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 June 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
- 5,300,470 shares at July 31, 1998.
Transition Small Business Disclosure Format (check one);
Yes No X
1
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheet
June 30, 1998 (unaudited) and December 31, 1997.................. 3
Condensed Consolidated Statements of Income
Three and Six months ended
June 30, 1998 and 1997 (unaudited)................................4
Condensed Consolidated Statements of Comprehensive Income
Three and Six months ended
June 30, 1998 and 1997 (unaudited)................................5
Condensed Consolidated Statements of Cash Flows
Six months ended June 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.........................................................17
Signatures...................................................................18
2
<PAGE>
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>
June 30, December 31,
1998 1997
ASSETS Unaudited
CASH AND DUE FROM BANKS-Non-interest-bearing $ 14,496 $ 12,735
FEDERAL FUNDS SOLD 4,500 10,110
-------- --------
Total cash and cash equivalents 18,996 22,845
-------- --------
DUE FROM BANKS - Interest-bearing 12,883 2,362
SECURITIES:
Available-for-sale, at fair value 99,922 91,251
Held-to-maturity, at amortized cost 34,228 35,525
-------- ---------
134,150 126,776
-------- ---------
LOANS 182,773 161,249
Less - Allowance for possible loan losses 3,107 2,731
Unearned income 527 393
-------- ---------
Net loans 179,139 158,125
PREMISES AND EQUIPMENT, net 5,430 5,439
OTHER REAL ESTATE OWNED 258 373
ACCRUED INTEREST RECEIVABLE 2,240 2,149
INTANGIBLE AND OTHER ASSETS 4,225 3,916
-------- ---------
Total assets $357,321 $321,985
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Non-interest-bearing 70,894 $72,521
Interest-bearing 56,178 45,010
Savings 31,457 27,503
Time 128,761 112,521
-------- ---------
Total deposits 287,290 257,555
ACCRUED INTEREST PAYABLE 2,889 2,053
OTHER LIABILITIES 2,561 2,975
REPURCHASE AGREEMENTS 8,771 6,338
FEDERAL FUNDS PURCHASED 2,100 -
REDEEMABLE SUBORDINATED DEBENTURES 795 803
GUARANTEED PREFERRED BENEFICIAL INTEREST IN THE
COMPANY'S SUBORDINATED DEBT 23,000 23,000
-------- ---------
Total Liabilities 327,406 292,724
-------- ---------
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, 5,295,468
and 5,294,032 shares outstanding 2,648 2,647
Additional paid-in capital 25,102 25,138
Retained earnings (accumulated deficit) 911 (391)
Unrealized holding gains on
securities available-for-sale 1,254 1,867
-------- --------
Total shareholders' equity 29,915 29,261
-------- --------
Total liabilities and shareholders' equity $357,321 $321,985
======== ========
(See notes to Condensed Consolidated Financial statements)
</TABLE>
3
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $3,947 $3,337 $7,736 $6,537
Securities 1,912 1,451 3,879 2,885
Federal Funds sold and deposits with banks 285 206 421 335
------- ------ ------- ------
Total interest income 6,144 4,994 12,036 9,757
------- ------ ------- ------
INTEREST EXPENSE
Deposits 2,358 1,604 4,515 3,152
Short-term borrowings 120 174 186 322
Long-term borrowings 597 365 1,190 475
------ ------ ------- ------
Total interest expense 3,075 2,143 5,891 3,949
------ ------ ------- ------
NET INTEREST INCOME 3,069 2,851 6,145 5,808
PROVISION FOR POSSIBLE LOAN LOSSES 108 160 228 275
------ ------ ------- ------
Net interest income after
provision for possible loan losses 2,961 2,691 5,917 5,533
OTHER INCOME 1,111 684 2,029 1,133
------ ------ ------ ------
OTHER EXPENSES
Salaries and employee benefits 1,409 1,131 2,749 2,251
Occupancy and equipment 625 495 1,209 981
Regulatory, professional and other fees 156 186 329 370
Office expense 141 148 275 292
All other operating expenses 490 447 949 769
------ ------ ------- ------
Total other expenses 2,821 2,407 5,511 4,663
------ ------ ------- ------
Income before income taxes 1,251 968 2,435 2,003
------ ------ ------- ------
PROVISION FOR INCOME TAXES 457 358 870 728
------ ------ ------- ------
NET INCOME $794 $610 $1,565 $1,275
====== ====== ======= ======
WEIGHTED AVERAGE SHARES OUTSTANDING - Basic 5,291 4,155 5,289 4,143
====== ====== ======= ======
WEIGHTED AVERAGE SHARES OUTSTANDING - Diluted 5,486 4,919 5,497 4,919
====== ====== ======= ======
NET INCOME PER SHARE - Basic $0.15 $0.15 $0.30 $0.31
====== ====== ======= ======
NET INCOME PER SHARE - Diluted $0.14 $0.13 $0.28 $0.28
====== ====== ======= ======
(See notes to Condensed Consolidated Financial Statements)
</TABLE>
4
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in thousands, except per share data)
(Unaudited)
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET INCOME $ 794 610 $1,565 $ 1,275
Other comprehensive income, net of tax
Unrealized gains on securities
Unrealized gains arising in the period (791) 377 (613) 628
Reclassification adjustment:
Gains included in the net income (198) (24) (260) (30)
------- ------ ------- -------
Other comprehensive income (989) 353 (873) 598
------- ------- ------- ------
Comprehensive income (195) 963 $ 692 $ 1,873
------- ------- ------- -------
</TABLE>
(See notes to Condensed Consolidated Financial Statements)
5
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
Six Months Ended
June 30,
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,565 $ 1,275
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 548 513
Accretion of discount on securities, net 56 (16)
Accretion of discount on debentures - 49
Gain on sale of securities, net (433) (50)
Gain on sale of other real estate owned - (87)
Provision for possible loan losses 228 275
Increase in accrued interest receivable (91) (259)
Increase in other assets (309) (1,471)
Increase accrued expenses and other liabilities 422 725
------- ------
Net cash provided by operating activities 2,077 912
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES
Available-for-sale securities -
Purchases (36,265) (25,330)
Sales 861 3,744
Maturities and principal paydowns 26,120 8,008
Held-to-maturity securities -
Purchases (3,853) (2,616)
Maturities 5,150 1,505
Net (increase) decrease in interest-bearing deposits
with banks (10,521) 34
Net increase in loans (21,014) (12,313)
Capital expenditure (485) (286)
Decrease in other real estate 115 1,411
--------- -------
Net cash used in investing activities (39,892) (25,843)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits accounts 29,735 (2,402)
Increase in federal funds purchased 2,100 3,700
Increase in repurchase agreements 2,433 2,143
Decrease in redeemable subordinated debentures (8) (118)
Proceeds from sale of preferred securities - 23,000
Dividends paid (264) (318)
Proceeds from exercise of stock options 87 51
Purchase of treasury stock (122) (155)
Other, net 5 9
-------- -------
Net cash provided by financing activities 33,966 25,910
-------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,849) 979
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 22,845 18,294
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $18,996 $19,273
======== ========
</TABLE>
(See notes to Condensed Consolidated Financial Statements)
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In the opinion of management, these unaudited financial statements contain all
disclosures which are necessary to present fairly the Corporation's consolidated
financial position at June 30, 1998 and the consolidated results of operations
and statement of comprehensive income for three and six months ended June 30,
1998 and 1997, and consolidated statement of cash flows for the six months ended
June 30, 1998. The financial statements include all adjustments (consisting only
of normal recurring adjustments) which in the opinion of management are
necessary in order to present fairly the financial position and results of
operations for the interim periods. Certain information and footnote disclosures
normally included in financial statements under generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission rules and regulations. These financial statements should be
read in conjunction with the annual financial statements and notes thereto
included in Form 10-KSB for the fiscal year ended December 31, 1997.
Dividend
During June 1998, the Corporation's Board of Directors declared a two-for-one
stock split followed by a cash dividend of 6 cents ($.06) per share, both of
which are payable on July 31, 1998 to shareholders of record July 15, 1998. As a
result of the declaration of the stock split, the number of the Corporation's
authorized and outstanding 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 June 30, 1998.
EARNINGS PER SHARE COMPUTATION
The Corporation's reported diluted earnings per share of $0.28 and $0.28 per
share for the and six-month periods ended June 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 options ("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 has scheduled the year 2000 compliance testing to occur late in
the 3rd quarter 1998. Given the Corporation's computer systems structure,
management estimates that the testing of its computer systems and applications
will be substantially completed by December 31, 1998. Although, it is not
possible to predict with certainty all adverse effects which might result from
failure to become fully year 2000 compliant, management does not expect the
costs bringing its computer systems and applications into year 2000 compliance
to have a material adverse effect on the Corporation's financial condition,
results of operations, or liquidity.
7
<PAGE>
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.
The Corporation is currently reviewing the provisions of SFAS No. 133 to
determine its possible effects on the Corporation's financial statements.
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 June 30, 1998 and the results of operations for the
three- and six-month periods ended June 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 June 30, 1998 and the statements of operations and
cash flows for the six months ended June 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. All dollar
figures, except for per share data, are set forth in thousands.
A. Financial Condition: June 30, 1998 and December 31, 1997
As of June 30, 1998, the Corporation's total assets were $357.3 million, an
increase of $35.3 million or 11% compared to the amount reported at December 31,
1997. This increase resulted primarily from the increase in total deposits
during the first six months of the year. Cash and due from banks increased by
$1.8 million or 14% whereas federal funds sold decreased by $5.6 million or 55%.
Due from banks interest-bearing increased by $10.5 million or 445% due in part
to the decrease in federal funds sold.
Investment Securities
Investment Securities totaled $134.2 million at June 30, 1998, an increase of
$7.4 million or 6% compared to the amount reported at December 31, 1997. The
increase in investment securities is a direct result of the proceeds from
increase in total deposits. Management reviews the investment portfolio
continually to achieve maximum yields without having to sacrifice the high
quality of the investments. Of the total investments, 16% are in U.S. Government
obligations, 14% in U.S. Government agency obligations, 67% 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
June 30, 1998 totaled $179.1 million, an increase of $21.0 million or 13%
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.
9
<PAGE>
Deposits
Total deposits at June 30, 1998 were $287.3 million, an increase of $29.7
million or 12%, compared to the amount reported at December 31, 1997. Of the
total increase, time deposits increased by $16.2 million primarily as a result
of deposit promotions, savings deposits increased by $4.0 million, and
interest-bearing demand deposits increased by $11.2 million coupled with a
decline of $1.6 million in non-interest bearing demand deposits. Of the total
deposits, time deposits accounts for 45%, non-interest-bearing deposits for 25%,
interest-bearing demand deposits for 20%, and savings deposits for 10%.
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 June 30, 1998, sources
of liquidity include $19.0 million in cash and cash equivalents, and $99.9
million in investment 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 June 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 $ 54,096 23.85% $ 18,160 8.00% $ - -
Great Falls Bank 15,154 11.34% 10,691 8.00% 13,363 10.00%
Bergen Commercial Bank 8,556 13.08% 5,233 8.00% 6,541 10.00%
Tier 1 Capital (to risk weighted assets)
Greater Community Bancorp 37,808 16.66% 9,078 4.00% - -
Great Falls Bank 13,476 10.08% 5,348 4.00% 8,021 6.00%
Bergen Commercial Bank 7,739 11.83% 2,617 4.00% 3,925 6.00%
Tier 1 Capital (to average assets)
Greater Community Bancorp 37,808 10.78% 14,029 4.00% - -
Great Falls Bank 13,476 6.29% 8,570 4.00% 10,712 5.00%
Bergen Commercial Bank 7,739 7.16% 4,323 4.00% 5,404 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 been fairly stable. 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 nonperforming assets are delinquent loans, nonperforming
assets and renegotiated loans. Each component is discussed in greater detail
below. Nonperforming 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
nonperforming 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>
June 30, December 31,
1998 1997
<S> <C> <C>
Non-accruing loans $1,284 $1,741
Renegotiated loans 427 521
------ ------
Total non-performing loans $1,711 $2,262
------ ------
Loans past due 90 days and accruing $ 148 135
Other real estate 258 373
------ ------
Total non-performing assets $2,117 $2,770
====== ======
Asset Quality Ratios
Non-performing loans to total gross loans 0.94% 1.40%
Non-performing assets to total gross loans 1.16% 1.71%
Non-performing assets to total assets 0.59% .86%
Allowance for possible loan losses to
non-performing loans 181.60% 120.73%
Allowance for possible loan losses to gross
loans 1.70% 1.69%
</TABLE>
Non-accruing loans decreased by $457 for the six-months ended June 30, 1998 when
compared to December 31, 1997, primarily due to such loans being brought up to
be current. Renegotiated loans decreased by $94 for the same period, primarily
due to a reclassification of a non-accrual loan. During the six months ended
June 30, 1998, gross interest income of $40 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 June 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 -
Valuation allowance required $ 975 $ 189
------ -----
Total impaired loans $ 975 $ 189
====== =====
</TABLE>
This valuation allowance is included in the allowance for possible loan losses
on the Corporation's consolidated balance sheet.
12
<PAGE>
The average recorded investment in impaired loans for the six-month period ended
June 30, 1998 was $1.3 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 are recorded as
reductions of principal. The Corporation recognized interest income on impaired
loans of $20 for the six-month period ended June 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 June 30, 1998 of $3,107 or
181.60% of nonperforming 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 June 30, 1998, the allowance for possible loan losses increased by $376 over
the amount recorded at December 31, 1997. The following table represents
transactions affecting the allowance for possible loan losses during the
six-month period ended June 30, 1998.
<TABLE>
<S> <C>
Balance at beginning of period, December 31, 1997 $2,731
Charge-offs:
Installment loans to individuals 14
Credit cards and related plans 22
36
Recoveries:
Commercial, financial and agricultural 170
Real estate--mortgage 8
Installment loans to individuals 3
Credit cards and related plans 3
------
184
Net Recoveries 148
Provision charged to operations
during the six-month period 228
------
Balance at end of period, June 30, 1998 $3,107
======
Ratio of net recoveries during the period to
average loans outstanding during the period .01%
</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 June 30, 1998.
Balance at June 30, 1998 applicable to:
<TABLE>
Percentage of
Loans in each
Percentage category to
Amount of Allowance total loans
<S> <C> <C> <C>
Commercial $1,828 59% 56%
Real estate construction 49 2% 3%
Real estate--mortgage 276 9% 35%
Installment loans to individuals 316 10% 6%
Unallocated 638 20% -
------ ---- ----
Total $3,107 100% 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 Six Months ended June 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 nonperforming 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 Six Months Ended June 30, 1998. The Corporation earned net income of
$794 or $0.15 per share basic and $0.14 per share diluted and $1,565 or $0.30
per share basic and $0.28 per share diluted, for the three- and six-month
periods ended June 30, 1998, compared to $610 or $0.15 per share basic and $0.13
per share diluted and $1,275 or $0.31 per share basic and $0.28 per share
diluted for the same periods in 1997.
Interest income increased by $1,150 and $2,279 for the three- and six-month
periods ended June 30, 1998 over the corresponding periods in 1997. The
increases primarily due to increases in average income-yielding assets. Other
income increased by $427 and $896 for the three- and six-month periods ended
June 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 $932 and $1,942 for the three- and six-month
periods ended June 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 $414 and $848 for the three- and six-month periods ended June 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 six-month
period, $498 was attributable to an increase in salaries and employee benefits
and $228 to increases in occupancy and equipment expenses. Total other expenses
increased by $180 while regulatory, professional fees and office expense
combined decreased by $58 for the six-month period ended June 30, 1998 over the
comparable period.
The provision for possible loan losses for the three- and six-month periods
ended June 30, 1998 was $108 and $228, respectively. This represents decreases
of $52 and $47 compared to the same periods in the prior year. The primary
reason for decline is evident by 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 are
such that a decline in interest rates during the next few months would have a
favorable impact 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
In connection with the Corporation's 2-for-1 stock split declared in June
1998 and payable July 31, 1998, the Corporation's Certificate of
Incorporation was amended to increase the number of shares of authorized
common stock from 10 million to 20 million, and to decrease the par value
per share from $1.00 to $0.50. These amendments have no effect upon either
rights of holders of common stock or the rights relating to the authorized
preferred stock (of which) no shares are outstanding)
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
See Part II, Item 4 of Form-10QSB for the quarter ended March 31, 1998 for
information with respect to the annual meeting of stockholders held on
April 21, 1998.
Item 5 - Other information
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibit is filed herewith:
Exhibit No. Description
3.4 Complete copy of the Certificate of Incorporation
reflecting all amendments through August 4, 1998.
(b) Reports on Form 8-K. The following reports on Form 8-K were filed
during the quarter ended June 30, 1998 and July, 1998.
1. Form 8-K with respect to the June 16, 1998 declaration of 2-
for-1 stock split, including exhibit 3.2, Certificate of
Amendment of Certificate of Incorporation of Greater Community
Bancorp dated June 23, 1998. This report was filed
16
<PAGE>
on June 30, 1998. [Note: the Certificate of amendment did not
conform to the directors' intentions and was superseded by
the Certificate of Amendment filed as Exhibit 3.3 in the
second Form 8-K described immediately below.
2. A second Form 8-K with respect to the June 16, 1998 declaration
of 2-for-1 stock split, including Exhibit 3.3, Certificate of
Amendment of Certificate of Incorporation of Greater Community
Bancorp dated July 15, 1998. This second report was filed on
July 21, 1998.
17
<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: August 14, 1998 By: /s/ Naqi A. Naqvi
-------- ------ ------------------
Naqi A. Naqvi, Treasurer
(Duly Authorized Officer and
Principal Financial Officer)
18
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 14496
<INT-BEARING-DEPOSITS> 12883
<FED-FUNDS-SOLD> 4500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 99922
<INVESTMENTS-CARRYING> 34228
<INVESTMENTS-MARKET> 33895
<LOANS> 182246
<ALLOWANCE> 3107
<TOTAL-ASSETS> 357321
<DEPOSITS> 287290
<SHORT-TERM> 10871
<LIABILITIES-OTHER> 5450
<LONG-TERM> 23795
<COMMON> 2648
0
0
<OTHER-SE> 27267
<TOTAL-LIABILITIES-AND-EQUITY> 357321
<INTEREST-LOAN> 7736
<INTEREST-INVEST> 3879
<INTEREST-OTHER> 421
<INTEREST-TOTAL> 12036
<INTEREST-DEPOSIT> 4515
<INTEREST-EXPENSE> 5891
<INTEREST-INCOME-NET> 6145
<LOAN-LOSSES> 228
<SECURITIES-GAINS> 433
<EXPENSE-OTHER> 5511
<INCOME-PRETAX> 2435
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1565
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.28
<YIELD-ACTUAL> 0
<LOANS-NON> 1284
<LOANS-PAST> 148
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2731
<CHARGE-OFFS> 36
<RECOVERIES> 184
<ALLOWANCE-CLOSE> 3107
<ALLOWANCE-DOMESTIC> 3107
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 638
</TABLE>
EXHIBIT 3.4
COMPLETE COPY OF CERTIFICATE OF INCORPORATION AS AMENDED THROUGH
AUGUST 4, 1998
RESTATED CERTIFICATE OF INCORPORATION
OF
GREATER COMMUNITY BANCORP
(formerly Great Falls Bancorp)
TO: Secretary of State
State of New Jersey
The undersigned hereby certifies as
follows in order to restate the certificate of incorporation of Greater
Community Bancorp (formerly Great Falls Bancorp), a business corporation of the
State of New Jersey, pursuant to N.J.S.A. 14A:9-5(2) and 14A:9-5(4) of the New
Jersey Business
Corporation Act:
1. The name of the corporation is
GREATER COMMUNITY BANCORP.
2. The purposes for which the
corporation is formed are as follows:
Generally to engage in any
activities within the purposes for which corporations may be organized under the
New Jersey Business Corporation Act. 3. (a) The total number of shares of stock
which the corporation shall have authority to issue is Twenty-One Million
(21,000,000) shares, consisting of (1) Twenty Million (20,000,000) shares of
2
<PAGE>
Common Stock, Fifty Cents ($0.50) par value per share, all of the same class
(hereinafter referred to as the "Common Stock"), and (2) One Million (1,000,000)
shares of preferred stock without par value which may be divided into classes
and into series within any class or classes as determined by the Board of
Directors (hereinafter referred to as the "Preferred Stock").
(b)(1) The corporation's
Common Stock shall be entitled to one vote per share at all annual meetings of
shareholders for the election of Directors and at all annual or special meetings
of shareholders at which shareholders of the corporation are entitled to vote.
Prior to the issuance of any shares of Preferred Stock entitled to vote, the
holders of outstanding Common Stock shall be the only shareholders entitled to
vote. In the event of the issuance of any shares of Preferred Stock entitled to
vote, the relative voting rights of the holders of Common Stock and such other
shares shall be as determined by the Board of Directors in amending the
Certificate of Incorporation with respect to such Preferred Stock.
(2) The Board of Directors is
authorized to issue shares of Common Stock to such person(s), firm(s),
corporation(s) or others, and for such lawful consideration(s), as the Board of
Directors shall from time to time determine.
(3) Prior to the issuance of
any shares of Preferred Stock, the holders of outstanding Common Stock shall be
entitled to all dividends declared with respect to stock of the corporation, and
to all assets of the corporation distributable to shareholders upon liquidation.
In the event of
3
<PAGE>
the issuance of any shares of Preferred Stock, the relative dividend rights,
rights upon liquidation, and other relative rights, preferences and limitations
shall be as determined by the Board of Directors in amending the Certificate of
Incorporation with respect to such Preferred Stock.
(c)(1) The Board of Directors
is authorized, subject to limitations prescribed by law and the provisions of
this Paragraph 3, to take action as provided herein with respect to the One
Million (1,000,000) authorized shares of Preferred Stock. In furtherance and not
in limitation of the foregoing general authority of the Board of Directors,
which shall be broadly construed to the extent permitted by the New Jersey
Corporation Business Act as now in existence or hereafter amended, or any
successor statute of like intent applicable to the corporation, the authority of
the Board of Directors with respect to the corporation's Preferred Stock shall
include determination of the following:
(A) The division of shares of
Preferred Stock into classes, and into series within any class or classes.
(B) The designation and the
number of shares of any class or series. This authority shall include the power
to increase the number of shares of any such class or series previously
determined by the Board of Directors, and shall include the power to decrease
such previously determined number of shares to a number not less than the number
of shares then outstanding. Upon any such decrease, the affected shares shall
continue as part of the authorized shares and shall have such designation and
such relative rights, preferences and
4
<PAGE>
limitations as they had before the Board of Directors first acted to include
them in such class or series.
(C) The relative rights,
preferences and limitations of the shares of any class or series. This authority
shall include, but not be limited to, determination of the following to the
extent permitted by law:
(i) The dividend rate on the
shares of such class, whether dividends shall be cumulative, and if so, from
which date or dates, and the relative rights of priority, if any, of payment of
dividends on shares of that class or series;
(ii) Whether that class or
series shall have voting rights, in addition to the voting rights provided by
law and, if so, the terms of such voting rights;
(iii) Whether that class or
series shall have conversion privileges, and, if so, the terms and conditions of
such conversion privileges, including whether that class or series is
convertible into Common Stock and/or one or more classes or series of Preferred
Stock, and further including provision for adjustment of the conversion rate in
such events as the Board of Directors shall determine;
(iv) Whether or not the shares
of that class or series shall be redeemable, and, if so, the terms and
conditions of such redemption, including the date or dates upon or after which
they shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates;
5
<PAGE>
(v) Whether that class or
series shall have a sinking fund for the redemption or purchase of shares of
that class or series, and, if so, the terms and amount of such sinking fund;
(vi) The rights of the shares
of that class or series in the event of a voluntary or involuntary liquidation,
dissolution or winding up of the corporation, and the relative rights of
priority, if any, of payment of shares of that class or series;
(vii) Any other relative
rights, preferences and limitations of that class or series; and
(ix) to the extent determined
by the Board of Directors, dividends on any one or more classes or series of
outstanding shares of Preferred Stock may be paid or declared and set apart for
payment, before any dividends shall be paid or declared and set apart for
payment on the Common Stock with respect to the same dividend period.
(D) This authority shall
further include the power to determine relative rights and preferences which are
prior or subordinate to, or equal with, the Common Stock and/or shares of any
other class or series, whether or not such other shares are issued and
outstanding at the time when the Board of Directors act to determine such
relative rights and preferences.
(2) The Board of Directors is
authorized to change the designation or number of shares, or the relative
rights, preferences and limitations of the shares, of any theretofore
established class or series of Preferred Stock no shares of which have been
issued.
6
<PAGE>
(3) In exercising its
authority to take action with respect to shares of Preferred Stock, the Board of
Directors shall adopt a resolution setting forth its action and stating the
designation and number of shares, and the relative rights, preferences and
limitations of the shares of each class and series thereby created or with
respect to which it has made a determination or change. Before the issuance of
any such shares of Preferred Stock, the corporation shall execute and file a
Certificate of Amendment to the Certificate of Incorporation of the corporation
regarding such action in accordance with N.J.S.A. 14A:7-2(4), as amended, or any
successor statute of like intent.
4. The corporation's current
Registered Office is 55 Union Boulevard, Totowa, New Jersey
07512. The name of the corporation's current Registered Agent at
such Registered Office is Naqi A. Naqvi.
5. The number of directors of the
corporation shall be fixed from time to time by or in the manner provided in the
Bylaws, but the number thereof shall never be less than three (3). The directors
shall be divided into three (3) classes, each class to consist, as nearly as may
be, of one-third (1/3) of the number of directors then constituting the whole
board. The directors in a class to be elected at a given annual meeting shall be
elected for a full term of three (3) years to succeed those directors whose
terms expire. Each director shall hold office for the term for which such
director is elected and until such director's successor shall have been elected
and qualified.
7
<PAGE>
6. Ten (10) persons currently
constitute the corporation's current Board of Directors, all currently having an
address at 55 Union Boulevard, Totowa, New Jersey 07512. Their names are as
follows:
Marino A. Bramante
Anthony M. Bruno, Jr.
C. Mark Campbell
Robert J. Conklin
William T. Ferguson
George E. Irwin
Joseph A. Lobosco
John L. Soldoveri
Alfred R. Urbano
Charles J. Volpe
7. A director or officer of the
corporation shall not be personally liable to the corporation or its
stockholders for damages for breach of any duty owed to the corporation or its
stockholders, except that this provision shall not relieve a director or officer
from liability for any breach of duty based upon an act or omission (a) in
breach of such person's duty of loyalty to the corporation or its stockholders,
(b) not in good faith or involving a knowing violation of law, or (c) resulting
in receipt by such person of an improper personal benefit. Any repeal or
modification of this Article by the stockholders of the corporation or otherwise
shall not adversely affect any right or protection of a director or officer of
the corporation existing at the time of such repeal or modification.
8
<PAGE>
IN WITNESS WHEREOF, the
undersigned has signed this restated certificate of incorporation
on August 4, 1998.
GREATER COMMUNITY BANCORP
By: /s/ George E. Irwin
George E. Irwin, President
9
