Item 1 - BUSINESS
THE HOLDING COMPANY
Greater Community Bancorp (the "Company") is a New Jersey business corporation. It is registered as a bank holding company with the Board of Governors of the Federal Reserve System ("Federal Reserve") under the Federal Bank Holding Company Act of 1956, as amended ("Holding Company Act"). The Company was incorporated in 1984.
The Company's only substantive business activity is the ownership and operation of Great Falls Bank ("GFB"), Bergen Commercial Bank ("BCB") and Rock Community Bank ("RCB") (the "Bank Subsidiaries"), which the Company acquired in 1985, 1995 and 1999, respectively (see "BANK SUBSIDIARIES" below) and its nonbank subsidiaries (see "NONBANK SUBSIDIARIES" below).
During 1999, the Company demonstrated continued growth. As of December 31, 1999, the Company's consolidated assets were $567.4 million, as compared with consolidated assets of $372.4 million at December 31, 1998. Net income for the year ended December 31, 1999 was $4.2 million ($0.71 per share-basic and $0.69 per share-diluted), up from $3.5 million ($0.64 per share-basic and $0.61 per share-diluted) in 1998. The Company declared total cash dividends of $0.27 per share and $0.23 per share during 1999 and 1998, respectively.
NONBANK SUBSIDIARIES
The Company owns five nonbank subsidiaries. (i) In March 1998, the Company continued its expansion efforts by forming another nonbank subsidiary, Highland Capital Corp. ("HCC"). HCC is a New Jersey corporation located in Paramus, New Jersey. The purpose of HCC is to engage in the business of leasing commercial office equipment to small and mid-size businesses in Bergen and surrounding counties.
(ii) GCB Realty, L.L.C. ("Realty") was formed in July 1997 as a New Jersey limited liability company located in Totowa, New Jersey. The purposes of Realty are to acquire and manage real estate properties. Realty owns two properties purchased for a total of $2.2 million in Bergen County, New Jersey. BCB, HCC and two other tenants lease space in one of the buildings. BCB also leases its Lyndhurst location from Realty. Annual rentals from both properties are estimated at $348,000.
(iii) GCB Capital Trust (the "Trust") was formed in April 1997 under the Business Trust Act of Delaware. The sole purposes of the Trust were issuing and selling Preferred Securities and Common Securities and using the sales proceeds to acquire Junior Subordinated Debentures (the "Debentures") issued by the Company. The Junior Subordinated Debentures are the sole assets of the Trust and the payments under the Junior Subordinated Debentures are its sole revenues. The Company owns all of the Trust's Common Securities.
In May 1997, the Company through the Trust sold 920,000 Preferred Securities with a liquidation preference of $25 per share for an aggregate amount of $23.0 million. It has a distribution rate of 10% per annum payable at the end of each calendar quarter. Although the Debentures are treated as debt of the Company, they currently qualify for Tier I capital treatment. The Preferred Securities have no maturity date and are callable by the Company on or about June 1, 2002, or earlier in the event the deduction of related interest for federal income tax is prohibited, treatment as Tier I capital is no longer permitted or certain other contingencies arise. The Debentures mature in 2027, at which time the Preferred Securities must be redeemed.
(iv) Greater Community Services, Inc., activated in March 1997, provides accounting/bookkeeping, data processing and management information systems, loan operations and various other banking-related services at cost to the Bank Subsidiaries.
(v) In October 1996, a nonbank subsidiary opened for business under the name of Greater Community Financial, L.L.C. ("GCF"), a New Jersey limited liability company located in Clifton, New Jersey. This Company engages in the business of securities broker and dealer. Effective November 30, 1999, the Company acquired the minority interest of this subsidiary, resulting in a 100% ownership as of this date.
BANK SUBSIDIARIES
GFB received its charter from the New Jersey Department of Banking & Insurance (the "Department") in 1985 and commenced operations as a commercial bank in 1986. Its main office is located at 55 Union Boulevard, Totowa, New Jersey. GFB has five additional branches, all of which are located in Passaic County, New Jersey. Two branches are located in Little Falls, one of which was acquired by merger in April 1999 and the other has operated since March 1988. Three branches are located in Clifton, two of which were acquired by merger in April 1995 and the other was a de novo branch established in 1997. A sixth branch, located at 100 Furler Street, Totowa, has been in operation since 1996. The seventh branch was acquired by merger in April 1999, located at 123 Newark-Pompton Turnpike in Singac.
GFB conducts a general commercial and retail banking business encompassing a wide range of traditional deposits and lending functions. GFB offers a broad variety of lending services, including commercial and residential real estate loans, short and medium term loans, revolving credit arrangements, lines of credit, and consumer installment loans. In the depository area, GFB offers a broad variety of deposit accounts, including consumer and commercial checking accounts and NOW accounts. GFB also offers other customary banking services.
BCB was incorporated in New Jersey in 1987 and commenced its banking operations in 1988. BCB concentrates its operations in commercial lending and loan origination secured by real estate generally involving nonresidential properties, primarily servicing Bergen County, New Jersey. BCB also offers other customary banking services. In addition to its main office at Two Sears Drive in Paramus, New Jersey, BCB has six additional branch offices, located in Hasbrouck Heights, Wood-Ridge, Wallington, Hackensack, and Lyndhurst. The sixth branch, acquired by merger in April 1999, is located at 100 Washington Avenue in Little Ferry.
GFB and BCB each have a wholly-owned investment company subsidiary formed to manage their respective investment portfolios to increase net yields.
RCB is located in Glen Rock, Bergen County, New Jersey. RCB commenced its banking operations in 2nd quarter 1999. RCB's main office is located at 175 Glen Rock Road in Glen Rock, New Jersey, primarily servicing Bergen County. RCB offers a variety of banking services, including commercial and real estate lending, revolving credit arrangements and consumer loans. It also offers the traditional deposit services and other customary banking services.
ACQUISITION
On April 1, 1999, the Company consummated its previously announced acquisition of First Savings Bancorp of Little Falls, Inc. ("First Savings"), parent of First Savings Bank of Little Falls located in Little Falls, New Jersey. Each share of common stock of First Savings was exchanged for $52.26 in cash for a total of $23.0 million. The merger was accounted for using the purchase method of accounting.
As of the date of acquisition First Savings had total assets of $193.0 million, total loans of $109.2 million and total deposits of $172.3 million, with 3 banking offices. The purchase price exceeded the fair market value of net assets acquired by approximately $13.2 million, which is reflected as goodwill, included in the accompanying consolidated balance sheet.
COMPETITION
The Company, through the Bank Subsidiaries, competes with other New Jersey commercial banks, savings banks, savings and loan associations, finance companies, insurance companies, and credit unions. A substantial number of offices of competing financial institutions are located within the Bank Subsidiaries' respective market areas. The past trend toward consolidation of the banking industry has continued in New Jersey in recent years. This trend may make it more difficult for smaller banks such as the Bank Subsidiaries to compete with larger national and regional banking institutions. Several of the Bank Subsidiaries' competitors are affiliated with major banking and financial institutions which are substantially larger and have far greater financial resources than the Bank Subsidiaries.
Competitive factors between financial institutions can be classified into two categories: competitive rates and competitive service. Rate competition is intense especially in the area of time deposits. The Bank Subsidiaries compete with larger institutions with respect to the interest rates they offer. From a service standpoint, the Bank Subsidiaries' competitors, by virtue
of their superior financial resources, have substantially greater lending limits than the Bank Subsidiaries. Such competitors also perform certain functions for their customers, such as trust and international services, which the Bank Subsidiaries have chosen not to provide.
SUPERVISION AND REGULATION
The banking industry is highly regulated. Statutory and regulatory controls increase a bank holding company's cost of doing business, limit its management's options to deploy assets and maximize income and may significantly limit the activities of institutions which do not meet regulatory capital or other requirements. Areas subject to regulation and supervision by the bank regulatory agencies include, among others: minimum capital levels; dividends; affiliate transactions; expansion of locations; acquisitions and mergers; reserves against deposits; deposit insurance premiums; credit underwriting standards; management and internal controls; investments; and general safety and soundness of banks and bank holding companies. Supervision, regulation and examination of the Company and the Bank Subsidiaries by the bank regulatory agencies are intended primarily for the protection of depositors, the communities served by the institutions or other governmental interests, rather than for holders of stock of the Company.
The following is a brief summary of certain statutes, rules and regulations affecting the Company and the Bank Subsidiaries. A number of other statutes and regulations and governmental policies have an impact on their operations. The Company is unable to predict the nature or the extent of the effects on its business and earnings that fiscal or monetary policies, economic control or new federal or state legislation may have in the future. The following summary does not purport to be complete and is qualified in its entirety by reference to such statutes and regulations.
Bank Holding Company Regulation
The Company is registered as a bank holding company under the Holding Company Act. As such, it is subject to regular examination, supervision and regulation by the Federal Reserve. The Company is required to file reports with the Federal Reserve and to furnish such additional information as the Federal Reserve may require pursuant to the Holding Company Act. The Company also is subject to regulation by the Department.
A policy of the Federal Reserve requires the Company to act as a source of financial and managerial strength to the Bank Subsidiaries and to commit resources to support them. In addition, any loans by the Company to the Bank Subsidiaries would be subordinate in right of payment to deposits and certain other indebtedness of the Bank Subsidiaries. At December 31, 1999, the Company had approximately $6.9 million in financial resources in addition to its investment in the Bank Subsidiaries and nonbank subsidiaries. The Federal Reserve has adopted guidelines regarding the capital adequacy of bank holding companies which require them to maintain specified minimum ratios of capital to total assets and capital to risk-weighted assets.
Holding Company Activities
With certain exceptions, the Holding Company Act prohibits a bank holding company from acquiring direct or indirect ownership or control of more than 5% of the voting shares of a company that is not a bank or a bank holding company or from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries. The principal exceptions to these prohibitions involve certain nonbank activities which, by statute or by Federal Reserve regulation or order, have been identified as activities closely related to the business of banking. The Company's activities are subject to these legal and regulatory limitations under the Holding Company Act and related Federal Reserve regulations.
Satisfactory capital ratios and Community Reinstatement Act ("CRA") ratings are generally prerequisites to obtaining regulatory approval to make acquisitions. The Financial Modernization Act of 1999, discussed below (see "Recent Legislation"), allows the Company to expand into insurance, securities, merchant banking and other activities that are financial in nature.
The federal Interstate Banking and Branching Act of 1994 permits a bank holding company to acquire banks in states other than its home state, regardless of applicable state law. The 1994 law also permits banks to create interstate branches, either by merging across state lines or by creating new branches, subject to a state's ability to opt out of these enabling provisions. As have most states, New Jersey has enacted legislation to authorize interstate banking either by merger or by branching into New
Jersey if the foreign bank already has branches in New Jersey; however, that legislation did not authorize de novo branching into New Jersey.
Recent Legislation
During November, 1999, the President signed the Gramm-Leach-Bliley Financial Modernization Act of 1999 into law. Under the new Act, effective March 13, 2000:
- Bank holding companies meeting standards as to management, capital and Community Reinvestment Act compliance will be permitted to engage in a substantially broader range of nonbanking activities than has previously been permissible, including insurance underwriting and making merchant banking investments in commercial and financial companies. If a bank holding company elects to become a financial holding company, it files a certification, effective in 30 days, and thereafter may engage in certain financial activities without further approvals.
- Insurers and other financial services companies are allowed to acquire banks.
- Various restrictions currently applicable to bank holding company ownership of securities firms and mutual fund advisory companies are removed.
- A new overall regulatory structure is established for bank holding companies also engaged in insurance and securities operations.
On January 19, 2000, the Federal Reserve adopted an interim rule allowing bank holding companies to submit certifications by February 15 to become financial holding companies on March 13, 2000. The Federal Reserve also established procedures which would be used against financial holding companies which have depository institutions which have fallen out of compliance with the management or capital criteria. Only financial holding companies can own insurance companies and engage in merchant banking.
The Modernization Act also modifies other current financial laws, including laws related to financial privacy and community reinvestment.
Notwithstanding the Federal Reserve's prior approval of specific nonbanking activities, the Federal Reserve has the power to order a holding company or its subsidiaries to terminate any activity, or to terminate its ownership or control of any subsidiary, when it has reasonable cause to believe that the continuation of such activity or such ownership or control constitutes a serious risk to the financial safety, soundness or stability of any bank subsidiary of that holding company. Bank holding companies and their subsidiaries are also prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or provision of any property or services.
Holding Company Dividends and Stock Repurchases
The Federal Reserve has the power to prohibit bank holding companies from paying dividends if their actions are deemed to constitute unsafe or unsound practices. The Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies. It is the Federal Reserve's view that a bank holding company should pay cash dividends only to the extent that its net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with its capital needs, asset quality and overall financial condition.
As a bank holding company, the Company is required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the Company's consolidated net worth. The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would violate any law, regulation, Federal Reserve order, directive, or any condition imposed by or written agreement with, the Federal Reserve.
Bank Regulation
As state-chartered banks which are not members of the Federal Reserve System, the Bank Subsidiaries are subject to the primary federal supervision of the FDIC under the Federal Deposit Insurance Act (the "FDIA"). Prior approval of the FDIC
is required for the Bank Subsidiaries to establish or relocate a branch office or to engage in any merger, consolidation or significant purchase or sale of assets. The Bank Subsidiaries are also subject to regulation and supervision by the Department. In addition, they are subject to numerous federal and state laws and regulations which set forth specific restrictions and procedural requirements with respect to the establishment of branches, investments, interest rates on loans, credit practices, the disclosure of credit terms and discrimination in credit transactions.
The FDIC and the Department regularly examine the operations of the respective Bank Subsidiaries and their condition, including capital adequacy, reserves, loans, investments and management practices. These examinations are for the protection of the Bank Subsidiaries' depositors and the Bank Insurance Fund ("BIF") and not the Company. The Bank Subsidiaries are also required to furnish quarterly and annual reports to the FDIC. The FDIC's enforcement authority includes the power to remove officers and directors and the authority to issue orders to prevent a bank from engaging in unsafe or unsound practices or violating laws or regulations governing its business.
The FDIC has adopted regulations regarding the capital adequacy of banks subject to its primary supervision. Such regulations require those banks to maintain specified minimum ratios of capital to total assets and capital to risk-weighted assets. See "Regulatory Capital Requirements," below.
Statewide branching is permitted in New Jersey. Branch approvals are subject to statutory standards relating to safety and soundness, competition, public convenience and CRA performance.
Community Reinvestment Act
Under the CRA, the Subsidiary Banks have a continuing and affirmative obligation, consistent with their safe and sound operation, to help meet the credit needs of their entire communities, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. GFB and BCB received "satisfactory" CRA ratings in their most recent examinations.
Bank Dividends
New Jersey law permits the Bank Subsidiaries to declare dividends only if, after payment of the dividends, their capital would be unimpaired and their remaining surplus would equal at least 50% of their capital. Under the FDIA, the Bank Subsidiaries are prohibited from declaring or paying dividends or making any other capital distribution if, after that distribution, they would fail to meet their regulatory capital requirements. At December 31, 1999, the Bank Subsidiaries met their regulatory capital requirements. The FDIC also has authority to prohibit the payment of dividends by a bank when it determines such payment to be an unsafe and unsound banking practice. The FDIC may prohibit bank holding companies of banks which are deemed to be "significantly undercapitalized" under the FDIA or which fail to properly submit and implement capital restoration plans required by the FDIA from paying dividends or making other capital distributions without the FDIC's permission. See "Holding Company Dividends and Stock Repurchases," above.
Restrictions Upon Intercompany Transactions
The Bank Subsidiaries are subject to restrictions imposed by federal law on extensions of credit to, and certain other transactions with, the Company and other affiliates. Such restrictions prevent the Company and its affiliates from borrowing from the Bank Subsidiaries unless the loans are secured by specified collateral, and require such transactions to have terms comparable to terms of arms-length transactions with third persons. Such transactions by each of the Bank Subsidiaries are generally limited in amount as to the Company and as to any other affiliate to 10% of the Subsidiary Bank's capital and surplus. As to the Company and all other affiliates, such transactions are limited to an aggregate of 20% of the Subsidiary Bank's capital and surplus. These regulations and restrictions may limit the Company's ability to obtain funds from the Bank Subsidiaries for its cash needs, including funds for acquisitions and for payment of dividends, interest and operating expenses.
Real Estate Lending Guidelines
Under FDIC regulations, state banks must adopt and maintain written policies establishing appropriate limits and standards for real estate lending activities. These policies must establish loan portfolio diversification standards, prudent underwriting standards (including loan-to-value limits that are clear and measurable), loan administration procedures and documentation,
approval and reporting requirements. A bank's real estate lending policy must reflect consideration of the Interagency Guidelines for Real Estate Lending Policies adopted by federal bank regulators.
Deposit Insurance
Since the Bank Subsidiaries are FDIC member institutions, their respective deposits are currently insured to a maximum of $100,000 per depositor through the BIF, administered by the FDIC. The Bank Subsidiaries are also required to pay deposit insurance premiums to the FDIC.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") included provisions to reform the federal deposit insurance system, including the implementation of risk-based deposit insurance premiums. FDICIA permits the FDIC to make special assessments on insured depository institutions in amounts determined by the FDIC to be necessary to give it adequate assessment income to repay amounts borrowed from the U.S. Treasury and other sources or for any other purpose the FDIC deems necessary. Under a risk-based insurance premium system which became permanent in 1994, banks are assessed insurance premiums according to how much risk they are deemed to present to the BIF. Banks with higher levels of capital and involving a low degree of supervisory concern are assessed lower premiums than banks with lower levels of capital and/or involving a higher degree of supervisory concern. Specifically, the assessment rate for an insured depository institution depends upon the risk classification assigned to the institution by the FDIC based upon the institution's capital level and supervisory evaluations. Institutions are assigned to one of three capital groups--well-capitalized, adequately capitalized or undercapitalized. Well-capitalized institutions are institutions satisfying the following capital ratio standards: (i) total risk-based capital ratios of 10.0% or greater, (ii) Tier I risk-based capital ratios of 6.0% or greater, and (iii) Tier I leverage ratios of 5.0% or greater. Adequately capitalized institutions are institutions that do not meet the standards for well-capitalized institutions but that satisfy the following capital ratio standards: (i) total risk-based capital ratios of 8.0% or greater; (ii) Tier I risk-based capital ratios of 4.0% or greater, and (iii) Tier I leverage ratios of 4.0% or greater. Undercapitalized institutions consist of institutions that do not qualify as either "well-capitalized" or "adequately capitalized." Within each capital group, institutions are assigned to one of three subgroups on the basis of supervisory evaluations by the institution's primary supervisory authority and such other information as the FDIC determines to be relevant. Effective January 1, 1997 the assessment rates ranged from 0.00% to 0.27% of deposits. The Bank Subsidiaries' deposit assessment rates were 0.00% in 1998 and 1999.
In addition, the Deposit Insurance Act of 1996 authorized the Financing Corporation ("FICO") to levy assessments on BIF assessable deposits and stipulated that the rate must equal one-fifth the FICO assessment rate that is applied to deposits assessable by the Savings Association Insurance Fund ("SAIF"). The rates established for GFB and BCB for 1997 through 2000 are 0.065% and 0.013%, respectively.
Standards for Safety and Soundness
Under FDICIA, each federal banking agency is required to prescribe noncapital safety and soundness standards for institutions under its authority. The federal banking agencies, including the Federal Reserve and the FDIC, have adopted interagency guidelines which cover internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees, benefits, and standards for asset quality and earnings sufficiency. An institution which fails to meet any of these standards may be required to develop a plan acceptable to the agency, specifying the steps that the institution will take to meet the standards. Failure to submit or implement such a plan may subject the institution to regulatory sanctions. The Company believes that the Bank Subsidiaries meet all adopted standards.
Enforcement Powers
The bank regulatory agencies have broad discretion to issue cease and desist orders if they determine that the Company or its Bank Subsidiaries are engaging in "unsafe or unsound banking practices." In addition, the federal bank regulatory authorities may impose substantial civil money penalties for violations of certain federal banking statutes and regulations, violation of a fiduciary duty, or violation of a final or temporary cease and desist orders, among other things. Financial institutions and a broad range of persons associated with them are subject to the imposition of fines, penalties, and other enforcement actions based upon the conduct of their relationships with the institutions.
The FDIC may be appointed as a conservator or receiver for a depository institution based upon a number of events and circumstances. The FDIC as a conservator or receiver of a depository institution also has express authority to repudiate most contracts with such institution which it determines to be burdensome or if such repudiation will promote the orderly administration of the institution's affairs. The FDIC is also given authority to enforce contracts made by a depository institution
notwithstanding any contractual provision providing for termination, default, acceleration, or exercise of rights upon, or solely by reason of, insolvency or the appointment of a conservator or receiver. Insured depository institutions also are prohibited from entering into contracts for goods, products or services which would adversely affect their safety and soundness.
Regulatory Capital Requirements
The Federal Reserve and the FDIC have established guidelines with respect to the maintenance of appropriate levels of capital by bank holding companies and state-chartered banks that are not members of the Federal Reserve System ("state nonmember banks"). The regulations impose two sets of capital adequacy requirements: minimum leverage rules, which require maintenance of a specified minimum ratio of capital to total assets, and risk-based capital rules, which require the maintenance of specified minimum ratios of capital to "risk-weighted" assets.
These regulations require bank holding companies and state nonmember banks to maintain a minimum leverage ratio of "Tier I capital" to total assets of 3%. Although setting a minimum 3% leverage ratio, the capital regulations state that only the strongest bank holding companies and banks, with composite examination ratings of 1 under the rating system used by the federal bank regulators, would be permitted to operate at or near such minimum level of capital. All other bank holding companies and banks are expected to maintain a leverage ratio of at least 1% to 2% above the minimum ratio, depending on the assessment of an individual organization's capital adequacy by its primary regulator. Any bank or bank holding company experiencing or anticipating significant growth would be expected to maintain capital well above the minimum levels. In addition, the Federal Reserve has indicated that whenever appropriate, and in particular when a bank holding company is undertaking expansion, seeking to engage in new activities or otherwise facing unusual or abnormal risks, it will consider, on a case-by-case basis, the level of an organization's ratio of tangible Tier I capital (after deducting all intangibles) to total assets in making an overall assessment of capital.
The risk-based capital rules require bank holding companies and state nonmember banks to maintain minimum regulatory capital levels based upon a weighting of their assets and off-balance sheet obligations according to risk. The risk-based capital rules have two basic components: a Tier I or core capital requirement and a Tier II or supplementary capital requirement. Tier I capital consists primarily of common stockholders' equity, certain perpetual preferred stock and minority interests in the equity accounts of consolidated subsidiaries, less most intangible assets, primarily goodwill. Tier II capital elements include, subject to certain limitations, the allowance for losses on loans and leases; perpetual preferred stock that does not qualify for Tier I and long-term preferred stock with an original maturity of at least 20 years from issuance; hybrid capital instruments, including perpetual debt and mandatory convertible securities; and subordinated debt and intermediate-term preferred stock.
The risk-based capital regulations assign balance sheet assets and credit equivalent amounts of off-balance sheet obligations to one of four broad risk categories based principally on the degree of credit risk associated with the obligor. The assets and off-balance sheet items in the four risk categories are weighted at 0%, 20%, 50% and 100%. These computations result in the total risk-weighted assets.
The risk-based capital regulations require all banks and bank holding companies to maintain a minimum ratio of total capital to total risk-weighted assets of 8%, with at least 4% as core capital. For the purpose of calculating these ratios, (i) supplementary capital is limited to no more than 100% of core capital, and (ii) the aggregate amount of certain types of supplementary capital is limited. In addition, the risk-based capital regulations limit the allowance for loan losses which may be included as capital to 1.25% of total risk-weighted assets.
At December 31, 1999, the Company's total risk-based capital and leverage capital ratios were 13.73% and 7.18%, respectively. The minimum levels established by the regulators for these measures are 8% and 4%, respectively.
FDICIA also required the federal banking regulators to classify insured depository institutions by capital levels and to take various prompt corrective actions to resolve the problems of any institution that fails to satisfy the capital standards. Under FDICIA and its "prompt corrective action" regulations, all institutions, regardless of their capital levels, are restricted from making any capital distribution or paying any management fees that would cause the institution to fail to satisfy the minimum levels for any of its capital requirements.
Under the FDIC's prompt corrective action regulation, a "well-capitalized" bank is one that is not subject to any regulatory order or directive to meet any specific capital level and that has or exceeds the following capital levels: a total risk-based capital ratio of 10%, a Tier I risk-based capital ratio of 6%, and a leverage ratio of 5%. An "adequately-capitalized" bank is one that does not qualify as "well-capitalized" but meets or exceeds the following capital requirements: a total risk-based capital ratio
of 8%, a Tier I risk-based capital ratio of 4%, and a leverage ratio of either 4% or 3% if the bank has the highest composite examination rating. A bank not meeting these criteria will be treated as "undercapitalized," "significantly undercapitalized," or "critically undercapitalized" depending on the extent to which the bank's capital levels are below these standards. A bank that falls within any of the three "undercapitalized" categories established by the prompt corrective action regulation will be: (i) subject to increased monitoring by the appropriate federal banking regulator; (ii) required to submit an acceptable capital restoration plan within 45 days; (iii) subject to asset growth limits; and (iv) required to obtain prior regulatory approval for acquisitions, branching and new lines of businesses. The capital restoration plan must include a guarantee by the institution's holding company that the institution will comply with the plan until it has been adequately capitalized on average for four consecutive quarters, under which the holding company would be liable up to the lesser of 5% of the institution's total assets or the amount necessary to bring the institution into capital compliance as of the date it failed to comply with its capital restoration plan. A significantly undercapitalized institution, as well as any undercapitalized institution that did not submit an acceptable capital restoration plan, will be subject to regulatory demands for recapitalization, broader application of restrictions on transactions with affiliates, limitations on interest rates paid on deposits, asset growth and other activities, possible replacement of directors and officers, and restrictions on capital distributions by any bank holding company controlling the institution. Any company controlling the institution may be required to divest its interest in the institution. If an institution's ratio of tangible capital to total assets falls below a "critical capital level" established by the appropriate federal banking regulator, the institution will be subject to conservatorship or receivership unless periodic determinations are made that forbearance from such action would better protect the deposit insurance fund.
EFFECT OF GOVERNMENT MONETARY POLICIES; POSSIBLE FURTHER LEGISLATION
The Company's earnings are and will be affected by domestic and international economic conditions and the monetary and fiscal policies of the United States and foreign governments and their agencies.
The Federal Reserve's monetary policies have had, and will probably continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The Federal Reserve has a major effect upon the levels of bank loans, investments and deposits through its open market operations in United States Government securities and through its regulation of, among other things, the discount rate on borrowings of banks and the imposition of nonearning reserve requirements against member bank deposits. It is not possible to predict the nature and impact of future changes in monetary and fiscal policies.
From time to time, proposals are made in the United States Congress, the New Jersey Legislature, and various bank regulatory authorities which would alter the powers of, and place restrictions on, different types of banking organizations. It is impossible to predict whether any of these proposals will be adopted and any impact of such adoption on the business of the Company and/or the Bank Subsidiaries.
The Bank Subsidiaries are also subject to various Federal and State laws such as usury laws and consumer protection laws.
EMPLOYEES
As of December 31, 1999, the Company employed a total of approximately 188 employees, including 152 full-time employees. Management considers relations with employees to be satisfactory.
Item 2
Item 2 - PROPERTIES
The Company does not directly own or lease any land, buildings or equipment. However, the Company's wholly-owned nonbank subsidiary, Realty, owns two properties in Bergen County, New Jersey.
GFB leases its main office banking facility and certain other office space at 55 Union Boulevard, Totowa, New Jersey. Such main office leased space is owned by a general partnership of which the Company's chairman and vice chairman are both partners. GFB also leases space for its five other branches in Totowa, Little Falls and Clifton, New Jersey.
BCB leases its main office space at Two Sears Drive, Paramus, New Jersey, and the Lyndhurst, New Jersey branch from Realty. BCB also leases space for three other branches in Hackensack, Wallington and Wood-Ridge, New Jersey. BCB owns the space for its branch located in Hasbrouck Heights, New Jersey.
RCB leases its main office space at 175 Glen Rock Road, Glen Rock, New Jersey. The leased space is owned by Sinabaldo Leone, Jr., a director of RCB.
In the opinion of management, all such leased properties are adequately insured and leased at fair rentals.
For further information regarding the Bank Subsidiaries' lease obligations, see Note 14 of the Company's Notes to Consolidated Financial Statements for the year ended December 31, 1999, contained in Item 7 -"Financial Statements."
Item 3
Item 3 - LEGAL PROCEEDINGS
The Company and its subsidiaries are from time to time parties to various legal actions arising in the normal course of business. Management believes there is no proceeding threatened or pending against the Company which, if determined adversely, would have a material effect on the Company's business, financial position or results of operations.
Item 4
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of 1999 to a vote of security holders, through the solicitation of proxies or otherwise.
PART II
Item 5
Item 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock was held by approximately 1,077 holders of record on December 31, 1999, and is traded on the NASDAQ National Market System under the symbol GFLS.
The following table indicates the range of high and low market quotations of the Common Stock, as reported by NASDAQ, and the cash dividends declared per share on the Common Stock, in each case for the quarterly periods indicated. The cash dividends have been adjusted to take into account the effect of the 5% stock dividend paid in 1999 and 2 for 1 stock split in 1998.
Market Quotations ----------------- Cash Dividends High Low Declared ---- --- -------- Year Ended December 31, 1998 First Quarter $10.75 $ 9.06 $ .048 Second Quarter 12.19 10.63 .057 Third Quarter 12.25 9.75 .057 Fourth Quarter 11.75 8.25 .058
Year Ended December 31, 1999 First Quarter $11.19 $ 9.29 $ .06 Second Quarter 10.36 9.17 .07 Third Quarter 11.42 9.50 .07 Fourth Quarter 10.96 9.25 .07
The Company's ability to pay dividends on its Common Stock in the future is subject to numerous regulatory restrictions which are potentially applicable. (See above, Item 1 "--DESCRIPTION OF BUSINESS--SUPERVISION AND REGULATION--Bank Holding Company Regulation--Holding Company Dividends and Stock Repurchases"; and "--Bank
Regulation--Bank Dividends"). However, management does not expect any of such restrictions to become applicable so long as the Company and the Bank Subsidiaries continue to operate profitably.
Item 6
Item 6 - SELECTED FINANCIAL DATA
The selected consolidated financial highlights of Greater Community Bancorp (the "Company") set forth below should be read in conjunction with the more detailed information included in the Consolidated Financial Statements, related Notes and Management's Discussion and Analysis of Financial Condition and Results of Operations, appearing elsewhere herein.
All per share data has been adjusted to reflect stock dividends and stock split.
Item 7
Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 each of the past three years and its financial condition at the end of each of the past two years. In order to fully appreciate this analysis, the reader is encouraged to review the consolidated financial statements and statistical data 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-K, 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 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 "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 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
On April 1, 1999, the Company acquired First Savings, a $193.0 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 of 1999 the Company also capitalized RCB, a new wholly-owned subsidiary bank located in Glen Rock, New Jersey, with $5.0 million. Approximately $4.1 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 in April 1999.
During the second half 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.
Results of Operations: Fiscal Years Ended December 31, 1999, 1998 and 1997
The results of operations for the year ended December 31, 1999 were significantly affected by the purchase of First Savings on April 1, 1999.
The Company earned $4.2 million or $0.69 per diluted share, a 20% increase over $3.5 million or $0.61 per diluted share earned during 1998. Excluding gains on the sale of investment 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 year ended December 31, 1999 was approximately $3.4 million compared to $2.5 million in 1998. The Company earned $2.6 million or $0.54 per diluted share in 1997, which included $216,000 in gains on sale of investment securities.
Cash earnings (earnings before amortization of intangible assets) per diluted share were $0.79, $0.63 and $0.56 for the years ending December 31, 1999, 1998 and 1997, respectively.
The increase in net income for the year ended December 31, 1999 primarily reflects higher net interest income and higher gain on the sale of investment 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 1999 (its first nine months of operations) were $283,000.
Average Balances and Net Interest Income
Net interest income, the primary source of the Company's results of operations, is the difference between interest, dividends and fees earned on loans and other earning assets, and interest paid on interest-bearing liabilities. Earning assets include loans to businesses and individuals, investment securities, interest-bearing deposits with banks and federal funds sold in the interbank market. Interest-bearing liabilities include primarily interest-bearing demand, savings and time deposits. Net interest income is determined by the difference between the yields earned on earning assets and rates paid on interest-bearing liabilities ("interest rate spread") and the relative amounts of 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 nonperforming assets.
The following table sets forth the Company's consolidated average balances of assets, liabilities and shareholders' equity as well as the amount of interest expense on related items, and the Company's average yield for the years ended December 31, 1999, 1998 and 1997. The yields are not shown on a fully taxable basis.
Average Balance Sheet, Interest Income and Expense, and Average Interest Rates
(1) Average balance includes nonperforming loans. (2) Balance includes FHLB Advances, Federal Funds purchased and securities sold under agreements to repurchase.
Net Interest Income
Changes in net interest income and margin result from the interaction between the volume and composition of earning assets, related yields and associated funding costs. Net interest income is the largest source of the Company's operating income. In 1999, net interest income increased by $4.6 million or 36% compared to 1998. Interest and fee income on loans during 1999 increased by $8.8 million or 54% over the comparable period in 1998 as a result of an increase of 62% in average total loans. The average yield on loans decreased to 8.41% in 1999 compared to 8.89% in 1998 as a result of repricing of loans at prevailing rates. Loans represent 65% and 55% of average earning assets in 1999 and 1998, respectively. Income earned on investment securities during 1999 increased by $746,000, or 10% compared to the same period in 1998. The increase was primarily due to a 9% increase in average investments for the year ended December 31, 1999 over 1998. The average yield on securities was 5.87% for the year ended December 31, 1999, compared to 5.80% for the same period in the prior year. Investments represent 30% and 38% at 1999 and 1998, respectively, of average earning assets. Interest income on federal funds sold and deposits with banks during 1999 increased by $191,000, or 16% compared to 1998 as a result of a $3.6 million, or 17%, increase in average federal funds sold and deposits with banks. Federal funds sold and deposits with banks represent 5% and 7% of average earning assets at 1999 and 1998, respectively.
In 1998, net interest income increased by $4.3 million or 21% compared to 1997. Interest and fee income on loans during 1999 increased by $2.7 million or 20% over the comparable period in 1997 as a result of an increase of 23% in average total loans. The average yield on loans decreased to 8.89% in 1998 from 9.14% in 1997 as a result of repricing of loans at the prevailing rates. Income earned on investment securities during 1998 increased by $1.1 million, or 18% compared to 1997. The increase was primarily due to a 24% increase in average investments for the year ended December 31, 1998 over 1997. The average yield on securities was 5.80% for the year ended December 31, 1998 compared to 6.12% for the prior year; the decline was due to general market conditions. Interest income on federal funds sold and deposits with banks during 1998 increased by $501,000 or 73% compared to the same period in the prior year as a result of a $8.7 million, or 68%, increase in average federal funds sold and deposits with banks due to the purchase of $13.1 million of interest-bearing deposits.
Interest expense for the year ended December 31, 1999, increased by $5.1 million or 43% from the level of interest expense for 1998. $4.4 million of the total increase was related to the increase in interest expense on deposits, $831,000 was related to the increase in interest expense on short-term borrowings, coupled with a decline of $57,000 related to interest expense on long-term borrowings, coupled with a 37 basis point decrease in the average rate paid. The increase in total interest expense was related to the increase in average interest-bearing liabilities of $134.9 million or 54%.
Interest expense for the year ended December 31, 1998, increased by $3.1 million or 34% from the level of interest expense for 1997. $2.2 million of the total increase in interest expense was related to the increase in interest expense on deposits, $592,000 was related to the increase in interest expense on long-term borrowings, and the remaining $267,000 was related to the increase in interest expense on short-term borrowings. The increase in total interest expense was related to the increase in average interest-bearing liabilities of $53.0 million or 27% primarily due to a $23.0 million increase in the 10% Trust Preferred Securities in May 1997, offset to some extent by the decrease in 8.5% Subordinated Debentures effective November 1, 1997.
Average interest-bearing deposits comprised 86%, 85% and 87% of Company total funding sources in 1999, 1998 and 1997, respectively, with the balance comprised of short- and long-term funding.
The Company's net interest margin, which measures net interest income as a percentage of average earning assets, was 3.78%, 3.87% and 4.40% for the years ended December 31, 1999, 1998 and 1997, respectively.
Rate/Volume Analysis
The following table sets forth the changes in interest income and expenses as they relate to changes in volume and rate for the years ended December 31, 1999 and 1998 compared to the prior years. Because of numerous simultaneous balance and rate changes during the periods indicated, it is difficult to allocate the changes precisely between balances and rates. For purposes of this table, changes which are not due solely to changes in balances or rates are allocated between such categories based on the average percentage changes in average balances and average rates.
(1) Includes FHLB advances, federal funds purchased, securities sold under agreements to repurchase, and trust preferred securities.
Provision for Possible Loan Losses
The Company recorded a provision for possible loan losses of $885,000 in 1999 compared with $520,000 in 1998 and $485,000 on 1997. Management of each Bank Subsidiary regularly performs an analysis to identify the inherent risk of loss in its loan portfolio. This analysis includes evaluation of concentrations of credit, past loss experience, current economic conditions, amount and composition of the loan portfolio (including loans being specifically monitored by management), estimated fair value of underlying collateral, loan commitments outstanding, delinquencies, and other factors.
The Bank Subsidiaries will continue to monitor their allowance for possible loan losses and make future adjustments to the allowance through the provision for possible loan losses as economic conditions dictate. Although the Bank Subsidiaries maintain their allowances for possible loan losses at levels that they consider to be adequate to provide for the inherent risk of loss in their loan portfolios, there can be no assurance that future losses will not exceed estimated amounts or that additional provisions for possible loan losses will not be required in future periods. In addition, the Bank Subsidiaries' determinations as to the amount of their allowances for possible loan losses are subject to review by the FDIC and the Department, as part of their examination process, which may result in the establishment of an additional allowance based upon the judgment of the FDIC or the Department, after a review of the information available at the time of their examination.
Other Income
Total non-interest income continues to represent a considerable source of income for the Company. In 1999 such non- interest income totaled $7.3 million, an increase of $2.6 million or 56% over 1998. Non-interest income for 1999 included $2.2 million in realized gains on sale of investment securities available-for-sale, an increase of $1.1 million over 1998. All other income includes $567,000 from fees and sales of lease financing, $480,000 from bank-owned life insurance and $207,000 from rental income. Service charges on deposit accounts increased by $211,000 over 1998 and other commissions and fees increased by $357,000. The majority of the increase in service charges on deposit accounts is attributable to the increase in deposit- related services during 1999. The increase in realized gain on sale of investment securities available-for-sale resulted from sale of $16.4 million of securities.
Total non-interest income for the year ended December 31, 1998 was $4.7 million, an increase of $1.9 million or 69% compared to 1997. The $1.9 million net increase was the result of significant fluctuations within the major components of other income. Of the net increase in 1998, service charges on deposit accounts increased by $280,000, other commissions and fees increased by $298,000, realized gain on sale of securities available-for-sale increased by $867,000, and all other income increased $456,000 over 1997. The majority of the increase in service charges on deposit accounts is attributable to the increase in deposit-related services during 1998. The increase in realized gain on sale of securities available-for-sale resulted from sale of $6.9 million of available-for-sale securities during 1998.
Other Expenses
Total other expenses increased by $5.8 million for the year ended December 31, 1999 over 1998. Of the total increase, $2.9 million is attributable to increases in salaries and employee benefits as a direct result of the acquisition of First Savings coupled with severance and bonuses paid out to certain key employees of First Savings. Occupancy and equipment expense, which includes the costs of leasing office and branch space, expenses associated with maintaining these facilities and depreciation of fixed assets, increased by $540,000. Regulatory, professional and other fees increased by $899,000. Computer services, office expenses and other operating expenses increased by $194,000, $447,000 and $347,000, respectively. The majority of these increases are attributable to the acquisition of First Savings and the balance is due to the overall growth of the Company. Amortization of intangibles increased by $500,000 over 1998. This increase reflect the amortization of goodwill resulting from the acquisition of First Savings.
Total non-interest expenses increased by $1.7 million for the year ended December 31, 1998 over 1997. The $1.7 million net increase was a result of fluctuations within the components of other expenses. More specifically, salaries and employee benefits increased by $962,000 or 20% as a result of an increase in number of employees and general salary increases coupled with an increase in employee benefits. Occupancy and equipment expense, which includes the costs of leasing office and branch space, expenses associated with maintaining these facilities and depreciation of fixed assets, increased by $244,000 or 11% primarily due to the addition of office space and equipment. Regulatory, professional and other fees, and office expenses in 1998 both decreased from 1997 by $80,000 or 11% and $25,000 or 4%, respectively. Other real estate operating expense increased by $101,000 or 168% due to an increase in ORE properties owned. Computer services expenses increased by $26,000 or 16%. All other operating expenses increased by $439,000 or 33%. The primary reason for the increase in such expenses is the growth of the Bank Subsidiaries.
Income Taxes
The Company recorded income tax provisions of $2.3 million, $2.0 million and $1.5 million for the years ended December 31, 1999, 1998 and 1997, respectively. The increases in income tax provision are attributable to increased earnings for each of the years over the prior year.
Financial Condition
At December 31, 1999, the Company's total assets were $567.4 million, an increase of $195.1 million or 52% over the amount reported at December 31, 1998. Gross loans increased by $140.8 million. The increase in loans was a direct result of the acquisition of First Savings coupled with increased loan demand. Investment securities increased by $39.6 million, while interest-bearing due from banks and federal funds sold decreased by $4.9 million and $3.5 million. These declines were related to the maturities of such assets and the proceeds were subsequently used to meet the loan demand.
At December 31, 1998, the Company's total assets were $372.4 million, an increase of $50.4 million or 16% over the amount reported at December 31, 1997. Gross loans increased by $44.9 million while investment securities decreased by $15.2 million. The increase in loans was a direct result of increased loan demand while the decrease in investment securities was related to the maturities which were used in purchasing interest-bearing due from banks. Interest-bearing due from banks increased by $13.2 million. Cash and non interest-bearing due from banks increased by $5.1 as a result of the overall growth of the Company. Federal funds sold decreased by $4.3 million and the proceeds were used in meeting loan demand.
Investment Securities
Investment securities at December 31, 1999 increased by $39.6 million or 35% over the amount reported at December 31, 1998. The increase was a result of investment securities totaling $57.0 million acquired in the acquisition of First Savings coupled with the maturity and sale of $63.2 million and purchases of $47.9 million. Investment securities at December 31, 1998 decreased by $15.2 million or 12% over the amount reported at December 31, 1997. The decrease was a result of investment securities either maturing or being sold. The proceeds were partly used in funding the increase in interest-bearing due from banks. The following table presents the composition of the investment securities portfolio along with the amortized cost and fair values of those components at December 31, 1999, 1998 and 1997.
During 1999, the Company realized net gains of $2.2 million through the sale of $16.4 million of investment securities from its available-for-sale portfolio. Included in shareholders' equity at December 31, 1999 is accumulated other comprehensive loss in the amount of $1.1 million, a decrease of $3.4 million or 151% over the end of 1998. In 1998, the Company realized net gains of $1.1 million through the sale of $6.9 million of investment securities from its available-for-sale portfolio. Included in shareholders' equity at December 31, 1998 is accumulated other comprehensive income in the amount of $2.3 million, an increase of $385,000 or 21% over the end of 1997. The Company has no investment securities held for trading purposes.
Statement of Financial Accounting Standards ("SFAS") No. 133 allows a reassessment of investment securities classified without calling into question the intent of the Company to hold other investment securities to maturity in the future. On October 1, 1998, the Company reclassified securities with a fair market value of $5.5 million resulting in an increase of accumulated other comprehensive income of $28,000.
The following table shows the average yields, amortized cost and fair values of the Company's investment securities by maturity.
Loan Portfolio
The Company's gross loan portfolio at December 31, 1999 totaled $346.9 million, an increase of $140.8 million or 68% compared to the amount reported at December 31, 1998. Of the total increase in 1999, $109.0 million were acquired through the acquisition of First Savings and the balance was due to internal growth. At December 31, 1998, the gross loan portfolio totaled $206.1 million, an increase of $44.9 million or 28% compared to the amount reported at December 31, 1997. This increase was primarily due to increased loan demand. The Company's gross loan portfolio increased $23.8 million to $161.2 million at December 31, 1997 compared to the amount reported at December 31, 1996. The following table summarizes the components of the gross loan portfolio at the dates indicated.
The following table sets forth the contractual maturity and interest rate sensitivity of certain components of the loan portfolio at December 31, 1999. Demand loans, having no stated schedule of repayment and no stated maturity, and overdrafts are reported as due within one year.
At the date indicated in the foregoing loan table, no loans were concentrated within a single industry or group of related industries and the Company had no foreign loans.
Asset Quality
Various degrees of risk are associated with substantially all investing activities. The lending function, however, carries the greatest risk of loss. The senior lending officers of BCB, GFB and RCB are charged with monitoring asset quality, establishing credit policies and procedures and seeking consistent application of these procedures. Nonperforming assets include past due, nonaccrual and renegotiated and other real estate loans. Since lending is concentrated within the local market area, nonperforming loans were also made primarily to customers operating in the area. The degree of risk inherent in all lending activities is influenced heavily by general economic conditions in the immediate market area. Among the factors which tend to affect portfolio risks are changes in local or regional real estate values, income levels and energy prices. These factors,
coupled with unemployment levels and tax rates, as well as governmental actions and weakened market conditions which reduce the demand for credit among qualified borrowers, are also important determinants of the risk inherent in lending.
Past Due, Nonaccruing and Renegotiated Loans. It is the Company's policy to review monthly all loans which are past due as to principal or interest. The accrual of interest income on loans is discontinued when it is determined that such loans are either doubtful of collection or are involved in a protracted collection process. The current year's uncollected interest is reversed on such nonaccrual loans. Management has also restructured the terms of certain loans to accommodate changes in the financial condition of borrowers. A typical concession would be a reduction in the currently payable interest rate to one which is lower than the current market rate for new debt with similar risks; interest foregone would be deferred until maturity.
The following table summarizes the composition of the Company's nonperforming assets and related asset quality ratios as of the dates indicated.
Nonperforming loans increased by $211,000 at December 31, 1999 compared to December 31, 1998. The increase is primarily due to the reclassification of certain loans from current loans to either nonaccruing or renegotiated status. Nonperforming loans decreased by $189,000 at December 31, 1998 compared to December 31, 1997. The decrease is primarily due to the reclassification of certain loans from nonaccruing or renegotiated status to current loans. If the nonaccruing loans in 1999, 1998 and 1997 had continued to pay interest, interest income during the same years would have increased by $60,000, $138,000 and $291,000, respectively.
Potential Problem Loans. As part of the loan review process, management routinely identifies performing loans where there is a doubt as to whether the borrowers will comply with the original loan repayment terms and allocates specific reserves against them. At December 31, 1999 and 1998, such loans totaled $8.3 million and $5.3 million with an allowance of $1.0 million and $664,000, respectively, specifically allocated to them.
Foreign Loans. The Company has no foreign loans or any other foreign exposure.
Allowance for Possible Loan Losses
At December 31, 1999, the allowance for possible loan losses was $4.9 million as compared to $3.5 million at December 31, 1998, an increase of $1.4 million of which $624,000 arose from the acquisition of First Savings. The allowance for possible loan losses is increased periodically through charges to earnings in the form of a provision for possible loan losses. Loans that are deemed uncollectible are charged against the allowance and any recoveries of such loans are credited to it. It is management's belief that, although charge-offs may occur in the future, there are adequate reserves allotted. The level of the allowance is based on the ongoing evaluation by management of the respective Bank Subsidiaries of potential losses in the loan portfolio. Such evaluation includes consideration of the current financial status and credit standing of borrowers, prior loss experiences, results of periodic regulatory examinations, comments and recommendations of the Company's independent
accountants, and management's judgment as to prevailing and anticipated real estate values and other economic conditions in the Bank Subsidiaries' market areas. Since future events that may affect these financial conditions are unpredictable, there is uncertainty as to the final outcome of the Bank Subsidiaries' loans and nonperforming assets.
The following table represents transactions affecting the allowance for possible loan losses for the periods indicated.
(1) Allowances for possible loan losses acquired from First Savings in 1999 and Family First in 1995
Allocation of the Allowance for Possible Loan Losses
The following table sets forth the allocation of the allowance for loan losses by loan category amounts, the percent of loans in each category to total loans in the allowance, and the percent of loans in each category to total loans, at each of the dates indicated.
Other Real Estate
As of December 31, 1999, other real estate totaled $467,000, a decrease of $28,000 or 6% compared to December 31, 1998. The net decrease was primarily due to sale of foreclosed properties. The $467,000 includes collateral acquired through foreclosure of loans, stated at the lower of the loan value or fair market value less estimated cost to sell. Management is actively seeking repayment through sale of the underlying collateral.
Deposits
As of December 31, 1999, total deposits were $460.6 million, an increase of $167.2 million or 57% over total deposits at December 31, 1998. This net increase results from acquiring $172.3 million in deposits through the acquisition of First Savings offset in part by a decrease of $5.1 million primarily due to maturity runoff. Average deposits for 1999 were $419.3 million, or 49% higher than for 1998. As of December 31, 1998, total deposits were $293.4 million, an increase of $35.8 million or 14% over total deposits at December 31, 1997. Average deposits for 1998 were $52.8 million higher than average deposits for 1997. The following table summarizes the average yield/rate of the components of average deposit liabilities for the years indicated.
Listed below is a summary of time certificates of deposit $100,000 and over categorized by time remaining to maturity.
At December 31, 1999 --------- (In Thousands) Three months or less............................................. $16,770 Over three months through six months............................ 6,876 Over six months through twelve months............................ 11.156 Over twelve months............................................... 2,350 ------- $37,152 =======
Short-Term Borrowings
As of December 31, 1999, federal funds purchased and securities sold under agreements to repurchase were $16.4 million. Short-term borrowings include various other borrowings which generally have maturities of less than one year. The details of these categories are presented below (in thousands):
Guaranteed Preferred Beneficial Interest in the Company's Subordinated Debt
On May 21, 1997, the Company, through the Trust, sold 920,000 Trust Preferred Securities at a price of $25 per share, for a total of $23.0 million. The Preferred Securities have an annual dividend rate of 10% payable quarterly. The Trust Preferred Securities which are treated as Junior Subordinated Debentures on the Company's books, currently qualify for Tier I capital treatment. The Trust Preferred Securities do not have a maturity date and are callable by the Company on or about June 1, 2002, or earlier if certain contingencies arise. The Debentures mature in the year 2027, at which time the Trust Preferred Securities must be redeemed.
Interest Rate Sensitivity
Banks are concerned with the extent to which they are able to match maturities of interest-earning assets and interest-bearing liabilities. Such matching is facilitated by examining the extent to which such assets and liabilities are interest rate-sensitive and by monitoring an institution's interest rate-sensitivity gap. An asset or liability is considered to be interest rate-sensitive if it will mature or reprice within a specific time period. The interest rate-sensitivity gap is defined as the excess of interest- earning assets maturing or repricing within a specific time period over interest-bearing liabilities maturing or repricing within that time period. The Bank Subsidiaries monitor their gaps on a monthly basis, primarily their six-month and one-year maturities, and work to maintain their gaps within a range of 10% to (25)%.
The Company had a negative one-year gap position with respect to its exposure to interest rate risk at December 31, 1999. The Asset/Liability Management Committees of the Bank Subsidiaries' respective Boards of Directors meet quarterly to discuss their interest rate risks. The Company uses simulation models to measure the impact of potential changes in interest rates on the net interest income, balance sheet mix and the spread relationship between market rates and bank products. As described below, sudden changes in interest rates should not have a material impact to the Bank Subsidiaries' results of operations. Should the Bank Subsidiaries experience a positive or negative mismatch in excess of the approved range, they have a number of remedial options. They have the ability to reposition their investment portfolios to include securities with more advantageous repricing and/or maturity characteristics. They can attract variable or fixed-rate loan products as appropriate. They can also price deposit products to attract deposits with maturity characteristics that can lower their exposures to interest rate risk.
The following table summarizes, as of December 31, 1999, the repricing of earning assets and interest-bearing liabilities in accordance with their contractual terms in given time periods.
(1) Includes FHLB advances, Federal funds purchased, securities sold under agreements to repurchase and trust preferred securities
Liquidity
The Company actively manages its liquidity under the direction of the Asset/Liability Management Committees of the Bank Subsidiaries. During the last two years the Company has been highly liquid and its liquid funds are more than sufficient to meet future loan demand or the possible outflow of deposits in addition to being able to adapt to changing interest rate conditions. Management expects this high liquidity trend to continue until overall economic conditions improve and loan demand rises.
Sources of liquidity at December 31, 1999 totaled $181.1 million or 32% of total assets, consisting of investment securities of $151.2 million and $29.9 million in cash and cash equivalents and interest-bearing due from banks. By comparison, total liquidity sources at December 31, 1998, were $150.8 million or 40% of total assets, consisting of investment securities in the amount of $111.6 million and cash and cash equivalents and interest-bearing due from banks in the amount of $39.2 million.
Capital Resources
The Company's primary regulator, the Federal Reserve (which regulates bank holding companies), has issued guidelines classifying and defining bank holding company capital into the following components: (1) Tier I capital, which includes tangible shareholders' equity for common stock and certain qualifying perpetual preferred stock, and (2) Tier II capital, which includes a portion of the allowance for possible loan losses, certain qualifying long-term debt and preferred stock that does not qualify as Tier II capital. The risk-based capital guidelines require financial institutions to maintain specific defined credit risk factors (risk-adjusted assets). As of December 31, 1999, the minimum Tier I and the combined Tier I and Tier II capital ratios required by the Federal Reserve Board for capital adequacy purposes were 4% and 8%, respectively.
In addition to the risk-based capital guidelines discussed above, the Federal Reserve requires that a bank holding company which meets that regulator's highest performance and operating standards maintain a minimum leverage ratio (Tier I capital as a percentage of tangible assets) of 3%. Those bank holding companies anticipating significant growth are expected to
maintain a leverage ratio above the minimum ratio. Minimum leverage ratios for each entity will be evaluated through the ongoing regulatory examination process. Regulations have also been issued by the Bank Subsidiaries' primary regulator, the FDIC, establishing similar risk-based and leverage capital ratios which apply to each bank as a separate entity.
The following table presents the risk-based and leverage capital ratios for the Company, GFB, BCB, and RCB respectively, as of December 31, 1999 and 1998.
Impact of Inflation and Changing Prices
The Company's consolidated financial statements and notes thereto presented elsewhere herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Company's operations. Unlike most industrial companies, nearly all of the Company's assets and liabilities are monetary in nature. As a result, interest rates have a greater impact on the Company's performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.
Item 7a
Item 7a - QUANTITATIVE AND QUALITATIVE MARKET RISK
See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 8
Item 8 - FINANCIAL STATEMENTS
GREATER COMMUNITY BANCORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands, except share data)
The accompanying notes to consolidated financial statements are an integral part of these statements.
GREATER COMMUNITY BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In Thousands, except per share data)
The accompanying notes to consolidated financial statements are an integral part of these statements.
GREATER COMMUNITY BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In Thousands)
The accompanying notes to consolidated financial statements are an integral part of these statements.
GREATER COMMUNITY BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands)
The accompanying notes to consolidated financial statements are an integral part of these statements.
GREATER COMMUNITY BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Greater Community Bancorp ("the Company"), through its subsidiary banks, Great Falls Bank ("GFB"), Bergen Commercial Bank ("BCB") and Rock Community Bank ("RCB") (collectively the "Bank Subsidiaries"), offers a broad range of lending, depository and related financial services to individual consumers, business and governmental units primarily through twelve full service offices located in Bergen and Passaic counties, New Jersey. Great Falls Investment Company, Inc. is a wholly-owned subsidiary of GFB, and BCB Investment Company, Inc. is a wholly-owned subsidiary of BCB. The primary business of these subsidiaries is to own and manage the investment portfolios of their respective parent banks.
Highland Capital Corp. ("HCC"), a wholly-owned nonbank subsidiary, engages in commercial equipment leasing focusing on small ticket and lower or middle market leases for resale to third parties. Two warehouse lines funded by GFB and BCB provide funding of leases.
GCB Realty, L.L.C. ("Realty"), a New Jersey limited liability company located in Totowa, New Jersey, was formed in 1997. The purposes of Realty are to engage in acquiring and managing real estate properties. In July 1997, Realty consummated the purchase of a property for $1.8 million in Bergen County, New Jersey. BCB and HCC are two of the tenants. Four tenants lease space in the building. In July 1998, Realty consummated the purchase of an office building in Lyndhurst, New Jersey for $400,000 which is currently being leased to BCB for one of its banking offices.
Greater Community Financial, L.L.C. ("GCF"), a wholly-owned New Jersey limited liability company located in Clifton, New Jersey, is a registered broker-dealer with the Securities and Exchange Commission and is a member of the National Association of Security Dealers.
The Bank Subsidiaries compete with other banking and financial institutions in their primary market communities, including financial institutions with resources substantially greater than their own. Commercial banks, savings banks, savings and loan associations, credit unions, and money market funds actively compete for deposits and for types of loans. Such institutions, as well as consumer finance and insurance companies, may be considered competitors with respect to one or more of the services they render.
The Company, Bank Subsidiaries and GCF are subject to regulations of certain state and federal agencies and, accordingly, they are periodically examined by those regulatory authorities. As a consequence of the extensive regulation of commercial banking activities, their respective businesses are particularly susceptible to being affected by state and federal legislation and regulations.
BASIS OF FINANCIAL PRESENTATION
The accounting and reporting policies of the Company and its subsidiaries conform with generally accepted accounting principles and predominant practices within the banking industry. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. These estimates and assumptions also affect reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The principal estimate that is particularly susceptible to significant change in the near term relates to the allowance for possible loan losses and intangible assets. The evaluation of the adequacy of the allowance for possible loan losses includes an analysis of the individual loans and overall risk characteristics and size of the different loan portfolios, and takes into consideration current economic and market conditions, the capability of specific borrowers to pay specific loan obligations, and current loan collateral values. However, actual losses on specific loans, which also are encompassed in the analysis, may vary from estimated losses.
Substantially all outstanding goodwill resulted from the acquisition of First Savings Bancorp of Little Falls, Inc. ("First Savings"), a Passaic County institution which had developed a compelling, if not predominant, market position of being the small business bank in Passaic County. As a result of First Savings' market penetration, the Company had formulated its own strategy to create such a market role. Accordingly, implicit in the purchase of the First Savings franchise was the acquisition of that role. However, if such benefits, including new business, are not derived or the Company changes its business plan, estimated amortization may increase and/or a charge for impairment may be recognized.
In 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 redefines how operating segments are determined and requires disclosures of certain financial and descriptive information about the Company's operating segments. Under current conditions, the company is reporting one segment.
FINANCIAL INSTRUMENTS
The Financial Accounting Standards Board ("FASB") issued SFAS No. 107, "Disclosures about Fair Value of Financial Instruments." SFAS No.107 requires all entities to disclose the estimated fair value of their assets and liabilities considered to be financial instruments. Financial instruments requiring disclosure consist primarily of investment securities, loans, deposits and borrowings.
INVESTMENT SECURITIES
The Company accounts for its investment securities in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Investment securities which the Company has the ability and intent to hold to maturity are classified as held-to-maturity and are stated at cost, adjusted for premium amortization and discount accretion. Securities which are held for indefinite periods of time which management intends to use as part of its asset/liability strategy, or that may be sold in response to changes in interest rates, changes in prepayment risk, increased capital requirements or other similar factors, are classified as available-for-sale and are carried at fair market value. Net unrealized gains and losses for such securities, net of income tax effect, are charged/credited directly to shareholders' equity. The Company does not engage in securities trading. Securities transactions are accounted for on a trade date basis. Gains or losses on disposition of investment securities are based on the net proceeds and the adjusted carrying amount of the securities sold using the specific identification method.
On October 1, 1998, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activity." SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments imbedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Additionally, SFAS No. 133 allows a one-time reclassification of securities without calling into question the intent of the company to hold other securities to maturity.
SFAS No. 133 allowed a reclassification of investment securities without calling into question the intent of the company to hold other investment securities to maturity in the future. On October 1, 1998, the Company reclassified securities with a fair market value of $5.5 million resulting in an increase of accumulated other comprehensive income of $28,000.
LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
Loans that management has the intent or the ability to hold for the foreseeable future or until maturity or payoff are stated at the amount of unpaid principal net of unearned discount, unearned loan fees, and an allowance for possible loan losses. The allowance for possible loan losses is established through a provision for possible loan losses charged to expense. Loans are charged against the allowance for possible loan losses when management believes that the collectibility of the principal is unlikely. The allowance for possible loan losses is maintained at a level considered by management to be adequate to provide for potential loan losses inherent in the loan portfolio at the reporting date. The level of the allowance is based on management's evaluation of potential losses in the loan portfolio after consideration of prevailing and anticipated economic conditions, including estimates and appraisals, among other items, known or anticipated at each reporting date. Credit reviews of the loan portfolio, designed to identify potential charges to the allowance, are made on a periodic basis during the year by management.
Interest income on loans is credited to operations based upon the principal amount outstanding. The net amounts of loan origination fees, direct loan origination costs and loan commitment fees are deferred and recognized over the lives of the related loans as adjustments of yield. When management believes there is sufficient doubt as to the ultimate collectibility of interest on any loan, the accrual of applicable interest is discontinued. A loan is generally classified as nonaccrual when principal and interest have consistently been in default for a period of 90 days or more or because of a deterioration in the financial condition of the borrower, and payment in full of principal or interest is not expected. Loans past due 90 days or more and still accruing interest are loans that are generally well-secured and expected to be restored to a current status in the near future.
The Company follows SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures." This standard requires that certain impaired loans be measured based on the present value of expected future cash flows discounted at the loan's effective interest rates, except that as a practical expedient, a creditor may measure impairment based on a loan's observable market price, or the fair value of the collateral if the loan is collateral dependent. Regardless of the measurement method, a creditor must measure impairment based on the fair value of the collateral when the creditor determines that foreclosure is probable. The Company had previously measured the allowance for credit losses using methods similar to those prescribed in this standard.
The Company accounts for its transfers and servicing assets in accordance with SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," as amended by SFAS No. 127, which provides accounting guidance on transfers of financial assets, servicing of financial assets and extinguishments of liabilities.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed primarily on the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the term of the lease or estimated useful life, whichever is shorter.
GOODWILL
Goodwill represents the excess of the cost over the fair value of net assets of acquired businesses. Substantially all outstanding goodwill resulted from the acquisition of First Savings in 1999 and is being amortized over 20 years on a straight line basis. Goodwill at December 31, 1999 and 1998, was approximately $13,128,000 and $350,000, respectively. The amortization charged to income was $608,000 for the year ended December 31, 1999 and $108,000 for the years ended December 31, 1998 and 1997.
DEFERRED FINANCING COSTS
Deferred financing costs related to the issuance of the subordinated debt are being amortized over the life of the instruments and are included in other assets. The unamortized balance at December 31, 1999 and 1998 was $1,125,000 and $1,155,000, respectively.
INCOME TAXES
The Company accounts for income taxes under the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities. The principal types of accounts resulting in differences between assets and liabilities for financial statement and tax return purposes are the allowance for possible losses on loans, other real estate, interest income on nonaccrual loans, depreciation and amortization, difference between book and tax basis of assets acquired and acquired net operating loss carryforwards. The Company and its subsidiaries file a consolidated Federal income tax return.
STATEMENTS OF CASH FLOWS
Cash and cash equivalents are defined as cash on hand, non interest-bearing amounts due from banks and Federal funds sold. Generally, Federal funds are sold for a one-day period. Cash paid for income taxes was $2.5 million, $1.9 million and $1.5 million for the years ended December 31, 1999, 1998 and 1997, respectively. Cash paid for interest was $16.7 million, $11.5 million and $8.4 million for the years ended December 31, 1999, 1998 and 1997, respectively.
ADVERTISING COSTS
The Company expenses advertising costs as incurred. Advertising expenses for the years ended December 31, 1999, 1998 and 1997 were approximately $265,000, $209,000 and $201,000, respectively.
STOCK OPTIONS
The Company accounts for its stock options under SFAS No. 123, "Accounting for Stock-Based Compensation." The standard contains a fair value-based method for valuing stock-based compensation that entities may use, and measures compensation cost at the grant date based on the fair value of the award. Compensation is then recognized over the service period, which is usually the vesting period. Alternatively, the standard permits entities to continue accounting for employee stock options and similar equity instruments under Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." Entities that continue to account for stock options using APB Opinion No. 25 are required to make pro forma disclosures of net income and earnings per share, as if the fair value-based method of accounting defined in SFAS No. 123 had been applied. The Company's stock option plans are accounted for under APB Opinion No. 25.
NET INCOME PER SHARE
The Company follows the provisions of SFAS No. 128, "Earnings per Share," which eliminates primary and fully diluted earnings per share and requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. All weighted average actual shares or per share information in the financial statements has been adjusted retroactively for the effect of stock split and stock dividends.
START-UP COST
Statement of Position ("SOP") 98-5, "Reporting on Costs of Start-up Activities," was adopted in 1998. SOP 98-5 requires that costs of start-up activities, as defined, including organization costs, be expensed as incurred. During 1998, the Company expensed $119,000 of costs that would have been previously categorized as start-up costs. The Company did not have any prior start-up cost capitalized.
COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income." This standard establishes new standards for reporting comprehensive income which includes net income as well as certain other items which result in a change to equity during the period.
The income tax effects allocated to comprehensive income (loss) are as follows:
RECLASSIFICATIONS
Certain reclassifications have been made in the 1998 and 1997 financial statements to conform to the classifications used in 1999.
NOTE 2 ACQUISITION
On April 1, 1999, the Company, GFB and BCB completed the merger with First Savings and its subsidiary bank. Under the terms of the merger, each share of First Savings common stock was purchased for $52.26. This transaction was accounted for under the purchase method of accounting. A total of $23.0 million was paid of which $13.2 million was recorded as goodwill and is being amortized over a 20 year period.
The unaudited proforma results of operations presented below reflect the Company's operations as though the acquisition of First Savings had taken place at the beginning of the periods presented. The proforma results are not necessarily indicative of what the actual results of operations would have been had the acquisition occurred at the beginning of the periods presented, or what the results of operations will be in the future.
(In Thousands) For the years ended December 31, 1999 1998 ------- ------- Interest Income ................................ $37,542 $37,251 Interest Expense ............................... 19,369 21,160 Net Interest Income ............................ 18,173 16,091 Net Income ..................................... 3,937 2,951 Net Income per share - Basic ................... 0.67 0.55 Net Income per share - Diluted ................. 0.65 0.53
NOTE 3 INVESTMENT SECURITIES
The amortized cost, unrealized gains and losses, and fair value of the Company's investment securities available-for-sale and held-to-maturity are as follows:
The amortized cost and fair value of securities at December 31, 1999, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers and borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
December 31, 1999 Amortized Fair Cost Value -------- -------- (In Thousands) Available-for-sale
Due in one year or less ...................... $ 9,852 $ 9,793 Due after one year through five years ........ 36,693 36,254 Due after five years through ten years ....... 5,589 5,426 Due after ten years .......................... 19,674 18,760 Mortgage-backed securities ................... 58,583 57,656 Other debt and equity securities ............. 13,790 14,347 -------- -------- $144,181 $142,236 Held-to-maturity
Due in one year or less ...................... 4,184 4,172 Due after one year through five years ........ 188 187 Due after five years through ten years ....... 1,000 600 Mortgage-backed securities ................... 3,583 3,546 -------- -------- $ 8,955 $ 8,505 ======== ========
Proceeds from sales of available-for-sale securities for the years ended December 31, 1999, 1998 and 1997 were $16.4 million, $6.9 million and $11.0 million, respectively. Gross gains of $2.2 million, $1.1 million and $216,000 were realized on these sales for the years ended December 31, 1999, 1998 and 1997, respectively. Gross losses were not significant for the years ended December 31, 1999, 1998 and 1997.
Securities with a carrying value of $52.9 million and $27.1 million at December 31, 1999 and 1998, respectively, were pledged to secure public deposits and repurchase agreements and for other purposes required by law.
NOTE 4 LOANS
Major classifications of loans are as follows:
The following table presents information related to loans which are on a nonaccrual basis, loans which have been renegotiated to provide a reduction or deferral of interest or principal for reasons related to the debtor's financial difficulties and loans contractually past due ninety days or more as to interest or principal payments.
The balance of impaired loans was $1.2 million, $907,000 and $1.3 million at December 31, 1999, 1998 and 1997, respectively. The Bank Subsidiaries have identified a loan as impaired when it is probable that interest and principal will not be collected according to the contractual terms of the loan agreements. The allowance for possible loan loss associated with impaired loans was $186,000, $138,000 and $156,000 at December 31, 1999, 1998 and 1997, respectively. The average recorded investment in impaired loans was $1.1 million, $419,000 and $1.0 million at December 31, 1999, 1998 and 1997, respectively. The income recognized on impaired loans for the years ended December 31, 1999, 1998 and 1997, was $60,000, $44,000 and $19,000, respectively. The Bank Subsidiaries' policy for interest income recognition on impaired loans is to recognize income on restructured loans under the accrual method. The Bank Subsidiaries recognize income on nonaccrual loans under the cash basis when both the loans are current and the collateral on the loans is sufficient to cover the outstanding obligation. If these factors do not exist, the Bank Subsidiaries will not recognize income.
The Bank Subsidiaries extended credit to various directors, executive officers and their associates. These extensions are made in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with others. At December 31, 1999, loans outstanding to these related parties amounted to $13.1 million. During the year ended December 31, 1999, there were new loans to related parties of $6.7 million and repayments of $1.3 million. All such loans are current as to principal and interest payments at December 31, 1999.
NOTE 5 ALLOWANCE FOR POSSIBLE LOAN LOSSES
An analysis of the allowance for possible loan losses is as follows:
NOTE 6 PREMISES AND EQUIPMENT
Premises and equipment consist of the following:
NOTE 7 DEPOSITS
At December 31, 1999, the schedule of maturities of Certificates of Deposit is as follows (in thousands):
2000............................................ $197,573 2001............................................ 31,039 2002 ........................................... 3,680 2003 ........................................... 2,450 2004............................................ 933 -------- $235,675 ========
NOTE 8 DEBT
Short-Term Borrowings
Federal funds purchased and securities sold under agreements to repurchase generally mature within 30 days from the date of the transaction. Short-term borrowings consist of various other borrowings which generally have maturities of less than one year. The details of these categories are presented below:
Years ended December 31, ----------------------------- (In Thousands) 1999 1998 1997 ------- ------- ------- Securities sold under repurchase agreements and federal funds purchased Balance at year-end ....................... $16,403 $ 7,103 $ 6,338 Average during the year ................... 13,316 10,190 7,507 Maximum month-end balance ................. 20,466 12,843 8,670 Weighted average rate during the year ..... 4.90% 4.49% 4.88% Rate at December 31 ....................... 6.34% 5.82% 5.00%
HCC maintains a revolving line of credit of $500,000 earning interest at the bank's prime rate plus 50 basis points through April 30, 2000. The amount outstanding at December 31, 1999 was $451,000 and is included in other liabilities.
Federal Home Loan Bank Advances
The Company has a line of credit for $15.9 million with the Federal Home Loan Bank ("FHLB") which is collateralized by FHLB stock. Borrowings under this arrangement have an interest rate that fluctuates based on market conditions and customer demand. As of December 31, 1999 and 1998 there were no outstanding balances.
At December 31, 1999, the Company had $25.5 million of advances from the FHLB. These advances are collateralized by certain first mortgage loans. The weighted average interest rate was 5.97%. At December 31, 1999, $5.5 million will mature in 2008 and $20.0 million will mature in 2009.
Guaranteed Preferred Beneficial Interest in the Company's Subordinated Debt
The Company issued $23.0 million of 10.00% of junior subordinated debentures to a Delaware Business Trust (the "Trust"), in which the Company owns all of the common equity. The Trust issued $23.0 million of Preferred Securities to investors, secured by the junior subordinated debentures and the guarantee of the Company. The junior subordinated debentures mature in the year 2027. Although the junior subordinated debentures are treated as debt of the Company, they currently qualify as Tier I capital investments, subject to the 25% limitation under risk-based capital guidelines of the Federal Reserve. The portion of the Trust Preferred Securities that exceeds this limitation qualifies as Tier II capital of the Company.
Subordinated Debentures and Cancellable Mandatory Stock Purchase Contracts
The Company issued $5.0 million of 8.5% Redeemable Subordinated Debentures ("Debentures") due November 1, 1998, interest payable quarterly. In addition to the Debentures, the Company issued Cancellable Mandatory Stock Purchase Contracts ("Equity Contracts") requiring the purchase of $5.0 million in common stock at a price of $4.23 per share no later than November 1, 1997, and permitting the purchase of common stock in that amount prior to that date. The purchase price under the Equity Contracts could be paid by the surrender of the Debentures with a principal amount equal to the amount of the common stock to be purchased. During November 1997, all of the outstanding stock purchase contracts which had not previously been exercised were mandatorily exercised at the adjusted price of $4.23 per share. The Company issued 1,178,808 shares (adjusted for subsequent stock dividends and splits) of common stock in connection with these November exercises.
NOTE 9 INCOME TAXES
The provision for income taxes was as follows:
The reconciliation of the tax computed at the statutory federal rate was as follows:
The net deferred tax asset consists of the following:
As a result of the acquisition of First Savings, the Company acquired a net deferred tax asset of $405,000, which includes unrealized holding gains of $90,000, during 1999.
At December 31, 1999, the Company had a net operating loss carryforward for federal income tax purposes of approximately $450,000. This net operating loss carryforward originated from previous acquisitions. Subject to certain yearly limitations, the Company can utilize the preacquisition net operating loss carryforward to offset future consolidated taxable income. The net operating loss carryforwards, if unused, would expire in the years 2008 to 2010.
NOTE 10 SHAREHOLDERS' EQUITY
On September 30, 1999, the Company paid a 5% stock dividend on its common stock to shareholders of record on September 15, 1999.
During 1999, the Company, through a private placement of common stock raised $3.8 million, net of offering costs. The private placement resulted in the issuance of 391,000 shares of the Company's stock at $9.58 per share. The proceeds were used to fund the initial capital of RCB, which opened business on April 27, 1999.
During 1998, the Company amended its Certificate of Incorporation to increase the number of authorized common shares from 10,000,000 shares with a par value of $1.00 to 20,000,000 shares with a par value of $0.50. In conjunction with this amendment, the Company declared a 2 for 1 stock split where one common share of $1.00 par value stock was exchanged for two common shares of $0.50 par value stock.
On July 31, 1997, the Company paid a 10% stock dividend on its common stock to shareholders of record on July 15, 1997.
NOTE 11 EARNINGS PER SHARE
The Company's calculation of earnings per share in accordance with SFAS No. 128, "Earnings Per Share," is as follows:
Options to purchase 25,750 shares of common stock from $10.56 to $11.19 per share were outstanding during 1999. They were not included in the computation of diluted EPS because the option exercise price was greater than the average market price of the common stock.
Options to purchase 96,548 shares of common stock at $9.88 per share were outstanding during 1998. They were not included in the computation of diluted EPS because the option exercise price was greater than the average market price of the common stock.
Options to purchase 9,450 shares of common stock at $9.23 per share were outstanding during 1997. They were not included in the computation of diluted EPS because the option exercise price was greater than the average market price of the common stock.
NOTE 12 STOCK OPTIONS
The Company adopted a nonstatutory stock option plan in 1988 (the "1988 Plan") allowing for the granting to employees of options to acquire up to a maximum of 233,738 shares of the Company's common stock. Effective with the approval of the 1996 Employee Plan, no further shares will be granted under the 1988 Plan. At December 31, 1999 and 1998, options to purchase 26,942 and 55,936 shares were outstanding.
The Company adopted two additional stock option plans in 1996. The 1996 Employee Stock Option Plan (the "1996 Employee Plan") provides for the granting of incentive stock options, nonqualified stock options and stock appreciation rights to employees of the Company and its subsidiaries. A total of 508,200 shares is authorized to be granted under the 1996 Employee Plan. During 1999 and 1998, options to acquire 78,750 and 96,548 shares were granted under this plan. At December 31, 1999 and 1998, options to purchase a total of 414,712 and 348,517 shares were outstanding under the 1996 Employee Plan.
The 1996 Stock Option Plan for Nonemployee Directors (the "1996 Directors Plan") provides for the granting of nonqualified stock options to nonemployee directors of the Bank Subsidiaries. A total of 241,395 shares is authorized to be granted under the 1996 Directors Plan. During 1996, options to acquire 241,395 shares were granted under this plan. At December 31, 1999 and 1998, options to purchase a total of 235,319 and 236,842 shares were outstanding under the 1996 Directors Plan.
Had compensation cost for the above stock option plans been determined based on the fair value of the options at the grant dates consistent with the method of SFAS No. 123, the Company's net income, basic and diluted net income per share would have been reduced to the pro forma amounts indicated below.
These pro forma amounts may not be representative of future disclosures because they do not take into effect pro forma compensation expense related to grants before 1995.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model with the following weighted-average assumptions used for grants in 1999, 1998 and 1997, respectively: dividend yields of 3.3%, 2.1% and 2.2%; expected volatility of 35%, 22% and 27%; risk-free interest rates of 5.74%, 4.58% and 6.43%; and expected lives of five and ten years.
A summary of the status of the Company's stock option plans as of December 31, 1999, 1998 and 1997 and the changes during the years ending on those dates is represented below.
The following table summarizes information about nonqualified options outstanding at December 31, 1999.
NOTE 13 BENEFIT PLANS
EMPLOYEE 401 (k) PLAN
The Company has a 401(k) savings plan covering substantially all employees. Under the plan, the Company matches 50% of employee contributions for all participants with less than five years employment, not to exceed 2% of their salary, and 75% of employee contributions for all participants with five or more years of employment, not to exceed 3% of their salary. Contributions made by the Company were approximately $405,000, $325,000 and $183,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
The Company adopted two Supplemental Executive Retirement Plans ("SERPs") effective January 1999. The SERPs are designed to provide key executives a benefit equal to the difference between (i) 70% of their respective highest average three consecutive years of annual salary at retirement and (ii) the benefits in fact provided from the respective subsidiary bank's funding of tax-qualified retirement plans (such as the 401K Plan). Under the SERPs, the aggregate amount of benefits to which the key executives would be entitled has been actuarially determined to be approximately $211,000 The benefits will be paid over 15 years. The Company intends to fund its obligations under the SERPs with the proceeds of life insurance policies that it purchased on these key executives.
DIRECTORS' RETIREMENT PLAN
During 1999, the Company established a noncontributory nonqualified retirement plan for nonemployee directors of the Company and its subsidiaries. ("Directors' Retirement Plan"). The Directors' Retirement Plan is designed to provide a benefit to those nonemployee directors who, at retirement age, will have a minimum of 15 years of service on the Board of which at least 5 years occur after establishment of the Directors' Retirement Plan. Each participant's Retirement Benefit is 75% of his projected annual board fees earned in the year prior to his normal retirement date. The annual payout under the plans are based upon the individual directors retirement ages and range from approximately $12,000 to $68,000.
DEFERRED COMPENSATION PLAN
Effective January, 1999 the Company established a deferred compensation plan for certain directors of the Company ("Deferred Compensation Plan"). A participating director may defer payment of a specified amount up to 100% of monthly board fees. Amounts deferred earn interest at the rate of 10% per annum. At retirement, the benefit under the Deferred Compensation Plan is payable in the form of a monthly annuity for 10 years.
NOTE 14 COMMITMENTS AND CONTINGENCIES
LEASE OBLIGATIONS
The Company and its subsidiaries lease banking facilities and other office space under operating leases which expire at various dates through 2007, containing certain renewal options. Rent expenses charged to operations approximated $820,000,
$630,000 and $681,000 for the years ended December 31, 1999, 1998 and 1997, respectively. Included in these amounts is $226,000, $215,000 and $146,000, in 1999, 1998 and 1997, respectively, paid to a general partnership that includes two directors of the Company.
As of December 31, 1999, future approximate minimum annual rental payments under these leases are as follows (in thousands):
2000.................................................. $496 2001.................................................. 265 2002.................................................. 118 2003 ................................................. 43 2004 ................................................. 6 ---- Total............................................ $928 ====
LITIGATION
The Company and its subsidiaries may, in the ordinary course of business, become a party to litigation involving collection matters, contract claims and other legal proceedings relating to the conduct of their business. In management's judgment, the consolidated financial position of the Company will not be affected materially by the final outcome of any present legal proceedings or other contingent liabilities and commitments.
NOTE 15 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK
The Bank Subsidiaries are parties to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of their customers and to reduce their own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable. Those instruments involve, to varying degrees, elements of credit and interest rate risks in excess of the amount recognized in the consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Bank Subsidiaries have in particular classes of financial instruments.
The Bank Subsidiaries' exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Bank Subsidiaries use the same credit policies in making commitments and conditional obligations as they do for on-balance-sheet instruments.
Unless noted otherwise, the Bank Subsidiaries do not require collateral or other security to support financial instruments with credit risk. The approximate contract amounts are as follows:
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank Subsidiaries evaluate each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank Subsidiaries upon extension of credit, is based on management's credit evaluation.
Standby letters of credit are conditional commitments issued by the Bank Subsidiaries to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank Subsidiaries hold residential or commercial real estate, accounts receivable, inventory and equipment as collateral supporting those commitments for which collateral is deemed necessary. The extent of collateral held for those commitments at December 31, 1999 varies up to 100%.
The Bank Subsidiaries grant various commercial and consumer loans, primarily within the State of New Jersey. Although the Bank Subsidiaries have diversified loan portfolios, a substantial portion of the ability of their borrowers to honor their loan payment obligations in a timely fashion is dependent on the success of the real estate industry. The distribution of commitments to extend credit approximates the distribution of loans outstanding. Commercial and standby letters of credit were granted primarily to commercial borrowers.
NOTE 16 FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 requires disclosure of the estimated fair value of an entity's assets and liabilities considered to be financial instruments. For the Company, as for most financial institutions, the majority of its assets and liabilities are considered financial instruments as defined in SFAS No. 107. However, many such instruments lack an available trading market, as characterized by a willing buyer and seller engaging in an exchange transaction. Also, it is the Company's general practice and intent to hold its financial instruments to maturity and not to engage in trading or sales activities. Therefore, the Company had to use significant estimations and present value calculations to prepare this disclosure.
Changes in the assumptions or methodologies used to estimate fair values may materially affect the estimated amounts. Also, management is concerned that there may not be reasonable comparability between institutions due to the wide range of permitted assumptions and methodologies in the absence of active markets. This lack of uniformity gives rise to a high degree of subjectivity in estimating financial instrument fair values.
Estimated fair values have been determined by the Company using the best available data and an estimation methodology suitable for each category of financial instruments. The estimation methodologies used, the estimated fair values, and recorded book balances at December 31, 1999 and 1998 are outlined below.
For cash and due from banks, the recorded book values of $19.2 million and $23.6 million at December 31, 1999 and 1998, respectively, approximate fair values. For interest-bearing deposits with banks, the recorded book values of $10.7 million and $15.5 million at December 31, 1999 and 1998, respectively, approximate fair values. The estimated fair values of investment securities are based on quoted market prices, if available. Estimated fair values are based on quoted market prices of comparable instruments if quoted market prices are not available.
The net loan portfolio at December 31, 1999 and 1998 has been valued using a present value discounted cash flow where market prices were not available. The discount rate used in these calculations is the estimated current market rate adjusted for credit risk. The carrying value of accrued interest approximates fair value.
The following table describes the carrying amounts and estimated fair values of investment securities and loans at December 31, 1999 and 1998.
The estimated fair values of demand deposits (i.e., interest-bearing (NOW) and non interest-bearing demand accounts, savings and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of variable rate accounts and certificates of deposit approximate their fair values at the reporting date. The carrying amount of accrued interest payable approximates its fair value.
The following table describes the carrying amounts and estimated fair values of time deposits, securities sold under agreements to repurchase and FHLB advances at December 31, 1999 and 1998.
The fair value of the guaranteed preferred beneficial interest in the Company's subordinated debt totaling $23.0 million at December 31, 1999 and 1998 approximates fair value.
There was no material difference between the notional amount and the estimated fair value of off-balance-sheet items which totaled approximately $66.7 million and $38.6 million at December 31, 1999 and 1998, respectively, and primarily comprise unfunded loan commitments which are generally priced at market at the time of funding.
NOTE 17 REGULATORY MATTERS AND CAPITAL REQUIREMENTS
New Jersey state law permits the payment of dividends from a bank subsidiary to its parent company provided there is no impairment of the subsidiary's capital accounts and provided the subsidiary bank maintains a surplus of not less than 50% of its capital stock, or if payment of the dividend will not reduce the subsidiary's surplus. GFB had $15.5 million and $7.7 million as of December 31, 1999 and 1998, respectively and BCB had $4.1 million as of December 31, 1999 and 1998 and RCB had $1.2 million as of December 31, 1999 of funds available for the payment of dividends to the Company, respectively.
The Company and the Bank Subsidiaries are subject to various regulatory capital requirements administered by the federal banking agencies including the Federal Reserve. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank Subsidiaries must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated under regular accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulations to ensure capital adequacy require the Bank Subsidiaries and the Company to maintain minimum amounts and ratios of total and Tier I capital to risk weighted assets. As of December 31, 1999, management believes that the Company and the Bank Subsidiaries meet all capital adequacy requirements to which they are subject.
As of December 31, 1999, the most recent notification from the FDIC categorized the Bank Subsidiaries as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the Company and Bank Subsidiaries must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the following table. There are no conditions or events which have occurred that management believes have changed the category of the Company or any of the Bank Subsidiaries.
NOTE 18 CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
The condensed financial information of Greater Community Bancorp (parent company only) is as follows:
CONDENSED BALANCE SHEET
CONDENSED STATEMENTS OF INCOME
CONDENSED STATEMENTS OF CASH FLOWS
NOTE 19 QUARTERLY FINANCIAL DATA (UNAUDITED)
The following represents summarized quarterly financial data of the Company which, in the opinion of management, reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company's results of operations.
Report Of Independent Certified Public Accountants
To the Board of Directors and Shareholders of Greater Community Bancorp
We have audited the accompanying consolidated balance sheets of Greater Community Bancorp and subsidiaries as of December 31, 1999 and 1998 and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Greater Community Bancorp and subsidiaries as of December 31, 1999 and 1998, and the consolidated results of their operations and their consolidated cash flows each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles.
/s/ Grant Thornton LLP
Philadelphia, Pennsylvania January 18, 2000
Item 9
Item 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10
Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A. Directors and Executive Officers: Information required by Items 401 and 405 of Reg. S-K is contained in the registrant's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders furnished to the Commission pursuant to Regulation 14A.
B. Other Significant Employees: Not applicable.
C. Family Relationships: John L. Soldoveri, Chairman of the Company and Chairman of GFB, is the uncle of Anthony M. Bruno, Jr., Vice Chairman of the Company and Chairman of BCB. C. Mark Campbell, a director and Executive Vice President of the Company and President of BCB, is Mr. Bruno's brother-in-law.
D. Involvement in Certain Legal Proceedings: Not applicable.
Item 11
Item 11 - EXECUTIVE COMPENSATION
Information required by Item 402 of Reg. S-K is contained in the registrant's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders furnished to the Commission pursuant to Regulation 14A.
Item 12
Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A. Security Ownership of Certain Beneficial Owners: Information required by Item 403(a) of Reg. S-K is contained in the registrant's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders furnished to the Commission pursuant to Regulation 14A.
B. Security Ownership of Management: Information required by Item 403(b) of Reg. S-K is contained in the registrant's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders to be furnished to the Commission pursuant to Regulation 14A.
C. Changes in Control: Not applicable. The registrant knows of no contractual arrangements which may, at a future date, result in a change of control of the registrant.
Item 13
Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Item 404 of Reg. S-K is contained in the registrant's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders furnished to the Commission pursuant to Regulation 14A.
PART IV
Item 14
Item 14 - EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits: The Exhibits listed below are filed with this report. [Note: Exhibits filed with Form 10-K have been omitted from the Annual Report to Stockholders]
Exhibit No. Description
3.1 Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.4 to Form 10-QSB for the quarter ended June 30, 1998) filed on August 14, 1998.
3.2 Bylaws of the Company 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).
4.1 Junior Subordinated Indenture between the Company 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 Certificates for junior subordinated debentures due May, 2007 (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 on 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).
10.1 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).
10.3 Employment Agreement of Erwin D. Knauer dated July 1, 1999 (incorporated by reference to Exhibit 10.3 to Form 10-Q for quarter ended September 30, 1999).
10.4 Executive Supplemental Retirement Income Agreement for George E. Irwin dated as of January 1, 1999 among Great Falls Bank, George E. Irwin and Greater Community Bancorp (as guarantor).
10.5 Executive Supplemental Retirement Income Agreement for C. Mark Campbell dated as of January 1, 1999 among Bergen Commercial Bank, C. Mark Campbell and Greater Community Bancorp (as guarantor).
21 Subsidiaries of Registrant
23 Consent of Grant Thornton LLP
27 Financial Data Schedule
B. Reports on Form 8-K: During the fourth quarter of 1999, the registrant filed Form 8-K on November 12, 1999, reporting the third quarter earnings.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Greater Community Bancorp
Date: March 17, 2000 BY: /s/George E. Irwin ------------------- George E. Irwin President and Chief Executive Officer
Date: March 17, 2000 BY: /s/Naqi A. Naqvi ---------------- Naqi A. Naqvi Treasurer, Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: March 17, 2000 BY: /s/George E. Irwin ------------------ George E. Irwin President, Chief Executive Officer and Director
Date: March 17, 2000 BY: /s/Anthony M. Bruno, Jr. ------------------------ Anthony M. Bruno, Jr. Vice Chairman of the Board
Date: March 17, 2000 BY: /s/Charles J. Volpe ------------------- Charles J. Volpe Director
Date: March 17, 2000 BY: /s/C. Mark Campbell ------------------- C. Mark Campbell Executive Vice President and Director
Date: March 17, 2000 BY: /s/Joseph A. Lobosco -------------------- Joseph A. Lobosco Director
Date: March 17, 2000 BY: /s/John L. Soldoveri -------------------- John L. Soldoveri Chairman of the Board