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 September 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)
(973) 942-1111
(Registrant's telephone number)
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 - 6,020,444 shares at November 8, 1999.
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet at
September 30, 1999 (Unaudited) and December 31, 1998............... 3
Consolidated Statements of Income (Unaudited)
Three and Nine months ended
September 30, 1999 and 1998 .........................................4
Consolidated Statements of Changes in Shareholders'
Equity and Comprehensive Income (Unaudited)
Three and Nine Months ended September 30, 1999 and 1998.............5
Consolidated Statements of Cash Flows (Unaudited)
Nine months ended September 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..16
PART II - OTHER INFORMATION
Items 1 through 6.........................................................17
Signatures..................................................................18
PART 1 - FINANCIAL INFORMATION
Item 1- Financial Statements
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
<TABLE>
September 30, December 31,
1999 1998
<S> <C> <C>
ASSETS Unaudited
CASH AND DUE FROM BANKS-Non-interest-bearing $ 21,405 $ 17,790
FEDERAL FUNDS SOLD 19,275 5,850
-------- -------
Total cash and cash equivalents 40,680 23,640
DUE FROM BANKS - Interest-bearing 13,576 15,544
SECURITIES:
Available-for-sale, at fair value 134,239 93,797
Held-to-maturity, at amortized cost
(Fair value $9,331 and $17,554) 9,742 17,804
143,981 111,601
-------- ---------
LOANS 332,554 206,120
Less - Allowance for possible loan losses 4,835 3,525
Unearned income 1,330 830
-------- ---------
Net loans 326,389 201,765
PREMISES AND EQUIPMENT, net 8,019 5,251
OTHER REAL ESTATE OWNED 765 495
ACCRUED INTEREST RECEIVABLE 4,000 2,293
INTANGIBLE ASSETS 13,322 347
OTHER ASSETS 19,127 11,464
-------- ---------
Total assets $569,859 $372,400
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Non-interest-bearing $ 90,368 $ 76,346
Interest-bearing 75,183 64,987
Savings 60,028 32,883
Time 250,237 119,179
-------- ---------
Total deposits 475,816 293,395
FHLB ADVANCES 15,000 10,000
REPURCHASE AGREEMENTS 11,253 7,103
ACCRUED INTEREST PAYABLE 2,434 2,589
OTHER LIABILITIES 6,762 4,004
GUARANTEED PREFERRED BENEFICIAL INTEREST
IN THE COMPANY'S SUBORDINATED DEBT 23,000 23,000
-------- ---------
Total Liabilities 534,265 340,091
-------- ---------
SHAREHOLDERS' EQUITY
Common Stock, par value $0.50 per share:
20,000,000 shares authorized, 6,020,444
and 5,329,566 shares outstanding 3,010 2,665
Additional paid-in capital 31,810 25,460
Retained earnings 842 1,932
Accumulated other comprehensive income (68) 2,252
-------- ---------
Total shareholders' equity 35,594 32,309
-------- ---------
Total liabilities and shareholders' equity $569,859 $372,400
========= =========
</TABLE>
(See notes to Condensed Consolidated Financial statements)
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
<TABLE>
Three Months Nine Months
Ended September 30, Ended September 30,
<S> <C> <C> <C> <C>
1999 1998 1999 1998
---- ---- ---- ----
INTEREST INCOME
Loans, including fees $6,960 $4,218 $18,013 $11,953
Securities 2,172 1,883 5,799 5,762
Federal Funds sold and deposits with banks 389 319 968 740
------- ------ ------- -------
Total interest income 9,521 6,420 24,780 18,455
------- ------ ------- -------
INTEREST EXPENSE
Deposits 3,937 2,331 9,554 6,846
Short-term borrowings 336 197 953 382
Long-term borrowings 575 609 1,725 1,799
------ ------ -------
Total interest expense 4,848 3,137 12,232 9,027
------ ------ ------- -------
NET INTEREST INCOME 4,673 3,283 12,548 9,428
PROVISION FOR POSSIBLE LOAN LOSSES 194 111 753 339
------ ------ ------ -------
Net interest income after
provision for possible loan losses 4,479 3,172 11,795 9,089
OTHER INCOME
Gain on sale of securities 103 425 2,096 786
All other income 1,302 714 3,738 2,381
------ ------ ------ -------
1,405 1,139 5,834 3,167
OTHER EXPENSES
Salaries and employee benefits 2,015 1,439 6,481 4,188
Occupancy and equipment 803 585 2,163 1,794
Regulatory, professional and other fees 391 168 1,161 497
Amortization of intangible assets 194 27 414 81
Office expense 211 140 595 414
All other operating expenses 461 484 2,038 1,379
------ ------ ------- -------
Total other expenses 4,075 2,843 12,852 8,353
------ ------ ------- -------
Income before income taxes 1,809 1,468 4,777 3,903
------ ------ ------- -------
PROVISION FOR INCOME TAXES 756 531 1,821 1,402
------ ------ ------- -------
NET INCOME $1,053 $ 937 $ 2,956 $ 2,501
====== ====== ======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING - Basic 6,025 5,567 5,838 5,558
====== ====== ======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING - Diluted 6,215 5,783 6,046 5,788
====== ====== ======= =======
NET INCOME PER SHARE - Basic $ 0.17 $ 0.17 $ 0.51 $ 0.45
====== ====== ====== =======
NET INCOME PER SHARE - Diluted $ 0.17 $ 0.16 $ 0.49 $ 0.43
====== ====== ====== =======
(See notes to Condensed Consolidated Financial Statements)
</TABLE>
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY AND COMPREHENSIVE INCOME
(in thousands, Unaudited)
Nine Months ended September 30, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Accumulated Other Comprehensive Income
Additional Paid in Capital Total Shareholders' Equity
Common Retained Earnings Comprehensive Income
Stock
Balance January 1, 1999 $2,665 $25,460 $1,932 $2,252 $32,309 -
Net Income 2,956 2,956 $ 2,956
5% stock dividend 143 2,740 (2,887) (4)
Exercise of stock options 9 98 107
Issuance of common stock 195 3,556 3,751
Issuance of common Stock for dividend 9 189 198
Reinvestment plan
Cash dividends (1,159) (1,159)
Other comprehensive income,
net of reclassification,
taxes and adjustments
(2,320) (2,320) (2,320)
---------
Total comprehensive income $ 636
Retirement of treasury stock (11) (233) (244)
Balance, September 30, 1999 $3,010 $31,810 $ 842 $ (68) $35,594
-------- --------- -------- --------- -------
Nine Months ended September 30, 1998
Accumulated Other Comprehensive Income
Additional Paid in Capital Total Shareholders' Equity
Common Retained Earnings Comprehensive Income
Stock
Balance January 1, 1998 $2,647 $25,138 ($391) $1,867 $29,261 -
Net Income 2,501 2,501 $2,501
Exercise of stock options 11 111 - - 122
Cash dividends (582) (582)
Other comprehensive income, net of reclassification, taxes and adjustments
(812) (812) (812)
-------
Total comprehensive income $1,689
Retirement of treasury stock
(6) (116) (122)
------- -------- -------- --------- --------
Balance, September 30, 1998 $2,652 $25,133 $1,528 $1,055 $30,368
-------- --------- ------- -------- -------
</TABLE>
(See notes to Consolidated Financial Statements)
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
Nine Months Ended
September 30,
1999 1998
<C> <C>
<S> ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,956 $ 2,501
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,325 886
Accretion of discount on securities, net (83) 41
Accretion of discount on debentures - -
Gain on sale of securities, net (2,096) (786)
Gain on sale of other real estate owned (18) -
Provision for possible loan losses 753 239
Increase in accrued interest receivable (382) (304)
Increase in other assets (6,020) (1,338)
Increase accrued expenses and other liabilities 1,217 999
------- --------
Net cash (used in)provided by operating activities (2,348) 2,338
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Available-for-sale securities -
Purchases (29,334) (45,198)
Sales 15,137 3,935
Maturities and principal paydowns 29,426 37,805
Held-to-maturity securities -
Purchases (684) (21,224)
Maturities 8,709 30,921
Net decrease (increase) in interest-bearing deposits
with banks 1,968 (11,948)
Net increase in loans (16,157) (30,628)
Capital expenditure (1,024) (877)
Decrease in other real estate 1,722 115
Cash paid in purchase transaction, First Savings Bank (23,000) -
--------- ---------
Net cash used in investing activities (13,237) (37,099)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposit accounts 10,083 28,965
Increase in federal funds purchased - 3,400
Increase in repurchase agreements 8,650 12,567
Decrease in redeemable subordinated debentures - (8)
Dividends paid (1,159) (582)
Proceeds from issuance of stock 4,056 122
Purchase of treasury stock (244) (122)
Other, net - 12
-------- ---------
Net cash provided by financing activities 21,386 44,354
-------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,801 9,593
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 23,640 22,845
-------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $29,441 $32,438
======== ==========
</TABLE>
(See notes to Condensed Consolidated Financial Statements)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In the opinion of management, these unaudited condensed financial statements
contain all disclosures which are necessary to present fairly the Company's
consolidated financial position at September 30, 1999, the consolidated results
of operations for three and nine months ended September 30, 1999 and 1998 and
cash flows for nine months ended September 30, 1999 and 1998. The financial
statements reflect all adjustments (consisting solely of normal recurring
adjustments) which in the opinion of management are necessary in order to
present fairly the financial position and results of operations for the interim
periods. Certain information and footnote disclosure normally included in
financial statements under generally accepted accounting principles have been
condensed or omitted pursuant to the Securities and Exchange Commission rules
and regulations. These financial statements should be read in conjunction with
the annual financial statements and notes thereto included in Form 10-KSB for
the fiscal year ended December 31, 1998.
Dividend
During September 1999, the Company's Board of Directors declared a cash dividend
of 7 cents ($.07) per share, payable on October 29, 1999 to shareholders of
record on October 15, 1999. The financial information in this report has been
adjusted to reflect the dividend as of September 30, 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 was
September 1, 1999 and the issue date was September 15, 1999. Accordingly,
on September 15, 1999, the Company issued 287,010 shares of common stock.
As a result of the stock dividend, the Company increased its outstanding
common shares to 6,025,394 at September 15, 1999. The financial information
in this Form 10-Q has been adjusted to reflect the 5% stock dividend.
EARNINGS PER SHARE COMPUTATION
The Company's reported diluted earnings per share of $0.49 and $0.43 per share
for the three- and nine-month periods ended September 30, 1999 and 1998,
respectively, both take into consideration the dilutive effects of the Company's
outstanding common stock equivalents, namely stock options. Prior period per
share amounts have been restated to reflect adoption of SFAS 128.
RECENT ACQUISITION
On April 01, 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 using 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 pro forma results of operations assuming First Savings had been acquired as
of January 1, 1999, are as follows:
[GRAPHIC OMITTED]
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 quarter ended June 30, 1999, pursuant to SEC Regulation D, the
Company conducted a private placement of common stock at $9.58 per share. The
proceeds of the private placement approximately $3.8 million were applied to
defray the Company's $5 million capital contribution to RCB. All shares sold in
the private placement constitute "restricted stock" under SEC Rule 144. (See the
Company's Form 8-K filed January 29, 1999.)
<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 September 30, 1999 and the results of operations for the three-
and nine-month periods ended September 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 September 30, 1999 and the statements of operations
and cash flows for the nine months ended September 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. 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. Unless
otherwise indicated, data is presented for the Company and its Subsidiaries in
the aggregate. Unless otherwise indicated, all dollar figures in the tables
below, except for per share data, are set forth in thousands.
PURPOSE OF DISCUSSION AND ANALYSIS
The purpose of this analysis is to provide you with information relevant to
understanding and assessing the Company's financial condition and results of
operations for the three months and nine months ended September 30, 1999. In
order to appreciate this analysis more fully you are encouraged to review the
consolidated financial statements and statistical data presented in this report
and in the MD&A section of the Company's Form 10-KSB for the year ended December
31, 1998.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Form 10-Q, both in this MD&A section and elsewhere, includes
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are not historical facts. They
include expressions about management's confidence and strategies and its
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 "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
Company's bank subsidiaries 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
(Y2K) technology changes, as well as the effects of economic conditions, legal
and regulatory barriers and structure, and competition. 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.
Business Overview
Greater Community Bancorp (the "Company") is registered with the Federal
Reserve Board as a bank holding company. Its primary business is banking,
which it conducts in northern New Jersey through three wholly-owned New
Jersey commercial bank subsidiaries, Great Falls Bank (GFB), Bergen Commercial
Bank (BCB) and Rock Community Bank (RCB) (together sometimes referred to as
the "Bank Subsidiaries"). The total assets of GFB, BCB and RCB at September
30, 1999 were $392.2 million, $148.8 million and $15.6
million, respectively.
The Company is a diversified financial services company in New Jersey operating
retail banking, brokerage, and equipment leasing businesses that provides
products and services in the any's primary geographic markets in northern
counties of New Jersey and expanding. Through Highland Capital Corp., one of the
Company's wholly-owned nonbank subsidiaries, the Company is also engaged in the
business of leasing equipment to small and mid-size businesses in New Jersey and
contiguous states. The Company also owns a majority interest in a securities
broker-dealer, Greater Community Financial, L.L.C.
Financial services providers as of late are challenged by intense competition,
changing customer demands, increased pricing pressures and the ongoing impact
of deregulation. This is more so for traditional loan and deposit services
due to continuous competitive pressures as both banks and non-banks compete
for customers with a broad array of banking, investments and capital market
products.
The Company has made an effort these challenges by providing highly focused
personalized customer service, which provides a basis for differential in
today's environment where banks and other financial service providers target
the same customer. To leverage the technology, the Company responded with
formation of e-commerce services through World Wide Web. As a result, an
Internet banking product for retail customers was introduced in mid 1999.
The Company expects to launch a cash management product
through Internet banking for its commercial customers by the end of 1999.
Recent Business Highlights
On April 1, 1999, the Company acquired First Savings Bank of Little Falls,
F.S.B. (First Savings), a $193 million thrift institution, for $23.0 million
in cash and the assumption of liabilities. The Company divided the business
of First Savings between GFB and BCB. GFB acquired two former branches of
First Savings in Little Falls, adjacent to Totowa, New Jersey, where GFB
has its headquarters. BCB acquired a former branch of First Savings in Little
Ferry, in Bergen County, New Jersey, BCB's primary
market area.
During the second quarter the Company also capitalized RCB, located in Glen
Rock, New Jersey, with $5 million during April, 1999. Approximately $3.8
million of the Company's capital contribution to RCB was raised by a private
placement of the Company's common stock. RCB commenced business as a de novo
bank during that same month.
During the third quarter of 1999 the Company continued its banking operations,
including efforts to assimilate the business of First Savings. The Company also
continued to devote attention to the establishment of RCB's new business
operations.
Effective July 1, 1999 the Company employed Erwin D. "Skip" Knauer as Executive
Vice President of the Company and as President and Chief Executive Officer of
Greater Community Services, Inc., the Company's bank-servicing subsidiary, at an
initial base annual salary of $160,000. Mr. Knauer's employment is "at will"
rather than for a fixed term. During the third quarter the Company entered into
a written agreement with Mr. Knauer effective as of July 1, 1999. Under the
agreement, in the event of certain terminations of employment within 12 months
after a "change of control" (as defined in the agreement) of the Company, Mr.
Knauer is generally entitled to receive twice his base annual compensation less
amounts paid after the change of control. Before joining the Company Mr. Knauer
was President of The Ramapo Bank, the banking subsidiary of Ramapo Financial
Corporation of Wayne, New Jersey, which recently merged with another financial
institution. The Company expects to benefit from Mr. Knauer's product
development skills and sales and service experience resulting from his 30 years
of community banking experience.
EARNINGS SUMMARY
The results of operations for the three and nine months ended September 30, 1999
were significantly affected by the purchase of First Savings on April 1, 1999.
Net income for the first nine months of 1999 was $3.0 million or $0.49 per
diluted share, a 18.9% increase over $2.5 million or $0.43 per diluted share
earned in the first nine months of 1998. Excluding gains on the sale of
securities and non-recurring expenses of $1.4 million related to the purchase
of First Savings incurred in the second quarter of 1999, net income for the
nine months ended September 30, 1999 were approximately $2.5 million compared
to $1.9 million for the comparable period in 1998.
Net Income for the third quarter of 1999 was $1.1 million or $0.17 per diluted
share, a 12.4% increase over $937,000 or ($0.16 per diluted share) earned in
the third quarter of 1998. Excluding gains on the sale of securities, net
income (after the tax effect) for the third quarter of 1999 were unchanged
compared to $647,000 for the 1998 third quarter.
Cash earnings (earnings before amortization of intangible assets) per diluted
share were $0.56 and $0.20 for the 1999 nine- and three- month periods ended
September 30, 1999, respectively, compared to $0.45 and $0.17 per share in the
same periods of 1998.
The increase in net income for the nine-month period primarily reflects higher
net interest income and higher gain on the sale of securities and other income,
partially offset by higher salaries and employee benefits, all other expenses
(including amortization of intangible assets and other charges related to the
acquisition of First Savings), and higher provisions for possible loan losses
and income taxes. Net operating losses from RCB for its first six months of
operations in the amount of $235,000.
The increase in net income for the three-month period primarily reflects higher
net interest income, offset by reduced gains on the sale of securities coupled
with higher salaries and employee benefits and other expenses (including
amortization or goodwill arising from to the acquisition of First Savings), and
higher provisions for possible loan losses and income taxes. Net income for the
third quarter of 1999 was also impacted negatively by RCB's third quarter
operating loss of $111,000.
Net Interest Income
Nine-Month Comparison: Net interest income is the largest source of the
Company's operating income. Net interest income for the nine months ended
September 30, 1999 increased by $3.1 million (33%) to $12.5 million from
$9.0 million for the nine months ended September 30, 1998. Interest income
from loans increased 51% to $18.0 million, while interest paid on deposits
increased 40% to $9.6 million. These increases result primarily from the
purchase of First Savings.
Three Month Comparison: Net interest income (before income tax effect)
for the three months ended September 30, 1999 increased by $1.4 million (42%)
to $4.7 million for the three months ended September 30, 1998.
The most important components of the increase were an increase of $2.7
million (65%) in net interest from loans, to $7.0 million, only partially
offset by an increase of $1.6 million (69%) in interest paid on deposits,
to $3.9 million. The increase in net interest income is primarily
attributable to the purchase of First Savings.
Other Income
Non-interest income continues to represent a considerable source of income
for the Company, constituting an amount equal to 46% of net interest income
for the nine months ended September 30, 1999 and 30% of net interest income
for the third quarter. Excluding gains on securities transactions, total
non-interest income increased $1.4 million (57%) to $3.7 million for the
nine months ended September 30, 1999, compared to the third quarter of 1998.
Such increase for the third quarter of 1999 was $588,000
(82%), to $1.3 million, compared to the third quarter of 1998. Those
increases are primarily attributable to the purchase of First Savings
and income from bank-owned life insurance policy which was put into place
in beginning of 1999.
Gain on the sale of securities increased $1.3 million (167%) to $2.1 million
during the first nine months of 1999 compared to the comparable period in 1998.
By contrast, the Company realized only $103,000 in gains on the sale of
securities during the third quarter of 1999, a 76% decrease from the $425,000 in
gains realized during the third quarter of 1998.
Non-Interest Expense
Total other expense increased by $1.2 million (43%) to $4.1 million, and by
$4.5 million (54%) to $12.9 million, for the three months and nine months
ended September 30, 1999 compared to the same periods in 1998. Those
increases are primarily attributable to the purchase of First Savings.
The largest component of other expense, salaries and employee benefits,
increased by $576,000 (40%) to $2.0 million, and by $2.3 million (55%) to
$6.5 million, for the three months and nine months ended September 30, 1999,
respectively, over the comparable 1998 periods. These increases are primarily
attributable to the purchase of First Savings. $957,000 of the increase for
the nine months ended September 30, 1999 represents one-time severance and
retention bonuses paid to certain key employees of First
Savings prior to the third quarter. Without such one-time payments,
salaries and employee benefits would have increased by $1.3 million
(32%) to $5.5 million for such nine-month period over the comparable
period in 1998.
The second largest component of other expense, occupancy and equipment
expense, also rose, by $218,000 (37%) and $369,000 (21%) respectively,
for the three months and nine months ended September 30, 1999 over the
comparable 1998 periods. The increases are primarily attributable to
the purchase of First Savings.
Regulatory, professional and other fees, the third largest component of other
expense, increased $223,000 (133%) and $664,000 (134%) for the three months
and nine months ended September 30, 1999, respectively, over the same periods
during 1998. The increase for the nine-month period includes various
expenses related to the purchase of First Savings, including $83,000
in professional fees incurred before the third quarter of 1999.
Amortization of intangible assets increased by $167,000 (619%) and $333,000
(411%) for the third quarter of 1999 and the nine months ended September 30,
1999, respectively. These increases reflect the amortization of goodwill
resulting from the purchase of First Savings. Such amortization commenced
at the beginning of the second quarter of 1999 at the rate of $168,000 per
quarter and will continue for 20 years.
Other operating expenses for the third quarter of 1999 were slightly lower
than for the third quarter of 1998. However, other operating expenses for
the nine months ended September 30, 1999 increased $659,000 (48%) over the
first nine months of 1998. The increase for the nine-month period includes
various expenses totaling $70,000 related to the purchase of First Savings.
Provision for Possible Loan Losses
The provision for possible loan losses for the three and nine months ended
September 30, 1999 increased by $83,000 (75%) to $194,000, and by $414,000
(122%) to $753,000, relative to the third quarter and first nine months of 1998,
respectively. Such increases are primarily due to the increase in total loans
resulting from the purchase of First Savings.
Provision for Income Taxes
The provision for income taxes for the three months ended September 30, 1999 was
$756,000, constituting 41.8% of income before income taxes, compared to
$531,000, constituting 36.2% of income before income taxes for the third quarter
of 1998.
The provision for income taxes for the nine months ended September 30, 1999 was
$1.8 million, constituting 38.1% of income before income taxes, compared to $1.4
million, constituting 35.9% of income before income taxes for the third quarter
of 1998.
The increase in the percentages of income provided for income taxes for the
three- and nine- month periods is attributable to the increase in amortization
expense on intangible assets which does not qualify as a tax deductible expense.
<PAGE>
FINANCIAL CONDITION
ASSETS
Between December 31, 1998 and September 30, 1999 total assets increased by
$197.5 million (53%) to $569.9 million. The increase is primarily attributable
to the acquisition of First Savings. The increase also reflects the Company's
receipt of $3.8 million raised through a private placement of common stock in
connection with the Company's formation of RCB, and $3.0 million in net income
for the nine-month period.
Loans -- Asset Quality and Allowance for Possible Loan Losses
Gross loans increased from December 31, 1998 to September 30, 1999 by $126.4
million (61%) to $332.6 million. Such increase resulted primarily from the
acquisition of First Savings, whose loans were approximately $109 million when
it was acquired on April 1, 1999. Approximately $16.9 million of the increase
was the result of internal growth.
The following table reflects the composition of the gross loan portfolio as of
September 30, 1999 and December 31, 1998. The majority of the increases
within the components of the loan portfolio is related to the acquisition
of First Savings.
[GRAPHIC OMITTED]
Nonperforming Assets
Nonperforming assets include nonaccrual loans and other real estate owned
(OREO). At September 30, 1999, total nonperforming assets totaled $3.7
million (1.12% of total loans), increased from $3.2 million
(1.47% of total loans) at December 31, 1998. Nonaccrual loans were $1.6
million or 0.47% of total loans, as compared to $1.7 million or 0.80% of
total loans at December 31, 1998. Loans past due 90 days or more and still
accruing at September 30, 1999 increased to $669,000 compared to $461,000 at
December 31, 1998.
Other real estate owned were $765,000 at September 30, 1999 compared to $495,000
at December 31, 1998, an increase of $270,000 primarily as a result of the First
Savings acquisition.
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.
<TABLE>
September 30, December 31,
1999 1998
<S> <C> <C>
Nonaccrual loans $1,572 $1,657
Renegotiated loans 734 416
------ ------
Total nonperforming loans $2,306 $2,073
------ ------
Loans past due 90 days and accruing $ 669 $ 461
Other real estate 765 495
------ ------
Total nonperforming assets $3,740 $3,029
====== ======
Asset Quality Ratios
Non-performing loans to total gross loans 0.69% 1.01%
Non-performing assets to total gross loans 1.12% 1.47%
Non-performing assets to total assets 0.66% .81%
Allowance for possible loan losses to
nonperforming loans 209.67% 170.04%
</TABLE>
During the Nine months ended September 30, 1999, gross interest income of
$47,000 would have been recorded on loans accounted for on a nonaccrual basis if
the loans had been current throughout the period.
Impaired Loans - In accordance with SFAS No. 114, the 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 nonaccruing loans where
situations exist which have reduced the probability of collection in
accordance with contractual terms.
As of September 30, 1999 the Company's recorded investment in impaired loans and
the related valuation allowance calculated under SFAS No. 114 are as follows:
September 30, December 31,
1999 1998
Impaired loans -
Recorded investment $ 920 $ 907
Valuation allowance $ 195 $ 138
This 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 nine-month period
ended September 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 nine-month
period ended September 30, 1999.
Analysis of the Allowance for Possible Loan Losses
Between December 31, 1998 and September 30, 1999, the allowance for possible
loan losses increased by $1.3 million (37%) to $4.8 million,
which constituted 1.45% of gross loans on September 30, 1999 compared to
1.71% at December 31, 1998. The provision for possible loan losses added
$753,000 for the nine-month period, while $624,000 of the increase resulted
from the purchase of First Savings.
Management believes the allowance for possible loan losses at September
30, 1999 of $4.8 million or 209.67% of
nonperforming assets, is adequate.
The following table represents transactions affecting the allowance for possible
loan losses during the nine-month period ended September 30, 1999.
Balance at beginning of period, January 1, $3,525 $2,731
Charge-offs:
Commercial, financial and agricultural 95 -
Real estate--mortgage - -
Installment loans to individuals 38 14
Credit cards and related plans 54 22
------- -----
187 36
Recoveries:
Commercial, financial and agricultural 47 170
Real estate--mortgage 61 8
Installment loans to individuals 2 3
Credit cards and related plans 10 3
-------- ------
120 184
Net (charge-offs) recoveries (67) 148
Provision charged to operations
during the three-month period 753
Adjustments 624 228
------- ------
Balance at end of period, September 30, 1999 $4,835 $3,107
======= ======
Ratio of net charge-offs during the
nine-month period to average loans
outstanding during that period .02% .01%
Investment Securities
Securities increased by a net amount of $32.4 million (29%). An increase
of $56.9 million of such increase is attributable to the First Savings
acquisition. A $41.3 million (44%) increase in securities available for sale,
to $135.1 million, was partially offset by a 50% decrease in securities held
to maturity, to $8.9 million.
Cash
Cash and cash equivalents increased by $17.0 million (72%) to $40.7 million.
Approximately $11.2 million of such increase is attributable to the First
Savings acquisition. Federal funds sold increased by $13.4 million (229%)
to $21.4 million while cash and due from banks increased 20% to $21.4 million.
Intangible Assets
Intangible assets rose nearly $13.0 million, from $347,000 million to $13.3
million. Substantially all of the increase represents the unamortized portion
of the goodwill intangible asset arising from the acquisition of First Savings
. The total premium was $13.3 million, which is being amortized at the rate
of $168,000 per quarter over a 20-year period. The premium net of
amortization at September 30, 1999 was $13.1 million.
Other Assets
Other assets increased $7.7 million (67%) to $19.1 million. Approximately $3.4
million of the increase is attributable to the First Savings acquisition.
Premises
Premises and equipment net of depreciation increased by $2.8 million (53%)
to $8.0 million. Approximately $2.7 of the increase is attributable to the
First Savings acquisition.
LIABILITIES
Between December 31, 1998 and September 30, 1999, total liabilities
increased by $193.8 million (57%) to $533.8 million. The increase is
primarily attributable to the acquisition of First Savings. The increase also
reflects continued growth of the Subsidiary Banks.
Deposits
Total deposits increased by $182.4 million (62%) to $475.8 million.
Such increase is primarily attributable to the acquisition of First Savings,
from which the Company acquired $172.3 million in deposits.
As of the reporting period, the Company lost approximately $7.0 million in
deposit runoff from the acquired deposits of First Savings.
The allocation of the $182.4 million increase in deposits between interest
bearing and non-interest bearing reflected the allocation of deposits acquired
from First Savings. Approximately $164 million of the deposits acquired from
First Savings were interest bearing, and approximately $8.3 million of the
deposits acquired from First Savings were non-interest bearing. The $182.4
million increase in deposits from December 31, 1998 to September 30, 1999
was predominantly attributable to a $131.1 million
(110%) increase in time deposits, while savings deposits increased $27.1
million (83%) and interest-bearing deposits increased $10.2 million (16%).
SHAREHOLDERS' EQUITY
Between December 31, 1998 and September 30, 1999 total shareholders' equity
increased by $3.3 million (11%) to $36.0 million.
In addition to the Company's net income of $3.0 million for the nine-month
period ended September 30, 1999, the Company received $3.8 million from the sale
of common stock pursuant to the second quarter 1999 private placement and an
additional $200,000 from the exercise of stock options and issuance of common
stock under the dividend reinvestment plan. Such increases in shareholders'
equity, totaling $4.0 million, were partially offset by dividends paid in the
amount of $1.1 million and a $2.3 million decrease in accumulated other
comprehensive income.
Book value per common share at September 30, 1999 was $5.91 compared to $6.06 at
December 31, 1998.
CAPITAL ADEQUACY, REGULATORY CAPITAL RATIOS AND DIVIDENDS
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 th
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).
Total shareholders' equity of $36.0 million at September 30, 1999 was 6.3% of
total assets, compared with $32.3 million or 8.7% of total assets at December
31, 1998. The decreased percentage resulted from the addition of significant
assets in the First Savings purchase. Moreover, for purposes of computing
regulatory capital of the Company, which includes the Company and the subsidiary
banks, governmental regulations require that the goodwill intangible asset
arising from the First Savings acquisition be ignored. As a result of these two
factors, the Company's and the Subsidiary Banks' regulatory capital ratios
decreased between December 31, 1998 and September 30, 1999. Despite these
decreases the Company and the Subsidiary Bank's remain well-capitalized for
regulatory purposes and management believes present capital is adequate to
support contemplated future internal growth.
<PAGE>
The following table sets forth selected regulatory capital ratios for the
Company and the Subsidiary Banks and the required minimum regulatory ratios at
September 30, 1999:
<TABLE>
To Be Well Capitalized
under Prompt Corrective
For Capital Adequacy Action Provision
Purposes
Actual
<S> <C> <C> <C> <C> <C> <C>
Amount Ratio Amount Ratio Amount Ratio
Total capital (to risk weighted assets)
Greater Community Bancorp $ 49,703 13.73% $ 28,954 8.00% $ - -
Great Falls Bank 27,229 11.71% 18,602 8.00% 23,253 10.00%
Bergen Commercial Bank 9,121 12.50% 5,837 8.00% 7,297 10.00%
Rock Community Bank 4,751 183.95% 207 8.00% 258 10.00%
Tier 1 Capital (to risk weighted assets)
Greater Community Bancorp 34,226 9.46% 14,477 4.00% - -
Great Falls Bank 24,222 10.45% 9,272 4.00% 13,907 6.00%
Bergen Commercial Bank 8,113 11.31% 2,869 4.00% 4,304 6.00%
Rock Community Bank 4,690 183.15% 102 4.00% 154 6.00%
Tier 1 Capital (to average assets)
Greater Community Bancorp 34,226 6.31% 21,700 4.00% - -
Great Falls Bank 24,222 6.48% 14,952 4.00% 18,690 5.00%
Bergen Commercial Bank 8,113 7.00% 5,636 4.00% 5,795 5.00%
Rock Community Bank 4,690 51.16% 367 4.00% 458 5.00%
</TABLE>
During the last three quarters of 1998 and the first quarter of 1999 the
Company declared cash dividends at the rate of $0.06 per share, or an annual
rate of $0.24 per share. During the second quarter of 1999 the Company
increased the declared quarterly dividend by 17% to $0.07 per share, or an
annual dividend rate of $0.28 per share. The Company's payment of a 5% stock
dividend during the third quarter of 1999 had the effect of further
increasing the annual dividend rate by 5%. The Company's Board of
Directors continues to believe that cash dividends are an important component
of shareholder value and that at its current level of performance and capital,
the Company expects to continue its current dividend policy of a quarterly
distribution of earnings to its shareholders.
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 Company does not expect the formation of RCB to have a material adverse
impact on its future results of operations for the next year.
YEAR 2000
Historically, until relatively recently most computer programs were written
using two digits rather than four to define the applicable year. These
programs were written without considering the impact of the upcoming change in
the century and these programs may experience problems handling dates beyond
the year 1999. This could cause computer applications to fail or to create
erroneous results unless corrective measures are taken. Incomplete or
untimely resolution of Year 2000 ("Y2K") issues could have
a material adverse impact on the Company's business, operations and financial
condition in the future.
As of September 30, 1999, virtually all of the Company's MIS and PC
client-server systems have been tested and returned to use as year 2000 ready.
In addition, all of the Company's non-PC related related hardware and systems
have been tested and determined to be year 2000 ready.
The Company had completed its company-wide assessment of year 2000 issues
relating to its identified mission critical systems and continues to monitor
these systems as necessary. No significant problems have been identified to
date with respect to these systems. Also, the Company has substantially
completed its assessment of the year 2000 preparedness of its mission
critical service providers and have not found any material problems associated
with its mission critical service providers. However, the
Company can make no guarantee as to the year 2000 preparedness of
any such provider or other third party.
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. No significant outlays have been made
to replace existing systems solely for year 2000 reasons. The costs to
complete its year 2000 readiness activities were based on management's best
estimates, which were derived using numerous assumptions of future events
including the continued availability of certain resources, third
party preparedness and other factors. Management believes that any additional
year 2000 expenses will not be significant.
Contingency plans for year 2000 issues have been and will continue to reviewed
and monitored during the remainder of 1999 and modify them when necessary and
appropriate.
It is not possible to predict with certainty all adverse effects that might
result from 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. However, if the Company or its third
party service providers were to fail to correct internal year 2000 problems
or if the Company's contingency plans fail to mitigate any such problems,
a disruption of operations could occur, resulting in increased
operation costs, loss of revenues and the Company could subject itself to
liquidity risk in the event of deposit withdrawals. Also, to the extend the
borrowers' financial positions are weakened, the Company's credit risk could
be adversely affected.
Item 3 Quantitative and Qualitative Disclosures About Market Risk
There has been no material changes in 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
None.
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
- - - -------------------------------------------------------------
None.
Item 5 - Other information
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are
filed with this Report.
Exhibit No. Description
4.1 Junior Subordinated
Indenture between Greater Community Bancorp and Bankers Trust Company as
Trustee, dated May 1997 (incorporated by reference to Exhibit 4.1 of
Exhibits to Form S-2/A Registration Statement filed by GCB Capital
Trust and Greater Community Bancorp under the Securities Act of 1933,
Registration Nos. 333-26453-01, 333-26453, filed May 9, 1997).
4.2 Form of Junior Subordinated Debenture
Certificate for junior subordinated debentures due May, 2027 1997
(incorporated by reference to Exhibit 4.2 of Exhibits to Form S-2/A
Registration Statement filed by GCB Capital Trust and Greater Community
Bancorp under the Securities Act of 1933, Registration Nos.
333-26453-01, 333-26453, filed May 9, 1997).
4.4 Amended and Restated Trust among
Greater Community Bancorp as Depositor, Bankers Trust Company as Property
Trustee, and Bankers Trust (Delaware) as Delaware Trustee, dated May 1997
(incorporated by reference to Exhibit 4.4 of Exhibits to Form S-2/A
Registration Statement filed by GCB Capital Trust and Greater Community
Bancorp under the Securities Act of 1933, Registration Nos.
333-26453-01, 333-26453, filed May 9, 1997).
4.6 Guarantee Agreement between Greater
Community Bancorp (as Guarantor) and Bankers Trust Company (as Trustee)
dated May , 1997 (incorporated by reference to Exhibit 4.6 of Exhibits
to Form S-2/A Registration Statement filed by GCB Capital Trust and Greater
Community Bancorp under the Securities Act of 1933, Registration Nos.
333-26453-01, 333-26453, filed May 9, 1997).
10.3 Agreement with Erwin D. Knauer dated July 1, 1999
27 Financial Data Schedule
(b) Reports on Form 8-K.
On January November 12, 1999, the Company filed a Form 8-K
with Securities and Exchange Commission reporting the third quarter earnings.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GREATER COMMUNITY BANCORP
(Registrant)
Date: November 12, 1999 By:
------------------ --------------------------------
Naqi A. Naqvi, Treasurer & CFO
(Duly Authorized Officer and
Principal Financial Officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27-4
FINANCIAL DATA SCHEDULE
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 21,045
<INT-BEARING-DEPOSITS> 13,576
<FED-FUNDS-SOLD> 19,275
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 134,239
<INVESTMENTS-CARRYING> 9,742
<INVESTMENTS-MARKET> 9,331
<LOANS> 331,224
<ALLOWANCE> 4,835
<TOTAL-ASSETS> 569,859
<DEPOSITS> 475,816
<SHORT-TERM> 11,253
<LIABILITIES-OTHER> 9,197
<LONG-TERM> 38,000
<COMMON> 3,010
0
0
<OTHER-SE> 32,584
<TOTAL-LIABILITIES-AND-EQUITY> 569,859
<INTEREST-LOAN> 18,013
<INTEREST-INVEST> 5,799
<INTEREST-OTHER> 968
<INTEREST-TOTAL> 24,780
<INTEREST-DEPOSIT> 9,554
<INTEREST-EXPENSE> 12,232
<INTEREST-INCOME-NET> 12,548
<LOAN-LOSSES> 753
<SECURITIES-GAINS> 2,096
<EXPENSE-OTHER> 12,852
<INCOME-PRETAX> 4,777
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,956
<EPS-BASIC> 0.51
<EPS-DILUTED> 0.49
<YIELD-ACTUAL> 0
<LOANS-NON> 1,572
<LOANS-PAST> 669
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,525
<CHARGE-OFFS> 187
<RECOVERIES> 120
<ALLOWANCE-CLOSE> 4,835
<ALLOWANCE-DOMESTIC> 4,835
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 919
</TABLE>
EXHIBIT 10.3
TO SEC FORM 10-Q OF GREATER COMMUNITY BANCORP
FOR QUARTER ENDED SEPTEMBER 30, 1999
AGREEMENT
This Agreement entered into as of July 1, 1999 ("Effective Date"), by
and between Greater Community Bancorp, a New Jersey business corporation having
its principal place of business at 55 Union Boulevard, Totowa, New Jersey 07511
("GCB"), and Erwin D. Knauer, residing at 10 Jay Street, Old Tappan, New Jersey
07675 (the "Employee").
WITNESSETH:
WHEREAS, the Employee is on the Effective Date being employed as
Executive Vice President of GCB, and as President and Chief Executive Officer of
GCB's subsidiary company, Greater Community Services ("GCS"); and
WHEREAS, as a material inducement to the Employee to accept the
foregoing positions and the employment by GCB and GCS, this Agreement is being
entered into and relied upon by the Employee;
NOW, THEREFORE, it is agreed as follows:
1. Definitions
a. "Base Compensation" shall mean as of any given
date, the Employee's annual salary as of that date.
b. "Just Cause" as used herein shall exist when there has been
a good faith determination by GCB's Board of Directors that there shall have
occurred one or more of the following events with respect to the Employee: (1)
personal dishonesty; (2) willful commission of an act that causes or that
probably will cause substantial economic damage to GCB or a subsidiary or
substantial injury to their business reputation; (3) willful misconduct; (4)
breach of fiduciary duty involving personal profit; (5) intentional failure to
perform stated duties; (6) willful violation of any law, rule or regulation
(other than traffic violations or similar offenses) or final cease-and desist
order; or (7) material breach of any provision of this Agreement.
Notwithstanding the foregoing, Just Cause shall not be deemed to exist unless
there shall have been delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board of Directors of GCB at a meeting of such Board called
and held for the purpose (after reasonable notice to the Employee and an
opportunity for the Employee to be heard before the Board), finding that in the
good faith opinion of the Board the Employee was guilty of conduct described
above and specifying the particulars thereof. Prior to holding a meeting at
which the Board is to make a final determination whether Just Cause exists, if
the Board of Directors of GCB determines in good faith at a meeting of
Directors, by not less than a majority of its entire membership, that there is
probable cause for it to find that the Employee was guilty of conduct
constituting Just Cause as described above, the Board of Directors may suspend
the Employee from his duties hereunder for a reasonable time not to exceed
fourteen (14) days pending a further meeting at which the Employee shall be
given the opportunity to be heard before the Board. During any such period of
suspension the Board of Directors may also suspend payment of the Employee's
base compensation and no stock options may be exercised.
2. Change in Control.
a. Involuntary Termination After Change in Control.
Notwithstanding any provision herein to the contrary, if, in connection with or
within twelve (12) months after any change in "control" of GCB, the Employee's
employment is terminated by GCB without the Employee's prior written consent and
for a reason other than Just Cause, the Employee shall be paid an amount equal
to two times base annual compensation less that amount of base compensation
actually paid after the change of control unless GCB was placed in
conservatorship or receivership in connection with such change in control and
the Board of Directors of GCB determines in good faith that the change in
control was directed by or otherwise required by the Federal Reserve Board or a
Federal Reserve Bank under delegated authority. In no event, however, may the
aggregate amount payable hereunder equal or exceed the difference between (i)
the product of 2.99 times the Employee's "base amount" as defined in
ss.280G(b)(3) of the Code and regulations promulgated thereunder, and (ii) the
sum of any other parachute payments (as defined under ss.280G(b)(2) of the Code)
that the Employee receives on account of the change in control. Said sum shall
be paid in one lump sum within ten (10) days of such termination. The term
"control," for purposes of determining whether a "change in control" has
occurred for purposes of this Section, shall be deemed to have occurred if any
of the following events shall occur after the effective date of this Agreement:
(1) the acquisition by any person of ownership or power to vote more than
twenty-five percent (25%) of GCB's voting stock; (2) the acquisition by any
person of the control of the election of a majority of GCB's directors; (3) the
exercise of a controlling influence over the management or policies of GCB or by
any person or by persons acting as a group within the meaning of ss.13(d) of the
Securities Exchange Act of 1934; or (4) during any period of two consecutive
years, individuals who at the beginning of such two-year period constitute the
Board of Directors of GCB (the "Company Board") (the "Continuing Directors")
cease for any reason to constitute at least two-thirds (2/3) thereof, provided
that any individual whose election or nomination for election as a member of the
Company Board was approved by a vote of at least two-thirds (2/3) of the
Continuing Directors then in office shall be considered a Continuing Director.
The term "person" as used above means an individual (other than the Employee),
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
b. Voluntary Termination After Change in Control.
Notwithstanding any other provision of this Agreement to the contrary, the
Employee may voluntarily terminate his employment under this Agreement within
twelve (12) months following a change in control of GCB, and the Employee shall
thereupon be entitled to receive the payment described in subsection 2.a. of
this Agreement, upon the occurrence of any of the following events, or within
ninety (90) days thereafter, which shall have not been consented to in advance
by the Employee in writing: (1) the requirement that the Employee move his
personal residence; (2) the assignment to the Employee of duties and
responsibilities substantially inconsistent with those normally associated with
his position and/or title at the time such change in control occurs; or (3) a
material reduction in the Employee's responsibilities or authority (including
reporting responsibilities) in connection with his employment with GCB.
c. Dispute Resolution. In the event that any disput
arises between the Employee and GCB as to the terms or interpretation of this
Agreement, each party hereto agrees that such dispute may, at the request of
3. Employment At Will. Subject only to the Employee's rights
under Section 2 hereof, the Employee acknowledges that he is an employee at
will of GCB and GCS.
------------------
4. Amendments. No Amendments or additions to this Agreement
shall be binding unless made in writing and signed by all of the parties
hereto, except as herein otherwise specifically provided.
----------
5. Applicable Law.
a. State Law. Except to the extent preempted by
Federal law, the laws of the State of New Jersey shall govern this Agreement
in all respects, whether as to its validity, construction, capacity,
performance or otherwise.
---------
b. Compliance with Law and Regulation.
All provisions of this Agreement are intended to be consistent with and comply
with all laws and regulations enacted or promulgated both before and after
the Effective Date, applicable to GCB and to the extent that any provision
is inconsistent or in non-compliance, such provision shall be deemed void.
----------------------------------
6. Headings. Headings contained herein are for convenience of
reference only and are not intended to affect the meaning of the text of this
Agreement.
--------
7. Entire Agreement. This Agreement, together with any
modifications thereof as may hereafter be agreed to in writing by the
parties, shall constitute the entire agreement between the parties hereto
with respect to the subject matter hereof.
----------------
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ATTEST: GREATER COMMUNITY BANCORP
/s/ Jeannette M. Chardavoyne By: /s/ George E. Irwin
Jeannette M. Chardavoyne, George E. Irwin, President
Assistant Secretary
WITNESS: EMPLOYEE
/s/ Janet M. Pagano By: /s/ Erwin D. Knauer
Janet M. Pagano Erwin D. Knauer
