U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14294
Greater Community Bancorp
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2545165
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
55 Union Boulevard, Totowa, New Jersey 07512 (Address of
principal executive offices) (Zip code)
(973) 942-1111
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
Indicate the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: Common stock $0.50 par
value - 5,739,151 shares at July 26, 1999.
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets at
June 30, 1999 (Unaudited) and December 31, 1998.................... 3
Consolidated Statements of Income (Unaudited)
Three and six months ended
June 30, 1999 and 1998 ..........................................4
Consolidated Statements of Changes in Shareholders'
Equity and Comprehensive Income (Unaudited)
Three and Six Months ended June 30, 1999 and 1998................5
Consolidated Statements of Cash Flows (Unaudited)
Six months ended June 30, 1999 and 1998.......... ...............6
Notes to Consolidated Financial Statements (Unaudited)..............7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................9
Item 3 - Quantitative and Qualitative Changes Regarding Market Risk. . ...17
PART II - OTHER INFORMATION
Items 1 through 6........................................................18
Signatures..................................................................20
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1- Financial Statements
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, December 31,
1999 1998
ASSETS (Unaudited)
CASH AND DUE FROM BANKS-Non-interest-bearing $ 18,479 $ 17,790
FEDERAL FUNDS SOLD 3,650 5,850
Total cash and cash equivalents 22,129 23,640
DUE FROM BANKS - Interest-bearing 11,320 15,544
SECURITIES:
Available-for-sale, at fair value 134,553 93,797
Held-to-maturity, at amortized cost
(Fair value $11,654 and $17,554) 12,057 17,804
146,610 111,601
LOANS 324,815 206,120
Less - Allowance for possible loan losses 4,615 3,525
Unearned income 1,253 830
Net loans 318,947 201,765
PREMISES AND EQUIPMENT, net 8,172 5,251
OTHER REAL ESTATE OWNED 2,288 495
ACCRUED INTEREST RECEIVABLE 3,777 2,293
INTANGIBLE ASSETS 13,476 347
OTHER ASSETS 16,026 11,464
Total assets $542,745 $372,400
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Non-interest-bearing $ 91,373 $ 76,346
Interest-bearing 71,447 64,987
Savings 61,273 32,883
Time 225,828 119,179
Total deposits 449,921 293,395
FHLB ADVANCES 10,498 10,000
REPURCHASE AGREEMENTS 9,208 7,103
FEDERAL FUNDS PURCHASED 8,400 -
ACCRUED INTEREST PAYABLE 2,105 2,589
OTHER LIABILITIES 3,972 4,004
GUARANTEED PREFERRED BENEFICIAL INTEREST
IN THE COMPANY?S SUBORDINATED DEBT 23,000 23,000
Total Liabilities 507,104 340,091
SHAREHOLDERS' EQUITY
Common Stock, par value $0.50 per share:
20,000,000 shares authorized, 5,739,151
and 5,329,566 shares outstanding 2,870 2,665
Additional paid-in capital 29,121 25,460
Retained earnings 3,098 1,932
Accumulated other comprehensive income 552 2,252
Total shareholders' equity 35,641 32,309
Total liabilities and shareholders' equity $542,745 $ 372,400
(See notes to Consolidated Financial Statements)
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
<S> <C> <C> <C> <C>
1999 1998 1999 1998
INTEREST INCOME
Loans, including fees $6,746 $3,948 $11,053 $ 7,736
Securities 2,169 1,912 3,627 3,879
Federal Funds sold and deposits with banks 272 285 579 421
Total interest income 9,187 6,145 15,259 12,036
INTEREST EXPENSE
Deposits 3,738 2,359 5,617 4,515
Short-term borrowings 371 120 617 186
Long-term borrowings 575 597 1,150 1,190
Total interest expense 4,684 3,076 7,384 5,891
NET INTEREST INCOME 4,503 3,069 7,875 6,145
PROVISION FOR POSSIBLE LOAN LOSSES 448 108 559 228
Net interest income after
provision for possible loan losses 4,055 2,961 7,316 5,917
OTHER INCOME
Gain on sale of securities 1,793 207 1,993 361
All other income 1,253 904 2,436 1,668
3,046 1,111 4,429 2,029
OTHER EXPENSES
Salaries and employee benefits 2,904 1,410 4,466 2,749
Occupancy and equipment 760 625 1,360 1,209
Regulatory, professional and other fees 532 156 770 329
Amortization of intangible assets 193 27 220 54
Office expense 208 141 384 275
All other operating expenses 938 462 1,577 895
Total other expenses 5,535 2,821 8,777 5,511
Income before income taxes 1,566 1,251 2,968 2,435
PROVISION FOR INCOME TAXES 550 457 1,065 870
NET INCOME $1,016 $ 794 $ 1,903 $ 1,565
WEIGHTED AVERAGE SHARES OUTSTANDING - Basic 5,597 5,291 5,469 5,289
WEIGHTED AVERAGE SHARES OUTSTANDING - Diluted 5,780 5,486 5,656 5,497
NET INCOME PER SHARE - Basic $ 0.18 $ 0.15 $ 0.35 $ 0.30
NET INCOME PER SHARE - Diluted $ 0.18 $ 0.14 $ 0.34 $ 0.28
</TABLE>
(See notes to Consolidated Financial Statements)
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY AND COMPREHENSIVE INCOME
(in thousands, Unaudited)
Six Months ended June 30, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Additional Other Total
Common Paid in Retained Comprehensive Shareholders' Comprehensive
Stock Capital Earnings Income Equity Income
Balance January 1, 1999 $2,665 $25,460 $1,932 $2,252 $32,309 -
Net Income 1,903 1,903 $ 1,903
Exercise of stock options 9 98 107
Issuance of common stock 200 3,640 3,840
Cash dividends (737) (737)
Other comprehensive income, net
of reclassification, taxes and
adjustments (1,700) (1,700) (1,700)
Total comprehensive income $203
Retirement of treasury
stock (4) (77) (81)
Balance, June 30, 1999 $2,870 $29,121 $3,098 $552 $35,641
Six Months ended June 30, 1998
Accumulated
Additional Other Total
Common Paid in Retained Comprehensive Shareholders' Comprehensive
Stock Capital Earnings Income Equity Income
Balance January 1, 1998 $2,647 $25,138 ($391) $1,867 $29,261 -
Net Income 1,565 1,565 $1,565
Exercise of stock options 5 64 - - 69
Cash dividends (263) (263)
Other comprehensive income, net
of reclassification, taxes and
adjustments (613) (613) (613)
Total comprehensive income $952
Retirement of treasury
stock (4) (100) (104)
Balance, June 30, 1998 $2,648 $25,102 $911 $1,254 $29,915
</TABLE>
(See notes to Consolidated Financial Statements)
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Six Months Ended
June 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,903 $ 1,565
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 821 548
Accretion of discount on securities, net (69) 56
Gain on sale of securities, net (1,975) (433)
Gain on sale of other real estate owned (18) -
Provision for possible loan losses 559 228
(Increase) decrease in accrued interest receivable (159) 91
Increase in other assets (3,073) (400)
(decrease) Increase in accrued expenses
and other liabilities (1,902) 422
Net cash (used in) provided by operating activities (3,913) 2,077
CASH FLOWS FROM INVESTING ACTIVITIES
Available-for-sale securities -
Purchases (21,920) (36,265)
Sales 14,779 861
Maturities and principal paydowns 23,001 26,120
Held-to-maturity securities -
Purchases (684) (3,853)
Maturities 6,399 5,150
Net decrease (increase) in interest-bearing deposits
with banks 4,224 (10,521)
Net increase in loans (8,781) (21,014)
Capital expenditure (867) (485)
Decrease in other real estate 199 115
Cash paid in purchase transaction, First Savings Bank (23,000) -
Net cash used in investing activities (6,650) (39,892)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in deposit accounts (15,812) 29,735
Increase in federal funds purchased 8,400 2,100
Increase in repurchase agreements 2,103 2,433
Decrease in redeemable subordinated debentures - (8)
Dividends paid (737) (264)
Proceeds from exercise of stock options 107 69
Proceeds from issuance of common stock 3,840 -
Purchase of treasury stock (81) (104)
Other, net (7) 5
Net cash (used in) provided by financing activities (2,187) 33,966
NET DECREASE IN CASH AND CASH EQUIVALENTS (12,750) (3,849)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 23,640 22,845
CASH AND CASH EQUIVALENTS, END OF PERIOD $10,890 $18,996
(See notes to Consolidated Financial Statements)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In the opinion of management, these unaudited financial statements contain
all disclosures which are necessary to present fairly the Company's consolidated
financial position at June 30, 1999, the consolidated results of operations for
three and six months ended June 30, 1999 and 1998 and cash flows for six months
ended June 30, 1999 and 1998. The financial statements reflect all adjustments
(consisting solely of normal recurring adjustments) which in the opinion of
management are necessary in order to present fairly the financial position and
results of operations for the interim periods. Certain information and footnote
disclosure normally included in financial statements under generally accepted
accounting principles have been condensed or omitted pursuant to the Securities
and Exchange Commission rules and regulations. These financial statements should
be read in conjunction with the annual financial statements and notes thereto
included in Form 10-KSB for the fiscal year ended December 31, 1998. CASH AND
STOCK DIVIDENDS During June 1999, the Company's Board of Directors declared a
cash dividend $.07 per share, which is payable on July 30, 1999 to shareholders
of record on July 15, 1999. On May 19, 1999, the Company's Board of Directors
declared a 5% stock dividend on the Company's common stock. The record date of
the dividend is September 1, 1999 and the issue date will be September 15, 1999.
Since the number of shareholders and the price of the common stock were unknown
as of June 30, 1999, the financial and per share information has not been
adjusted to reflect the 5% stock dividend. EARNINGS PER SHARE COMPUTATION The
Company's reported diluted earnings per share of $0.34 and $0.28 per share for
the six-month periods ended June 30, 1999 and 1998 take into consideration the
dilutive effects of the Company's outstanding common stock equivalents, namely
stock options. RECENT ACQUISITION On April 1, 1999, the Company consummated its
previously announced merger agreement with First Savings Bancorp of Little
Falls, Inc. ("FSB"), parent of First Savings Bank of Little Falls located in
Little Falls, New Jersey. As the date of the acquisition, FSB had total assets
of $193 million, total loans of $109 million and total deposits of $184 million,
with 3 banking offices. The transaction was accounted for under the purchase
method of accounting. Each share of common stock of FSB was exchanged for $52.26
in cash for a total of $23.0 million. The acquisition created a net intangible
asset in the amount of $13.4 million, which will be amortized over a 20-year
period.
<PAGE>
The pro forma results of operations assuming FSB had been acquired as of
January 1, 1999, are as follows:
Six Months
Ended June 30,
Net interest income $8,930
Net income 2,071
Net income per share - Basic $ 0.38
Net income per share - diluted $ 0.37
RECENT DEVELOPMENTS
Effective April 27, 1999, the Company opened for business a wholly-owned de
novo bank subsidiary named Rock Community Bank ("RCB") located in Glen Rock,
Bergen County, New Jersey. On April 19, 1999, the Company funded RCB with $5.0
million in capital. During the second quarter of 1999, the Company conducted a
private placement of common stock in order to reimburse the Company for its
capital contribution to RCB and obtain the financial involvement of persons
located in RCB's market area. All shares issued constitute "restricted stock"
under SEC Rule 144. The Company sold 391,566 shares of common stock at $9.58 per
share, for which the Company received gross proceeds of approximately $3.8
million. Approximately two-thirds of the shares sold in the offering were
purchased by RCB directors and their affiliates.
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION ITEM 2 - Management's Discussion and
Analysis of Financial Condition and Results of Operations The following
discussion and analysis of the Company's consolidated financial condition as of
June 30, 1999 and the results of operations for the three- and six-month periods
ended June 30, 1999 and 1998 should be read in conjunction with the consolidated
financial statements, including notes thereto, included in the Company's latest
annual report on Form 10-KSB for the fiscal year ended December 31, 1998, and
the other information herein. The consolidated statement of condition as of June
30, 1999 and the statements of operations and cash flows for the six months
ended June 30, 1999 and 1998 are unaudited but include, in the opinion of the
management, all adjustments considered necessary for a fair presentation of such
data. The results of operations for the three- and six-month periods ended June
30, 1999 are not necessarily indicative of the results which may be expected for
any future period. As used herein, the term "Company" refers to Greater
Community Bancorp and subsidiaries, the term "Subsidiary Banks" refers to Great
Falls Bank, Bergen Commercial Bank and Rock Community Bank, and the term "Trust"
refers to GCB Capital Trust. Data is presented for both the Company and the
Subsidiaries unless otherwise noted. Unless otherwise indicated, amounts set
forth in the tables below are in thousands, except for per share data.
PURPOSE OF DISCUSSION AND ANALYSIS
The purpose of this analysis is to provide the reader with information
relevant to understanding and assessing the Company's financial condition and
results of operations for the second quarter of 1999. In order to fully
appreciate this analysis the reader is encouraged to review the consolidated
financial statements presented in this document. Data is presented for the
Company and its subsidiaries in the aggregate unless otherwise indicated.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Form 10-Q, both in this MD&A section and elsewhere (including
documents incorporated by reference herein), contains both historical
information and "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking 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 an asterisk (*) or such forward-looking
terminology as "projected", "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, the ability of the Subsidiary Banks to generate deposits and loans
and attract qualified employees, the direction of interest rates, continued
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 Company
assumes no obligation for updating any such forward-looking statement at any
time.
RECENT DEVELOPMENTS
Three important events occurred during the second quarter of 1999. All of
these events were previously reported.
<PAGE>
On April 1, 1999 the Company completed its acquisition of First Savings
Bancorp of Little Falls, Inc. ("FSB"). See "Recent Acquisition" in the Notes to
Financial Statements in this Form 10-Q. See also Form 8-K/A filed on June 18,
1999.
Effective April 27, 1999, Rock Community Bank ("RCB"), a de novo New Jersey
commercial bank subsidiary of the Company, opened for business. During the
second quarter the Company also conducted a private placement of common stock,
selling 391,566 shares at $9.58 per share and receiving gross proceeds of
approximately $3.8 million. See "Recent Developments" in the notes to financial
statements in this Form 10-Q.
A. Financial Condition: June 30, 1999 and December 31, 1998
At June 30, 1999, the Company's total assets were $542.7 million, a net
increase of $170.3 million or 46% compared to the amount reported at December
31, 1998. Securities increased by $35.0 million or 31% and net loans increased
by $117.2 million or 58%. The increases in total assets, investment securities
and net loans as a direct result of the FSB acquisition were $184.4 million,
$57.0 million and $108.4 million, respectively.
Cash and due from banks increased by $689,000 or 4% whereas federal funds
sold decreased by $2.2 million or 38%. Due from banks interest-bearing decreased
by $4.2 million or 27%. The funds generated by decreases in federal funds sold
and due from bank interest-bearing were used in part to fund the loan demand.
Securities
Securities totaled $146.6 million at June 30, 1999, a net increase of $35.0
million or 31% compared to the amount reported at December 31, 1998. The
increase in securities is a combination of a $57.0 million increase as a result
of the FSB acquisition offset in part by a decrease of $22.0 million in other
securities. The decrease is primarily due to sales, calls and prepayments of
principal. Management reviews the investment portfolio continually to achieve
maximum yields without having to sacrifice the high quality of the investments.
Of the total securities, 31% are in U.S. Government and agency obligations, 45%
in mortgage-backed securities and the balance in municipal and other securities.
Loan Portfolio
The Company's loan portfolio net of allowance for possible loan losses at
June 30, 1999 totaled $318.9 million, an increase of $117.2 million or 57%
compared to the amount reported at December 31, 1998. The loan portfolio
increased by $108.4 million as a result of the FSB acquisition and $8.8 million
as a result of internal growth.
Other Real Estate
As of June 30, 1999, other real estate totaled $2.3 million, an increase of
$1.8 million or 362% compared to the amount reported at December 31, 1998. The
increase in other real estate as a result of the FSB acquisition was $1.9
million which was partially offset by a decline of $100,000 in other real estate
held prior to that acquisition.
<PAGE>
Intangible Assets
As of June 30, 1999, intangible assets, which consist primarily of
goodwill, totaled $13.5 million, an increase of $13.1 million compared to the
amount reported at December 31, 1998. Goodwill created from the FSB acquisition
totaled $13.4 million. This portion of goodwill will be amortized over a 20-year
period at the rate of approximately $670,000 per year.
Deposits
Total deposits at June 30, 1999 were $449.9 million, an increase of $156.5
million or 53% compared to the amount reported at December 31, 1998. Total
deposits acquired through the acquisition of FSB amounted to $172.3 million.
Excluding the acquired deposits, overall deposits decreased by $15.8 million,
primarily due to maturities. Of the total increase reported, time deposits
increased by $106.6 million, savings deposits increased by $28.3 million,
interest-bearing demand deposits increased by $6.4 million and non-interest
bearing demand deposits increased by $15.2 million. Of the total deposits, time
deposits accounts for 50%, non-interest-bearing deposits for 20%,
interest-bearing demand deposits accounts for 16%, and savings deposits accounts
for 14%.
Liquidity
Liquidity measures the Company's ability to provide sufficient cash flows
for current and future financial obligations on a timely basis. Maintaining an
adequate level of liquid funds through asset-liability management seeks to
ensure that these needs are met at a reasonable cost. The Company maintains a
liquidity position which it considers adequate to provide funds to meet loan
demand or the possible outflow of deposits. At June 30, 1999, sources of
liquidity include $22.1 million in cash and cash equivalents, and $135.5 million
in securities available for sale.
Capital Adequacy and Regulatory Matters
The Company is subject to regulation by the Board of Governors of the
Federal Reserve System (Federal Reserve Board). The Subsidiary Banks are subject
to regulation by both the Federal Deposit Insurance Corporation (FDIC) and the
New Jersey Department of Banking and Insurance (Department). Such regulators
have promulgated risk-based capital guidelines which require the Company and the
Subsidiary Banks to maintain certain minimum capital as a percentage of their
assets and certain off-balance sheet items adjusted for predefined credit risk
factors (risk-adjusted assets).
<PAGE>
The following table sets forth selected regulatory capital ratios for the
Company and the Subsidiary Banks and the required minimum regulatory ratios at
June 30, 1999:
<TABLE>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provision
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk weighted assets)
Greater Community Bancorp $ 48,869 13.82% $ 28,283 8.00% $ - -
Great Falls Bank 26,052 10.73% 19,424 8.00% 24,280 10.00%
Bergen Commercial Bank 8,720 10.49% 6,650 8.00% 8,313 10.00%
Rock Community Bank 4,822 183.95% 210 8.00% 262 10.00%
Tier 1 Capital (to risk weighted assets)
Greater Community Bancorp 33,309 9.42% 14,143 4.00% - -
Great Falls Bank 23,010 9.48% 9,709 4.00% 14,563 6.00%
Bergen Commercial Bank 7,778 9.36% 3,324 4.00% 4,986 6.00%
Rock Community Bank 4,801 183.15% 105 4.00% 157 6.00%
Tier 1 Capital (to average assets)
Greater Community Bancorp 33,309 6.25% 21,304 4.00% - -
Great Falls Bank 23,010 6.22% 14,797 4.00% 18,497 5.00%
Bergen Commercial Bank 7,778 6.01% 5,177 4.00% 6,471 5.00%
Rock Community Bank 4,801 51.16% 375 4.00% 469 5.00%
</TABLE>
Asset Quality
The Company seeks to manage credit risk through diversification of its loan
portfolio and the application of policies and procedures designed to foster
sound underwriting and credit monitoring policies. Over the last several years
management has devoted increased resources to its lending department to
remediate problem assets and improve loan review procedures. The senior lending
officers of the Subsidiary Banks are charged with monitoring asset quality,
establishing credit policies and procedures and seeking consistent applications
of these procedures.
The Company's lending is concentrated in its local market area. Its
non-performing loans primarily were made to customers operating in northeastern
New Jersey. The degree of risk inherent in all of the Company's lending
activities is influenced heavily by general economic conditions in the immediate
market area. Among the factors which tend to increase or decrease portfolio risk
are changes in local or regional real estate values, income levels and energy
prices. These factors, coupled with levels of unemployment, tax rates,
governmental actions and market conditions affecting the demand for credit among
qualified borrowers, are also important determinants of the risk inherent in the
Company's lending.
General economic conditions in the State of New Jersey have improved over
the past few years. Interest rates have been fairly stable with the exception of
the recent increase announced by the Federal Reserve Board. The real estate
market, real estate values and employment levels have shown an upward movement
as of late.
Non-performing assets consist of non-accrual loans, renegotiated loans,
accruing loans past due 90 days or more, and other real estate (ORE). It is the
Company's policy to place a loan on non-accrual status when, in the opinion of
management, the ultimate collectibility of the principal or interest on the loan
becomes doubtful. As a general rule, a commercial loan or real estate loan more
than 90 days past due with respect to principal or interest is classified as a
non-accrual loan. Installment loans generally are not placed on non-accrual
status but, instead, are charged off at 90 days past due, except where the loans
are secured and foreclosure proceedings have commenced.
<PAGE>
Loans are considered renegotiated if, for economic or legal reasons, a
concession has been granted to the borrower related to the borrower's financial
difficulties that the creditor would not otherwise consider. The Company has
renegotiated certain loans in instances where a determination was made that
greater economic value will be realized under new terms than through
foreclosure, liquidation, or other disposition. ORE includes both loan
collateral that has been formally repossessed and collateral that is in the
Company's possession and under its control without legal transfer of title.
At the time of classification as ORE, loans are reduced to the fair value
of the collateral (if less than the loan receivable) by charge-offs against the
allowance for possible loan losses. ORE is carried on the books at the lower of
cost or fair value, less estimated costs to sell. Subsequent valuation
adjustments to the fair value of the collateral are charged or credited to
current operations.
The following table sets forth the composition of the Company's non-performing
assets and related asset quality ratios as of the dates indicated. All of such
assets were domestic assets since the Company had no foreign loans.
June 30, December 31,
1999 1998
Non-accruing loans $1,763 $1,657
Renegotiated loans 737 416
Total non-performing loans $2,490 $2,073
Loans past due 90 days and accruing $ 99 461
Other real estate 2,287 495
Total non-performing assets $4,876 $3,029
Asset Quality Ratios
Non-performing loans to total gross loans 0.77% 1.01%
Non-performing assets to total gross loans 1.51% 1.47%
Non-performing assets to total assets 0.90% .81%
Allowance for possible loan losses to
non-performing loans 185.34% 170.04%
Non-accruing loans increased by $106,000 for the six months ended June 30,
1999 when compared to December 31, 1998. Renegotiated loans increased by
$321,000 for the same period. Other real estate increased by 1.9 million. The
increase in other real estate resulting from the FSB acquisition totaled $2.0
million; since the acquisition, the Company sold one other real estate property
for $200,000. During the six months ended June 30, 1999, gross interest income
of $47,000 would have been recorded on loans accounted for on a non-accrual
basis if the loans had been current throughout the period.
Impaired Loans - In accordance with SFAS No. 114, the Company utilizes the
following information when measuring its allowance for possible loan losses. A
loan is considered impaired when it is probable that the Company will be unable
to collect all amounts due according to the contractual terms of the loan
agreement. These loans consist primarily of non-accruing loans where situations
exist which have reduce the probability of collection in accordance with
contractual terms.
<PAGE>
As of June 30, 1999 the Company's recorded investment in impaired loans and
the related valuation allowance calculated under SFAS No. 114 are as follows:
June 30, December 31,
1999 1998
Impaired loans -
Recorded investment $1,119 $ 907
Valuation allowance $ 209 $ 138
The valuation allowance is included in the allowance for possible loan
losses on the Company's consolidated balance sheet.
The average recorded investment in impaired loans for the six-month period
ended June 30, 1999 was $1.2 million compared to $419,000 at December 31, 1998.
Interest payments received on impaired loans are recorded as interest
income unless collection of the remaining recorded investment is doubtful, in
which event payments received are recorded as reductions of principal. The
Company recognized interest income on impaired loans of $74,000 for the
six-month period ended June 30, 1999.
Analysis of the Allowance For Possible Loan Losses
The allowance for possible loan losses is determined by management based
upon its evaluation of the known, as well as the inherent, risks within the
Company's loan portfolio, and is maintained at a level considered adequate to
provide for potential loan losses. The allowance for possible loan losses is
increased by provisions charged to expense and recoveries of prior charge-offs,
and is reduced by charge-offs. In establishing the allowance for possible loan
losses, management considers, among other factors, previous loss experience, the
performance of individual loans in relation to contract terms, the size of
particular loans, the risk characteristics of the loan portfolio generally, the
current status and credit standing of borrowers, management's judgment as to
prevailing and anticipated real estate values, other economic conditions in the
Company's market, and other factors affecting credit quality. Management
believes the allowance for possible loan losses at June 30, 1999 of $4.6 million
or 184.06% of non-performing loans, was adequate.
The Company's management continues to actively monitor the Company's asset
quality and to charge off loans against the allowance for possible loan losses
as it deems appropriate. Although management believes it uses the best
information available to make determinations with respect to the allowance for
possible loan losses, future adjustments may be necessary if economic conditions
differ substantially from the assumptions used in making the initial
determinations.
<PAGE>
At June 30, 1999, the allowance for possible loan losses increased by $1.1
million over the amount recorded at December 31, 1998. Of the total increase,
$658,000 was a result of the FSB acquisition. The following table represents
transactions affecting the allowance for possible loan losses during the
six-month periods ended June 30, 1999 and 1998.
1999 1998
Balance at beginning of period, January 1 $3,525 $2,731
Charge-offs:
Commercial, financial and agricultural 84 -
Real estate--mortgage - -
Installment loans to individuals 30 14
Credit cards and related plans 39 22
153 36
Recoveries:
Commercial, financial and agricultural 5 170
Real estate--mortgage 11 8
Installment loans to individuals 1 3
Credit cards and related plans 8 3
25 184
Net charge-offs 128 148
Provision charged to operations
during the six-month period 559 228
Purchase of FSB 658 -
Balance at end of period, June 30 $4,615 $ 3,107
Ratio of net charge-offs during the
six-month period to average loans
outstanding during that period .01% .01%
B. Results of Operations: Three and Six Months ended June 30, 1999
General. The Company's results of operations are dependent primarily on its
net interest and dividend income, which is the difference between interest
earned on its loans and investments and the interest paid on interest-bearing
liabilities. The Company's net income is also affected by the generation of
non-interest income, which primarily consists of service fees on deposit
accounts and other income. Net interest income is determined by the difference
between yields earned on interest-earning assets and rates paid on
interest-bearing liabilities ("interest rate spread") and (ii) the relative
amounts of interest-earning assets and interest-bearing liabilities. The
Company's interest rate spread is affected by regulatory, economic and
competitive factors that influence interest rates, loan demand and deposit flows
and general levels of non-performing assets. In addition, the level of operating
expenses and establishment of loan loss reserves and ORE reserves affects net
income affects net income.
The operations of the Company and the entire banking industry are
significantly affected by prevailing economic conditions, competition and the
monetary and fiscal policies of governmental agencies. Lending activities are
influenced by the demand for and supply of real estate, competition among
lenders, the level of interest rates and the availability of funds. Deposit
flows and cost of funds are influenced by prevailing market rates of interest,
primarily on competing investments, account maturities and the levels of
personal income and savings in the market area.
Three and Six Months Ended June 30, 1999. The Company earned net income of
$1.0 million or $0.18 per share basic and diluted and $1.9 million or $0.35 per
share basic and $0.34 per share diluted, for the three- and six-month periods
ended June 30, 1999, compared to $794,000 or $0.15 per share basic and $0.14 per
share diluted and $1.6 million or $0.30 per share basic and $0.28 per share
diluted for the same periods in 1998.
<PAGE>
Interest income increased by $3.0 million or 50% and $3.2 million or 27%
for the three- and six-month periods ended June 30, 1999 over the corresponding
periods in 1998. The increases in interest income are primarily due to increases
in average income-yielding assets resulting from the FSB acquisition. Other
income increased by $1.9 million or 174% and $2.4 million or 118% for the three-
and six-month periods ended June 30, 1999 over the comparable periods in 1998.
The majority of such increase is primarily related to increased gain on sale of
securities in the amount of $1.6 million during the second quarter.
Total interest expense increased by $1.6 million or 52% and $1.5 million or
25% for the three- and six-month periods ended June 30, 1999 over the
corresponding periods in the prior year, primarily due to an increase in average
interest bearing deposits resulting from the FSB acquisition. Total other
expenses increased by $2.7 million or 96% and $3.3 million or 59% for the three-
and six-month periods ended June 30, 1999 compared to the same periods in the
prior year, primarily as a result of the FSB acquisition. Of the total increase
for the six-month period, $1.7 million was attributable to an increase in
salaries and employee benefits as a result of additional personnel acquired
through the acquisition and one-time bonuses paid to certain key employees of
FSB. Amortization of intangible assets totaled $193,000 and $220,000 for the
three- and six-month periods ended June 30, 1999 primarily as a result of
amortization of goodwill created from the acquisition of FSB; such amortization
was $168,000, which will continue quarterly for 20 years. Other expenses
increased by $848,000 while regulatory and professional fees increased by
$441,000 for the six-month period ended June 30, 1999 over the comparable
period; the majority of such increase is related to the FSB acquisition.
During second quarter of 1999, the Company incurred $1.4 million in
non-recurring expenses related to the FSB acquisition. Of the total, $957,000
were attributable to severance and retention bonuses, $290,000 was attributable
to provision for loan losses, $83,000 was attributable to professional fees, and
the balance was attributable to all other operating expenses related to the FSB
acquisition.
The provision for possible loan losses for the three- and six-month periods
ended June 30, 1999 was $448,000 and $559,000, respectively. This represents
increases of $340,000 and $331,000 compared to the same periods in the prior
year. The primary reason for the increase is the increase in total loan
portfolio resulting from the FSB acquisition.
Some Specific Factors Affecting Future Results of Operations
Although future movement of interest rates cannot be predicted with
certainty, the interest rate sensitivity of the Company's assets and liabilities
are such that a decline in interest rates during the next few months would have
a favorable impact on the Company's results of operations. However, because
overall future performance is dependent on many other factors, past performance
is not necessarily an indication of future results and there can be no guarantee
regarding future overall results of operations.
With the acquisition and consolidation of FSB, the Company expects to
improve its results of operations and earnings per share in future reporting
periods. The acquisition of FSB created goodwill in the amount of $13.4 million
which the Company expects to amortize the goodwill over a 20-year period. The
annual amortization expense of goodwill is approximately $670,000. The Company
does not expect the formation of RCB to have a material adverse impact on its
future results of operations for the next year.
<PAGE>
YEAR 2000
The Company has been working since early 1997 to prepare its computer
systems and applications for the year 2000. A year 2000 committee, with
representatives from all departments of the Company, has been reviewing,
modifying and communicating with external service providers as well as customers
to ensure the year 2000 issue is being addressed appropriately.
The committee started the year 2000 compliance testing late in the 3rd
quarter 1998. The testing of the Company's computer systems and applications has
been completed. Currently, almost all of the PCs and local area network servers
have been tested for year 2000 readiness and have been returned to production as
ready. The Company has also run tests with its mission critical service
providers. To date, the Company has not identified any material third party
servicer problems, but it continues to assess the situation.
For the computer systems and facilities that it has determined to be most
critical, the Company expects to complete, test, and adopt business contingency
and resumption plans by the end of third quarter of 1999. The plans will conform
to the latest guidelines from the FFIEC for year 2000 readiness. Plans will
include, among other actions, manual workarounds, identification of resource
requirements and alternative solutions for resuming critical business processes
in the event of a year 2000-related failure.
The estimated total cost to become year 2000 compliant is approximately
$100,000. As of year-end 1998, the Company had already expensed $100,000 in year
2000 anticipated expenses. Although management believes that any additional year
2000 expenses will not be significant, it is not possible to predict with
certainty all adverse effects that might result from a failure to become fully
year 2000 compliant or whether such effects could have a material impact on the
Company's financial condition, results of operations, or liquidity.
ITEM 3 - Quantitative and Qualitative Changes Regarding Market Risk
There has been no material change in the Company's assessment of its
sensitivity to market risk since its presentation in 1998 Annual Report to
Shareholders in Form 10-KSB filed with Securities and Exchange Commission.
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
The Company and its subsidiaries are parties in the ordinary course of
business to litigation involving collection matters, contract claims and other
miscellaneous causes of action arising from their business. Management does not
consider that any such proceedings depart from usual routine litigation, and in
its judgement neither the Company's consolidated financial position nor its
results of operations will be affected materially by any present proceedings.
Item 2 - Changes in Securities and Use of Proceeds
On April 15, 1999 the Company sold 254,480 shares of common stock in the
first stage of a private placement related to Rock Community Bank. The sales
price was $9.58 per share. The Company received $2,437,918 in gross sales
proceeds in cash from this first stage. On June 10, 1999 the Company sold an
additional 137,086 shares of common stock in the second stage of such private
placement, also at a price of $9.58 per share, receiving additional gross sales
proceeds of $1,313,283 in cash. Following such sales the offering was
terminated.
The offering was conducted by the Company's officers, without the use of
any underwriter. The sales proceeds have been applied to reimburse the Company
for the majority of the $5.0 million it invested in Rock Community Bank, the
Company's de novo bank subsidiary, as that bank's initial capital before it
opened for operations in April, 1999.
The sales were exempt from registration by virtue of Regulation D of the
Commission. The exemption was available based upon the following facts: most of
the purchasers were "accredited investors" under Regulation D; the majority of
the stock purchasers are directors of Rock Community Bank and their affiliates;
other investors are persons considered to have a potential banking relationship
with Rock Community Bank; a private offering memorandum was furnished to each
offeree which included, among other things, a statement that the securities
purchased would be "restricted stock" subject to the holding period and other
conditions to the Commission's Rule 144; and the stock certificates for the
common stock sold in the private placement were issued with a restrictive legend
referring to the lack of registration under the 1933 Act.
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
See Part II, Item 4 of Form-10Q for the quarter ended March 31, 1999 for
information with respect to the annual meeting of stockholders held on April 20,
1999.
Item 5 - Other information
None.
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are filed with this Report.
Exhibit No. Description
3.1 Restated Certificate of Incorporation of Greater Community Bancorp
(incorporated by reference to Exhibit 3.4 filed with Form 10-QSB for the quarter
ended June 30, 1998 filed on August 14, 1998). 3.2 Bylaws of Greater Community
Bancorp as amended and restated effective December 16, 1997 (incorporated by
reference to
Exhibit 3 to Form 10-KSB for the year ended December 31, 1997 filed on March
23, 1998).
10.1 Employment agreement of George E. Irwin dated July 31, 1998
(incorporated by reference to Exhibit 10.1 to Form 10-KSB for the year ended
December 31, 1998 filed on March 17, 1999).
10.2 Employment agreement of C. Mark Campbell dated July 31, 1998
(incorporated by reference to Exhibit 10.2 to Form 10-KSB for the year ended
December 31, 1998 filed on March 17, 1999).
27 Financial Data Schedule
(b) Reports on Form 8-K.
On April 13, 1999, the Company filed a Form 8-K reporting the consummation
of the previously announced acquisition of First Savings Bancorp of Little
Falls, Inc.
On April 30, 1999, the Company filed a Form 8-K reporting the election of
directors, change of CEO and first quarter financial information.
On June 14, 1999, the Company filed Form 8-K/A with respect to the
acquisition of First Savings Bancorp of Little Falls, Inc., amending the
Form 8-K filed on April 13, 1999.
On June 18, 1999 the Company filed a second Form 8-K/A with respect to the
acquisition of First Savings Bancorp of Little Falls, Inc., amending the
Form 8-K/A filed on June 14, 1999.
<PAGE>
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 thereunto duly authorized.
GREATER COMMUNITY BANCORP
(Registrant)
Date: July 30, 1999 By:
Naqi A. Naqvi, Treasurer
(Duly Authorized Officer and
Principal Financial Officer)
21
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27-4
FINANCIAL DATA SCHEDULE
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 18,479
<INT-BEARING-DEPOSITS> 11,320
<FED-FUNDS-SOLD> 3,650
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 134,553
<INVESTMENTS-CARRYING> 12,057
<INVESTMENTS-MARKET> 11,684
<LOANS> 323,562
<ALLOWANCE> 4,615
<TOTAL-ASSETS> 542,745
<DEPOSITS> 449,921
<SHORT-TERM> 17,608
<LIABILITIES-OTHER> 6,077
<LONG-TERM> 33,498
<COMMON> 2,870
0
0
<OTHER-SE> 32,771
<TOTAL-LIABILITIES-AND-EQUITY> 542,745
<INTEREST-LOAN> 11,053
<INTEREST-INVEST> 3,627
<INTEREST-OTHER> 579
<INTEREST-TOTAL> 15,259
<INTEREST-DEPOSIT> 5,617
<INTEREST-EXPENSE> 7,384
<INTEREST-INCOME-NET> 7,875
<LOAN-LOSSES> 559
<SECURITIES-GAINS> 1,993
<EXPENSE-OTHER> 8,777
<INCOME-PRETAX> 2,968
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,903
<EPS-BASIC> 0.35
<EPS-DILUTED> 0.34
<YIELD-ACTUAL> 0
<LOANS-NON> 1,763
<LOANS-PAST> 99
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,525
<CHARGE-OFFS> 153
<RECOVERIES> 25
<ALLOWANCE-CLOSE> 4,615
<ALLOWANCE-DOMESTIC> 4,615
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 742
</TABLE>
