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 March 31, 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 issuer as specified in its charter)
NEW JERSEY 22-2545165
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
55 Union Boulevard, Totowa, New Jersey 07512
(Address of principal executive offices)
(973) 942-1111
(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 - 5,609,114 shares at May 14, 1999.
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
Form 10-Q
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1-Financial Statements
Consolidated Balance Sheets at March 31, 1999 (Unaudited)
and December 31, 1998. . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Income (Unaudited)
Three Months ended March 31, 1999 and 1998 . . . . . . . . . . . 3
Consolidated Statements of Changes in Shareholders'
Equity and Comprehensive Income (Unaudited)
Three Months ended March 31, 1999 and 1998 . . . . . . . . . . 4
Consolidated Statements of Cash Flows (Unaudited)
Three Months ended March 31, 1999 and 1998 . . . . . . . . . . 5
Notes to Consolidated Financial Statements (Unaudited) . . . . . . . 6
Item 2-Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . . 8
Item 3-Quantitative and Qualitative Changes Regarding Market Risk . . . . . 15
PART II - OTHER INFORMATION
Items 1 through 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
March 31, December 31,
1999 1998
ASSETS
CASH AND DUE FROM BANKS-Non-interest-bearing $ 13,306 $ 17,790
FEDERAL FUNDS SOLD 4,850 5,850
-------- --------
Total cash and cash equivalents 18,156 23,640
DUE FROM BANKS - Interest-bearing 37,237 15,544
SECURITIES:
Available-for-sale, at fair value 85,782 93,797
Held-to-maturity, at amortized cost (fair
Value $13,928 and $17,554) 14,258 17,804
-------- --------
100,040 111,601
LOANS 207,127 206,120
Less - Allowance for possible loan losses 3,606 3,525
Unearned income 880 830
-------- --------
Net loans 202,641 201,765
PREMISES AND EQUIPMENT, net 5,396 5,251
OTHER REAL ESTATE 471 495
ACCRUED INTEREST RECEIVABLE 2,385 2,293
INTANGIBLE AND OTHER ASSETS 15,664 11,811
-------- --------
Total assets $381,990 $372,400
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Non-interest-bearing $ 79,193 $ 76,346
Interest-bearing 59,285 64,987
Savings 33,880 32,883
Time 105,082 119,179
-------- --------
Total deposits 277,440 293,395
FHLB ADVANCES 10,000 10,000
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE 32,356 7,103
ACCRUED INTEREST PAYABLE 2,254 2,589
OTHER LIABILITIES 4,348 4,004
GUARANTEED PREFERRED BENEFICIAL INTEREST
IN THE COMPANY=S SUBORDINATED DEBT 23,000 23,000
-------- --------
Total Liabilities 349,398 340,091
-------- --------
SHAREHOLDERS' EQUITY
Common Stock, par value $1 per share:
10,000,000 shares authorized, 5,340,230
and 5,329,566 shares issued 2,670 2,665
Additional paid-in capital 25,491 25,460
Retained earnings 2,483 1,932
Accumulated other comprehensive
income 1,948 2,252
-------- --------
Total shareholders' equity 32,592 32,309
-------- --------
Total liabilities and
shareholders' equity $381,990 $372,400
======== ========
(See notes to Consolidated Financial Statements)
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
1999 1998
INTEREST INCOME
Loans, including fees $ 4,306 $ 3,788
Investment securities 1,458 1,967
Federal Funds sold and deposits with banks 307 136
------- -------
Total interest income 6,072 5,891
------- -------
INTEREST EXPENSE
Deposits 1,879 2,156
Short-term borrowings 246 66
Long-term borrowings 575 593
------- -------
Total interest expense 2,700 2,815
------- -------
NET INTEREST INCOME 3,372 3,076
PROVISION FOR POSSIBLE LOAN LOSSES 111 120
------- -------
Net interest income after
provision for possible loan losses 3,261 2,956
OTHER INCOME
Gain on sale of investment securities 200 154
All other income 1,183 764
--------- -------
1,383 918
OTHER EXPENSES
Salaries and employee benefits 1,562 1,339
Occupancy and equipment 600 584
Regulatory, professional and other fees 238 173
Office expenses 176 134
Other operating expenses 666 460
------- -------
Total other expenses 3,242 2,690
------- -------
Income before income taxes 1,402 1,184
PROVISION FOR INCOME TAXES 515 413
------- -------
NET INCOME 887 771
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING - Basic 5,340 5,287
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING - Diluted 5,531 5,663
======= =======
NET INCOME PER SHARE - Basic $0.17 $0.15
======= =======
NET INCOME PER SHARE - Diluted $0.16 $0.14
======= =======
(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)
Three Months ended March 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C>
Accumulated
Additional Other Total
Common Paid in Retained Comprehensive Sahreholders' Comprehensive
Stock Capital Earnings Income Equity Income
Balance January 1, 1999 $2,665 $25,460 $1,932 $2,252 $32,309 -
Net Income 887 887 $887
Exercise of stock options 8 97 105
Cash dividends (336) (336)
Other comprehensive income,
net of reclassification,
taxes and adjustments (304) (304) (304)
--------
Total comprehensive income $584
Retirement of treasury
stock (3) (66) (69)
------- -------- -------- --------- --------
Balance, March 31, 1999 $2,670 $25,491 $2,483 $1,948 $32,592
-------- --------- ------- --------- --------
Three Months ended March 31, 1998
Accumulated
Additional Other Total
Common Paid in Retained Comprehensive Sahreholders' Comprehensive
Stock Capital Earnings Income Equity Income
<C> <C> <C> <C> <C> <C>
Balance January 1, 1998 $2,647 $25,138 ($391) $1,867 $29,261 -
Net Income 771 771 $771
Cash dividends (264) (264)
Other comprehensive income,
net of reclassification,
taxes and adjustments
178 178 178
-----
Total comprehensive income $949
Retirement of treasury
stock (4) (100) (104)
------- -------- ------- ------- -------
Balance, March 31, 1998 $2,643 $25,038 $ 116 $2,045 $29,842
-------- -------- ------- ------- -------
</TABLE>
(See notes to Consolidated Financial Statements)
<PAGE>
GREATER COMMUNITY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended
March 31
1999 1998
------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 887 $ 771
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 305 288
Accretion of discount on securities, net 23 -
Provision for possible loan losses 111 120
Gain on sale of investment securities (200) (154)
(Increase) decrease in accrued interest receivable (92) 91
(Increase)in other assets (3,853) (526)
Increase in accrued expenses
and other liabilities 9 759
-------- -------
Net cash provided by operating activities (2,810) 1,349
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Available-for-sale securities:
Purchases (9,812) (21,920)
Sales 4,670 112
Calls or Maturities 12,892 13,347
Held-to-maturity securities:
Purchases (670) -
Maturities 4,216 2,166
Net (increase)decrease in interest-bearing
deposits with banks (21,693) (301)
Net increase in loans (876) (10,096)
Capital expenditure (422) (254)
Decrease in other real estate 24 115
--------- ---------
Net cash used in investing activities (11,671) (16,831)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in deposit accounts (15,955) 28,033
Increase in repurchase agreements 25,253 795
Dividends paid (336) (264)
Proceeds from exercise of stock options 105 18
Purchase of treasury stock (69) (122)
Other, net (1) 7
-------- --------
Net cash provided by financing activities 8,997 28,467
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,484) 12,985
--------- --------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 23,640 22,845
-------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $18,156 $35,830
======== =========
(See notes to 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 March 31, 1999 and the consolidated results
of operations and cash flows for three months ended March 31, 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. The results of operations for such interim periods are not
necessarily indicative of the results for the full year. 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 March, 1999, the Company's Board of Directors declared a cash dividend
of $.06 per share payable on April 30, 1999 to shareholders of record on April
15, 1999. The financial information in this report has been adjusted to
reflect the dividend payable as of March 31, 1999.
EARNINGS PER SHARE
The Company's reported diluted earnings per share of $0.16 and $0.14 per share
for the three-month periods ended March 31, 1999 and 1998, respectively, both
take into consideration the dilutive effects of the Company's outstanding common
stock equivalents, namely stock options.
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 consolidated financial statements in this Form 10-Q do not
reflect the FSB acquisition.
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 April, 1999, pursuant to SEC Regulation D, the Company commenced a
private placement of $5 million of common stock at $9.58 per share. The proceeds
of the private placement are to be applied to reimburse the Company for its $5
million capital contribution to RCB. During April the Company completed the
first stage of the private placement, which resulted in the issuance, to RCB's
directors and their affiliates pursuant to a prior agreement, of 254,480 shares
for gross sales proceeds of $2.5 million. Early in May, 1999 the Company
commenced the second stage of such private placement,
<PAGE>
in which an additional $2.5 million of stock is being privately offered in
the RCB market area, also at $9.58 per share. 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 March 31, 1999 and results of operations for the three-month
periods ended March 31, 1999 and 1998 should be read in conjunction with the
Consolidated Financial Statements and related Notes thereto included in the
Company's latest Annual Report on Form 10-KSB and the other information herein.
The information as of March 31, 1999 and for the three-month periods ended March
31, 1999 and 1998 is derived from unaudited financial data but, in the opinion
of management of the Company, reflects all adjustments (consisting solely of
normal recurring accruals) necessary for a fair presentation of the financial
condition and results of operations at that date and for those periods.
The results of operations for the three months ended March 31, 1999 are not
necessarily indicative of the results which may be expected for any other
period. The term "Company" as used herein refers to Greater Community Bancorp
and subsidiaries and the term "Subsidiary Banks" as used herein refers to Great
Falls Bank (GFB) and Bergen Commercial Bank (BCB). Unless otherwise indicated,
amounts indicated in the tables below are in thousands, except 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 first 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 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 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
Effective April 1, 1999 the Company completed the acquisition of First Savings
Bank of Little Falls, F.S.B. See Note 3 to the financial statements in this
Form 10-Q.
<PAGE>
Effective April 27, 1999, a de novo New Jersey commercial bank subsidiary of the
Company, Rock Community Bank ("RCB"), opened for business. During April the
Company also commenced a private placement of common stock whose purpose is to
raise up to $5 million to reimburse the Company for its $5 million capital
contribution to RCB. See Note 4 to the financial statements in this Form 10-Q.
A. Financial Condition: March 31, 1999 and December 31, 1998
At March 31, 1999, the Company's total assets were $382.0 million, an increase
of $9.6 million or 3% compared to the amount reported at December 31, 1998.
Investment securities decreased by $11.6 million or 11% while net loans
increased by $876,000.
The decline in investment securities was a result of maturities. Cash and cash
equivalents decreased by $5.5 million or 23%. The proceeds from investment
securities and cash and cash equivalents were subsequently used to fund the
decline of $16.0 million or 5% in total deposits.
Investment Securities
Investment securities totaled $100.0 million at March 31, 1999, a decrease of
$11.6 million or 11% compared to the amount reported at December 31, 1998.
Management reviews the investment portfolio continually to achieve maximum
yields without having to sacrifice the quality of the investments. Of the total
at March 31, 1999, 23% of the investments are in U.S. Government obligations,
58% in mortgage backed securities and the balance in municipal and equity
securities.
Loan Portfolio
The Company's loan portfolio net of allowance for possible loan losses at March
31, 1999 totaled $202.6 million, an increase of $876,000, compared to the amount
reported at December 31, 1998. This moderate increase is primarily due to
increased loan demand for both Subsidiary Banks.
Deposits
Total deposits at March 31, 1999 were $277.4 million, a decrease of $16.0
million or 5%, compared to the amount reported at December 31, 1998. The
majority of the such decrease is due to the non-renewal of matured time
deposits. Of the total decrease, time deposits decreased by $14.1 million
primarily as a result of deposit maturities. Interest-bearing demand deposits
decreased by $5.7 million while non-interest bearing demand deposits increased
by $2.8 million and savings deposits increased by $1.0 million. Of the total
deposits, time deposits accounts for 38%, non-interest-bearing deposits accounts
for 29%, interest-bearing demand deposits accounts for 21%, and savings deposits
accounts for 12%.
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 March 31, 1999, sources of
liquidity include $18.2 million in cash and cash equivalents, and $85.8 million
in investment securities available for sale.
<PAGE>
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).
The following table sets forth selected regulatory capital ratios for the
Company and the Subsidiary Banks and the required minimum regulatory ratios at
March 31, 1999:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
To Be Well
Capitalized Under
For Capital Adequacy Prompt Corrective
Actual Purposes Action Provision
Amount Ratio Amount Ratio Amount Ratio
Total capital (to risk weighted assets)
Greater Community Bancorp $ 56,740 20.77% $ 21,855 8.00% $ - -
Great Falls Bank 17,554 11.43% 12,286 8.00% 15,357 10.00%
Bergen Commercial Bank 9,250 12.06% 6,136 8.00% 7,670 10.00%
Tier 1 Capital (to risk weighted assets)
Greater Community Bancorp 40,536 14.84% 10,926 4.00% - -
Great Falls Bank 15,624 10.17% 6,145 4.00% 9,218 6.00%
Bergen Commercial Bank 8,375 10.92% 3,068 4.00% 4,602 6.00%
Tier 1 Capital (to average assets)
Greater Community Bancorp 40,536 11.17% 14,516 4.00% - -
Great Falls Bank 15,624 7.02% 8,903 4.00% 11,128 5.00%
Bergen Commercial Bank 8,375 7.35% 4,558 4.00% 5,697 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 the Company's customers who
operated 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. The real estate
market, real estate values and employment levels are fairly stable and in some
cases have shown an upward movement.
<PAGE>
Non-performing assets consist of non-accrual loans, renegotiated loans,
accruing loans past due 90 days or more, and 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.
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.
<PAGE>
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.
March 31, December 31,
1999 1998
Non-accruing loans $1,522 $ 1,657
Renegotiated loans 746 416
------- -------
Total non-performing loans $2,268 $ 2,073
Loans past due 90 days and accruing 9 461
Other real estate 471 495
------- -------
Total non-performing assets $ 2,748 $ 3,029
======= =======
Asset Quality Ratios
Non-performing loans to total gross loans 1.09% 1.01%
Non-performing assets to total gross loans 1.33% 1.47%
Non-performing assets to total assets .72% .81%
Allowance for possible loan losses to
non-performing loans 158.99% 170.04%
Non-accruing loans decreased by $135,000 for the three months ended March 31,
1999 when compared to December 31, 1998, primarily due to such loans being
brought to current status. Renegotiated loans increased by $330,000 for the same
period, primarily due to a reclassification of a non-accrual loan. During the
three months ended March 31, 1999, gross interest income of $24,000 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 bank will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. These loans consist primarily of non-accrual loans but may include
performing loans to the extent that situations arise which would reduce the
probability of collection in accordance with contractual terms. As of March 31,
1999 the Company's recorded investment in impaired loans and the related
valuation allowance calculated under SFAS No. 114 are as follows:
March 31, December 31,
1999 1998
Impaired loans -
Recorded investment $1,204 $ 907
Valuation allowance $ 266 $ 138
This valuation allowance is included in the allowance for possible loan losses
on the Company's statement of condition.
The average recorded investment in impaired loans for the three-month period
ended March 31, 1999 was $1.1 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 $11,000 for the
three-month period ended March 31, 1999.
<PAGE>
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 March 31, 1999 of $3.6
million or 159% 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.
At March 31, 1999, the allowance for possible loan losses increased by $81,000
over the amount recorded at December 31, 1998. The following table represents
transactions affecting the allowance for possible loan losses during the
three-month period ended March 31, 1999 and 1998.
Balance at beginning of period, January 1, 1999 $3,525
Charge-offs:
Commercial, financial and agricultural -
Real estate--mortgage -
Installment loans to individuals 13
Credit cards and related plans 34
-------
47
Recoveries:
Commercial, financial and agricultural 2
Real estate--mortgage 13
Installment loans to individuals 1
Credit cards and related plans 1
-------
17
Net charge-offs 30
Provision charged to operations
during the three-month period 111
Balance at end of period, March 31, 1999 $3,606
=======
Ratio of net charge-offs during the
three-month period to average loans
outstanding during that period .01%
<PAGE>
Balance at beginning of period, January 1, 1998 $2,731
Charge-offs:
Commercial, financial and agricultural -
Real estate--mortgage -
Installment loans to individuals 8
Credit cards and related plans 5
-------
14
Recoveries:
Commercial, financial and agricultural 25
Real estate--mortgage 6
Installment loans to individuals -
Credit cards and related plans 3
-------
34
Net Recoveries 20
Provision charged to operations
during the three-month period 120
-------
Balance at end of period, March 31, 1998 $2,871
=======
Ratio of net recoveries during the
three-month period to average loans
outstanding during that period .01%
B. Results of Operations: Three-Months ended March 31, 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 (i) 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.
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 Months Ended March 31, 1999. The Company earned net income of
$887,000 or $0.17 per share basic and $0.16 per share diluted for the three
months ended March 31, 1999, compared to $771,000 or $0.15 per share basic and
$0.14 per share diluted for the same period in 1998.
Interest income increased by $181,000 or 3% for the three months ended March 31,
1999 relative to the comparable period in 1998. The moderate increase in
interest income is attributable primarily to increase in average loans coupled
with a decline in average investment securities. Other income increased by
$465,000 or 51% in the first quarter of 1999 compared to the same period in
1998. The majority of such increase is attributable to the increase in sales and
commission fees from trading activities in the amount of $160,000 and gains on
sale of investment securities of $46,000.
Total interest expense decreased by $115,000 during the first three months
of 1999 relative to the same period in 1998. The majority of such decrease is
related to the decrease in average rate-related liabilities. Total other
expenses increased by $552,000 during the first three months of 1999 compared to
the same period in 1998. The majority of such increase is attributable to the
increase in salaries and employee benefits and all other operating expenses due
to increased personnel.
The provision for possible loan losses for the three months ended March 31, 1999
was $111,000 compared to $120,000 during the first three months of the prior
year.
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
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 and it is expected to be completed by June 1999. The majority of 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 is also taking steps to run tests with its mission control service
providers as well as its mini-frame computer systems. 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
plans by June 1999. The plans will conform to the latest guidelines from the
FFIEC on business contingency planning for year 2000 readiness. Contingency
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-relate 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 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 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>
GREAT FALLS 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
None.
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
The Company's annual meeting of stockholders (the 1999 Annual Meeting) was
held on April 20, 1999. The following actions were taken at the 1999 Annual
Meeting with respect to election of directors. In accordance with the
nominations described in the Company's Proxy Statement dated March 17, 1999 (the
1999 Proxy Statement), previously filed with the Commission, all four of the
nominees, C. Mark Campbell, Joseph A. Lobosco, John L. Soldoveri and Charles J.
Volpe, were elected as directors for three-year terms expiring in 2002 and until
the election and qualification of their respective successors. The voting was as
follows:
Name of Nominee Votes for Votes Against Votes Withheld
- ---------------- ---------- ------------- --------------
C. Mark Campbell 4,405,210 - 22,351
Joseph A. Lobosco 4,405,210 - 22,351
John L. Soldoveri 4,405,100 - 22,461
Charles J. Volpe 4,405,210 - 22,351
The names of the other Directors of the Company whose terms of office as
Director continued after the 1999 Annual Meeting (and the year in which their
respective terms expire) are as follows: Marino A. Bramante (2000); Robert J.
Conklin (2000); William T. Ferguson (2000); Anthony M. Bruno, Jr. (2001); George
E. Irwin (2001); and Alfred R. Urbano (2001).
Item 5 - Other information
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits is 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 By laws 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 January 29, 1999, the Company filed a Form 8-K with
reporting the approval of the application of Rock
Community Bank by the State of New Jersey, Department
of Banking and Insurance.
On April 13, 1999, the Company filed a Form 8-K reporting the
consummation of 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GREATER COMMUNITY BANCORP
(Registrant)
Date: May 17, 1999 By: \Naqi A. Naqvi\
------------ ----------------------------
Naqi A. Naqvi, Treasurer
(Duly Authorized Officer and
Principal Financial Officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 13,306
<INT-BEARING-DEPOSITS> 37,237
<FED-FUNDS-SOLD> 4,850
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 85,782
<INVESTMENTS-CARRYING> 14,258
<INVESTMENTS-MARKET> 13,928
<LOANS> 206,247
<ALLOWANCE> 3,606
<TOTAL-ASSETS> 381,990
<DEPOSITS> 277,440
<SHORT-TERM> 32,356
<LIABILITIES-OTHER> 6,602
<LONG-TERM> 33,000
<COMMON> 2,670
0
0
<OTHER-SE> 27,974
<TOTAL-LIABILITIES-AND-EQUITY> 381,990
<INTEREST-LOAN> 4,306
<INTEREST-INVEST> 1,458
<INTEREST-OTHER> 307
<INTEREST-TOTAL> 6,072
<INTEREST-DEPOSIT> 1,879
<INTEREST-EXPENSE> 2,700
<INTEREST-INCOME-NET> 3,372
<LOAN-LOSSES> 111
<SECURITIES-GAINS> 200
<EXPENSE-OTHER> 3,242
<INCOME-PRETAX> 1,402
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 887
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.16
<YIELD-ACTUAL> 0
<LOANS-NON> 1,522
<LOANS-PAST> 9
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,525
<CHARGE-OFFS> 47
<RECOVERIES> 17
<ALLOWANCE-CLOSE> 3,606
<ALLOWANCE-DOMESTIC> 3,606
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 755
</TABLE>
