UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
-------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to __________________
Commission file number 0-13108
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Garden State BancShares, Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2549534
------------------------------- ------------------
(State or other jurisdiction of IRS Employer
incorporation or organization) Identification No.
2290 West County Line Road, Jackson, New Jersey 08527
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 905-2200
--------------
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 latest practicable date.
Outstanding at
Class August 03, 1995
- -------------------------- ------------------
Common Stock, No Par Value 3,093,993
<PAGE>
GARDEN STATE BANCSHARES, INC.
INDEX
Part 1: Financial Information
Item 1. - Financial Statements
Consolidated Balance Sheets at June 30, 1995
and December 31, 1994
Consolidated Statements of Operations for the Three
Months Ended June 30, 1995 and 1994
Consolidated Statements of Operations for the Six
Months Ended June 30, 1995 and 1994
Consolidated Statement of Changes in Stockholders'
Equity for the Six months ended June 30, 1995
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1995 and 1994
Notes to Consolidated Financial Statements
Item 2. - Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part 2: Other Information
Item 4 - Submission of Matters to a Vote of Security Holders
Item 5 - Other Information
Item 6(a) - Exhibits
Item 6(b) - Reports on Form 8-K
Signatures
<PAGE>
Part 1 - Financial Information
GARDEN STATE BANCSHARES, INC.
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
--------- ---------
<S> <C> <C>
Assets
Cash and due from banks ........................... $ 10,994 $ 12,002
Interest bearing deposits with banks
with maturities of
three months or less ......................... 109 277
Federal funds sold ................................ 5,800 400
--------- ---------
Total Cash and Cash Equivalents ............... 16,903 12,679
Investments available for sale (Note 2) ........... 17,618 17,133
Investments held to maturity: (Note 3)
U.S. Treasury Securities ...................... 28,182 28,197
Obligation of other Government agencies ....... 15,870 17,346
Obligations of state and
political subdivisions .................... 6,688 5,385
Other securities .............................. 673 630
--------- ---------
Total investments held to maturity ........ 51,413 51,558
Loans available for sale .......................... 7,346 5,461
Loans, net of unearned income ..................... 210,927 208,097
Less: Allowance for possible loan losses ...... 4,181 4,217
--------- ---------
Loans, net ................................ 206,746 203,880
Bank premises and equipment, net (Note 4) ......... 8,215 7,757
Other Real Estate Owned, net ...................... 2,269 2,930
Accrued interest receivable and other assets ...... 4,829 5,000
--------- ---------
Total assets .............................. $ 315,339 $ 306,398
========= =========
</TABLE>
<PAGE>
GARDEN STATE BANCSHARES, INC.
Consolidated Balance Sheets (Continued)
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
--------- ---------
<S> <C> <C>
Liabilities and Stockholders' Equity
Deposits:
Demand noninterest bearing .................... $ 39,485 $ 38,859
Demand interest bearing ....................... 64,643 58,530
Savings ....................................... 59,030 64,403
Time - under $100,000 ......................... 111,970 90,568
Time - $100,000 and over ...................... 11,530 17,815
--------- ---------
Total Deposits ............................ 286,658 270,175
Other liabilities and borrowed funds .............. 1,005 10,536
Total liabilities ......................... 287,663 280,711
Shareholders' Equity:
Common stock, no par value
Authorized 4,088,091 shares,
issued and outstanding,
3,045,455 shares at June 30, 1995
3,028,352 shares at December 31, 1994 ..... 12,302 12,302
Capital surplus ............................... 9,290 9,150
Undivided profits ............................. 6,032 4,591
Fair market value adjustment of
investments available for sale ............ 52 (356)
--------- ---------
Total stockholders' equity ........................ 27,676 25,687
--------- ---------
Total liabilities and
stockholders' equity ....................... $ 315,339 $ 306,398
========= =========
</TABLE>
<PAGE>
GARDEN STATE BANCSHARES, INC.
Consolidated Statements of Operations
(In Thousands Except for per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended June 30, 1995 1994
---------- ----------
<S> <C> <C>
Interest Income:
Interest and fees on loans ................. $ 5,119 $ 3,929
Interest on investments securities
Taxable ................................ 921 965
Exempt from federal income tax ........ 66 72
Interest on Federal funds sold ............ 144 21
Interest on cash due from banks ............ 1 37
---------- ----------
Total interest income ...................... 6,251 5,024
---------- ----------
Interest Expense:
Demand interest bearing and savings ........ 753 771
Time ....................................... 1,400 804
Time $100,000 and over ..................... 336 177
Borrowed funds ............................. -- 4
---------- ----------
Total interest expense ................. 2,489 1,756
---------- ----------
Net interest income .................... 3,762 3,268
Provision for possible loan losses ............. -- 94
---------- ----------
Net interest income after provision
for loan losses ........................ 3,762 3,174
---------- ----------
Noninterest income:
Service charges - deposit accounts ......... 406 308
Other charges, commissions and fees ........ 307 272
Gain on sale of loans ...................... 27 204
Gain on sale of securities ................. -- 12
Other noninterest income ................... 18 11
---------- ----------
Total noninterest income ............... 758 807
---------- ----------
</TABLE>
<PAGE>
GARDEN STATE BANCSHARES, INC.
Consolidated Statements of Operations (Continued)
(In Thousands Except for per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended June 30, 1995 1994
---------- ----------
<S> <C> <C>
Noninterest expense:
Salaries, wages ............................ 1,348 1,360
Employee benefits .......................... 399 360
Occupancy expense .......................... 309 287
Other real estate owned .................... 137 441
FDIC premium ............................... 173 206
Other ...................................... 1,026 869
---------- ----------
Total noninterest expense .............. 3,392 3,523
---------- ----------
Income before income taxes ............. 1,128 458
Income tax expense ............................. 338 27
---------- ----------
Net income ................................. $ 790 $ 431
========== ==========
Earnings per share of Common Stock ............. $ 0.26 $ 0.20
========== ==========
Weighted average shares outstanding ............ 3,037,337 2,115,288
========= =========
</TABLE>
<PAGE>
GARDEN STATE BANCSHARES, INC.
Consolidated Statements of Operations
(In Thousands Except for per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended June 30, 1995 1994
---------- ----------
<S> <C> <C>
Interest Income:
Interest and fees on loans ................. $ 10,109 $ 7,630
Interest on investments securities
Taxable ................................ 1,848 2,072
Exempt from federal income tax ........ 134 146
Interest on Federal funds sold ............ 272 32
Interest on cash due from banks ............ 7 69
---------- ----------
Total interest income ...................... 12,370 9,949
---------- ----------
Interest Expense:
Demand interest bearing and savings ........ 1,512 1,523
Time ....................................... 2,519 1,683
Time $100,000 and over ..................... 733 288
Borrowed funds ............................. 74 6
---------- ----------
Total interest expense ................. 4,838 3,500
---------- ----------
Net interest income .................... 7,532 6,449
Provision for possible loan losses ............. 87 417
---------- ----------
Net interest income after provision
for loan losses ........................ 7,445 6,032
---------- ----------
</TABLE>
<PAGE>
GARDEN STATE BANCSHARES, INC.
Consolidated Statements of Operations (Continued)
(In Thousands Except for per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended June 30, 1995 1994
---------- ----------
<S> <C> <C>
Noninterest income:
Service charges - deposit accounts ......... 744 605
Other charges, commissions and fees ........ 610 532
Gain on sale of loans ...................... 122 367
Gain on sale of securities ................. -- 133
Other noninterest income ................... 29 21
---------- ----------
Total noninterest income ............... 1,505 1,658
---------- ----------
Noninterest expense:
Salaries, wages ............................ 2,708 2,679
Employee benefits .......................... 788 670
Occupancy expense .......................... 601 610
Other real estate owned .................... 334 718
FDIC premium ............................... 346 413
Other ...................................... 2,053 1,738
---------- ----------
Total noninterest expense .............. 6,830 6,828
---------- ----------
Income before income taxes ............. 2,120 862
Income tax expense ............................. 679 50
---------- ----------
Net income ................................. $ 1,441 $ 812
========== ==========
Earnings per share of Common Stock ............. $ 0.48 $ 0.42
========== ==========
Weighted average shares outstanding ............ 3,033,160 1,920,714
========== ==========
</TABLE>
<PAGE>
GARDEN STATE BANCSHARES, INC.
Consolidated Statements of Changes in Stockholder's Equity
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Common Capital Retained Investment
Stock Surplus Earnings Valuation Total
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 ...... $12,302 $9,150 $4,591 $(356) $25,687
Net Income .................... -- -- 1,441 -- 1,441
Proceeds from Issuance of Stock -- 140 -- -- 140
Fair Market Value Adjustment of
Investments Available for Sale -- -- -- 408 408
Balance, June 30, 1995 ........ $12,302 $9,290 $6,032 $ 52 $27,676
</TABLE>
<PAGE>
GARDEN STATE BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended June 30, 1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net Income ................................................. $ 1,441 $ 812
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization ............................ 411 476
Provision for loan losses ................................ 87 417
Provision for other real estate owned .................... 72 305
Accretion of discount on investment securities ........... (9) (68)
Amortization of premium on investment securities ......... 94 128
Gain on sale of investments available for sale ........... -- (133)
Loss on call of investment held to maturity .............. 1 --
Gain on sale of loans .................................... (122) (367)
Gain on sale of other real estate owned .................. (56) (24)
Sale of loans available for sale ......................... 4,190 11,012
(Increase) decrease in income tax receivable ............ (95) 148
Deferred tax benefit ..................................... 20 116
Decrease in deferred loan fees ........................... (69) (27)
Decrease (increase) in interest receivable ............... 88 (300)
Increase (decrease) in interest payable .................. 192 (38)
Decrease (increase) in purchase
mortage servicing rights .............................. 30 (458)
(Increase) decrease in other assets ...................... (142) 170
Decrease in other liabilities ............................ (75) (210)
-------- --------
Total adjustments ........................................ 4,617 11,147
-------- --------
Net cash provided by operating activities .................... 6,058 11,959
======== ========
Cash flows from investment activities:
Proceeds from sale of investments available for sale ......... -- 17,018
Proceeds from maturities of investments
available for sale ......................................... 166 4,666
Proceeds from maturities of investments
held to maturity ........................................... 4,148 5,110
Purchase of investment securities held to maturity ........... (4,062) (10,676)
Purchase of investment securities available for sale ......... -- (13,182)
Net increase in loans ........................................ (10,038) (13,973)
Recoveries of loans previously charged off ................... 213 186
Proceeds from sale of other real estate owned ................ 1,634 1,828
Property and equipment expenditures .......................... (870) (153)
-------- --------
Net cash applied to investing activities ................... (8,809) (9,176)
======== ========
</TABLE>
<PAGE>
GARDEN STATE BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended June 30, 1995 1994
-------- --------
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in demand deposits
and saving accounts ........................................ 1,366 (875)
Net increase (decrease) in time deposits ..................... 15,117 (8,639)
Repayments of short-term borrowings .......................... (9,648) --
Proceeds from issuance of common stock ....................... 140 3,280
-------- --------
Net cash provided by (applied to) financing activities...... 6,975 (6,234)
======== ========
Net increase cash and cash equivalents ....................... 4,224 (3,451)
Cash and cash equivalents at beginning of year ............... 12,679 19,066
-------- --------
Cash and cash equivalents at end of year ..................... $ 16,903 $ 15,615
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest ................................................... $ 4,646 $ 3,538
======== ========
Income taxes ............................................... 754 --
======== ========
Supplemental schedule of noncash investing financing activities:
During the six months ended June 30, 1995 and 1994, the Bank transferred
assets of approximately $988,000 and $2,293,000 respectively, to other real
estate owned from the loan portfolio.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying consolidated condensed financial statements as
presented for the six months ended June 30,1995 and 1994 are unaudited and in
the opinion of Garden State Bancshares, Inc. (the "Company") reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results for the unaudited periods. The financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and are not necessarily indicative
of results for the year. "The Bank", as referred to hereinafter, refers to
Garden State Bank, the Company's sole subsidiary.
2. Securities Available for Sale
The amortized cost and approximate market value (carrying value) of
securities available for sale are summarized as follows:
<TABLE>
<CAPTION>
June 30,1995
Amortized Market
Cost Value
------- -------
<S> <C> <C>
U.S. Treasury ...................................... $ 3,000 $ 2,987
Obligations of other Government agencies ........... 14,445 14,552
Other Securities ................................... 87 79
------- -------
$17,532 $17,618
======= =======
<CAPTION>
December 31,1994
Amortized Market
Cost Value
------- -------
<S> <C> <C>
U.S. Treasury ...................................... $ 3,000 $ 2,913
Obligations of other Government agencies ........... 14,617 14,106
Other Securities ................................... 109 114
------- -------
$17,726 $17,133
======= =======
</TABLE>
<PAGE>
3. Investment Securities
The amortized cost (carrying value) and approximate market value of
investment securities are summarized as follows:
<TABLE>
<CAPTION>
June 30,1995
Amortized Market
Cost Value
------- -------
<S> <C> <C>
U.S. Treasury ........................................ $28,182 $28,061
Obligations of other Government agencies ............. 15,870 15,731
Obligations of State & Political Subdivisions ........ 6,688 6,791
Other Securities ..................................... 673 667
------- -------
$51,413 $51,250
======= =======
<CAPTION>
December 31,1994
Amortized Market
Cost Value
------- -------
<S> <C> <C>
U.S. Treasury ........................................ $28,197 $26,366
Obligations of other Government agencies ............. 17,346 16,314
Obligations of State & Political Subdivisions ........ 5,385 5,425
Other Securities ..................................... 630 627
------- -------
$51,558 $48,732
======= =======
</TABLE>
4. Premises and Equipment
The Bank operates from its Corporate Headquarters located in Jackson,
New Jersey. It also maintains nine branches, one is in Jackson, adjacent to the
corporate headquarters, two are in Lakewood Township, two in Dover Township, and
one each in Brick Township, Whiting, Wall Township and Seaside Heights. The Bank
owns its headquarters facility and its Brick Township and Route 70 Lakewood
branch offices. The remaining branches are leased. The Bank also owns a parcel
of undeveloped land in Jackson Township, which it periodically evaluates as a
site for a potential future branch office.
5. Regulatory Matters
Effective as of June 30, 1994 the Bank entered into a Memorandum of
Understanding (the "Bank MOU") with the Federal Deposit Insurance Corporation
(the "FDIC") and the New Jersey Department of Banking (the "Department") whereby
it agreed to undertake certain actions and refrain from certain actions in order
to correct certain deficiencies observed by the FDIC and the Department in their
examinations of the Bank. In April 1995, the FDIC and Department concluded
regulatory examinations as of December 31, 1994. On May 23,1995 the Bank was
notified that the Bank MOU had been lifted.
6. Change in Accounting Principles
Effective January 1, 1995 the Company adopted Statement of Financial
Account Standards ("SFAS")114, "Accounting by Creditors for Impairment of a
Loan" and SFAS 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures". SFAS 114 and SFAS 118 address the accounting
treatment of certain impaired loans. A loan is considered impaired when, based
upon current information and events, it is probable that a creditor will be
unable to collect amounts due. SFAS 114 and SFAS 118 do not apply to large
groups of smaller-balance homogeneous loans that are collectively evaluated for
impairment, loans that are measured at fair value or at the lower of cost or
fair value, leases or debt securities. Prior to January 1, 1995, the Company's
"impaired" loans were described as, and included in, "nonaccruing" loans.
In response to the above, the Company has amended its accounting policy
regarding the recognition of interest income to read as follows:
"The accrual of income on loans is generally discontinued and all interest
income previously accrued and unpaid is deducted from income when a loan becomes
more than ninety days delinquent, or when certain factors indicate reasonable
doubt as to the timely collectibility of all amounts due. Generally, loans on
which the accrual of income has been discontinued are designated as nonaccruing
loans, and includes all loans classified as "impaired" loans.
Generally, nonaccruing loans are returned to an accrual status only when none of
the principal or interest is due and unpaid and the full collectibility of the
outstanding loan balance is reasonably assured. Cash receipts on nonaccruing
loans are generally applied to the principal balance until the remaining balance
is considered fully collectible.
All financial information and schedules have been reclassified to conform
with SFAS No. 114 guidelines. Accordingly, insubstance foreclosure loans and the
associated allowance have been reclassified from Other Real Estate Owned to the
loan portfolio. Likewise, the provision for possible Other Real Estate Owned
losses associated with insubstance foreclosure loans has been reclassified from
Other Real Estate Owned expense to the provision for loan losses. Based upon
these new accounting standards as of June 30, 1995 the Company had impaired
loans of $5,265,000.
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations for the Three Month Period
The company reported net income of $790,000 for the three months ended
June 30, 1995 an increase of $359,000 or 83.29% as compared to net income of
$431,000 for the same period in 1994. The primary factors contributing to the
improved performance in 1995 were an increase in net interest income of $494,000
as well as a $94,000 decrease in the provision for possible loan losses and a
$131,000 decrease in noninterest expense. These factors were partially offset by
a decrease in noninterest income of $49,000 and an increase in income tax
expense of $311,000.
Net income per share for the three months ended June 30,1995 was $0.26
compared to $0.20 for the same period in 1994.
Interest income increased $1,227,000 or 24.42% for the second quarter
of 1995 compared to the same period in 1994. The improvement was primarily due
to an increase of $1,190,000 or 30.29% in interest and fees on loans as well as
an increase of $87,000 or 150.00% in interest on Short Term Investments,
including Federal Funds Sold and Interest Bearing Deposits with Banks. Average
performing loan balances increased $31,074,000 during the second quarter of 1995
compared to the same period in 1994 and the yield increased 111 basis points. In
addition, average balances for short term investments, including Federal Funds
Sold and Interest Bearing Deposits with banks, increased $2,585,000 and the
yield increased 271 basis points. Although average balances for investments
during the second quarter of 1995 as compared to the same period in 1994
decreased $3,572,000, the yield increased 44 basis points. The yield on earning
assets increased to 8.42% for the second quarter of 1995 from 7.38% for the same
period in 1994.
During the second quarter of 1995 as compared to the second quarter of
1994, interest expense increased $733,000 or 41.74%. Interest expense on CD's
under $100,000 increased $596,000 or 74.13% as a result of both a $12,113,000
increase in average balances as well as an increase in yield of 185 basis
points. Interest expense on CD's $100,000 and over increased $159,000 or 89.83%
due to both a $5,403,000 increase in average balances coupled with a 184 basis
point increase in yield. The yield on interest bearing liabilities for the
second quarter increased from 2.94% at June 30, 1994 to 3.99% at June 30, 1995.
Net interest income for the second quarter of 1995 as compared to the
same period in 1994 increased $494,000 or 15.12%. The Company's net interest
margin (FTE) increased from 4.87% to 5.13% for the three month period ending
June 30, 1995 compared to the same period a year ago.
The provision for possible loan losses represents charges to current
operations. These charges allow management to maintain an allowance for possible
loan losses it considers adequate to cover the risk of losses associated with
its loan portfolio. Management reviews the allowance on a monthly basis and
monitors deteriorating loans on a continual basis. During the second quarter of
1995, management did not authorize any charges to the provision for possible
loan losses, compared to the authorization of $94,000 for the same period last
year.
For the three month period ending June 30, 1995, there was no
provision made for possible loan losses and therefore the only change in the
allowance for possible loan losses was net charge-offs of $250,000 which
resulted in an allowance for possible loan losses of $4,181,000 at June 30, 1995
compared to $4,431,000 at March 31, 1995.
Noninterest income decreased $49,000 for the three months ended June
30,1995 compared to the same period a year ago. The decrease was attributable to
a decline of $177,000 and $12,000 on the gain on sale of loans and securities,
respectively. The decrease was partially offset by an increase of $98,000 for
service charges on deposit accounts and an increase of $35,000 for other
charges, commissions and fees. During the three months ended June 30, 1995, the
principal balance of loans sold was $2,063,000 compared to $6,692,000 for the
same period last year. There were no sales of investment securities available
for sale during the three month period ending June 30, 1995 whereas $7,942,000
of securities were sold during the same period in 1994.
Noninterest expense decreased $131,000 during the second quarter of
1995 as compared to the same period in 1994. Other real estate owned expense
decreased $304,000 or 68.93% and FDIC insurance premium decreased $33,000 or
16.02%. These factors were partially offset by an increase in salaries and
employee benefits of $27,000 or 1.57%, occupancy expense of $22,000 or 7.67% and
other expense of $157,000 or 18.07%. The increase in salaries and employee
benefits expense was primarily due to a $20,000 increase in ESOP and 401K
accruals, a $18,000 increase in management incentive accruals and a $14,000
increase in medical and dental plan expenses. These increases were partially
offset by a $16,000 decrease in salary expense. The major portion of the
increase in occupancy expense was due to higher net rental and real estate tax
expense. The decrease in other real estate owned expense was the result of a
lower provision as well as lower operating expenses. The FDIC insurance premium
expense reduction was due to a lower assessment rate. The increase in other
expense was primarily due to a $65,000 accrual made in connection with an
employee separation settlement as well as a $36,000 increase in legal fees, a
$35,000 increase in shareholders expense, a $29,000 increase in advertising
expense and a $19,000 increase in business development expenses. These increases
were partially offset by a $49,000 decrease in equipment expense.
Income tax expense increased $311,000 for the three months ended June
30, 1995 compared to the same period a year ago. There was no federal income tax
expense during this period in 1994 due to the realization of the net operating
loss carryforward from 1993.
Results of Operations for the Six Month Period
The Company reported net income of $1,441,000 for the six months ended
June 30,1995, an increase of $629,000, or 77.46%, as compared to net income of
$812,000 for the same period in 1994. The primary factors contributing to the
improved performance in 1995 were an increase in net interest income of
$1,083,000 as well as a $330,000 decrease in the provision for possible loan
losses. These factors were partially offset by a decrease in noninterest income
of $153,000, and an increase in income tax expense of $629,000.
Net income per share for the six months ended June 30, 1995 was $0.48
compared to $0.42 for the same period last year.
Interest income increased $2,421,000 or 24.33% for the first six
months of 1995 compared to the same period in 1994. The improvement was due
primarily to an increase of $2,479,000 or 32.49% in interest and fees on loans,
due in part to an increase of $31,632,000 or 17.44% in average performing loans
from $181,369,000 at June 30,1994 to $213,001,000 at June 30,1995. Additionally,
loan fees increased $42,450 or 10.88% from $389,994 for the first six months of
1994 to $432,444 for the same period in 1995. Interest on Short Term
Investments, including Federal Funds Sold and Interest Bearing Deposits,
increased $178,000 or 176.24% from $101,000 for the six months ended June 30,
1994 to $279,000 for the same period in 1995. The increase was the result of a
50.87% increase in average balances as well as an increase in the rate of
return. The yield on earning assets increased to 8.40% at June 30, 1995 compared
to 7.31% at June 30,1994.
Interest expense increased $1,338,000 or 38.23% from $3,500,000 for
the first six months of 1994 to $4,838,000 for the same period in 1995. Interest
expense for demand deposits increased $133,000 or 21.51% as a result of both a
$5,698,000 increase in average balances and a 23 basis point increase in rate.
Interest expense for CD's under $100,000 increased $836,000 or 49.67% due to
both a $4,466,000 increase in average balances and a 150 basis point increase in
rate. Interest expense for CD's $100,000 and over increased $445,000 or 154.51%
as a result of a $9,619,000 increase in average balances coupled with a 214
basis point increase in rate. Interest expense for other borrowed funds
increased $68,000. Average balances increased $1,991,000 and the interest rate
increased by 264 basis points. The yield on interest bearing liabilities
increased 94 basis points from 2.95% at June 30,1994 to 3.89% at June 30,1995.
Net interest income for the first six months of 1995 as compared to
the same period in 1994 increased $1,083,000 or 16.79%. The Company's net
interest margin (FTE) increased from 4.81% at June 30, 1994 to 5.17% at June 30,
1995.
The provision for possible loan losses represents charges to current
operations. The charges to current operations allow management to maintain an
allowance for possible loan losses it considers adequate to cover the risk of
losses associated with its loan portfolio. Management reviews the allowance on a
monthly basis, and monitors deteriorating loans on a continual basis. In the
first six months of 1995 management authorized charges to the provision for loan
losses of $87,000, compared to $417,000 during the first six months of 1994.
The provision for possible loan losses for the six months ended June
30,1995 of $87,000, and net charge-offs of $123,000, resulted in an allowance
for possible loan losses of $4,181,000 at June 30,1995 as compared to $4,217,000
at December 31,1994. The allowance for possible loan losses at June 30,1995
represented 68.90% of nonperforming loans at such date. The allowance for
possible loan losses plus the allowance for OREO losses represented 51.65% of
total nonperforming assets at June 30,1995. The allowance for possible loan
losses of $4,217,000 represented 82.98% of nonperforming loans at December
31,1994, while the allowance for possible loan losses and allowance for OREO
losses represented 54.41% of total nonperforming assets at such date.
Noninterest income decreased $153,000 or 9.23%, during the first six
months of 1995 compared to the first six months of 1994. The decrease was
attributable to a decline of $133,000 in gain on sale of securities and $245,000
in gain on sale of loans. These reductions in noninterest income were partially
offset by an increase of $139,000 for service charges on deposit accounts and
$78,000 for other charges, commissions, and fees. During the first six months of
1995, the principal balance of loans sold was $4,068,000 as compared to
$10,645,000 for the same period in 1994. There were no sales of investment
securities available for sale during the first six months of 1995, whereas
$16,885,000 of securities were sold during the same period in 1994.
Noninterest expense remained stable comparing the first six months of
1995 to the same period in 1994. Salaries and employee benefits increased
$147,000 or 4.39% and other expense increased $315,000 or 18.12%. These factors
were partially offset by a decrease in occupancy expense of $9,000 or 1.48%,
other real estate owned expense of $384,000 or 53.48% and FDIC premium of
$67,000 or 16.22%. The increase in salaries and benefits expense was primarily
due to a $56,000 increase in management incentives, a $37,000 increase in
medical and dental expenses and a $41,000 increase in accruals for ESOP and 401K
expenses. The increase of $315,000 in other expense was due primarily to a
payment of $175,000 made in connection with an employee separation settlement,
as well as a $46,000 increase in professional and other fees, a $40,000 increase
in advertising expense, a $31,000 increase in business development and travel
expense, a $39,000 increase in shareholder expense, and a $24,000 increase in
stationary and supplies expense. These increases were partially offset by a
decrease of $35,000 for legal fees and a $92,000 decrease in furniture and
equipment expense.
Income tax expense increased $629,000 for the six months ended June
30,1995 as compared to the same period in 1994. There was no federal income tax
expense during the first six months of 1994 due to the realization of the net
operating loss carryforward from 1993.
Financial Condition
During the first six months of 1995, total assets increased $8,941,000
or 2.92% from $306,398,000 at December 31,1994 to $315,339,000 at June 30,1995.
Total cash and cash equivalents increased by $4,224,000 or 33.31%. The held to
maturity securities portfolio remained relatively stable. The increase in the
available for sale securities portfolio of $485,000 or 2.83% was due to a
$678,000 SFAS No. 115 mark to market adjustment offset by paydowns of mortgage
backed securities. Loans (net) increased $2,866,000 or 1.41% and bank premises
and equipment increased $458,000 or 5.90%. Decreases of $661,000 or 22.56% for
other real estate owned (net) and $171,000 or 3.42% for accrued interest
receivable and other assets partially offset the aforementioned increases.
Total deposits increased $16,483,000 or 6.10% from $270,175,000 at
December 31,1994 to $286,658,000 at June 30,1995. While Interest Bearing Demand
increased $6,113,000 or 10.44% and Time under $100,000 increased $21,402,000, or
23.63%, Time $100,000 and over decreased $6,285,000, or 35.28% and Savings
decreased $5,373,000, or 8.34%.
Other liabilities decreased $9,531,000 or 90.46% from December 31, 1994 to
June 30, 1995. The decrease was due to a $9,648,000 decrease in securities sold
under agreement to repurchase which was partially offset by an increase of
$192,000 for accrued interest payable.
<PAGE>
Asset Quality
Nonperforming loans increased $986,000, or 19.40% from $5,082,000 at
December 31,1994 to $6,068,000 at June 30, 1995, while nonperforming assets
increased $270,000 or 3.24% from $8,324,000 at December 31,1994 to $8,594,000 at
June 30,1995. The table below presents on a quarterly basis loans accounted for
on a nonaccrual basis, loans which are contractually past due 90 days or more
and other real estate owned.
<TABLE>
<CAPTION>
(In thousands) Three month period ending:
06/95 03/95 12/94 09/94
------- ------- ------- -------
<S> <C> <C> <C> <C>
Nonaccruing loans .................. $ 5,265 $ 5,573 $ 4,869 $ 6,742
Accruing loans 90 days past ........ 803 86 213 216
------- ------- ------- -------
Total Nonperforming loans .......... 6,068 5,659 5,082 6,958
Other Real Estate Owned ............ 2,526 2,940 3,242 6,756
------- ------- ------- -------
Total Nonperforming Assets ......... 8,594 8,599 8,324 13,714
Accruing TDR ....................... 1,544 1,503 1,126 1,547
------- ------- ------- -------
Total Risk Elements ................ $10,138 $10,102 $ 9,450 $15,261
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Three month period ending:
06/95 03/95 12/94 09/94
----- ----- ----- -----
<S> <C> <C> <C> <C>
Percentage of nonperforming loans to
total loans: 2.78% 2.57% 2.38% 3.48%
Percentage of nonperforming assets to
total loans and other real estate owned: 3.89% 3.86% 3.84% 6.64%
Percentage of nonperforming assets to
total assets: 2.73% 2.72% 2.72% 4.56%
Percentage of allowance for possible
loan losses to:
Total Loans 1.92% 2.01% 1.97% 2.03%
Nonperforming Loans 68.90% 78.30% 82.98% 58.16%
Percentage of allowance for possible
loan and OREO losses to:
Nonperforming Assets 51.65% 54.65% 54.41% 34.83%
</TABLE>
<PAGE>
Liquidity
The Company actively manages its liquidity position under policies and
procedures intended to insure that the Company will maintain adequate levels of
available funds. Liquidity is measured by the Company's ability to raise cash at
a reasonable cost or with a minimum of loss. Liquidity planning is necessary so
that the Company will be capable of funding all obligations to its customers at
all times, from meeting their immediate cash withdrawal requirements to
fulfilling their short-term credit needs. The Company's asset liquidity consists
of cash and due from banks, money market investments, investment securities that
mature within one year and loans that mature or reprice in one year or less.
Cash and due from banks decreased $1,008,000, or 8.40% and money market
investments decreased $168,000, or 60.65% from December 31, 1994 to June 30,
1995. As of June 30, 1995 investment securities in the amount of $8,984,000
mature within one year and loans in the amount of $141,436,000 either mature or
reprice within one year.
Deposits are the most important source of funds for the Bank. Deposits
increased $16,483,000, or 6.10% from December 31, 1994 to June 30, 1995. The
deposit base encountered substantial increases in both certificates of deposit
under $100,000 and interest bearing demand of $21,402,000 or 23.63% and
$6,113,000 or 10.44%, respectively. These increases were partially offset by a
$5,373,000 or 8.34% decrease in savings deposits and a $6,285,000 or 35.28%
decrease in certificates of deposit $100,000 and over.
The Company had no material commitments for capital expenditures as of June
30, 1995.
Capital
The table below presents selected ratios for the quarter ended June 30,
1995:
<TABLE>
<CAPTION>
Bank Company Regulatory
Minimum
Risk Based Capital 06/30/95 06/30/95 06/30/95
-------- -------- ---------
<S> <C> <C> <C>
Tier I .................... 14.05% 14.13% 4.00%
Total ..................... 15.30% 15.38% 8.00%
Leverage .................. 8.64% 8.69% 6.00%
</TABLE>
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders
On or about March 27, 1995, Registrant mailed to its shareholders a proxy
statement (Proxy Statement) for the purpose of soliciting proxies for use at its
Annual Meeting of Shareholders. The proxies were solicited pursuant to
Regulation 14A of the Securities Exchange Act of 1934 and there was no
solicitation in opposition thereto.
At the Annual Meeting, held April 18, 1995, the shareholders approved the
following proposals as set forth in the Proxy Statement:
1. The election of four directors:
<TABLE>
<CAPTION>
Authority
For Withheld Against
--------- --------- -------
<S> <C> <C> <C>
H. George Buckwald 2,595,095 9,541 501
Michael E. Levin 2,595,195 9,541 401
Matthew A. Lindenbaum 2,595,596 9,541 0
Ronald P. Vogel 2,595,596 9,541 0
</TABLE>
2. Directors whose terms extended beyond this Annual Meeting:
Theodore D. Bessler
Peter Boyarin
Lee A. Harris
Arnold D. Mohel
Herbert E. Wishnick
3. Approval of the 1995 Officers and Employees Incentive Stock Option Plan
which provides for up to 55,000 shares of stock to be issued to
officers and employees of the Corporation and its subsidiaries
(2,370,135 for, 204,530 against and 30,472 abstentions).
4. Such other business as may properly come before the Meeting.
Item 5 - Other Information
The Company is listed on the NASDAQ Small-Cap Market under the symbol GRDN and
is also listed on the Boston Stock Exchange under the symbol GSB. Ryan Beck &
Co., Janney Montgomery Scott, Inc., Sandler, O'Neill & Partners, and Herzog,
Heine, Geguld, Inc. serve as market makers for the stock.
On June 13, 1995, Garden State Bancshares entered into an agreement and plan of
merger with The Summit Bancorporation ("Summit"), a $5.5 billion bank holding
company headquartered in Chatham, New Jersey, that provides for the acquisition
of Garden State Bancshares by Summit. Upon consummation of the acquisition, each
outstanding share of Garden State Bancshares stock will be exchanged for 1.08
shares of Summit Bancorp's common stock. Also, Garden State has the option, and
is expected, to declare common dividends until the deal closes, in an amount
equal to what Garden State shareholders would have received if the merger had
occurred on June 13,1995. The transaction is expected to close in the fourth
quarter. The merger is subject to approval by Garden State shareholders and by
the appropriate state and federal banking authorities.
Item 6(a) - Exhibits
(a)(3) Exhibits
Lists of Exhibits
(3)(a) Certificate of Incorporation of the Company (Incorporated by
reference to GSB's Registration Statement on Form S-14, filed September
5, 1984 (Exhibit II).
(b) Amendment to Certificate of Incorporation of the Company
(Incorporated by reference to GSB's Form 10-K for the year ended
December 31, 1990 (Exhibit 3.b)).
(c) By-laws of the Company (Incorporated by reference to GSB's
Registration Statement on Form S-14, filed September 5, 1984 (Exhibit 3
Part II).
Item 6(b) - Reports on Form 8-K
The Company filed a current report on Form 8-K on April 26, 1995 under Item
5 of Form 8-K regarding the Company's first quarter 1995 results and in the
exhibits to Form 8-K listed certain amended and restated change of control
agreements, and is incorporated herein by reference.
The Company filed a current report on Form 8-K on June 28, 1995 regarding
the Definitive Merger Agreement between Garden State BancShares Inc. and Summit
Bancorporation and is incorporated herein by reference.
<PAGE>
SIGNATURES
Pursuant to the requirement 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.
Garden State BancShares, Inc.
DATE: 08/11/95 /s/THEODORE D. BESSLER
------------- -----------------------------
Theodore D. Bessler
President and Chief
Executive Officer
DATE: 08/11/95 /s/ROBERT T. ENGLISH
------------- -----------------------------
Robert T. English
Sr. Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 10,994
<INT-BEARING-DEPOSITS> 109
<FED-FUNDS-SOLD> 5,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17,618
<INVESTMENTS-CARRYING> 51,413
<INVESTMENTS-MARKET> 51,250
<LOANS> 218,273
<ALLOWANCE> 4,181
<TOTAL-ASSETS> 315,339
<DEPOSITS> 286,658
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,005
<LONG-TERM> 0
<COMMON> 12,302
0
0
<OTHER-SE> 15,374
<TOTAL-LIABILITIES-AND-EQUITY> 315,339
<INTEREST-LOAN> 10,109
<INTEREST-INVEST> 1,982
<INTEREST-OTHER> 279
<INTEREST-TOTAL> 12,370
<INTEREST-DEPOSIT> 4,764
<INTEREST-EXPENSE> 4,838
<INTEREST-INCOME-NET> 7,532
<LOAN-LOSSES> 87
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 6,830
<INCOME-PRETAX> 2,120
<INCOME-PRE-EXTRAORDINARY> 2,120
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,441
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
<YIELD-ACTUAL> 8.40
<LOANS-NON> 5,265
<LOANS-PAST> 803
<LOANS-TROUBLED> 1,544
<LOANS-PROBLEM> 4,074
<ALLOWANCE-OPEN> 4,217
<CHARGE-OFFS> 336
<RECOVERIES> 213
<ALLOWANCE-CLOSE> 4,181
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 4,181
</TABLE>
