-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C5VuDqxGR5iE/oqfPuXQXnFkYu7WlhWpVoQ9Z5L+aBUjsxkeTsw7fbfuyaNQbcDs S4IY2LlwfAYBFd+ruwArFQ== 0000351710-96-000007.txt : 19960807 0000351710-96-000007.hdr.sgml : 19960807 ACCESSION NUMBER: 0000351710-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960806 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GBC BANCORP CENTRAL INDEX KEY: 0000351710 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 953586596 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10731 FILM NUMBER: 96604251 BUSINESS ADDRESS: STREET 1: 800 W. 6TH STREET STREET 2: 15TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90017 BUSINESS PHONE: 2139724172 MAIL ADDRESS: STREET 1: 800 W. 6TH ST STREET 2: 15TH FL CITY: LOS ANGELES STATE: CA ZIP: 90017 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 For Quarter Ended June 30, 1996 Commission file number 0-16213 ------------- ------- GBC BANCORP - ------------------------------------------------------ (Exact name of registrant as specified in its charter) California 95-3586596 - ------------------------------- ---------------------------------- (State or other jurisdiction of (I.R.S.Employer Identification No.) incorporation or organization) 800 West 6th Street, Los Angeles, California 90017 - -------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code 213/972-4172 ------------ Former name address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------------ ----------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Common stock, no par value, 6,723,566 shares issued and ---------------- outstanding as of June 30, 1996. ------------- TABLE OF CONTENTS PART I - FINANCIAL INFORMATION......................... Item 1. Financial Statements......................... Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II - OTHER INFORMATION............................ Item 1. Legal Proceedings............................ Item 2. Changes In Securities........................ Item 3. Default Upon Senior Securities............... Item 4. Submission Of Matters To A Vote Of Securities Holders...................................... Item 5. Other Information............................ Item 6. Exhibits And Reports On Form 8-K............. PART III - SIGNATURES.................................. PART I - FINANCIAL INFORMATION GBC Bancorp and Subsidiaries Consolidated Statements of Financial Condition
June 30, December 31, (IN THOUSANDS) 1996 1995 - -------------------------------------------------------------------------------- ASSETS (Unaudited) Cash and Due From Banks $34,651 $38,837 Federal Funds Sold and Securities Purchased Under Agreements to Resell 138,000 125,000 Securities Available for Sale at Fair Value 572,055 507,141 Securities Held to Maturity (Fair Value of $24,342 and $34,370 at June 30, 1996 and December 31, 1995, Respectively) 23,989 33,553 Loans and Leases 517,079 471,944 Less: Allowance for Credit Losses (16,676) (16,674) Deferred Loan Fees (3,274) (3,379) ------------------------------- Loans and Leases, Net 497,129 451,891 Bank Premises and Equipment, Net 6,166 6,101 Other Real Estate Owned, Net 15,525 7,686 Due From Customers on Acceptances 5,600 4,703 Real Estate Held for Investment 10,350 12,142 Accrued Interest Receivable and Other Assets 18,892 17,452 ------------------------------- Total Assets $1,322,357 $1,204,506 =============================== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Demand $139,320 $137,048 Interest Bearing Demand 207,387 200,614 Savings 133,816 129,202 Time Certificates of Deposit of $100,000 or More 505,663 408,289 Other Time Deposits 174,806 171,047 ------------------------------- Total Deposits 1,160,992 1,046,200 Federal Funds Purchased and Securities Sold Under Repurchase Agreements $24,000 $24,000 Subordinated Debt 15,000 15,000 Acceptances Outstanding 5,600 4,703 Accrued Expenses and Other Liabilities 12,225 15,126 ------------------------------- Total Liabilities 1,217,817 1,105,029 Stockholders' Equity: Common Stock, No Par or Stated Value; 20,000,000 Shares Authorized; 6,723,566 and 6,679,661 Shares Outstanding at June 30, 1996 and December 31, 1995, Respectively 46,442 45,658 Securities Valuation Allowance, Net of Tax (1,896) 1,723 Retained Earnings 60,001 52,103 Foreign Currency Translation Adjustments (7) (7) ------------------------------- Total Stockholders' Equity 104,540 99,477 ------------------------------- Total Liabilities and Stockholders' Equity $1,322,357 $1,204,506 ===============================
See Accompanying Notes to Consolidated Financial Statements GBC Bancorp and Subsidiaries Consolidated Statements of Income (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, (IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 1996 1995 - ------------------------------------------------------------------------------- INTEREST INCOME Loans and Leases, Including Fees $12,989 $12,691 $25,268 $25,050 Securities Available for Sale 9,208 5,449 17,325 10,656 Securities Held to Maturity 577 1,623 1,225 3,067 Federal Funds Sold and Securities Purchased under Agreements to Resell 1,721 1,253 3,961 2,777 Other - - - 5 ------------------------------------------ Total Interest Income 24,495 21,016 47,779 41,555 INTEREST EXPENSE Interest Bearing Demand 1,111 1,054 2,255 2,142 Savings 950 1,195 1,881 2,540 Time Deposits of $100,000 or More 6,259 4,132 11,937 7,969 Other Time Deposits 2,140 1,923 4,318 3,696 Federal Funds Purchased and Securities Sold under Repurchase Agreements 333 - 669 - Borrowings from the Federal Home Loan Bank - 356 - 704 Subordinated Debt 399 399 798 798 ------------------------------------------ Total Interest Expense 11,192 9,059 21,858 17,849 Net Interest Income 13,303 11,957 25,921 23,706 Provision for Credit Losses 1,000 5,000 2,500 10,100 ------------------------------------------ Net Interest Income after Provision for Credit Losses 12,303 6,957 23,421 13,606 NON-INTEREST INCOME Service Charges and Commissions 1,257 1,392 2,805 2,773 Gain/(Loss) on Sale of Loans, Net 16 31 101 (18) Gain on Sale of Fixed Assets 8 9 8 9 Gain on Sale of Real Estate Investment - - 101 - Other 122 172 219 347 ------------------------------------------ Total Non-Interest Income 1,403 1,604 3,234 3,111 NON-INTEREST EXPENSE Salaries and Employee Benefits 3,440 2,612 6,826 5,159 Occupancy Expense 687 678 1,362 1,364 Furniture and Equipment Expense 395 389 791 791 Net Other Real Estate Owned Expense 419 506 906 1,537 Other 1,802 2,072 3,446 4,022 ------------------------------------------ Total Non-Interest Expense 6,743 6,257 13,331 12,873 Income before Income Taxes 6,963 2,304 13,324 3,844 Provision for Income Taxes 2,301 850 4,353 771 ------------------------------------------ Net Income $4,662 $1,454 $8,971 $3,073 ========================================== Earnings Per Share $0.66 $0.22 $1.27 $0.46 ==========================================
See Accompanying Notes to Consolidated Financial Statements GBC Bancorp and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, (IN THOUSANDS) 1996 1995 - ----------------------------------------------------------------------- OPERATING ACTIVITIES: Net Income $8,971 $3,073 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 556 530 Net Accretion of Premiums/Discounts on Securitie s (1,186) (2,290) Writedowns on Real Estate Held for 761 387 Investment Provision for Credit Losses 2,500 10,100 Provision for Losses on Other Real Estate Owned 554 868 Amortization of Deferred Loan Fees (1,136) (1,329) (Gain)/Loss on Sale of Loans (101) 45 Gain on Sale of Real Estate Investment (101) - Gain/(Loss) on Sale of Other Real Estate Owned 2 (10) Gain on Sale of Fixed Assets (8) (9) Loans Originated for Sale (18,125) (25,476) Proceeds from Sale of Loans Originated for Sale 23,755 14,777 Net (Increase)/Decrease in Interest Receivable and Other Assets (48) 60 Net Decrease in Accrued Expenses and Other Liabilities (1,646) (959) Other, Net (2) (17) ------------------------------ Net Cash Provided/(Used) by Operating Activities 14,746 (250) INVESTING ACTIVITIES: Purchases of Securities Available for Sale (454,068) (275,872) Proceeds from Maturities of Securities Available for Sale 384,059 282,059 Proceeds from Maturities of Securities Held to Maturity 9,580 15,688 Purchases of Securities Held to Maturity - (34,158) Net (Increase)/Decrease in Loans and Lease (62,049) 10,721 Proceeds from Sale of Other Real Estate Owned 1,522 2,805 Proceeds from Sale of Bank Premises and Equipment 19 18 Purchases of Bank Premises and Equipment (631) (282) Proceeds from Sale of Real Estate Investment 1,134 2,635 Purchases/Additions to Real Estate Held for Investment - (356) ------------------------------ Net Cash (Used)/Provided by Investing Activities (120,434) 3,258
See Accompanying Notes to Consolidated Financial Statements GBC BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Six Months Ended June 30, (IN THOUSANDS) 1996 1995 - -------------------------------------------------------------------------- FINANCING ACTIVITIES: Net Increase/(Decrease) in Demand Deposits $2,272 ($13,680) Net Increase/(Decrease) in Interest-Bearing Demand Accounts 6,773 (21,180) Net Increase/(Decrease) in Savings Deposits 4,614 (22,307) Net Increase in Certificates of Deposits 101,133 23,426 Cash Dividend Paid (1,074) (1,066) Proceeds from Exercise of Stock Options 784 18 -------------------------- Net Cash Provided/(Used) by Financing Activities 114,502 (34,789) -------------------------- Net Change in Cash and Cash Equivalents 8,814 (31,781) Cash and Cash Equivalents at Beginning of Period 163,837 112,359 ------------------------- Cash and Cash Equivalents at End of Period $172,651 $80,578 ========================= Supplemental Disclosures of Cash Flow Information: Cash Paid during This Period for: Interest Paid (Net of Capitalized Interest) $21,797 $17,954 Income Taxes 4,180 450 ========================= Noncash Investing Activities: Loans Transferred to Other Real Estate Owned $10,180 $7,383 Loans to Facilitate the sale of Other Real Estate Owned 262 290 =========================
See Accompanying Notes to Consolidated Financial Statements GBC Bancorp and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) In the opinion of management, the consolidated financial statements of GBC Bancorp and its subsidiaries (the "Company") as of June 30, 1996 and December 31, 1995, and the six and three months ended June 30, 1996 and 1995, reflect all adjustments (which consist only of normal recurring adjustments) necessary for a fair presentation. In the opinion of management, the aforementioned consolidated financial statements are in conformity with general accepted accounting principles. Earnings Per Share Earnings per share are computed based on the weighted average shares outstanding including common stock equivalents for the periods disclosed. Consolidated Statements of Cash Flows Cash and cash equivalents consist of cash and due from banks, and federal funds sold and securities purchased under agreements to resell. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW For the six months ended June 30, 1996, net income totaled $8,971,000, an increase of $5,898,000, or 192% from the $3,073,000 earned during the corresponding period of 1995. Earnings per share for the six months ended June 30, 1996 were $1.27 per share compared to $0.46 per share for the same period of 1995. The increase in net income was primarily due to a lower provision for credit losses combined with an increase in net interest income. The decline of the provision for credit losses in 1996 was caused by the reduction of non-accrual loans, and a decrease in charge-offs. Non-accrual loans decreased to $19.0 million at June 30, 1996, as compared to $43.7 million at December 31, 1995. Additionally, net charge-offs of $2.5 million were recorded during the six months ended June 30, 1996 as compared to $12.9 million during the corresponding period of 1995. The allowance for credit losses was $16.7 million as of June 30, 1996 and the same as of December 31, 1995, representing 3.36% and 3.69% of net loans, respectively. Net income for the second quarter of 1996 was $4,662,000, or $0.66 per share compared to $1,454,000, or $0.22 per share for the corresponding period of 1995. The quarter represented the second consecutive record quarterly earnings in the Company's history. As was the case for the six months ended June 30, 1996 the increase in the net income for the second quarter was primarily the result of a reduced provision for credit losses and an increase in net interest income. For the six months ended June 30, 1996 and 1995, the return on average assets ("ROA") was 1.39% and 0.58%, respectively. For the six months ended June 30, 1996 and 1995, the return on average stockholders' equity ("ROE") was 17.61% and 6.78%, respectively. The improvement of these ratios is as explained above. For the quarter ended June 30, 1996 and 1995, ROA was 1.41% and 0.55%, respectively, and ROE was 18.2% and 6.3%, respectively. The improvement of these ratios is as explained above. RESULTS OF OPERATIONS Net Interest Income For the six months ended June 30, 1996, net interest income before the provision for credit losses was $25,921,000, an increase of $2,215,000, or 9.3%, compared to the corresponding period of 1995. The increase is explained in the following paragraphs. Total interest income for the six months ended June 30, 1996 was $47,779,000 compared to $41,555,000 for the corresponding period of a year ago. The $6,224,000, or 15.0%, increase is primarily the result of a $227.2 million, or 22.7%, increase of average earning assets. The effect of the increase in average earning assets was partially offset by a reduced yield. For the six months ended June 30, 1996, the yield on average earning assets was 7.81% compared to 8.36% for the six months of the corresponding period of last year. The reduced yield was primarily due to two factors. The average national prime rate of interest for the six months ended June 30, 1996 was 8.29% compared to 8.91% for the six months ended June 30, 1995. In addition, there was a shift in the composition of earning assets. For the six months ended June 30, 1996, average loans and leases, the highest yielding assets, net of average non-accrual loans, comprised 38% of total average earning assets, net of non- accrual loans. For the six months ended June 30, 1995, average loans and leases, net of average non-accrual loans, comprised 47% of total average earning assets, net of non- accrual loans. The impact of the change in asset composition was partially offset by a decline of average non- accrual loans. For the six months ended June 30, 1996, average non-accrual loans were $38.4 million, down $12.3 million, or 24.3%, from $50.7 million for the six months ended June 30, 1995. The shift in the asset composition is the result of the growth in average deposits which was invested primarily in federal funds sold, securities purchased under agreements to resell and securities available for sale. Total interest expense for the six months ended June 30, 1996 was $21,858,000 compared to $17,849,000 for the corresponding period of a year ago. The increase of $4,009,000, or 22.5%, was due to an increase of average deposits. For the six months ended June 30, 1996 and 1995 average interest bearing deposits were $1,009.1 million and $794.3 million, respectively, an increase of $214.8 million, or 27.0%. The effect of the interest bearing deposit increase was partially offset by a reduction on the rates paid on interest bearing deposits. For the six months ended June 30, 1996 and 1995, the rates paid were 4.06% and 4.15%, respectively. While interest rates were generally lower during the six months ended June 30, 1996, compared to the corresponding period of a year ago, this was partially offset by the deposit growth occurring in the higher-costing time certificates of deposit. For the six months ending June 30, 1996, average interest bearing deposits grew $214.8 million compared to the corresponding period of a year ago. $165.3 million of this increase was in the category of time certificates of deposit of $100,000 or more, the most costly deposit product. The net interest spread is defined as the yield on earning assets less the rates paid on interest bearing liabilities. For the six months ending June 30, 1996 and 1995, the net interest spread was 3.62% and 4.07%, respectively. The decline of the spread is due to the reasons explained above. The net interest margin is defined as the difference between interest income and interest expense divided by average earning assets and annualized. For the six months ended June 30, 1996 and 1995, the net interest margin was 4.24% and 4.74%, respectively. The decrease in the margin is the result of the growth of earning assets and the reduced net interest spread. For the quarter ended June 30, 1996 and 1995, net interest income before the provision for credit losses was $13,303,000 and $11,957,000, respectively, representing an increase of $1,346,000, or 11.3%. Total interest income for the quarter ended June 30, 1996 was $24,495,000, representing a $3,479,000, or 16.6%, increase over the corresponding quarter of a year ago. The increase was due to a growth of $265 million, or 26.5%, of average earning assets, partially offset by a reduced yield on earning assets. For the quarter ended June 30, 1996 and 1995, the yield on earning assets was 7.79% and 8.43%, respectively. The decline was for the reasons described above. Total interest expense for the quarter ended June 30, 1996 was $11,192,000, representing a $2,133,000, or 23.5%, increase over the corresponding quarter of a year ago. The increase was due to a growth of $249 million of interest bearing liabilities, partially offset by a reduced rate paid on interest bearing liabilities. For the quarter ended June 30, 1996 and 1995, the rate paid on interest-bearing liabilities was 4.15% and 4.35%, respectively. The decline was for the reasons described above. Provision for Credit Losses For the six months ended June 30, 1996, the provision for credit losses was $2,500,000, compared to $10,100,000 for the same period of 1995, a decrease of $7,600,000, or 75.2%. The decline of the provision for credit losses was primarily due to the reduction of non-accrual loans and a decrease in charge-offs. As of June 30, 1996, non-accrual loans totaled $19.0 million compared with $43.7 million and $41.9 million as of December 31, 1995 and June 30, 1995, respectively. The June 30, 1996 outstanding non-accrual loans are at their lowest level since September 30, 1993 at which time non-accrual loans were $18.2 million. The combination of loans returned to accrual status and repayments both significantly impacted the reduction of non- accrual loans, as well as transfers to OREO. The amount of the provision for credit losses is determined by management and is based upon the quality of the loan portfolio, management's assessment of the economic environment, evaluations made by regulatory authorities, historical loan loss experience, collateral values, assessment of borrowers' ability to repay, and estimates of potential future losses. Please refer to the discussion "Allowance for Credit Losses", following. Non-Interest Income For the six months ended June 30, 1996, non-interest income totaled $3,234,000 representing a $123,000 or 4.0% increase compared to $3,111,000 for the six months ended June 30, 1995. The net increase was primarily due to increases in the gain on sale of loans and the recording of a gain on the sale of real estate investment, partially offset by a reduction of other income. The reduction of $128,000 of other income is primarily due to reduced escrow fees from the Bank's escrow subsidiary. In addition, service charges and commissions for the six months ended June 30, 1996 included a $400,000 fee recorded in the first quarter in exchange for which the Bank released a guarantor of a real estate loan. Non-interest income for the quarter ended June 30, 1996, totaled $1,403,000, representing a $201,000, or 12.5%, decline compared to $1,604,000 for the quarter ended June 30, 1995. The reduction was primarily due to $135,000 decrease in service charges and commissions and $50,000 decrease in other income, primarily due to reduced escrow fees. Non-Interest Expense For the six months ended June 30, 1996, non-interest expense was $13,331,000, representing a $458,000, or 3.6%, increase over $12,873,000 reported for the corresponding period of a year ago. The increase was due to a $1,667,000, or 3.2%, growth of salaries and employee benefits, caused primarily by higher incentive compensation which is a function of the higher level of pre-tax income. This was partially offset by reductions of $631,000 (41.1%) and $576,000 (14.3%) in net other real estate owned expense and other expense, respectively. The decline of other expense was primarily attributable to reduced FDIC deposit insurance expense as a result of the upgrading of the Bank's rating for deposit insurance purposes. For the three months ended June 30, 1996, non-interest expense was $6,743,000, representing a $486,000, or 7.8%, increase over $6,257,000 reported for the corresponding period of a year ago. The reasons for the increase are as explained above for the six month variance. Provision for Income Taxes For the six months ended June 30, 1996, the provision for income taxes was $4,353,000, representing 32.7% of pre- tax income. The provision for the six months ended June 30, 1995, was $771,000, representing 20.1% of pre-tax income. The difference in the effective tax is due to the federal income tax credits related to the low- income housing investments. As the tax credit has remained relatively fixed during the six month periods ended June 30, 1996 and 1995, and income before income taxes has increased to $13,324,000 from $3,844,000, the effective tax rate increased. For the quarter ended June 30, 1996 and 1995, the provision for income taxes was $2,301,000 and $850,000, respectively, representing effective tax rates of 33.0% and 36.9%. The higher rate for the quarter ended June 30, 1995, reflected a year-to-date change in the assumption of pre-tax income for the year 1995. FINANCIAL CONDITION Total assets as of June 30, 1996, were $1,322.4 million, an increase of $117.9 million from total assets of $1,204.5 million as of December 31, 1995. The increase was due to the growth of deposits that was invested primarily in federal funds sold and securities purchased under agreements to resell and securities available for sale. As of June 30, 1996 and December 31, 1995, total deposits were $1,161.0 million and $1,046.2 million, respectively. Loans As of June 30, 1996, total loans and leases totaled $517.1 million, representing a $45.2 million, or 9.58%, increase from total loans and leases of $471.9 million as of December 31, 1995. The net increase was primarily due to $30 million growth of term fed funds sold, with increases also occurring in real estate construction and commercial loans. The following table sets forth the amount of loans and leases outstanding by category and the percentage of each category to the total loans and leases outstanding:
June 30, 1996 December 31, 1995 (IN THOUSANDS) Amount Percentage Amount Percentage - ----------------------------------------------------------------------- Commercial $160,008 30.94% $151,709 32.15% Real Estate - Construction 68,913 13.33% 53,423 11.32% Real Estate - Conventional 235,653 45.57% 239,016 50.64% Installment 167 0.03% 231 0.05% Other Loans 17,091 3.31% 22,310 4.73% Leveraged Leases 247 0.05% 255 0.05% Term Fed Funds Sold 35,000 6.77% 5,000 1.06% ======================================================================= Total $517,079 100.00% $471,944 100.00%
Non-performing Assets A certain degree of risk is inherent in the extension of credit. Management believes that it has credit policies in place to minimize the level of loan losses and non- performing loans. The Company performs a quarterly assessment of the credit portfolio to determine the appropriate level of the allowance. Included in the assessment is the identification of loan impairment. A loan is identified as impaired when it is probable that interest and principal will not be collected according to the contractual terms of the loan agreement. Loan impairment is measured by estimating the expected future cash flows and discounting them at the respective effective interest rate or by valuing the underlying collateral. The Company has a policy of classifying loans (including an impaired loan) which are 90 days past due as to principal and/or interest as non-accrual loans unless management determines that the fair value of underlying collateral is substantially in excess of the loan amount or circumstances justify treating the loan as fully collectible. After a loan is placed on non-accrual status, any interest previously accrued, but not yet collected, is reversed against current income. A loan is returned to accrual status only when the borrower has demonstrated the ability to make future payments of principal and interest as scheduled, and the borrower has demonstrated a sustained period of repayment performance in accordance with the contractual terms. Interest received on non-accrual loans generally is either applied as principal reduction or reported as recoveries on amounts previously charged-off, according to management's judgment as to the collectability of principal. The following table provides information with respect to the Company's past due loans, non-accrual loans, restructured loans and other real estate owned, net, as of the dates indicated:
(IN THOUSANDS) June 30, 1996 December 31, 1995 - ------------------------------------------------------------------- Loans 90 Days or More Past Due and Still Accruing $9,485 $9 Non-accrual Loans 18,972 43,712 Total Past Due Loans 28,457 43,721 Restructured Loans 22,631 10,151 Total Non-performing Loans 51,088 53,872 Other Real Estate Owned, Net 15,525 7,686 =================================================================== Total Non-performing Assets $66,613 $61,558
Total non-performing assets increased from $61.6 million as of December 31, 1995 to $66.6 million, as of June 30, 1996. This was due to the increase of loans 90 days or more past due and still accruing, which increased $9.5 million. The category of loans 90 days or more past due and still accruing totaling $9.5 million was comprised of five credits. With the exception of one credit, all of the credits are past due for principal only, due to the maturity of the underlying loan agreements, with interest current as of June 30, 1996. The principal amount of the loans was not paid because the Bank and its borrowers were negotiating the terms of renewing the credit. On two of the credits, the credit renewal was approved by the Bank as of mid-July. All five credits were evaluated for conformity with the Bank's policy for non-accrual loans and were found to meet the requirements for accrual status. Non-accrual loans declined significantly from $43.7 million as of December 31, 1995 to $19.0 million as of June 30, 1996, a reduction of $24.7 million, or 56.5%. As of June 30, 1996, non-accrual loans are at their lowest level since September 30, 1993, at which time non-accrual loans outstanding were $18.2 million. The following table analyzes the decline in non-accrual loans during the six months ended June 30, 1996:
NON-ACCRUAL LOANS (IN THOUSANDS) - -------------------------------------------------------- Balance, December 31, 1995 $43,712 Add: Loans placed on non-accrual 9,735 Less: Charge-offs (2,694) Returned to accrual status (15,141) Repayments (5,585) Transfer to OREO (11,055) Balance, June 30, 1996 $18,972 - --------------------------------------------------------
Conventional real estate and construction loans as a group comprise 71.9% of the total non-accrual loans, as of June 30, 1996. Management believes the collateral provides substantial protection against the loss of principal. The following table breaks out the Company's non- accrual loans by category as of June 30, 1996 and December 31, 1995:
(IN THOUSANDS) June 30, 1996 December 31, 1995 - ----------------------------------------------------------------- Commercial $5,329 $3,802 Real Estate-Construction 1,064 3,630 Real Estate-Conventional 12,579 36,241 Other Loans - 39 ================================================================= Total $18,972 $43,712
Restructured loans consist of fifteen real estate credits with a balance of $22.6 million as of June 30, 1996. This compares to nine real estate credits with a balance of $10.2 million as of December 31, 1995. There was but one newly restructured loan as of June 30, 1996 compared to December 31, 1995. The increase of the balance of restructured loans was primarily due to the return to accrual status of six restructured loans during the six months ended June 30, 1996. A loan is returned to accrual status only when the borrower has demonstrated the ability to make future payments of principal and interest as scheduled, and the borrower has demonstrated a sustained period of repayment performance in accordance with the contractual terms. Restructured loans which are non-accrual are not included in the balance of restructured loans, but are reported as part of the total non-accrual loans. The weighted average yield of the restructured loans (on accrual status) as of June 30, 1996, was 10.20%. The following table breaks out the restructured loans by accrual status as of the dates indicated:
(IN THOUSANDS) June 30, 1996 December 31, 1995 - --------------------------------------------------------------- RESTRUCTURED LOANS: On Accrual Status $22,631 $10,151 On Non-accrual Status 5,678 16,727 =============================================================== Total $28,309 $26,878
There are no commitments to lend additional funds on any of the restructured loans including those both on an accrual status and on non-accrual status. As of June 30, 1996, four restructured loans (on accrual status) totaling $9.3 million were past due for interest between 30 and 90 days. Other real estate owned ("OREO"), net of valuation allowance of $1.0 million, totaled $15.5 million, representing an increase of $7.8 million, or 101.30%, from the net balance of $7.7 million, net of valuation allowance of $0.6 million, as of December 31, 1995. As of June 30, 1996 and December 31, 1995, OREO consisted of 23 properties and 14 properties, respectively. The following table sets forth OREO by property type for the dates as indicated:
(IN THOUSANDS) June 30, 1996 December 31, 1995 - --------------------------------------------------------------------- PROPERTY TYPE Single-Family Residential $109 $11 Condominium 3,093 509 Multi-Family Residential 829 978 Warehouse 14 188 Land for Residential 1,319 1,054 Land for Commercial 735 - Retail Facilities 6,496 5,289 Office 377 268 Hotel 3,600 - Less: Valuation Allowance (1,047) (611) ===================================================================== Total $15,525 $7,686
The above properties are all included in the Bank's market area. Management cannot predict the extent to which the current economic environment, including the real estate market, may improve, persist or worsen, or the full impact such environment may have on the Bank's loan portfolio. Furthermore, as the Bank's primary regulators review the loan portfolio as part of their routine, periodic bank examinations, their assessment of specific credits may affect the level of the Bank's non-performing loans. Accordingly, there can be no assurance that other loans will not become non-performing in the future. Allowance for Credit Losses As of June 30, 1996, the balance of the allowance for credit losses was $16.7 million, representing 3.23% of outstanding loans and leases. This compares to an allowance for credit losses of the same amount as of December 31, 1995, representing 3.54% of outstanding loans and leases. SFAS 114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS 118, was adopted on January 1, 1995. The following table discloses pertinent information as it relates to the Company's impaired loans as of and for the dates indicated:
As of and for the six Impaired Loans months ended June 30, (IN THOUSANDS) 1996 1995 - ---------------------------------------------------------------------------- Recorded Investment with Related Allowance $34,467 $34,599 Recorded Investment with no Related Allowance 2,210 312 Total Recorded Investment 36,677 34,911 Allowance for Impaired Loans 3,925 5,576 Average Balance of Impaired Loans before Allowance $39,461 $42,671 - ----------------------------------------------------------------------------
For the six months ended June 30, 1996, interest income recognized for impaired loans was $1,472,000. No interest income was recognized on a cash basis. The table below summarizes the activity in the total allowance for credit losses (which amount includes the allowance on impaired loans), for the six month periods ended as indicated:
(IN THOUSANDS) June 30, 1996 June 30,1995 - --------------------------------------------------------------- Balance, Beginning of Period $16,674 $23,025 Provision for Credit Losses 2,500 10,100 Charge-offs (4,008) (13,002) Recoveries 1,510 132 Net Charge-offs (2,498) (12,870) Balance, End of Period $16,676 $20,255 - ---------------------------------------------------------------
As of June 30, 1996, the allowance represents 32.6% of non-performing loans. As of December 31, 1995, the allowance represented 31.0% of non-performing loans. As of June 30, 1996, the allowance represents 87.9% of non-accrual loans. As of December 31, 1995, the allowance represented 38.1% of non-accrual loans. Management believes that the allowance for credit losses is adequate to cover known and inherent losses related to loans and leases outstanding as of June 30, 1996. Securities The Company classifies its securities as held to maturity or available for sale. Securities classified as held to maturity are those that the Company has the positive intent and ability to hold until maturity. These securities are carried at amortized cost. Securities that could be sold in response to changes in interest rates, increased loan demand, liquidity needs, capital requirements or other similar factors, are classified as securities available for sale. These securities are carried at market value, with unrealized gains or losses reflected net of tax in stockholders' equity. As of June 30, 1996, the Company recorded gross unrealized losses of $3,288,000 on its available-for-sale portfolio and the inclusion as a separate deduction of stockholders' equity of $1,896,000 representing the unrealized holding loss, net of tax. The amortized cost, gross unrealized gains, gross unrealized losses and fair value of securities at June 30, 1996 and December 31, 1995 were as follows:
June 30, 1996 | December 31, 1995 - ------------------------------------------------------------|----------------------------------------- (IN THOUSANDS) AMORTIZED GROSS GROSS FAIR|AMORTIZED GROSS GROSS FAIR COST UNREALIZED UNREALIZED VALUE| COST UNREALIZED UNREALIZED VALUE GAINS LOSSES | GAINS LOSSES - ------------------------------------------------------------|----------------------------------------- | Securities Held | to Maturity | State and | Municipal | Securities $2,918 $58 $- $2,976| $6,460 $154 $- $6,614 Collateralized | Mortgage | Obligations 68 7 - 75| 82 8 - 90 Asset Backed | Securities 21,003 288 - 21,291| 27,011 655 - 27,666 - ------------------------------------------------------------|----------------------------------------- Total Securities | Held to Maturity $23,989 $353 $0 $24,342| $33,553 $817 $0 $34,370 ============================================================|=========================================
June 30, 1996 | December 31, 1995 - ------------------------------------------------------------|----------------------------------------- (IN THOUSANDS) AMORTIZED GROSS GROSS FAIR|AMORTIZED GROSS GROSS FAIR COST UNREALIZED UNREALIZED VALUE| COST UNREALIZED UNREALIZED VALUE GAINS LOSSES | GAINS LOSSES - ------------------------------------------------------------|----------------------------------------- Securities | available for | sale | U. S. Treasuries $1,933 $- ($56) $1,877| $16,948 $- ($4) $16,944 U.S. Government | Agencies 215,852 - (1,775) 214,077| 222,578 950 - 223,528 Mortgage Backed | Securities 55,878 - (1,007) 54,871| 61,987 212 - 62,199 Corporate Notes 27,016 742 - 27,758| 27,016 1,299 - 28,315 Collateralized | Mortgage | Obligations 224,711 - (1,292) 223,419| 133,611 346 - 133,957 Auctioned | Preferred Stock 40,000 - - 40,000| 32,200 - - 32,200 Other | Sescurities 9,953 100 - 10,053| 9,823 175 - 9,998 - ------------------------------------------------------------|----------------------------------------- Total Securities | Available for | Sale $575,343 $842 ($4,130) $572,055| $504,163 $2,982 ($4) $507,141 ============================================================|==========================================
There were no sales of securities available for sale during the six months ended June 30, 1996 and 1995. There were no sales of securities held to maturity for the six months ended June 30, 1996 and 1995. Deposits The Company's deposits totaled $1,161.0 million as of June 30, 1996, representing a $114.8 million , or 11.0%, increase from total deposits of $1,046.2 million as of December 31, 1995. All deposit categories reflected increases comparing June 30, 1996 to December 31, 1995. The largest deposit growth was in the time certificates of deposit of $100,000 or more, which increased $97.4 million, or 23.9%. The Company believes that the majority of its deposit customers have strong ties to the Bank and there is no large concentration with any major depositors. The maturity schedule of time certificates of deposit of $100,000 or more as of June 30, 1996 is as follows:
(IN THOUSANDS) - ------------------------------------------------------ 3 Months or Less $259,720 Over 3 Months Through One Year 245,738 Over One Year through 5 Years 205 ====================================================== Total $505,663
Regulatory Matters On April 23, 1996, the Bank was notified by its primary regulator, the Federal Deposit Insurance Corporation ("FDIC"), that the Memorandum of Understanding dated August 17, 1995, had been terminated based upon the results of a safety and soundness examination dated January 8, 1996. The Company's Board of Directors received a letter, dated July 19, 1996, from the Federal Reserve Bank of San Francisco (the "Federal Reserve") that indicates that the existing board resolution which required the Company to inform the Federal Reserve prior to: (a) declaring cash or in-kind dividends; (b) incurring debt; (c) repurchasing stock; or (d) entering into any agreements to acquire any entities or portfolios, is no longer required. The Company's Board will consider the rescission of the resolution at its August Board Meeting. Capital Resources As of June 30, 1996, stockholders' equity totaled $104.5 million, an increase of $5.0 million, or 5.03%, from $99.5 million, as of December 31, 1995. The increase was due primarily to net income of $9.0 million, less cash dividends declared to stockholders of $1.1 million, less the net change in the securities valuation allowance, net of tax, of $3.6 million for the six months ended June 30, 1996. Capital ratios for the Company and for the Bank were as follows as of the dates indicated:
Well-Capitalized June 30 December 31 Standards 1996 1995 - --------------------------------------------------------------------------- GBC Bancorp Tier 1 Leverage Ratio 5% 7.90% 8.27% Tier 1 Risk-Based Capital 6 12.39 13.83 Ratio Total Risk-Based Capital Ratio 10 14.52 15.51 General Bank Tier 1 Leverage Ratio 5% 8.55% 9.10% Tier 1 Risk-Based Capital 6 13.43 15.26 Ratio Total Risk-Based Capital Ratio 10 14.68 16.51 - ---------------------------------------------------------------------------
Liquidity and Interest Rate Sensitivity Liquidity measures the ability of the Company to meet `fluctuations in deposit levels, to fund its operations and to provide for customers' credit needs. Asset liquidity is provided by cash and short-term financial instruments which include federal funds sold and securities purchased under agreements to resell, unpledged securities held to maturity maturing within one year and unpledged securities available for sale. These sources of liquidity amounted to $726.3 million, or 54.9% of total assets as of June 30, 1996, compared to $614.0 million, or 51.1% of total assets at December 31, 1995. To further supplement its liquidity, the Company has established federal funds lines with correspondent banks and three master repurchase agreements with major brokerage companies. In August, 1992 the Federal Home Loan Bank of San Francisco ("FHLB") granted the Bank a line of credit equal to 20 percent of assets with terms up to 240 months. As of June 30, 1996 the Company has no borrowing outstanding under this financing facility with the FHLB. Management believes its liquidity sources to be stable and adequate. As of June 30, 1996, total loans and leases represented 44.5% of total deposits. This compares to 45.1% at December 31, 1995. Effective asset/liability management includes maintaining adequate liquidity and minimizing the impact of future interest rate changes on net interest income. The Company attempts to manage its interest rate sensitivity on an on-going basis through the analysis of the repricing characteristics of its loans, investments, and deposits, and managing the estimated net interest income volatility by adjusting the terms of its interest-earning assets and liabilities, and through the use of derivatives as needed. As of June 30, 1996, there were no outstanding derivative contracts. The Company has only limited involvement with derivative financial instruments and does not use them for trading purposes. They are used to manage the interest rate risk from the origination of fixed rate residential mortgage loans for sale in the secondary markets. The Company utilizes Treasury note futures and forward sales of mortgage-backed securities to hedge interest rate risk associated with its residential mortgage banking activities. Futures and forward sale contracts provide for sale of the underlying securities, including mortgage-backed securities, at a specified future date, at a specified price or yield. The amount of the futures and forward sale contracts is determined by the aggregate amount of fixed rate commitments for mortgage loans that are expected to be funded plus the amount of fixed rate residential mortgages categorized as being held for sale that have not been sold. The fair value of the underlying futures and forward sale contracts is expected to move inversely to the change in fair value of the mortgage loans. The Company never intends to deliver the underlying securities that the futures and forward sale contracts commit to sell, rather it purchases offsetting contracts to eliminate the obligation. The Company is exposed to the risk that the fair value of futures contracts, being based on the value of the Treasury note will not move proportionately with the change in value of the mortgage loans being hedged. This basis risk is unpredictable and can result in economic loss to the Company. There is no basis risk related to the use of forward sale contracts on mortgage-backed securities since their fair value is based on similar mortgage loans. However, a gain or loss will arise from the difference between the fair value and the forward sale price of the mortgage-backed security. As of June 30, 1996 and December 31, 1995, there were outstanding fixed rate mortgages held for sale of $0.5 million and $6.3 million. There were no related derivative instruments outstanding as of June 30, 1996 and December 31, 1996. For the six months ended June 30, 1996 and 1995, the Company had realized net losses of $11,000 and $108,000 related to its hedging activities. There were no unrealized gains/losses related to hedging activities as of June 30, 1996 and 1995. Initial margin requirements and daily calls on futures contracts are met in cash. There are no margin requirements nor daily calls on forward sale contracts since whole loans are expected to be delivered to fulfill the commitment. While no single measure can completely identify the impact of changes in interest rates on net interest income, one gauge of interest rate sensitivity is to measure, over various time periods, the differences in the amounts of the Company's rate sensitive assets and rate sensitive liabilities. These differences, or "gaps", provide an indication of the extent that net interest income may be affected by future changes in interest rates. However, these "gaps" do not take into account timing differences between the repricing of assets and the repricing of liabilities. Since interest rate changes do not affect all categories of assets and liabilities equally or simultaneously, a cumulative gap analysis alone cannot be used to evaluate the Company's interest rate sensitivity position. To supplement traditional gap analysis, the Company uses simulation modeling to estimate the potential effects of changing interest rates. This process allows the Company to more fully explore the complex relationships within the gap over time and various interest rate scenarios. The following table indicates the Company's interest rate sensitivity position as of June 30, 1996; it may not be reflective of positions in subsequent periods:
6/30/1996 Interest Sensitivity Period - ------------------------------------------------------------------------------------------------------- 0 to 90 91 to 365 Over 1 Year Over Non-Interest (IN THOUSANDS) Days Days to 5 Years 5 Years Erng/Bearing Total - ------------------------------------------------------------------------------------------------------- Earning Assets: Securities Available for Sale $134,501 $35,662 $181,313 $220,579 $- $572,055 Securities Held to Maturity 5,001 993 13,903 4,092 23,989 Federal Funds Sold 138,000 - - - - 138,000 Loans (1) (2) 335,923 39,077 64,871 23,236 - 463,107 Loans to Depository Insititutions 35,000 - - - - 35,000 Non-Earning Assets(2) - - - - 90,206 90,206 - ------------------------------------------------------------------------------------------------------- Total Assets $648,425 $75,732 $260,087 $247,907 $90,206 $1,322,357 ======================================================================================================= Source of Funds for Assets: Deposits: Demand $- $- $- $- $139,320 $139,320 Interest Bearing Demand 207,387 - - - - 207,387 Savings 133,816 - - - - 133,816 TCD'S Under $100,000 124,737 49,208 861 - - 174,806 TCD'S $100,000 and Over 379,349 126,209 105 - - 505,663 - ------------------------------------------------------------------------------------------------------- Total Deposits 845,289 175,417 966 - 139,320 1,160,992 - ------------------------------------------------------------------------------------------------------- Securities Sold Under Repurchase Agreements $24,000 - - - - $24,000 Subordinated Debt - - 15,000 - - 15,000 Other Liabilities - - - - 17,825 17,825 Stockholders' Equity - - - - 104,540 104,540 - ------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $869,289 $175,417 $15,966 $0 $261,685 $1,322,357 ======================================================================================================= Interest Sensitivity Gap ($220,864) ($99,685) $244,121 $247,907 ($171,479) Cumulative Interest Sensivity Gap ($220,864) ($320,549) ($76,428) $171,479 - Gap Ratio (% of Total -16.7% -7.5% 18.5% 18.7% -13.0% Assets) Cumulative Gap Ratio -16.7% -24.2% -5.8% 13.0% 0.0% - -------------------------------------------------------------------------------------------------------
(1) Loans are before unamortized deferred loan fees and allowance for loan losses. (2) Nonaccrual loans are included in non-earning assets. PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS The Bank is a defendant in various lawsuits arising from the normal course of business. No material legal proceedings to which the Registrant or its subsidiaries is a party have been initiated or terminated during the quarter ended June 30, 1996. There have been no significant developments in any material pending legal proceedings involving the Registrant or its subsidiaries during this same quarter. Item 2. CHANGES IN SECURITIES There have been no changes in the securities of the Registrant during the quarter ended June 30, 1996. Item 3. DEFAULT UPON SENIOR SECURITIES This item is not applicable. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Annual Meeting of Shareholders held on April 20, 1996, the following proposal was submitted and approved by a vote of shareholders: A proposal to elect seventeen directors to the Board of Directors of the Registrant to hold office until the next Annual Meeting and until their successors are elected and qualified was approved by shareholders. This proposal received the following votes:
For Withheld - ------------------------------------------------------------ Eric W. Chang 4,415,914 7,451 Helen Y. Chen 4,415,914 7,451 Thomas C. J. Chiu 4,415,914 7,451 Stephen Huang 4,415,914 7,451 Chuang-I Lin 4,415,914 7,451 Ko-Yen Lin 4,415,914 7,451 Ting Yung Liu 4,415,914 7,451 Alan Thian 4,415,914 7,451 John Wang 4,415,914 7,451 Kenneth Wang 4,391,772 31,593 Chien-Te Wu 4,415,914 7,451 Julian Wu 4,415,914 7,451 Li-Pei Wu 4,415,914 7,451 Peter Wu 4,415,914 7,451 Ping C. Wu 4,415,914 7,451 Walter Wu 4,415,914 7,451 Chin-Liang Yen 4,415,914 7,451 - ------------------------------------------------------------
Item 5. OTHER INFORMATION There are no events to be reported under this item. Item 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: None. b) Reports on Form 8-K: None. PART III - SIGNATURES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GBC Bancorp (Registrant) Dated: __________________ s/ ______________________ Li-Pei Wu, Chairman, President and Chief Executive Officer Dated: ___________________ s/ _______________________ Peter Lowe, Executive Vice President and Chief Financial Officer EX-27 2
9 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 34,651 0 138,000 0 572,055 23,989 24,342 517,079 16,676 1,322,357 1,160,992 24,000 17,825 15,000 46,442 0 0 58,098 1,322,357 25,268 22,511 0 47,779 20,391 21,858 25,921 2,500 0 13,331 13,324 13,324 0 0 8,971 1.27 1.26 4.24 18,972 9,485 22,631 0 16,674 4,008 1,510 16,676 16,676 0 0
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