SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarter Ended March 31, 2000 Commission file number 0-16213
-------------- -------
GBC BANCORP
- ----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-3586596
- ----------------------------------------------------------------------
(State or other jurisdiction of (I.R.S.Employer Identification
incorporation or organization) No.)
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 213/972-4174
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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
---------- ----------
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, 11,511,484 shares issued
and outstanding as of March 31, 2000.
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 .................... 8
PART II - OTHER INFORMATION ..................................... 31
Item 1. Legal Proceedings...................................... 32
Item 2. Changes In Securities ................................. 32
Item 3. Default Upon Senior Securities ........................ 32
Item 4. Submission Of Matters To A Vote Of Securities Holders . 32
Item 5. Other Information ..................................... 32
Item 6. Exhibits And Reports On Form 8-K ...................... 32
PART III - SIGNATURES ............................................ 33
PART I - FINANCIAL INFORMATION
GBC BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
(Dollars In Thousands) 2000 1999
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and Due From Banks $ 46,569 $ 26,120
Federal Funds Sold and Securities Purchased Under
Agreements to Resell 162,250 80,000
------------ ------------
Cash and Cash Equivalents 208,819 106,120
Securities Available for Sale at Fair Value (Amortized
Cost of $753,048, at March 31, 2000 and $697,300 at
December 31, 1999, respectively) 734,010 683,017
Securities Held to Maturity (Fair Value of $1,182 at
March 31, 2000 and $1,241 at December 31, 1999,
respectively) 1,251 1,300
Trading Securities 5,071 1,114
Loans and Leases 913,919 925,957
Less: Allowance for Credit Losses (19,945) (19,808)
Deferred Loan Fees (3,829) (4,149)
------------ ------------
Loans and Leases, Net 890,145 902,000
Bank Premises and Equipment, Net 5,465 5,435
Other Real Estate Owned, Net 7,369 8,170
Due From Customers on Acceptances 9,664 7,197
Real Estate Held for Investment 5,098 5,522
Other Investments 10,515 9,801
Accrued Interest Receivable and Other Assets 19,448 14,524
------------ ------------
Total Assets $ 1,896,855 $ 1,744,200
============ ============
Liabilities and Stockholders' Equity
Deposits:
Demand $ 187,235 $ 174,753
Interest Bearing Demand 405,542 323,451
Savings 79,850 78,050
Time Certificates of Deposit of $100,000 or More 752,999 712,398
Other Time Deposits 204,752 202,159
------------ ------------
Total Deposits 1,630,378 1,490,811
Forward Sales Equity Securities 3,459 828
Borrowings from the Federal Home Loan Bank 50,000 50,000
Subordinated Debt 39,039 39,007
Acceptances Outstanding 9,664 7,197
Accrued Expenses and Other Liabilities 26,231 23,319
------------ ------------
Total Liabilities 1,758,771 1,611,162
Stockholders' Equity:
Common Stock, No Par or Stated Value;
40,000,000 Shares Authorized; 11, 511,484
shares and 11,523,019 Shares Outstanding
at March 31, 2000 and December 31, 1999,
respectively $ 60,026 $ 57,289
Accumulated Other Comprehensive Loss (11,041) (8,286)
Retained Earnings 90,670 84,035
Shares Held in Trust for Deferred Compensation (1,571) -
------------ ------------
Total Stockholders' Equity 138,084 133,038
------------ ------------
Total Liabilities and Stockholders' Equity $ 1,896,855 $ 1,744,200
============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
GBC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
(In Thousands, Except Per Share Data) 2000 1999
- ------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Loans and Leases, Including Fees $ 22,443 $ 18,826
Securities Available for Sale 11,621 10,890
Securities Held to Maturity 20 305
Federal Funds Sold and Securities
Purchased under Agreements to Resell 1,671 1,132
Other 3 1
_____________ _____________
Total Interest Income 35,758 31,154
INTEREST EXPENSE
Interest Bearing Demand 2,827 1,635
Savings 475 418
Time Certificates of Deposits of $100,000
or More 9,050 7,100
Other Time Deposits 2,248 2,883
Federal Funds Purchased and Securities
Sold under Repurchase Agreements 9 17
Borrowings from the Federal Home Loan Bank 613 504
Subordinated Debt 870 870
_____________ _____________
Total Interest Expense 16,092 13,427
Net Interest Income 19,666 17,727
Provision for Credit Losses - 1,500
_____________ _____________
Net Interest Income after Provision for
Credit Losses 19,666 16,227
NON-INTEREST INCOME
Service Charges and Commissions 1,966 1,640
Gain on Sale of Loans, Net 3 99
Gain on Sale of Fixed Assets 4 -
Trading Account Revenue 5,201 -
Expense from Other Investments (2) -
Other 67 113
_____________ _____________
Total Non-Interest Income 7,239 1,852
NON-INTEREST EXPENSE
Salaries and Employee Benefits 5,480 4,472
Occupancy Expense 797 763
Furniture and Equipment Expense 515 610
Net Other Real Estate Owned Expense 606 46
Other 1,879 1,704
_____________ _____________
Total Non-Interest Expense 9,277 7,595
Income before Income Taxes 17,628 10,484
Provision for Income Taxes 6,780 3,919
_____________ _____________
Net Income $ 10,848 $ 6,565
============= =============
Earnings Per Share:
Basic $ 0.94 $ 0.48
Diluted 0.92 0.47
============= =============
Weighted Average Basic Shares Outstanding 11,518,119 13,558,078
============= =============
Weighted Average Diluted Shares Outstanding 11,742,361 13,826,824
============= =============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
GBC BANCORP & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Stock Held Accumulated
in Trust for Other Total
Common Stock Retained Deferred Comprehensive Comprehensive Stockholders'
(In Thousands, Except per Share Amounts) Shares Amounts Earnings Compensation Income (Loss) Income (Loss) Equity
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 13,712 $ 56,303 $ 104,898 $ 1,829 $ 163,030
- ----------------------------
Comprehensive Income
Net Income for the year 29,988 $ 29,988 29,988
-----------
Other Comprehensive Income,
Net of Tax
Net Changes in Securities
Valuation Allowance (10,115) (10,115) (10,115)
-----------
Comprehensive Income $ 19,873
===========
Stock Options Exercised 73 664 664
Tax Benefit-Stock Options Exercised 322 322
Stock Repurchase (2,262) (46,817) (46,817)
Cash Dividend- $.33 per Share (4,034) (4,034)
--------------------------------------------------------- -----------
Balance at December 31, 1999 $ 11,523 $ 57,289 $ 84,035 $ - $ (8,286) $ 133,038
- ---------------------------- ========= ======== ========= ======== ========== ===========
Comprehensive Income
Net Income for the Year $ 10,848 $ 10,848 $ 10,848
-----------
Other Comprehensive Income,
Net of Tax
Net Changes in Securities
Valuation Allowance (2,755) (2,755) (2,755)
-----------
Comprehensive Income $ 8,093
===========
Stock Issued for Executive
Compensation 113 2,401 2,401
Stock held in Trust for
Deferred Compensation (1,571) (1,571)
Stock Options Exercised 23 224 224
Tax Benefit-Stock Options
Exercised 112 112
Stock Repurchase (148) (3,177) (3,177)
Cash Dividend- $.09 per Share (1,036) (1,036)
--------------------------------------------------------- -----------
Balance at March 31, 2000 $ 11,511 $ 60,026 $ 90,670 $ (1,571) $ (11,041) $ 138,084
- ------------------------- ========= ======== ========= ========= =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Disclosure of For the Quarter For the Year
Reclassification Amount: Ended March 31, 2000 Ended December 31, 1999
<S> <C> <C>
Net Change of Unrealized Gains
(Losses) Arising During Period
Net of Tax Expense (Benefit) of
($1,999), ($7,655) in 2000 and
1999, respectively $ (2,755) $ (10,550)
Less: Reclassification Adjustment
for Losses Included in Net Income
Net of Tax Benefit of $0 and $316
in 2000 and 1999, Respectively - 435
----------- ------------
Net Unrealized (Losses) Gains on
Securities Net of Tax (Benefit )
Expense of ($1,999) and ($7,339)
in 2000 and 1999, Respectively. $ (2,755) $ (10,115)
=========== ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
GBC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
- --------------------------------------------------------------------------------------------------------------
(In Thousands) 2000 1999
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities:
Net Income $ 10,848 $ 6,565
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation 370 360
Net Amortization of Premiums on Securities 106 159
Net Unrealized Holding Gains on Trading Securities and Liabilities (2,803) -
Proceeds from Sale of Trading Securities 2,453 -
Gain on Sale of Trading Securities (2,398) -
Cash Purchases of Trading Securities (200) -
Accretion of Discount on Subordinated Notes 32 32
Writedown on Real Estate Held for Investment 424 332
Write-off of Goodwill - 256
Provision for Credit Losses - 1,500
Provision for Losses on Other Real Estate Owned 389 -
Amortization of Deferred Loan Fees (938) (1,130)
Gain on Sale of Loans - (99)
Gain on Sale of Other Real Estate Owned (29) (151)
Gain on Sale of Fixed Assets (4) -
Net (Increase)/Decrease in Accrued Interest Receivable and Other
Assets (4,216) 1,293
Net Increase/(Decrease) in Accrued Expenses and Other Liabilities 5,027 (31,231)
Other, net (4) -
------------ ------------
Net Cash Provided (Used) by Operating Activities $ 9,057 $ (22,114)
============ ============
Investing Activities:
Purchases of Securities Available for Sale $ (75,662) $ (155,697)
Proceeds from Maturities of Securities Available for Sale 20,009 131,087
Proceeds from Maturities of Securities Held to Maturity 49 18,648
Net Increase in Loans and Leases 12,772 (35,189)
Proceeds from Sales of Other Real Estate Owned 463 1,812
Capitalized Costs of Other Real Estate Owned - (283)
Purchases of Premises and Equipment (399) (211)
Proceeds from Sales of Bank Premises and Equipment 4 -
------------ ------------
Net Cash Used by Investing Activities $ (42,764) $ (39,833)
============ ============
Financing Activities:
Net Increase/(Decrease) in Demand,Interest Bearing Demand
and Savings Deposits $ 96,373 $ (6,913)
Net Increase in Time Certificates of Deposit 43,194 234
Net Increase in Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase - 6,000
Borrowings from the Federal Home Loan Bank - 15,000
Stock Repurchase Program (3,177) (9,087)
Cash Dividends Paid (1,037) (1,028)
Proceeds from Exercise of Stock Options 224 376
Issuance of Stock 829 -
------------ ------------
Net Cash Provided by Financing Activisties $ 136,406 $ 4,582
============ ============
Net Change in Cash and Cash Equivalents $ 102,699 $ (57,365)
Cash and Cash Equivalents at Beginning of Period 106,120 128,514
------------ ------------
Cash and Cash Equivalents at End of Period $ 208,819 $ 71,149
============ ============
Supplemental Disclosures of Cash Flow Information:
Cash Paid During This Period for:
Interest $ 15,688 $ 13,205
Income Taxes 2,049 1,155
============ ============
Noncash Investing Activities:
Loans Transferred to Other Real Estate Owned at Fair Value $ 21 $ 64
============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
GBC Bancorp and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
In the opinion of management, the unaudited
consolidated financial statements of GBC Bancorp and its
subsidiaries (the "Company") as of March 31, 2000 and
December 31, 1999 and the quarter ended March 31, 2000 and
1999, reflect all adjustments (which consist only of normal
recurring adjustments) necessary for a fair presentation.
Operating results for the three months ended March 31, 2000,
are not necessarily indicative of the results that may be
expected for the full year ending December 31, 2000. In the
opinion of management, the aforementioned consolidated
financial statements are in conformity with general accepted
accounting principles.
Earnings Per Share
- ------------------
Basic earnings per share is determined by dividing net
income by the weighted average number of shares of common
stock outstanding, while diluted earnings per share is
determined by dividing net income by the weighted average
number of shares of common stock outstanding adjusted for
the dilutive effect of common stock equivalents.
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
- --------
For the quarter ended March 31, 2000, net income
totaled $10,848,000, or $0.92 diluted earnings per share,
compared to $6,565,000, or $0.47 diluted earnings per share
for the first quarter of 1999.
The $4,283,000, or 65.2%, increase in net income from
the same period of 1999 was primarily the result of
$5,387,000 increase of non-interest income. This increase
was due in turn to the recognition of $5,201,000 of trading
revenue from both the receipt of securities from venture
capital funds and the exercise of warrants received as an
adjunct to its high technology banking relationships. Net
interest income also increased $1,939,000 and there was no
provision for credit losses necessary compared to the
$1,500,000 for the three months ended March 31, 1999.
Partially offsetting the above was an increase of $1,682,000
of non-interest expense.
In February, 2000, the Company announced the receipt
of $28 million from the sale of a portion of the Bank's
collateral for the Sunrise Suites loan. In April, 2000,
additional collateral for the loan, consisting of
approximately 18 acres of land, was sold through auction for
$8 million. If the sale closes as expected in May, 2000, the
Bank will receive funds sufficient to repay the outstanding
principal. The remaining proceeds from the sale that are to
be paid to the Bank are expected to pay substantial portions
of the interest and expenses on the Sunrise loan. The actual
additional amount of sale proceeds to be received by the
Bank is subject to resolution of certain remaining disputes.
On February 10, 2000, the Bank opened a full-service
branch office in Bellevue, Washington.
The annualized return on average assets ("ROA") for the
Company was 2.42% and 1.59% for the quarter ended March 31,
2000 and 1999, respectively. The annualized return on
average stockholders' equity ("ROE") for the quarter ended
March 31, 2000 and 1999 was 31.8% and 16.3%, respectively.
RESULTS OF OPERATIONS
- ---------------------
Net Interest Income
- -------------------
For the quarter ended March 31, 2000 and 1999, net
interest income before the provision for credit losses was
$19,666,000 and $17,727,000, respectively, representing an
increase of $1,939,000, or 10.9%. The components explaining
this increase are discussed below.
Interest Income
- ---------------
Total interest income for the quarter ended March 31,
2000 was $35,758,000 compared to $31,154,000 for the
corresponding period of a year ago. The increase of
$4,604,000, or 14.8%, was due to both an increase of average
earning assets and the yield earned thereon. For the
quarter ended March 31, 2000 and 1999, average earning
assets were $1,733.1 million and $1,626.6 million,
respectively, representing a $106.5 million, or 6.5%,
growth. The yield on earning assets increased from 7.77% to
8.30%, for the quarter ended March 31, 1999 and 2000,
respectively.
The 53-basis point increase was mainly due to the
average prime rate increase of 94 basis points from first
quarter of 1999. This is reflected in the 93 basis point
increase of the yield on federal funds sold and securities
purchased under agreements to resell. The yield on total
loans and leases increased 44-basis points. Variable rate
loans that are immediately repricable average approximately
73% of the loan portfolio.
The impact of the prime rate increases on the yield of
total loans and leases was partially offset by an increased
average of non-accrual loans. For the quarter ended March
31, 2000 and 1999, average non-accrual loans were $32.9
million and $21.9 million, respectively. In addition, within
the loan portfolio itself, there has been a shift in the
composition of loan categories. The higher yielding
construction loans have declined from representing 23.0% of
the average loan portfolio for the three months ended March
31, 1999 to 16.4% for the three months ended March 31, 2000.
The yield on securities increased 38 basis points due to the
increase in money market rates and an increase in the
average maturity. The 53-basis point increase of the yield
on average earning assets also reflected the increasing
percentage of total average earning assets from average
loans and leases. As of March 31, 2000 and 1999, average
loans and leases comprised 52.7% and 49.7%, respectively, of
total average earning assets.
Interest Expense
- ----------------
Total interest expense for the quarter ended March 31,
2000 was $16,092,000 compared to $13,427,000 for the
corresponding period of a year ago. The increase of
$2,665,000, or 19.9%, was due to both the increase of the
cost of funds and the increase of average interest-bearing
deposits. The cost of funds increased from 4.13% for the
quarter ended March 31, 1999 to 4.47% for the quarter ended
March 31, 2000 and is primarily due to the increase of short-
term money market rates, with all deposit categories
reflecting increased rates. Average interest-bearing
deposits were $1,357.2 million and $1,235.2 million for the
quarter ended March 31, 2000 and 1999, respectively, an
increase of $122.0 million, or 9.9%. The growth was
primarily in the higher costing time certificates of deposit
of $100,000 or more which increased $105.2 million and lower
costing interest bearing demand which increased $76.6
million. These increases were partially offset by a $60.1
million decline of the average other time deposits.
For the quarter ended as indicated the average balance
and rates paid for the deposit categories were as follows:
<TABLE>
<CAPTION>
For the Quarter Ended March 31,
(Dollars in Thousands) 2000 1999
- -----------------------------------------------------------------------------
<S> <C> <C>
Interest-bearing demand - Average balance $ 358,545 $ 281,950
Rate 3.17% 2.35%
Savings - Average balance 79,696 79,379
Rate 2.40% 2.14%
Time certificates of deposit
of $100,000 or more - Average balance 721,608 616,412
Rate 5.04% 4.67%
Other time deposits - Average balance 197,379 257,443
Rate 4.58% 4.54%
</TABLE>
The net interest spread, defined as the yield on
earning assets less the rates paid on interest-bearing
liabilities, increased to 3.83% for the quarter ended March
31, 2000 from 3.64% for the corresponding period of a year
ago. The 19 basis point increase is primarily due to the
reasons as explained above.
The net interest margin, defined as the annualized
difference between interest income and interest expense
divided by average interest earning assets, increased 14
basis points to 4.56% for the quarter ended March 31, 2000,
from 4.42% for the corresponding period of a year ago. The
net interest margin increased somewhat less than the net
interest spread due to the decline of average stockholders'
equity as a result of stock repurchase programs.
Provision for Credit Losses
- ---------------------------
For the quarter ended March 31, 1999, the provision for
credit losses was $1,500,000. For the quarter ended March
31, 2000, there was no provision for credit losses.
The substantial reduction in non-accrual loans
outstanding and a net recovery in the quarter were primarily
the reason no provision was deemed necessary. As of
March 31, 2000 and March 31, 1999, outstanding non-accrual
loans were $12.2 million and $50.6 million, respectively. As
previously discussed, there was a $28 million pay-down of a
non-accrual loan in the first quarter of 2000.
For the quarter end March 31, 2000 net recoveries were
$0.1 million compared to net charge-offs of $0.4 million for
the year ago quarter.
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 March 31,
2000 totaled $7,239,000 compared to $1,852,000 for the same
period ended March 31, 1999. In addition to the $5,201,000
of trading account revenue, service charges and commissions
were up $326,000, or 19.9%, from the first quarter of 1999.
Trading account revenue is income earned on securities
classified as trading account securities. During the three
months ended March 31, 2000, the Company's subsidiary, GBC
Venture Capital, ("VC") received equity securities which it
held as trading securities from two sources: a distribution
from venture capital funds in which it invests and the
exercise of warrants acquired through the lending operations
of General Bank, its affiliate. The mark to market and
ultimate disposition of these securities results in trading
account revenue. In addition, outstanding short sales
transactions are marked to market through the statement of
income. As of March 31, 2000, VC had entered into short
sales of marketable equity securities totaling $3.5 million.
Non-Interest Expense
- --------------------
Non-interest expense for the quarter ended March 31,
2000, totaled $9,277,000, a $1,682,000, or 22.2%, increase
over the $7,595,000 recorded in the same period of 1999.
The increases in non-interest expense were primarily caused
by the increases in salary and benefit expenses and OREO
expenses. The $1,008,000 increase in salaries and employee
benefits was caused by higher bonus expense, due to higher
pre-tax earnings, and an accrual for the deferred
compensation of the Chief Executive Officer of the Company.
For the quarter ended March 31, 2000, the Company's
efficiency ratio, defined as non-interest expense divided by
the sum of net interest income plus non-interest income,
declined to 34.5%, comparing favorably to 38.8% for the
corresponding period of 1999.
Provision for Income Taxes
- --------------------------
For the quarter ended March 31, 2000, the provision for
income taxes was $6,780,000, representing 38.5% of pre-tax
income. The provision for the quarter ended March 31, 1999
was $3,919,000, representing 37.4% of pre-tax income.
FINANCIAL CONDITION
- -------------------
Total assets as of March 31, 2000, were $1,896.9
million representing a $152.7 million, or 8.8%, increase
from total assets of $1,744.2 million as of December 31,
1999. The growth of total assets from December 31, 1999 to
March 31, 2000 is primarily funded by an increase of total
deposits of $139.6 million. Both assets and deposits were
at record levels, as of March 31, 2000.
Loans and Leases
- ----------------
As of March 31, 2000, total loans and leases were
$913.9 million compared to $926.0 million as of December 31,
1999, representing a $12.1 million, or 1.3% decrease. The
decrease was due to a $46 million decline of the real estate
construction loan portfolio, partially offset by increases
in all the major other loan categories. The decline of the
real estate construction portfolio was the result of the $28
million pay down of the Sunrise Suites loan in addition to
several other pay-offs in the quarter.
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>
March 31, 2000 December 31, 1999
(In Thousands) Amount Percentage Amount Percentage
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial $ 417,951 45.73% $ 398,379 43.02%
Real Estate - Construction 149,128 16.32% 195,133 21.07%
Real Estate - Conventional 303,000 33.15% 295,624 31.93%
Installment 9 N/A 11 N/A
Other Loans 27,110 2.97% 30,238 2.19%
Leveraged Leases 16,721 1.83% 16,582 1.79%
- -----------------------------------------------------------------------------------
Total $ 913,919 100.00% $ 925,957 100.00%
==================================================
N/A = Percentage less than 0.01
</TABLE>
Trade financing loans which are included in commercial
loans, increased $19.9 million, or 6.3% from December 31,
1999, to $335.2 million as of March 31, 2000. Trade
financing loans are made by the Bank's Corporate Lending and
International Divisions which, in addition to granting
loans to finance the import and export of goods between the
United Sates and countries in the Pacific Rim, also provide
letters of credit and other related services. The Bank does
not make loans to foreign banks, foreign government or their
central banks, or commercial and industrial loans to
entities domiciled outside of the United States, except for
the extension of overdraft privileges to its foreign
correspondent banks on a limited, case by case, basis.
Other loans increased $6.9 million, or 34.0%, during
the first quarter of 2000. This is mainly from commercial
loans which are 100% secured by certificates of deposit.
With the increase of commercial loans and the decrease
of construction loans, as explained above, the percentage of
real estate loans to total loans has declined along with the
risk of a concentration in real estate lending.
Non-performing Assets
- ---------------------
A certain degree of risk is inherent in the extension
of credit. Management believes that it has credit policies
in place to assure minimizing 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 in accordance with 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 impaired loans) 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
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, in
accordance with management's judgment as to the
collectability of principal.
The following table provides information on 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) March 31, 2000 December 31, 1999
- ---------------------------------------------------------------------
<S> <C> <C>
Loans 90 Days or More
Past Due and Still $ - $ -
Accruing
Non-accrual Loans 12,178 44,521
Total Past Due Loans 12,178 44,521
Restructured Loans (on
Accrual Status) 7,173 7,249
Total Non-performing
and Restructured Loans 19,351 51,770
Other Real Estate Owned, 7,369 8,170
Net
- ---------------------------------------------------------------------
Total Non-performing Assets $ 26,720 $ 59,940
- ---------------------------------------------------------------------
</TABLE>
Total non-performing assets decreased from $59.9
million to $26.7 million from December 31, 1999 to March 31,
2000, respectively. The $33.2 million or 55.4%, decrease
was the result of the decline of non-accrual loans.
Loans 90 Days or More Past Due
- ------------------------------
There was no credits comprising this category as of
March 31, 2000 nor as of December 31, 1999.
Non-accrual loans
- -----------------
The $32.3 million or 72.6%, decrease of non-accrual
loans, is due to the $28 million pay down received on the
Sunrise Suites non-accrual construction loan, as discussed
above.
The following table identifies the components of the
reduction in non-accrual loans during the three months ended
March 31, 2000:
<TABLE>
<CAPTION>
-----------------------------------------------
Non-Accrual Loans (In Thousands)
-----------------------------------------------
<S> <C>
Balance, December 31, 1999 $44,521
Add: Loans placed on non-accrual 308
Less: Charge-offs (11)
Returned to accrual status -
Repayments (32,640)
Transfer to OREO -
Balance, March 31, 2000 12,178
-----------------------------------------------
</TABLE>
The following table breaks out the Company's non-
accrual loans by category as of March 31, 2000 and December
31, 1999:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
(IN THOUSANDS) March 31, 2000 December 31, 1999
- ------------------------------------------------------------------
<S> <C> <C>
Commercial $ 5,924 $ 8,567
Real Estate - Construction 6,060 35,694
Real Estate - Conventional 194 221
Installment & Other Loans - 39
- ------------------------------------------------------------------
Total $ 12,178 $ 44,521
- ------------------------------------------------------------------
</TABLE>
Restructured Loans
- ------------------
As of March 31, 2000, the balance of restructured loans
was $7.2 million, unchanged from December 31, 1999. 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 March 31, 2000, there were two loans on non-accrual
status totaling $191,000. As of March 31, 2000,
restructured loans, excluding the two non-accrual loans,
consisted of eight real estate credits. The weighted average
yield of the restructured loans as of March 31, 2000 was
9.90%.
There are no commitments to lend additional funds on
any of the restructured loans.
Other Real Estate Owned
- -----------------------
As of March 31, 2000, other real estate owned ("OREO"),
net of valuation allowance of $3.4 million, totaled $7.4
million, representing a decrease of $0.8 million, or 9.8%,
from the net balance of $8.2 million, net of valuation
allowance of $3.0 million, as of December 31, 1999. As of
March 31, 2000, OREO consisted of 10 properties, down from
12 properties, as of December 31, 1999.
The OREO properties are all physically located in the
Bank's market area. They include single family residences,
commercial and industrial buildings, and land. Six
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 the Bank's OREO by
property type, as of the dates indicated:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
March 30, December 31,
(In Thousands) 2000 1999
- -----------------------------------------------------------
<S> <C> <C>
Property Type
- -------------
Single-Family Residential $ 299 $ 395
Land 1,099 1,099
Retail Facilities 825 1,141
Industrial Facilities 8,550 8,550
--------- ---------
Less: Valuation Allowance (3,404) (3,015)
--------- ---------
Total $ 7,369 $ 8,170
========= =========
</TABLE>
Impaired Loans
- --------------
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
following table discloses pertinent information as it
relates to the Company's impaired loans as of the dates
indicated:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(IN THOUSANDS) March 31, 2000 Dec. 31, 1999
- ------------------------------------------------------------------------------
<S> <C> <C>
Recorded Investment with Related Allowance $ 16,521 $ 42,881
Recorded Investment with no Related Allowance 4,003 4,003
Total Recorded Investment 20,515 46,884
Specific Allowance on Impaired Loans 3,498 5,806
- ------------------------------------------------------------------------------
</TABLE>
The $26.4 million reduction of total recorded
investment is primarily due to the $28 million pay down on
the Sunrise Suites non-accrual loan as discussed above.
The average balance of total recorded investment in
impaired loans was $33.7 million for the three months ended
March 31, 2000 and $46.5 million for the twelve months ended
December 31, 1999.
For the quarter ended March 31, 2000 and 1999, interest
income recognized on impaired loans was $178,000 and
$180,000, respectively. Of the amount of interest income
recognized during the quarters ended March 31, 2000 and
1999, 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 continue to 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 March 31, 2000, the balance of the allowance for
credit losses was $19.9 million, representing 2.18% of
outstanding loans and leases. This compares to an allowance
for credit losses of $19.8 million as of December 31, 1999,
representing 2.14% of outstanding loans and leases.
The table below summarizes the activity in the
allowance for credit losses (which amount includes the
allowance on impaired loans), for the three-month period
ended as indicated:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(IN THOUSANDS) March 31, 2000 March 31, 1999
- ---------------------------------------------------------------------
<S> <C> <C>
Balance, Beginning of Period $ 19,808 $ 19,381
Provision for Credit Losses - 1,500
Charge-offs (20) (1,056)
Recoveries 157 667
Net Recoveries / [CHARGE-OFFS] 137 (389)
Balance, End of Period $ 19,945 $ 20,492
- ---------------------------------------------------------------------
</TABLE>
As of March 31, 2000, the allowance represents 164% of
non-accrual loans and 103% of non-performing and
restructured loans combined. As of December 31, 1999, the
allowance represented 44.5% of non-accrual loans and 38.3%
of non-performing and restructured loans combined. The
increase of these ratios is due to the decline of non-
accrual loans in general, and the Sunrise Suites pay-down,
in particular. The provision for credit losses is the
amount required to maintain an allowance for credit losses
that is adequate to cover probable credit losses related to
specifically identified loans as well as probable credit
losses inherent in the remainder of the loan and lease
portfolio. Management evaluates the loan portfolio, the
economic environment, historical loan loss experience,
collateral values and assessments of borrowers' ability to
repay.
The allowance is based on ongoing, quarterly
assessments of the probable estimated losses inherent in the
loan and lease portfolio, and to a lesser extent, unused
commitments to provide financing. The Company's methodology
for assessing the appropriateness of the allowance consists
primarily of the formula allowance.
The formula allowance is calculated by applying loss
factors to outstanding loans and leases and certain unused
commitments, in each case based on the internal risk rating
of such loans, pools of loans, leases or commitments.
Changes in risk rating of both performing and non-performing
loans affect the amount of the formula allowance. Loss
factors are based on the Company's historical loss
experience and may be adjusted for significant factors that,
in management's judgement, affect the collectibility of the
portfolio as of the evaluation date. Loss factors are
described as follows:
- Problem graded loan loss factors represent percentages
which have proven accurate over time. Such factors are
checked against and supported by migration analysis which
tracks loss experience over a five-year period.
- Pass graded loan loss factors are based on the
approximate average annual net charge-off rate over an eight-
year period.
- Pooled loan loss factors (not individually graded
loans) are based on probable net charge-offs. Pooled loans
are loans and leases that are homogeneous in nature, such as
residential mortgage loans and small business loans.
Management believes that the allowance for credit
losses is adequate to cover known and inherent losses
related to loans and leases outstanding as of March 31,
2000.
Securities
- ----------
The Company classifies its securities as held to
maturity, trading 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 are obtained and held principally for
the purpose of selling them in the near term are classified
as trading and are reported at fair value, with unrealized
gains and losses included in earnings. Equity securities
obtained from the exercise of warrants and distributions
from venture capital funds are classified as trading.
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 accumulated other
comprehensive income.
As of March 31, 2000, the Company recorded net
unrealized losses of $19,038,000 on its available for sale
portfolio. Other comprehensive income includes $11,033,000,
representing the net unrealized losses, net of tax.
The amortized cost, gross unrealized gains, gross
unrealized losses and fair value of securities at March 31,
2000 and December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Gross Gross
(In Thousands) Amortized Unrealized Unrealized Fair
March 31, 2000 Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities Held to Maturity
U.S. Government Agencies $ 1,247 $ - $ (69) $ 1,178
Collateralized Mortgage Obligations 4 - - 4
----------------------------------------------------
Total $ 1,251 $ - $ (69) $ 1,182
====================================================
Securities Available for Sale
U.S. Government Agencies $ 22,594 $ - $ (471) $ 22,123
Mortgage Backed Securities 171,154 - (6,644) 164,510
Commercial Mortgage Backed Securities 50,531 - (584) 49,947
Corporate Notes 59,363 - (1,508) 57,855
Collateralized Mortgage Obligations 158,026 - (4,693) 153,333
Asset Backed Securities 284,986 - (5,138) 279,848
Other Securities 6,394 - - 6,394
----------------------------------------------------
Total $ 753,048 $ - $ (19,038) $ 734,010
====================================================
Trading Account Securities
Equity Issues $ - $ - $ - $ 5,071
----------------------------------------------------
$ - $ - $ - $ 5,071
====================================================
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
(In Thousands) Amortized Unrealized Unrealized Fair
December 31, 1999 Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities Held to Maturity
U.S. Government Agencies $ 1,294 $ - $ (59) $ 1,235
Collateralized Mortgage Obligations 6 - - 6
----------------------------------------------------
Total $ 1,300 $ - $ (59) $ 1,241
====================================================
Securities Available for Sale
U.S. Treassuries
U.S. Government Agencies $ 21,591 $ - $ (217) $ 21,374
Mortgage Backed Securities 176,217 - (5,446) 170,771
Commercial Mortgage Backed Securities 30,585 - (307) 30,278
Corporate Notes 59,319 - (748) 58,571
Collateralized Mortgage Obligations 163,323 - (4,412) 158,911
Asset Backed Securities 240,155 - (3,153) 237,002
Other Securities 6,110 - - 6,110
----------------------------------------------------
Total $ 697,300 $ - $ (14,283) $ 683,017
====================================================
Trading Account Securities
Equity Issues $ - $ - $ - $ 1,114
----------------------------------------------------
$ - $ - $ - $ 1,114
====================================================
</TABLE>
As of March 31, 2000, trading securities totaled $5.1
million and were comprised of three equity securities. The
equity securities are non interest yielding instruments.
There were no sales of securities available for sale or
securities held to maturity during the quarter ended March
31, 2000 and 1999.
Other Investments
- -----------------
As of March 31, 2000, other investments totaled $10.5
million. The balance is comprised of various venture capital
funds that invest in technology companies. In addition to
seeking an appropriate return from such investments, the
Company seeks to use the investments to increase its high
technology banking business. Also included in other
investments is a 10% equity interest in an aircraft finance
trust ("AFT") totaling $7.4 million as of March 31, 2000.
AFT owns a number of aircraft which it leases to different
lessees in various countries. All these partnership
interests are accounted for by the equity method.
Deposits
- --------
The Company's deposits totaled $1,630.4 million as of
March 31, 2000, an increase of $139.6 million, or 9.4% from
$1,490.8 million as of December 31, 1999. The growth took
place in all deposit categories. The time certificate of
deposit of $100,000 or more and interest-bearing demand
increased $40.6 million and $82.1 million, respectively.
There were no brokered deposits outstanding as of March
31, 2000 and December 31, 1999. 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 certificates of deposit of $100,000 or more having
maturities of one year or less, and has experienced growth
in this area, the depositors have generally renewed their
deposits in the past at their maturity.
The maturity schedule of time certificates of deposit
of $100,000 or more as of March 31, 2000 is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------
(IN THOUSANDS)
- ------------------------------------------------------
<S> <C>
3 Months or Less $ 379,690
Over 3 Months Through 6 Months 191,594
Over 6 Months through 12 Months 165,734
Over 12 Months 15,981
- ------------------------------------------------------
Total $ 752,999
- ------------------------------------------------------
</TABLE>
Forward Sales-Equity Securities
- -------------------------------
As of March 31, 2000, the Company had $3.5 million
outstanding net of $0.4 million mark to market of forward
sales involving two equity securities. The equity securities
are non interest bearing.
Other Borrowings
- ----------------
Subordinated debt is comprised of a $40 million public
offering issuance of 8.375% subordinated notes due August 1,
2007. Proceeds of $38.7 million, net of underwriting
discount of $1.3 million, were received by the Company. The
discount is amortized as a yield adjustment over the 10-year
life of the notes.
The Bank has obtained advances from the Federal Home
Loan Bank of San Francisco (the "FHLB") totaling $50.0
million. The advances are under an existing line of credit
whereby the FHLB has granted the Bank a line of credit equal
to 25 percent of its assets. The following relates to the
four outstanding advances as of March 31, 2000:
<TABLE>
<CAPTION>
Maturity Amount Fixed Rate of Interest
(In Thousnds)
------------------------------------------------------------
<C> <C> <C>
Nov. 1, 2000 $25,000 4.53%
Jan. 31, 2001 10,000 5.19%
Apr. 30, 2001 10,000 4.92%
July 15, 2002 5,000 5.61%
</TABLE>
The total outstanding of $50 million of advances as of March
31, 2000 has a composite fixed rate of interest of 4.85%.
Regulatory Matters
- ------------------
The Company has filed the application election to
become a financial holding company pursuant to the Bank
Holding Company Act and the Regulation Y of the Federal
Reserve Board (the "Board"). The Board has reviewed all the
facts of record including capital, CRA rating and other
relevant examination and information and has determined that
the Company's election to become a financial holding company
is effective as of March 13, 2000.
Capital Resources
- -----------------
Stockholders' equity totaled $138.1 million as of March
31, 2000, an increase of $5.1 million, or 5.0%, from $133.0
million as of December 31, 1999.
An analysis of the change in stockholders' equity is as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Stockholders' Equity Amount
(In Thousands)
- ------------------------------------------------------------
<S> <C>
Balance as of December 31, 1999 $ 133,038
Repurchase of Stock (3,177)
Net Income 10,848
Cash Dividends Declared (1,036)
Change in Securities Valuation, Net of Tax (2,755)
Stock Issuance 2,401
Exercise of Stock Options and related
Tax Benefits 336
Shares Held in Trust for Deferred Compensation (1,571)
- ------------------------------------------------------------
Balance as of March 31, 2000 $ 138,084
- ------------------------------------------------------------
</TABLE>
On December 20, 1999, the Board of Directors authorized
a stock repurchase program approving the buy-back of up to
$10 million of the Company's stock. As of March 31, 2000,
148,000 shares had been repurchased at an average cost of
$21.46 per share. As of April 30, 2000, 153,700 shares had
been repurchased for $3.3 million, for an average cost of
$21.49 per share.
Capital ratios for the Company and for the Bank were as
follows as of the dates indicated:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Well-Capitalized March 31, December 31,
Requirements 2000 1999
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
GBC Bancorp
Tier 1 Leverage Ratio 5% 8.21% 8.06%
Tier 1 Risk-Based Capital Ratio 6% 8.89% 9.07%
Total Risk-Based Capital Ratio 10% 12.41% 12.83%
General Bank
Tier 1 Leverage Ratio 5% 9.69% 9.58%
Tier 1 Risk-Based Capital Ratio 6% 10.55% 10.82%
Total Risk-Based Capital Ratio 10% 11.75% 12.07%
- ---------------------------------------------------------------------------------
</TABLE>
For the quarter ended March 31, 2000, the ratio of the
Company's average stockholders' equity to average assets was
7.61%. For the year ended December 31, 1999, this ratio was
8.57%. The decrease of the ratio is mainly the result of
the repricing of the securities available for sale. For the
year ended December 31, 1999, the average net unrealized
holding losses, net of tax was $1,446,000 compared to
$8,308,000 for the quarter ended March 31, 2000. In
addition, during these two periods average assets increased
by $91.7 million.
Executive Obligation Trust ("Rabbi Trust")
- ------------------------------------------
In the first quarter, 2000, the Company entered into a
trust agreement with Union Bank of California (the "Rabbi
Trust"). The purpose of the Rabbi Trust was to resolve
accounting and administrative issues relating to the
deferred compensation payable to the Company's Chairman and
CEO pursuant to his employment agreement with the Company.
Accordingly, in March, 71,007 restricted shares of Company
stock previously earned, were issued and transferred to the
Rabbi Trust.
Upon consolidation, the total stockholders' equity is
reduced by the cost of the shares held in the Rabbi Trust
and the deferred compensation obligation is included in
accrued expenses and other liabilities.
Liquidity
- ---------
Liquidity measures the ability of the Company to meet
fluctuations in deposit levels, to fund its operations and
to provide for customers' credit needs. Liquidity is
monitored by management on an on-going basis. 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 $725.7 million, or 38.3%, of total assets, as
of March 31, 2000, compared to $504.5 million, or 28.9%, of
total assets, as of December 31, 1999. The year-end
liquidity ratio was depressed due to increased pledging to
the Federal Reserve Bank as part of the overall Year 2000
preparedness of the Company.
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
equal to 25 percent of assets with terms up to 360 months.
As of March 31, 2000, the Company has $50 million
outstanding under this financing facility. Management
believes its liquidity sources to be stable and adequate.
As of March 31, 2000, total loans and leases
represented 56.1% of total deposits. This compares to 62.1%
as of December 31, 1999.
The liquidity of the parent company, GBC Bancorp, is
primarily 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
three months ending March 31, 2000, General Bank declared
cash dividends of $4.5 million to GBC Bancorp.
"GAP" Measurement
- ------------------
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 a
variety of time periods, contractual 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 contractual "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 are utilized as a means to provide
management with a tool to monitor 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.
Contractual "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.
As of March 31, 2000 there is a cumulative one year
negative "gap" of $604.8 million. As of December 31, 1999,
there was a cumulative one year negative "gap" of $591.4
million.
The following table indicates the Company's interest
rate sensitivity position as of March 31, 2000, and is based
on contractual maturities. It may not be representative of
positions in subsequent periods.
<TABLE>
<CAPTION>
March 31, 2000
INTEREST SENSITIVITY PERIOD
--------------------------------------------------------------------------------------
0 to 90 91 to 365 Over 1 Year Over Non-Interest
(In Thousands) Days Days to 5 Years 5 Years Earning/Bearing Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
Securities Available for Sale $ 14,623 $ - $ 113,622 $ 605,765 $ - $ 734,010
Securities Held to Maturity - - 1,247 4 - 1,251
Trading Account Securities - - - - 5,071 5,071
Federal Funds Sold & Securities
Purchased Under Agreement to Resell 162,250 - - - - 162,250
Loans and Leases (1) (2) 644,305 28,811 115,863 112,762 - 901,741
Loans to Depository Insititutions - - - - - -
Non-Earning Assets (2) - - - - 92,532 92,532
--------------------------------------------------------------------------------------
Total Earning Assets $ 821,178 $ 28,811 $ 230,732 $ 718,531 $ 97,603 $1,896,855
=====================================================================================
Source of Funds for Assets:
Deposits:
Demand - N/B $ - $ - $ - $ - $ 187,235 $ 187,235
Interest Bearing Demand 405,542 - - - - 405,542
Savings 79,850 - - - - 79,850
TCD'S Under $100,000 82,229 115,175 7,348 - - 204,752
TCD'S $100,000 and Over 379,690 357,328 15,981 - - 752,999
-------------------------------------------------------------------------------------
Total Deposits $ 947,311 $ 472,503 $ 23,329 $ - $ 187,235 $1,630,378
=====================================================================================
Forward Sales Equity Security $ - $ - $ - $ - $ 3,459 $ 3,459
Borrowings from the Federal Home Loan
Bank - 35,000 15,000 - - 50,000
Subordinated Debt - - - 39,039 - 39,039
Other Liabilities - - - - 35,895 35,895
Stockholders' Equity - - - - 138,084 138,084
-------------------------------------------------------------------------------------
Total Liabilities and Stockholders'
Equity $ 947,311 $ 507,503 $ 38,329 $ 39,039 $ 364,673 $1,896,855
=====================================================================================
Interest Sensitivity Gap $ (126,133) $ (478,692) $ 192,403 $ 679,492 $ (267,070)
Cumulative Interest Sensitivity Gap $ (126,133) $ (604,825) $ (412,422) $ 267,070 $ -
Gap Ratio (% of Total Assets) -6.6% -25.2% 10.1% 35.8% -14.1%
Cumulative Gap Ratio -6.6% -31.8% -21.7% -14.1% 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.
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, securities, 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.
Market Risk
- -----------
Market risk is the risk of financial loss arising from
adverse changes in market prices and interest rates. The
Company's market risk is inherent in its lending and deposit
taking activities to the extent of differences in the
amounts maturing or degree of repricing sensitivity.
Adverse changes in market prices and interest rates may
therefore result in diminished earnings and ultimately an
erosion of capital.
Since the Company's profitability is affected by
changes in interest rates, management actively monitors how
changes in interest rates may affect earnings and ultimately
the underlying market value of equity. Management monitors
interest rate exposure through the use of three basic
measurement tools in conjunction with established risk
limits. These tools are the expected maturity gap report,
net interest income volatility and market value of equity
volatility reports. The gap report details the expected
maturity mismatch or gap between interest earning assets and
interest bearing liabilities over a specified timeframe.
The expected gap differs from the contractual gap report
shown earlier in this section by adjusting contractual
maturities for expected prepayments of principal on loans
and amortizing securities as well as the projected timing of
repricing non-maturity deposits. The following table
indicates the Company's financial instruments that are
sensitive to changes in interest rates categorized by their
expected maturity, as of March 31, 2000:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
0 to 90 91 to 365 Over 1 Year Over
(In Thousands) Days Days to 5 Years 5 Years Total
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest-sensitive Assets:
Securities Available for Sale $ 28,094 $ 84,910 $ 510,204 $ 110,802 $ 734,010
Securities Held to Maturity 1,251 - - - 1,251
Federal Funds Sold & Securities
Purchased Under Agreements to Resell 162,250 - - - 162,250
Loans and Leases (1) 644,305 28,811 115,863 112,762 901,741
-------------------------------------------------------------------------
Total Interest-earning Assets $ 835,900 $ 113,721 $ 626,067 $ 223,564 $1,799,252
=========================================================================
Interest-sensitive Liabilities:
Deposits:
Interest Bearing Demand $ 13,932 $ 41,797 $ 269,415 $ 80,398 $ 405,542
Savings 2,662 7,985 53,233 15,970 79,850
Time Deposit of Certificates 461,869 472,553 23,329 - 957,751
-------------------------------------------------------------------------
Total Deposits $ 478,463 $ 522,335 $ 345,977 $ 96,368 $1,443,143
=========================================================================
Borrowing from FHLB $ - $ 35,000 $ 15,000 $ - $ 50,000
Subordinated Debt - - - 39,039 39,039
-------------------------------------------------------------------------
Total Interest-sensitive Liabilities $ 478,463 $ 557,335 $ 360,977 $135,407 $1,532,182
=========================================================================
</TABLE>
(1) Loans and leases are net of non-accrual loans and before unamortized
deferred loan fees and allowance for credit losses.
Expected maturities of assets are contractual
maturities adjusted for projected payment based on
contractual amortization and unscheduled prepayments of
principal as well as repricing frequency. Expected
maturities for deposits are based on contractual maturities
adjusted for projected rollover rates and changes in pricing
for non-maturity deposits. The Company utilizes assumptions
supported by documented analysis for the expected maturities
of its loans and repricing of its deposits and relies on
third party data providers for prepayment projections for
amortizing securities. The actual maturities of these
instruments could vary significantly if future prepayments
and repricing differ from the Company's expectations based
on historical experience.
The Company uses a computer simulation analysis to
attempt to predict changes in the yields earned on assets
and the rates paid on liabilities in relation to changes in
market interest rates. The net interest income volatility
and market value of equity volatility reports measure the
exposure of earnings and capital respectively, to immediate
incremental changes in market interest rates as represented
by the prime rate change of 100 to 200 basis points. Market
value of equity is defined as the present value of assets
minus the present value of liabilities and off balance sheet
contracts. The table below shows the estimated impact of
changes in interest rates on net interest income and market
value of equity as of March 31, 2000:
<TABLE>
<CAPTION>
Net Interest Income Market Value Of Equity
Interest Rates Volatility Volatility
(Basis Points) March 31, 2000 (1) March 31, 2000 (2)
- ---------------------------------------------------------------------
<C> <C> <C>
+200 2.1% -8.8%
+100 0.5% -5.0%
-100 -1.9% 5.7%
-200 -4.9% 9.7%
</TABLE>
(1) The percentage change in this column represents net interest income
for 12 months in a stable interest rate enviornment versus the net
interest income in the various rate scenarios
(2) The percentage change in this column represents net portfolio value
of the Bank in a stable interest rate environment versus the net
portfolio value in the various rate scenarios
The Company's primary objective in managing interest
rate risk is to minimize the adverse effects of changes in
interest rates on earnings and capital. In this regard the
Company has established internal risk limits for net
interest income volatility given a 100 and 200 basis point
decline in rates of 10% and 15% respectively, over a twelve
month horizon. Similarly, risk limits have been established
for market value of equity volatility in response to a 100
and 200 basis point increase in rates of 10% and 15%,
respectively.
Forward-Looking Statements
- --------------------------
Certain statements contained herein, including, without
limitation, statements containing the words "indicates,"
"anticipates," "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,
Market Risk, Liquidity and Interest Rate Sensitivity, and
Year 2000. 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 June 1998, the Financial Accounting Standards Board
("FASB") issued statement No. 133, " Accounting for
Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for
derivative instruments (i.e., interest rate swaps),
including some derivative instruments embedded in other
contracts, (collectively referred to as derivatives) and for
hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. In July
1999, the FASB issued Statement No. 137, " Accounting for
Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133- an amendment
of FASB Statement No. 133." This statement has delayed the
effective date of Statement No. 133 for one year. This new
standard is effective for the first quarter in 2001 and is
not to be applied retroactively to financial statements of
prior periods. Management does not believe there will be a
material adverse impact on the financial position or results
of operations of the Company upon adoption of FASB Statement
No. 133.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
- -------------------------
In the normal course of business, the Company is
subject to pending and threatened legal actions. Management
believes that the outcome of such actions will not have a
material adverse effect on the Company's financial condition
or results of operations.
Item 2. CHANGES IN SECURITIES
- ------------------------------
There have been no changes in the securities of the
Registrant during the quarter ended March 31, 2000.
Item 3. DEFAULT UPON SENIOR SECURITIES
- ---------------------------------------
This item is not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
No matters were submitted to a vote of the Company
security holders during the quarter ended March 31, 2000.
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 and
Chief Executive Officer
Dated: s/
----------------- ------------------------
Peter Lowe, Executive
Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 46,569
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 162,250
<TRADING-ASSETS> 5,071
<INVESTMENTS-HELD-FOR-SALE> 734,010
<INVESTMENTS-CARRYING> 1,251
<INVESTMENTS-MARKET> 1,182
<LOANS> 913,919
<ALLOWANCE> 19,945
<TOTAL-ASSETS> 1,896,855
<DEPOSITS> 1,630,378
<SHORT-TERM> 35,000
<LIABILITIES-OTHER> 39,354
<LONG-TERM> 54,039
0
0
<COMMON> 60,026
<OTHER-SE> 78,058
<TOTAL-LIABILITIES-AND-EQUITY> 1,896,855
<INTEREST-LOAN> 22,443
<INTEREST-INVEST> 13,312
<INTEREST-OTHER> 3
<INTEREST-TOTAL> 35,758
<INTEREST-DEPOSIT> 14,600
<INTEREST-EXPENSE> 16,092
<INTEREST-INCOME-NET> 19,666
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 9,277
<INCOME-PRETAX> 17,628
<INCOME-PRE-EXTRAORDINARY> 17,628
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,848
<EPS-BASIC> 0.94
<EPS-DILUTED> 0.92
<YIELD-ACTUAL> 4.56
<LOANS-NON> 12,178
<LOANS-PAST> 0
<LOANS-TROUBLED> 7,173
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 19,808
<CHARGE-OFFS> 20
<RECOVERIES> 157
<ALLOWANCE-CLOSE> 19,945
<ALLOWANCE-DOMESTIC> 19,945
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
