FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): APRIL 1, 1999
GREATER COMMUNITY BANCORP
(Exact name of registrant as specified in its charter)
NEW JERSEY 0-14294 22-2545165
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification
incorporation) No.)
55 UNION BOULEVARD, TOTOWA, NEW JERSEY 07512
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 973-942-1111
____________________________________________________________
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
Effective April 1, 1999, Greater Community Bancorp (the "Corporation")
consummated the acquisition of First Savings Bancorp of Little Falls, Inc.
("First Savings") and its subsidiary, First Savings Bank of Little Falls, F.S.B.
(the "Bank"). The main offices of First Savings and the Bank were located in
Little Falls, Passaic County, New Jersey. The Bank had three branch offices.
The acquisition was made pursuant to a merger agreement entered into in
September, 1998 (the "Merger Agreement"). A copy of the Merger Agreement was
previously filed as Exhibit 2.1 to the Corporation's Form 8-K filed on September
10, 1998.
Pursuant to the Merger Agreement: (1) the Corporation paid the stockholders
of First Savings $23 million in cash; (2) GCB Acquisition Corp., a wholly-owned
subsidiary of the Corporation, merged with and into First Savings, which was the
surviving corporation of the merger and thereby became a wholly-owned subsidiary
of the Corporation; and (3) the Bank merged with and into Great Falls Bank, one
of the Corporation's bank subsidiaries. In a concurrent reorganization, the
assets and liabilities of one of the Bank's branches, located in Little Ferry,
New Jersey, were transferred to Bergen Commercial Bank, the Corporation's other
bank subsidiary.
The assets acquired in the merger were as follows:
- Approximately $109.8 million in net loans.
- Approximately $57.8 million in investments (primarily, approximately
$37.0 million in taxable securities, net, and approximately $19.1 million
in mortgage-backed securities, net).
- Approximately $7.7 million in nonearning assets (primarily,
approximately $1.2 million in cash and due from banks, and approximately
$1.5 million in real estate owned, net; also includes approximately $2.7 in
fixed assets, net, consisting of leasehold improvements, equipment and
other physical assets related to the conduct of the Bank's banking
business. The Bank had used such fixed assets in its banking business. The
Corporation's Bank Subsidiaries intend to continue to use substantially all
such fixed assets in their conduct of the banking business at the
newly-acquired branch locations.
In connection with the merger the Corporation also assumed approximately
$175.3 million in liabilities, consisting primarily of approximately $174.2
million in deposits, of which approximately $165.7 million were interest-bearing
and approximately $8.4 million were non-interest-bearing.
The sources of the Corporation's funds to pay the $23 million purchase
price were as follows: (1) $12.1 million from the proceeds of a short-term
borrowing from Atlantic Central Bankers Bank; and (2) the remaining $10.9
million from cash on hand.
The $23 million purchase price is approximately 227% of the book value of
First Savings at December 31, 1998 and 27 times its earnings for the twelve
months ended December 31, 1998.
The First Savings acquisition will be accounted for as a purchase. The
acquisition will both increase the Corporation's consolidated assets by
approximately 47% and reduce its tangible net worth by approximately $14.0
million, or 44%. The Bank had approximately $180 million in assets, and operated
from three branches. As a result of the
<PAGE>
acquisition the Corporation has net loans of approximately $310.8 million,
deposits of approximately $467.6 million and total assets of approximately
$547.7 million. The acquisition will result in an increase of approximately
$14.0 million in the Corporation's intangible assets reflecting the premium
paid, and concurrent reductions of the Corporation's regulatory capital to
approximately the following estimated levels:
Pro Forma Capital Analysis
--------------------------
Pre- Post-
Acquisition Acquisition
----------- -----------
Tier 1 Leverage Ratio (Tier I/Average Assets) 11.21% 6.21%
Tier I Core Capital Ratio 8.08% 3.85%
Tier I Risk-Based Capital Ratio 15.32% 8.86%
Tier I & Tier II Risk-Based Capital Ratio 21.58% 13.26%
The foregoing approximate numbers are estimates only. More complete actual
results will be reported in subsequent filings.
The Corporation anticipates the First Savings acquisition will have an
insignificant impact on earnings in 1999 and will be accretive to earnings in
2000. On a cash earnings basis (excluding the effect of amortization of
goodwill, which will be amortized over 20 years), the acquisition is expected to
be accretive to earnings in 1999 and 2000. However, there can be no guarantee in
this regard.
The foregoing contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are not
historical facts and include expressions about management's confidence and
strategies and management's expectations about new and existing programs and
products, relationships, opportunities, technology and market conditions. These
statements may be identified by such forward looking terminology as "projected",
"estimated", "expect", "look", "believe", "anticipate", "may", "will", or
similar statements or variations of such terms. Such forward-looking statements
involve certain risks and uncertainties. These include, but are not limited to,
Rock's ability to generate deposits and loans and attract qualified employees,
the direction of interest rates, levels of loan quality and origination volume,
continued relationships with major customers including sources for loans,
successful completion of the implementation of Year 2000 technology changes, as
well as the effects of economic conditions and legal and regulatory barriers and
structure. Actual results may differ materially from such forward-looking
statements. The Corporation assumes no obligation for updating any such
forward-looking statement at any time.
<PAGE>
Item 7. Financial Statements and Exhibits.
Item 7(a) Financial Statements of the acquired institution
INDEPENDENT AUDITORS' REPORT
To The Board of Directors
Greater Community Bancorp
Totowa, New Jersey
We have audited the accompanying consolidated statements of financial condition
of First Savings Bancorp of Little Falls, Inc. (the "Corporation") and
Subsidiaries as of December 31, 1998 and 1997 and the related consolidated
statements of operations, comprehensive income, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1998. These consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
consolidated 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 audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to in the second
preceding paragraph present fairly, in all material respects, the consolidated
financial position of First Savings Bancorp of Little Falls, Inc. and
Subsidiaries at December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the years in the three-year period ended
December 31, 1998, in conformity with generally accepted accounting principles.
Radics & Co., LLC
Pine Brook, NJ
March 19, 1999, except for Note 2, as to
which the date is March 31, 1999.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Assets
Cash and amounts due from depository institutions $ 2,030,360 $ 2,142,413
Interest-bearing deposits in other banks 11,585,467 1,540,810
------------ ------------
Total cash and cash equivalents 13,615,827 3,683,223
Securities available for sale 23,307,610 31,226,440
Investment securities held to maturity 24,146,459 19,643,589
Mortgage-backed securities held to maturity 8,012,644 10,414,679
Loans receivable 109,203,584 105,467,485
Real estate owned 1,485,738 1,640,004
Premises and equipment 2,703,869 2,775,060
Federal Home Loan Bank of New York stock 1,154,400 1,106,600
Interest receivable 1,357,687 1,379,628
Other assets 1,551,834 807,631
------------ ------------
Total assets $186,539,652 $178,144,339
============ ============
Liabilities and stockholders' equity
Liabilities
Deposits $174,465,620 $166,758,857
Borrowed money 508,680 551,132
Advance payments by borrowers for taxes and insurance 795,293 769,354
Other liabilities 176,506 200,537
------------ ------------
Total liabilities 175,946,099 168,279,880
------------ ------------
Commitments and contingencies -- --
Stockholders' equity
Preferred stock - par value $0.01 per share; authorized
1,000,000 shares; issued and outstanding -0- shares -- --
Common stock - par value $1.00 per share;
authorized 5,000,000 shares;
issued and outstanding 440,100 shares 440,100 440,100
Paid-in capital 4,316,670 3,670,377
Retained earnings - substantially restricted 5,673,009 5,458,904
Accumulated other comprehensive income 163,774 295,078
------------ ------------
Total stockholders' equity 10,593,553 9,864,459
------------ ------------
Total liabilities and stockholders' equity $186,539,652 $178,144,339
============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Interest income:
Loans $ 8,921,099 $ 8,638,815 $ 7,686,356
Mortgage-backed securities 1,477,091 1,810,796 1,935,936
Investments 2,172,773 1,853,970 1,730,414
Other interest-earning assets 517,396 403,835 102,974
------------ ------------ ------------
Total interest income 13,088,359 12,707,416 11,455,680
------------ ------------ ------------
Interest expense:
Deposits 8,510,485 8,083,690 6,593,393
Borrowed money 35,727 20,332 591,823
------------ ------------ ------------
Total interest expense 8,546,212 8,104,022 7,185,216
------------ ------------ ------------
Net interest income 4,542,147 4,603,394 4,270,464
Provision for loan losses 138,000 101,174 142,500
------------ ------------ ------------
Net interest income after provision for loan losses 4,404,147 4,502,220 4,127,964
------------ ------------ ------------
Non-interest income:
Fees and service charges 99,297 90,980 90,606
Gain on calls and sales of securities -- 7,836 3,575
Gain on sale of loans 217 -- --
Miscellaneous 63,378 68,060 85,884
------------ ------------ ------------
Total non-interest income 162,892 166,876 180,065
------------ ------------ ------------
Non-interest expenses:
Salaries and employee benefits 1,487,015 1,457,573 1,368,656
Net occupancy expense of premises 249,735 243,005 245,327
Equipment 397,181 375,333 361,738
Loss on foreclosed real estate 39,408 161,599 396,168
Federal insurance premium 101,823 98,312 1,130,410
Legal fees 192,858 276,148 170,763
Amortization of intangibles 33,333 33,336 33,336
Miscellaneous 704,747 793,305 780,741
------------ ------------ ------------
Total non-interest expenses 3,206,100 3,438,611 4,487,139
------------ ------------ ------------
Income (loss) before income taxes (benefit) 1,360,939 1,230,485 (179,110)
Income taxes (benefit) 486,684 436,373 (59,039)
------------ ------------ ------------
Net income (loss) 874,255 794,112 (120,071)
Preferred stock dividends -- -- 170,000
------------ ------------ ------------
Net income (loss) applicable to common shares $ 874,255 $ 794,112 $ (290,071)
------------ ------------ ------------
Net income (loss) per common share:
Basic $ 1.99 $ 1.80 $ (2.90)
Diluted 1.99 1.80 (0.27)
------------ ------------ ------------
Dividends declared per common share $ 1.50 $ 1.00 $ --
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net income (loss) $ 874,255 $ 794,112 $(120,071)
--------- --------- ---------
Other comprehensive income, net of income taxes:
Unrealized gains (losses) on securities available for sale,
net of income taxes of $71,486, $(76,676) and $(21,469),
respectively (131,304) 140,716 28,322
Reclassification adjustment for realized gains on securities
available for sale, net of income taxes of $2,819 and
$1,636 in 1997 and 1996, respectively -- (5,017) (2,912)
--------- --------- ---------
Other comprehensive income (131,304) 135,699 25,410
--------- --------- ---------
Comprehensive income (loss) $ 742,951 $ 929,811 $ (94,661)
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Retained Accumulated
Earnings - Other Total
Preferred Common Paid-in Substantially Comprehensive Stockholders'
Stock Stock Capital Restricted Income Equity
--------- ------ ------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1995 $340 $100,100 $4,010,037 $5,352,463 $133,969 $9,596,909
Net (loss) for the year
ended December 31, 1996 -- -- -- (120,071) -- (120,071)
Unrealized gain on
securities available
for sale, net of
income tax effect -- -- -- -- 25,410 25,410
Conversion of preferred
stock to common stock (340) 340,000 (339,660) -- -- --
Dividend on preferred stock -- -- -- (170,000) -- (170,000)
---- -------- ---------- ---------- -------- -----------
Balance - December 31, 1996 -- 440,100 3,670,377 5,062,392 159,379 9,332,248
Net income for the year
ended December 31, 1997 -- -- -- 794,112 -- 794,112
Unrealized gain on
securities available
for sale, net of
income tax effect -- -- -- -- 135,699 135,699
Dividend on common stock -- -- -- (397,600) -- (397,600)
---- -------- ---------- ---------- -------- -----------
Balance - December 31, 1997 -- 440,100 3,670,377 5,458,904 295,078 9,864,459
Net income for the year
ended December 31, 1998 -- -- -- 874,255 -- 874,255
Unrealized loss on
securities available
for sale, net of
income tax effect -- -- -- -- (131,304) (131,304)
Dividend on common stock -- -- -- (660,150) -- (660,150)
Income tax benefit related to
restricted stock award -- -- 646,293 -- -- 646,293
---- -------- ---------- ---------- -------- -----------
Balance - December 31, 1998 $ -- $440,100 $4,316,670 $5,673,009 $163,774 $10,593,553
==== ======== ========== ========== ======== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 874,255 $ 794,112 $ (120,071)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 263,934 284,052 287,849
Amortization of premiums, discounts and fees, net 254,482 183,675 307,664
Amortization of intangibles 33,333 33,336 33,336
Deferred income taxes (36,286) 147,493 (84,225)
Provision for losses on loans and real estate owned 138,000 138,511 399,000
Net (gain) loss on sales of assets (17,844) (8,817) 4,965
(Increase) decrease in interest receivable 21,941 (268,863) 317,103
(Increase) decrease in other assets (333,582) 55,198 194,656
(Decrease) increase in accrued interest payable (130,287) 12,111 966
Increase (decrease) in other liabilities 286,317 68,040 (16,745)
------------ ------------ ------------
Net cash provided by operating activities 1,354,263 1,438,848 1,324,498
------------ ------------ ------------
Cash flows from investing activities:
Purchases of:
Securities available for sale (2,120,003) (3,202,687) (12,189,859)
Investment securities held to maturity (27,356,260) (26,607,569) --
Mortgage-backed securities held to maturity (1,021,875) -- (12,491,176)
Loans receivable -- -- (6,135,880)
Premises and equipment (192,743) (102,797) (339,230)
Federal Home Loan Bank of New York stock (47,800) (181,000) (102,300)
Principal repayments on:
Securities available for sale 9,569,720 6,085,224 6,442,347
Investment securities held to maturity 22,859,999 9,000,000 17,000,000
Mortgage-backed securities held to maturity 3,413,896 2,393,587 1,817,557
Proceeds from sales of:
Securities available for sale -- 3,340,764 3,924,166
Mortgage-backed securities held to maturity -- -- 403,979
Loans receivable 98,727 -- 64,615
Real estate owned 350,742 612,029 638,401
Net (increase) in loans receivable (4,136,212) (10,121,440) (2,929,591)
Additions to real estate owned -- (51,355) (104,711)
Payments applied to real estate owned -- 6,000 13,380
------------ ------------ ------------
Net cash provided by (used in) investing activities 1,418,191 (18,829,244) (3,988,302)
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase in deposits $ 7,836,813 $ 10,153,709 $ 24,959,065
Proceeds, net of repayments, from short-term borrowed money -- -- (12,600,000)
Proceeds of long-term debt -- 568,000 --
Repayments of long-term debt (42,452) (16,868) --
Increase in advance payments
by borrowers for taxes and insurance 25,939 135,539 70,553
Cash dividend paid on preferred stock -- (42,500) (170,000)
Cash dividend paid on common stock (660,150) (397,600) (50,050)
------------ ------------ ------------
Net cash provided by financing activities 7,160,150 10,400,280 12,209,568
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 9,932,604 (6,990,116) 9,545,764
Cash and cash equivalents - beginning 3,683,223 10,673,339 1,127,575
------------ ------------ ------------
Cash and cash equivalents - ending $ 13,615,827 $ 3,683,223 $ 10,673,339
Supplemental disclosure of cash flow information: Cash paid during the year for:
Interest $ 8,676,499 $ 8,091,911 $ 7,195,772
------------ ------------ ------------
Income taxes, net of refunds $ 283,227 $ 240,792 $ (210,459)
------------ ------------ ------------
Unrealized (loss) gain on securities available for sale, net $ (131,304) $ 135,699 $ 25,410
------------ ------------ ------------
Loans transferred to real estate owned $ 178,849 $ -- $ 493,186
------------ ------------ ------------
Loans originated to facilitate the sale of real estate owned $ -- $ 663,000 $ --
------------ ------------ ------------
Income tax benefit recorded directly to paid-in capital $ 646,293 $ -- $ --
------------ ------------ ------------
Dividends on preferred stock declared but not paid $ -- $ -- $ 42,500
------------ ------------ ------------
Preferred stock converted to common stock $ -- $ -- $ 339,660
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidated financial statement presentation
The consolidated financial statements include the accounts of the
Corporation and its wholly owned subsidiary, First Savings Bank of Little
Falls, FSB (the "Savings Bank"), and the Savings Bank's wholly owned
subsidiaries, The First Service Corporation of Little Falls (the "Service
Corp.") and Redeem, Inc., and have been prepared in conformity with
generally accepted accounting principles. All significant intercompany
accounts and transactions have been eliminated in consolidation.
In preparing the consolidated financial statements, management is required
to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the statements of consolidated
financial condition and revenues and expenses for the periods then ended.
Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant changes
relate to the determination of the allowance for loan losses, the valuation
of real estate owned and the determination of the amount of deferred tax
assets which are more likely than not to be realized.
Management believes that the allowance for loan losses is adequate, real
estate owned is appropriately valued and deferred tax assets recorded are
more likely than not to be realized. While management uses available
information to recognize losses on loans and real estate owned, future
additions to the allowance for loan losses or further writedowns of real
estate owned may be necessary based on changes in economic conditions in
the Savings Bank's market area.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Savings Bank's allowance for
loan losses and real estate owned valuations. Such agencies may require the
Savings Bank to recognize additions to the allowance or additional
writedowns based on their judgments about information available to them at
the time of their examination.
Cash and cash equivalents
Cash and cash equivalents include cash and amounts due from depository
institutions and interest-bearing deposits with other financial
institutions with original maturities of three months or less.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Investment and mortgage-backed securities
Investments in debt securities that the Corporation has the positive intent
and ability to hold to maturity are classified as held-to-maturity
securities and reported at amortized cost. Debt and equity securities that
are bought and held principally for the purpose of selling them in the near
term are classified as trading securities and reported at fair value, with
unrealized holding gains and losses included in earnings. Debt and equity
securities not classified as trading securities nor as held-to-maturity
securities are classified as available for sale securities and reported at
fair value, with unrealized holding gains or losses, net of deferred income
taxes, reported in the accumulated other comprehensive income component of
stockholders' equity.
Premiums and discounts on all securities are amortized/accreted using the
interest method. Interest and dividend income on securities, which includes
amortization of premiums and accretion of discounts, is recognized in the
consolidated financial statements when earned. The adjusted cost basis of
an identified security sold or called is used for determining security
gains and losses recognized in the consolidated statements of operations.
Loans receivable
Loans receivable are stated at unpaid principal balances less the allowance
for loan losses and deferred loan fees and discounts. Interest is
calculated by the use of the actuarial method.
The Savings Bank defers loan origination fees and certain direct loan
origination costs and accretes such amounts as an adjustment of yield over
the contractual lives of the related loans. Discounts on loans purchased
are recognized as income by use of a method which approximates the
level-yield method over the terms of the respective loans.
Uncollectible interest on loans that are contractually past due is charged
off and the related loans placed on nonaccrual status. Income is
subsequently recognized only to the extent that cash payments are received
until, in management's judgment, the borrower's ability to make periodic
interest and principal payments is probable, in which case the loan is
returned to an accrual status.
Allowance for loan losses
An allowance for loan losses is maintained at a level considered adequate
to absorb future loan losses. Management of the Savings Bank, in
determining the allowance for loan losses, considers the risks inherent in
its loan portfolio and changes in the nature and volume of its loan
activities, along with the general economic and real estate market
conditions. The Savings Bank utilizes a two-tier approach: (1)
identification of impaired loans and establishment of specific loss
allowances on such loans; and (2) establishment of general valuation
allowances on the remainder of its loan portfolio. The Savings Bank
maintains a loan review system which allows for a periodic review of its
loan portfolio and the early identification of potential impaired loans.
Such system takes into consideration, among other things, delinquency
status, size of loans, type and estimated fair value of collateral and
financial
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Allowance for loan losses (Cont'd.)
condition of the borrowers. Specific loan loss allowances are established
for identified loans based on a review of such information. General loan
loss allowance are based upon a combination of factors including, but not
limited to, actual loan loss experience, composition of loan portfolio,
current economic conditions and management's judgment. Although management
believes that adequate specific and general loan loss allowances are
established, actual losses are dependent upon future events and, as such,
further additions to the level of the allowance for loan losses may be
necessary.
Impaired loans are measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loans observable market price or fair value of
the collateral if the loan is collateral dependent. A loan evaluated for
impairment is deemed to be impaired when, based on current information and
events, it is probable that the Savings Bank will be unable to collect all
amounts due according to the contractual terms of the loan agreement. All
loans identified as impaired are evaluated independently. The Savings Bank
does not aggregate such loans for evaluation purposes. Payments received on
impaired loans are applied first to accrued interest receivable and then to
principal.
Real estate owned
Real estate owned consists of real estate acquired by foreclosure or deed
in lieu of foreclosure. Real estate owned is recorded at the lower of cost
or fair value at date of acquisition and thereafter carried at the lower of
such initially recorded amount or fair value less estimated selling costs.
Costs incurred in developing or preparing properties for sale are
capitalized. Income and expense related to the holding and operating of
properties are recorded in operations. Gains and losses from sales of such
properties are recognized as incurred.
Concentration of risk
The Savings Bank's real estate and lending activity is concentrated in real
estate and loans secured by real estate located primarily in the State of
New Jersey.
Premises and equipment
Premises and equipment are comprised of land, at cost, and buildings,
building improvements, furniture, fixtures and equipment, at cost, less
accumulated depreciation. Depreciation charges are computed on the
straight-line method over the following estimated useful lives:
Building and improvements 40 to 50 years
Furniture, fixtures and equipment 3 to 10 years
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Significant renewals and betterments are charged to the premises and
equipment account. Maintenance and repairs are charged to operations in the
year incurred. Rental income is netted against occupancy costs in the
consolidated statements of operations.
Income Taxes
The Corporation and its subsidiaries file a consolidated federal income tax
return. Income taxes are allocated based on the contribution of income to
the consolidated income tax return. Separate state income tax returns are
filed.
The accrual basis of accounting is used for both financial and income tax
reporting. Provisions for income taxes reflected in the consolidated
financial statements differ from the amounts reflected in the income tax
returns due to temporary differences in the reporting of certain items for
financial reporting and tax reporting purposes and the recognition of net
operating loss carry forwards for financial reporting purposes. The income
tax provision shown in the consolidated financial statements relates to
items of income and expense in those statements irrespective of temporary
variances for income tax reporting purposes. The tax effect of these
temporary variances is accounted for as deferred income taxes applicable to
future years. A valuation allowance is provided for deferred tax assets
when it is more likely than not that a portion of the deferred tax assets
will not be realized.
Interest rate risk
The Savings Bank is principally engaged in the business of attracting
deposits from the general public and using these deposits, together with
borrowings and other funds, to purchase securities and to make loans
secured by real estate. The potential for interest-rate risk exists as a
result of the generally shorter duration of interest-sensitive liabilities
compared to the generally longer duration of interest-sensitive assets. In
a rising rate environment, liabilities will reprice faster than assets,
thereby reducing the market value of long-term assets and net interest
income. For this reason, management regularly monitors the maturity
structure of interest sensitive assets and liabilities in order to measure
its level of interest-rate risk and to plan for future volatility.
Excess of cost over assets acquired
The cost in excess of fair value of net assets (goodwill) is amortized to
expense over a period of fifteen years by use of the straight-line method.
The remaining unamortized balance amounted to $344,000 and $378,000 at
December 31, 1998 and 1997, respectively, and is included in other assets.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Net income per common share
Basic net income per common share is calculated by dividing net income by
the weighted average number of shares of common stock outstanding. Diluted
net income per share is calculated by adjusting the weighted average number
of shares of common stock outstanding to include the effect of convertible
preferred stock. See Note 16 for a reconciliation of such amounts.
Comprehensive income
Effective January 1, 1998, the Corporation and the Savings Bank adopted
Statement of Financial Accounting Standards ("Statement") No. 130,
"Reporting Comprehensive Income". Statement No. 130 requires the reporting
of comprehensive income in addition to net income from operations.
Comprehensive income is a more inclusive financial reporting methodology
that includes disclosure of certain financial information that historically
has not been recognized in the calculation of net income. As required, the
provisions of Statement No. 130 have been retroactively applied to
previously reported periods. The application of Statement No. 130 had no
material effect on consolidated financial condition or operations.
Reclassification
Certain amounts for the years ended December 31, 1997 and 1996 have been
reclassified to conform to current year's presentation.
2. MERGER
On September 4, 1998, the Corporation signed an Agreement and Plan of
Merger (the "Merger Agreement") whereby the Corporation would be acquired
by Greater Community Bancorp. Under the Merger Agreement (i) the Company
would merge with GCB Acquisition Corp. ("GCB"), a wholly-owned subsidiary
of greater Community Bancorp, with the Company surviving, and (ii) the
Savings Bank would merge with Great Falls Bank, with Great Falls Bank
surviving.
Upon consummation of the merger, each outstanding share of Company common
stock will be converted in the right, subject to adjustment, to receive a
cash payment of $52.26. The Merger Agreement was approved by the Company's
stockholders on December 29, 1998 and the merger was consummated on March
31, 1999. As of December 31, 1998, there were $282,000 of costs associated
with the merger that have been deferred and are included in "Other Assets".
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. STOCKHOLDERS' EQUITY
For the purpose of granting to eligible account holders a priority over
stockholders in the event of future liquidation, the Savings Bank, at the
time of its conversion to stock form, established a liquidation account in
an amount equal to its total net worth of $1,579,000 at March 31, 1992. In
the event of future liquidation of the converted Savings Bank (and only in
such event), an eligible account holder who continues to maintain his/her
deposit account shall be entitled to receive a distribution from the
liquidation account. The total amount of the liquidation account will be
decreased (but never increased) in an amount proportionately corresponding
to decreases in the deposit account balances of eligible account holders as
of each subsequent year end. No dividends may be paid to stockholders if
such dividends would reduce the net worth of the converted Savings Bank
below the amount required by the liquidation account. The balance of the
liquidation account at December 31, 1998 has not been determined.
The preferred stock issued in the conversion was non-cumulative. Each share
was permitted to be converted, at stockholder option, into ten shares of
common stock. Effective December 31, 1996, all 34,000 outstanding shares of
preferred stock were converted into 340,000 shares of common stock. The
holders of preferred stock received dividends at the annual rate of $5.00
per share. Holders of the non-cumulative preferred stock had no voting
rights and liquidation rights subordinate to those of holders of common
stock.
The ability of the Corporation to pay dividends to stockholders is
dependent upon its receiving dividends from the Savings Bank. The Savings
Bank may pay dividends and/or capital distributions, as defined by
regulations, during a calendar year up to one-hundred percent of its net
income to date during such year plus an amount which would reduce by fifty
percent its excess capital over its regulatory capital requirements at the
beginning of such year.
During the year ended December 31, 1997, the Corporation declared cash
dividends to common shareholders of $440,100, or $1.00 per share. The four
largest shareholders, whose combined holdings exceed 90% of the total
shares of common stock outstanding, waived $42,500 of such dividends due
them. As such, dividends actually paid during 1997 totalled $397,600.
4. SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
December 31, 1998
--------------------------------------------------------
Gross Unrealized
Amortized -------------------------- Carrying
Value Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Mortgage-backed securities:
Government National Mortgage Association $ 8,018,070 $ 20,661 $ 3,626 $ 8,035,105
Federal National Mortgage Association 1,864,522 2,373 4,676 1,862,219
Federal Home Loan Mortgage Corporation 581,222 9,467 -- 590,689
Federal National Mortgage Association REMIC 1,919,947 21,663 -- 1,941,610
----------- ----------- ----------- -----------
12,383,761 54,164 8,302 12,429,623
Small Business Administration 10,646,889 201,202 104 10,847,987
Common stock 25,000 5,000 -- 30,000
----------- ----------- ----------- -----------
$23,055,650 $ 260,366 $ 8,406 $23,307,610
=========== =========== =========== ===========
</TABLE>
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. SECURITIES AVAILABLE FOR SALE (Cont'd.)
<TABLE>
<CAPTION>
December 31, 1997
--------------------------------------------------------
Gross Unrealized
Amortized -------------------------- Carrying
Value Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Mortgage-backed securities:
Government National Mortgage Association $ 9,913,396 $ 151,585 $ -- $10,064,981
Federal National Mortgage Association 2,135,837 4,898 19,523 2,121,212
Federal Home Loan Mortgage Corporation 665,900 15,132 -- 681,032
Federal National Mortgage Association REMIC 1,920,246 -- 59 1,920,187
----------- ----------- ----------- -----------
14,635,379 171,615 19,582 14,787,412
Small Business Administration 16,111,311 297,717 -- 16,409,028
Common stock 25,000 5,000 -- 30,000
----------- ----------- ----------- -----------
$30,771,690 $ 474,332 $ 19,582 $31,226,440
=========== =========== =========== ===========
</TABLE>
The foregoing securities are not due at a single maturity date as they are
subject to periodic repayment. Accordingly, such securities will generally
repay at a more rapid rate than reflected in the following table of
securities by final maturity date.
<TABLE>
<CAPTION>
December 31, 1998
--------------------------------------------------------
Gross Unrealized
Amortized -------------------------- Carrying
Value Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Due after one year through five years $ 1,705,663 $ 28,178 $ -- $ 1,733,841
Due after five years through ten years 4,359,743 115,414 104 4,475,053
Due after ten years 16,965,244 111,774 8,302 17,068,716
Equity security 25,000 5,000 -- 30,000
----------- ----------- ----------- -----------
$23,055,650 $ 260,366 $ 8,406 $23,307,610
=========== =========== =========== ===========
<CAPTION>
December 31, 1997
--------------------------------------------------------
Gross Unrealized
Amortized -------------------------- Carrying
Value Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Due after one year through five years $ 2,184,043 $ 51,484 $ -- $ 2,235,527
Due after five years through ten years 7,123,438 174,670 -- 7,298,108
Due after ten years 21,439,209 243,178 19,582 21,662,805
Equity security 25,000 5,000 -- 30,000
----------- ----------- ----------- -----------
$30,771,690 $ 474,332 $ 19,582 $31,226,440
=========== =========== =========== ===========
</TABLE>
There were no sales of securities available for sale during the year ended
December 31, 1998. During the years ended December 31, 1997 and 1996,
proceeds from sales of securities available for sale totalled $3,340,764
and $3,924,166, respectively, and resulted in gross gains of $45,337 and
$4,548, respectively, and, during the year ended December 31, 1997, gross
losses of $37,501.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. SECURITIES AVAILABLE FOR SALE (Cont'd.)
At December 31, 1998 and 1997, securities available for sale with an
aggregate carrying value of $1,504,000 and $2,593,000, respectively, are
pledged to secure customer deposits.
5. INVESTMENT SECURITIES HELD TO MATURITY
<TABLE>
<CAPTION>
December 31, 1998
--------------------------------------------------------
Gross Unrealized
Carrying -------------------------- Estimated
Value Gains Losses Fair Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Government Agencies:
Due after one year through five years $ 7,999,689 $ 311 $ -- $ 8,000,000
Due after five years through ten years 4,000,000 3,448 -- 4,003,448
Due after ten years 10,394,025 11,565 -- 10,405,590
----------- ----------- ----------- -----------
22,393,714 15,324 -- 22,409,038
Municipal obligations due after ten years 1,752,745 19,065 2,744 1,769,066
----------- ----------- ----------- -----------
$24,146,459 $ 34,389 $ 2,744 $24,178,104
=========== =========== =========== ===========
<CAPTION>
December 31, 1997
--------------------------------------------------------
Gross Unrealized
Carrying -------------------------- Estimated
Value Gains Losses Fair Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Government Agencies:
Due after one year through five years $ 1,999,587 $ 3,485 $ -- $ 2,003,072
Due after five years through ten years 8,000,000 -- -- 8,000,000
Due after ten years 9,644,002 2,591 2,482 9,644,111
----------- ----------- ----------- -----------
$19,643,589 $ 6,076 $ 2,482 $19,647,183
=========== =========== =========== ===========
</TABLE>
There were no sales of investment securities held to maturity during the
years ended December 31, 1998, 1997 and 1996.
6. MORTGAGE-BACKED SECURITIES HELD TO MATURITY
<TABLE>
<CAPTION>
December 31, 1998
--------------------------------------------------------
Gross Unrealized
Carrying -------------------------- Estimated
Value Gains Losses Fair Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Government National Mortgage Association $ 22,867 $ 606 $ 125 $ 23,348
Federal National Mortgage Association 1,034,086 7,740 -- 1,041,826
Federal Home Loan Mortgage Corporation 5,955,691 26,081 223 5,981,549
Federal National Mortgage Association REMIC 1,000,000 32,500 -- 1,032,500
----------- ----------- ----------- -----------
$ 8,012,644 $ 66,927 $ 348 $ 8,079,223
=========== =========== =========== ===========
</TABLE>
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. MORTGAGE-BACKED SECURITIES HELD TO MATURITY (Cont'd.)
<TABLE>
<CAPTION>
December 31, 1997
--------------------------------------------------------
Gross Unrealized
Carrying -------------------------- Estimated
Value Gains Losses Fair Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Government National Mortgage Association $ 31,453 $ 630 $ -- $ 32,083
Federal National Mortgage Association 1,540,181 -- 167 1,540,014
Federal Home Loan Mortgage Corporation 7,843,045 25,541 2,864 7,865,722
Federal National Mortgage Association REMIC 1,000,000 -- -- 1,000,000
----------- ----------- ----------- -----------
$10,414,679 $ 26,171 $ 3,031 $10,437,819
=========== =========== =========== ===========
</TABLE>
There were no sales of mortgage-backed securities held to maturity during
the years ended December 31, 1998 and 1997.During the year ended December
31, 1996, proceeds from sales of mortgage-backed securities held to
maturity totalled $403,979 and resulted in gross losses of $973.
Mortgage-backed securities held to maturity with a carrying value of
$181,000 and $414,000 at December 31, 1998 and 1997, respectively, were
pledged to secure public finds on deposit.
7. LOANS RECEIVABLE
December 31,
-----------------------------
1998 1997
------------ ------------
Real estate mortgage:
One-to-four family $ 89,402,631 $ 83,317,259
Multi-family 4,270,234 5,020,506
Non-residential 5,987,588 6,182,670
Land -- 38,949
------------ ------------
99,660,453 94,559,384
------------ ------------
Commercial 4,443,739 4,655,264
------------ ------------
Consumer:
Equity 3,697,045 4,398,584
Home improvement and second mortgages 1,187,839 1,346,046
Passbook or certificate 506,543 629,681
Student education 9,313 90,750
Other loans 532,258 619,456
------------ ------------
5,932,998 7,084,517
------------ ------------
Total 110,037,190 106,299,165
------------ ------------
Less: Allowance for loan losses 634,047 596,230
Deferred loan fees and discounts 199,559 235,450
------------ ------------
833,606 831,680
------------ ------------
$109,203,584 $105,467,485
============ ============
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LOANS RECEIVABLE (Cont'd)
The Savings Bank has granted loans to its officers and directors and to
their associates. Related party loans are made on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with unrelated persons and do not involve
more than the normal risk of collectibility. The aggregate dollar amount of
these loans, exclusive of loans to any officer or director and their
affiliates which total less than $60,000, was $839,000 and $934,000 at
December 31, 1998 and 1997, respectively. Activity during the year ended
December 31, 1998 included new loans of $100,000 and repayments of
$195,000.
An analysis of the allowance for loan losses is as follows:
Year Ended December 31,
-------------------------------------
1998 1997 1996
--------- --------- ---------
Balance - beginning $ 596,230 $ 523,715 $ 388,633
Provision charged to operations 138,000 101,174 142,500
Loans charged off (103,427) (37,374) (7,418)
Recoveries 3,244 8,715 --
--------- --------- ---------
Balance - ending $ 634,047 $ 596,230 $ 523,715
========= ========= =========
Impaired loans and related amounts recorded in the allowance for loan
losses are summarized as follows: (in thousands):
December 31,
----------------
1998 1997
---- ----
Recorded investment in impaired loans:
With recorded allowance $328 $696
Without recorded allowances -- --
---- ----
Total impaired loans 328 696
Related allowance for loan losses 16 35
---- ----
Net impaired loans $312 $661
==== ====
For the years ended December 31, 1998, 1997 and 1996, the average recorded
investment in impaired loans totalled $538,000, $1,321,000 and $559,000,
respectively. Interest income recognized on such loans during the time each
was impaired totalled $13,000, $118,000 and $28,000, respectively, all of
which was recorded on the cash basis.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LOANS RECEIVABLE (Cont'd)
Nonaccrual loans totalled approximately $1,546,000, $2,601,000 and
$1,639,000 at December 31, 1998, 1997 and 1996, respectively. Renegotiated
loans for which interest has been reduced totalled approximately $396,000,
$406,000 and $1,313,000 at December 31, 1998, 1997 and 1996, respectively.
Interest income that would have been recorded under the original terms of
such loans and the interest income actually recognized are summarized
below:
Year Ended December 31,
------------------------
1998 1997 1996
---- ---- ----
(In Thousands)
Interest income that would have been recorded $159 $292 $303
Interest income recognized 27 161 230
---- ---- ----
Interest income foregone $132 $131 $ 73
==== ==== ====
8. REAL ESTATE OWNED
December 31,
-----------------------------
1998 1997
----------- -----------
Acquired in settlement of loans $ 1,520,350 $ 1,674,616
Allowance for losses (34,612) (34,612)
----------- -----------
$ 1,485,738 $ 1,640,004
=========== ===========
The following is an analysis of the allowance for losses:
Year Ended December 31,
--------------------------------------
1998 1997 1996
--------- --------- ---------
Balance - beginning $ 34,612 $ 537,602 $ 302,537
Provision charged to operations -- 37,337 256,500
Losses charged off -- (540,327) (21,435)
--------- --------- ---------
Balance - ending $ 34,612 $ 34,612 $ 537,602
========= ========= =========
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. REAL ESTATE OWNED (Cont'd.)
The following is an analysis of loss on foreclosed real estate:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Provision for losses $ -- $ 37,337 $ 256,500
Operating expenses, net of rental income 57,035 125,243 131,128
(Gain) loss on disposition (17,627) (981) 8,540
--------- --------- ---------
$ 39,408 $ 161,599 $ 396,168
========= ========= =========
</TABLE>
9. PREMISES AND EQUIPMENT
December 31,
--------------------------
1998 1997
---------- ----------
Land $ 547,867 $ 547,867
---------- ----------
Buildings and improvements 3,117,363 3,112,048
Less accumulated depreciation 1,282,391 1,173,521
---------- ----------
1,834,972 1,938,527
---------- ----------
Furniture, fixtures and equipment 1,693,534 1,677,207
Less accumulated depreciation 1,372,504 1,388,541
---------- ----------
321,030 288,666
---------- ----------
$2,703,869 $2,775,060
========== ==========
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. INTEREST RECEIVABLE
December 31,
----------------------------
1998 1997
---------- ----------
Loans $ 679,916 $ 652,651
Securities 677,771 707,313
Other interest-earning assets -- 19,664
---------- ----------
$1,357,687 $1,379,628
========== ==========
11. DEPOSITS
<TABLE>
<CAPTION>
December 31 ,
-------------------------------------------------------------------
1998 1997
----------------------------- ------------------------------
Weighted Weighted
Average Average
Rate Amount Rate Amount
-------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Non-interest-bearing demand 0.00% $ 3,861,898 0.00% $ 2,958,852
NOW and Super NOW 1.75% 5,547,802 2.04% 4,336,162
Money Market 2.55% 9,242,478 3.51% 8,107,509
Savings and Realty Trust 3.41% 26,967,581 3.39% 24,403,289
Certificates of deposit 5.51% 128,845,861 5.67% 126,953,045
------------ ------------
4.85% $174,465,620 5.04% $166,758,857
============ ============
</TABLE>
Interest expense on deposits is summarized as follows:
Year Ended Decmber 31,
--------------------------------
1998 1997 1996
------ ------ ------
(In Thousands)
Savings and Realty Trust $ 889 $ 796 $ 754
NOW and Money Market 366 365 364
Certificates of deposit 7,255 6,923 5,475
------ ------ ------
$8,510 $8,084 $6,593
====== ====== ======
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. DEPOSITS (Cont'd.)
A summary of certificates of deposit by time remaining until maturity follows:
December 31,
------------------------
1998 1997
-------- --------
(In Thousands)
Within one year $102,086 $ 97,555
After one year through two years 18,365 18,216
Thereafter 8,395 11,182
-------- --------
Total $128,846 $126,953
======== ========
A summary of certificates of deposit of $100,000 or more by time remaining
to maturity follows:
December 31,
----------------------
1998 1997
------- -------
(In Thousands)
Within three months $ 2,078 $ 1,984
After three through six months 2,578 2,402
After six through twelve months 5,542 4,534
After twelve months 1,912 2,236
------- -------
$12,110 $11,156
======= =======
12. BORROWED MONEY
Borrowed money at December 31, 1998 and 1997 consisted of a ten-year term
advance from the Federal Home Loan Bank of New York ("FHLB"), maturing June
18, 2007, carrying an interest rate of 6.70% and having a remaining balance
of $508,680 and $551,132, respectively. The advance is payable in monthly
principal and interest installments of $6,507 through maturity.
At December 31, 1998 and 1997, the Savings Bank had available to it
overnight lines of credit of $18,154,000 and $16,936,000, respectively,
granted by the FHLB. The unused amount of credit available to the Savings
Bank under these lines will continue until terminated by either the Savings
Bank or the FHLB. At December 31, 1998 and 1997, no amounts were
outstanding under this credit facility.
Collateral pledged to secure the foregoing credit facilities consists of
FHLB stock of $1,154,400 and $1,106,600 at December 31, 1998 and 1997,
respectively, and securities with an aggregate carrying value of
$12,009,000 and $16,504,000 at December 31, 1998 and 1997, respectively.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. REGULATORY CAPITAL
The Savings Bank is subject to capital requirements prescribed by the
Office of Thrift Supervision ("OTS") consisting of three separate
measurements of capital adequacy (the "Capital Rule"). The Capital Rule
requires each saving institution to maintain tangible capital equal to at
least 1.5% of its total tangible assets and core capital equal to at least
3.0% of its adjusted total assets. The Capital Rule further requires each
savings institution to maintain total capital equal to at least 8.0% of its
risk-weighted assets.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") imposes increased requirements on the operations of financial
institutions and mandated the development of regulations designed to
empower regulators to take prompt corrective action with respect to
institutions that fall below certain capital standards. FDICIA stipulates
that an institution with less than 4% core capital is deemed to be
undercapitalized. Quantitative measures established by FDICIA to ensure
capital adequacy require the Savings Bank to maintain minimum amounts and
ratios of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital to average assets
(as defined). Management believes, as of December 31, 1998, that the
Savings Bank meets all capital adequacy requirements to which it is
subject.
As of September 30, 1997, the most recent notification from the OTS, the
Savings Bank was categorized as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized, the Savings Bank must maintain minimum total, risk-based, and
Tier I leverage ratios of 10%, 6%, and 5%, respectively. There are no
conditions existing or events which have occurred since notification that
management believes have changed the institution's category.
14. INCOME TAXES
The Savings Bank qualifies as a Savings Institution under the provisions of
the Internal Revenue Code and was therefore permitted, prior to January 1,
1996, to deduct from taxable income an allowance for bad debts based on the
greater of: (1) actual loan losses (the "experience method"); or (2) eight
percent of taxable income before such bad debt deduction less certain
adjustments (the "percentage of taxable income method"). The percentage of
taxable income method was repealed effective January 1, 1996. For income
tax years ended December 31, 1996 and thereafter, the Saving Bank must use
either the experience method or the specific charge off method. Retained
earnings at December 31, 1998 includes approximately $3.5 million of such
bad debt allowance, for which income taxes have not been provided.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. INCOME TAXES (Cont'd.)
The components of income taxes (benefit) are summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Current $ 522,970 $ 288,880 $ 25,216
--------- --------- ---------
Deferred:
Temporary differences (36,286) 125,903 (105,845)
Net operating loss carryforward -- 21,590 21,590
--------- --------- ---------
(36,286) 147,493 (84,255)
--------- --------- ---------
$ 486,684 $ 436,373 $ (59,039)
========= ========= =========
</TABLE>
During the year ended December 31, 1998, an income tax benefit of $646,293
was recorded directly to paid-in capital. Such benefit was attributable to
shares of Corporation common stock awarded to a member of the Company's
majority ownership group by the other members thereof.
Deferred income taxes result from temporary differences in the recognition
of income and expense for tax and financial statement purposes. The sources
of these temporary differences and the tax effects are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Allowance for losses on
loans and real estate owned $ (13,867) $ 155,928 $(125,575)
Deferred loan fees 7,270 4,342 8,639
Nonaccrual interesst 13,781 (14,965) 25,477
Depreciation (30,156) (32,715) (6,400)
Net operating loss carryforward -- 21,590 21,590
Other (13,314) 13,313 (7,986)
--------- --------- ---------
$ (36,286) $ 147,493 $ (84,255)
========= ========= =========
</TABLE>
<PAGE>
FIRST SAVINGS BANCORP, OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. INCOME TAXES (Cont'd.)
The components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1997
-------- --------
<S> <C> <C>
Deferred tax assets:
Allowance for losses on
loans and real estate owned $239,801 $225,934
Net operating loss carryfoward 194,310 194,310
Nonaccrual interest 30,566 44,347
Deferred loan fees, net 27,966 35,236
Depreciation 7,102 --
Other 13,314 --
-------- --------
513,059 499,827
-------- --------
Deferred tax liabilities:
Depreciation -- 23,054
Unrealized gain on securities available for sale 88,186 159,672
-------- --------
88,186 182,726
-------- --------
Net deferred tax assets included in other assets $424,873 $317,101
======== ========
</TABLE>
For income tax reporting purposes, at December 31, 1998, the Corporation
has net operating loss carryforwards totalling approximately $571,500 that
will expire on December 31, 2006.
The following table presents a reconciliation between the reported income
tax expense (benefit) and the income tax expense (benefit) which would be
computed by applying the federal statutory rate of 34% to income before
income taxes:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Federal income taxes (benefit) $ 462,719 $ 418,365 $ (60,897)
Increase (reduction) of income taxes resulting from:
State income taxes,
net of federal income tax effect 28,182 25,670 (3,216)
Other (4,217) (7,662) 5,074
--------- --------- ---------
$ 486,684 $ 436,373 $ (59,039)
========= ========= =========
</TABLE>
<PAGE>
FIRST SAVINGS BANCORP, OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. RETIREMENT PLAN
The Savings Bank has a 401(k) plan covering all eligible employees. Under
this plan, participants may elect to contribute up to 15% of their
compensation, not to exceed applicable limits as per the Internal Revenue
Code. The Savings Bank has elected to match 50% of employees'
contributions, up to a maximum 6% of each respective employee's
compensation. The 401(k) plan expense was $24,000, $25,000 and $18,000 for
the years ended December 31, 1998, 1997 and 1996, respectively.
16. NET INCOME (LOSS) PER COMMON SHARE
<TABLE>
<CAPTION>
Year Ended December 31, 1998 Year Ended December 31, 1997
---------------------------------- ----------------------------------
Weighted Weighted
Average Average
Net Number Per Net Number Per
Income of Shares Share Income of Shares Share
--------- --------- ----- --------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Basic and diluted net income $ 874,255 440,100 $1.99 $ 794,112 440,100 $1.80
========= ======= ===== ========= ======= =====
<CAPTION>
Year Ended December 31,
----------------------------------
1996
----------------------------------
Weighted
Average
Net Number Per
(Loss) of Shares Share
--------- --------- -----
<S> <C> <C> <C>
Basic net (loss)
applicable to common shares $(290,071) 100,100 $(2.90)
======
Assumed conversion of
preferred stock to
common stock 170,000 340,000
--------- -------
Diluted net (loss) $(120,071) 440,100 $(0.27)
========= ======= ======
</TABLE>
17. COMMITMENTS AND CONTINGENCIES
The Savings Bank is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments primarily include commitments to
extend credit. These instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
consolidated statement of financial condition. The contract or notional
amounts of those instruments reflect the extent of involvement the Savings
Bank has in particular classes of financial instruments.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. COMMITMENTS AND CONTINGENCIES (Cont'd.)
The Savings Bank's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to extend
credit is represented by the contractual notional amount of those
instruments. The Savings Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
At December 31, 1998, the Bank had outstanding commitments to originate
loans totalling $3,506,000, consisting of $3,262,000 for fixed rate first
mortgage loans with rates ranging from 6.375% through 10.00% and $244,000
for adjustable rate first mortgage loans with initial rates ranging from
6.375% to 7.875%.
At December 31, 1997, the Bank had outstanding commitments to originate
loans totalling $975,000, consisting of $691,000 for fixed rate first
mortgage loans with rates ranging from 7.00% through 7.75%, $259,000 for
adjustable rate first mortgage loans with initial rates ranging from 6.875%
to 7.65% and $25,000 for an equity line of credit.
At December 31, 1998 and 1997, undisbursed funds from approved home equity
lines of credit amounted to approximately $2,641,000 and $2,686,000,
respectively. Unless they are specifically cancelled by notice from the
Savings Bank, these funds represent firm commitments available to the
respective borrowers on demand. The interest rate charged for any month on
funds disbursed is generally 1.00% to 2.00% above the prime rate. Certain
lines are subject to an introductory rate of 2% below the prime rate for
the first year. The Savings Bank also offers unsecured credit lines in
conjunction with a credit card program. At December 31, 1998 and 1997,
unused amounts under these lines of credit totalled $1,107,000 and
$137,000, respectively.
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 Savings Bank
evaluates each customer's creditworthiness on a case-by case basis. The
amount of collateral obtained if deemed necessary by the Savings Bank upon
extension of credit is based on management's credit evaluation of the
counterparty. Collateral held generally includes residential and commercial
real estate. Management does not anticipate losses on any of these
transactions.
At December 31, 1998, the Bank had an outstanding commitment to purchase a
$1,000,000 Federal Home Loan Mortgage Corporation bond carrying a 6.125%
interest rate and maturing on January 5, 2004.
In the conduct of their business, the Corporation, the Savings Bank and the
Savings Bank's subsidiaries are involved in normal litigation matters. In
the opinion of management, the ultimate disposition of such litigation
should not have a material adverse effect on the consolidated financial
position or operations of the Corporation.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. LEGISLATIVE MATTERS
On September 30, 1996, legislation was enacted which, among other things,
imposed a special one-time assessment on Savings Association Insurance Fund
("SAIF") member institutions, including the Savings Bank, to recapitalize
the SAIF and spread the obligation for payment of Financial Corporation
("FICO") bonds across all SAIF and Bank Insurance Fund ("BIF") members. The
special assessment levied amounted to 65.7 basis points on SAIF assessable
deposits held as of March 31, 1995. The special assessment was recognized
in the third quarter of 1996 and was tax deductible. The Savings Bank took
a charge of $845,000 as a result of the special assessment. This
legislation eliminates the substantial disparity between the amount that
BIF and SAIF members had been paying for deposit insurance premiums.
The FDIC has lowered SAIF assessments to a range comparable to that of BIF
members, although SAIF members must also make the FICO payments described
above. Management cannot predict the precise level of FDIC insurance
assessments on an ongoing basis.
On August 21, 1996, legislation was enacted to allow for the recapture of
post-1987 tax bad debt reserves ("excess reserves"). Prior to enactment
certain thrift institutions such as the Savings Bank were allowed
deductions for bad debts under methods more favorable than those granted to
other taxpayers. This legislation repealed the Code Section 593 reserve
method of accounting for bad debts by thrift institutions effective for
taxable years beginning after 1995. Thrift institutions that are treated as
small banks are allowed to utilize the experience method applicable to such
institutions, while thrift institutions that are treated as large banks are
required to use only the specific charge off method.
For small institutions such as the Savings Bank, the amount of the
institution's applicable excess reserves generally is the excess of (1) the
balances of its reserve for losses on qualifying real property loans and
its reserve for losses on nonqualifying loans as of the close of its last
taxable year beginning before January 1, 1996, over (ii) the greater of the
balance of (a) its pre-1988 tax reserves or (b) what the reserves would
have been at the close of its last year beginning before January 1, 1996,
had the Savings Bank always used the experience method. The Savings Bank
has excess reserves of approximately $2,000 remaining at December 31, 1998
which will be recaptured ratably during the next three years.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. PARENT CORPORATION FINANCIAL INFORMATION
The following condensed financial statements of the Corporation should be
read in conjunction with the Notes to Consolidated Financial Statements.
STATEMENTS OF FINANCIAL CONDITION
December 31,
----------------------------
1998 1997
----------- -----------
Assets
Cash and cash equivalents $ 18,380 $ 17,882
Investment in subsidiary 10,798,676 9,867,301
Organization costs 8,069 15,509
Other 22,980 --
----------- -----------
Total assets $10,848,105 $ 9,900,692
----------- -----------
Liabilities and stockholders' equity
Liabilities
Due to subsidiary $ 254,552 $ 36,233
----------- -----------
Total liabilities 254,552 36,233
----------- -----------
Stockholders' equity
Preferred stock -- --
Common stock 440,100 440,100
Paid-in-capital in excess of par value 4,316,670 3,670,377
Retained earnings - substantially restricted 5,836,783 5,753,982
----------- -----------
Total stockholders' equity 10,593,553 9,864,459
----------- -----------
Total liabilities and stockholders' equity $10,848,105 $ 9,900,692
=========== ===========
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. PARENT CORPORATION FINANCIAL INFORMATION (Cont'd)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Dividends from subsidiary $ 500,100 $ 440,100 $ 220,050
Interest income 498 486 474
--------- --------- ---------
Total inocme 500,598 440,586 220,524
Expenses 67,805 7,845 7,440
--------- --------- ---------
432,793 432,741 213,084
Equity in undistributed earnings (loss) of subsidiaries 416,386 359,479 (333,155)
--------- --------- ---------
Income (loss) before income taxes 849,179 792,220 (120,071)
Income tax (benefit) (25,076) (1,892) --
--------- --------- ---------
Net income (loss) $ 874,255 $ 794,112 $(120,071)
--------- --------- ---------
</TABLE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ 874,255 $ 794,112 $(120,071)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Equity in undistributed
(earnings) loss of subsidiary (416,386) (359,479) 333,155
Amortization of organization costs 7,440 7,440 7,440
(Increase) in other assets (22,980) -- --
Increase (decrease) in due to subsidiary 218,319 (1,488) --
--------- --------- ---------
Net cash provided by operating activities 660,648 440,585 220,524
--------- --------- ---------
Cash flows from financing activities:
Cash dividends paid (660,150) (440,100) (220,050)
--------- --------- ---------
Net cash (used in) financing activities (660,150) (440,100) (220,050)
--------- --------- ---------
Net increase in cash and cash equivalents 498 485 474
Cash and cash equivalents - beginning 17,882 17,397 16,923
--------- --------- ---------
Cash and cash equivalents - ending $ 18,380 $ 17,882 $ 17,397
========= ========= =========
</TABLE>
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------------------
March 31, June 30, September 30, December 31,
1998 1998 1998 1998
--------- -------- ------------- ------------
(in thousands, except for per share data)
<S> <C> <C> <C> <C>
Total interest income $3,279 $3,255 $3,272 $3,282
Total interest expense 2,103 2,150 2,157 2,136
------ ------ ------ ------
Net interest income 1,176 1,105 1,115 1,146
Provision for loan losses 25 25 25 63
Total non-interest income 43 37 43 40
Total non-interest expenses 803 879 761 763
Income taxes 164 85 137 101
------ ------ ------ ------
Net income $ 227 $ 153 $ 235 $ 259
====== ====== ====== ======
Basic and diluted net
income per common share $ 0.51 $ 0.35 $ 0.53 $ 0.60
====== ====== ====== ======
<CAPTION>
Quarter Ended
--------------------------------------------------------
March 31, June 30, September 30, December 31,
1997 1997 1997 1997
--------- -------- ------------- ------------
(in thousands, except for per share data)
<S> <C> <C> <C> <C>
Total interest income $2,981 $3,159 $3,271 $3,296
Total interest expense 1,957 2,007 2,062 2,078
------ ------ ------ ------
Net interest income 1,024 1,152 1,209 1,218
Provision for loan losses 25 25 25 26
Total non-interest income 31 52 41 43
Total non-interest expenses 794 854 850 941
Income taxes 87 114 135 100
------ ------ ------ ------
Net income $ 149 $ 211 $ 240 $ 194
====== ====== ====== ======
Basic and diluted net
income per common share $ 0.34 $ 0.48 $ 0.55 $ 0.43
====== ====== ====== ======
</TABLE>
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is defined as the amount at which
the instrument could be exchanged in a current transaction between willing
parties, other than a forced or liquidation sale. Significant estimations
were used for the purposes of this disclosure. Estimated fair values have
been determined using the best available data and estimation methodology
suitable for each category of financial instruments. For those loans and
deposits with floating interest rates, it is presumed that estimated fair
values generally approximate their recorded book balances. The estimation
methodologies used and the estimated fair values and carrying values of the
financial instruments are set forth below.
Cash and cash equivalents and interest receivable
The carrying amounts for cash and cash equivalents and interest receivable
approximate fair value as a result of their short-term nature.
Securities
The fair values for securities, both available for sale and held to
maturity, are based on quoted market prices or dealer prices, if available.
If quoted market prices or dealer prices are not available, fair value is
estimated using quoted market prices or dealer prices for similar
securities.
Loans
The fair value of loans is estimated by discounting future cash flows,
using the current rates at which similar loans with similar remaining
maturities would be made to borrowers with similar credit ratings.
Deposits
For demand, savings and club accounts, fair value is the carrying amount
reported in the consolidated financial statements. For fixed-maturity
certificates of deposit, fair value is estimated using the rates currently
offered for deposits of similar remaining maturities.
Borrowed money
The fair value of borrowed money is estimated by discounting future cash
flows, using the current rates available for borrowings of similar
remaining maturities.
Commitments
The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. For fixed-rate loan commitments, fair value also considers
the difference between the current levels of interest rates and the
committed rates.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (Cont'd)
The carrying values and estimated fair values of financial instruments are
as follows.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------
1998 1997
-------------------------- --------------------------
Carrying Estimates Carrying Estimated
Value Fair Value Value Fair Value
-------- ---------- -------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Financial assets
Cash and cash equivalents $ 13,616 $ 13,616 $ 3,683 $ 3,683
Securities available for sale 23,308 23,308 31,226 31,226
Investment securities held to maturity 24,146 24,178 19,644 19,647
Mortgage-backed securities held to maturity 8,013 8,079 10,415 10,438
Loans receivable 109,204 112,012 105,467 108,497
Interest receivable 1,358 1,358 1,380 1,380
Financial liabilities
Deposits 174,466 175,390 166,759 167,415
Borrowed money 509 524 551 557
Commitments
To purchase securities 1,000 1,000 -- --
To originate and fund loans 7,254 7,254 3,798 3,798
</TABLE>
Fair value estimates are made at a specific point in time based on relevant
market information and information about the financial instruments. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the entire holdings of a particular financial
instrument. Because no market value exists for a significant portion of the
financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions,
risk characteristics of various financial instruments, and other factors.
These estimates are subjective in nature, involve uncertainties and matters
of judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates. In addition, fair
value estimates are based on existing on-and-off balance sheet financial
instruments without attempting to estimate the value of anticipated future
business, and exclude the value of assets and liabilities that are not
considered financial instruments. Other significant assets and liabilities
that are not considered financial assets and liabilities include premises
and equipment, other real estate owned and advance payments by borrowers
for taxes and insurance. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant
effect on fair value estimates and have not been considered in any of these
estimates.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (Cont'd)
Finally, reasonable comparability between financial institutions may not be
likely due to the wide range of permitted valuation techniques and numerous
estimates which must be made given the absence of active secondary markets
for many of the financial instruments. This lack of uniform valuation
methodologies introduces a greater degree of subjectivity to those
estimated fair values.
22. IMPACT OF RECENT ACOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities".
Statement No. 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded
in other contracts (collectively referred to as derivatives), and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statements of financial position and
measure those instruments at fair value. If certain conditions are met, a
derivative may be specifically designated as (a) a hedge of the exposure to
changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash
flows of a forecasted transaction, or (c) a hedge of the foreign currency
exposure of a net investment in a foreign operation, an unrecognized firm
commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. The accounting for
changes in the fair value of a derivative (that is, gains and losses)
depends on the intended use of the derivative and the resulting
designation.
At the date of initial application of Statement No. 133, an entity may
transfer any held-to-maturity security into the available-for-sale category
or the trading category. An entity will then be able in the future to
designate a security transferred into the available-for-sale category as
the hedged item, or its variable interest payments as the cash flow hedged
transactions, in a hedge of the exposure to changes in market interest
rates, changes in foreign currency exchange rates, or changes in the
overall fair value. (Statement No. 133 precludes a held-to-maturity
security from being designated as the hedged item in a fair value hedge of
market interest rate risk or the risk of changes in its overall fair value
and precludes the variable cash flows of a held-to-maturity security from
being designated as the hedged transaction in a cash flow hedge of market
interest rate risk). Statement No. 133 provides that such transfers from
the held-to-maturity category at the date of initial adoption shall not
call into question an entity's intent to hold other debt securities to
maturity in the future.
Statement No. 133 is effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999, the quarter ended March 31, 2000 for the
Corporation and Savings Bank. Initial application shall be as of the
beginning of an entity's fiscal quarter. Earlier application of all of the
provisions of Statement No. 133 is permitted only as of the beginning of a
fiscal quarter. Earlier application of selected provisions or retroactive
application of provisions of Statement No. 133 are not permitted.
<PAGE>
Management has not yet determined when Statement No. 133 will be
implemented, but does not believe the ultimate implementation of Statement
No. 133 will have a material impact on their consolidated financial
position or results of operations.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1999 1998
------------ ------------
<S> <C> <C>
Cash and amounts due from depository institutions $1,217,350 $2,030,360
Interest bearing demand deposits in other banks 9,033,390 11,585,467
------------ ------------
Total cash and cash equivalents 10,250,740 13,615,827
Securities available for sale 29,237,599 23,307,610
Investment securities held to maturity 26,778,502 32,159,103
Loans receivable, (net allowance for loan loss 108,702,368 109,203,584
of $623,649 and $ 578,205 respectively)
Real estate owned 1,991,655 1,485,738
Premises and equipment 2,655,230 2,703,869
Federal Home Loan Bank of NY stock (at cost) 1,259,400 1,154,400
Interest and dividends receivable 1,337,695 1,357,687
Other assets 2,370,554 1,551,834
------------ ------------
TOTAL ASSETS $184,583,743 $186,539,652
============ ============
LIABILITIES
Deposits $172,464,776 $174,465,620
Borrowed money 497,617 508,680
Advance payments by borrowers for taxes and insurance 836,973 795,293
Other Liabilities 109,313 176,506
------------ ------------
TOTAL LIABILITIES $173,908,679 $175,946,099
------------ ------------
STOCKHOLDERS EQUITY
Common Stock (par value $1.00 per share; authorized
(500,000 shares; outstanding 440,100 shares) 440,100 440,100
Additional paid-in-capital 4,316,670 4,316,670
Retained earnings substantially restricted 5,751,958 5,673,009
Accumulated other comprehensive income 166,336 163,774
------------ ------------
TOTAL STOCKHOLDERS EQUITY $10,675,064 $10,593,553
------------ ------------
</TABLE>
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
Three Months Ended
March 31,
--------------------------
1999 1998
Interest Income
<S> <C> <C>
Loans $2,175,536 $2,217,253
Mortgage-backed securities 296,605 407,536
Investments 529,970 549,092
Other Interest earning assets 151,634 104,937
---------- ----------
Total Interest Income 3,153,745 3,278,818
Interest Expense
Deposits 2,069,525 2,093,391
Borrowed Money 8,397 9,116
---------- ----------
Total Interest expense 2,077,922 2,102,507
---------- ----------
Net Interest Income 1,075,823 1,176,311
Provision for loan loss -- 25,000
---------- ----------
Net interest income after provision for loan loss 1,075,823 1,151,311
Non-interest income
Service charges 23,727 27,784
Miscellaneous 17,540 15,151
---------- ----------
Total non interest income 41,267 42,935
---------- ----------
Non-interest expense
Salaries and employee benefits 357,671 364,918
Net occupancy expense 72,031 61,098
Equipment 105,919 89,781
Loss on foreclosed real estates 60,097 31,218
Federal insurance premium 26,062 25,802
Advertising and promotion 14,039 11,588
Legal fees 31,550 53,421
Miscellaneous 236,217 165,308
---------- ----------
Total non-interest expense 903,586 803,134
---------- ----------
Income before income taxes 213,504 391,112
Income taxes 85365 164,523
---------- ----------
Net Income $128,139 $226,589
---------- ----------
</TABLE>
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 1998
-------- --------
<S> <C> <C>
Net income $128,139 $226,589
Other comprehensive income, net of income taxes:
Unrealized gains on securities available for sale,
net of income taxes of $1,320 and $630,
respectively 2,562 2,626
-------- --------
Comprehensive income $130,701 $229,215
======== ========
</TABLE>
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 128,139 $ 226,589
Adjustments to reconcile net income to
net cash (used in) provided by operating activities:
Depreciation and amortization 48,640 65,298
Accretion of discount on securities, net -- 93,526
Provision for possible loan losses -- 63,000
Gain on sale of other real estate owned -- (37,814)
Decrease (increase) in accrued interest receivable 19,992 (22,805)
Increase (decrease) in accrued expenses and other liabilities (67,193) 246,732
Decrease (increase) in other assets (818,720) (116,406)
Amortization of branch premium -- 8,334
------------ ------------
Net cash (used in) provided by operating activities (689,142) 526,454
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Available-for-sale securities
Purchases (6,032,426) (2,167,803)
Maturities and princial paydowns -- 2,213,023
Held-to-maturity securities
Purchases -- (1,203,806)
Maturities 5,380,601 4,492,184
Net decrease in loans 501,216 1,673,908
Capital expenditures -- (153,968)
Decrease (increase) in other real estate (505,400) 192,081
------------ ------------
Net cash (used in) provided by investing activities (656,009) 5,045,619
------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposit accounts (2,000,844) 3,278,344
Increase in federal funds purchased (11,063) (10,349)
Increase in advance payments by borrowers for taxes 41,680 5,333
Dividends paid (49,709) --
------------ ------------
Net cash (used in) provided by financing activities (2,019,936) 3,273,328
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,365,087) 8,845,401
============ ============
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 13,615,827 3,683,223
============ ============
CASH AND CASH EQUIVALENTS, END OF PERIOD $10,250,740 $12,528,624
============ ============
</TABLE>
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
Notes to Consolidated Financial Statements
The consolidated financial statements include the accounts of First Savings
Bancorp of Little Falls, Inc., (the "Company") and its wholly owned subsidiary,
First Savings Bank of Little Falls, FSB (the "Savings Bank") and the Savings
Bank's wholly owned subsidiaries, The First Service Corporation of Little Falls
and Redeem, Inc. All significant intercompany balances and transactions have
been eliminated in consolidation.
These consolidated financial statements were prepared in accordance with
instructions for Form-10QSB and therefore, do not include all disclosures
necessary for a complete presentation of the statements of financial condition,
statements of income, and statements of cash flows in conformity with generally
accepted accounting principles. However, all adjustments which are, in the
opinion of the management, necessary for the fair presentation of the interim
financial statements have been included and all such adjustments are of a normal
recurring nature. The results of operations for the three months ended March 31,
1999 are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1999 or any other interim period.
These statements should be read in conjunction with consolidated statements and
related notes which are incorporated by reference in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1998.
Item 7(b) - Pro forma Financial Statements
PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL INFORMATION
(unaudited)
The following statements set forth certain selected financial information for
Greater Community Bancorp (GCB) and the First Savings Bancorp of Little Falls,
Inc., (First Savings) on an unaudited pro forma combined basis giving effect to
the acquisition as if the acquisition had become effective on March 31, 1999, in
the case of balance sheet information presented, and as if the acquisition had
become effective at the beginning of the periods indicated, in the case of
operations information presented.
The unaudited pro forma condensed combined financial information set forth in
the following tables is presented for information purposes only and is not
necessarily indicative of the combined financial position or results of
operations that would have occurred had the acquisition been consummated on
March 31, 1999 or at the beginning of the periods indicated or which may occur
in the future.
<PAGE>
Proforma Combined Condensed Balance Sheet
March 31, 1999 (unaudited)
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Greater First Savings
Community Bancorp of Little
ASSETS Bancorp Falls, Inc. Adjustments Pro forma
--------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
Cash and due from banks $13,306 $1,217 $14,523
Federal funds sold 4,850 4,850
Due from banks - interest bearing 37,237 9,033 (23,000)(1) 23,270
Securities available for sale 85,782 29,238 115,020
Securities held to maturity 14,258 26,779 41,037
Loans 202,641 108,702 311,343
Premises and equipment 5,396 2,655 8,051
Accrued interest receivable 2,385 1,338 3,723
Other real estate owned 471 1,992 2,463
Other assets 15,664 3,630 19,294
Goodwill 0 0 12,325 12,325
-------- -------- -------- --------
Total assets $381,990 $184,584 ($10,675) $555,899
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits $277,440 $172,465 $449,905
FHLB Advances 10,000 498 10,498
Advance payments by borrowers for taxes and insurance 0 837 837
Securities sold under agreements to repurchase 32,356 0 32,356
Other liabilities 6,602 109 6,711
Guaranteed Preferred Beneficial Interest in the Company's 0
subordinated debt 23,000 0 23,000
-------- -------- -------- --------
Total liabilities 349,398 173,909 523,307
-------- -------- -------- --------
Shareholders' Equity
Common stock 2,670 440 (440)(1) 2,670
Additional Paid in Capital 25,491 4,317 (4,317)(1) 25,491
Retained earnings 2,483 5,752 (5,752)(1) 2,483
Accumulated other comprehensive income 1,948 166 (166)(1) 1,948
-------- -------- -------- --------
Total shareholders' equity 32,592 10,675 (10,675) 32,592
-------- -------- -------- --------
Total liabilities and shareholders' equity $381,990 $184,584 ($10,675) $555,899
======== ======== ======== ========
</TABLE>
(1) The pro forma condensed combined consolidated balance sheet reflects the
$23.0 million of cash used to purchase 410,100 shares of the outstanding common
stock of the Bank and $12.3 million of goodwill which is being amortized over a
20 year period. Professional fees and transaction costs, approximately $507,000,
have been capitalized to goodwill. No other purchase accounitng adjustments were
made to the assets and liabilities of the Bank as of the acquisition date since
there was no material differences between the fair values and carryinh values on
that date.
<PAGE>
Proforma Combined Condensed Statements of Income
Three months ended March 31, 1999 (unaudited)
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Greater First Savings
Community Bancorp of Little Pro forma
Bancorp Falls, Inc. Adjustments Pro forma
--------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans and fees $ 4,306 $ 2,176 $ -- $ 6,482
Federal funds sold and deposits with other banks 308 151 (176)(1) 283
Investment securities 1,458 827 0 2,285
------- ------- ------- -------
Total interest income 6,072 3,154 (176) 9,050
------- ------- ------- -------
INTEREST EXPENSE:
Deposits 1,879 2,070 0 3,949
Short term borrowings 246 8 151(1) 405
Long term borrowings 575 0 575
------- ------- ------- -------
Total interest expense 2,700 2,078 151 4,929
------- ------- ------- -------
Net interest income 3,372 1,076 (327) 4,121
PROVISION FOR POSSIBLE LOAN LOSSES 111 -- 0 111
Net interest income after provision
------- ------- ------- -------
for possible loan losses 3,261 1,076 (327) 4,010
------- ------- ------- -------
OTHER INCOME: 1,383 41 0 1,424
OTHER EXPENSES: 3,242 904 154(2) 4,300
INCOME BEFORE INCOME TAXES 1,402 213 (481) 1,134
INCOME TAXES 515 85 (118)(1) 482
------- ------- ------- -------
NET INCOME $ 887 $ 128 ($ 363) $ 652
======= ======= ======= =======
Per share data:
Net income per common share - basic $ 0.17 $ 0.29 $ 0.12
Average number of common shares basic 5,340 440 5,340
Net Icome per common share - diluted $ 0.16 $ 0.29 $ 0.12
Average number of commons shares
and equivalents diluted 5,531 440 5,531
</TABLE>
(1) Interest income, net was reduced by $ 327,000 (or 5.69% of $23.0 million)
reflecting the decrease in available cash to earn interest income or
interest expense on pro forma borrowings.
(2) Amortization of goodwill over a twenty year period.
<PAGE>
Proforma Combined Condensed Statements of Income
Three months ended March 31, 1998 (unaudited)
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Greater First Savings
Community Bancorp of Little
Bancorp Falls, Inc. Adjustments Pro forma
--------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans and fees $3,788 $2,217 $0 $6,005
Federal funds sold and deposits with other banks 136 105 (176)(1) 65
Investment securities 1,967 957 0 2,924
------ ------ ----- ------
Total interest income 5,891 3,279 (176) 8,994
------ ------ ----- ------
INTEREST EXPENSE:
Deposits 2,156 2,093 0 4,249
Short term borrowings 66 9 151(1) 226
Long term debt 593 0 0 593
------ ------ ----- ------
Total interest expense 2,815 2,102 151 5,068
------ ------ ----- ------
Net interest income 3,076 1,177 (327) 3,926
PROVISION FOR POSSIBLE LOAN LOSSES 120 25 0 145
------ ------ ----- ------
Net interest income after provision
for possible loan losses 2,956 1,152 (327) 3,781
------ ------ ----- ------
OTHER INCOME: 918 43 0 961
OTHER EXPENSES: 2,690 803 154(2) 3,647
INCOME BEFORE INCOME TAXES 1,184 392 (481) 1,095
INCOME TAXES 413 165 (118)(1) 460
------ ------ ----- ------
NET INCOME $ 771 227 ($ 363) $ 635
====== ====== ===== ======
Per share data:
Net income per common share - basic $0.15 $0.52 $0.12
Average number of common shares basic 5,287 440 5,287
Net income per common share - diluted $0.14 $0.52 $0.11
Average number of commons shares
and equivalents diluted 5,663 440 5,663
</TABLE>
(1) Interest income, net was reduced by $327,000 (or 5.91% of $11.9 million of
interest bearing deposits and 5% of $12.1 million of borrowings) reflecting the
decrease in available cash to earn interest income and the increase in interest
expense on pro forma borrowings.
(2) Amortization of goodwill over a twenty year period.
<PAGE>
Proforma Combined Condensed Statements of Income
Year ended December 31, 1998
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Greater First Savings
Community Bancorp of Little Pro forma
Bancorp Falls, Inc. Adjustments Pro forma
--------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans and fees $16,335 $8,921 $ 0 $25,256
Federal funds sold and deposits with other banks 1,183 517 (703)(1) 997
Investment securities 7,348 3,650 0 10,998
------- ------- ------- -------
Total interest income 24,866 13,088 (703) 37,251
------- ------- ------- -------
INTEREST EXPENSE:
Deposits 9,019 8,510 0 17,529
Short term borrowings 633 36 605(1) 1,274
Long term borrowings 2,357 0 2,357
------- ------- ------- -------
Total interest expense 12,009 8,546 605 21,160
------- ------- ------- -------
Net interest income 12,857 4,542 (1,308) 16,091
PROVISION FOR POSSIBLE LOAN LOSSES 520 138 0 658
------- ------- ------- -------
Net interest income after provision
for possible loan losses 12,337 4,404 (1,308) 15,433
------- ------- ------- -------
OTHER INCOME: 4,656 163 0 4,819
OTHER EXPENSES: 11,450 3,206 616(2) 15,272
INCOME BEFORE INCOME TAXES 5,543 1,361 (1,924) 4,980
INCOME TAXES 2,000 487 (470)(1) 2,017
------- ------- ------- -------
NET INCOME $3,543 874 (1,454) $2,963
======= ======= ======= =======
Per share data:
Net income per common share - basic $0.67 $1.99 $0.55
Average number of common shares basic 5,297 440 5,340
Net Icome per common share - diluted $0.65 $1.99 $0.54
Average number of commons shares
and equivalents diluted 5,487 440 5,531
</TABLE>
(1) Interest income, net was reduced by $ 1.3 million (or 5.91% of $11.9
million of interest bearing deposits and 5% of $12,1 million of borrowings)
reflecting the decrease in available cash to earn interest income or
interest expense on proforma borrowings.
(2) Amortization of goodwill over a twenty year period.
<PAGE>
Item 7(c) - Exhibits
The following exhibit is being filed with this Report and is attached hereto:
99.1 Certificate of Merger filed with the New Jersey Secretary of State on
March 31, 1999 relating to the merger of GCB Acquisition Corp.
(acquired corporation) with and into First Savings Bancorp of Little
Falls, Inc. (surviving corporation), which thereby became a
wholly-owned subsidiary of the Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GREATER COMMUNITY BANCORP
-------------------------------
(Registrant)
June 14, 1999 /s/ Naqi A. Naqvi
Date -------------------------- -------------------------------
(Signature)
NAQI A. NAQVI
Treasurer & C.F.O.
EXHIBIT 99.1
CERTIFICATE OF MERGER OF GCB ACQUISITION CORP. WITH AND
INTO FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
TO: SECRETARY OF STATE
STATE OF NEW JERSEY
Pursuant to the provisions of Section 14A:10-4.1 of the New Jersey Business
Corporation Act, N.J.S.A. 14A:1-1 et seq., the undersigned corporations hereby
certify as follows:
1. The names of the merging corporations are GCB ACQUISITION CORP. and
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC. The merging corporations are
business corporations of the State of New Jersey.
2. FIRST SAVINGS BANCORP OF LITTLE FALLS, INC. is the surviving corporation
of the merger and the name of the surviving corporation following the merger is
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
3. Attached hereto and made a part hereof is a copy of the Plan of Merger
for the merger of GCB ACQUISITION CORP. and FIRST SAVINGS BANCORP OF LITTLE
FALLS, INC. as approved by the directors and the shareholders entitled to vote
of each of said merging corporations.
4. The Plan of Merger was approved by the sole shareholder of GCB
ACQUISITION CORP. on September 4, 1998.
5. The Plan of Merger was approved by the shareholders of FIRST SAVINGS
BANCORP OF LITTLE FALLS, INC. on January 19, 1999.
6. With respect to each corporation, the number of shares entitled to vote
on the plan of merger and the number of shares voted for and against the plan,
respectively, are as follows:
Number of Shares
Entitled Voted Voted
Name of Corporation to Vote For Against
GCB ACQUISITION CORP.
(Merging Corporation) 1,000 1,000 -0-
FIRST SAVINGS BANCORP OF
LITTLE FALLS, INC.
(Surviving Corporation) 440,100 430,675 -0-
7. The Registered Agent of FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
immediately prior to the effective date of the merger is Haralambos S.
Kostakopoulos and its Registered Office in New Jersey at which such Agent may be
found is 7 Center Avenue, Little Falls, NJ 07424. The Registered Agent of FIRST
SAVINGS BANCORP OF LITTLE FALLS, INC. immediately following the merger will be
NAQI A. NAQVI and its Registered Office will be 55 UNION BOULEVARD, TOTOWA, NJ
07512.
5
8. Pursuant to N.J.S.A. 14A:10-4.1(2), the merger provided for herein shall
<PAGE>
become effective at the later of (a) the date of filing of this Certificate of
Merger with the Secretary of State of New Jersey or (b) 12:01 a.m. on April 1,
1999.
IN WITNESS WHEREOF, the corporations have executed this Certificate of
Merger on March 31, 1999.
GCB ACQUISITION CORP.
(Merging Corporation)
By: /s/ George E. Irwin
George E. Irwin, President
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
(Surviving Corporation)
By: /s/ Haralambos S. Kostakopoulos
Haralambos S. Kostakopoulos, President
<PAGE>
PLAN OF MERGER OF GCB ACQUISITION CORP. AND
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
1. This Plan of Merger is to be approved and implemented pursuant to and in
accordance with the Business Corporation Act of the State of New Jersey, Title
14A of the New Jersey Statutes (the "Act"), Chapter 10, N.J.S.A. 14A:10-1 et
seq., and that certain agreement entitled "Agreement and Plan of Merger" dated
September 4, 1998, by and among GREATER COMMUNITY BANCORP, GCB ACQUISITION CORP.
and FIRST SAVINGS BANCORP OF LITTLE FALLS, INC. (the "Merger Agreement").
2. The names of the corporations proposing to merge are GCB ACQUISITION
CORP. and FIRST SAVINGS BANCORP OF LITTLE FALLS, INC. Both of such corporations
are business corporations organized and existing under the Act.
3. GCB ACQUISITION CORP. shall be merged with and into FIRST SAVINGS
BANCORP OF LITTLE FALLS, INC., which shall be the surviving corporation upon the
effective date of the merger and which shall continue to exist as the surviving
corporation under its present name pursuant to the provisions of the Act. FIRST
SAVINGS BANCORP OF LITTLE FALLS, INC. is hereinafter sometimes referred to as
the "Surviving Corporation." The separate corporate existence of GCB ACQUISITION
CORP. shall cease upon the effective date of the merger in accordance with the
provisions of the Act. GCB ACQUISITION CORP. is hereinafter sometimes referred
to as the "Acquired Corporation."
4. The Certificate of Incorporation of FIRST SAVINGS BANCORP OF LITTLE
FALLS, INC. upon the effective date of the merger shall be the Certificate of
Incorporation of the Surviving Corporation and said Certificate of Incorporation
shall continue in full force and effect until amended in the manner prescribed
by the provisions of the Act.
5. The Bylaws of GCB ACQUISITION CORP. upon the effective date of the
merger shall be the Bylaws of the Surviving Corporation and said Bylaws shall
continue in full force and effect until changed, altered or amended in the
manner prescribed by such Bylaws and the provisions of the Act.
6. Upon the effective date of the merger, GEORGE E. IRWIN shall take office
as the Surviving Corporation's sole director, and shall hold his directorship
until the election and qualification of his successor(s) or until his tenure is
otherwise terminated in accordance with the Surviving Corporation's Bylaws.
7. Until the election and qualification of their respective successors, the
officers of GCB ACQUISITION CORP. on the effective date of the merger will take
office as the officers of the Surviving Corporation. As soon as is practicable
following the effective date of the merger, the Surviving Corporation's
<PAGE>
Plan of Merger Page 2
director shall meet or otherwise take proper corporate action to consider the
election of additional or different officers of the Surviving Corporation, the
change of authorized signers on its bank accounts, and other matters affected by
the merger.
8. Each share of Common Stock of FIRST SAVINGS BANCORP OF LITTLE FALLS,
INC. issued and outstanding immediately prior to the effective date of the
merger shall be converted into a right to receive $52.26, subject to adjustment
as provided in Section 1.5 of the Merger Agreement and further subject to the
provisions of Section 1.6 thereof; provided that the total conversion amount
shall not exceed $23,000,000.
9. Each share of Common Stock of GCB ACQUISITION CORP. issued and
outstanding immediately prior to the effective date of the merger shall remain
outstanding immediately after the merger as an identical share of Common Stock
of the Surviving Corporation.
10. The proper officers of the Acquired Corporation and the Surviving
Corporation, respectively, shall execute and file a Certificate of Merger as
prescribed by the Act and shall do any and all other acts and things, and shall
make, execute, deliver, file, and/or record any and all other instruments,
papers, and documents which shall be or become necessary, proper, or convenient
to carry out or put into effect the merger provided for herein and in the Merger
Agreement.
11. The effective date of the merger herein provided for shall be the date
of filing of a Certificate of Merger with the Secretary of State of the State of
New Jersey in accordance with the Act or such later date as may be specified in
such Certificate of Merger.
