to $717.0 million, or 53.0% of total assets, as of
December 31, 1996.
To further supplement its liquidity, the Company has
established federal funds lines with correspondent banks and
three master repurchase agreements with major brokerage
companies. In August, 1992, the Federal Home Loan Bank of
San Francisco ("FHLB") granted the Bank a line of credit
currently equal to 25 percent of assets with terms up to 360
months. As of September 30, 1997, the Company has no
borrowing outstanding under this financing facility with the
FHLB. Management believes its liquidity sources to be stable
and adequate.
As of September 30, 1997, total loans and leases
represented 47.7% of total deposits. This compares to 50.1%
as of December 31, 1996.
The liquidity of the parent company, GBC Bancorp, is
dependent on the payment of cash dividends by its
subsidiary, General Bank, subject to the limitations imposed
by the Financial Code of the State of California. For the
nine months ended September 30, 1997, General Bank
paid/declared $7.5 million of cash dividends to GBC Bancorp.
Effective asset/liability management includes
maintaining adequate liquidity and minimizing the impact of
future interest rate changes on net interest income. The
Company attempts to manage its interest rate sensitivity on
an on-going basis through the analysis of the repricing
characteristics of its loans, investments, and deposits, and
managing the estimated net interest income volatility by
adjusting the terms of its interest-earning assets and
liabilities, and through the use of derivatives as needed.
The Company has only limited involvement with
derivative financial instruments and does not use them for
trading purposes. As of September 30, 1997, one contract
totaling $1 million was outstanding. These instruments are
used to manage the interest rate risk from the origination
of fixed rate residential mortgage loans for sale in the
secondary markets. The Company utilizes Treasury note
futures and forward sales of mortgage-backed securities to
hedge interest rate risk associated with its residential
mortgage banking activities. Futures and forward sale
contracts provide for sale of the underlying securities,
including mortgage-backed securities, at a specified future
date, at a specified price or yield. The amount of the
futures and forward sale contracts is determined by the
aggregate amount of fixed rate commitments for mortgage
loans that are expected to be funded plus the amount of
fixed rate residential mortgages categorized as being held
for sale that have not been sold. The fair value of the
underlying futures and forward sale contracts is expected to
move inversely to the change in fair value of the mortgage
loans.
The Company never intends to deliver the underlying
securities that the futures and forward sale contracts
commit to sell, rather it purchases offsetting contracts to
eliminate the obligation. The Company is exposed to the
risk that the fair value of futures contracts, being based
on the value of the Treasury note will not move
proportionately with the change in value of the mortgage
loans being hedged. This basis risk is unpredictable and
can result in economic loss to the Company. There is no
basis risk related to the use of forward sale contracts on
mortgage-backed securities since their fair value is based
on similar mortgage loans. However, a gain or loss will
arise from the difference between the fair value and the
forward sale price of the mortgage-backed security. At the
time the obligation of the forward sales contract or
treasury note future is eliminated, a resulting gain or loss
is included in the computation of the gain/loss on sale of
loans, net, and accordingly, is included in non-interest
income. In addition, as of month-end, unrealized
gains/losses on outstanding contracts are recorded and
included in gain/loss on sale of loans, net.
As of September 30, 1997 and December 31, 1996, there
were outstanding fixed rate mortgages held for sale of $5.0
million and $1.9 million, respectively, and a notional value
of derivative instruments of $1.0 million and $0.5 million,
respectively. For the nine months ended September 30, 1997
and 1996, the Company had realized net losses of $31,000 and
$7,000, respectively, related to its hedging activities.
There was a $10,000 unrealized loss related to hedging
activities as of September 30, 1997. For the nine months
ended September 30, 1997 and 1996, unrealized losses were
$12,000 and $0, respectively.
Initial margin requirements and daily calls on futures
contracts are met in cash. There are no margin requirements
nor daily calls on forward sale contracts since whole loans
are expected to be delivered to fulfill the commitment.
While no single measure can completely identify the
impact of changes in interest rates on net interest income,
one gauge of interest rate sensitivity is to measure, over
various time periods, the differences in the amounts of the
Company's rate sensitive assets and rate sensitive
liabilities. These differences, or "gaps", provide an
indication of the extent that net interest income may be
affected by future changes in interest rates. However,
these "gaps" do not take into account timing differences
between the repricing of assets and the repricing of
liabilities.
A positive gap exists when rate sensitive assets exceed
rate sensitive liabilities and indicates that a greater
volume of assets than liabilities will reprice during a
given period. This mismatch may enhance earnings in a
rising rate environment and may inhibit earnings when rates
decline. Conversely, when rate sensitive liabilities exceed
rate sensitive assets, referred to as a negative gap, it
indicates that a greater volume of liabilities than assets
will reprice during the period. In this case, a rising
interest rate environment may inhibit earnings and declining
rates may enhance earnings.
"Gap" reports originated as a means to provide
management with a tool to monitor repricing differences, or
"gaps", between assets and liabilities repricing
differences, or "gaps", between assets and liabilities
repricing in a specified period, based upon their underlying
contractual rights. The use of "gap" reports is thus
limited to a quantification of the "mismatch" between assets
and liabilities repricing within a unique specified
timeframe. "Gap" reports cannot be used to quantify
exposure to interest rate changes because they do not take
into account timing differences between repricing assets and
liabilities, and changes in the amount of prepayments.
The Company uses a simulation analysis to attempt to
predict changes in the yields earned on different asset
categories and the rates paid on liabilities in relation to
changes in market interest rates. The analysis has
concluded that the Bank's liabilities reprice more slowly
than it's assets, and the Company's balance sheet has a
positive gap when the timing of repricing is taken into
account. This results in an interest rate sensitivity
profile for the Company where it has exposure to a downward
shift in interest rates. The Company has established an
internal policy to manage its net interest income volatility
to a change of 10% when the simulation is using an assumed
instant change of money market rates of 100 basis points and
to a change of 15% when the assumed rate change is 200 basis
points. As of September 30, 1997, the Company was well
within the policy limits.
As of September 30, 1997, there was a cumulative one
year negative "gap" of $438.4 million, up from $311.4
million, as of December 31, 1996. The $127.0 million
increase in the gap was caused by the purchase of
intermediate maturity investment securities and loan
activity. The negative gaps would appear to be predictive
of an increase in the net interest margin if interest rates
were to fall significantly. However, as discussed above,
due to the lag in the downward repricing of the rates paid
on liabilities versus the immediate downward repricing of
its assets, the Company would not anticipate a corresponding
increase in the net interest margin should rates decline.
The following table indicates the Company's interest
rate sensitivity position as of September 30, 1997, and may
not be reflective of positions in subsequent periods:
<TABLE>
<CAPTION>
SEPTEMBER 30,1997
INTEREST SENSITIVITY PERIOD
- -----------------------------------------------------------------------------------------------------------------------------
0 to 90 91 to 365 Over 1 Year Over Non-Interest
(In Thousands) Days Days to 5 Years 5 Years Erng/Bearing Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
Securities Available for Sale $ 51,723 $ 44,755 $ 153,649 $ 375,938 - $ 626,065
Securities Held to Maturity 987 - 33,126 15,892 - 50,005
Federal Funds Sold & Securities
Purchased Under Agreement to Resell 122,200 - - - - 122,200
Loans and Leases (1) (2) 415,860 34,184 78,313 74,510 - 602,867
Non-Earning Assets (2) - - - - 86,214 86,214
----------- ----------- ------------ ------------ ---------- -----------
Total Assets $ 590,770 $ 78,939 $ 265,088 $ 466,340 $ 86,214 $ 1,487,351
=========== =========== ============ ============ ========== ============
Source of Funds for Assets:
Deposits:
Demand $ - $ - $ - $ - $ 171,024 $ 171,024
Interest Bearing Demand 232,923 - - - - 232,923
Savings 108,348 - - - - 108,348
TCD'S Under $100,000 89,719 116,568 2,674 - - 208,961
TCD'S $100,000 and Over 276,528 284,062 1,440 - - 562,030
----------- ----------- ------------ ------------ ---------- -----------
Total Deposits $ 707,518 $ 400,630 $ 4,114 $ - $ 171,024 $ 1,283,286
----------- ----------- ------------ ------------ ---------- ------------
Subordinated Debt $ - $ - $ - $ 38,712 $ - $ 38,712
Other Liabilities - - - - 26,460 26,460
Stockholders' Equity - - - - 138,893 138,893
----------- ----------- ------------ ------------ ---------- ------------
Total Liabilities
and Stockholders' Equity $ 707,518 $ 400,630 $ 4,114 $ 38,712 $ 336,377 $ 1,487,351
=========== =========== ============ ============ ========== ============
Interest Sensitivity Gap ($116,748) ($321,691) $260,974 $427,628 ($250,163)
Cumulative Interest Sensitivity
Gap ($116,748) ($438,439) ($177,465) $250,163 -
Gap Ratio (% of Total Assets) -7.8% -21.6% 17.5% 28.8% -16.8%
Cumulative Gap Ratio -7.8% -29.5% -11.9% 16.8% 0.0%
</TABLE>
(1) Loans and leases are before unamortized deferred loan fees and allowance
for credit losses.
(2) Non-accrual loans are included in non-earning assets.
Forward-Looking Statements
- --------------------------
Certain statements contained herein, including, without
limitation, statements containing the words "believes,"
"intends," "expects" and words of similar import, constitute
"forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the
following: general economics and business conditions in
those areas in which the Company operates; demographic
changes; competition; fluctuations in interest rates;
changes in business strategy or development plans; changes
in governmental regulation; credit quality; and other
factors referenced herein, including, without limitation,
under the captions Provision for Credit Losses, Non-
Performing Assets, Allowance for Credit Losses, and
Liquidity and Interest Rate Sensitivity. Given these
uncertainties, the reader is cautioned not to place undue
reliance on such forward-looking statements. The Company
disclaims any obligation to update any such factors or to
publicly announce the results of any revisions to any of the
forward-looking statements contained herein to reflect
future events or developments.
Recent Accounting Developments
- ------------------------------
In February 1997, the FASB issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per
share". SFAS 128 establishes standards for computing and
presenting basic and diluted earnings per share and is
effective for financial statement periods ending after
December 15, 1997. Earlier application is not permitted.
SFAS 128 replaces the presentation of primary earnings per
share with a presentation of basic earnings per share.
Diluted earnings per share is computed similarly to fully
diluted earnings per share pursuant to SFAS 15.
Implementation of SFAS 128 will not have a material adverse
effect on the Company's financial condition or results of
operations.
In February, 1997, the FASB issued SFAS 129,
"Disclosure of Information about Capital Structure". This
statement was issued in connection with SFAS 128. The
statement lists required disclosures about capital structure
that had been included in a number of previously existing
separate statements and opinions. Whereas SFAS 128 applies
only to public entities, the guidance relative to SFAS 129
is applicable to both public and non-public entities. SFAS
129 is effective for financial statements for periods ending
after December 15, 1997. Implementation of SFAS 129 will
not have a material adverse effect on the Company's
financial condition or results of operations.
In June 1997, the FASB issued SFAS 130, "Reporting
Comprehensive Income". Comprehensive income represents the
change in equity of the Company during a period from
transactions and other events and circumstances from non-
owner sources. It includes all changes in equity during a
period except those resulting from investments by owners and
distributions to owners. SFAS 130 establishes standards for
reporting and display of comprehensive income and its
components in a full set of general purpose financial
statements. It does not, however, specify when to recognize
or how to measure items that make up comprehensive income.
This statement requires 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 in equal prominence with the other
financial statements. It does not require a specific format
for that financial statement, but will require the Company
to display an amount representing total comprehensive income
for the period in that financial statement. SFAS 130 is
effective for both interim and annual periods beginning
after December 15, 1997. Implementation of SFAS 130 will
not have a material adverse effect on the Company's
financial condition or results of operations.
In June 1997, the FASB issued SFAS 131, "Disclosures
about Segments of an Enterprise and Related Information".
This statement establishes standards for the way public
business enterprises are to report information about
operating segments in annual financial statements and
requires those enterprises to report selected information
about operating segments in interim financial reports issued
to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas,
and major customers. SFAS 131 supersedes SFAS 14,
"Financial Reporting for Segments of a Business Enterprise",
but retains the requirement to report information about
major customers. SFAS 131 is effective for financial
statements for periods beginning after December 15, 1997.
Implementation of SFAS 131 will not have a material adverse
effect on the Company's financial condition or results of
operations.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
- -------------------------
The Bank is a defendant in various lawsuits arising
from the normal course of business. No material legal
proceedings to which the Registrant or its subsidiaries is a
party have been initiated or terminated during the quarter
ended September 30, 1997. There have been no significant
developments in any material pending legal proceedings
involving the Registrant or its subsidiaries during this
same quarter.
Item 2. CHANGES IN SECURITIES
- ------------------------------
There have been no changes in the securities of the
Registrant during the quarter ended September 30, 1997.
Item 3. DEFAULT UPON SENIOR SECURITIES
- ---------------------------------------
This item is not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
- --------------------------------------------------------------------
No matters were submitted to a vote of security holders
during the quarter ended September 30, 1997.
Item 5. OTHER INFORMATION
- --------------------------
There are no events to be reported under this item.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
a) Exhibits: None.
b) Reports on Form 8-K: None.
PART III - SIGNATURES
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.
GBC Bancorp
(Registrant)
Dated: __________________ s/ ______________________
Li-Pei Wu, Chairman,
President and Chief
Executive Officer
Dated: ___________________ s/ _______________________
Peter Lowe, Executive
Vice President and
Chief Financial Officer
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