SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

Quarterly Report under Section 13 or 15(d)

of The Securities Exchange Act of 1934

 

 

For the Quarter Ended March 31, 2002        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 213/972-4174
 

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, 11,524,062 shares issued        and outstanding as of March 31, 2002.

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

 

PART I -
FINANCIAL INFORMATION              .............................................................
3
Item 1.
Financial Statements              ................................................................................
4
Item 2.
Management's Discussion and Analysis of              Financial Condition and Results of Operations              ..........................................................................................
                        9
Item 3.
Qualitative and Quantitative Disclosure about              Market Risk .............................................
31
PART II -
OTHER INFORMATION              ........................................................................................................
33
Item 1.
Legal Proceedings              ....................................................................................................................
34
Item 2.
Changes In Securities              .............................................................................................................
34
Item 3.
Default Upon Senior Securities              ..............................................................................................
34
Item 4.
Submission Of Matters To A Vote Of Securities              Holders .................................................
34
Item 5.
Other Information              .....................................................................................................................
34
Item 6.
Exhibits And Reports On Form 8-K              ......................................................................................
34
PART III -
SIGNATURES              ...........................................................................................................................
35
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

<TABLE>

<CAPTION>

 

GBC BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)


<c>
<c>
March 31,
December 31,
(Dollars In Thousands)
2002
2001
ASSETS
Cash and Due From Banks
$ 39,058
$ 33,034
Federal Funds Sold and Securities Purchased Under Agreements to              Resell
50,000
90,000
Cash and Cash Equivalents
89,058
123,034
Securities Available-for-Sale at Fair Value (Amortized Cost of              $1,224,033 at
March 31, 2002 and $1,080,819 at December 31, 2001,              respectively)
1,231,103
1,098,989
Trading Securities
3
31
Loans and Leases
1,185,542
1,132,889
Less: Allowance for Credit Losses
(35,992)
(23,656)
Deferred Loan Fees
(7,042)
(7,600)
Loans and Leases, net
1,142,508
1,101,633
Bank Premises and Equipment, net
6,670
6,382
Other Real Estate Owned, net
383
383
Due From Customers on Acceptances
9,291
6,471
Real Estate Held for Investment
1,968
2,129
Other Investments
9,062
11,509
Accrued Interest Receivable and Other Assets
22,144
16,682
Total Assets
$ 2,512,190
$ 2,367,243
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand
$ 227,813
$ 217,413
Interest Bearing Demand
536,890
438,660
Savings
108,225
91,418
Time Certificates of Deposit of $100,000 or More
936,063
920,615
Other Time Deposits
145,686
159,821
Total Deposits
1,954,677
1,827,927
Federal Funds Purchased and Securities Sold Under Repurchase
Agreements
15,500
-
Borrowings from the Federal Home Loan Bank
273,400
252,400
Subordinated Debt
39,301
39,269
Acceptances Outstanding
9,291
6,471
Accrued Expenses and Other Liabilities
23,234
34,858
Total Liabilities
2,315,403
2,160,925
Stockholders' Equity
Common Stock, No Par or Stated Value;
40,000,000 Shares Authorized; 11,524,062 shares              (net of 79,001              shares
held in trust) at March 31, 2002 and 11,477,394 shares (net of              96,935
shares held in trust) at December 31, 2001, respectively
$ 72,526
$ 71,316
Retained Earnings
119,841
124,196
Accumulated Other Comprehensive Income
2,317
8,332
Deferred Compensation
2,103
2,474
Total Stockholders' Equity
196,787
206,318
Total Liabilities and Stockholders' Equity
$ 2,512,190
$ 2,367,243
See Accompanying Notes to Unaudited Consolidated Financial              Statements.
</TABLE>

<TABLE>

<CAPTION>

 

GBC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)


<c>
<c>
<c>
For the Three Months Ended
March 31,
(In Thousands, Except Per Share Data)
2002
2001
INTEREST INCOME
Loans and Leases, Including Fees
$ 19,825
$ 23,244
Securities Available-for-Sale
16,917
15,343
Securities Held-to-Maturity
-
16
Federal Funds Sold and Securities
Purchased under Agreements to Resell
392
1,047
Other
3
8
Total Interest Income
37,137
39,658
INTEREST EXPENSE
Interest Bearing Demand
1,843
2,909
Savings
291
352
Time Certificates of Deposits of $100,000 or More
6,497
11,701
Other Time Deposits
941
2,353
Federal Funds Purchased and Securities
Sold under Repurchase Agreements
3
12
Borrowings from the Federal Home Loan Bank
2,649
421
Subordinated Debt
871
870
Total Interest Expense
13,095
18,618
Net Interest Income
24,042
21,040
Provision for Credit Losses
18,514
6,000
Net Interest Income after Provision
for Credit Losses
5,528
15,040
NON-INTEREST INCOME
Service Charges and Commissions
1,774
1,887
Trading Account Revenue
19
2,273
Expense from Other Investments
(3,363)
(135)
Other
67
34
Total Non-Interest Income
(1,503)
4,059
NON-INTEREST EXPENSE
Salaries and Employee Benefits
5,032
5,326
Occupancy Expense
960
830
Furniture and Equipment Expense
900
513
Net Other Real Estate Owned (Income)              Expense
(25)
43
Other
1,645
2,192
Reduction of Fair Value of Derivatives
96
6,727
Total Non-Interest Expense
8,608
15,631
(Loss)/Income before Income Taxes
(4,583)
3,468
(Benefit)/Provision for Income Taxes
(1,677)
1,083
Net (Loss)/Income before Cumulative Effect of a Change in              Accounting Principle
(2,906)
2,385
Cumulative Effect of a Change in Accounting Principle
-
4,962
Net (Loss)/Income
$ (2,906)
$ 7,347
(Loss) / Earnings Per Share:
Net (Loss)/Income before Cumulative Effect of a Change in              Accounting Principle
Basic
$ (0.25)
$ 0.20
Diluted
(0.25)
0.20
Cumulative Effect of a Change in Accounting Principle
Basic
$ -
$ 0.42
Diluted
-
0.41
Net (Loss)/Income
Basic
$ (0.25)
$ 0.62
Diluted
(0.25)
0.61
Weighted Average Basic Shares Outstanding
11,589,833
11,790,083
Weighted Average Diluted Shares Outstanding
11,589,833
11,972,208
See Accompanying Notes to Unaudited Consolidated Financial              Statements
</TABLE>

<TABLE>

<CAPTION>

 

GBC BANCORP AND  SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN              STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(UNAUDITED)
<S>
<C>
<C>
<C>
<C>
<C>
<C>
(In Thousands, Except per Share Amounts)
Accumulated
Other
Total
Common Stock
Retained
Deferred
Comprehensive
Comprehensive
Stockholders'
Shares
Amount
Earnings
Compensation
Income (Loss)
Income (Loss)
Equity
Balance at December 31, 1999
11,523
$ 57,289
$ 84,035
$ -
$ (8,286)
$ 133,038
Comprehensive Income
Net Income for the year
38,476
$ 38,476
38,476
Other Comprehensive Income, Net of Tax
Net Changes in Securities Valuation Allowance
18,178
18,178
18,178
Foreign Currency Translation Adjustment
(1)
(1)
(1)
Comprehensive Income
$ 56,654
Stock Issued for Executive Compensation
114
2,401
2,401
Stock Held by Executive Obligation Trust
(71)
(1,571)

1,571
-
Stock Issuance
161
2,975
2,975
Tax Benefit-Stock Options Exercised
960
960
Stock Repurchase
(169)
(3,732)
(3,732)
Cash Dividend- $0.39 per Share
(4,513)
(4,513)
Balance at December 31, 2000
$ 11,558
$ 62,054
$ 114,266
$ 1,571
$ 9,891
$ 187,782
Comprehensive Income
Net Income for the year
32,602
$ 32,602
32,602
Other Comprehensive Income, Net of Tax
Net Changes in Securities Valuation Allowance
630
630
630
Net Changes in Investment Valuation Allowance
(2,188)
(2,188)
(2,188)
Net Changes in Foreign Currency Translation Adjustments
(1)
(1)
(1)
Comprehensive Income
$ 31,043
Stock Held by Executive Obligation Trust
(26)
(903)

903
-
Stock Issuance
563
5,264
5,264
Tax Benefit-Stock Options Exercised
4,901
4,901
Stock Repurchase
(618)
(17,077)
(17,077)
Cash Dividend- $0.48 per Share
(5,595)
(5,595)
Balance at December 31, 2001
11,477
$ 71,316
$ 124,196
$ 2,474
$ 8,332
$ 206,318
Comprehensive Income
Net Loss for the Period
(2,906)
$ (2,906)
(2,906)
Other Comprehensive Income, Net of Tax
Net Changes in Securities Valuation Allowance
(6,433)
(6,433)
(6,433)
Net Changes in Investment Valuation Allowance
418
418
418
Net Changes in Foreign Currency Translation Adjustments
-
-
-
Comprehensive Loss
$ (8,921)
Stock Held by Executive Obligation Trust
18
371

(371)
-
Stock Issuance
31
761
761
Tax Benefit-Stock Options Exercised
78
78
Stock Repurchase
(2)
(57)
(57)
Cash Dividend- $0.12 per Share
(1,392)
(1,392)
Balance at March 31, 2002
11,524
$ 72,526
$ 119,841
$ 2,103
$ 2,317
$ 196,787
For the Three Months
For the Year
Disclosure of Reclassification Amount:
Ended 03/31/2002
Ended 12/31/2001

Net Change of Unrealized Gains (Losses) Arising During Period,              Net of Tax
Expense (Benefit) of ($4,667) and $3,280 in 2002 and 2001              respectively
$ (6,433)
$ 4,520
Less: Reclassification Adjustment for (Gains) Losses Included              in Net Income, Net of Tax
Expense of $2,823 in 2001.
-
(3,890)
Net Change of Unrealized (Losses) Gains on Securities, Net of              Tax (Benefit)
Expense of ($4,667) and $457 in 2002 and 2001, respectively.
$ (6,433)
$ 630
See Accompanying Notes to Unaudited Consolidated Financial              Statements
</TABLE>

<TABLE>

<CAPTION>

 

GBC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
              (UNAUDITED)
<S>
<C>
For the Three Months Ended March 31,
(In Thousands)
2002
2001
OPERATING ACTIVITIES
Net Income
$ (2,906)
$ 7,347
Adjustments to Reconcile Net Income to Net Cash Provided by              Operating Activities:
Depreciation
359
325
Net (Accretion)/Amortization of Discount/Premiums on Securities
509
(1,061)
Accretion of Discount on Subordinated Notes
32
32
Writedown on Real Estate Held for Investment
161
424
Provision/(Benefit) for Credit Losses
18,514
6,000
Amortization of Deferred Loan Fees
(1,368)
(1,014)
Gain on Sale of Other Real Estate Owned
(7)
-
Reduction in Fair Value of Derivative Instruments
96
6,727
Implementation of SFAS 133 - Cumulative Effect of a Change in              Accounting Principle
-
(8,561)
Net Increase in Trading Securities
28
3,302
Net Increase/(Decrease) in Accrued Interest Receivable and              Other Assets
511
(2,213)
Net Increase / (Decrease) in Accrued Expenses and Other              Liabilities
(7,591)
2,491
Other, net
-
(2)
Net Cash Provided by Operating Activities
8,338
15,798
INVESTING ACTIVITIES
Purchases of Securities Available-for-Sale
(263,209)
(59,415)
Proceeds from Maturities of Securities Available-for-Sale
125,962
43,855
Proceeds from Maturities of Securities Held-to-Maturity
-
66
Net Increase in Loans and Leases
(36,399)
(48,861)
Purchase of Equity Interest in Limited Partnerships
(265)
(1,135)
Net Decrease in Other Investments
3,434
307
Proceeds from Sales of Other Real Estate Owned
52
-
Purchases of Premises and Equipment
(626)
(351)
Proceeds from Sale/Disposal of Premises and Equipment
150
3              Purchase of Liberty Bank & Trust Net of Cash Acquired
(1,962)
-
Net Cash Used by Investing Activities
(170,901)
(65,531)
FINANCING ACTIVITIES
Net Increase/(Decrease) in Demand, Interest Bearing Demand and              Savings Deposits
104,101
(15,287)
Net Increase/(Decrease) in Time Certificates of Deposit
(9,591)
11,041
Net Increase in Federal Funds Purchased and Securities Sold              Under Agreements
to Repurchase
15,500
-
Proceeds from Borrowings
21,000
48,000
Repayment of Borrowings
Repurchase of Company Stock
(57)
(4,174)
Cash Dividends Paid
(1,166)
(1,163)
Proceeds from Exercise of Stock Options/sale of stock
662
2,077
Issuance of Stock Held by Executive Obligation Trust
100
903
`
Net Cash Provided by Financing Activities
128,587
$ 41,397
Net Change in Cash and Cash Equivalents
(33,976)
(8,336)
Cash and Cash Equivalents at Beginning of Period
123,034
115,306
Cash and Cash Equivalents at End of Period
$ 89,058
$ 106,970
Supplemental Disclosures of Cash Flow Information
Cash Paid During This Period for
Interest
$ 13,660
$ 19,247
Income Taxes
-
15
Noncash Investing Activities
Loans Transferred to Other Real Estate Owned at Fair Value
$ 45
$ 18
</TABLE>

<TABLE>

<CAPTION>

 

Supplemental Disclosure for Acquisition of Liberty Bank &              Trust
Assets Acquired:
<S>
<C>
<C>
<C>
Cash
$ 9,969
-
Securities Available-for-Sale
6,476
-
Loans and Leases
21,667
-
Premises and Equipment
171
-
Accrued Interest Receivable and Other Assets
250
-
Goodwill
4,855
-
Core Deposit Premium Intangible
964
-
44,352
-
Liabilities Assumed:
Deposits
32,240
-
Accrued Interest and Other Liabilities
181
-
32,421
-
Cash Paid for Common Stock
$ 11,931
-
See Accompanying Notes to Unaudited Consolidated Financial              Statements
 
**GBC Bancorp and Subsidiaries**
 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 
- Basis of Presentation
 
The accompanying unaudited consolidated financial        statements have been prepared in accordance with generally accepted        accounting principles for interim financial information and the        instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,        they do not include all of the information and footnotes required by        accounting principles generally accepted in the United States of America        for complete financial statements. In the opinion of management, all        adjustments (consisting of normal recurring accruals) considered        necessary for a fair presentation of the Company's financial condition        and results of operations for the interim periods presented in this Form        10-Q have been included. Operating results for the interim periods are        not necessarily indicative of financial results for the full year. These        unaudited consolidated financial statements should be read in        conjunction with the consolidated financial statements and notes thereto        included in the Company's Annual Report on Form 10-K for the year        ended December 31, 2001.
 
The preparation of financial statements in conformity        with accounting principles generally accepted in the United States of        America requires management to make estimates and assumptions that        affect the amounts reported in the financial statements and accompanying        notes. Actual results could differ from those estimates.
 
The financial statements include the accounts of GBC        Bancorp (the "Bancorp") and its wholly owned subsidiaries, GBC        Venture Capital, Inc., General Bank, (the "Bank"), a        California state chartered bank, and the Bank's wholly owned        subsidiaries, GBC Insurance Services, Inc., GBC Investment &        Consulting Company, Inc., GBC Real Estate Investments, Inc., GBC Trade        Services, Asia Limited and GB Capital Trust II. The Bank also holds 90%        of the voting stock of GBC Leasing Company, Inc., which amount is not        material.
 

 
Change of Accounting Principle

 

On January 1, 2001, the Company adopted Statement of        Financial Accounting Standards No. 133, "Accounting for Derivative        Instruments and Hedging Activities," ("SFAS No. 133"). On        that date a transition adjustment of $8,561,000 was recorded. The        transition adjustment is presented net of tax in the amount of        $4,962,000 as a cumulative effect of a change of accounting principle in        the Company's consolidated statements of income for the quarter ended        March 31, 2001. The Company has received rights to acquire stock in the        form of warrants, as an adjunct to its high technology banking        relationships. Most of the warrants contain a cashless exercise        provision thereby qualifying them as derivatives under SFAS No. 133,        requiring they be carried at fair value.
 
 
Commitments and Contingencies

 
In the normal course of business, there are various        outstanding commitments to extend credit which are not reflected in the        accompanying interim consolidated financial statements.
 
The following is a summary of the Company's        commitments and contingencies as of March 31, 2002 and December 31,        2001:

 

<TABLE>

<CAPTION>

 
 
March 31,
December 31,
(In Thousands)
2002
2001
<S>
<C>
<C>
Undisbursed Commitments
$642,191
$592,469
Standby Letters of Credit
71,346
80,091
Bill of Lading Guarantees
623
487
Commercial Letters of Credit
69,856
63,578
</TABLE>

 
Pending Litigation

 

In the normal course of business, the Company is        subject to pending and threatened legal actions. After reviewing pending        actions with counsel, management believes that the outcome of such        actions will not have a material adverse effect on the financial        condition or the results of operations of the Company.

 
Earnings (Loss) Per Share

 

Basic earnings / (loss) per share is determined by        dividing net income/(loss) by the weighted average number of shares of        common stock outstanding, while diluted earnings per share is determined        by dividing net income by the weighted average number of shares of        common stock outstanding adjusted for the dilative effect of common        stock equivalents. In the case of a loss from operations (the quarter        ended March 31, 2002) no common stock equivalents are included in the        computation of the diluted loss per share. The following table sets        forth basic and diluted earnings/(loss) per share calculations:

<TABLE>

<CAPTION>

 

March 31,
2002
2001
<S>
<C>
<C>
(In Thousands Except per Share Data)
Net (Loss) Income
($2,906)
$7,347
Weighted-average Shares
Basic Shares Outstanding
11,590
11,790
Dilutive Effect Equivalent Shares
-
182
Dilutive Shares Outstanding
11,590
11,972
(Loss) /Earnings per Share- Basic
($0.25)
$0.62
(Loss) /Earnings per Share- Diluted
($0.25)
$0.61
</TABLE>
Quarterly Dividends

 

On February 21, 2002, the Company's Board of        Directors declared a quarterly common stock cash dividend of $0.12 per        share payable on or about April 15, 2002 to shareholders of record on        March 31, 2002.

 
Acquisition of Liberty Bank & Trust

 

On February 28, 2002, General Bank consummated its        purchase transaction of Liberty Bank and Trust Co. of Boston. The        purchase transaction was accounted for in accordance with SFAS No. 141,        "Business Combinations". The assets acquired had a fair value        of $44,352,000 and the fair value of liabilities assumed was        $32,421,000. Good will in the amount of $4,855,000 and core deposit        premium in the amount of $964,000 were initially recognized in        accordance with SFAS No. 141.  SFAS No. 142, "Goodwill and        other Intangible Assets," requires that goodwill and intangible        assets with indefinite useful lives no longer be amortized, but instead        tested for impairment at least annually in accordance with the        provisions of SFAS No.142. SFAS No.142 also requires that intangible        assets with definite useful lives be amortized over their respective        estimated useful lives to their estimated residual values, and reviewed        for impairment in accordance with SFAS No.144, "Accounting for the        Impairment or Disposal of Long-lived Assets". The core deposit        premium intangible is being amortized over a 5 year period, estimated to        be the useful life.

 
Recent Accounting Developments

 

In June 2001, the FASB issued SFAS No. 143,        "Accounting for Asset Retirement Obligations," which requires        that the fair value of a liability for an asset retirement obligation be        recognized in the period in which it is incurred if a reasonable        estimate of fair value can be made. The associated asset retirement        costs would be capitalized as part of the carrying amount of the        long-lived asset and depreciated over the life of the asset. The        liability is accreted at the end of each period through charges to        operating expense. If the obligation is settled for other than the        carrying amount of the liability, the Company will recognize a gain or        loss on settlement. Two provisions of SFAS No.143 are effective for        fiscal years beginning after June 15, 2002. The adoption of this        statement will have no impact on the Company.

 

The Company adopted SFAS No. 144, "Accounting        for the Impairment or Disposal of Long-lived Assets", effective        January 1, 2002. The adoption of SFAS No. 144 did not have a significant        impact on the Company's financial statements.

 

In April 2002, the FASB issued SFAS No. 145,        "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB        Statement No. 13, and Technical Corrections" ("SFAS No.        145"). SFAS No.145 will rescind SFAS No. 4 which required all gains        and losses from extinguishment of debt to be aggregated and, if        material, classified as an extraordinary item, net of related income tax        effect. As a result of SFAS No. 145, the criteria in APB Opinion No. 30,        *Reporting the Results of Operations - Reporting the Effects of        Disposal of a Segment of a Business, and Extraordinary, Unusual and        Infrequently Occurring Events and Transactions* will now be used to        classify those gains and losses. SFAS No. 64 amended SFAS No. 4, and is        no longer necessary because SFAS No. 4 has been rescinded.

SFAS No. 44 was issued to establish accounting        requirements for the effects of transition to the provisions of the        Motor Carrier Act of 1980. Since the transition has been completed, SFAS        No. 44 is no longer necessary. SFAS No. 145 amends SFAS No. 13 to        require that certain lease modifications that have economic effects        similar to sale-leaseback transactions be accounted for in the same        manner as sale-leaseback transactions.

SFAS No. 145 will be effective for fiscal years        beginning after May 15, 2002, with early adoption of the provisions        related to the rescission of SFAS No. 4 encouraged. Upon adoption,        companies must reclassify prior period items that do not meet the        extraordinary item classification criteria in APB 30. It is not        anticipated that the adoption of this statement will have a material        effect on the Company.

 

 

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 

Critical Accounting Policies

 

The discussion and analysis of our financial        condition and results of operations are based upon our consolidated        financial statements, which have been prepared in accordance with        accounting principles generally accepted in the United States of        America. The preparation of these financial statements requires        management to make estimates and judgments that affect the reported        amounts of assets and liabilities, revenues and expenses, and related        disclosures of contingent assets and liabilities at the date of our        financial statements. Actual results may differ from these estimates        under different assumptions or conditions.

 

Accounting for the allowance for credit losses        involves significant judgments and assumptions by management which have        a material impact on the carrying value of net loans; management        considers this accounting policy to be a critical accounting policy. The        judgments and assumptions used by management are based upon the        evaluation of the loan portfolio, the economic environment, historical        loan loss experience, collateral values and assessments of borrower's        ability to repay, as described in "Allowance for Credit        Losses".

 

Accounting for derivatives is in compliance with SFAS        No.133, "Accounting for Derivative Instruments and Hedging        Activities ("SFAS No. 133"). Implementation of SFAS No.133 has        a material impact on the carrying value of derivative instruments;        management considers this accounting policy to be a critical accounting        policy. The judgments and assumptions used by management to mark to        market derivatives are based on the most recent information available        and other factors which are believed to be reasonable under the        circumstances as described in "Non-Interest Income",        "Non-Interest Expense" and "Cumulative Effect of a Change        of Accounting Principle".

 

 

OVERVIEW

 

For the quarter ended March 31, 2002, the net loss        totaled $2,906,000, or ($0.25) diluted loss per share, compared to net        income of $7,347,000, or $0.61 diluted earnings per share for the first quarter of        2001.

 

The incurrence of the net loss was primarily the        result of an $18,514,000 provision for credit losses, an increase of        $12,514,000 compared to the corresponding period of a year ago. In        addition, non-interest income was $(1,503,000) compared to $4,059,000 of        the year ago period due primarily to recording operating losses        associated with certain of the Company's investments which are        accounted for under the equity method. Partially offsetting the above        was a $3,002,000 increase of net interest income for quarter ended March        31, 2002 compared to the quarter ended March 31, 2001.

 

The annualized return on average assets ("ROA")        for the Company was (0.48)% and 1.52% for the quarter ended March 31,        2002 and 2001, respectively. The annualized return on average        stockholders' equity ("ROE") for the quarter ended March 31,        2002 and 2001 was (5.59)% and 15.3%, respectively.

 

 

RESULTS OF OPERATIONS

 

 

Net Interest Income

 

For the quarter ended March 31, 2002 and 2001, net        interest income before the provision for credit losses was $24,042,000        and $21,040,000, respectively, representing an increase of $3,002,000,        or 14.3%. The growth was due to the increase of average interest earning        assets, partially offset by a decrease of the net interest margin to        4.08% from 4.50%.

 

 

Interest Income

 

Total interest income for the quarter ended March 31,        2002 was $37,137,000 compared to $39,658,000 for the corresponding        period of a year ago. The decrease of $2,521,000, or 6.36%, was related        to the decline of the yield on earning assets. For the quarter ended        March 31, 2002 and 2001, the yield was 6.30% and 8.49%, respectively.        The 219 basis point decline is primarily due to the reduction of the        prime rate of interest. For the quarter ended March 31, 2002 and 2001,        the daily average prime rate was 4.75% and 8.63%, respectively, a        decline of 388 basis points. The yield on loans and leases declined to        6.95% from 9.71%, a 276 basis point decline. The decline of the yield on        loans and leases was less than the decline of the average prime rate due        to the fixed rate portion of the portfolio (approximately 25% of total        loans and leases), and the impact of net interest income recoveries /        charge-offs. During the quarter ended March 31, 2002 and 2001, there        were net recoveries of $253,000 and net charge-offs of $339,000,        respectively. The yield on securities declined to 5.96% from 7.32% for        the quarter ended March 31, 2002 and 2001, respectively, a decline of        136 basis points. The yield on federal funds sold and securities        purchased under agreements to resell declined to 1.86% from 5.83% for        the quarter ended March 31, 2002 and 2001, respectively, mirroring the        decline of the above-referenced average prime rate.

 

The impact of the declining yields on interest income        was partially offset by a $497.9 million growth of average interest        earning assets to $2,392.4 million from $1,894.5 million for the quarter        ended March 31, 2002 and 2001, respectively. This growth of average        interest earning assets was comprised of increases of $185.5 million and        $299.8 million for loans and leases and securities available-for-sale,        respectively. The dilution of the loans and leases as a percentage of        total average interest earning assets to 48% from 51% also put downward        pressure on the yield on interest earning assets.

 

Interest Expense

 

Total interest expense for the quarter ended March        31, 2002 was $13,095,000 compared to $18,618,000 for the corresponding        period of a year ago. The decrease of $5,523,000, or 29.7%, was due to        the decrease of the cost of funds which decreased from 4.92% for the        quarter ended March 31, 2001 to 2.69% for the quarter ended March 31,        2002. The 223 basis point decrease of the cost of funds was primarily        the result of the decline of deposit rates caused by the movement of the        prime rate of interest as discussed above.

 

Partially offsetting the decrease of the cost of        funds was the growth of average interest-bearing liabilities, which        increased $442.5 million to $1,976.8 million from $1,534.3 million for        the quarter ended March 31, 2002 and 2001, respectively. Constituting        approximately 50% of the increase of average interest bearing        liabilities was the increase of average interest bearing deposits which        increased $220.6 million to $1,682.1 million from $1,461.5 million. The        higher costing time certificates of deposit of $100,000 or more        increased $91.9 million to $921.9 million from $830.0 million. As a        result of the growth of time certificates of deposit of $100,000 or        more, the average of this deposit category represented 54.8% of total        average interest bearing deposits compared to 50.2% for the        corresponding year ago period. This increase has the effect of exerting        upward pressure on the annualized cost of deposits.

 

The largest amount of growth, $160.5 million, was in        average interest bearing demand and savings deposits comparing the        quarter ended March 31, 2002 with the year ago period.

 

For the quarter ended as indicated, the average        balance and rates paid for the interest bearing deposit categories were        as follows (dollars in thousands)

<TABLE>

<CAPTION>

 

For the Quarter Ended March 31
2002
2001
<S>
<C>
<C>
Interest bearing demand - Average balance
$ 508,516
$ 380,109
Rate
1.47%
3.10%
Savings - Average balance
100,605
68,494
Rate
1.17%
2.09%
Time certificates of deposit
of $100,000 or more - Average balance
921,875
830,005
Rate
2.86%
5.72%
 
Other time deposits - Average balance
151,121
182,920
Rate
2.53%
5.22%
</TABLE>

Average borrowings from the Federal Home Loan Bank        ("FHLB") increased to $254.7 million from $32.8 million, an        increase of $221.9 million for the quarter ended March 31, 2002 and        2001, respectively. During the fourth quarter of 2001 and the first        quarter of 2002, increased borrowings from the FHLB invested in        securities, while generating net interest income, exerted downward        pressure on the net interest margin. The net interest margin is        discussed in a following paragraph.

 

The increase in borrowings from the FHLB as a        percentage of average interest bearing liabilities, partially offset the        impact of the decline of short-term interest rates. The cost of these        funds was 4.22% and 5.20% for the quarter ended March 31, 2002 and 2001,        respectively. This compares to annualized cost of deposits of 2.31% and        4.80%, for the quarter ended March 31, 2002 and 2001, respectively. The        cost of funds therefore decline to 2.69% from 4.92%.

 

The net interest spread, defined as the yield on        earning assets less the rates paid on interest-bearing liabilities,        increased to 3.61% for the quarter ended March 31, 2002 from 3.57% for        the corresponding period of a year ago and is due to the difference in        the reduction of the cost of funds compared to the reduction of the        yield on earning assets.

 

The net interest margin, defined as the annualized        difference between interest income and interest expense divided by        average interest earning assets, decreased 42 basis points to 4.08% for        the quarter ended March 31, 2002, from 4.50% for the corresponding        period of a year ago. The decline of the net interest margin was        primarily due to the following:

 
The growth of average earning assets was represented primarily              by securities available-for-sale. $299.8 million, or 60.2%, of the              growth of average earning assets of $497.9 million, was from the              growth of average securities available-for-sale.
The primary source of funds for the above growth was from FHLB              borrowings which increased $221.9 million.
A reduction of the percentage of average interest earning assets              as funded by non-costing sources namely, non-interest bearing              demand deposits and average capital, net of non-cash component.              For the quarter ended March 31, 2002 and 2001, this percentage was              17.6% and 19.9% respectively. The Company increased its leverage,              resulting in a reduction of the net interest margin.

 

 

Provision for Credit Losses

 

For the quarter ended March 31, 2002, a provision for        credit losses of $18,514,000, was recorded compared to a $6,000,000        provision for credit losses for the corresponding quarter of a year ago.

 

The $18,514,000 provision, representing a $12,514,000        increase, was based on the quarter-end review of existing problem loans        and was primarily the result of the addition during the first quarter of        two commercial loans with total outstandings of $26.9 million, as of        March 31, 2002. The two loans represent potential problem loans due to        liquidity issues. The loans are collateralized by receivables and        inventory. The collateralized receivables are covered by insolvency risk        insurance with certain exclusions. The Company cannot estimate at this        time the extent to which the collateral plus insurance coverage will        repay the loans. Accordingly, management has classified the loans        doubtful and provided the necessary additional amounts in the provision        for loan losses in the first quarter. In addition, because of the        uncertainty of the timing and amount of recovery, an additional $5.4        million charge-off was recorded related to a participation in a        syndicated commercial loan. The charge-off includes a $5.1 million        letter of credit which was drawn on in the first quarter of 2002. The        provision for credit losses recorded in the fourth quarter of 2001 took        into account the anticipated risk associated with this letter of credit.

 

For the quarter ended March 31, 2002, net charge-offs        were $6.2 million compared to $3.1 million for the corresponding period        of a year ago. As of March 31, 2002 non-accrual loans which included the        above-mentioned commercial loans totaled $55.5 million compared to        $23.6 million, as of March 31, 2001.

 

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 losses. Please refer to the        discussion in "Allowance for Credit Losses".

 

 

Non-Interest Income

 

Non-interest (loss) income for the quarter ended        March 31, 2002 totaled ($1,503,000) compared to $4,059,000 for the same        period ended March 31, 2001, representing a $5,562,000, or 137%        decrease. The decline is primarily due to the following:

 
A reduction of trading account revenue totaling $2,254,000
An increase in loss from other investments totaling $3,228,000.

 

Trading account revenue is income earned on        securities classified as trading account securities. The Company's        subsidiary, GBC Venture Capital, receives equity securities which it        holds as trading securities primarily from two sources: a distribution        from venture capital funds in which it invests and the exercise of        warrants acquired through the lending operations of General Bank, its        affiliate. The recognition of fair value and ultimate disposition of        these trading securities results in trading account revenue.

 

Other investments includes a 10% interest in an        aircraft finance trust ("AFT"). AFT reflected a fourth quarter        loss of $28,788,000 which amount included an additional impairment        expense of $28,364,000. The Company's 10% share of this was recorded        in the first quarter of 2002, bringing the total loss to $3,010,000 in        the first quarter ended March 31, 2002. This compares to $31,000 of        income for the quarter ended March 31, 2001.

 

Other investments also includes the operating results        of various venture capital funds in which the Company is a limited        partner. The Company recorded $352,000 of net loss for these        partnerships in the first quarter of 2002 compared to $166,000 of net        loss for the corresponding quarter of a year ago.

 

 

Non-Interest Expense

Total non-interest expense for the quarter ended        March 31, 2002 and 2001 was $8,608,000 and $15,631,000, respectively,        which amount includes the reduction of the fair value of derivatives.        Excluding the reduction of the fair value of derivatives, non-interest        expense decreased $392,000. The decrease was due to a decline of        salaries and employee benefits due to a reduced incentive compensation        expense and the absence of litigation expense included in the other        expense category. These reductions were partially offset by an increase        of furniture and equipment expense totaling $387,000. This increase was        primarily the result of recording period expenses relating to a new        accounting system for the processing of the Company's international        transactions.

 

The reduction of the fair value of derivatives of        $96,000 and $6,727,000 represents the decline of the fair value of the    Company's derivative instruments as measured as of March 31, 2002 and        2001, respectively. The fair value of the Company's derivatives was        recorded upon the implementation of SFAS No. 133, on January 1, 2001.        The $6,727,000 amount for the quarter ended March 31, 2001 was a        reduction of the fair value determined on January 1, 2001. This amount        was recorded net of taxes as a cumulative effect of a change in        accounting principle. See also note 2 of notes to unaudited consolidated        financial statements.

 

For the quarter ended March 31, 2002, the Company's        efficiency ratio, defined as non-interest expense excluding the        reduction of fair value of derivatives divided by the sum of net        interest income plus non-interest income less trading revenue and income    (loss) from venture capital fund investments declined to 32.9%,        comparing favorably to 38.8% for the corresponding period of 2001.

 

Provision for Income Taxes

 

For the quarter ended March 31, 2002, the (benefit)        for income taxes was ($1,677,000). The tax benefit assumes a 35% federal        income tax rate and no California tax benefit. The provision for the        quarter ended March 31, 2001 was $1,083,000, representing 31.2% of        pre-tax income. GB Capital Trust II was formed to provide the        flexibility of raising additional capital for future business        opportunities, if desired. It also provides tax benefits. There was no        tax impact for the quarter ended March 31, 2002 because of the net loss.

 

 

Cumulative Effect of a Change in Accounting Principle

 

On January 1, 2001, the Company adopted SFAS No. 133.        On that date a transition adjustment of $8,561,000 was recorded. The        transition adjustment is presented net of tax in the amount of        $4,962,000 as a cumulative effect of a change of accounting principle in        the Company's statement of income for the quarter ended March 31,        2001.

FINANCIAL CONDITION

Total assets as of March 31, 2002 were $2,512.2        million representing a $144.9 million, or 6.1%, increase from total        assets of $2,367.2 million as of December 31, 2001. The growth of total        assets from December 31, 2001 to March 31, 2002 was primarily funded by        increases from total deposits of $126.8 million, or 6.9%. Total assets,        total deposits and total loans and leases were at record levels, as of        March 31, 2002. Stockholders' equity decreased to $196.8 million as of        March 31, 2002 from $206.3 million as of December 31, 2001, a reduction        of $9.5 million, or 4.6%. The decline is related to the net loss for the        quarter and the decline in the valuation of the securities        available-for-sale, net of tax.

Loans and Leases

 

As of March 31, 2002, total loans and leases were        $1,185.5 million compared to $1,132.9 million as of December 31, 2001,        representing a $52.6 million, or 4.6% increase. The increase was        primarily due to growth of $46.4 million conventional real estate        portfolios.

 

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

<TABLE>

<CAPTION>

March 31, 2002
December 31, 2001
<S>
<C>
<C>
<C>
<C>
(In Thousands)
Amount
Percentage
Amount
Percentage
Commercial
$ 505,450
42.63%
$ 495,681
43.76%
Real Estate - Construction
221,794
18.71%
234,860
20.73%
Real Estate - Conventional
410,958
34.66%
364,567
32.18%
Installment
253
0.02%
101
N/A
Other Loans
29,668
2.51%
20,345
1.80%
Leveraged Leases
17,419
1.47%
17,335
1.53%
Total
$ 1,185,542
100.00%
$1,132,889
100.00%
</TABLE>

N/A = Percentage less than 0.01

The two largest concentrations in commercial loans        continue to be the apparel/textile industry and the computer/electronic        goods industry (excluding early-stage technology companies). The        approximate amounts of commercial loans for these two segments as of        March 31, 2002 are $71 million and $64 million, respectively. There are        $41 million of loans to early stage high technology companies. As of        December 31, 2001, the apparel/textile industry and the computer /        electronic goods industry comprised $75 million and $65 million,        respectively, of the commercial loan portfolio. As of December 31, 2001,        commercial loans also included $38 million of credits to early stage        high technology companies.

 

Within commercial loans as of March 31, 2002 above,        the Bank has two credits where it is participating in a facility led by        another financial institution. The total commitments of these two        credits is $10 million, as the loans outstanding totaled $5 million. In        addition, the Bank has a $20 million standby letter of credit        outstanding to the U.S. subsidiary of a Taiwanese company that is part        of a facility led by a major U.S. bank.

 

As of March 31, 2002, there also are three credits in        the commercial loan portfolio totaling $50 million of commitments and        $45 million of loans outstanding where the Bank is the major lender.        Included in this group is a commitment of $19 million with a loan        outstanding of $16 million where the Bank is one of several banks        providing credit facilities based upon non-commingled collateral and is        considered within the Bank's normal lending base. In addition, there        is a $22 million loan commitment that is part of a $36 million facility        to an importer, where a portion of the loan facility has been        participated to another financial institution. The loan outstanding is        $5.6 million.

 

Also included in commercial loans are five credits        that are participations in facilities to Indian casinos that are        construction loans to be repaid under a mini-perm facility from cash        flow from the casinos. The total commitments were $43 million as of        March 31, 2002 and the total loan outstanding were $32 million.

 

Real estate-construction loans reflected a decrease        of $13.1 million. The reduction is due to a $21.0 million construction        loan becoming a mini-perm and thus included in the real estate - conventional portfolio, as of March 31, 2002. Construction loans are        real estate loans secured by first trust deeds. The following table sets        forth the break down by type of collateral for construction and        conventional real-estate loans as of March 31, 2002 and December 31,        2001:

<TABLE>

<CAPTION>

 

3/31/2002
12/31/2001
(In Thousands)
Conventional
Conventional
Construction
Real Estate
Construction
Real Estate
Project Type
Loans
Percentage
Loans

Percentage
Loans
Percentage
Loans

Percentage
<S>
<C>
<C>
<C>
<C>
<C>
<C>
<C>
<C>
Residential:
Single-Family
$ 96,845
43%
$ 13,540
3%
$ 104,427
45%
$ 13,422
4%
Townhouse
5,318
2
502
-
6,589
3
506
-
Condominums
99,122
45
3,267
1
91,998
39
3,483
1
Multi-Family
1,880
1
55,369
14
17,026
7
25,162
7
Land Development
8,158
4
-
-
4,952
2
272
-

Total Residential
$ 211,323
95%
$ 72,678
18%
$ 224,992
96%
$ 42,845
12%

Non-Residential:

Warehouse
$ -
0%
$ 44,252
11%
$ -
0%
$ 46,824
13%
Retail Facilities
1,376
1
84,144
20
481
-
84,532
23
Industrial Use
-
-
29,781
7
-
-
30,389
8
Office
-
-
54,634
13
2,452
1
43,555
12
Hotel and Motel
6,864
3
55,567
14
5,486
2
56,239
15
Other
2,231
1
69,902
17
1,449
1
60,183
17

Total Non-Residential
$ 10,471
5%
$ 338,280
82%
$ 9,868
4%
$ 321,722
88%

Total
$ 221,794
100%
$ 410,958
100%
$ 234,860
100%
$ 364,567
100%

</TABLE>

As of March 31, 2002, the Company had an ownership        interest in two leveraged leases of Boeing 737s leased by two major U.S.        airlines. As of March 31, 2002, the total investment included as part of        loans and leases was $17.4 million. Such amount includes an estimated        residual value of $13.1 million. The value of the leveraged leases may        be affected in the future by the profitability of the airline industry        and of the two airlines, in particular. Were either of the two airlines        to default on the above-described leveraged leases, the Company's        investments would be substantially at risk due to the debt outstanding        and the current depressed market values of such aircraft. The leases        were acquired in 1996 and 1997, with terms of 16 years and 19 years,        respectively.

 

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        assure minimizing 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 in accordance with 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 impaired loans) 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, in accordance with management's judgment as to        the collectability of principal.

 

The following table provides information on the        Company's past due loans, non-accrual loans, restructured loans and        other real estate owned, net, as of the dates indicated:

 

<TABLE>

<CAPTION>

 

 

(IN THOUSANDS)**March 31, 2002**December 31, 2001
<S>
<C>
<C>
Loans 90 Days or More Past Due and Still              Accruing
 

$ -
 

$ 1,730
Non-accrual Loans
55,462
24,940
Total Past Due Loans
55,462
26,670
Restructured Loans (on Accrual Status)
 

1,642
 

1,706
Total Non-performing and Restructured Loans
 

57,104
 

28,376
Other Real Estate Owned, Net
383
383**Total Non-performing Assets**$ 57,487**$ 28,759
</TABLE>

 

 

Total non-performing assets increased from $28.8        million to $57.5 million from December 31, 2001 to March 31, 2002. The        $28.7 million, or 99.9%, increase was the result of the increase of        total non-accrual loans.

 

 

Loans 90 Days or More Past Due

 

As of March 31, 2002, there were no loans 90 days or        more past due and still accruing.
** **
Non-accrual loans

 

The non-accrual loans increased $30.5 million, or        122%, to $55.5 million as of March 31, 2002 from $24.9 million as of        December 31, 2001. The increase was primarily due to two borrowers with        loans outstanding totaling $26.9 million. The two companies, which are        related, are in the metal importing and trading business. They represent problem loans due to liquidity problems associated with their        financing institutions.

 

As indicated below, the non-accrual commercial loans        are comprised primarily of trade financing loans. Trade financing loans        have represented the largest growth sector of the Bank's loan        portfolio over the past several years. Of the $43.3 million of        non-accrual commercial loans included in the above, the apparel /        textile industry and the computer / electronic goods represent $5.0        million and $0.4 million, respectively. The apparel / textile industry        and the computer / electronic goods industry are the largest        concentrations of the commercial loan portfolio, as of March 31, 2002.        There are $3.6 million of loans to early stage high technology companies        on non-accrual status as of March 31, 2002.

 

The following table identifies the components of the        increase in non-accrual loans during the quarter ended March 31, 2002:

 

 
**Non-Accrual Loans (In Thousands)**
<TABLE>

<CAPTION>

 

<S>
<C>
Balance, December 31, 2001
$24,940
Add: Loans placed on non-accrual
41,119
Less: Charge-offs
(6,287)
Returned to accrual status
(1,333)
Repayments
(2,932)
Transfer to OREO
(45)
Balance, March 31, 2002**$55,462
 

</TABLE>

 

The following table breaks out the Company's        non-accrual loans by category as of March 31, 2002 and December 31,        2001:

<TABLE>

<CAPTION>

 

(IN THOUSANDS)**March 31, 2002**December 31, 2001
<S>
<C>
<C>
Commercial
$ 43,620
$ 15,093
Real Estate-Construction
10,826
9,738
Real Estate-Conventional
1,016
109**Total**$55,462**$24,940
</TABLE>

The $28.5 million increase of commercial non-accruals        is almost entirely related to the above-referenced borrowers.

 

Restructured Loans

 

As of March 31, 2002, the balance of restructured        loans was $1.6 million compared to $1.7 million as of December 31, 2001.        The $0.1 million decline is the result of monthly pay-downs on the two        restructured loans outstanding as of March 31, 2002. They are the same        loans that were outstanding as of December 31, 2001. A loan is        categorized as restructured if the original interest rate on such loan,        the repayment terms, or both, are modified due to a deterioration in the        financial condition of the borrower. Restructured loans may also be put        on a non-accrual status in keeping with the Bank's policy of        classifying loans which are 90 days past due as to principal and/or        interest. Restructured loans which are non-accrual loans are not        included in the balance of restructured loans. As of March 31, 2002,        there was one restructured loan with a balance of $54,000 on non-accrual        status. The weighted average yield of the restructured loans as of March        31, 2002 was 9.96%.

 

There are no commitments to lend additional funds on        any of the restructured loans.

 

 

Other Real Estate Owned

 

As of March 31, 2002 and December 31, 2001, other        real estate owned ("OREO"), net of valuation allowance of $0.4        million, totaled $0.4 million and consisted of 1 property. The property,        a retail facility, is located in the Los Angeles area.

During the first quarter of 2002, there was a        foreclosure on a retail market (an SBA loan) which was subsequently sold        for a $7,000 gain. This amount is included as a reduction of OREO        expense, net.

Impaired Loans

 

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. Of the $ 23.6 million of net recorded investment of impaired        loans as of March 31, 2002, $1.5 million is included in the balance of        restructured loans and is performing pursuant to the terms and        conditions of the restructuring. The following table discloses pertinent        information as it relates to the Company's impaired loans as of the        dates indicated:

<TABLE>

<CAPTION>

 

(IN THOUSANDS)
March 31, 2002
Dec. 31, 2001
<S>
<C>
<C>
Recorded Investment with Related Allowance
$48,353
$28,734
Recorded Investment with no Related Allowance
204
273
Total Recorded Investment
48,557
29,007
Allowance for Impaired Loans
(17,040)
(5,224)
Net Recorded Investment in Impaired Loans
$31,517
23,783
</TABLE>

The average balance of total recorded investment in        impaired loans was $38.8 million for the three months ended March 31,        2002 and $23.8 million for the twelve months ended December 31, 2001.

 

For the quarter ended March 31, 2002 and 2001,        interest income recognized on impaired loans was $355,000 and $75,000,        respectively. Of the amount of interest income recognized during the        quarters ended March 31, 2002 and 2001, no interest was recognized under        the cash basis method.

 

Management cannot predict the extent to which the        current economic environment, including the real estate market, may        continue to improve 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 examinations of the Bank, 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 be placed on        non-accrual, become 90 days or more past due, have terms modified in the        future, or become OREO.

 

Allowance for Credit Losses

 

As of March 31, 2002, the balance of the allowance        for credit losses was $36.0 million, representing 3.04% of outstanding        loans and leases. This compares to an allowance for credit losses of        $23.7 million as of December 31, 2001, representing 2.09% of outstanding        loans and leases.

 

The table below summarizes the activity in the        allowance for credit losses (which amount includes the allowance on        impaired loans), for the quarter ended as indicated:

<TABLE>

<CAPTION>

 

(IN THOUSANDS)**March 31, 2002**March 31, 2001
<S>
<C>
<C>
Balance, Beginning of Period
$23,656
$19,426
Provision for Credit Losses
18,514
6,000
Charge-offs
(6,300)
(3,804)
Recoveries
122
676
Net (Charge-offs) / Recoveries
(6,178)
(3,128)
Balance, End of Period
$35,992
$22,298
 

</TABLE>

As of March 31, 2002, the allowance represents 64.9%        of non-accrual loans and 63.0% of non-performing and restructured loans        combined. As of December 31, 2001, the allowance represented 94.9% of        non-accrual loans and 83.4% of non-performing and restructured loans        combined.

 

The provision for credit losses is an amount required        to maintain an allowance for credit losses that is adequate to cover        probable credit losses related to specifically identified loans as well        as probable credit losses inherent in the remainder of the loan and        lease portfolio. Management evaluates the loan portfolio, the economic        environment, historical loan loss experience, collateral values and        assessments of borrowers' ability to repay, in determining the amount        of the allowance for credit losses. The balance of the allowance for        credit losses is an accounting estimate of probable but unconfirmed        losses in the Bank's loan portfolio as of March 31, 2002. Such an        amount is based on ongoing, quarterly assessments of the probable        estimated losses inherent in the loan and lease portfolio, and to a        lesser extent, unused commitments to provide financing. The Company's        methodology for assessing the appropriateness of the allowance consists        primarily of the use of a formula allowance.

 

The formula allowance is calculated by applying loss        factors to outstanding loans and leases and certain unused commitments,        in each case based on the internal risk rating of such loans, pools of        loans, leases or commitments. Changes in risk ratings of both performing        and non-performing loans affect the amount of the formula allowance.        Loss factors are based on the Company's historical loss experience and        may be adjusted for significant factors that, in management's judgment, affect the  collectibles of the portfolio as of the        evaluation date. Loss factors are described as follows:

 
Problem graded loan loss factors represent percentages which              have proven accurate over time. Such factors are checked against              and supported by migration analysis which tracks loss experience              over a five-year period.

 
Pass graded loan loss factors are based on the approximate              average annual net charge-off rate over an eight-year period.

 
Pooled loan loss factors (not individually graded loans) are              based on probable net charge-offs. Pooled loans are loans and              leases that are homogeneous in nature, such as residential              mortgage loans and small business 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 March 31, 2002.

 

 

Securities

 

The Company classifies its securities as        held-to-maturity, trading 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.

 

Common shares of companies held principally for the        purpose of selling them in the near term are classified as trading and        are reported at fair value with unrealized gains/losses included in        earnings.

 

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 fair value, with        unrealized gains or losses reflected net of tax in other comprehensive        income.

 

As of March 31, 2002, the Company recorded net        unrealized gains of $7,070,000 on its available-for-sale portfolio.        Accumulated other comprehensive income includes $4,097,000, representing        the net unrealized gains of the available-for-sale securities, net of        tax.

 

The amortized cost, gross unrealized gains, gross        unrealized losses and fair value of securities as of March 31, 2002 and        December 31, 2001 were as follows:

<TABLE>

<CAPTION>

 

Gross
Gross
(In Thousands)
Amortized
Unrealized
Unrealized
Fair
March 31, 2002
Cost
Gains
Losses
Value
<S>
<C>
<c>
<C>
<C>**Securities Available-for-Sale
State and Municipal Securities
$ 2,227
$ -
$ 68
$ 2,159
U. S. Treasuries
1,084
-
20
1,064
U.S. Government Agencies
101,906
1,170
997
102,079
Mortgage Backed Securities
513,617
2,133
5,021
510,729
Commercial Mortgage Backed Securities
165,471
3,252
1,303
167,420
Corporate Notes
89,704
3,055
48
92,711
Collateralized Mortgage Obligations
268,039
4,462
1,257
271,244
Asset Backed Securities
68,315
1,712
-
70,027
FHLB Stock
13,670
-
-
13,670
Total
$1,224,033
$15,784
$ 8,714
$1,231,103**Trading Account Securities
Equity Issues
$ -
$ -
$ -
$ 3
Total
$ -
$ -
$ -
$ 3
Gross
Gross
(In Thousands)
Amortized
Unrealized
Unrealized
Fair
December 31, 2001
Cost
Gains
Losses
Value**Securities Available-for-Sale
U.S. Government Agencies
$ 100,877
$ 1,614
$ 237
$ 102,254
Mortgage Backed Securities
302,827
2,212
1,963
303,076
Commercial Mortgage Backed Securities
166,332
4,879
848
170,363
Corporate Notes
87,530
4,446
-
91,976
Collateralized Mortgage Obligations
308,299
6,176
697
313,778
Asset Backed Securities
102,334
2,588
-
104,922
FHLB Stock
12,620
-
-
12,620
Total
$ 1,080,819
$ 21,915
$ 3,745
$ 1,098,989**Trading Account Securities
Equity Issues
$ -
$ -
$ -
$ 31
Total
$ -
$ -
$ -
$ 31
</TABLE>

As of March 31, 2002, the fair value of total        securities available-for-sale was $1,231.1 million, of which $92.7        million is unsecured corporate debt, as shown below (dollars in        millions):

<TABLE>

<CAPTION>

 

<S>
<C>
American General
$ 5.1
Aristar Inc.
10.6
Bear Stearns
10.3
CIT Group
10.0
Countrywide Credit
2.1
Daimler Chrysler
6.2
Ford Motor Credit
10.2
General Motor
1.0
Heller Financial
10.2
Household Financial
10.4
Lehman Brothers
16.6
Total
$ 92.7
</TABLE>

As of March 31, 2002, trading securities totaled        $3,000 and were comprised of two equity issues. The equity securities        are non-interest bearing instruments.

 

There were no sales of securities available-for-sale        or securities held-to-maturity during the quarter ended March 31, 2002        and 2001.

 

 

Other Investments

 

As of March 31, 2002, other investments totaled $9.1        million. The balance includes various venture capital funds that invest        in technology companies. As of March 31, 2002, undisbursed commitments        to invest in these various funds totaled $6.4 million. In addition to        seeking an appropriate return from such investments, the Company seeks        to use the investments to increase its high technology banking business.        Also included in other investments is a 10% equity ownership in the        beneficial interest in an aircraft trust ("AFT") which totaled        $6.1 million, as of December 31, 2001. This amount excluded an        accumulated other comprehensive loss amount of $3.8 million which        reduces the carrying value of AFT. Thus, as of December 31, 2001, the        AFT investment had a carrying value of $2.3 million. AFT owns 36        aircraft on lease to different lessees in various countries. In its        recently filed Report on Form 10-K, ("10-K"), AFT disclosed a        $28.4 million impairment expense for the write-down of 3 aircraft in its        4th quarter financials, bringing its total impairment expense        in 2001 to $46.5 million for the write-down of 5 aircraft. Including its        share of this impairment expense, GBC recorded a $3 million loss in the        1st quarter, 2002. Reference also preceding section entitled Non-Interest-Income.         As a result of the recognition of this expense, the accumulated other        comprehensive loss amount was reduced to $3.1 million, resulting in        before-tax accumulated other comprehensive income of $0.7 million. AFT's        debt was not in default at the time of the filing of its 10-K but GBC's        remaining investment of $3.1 million is subject to possible future        impairment losses of AFT. The partnership investments in venture capital        funds and the equity ownership in the beneficial interest of AFT are        accounted for by the equity method.

Finally, included in other investments are        investments made by the Bank in corporations responsible for lending        activities qualifying under, among other things, the Community        Reinvestment Act. These investments are accounted for by the cost method        or equity method, as appropriate.

Deposits

 

The Company's deposits totaled $1,954.7 million as of        March 31, 2002, an increase of $126.8 million from $1,827.9 million as        of December 31, 2001. All deposit categories reflected growth with the        exception of other time certificates of deposit, which decreased $14.1        million from $159.8 million as of December 31, 2001 to $145.7 million,        as of March 31, 2002.****
 

There were no brokered deposits outstanding as of        March 31, 2002 and December 31, 2001. The growth of deposits from the        company's customers reflects the continuing tradition of personalized        service. The Company believes that the majority of its deposit customers        have strong ties to the Bank. Although the Company has a significant        amount of time certificates of deposit of $100,000 or more having        maturities of one year or less, and has experienced growth in this area,        the depositors have generally renewed their deposits in the past at        maturity.

 

The maturity schedule of time certificates of deposit        of $100,000 or more as of March 31, 2002 is as follows:

<TABLE>

<CAPTION>

 

(IN THOUSANDS) 
<S>
<C>
3 Months or Less
$398,926
Over 3 Months Through 6 Months
307,510
Over 6 Months through 12 Months
214,520
Over 12 Months
15,107
Total
$936,063
</TABLE>

 

Other Borrowings

 

As of March 31, 2002, the Company has two sources of        outstanding borrowings.

 

Subordinated debt is comprised of a $40 million        public offering issuance of 8.375% subordinated notes due August 1,        2007. Proceeds of $38.7 million, net of underwriting discount of $1.3        million, were received by the Company at date of issuance. The discount        is amortized as a yield adjustment over the 10-year life of the notes.

 

The Bank has obtained advances from the Federal Home        Loan Bank of San Francisco (the "FHLB") totaling $273.4        million, as of March 31, 2002. The advances are under an existing line        of credit whereby the FHLB has granted the Bank an amount equal to 25        percent of its assets.

 

The maturity schedule of outstanding advances as of        March 31, 2002 is as follows:

<TABLE>

<CAPTION>

 

(In Thousands)
Amount
Fixed Rate of Interest
<S>
<C>
<C>
3 Months or Less
$ 10,000
4.71%
Over 3 Months Through 12 Months
40,000
4.71% - 5.61%
Over 1 Year Through 3 Years
223,400
2.89% - 5.25%
Total
$ 273,400
2.89% - 5.61%
</TABLE>

The total outstanding advances of $273.4 million as        of March 31, 2002 has a composite fixed rate of interest of 4.15%.

 

Capital Resources

 

Stockholders' equity totaled $196.8 million as of        March 31, 2002, a decrease of $9.5 million, or 4.6%, from $206.3        million, as of December 31, 2001. The decline was primarily the result        of a reduction of the securities available-for-sale valuation and the        net loss recorded for the quarter ended March 31, 2002.

 

In February, 2001, the Board of Directors authorized        a stock repurchase program approving the buy-back of up to 500,000        shares of the Company's stock. As of March 31, 2002, 405,000 shares        had been repurchased at an average cost of $26.83 per share for a total        of $10.9 million.

 

Capital ratios for the Company and for the Bank were        as follows as of the dates indicated:

<TABLE>

<CAPTION>

 
 
Well-Capitalized
March 31,
December 31, 
Requirements
2002
2001**GBC Bancorp   
<S>
<C>
<C>
<C>
Tier 1 Leverage Ratio
5%
7.82%
8.73%
Tier 1 Risk-Based Capital Ratio
6%
10.65%
10.70%
Total Risk-Based Capital Ratio
10%
14.13%
14.09%**General Bank   
Tier 1 Leverage Ratio
5%
8.25%
9.25%
Tier 1 Risk-Based Capital Ratio
6%
11.34%
11.38%
Total Risk-Based Capital Ratio
10%
12.60%
12.63%
</TABLE>

 

For the quarter ended March 31, 2002, the ratio of        the Company's average stockholders' equity to average assets was        8.62%. For the year ended December 31, 2001, this ratio was 9.60%.

 

GBC Bancorp Executive Obligation Trust (The        "Trust")

 

In the first quarter, 2000, the Company entered into        a trust agreement providing for the Trust with Union Bank of California        as trustee. The following tables discloses the transactions involving        the Trust for the quarter ended March 31, 2002:

<TABLE>

<CAPTION>

 

Date
Description
Number of Shares
Amount
<S>
<C>
<C>
<C>
December 31, 2001
Beginning balance
96,935
$2,474,000
February 1, 2002
Distribution of 1999
2-year deferred shares
(21,279)
(471,000)
February 1, 2002
Issuance of shares for
2-year deferral for year 2001
3,345
100,000
March 31, 2002
Balance
79,001
$2,103,000
</TABLE>

 

In the consolidated financial statements, the shares        held in the Trust are reduced from common stock and included as a        separate component of retained earnings captioned "deferred        compensation". As of March 31, 2002, this amount was $2,103,000,        representing the cost of the 79,001 shares held in the Trust.

 

Liquidity

 

Liquidity measures the ability of the Company to meet        fluctuations in deposit levels, to fund its operations and to provide        for customers' credit needs. Liquidity is monitored by management on an        on-going basis. 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        available-for-sale and loans guaranteed by the Small Business        Administration. These sources of liquidity amounted to $872.1 million,        or 34.7%, of total assets, as of March 31, 2002, compared to $823.9        million, or 34.8%, of total assets, as of December 31, 2001.

 

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 FHLB granted the Bank a line of credit equal to 25 percent of        assets with terms up to 360 months. As of March 31, 2002, the Company        has $273.4 million outstanding under this financing facility. Management        believes its liquidity sources to be stable and adequate.

 

As of March 31, 2002, total loans and leases        represented 60.7% of total deposits. This compares to 62.0% as of        December 31, 2001.

 

The liquidity of the parent company, GBC Bancorp, is        primarily dependent on the payment of cash dividends by its subsidiary,        General Bank, subject to the limitations imposed by the Financial Code        of the State of California. For the quarter ended March 31, 2002,        General Bank declared cash dividends of $1.4 million to GBC Bancorp.

 

"GAP" Measurement

 

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 a variety of time periods,        contractual 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 contractual "gaps" do not take into account timing        differences between the repricing of assets and the repricing of        liabilities.

 

A positive gap exists when rate sensitive assets        exceed rate sensitive liabilities and indicates that a greater volume of        assets than liabilities will reprice during a given period. This        mismatch may enhance earnings in a rising rate environment and may        inhibit earnings when rates decline. Conversely, when rate sensitive        liabilities exceed rate sensitive assets, referred to as a negative gap,        it indicates that a greater volume of liabilities than assets will        reprice during the period. In this case, a rising interest rate        environment may inhibit earnings and declining rates may enhance        earnings.

 

"Gap" reports are utilized as a means to        provide management with a tool to monitor repricing differences, or        "gaps", between assets and liabilities repricing in a        specified period, based upon their underlying contractual rights. The        use of "gap" reports is thus limited to a quantification of        the "mismatch" between assets and liabilities repricing within        a unique specified timeframe. Contractual "gap" reports cannot        be used to quantify exposure to interest rate changes because they do        not take into account timing differences between repricing assets and        liabilities, and changes in the amount of prepayments.

 

As of March 31, 2002 there is a cumulative one year        negative "gap" of $834.3 million. As of December 31, 2001,        there was a cumulative one year negative "gap" of $663.6        million.

 

The following table indicates the Company's interest        rate sensitivity position as of March 31, 2002, and is based on        contractual maturities and repricing dates. It may not be representative        of positions in subsequent periods.

<TABLE>

<CAPTION>

 

March 31, 2002
INTEREST SENSITIVITY PERIOD
<S>
<C>
<C>
<C>
<C>
<C>
<C>
0 to 90
91 to 365
Over 1 Year
Over
Non-Interest
(In Thousands)
Days
Days
to 5 Years
5 Years
Earning/Bearing
Total
Interest Earning Assets
Securities Available-for-Sale
$ 18,060
$ 25,257
$ 169,874
$ 1,017,912
$ -
$ 1,231,103
Trading Account Securities
-
-
-
-
3
3
Federal Funds Sold & Securities
Purchased Under Agreement to Resell
50,000
-
-
-
-
50,000
Loans and Leases (1) (2)
825,773
20,663
136,818
146,826
-
1,130,080
Non-Interest Earning Assets (2)
-
-
-
-
101,004
101,004
Total Assets
$ 893,833
$ 45,920
$ 306,692
$ 1,164,738
$ 101,007
$ 2,512,190
Source of Funds for Assets
Deposits:
Demand - N/B
$ -
$ -
$ -
$ -
$ 227,813
$ 227,813
Interest Bearing Demand
536,890
-
-
-
-
536,890
Savings
108,225
-
-
-
-
108,225
TCD'S Under $100,000
65,614
76,904
3,168
-
-
145,686
TCD'S $100,000 and Over
398,926
522,030
15,107
-
-
936,063
Total Deposits
$ 1,109,655
$ 598,934
$ 18,275
$ -
$ 227,813
$ 1,954,677
Federal Funds Purchased & Securities
Sold Under Agreement to Resell
$ 15,500
$ -
$ -
$ -
$ -
$ 15,500
Borrowings from the Federal Home Loan Bank
10,000
40,000
223,400
-
273,400
Subordinated Debt
-
-
-
39,301
-
39,301
Other Liabilities
-
-
-
-
32,525
32,525
Stockholders' Equity
-
-
-
-
196,787
196,787
Total Liabilities and
Stockholders' Equity
$ 1,135,155
$ 638,934
$ 241,675
$ 39,301
$ 457,125
$ 2,512,190
Interest Sensitivity Gap
$ (241,322)
$ (593,014)
$ 65,017
$ 1,125,437
$ (356,118)
Cumulative Interest Sensitivity
Gap
($241,322)
($834,336)
($769,319)
$356,118
-
Gap Ratio (% of Total Assets)
-9.6%
-23.6%
2.6%
44.8%
-14.2%
Cumulative Gap Ratio
-9.6%
-33.2%
-30.6%
14.2%
0.0%
(1) Loans and leases are before unamortized deferred loan fees              and allowance for credit losses.
(2) Non-accrual loans are included in non-interest earning              assets.
 

</TABLE>

 

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, securities, 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.

 

 

Market Risk

 

Market risk is the risk of financial loss arising        from adverse changes in market prices and interest rates. The Company's        market risk is inherent in its lending and deposit taking activities to        the extent of differences in the amounts maturing or degree of repricing        sensitivity. Adverse changes in market prices and interest rates may        therefore result in diminished earnings and ultimately an erosion of        capital.

 

Since the Company's profitability is affected by        changes in interest rates, management actively monitors how changes in        interest rates may affect earnings and ultimately the underlying market        value of equity. Management monitors interest rate exposure through the        use of three basic measurement tools in conjunction with established        risk limits. These tools are the expected maturity gap report, net        interest income volatility and market value of equity volatility        reports. The gap report details the expected maturity mismatch or gap        between interest earning assets and interest bearing liabilities over a        specified timeframe. The expected gap differs from the contractual gap        report shown earlier in this section by adjusting contractual maturities        for expected prepayments of principal on loans and amortizing securities        as well as the projected timing of repricing non-maturity deposits. The        following table indicates the Company's financial instruments that are        sensitive to changes in interest rates categorized by their expected        maturity, as of March 31, 2002:

<TABLE>

<CAPTION>

 

Expected Maturity Date March 31, 2002
(Dollars in Thousands)
0 to 90
91 to 365
Over 1 Year
Over
(In Thousands)
Days
Days
to 5 Years
5 Years
Total
<S>
`
<C>
<C>
<C>
<C>
<C>
Interest-sensitive Assets:
Securities Available-for-Sale
$ 66,441
$ 159,488
$ 685,343
$ 319,831
$1,231,103
Federal Funds Sold & Securities
Purchased Under Agreements to Resell
50,000
-
-
-
50,000
Loans and Leases (1)
825,773
20,663
136,818
146,826
1,130,080
Total Interest-earning Assets
$ 942,214
$ 180,151
$ 822,161
$ 466,657
$2,411,183
Interest-sensitive Liabilities:
Deposits:
Interest Bearing Demand
$ 27,212
$ 81,634
$ 268,078
$ 159,966
$ 536,890
Savings
2,706
8,117
32,467
64,935
108,225
Time Certificates of Deposit
464,540
598,934
18,275
-
1,081,749
Total Deposits
$ 494,458
$ 688,685
$ 318,820
$ 224,901
$1,726,864
Federal Funds Purchased
$ 15,500
$ -
$ -
$ -
$ 15,500
Borrowings From the Federal Home
Loan Bank
10,000
40,000
223,400
-
273,400
Subordinated Debt
-
-
-
39,301
39,301
Total Interest-sensitive Liabilities
$ 519,958
$ 728,685
$ 542,220
$ 264,202
$2,055,065
(1) Loans and leases are net of non-accrual loans and before              unamortized deferred loan fees and allowance for credit losses.
</TABLE>

Expected maturities of assets are contractual        maturities adjusted for projected payment based on contractual        amortization and unscheduled prepayments of principal as well as        repricing frequency. Expected maturities for deposits are based on        contractual maturities adjusted for projected rollover rates and changes        in pricing for non-maturity deposits. The Company utilizes assumptions        supported by documented analysis for the expected maturities of its        loans and repricing of its deposits and relies on third party data        providers for prepayment projections for amortizing securities. The        actual maturities of these instruments could vary significantly if        future prepayments and repricing differ from the Company's        expectations based on historical experience.

 

The Company uses a computer simulation analysis to        attempt to predict changes in the yields earned on assets and the rates        paid on liabilities in relation to changes in market interest rates. The        net interest income volatility and market value of equity volatility        reports measure the exposure of earnings and capital respectively, to        immediate incremental changes in market interest rates as represented by        the prime rate change of from 100 to 200 basis points. Market value of        equity is defined as the present value of assets minus the present value        of liabilities and off balance sheet contracts. The table below shows        the estimated impact of changes in interest rates on net interest income        and market value of equity as of March 31, 2002:

<TABLE>

<CAPTION>

 

Net Interest
Market Value of
Change in Interest
Income Volatility
Portfolio Equity Volatility
Rates (Basis Points)
March 31, 2002 (1)
March 31, 2002 (2)
<S>
<C>
<C>
+200
2.9%
-9.6%
+100
1.6%
-4.1%
-100
-3.3%
-0.4%
-200
-8.1%
-2.3%
(1) The percentage change in this column represents net              interest income of the Company for
12 months in a stable interest rate environment versus the net              interest income in the various
rate scenarios.
(2) The percentage change in this column represents net              portfolio value of the Company in a stable
interest rate environment versus the net portfolio value in the              various rate scenarios.
</TABLE>

The Company's primary objective in managing        interest rate risk is to minimize the adverse effects of changes in        interest rates on earnings and capital. In this regard the Company has        established internal risk limits for net interest income volatility        given a 100 and 200 basis point decline in rates of 10% and 15%        respectively, over a twelve month horizon. Similarly, risk limits have        been established for market value of equity volatility in response to a        100 and 200 basis point increase in rates of 10% and 15%, respectively.

 

 

FORWARD-LOOKING STATEMENTS

 

Certain statements contained herein, including,        without limitation, statements containing the words        "indicates," "anticipates," "believes,"        "intends," "expects" and words of similar import,        constitute "forward-looking statements" within the meaning of        the Private Securities Litigation Reform Act of 1995. Such        forward-looking statements involve known and unknown risks,        uncertainties and other factors that may cause the actual results,        performance or achievements of the Company to be materially different        from any future results, performance or achievements expressed or        implied by such forward-looking statements. Such factors include, among        others, the following: general economics and business conditions in        those areas in which the Company operates; competition; fluctuations in        interest rates; changes in business strategy or development plans;        changes in governmental regulation; credit quality; and other factors        referenced herein, including, without limitation, under the captions        Provision for Credit Losses, Market Risk, Liquidity and Interest Rate        Sensitivity, and Recent Accounting Developments. Given these        uncertainties, the reader is cautioned not to place undue reliance on        such forward-looking statements. The Company disclaims any obligation to        update any such factors or to publicly announce the results of any        revisions to any of the forward-looking statements contained herein to        reflect future events or developments.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 1. LEGAL PROCEEDINGS

 

In the normal course of business, the Company is        subject to pending and threatened legal actions. After reviewing pending        actions with counsel, management believes that the outcome of such        actions will not have a material adverse effect on the financial        condition or the results of operations of the Company.

 

 

Item 2. CHANGES IN SECURITIES

There have been no changes in the securities of the        Registrant during the quarter ended March 31, 2002.

 

 

Item 3. DEFAULT UPON SENIOR SECURITIES

This item is not applicable.

 

 

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY        HOLDERS

No matters were submitted to a vote of the Company        security holders during the quarter ended March 31, 2002.

 

 

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: May 10, 2002                                                   /s/           Peter Wu                     

                                                                                           Peter Wu, President and

                                                                                           Chief Executive Officer

 

Dated: May 10, 2002                                                   /s/           Peter Lowe                 
                                                                                           Peter Lowe, Executive

                                                                                           Vice President and

                                                                                           Chief Financial Officer************************************** |
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