U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14294
Greater Community Bancorp
(Exact name of small business issuer as specified in its charter)
NEW JERSEY 22-2545165
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
55 Union Boulevard, Totowa, New Jersey 07512
(Address of principal executive offices)
(973) 942-1111
(Issuer's telephone number)
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
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common stock $0.50 par value
- 5,304,432 shares at November 12, 1998.
Transition Small Business Disclosure Format (check one);
Yes No X
1
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GREATER COMMUNITY BANCORP AND SUBSIDIARIES
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheet
September 30, 1998 (unaudited) and December 31, 1997............. 3
Condensed Consolidated Statements of Income
Three and Nine months ended
September 30, 1998 and 1997 (unaudited).......................... 4
Condensed Consolidated Statements of Comprehensive Income
Three and Nine months ended
September 30, 1998 and 1997 (unaudited)...........................5
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 1998 and 1997 (unaudited).........6
Notes to Consolidated Financial Statements(unaudited)................7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................9
PART II - OTHER INFORMATION
Items 1 through 6.........................................................16
Signatures...................................................................17
2
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PART 1 - FINANCIAL INFORMATION
Item 1- Financial Statements
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
<TABLE>
<S> <C> <C>
September 30, December 31,
1998 1997
ASSETS (Unaudited)
CASH AND DUE FROM BANKS-Non-interest-bearing $ 14,423 $ 12,735
FEDERAL FUNDS SOLD 18,015 10,110
-------- --------
Total cash and cash equivalents 32,438 22,845
------- --------
DUE FROM BANKS - Interest-bearing 14,310 2,362
SECURITIES:
Available-for-sale, at fair value 94,745 91,251
Held-to-maturity, at amortized cost 25,776 35,525
------- ---------
120,521 126,776
-------- ---------
LOANS 192,317 161,249
Less - Allowance for possible loan losses 3,172 2,731
Unearned income 730 393
-------- ---------
Net loans 188,415 158,125
PREMISES AND EQUIPMENT, net 5,367 5,439
OTHER REAL ESTATE OWNED 258 373
ACCRUED INTEREST RECEIVABLE 2,453 2,149
INTANGIBLE AND OTHER ASSETS 5,253 3,916
-------- ---------
Total assets $369,015 $321,985
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Non-interest-bearing 73,059 $72,521
Interest-bearing 52,470 45,010
Savings 30,945 27,503
Time 130,046 112,521
-------- ---------
Total deposits 286,520 257,555
ACCRUED INTEREST PAYABLE 3,029 2,053
OTHER LIABILITIES 2,998 2,975
REPURCHASE AGREEMENTS 18,905 6,338
FEDERAL FUNDS PURCHASED 3,400 -
REDEEMABLE SUBORDINATED DEBENTURES 795 803
GUARANTEED PREFERRED BENEFICIAL INTEREST IN THE
COMPANY'S SUBORDINATED DEBT 23,000 23,000
-------- ---------
Total Liabilities 338,647 292,724
-------- ---------
SHAREHOLDERS' EQUITY Preferred stock, without par value:
1,000,000 shares authorized, none outstanding - -
Common Stock, par value $0.50 per share:
20,000,000 shares authorized, 5,304,392
and 5,294,032 shares outstanding 2,652 2,647
Additional paid-in capital 25,133 25,138
Retained earnings (accumulated deficit) 1,528 (391)
Unrealized holding gains on
securities available-for-sale 1,055 1,867
-------- ---------
Total shareholders' equity 30,368 29,261
-------- ---------
Total liabilities and shareholders' equity $369,015 $321,985
======== =========
(See notes to Condensed Consolidated Financial statements)
</TABLE>
3
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GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
<TABLE>
Three Months Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $4,218 $3,488 $11,953 $10,024
Securities 1,883 1,613 5,762 4,499
Federal Funds sold and deposits with banks 319 195 740 530
------- ------ ------- -------
Total interest income 6,420 5,296 18,455 15,053
------- ------ ------- -------
INTEREST EXPENSE
Deposits 2,331 1,721 6,846 4,873
Short-term borrowings 197 101 382 423
Long-term borrowings 609 669 1,799 1,144
------ ------ ------- -------
Total interest expense 3,137 2,491 9,027 6,440
------ ------ ------- -------
NET INTEREST INCOME 3,283 2,805 9,428 8,613
PROVISION FOR POSSIBLE LOAN LOSSES 111 105 339 380
------ ------ ------- -------
Net interest income after
provision for possible loan losses 3,172 2,700 9,089 8,233
OTHER INCOME 1,139 766 3,167 1,899
------ ------ ------- -------
OTHER EXPENSES
Salaries and employee benefits 1,439 1,241 4,188 3,492
Occupancy and equipment 585 570 1,794 1,551
Regulatory, professional and other fees 168 315 497 685
Office expense 140 146 414 438
All other operating expenses 510 243 1,460 1,012
------ ------ -------- -------
Total other expenses 2,842 2,515 8,353 7,178
------ ------ -------- -------
Income before income taxes 1,469 951 3,903 2,954
------ ------ ------- -------
PROVISION FOR INCOME TAXES 531 347 1,402 1,075
------ ------ ------- -------
NET INCOME $938 $604 $2,501 $1,879
====== ====== ======= ======
WEIGHTED AVERAGE SHARES OUTSTANDING - Basic 5,302 4,170 5,293 4,152
====== ====== ======= ======
WEIGHTED AVERAGE SHARES OUTSTANDING - Diluted 5,492 4,911 5,496 4,893
====== ====== ======= ======
NET INCOME PER SHARE - Basic $0.18 $0.14 $0.47 $0.45
====== ====== ======= ======
NET INCOME PER SHARE - Diluted $0.17 $0.14 $0.46 $0.42
====== ====== ======= ======
(See notes to Condensed Consolidated Financial Statements)
</TABLE>
4
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GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(Unaudited)
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET INCOME $ 938 604 $2,501 $ 1,879
Other comprehensive income, net of tax
Unrealized gains on securities
Unrealized gains arising in the period (199) 592 (812) 1,220
Reclassification adjustment:
Gains included in the net income (526) (172) (786) (202)
------- ------- ------- --------
Other comprehensive income (725) 420 (1,598) 1,018
------- ------- ------- --------
Comprehensive income 213 1,024 $ 903 $ 2,897
------- ------- ------- --------
</TABLE>
(See notes to condensed Consolidated Financial Statements)
5
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GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
Nine Months Ended
September 30,
1998 1997
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,501 $ 1,879
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 886 787
Accretion of discount on securities, net 41 (134)
Accretion of discount on debentures - 10
Gain on sale of securities, net (786) (114)
Gain on sale of other real estate owned - (88)
Provision for possible loan losses 339 380
Increase in accrued interest receivable (304) (285)
Increase in other assets (1,338) (1,534)
Increase in accrued expenses and other liabilities 999 1,111
------- -------
Net cash provided by operating activities 2,338 2,012
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Available-for-sale securities -
Purchases (45,198) (33,609)
Sales 3,935 9,039
Maturities and principal paydowns 37,805 10,508
Held-to-maturity securities -
Purchases (21,224) (3,606)
Maturities 30,921 4,415
Net increase in interest-bearing deposits
with banks (11,948) (537)
Net increase in loans (30,628) (16,563)
Capital expenditures (877) (2,562)
Decrease in other real estate 115 1,542
--------- --------
Net cash used in investing activities (37,099) (31,373)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits accounts 28,965 10,200
Increase in federal funds purchased 3,400 -
Increase in repurchase agreements 12,567 3,816
Decrease in redeemable subordinated debentures (8) (165)
Proceeds from sale of preferred securities - 23,000
Dividends paid (582) (530)
Purchase of treasury stock (122) -
Proceeds from exercise of stock options 122 82
Other, Net 12 104
-------- --------
Net cash provided by financing activities 44,354 36,507
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,593 7,146
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 22,845 18,294
-------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $32,438 $25,440
======== =========
</TABLE>
(See notes to Condensed Consolidated Financial Statements)
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In the opinion of management, these unaudited financial statements contain all
disclosures which are necessary to present fairly the Corporation's consolidated
financial position at September 30, 1998, the consolidated results of operations
and statement of comprehensive income for the three and nine months ended
September 30, 1998 and 1997, and consolidated statement of cash flows for the
nine months ended September 30, 1998. The financial statements include all
adjustments (consisting only of normal recurring adjustments) which in the
opinion of management are necessary in order to present fairly the financial
position and results of operations for the interim periods. Certain information
and footnote disclosures normally included in financial statements under
generally accepted accounting principles have been condensed or omitted pursuant
to the Securities and Exchange Commission rules and regulations. These financial
statements should be read in conjunction with the annual financial statements
and notes thereto included in Form 10-KSB for the fiscal year ended December 31,
1997.
Dividend
During September 1998, the Corporation's Board of Directors declared a cash
dividend of 6 cents ($.06) per share payable on October 30, 1998 to shareholders
of record October 15, 1998. The financial information in this report has been
adjusted to reflect the dividends as of September 30, 1998.
In June 1998, the Corporation's Board of Directors declared a two-for-one common
stock split which was paid on July 31, 1998 to shareholders of record July 15,
1998. As a result of the stock split, the number of the Corporation's authorized
and outstanding common shares as of June 30, 1998 increased to 20,000,000 and
5,295,468, respectively, and the par value of the common stock was reduced from
$1.00 to $0.50 per share. The financial information in this report has been
adjusted to reflect the dividends as of September 30, 1998.
EARNINGS PER SHARE COMPUTATION
The Corporation's reported diluted earnings per share of $0.46 and $0.42 per
share for the and nine-month periods ended September 30, 1998 and 1997,
respectively, both take into consideration the dilutive effects of the
Corporation's outstanding common stock equivalents, namely stock options and
(for 1997 only) mandatory stock purchase contracts ("Equity Contracts").
YEAR 2000
The Corporation has been working since early 1997 to prepare its computer
systems and applications for the year 2000. A year 2000 committee, with
representatives from all departments of the Corporation, has been reviewing,
modifying and communicating with external service providers as well as customers
to ensure the year 2000 issue is being addressed appropriately.
The committee started the year 2000 compliance testing late in the 3rd quarter
1998 and it is expected to be completed in early 1999. Given the Corporation's
computer systems structure, management estimates that the testing of its
computer systems and applications will be substantially completed by March 31,
1999. Currently, almost all of the PCs and local area network servers have
been tested for year 2000 readiness and have been returned to production as
ready. The Corporation is also taking steps to run tests with its mission
7
<PAGE>
control service providers as well as its mini-frame computer systems. To date,
the Corporation has not identified any material third party servicer problems,
but it continues to assess the situation.
The estimated total cost to become year 2000 compliant is approximately
$100,000. Through September 30, 1998, the Corporation has expensed in excess of
$50,000 in year 2000 anticipated expenses. The remaining costs will be added to
its anticipated expenses over the next six months. It is not possible to predict
with certainty all adverse effects which might result from failure to become
fully year 2000 compliant or whether such effects could have a material impact
on the Corporation's financial condition, results of operations, or liquidity.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivatives
Instruments and Hedging Activity." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivatives
embedded in other contracts, and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. If
certain conditions are met, a derivative may be especially designated as a
hedge. The accounting for changes in the fair value of a derivative (gains or
losses) depends on its intended use and resulting designation. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
Earlier application is permitted only as of the beginning of any fiscal quarter.
On October 1, 1998, the Corporation adopted SFAS No. 133 and accordingly
reclassified investment securities with a book value of $4,503 and market value
of $4,527 from held-to-maturity to available-for-sale portfolio.
8
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
The following discussion and analysis of the Corporation's consolidated
financial condition as of September 30, 1998 and the results of operations for
the three- and nine-month periods ended September 30, 1998 and 1997 should be
read in conjunction with the consolidated financial statements, including notes
thereto, included in the Corporation's latest annual report on Form 10-KSB for
the fiscal year ended December 31, 1997, and the other information herein. The
consolidated statement of condition as of September 30, 1998 and the statements
of operations and cash flows for the nine months ended September 30, 1998 and
1997 are unaudited but include, in the opinion of the management, all
adjustments considered necessary for a fair presentation of such data. The term
"Corporation" as used herein refers to Greater Community Bancorp and
subsidiaries, the term "Subsidiary Banks" as used herein refers to Great Falls
Bank and Bergen Commercial Bank and the term "Trust" as used herein refers to
GCB Capital Trust. Data is presented for both the Corporation and the
Subsidiaries unless otherwise noted. Unless otherwise indicated, all dollar
figures, except for per share data, are set forth in thousands.
A. Financial Condition: September 30, 1998 and December 31, 1997
As of September 30, 1998, the Corporation's total assets were $369 million, an
increase of $47.0 million or 15% compared to the amount reported at December 31,
1997. This increase resulted primarily from the increases in total deposits and
repurchase agreements with an offsetting increase in lending activities during
the first nine months of the year. Cash and due from banks and federal funds
sold increased by $1.7 million or 13% and $7.9 million or 78%, respectively. Due
from banks interest-bearing increased by $11.9 million or 506% due in part to
the decrease in investment securities.
Investment Securities
Investment Securities totaled $120.5 million at September 30, 1998, a decrease
of $6.3 million or 5% compared to the amount reported at December 31, 1997. The
decrease in investment securities is a direct result of the proceeds from
matured investments which were subsequently placed in interest bearing due from
banks. Management reviews the investment portfolio continually to achieve
maximum yields without having to sacrifice the high quality of the investments.
Of the total investments, 10% are in U.S. Government obligations, 14% in U.S.
Government agency obligations, 54% in mortgage-backed securities and the balance
in municipal and other securities.
Loan Portfolio
The Corporation's loan portfolio net of allowance for possible loan losses at
September 30, 1998 totaled $188.4 million, an increase of $30.3 million or 19%
compared to the amount reported at December 31, 1997. The increase in loans is
primarily due to increased loan demand in both Passaic and Bergen counties,
particularly in real estate lending.
9
<PAGE>
Deposits
Total deposits at September 30, 1998 were $286.5 million, an increase of $28.9
million or 11%, compared to the amount reported at December 31, 1997. Of the
total increase, time deposits increased by $17.5 million primarily as a result
of deposit promotions, savings deposits increased by $3.4 million, and
interest-bearing demand deposits increased by $7.5 million. Of the total
deposits, time deposits accounts for 45%, non-interest-bearing deposits for 25%,
interest-bearing demand deposits for 19%, and savings deposits for 11%.
Liquidity
Liquidity measures the Corporation's ability to provide sufficient cash flows
for current and future financial obligations on a timely basis. The Corporation
maintains a liquidity position which it considers adequate to provide funds to
meet loan demand or the possible outflow of deposits. At September 30, 1998,
sources of liquidity include $32.4 million in cash and cash equivalents, and
$94.7 million in securities available for sale.
Capital Adequacy and Regulatory Matters
The Corporation is subject to regulation by the Board of Governors of the
Federal Reserve System (Federal Reserve Board). The Subsidiary Banks are subject
to regulation by both the Federal Deposit Insurance Corporation (FDIC) and the
New Jersey Department of Banking and Insurance (Department). Such regulators
have promulgated risk-based capital guidelines which require the Corporation and
the Subsidiary Banks to maintain certain minimum capital as a percentage of
their assets and certain off-balance sheet items adjusted for predefined credit
risk factors (risk-adjusted assets).
The following table sets forth selected regulatory capital ratios for the
Corporation and the Subsidiary Banks and the required minimum regulatory ratios
at September 30, 1998:
<TABLE>
To Be Well
For Capital Capitalized under
Adequacy Prompt Corrective
Actual Purposes Action Provision
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk weighted assets)
Greater Community Bancorp $ 54,953 22.78% $ 19,302 8.00% $ - -
Great Falls Bank 15,906 11.71% 10,867 8.00% 13,583 10.00%
Bergen Commercial Bank 8,746 12.50% 5,597 8.00% 6,997 10.00%
Tier 1 Capital (to risk weighted assets)
Greater Community Bancorp 38,705 16.04% 9,651 4.00% - -
Great Falls Bank 14,200 10.45% 5,435 4.00% 8,153 6.00%
Bergen Commercial Bank 7,917 11.31% 2,800 4.00% 4,200 6.00%
Tier 1 Capital (to average assets)
Greater Community Bancorp 38,705 10.90% 14,204 4.00% - -
Great Falls Bank 14,200 6.48% 8,765 4.00% 10,957 5.00%
Bergen Commercial Bank 7,917 7.00% 4,524 4.00% 5,655 5.00%
</TABLE>
10
<PAGE>
Asset Quality
The Corporation seeks to manage credit risk through diversification of its loan
portfolio and the application of policies and procedures designed to foster
sound underwriting and credit monitoring policies. Over the last several years
management has devoted increased resources to its lending department to
remediate problem assets and improve loan review procedures. The senior lending
officers of the Subsidiary Banks are charged with monitoring asset quality,
establishing credit policies and procedures and seeking consistent applications
of these procedures.
The Corporation's lending is concentrated in its local market area. Its
non-performing loans primarily were made to customers operating in northeastern
New Jersey. The degree of risk inherent in all of the Corporation's lending
activities is influenced heavily by general economic conditions in the immediate
market area. Among the factors which tend to increase or decrease portfolio risk
are changes in local or regional real estate values, income levels and energy
prices. These factors, coupled with levels of unemployment, tax rates,
governmental actions and market conditions affecting the demand for credit among
qualified borrowers, are also important determinants of the risk inherent in the
Corporation's lending.
General economic conditions in the State of New Jersey have improved over the
past few years. Interest rates have declined over the last few months, due in
part to action taken by Federal Reserve Board. The real estate market, real
estate values and employment levels are fairly stable and in some cases have
shown an upward movement.
The components of non-performing assets are delinquent loans, non-performing
assets and renegotiated loans. Each component is discussed in greater detail
below. Non-performing assets consist of nonaccrual loans, accruing loans past
due 90 days or more delinquent, and other real estate (ORE). It is the
Corporation's policy to place a loan on nonaccrual status when, in the opinion
of management, the ultimate collectibility of the principal or interest on the
loan becomes doubtful. As a general rule, a commercial loan or real estate loan
more than 90 days past due with respect to principal or interest is classified
as a nonaccrual loan. Installment loans generally are not placed on nonaccrual
status but, instead, are charged off at 90 days past due, except where the loans
are secured and foreclosure proceedings have commenced.
Loans are considered renegotiated if, for economic or legal reasons, a
concession has been granted to the borrower related to the borrower's financial
difficulties that the creditor would not otherwise consider. The Corporation has
renegotiated certain loans in instances where a determination was made that
greater economic value will be realized under new terms than through
foreclosure, liquidation, or other disposition. ORE includes both loan
collateral that has been formally repossessed and collateral that is in the
Corporation's possession and under its control without legal transfer of title.
At the time of classification as ORE, loans are reduced to the fair value of the
collateral (if less than the loan receivable) by charge-offs against the
allowance for possible loan losses. ORE is carried on the books at the lower of
cost or fair value, less estimated costs to sell. Subsequent valuation
adjustments to the fair value of the collateral are charged or credited to
current operations.
11
<PAGE>
The following table sets forth the composition of the Corporation's
non-performing assets and related asset quality ratios as of the dates
indicated. All of such assets were domestic assets since the Corporation had no
foreign loans.
<TABLE>
September 30, December 31,
1998 1997
<S> <C> <C>
Non-accruing loans $1,737 $1,741
Renegotiated loans 423 521
------ ------
Total non-performing loans $2,160 $2,262
------ ------
Loans past due 90 days and accruing $ 708 135
Other real estate 258 373
------ ------
Total non-performing assets $3,126 $2,770
====== ======
Asset Quality Ratios
Non-performing loans to total gross loans 1.12% 1.40%
Non-performing assets to total gross loans 1.63% 1.71%
Non-performing assets to total assets 0.85% .86%
Allowance for possible loan losses to
non-performing loans 146.39% 120.73%
Allowance for possible loan losses to gross
loans 1.65% 1.69%
</TABLE>
Non-accruing loans at September 30, 1998 were almost unchanged from December 31,
1997. Renegotiated loans decreased by $98 for the same period, primarily due to
a reclassification of a non-accrual loan. During the nine months ended September
30, 1998, gross interest income of $37 would have been recorded on loans
accounted for on a nonaccrual basis if the loans had been current throughout the
period.
Impaired Loans - In accordance with SFAS No. 114, the Corporation utilizes the
following information when measuring its allowance for possible loan losses. A
loan is considered impaired when it is probable that the Corporation will be
unable to collect all amounts due according to the contractual terms of the loan
agreement. These loans consist primarily of non-accruing loans where situations
exist which have reduce the probability of collection in accordance with
contractual terms.
As of September 30, 1998 the Corporation's recorded investment in impaired loans
and the related valuation allowance calculated under SFAS No. 114 are as
follows:
<TABLE>
Recorded Valuation
Investment Allowance
<S> <C> <C>
Impaired loans - $1,003 $194
</TABLE>
This valuation allowance is included in the allowance for possible loan losses
on the Corporation's consolidated balance sheet.
The average recorded investment in impaired loans for the nine-month period
ended September 30, 1998 was $1.0 million. Interest payments received on
impaired loans are recorded as interest income unless collection of the
remaining recorded investment is doubtful in which event payments received
12
<PAGE>
are recorded as reductions of principal. The Corporation recognized interest
income on impaired loans of $47 for the nine-month period ended September 30,
1998.
Analysis of the Allowance For Possible Loan Losses
The allowance for possible loan losses is determined by management based upon
its evaluation of the known, as well as the inherent, risks within the
Corporation's loan portfolio, and is maintained at a level considered adequate
to provide for potential loan losses. The allowance for possible loan losses is
increased by provisions charged to expense and recoveries of prior charge-offs,
and is reduced by charge-offs. In establishing the allowance for possible loan
losses, management considers, among other factors, previous loss experience, the
performance of individual loans in relation to contract terms, the size of
particular loans, the risk characteristics of the loan portfolio generally, the
current status and credit standing of borrowers, management's judgment as to
prevailing and anticipated real estate values, other economic conditions in the
Corporation's market, and other factors affecting credit quality. Management
believes the allowance for possible loan losses at September 30, 1998 of $3,172
or 146.39% of non-performing loans, was adequate.
The Corporation's management continues to actively monitor the Corporation's
asset quality and to charge off loans against the allowance for possible loan
losses as it deems appropriate. Although management believes it uses the best
information available to make determinations with respect to the allowance for
possible loan losses, future adjustments may be necessary if economic conditions
differ substantially from the assumptions used in making the initial
determinations.
At September 30, 1998, the allowance for possible loan losses increased by $441
over the amount recorded at December 31, 1997. The following table represents
transactions affecting the allowance for possible loan losses during the
nine-month period ended September 30, 1998.
<TABLE>
<S> <C>
Balance at beginning of period, December 31, 1997 $2,731
Charge-offs:
Commercial, Financial and agricultural 5
Real estate -- mortgage 31
Installment loans to individuals 28
Credit cards and related plans 40
-------
104
Recoveries:
Commercial, financial and agricultural 187
Real estate--mortgage 11
Installment loans to individuals 4
Credit cards and related plans 4
------
206
Net Recoveries 101
Provision charged to operations
during the nine-month period 339
-------
Balance at end of period, September 30, 1998 $3,172
=======
Ratio of net recoveries during the period to
average loans outstanding during the period .05%
</TABLE>
13
<PAGE>
Allocation of the Allowance for Possible Loan Losses
The following table sets forth the allocation of the allowance for possible loan
losses by loan category amounts, the percent of loans in each category to total
loans in the allowance, and the percentage of loans in each category to total
loans, at September 30, 1998.
Balance at September 30, 1998 applicable to:
<TABLE>
Percentage of
Loans in each
Percentage category to
Amount of Allowance total loans
<S> <C> <C> <C>
Commercial $1,761 56% 56%
Real estate construction 46 1% 3%
Real estate--mortgage 484 15% 36%
Installment loans to individuals 353 11% 5%
Unallocated 528 17% -
------ ---- ----
Total $3,172 100% 100%
====== ==== ====
</TABLE>
Management has determined from continued evaluation of the various elements of
the loan portfolio, previous charge-off experience, collateral evaluation and
borrowers' credit histories, that different risks are associated with each loan
category. Accordingly, management has assigned general reserve percentages
within each loan category, in addition to specific reserves allocated to
individual loans within each category.
B. Results of Operations: Three and Nine Months ended September 30, 1998
and 1997
General. The Corporation's results of operations are dependent primarily on its
net interest and dividend income, which is the difference between interest
earned on its loans and investments and the interest paid on interest-bearing
liabilities. The Corporation's net income is also affected by the generation of
noninterest income, which primarily consists of service fees on deposit accounts
and other income. Net interest income is determined by the difference between
yields earned on interest-earning assets and rates paid on interest-bearing
liabilities ("interest rate spread") and (ii) the relative amounts of
interest-earning assets and interest-bearing liabilities. The Corporation'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. In addition, net income is affected by the level of
operating expenses and establishment of loan loss reserves and ORE reserves.
The operations of the Corporation and the entire banking industry are
significantly affected by prevailing economic conditions, competition and the
monetary and fiscal policies of governmental agencies. Lending activities are
influenced by the demand for and supply of real estate, competition among
lenders, the level of interest rates and the availability of funds. Deposit
flows and costs of funds are influenced by prevailing market rates of interest,
primarily on competing investments, account maturities and the levels of
personal income and savings in the market area.
14
<PAGE>
Three and Nine Months Ended September 30, 1998. The Corporation earned net
income of $938 or $0.18 per share basic and $0.17 per share diluted and $2,501
or $0.47 per share basic and $0.46 per share diluted, for the three- and
nine-month periods ended September 30, 1998, compared to $604 or $0.14 per share
basic and diluted and $1,879 or $0.45 per share basic and $0.42 per share
diluted for the same periods in 1997.
Interest income increased by $1,124 and $3,402 for the three- and nine-month
periods ended September 30, 1998 over the corresponding periods in 1997. The
increases were primarily due to increases in average income-yielding assets.
Other income increased by $373 and $1,268 for the three- and nine-month periods
ended September 30, 1998 over the comparable periods in 1997. The majority of
such increase is directly related to increase in sales and commission fees from
brokerage services coupled with gain on sale of securities.
Total interest expense increased by $646 and $2,587 for the three- and
nine-month periods ended September 30, 1998 over the corresponding periods in
the prior year, primarily due to an increase in average interest bearing
deposits coupled with interest expense related to the junior subordinated debt.
Total other expenses increased by $327 and $1,175 for the three- and nine-month
periods ended September 30, 1998 compared to the same periods in the prior year,
primarily as a result of overall growth of the Corporation. Of the total
increase for the nine-month period, $696 was attributable to an increase in
salaries and employee benefits and $243 to increases in occupancy and equipment
expenses. All other expenses increased by $448 while regulatory, professional
fees and office expense combined decreased by $212 for the nine-month period
ended September 30, 1998 over the comparable period.
The provision for possible loan losses for the three- and nine-month periods
ended September 30, 1998 was $111 and $339, respectively. These represent a
moderate increase of $6 for the three-month period but a decrease of $41 for the
nine-month period compared to the same periods in the prior year. The primary
reason for the decline in the nine-month period is directly related to a decline
in total non-performing loans.
Some Specific Factors Affecting Future Results of Operations
Although future movement of interest rates cannot be predicted with certainty,
the interest rate sensitivity of the Corporation's assets and liabilities over
the next twelve-month period is such that a 3% change in interest rates in
either direction would not have a material effect on the Corporation's results
of operations. However, because overall future performance is dependent on many
other factors, past performance is not necessarily an indication of future
results and there can be no guarantee regarding future overall results of
operations.
ITEM 3 - Quantitative and Qualitative Changes Regarding Market Risk
There have been no material changes in the Corporation's assessment of its
sensitivity to market risk since its presentation in 1997 Annual Report to
Shareholders in Form 10-KSB filed with Securities and Exchange Commission.
15
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
The Corporation and its subsidiaries are parties in the ordinary course of
business to litigation involving collection matters, contract claims and
other miscellaneous causes of action arising from their business.
Management does not consider that any such proceedings depart from usual
routine litigation, and in its judgement neither the Corporation's
consolidated financial position nor its results of operations will be
affected materially by any present proceedings.
Item 2 - Changes in Securities
On July 31, 1998, the Corporation issued 2,647,734 shares of common stock
pursuant to a two-for-one stock split declared in June, 1998. The par value
of the Corporation's common stock was concurrently changed from $1.00 to
$0.50 per common share. See Form 10-Q.B. for quarter ended June 30, 1998
(filed August 14, 1998), Part II, Item 2, and Section 3 of the
Corporation's Restated Certificate of Incorporation filed as Exhibit 3.4 to
such Form 10-Q.B..
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
None.
Item 5 - Other information
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits . Attached hereto is Exhibit 27-4 Financial Data
Schedule.
(b) Reports on Form 8-K. In addition to a Form 8-K filed July 21, 1998
reporting the reduction of the common stock's par value in connection with the
stock split, a second report on Form 8-K were filed during the quarter ended
September 30, 1998. This second Form 8-K provided information about the
Corporation's execution of a definitive merger agreement with First Savings
Bancorp of Little Falls, Inc. Such report was filed on September 10, 1998.
16
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GREATER COMMUNITY BANCORP
(Registrant)
Date: November 13, 1998 By: /s/ Naqi A. Naqvi
----------------- ---------------------
Naqi A. Naqvi, Treasurer
(Duly Authorized Officer and
Principal Accounting Officer)
17
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27-4
FINANCIAL DATA SCHEDULE
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 14423
<INT-BEARING-DEPOSITS> 14310
<FED-FUNDS-SOLD> 18015
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 94745
<INVESTMENTS-CARRYING> 25776
<INVESTMENTS-MARKET> 25557
<LOANS> 191587
<ALLOWANCE> 3172
<TOTAL-ASSETS> 369015
<DEPOSITS> 286520
<SHORT-TERM> 22305
<LIABILITIES-OTHER> 6027
<LONG-TERM> 23795
<COMMON> 2652
0
0
<OTHER-SE> 27716
<TOTAL-LIABILITIES-AND-EQUITY> 369015
<INTEREST-LOAN> 11953
<INTEREST-INVEST> 5762
<INTEREST-OTHER> 740
<INTEREST-TOTAL> 18455
<INTEREST-DEPOSIT> 6846
<INTEREST-EXPENSE> 9027
<INTEREST-INCOME-NET> 9428
<LOAN-LOSSES> 339
<SECURITIES-GAINS> 786
<EXPENSE-OTHER> 8353
<INCOME-PRETAX> 3903
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2501
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.46
<YIELD-ACTUAL> 0
<LOANS-NON> 1737
<LOANS-PAST> 708
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2731
<CHARGE-OFFS> 104
<RECOVERIES> 206
<ALLOWANCE-CLOSE> 3172
<ALLOWANCE-DOMESTIC> 3172
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 528
</TABLE>
