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 September 30, 2001 Commission filenumber 0-16213

 

| GBC BANCORP 
(Exact name of registrant as specified in its charter)

 

California
95-3586596
(State or other jurisdiction of (I.R.S. EmployerIdentification 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 filedall reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has been subjectto such filing requirements for the past 90 days.

Yes X No _______
 

Indicate the number of shares outstanding of each of theissuer's classes of common stock, as of the close of the period covered by thisreport.

 

Common stock, no par value, 11,541,877 shares issued andoutstanding as of September 30, 2001.

 

 

 

 

 

 

 

 

 

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      .............................................................................
 

11
Item 3.
Qualitative and Quantitative Disclosure about Market      Risk ......................
35
 

 
PART II -
OTHER INFORMATION      ......................................................................
39
Item 1.
Legal Proceedings      ..................................................................................
40
Item 2.
Changes In Securities      .............................................................................
40
Item 3.
Default Upon Senior Securities      ..............................................................
40
Item 4.
Submission Of Matters To A Vote Of Securities Holders      .....................
40
Item 5.
Other Information      ...................................................................................
40
Item 6.
Exhibits And Reports On Form 8-K      ......................................................
40
PART III -
SIGNATURES      .......................................................................................
41

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

<TABLE>

<CAPTION>

GBC BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30,
December 31,
(Dollars In Thousands)
2001
2000
ASSETS
<S>
<C>
<C>
Cash and Due From Banks
$ 41,109
$ 40,306
Federal Funds Sold and Securities Purchased Under Agreements to Resell
83,000
75,000
Cash and Cash Equivalents
124,109
115,306
Securities Available for Sale at Fair Value (Amortized Cost of $907,731      at
September 30, 2001 and $838,302 at December 31, 2000, respectively)
939,175
855,383
Securities Held to Maturity (Fair Value of
$968 at December 31, 2000)
-
1,025
Trading Securities
20
4,637
Loans and Leases
1,123,540
969,023
Less: Allowance for Credit Losses
(25,533)
(19,426)
Deferred Loan Fees
(5,124)
(4,085)
Loans and Leases, net
1,092,883
945,512
Bank Premises and Equipment, net
5,779
5,578
Other Real Estate Owned, net
383
1,035
Due From Customers on Acceptances
8,643
6,304
Real Estate Held for Investment
2,553
3,826
Other Investments
15,548
15,444
Accrued Interest Receivable and Other Assets
15,788
15,059
Total Assets
$ 2,204,881
$ 1,969,109
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand
$ 195,399
$ 207,281
Interest Bearing Demand
343,491
389,347
Savings
73,669
69,386
Time Certificates of Deposit of $100,000 or More
963,826
826,157
Other Time Deposits
176,707
182,398
Total Deposits
1,753,092
1,674,569
Borrowings from the Federal Home Loan Bank
142,000
25,000
Subordinated Debt
39,236
39,138
Acceptances Outstanding
8,643
6,304
Accrued Expenses and Other Liabilities
49,616
36,316
Total Liabilities
1,992,587
1,781,327
Stockholders' Equity
40,000,000 Shares Authorized; 11,541,877 shares(net of 96,935 shares
held in trust) at September 30, 2001 and 11,557,727 shares (net of      71,007
shares held in trust) at December 31, 2000, respectively
$ 70,622
$ 62,054
Retained Earnings
121,730
114,266
Accumulated Other Comprehensive Income
17,468
9,891
Deferred Compensation
2,474
1,571
Total Stockholders' Equity
212,294
187,782
Total Liabilities and Stockholders' Equity
$ 2,204,881
$ 1,969,109
See Accompanying Notes to Unaudited Consolidated Financial Statements
 

</TABLE>

<TABLE>

<CAPTION>

 

GBC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the Three Months Ended
For the Nine Months Ended
September 30,
September 30,
(In Thousands, Except Per Share Data)
2001
2000
2001
2000
<S>
<C>
<C>
<C>
<C>
INTEREST INCOME
Loans and Leases, Including Fees
$ 22,866
$ 25,834
$ 69,578
$ 75,077
Securities Available for Sale
15,509
13,807
46,330
38,261
Securities Held to Maturity
3
17
33
56
Federal Funds Sold and Securities
Purchased under Agreements to Resell
816
2,404
2,549
6,287
Other
3
3
17
12
Total Interest Income
39,197
42,065
118,507
119,693
INTEREST EXPENSE
Interest Bearing Demand
1,470
3,717
6,256
9,956
Savings
180
437
771
1,399
Time Certificates of Deposits of $100,000 or More
10,366
11,614
33,122
31,049
Other Time Deposits
1,901
2,587
6,285
7,390
Federal Funds Purchased and Securities
Sold under Repurchase Agreements
1
13
22
47
Borrowings from the Federal Home Loan Bank
1,649
620
3,259
1,845
Subordinated Debt
870
870
2,611
2,611
Total Interest Expense
16,437
19,858
52,326
54,297
Net Interest Income
22,760
22,207
66,181
65,396
Provision for Credit Losses
6,000
1,000
13,800
(500)
Net Interest Income after Provision
for Credit Losses
16,760
21,207
52,381
65,896
NON-INTEREST INCOME
Service Charges and Commissions
2,108
2,041
6,027
6,276
Gain on Sale of Loans, Net
3
3
9
8
Gain on Sale of Securities Available for Sale
4,927
-
4,927
-
Gain on Sale of Fixed Assets
-
-
38
7
Trading Account (Expense)Revenue
(224)
(226)
1,946
7,806
(Expense) Income from Other Investments
(560)
658
(739)
376
Other
1,019
144
1,680
272
Total Non-Interest Income
7,273
2,620
13,888
14,745
NON-INTEREST EXPENSE
Salaries and Employee Benefits
5,181
5,698
15,593
16,876
Occupancy Expense
904
807
2,597
2,484
Furniture and Equipment Expense
522
502
1,566
1,506
Loss on Sale of Securities Available for Sale
-
-
-
104
Net Other Real Estate Owned Income
(14)
(1,447)
(408)
(1,138)
Other
2,269
1,961
6,704
5,698
Reduction of Fair Value of Derivatives
286
-
7,401
-
Total Non-Interest Expense
9,148
7,521
33,453
25,530
Income before Income Taxes
14,885
16,306
32,816
55,111
Provision for Income Taxes
5,121
6,234
11,862
21,314
Net Income before Cumulative Effect of a Change in Accounting Principle
9,764
10,072
20,954
33,797
Cumulative Effect of a Change in Accounting Principle
-
-
4,962
-
Net Income
$ 9,764
$ 10,072
$ 25,916
$ 33,797
Earnings Per Share:
Net Income before Cumulative Effect of a Change in Accounting Principle
Basic
$ 0.84
$ 0.87
$ 1.79
$ 2.93
Diluted
0.84
0.85
1.78
2.87
Cumulative Effect of a Change in Accounting Principle
Basic
$ -
$ -
$ 0.42
$ -
Diluted
-
-
0.42
-
Net Income
Basic
$ 0.84
$ 0.87
$ 2.21
$ 2.93
Diluted
0.84
0.85
2.20
2.87
Weighted Average Basic Shares Outstanding
11,607,091
11,569,516
11,707,891
11,535,268
Weighted Average Diluted Shares Outstanding
11,652,904
11,889,530
11,802,292
11,780,917
See Accompanying Notes to Unaudited Consolidated Financial Statements
</TABLE>

<TABLE>

<CAPTION>

GBC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'      EQUITY
(UNAUDITED)
(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
<S>
<C>
<C>
<C>
<C>
<C>
<C>
<C>
Balance at December 31, 1999
11,523
$ 57,289
$ 84,035
$ -
$ (8,286)
$133,038
Comprehensive Income
Net Income for the period
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 period
25,916
$ 25,916
25,916
Other Comprehensive Income, Net of Tax
Net Changes in Securities Valuation Allowance
8,323
8,323
8,323
Net Changes in Investment Valuation Allowance
(746)
(746)
(746)
Comprehensive Income
$ 33,493
Stock Held by Executive Obligation Trust
(26)
(903)

903
-
Stock Issuance
525
4,864
4,864
Tax Benefit-Stock Options Exercised
4,607
4,607
Stock Repurchase
(515)
(14,251)
(14,251)
Cash Dividend- $0.36 per Share
(4,201)
(4,201)
Balance at September 30, 2001
11,542
$ 70,622
$ 121,730
$ 2,474
$ 17,468
$212,294
Disclosure of Reclassification Amount:
For the Nine Months
For the Year
Ended 9/30/2001
Ended 12/31/2000
Net Change of Unrealized Gains on Securities Arising During Period, Net      of Tax
Expense of $9,631 and $8,839 in 2001 and 2000, respectively
$ 11,178
$ 12,185
Less: Reclassification Adjustment for (Gains) Losses on Securities      Included in Net Income, Net of Tax
(Expense) Benefit of ($2,072) and $4,348 in 2001 and 2000,      respectively.
(2,855)
5,993
Net Change of Unrealized Gains on Securities, Net of Tax
Expense of $7,559 and $13,187 in 2001 and 2000, respectively.
$ 8,323
$ 18,178
See Accompanying Notes to Unaudited Consolidated Financial Statements
</TABLE>

<TABLE>

<CAPTION>

GBCBANCORP AND SUBIDARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months Ended September 30,
(In Thousands)
2001
2000
<S>
<C>
<C>
OPERATING ACTIVITIES
Net Income
$ 25,916
$ 33,797
Adjustments to Reconcile Net Income to Net Cash Provided by Operating      Activities:
Depreciation
931
1,054
Net (Accretion)/Amortization of Discount/Premiums on Securities
(2,750)
(304)
Accretion of Discount on Subordinated Notes
98
98
Writedown on Real Estate Held for Investment
1,273
1,272
Write-off of Securities
190
-
Provision/(Benefit) for Credit Losses
13,800
(500)
Provision for Losses on Other Real Estate Owned
-
389
Amortization of Deferred Loan Fees
(3,383)
(2,799)
(Gain)/Loss on Sale of Securities Available - for-Sale
(4,927)
104
Gain on Sale of Other Real Estate Owned
(475)
(1,593)
Gain on Sale of Fixed Assets
(38)
(7)
Net Increase in Fair Value of Derivative Instruments
(1,161)
-
Net Increase in Trading Securities
4,617
3,344
Net (Decrease)/Increase in Forward Sales Equity Securities
-
(828)
Net (Increase)/Decrease in Accrued Interest Receivable and Other Assets
432
(1,580)
Net Increase in Accrued Expenses and Other Liabilities
12,181
255
Other, net
(47)
1
Net Cash Provided by Operating Activities
46,657
32,703
INVESTING ACTIVITIES
Purchases of Securities Available - for  - Sale
(363,649)
(233,451)
Proceeds from Maturities of Securities Available -  for - Sale
187,362
74,945
Proceeds from Maturities of Securities Held -  to - Maturity
1,025
203
Proceeds from Sales of Securities Available - for - Sale
114,392
6,762
Net Increase in Loans and Leases
(157,806)
(22,939)
Purchase of Equity Interest in Limited Partnerships
(2,314)
(5,240)
Net Decrease in Other Investments
924
-
Proceeds from Sales of Other Real Estate Owned
1,145
8,733
Purchases of Premises and Equipment
(1,341)
(1,114)
Proceeds from Sale/Disposal of Premises and Equipment
246
8
Net Cash Used by Investing Activities
(220,016)
(172,093)
FINANCING ACTIVITIES
Net (Decrease)/Increase in Demand, Interest Bearing Demand and Savings      Deposits
(53,455)
168,653
Net Increase in Time Certificates of Deposit
131,978
93,008
Proceeds from Borrowings from FHLB
137,000
-
Repayments of Borrowings from FHLB
(20,000)
-
Repurchase of Company Stock
(14,251)
(3,473)
Cash Dividends Paid
(3,974)
(3,226)
Proceeds from Exercise of Stock Options
3,961
2,345
Issuance of Stock
903
829
`
Net Cash Provided by Financing Activities
182,162
$ 258,136
Net Change in Cash and Cash Equivalents
8,803
118,746
Cash and Cash Equivalents at Beginning of Period
115,306
106,120
Cash and Cash Equivalents at End of Period
$ 124,109
224,866
Supplemental Disclosures of Cash Flow Information
Cash Paid During This Period for
Interest
$ 51,820
53,536
Income Taxes
2,160
19,872
Noncash Investing Activities
Loans Transferred to Other Real Estate Owned at Fair Value
$ 18
$ 21
See Accompanying Notes to Unaudited Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

 
- Basis of Presentation
 
The accompanying unaudited consolidated financial statementshave been prepared in accordance with generally accepted accounting principlesfor interim financial information and the instructions to Form 10-Q and Article10 of Regulation S-X. Accordingly, they do not include all of the informationand footnotes required by accounting principles generally accepted in the UnitedStates of America for complete financial statements. In the opinion ofmanagement, all adjustments (consisting of normal recurring accruals) considerednecessary for a fair presentation of the Company's financial condition andresults of operations for the interim periods presented in this Form 10-Q havebeen included. Operating results for the interim periods are not necessarilyindicative of financial results for the full year. These unaudited consolidatedfinancial statements should be read in conjunction with the unauditedconsolidated financial statements and notes thereto included in the Company'sAnnual Report on Form 10-K for the year ended December 31, 2000.
 
The preparation of financial statements in conformity withaccounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect the amountsreported in the financial statements and accompanying notes. Actual resultscould differ from those estimates.
 
The financial statements include the accounts of GBC Bancorp(the "Bancorp") and its wholly owned subsidiaries, GBC VentureCapital, Inc., General Bank, (the "Bank"), a California statechartered bank, and the Bank's wholly owned subsidiaries, GBC InsuranceServices, Inc., GBC Investment & Consulting Company, Inc., GBC Real EstateInvestments, Inc. and GB Capital Trust. The Bank also holds 90% of the votingstock of GBC Leasing Company, Inc., which amount is not material.
 
During the third quarter of 2001, the Bank formed a newsubsidiary , GB Capital Trust, to provide both the flexibility of raisingadditional capital for future business opportunities and to provide taxbenefits.
 
 
 
Change of Accounting Principle

 
On January 1, 2001, the Company adopted Statement ofFinancial Accounting Standards No. 133, "Accounting for DerivativeInstruments and Hedging Activities," ("Statement 133"). On thatdate a transition adjustment of $8,561,000 was recorded. The transitionadjustment is presented net of tax in the amount of $4,962,000 as a cumulativeeffect of a change of accounting principle in the Company's consolidatedstatements of income. The Company has received rights to acquire stock in theform of warrants, as an adjunct to its high technology banking relationships.Most of the warrants contain a cash less exercise provision thereby qualifyingthem as derivatives under Statement 133, requiring they be carried at fairvalue. The amount represents the difference between the carrying value of theCompany's derivatives and their fair value on January 1, 2001.
 
Commitments

 
In the normal course of business, there are variousoutstanding commitments to extend credit which are not reflected in theaccompanying interim consolidated financial statements.
 
The following is a summary of the Company's commitments asof September 30, 2001 and December 31, 2000:
 
</TABLE>
<TABLE>
<CAPTION>
 

September 30,
December 31,
(In Thousands)
2001
2000
<S>
<C>
<C>
Undisbursed Commitments
$ 566,959
$535,208
Standby Letters of Credit
111,248
108,925
Bill of Lading Guarantees
799
1,118
Commercial Letters of Credit
75,396
70,154
 
Pending Litigation

 

In the normal course of business, the Company is subject topending and threatened legal actions. In April, 2001 an adverse verbal rulingwas issued with respect to a claim by the Bank against a borrower relating to anon-accrual loan with $3.1 million of principal outstanding as of September 30,2001. This ruling disallowed the Bank's claim for principal and interest withrespect to the loan. The Bank has conferred with its counsel and has appealedthe ruling. Management believes that it's reasonably probable that the rulingwill be overturned and no additional charge-offs nor additions to the allowancefor credit losses have been provided as a result of the ruling. Management doesnot believe that the outcome of other actions where the Company is subject topending and threatened legal action will have a material adverse effect on theCompany's financial condition or results of operations.

 
Earnings Per Share

 

Basic earnings per share is determined by dividing net incomeby the weighted average number of shares of common stock outstanding, whilediluted earnings per share is determined by dividing net income by the weightedaverage number of shares of common stock outstanding adjusted for the dilutiveeffect of common stock equivalents. The following table sets forth basic anddiluted earnings per share calculations:

</TABLE>

<TABLE>

<CAPTION>

 

Three Months Ended
Nine Months Ended
September 30,
September 30,
2001
2000
2001
2000
(In Thousands Except per Share Data)
<S>
<C>
<C>
<C>
<C>
Net Income
$9,764
$10,072
$25,916
$33,797
Weighted-average Shares
Basic Shares Outstanding
11,607
11,570
11,708
11,535
Dilutive Effect Equivalent Shares
46
320
94
246
Dilutive Shares Outstanding
11,653
11,890
11,802
11,781
Earnings per Share- Basic
$0.84
$0.87
$2.21
$2.93
Earnings per Share- Diluted
$0.84
$0.85
$2.20
$2.87
 

 
Quarterly Dividends

 

In September 2001, the Company's Board of Directorsdeclared a quarterly common stock cash dividend of $0.12 per share payable on orabout October 15, 2001 to shareholders of record on September 30, 2001.

 
Recent Accounting Developments

 

In July 2001, the Financial Accounting Standards Board (FASB)issued Statement No. 141, "Business Combinations", and Statement No.142, "Goodwill and Other Intangible Assets." Statement 141 requiresthat the purchase method of accounting be used for all business combinationsinitiated after June 30, 2001 as well as all purchase method businesscombinations completed after June 30, 2001. Statement 141 also specifiescriteria intangible assets acquired in a purchase method business combinationmust meet to be recognized and reported apart from goodwill.

 

Statement 142 will require that goodwill and intangibleassets with indefinite useful lives no longer be amortized, but instead testedfor impairment at least annually in accordance with the provisions of Statement142. Statement 142 will also require that intangible assets with definite usefullives be amortized over their respective estimated useful lives to theirestimated residual values, and reviewed for impairment in accordance withStatement 121, "Accounting for the Impairment of long-lived Assets and forlong-lived Assets to be Disposed Of." As permitted by Statement 142, theCompany plans to adopt the new standard in the first quarter of the fiscal year2002. Upon adoption of Statement 142, the Company will be required to reassessthe useful lives and residual values of all intangible assets acquired inpurchase business combinations, and make any necessary amortization periodadjustments and/or impairment adjustments. Any impairment loss will be measuredas of the date of adoption and recognized as the cumulative effect of a changein accounting principle in the first interim period. Beginning on January 1,2002, amortization of goodwill and intangibles with indefinite lives will cease.It is not anticipated that the financial impact of this statement will have amaterial effect on the Company.

 

In September 2000, the Financial Accounting Standards Boardissued Statement of Financial Accounting Standards No. 140, "Accounting forTransfers and Servicing of Financial Assets and Extinguishments of Liabilities -a replacement of FASB Statement No. 125," which revises the standards foraccounting for securitizations and other transfers of financial assets andcollateral and requires certain disclosures. Although it replaces FASB StatementNo. 125, it carries over most of Statement 125's provisions withoutreconsideration. The accounting provisions are effective for transfers andservicing of financial assets and extinguishments of liabilities occurring afterMarch 15, 2001. The Company adopted Statement 140 on April 1, 2001. The adoptionof this Statement did not have a material impact on the Company's results ofoperations, financial position, or cash flows.

In June 2001, the FASB issued Statement SFAS No. 143,"Accounting for Asset Retirement Obligations," which requires that thefair value of a liability for an asset retirement obligation be recognized inthe period in which it is incurred if a reasonable estimate of fair value can bemade. The associated asset retirement costs would be capitalized as part of thecarrying amount of the long-lived asset and depreciated over the life of theasset. The liability is accreted at the end of each period through charges tooperating expense. If the obligation is settled for other than the carryingamount of the liability, the Company will recognize a gain or loss onsettlement. Two provisions of Statement No. 143 are effective for fiscal yearsbeginning after June 15, 2002. Management has not yet determined the impact, ifany, of adoption of Statement No. 143.

 

In August 2001, the FASB issued Statement No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets." Forlong-lived assets to be held and used, Statement No. 144 retains therequirements of Statement No. 121 to (a) recognize an impairment loss only ifthe carrying amount of a long-lived asset is not recoverable from itsundiscounted cash flows and (b) measure an impairment loss as the differencebetween the carrying amount and fair value. Further, Statement No. 144eliminates the requirement to allocate goodwill to long-lived assets to betested for impairment, describes a probability-weighted cash flow estimationapproach to deal with situations in which alternative courses of action torecover the carrying amount of long-lived asset are under consideration or arange is estimated for the amount of possible future cash flows, and establishesa "primary-assets" approach to determine the cash flow estimationperiod. For long-lived assets to be disposed of other than by sale (e.g., assetsabandoned, exchanged or distributed to owners in a spin off), Statement No. 144requires that such assets be considered held and used until disposed of.Further, an impairment loss should be recognized at the date an asset isexchanged for a similar productive asset or distributed to owners in a spinoffif the carrying amount exceeds its fair value. For long-lived assets to bedisposed of by sale, Statement No. 144 retains the requirement of Statement No.121 to measure a long-lived asset classified as held for sale at the lower ofits carrying amount or fair value less cost to sell and to cease depreciation.Discontinued operations would no longer be measured on a net realizable valuebasis, and future operating losses would no longer be recognized before theyoccur. Statement No. 144 broadens the presentation of discontinued operations toinclude a component of an entity, establishes criteria to determine when along-lived asset is held for sale, prohibits retroactive reclassification ofthe asset as held for sale at the balance sheet date if the criteria are metafter the balance sheet date but before issue of the financial statements, andprovides accounting guidance for the reclassification of an asset from"held for sale" to "held and used". The provisions ofStatement No. 144 are effective for fiscal years beginning after December 152001. Management has not yet determined the impact, if any of adoption StatementNo. 144.

 

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

FORWARD-LOOKING STATEMENTS

 

Certain statements contained herein, including, withoutlimitation, statements containing the words "indicates,""anticipates," "believes," intends,""expects" and words of similar import, constitute"forward-looking statements" within the meaning of the PrivateSecurities Litigation Reform Act of 1995. Such forward-looking statementsinvolve known and unknown risks, uncertainties and other factors that may causethe actual results, performance or achievements of the Company to be materiallydifferent from any future results, performance or achievements expressed orimplied by such forward-looking statements. Such factors include, among others,the following: general economics and business conditions in those areas in whichthe Company operates; demographic changes; competition; fluctuations in interestrates; changes in business strategy or development plans; changes ingovernmental 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 AccountingDevelopments. Given these uncertainties, the reader is cautioned not to placeundue reliance on such forward-looking statements. The Company disclaims anyobligation to update any such factors or to publicly announce the results of anyrevisions to any of the forward-looking statements contained herein to reflectfuture events or developments.

 

OVERVIEW

 

Net income for the third quarter of 2001 was $9,764,000 or$0.84 diluted earnings per share, compared to $10,072,000, or $0.85 dilutedearnings per share, for the corresponding period of 2000. The provision forcredit losses increased by $5,000,000 which was offset by $4,927,000 net gain onthe sale of available-for-sale securities.

 

For the nine months ended September 30, 2001, net incometotaled $25,916,000, a decrease****of $7,881,000, or 23.3%, from the$33,797,000 earned during the corresponding period of 2000. Diluted earnings pershare for the nine months ended September 30, 2001 were $2.20 compared to $2.87for the same period of 2000. The decrease in net income was primarily due to a$14,300,000 increase of the provision for credit losses partially offset by$4,927,000 net gain on the sale of available-for-sale securities in 2001compared to a net loss of $104,000 for the corresponding period of a year ago.For the nine months ended September 30, 2001 the diluted earnings per sharedecreased to $2.20 from $2.87 during the corresponding period of 2000,representing a $0.67, or 23.3%, decrease.

 

For the quarter ended September 30, 2001 and 2000, theannualized return on average assets ("ROA") was 1.79% and 2.04%,respectively, and the annualized return on average stockholders' equity("ROE") was 19.1% and 25.2%, respectively.

 

For the nine months ended September 30, 2001 and 2000, theROA was 1.68% and 2.40%, respectively, and the ROE was 17.4% and 30.7%,respectively.

 

 

RESULTS OF OPERATIONS

 

 

Net Interest Income-Quarterly Results

 

For the quarter ended September 30, 2001 and 2000, netinterest income before the provision for credit losses was $22,760,000 and$22,207,000, respectively, representing an increase of $553,000, or 2.5%.

 

Total interest income for the quarter ended September 30,2001 was $39,197,000, representing a $2,868,000, or 6.8%, decrease from thecorresponding quarter of a year ago. The decrease was primarily related to thedecline of the yield on earning assets. For the quarter ended September 30, 2001and 2000, the yield was 7.36% and 8.83% respectively. The 147 basis pointdecline is primarily due to the reduction of the prime rate of interest. Duringthe period ended September 30, 2001, the prime rate of interest declined 350basis points from 9.50% to 6.00%. This decline contrasts to a 100 basis pointincrease during the corresponding period of a year ago. The yield on all earningassets categories declined compared with those of the corresponding quarter of ayear ago. The yield on loans and leases declined to 8.23% from 10.80% for thequarter ended September 30, 2001 and 2000, respectively. The 257 basis pointdecline is primarily a function of the prime rate movement. The average primerate of interest for the three months ended September 30, 2001 and 2000 was6.57% and 9.50%, respectively. As of September 30, 2001, excluding non-accrualloans, 77.3% of the Bank's loan portfolio has yields based upon prime. Theyield on securities declined to 6.69% from 6.85% for the quarter ended September30, 2001 and 2000 respectively. The yield on federal funds sold and securitiespurchased under agreements to resell declined to 3.58% from 6.79% for thequarter ended September 30, 2001 and 2000, respectively.

 

The impact of the declining yields on interest income waspartially offset by a $216.7 million growth of average interest earning assetsto $2,112.1 million from $1,895.4 million for the quarter ended September 30,2001 and 2000 respectively. This growth of average earning assets was comprisedof increases of $150.8 million and $116.4 million for loans and leases andinvestment securities, respectively, partially offset by a $50.5 million declinein average federal funds sold and securities purchased under agreements toresell. The composition of earning asset growth also helped to mitigate thedecline of the yield. Average federal funds sold and securities purchased underagreement to resell, the lowest yielding of earning assets, represented 4.3% and7.4% of total average earning assets for the quarter ended September 30, 2001and 2000, respectively. Average loans and leases, the highest yielding ofearning assets, increased to 52.2% of average earning assets from 50.2%.

 

Total interest expense for the quarter ended September 30,2001 was $16,437,000, representing a $3,421,000 or 17.2%, decrease from thecorresponding quarter of a year ago. The decrease was due primarily to thedecline of the cost of funds. For the quarter ended September 30, 2001, the costof funds was 3.79% compared to 5.03% for the corresponding period of a year ago,a decline of 124 basis points. The rates paid on all interest bearing depositsdecreased to 3.57% from 4.93% for the quarter ended September 30, 2001 and 2000,respectively.

 

The main reason for the 136 basis point decrease of the ratespaid on interest bearing deposits was the movement of the prime rate of interestas discussed above. The following table displays the average balance and ratespaid for the deposit products of the Bank for the quarters ended as indicated:

 

</TABLE>

<TABLE>

<CAPTION>

For the Quarter Ended September 30,
2001
2000
<S>
<C>
<C>
Interest bearing demand - Average balance
$358,650
$405,272
Rate
1.63%
3.65%
Savings - Average balance
68,538
71,075
Rate
1.04%
2.45%
Time certificates of deposit
of $100,000 or more - Average balance
942,107
808,634
Rate
4.39%
5.71%
Other time deposits - Average balance
179,175
196,460
Rate
4.09%
5.24%
 

For the quarter ended September 30, 2001, averageinterest-bearing demand and time deposits represented 23.2% and 72.4% of averageinterest bearing deposits, respectively. For the quarter ended September 30,2000 average interest-bearing demand and time deposits represented 27.4% and67.8% of total average interest bearing deposits, respectively. Interest bearingdemand represents a lower costing source of interest bearing deposits whereastime deposits represents the most expensive source. The shift in composition ofdeposits partially offset the decline of rates paid as explained above.

 

In addition, offsetting the impact of the decline of therates paid on interest expense was the growth of average total interest bearingliabilities. For the three months ended September 30 2001 and 2000, averageinterest bearing liabilities was $1,719.8 million compared to $1,571.2 million,respectively, representing a growth of $148.6 million, or 9.5%.

 

The increase of borrowings from the Federal Home Loan Bank(the "FHLB") also partially offset the decline of short-term interestrates. The average balance of this source of funds increased to $132.1 millionfrom $50.0 million for the three months ended September 30, 2001 and 2000,respectively. The cost of these funds was 4.95% and 4.93% for the three monthsended September 30, 2001 and 2000, respectively.

 

The net interest spread is defined as the yield on interestearning assets less the rates paid on interest-bearing liabilities. For thethree months ended September 30, 2001 and 2000, the net interest spreaddecreased 23 basis points to 3.57% from 3.80%, respectively.

 

The net interest margin is defined as the annualizeddifference between interest income and interest expense divided by averageinterest earning assets. For the three months ended September 30, 2001 and 2000,the net interest margin was 4.28% and 4.66%, respectively, representing adecline of 38 basis points.

 

Net Interest Income - Nine-Month Results

 

For the nine months ended September 30, 2001, net interestincome before the provision for credit losses was $66,181,000, representing a$785,000, or 1.2%, growth over the corresponding period of a year ago.

 

Total interest income for the nine months ended September 30,2001 was $118,507,000 compared to $119,693,000 for the corresponding period of ayear ago. The $1,186,000, or 1.0%, decrease is primarily related to the declineof the yield on earning assets. The yield on average earning assets decreased 89basis points to 7.92% from 8.81% for the nine months ended September 30, 2001and 2000, respectively. The yield on loans and leases declined to 8.96% from10.79% for the nine months ended September 30, 2001 and 2000, respectively. Theyear 2000 yield of 10.79% was favorably impacted by significant interestrecoveries amounting to $3,892,000. Excluding the interest recoveries, the yieldon loans and leases would have been 10.23%. For the year 2001, there were nosignificant net interest recoveries or charge-offs. The 127 basis point declinerelates to the reductions of the prime rate of interest as discussed above. Forthe nine months ended September 30, 2001 and 2000, the average prime rate was7.51% and 9.15%, respectively, a 164 basis point reduction.

 

The yield on federal funds sold and securities purchasedunder agreements to resell was 4.51% and 6.47% for the nine months endedSeptember 30, 2001 and 2000, respectively. The yield on securities was 6.99% and6.77% for the nine months ended September 30, 2001 and 2000, respectively. Theyield on securities increased 22 basis points mainly due to restructuring of theportfolio during the fourth quarter of 2000.

 

The impact on interest income as a result of the decline ofthe prime rate was partially offset by the increase of average interest earningassets. For the nine months ended September 30, 2001 and 2000, average interestearning assets was $2,000.6 million and $1,815.1 million, respectively,representing growth of $185.5 million, or 10.22%. The growth was representedprimarily by increases of $108.8 million and $131.0 million for loans and leasesand for investment securities, respectively. The average balance of federalfunds sold and securities purchased under agreements to resell declined to $75.5million from $129.7 million for the nine month period ended September 30, 2001and 2000, respectively.

 

Total interest expense for the nine months ended September30, 2001, was $52,326,000 compared to $54,297,000 for the corresponding periodof a year ago. The decrease of $1,971,000, or 3.6%, was due to the 48 basispoint decrease in the cost of funds from 4.79% to 4.31%. The decrease of thecost of funds is due to rate decreases in all the categories of interest bearingdeposits which in turn is related to the prime rate reductions. The rates paiddeclined on all interest bearing deposits, which decreased to 4.15% from 4.67%for the nine months ended September 30, 2001 and 2000, respectively.

 

The average balance and the rates paid on deposit categoriesfor the nine months ended as indicated were as follows:

 

</TABLE>

<TABLE>

<CAPTION>

 

For the nine months ended September 30,
2001
2000
<S>
<C>
<C>
Interest bearing demand - Average balance
$366,935
$385,637
Rate
2.28%
3.45%
Savings - Average balance
68,128
75,716
Rate
1.51%
2.47%
Time certificates of deposit
of $100,000 or more - Average balance
881,654
764,782
Rate
5.02%
5.42%
Other time deposits - Average balance
180,188
198,813
Rate
4.66%
4.97%
 

Partially offsetting the across-the-board decrease of therates paid on deposits was the growth of the average interest-bearing deposits.The $108.6 million growth of average interest bearing liabilities was largelydue to both a $72.0 million growth of interest bearing deposits and a $36.9million growth of borrowings from the Federal Home Loan Bank. The growth ofinterest bearing deposits was entirely in the time certificates of deposit of$100,000 or more, in the amount of $116.9 million.

 

For the nine months ended September 30, 2001 and 2000, thenet interest spread was 3.61% and 4.02%, respectively, representing a 41 basispoint decrease. Excluding the year 2000 interest recoveries, the net interestspread for the year 2000 would have been 3.73%. Thus, the net interest spreadwas 12 basis points less in 2001.

 

For the nine months ended September 30, 2001 and 2000, thenet interest margin was 4.42% and 4.81%, respectively, representing a 39 basispoint decrease. The net interest margin for the year 2001 excluding the interestincome recoveries was 4.53%. Accordingly, the net interest margin was 11 basispoints less in 2001.

 

Provision for Credit Losses

 

For the quarter ended September 30, 2001, a provision forcredit losses of $6,000,000, was recorded compared to $1,000,000 provision forcredit losses for the corresponding quarter of a year ago. At quarter-end, areview of existing problem loans resulted in net charge-offs of $3.3 million forthe quarter. In addition, non-accrual loans increased from $19.9 million as ofJune 30, 2001 to $27.4 million as of September 30, 2001.

 

For the nine months ended September 30, 2001 and 2000, theprovision / (benefit) for credit losses was $13,800,000 and ($500,000),respectively.

 

The amount of the provision for credit losses is determinedby management and is based upon the quality of the loan portfolio, management'sassessment of the economic environment, evaluations made by regulatoryauthorities, historical loan loss experience, collateral values, assessment ofborrowers' ability to repay, and estimates of potential future losses. Pleaserefer to the discussion "Allowance for Credit Losses", following.

 

 

Non-Interest Income

 

Non-interest income for the quarter ended September 30, 2001totaled $7,273,000, representing a $4,653,000, or 178%, increase compared to$2,620,000 for the quarter ended September 30, 2000. The increase was primarilydue to the gain on sale of available for sale securities of $4,927,000. Inaddition, $1,000,000 of other non-interest income was recorded in the quarterfrom fees associated with a paid-off construction loan. Partially offsetting theabove was a $560,000 loss from reported losses from venture capital fundinvestments compared to income of $658,000 from the same source for thecorresponding period of a year ago.

 

For the nine months ended September 30, 2001, non-interestincome totaled $13,888,000 representing an $857,000, or 5.8%, decrease comparedto $14,745,000 for the nine months ended September 30, 2000.****Non-interestincome decreased primarily due to the reduction of trading account revenue of$5,860,000 during the nine months ended September 30, 2001 and the (losses) /gains from venture capital fund investment of $(739,000) and $376,000 for thenine month ended September 30, 2001 and 2000 respectively. Offsetting the abovewas the gain on sale of available-for-sale securities of $4,927,000 and by thefees received of $1,600,000 for the above referenced paid-off construction loan.

 

Trading account revenue is income earned on securitiesclassified as trading account securities. The Company's subsidiary, GBCVenture Capital, ("VC") receives equity securities which it holds astrading securities primarily from two sources: a distribution from venturecapital funds in which it invests and the exercise of warrants acquired throughthe lending operations of General Bank, its affiliate. The recognition of fairvalue and ultimate disposition of these securities results in trading accountrevenue.

 

 

Non-Interest Expense

 

For the three months ended September 30, 2001, non-interestexpense was $9,148,000, representing a $1,627,000, or 21.6%, increase from$7,521,000 for the corresponding period of a year ago. The increase wasprimarily due to the reduction of income from other real estate owned. For thethree months ended September 30, 2001 and 2000, income from OREO was $14,000 and$1,447,000, respectively, representing a reduction of $1,433,000. For the threemonths ended September 30, 2001 and 2000, the net gain on sale of OREO was$36,000 and $1,477,000, respectively. The net gain / loss on sale of OREO isincluded as a component of net other real estate owned (income) expense.

 

For the quarter ended September 30, 2001, and 2000, theCompany's efficiency ratio, defined as non-interest expense divided by the sumof net interest income plus non-interest income, was 34.2% and 30.8%,respectively. The efficiency ratios as reported exclude trading revenue, income(expense) from other investments, the adoption of Statement 133 and gain /(loss) on sale of available-for-sale securities.
** **
For the nine months ended September 30, 2001, non-interestexpense was $33,453,000, representing a $7,923,000, or 31.0%, increase from the$25,530,000 reported for the corresponding period of a year ago. The netincrease was primarily due to the reduction of fair value of derivatives of$7,401,000. This amount represents the decline of fair value of derivatives asmeasured at September 30, 2001 compared to January 1, 2001. As Statement 133 wasimplemented on January 1, 2001, there was no such account during the year 2000.See also "Cumulative Effect of a Change in Accounting Principle,"following. As discussed in the following section entitled "CumulativeEffect of a Change in Accounting Principle", as of January 1, 2001,warrants classified as derivatives totaled $8,561,000 pre-tax. The conversion ofthese warrants and a decline in the value of the underlying shares caused themajority of the $7,401,000 which was recognized as reduction of fair value ofderivatives, as of September 30, 2001. In addition to the reduction of fairvalue of derivatives, the income from OREO decreased $730,000 during the ninemonths ended September 30, 2001, contributing to the increase of non-interestexpense.

 

Partially offsetting the above was the decrease of salariesand employees benefit of $1,283,000. The reduction is due to reduced incentivecompensation and deferred compensation expense for the Company's Chairman.

 

For the nine months ended September 30, 2001, the Company'sefficiency ratio was 35.2%, compared to 35.3% for the corresponding period of2000. The efficiency ratios as reported exclude trading revenue income, income(expense) from other investments, the adoption of Statement 133 and gain /(loss) on sale of available-for-sale securities.

 

 

Provision for Income Taxes

 

For the quarter ended September 30, 2001 and 2000, theprovision for income taxes was $5,121,000 and $6,234,000, respectively,representing effective tax rates of 34.4% and 38.2%. In the third quarter, GBCapital Trust, a Real Estate Investment Trust (the "REIT"), was formedas a subsidiary of General Bank and capitalized by the contribution of assets.The formation of this entity provides the flexibility of raising additionalcapital for future business opportunities, if desired. It also provides taxbenefits, resulting in the provision for taxes in the third quarter, 2001 beingaccrued at a 34.4% effective tax rate, as compared to the 38.2% effective taxrate for the corresponding quarter of the prior year.

 

For the nine months ended September 30, 2001 and 2000, theprovision for income taxes was $11,862,000 and $21,314,000, representingeffective tax rates of 36.1% and 38.7%, respectively. Again, as was the case forthe third quarter of 2001, the formation of the REIT provided for a reducedeffective tax rate.

 

Cumulative Effect of a Change in Accounting Principle

 

On January 1, 2001, the Company adopted Statement ofFinancial Accounting Standards No. 133, "Accounting for DerivativeInstruments and Hedging Activities," ("Statement 133"). On thatdate a transition adjustment of $8,561,000 was recorded. The transitionadjustment is presented net of tax in the amount of $4,962,000 as a cumulativeeffect of a change of accounting principle in the Company's statements ofincome. The Company has received rights to acquire stock in the form ofwarrants, as an adjunct to its high technology banking relationships. Most ofthe warrants contain a cashless exercise provision thereby qualifying them asderivatives under Statement 133, requiring they be carried at fair value. Theamount represents the difference between the carrying value of the Company'sderivatives and their fair value on January 1, 2001.

 

 

Other Matters

 

In April 2001, an adverse verbal ruling was issued withrespect to a claim by the Bank against a borrower relating to a non-accrual loanwith $3.1 million of principal outstanding as of September 30, 2001. This rulingdisallowed the Bank's claim for principal and interest with respect to theloan. The Bank has conferred with its counsel and has appealed. Managementbelieves that it is reasonably probable that the ruling will be overturned andno additional charge-off or additions to the allowance for credit losses will berequired.

 

On October 11, 2001, the Bank announced the approvedagreement between Liberty Bank and Trust Co. of Boston ("Liberty") andthe Bank to acquire the outstanding shares of Liberty. Liberty, founded in 1965,is a state chartered commercial bank operating two branches in Boston,Massachusetts. As of June 30, 2001, Liberty's total assets were $37.4 million.The acquisition will be effected on an all cash basis and is subject to approvalby appropriate regulatory authorities and by shareholders of Liberty.

 

 

FINANCIAL CONDITION

 

As of September 30, 2001, the total assets were $2,204.9million, a $235.8 million, or 12.0%, increase from $1,969.1 million, as ofDecember 31, 2000. The balance of total assets as of September 30, 2001represents a record level.

 

As of September 30, 2001, total deposits were $1,753.1million, up $78.5 million, or 4.7%, from $1,674.6 million, as of December 31,2000. Stockholders' equity was $212.3 million, up $24.5 million, or 13.1%,from $187.8 million, as of December 31, 2000.

 

 

Loans and Leases

 

As of September 30, 2001, total loans and leases were$1,123.5 million compared to $969.0 million as of December 31, 2000,representing a $154.5 million, or 15.9% growth. This also represented a recordlevel for total loans and leases. The loan growth from year-end 2000 was mainlydue to increases in the commercial loan and construction loan portfolios.

 

Commercial loans reflected an increase of $96.9 million, or21.6%. The growth of commercial loans included $38.2 million of unsecuredcommercial loans and $58.6 million of trade financing loans. The two largestconcentrations of the commercial loan portfolio are the apparel/textile industryand the computer/electronic goods industry (excluding early-stage technologycompanies). The approximate amount of commercial loans represented by these twosegments as of September 30, 2001 is $100 million and $89 million, respectively.There are $36 million of loans to early high technology companies.

 

Trade financing loans are made by the Bank's CorporateLending and International Divisions which, in addition to granting loans tofinance the import and export of goods between the United States and countriesin the Pacific Rim, also provide letters of credit and other related services.The Bank does not make loans to foreign banks, foreign governments or theircentral banks, or commercial and industrial loans to entities domiciled outsideof the United States, except for the extension of overdraft privileges to itsforeign correspondent banks on a limited, case by case, basis. All loantransactions are U.S. dollar denominated.

 

The following table sets forth the amount of loans and leasesoutstanding by category and the percentage of each category to the total loansand leases outstanding as of the dates indicated:

 

</TABLE>

<TABLE>

<CAPTION>

 

September 30, 2001
December 31, 2000
(In Thousands)
Amount
Percentage
Amount
Percentage
<S>
<C>
<C>
<C>
<C>
Commercial
$546,407
49
$449,484
46
Real Estate - Construction
225,370
20
166,656
17
Real Estate - Conventional
312,754
28
309,834
32
Installment
108
N/A
2
N/A
Other Loans
21,659
1
25,969
3
Leveraged Leases
17,242
2
17,078
2
Total
$1,123,540
100
$969,023
100
N/A = Percentage less than 0.01
 

The two largest concentrations in commercial loans areapparel/textile industry and the computer/electronic goods industry (excludingearly-stage technology companies). The approximate amounts of commercial loansfor these two segments as of September 30, 2001 are $100 million and $89million, respectively. There are $36 million of loans to early stage hightechnology companies.

 

Construction loans reflected an increase of $58.7 million.Construction loans are real estate loans secured by first trust deeds. Thefollowing table sets forth the break down by type of collateral for constructionand conventional real-estate loans as of September 30, 2001 and December 31,2000:

 

</TABLE>

<TABLE>

<CAPTION>

 

September 30, 2001
December 31, 2000
(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
$ 96,617
43%
$ 14,960
5%
$ 79,280
48%
$ 18,584
6%
Townhouse
6,189
3
510
-
6,161
4
519
1
Condominums
82,342
37
4,443
1
59,838
36
4,371
1
Multi-Family
16,538
7
39,645
13
12,107
7
40,328
13
Land Development
19,342
9
975
-
-
-
-
-

Total Residential
$ 221,028
98%
$ 60,533
19%
$ 157,386
95%
$ 63,802
21%

Non-Residential:

Warehouse
$ -
-
$ 50,529
16%
$ -
-
$ 50,584
16%
Retail Facilities
-
-
62,471
20
-
-
57,806
19
Industrial Use
-
-
23,467
8
3,864
2
32,240
10
Office
2,919
1
38,331
12
1,510
1
24,634
8
Hotel and Motel
-
-
54,364
18
-
-
56,098
18
Other
1,423
1
23,059
7
3,896
2
24,670
8

Total Non-Residential
$ 4,342
2%
$ 252,221
81%
$ 9,270
5%
$ 246,032
79%

Total
$ 225,370
100%
$ 312,754
100%
$ 166,656
100%
$ 309,834
100%
 

As of September 30, 2001, the Company had an ownershipinterest in two leveraged leases of Boeing 737s leased by two major U.S.airlines. As of September 30, 2001, the total investment was $17.0 million,including an estimated residual value of $13.1 million. As a result of theSeptember 11 incident, the airlines leasing the aircraft have incurredsubstantial operating losses, though federal grants are being given the airlinesto offset these losses. In addition, the market value of aircraft is notdeterminable until sometime in the future. If it is determined that there hasbeen an other-than-temporary decline in the forecast residual values at the endof the lease terms, the income recognized from the inception of the purchase ofthe leases will be recalculated, with the cumulative reduction of incomerecognized at the time of recalculation. The leases were acquired in 1996 and1997, with terms of 16 years and 19 years, respectively.

 

Non-Performing Assets

 

A certain degree of risk is inherent in the extension ofcredit. Management has credit policies in place to minimize the level of loanlosses and non-performing loans. The Company performs a quarterly assessment ofthe credit portfolio to determine the appropriate level of the allowance.Included in the assessment is the identification of loan impairment. A loan isidentified as impaired when it is probable that interest and principal will notbe collected according to the contractual terms of the loan agreement. Loanimpairment is measured by estimating the expected future cash flows anddiscounting them at the respective effective interest rate or by valuing theunderlying collateral.

 

The Company has a policy of classifying loans (including animpaired loan) which are 90 days past due as to principal and/or interest asnon-accrual loans unless management determines that the fair value of underlyingcollateral is substantially in excess of the loan amount or other circumstancesjustify treating the loan as fully collectible. After a loan is placed onnon-accrual status, any interest previously accrued, but not yet collected, isreversed against current income. A loan is returned to accrual status only whenthe borrower has demonstrated the ability to make future payments of principaland interest as scheduled, and the borrower has demonstrated a sustained periodof repayment performance in accordance with the contractual terms. Interestreceived on non-accrual loans generally is either applied as principal reductionor reported as recoveries on amounts previously charged-off, according tomanagement's judgment as to the collectability of principal.

 

The following table provides information with respect to theCompany's past due loans, non-accrual loans, restructured loans and other realestate owned, net, as of the dates indicated:

</TABLE>

<TABLE>

<CAPTION>

(IN THOUSANDS)
September 30, 2001
December 31, 2000
<S>
<C>
<C>
Loans 90 Days or More Past Due and Still Accruing
$ 11,676
$ 2,217
Non-accrual Loans
27,438
14,823
Total Past Due Loans
39,114
17,040
Restructured Loans (on Accrual Status)
1,014
4,978
Total Non-performing and Restructured Loans
40,128
22,018
Other Real Estate Owned, Net
383
1,035**Total Non-performing Assets**$ 40,511**$ 23,053
 

Total non-performing assets increased to $40.5 million, as ofSeptember 30, 2001, from $23.1 million, as of December 31, 2000, representing a$17.4 million, or 75.3%, increase. The increase is primarily the result of thelevel of non-accrual loans, as discussed further below.

 

Loans 90 Days or More Past Due and Still Accruing

 

The category of loans 90 days or more past due and stillaccruing totaling $11.7 million is represented by 13 borrowers, one of whichsubsequently paid off in October 2001. The credits have all been renewed withthe exception of one where interest is current. Management does not anticipateany losses on these credits.

 

 

Non-Accrual Loans

 

As of September 30, 2001 non-accrual loans totaled $27.4million, compared to $14.8 million as of December 31, 2000, an increase of $12.6million, or 85.1%.

 

The following table breaks out the Company's non-accrualloans by category as of the dates indicated:

</TABLE>

<TABLE>

<CAPTION>

(IN THOUSANDS)
September 30, 2001
December 31, 2000
<S>
<C>
<C>
Commercial
$ 20,363
$ 14,823
Real Estate-Construction
5,064
-
Real Estate-Conventional
2,011
-**Total**$ 27,438**$ 14,823
 

The non-accrual commercial loans are comprised primarily oftrade financing loans. Trade financing loans have represented the largest growthsector of the Bank's loan portfolio over the past several years. Of the $20.4million of commercial loans included in the above, the apparel / textileindustry and the computer / electronic goods represent $4.7 million and $1.3million, respectively. The apparel / textile industry and the computer /electronic goods industry are the largest concentrations of the commercial loanportfolio, as of September 30, 2001. There are $1.2 million of loans to earlystage high technology companies on non-accrual status as of September 30, 2001

 

The following table details the change in non-accrual loansduring the nine months ended September 30, 2001:

 

 

 
**Non-Accrual Loans

 **
</TABLE>

<TABLE>

<CAPTION>

(In Thousands)
<S>
<C>
Balance, December 31, 2000
$ 14,823
Add: Loans placed on non-accrual
30,692
Less: Charge-offs
(5,903)
Returned to accrual status
(3,974)
Repayments
(8,182)
Transfer to OREO
(18)**Balance, September 30, 2001**$ 27,438
 

Restructured Loans

 

The balance of restructured loans as of September 30, 2001was $1.0 million compared to $5.0 million as of December 31, 2000, representinga $4.0 million, or 80.0% decrease. The decline was due to the $1.5 millionpay-off in full of one credit, a $0.9 million restructured loan becomingnon-accrual in the third quarter of 2001 and a $1.5 million restructured loanbecoming 90 days or more past due and still accruing. There were no newrestructured loans during 2001.

 

A loan is categorized as restructured if the originalinterest rate on such loan, the repayment terms, or both, is modified due todeterioration in the financial condition of the borrower. Restructured loans mayalso be put on a non-accrual status in keeping with the Bank's policy ofclassifying 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 balanceof restructured loans. Restructured loans which are 90 days or more past due andstill accruing are not included in the balance of restructured loans. As ofSeptember 30, 2001, restructured loans consisted of four loans compared toeleven loans as of December 31, 2000. The weighted average yield of therestructured loans was 10.72% as of September 30, 2001.

 

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

 

 

Other Real Estate Owned

 

As of September 30, 2001, other real estate owned("OREO"), net of valuation allowance of $0.4 million, totaled $0.4million, representing a decrease of $0.7 million, or 63.0%, from the net balanceof $1.0 million, net of valuation allowance of $0.9 million, as of December 31,2000. As of September 30, 2001, OREO consisted of 1 property compared with sixproperties as of December 31, 2000.

 

As of September 30, 2001, the outstanding OREO property, aretail facility, is physically located in the Los Angeles area.

 

The following table sets forth OREO by property type as ofthe dates indicated:

 

</TABLE>

<TABLE>

<CAPTION>

 

September 30,
December 31,
(In Thousands)
2001
2000
Property Type
<S>
<C>
<C>
Land
$ -
$ 471
Retail Facilities
803
803
Industrial Facilities
-
652
Less: Valuation Allowance
(420)
(891)
Total
$ 383
$ 1,035
 

Impaired Loans

 

A loan is identified as impaired when it is probable thatinterest and principal will not be collected according to the contractual termsof the loan agreement. Loan impairment is measured by estimating the expectedfuture cash flows and discounting them at the respective effective interest rateor by valuing the underlying collateral.

 

The following information discloses pertinent information asit relates to the Company's impaired loans as of the dates requested:

 

</TABLE>

<TABLE>

<CAPTION>

(IN THOUSANDS)
September 30, 2001
December 31, 2000
<S>
<C>
<C>
Recorded Investment with Related Allowance
$ 24,493
$ 9,598
Recorded Investment with no Related Allowance
3,190
3,778
Total Recorded Investment
27,683
13,376
Allowance for Impaired Loans
(6,926)
(2,626)
Net Recorded Investment in Impaired Loans
$ 20,757
$ 10,750
 

The average balance of impaired loans before the allowancewas $21.9 million for the nine months ended September 30, 2001 and $20.4 millionfor the twelve months ended December 31, 2000.

 

For the nine months ended September 30, 2001 and 2000,interest income recognized on impaired loans was $307,000 and $472,000,respectively. Of the amount of interest income recognized during the nine monthsended September 30, 2001 and 2000, no interest was recognized under the cashbasis method.

 

Management cannot predict the extent to which the currenteconomic environment, including the real estate market, may 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 aspart of their routine, periodic examinations of the Bank, their assessment ofspecific 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 onnon-accrual, become 90 days or more past due, have terms modified in the future,or become OREO.

 

 

Allowance for Credit Losses

 

As of September 30, 2001, the balance of the allowance forcredit losses was $25.5 million, representing 2.27% of outstanding loans andleases. This compares to an allowance for credit losses of $19.4 million as ofDecember 31, 2000, representing 2.00% of outstanding loans and leases.

 

The table below summarizes the activity in the totalallowance for credit losses (which amount includes the specific allowance onimpaired loans) for the nine-month periods ended as indicated:

 

</TABLE>

<TABLE>

<CAPTION>

(IN THOUSANDS)
September 30, 2001
September 30, 2000
<S>
<C>
<C>
Balance, Beginning of Period
$ 19,426
$ 19,808
Provision (Benefit) for Credit Losses
13,800
(500)
Charge-offs
(8,783)
(1,008)
Recoveries
1,090
2,718
Balance, End of Period
$ 25,533
$ 21,018
 

As of September 30, 2001, the allowance represents 63.6% and93.1% of non-performing and restructured loans and of non-accrual loans,respectively. As of December 31, 2000, the allowance represented 88.2% and 131%of non-performing and restructured loans and of non-accrual loans, respectively.

 

The provision for credit losses is an amount required tomaintain an allowance for credit losses that is adequate to cover probablecredit losses related to specifically identified loans as well as probablecredit losses inherent in the remainder of the loan and lease portfolio.Management evaluates the loan portfolio, the economic environment, historicalloan loss experience, collateral values and assessments of borrowers' abilityto repay in determining the amount of the allowance for credit losses. Thebalance of the allowance for credit losses is an accounting estimate of probablebut unconfirmed losses in the Bank's loan portfolio as of September 30, 2001.Such an amount is based on ongoing, quarterly assessments of the probableestimated losses inherent in the loan and lease portfolio, and to a lesserextent, unused commitments to provide financing. The Company's methodology forassessing the adequacy of the allowance consists primarily of the use of aformula allowance.

 

This formula allowance is calculated by applying loss factorsto outstanding loans and leases and certain unused commitments, in each casebased on the internal risk rating of such loans, pools of loans, leases orcommitments. Changes in risk rating of both performing and non-performing loansaffect the amount of the formula allowance. Loss factors are based on theCompany's historical loss experience and may be adjusted for significantfactors that, in management's judgement, affect the collectibility of theportfolio 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 lossesapproximates the probable but unconfirmed losses existing in the Bank's loanportfolio, as of September 30, 2001.

 

 

Securities

 

The Company classifies its securities as held to maturity,trading or available for sale. Securities classified as held to maturity arethose that the Company has the positive intent and ability to hold untilmaturity. These securities are carried at amortized cost.

 

Securities that are obtained and held principally for thepurpose of selling them in the near term are classified as trading and arereported at fair value, with unrealized gains and losses included in earnings.Equity securities received upon the exercise of warrants and securitydistributions from venture capital funds are classified as trading.

 

Securities that could be sold in response to changes ininterest rates, increased loan demand, liquidity needs, capital requirements orother similar factors, are classified as securities available for sale. Thesesecurities are carried at fair value, with unrealized gains or losses reportedin other comprehensive income.

 

In the third quarter, 2001, $99 million of available-for-salesecurities having an estimated remaining life of 2 years and a book yield of7.0% were sold for a gain of $4.6 million. The proceeds were immediatelyreinvested in the same amount of investment securities having an estimated lifeof 6 years and a book yield of 6.0%. Unrealized gains on available-for-salesecurities at September 30, 2001 were $31.4 million. Also in the quarter, $11.4million of payments from the restructuring of Finova were received, resulting inthe elimination of the book value of the Finova debt previously held plus a $0.3million gain. In addition, $4.5 million par value of new Finova senior securednotes having a term of 8 years and a coupon rate of 7.5% were received. InOctober 2001, the $4.5 million Finova debt was sold and a $1,788,000 gain wasrecognized. Currently, the Company holds no Finova debt.

 

As of September 30, 2001, the Company recorded net unrealizedholding gains****of $31,444,000 on its available-for-sale portfolio.Accumulated other comprehensive income includes $18,223,000 representing the netunrealized holding gain, net of tax on securities available-for-sale.

 

The amortized cost, gross unrealized gains, gross unrealizedlosses and fair value of securities at September 30, 2001 and December 31, 2000were as follows:

 

</TABLE>

<TABLE>

<CAPTION>

 

Gross
Gross
(In Thousands)
Amortized
Unrealized
Unrealized
Fair
September 30, 2001
Cost
Gains
Losses
Value
<S>
<C>
<C>
<C>
<C>**Securities Available for Sale
U.S. Government Agencies
$ 50,594
$ 1,963
$ -
$ 52,557
Mortgage Backed Securities
227,960
3,023
-
230,983
Commercial Mortgage Backed Securities
105,494
6,296
-
111,790
Corporate Notes
87,501
6,494
-
93,995
Collateralized Mortgage Obligations
296,397
10,481
-
306,878
Asset Backed Securities
132,685
3,187
-
135,872
Other Securities
7,100
-
-
7,100
Total
$907,731
$31,444
$ -
$939,175**Trading Account Securities
Equity Issues
$ -
$ -
$ -
$ 20
Total
$ -
$ -
$ -
$ 20
Gross
Gross
(In Thousands)
Amortized
Unrealized
Unrealized
Fair
December 31, 2000
Cost
Gains
Losses
Value**Securities Held to Maturity
U.S. Government Agencies
$ 1,025
$ -
$ (57)
$ 968
Total
$ 1,025
$ -
$ (57)
$ 968**Securities Available for Sale
U.S. Government Agencies
$ 20,854
$ 526
$ -
$ 21,380
Mortgage Backed Securities
93,147
1,350
235
94,262
Commercial Mortgage Backed Securities
69,504
2,898
-
72,402
Corporate Notes
84,975
955
55
85,875
Collateralized Mortgage Obligations
263,287
3,704
290
266,701
Asset Backed Securities
303,221
3,371
1,041
305,551
Other Securities
3,314
5,898
-
9,212
Total
$ 838,302
$ 18,702
$ 1,621
$ 855,383**Trading Account Securities
Equity Issues
$ -
$ -
$ -
$ 4,637
Total
$ -
$ -
$ -
$ 4,637
 

The following table discloses proceeds received and grossgains/(losses) recognized from the sale of available-for-sale securities for thenine month periods ended as indicated (Proceeds do not include amountsrepresenting accrued interest):

 

</TABLE>

<TABLE>

<CAPTION>

(In Thousands)
September 30, 2001
September 30, 2000
<S>
<C>
<C>
Proceeds
$ 114,095
$ 6,762
Gain
5,058
-
Loss
131
104
 

Other Investments

 

As of September 30, 2001, other investments totaled $15.5million. Included in the balance is $8.6 million of investments in variousventure capital funds which in turn invest in technology companies. As ofSeptember 30, 2001 undisbursed commitments to invest in these various fundstotaled $7.1 million. In addition to seeking an appropriate return from suchinvestments, the Company attempts to use the investments to increase its hightechnology banking business. Also included in other investments is a 10% equityinterest in an aircraft finance trust ("AFT") totaling $6.5 million asof September 30, 2001. AFT owns a number of aircraft, which it leases todifferent lessees in various countries. Its results may be adversely affected inthe future as a result of the September 11 incident. All these partnershipinterests are accounted for by the equity method. Also included in otherinvestments are investments made by the Bank in corporations responsible forlending activities qualifying under, among other things, the CommunityReinvestment Act. These investments are accounted for by the cost method orequity method, as appropriate.

 

Deposits

 

The Company's deposits totaled $1,753.1 million as ofSeptember 30, 2001, representing an $78.5 million, or 4.7%, increase from totaldeposits of $1,674.6 million as of December 31, 2000. The growth for the ninemonths ended September 30, 2001, was primarily due to increases in timecertificates of deposit of $100,000 or more which grew $137.7 million, or 16.7%.This increase was partially offset by decreases totaling $59.2 million in allother deposit categories.

 

As of September 30, 2001 and December 31, 2000, there were nobrokered deposits outstanding. The Company believes that the majority of itsdeposit customers has strong ties to the Bank. Although the Company has asignificant amount of time deposits of $100,000 or more having maturities of oneyear or less, historically, the depositors have generally renewed their depositsupon maturity. Accordingly, the Company believes its deposit source to bestable.

 

The maturity schedule of time certificates of deposit of$100,000 or more, as of September 30, 2001, is as follows:

 

</TABLE>

<TABLE>

<CAPTION>

(IN THOUSANDS)
<S>
<C>
3 Months or Less
$ 484,971
Over 3 Months Through 6 Months
293,540
Over 6 Months Through 12 Months
175,254
Over 12 Months
10,061
Total
$ 963,826
 

Other Borrowings

 

As of September 30, 2001, the Company has two sources ofoutstanding borrowings.

 

Subordinated debt is comprised of a $40 million publicoffering 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 bythe Company at date of issuance. The discount is amortized as a yield adjustmentover the 10-year life of the notes.

 

The Bank has obtained advances from the Federal Home LoanBank of San Francisco (the "FHLB") totaling $142.0 million, as ofSeptember 30, 2001. The advances are under an existing line of credit wherebythe FHLB has granted the Bank an amount equal to 25 percent of its assets.

 

The maturity schedule of outstanding advances as of September30, 2001 is as follows:

 

</TABLE>

<TABLE>

<CAPTION>

 

(In Thousands)
Amount
Fixed Rate of Interest
<S>
<C>
<C>
Over 3 Months Through 12 Months
$ 15,000
4.71% - 5.61%
Over 1 Year Through 3 Years
118,000
4.33% - 5.25%
Over 3 Years
9,000
5.06%**Total**$ 142,000**4.33% - 5.61%
 

The total outstanding of $142.0 million of advances as ofSeptember 30, 2001 has a composite fixed rate of interest of 4.87%.

 

 

Capital Resources

 

As of September 30, 2001, stockholders' equity totaled $212.3million, an increase of $24.5 million, or 13.1%, from $187.8 million as ofDecember 31, 2000.

 

The detail of the change in stockholders' equity is asfollows:

 

</TABLE>

<TABLE>

<CAPTION>

Stockholders' Equity
Amount
(In Thousands)
<S>
<C>
Balance as of December 31, 2000
$ 187,782
Repurchase of Stock
(14,251)
Net Income
25,916
Cash Dividends
(4,201)
Change in Securities Valuation, Net of Tax
8,323
Change in Investment Valuation, Net of Tax
(746)
Stock Issuance (Includes $3,961 of stock options exercised)
4,864
Tax Benefits related to Exercise of Non-qualified stock Options
4,607
Balance as of September 30, 2001
$ 212,294
 

As more fully described in the preceding section entitled OtherInvestments, the Bank has an investment in an aircraft finance trust("AFT"). Because AFT holds cash flow derivatives, upon implementationof Statement 133, AFT reflected accumulated other comprehensive loss of $12.9million, requiring a valuation reserve for the Bank's 10% equity interest.This resulted in the above captioned $746,000 change in investment valuation,net of tax.

 

On December 20, 1999, the Board of Directors authorized astock repurchase program approving the buy-back of up to $10 million of theCompany's stock. As of April 25, 2001, this program was completed. 384,154shares were repurchased for a total of $10 million at an average cost per shareof $26.03.

 

In February 2001, the Board of Directors authorized a stockrepurchase program approving the buy-back of up to 500,000 shares of the Company'sstock. As of October 11, 2001, 367,529 shares had been repurchased at an averagecost of $26.72 per share for a total of $9.8 million under this program.

 

On October 11, 2001, the Board of Directors authorizedanother stock repurchase program approving the buy-back of up to 300,000 sharesof the Company's stock under conditions which allow such repurchases to beaccretive to earnings.

 

A "well capitalized" institution is one withcapital ratios as shown in the following table. As of September 30, 2001, Tier 1risk based capital, total risk based and leverage ratios for both the Companyand Bank exceeded the "well capitalized" ratio requirements asfollows:

 

</TABLE>

<TABLE>

<CAPTION>

Well-Capitalized
September 30,
December 31,
Requirements
2001
2000**GBC Bancorp
<S>
<C>
<C>
<C>
Tier 1 Leverage Ratio
5%
9.08%
8.96%
Tier 1 Risk-Based Capital Ratio
6%
10.92%
10.23%
Total Risk-Based Capital Ratio
10%
14.38%
13.75%**General Bank
Tier 1 Leverage Ratio
5%
9.59%
9.63%
Tier 1 Risk-Based Capital Ratio
6%
11.55%
11.13%
Total Risk-Based Capital Ratio
10%
12.80%
12.26%
 

For the nine months ended September 30, 2001, the ratio ofthe Company's average stockholders' equity to average assets was 9.66%. Forthe year ended December 31, 2000, this ratio was 8.12%.

 

 

 

GBC Bancorp Executive Obligation Trust (the"Trust")

 

In the first quarter of 2000, the Company entered into atrust agreement providing for the Trust with Union Bank of California astrustee. As of September 30, 2001, 96,935 shares of Company stock have beenissued and transferred to the Trust. Such shares represent the earned deferredcompensation of the Company's Chairman.

 

In the consolidated financial statements, the shares held inthe Trust are reduced from common stock and included as a separate component ofshareholders' equity. As of September 30, 2001, this amount was $2,474,000,representing the cost of the 96,935 shares held in the Trust.

 

 

Liquidity

 

Liquidity measures the ability of the Company to meetfluctuations in deposit levels, to fund its operations and to provide forcustomers' credit needs. Asset liquidity is provided by cash and short-termfinancial instruments which include federal funds sold and securities purchasedunder agreements to resell, unpledged securities held to maturity maturingwithin one year and unpledged securities available for sale. These sources ofliquidity amounted to $747.6 million, or 33.9% of total assets, as of September30, 2001, compared to $785.0 million, or 39.9% of total assets, as of December31, 2000.

 

To further supplement its liquidity, the Company hasestablished federal funds lines with correspondent banks and three masterrepurchase agreements with major brokerage companies. In August, 1992, theFederal Home Loan Bank of San Francisco ("FHLB") granted the Bank aline of credit currently equal to 25 percent of assets with terms up to 360months. As of September 30, 2001, the Company has $142 million outstanding underthis financing. Management believes its liquidity sources to be stable andadequate.

 

As of September 30, 2001, total loans and leases represented64.1% of total deposits. This compares to 63.0% and 57.9% as of June 30, 2001and December 31, 2000, respectively.

 

The liquidity of the parent company, GBC Bancorp ("GBC"),is primarily dependent on the payment of cash dividends by its subsidiarycompanies in general, and General Bank (the "Bank"), in particular,subject to the limitations imposed by the Financial Code of the State ofCalifornia. For the nine months ended September 30, 2001, the Bank and GBCVenture Capital, Inc. declared cash dividends of $11.4 million and $14.0million, respectively.

 

 

"GAP" Measurement

 

While no single measure can completely identify the impact ofchanges in interest rates on net interest income, one gauge of interest ratesensitivity is to measure, over a variety of time periods, contractualdifferences in the amounts of the Company's rate sensitive assets and ratesensitive liabilities. These differences, or "gaps", provide anindication of the extent that net interest income may be affected by futurechanges in interest rates. However, these contractual "gaps" do nottake into account timing differences between the repricing of assets and therepricing of liabilities.

 

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

 

"Gap" reports originated as a means to providemanagement with a tool to monitor repricing differences, or "gaps",between assets and liabilities repricing in a specified period, based upon theirunderlying contractual rights. The use of "gap" reports is thuslimited to a quantification of the "mismatch" between assets andliabilities repricing within a unique specified timeframe. Contractual"Gap" reports cannot be used to quantify exposure to interest ratechanges because they do not take into account timing differences betweenrepricing assets and liabilities, and changes in the amount of prepayments.

 
*As of September 30, 2001, there was a cumulative one-yearnegative "gap" of $612.7 million, compared to a one-year negative gapof $667.8 million as of December 31, 2000.

 

The following table indicates the Company's interest ratesensitivity position as of September 30, 2001, and is based on contractualmaturities. It may not be reflective of positions in subsequent periods:

 

</TABLE>

<TABLE>

<CAPTION>

September 30 , 2001

INTEREST SENSITIVITY PERIOD
0 to 90
91 to 365
Over 1 Year
Over
Non-Interest
(In Thousands)
Days
Days
to 5 Years
5 Years
Earning/Bearing
Total
<S>
<C>
<C>
<C>
<C>
<C>
<C>
Earning Assets
Securities Available for Sale
$ 7,879
$ 10,268
$ 133,764
$ 787,264
$ -
$939,175
Trading Account Securities
-
-
-
-
20
20
Federal Funds Sold & Securities
Purchased Under Agreement to Resell
83,000
-
-
-
-
83,000
Loans and Leases (1) (2)
822,326
24,623
133,818
115,335
-
1,096,102
Non-Earning Assets (2)
-
-
-
-
86,584
86,584
Total Earning Assets
$ 913,205
$ 34,891
$ 267,582
$ 902,599
$ 86,604
$2,204,881
Source of Funds for Assets
Deposits:
Demand - N/B
$ -
$ -
$ -
$ -
$ 195,399
$ 195,399
Interest Bearing Demand
343,491
-
-
-
-
343,491
Savings
73,669
-
-
-
-
73,669
TCD'S Under $100,000
91,215
83,699
1,793
-
-
176,707
TCD'S $100,000 and Over
484,971
468,794
10,061
-
-
963,826
Total Deposits
$ 993,346
$ 552,493
$ 11,854
$ -
$ 195,399
$1,753,092
Borrowings from the Federal Home Loan Bank
$ -
$ 15,000
$ 127,000
$ -
$ -
$ 142,000
Subordinated Debt
-
-
-
39,236
-
39,236
Other Liabilities
-
-
-
-
58,259
58,259
Stockholders' Equity
-
-
-
-
212,294
212,294
Total Liabilities and
Stockholders' Equity
$ 993,346
$ 567,493
$ 138,854
$ 39,236
$ 465,952
$2,204,881
Interest Sensitivity Gap
$ (80,141)
$ (532,602)
$ 128,728
$ 863,363
$ (379,348)
Cumulative Interest Sensitivity
Gap
($80,141)
($612,743)
($484,015)
$379,348
-
Gap Ratio (% of Total Assets)
-3.6%
-24.2%
5.8%
39.2%
-17.2%
Cumulative Gap Ratio
-3.6%
-27.8%
-22.0%
17.2%
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-earning assets.
 

Effective asset/liability management includes maintainingadequate liquidity and minimizing the impact of future interest rate changes onnet interest income. The Company attempts to manage its interest ratesensitivity on an on-going basis through the analysis of the repricingcharacteristics of its loans, securities, and deposits, and managing theestimated net interest income volatility by adjusting the terms of itsinterest-earning assets and liabilities, and through the use of derivatives asneeded.

 

Item 3. Qualitative and Quantitative Disclosures about MarketRisk

 

Market risk

 

Market risk is the risk of financial loss arising fromadverse changes in market prices and interest rates. The Company's market riskis inherent in its lending and deposit taking activities to the extent ofdifferences in the amounts maturing or degree of repricing sensitivity. Adversechanges in market prices and interest rates may therefore result in diminishedearnings and ultimately an erosion of capital.

 

Since the Company's profitability is affected by changes ininterest rates, management actively monitors how changes in interest rates mayaffect earnings and ultimately the underlying market value of equity. Managementmonitors interest rate exposure through the use of three basic measurement toolsin conjunction with established risk limits. These tools are the expectedmaturity gap report, net interest income volatility and market value of equityvolatility reports. The gap report details the expected maturity mismatch or gapbetween interest earning assets and interest bearing liabilities over aspecified timeframe. The expected gap differs from the contractual gap reportshown earlier in this section by adjusting contractual maturities for expectedprepayments of principal on loans and amortizing securities as well as theprojected timing of repricing non-maturity deposits. The following table showsthe Company's financial instruments that are sensitive to changes in interestrates categorized by their expected maturity, as of September 30, 2001:

 

</TABLE>

<TABLE>

<CAPTION>

Expected Maturity Date as of September 30, 2001
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
$ 77,472
$ 260,087
$ 508,472
$ 93,144
$ 939,175
Federal Funds Sold & Securities
Purchased Under Agreements to Resell
83,000
-
-
-
83,000
Loans and Leases (1)
822,326
24,623
133,818
115,335
1,096,102
Total Interest-earning Assets
$ 982,798
$ 284,710
$ 642,290
$ 208,479
$ 2,118,277
Interest-sensitive Liabilities:
Deposits:
Interest Bearing Demand
$ 17,405
$ 52,217
$ 171,515
$ 102,354
$ 343,491
Savings
1,842
5,525
22,101
44,201
73,669
Time Certificates of Deposit
576,186
552,493
11,854
-
1,140,533
Total Deposits
$ 595,433
$ 610,235
$ 205,470
$ 146,555
$ 1,557,693
Borrowing from FHLB
$ -
$ 15,000
$ 127,000
$ -
$ 142,000
Subordinated Debt
-
-
-
39,236
39,236
Total Interest-sensitive Liabilities
$ 595,433
$ 625,235
$ 332,470
$ 185,791
$ 1,738,929
 
Loans and leases are net of non-accrual loans and before unamortized    deferred loan fees and allowance for credit losses

 
Expected maturities of assets are contractual maturitiesadjusted for projected payment based on contractual amortization and unscheduledprepayments of principal as well as repricing frequency. Expected maturities fordeposits are based on contractual maturities adjusted for projected rolloverrates and changes in pricing for non-maturity deposits. The Company utilizesassumptions supported by documented analysis for the expected maturities of itsloans and repricing of its deposits and relies on third party data providers forprepayment projections for amortizing securities. The actual maturities of theseinstruments could vary significantly if future prepayments and repricing differfrom the Company's expectations based on historical experience.
 
The Company uses a computer simulation analysis to attempt topredict changes in the yields earned on assets and the rates paid on liabilitiesin relation to changes in market interest rates. The net interest incomevolatility and market value of equity volatility reports measure the exposure ofearnings and capital, respectively, to immediate incremental changes in marketinterest rates as represented by the prime rate change of 100 to 200 basispoints. Market value of portfolio equity is defined as the present value ofassets minus the present value of liabilities and off balance sheet contracts.The table below shows the estimated impact of changes in interest rates on netinterest income and market value of equity as of September 30, 2001:
 
</TABLE>
<TABLE>
<CAPTION>

Net Interest
Market Value of
Change in Interest
Income Volatility
Portfolio Equity Volatility
Rates (Basis Points)
September 30, 2001 (1)
September 30, 2001 (2)
<C>
<C>
<C>
+200
6.15%
-10.26%
+100
3.82%
-4.66%
-100
-6.25%
-0.94%
-200
-14.03%
-3.65%
 
- 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.
- 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.

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 1. LEGAL PROCEEDINGS

 

In the normal course of business, the Company is subject topending and threatened legal actions. In April of 2001, an adverse verbal rulingwas issued with respect to a claim by the Bank against a borrower relating to anon-accrual loan with $3.1 million of principal outstanding as of September 30,2001. This ruling disallowed the Bank's claim for principal and interest withrespect to the loan. The Bank has conferred with its counsel and has appealedthe ruling. It is believed that it is reasonably probable that the ruling willbe overturned, and no additional charge-offs nor additions to the allowance forcredit losses have been provided as a result of the ruling. Management believesthat the outcome of other actions where the Company is subject to pending andthreatened legal action will not have a material adverse effect on the Company'sfinancial condition or results of operations.

 

 

Item 2. CHANGES IN SECURITIES

 

There have been no changes in the securities of theRegistrant during the quarter ended September 30, 2001.

 

 

Item 3. DEFAULT UPON SENIOR SECURITIES

 

This item is not applicable.

 

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

 

No matters were submitted to a vote of security holdersduring the quarter ended September 30, 2001.

 

 

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:Exhibit11.(Referencefootnote5ofNotestoConsolidatedFinancialStatements,

PartI,Item1.)

                                                           b) Reports on Form 8-K: None.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART III - SIGNATURES

 

 

 

SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Actof 1934, the Registrant has duly caused this report to be signed on its behalfby the undersigned thereunto duly authorized.

 

 

 

GBC Bancorp

(Registrant)

 

 

Dated: 13 Nov 2001  /s/     Peter Wu 

Peter Wu, President and

Chief Executive Officer

 

 

 

Dated: 13 November, 2001   /s/        Peter Lowe

Peter Lowe, Executive

Vice President and

Chief Financial Officer

 ************************************* |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|