Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB/A
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
---------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-14294
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Greater Community Bancorp (formerly Great Falls Bancorp)
-----------------------------------------------------------------------
(Name of small business issuer in its charter)
New Jersey 22-2545165
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification No.)
55 Union Boulevard, Totowa, New Jersey 07512
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (201) 942-1111
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Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
NONE
------------------- -----------------------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $1 per share
- --------------------------------------------------------------------------------
(Title of class)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
YES X NO
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<PAGE>
REASON FOR AMENDMENT
The Registrant hereby amends the following sections of its Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1996:
Part II -- Items 6 (Management's Discussion and Analysis of
Financial Condition and Results of Operations)
Item 7A (Financial Statements)
Part III -- Item 13 (Exhibit 11 -- Statement re: computation of per
share earnings)
Item 13 (Exhibit 99 -- Press release dated April 29, 1997)
On April 29, 1997, the Registrant issued a press release announcing
the restatement of its net earnings per share for the fiscal year ended December
31, 1996, and the reason therefor. A copy of the press release is filed as
Exhibit 99 to this Form 10-KSB/A and incorporated in its entirety by this
reference. All references to earnings per share for the Registrant's fiscal year
ended December 31, 1996, contained in the above-referenced sections of the
Registrant's Annual Report on Form 10-KSB are hereby amended to include the
restated earnings per share data for fiscal 1996.
<PAGE>
PART II
Item 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This section presents a review of the Company's consolidated
financial condition and results of operations. Data is presented for both the
Company and its subsidiaries unless otherwise noted.
In addition to historical information, this discussion and analysis
contains forward-looking statements. The forward-looking statements contained
herein are subject to certain risks and uncertainties that could cause actual
results to differ materially from those projected in the forward-looking
statements. Important factors that might cause such a difference include, but
are not limited to, those discussed in this section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date hereof. The
Company undertakes no obligation to publicly revise or update these
forward-looking statements to reflect events and circumstances that arise after
the date hereof.
Acquisitions
During 1995, the Company completed certain transactions which were
significant to its business, operations and structure. On April 7, 1995, the
Company acquired Family First which was merged into GFB. In connection with the
Family First acquisition, GFB added two full-service banking offices. The
acquisition was accounted for as a purchase transaction and accordingly GFB
recorded all assets and liabilities of Family First on its books at the
acquisition date. The Company acquired $26.3 million in loans and $49.8 million
in deposits pursuant to the Family First acquisition. The purchase price
exceeded the fair market value of net assets acquired by approximately $734,000,
which was recorded as goodwill and is being amortized over a period of six
years. Income and expense are recorded in the Company's results since the
acquisition date and prior periods have not been restated. In addition, in July
1995 GFB opened a de novo full-service banking office in Totowa, New Jersey.
As of December 31, 1995, the Company acquired BCB through a stock for
stock exchange which was accounted for as a pooling-of-interests. Due to the
pooling-of-interest accounting treatment, financial results for periods prior to
1995 have been restated to include BCB. The acquisition of BCB added four
full-service banking offices. At December 31, 1995, BCB had total assets of
$76.9 million and total deposits of $68.8 million.
Results of Operations: Fiscal Years Ended December 31, 1996, 1995 and 1994
The Company earned $2.3 million or $0.97 per share in 1996 compared
to $2.1 million or $1.04 per share in 1995, and $1.5 million or $.89 per share
in 1994. The earnings reported are after $111,000, $191,000 and $110,000 of
amortization expense of intangible assets on a pre-tax basis, for the years
ended December 31, 1996, 1995 and 1994, respectively. In 1996, the Company's
earnings improved 13% over 1995. In 1995, the Company's earnings, improved 39%
over 1994. Net interest income increased by $656,000, or 6%, in 1996 compared to
1995, and $3.1 million or 40% in 1995 compared to 1994. Total other expenses
showed a moderate increase of $63,000 in 1996 over 1995 and increased by $3.3
million or 54% in 1995 over 1994. The increase in net interest income in 1996 is
attributable to the growth of the Company. The increases in both net interest
income and other expenses in 1995 over 1994 are primarily attributable to the
acquisition of Family First and in part to the growth of the Company. The
provision for possible loan losses increased by $26,000 in 1996 compared to
1995, and increased
1
<PAGE>
by $242,000 in 1995 compared to 1994, primarily as a result of the increase in
the loan portfolio resulting from the acquisition of Family First and in part to
internal growth. The Company's annual interest expense increased by $604,000 in
1996 compared to 1995, primarily due to an increase in average interest-bearing
liabilities. In 1995 the annual interest expense increased by $2.9 million
compared to 1994, primarily due to the increase in average deposits which
resulted from the Family First acquisition completed by the Company during 1995.
During 1996, the Company's earnings, through its Bank Subsidiaries,
were adversely affected by a legislative action taken by the United States
Government to sign into law the Deposit Insurance Funds Act of 1996 to
recapitalize the SAIF. Under the act, the FDIC levied a special assessment on
SAIF-assessable deposits held as of March 31, 1995. In its acquisition of Family
First in 1995, the Company had acquired SAIF-assessable deposits which were
subject to this special assessment. In the third quarter of 1996, the Company
recorded $249,000 before income taxes as its portion of the assessment.
Excluding this assessment, the Company's earnings would have been $2.5 million
or $1.03 per share for the year ended December 31, 1996.
Average Balances and Net Interest Income
Net interest income, the primary source of the Company's results of
operations, is the difference between interest, dividends and fees earned on
loans and other earning assets, and interest paid on interest-bearing
liabilities. Earning assets include loans to businesses and individuals,
investment securities, interest-bearing deposits with banks and federal funds
sold in the interbank market. Interest- bearing liabilities include primarily
interest-bearing demand, savings and time deposits. Net interest income is
determined by (i) the difference between the yields earned on earning assets and
rates paid on interest-bearing liabilities ("interest rate spread") and (ii) the
relative amounts of earning assets and interest-bearing liabilities. The
Company's interest rate spread is affected by regulatory, economic and
competitive factors that influence interest rates, loan demand and deposit flows
and general levels of non-performing assets.
The following table sets forth the Company's consolidated average
balances of assets, liabilities and shareholders' equity as well as the amount
of interest expense on related items, and the Company's average yield for the
years ended December 31, 1996, 1995 and 1994. The yields are shown on a fully
taxable basis and assume a 34% tax rate.
2
<PAGE>
Average Balance Sheet, Interest Income and Expense, and Average Interest Rates
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995 December 31, 1994
------------------- ------------------ -----------------
Average Interest Average Average Interest Average Average Interest Average
Balance Earned/Paid Yield/Rate Balance Earned/Paid Yield/Rate Balance Earned/Paid Yield/Rate
------- ----------- ---------- ------- ----------- ---------- ------- ----------- ----------
(Dollars in Thousands)
ASSETS:
Earning Assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment securities ......... $ 87,604 $ 5,569 6.36% $ 74,751 $ 4,790 6.41% $ 52,813 $ 2,693 5.10%
Due from banks--interest-
bearing ................... 2,947 138 4.67% 1,271 54 4.23% 3,884 158 4.07%
Federal funds sold .......... 7,468 365 4.89% 11,178 658 5.89% 4,991 143 2.87%
Loans 1 ..................... 135,161 12,621 9.34% 120,379 11,931 9.91% 92,978 8,408 9.04%
-------- -------- -------- -------- -------- ---- -------- ----- -------
Total earning
assets ........... 233,180 18,693 8.02% 207,579 17,433 8.40% 154,666 11,402 7.37%
Less: Allowance for possible
loan losses.................. 2,393 -- 2,427 -- 1,777 --
Unearned income -
loans ............. 317 -- 335 -- 262 --
All other assets ............ 21,433 -- 17,368 -- 10,546 --
-------- -------- -------- -------- -------- -------
Total assets ...... $251,903 $ 18,693 $222,185 $ 17,433 $163,173 $11,402
======== ======== ======== ======== ======== =======
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing Liabilities:
Savings and interest-bearing
accounts .................. $ 81,112 $ 1,799 2.22% $ 74,207 $ 1,890 2.55% $ 63,409 $1,388 2.19%
Time deposits ............... 86,277 4,605 5.34% 75,505 4,037 5.35% 45,458 1,755 3.86%
Federal funds and short-term
borrowings ................. 6,062 312 5.15% 2,934 185 6.31% 1,122 53 4.72%
Long-term borrowings ........ 4,982 438 8.79% 4,969 438 8.82% 4,958 438 8.83%
-------- -------- ------- -------- -------- ------ -------- ------- -------
Total interest-
bearing liabilities 178,433 7,154 4.01% 157,615 6,550 4.16% 114,947 3,634 3.16%
Demand deposits ............... 50,243 -- 44,335 -- 32,446 --
Other liabilities ............. 3,240 -- 2,948 -- 1,200 --
Shareholders' equity .......... 19,987 -- 17,287 -- 14,580 --
-------- -------- -------- -------- -------- -------
Total liabilities
and shareholders'
equity ........... $251,903 $ 7,154 $222,185 $ 6,550 $163,173 $3,634
======== ======== ======== ======== ======== =======
NET INTEREST INCOME
(fully taxable basis) ......... $ 11,539 $ 10,883 $7,768
======== ======== ======
NET INTEREST MARGIN
(fully taxable basis) ......... 4.95% 5.24% 5.02%
==== ==== ====
</TABLE>
1 Average balance includes non-performing loans.
3
<PAGE>
Net Interest Income
In 1996, interest income increased by $1.2 million or 7% compared to
1995. Interest and fee income on loans during 1996 increased by $690,000, or 6%
over the comparable period in 1995 as a result of an increase of 12% in average
total loans. The average yield on loans decreased to 9.34% in 1996 compared to
9.91% in 1995. Income earned on securities during 1996 increased by $779,000 or
16% compared to the same period in 1995. The increase was primarily due to a 17%
increase in average investments for the year ended December 31, 1996 over 1995.
The average yield on securities was 6.36% for the year ended December 31, 1996
compared to 6.41% for the same period in the prior year, a moderate decline due
to general market conditions. Interest income on federal funds sold and deposits
with banks during 1996 decreased by $209,000 or 29% compared to the same period
in the prior year as a result of a $2.0 million, or 16%, decrease in average
federal funds sold and deposits with banks.
In 1995, interest income of $17.4 million represented a $6.0 million
or 53% increase over $11.4 million reported for 1994. Interest and fee income on
loans during 1995 increased by $3.5 million or 42% over 1994. This increase was
due to an increase of 29% in average total loans and an increase in the average
yield on loans to 9.91% in 1995 compared to 9.04% in 1994. Income earned on
securities during 1995 increased by $2.1 million or 78% compared to the same
period in 1994. This increase was primarily due to a 42% increase in average
investments for the year ended December 31, 1995 over 1994. In addition, the
average yield on securities increased to 6.41% for the year ended December 31,
1995, compared to 5.10% for the prior year. Interest income on federal funds
sold and deposits with banks increased from 1994 to 1995 by $411,000 or 137% as
a result of a $3.6 million, or 40%, increase in average federal funds sold and
deposits with banks. All such increases are primarily attributable to the
acquisitions which occurred during 1995 and the overall growth of the Company.
Interest expense for the year ended December 31, 1996, increased by
$604,000 or 9% from the level of interest expense for 1995. $477,000 of the
total increase in interest expense is related to the increase in interest
expense on deposits from 1996 to 1995 and the remaining $127,000 is related to
the increase in interest expense on short- and long-term borrowings. The
increase in total interest expense is related to the increase in average
interest-bearing liabilities of $20.8 million or 13% due to the overall growth
of the Company.
Interest expense for the year ended December 31, 1995, increased by
$2.9 million or 80% from the level of interest expense for 1994. $2.8 million of
the total increase in interest expense is related to the increase in interest
expense on deposits from 1995 to 1994. The increase in total interest expense is
related to the increase in average interest-bearing liabilities of $42.7 million
or 37% due to the acquisitions which occurred in 1995 and the overall growth of
the Company.
The Company's net interest margin, which measures net interest income
as a percentage of average earning assets, was 4.95%, 5.24% and 5.02% for the
years ended December 31, 1996, 1995 and 1994, respectively.
Rate/Volume Analysis
The following table sets forth the changes in interest income and
expenses as they relate to changes in volume and rate for the twelve-month
periods ended December 31, 1996, 1995 and 1994. Because of numerous simultaneous
balance and rate changes during the periods indicated, it is difficult to
allocate the changes precisely between balances and rates. For purposes of this
table, changes which
4
<PAGE>
are not due solely to changes in balances or rates are allocated between such
categories based on the average percentage changes in average balances and
average rates.
<TABLE>
<CAPTION>
Full Year 1996 Full Year 1995 Full Year 1994
Compared to Full Year 1995 Compared to Full Year 1994 Compared to Full Year 1993
Increase (Decrease) Increase (Decrease) Increase (Decrease)
------------------------------- ---------------------------- -----------------------------
Volume Rate Net Volume Rate Net Volume Rate Net
------- ------ ------- -------- ------ ------- -------- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Earned On:
Loans .................... $ 1,378 $ (688) $ 690 $ 2,991 $ 532 $ 3,523 $ 986 $ 335 $ 1,321
Investment securities .... 819 (40) 779 1,347 750 2,097 791 169 960
Other earning assets ..... (103) (106) (209) 268 143 411 (301) 87 (214)
------- ------- ------- ------- ------- ------- ------- ------- -------
Total earning assets ... $ 2,094 $ (834) $ 1,260 $ 4,606 $ 1,425 $ 6,031 $ 1,476 $ 591 $ 2,067
======= ======= ======= ======= ======= ======= ======= ======= =======
Interest Paid On:
Savings & money market ... $ 158 $ (249) $ (91) $ 262 $ 240 $ 502 $ 108 $ (213) $ (105)
Time deposits ............ 575 (7) 568 1,507 775 2,282 215 71 286
Borrowings ............... 213 (86) 127 133 (1) 132 430 21 451
------- ------- ------- ------- ------- ------- ------- ------- -------
Total interest-bearing
Liabilities........... $ 946 $ (342) $ 604 $ 1,902 $ 1,014 $ 2,916 $ 753 ($ 121) $ 632
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
Provision for Possible Loan Losses
The Company recorded a provision for possible loan losses of $440,000
in 1996 compared with $414,000 in 1995 and $172,000 in 1994. The increase in the
provision for possible loan losses in 1995 was attributable to an increase in
the size of the loan portfolio due to the acquisitions in 1995 and internal loan
growth. Management of each bank subsidiary regularly performs an analysis to
identify the inherent risk of loss in its loan portfolio. This analysis includes
evaluation of concentrations of credit, past loss experience, current economic
conditions, amount and composition of the loan portfolio (including loans being
specifically monitored by management), estimated fair value of underlying
collateral, loan commitments outstanding, delinquencies, and other factors.
The Bank Subsidiaries will continue to monitor their allowance for
possible loan losses and make future adjustments to the allowance through the
provision for possible loan losses as economic conditions dictate. Although the
Bank Subsidiaries maintain their allowance for possible loan losses at a level
that they consider to be adequate to provide for the inherent risk of loss in
their loan portfolio, there can be no assurance that future losses will not
exceed estimated amounts or that additional provisions for possible loan losses
will not be required in future periods. In addition, the Bank Subsidiaries'
determination as to the amount of their allowance for possible loan losses is
subject to review by the FDIC and the Department, as part of their examination
process, which may result in the establishment of an additional allowance based
upon the judgment of the FDIC or the Department, after a review of the
information available at the time of their examination.
Other Income
Total other income for the year ended December 31, 1996, was $1.9
million, a decrease of $248,000 or 11% compared to 1995. The $248,000 net
decrease was the result of significant fluctuations within the major components
of Other Income. Although service charges on deposit accounts increased by
$307,000, fees on merchant credit card processing and other commissions and fees
decreased by $385,000 and $142,000, respectively. The majority of increase in
service charges on deposit accounts is attributable to the increase in
deposit-related services during 1996. The primary reason for the decrease in
merchant credit card processing fees is due to the discontinuation of such
services offered by BCB.
5
<PAGE>
Realized gain or loss on sale of securities available-for-sale during 1996
decreased by $158,000 while all other income increased by $130,000 when compared
to 1995.
Total other income for the year ended December 31, 1995 was $2.2
million, an increase of $1.3 million or 155% compared to 1994. The $1.3 million
net increase was the result of significant fluctuations in the major components
of Other Income. More specifically, fee on merchant credit card processing
increased by $502,000 and service charges on deposits increased by $352,000.
Realized loss or gain on sale of investment securities available-for-sale during
1995 increased by $293,000 compared to 1994. The majority of such increases are
attributable to the increase in deposit-related services during 1995.
Other Expenses
Total other expenses increased by $63,000 for the year ended December
31, 1996 over 1995. The $63,000 net increase was a result of significant
fluctuations within the components of Other Expenses. More specifically,
salaries and employee benefits increased by $444,000 or 12%. The increase in
salaries and employee benefits is attributable to general salary increases
coupled with increases in employee benefits expense. Occupancy and equipment
expense, which includes the costs of leasing office and branch space, expenses
associated with maintaining these facilities and depreciation of fixed assets,
increased by $540,000 or 38% primarily due to the addition of office space and
equipment.
Regulatory, professional and other fees, and computer services
decreased by $85,000 or 11% and $141,000 or 36%, respectively, from 1995. The
primary reason for such decreases is the reduction in expenses associated with
the 1995 acquisitions. The $432,000 or 70% decrease in merchant credit card
expense is a result of discontinuation of merchant processing activity by BCB.
All other operating expenses decreased by $347,000 or 24% due in part to
management's efforts to reduce such expenses. Included in all other operating
expenses is the amortization expense of intangible assets which declined by
$80,000 in 1996 compared to 1995 as a result of fully written-off intangible
assets relative to the formation of GFB in 1986. Office expenses increased
moderately while other real estate operating expense decreased moderately in
1996 when compared to 1995.
FDIC insurance assessment totaled $340,000 for the year ended
December 31, 1996, an increase of $78,000 over 1995. The increase is a direct
result of a legislation enacted to recapitalize the SAIF. The FDIC levied a
special assessment on SAIF-assessable deposits held as of March 31, 1995. In its
acquisition of Family First in 1995, the Company acquired SAIF-assessable
deposits which were subject to this special assessment. In the third quarter of
1996, the Company recorded $249,000 as its portion of this assessment. Excluding
this special assessment, the FDIC insurance assessment would have decreased for
1996 compared to 1995. The legislation is expected to reduce the future annual
deposit insurance costs for SAIF deposits. The Company anticipates that such
reductions, which are to become effective in 1997, will equal the $249,000
charge in approximately 3 years.
Total other expenses increased by $3.3 million or 54% for the year
ended December 31, 1995 over 1994. Of this increase, $955,000 was attributable
to increases in salaries and benefits. The increase in salaries and employee
benefits is attributable to the acquisition of Family First, hiring of
additional employees and general increases in employee benefits. Occupancy and
equipment expense, which includes the costs of leasing office and branch space,
expenses associated with maintaining these facilities and depreciation of fixed
assets, increased by $499,000 primarily due to the addition of office space and
equipment.
6
<PAGE>
Regulatory, professional and other fees, computer services and office
expenses during 1995 increased by $170,000, $138,000 and $123,000 respectively,
compared to 1994. Other real estate expenses and merchant credit card expenses
increased by $259,000 and $562,000, respectively, compared to 1994. Such
increases were primarily due to the acquisitions in 1995 and in part due to the
Company's overall growth. FDIC insurance assessment for 1995 decreased by
$98,000 due to a decline in FDIC assessment rate when compared to 1994.
All other operating expenses for 1995 increased by $667,000 when
compared to 1994. The majority of such increase is directly related to the
acquisition of Family First. Included in all other expenses is amortization
expense totaling $191,000 and $110,000 for the years 1995 and 1994,
respectively. The final amortization of the intangible assets related to the
1986 acquisition was $110,000 in 1995. In December 1993, the Company incurred
costs of $106,000 relative to the sale of debentures and equity contracts. These
costs are being amortized over 4 years commencing in 1994 at an annual expense
of $26,000. In addition, the acquisition of Family First early in the second
quarter of 1995 resulted in an increase in the amortization expense of $70,000
in 1995. The Company expects amortized expenses relating to the acquisition of
Family First to be $108,000 per year for the next six years.
Income Taxes
The Company recorded income tax provisions of $1.3 million, $1.2
million and $840,000 for the years ended December 31, 1996, 1995 and 1994,
respectively. The increases in income tax provision are attributable to
increased earnings for those three years.
Financial Condition
At December 31, 1996, the Company's total assets were $256.5 million,
an increase of $3.5 million or 1.3%, over the amount reported at December 31,
1995. Federal funds sold decreased by $11.3 million. Substantially all of such
decrease was offset by increases in both investment securities and gross loans
of $5.7 million and $5.7 million, respectively. Interest bearing due from banks
increased by $3.3 million primarily due to additional investing in such assets
when compared to the amount reported at December 31, 1995. Cash and non-interest
bearing due from banks increased by $523,000.
7
<PAGE>
Investment Securities
The following table provides information concerning the
available-for-sale and held-to-maturity portions of the Corporation's investment
securities portfolio at December 31, 1996:
<TABLE>
<CAPTION>
December 31, 1996
-----------------------------------------------------------------------------------------------------
Due One to Due Five to Due Ten
Due Within One Year Five Years Ten Years Years and Over Total
------------------- ------------------ ------------------- ------------------- -------------------
Fair Fair Fair Fair Fair
Amortized Market Amortized Market Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value Cost Value Cost Value
---- ----- ---- ----- ---- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Available-for-sale:
U.S. Treasury &
Government securities....... $10,596 $10,652 $24,362 $24,488 $ 1,394 $ 1,404 $ 321 $ 317 $36,673 $36,861
State and political
subdivisions ............... 1,006 1,006 -- -- -- -- -- -- 1,006 1,006
Other debt and equity
securities ................. 6,192 6,407 -- -- -- -- -- -- 6,192 6,407
Mortgage-backed
securities ................. 368 373 5,543 5,612 1,902 1,924 66 68 7,879 7,977
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total available-
for-sale ............... 18,162 18,437 29,905 30,100 3,296 3,328 387 385 51,750 52,251
Held-to-maturity:
U.S. Treasury &
Government securities....... 3,197 3,198 13,620 13,545 1,179 1,220 1,000 640 18,996 18,602
State and political
subdivisions ............... -- -- 202 202 191 188 -- -- 393 390
Mortgage-backed securities ... -- -- 9,479 9,470 5,147 5,112 3,413 3,396 18,039 17,978
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total held-to-maturity ... 3,197 3,198 23,301 23,217 6,517 6,520 4,413 4,036 37,428 36,970
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total securities ....... $21,359 $21,635 $53,206 $53,317 $ 9,813 $ 9,848 $ 4,800 $ 4,421 $89,178 $89,221
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
8
<PAGE>
Investment securities at December 31, 1996, constituted an increase
of $5.7 million or 7% over the amount reported at December 31, 1995. The
following table presents the composition of the securities portfolio along with
the book and market values of those components at December 31, 1996 and 1995.
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------
1996 1995
----------------------------------- -----------------------------------
Amortized Cost Fair Market Value Amortized Cost Fair Market Value
-------------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C>
Available-for-sale
U.S. Treasury securities and U.S. Government
agencies ................................ $36,673 $36,861 $36,812 $37,805
State & political subdivisions ............. 1,006 1,006 -- --
Other debt and equity securities ........... 6,192 6,407 2,524 2,507
Mortgage-backed securities ................. 7,879 7,977 7,577 7,523
------- ------- ------- -------
Total available-for-sale .............. $51,750 $52,251 $46,913 $47,835
------- ------- ------- -------
Held-to-maturity
U.S. Treasury securities and U.S. Government
agencies ................................. $18,996 $18,602 $32,774 $32,679
State and political subdivisions ........... 393 390 613 615
Mortgage-backed securities ................. 18,039 17,978 2,764 2,767
------- ------- ------- -------
Total held-to-maturity ................ $37,428 $36,970 $36,151 $36,061
------- ------- ------- -------
Total securities ...... $89,178 $89,221 $83,064 $83,896
======= ======= ======= =======
</TABLE>
During 1996, the Company realized net gains of $51,000. The gains
were realized through the sale of $5.5 million of securities from its
available-for-sale portfolio. Included in shareholders' equity at December 31,
1996, is an unrealized holding net gain on available-for-sale securities, net of
income taxes, in the amount of $307,000. The Company has no securities held for
trading purposes.
9
<PAGE>
Maturity Schedule - Securities
The following table shows the average yields, book values and fair
market value of the Company's investment securities by maturity for the years
ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1996 1995
------------------------------------- --------------------------------------
Average Amortized Fair Market Average Amortized Fair Market
Yield Cost Value Yield Cost Value
----- ---- ----- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Available-for-sale
Due 0-1 Years......................... 6.29% $ 11,602 $ 11,656 6.10% $ 16,531 $ 16,716
Due 1-5 Years......................... 6.94% 24,360 24,487 6.32% 23,750 24,529
Due 5-10 Years........................ 7.72% 1,393 1,403 6.32% 4,209 4,184
Due 10 Years and Over................. 9.09% 324 321 N/A - -
Mortgage-backed and equity
securities.......................... N/A 14,071 14,384 N/A 2,423 2,406
-------- -------- -------- --------
Total available-for-sale.......... $ 51,750 $ 52,251 $ 46,913 $ 47,835
------- ------- ------- -------
Held-to-maturity
Due 0-1 Years......................... 5.34% $ 3,198 $ 3,198 4.99% $ 12,472 $12,562
Due 1-5 Years......................... 5.94% 13,822 13,748 5.49% 19,404 19,481
Due 5-10 Years........................ 6.54% 1,369 1,407 5.39% 4,275 4,018
Due 10 Years and Over................. 5.94% 1,000 640 N/A - -
Mortgage-backed securities............ 6.27% 18,039 17,977 N/A - -
------- ------- -------- --------
Total held-to-maturity.............. $ 37,428 $ 36,970 36,151 36,061
------- ------- -------- --------
Total investment securities......... $ 89,178 $ 89,221 $ 83,064 $ 83,896
======= ======= ======= =======
</TABLE>
10
<PAGE>
Loan Portfolio
The Company's gross loan portfolio at December 31, 1996, totaled
$137.4 million, an increase of $5.7 million or 4%, as compared to the amount
reported at December 31, 1995. This increase was primarily due to increased loan
demand. The Company's gross loan portfolio increased $35.1 million to $131.7
million at December 31, 1995, from $96.7 million at December 31, 1994. This
increase was primarily due to the acquisition of $26.3 million of gross loans in
connection with the Family First acquisition, as well as increased loan demand.
The following table summarizes the components of the loan portfolio as of
December 31, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
December 31,
-----------------------------
1996 1995 1994
-------- -------- ------
(In Thousands)
<S> <C> <C> <C>
Loans secured by one- to four-family
residential properties ................. $ 43,100 $ 43,328 $ 26,925
Loans secured by nonresidential properties 58,106 51,133 41,891
Loans to individuals ..................... 9,997 8,661 6,688
Loans to depository institutions ......... -- 4,600 600
Commercial loans ......................... 14,106 14,823 10,320
Construction loans ....................... 5,534 4,292 4,754
Other loans .............................. 6,567 4,905 5,486
-------- -------- --------
Total gross loans ................... $137,410 $131,742 $ 96,664
======== ======== ========
</TABLE>
11
<PAGE>
The following tables set forth the contractual maturity and interest
rate sensitivity of components of the loan portfolio at December 31, 1996 and
1995. Demand loans, having no stated schedule of repayment and no stated
maturity, and overdrafts are reported as due in one year or less.
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------
Within 1 - 5 Over 5
1 year Years Years Total
------- ------- ------- -------
(In Thousands)
<S> <C> <C> <C> <C>
Loans with predetermined interest rates:
Commercial ........................... $ 7,360 $ 13,578 $ 1,028 $ 21,966
Real estate construction ............. 1,343 -- -- 1,343
Real estate mortgage ................. 7,919 35,879 7,949 51,747
Consumer ............................. 1,855 5,811 2,234 9,900
-------- -------- -------- --------
18,477 55,268 11,211 84,956
Loans with floating interest rates:
Commercial ........................... 29,876 -- -- 29,876
Lease financing ...................... 3,785 -- -- 3,785
Real estate mortgage ................. 12,648 3,508 -- 16,156
Consumer ............................. 2,637 -- -- 2,637
-------- -------- -------- --------
48,946 3,508 -- 52,454
-------- -------- -------- --------
Total loans ............... $ 67,423 $ 58,776 $ 11,211 $137,410
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------
Within 1 - 5 Over 5
1 year Years Years Total
------ ------- ------- -------
(In Thousands)
<S> <C> <C> <C> <C>
Loans with predetermined interest rates:
Commercial ............................ $ 13,707 $ 20,299 $ 2,174 $ 36,180
Real estate construction ............. 4,000 -- -- 4,000
Real estate mortgage ................. 2,038 19,180 7,016 28,234
Consumer ............................. 4,414 2,716 722 7,852
-------- -------- -------- --------
24,159 42,195 9,912 76,266
Loans with floating interest rates:
Commercial ........................... 29,850 -- -- 29,850
Loans to depository institutions ..... 600 -- -- 600
Real estate construction ............. 3,848 -- -- 3,848
Lease financing ...................... -- 902 -- --
Real estate mortgages ................ 13,243 -- -- 14,145
Consumer ............................. 7,033 -- -- 7,033
-------- -------- -------- --------
54,574 902 -- 55,476
-------- -------- -------- --------
Total loans ............. $ 78,733 $ 43,097 $ 9,912 $131,742
======== ======== ======== ========
</TABLE>
At the dates indicated in the foregoing loan tables, no loans were
concentrated within a single industry or group of related industries and the
Company had no foreign loans.
12
<PAGE>
Asset Quality
Various degrees of risk are associated with substantially all
investing activities. The lending function, however, carries the greatest risk
of loss. The senior lending officers of BCB and GFB are charged with monitoring
asset quality, establishing credit policies and procedures and seeking
consistent application of these procedures. Non-performing assets include loans
past due, nonaccrual, renegotiated and other real estate. Since lending is
concentrated within the local market area, non-performing loans were also made
primarily to customers operating in the area. The degree of risk inherent in all
lending activities is influenced heavily by general economic conditions in the
immediate market area. Among the factors which tend to affect portfolio risks
are changes in local or regional real estate values, income levels and energy
prices. These factors, coupled with high unemployment levels and tax rates, as
well as governmental actions and weakened market conditions which reduce the
demand for credit among qualified borrowers, are also important determinants of
the risk inherent in lending.
Past Due, Non-accruing and Renegotiated Loans. It is the Company's
policy to review monthly all loans which are past due as to principal or
interest. The accrual of interest income on loans is discontinued when it is
determined that such loans are either doubtful of collection or are involved in
a protracted collection process. The current year's uncollected interest is
reversed on such non-accrual loans. Management has also restructured the terms
of certain loans to accommodate changes in the financial condition of borrowers.
A typical concession would be a reduction in the currently payable interest rate
to one which is lower than the current market rate for new debt with similar
risks; interest foregone would be deferred until maturity. The following table
summarizes the composition of the Company's non-performing assets and related
asset quality ratios as of the dates indicated.
<TABLE>
<CAPTION>
December 31,
-------------------------
1996 1995 1994
----- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Non-accruing loans ........................ $1,033 $1,422 $1,499
Renegotiated loans ........................ 726 517 526
------ ------ ------
Total non-performing loans ........... 1,759 1,939 2,025
Loans past due 90 days and accruing ....... 876 1,125 10
Other real estate ......................... 1,834 2,070 1,184
------ ------ ------
Total non-performing assets .......... $4,469 $5,134 $3,219
====== ====== ======
Non-performing loans to total gross loans . 1.28% 1.47% 2.09%
Non-performing assets to total gross loans
and other real estate owned ............. 3.21% 3.84% 3.29%
Non-performing assets to total assets ..... 1.74% 2.03% 1.91%
Allowance for loan losses to non-performing
loans .................................... 144.40% 120.27% 90.07%
</TABLE>
The $180,000 or 4% decrease in non-performing loans at December 31,
1996 compared to December 31, 1995, is primarily the result of an improved loan
portfolio coupled with the management's effort to collect on the loans and make
them current. If the non-accruing loans in 1996 had continued to pay interest,
interest income during 1996 would have increased by $286,000. If non-accruing
loans in 1995 had continued to pay interest, interest income during 1995 would
have increased by $135,000.
13
<PAGE>
Potential Problem Loans. As part of the loan review process,
management routinely identifies performing loans where there is a doubt as to
whether the borrowers will comply with the original loan repayment terms and
thus allocates specific reserves against them. At December 31, 1996, such loans
totaled $6.5 million with an allowance of $1.0 million specifically allocated to
them.
Foreign Loans. The Company has no foreign loans or any other foreign
exposure.
Allowance for Possible Loan Losses
At December 31, 1996, the allowance for possible loan losses was $2.5
million as compared to $2.3 million at December 31, 1995. The allowance for
possible loan losses is increased periodically through charges to earnings in
the form of a provision for possible loan losses. Loans that are deemed
uncollectible are charged against the allowance and any recoveries of such loans
are credited to it. It is management's belief that, although charge-offs may
occur in the future, there are adequate reserves allotted. The level of the
allowance is based on the ongoing evaluation by management of the respective
Bank Subsidiaries of potential losses in the loan portfolio. Such evaluation
includes consideration of the current financial status and credit standing of
borrowers, prior loss experiences, results of periodic regulatory examinations,
comments and recommendations of the Company's independent accountants, and
management's judgment as to prevailing and anticipated real estate values and
other economic conditions in the Bank Subsidiaries' market areas. Since future
events that may affect these financial conditions are unpredictable, there is
uncertainty as to the final outcome of the Bank Subsidiaries' loans and
non-performing assets.
The following table represents transactions affecting the allowance
for possible loan losses for the years ended December 31, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995 1994
------ ------ -----
(Dollars in Thousands)
<S> <C> <C> <C>
Balance--beginning of period ................. $ 2,332 $ 1,824 $ 1,771
Charge-offs:
Commercial, financial and agricultural ..... (21) (589) (164)
Real estate - mortgage ..................... (281) (364) (57)
Installment loans to individuals ........... (63) (82) (43)
Credit cards and related plans ............. -- -- --
------- ------- -------
(365) (1,035) (264)
------- ------- -------
Recoveries:
Commercial, financial and agricultural ..... 124 87 100
Real Estate - mortgage ..................... 9 -- --
Installment loans to individuals ........... 9 3 45
------- ------- -------
142 90 145
------- ------- -------
Net charge-offs .............................. (223) (945) (119)
Provision for possible loan losses ........... 440 414 172
Adjustment (allowance for loan losses acquired
from Family First) .......................... (9) 1,039 --
------- ------- -------
Balance--end of period ....................... $ 2,540 $ 2,332 $ 1,824
======= ======= =======
Ratio of net charge-offs during the period to
average loans outstanding during the period . .16% .79% .13%
</TABLE>
14
<PAGE>
Allocation of the Allowance for Possible Loan Losses
The following table sets forth the allocation of the allowance for
loan losses by loan category amounts, the percent of loans in each category to
total loans in the allowance, and the percent of loans in each category to total
loans, at each of the dates indicated.
<TABLE>
<CAPTION>
At December 31,
-------------------------------------------------------------------------------------------
1996 1995 1994
-------------------------------- -------------------- -----------------------------------
% of Loans % of Loans % of Loans
% of to Total % of to Total % of to Total
Amount Allowance Loans Amount Allowance Loans Amount Allowance Loans
------- --------- ---------- ------ --------- ----- -------- --------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at end of period
allocable to:
Commercial .............. $ 859 34% 53% $1,256 54% 53% $ 876 48% 54%
Real estate--construction -- -- 4 -- -- 3 -- -- 5
Real estate--mortgage ... 670 26 31 662 28 33 457 25 27
Installment loans to
individuals ............ 206 8 12 296 13 11 215 12 14
Unallocated reserves..... 805 32 -- 118 5 -- 276 15 --
------ --- --- ------ --- --- ------ --- ---
Total allowance for
possible loan losses.. $2,540 100% 100% $2,332 100% 100% $1,824 100% 100%
====== === === ====== === === ====== === ===
</TABLE>
15
<PAGE>
Other Real Estate
As of December 31, 1996, other real estate totaled $1.8 million, a decrease
of $236,000 or 11% compared to December 31, 1995, primarily due to the
reclassification of foreclosed properties. The $1.8 million includes collateral
acquired through foreclosure of loans, stated at the lower of the loan value or
fair market value less estimated costs to sell. Management is actively seeking
repayment through sale of the underlying collateral.
Deposits
As of December 31, 1996, total deposits were $223.2 million, a moderate
increase over the amount reported at December 31, 1995.
The following table summarizes the average yield/rate of the
components of average deposit liabilities for the years ended December 31, 1996,
1995 and 1994.
<TABLE>
<CAPTION>
At December 31,
-------------------------------------------------------------------------------------------------
Average Average Average
1996 Yield/Rate 1995 Yield/Rate 1994 Yield/Rate
------ ---------- ------ ----------- ------ -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Demand......................... $ 50,243 - $ 44,335 - $ 32,446 -
Savings and interest-
bearing....................... 81,112 2.22% 74,207 2.55% 63,409 2.19%
Time........................... 86,277 5.34% 75,505 5.35% 46,548 3.86%
-------- -------- --------
$217,632 $194,047 $142,403
======= ======= =======
</TABLE>
Listed below is a summary of time certificates of deposit $100,000 and over
categorized by time remaining to maturity at March 31, 1997, and December 31,
1996 and 1995.
At December 31,
-------------------------------
1996 1995
--------- ---------
(In thousands)
Three months or less ........... $15,057 $16,633
Over three months through twelve
months ........................ 8,974 7,977
Over twelve months.............. 1,153 1,486
------- -------
$25,184 $26,096
======= =======
Subordinated Debentures and Equity Contracts
In December 1993, the Company raised $5 million by issuing Redeemable
Subordinated Debentures ("Debentures") (unsecured debt obligation of the
Company) due November 1, 1998, at an
16
<PAGE>
interest rate of 8.5% payable quarterly. In addition, the Company issued
Cancellable Mandatory Stock Purchase Contracts ("Equity Contracts") to purchase
$5 million of the Company's common stock at a predetermined price of $9.77 (as
adjusted for stock dividends) per share to be exercised no later than November
1, 1997. 511,770 shares of the Company's common stock were reserved for future
issuance pursuant to the outstanding Equity Contracts.
Interest Rate Sensitivity
Banks are concerned with the extent to which they are able to match
maturities of interest-earning assets and interest-bearing liabilities. Such
matching is facilitated by examining the extent to which such assets and
liabilities are interest-rate sensitive and by monitoring an institution's
interest rate sensitivity gap. An asset or liability is considered to be
interest-rate sensitive if it will mature or reprice within a specific time
period. The interest rate sensitivity gap is defined as the excess of
interest-earning assets maturing or repricing within a specific time period over
interest-bearing liabilities maturing or repricing within that time period. On a
monthly basis, the Bank Subsidiaries monitor their gap, primarily their
six-month and one-year maturities and work to maintain their gap within a range
10% to (25)%.
The Company currently has a negative position with respect to its
exposure to interest rate risk. The Asset/Liability Management Committees of the
Bank Subsidiaries' respective Boards of Directors meet quarterly to discuss the
bank's interest rate risk. The Company uses simulation models to measure the
impact of potential changes in interest rates on the net interest income,
balance sheet mix and the spread relationship between market rates and bank
products. As described below, sudden changes in interest rates should not have a
material impact to the Bank Subsidiaries' results of operations. Should the Bank
Subsidiaries experience a positive or negative mismatch in excess of the
approved range, they have a number of remedial options. They have the ability to
reposition their investment portfolio to include securities with more
advantageous repricing and/or maturity characteristics. They can attract
variable- or fixed-rate loan products as appropriate. They can also price
deposit products to attract deposits with maturity characteristics that can
lower their exposure to interest rate risk.
Liquidity
The Company actively manages its liquidity under the direction of the
Bank's Asset/Liability Management Committee. During the last two years the
Company has been highly liquid and its liquid funds are more than sufficient to
meet future loan demand or the possible outflow of deposits in addition to being
able to adapt to changing interest rate conditions. Management expects that this
high liquidity trend will continue until such time as overall economic
conditions improve and loan demand rises.
Sources of liquidity at December 31, 1996, totaled $112.5 million or
44% of total assets, consisting of investment securities of $89.7 million and
$22.8 million in cash and cash equivalents and interest-bearing due from banks.
By comparison, total liquidity sources were $114.2 million or 45% of total
assets at December 31, 1995, consisting of investment securities in the amount
of $84.0 million and cash and cash equivalents and interest-bearing due from
banks in the amount of $30.2 million.
Certificates of Deposit scheduled to mature during the fiscal year
ending December 31, 1997 totaled $72.7 million. The Company may renew these
certificates, attract new replacement deposits or replace such funds with
borrowings. Management believes, based on past experience, that the Company will
retain much of the deposits or replace them with new deposits.
17
<PAGE>
Capital Resources
The Company's primary regulator, the Federal Reserve (which regulates
bank holding companies), has issued guidelines classifying and defining bank
holding company capital into the following components: (1) Tier 1 Capital, which
includes tangible shareholders' equity for common stock and certain qualifying
perpetual preferred stock, and (2) Tier 2 Capital, which includes a portion of
the allowance for possible loan losses, certain qualifying long-term debt and
preferred stock that does not qualify as Tier 1 Capital. The risk-based capital
guidelines require financial institutions to maintain specific defined credit
risk factors (risk-adjusted assets). As of December 31, 1996, the minimum Tier 1
and the combined Tier 1 and Tier 2 capital ratios required by the Federal
Reserve Board were 4% and 8%, respectively.
In addition to the risk-based capital guidelines discussed above, the
Federal Reserve requires that a bank holding company which meets that
regulator's highest performance and operating standards maintain a minimum
leverage ratio (Tier 1 capital as a percentage of tangible assets) of 3%. Those
bank holding companies anticipating significant growth are expected to maintain
a leverage ratio above the minimum ratio. Minimum leverage ratios for each
entity will be evaluated through the ongoing regulatory examination process.
Regulations have also been issued by the Bank Subsidiaries' primary regulator,
the FDIC, establishing similar risk-based and leverage capital ratios which
apply to each bank as a separate entity.
The following table presents the risk-based and leverage capital
ratios for GFB, BCB and the Company, respectively, as of December 31, 1996.
<TABLE>
<CAPTION>
Bergen Great Community (Under FDIC
Great Falls Bank Commercial Bank Bancorp requirements)
---------------- --------------- --------------- --------------
December 31, December 31, December 31,
---------------- --------------- ---------------
1996 1996 1996
----------------- --------------- ---------------
<S> <C> <C> <C> <C>
Tier 1 and Tier 2 ... 13.21% 14.17% 16.89% 10.00%
Tier 1 Risk-Based
Capital Ratio ..... 11.95% 12.96% 12.90% 6.00%
Tier 1 Leverage Ratio 6.78% 9.32% 8.12% 5.00%
</TABLE>
18
<PAGE>
Impact of Inflation and Changing Prices
The Company's consolidated financial statements and notes thereto
presented elsewhere herein have been prepared in accordance with generally
accepted accounting principles, which require the measurement of financial
position and operating results in terms of historical dollars without
considering the changes in the relative purchasing power of money over time due
to inflation. The impact of inflation is reflected in the increased cost of the
Company's operations. Unlike most industrial companies, nearly all of the
Company's assets and liabilities are monetary in nature. As a result, interest
rates have a greater impact on the Company's performance than do the effects of
general levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.
Impact of Recent Accounting Standards
The FASB has issued Statement of Financial Accounting Standards No.
128, Earnings Per Share, which is effective for financial statements issued
after December 15, 1997. Early adoption of the new standard is not permitted.
The new standard eliminates primary and fully diluted earnings per share and
requires presentation of basic and diluted earnings per share together with
disclosure of how the per share amounts were computed. Basic earnings per share
excludes dilution and is computed by dividing income available to common
shareholders by the weighted-average common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised and converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. The adoption of this new standard is not expected
to have a material impact on the disclosure of earnings per share in the
financial statements. The effect of adopting this new standard has not been
determined.
19
<PAGE>
PART II
Item 7A
FINANCIAL STATEMENTS
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
----------------------
ASSETS 1996 1995
----------- ---------
<S> <C> <C>
CASH AND DUE FROM BANKS - Non-interest-bearing .................................... $ 11,994 $ 11,471
FEDERAL FUNDS SOLD ................................................................ 6,300 17,575
--------- ---------
Total cash and cash equivalents ............................... 18,294 29,046
DUE FROM BANKS - Interest-bearing ................................................. 4,481 1,148
INVESTMENT SECURITIES - Available-for-sale ........................................ 52,251 47,835
INVESTMENT SECURITIES - Held-to-maturity (aggregate fair values of
$36,970 and $36,061 at December 31, 1996 and 1995, respectively) .............. 37,428 36,151
--------- ---------
89,679 83,986
LOANS ............................................................................. 137,410 131,742
Allowance for possible loan losses .............................................. (2,540) (2,332)
Unearned income ................................................................. (283) (303)
--------- ---------
Net loans ..................................................... 134,587 129,107
PREMISES AND EQUIPMENT, net ....................................................... 3,203 3,082
OTHER REAL ESTATE ................................................................. 1,834 2,070
ACCRUED INTEREST RECEIVABLE ....................................................... 1,906 1,977
INTANGIBLE AND OTHER ASSETS ....................................................... 2,522 2,629
--------- ---------
TOTAL ASSETS .................................................. $ 256,506 $ 253,045
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Non-interest-bearing ........................................................... $ 59,588 $ 46,332
Interest-bearing ............................................................... 55,882 59,141
Savings ........................................................................ 25,918 26,030
Time (includes deposits $100 and over of $25,184 and
$26,096 at December 31, 1996 and 1995, respectively) ........................ 81,854 91,263
--------- ---------
Total deposits ................................................ 223,242 222,766
ACCRUED INTEREST PAYABLE .......................................................... 1,466 1,626
OTHER LIABILITIES ................................................................. 1,590 1,326
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE .................................... 4,159 2,756
FEDERAL FUNDS PURCHASED ........................................................... -- --
REDEEMABLE SUBORDINATED DEBENTURES ................................................ 4,988 4,976
--------- ---------
Total liabilities ............................................. 235,445 233,450
--------- ---------
SHAREHOLDERS' EQUITY:
Preferred stock, without par value: 1,000,000 shares authorized, none outstanding -- --
Common stock, par value $1 per share: 10,000,000 shares authorized,
1,891,733 and 1,709,451 shares outstanding at December 31, 1996 and 1995,
respectively .................................................................. 1,892 1,709
Additional paid-in capital ...................................................... 17,841 15,231
Retained earnings ............................................................... 1,209 2,102
Net unrealized holding gains on investment securities available-for-sale ........ 307 553
Treasury stock (12,596 and -0- shares at December 31, 1996
and 1995, respectively, at cost) ............................................. (188) --
--------- ---------
Total shareholders' equity ........................................... 21,061 19,595
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........................................ $ 256,506 $ 253,045
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-1
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
INTEREST INCOME:
Loans, including fees ........................ $ 12,621 $ 11,931 $ 8,408
Investment securities ........................ 5,569 4,790 2,693
Federal funds sold and deposits with banks ... 503 712 301
-------- -------- --------
Total interest income ........ 18,693 17,433 11,402
-------- -------- --------
INTEREST EXPENSE:
Deposits .................................... 6,404 5,927 3,143
Short-term borrowings ....................... 312 185 53
Long-term borrowings ........................ 438 438 438
-------- -------- --------
Total interest expense ....... 7,154 6,550 3,634
-------- -------- --------
NET INTEREST INCOME .............................. 11,539 10,883 7,768
PROVISION FOR POSSIBLE LOAN LOSSES ............... 440 414 172
-------- -------- --------
Net interest income after provision
for losses ........................ 11,099 10,469 7,596
-------- -------- --------
OTHER INCOME
Service charges on deposit accounts ......... 1,174 867 515
Credit card fee income ...................... 182 567 65
Other commission and fees ................... 48 190 136
Gain (loss) on sale of securities ........... 51 209 (84)
All other income ............................ 474 344 223
-------- -------- --------
Total other income ........... 1,929 2,177 855
OTHER EXPENSES:
Salaries and employee benefits .............. 4,144 3,700 2,745
Occupancy and equipment ..................... 1,958 1,418 919
Regulatory, professional and other fees ..... 696 781 611
FDIC insurance assessment ................... 340 262 360
Computer services ........................... 249 390 252
Office expenses ............................. 510 494 371
Other real estate operating and loan expenses 304 314 55
Merchant credit card expenses ............... 184 616 54
All other operating expenses ................ 1,078 1,425 758
-------- -------- --------
Total other expenses ......... 9,463 9,400 6,125
-------- -------- --------
Income before income taxes
and minority interest ...... 3,565 3,246 2,326
PROVISION FOR INCOME TAXES ....................... 1,312 1,174 840
-------- -------- --------
Income before minority interest ....... 2,253 2,072 1,486
-------- -------- --------
MINORITY INTEREST ................................ 84 -- --
-------- -------- --------
NET INCOME ....................................... $ 2,337 $ 2,072 $ 1,486
======== ======== ========
Weighted average shares outstanding ........... 2,111 2,065 1,664
======== ======== ========
Net income per share .......................... $ 0.97 $ 1.04 $ 0.89
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-2
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1996, 1995 and 1994
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Net Unrealized
Common Holding
----------------- Gain(Loss)
Additional on Securities Total
Paid-in Retained Available- Treasury Shareholders'
Shares Par Value Capital Earnings -for-Sale Stock Equity
------ --------- ---------- --------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994 .................... 1,359 $ 1,359 $ 11,354 $ 1,443 $ -- $ -- $ 14,156
Net income for the year ended ............. -- -- -- 1,486 -- -- 1,486
10% stock dividend ........................ 72 72 766 (841) -- -- (3)
Cash dividend ............................. -- -- -- (245) -- -- (245)
Exercise of stock options ................. 12 12 89 -- -- -- 101
Change in net unrealized holding loss on
securities available-for-sale ........... -- -- -- -- (534) -- (534)
-------- -------- -------- -------- -------- -------- --------
BALANCE, December 31, 1994 .................. 1,443 1,443 12,209 1,843 (534) -- 14,961
Net income for the year ended ............. -- -- -- 2,072 -- -- 2,072
Stock issued in connection with acquisition
of Family First Federal Savings Bank .. 157 157 1,645 -- -- -- 1,802
10% stock dividend ........................ 100 100 1,293 (1,398) -- -- (5)
Exercise of stock options ................. 9 9 84 -- -- -- 93
Cash dividend ............................. -- -- -- (415) -- -- (415)
Change in net unrealized holding gains on
securities available-for-sale ........ -- -- -- -- 1,087 -- 1,087
-------- -------- -------- -------- -------- -------- --------
BALANCE, December 31, 1995 .................. 1,709 1,709 15,231 2,102 553 -- 19,595
Net income for the year ended ............. -- -- -- 2,337 -- -- 2,337
10% stock dividend ........................ 171 171 2,520 (2,697) -- -- (6)
Exercise of stock options ................. 12 12 90 -- -- -- 102
Cash dividend ............................. -- -- -- (533) -- -- (533)
Change in net unrealized holding loss on
securities available-for-sale ........ -- -- -- -- (246) -- (246)
Purchase of treasury stock ................ -- -- -- -- -- (188) (188)
-------- -------- -------- -------- -------- -------- --------
BALANCE, December 31, 1996 .................. $ 1,892 $ 1,892 $ 17,841 $ 1,209 $ 307 ($ 188) $ 21,061
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-3
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-----------------------------------------
1996 1995 1994
------ ------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................................. $2,337 $ 2,072 $ 1,486
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization......................................... 1,056 626 449
Accretion of discount on securities, net.............................. (241) (69) (19)
Accretion of discount on debentures................................... 12 13 13
Realization of discount on securities sold............................ 3 21 22
Loss (gain) on sale of securities, net................................ (51) (209) 84
Provision for possible loan losses.................................... 440 375 172
Deferred income tax provision (benefit)............................... (267) 135 (65)
(Increase) decrease in accrued interest receivable.................... 71 (481) (533)
(Increase) decrease in other assets................................... 107 (1,998) (170)
Increase (decrease) in accrued interest and other liabilities......... 104 1,560 466
------ ------- ---------
Net cash provided by operating activities........... 3,571 2,045 1,905
------ ------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Available-for-sale securities -
Purchases........................................................... (18,962) (18,670) (24,694)
Sales............................................................... 5,472 16,619 13,061
Maturities.......................................................... 9,004 2,550 -
Held-to-maturity securities -
Purchases........................................................... (23,089) (10,225) (13,367)
Maturities.......................................................... 21,812 1,415 8,569
Net decrease in interest-bearing deposits with banks................... (3,333) 1,220 5,710
Net (increase) decrease in loans....................................... (5,920) (4,668) (10,062)
Capital expenditures.................................................. (824) (1,994) (779)
Decrease in other real estate......................................... 236 280 453
------ ------- ---------
Net cash used in investing activities................ (15,604) (13,473) (21,109)
------ ------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposit accounts...................................... 476 28,668 14,437
Increase in securities sold under agreement to repurchase............. 1,403 57 1,950
Increase in federal funds purchased................................... - - -
Dividends paid........................................................ (533) (415) (245)
Proceeds from exercise of stock options............................... 102 93 101
Purchases of treasury stock........................................... (188) - -
Conversion of redeemable subordinated debentures...................... - - -
Cash acquired from purchase business combination...................... - 4,045 -
Other, net............................................................ 21 (26) (3)
------ ------- ---------
Net cash provided by financing activities......... 1,281 32,422 16,240
------ ------- ---------
Net increase (decrease) in cash and cash equivalents (10,752) 20,994 (2,964)
CASH AND CASH EQUIVALENTS, beginning of period .......................... 29,046 8,052 11,016
------ ------- ---------
CASH AND CASH EQUIVALENTS, end of period................................. $18,294 $29,046 $ 8,052
======= ======= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements
F-4
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
The Company, through its subsidiary banks, Great Falls Bank (GFB) and Bergen
Commercial Bank (BCB) (collectively the "Bank Subsidiaries"), offers a broad
range of lending, depository and related financial services to individual
consumers, business and governmental units primarily through eight full service
offices located in Bergen and Passaic counties, New Jersey. Great Falls
Investment Company, Inc. is a wholly-owned subsidiary of GFB, and BCB Investment
Company, Inc. is a wholly-owned subsidiary of BCB. The primary business of these
subsidiaries is to own and manage the investment portfolios of their respective
parent banks. In 1996, the Company changed its name to Greater Community Bancorp
from Great Falls Bancorp to reflect the expanded embraced range of businesses
under its umbrella.
In October 1996, the Company formed Greater Community Financial,
L.L.C. ("Greater Community Financial"), a New Jersey limited liability company
located in Clifton, New Jersey. The Company is a registered broker-dealer. At
December 31, 1996, Greater Community Financial had assets of $313,000 and member
capital of $311,000.
The Bank Subsidiaries compete with other banking and financial
institutions in their primary market communities, including financial
institutions with resources substantially greater than their own. Commercial
banks, savings banks, savings and loan associations, credit unions, and money
market funds actively compete for deposits and for types of loans. Such
institutions, as well as consumer finance and insurance companies, may be
considered competitors with respect to one or more of the services they render.
The Company and the Bank Subsidiaries are subject to regulations of
certain state and federal agencies and, accordingly, they are periodically
examined by those regulatory authorities. As a consequence of the extensive
regulation of commercial banking activities, the Bank Subsidiaries' businesses
are particularly susceptible to being affected by state and federal legislation
and regulations.
Basis of financial presentation
- -------------------------------
The accounting and reporting policies of the Company and its
subsidiaries conform with generally accepted accounting principles and
predominant practices within the banking industry. All significant intercompany
accounts and transactions have been eliminated. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements. These estimates and assumptions also
affect reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-5
<PAGE>
Financial instruments
- ---------------------
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 107, "Disclosures about Fair Value of
Financial Instruments," which requires all entities to disclose the estimated
fair value of their assets and liabilities considered to be financial
instruments. Financial instruments requiring disclosure consist primarily of
investment securities, loans and deposits.
INVESTMENT SECURITIES
The Company adopted SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," on January 1, 1994. Investment securities which
the Company has the ability and intent to hold to maturity are classified as
held-to-maturity and are stated at cost, adjusted for premium amortization and
discount accretion. Securities which are held for indefinite periods of time
which management intends to use as part of its asset/liability strategy, or that
may be sold in response to changes in interest rates, changes in prepayment
risk, increased capital requirements or other similar factors, are classified as
available-for-sale and are carried at fair market value. Net unrealized gains
and losses for such securities, net of income tax effect, are charged/credited
directly to shareholders' equity. The Company does not engage in securities
trading. Securities transactions are accounted for on a trade date basis. Gains
or losses on disposition of investment securities are based on the net proceeds
and the adjusted carrying amount of the securities sold using the specific
identification method.
LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
Loans are stated at the amount of unpaid principal and are net of
unearned discount, unearned loan fees, and an allowance for loan losses. The
allowance for loan losses is established through a provision for possible loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely. The allowance for possible loan losses is maintained at a level
considered by management to be adequate to provide for potential loan losses
inherent in the loan portfolio at the reporting date. The level of the allowance
is based on management's evaluation of potential losses in the loan portfolio
after consideration of prevailing and anticipated economic conditions, including
estimates and appraisals, among other items, known or anticipated at each
reporting date. Credit reviews of the loan portfolio, designed to identify
potential charges to the allowance, are made on a periodic basis during the year
by management.
Interest income on loans is credited to operations based upon the
principal amount outstanding. The net amounts of loan origination fees, direct
loan origination costs and loan commitment fees are deferred and recognized over
the lives of the related loans as adjustments of yield. When management believes
there is sufficient doubt as to the ultimate collectibility of interest on any
loan, the accrual of applicable interest is discontinued. A loan is generally
classified as non-accrual when principal and interest has consistently been in
default for a period of 90 days or more or because of a deterioration in the
financial condition of the borrower, and payment in full of principal or
interest is not expected. Loans past due 90 days or more and still accruing
interest are loans that are generally well-secured and expected to be restored
to a current status in the near future.
The Company adopted SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," as amended by SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures," on January 1, 1995.
This standard requires that certain impaired loans be measured
F-6
<PAGE>
based on the present value of expected future cash flows discounted at the
loan's effective interest rates, except that as a practical expedient, a
creditor may measure impairment based on a loan's observable market price, or
the fair value of the collateral if the loan is collateral dependent. Regardless
of the measurement method, a creditor must measure impairment based on the fair
value of the collateral when the creditor determines that foreclosure is
probable. The Company had previously measured the allowance for credit losses
using methods similar to those prescribed in this standard. As a result, no
additional allowance for loan losses was required on January 1, 1995 when SFAS
No. 114, as amended by SFAS No. 118 was adopted.
On January 1, 1996, the Company adopted SFAS No. 122, "Accounting for
Mortgage Servicing Rights," which requires that a mortgage banking enterprise
recognize as a separate asset rights to service mortgage loans for others,
however those servicing rights are acquired. In circumstances where mortgage
loans are originated, separate asset rights to service mortgage loans are only
recorded when the enterprise intends to sell such loans. The adoption of SFAS
No. 122 did not have a material impact on the Company's consolidated financial
position or results of operations.
The FASB issued SFAS No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities," as amended by SFAS No.
127, which provides accounting guidance on transfers of financial assets,
servicing of financial assets and extinguishment of liabilities. This statement
is effective for transfers of financial assets, servicing of financial assets
and extinguishments of liabilities occurring after December 31, 1996. Adoption
of this new statement is not expected to have a material impact on the Company's
consolidated financial position or results of operations.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is computed primarily on the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized over the term of the lease or estimated useful life,
whichever is shorter.
On January 1, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
which provides guidance on when to recognize and how to measure impairment
losses of long-lived assets and certain identifiable intangibles and how to
value long-lived assets to be disposed of. The adoption of SFAS No. 121 had no
material effect on the Company's consolidated financial position or results of
operations.
OTHER REAL ESTATE
Other real estate owned, representing property acquired through
foreclosure, is carried at the lower of the principal balance of the secured
loan or the fair value less estimated disposal costs, of the acquired property.
F-7
<PAGE>
INTANGIBLE ASSETS
Intangible assets represent the excess of the cost over the fair
value of net assets of acquired businesses. Intangible assets at December 31,
1996 and 1995, were approximately $566,000 and $676,000, respectively and are
being charged to operations on a straight line basis over a seven-year period
which coincides with the average life of the assets acquired. The amortization
charged to income was $111,000, $191,000 and $110,000 for the years ended
December 31, 1996, 1995 and 1994, respectively.
MORTGAGES HELD FOR SALE
Mortgages held for sale are recorded at cost which approximate
market. Gains or losses on such sales are recognized at the time of sale in an
amount equal to the present value of the difference between the effective
interest rate to the Bank Subsidiaries and the net yield to the investor,
excluding normal future loan servicing fees, over the estimated remaining lives
of the loans sold, adjusted for prepayments. Included in loans in the
accompanying consolidated financial statements are $0 and $228,000 of loans held
for sale at December 31, 1996 and 1995, respectively.
FEDERAL INCOME TAXES
The Company accounts for income taxes under the liability method.
Under the liability method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of assets
and liabilities as measured by the enacted tax rates which will be in effect
when these differences reverse. Deferred tax expense is the result of changes in
deferred tax assets and liabilities. The principal types of accounts resulting
in differences between assets and liabilities for financial statement and tax
return purposes are the allowance for possible losses on loans, interest on
non-accrual loans and acquired net operating loss carryforwards. The Company and
its subsidiaries file a consolidated Federal income tax return.
DIVIDEND RESTRICTIONS
New Jersey state law permits the payment of dividends from subsidiary
banks to their parent company(ies) provided there is no impairment of the
subsidiary's capital accounts and provided the subsidiary bank maintains a
surplus of not less than 50% of its capital stock, or, provided payment of the
dividend will not reduce the subsidiary's surplus. As of December 31, 1996 and
1995, GFB had $6.5 million and $5.9 million and BCB had $1.6 million and $1.4
million of funds available for the payment of dividends to their parent Company,
respectively.
STATEMENTS OF CASH FLOWS
Cash and cash equivalents are defined as cash on hand,
non-interest-bearing amounts due from banks and Federal funds sold. Generally,
Federal funds are sold for a one-day period. Cash paid for income taxes was
$991,000, $1.0 million and $744,000 for the years ended December 31, 1996, 1995,
and 1994, respectively. Cash paid for interest was $7.3 million, $5.6 million
and $3.3 million for the years ended December 31, 1996, 1995, and 1994,
respectively.
F-8
<PAGE>
Advertising Costs
The Company expenses advertising costs as incurred. Advertising
expenses for the years ended December 31, 1996, 1995, and 1994 were
approximately $143,000, $106,000, and $188,000, respectively.
Stock Options
The Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation," on January 1, 1996, which contains a fair value-based method for
valuing stock-based compensation that entities may use, which measures
compensation cost at the grant date based on the fair value of the award.
Compensation is then recognized over the service period, which is usually the
vesting period. Alternatively, the standard permits entities to continue
accounting for employee stock options and similar equity instruments under
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees." Entities that continue to account for stock options using APB
Opinion No. 25 are required to make pro forma disclosures of net income and
earnings per share, as if the fair value-based method of accounting defined in
SFAS No. 123 had been applied. The Company's stock option plans are accounted
for under APB Opinion No. 25.
NET INCOME PER SHARE
Net income per share is computed based on the weighted average number
of common and common equivalent shares outstanding during each year. All
weighted average actual share or per share information in the financial
statements has been adjusted retroactively for the effect of stock dividends.
The effect of outstanding dilutive options and equity contracts was considered
in the computation.
The previously reported net income per share has been corrected to
reflect the dilutive effect of certain common stock equivalents. As a result,
the previously reported net income per share of $1.11 has been changed to $.97.
RECLASSIFICATIONS
Certain reclassifications have been made in the 1995 and 1994
financial statements to conform to the classifications used in 1996.
F-9
<PAGE>
NOTE 2 ACQUISITIONS
On December 31, 1995, the Company acquired BCB by an exchange of
stock. Each share of BCB common stock outstanding was exchanged for 1.7 shares
of the Company's common stock, resulting in the issuance of 629,298 shares. The
acquisition was accounted for as a pooling of interest basis and all prior
periods have been restated to reflect the combination as follows:
1995 1994
------- --------
Net interest income $ 7,110 $ 4,554
BCB ............... 3,773 3,214
------- -------
$10,883 $ 7,768
======= =======
Net income ........ $ 1,533 $ 966
BCB ............... 539 520
------- -------
$ 2,072 $ 1,486
======= =======
On April 7, 1995, the Company completed the acquisition of Family
First Federal Savings Bank ("Family First") of Clifton, New Jersey. Under the
terms of the agreement, the Company issued 172,310 shares of its common stock at
a cost of $1.8 million in exchange for the common stock of Family First. The
merger was accounted for using the purchase method of accounting. The purchase
price exceeded the fair market value of net assets acquired by approximately
$734,000, which is reflected as goodwill, included in intangible and other
assets in the accompanying consolidated balance sheet. The unamortized balance
at December 31, 1996 and 1995 was $566,000 and $675,000, respectively.
The pro forma results of operations, assuming Family First had been
acquired as of January 1, 1994, are as follows:
1995 1994
------- --------
Net interest income $11,372 $ 9,905
Net income ........ 2,079 1,102
F-10
<PAGE>
NOTE 3 SECURITIES
The amortized cost, unrealized gains and losses, and estimated market
value of the Company's investment securities available-for-sale and
held-to-maturity are as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------------------------------------------------
1996 1995
---------------------------------------------- ---------------------------------------------
Gross Gross Fair Gross Gross Fair
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gain Losses Value Cost Gain Losses Value
---------- ---------- ----------- --------- ----------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available-for-sale
U.S. Treasury securities and
U.S. Government agencies $ 36,673 $ 213 $ (25) $ 36,861 $36,812 $ 1,001 $ ( 8) $ 37,805
State and political
subdivisions ............ 1,006 -- -- 1,006 -- -- -- --
Other debt and equity
securities .............. 6,192 215 -- 6,407 2,524 -- (17) 2,507
Mortgage-backed securities . 7,879 98 -- 7,977 7,577 19 (73) 7,523
-------- -------- -------- -------- -------- -------- -------- --------
$ 51,750 $ 526 $ (25) $ 52,251 $ 46,913 $ 1,020 $ (98) $ 47,835
======== ======== ======== ======== ======== ======== ======== ========
Held-to-maturity
U.S. Treasury securities and
U.S. Government agencies $ 18,996 $ 135 $ (529) $ 18,602 $ 32,774 $ 325 $ (420) $ 32,679
State and political
subdivisions ............ 393 -- (3) 390 613 2 -- 615
Mortgage-backed securities . 18,039 19 (80) 17,978 2,764 7 (4) 2,767
-------- -------- -------- -------- -------- -------- -------- --------
$ 37,428 $ 154 $ (612) $ 36,970 $ 36,151 $ 334 $ (424) $ 36,061
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
F-11
<PAGE>
In the fourth quarter of 1995, concurrent with the adoption of its
implementation guide on SFAS No. 115, the FASB allowed a one-time reassessment
of the classifications of all securities currently held. Any reclassifications
would be accounted for at fair value in accordance with SFAS No. 115 and any
reclassifications from the held-to-maturity portfolio that resulted from this
one-time reassessment would not call into question the intent of the Company to
hold other debt securities to maturity in the future. The Company used the
opportunity under this one-time reassessment to reclassify $6.2 million in U.S.
Treasury securities from held-to-maturity to available-for-sale. In connection
with this reclassification, gross unrealized gains of $30,000 and gross
unrealized losses of $12,000 were recorded on available-for-sale securities.
The amortized cost and estimated market value of securities at
December 31, 1996, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because issuers and borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
December 31, 1996
------------------------------------
Amortized Fair Market
Cost Value
------------ -------------
Available-for-sale
<S> <C> <C>
Due in one year or less............................ $ 11,602 $ 11,656
Due after one year through five years.............. 24,360 24,487
Due after five years through ten years............. 1,393 1,403
Due after ten years................................ 324 321
Mortgage-backed and equity securities.............. 14,071 14,384
-------- -------
$ 51,750 $ 52,251
======= =======
Held-to-maturity
Due in one year or less............................ $ 3,198 $ 3,198
Due after one year through five years.............. 13,822 13,748
Due after five years through ten years............. 1,369 1,407
Due after ten years................................ 1,000 640
Mortgage-backed securities......................... 18,039 17,977
------- -------
$ 37,428 $ 36,970
======= =======
</TABLE>
Proceeds from sales of available-for-sale securities for the years
ended December 31, 1996, 1995 and 1994 were $5.5 million, and $16.6 million, and
$13.1 million, respectively. Gross gains of $51,000 and $209,000 were realized
on these sales for the years ended December 31, 1996 and 1995, respectively.
Gross losses of $84,000 were realized on these sales for the year ended December
31, 1994.
F-12
<PAGE>
Securities with a carrying value of $13.7 million and $17.6 million
at December 31, 1996, and 1995, respectively, were pledged to secure public
deposits and repurchase agreements and for other purposes required by law.
NOTE 4 LOANS
Major classifications of Loans are as follows:
<TABLE>
<CAPTION>
------------------------------
1996 1995
--------- ---------
<S> <C> <C>
Loans secured by one-to four-family residential properties................ $ 43,100 $ 43,328
Loans secured by nonresidential properties................................ 58,106 51,133
Loans to individuals...................................................... 9,997 8,661
Loans to depository institutions.......................................... - 4,600
Commercial loans.......................................................... 14,106 14,823
Construction loans........................................................ 5,534 4,292
Other loans............................................................... 6,567 4,905
------- -------
$137,410 $131,742
======= =======
</TABLE>
The following table presents information related to loans which are
on a non-accrual basis, loans which have been renegotiated to provide a
reduction or deferral of interest or principal for reasons related to the
debtor's financial difficulties and loans contractually past due ninety days or
more as to interest or principal payments.
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
-------- --------
<S> <C> <C>
Nonaccrual loans.................................................... $1,033 $1,422
Renegotiated loans.................................................. 726 517
----- -----
Total non-performing loans........................................ $1,759 $1,939
===== =====
Loans 90 days or more past due and still accruing................... $ 876 $1,125
===== =====
Gross interest income which would have
been recorded under original terms............................... $ 286 $ 135
===== =====
</TABLE>
The balance of impaired loans was $711,000 and $1.5 million at
December 31, 1996 and 1995, respectively. The Bank Subsidiaries have identified
a loan as impaired when it is probable that interest and principal will not be
collected according to the contractual terms of the loan agreements. The
F-13
<PAGE>
allowance for credit loss associated with impaired loans was $316,000 and
$588,000 at December 31, 1996 and 1995, respectively. The average recorded
investment in impaired loans was $1.1 million and $1.5 million at December 31,
1996 and 1995, respectively. The income recognized on impaired loans for the
years ended December 31, 1996 and 1995, was $0 and $59,000, respectively. The
Bank Subsidiaries' policy for interest income recognition on impaired loans is
to recognize income on restructured loans under the accrual method. The Bank
Subsidiaries recognize income on non-accrual loans under the cash basis when the
loans are both current and the collateral on the loan is sufficient to cover the
outstanding obligation to the Bank Subsidiaries. If these factors do not exist
the Banks, will not recognize income.
The Bank Subsidiaries extended credit to various directors, executive
officers and their associates. These extensions are made in the ordinary course
of business and on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
others. At December 31, 1996, loans outstanding to these related parties
amounted to $6.6 million. An analysis of activity in loans to related parties at
December 31, 1996, resulted in new loans of $3.2 million and repayments of $1.5
million. All such loans are current as to principal and interest payments at
December 31, 1996.
NOTE 5 ALLOWANCE FOR POSSIBLE LOAN LOSSES
An analysis of the allowance for possible loan losses is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------
1996 1995 1994
----------- ---------- ------------
<S> <C> <C> <C>
Balance at beginning of year................... $ 2,332 $ 1,824 $1,771
Acquired businesses............................ (9) 1,039 -
Provision charged to operations................ 440 414 172
Charge-offs.................................... (365) (1,035) (264)
Recoveries..................................... 142 90 145
------ ------- ------
Balance at end of year......................... $ 2,540 $ 2,332 $1,824
====== ====== =====
</TABLE>
F-14
<PAGE>
NOTE 6 PREMISES AND EQUIPMENT
Premises and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------
Estimated
Useful Lives 1996 1995
------------ ------------- ------------
<S> <C> <C> <C>
Land......................................... $ 124 $ 124
Buildings and improvements................... 5 to 20 years 481 1,489
Furniture, fixtures and equipment............ 3 to 10 years 3,327 2,937
Leasehold improvements....................... 3 to 40 years 1,982 403
------ ------
5,914 4,953
Less accumulated depreciation and
amortization................................. 2,711 1,871
------ ------
$ 3,203 $ 3,082
====== ======
</TABLE>
NOTE 7 DEPOSITS
At December 31, 1996, the schedule of maturities of Certificates of
Deposit is as follows:
<TABLE>
<CAPTION>
<C> <C>
1997................................................... $72,666
1998................................................... 5,582
1999................................................... 2,230
2000................................................... 988
2001 and thereafter.................................... 388
-------
$81,854
=======
</TABLE>
NOTE 8 DEBT
Federal Home Loan Bank Advances
The Company has a line of credit for $15.9 million with the Federal
Home Loan Bank (FHLB) which is collateralized by FHLB stock. Borrowings under
this arrangement have an interest rate that fluctuates based on market
conditions and customer demand. As of December 31, 1996 and 1995, there were no
outstanding balances.
F-15
<PAGE>
Redeemable Subordinated Debentures And Cancellable Mandatory Stock Purchase
Contracts
The Company issued $5.0 million of 8.5% Redeemable Subordinated
Debentures ("Debentures") due November 1, 1998, interest payable quarterly. In
addition to the Debentures, the Company issued Cancellable Mandatory Stock
Purchase Contracts ("Equity Contracts") requiring the purchase of $5.0 million
in common stock at a price of $9.77 (as adjusted for stock dividends) per share
no later than November 1, 1997, and permitting the purchase of common stock in
that amount prior to that date. The purchase price under the Equity Contracts
can be paid by the surrender of the Debentures with a principal amount equal to
the amount of the common stock to be purchased. The Debentures are redeemable
and the Equity Contracts are cancellable at the election of the Company upon 60
days written notice. At December 31, 1996, 511,770 shares of common stock were
reserved for future issuance pursuant to the outstanding Equity Contracts.
NOTE 9 INCOME TAXES
The provision for income taxes was as follows:
Year Ended December 31,
--------------------------------------------
1996 1995 1994
----------- ---------- ----------
Federal
Current $ 1,452 $ 872 $ 796
Deferred (267) 135 (65)
State ..... 127 167 109
------- ------- -------
$ 1,312 $ 1,174 $ 840
======= ======= =======
F-16
<PAGE>
The reconciliation of the tax computed at the statutory federal rate
was as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1996 1995 1994
---------- ---------- --------
<S> <C> <C> <C>
Tax at statutory rate ..................... $ 1,241 $ 1,104 $ 791
Increase (reduction) in tax resulting from:
Tax-exempt income ...................... (22) (24) (8)
Amortization of intangible assets ...... 37 51 24
State income tax, net of federal benefit .. 84 110 72
Acquisition expenses ................... -- 58 --
Utilization of capital loss carryforward -- (99) --
Other ..................................... (28) (26) (39)
------- ------- -------
Provision for income taxes ............. $ 1,312 $ 1,174 $ 840
======= ======= =======
</TABLE>
The net deferred tax asset consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------
1996 1995
------- -------
<S> <C> <C>
Allowance for possible losses on loans and other real estate $ 604 $ 407
Interest income on non-accrual loans ....................... 237 181
Depreciation and amortization .............................. 76 (10)
Acquired net operating loss carryforward ................... 272 374
Difference between book and tax basis of assets acquired ... 370 346
Unrealized holding gain loss on investment securities
available-for-sale ....................................... (194) (194)
Other ...................................................... (97) (103)
------- -------
Total net deferred tax asset (included in other assets) $ 1,268 $ 1,001
======= =======
</TABLE>
At December 31, 1996, the Company had a net operating loss carryforward for
federal income tax purposes of approximately $1.0 million. This net operating
loss carryforward originated from pre-acquisition losses at Family First.
Subject to certain yearly limitations, the Company can utilize the
pre-acquisition net operating loss carryforward to offset future consolidated
taxable income. The net operating loss carryforwards, if unused, would expire in
the years 2008 to 2010.
F-17
<PAGE>
NOTE 10 SHAREHOLDERS' EQUITY
On July 31, 1996, the Company paid a 10% stock dividend on its common
stock to shareholders of record on July 15, 1996.
In April 1996, the Company amended its articles of incorporation
whereby the number of authorized shares of its common stock was increased from
4,000,000 shares to 10,000,000 shares.
On July 31, 1995, the Company paid a 10% stock dividend on its common
stock to shareholders of record on July 15, 1995.
On July 31, 1994, the Company paid a 10% stock dividend on its common
stock to shareholders of record on July 15, 1994.
NOTE 11 STOCK OPTIONS
The Company adopted a non-statutory stock option plan in 1988 (the
"1988 Plan") that also allows for the granting to employees of options to
acquire up to a maximum of 111,304 shares (after adjustments for stock
dividends) of the Company's common stock. The exercise price of any options
granted under the 1988 Plan will not be less than 100% of the fair market value
per share of the Company's common stock on the date such options are granted.
Options granted may have terms of not more than 10 years from the respective
dates of grant and outstanding options are exercisable over various periods
following the respective dates of grant.
The Company adopted a non-statutory stock option plan in 1993 (the
"1993 Plan") authorizing the granting of options to purchase shares of the
Company's common stock to individuals who were then directors of GFB. All
options authorized by the 1993 Plan were granted during 1993 and no further
options are available for grant under that plan. At December 31, 1996, options
to purchase a total of 3,663 shares were outstanding and expired on December 31,
1996.
The Company adopted a non-statutory stock option plan in 1994 (the
"1995 Plan") allowing for the Company's Board of Directors to grant, to the
individuals who were directors of GFB at that time, options to purchase a total
of 32,670 shares of the Company's common stock. At December 31, 1996, options to
purchase a total of 30,250 shares were outstanding and will expire if not
exercised by December 31, 1997.
The Company adopted two additional stock option plans in 1996. The
1996 Employee Stock Option Plan (the "1996 Employee Plan") provides for the
granting of incentive stock options, nonqualified stock options and stock
appreciation rights to employees of the Company and its subsidiaries. Effective
with the approval of the 1996 Employee Plan, the 1988 Plan was terminated. A
total of 220,000 shares are authorized to be granted under the 1996 Employee
Plan. During 1996, options to acquire 112,200 shares were granted under this
plan. The 1996 Stock Option Plan for Non-employee Directors (the "1996 Directors
Plan") provides for the granting of nonqualified stock options to non-employee
directors of the corporation's bank subsidiaries. A total of 104,500 shares are
authorized to be granted under the 1996 Directors Plan. During 1996, options to
acquire 104,500 shares were granted under this plan.
F-18
<PAGE>
Had compensation cost for the plan been determined based on the fair
value of the options at the grant dates consistent with the method of (SFAS
123), the Company's net income and earnings per share would have been reduced to
the pro forma amounts indicated below.
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Net income........................................ As reported $2,337 $2,072
Pro forma $2,300 $2,068
Primary earnings per share........................ As reported $ .97 $1.04
Proforma $ .95 $1.04
</TABLE>
These pro forma amounts may not be representative of future
disclosures because they do not take into effect pro forma compensation expense
related to grants before 1995.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes options-pricing model with the following
weighted-average assumptions used for grants in 1996 and 1995, respectively:
dividend yield of 2.2 % for both years; expected volatility of 35% and 34%;
risk-free interest rates of 6.35% and 7.89% percent; and expected lives of 10
years for both years.
A summary of the status of the Company's option plans as of December
31, 1996, 1995, and 1994 and the changes during the years ending on those dates
is represented below:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------- ----------------------- -------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price Shares
------ -------- ------ --------- ------
<S> <C> <C> <C> <C> <C>
Outstanding, beginning of year........... 97,071 $ 8.95 77,878 $ 8.39 75,237
Granted.................................. 216,700 16.90 32,670 10.33 24,079
Exercised................................ (10,632) 8.86 (12,355) 8.76 (15,717)
Terminated............................... (924) 10.33 (1,122) 7.06 (5,721)
--------- ----- ------ ----- -------
Outstanding, end of year................. 302,215 $13.71 97,071 $ 8.95 77,878
======= ===== ====== ===== ======
Options exercisable at year-end.......... 32,954 36,866
======== ======
Weighted average fair value of
options granted during the year....... $ 7.53 $ 5.18
===== =====
</TABLE>
F-19
<PAGE>
The following information applies to options outstanding at December
31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Number outstanding................................................. 302,215
Range of exercise prices........................................... $6.83 - $17.125
Weighted average exercise price.................................... $13.71
Weighted average remaining contractual life........................ 8.63 years
</TABLE>
NOTE 12 EMPLOYEE BENEFIT PLAN
The Company has a 401(k) savings plan covering substantially all
employees. Under the plan, the Company matches 50% of employee contributions for
all participants with less than five years employment, not to exceed 2% of their
salary, and 75% of employee contributions for all participants with five or more
years of employment, not to exceed 3% of their salary. Contributions made by the
Company were approximately $139,000, $142,000 and $91,000 for the years ended
December 31, 1996, 1995, and 1994, respectively.
NOTE 13 COMMITMENTS AND CONTINGENCIES
LEASE OBLIGATIONS
The Company and its subsidiaries lease banking facilities and other
office space under operating leases which expire at various dates through 2007,
containing certain renewal options. Rent expenses charged to operations
approximated $621,000, $530,000 and $195,000, for the years ended December 31,
1996, 1995 and 1994, respectively. Included in these amounts is $146,000 per
year which is paid to a general partnership that includes two directors of the
Company.
As of December 31, 1996, future minimum annual rental payments under
these leases are as follows:
1997................................................ $ 578
1998................................................ 579
1999................................................ 579
2000................................................ 560
2001................................................ 571
Thereafter.......................................... 2,539
-------
Total........................................... $ 5,406
-------
F-20
<PAGE>
LITIGATION
The Company and its subsidiaries may, in the ordinary course of
business, become a party to litigation involving collection matters, contract
claims and other legal proceedings relating to the conduct of their business. In
management's judgment, the consolidated financial position of the Company will
not be affected materially by the final outcome of any present legal proceedings
or other contingent liabilities and commitments.
NOTE 14 - FINANCIAL INSTRUMENTS WITH
OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK
The Bank Subsidiaries are parties to financial instruments with
off-balance-sheet risk in the normal course of business to meet the financing
needs of their customers and to reduce their own exposure to fluctuations in
interest rates. These financial instruments include commitments to extend credit
and standby letters of credit. Such financial instruments are recorded in the
financial statements when they become payable. Those instruments involve, to
varying degrees, elements of credit and interest rate risks in excess of the
amount recognized in the consolidated balance sheets. The contract or notional
amounts of those instruments reflect the extent of involvement the Bank
Subsidiaries have in particular classes of financial instruments.
The Bank Subsidiaries' exposure to credit loss in the event of
non-performance by the other party to the financial instrument for commitments
to extend credit and standby letters of credit is represented by the contractual
or notional amount of those instruments. The Bank Subsidiaries use the same
credit policies in making commitments and conditional obligations as they do for
on-balance-sheet instruments.
Unless noted otherwise, the Bank Subsidiaries do not require
collateral or other security to support financial instruments with credit risk.
The approximate contract amounts are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1995
---------- ---------
<S> <C> <C>
Financial instruments whose contract amounts represent credit risk
Commitments to extend credit............................................. $22,100 $22,652
Standby letters of credit and financial guarantees written.............. 1,144 1,908
</TABLE>
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank Subsidiaries evaluate each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Bank Subsidiaries upon extension of credit,
is based on management's credit evaluation.
F-21
<PAGE>
Standby letters of credit are conditional commitments issued by the
Bank Subsidiaries to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private borrowing
arrangements. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
The Bank Subsidiaries hold residential or commercial real estate, accounts
receivable, inventory and equipment as collateral supporting those commitments
for which collateral is deemed necessary. The extent of collateral held for
those commitments at December 31, 1996 varies up to 100%.
The Bank Subsidiaries grant various commercial and consumer loans,
primarily within the State of New Jersey. Although the Bank Subsidiaries have
diversified loan portfolios, a substantial portion of the ability of their
borrowers to honor their loan payment obligations in a timely fashion is
dependent on the success of the real estate industry. The distribution of
commitments to extend credit approximates the distribution of loans outstanding.
Commercial and standby letters of credit were granted primarily to commercial
borrowers.
NOTE 15 FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 requires disclosure of the estimated fair value of an
entity's assets and liabilities considered to be financial instruments. For the
Company, as for most financial institutions, the majority of its assets and
liabilities are considered financial instruments as defined in SFAS No. 107.
However, many such instruments lack an available trading market, as
characterized by a willing buyer and seller engaging in an exchange transaction.
Also, it is the Company's general practice and intent to hold its financial
instruments to maturity and not to engage in trading or sales activities, except
for certain loans. Therefore, the Company had to use significant estimations and
present value calculations to prepare this disclosure.
Changes in the assumptions or methodologies used to estimate fair
values may materially affect the estimated amounts. Also, management is
concerned that there may not be reasonable comparability between institutions
due to the wide range of permitted assumptions and methodologies in the absence
of active markets. This lack of uniformity gives rise to a high degree of
subjectivity in estimating financial instrument fair values.
Estimated fair values have been determined by the Company using the
best available data and an estimation methodology suitable for each category of
financial instruments. The estimation methodologies used, the estimated fair
values, and recorded book balances at December 31, 1996 and 1995 are outlined
below.
For cash and due from banks, the recorded book values of $18.3
million and $29.0 million at December 31, 1996 and 1995, respectively,
approximate fair values. For interest-bearing deposits with banks, the recorded
book values of $4.5 million and $1.1 million at December 31, 1996 and 1995,
respectively, approximate fair values. The estimated fair values of investment
securities are based on quoted market prices, if available. Estimated fair
values are based on quoted market prices of comparable instruments if quoted
market prices are not available.
The net loan portfolio at December 31, 1996 and 1995, has been valued
using a present value discounted cash flow where market prices were not
available. The discount rate used in these calculations is the estimated current
market rate adjusted for credit risk. The carrying value of accrued interest
approximates fair value.
F-22
<PAGE>
<TABLE>
<CAPTION>
1996 1995
--------------------------- ------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Investment securities available-for-sale.......... $ 52,251 $52,251 $ 47,835 $ 47,835
Investment securities held-to-maturity........... 37,428 36,970 36,151 36,061
Loans............................................. 137,127 137,257 132,440 132,563
</TABLE>
The estimated fair values of demand deposits (i.e., interest (NOW)
and non-interest bearing demand accounts, savings and certain types of money
market accounts) are, by definition, equal to the amount payable on demand at
the reporting date (i.e., their carrying amounts). The carrying amounts of
variable rate accounts and certificates of deposit approximate their fair values
at the reporting date. The carrying amount of accrued interest payable
approximates its fair value.
<TABLE>
<CAPTION>
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
--------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Time deposits............................................ $81,854 $82,540 $ 91,263 $ 91,648
Securities sold under agreements to repurchase........... 4,159 4,159 2,756 2,759
</TABLE>
The fair values of the redeemable subordinated debentures totaling
$5.0 million and $5.0 million are estimated to approximate their recorded book
balances at December 31, 1996 and 1995, respectively.
There was no material difference between the notional amount and the
estimated fair value of off-balance-sheet items which totaled approximately
$22.1 million and $24.6 million at December 31, 1996 and 1995, respectively, and
primarily comprise unfunded loan commitments which are generally priced at
market at the time of funding.
NOTE 16 REGULATORY MATTERS AND CAPITAL REQUIREMENTS
The Company and the Bank Subsidiaries are subject to various
regulatory capital requirements administered by the federal banking agencies
including the Federal Reserve. Failure to meet minimum capital requirements can
initiate certain mandatory and possible additional discretionary actions by
regulators that, if undertaken, could have a material effect on the Company's
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and the Bank Subsidiaries
must meet specific capital guidelines that involve quantitative measures of
their assets, liabilities, and certain off-balance-sheet items as calculated
under regular accounting practices. The capital amounts and classifications are
also subject to qualitative judgements by the regulators about components, risk
weightings and other factors.
F-23
<PAGE>
Quantitative measures established by regulations to ensure capital
adequacy require the Bank Subsidiaries and the Company to maintain minimum
amounts and ratios of total and Tier 1 capital to risk weighted assets. As of
December 31, 1996, management believes that the Company and the Bank
Subsidiaries meet all capital adequacy requirements to which they are subject.
As of December 31, 1996, the Company and the Bank Subsidiaries met
all regulatory requirements for classification as "well-capitalized"
institutions. To be categorized as well capitalized, the Company and Bank
Subsidiaries must maintain minimum total risk-based, Tier 1 risk-based, and Tier
1 leverage ratios as set forth in the table. There are no conditions or events
which have occurred that management believes have changed the institution's
category.
F-24
<PAGE>
The Bank Subsidiaries and the Company had the following capital
ratios:
<TABLE>
<CAPTION>
Bergen Greater Well Capitalized
Great Falls Bank Commercial Bank Community Bancorp (FDIC requirements)
---------------------- --------------------- ---------------------- -------------------
December 31, December 31, December 31,
--------------------- -------------------- ---------------------
1996 1995 1996 1995 1996 1995
-------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Tier 1 and Tier 2............... 13.21% 14.71% 14.17% 13.68% 16.89% 16.77% 10.00%
Tier 1 Core Capital Ratio....... 6.83% 6.79% 9.04% 12.66% 7.97% 7.27% 6.00%
Tier 1 Leverage Ratio........... 6.78% 7.90% 9.32% 9.11% 8.12% 8.28% 5.00%
</TABLE>
F-25
<PAGE>
NOTE 17 CONDENSED FINANCIAL
INFORMATION - PARENT COMPANY ONLY
The condensed financial information of Greater Community Bancorp is
as follows:
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995
----------- ----------
ASSETS:
<S> <C> <C>
Cash and due from banks - non-interest-bearing.......................... $ 627 $ 632
Investment securities available-for-sale................................ 5,766 4,800
Accrued interest receivable............................................. 29 63
Investment in subsidiaries.............................................. 19,844 19,168
Other assets............................................................ 92 178
--------- -------
Total assets................................................... $ 26,358 $24,841
========= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
Redeemable subordinated debentures...................................... $ 4,988 $ 4,976
Other liabilities....................................................... 309 270
Shareholders' equity.................................................... 21,061 19,595
--------- -------
Total liabilities and shareholders' equity..................... $ 26,358 $24,841
========= =======
</TABLE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Income
Equity in undistributed income of Bank Subsidiaries................. $ 712 $2,069 $1,646
Dividends from Bank Subsidiaries..................................... 1,858 - -
Interest income...................................................... 234 342 244
Non-interest income.................................................. (9) 291 -
------ ------ ------
2,795 2,702 1,890
Other expenses....................................................... 656 735 528
------ ------ ------
Income before income taxes...................................... 2,139 1,967 1,362
Income tax benefit................................................... 198 105 124
------- ------- -------
Net income.................................................... $ 2,337 $2,072 $ 1,486
======= ======= =======
</TABLE>
F-26
<PAGE>
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1996 1995 1994
-------- ------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income................................................................. $2,337 $ 2,072 $ 1,486
Adjustments to reconcile net income to cash
(used in) provided by operating activities:
Discount accretion....................................................... 25 22 22
(Gain) loss on sale of investment securities available-for-sale.......... (9) (291) 13
(Increase) decrease in other assets..................................... 87 169 (252)
(Increase) decrease in accrued interest payable.......................... 34 3 (56)
(Decrease) increase in other liabilities................................. 39 156 ( 27)
Equity in undistributed income of subsidiaries........................... (712) (2,069) (1,646)
----- ------ ------
Net cash provided by (used in) operating activities.......... 1,801 62 (460)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities, available-for-sale......... 2,193 509 680
Proceeds from maturities of investment securities, available-for-sale.... (3,301) - (4,345)
-------- -------- --------
Net cash used in investing activities......................... (1,108) 509 (3,665)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options.................................. 102 93 87
Dividends paid........................................................... (533) (269) (134)
Purchase of treasury stock............................................... (188) - -
Other, net............................................................... (79) (30) (23)
-------- -------- --------
Net cash provided by financing activities............ (698) (206) (70)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents. (5) 365 (4,195)
CASH AND CASH EQUIVALENTS, beginning of year................................ 632 267 4,462
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of year...................................... $ 627 $ 632 $ 267
-------- -------- --------
</TABLE>
F-27
<PAGE>
NOTE 18 - QUARTERLY
FINANCIAL DATA (UNAUDITED)
The following represents summarized quarterly financial data of the
Company which, in the opinion of management, reflects all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the Company's results of operations.
<TABLE>
<CAPTION>
Three months ended
----------------------------------------------------------
December 31 September 30 June 30 March 31
------------ ------------- --------- -----------
1996
- ----
<S> <C> <C> <C> <C>
Interest income............................................. $ 4,789 $ 4,771 $ 4,610 $ 4,523
Interest expense............................................ 1,794 1,844 1,748 1,769
Net interest income......................................... 2,995 2,927 2,862 2,754
Provision for credit losses................................. 150 110 90 90
Other operating income...................................... 470 465 248 746
Other operating expenses.................................... 2,049 2,560 2,204 2,650
Income before income taxes.................................. 1,267 722 816 760
Net income.................................................. 856 477 522 482
Per share data
--------------
Average common shares outstanding........................... 2,337 2,337 2,200 2,095
Net income per common share - primary....................... .28 .18 .28 .23
1995
- ----
Interest income............................................. $ 4,895 $ 4,739 $ 4,497 $ 3,302
Interest expense............................................ 1,931 1,735 1,738 1,146
Net interest income......................................... 2,964 3,004 2,759 2,156
Provision for credit losses................................. 119 134 96 65
Other operating income...................................... 1,034 264 597 282
Other operating expenses.................................... 3,010 2,296 2,334 1,760
Income before income taxes.................................. 869 838 926 613
Net income.................................................. 733 317 633 389
Per share data
--------------
Average common shares outstanding........................... 2,065 2,054 2,038 1,679
Net income per common share - primary....................... .35 .25 .23 .23
</TABLE>
F-28
<PAGE>
Report Of Independent
Certified Public Accountants
To the Board of Directors
and Shareholders of
Greater Community Bancorp
We have audited the accompanying consolidated balance sheet of Greater Community
Bancorp (formally Great Falls Bancorp) and Subsidiaries as of December 31, 1996,
and the related consolidated statements of income, shareholders' equity, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. We also audited the
adjustments to share and earnings per share data for 1995 and 1994 due to the
10% stock dividend declared in 1996 as discussed in Note 10 and the restatement
of the stock option information in 1995, as discussed in Note 11. In our opinion
such adjustments are appropriate and have been properly applied.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 financial statements referred to above present fairly,
in all material respects, the financial position of Greater Community Bancorp
and Subsidiaries as of December 31, 1996, and the results of their operations
and their cash flows for the year then ended, in conformity with generally
accepted accounting principles.
/s/Grant Thornton, LLP
GRANT THORNTON, LLP
Philadelphia, Pennsylvania
January 15, 1997 (except for Note 1, as to which the date is April 29, 1997)
F-29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Greater Community Bancorp:
We have audited the accompanying consolidated balance sheet of Greater Community
Bancorp (a New Jersey corporation) (formerly Great Falls Bancorp) and subsidiary
as of December 31, 1995, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the two years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Greater Community Bancorp and
subsidiaries as of December 31, 1995, and the results of their operations and
their cash flows for each of the two years in the period ended December 31, 1995
in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, effective
January 1, 1994, the Company changed its method of accounting for debt and
equity securities.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 16, 1996
F-30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
GREATER COMMUNITY BANCORP
Dated: May 8, 1997 By:/s/George E. Irwin
---------------------------------
George E. Irwin, President
(Duly Authorized Representative)
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<PAGE>
The Corporation's reported earnings of $0.97 per share for the year
ended December 31, 1996 takes into account the dilutive effect of the
corporation's outstanding common stock equivalents, namely, stock options and
mandatory stock purchase contracts ("Equity Contracts").
The dilution results from the calculation of adjustments to both the
number of weighted shares outstanding and the Corporation's net income for 1996.
Weighted average shares outstanding were computed using the Modified Treasury
Stock Method. The average market price of $16.17 per share for the Corporation's
common stock during 1996 exceeded the exercise prices of outstanding stock
options and Equity Contracts. Stock options totalling 302,215 shares are
exercisable at prices ranging from $6.83 to $17.13 per share were included in
the application of the modified treasury method. The Equity Contracts require
the purchase of $5 million of common stock on or before November 1, 1997, and
contemplate the issuance of 511,770 shares of common stock at a price of $9.77
per share (number of shares and price have been adjusted as a result of stock
dividends).
Under the modified treasury stock method, the assumed aggregate
proceeds from exercise are applied in two steps. First, the funds are applied in
two steps. First, the funds are applied to repurchase common shares at the
average market price during the period but not to exceed 20 percent of the
outstanding shares. Second, the remaining funds were applied to reduce the
Corporation's outstanding 8.5% subordinated debentures due November 1, 1998
("Debentures"). Interest income (net of tax effect) was also calculated,
utilizing an assumed 6.0% rate payable on the debentures, and added to the
Corporation's 1996 net income.
Net income as so increased was divided by the increased number of
weighted shares outstanding to arrive at the reported earnings per share of
$0.97.
The Corporation's reported earnings of $1.04 per share for the year
ended December 31, 1995 also takes into account the dilutive effect of the
Corporation's outstanding common stock equivalents, namely, stock options and
mandatory stock purchase contracts ("Equity Contracts").
The dilution results from the calculation of adjustments to both the
number of weighted shares outstanding and the Corporation's net income for 1995.
Weighted average shares outstanding were also computed using the Modified
Treasury Stock Method. The average market price of $12.88 per share for the
Corporation's common stock during 1995 exceeded the exercise prices of
outstanding stock options and Equity Contracts. Stock options to purchase a
total of 98,110 shares are exercisable at prices ranging from $5.37 to $11.75
per share. The equity contracts require the purchase of $5 million of common
stock on or before November 1, 1997, and contemplate the issuance of 511,770
shares of common stock at a price of $9.77 per share (number of shares and price
have been adjusted as a result of 1995 and 1996 stock dividends).
Under the modified treasury stock method, the assumed aggregate
proceeds from exercise are applied in two steps. First, the funds are applied to
repurchase common shares at the average market price during the period but not
to exceed 20 percent of the outstanding shares. Second, the remaining funds were
applied to reduce the Corporation's outstanding 8.5% subordinated debentures due
November 1, 1998 ("Debentures"). Interest foregone (net of tax effect) was also
calculated, utilizing an assumed 8.5% rate payable on the debentures, and added
to the Corporation's 1995 net income.
Net income as so increased was divided by the increased number of
weighted shares outstanding to arrive at the reported earnings per share of
$1.04.
Earnings per share for 1994 was not affected by outstanding Equity
Contracts and stock options because the effect upon earnings per share of
considering those common stock equivalents would be immaterial or anti-dilutive
for those years.
EXHIBIT 99
PRESS RELEASE DATED APRIL 29, 1997
<PAGE>
[LOGO]
55 Union Boulevard - P.O. Box 269 - Totowa, NJ 07511-0269
Phone: (201) 942-1111 - Fax: (201) 942-6830
FOR IMMEDIATE RELEASE
CONTACT: George E. Irwin
President
SYMBOL: GFLS
Totowa, NJ, April 29, 1997 - Greater Community Bancorp of Totowa, NJ
reports a correction to its per share earnings previously reported on January
22, 1997 for the fiscal year ended December 31, 1996.
As previously reported $1.11
As revised $ .97
The Company's previously announced net earnings for the fiscal year
ended December 31, 1996 of $2,337,000 remain unchanged. In addition, the
Company's previously announced net earnings and earnings per share for the
quarter ended March 31, 1997, remain unchanged.
In connection with the final release and audit of the Company's 1996
financial statements, the Company's independent public accountants and
management determined that the weighted average common shares used in
determining the Company's previous per share amount was required to be adjusted,
primarily to reflect the dilutive effect of the potential exercise of stock
options. This adjustment caused the downward revision to the earnings per share
amount for the fiscal year ended December 31, 1996.
X X X
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