0001012870-01-502325.txt : 20011019
0001012870-01-502325.hdr.sgml : 20011019
ACCESSION NUMBER: 0001012870-01-502325
CONFORMED SUBMISSION TYPE: 8-K
PUBLIC DOCUMENT COUNT: 3
CONFORMED PERIOD OF REPORT: 20011017
ITEM INFORMATION: Other events
ITEM INFORMATION: Financial statements and exhibits
ITEM INFORMATION:
FILED AS OF DATE: 20011017
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: GREATER BAY BANCORP
CENTRAL INDEX KEY: 0000775473
STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021]
IRS NUMBER: 770387041
STATE OF INCORPORATION: CA
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 8-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-25034
FILM NUMBER: 1760491
BUSINESS ADDRESS:
STREET 1: 2860 WEST BAYSHORE ROAD
CITY: PALO ALTO
STATE: CA
ZIP: 94303
BUSINESS PHONE: 4153751555
MAIL ADDRESS:
STREET 1: 2860 BAYSHORE ROAD
STREET 2: 420 COWPER ST
CITY: PALO ALTO
STATE: CA
ZIP: 943011504
FORMER COMPANY:
FORMER CONFORMED NAME: MID PENINSULA BANCORP
DATE OF NAME CHANGE: 19941031
FORMER COMPANY:
FORMER CONFORMED NAME: SAN MATEO COUNTY BANCORP
DATE OF NAME CHANGE: 19920703
8-K
1
d8k.txt
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 17, 2001
Greater Bay Bancorp
(Exact name of registrant as specified in its charter)
California 77-0387041
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
Commission file number: 0-25034
2860 West Bayshore Road
Palo Alto, California 94303
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (650) 813-8200
Item 5. Other Events.
On October 17, 2001, the Registrant issued a press release announcing
its third quarter 2001 results. The title and paragraphs 1 through 8, 12 and 15
through 18 of the press release, which appear as part of Exhibit 99.1, are filed
and incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
Exhibits
--------
99.1 Press Release dated October 17, 2001 re third quarter results
99.2 Management's Discussion of Trends and Performance Guidance
Item 9. Regulation FD Disclosure
Paragraphs 9 through 11, 13 and 14 of the press release appearing in
Exhibit 99.1 are not filed but are furnished pursuant to Regulation FD.
To assist investors, financial analysts and other interested parties in
their analysis of Greater Bay Bancorp, the Registrant has developed the document
attached as Exhibit 99.2 to this Form 8-K. Exhibit 99.2 is not filed but is
furnished pursuant to Regulation FD.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Greater Bay Bancorp
(Registrant)
Dated: October 17, 2001 By: /s/ Steven C. Smith
----------------------------------
Steven C. Smith
Executive Vice President, Chief
Administrative Officer and
Chief Financial Officer
3
Exhibit Index
-------------
99.1 Press Release dated October 17, 2001 re third quarter results
99.2 Management's Discussion of Trends and Performance Guidance
EX-99.1
3
dex991.txt
PRESS RELEASE DATED OCTOBER 17, 2001
EXHIBIT 99.1
Press Release Dated October 17, 2001
For Information Contact
-----------------------
At Greater Bay Bancorp: At Financial Relations Board:
David L. Kalkbrenner Christina Carrabino (general information)
President and CEO Stephanie Mishra (analyst contact)
(650) 614-5767 (415) 986-1591
Steven C. Smith
EVP, CAO and CFO
(650) 813-8222
FOR IMMEDIATE RELEASE
---------------------
GREATER BAY BANCORP REPORTS 16% INCREASE
IN THIRD QUARTER 2001 CORE EARNINGS
"28% Increase in Core Earnings Year Over Year"
PALO ALTO, CA, October 17, 2001 -- Greater Bay Bancorp (Nasdaq: GBBK), a $6.8
billion in assets financial services holding company, today announced results
for the third quarter and nine months ended September 30, 2001. Greater Bay
Bancorp's CORE EARNINGS, net income excluding nonrecurring warrant income and
-----------------------------------------
merger related expenses, for the third quarter of 2001 increased 16% to $21.3
-----------------------
million, or $0.48 per diluted share, compared to $18.3 million, or $0.42 per
diluted share, in the third quarter of 2000.
Based on CORE EARNINGS for the third quarter of 2001, Greater Bay Bancorp's
return on average equity was 21.68%, return on average assets was 1.30% and
efficiency ratio was 48.94%, while the third quarter of 2000 core earnings
resulted in a return on average equity of 24.14%, return on average assets of
1.61% and an efficiency ratio of 45.03%.
For the first nine months of 2001, Greater Bay Bancorp's CORE EARNINGS increased
28% to $63.7 million, or $1.45 per diluted share, compared to $49.7 million, or
$1.16 per diluted share, for the first nine months of 2000.
Based on CORE EARNINGS for the first nine months of 2001, Greater Bay Bancorp's
return on average equity was 23.30%, return on average assets was 1.47% and
efficiency ratio was 47.21%, while the first nine months of 2000 core earnings
resulted in a return on average equity of 23.25%, return on average assets of
1.57% and an efficiency ratio of 46.69%.
For the third quarter of 2001, NET INCOME increased to $21.4 million, or $0.49
per diluted share, compared to net income of $12.9 million, or $0.29 per diluted
share, for the third quarter of 2000. Net income for the third quarter of 2001
included $0.1 million in nonrecurring warrant income and zero merger related
expenses, compared to $1.6 million in nonrecurring warrant income and $7.0
million in merger related expenses for the third quarter of 2000.
For the first nine months of 2001, NET INCOME increased to $64.0 million, or
$1.46 per diluted share, compared to net income of $40.6 million, or $0.94 per
diluted share for the first nine months of 2000. Net income for the first nine
months of 2001 included $0.3 million in nonrecurring warrant income and zero in
merger related expenses, compared to $7.1 million in nonrecurring warrant income
and $16.2 million in merger related expenses for the first nine months of 2000.
At September 30, 2001, Greater Bay Bancorp's total assets were $6.8 billion, an
increase of 50% or $2.3 billion from September 30, 2000. Total loans grew 26% to
$3.9 billion, an increase of $804.4 million from September 30, 2000, while total
deposits increased to $4.3 billion, an increase of 10% or $389.0 million from
September 30, 2000.
Greater Bay Bancorp's allowance for loan losses was 2.31% of total loans at
September 30, 2001 and 2.18% at September 30, 2000, while its ratio of
non-performing assets to total assets was 0.32% at September 30, 2001, compared
to 0.35% at September 30, 2000. The allowance for loan losses was 418.20% of
total non-performing assets at September 30, 2001, compared to 430.84% at
September 30, 2000.
"Greater Bay Bancorp continues to post excellent operating results, even during
this period of a rapidly declining economy," stated David Kalkbrenner, President
and Chief Executive Officer of Greater Bay Bancorp. "The dramatic decline in
market interest rates has directly impacted the Company's net interest margin
and ultimately its net interest income; however, through continued prudent
expense management, strategic expense investments and client relationship
pricing, we have been able to continue to report quality earnings."
Mr. Kalkbrenner continued, "We continue to be vigilant in managing our credit
risk during this period of economic uncertainty and the results of that are
shown in our strong loan loss reserve position, low non-performing asset ratio
and very manageable net charge-off ratio. While our net charge-off ratio is
higher than prior years and higher than our original estimates, we are pleased
that during this challenging economic environment our relationship portfolios,
including commercial business and real estate loans, continue to perform well.
Our losses to date have been primarily in our shared national credit portfolio
which continues to shrink as a percentage of our total loan portfolio."
"Greater Bay Bancorp's lending philosophy has always focused on relationship
banking, which we believe allows for substantially better credit risk management
than can be attributed to transaction lending institutions," stated Mr.
Kalkbrenner. "To date, this has resulted in excellent credit metrics in our
portfolio. While we are pleased with the results, we continue to actively
monitor all segments of our portfolio, particularly the real estate segment. The
results of our ongoing review indicate that our conservative underwriting
standards and strong relationships at the time we funded the term and
construction real estate loans, continue to be reflected in the quality of the
portfolio. We currently do not see any significant deterioration in this
portfolio; however, we recognize that the economic downturn is more severe than
many people had anticipated. We will continue to be diligent in our credit
management, as well as new business underwriting, but we are pleased that our
core earnings supplemented by strong loan loss
reserves allowed Greater Bay Bancorp to continue to report quality earnings and
build long-term value for our shareholders."
The capital ratios of Greater Bay Bancorp and each of its subsidiary banks
continue to be above the well-capitalized guidelines established by the bank
regulatory agencies.
Merger with SJNB Financial Corp.
The previously announced merger transaction between Greater Bay Bancorp and SJNB
Financial Corp., San Jose, California is anticipated to close on October 23,
2001, subject to receipt of shareholder approvals. Regulatory approval for the
merger was received on October 3, 2001. On a pro forma basis, as if this merger
had been completed on September 30, 2001, the combined organization would have
had $7.5 billion in assets, $4.9 billion in deposits and 42 banking offices
covering the entire San Francisco Bay Area.
Forward-Looking Information
According to Mr. Kalkbrenner, "Based on current information, we believe our
previous guidance given for 2001 remains the same except for net charge-offs.
Due to the unprecedented slowing in our economy, net charge-offs will be in the
range of 55 basis points to 65 basis points for this year. Even with the higher
net loan charge-offs and substantial net interest margin compression, Greater
Bay remains comfortable with full year 2001 First Call analyst consensus
estimates of $1.92 to $1.93 per share, before the merger with SJNB. These
---------------------------
excellent operating results are expected to once again place Greater Bay in the
top 10% of its peer group when judged on the financial performance metrics of
return on equity, earnings per share and asset growth."
Looking forward to 2002, Mr. Kalkbrenner commented, "Greater Bay's overriding
performance goal is to continue to be in the top echelon of its peer group bank
competitors. Like most banks, we will also be impacted by the turbulent economic
environment but firmly believe our results will once again place Greater Bay in
the top group of performers for 2002, based on currently available mid-cap bank
analysts' estimates. We anticipate earnings growth of 11% to 17% with return on
equity being in excess of 20%. For a detailed review of our 2002 performance
goals, please review our Form 8-K which we filed today with the SEC."
Subsequent Events
Greater Bay Bancorp is currently in the process of establishing a real estate
investment Trust ("REIT") that will allow for flexibility in raising capital,
while also providing for a one-time capital gains tax loss carryback and a
one-time reduction in income tax expense. It is anticipated that the REIT will
be fully operational late in the fourth quarter of 2001 or early in the first
quarter of 2002. The impact on the Company's results of operations in
establishing the REIT is estimated to be a one-time reduction in income tax
expense of approximately $10 million to $12 million. Given the economic
uncertainty in the US economy, this one time benefit can be used either to
increase capital or, alternatively, to bolster balance sheet reserves.
Greater Bay Bancorp through its ten subsidiary banks, Bank of Petaluma, Bank of
Santa Clara, Bay Area Bank, Bay Bank of Commerce, Coast Commercial Bank,
Cupertino National Bank, Golden Gate Bank, Mid-Peninsula Bank, Mt. Diablo
National Bank and Peninsula Bank of Commerce, along with its operating
divisions, serves clients throughout Silicon Valley, San Francisco, the San
Francisco Peninsula, the East Bay Region, the North Bay Region and the Central
Coastal Region.
Greater Bay Bancorp's third quarter 2001 earnings conference call is scheduled
for October 17, 2001 at 8:00 am PDT. Investors have the opportunity to listen to
the conference call live on the Internet through Street Events at
http://www.streetevents.com. Investors should go to the Street Events Web site
---------------------------
15 minutes prior to the start of the call, as it may be necessary to download
audio software to hear the conference call. To do so, investors should click on
the Windows Media Player icon and follow directions from there. A replay of the
conference call will be available on the Street Events Web site for 30 days and
via telephone through October 24, 2001 by dialing (703) 925-2435, passcode
5587068.
Greater Bay Bancorp's corporate press releases are available on the Company's
Web site at http://www.gbbk.com.
-------------------
Safe Harbor
Certain matters discussed in this press release constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These forward looking statements relate to the Company's current
expectations regarding future operating results, growth in loans, deposits and
assets, net loan charge-offs, level of loan loss reserves, loan quality,
continued success of its Super Community Banking strategy and the strength of
the local economy. These forward looking statements are subject to certain risks
and uncertainties that could cause the actual results, performance or
achievements to differ materially from those expressed, suggested or implied by
the forward looking statements. These risks and uncertainties include, but are
not limited to: (1) the impact of changes in interest rates, a decline in
economic conditions at the international, national and local levels and
increased competition among financial service providers on the Company's results
of operations, the Company's ability to continue its internal growth at
historical rates, the Company's ability to maintain its net interest spread, and
the quality of the Company's earning assets; (2) government regulations; (3) the
ability to successfully integrate pending mergers and acquisitions; (4)
completion of the formation of the REIT; (5) the risks relating to the Company's
warrant positions; and (6) the other risks set forth in the Company's reports
filed with the Securities and Exchange Commission, including its Annual Report
on Form 10-K for the year ended December 31, 2000.
For investor information on Greater Bay Bancorp at no charge, call our automated
shareholder information line at 1-800-PRO-INFO (1-800-776-4636) and enter code
GBBK. For international access, dial 1-201-432-6555.
-Financial Tables Follow-
GREATER BAY BANCORP
SEPTEMBER 30, 2001 - FINANCIAL SUMMARY
($ in 000's, except share and per share data)
-----------------------------------------------------------------------------------------------------------------------------------
SELECTED CONSOLIDATED FINANCIAL CONDITION DATA:
Sept 30 Jun 30 Mar 31 Dec 31 Sept 30
2001 2001 2001 2000 2000
-------------------------------------------------------------------
Cash and Due From Banks $ 212,811 $ 200,271 $ 206,156 $ 270,774 $ 243,207
Investments 2,538,501 2,038,824 1,301,970 1,100,333 1,085,257
Loans:
Commercial 1,645,159 1,620,541 1,595,293 1,562,712 1,250,056
Term Real Estate - Commercial 1,177,058 1,041,530 992,777 967,428 890,127
-------------------------------------------------------------------
Total Commercial 2,632,217 2,662,071 2,588,070 2,530,140 2,140,183
Construction 675,527 723,394 701,414 691,912 581,956
Real Estate - Other 226,553 236,927 233,538 176,568 174,997
Consumer and Other 184,458 204,939 216,064 216,459 206,632
Deferred Loan Fees, Net (14,075) (13,759) (13,461) (13,657) (13,440)
-------------------------------------------------------------------
Total Loans 3,894,680 3,813,572 3,725,625 3,601,422 3,090,328
Allowance for Loan Losses (90,414) (88,190) (85,914) (84,014) (67,637)
-------------------------------------------------------------------
Total Loans, Net 3,804,266 3,725,382 3,639,711 3,517,408 3,022,691
Other Assets 287,946 260,500 258,409 241,863 196,914
-------------------------------------------------------------------
Total Assets $ 6,843,524 $ 6,224,977 $ 5,406,246 $ 5,130,378 $ 4,548,069
===================================================================
Deposits:
Demand, Non-Interest Bearing $ 851,708 $ 846,505 $ 897,229 $ 1,003,828 $ 899,496
NOW, MMDA and Savings 2,018,214 2,058,234 2,108,098 2,082,708 2,132,184
Time Certificates, $100,000 and over 593,536 545,043 595,710 571,330 555,158
Other Time Certificates 850,893 866,970 672,593 507,195 338,500
-------------------------------------------------------------------
Total Deposits 4,314,351 4,316,752 4,273,630 4,165,061 3,925,338
-------------------------------------------------------------------
Other Borrowings 1,770,519 1,344,926 572,828 431,228 135,313
Other Liabilities 133,994 92,157 105,922 112,224 87,702
-------------------------------------------------------------------
Total Liabilities 6,218,864 5,753,835 4,952,380 4,708,513 4,148,353
-------------------------------------------------------------------
Trust Preferred Securities 218,000 99,500 99,500 99,500 99,500
Stockholders' Equity 406,660 371,642 354,366 322,365 300,216
-------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 6,843,524 $ 6,224,977 $ 5,406,246 $ 5,130,378 $ 4,548,069
===================================================================
Average Quarterly Total Loans, excluding Nonaccrual $ 3,838,288 $ 3,759,151 $ 3,638,946 $ 3,326,505 $ 2,962,402
Average Quarterly Investments $ 2,302,123 $ 1,649,065 $ 1,048,617 $ 1,095,752 $ 1,225,598
Average Quarterly Interest Earning Assets $ 6,140,411 $ 5,408,216 $ 4,687,563 $ 4,422,257 $ 4,188,000
Average Quarterly Interest Bearing Liabilities $ 5,004,378 $ 4,353,948 $ 3,643,025 $ 3,334,513 $ 3,044,342
Average Quarterly Assets $ 6,490,768 $ 5,770,784 $ 5,088,379 $ 4,783,445 $ 4,532,392
Average Quarterly Equity $ 390,017 $ 363,785 $ 340,582 $ 316,331 $ 301,644
Total Regulatory Capital
Tier I or Leverage Capital $ 494,374 $ 446,412 $ 431,427 $ 417,847 $ 412,724
Total Capital $ 646,596 $ 507,979 $ 491,675 $ 475,891 $ 462,807
Nonperforming Assets
Nonaccrual Loans $ 21,620 $ 7,221 $ 17,874 $ 12,593 $ 14,884
Restructured Loans -- -- -- -- 420
ORFO 259 -- -- -- 395
-------------------------------------------------------------------
Total Nonperforming Assets $ 21,620 $ 7,221 $ 18,133 $ 12,593 $ 15,699
===================================================================
Greater Bay Trust Company Assets $ 672,077 $ 683,306 $ 734,910 $ 773,791 $ 838,659
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
SELECTED QUARTERLY CONSOLIDATED FINANCIAL CONDITION RATIOS:
Sept 30 Jun 30 Mar 31 Dec 31 Sept 30
2001 2001 2001 2000 2000
-------------------------------------------------------------------
Loan to Deposit Ratio 90.27% 88.34% 87.18% 86.47% 78.73%
Core Bank Loan to Deposit Ratio (1) 74.15% 72.42% 72.39% 72.44% 71.89%
Ratio of Allowance for Loan Losses to:
Average Loans 2.34% 2.34% 2.35% 2.52% 2.27%
End of Period Loans 2.31% 2.30% 2.30% 2.32% 2.18%
Total Nonperforming Assets 418.20% 1221.30% 473.80% 667.15% 430.84%
Ratio of Provision for Loan Losses to Average Loans,
annualized: 0.81% 1.05% 0.77% 0.75% 1.05%
Total Nonperforming Assets to Total Assets 0.32% 0.12% 0.34% 0.25% 0.35%
Ratio of Quarterly Net Charge-offs to Average Loans, annualized 0.58% 0.79% 0.59% 0.31% 0.37%
Ratio of YTD Net Charge-offs to YTD Average Loans, annualized 0.66% 0.69% 0.59% 0.38% 0.41%
Loan Growth, current quarter to prior year quarter 26.03% 34.31% 40.23% 46.13% 37.05%
Loan Growth, current quarter to prior quarter, annualized 8.44% 9.47% 13.99% 65.79% 35.17%
Loan Growth, YTD annualized 10.89% 11.88% 13.99% 46.13% 33.92%
Recurring Revenue Growth, current quarter to prior year quarter 21.73% 24.95% 30.94% 30.59% 34.71%
Recurring Revenue Growth, current quarter to prior quarter,
annualized 10.20% 18.71% 20.12% 31.93% 21.05%
Net Interest Income Growth, current quarter to prior year
quarter 21.63% 21.53% 32.06% 40.04% 40.11%
Net Interest Income Growth, current quarter to prior quarter,
annualized 23.15% 15.11% 5.13% 37.27% 22.88%
Average Earning Assets to Average Total Assets 94.60% 93.72% 92.12% 92.45% 92.40%
Average Earning Assets to Average Interest-Bearing Liabilities 122.70% 124.21% 128.67% 132.62% 137.57%
Capital Ratios:
Leverage 7.64% 7.76% 8.52% 8.77% 9.11%
Tier 1 Risk Based Capital 9.83% 9.19% 9.14% 9.40% 10.83%
Total Risk Based Capital 12.86% 10.46% 10.42% 10.70% 12.14%
Risk Weighted Assets $ 5,026,795 $ 4,856,661 $ 4,720,719 $ 4,446,088 $ 3,812,504
Book Value Per Share (2) $ 9.51 $ 8.72 $ 8.33 $ 7.69 $ 7.21
Total Shares Outstanding (2) 42,774,660 42,625,248 42,546,142 41,929,173 41,648,016
---------------
(1) Includes the ten core banking divisions and excludes Matsco, Capco, Pacific
Business Funding and Corporate Finance.
(2) Prior periods have been restated for the 2 for 1 stock split effective
October 4, 2000.
Note: Prior periods have been restated to reflect the mergers between Greater
Bay Bancorp, Bank of Santa Clara and Bank of Petaluma on a pooling-of-interests
basis.
--------------------------------------------------------------------------------
GREATER BAY BANCORP
SEPTEMBER 30, 2001 - FINANCIAL SUMMARY
($ in 000's, except share and per share data)
------------------------------------------------------------------------------------------------------------------------------------
SELECTED QUARTERLY CONSOLIDATED OPERATING DATA:
Third Second First Fourth Third
Quarter Quarter Quarter Quarter Quarter
2001 2001 2001 2000 2000
-------------------------------------------------------------------
Interest Income $ 119,706 $ 111,807 $ 106,694 $ 104,376 $ 96,612
Interest Expense 46,954 43,066 40,448 38,957 36,797
-------------------------------------------------------------------
Net Interest Income Before Provision for Loan Losses 72,752 68,741 66,246 65,419 59,815
Provision for Loan Losses 7,880 9,849 6,928 6,316 7,844
-------------------------------------------------------------------
Net Interest Income After Provision for Loan Losses 64,872 58,892 59,318 59,103 51,971
Other Income:
Trust Fees 865 978 886 954 822
Depositor Service Fees 2,192 2,091 2,013 2,034 2,219
ATM Fees 803 766 662 748 817
Loan and International Banking Fees 1,987 2,085 2,541 2,562 2,497
Gain on Sale of Loans 1,684 375 835 312 429
Gain/(loss) on Investments 819 3,944 1,578 21 3
Other Income 1,538 1,588 2,216 1,289 1,288
-------------------------------------------------------------------
9,888 11,827 10,731 7,920 8,075
Nonrecurring - Warrant Income (2) 77 504 -- 870 2,767
-------------------------------------------------------------------
Total Other Income 9,965 12,331 10,731 8,790 10,842
Operating Expenses:
Salaries 16,086 15,188 14,726 14,565 13,022
Benefits 3,594 3,872 3,679 2,884 2,770
-------------------------------------------------------------------
Total Compensation and Benefits (4) 19,680 19,060 18,405 17,449 15,792
Occupancy and Equipment 6,597 6,286 5,863 5,711 5,575
Professional Services & Legal 2,324 1,532 1,387 1,083 1,312
Telephone, postage and supplies 1,232 1,382 1,323 1,295 1,040
Marketing and promotion 1,272 1,272 1,235 1,229 935
Data Processing 948 922 911 757 461
Client Services 548 653 644 563 477
FDIC Insurance and Assessments 406 330 273 356 379
Other Real Estate, Net -- -- -- 5 --
Other Expenses 3,709 3,481 3,091 2,489 2,014
-------------------------------------------------------------------
36,716 34,918 33,132 30,937 27,985
Trust Preferred Securities (TPS) expense 3,724 2,454 2,458 2,412 2,585
-------------------------------------------------------------------
Total Operating Expenses 40,440 37,372 35,590 33,349 30,570
-------------------------------------------------------------------
Income Before Income Taxes, Merger and Other
Related Nonrecurring Costs 34,397 33,851 34,459 34,544 32,243
Income Taxes:
Income Tax Expense 13,005 12,491 12,928 12,695 11,173
Nonrecurring Income Tax Expense (2) 32 212 -- 366 1,164
-------------------------------------------------------------------
Total Income Tax Expense 13,037 12,703 12,928 13,061 12,337
Income Before Merger and Other Related Nonrecurring Costs 21,360 21,148 21,531 21,483 19,906
Merger and Other Related Nonrecurring Costs, net of tax (2) -- -- -- 3,533 7,037
-------------------------------------------------------------------
Net Income $ 21,360 $ 21,148 $ 21,531 $ 17,950 $ 12,869
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
SELECTED QUARTERLY CONSOLIDATED OPERATING RATIOS:
Third Second First Fourth Third
Quarter Quarter Quarter Quarter Quarter
2001 2001 2001 2000 2000
-------------------------------------------------------------------
Income Per Share (Before Nonrecurring and Merger
Items) (2),(3)
Basic $ 0.50 $ 0.49 $ 0.51 $ 0.50 $ 0.44
Diluted $ 0.48 $ 0.48 $ 0.49 $ 0.47 $ 0.42
Income Per Share (Before Merger Items) (3)
Basic $ 0.50 $ 0.50 $ 0.51 $ 0.51 $ 0.48
Diluted $ 0.49 $ 0.48 $ 0.49 $ 0.48 $ 0.46
Net Income Per Share (3)
Basic $ 0.50 $ 0.50 $ 0.51 $ 0.43 $ 0.31
Diluted $ 0.49 $ 0.48 $ 0.49 $ 0.41 $ 0.29
Weighted Average Common Shares Outstanding (3) 42,652,000 42,562,000 42,323,000 41,817,000 41,448,000
Weighted Average Common & Common Equivalent Shares
Outstanding (3) 43,983,000 43,685,000 44,175,000 44,319,000 43,676,000
Return on Period Average Assets, annualized (1) 1.30% 1.45% 1.72% 1.74% 1.61%
Return on Period Average Equity, annualized (1) 21.68% 23.00% 25.64% 26.38% 24.14%
Net Interest Margin - Average Earning Assets (5) 4.70% 5.10% 5.73% 5.89% 5.68%
Operating Expense Ratio (Before Nonrecurring and Merger
Items) 2.47% 2.60% 2.84% 2.77% 2.68%
Operating Expense Ratio (Before Nonrecurring and Merger
Items and excluding TPS expense) 2.24% 2.43% 2.64% 2.57% 2.46%
Efficiency Ratio (Before Nonrecurring and Merger Items) 48.94% 46.39% 46.23% 45.47% 45.03%
Efficiency Ratio (Before Nonrecurring and Merger Items
and excluding TPS expense) 44.43% 43.34% 43.04% 42.18% 41.22%
------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(1) Before Nonrecurring and Merger Items of $45 thousand, net of tax, in Q3
2001; $292 thousand, net of tax, in Q2 2001; $3.0 million, net of tax, in
Q4 2000 and $5.4 million, net of tax, in Q3 2000.
(2) Components of Nonrecurring and Merger Items. Net Income excluding these
items is $21,315 for Q3 2001;$20,856 for Q2 2001; $20,979 for Q4 2000 and
$18,303 for Q3 2000.
(3) Prior periods have been restated for the 2 for 1 stock split effective
October 4, 2000.
(4) Included Matsco compensation and benefits of $1.4 million in Q3 2001; $1.1
million in Q2 2001; $2.4 million in Q1 2001 and $904,000 in Q4 2000. (5)
The Net Interest Margin for Q3 2001 would have been 4.98%, if there was no
change in the balance sheet mix.
Note: Prior periods have been restated to reflect the mergers between Greater
Bay Bancorp, Bank of Santa Clara and Bank of Petaluma on a pooling-of-interests
basis.
--------------------------------------------------------------------------------
GREATER BAY BANCORP
SEPTEMBER 30, 2001 - FINANCIAL SUMMARY
($ in 000's, except share and per share data)
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SELECTED YEAR TO DATE CONSOLIDATED OPERATING DATA:
YTD YTD
30-Sep 30-Sep
2001 2000
------------- -------------
Interest Income $ 338,207 $ 263,987
Interest Expense 130,468 97,447
------------- -------------
Net Interest Income Before Provision for Loan Losses 207,739 166,540
Provision for Loan Losses 24,657 21,780
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Net Interest Income After Provision for Loan Losses 183,082 144,760
Other Income:
Trust Fees 2,729 2,496
Depositor Service Fees 6,296 6,560
ATM Fees 2,231 2,143
Loan and International Banking Fees 6,613 5,600
Gain on Sale of Loans 2,894 1,878
Gain/(loss) on Investments 6,341 60
Other Income 5,342 5,882
------------- -------------
32,446 24,619
Nonrecurring - Warrant Income (2) 581 12,116
------------- -------------
Total Other Income 33,027 36,735
Operating Expenses:
Salaries 46,000 38,513
Benefits 11,145 8,362
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Total Compensation and Benefits (4) 57,145 46,875
Occupancy and Equipment 18,746 15,977
Professional Services & Legal 5,243 3,621
Telephone, postage and supplies 3,937 3,362
Marketing and promotion 3,779 2,956
Data Processing 2,781 1,375
Client Services 1,845 1,518
FDIC Insurance and Assessments 1,009 880
Other Real Estate, Net -- 51
Other Expenses 10,281 7,218
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104,766 83,833
Trust Preferred Securities (TPS) expense 8,636 5,426
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Total Operating Expenses 113,402 89,259
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Income Before Income Taxes, Merger and Other Related Nonrecurring Costs 102,707 92,236
Income Taxes:
Income Tax Expense 38,424 30,432
Nonrecurring Income Tax Expense (2) 244 5,044
------------- -------------
Total Income Tax Expense 38,668 35,476
Income Before Merger and Other Related Nonrecurring Costs 64,039 56,760
Merger and Other Related Nonrecurring Costs, net of tax (2) -- 16,170
------------- -------------
Net Income $ 64,039 $ 40,590
------------- -------------
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SELECTED YEAR TO DATE CONSOLIDATED OPERATING RATIOS:
30-Sep 30-Sep
2001 2000
------------- -------------
Income Per Share (Before Nonrecurring and Merger Items) (2), (3)
Basic $ 1.50 $ 1.21
Diluted $ 1.45 $ 1.16
Income Per Share (Before Merger Items) (3)
Basic $ 1.51 $ 1.38
Diluted $ 1.46 $ 1.32
Net Income Per Share (3)
Basic $ 1.51 $ 0.99
Diluted $ 1.46 $ 0.94
Weighted Average Common Shares Outstanding (3) 42,515,000 40,996,000
Weighted Average Common & Common Equivalent Shares Outstanding (3) 43,850,000 42,981,000
Return on Period Average Assets, annualized (1) 1.47% 1.57%
Return on Period Average Equity, annualized (1) 23.30% 23.25%
Net Interest Margin - Average Earning Assets 5.13% 5.64%
Operating Expense Ratio (Before Nonrecurring and Merger Items) 2.62% 2.81%
Operating Expense Ratio (Before Nonrecurring and Merger Items and
excluding TPS expense) 2.42% 2.64%
Efficiency Ratio (Before Nonrecurring and Merger Items) 47.21% 46.69%
Efficiency Ratio (Before Nonrecurring and Merger Items and excluding
TPS expense) 43.62% 43.86%
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(1) Before Nonrecurring and Merger Items of $337 thousand, net of tax, in YTD
Sept 2001 and $9.1 million, net of tax, in YTD Sept 2000.
(2) Components of Nonrecurring and Merger Items. Net Income excluding these
items is $63,702 for YTD Sept 2001 and $49,688 for YTD Sept 2000.
(3) Prior periods have been restated for the 2 for 1 stock split effective
October 4, 2000.
(4) Included Matsco compensation and benefits of $5.0 million in YTD September
2001.
Note: Prior periods have been restated to reflect the mergers between Greater
Bay Bancorp, Bank of Santa Clara and Bank of Petaluma on a pooling-of-interests
basis.
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EX-99.2
4
dex992.txt
MANAGEMENT'S DISCUSSION OF TRENDS
EXHIBIT 99.2
Management's Discussion of Trends and Performance Guidance
To assist investors, financial analysts and other interested parties in their
analysis of Greater Bay Bancorp ("Greater Bay" or the "Company"), we have
developed the following update of Greater Bay Bancorp's last quarter of 2001 and
full year 2002 performance guidance. The guidance is based on the most current
information available to the Company through the end of September 2001 and is
predicated on the current economic environment with a continued weakening in the
economy through mid 2002 and a very slow recovery beginning in late 2002. If the
current economic slowdown intensifies and we fall into a recession, Greater Bay
along with many other companies would have to revisit our 2002 forecasts.
General Overview
Greater Bay's outlook for the last quarter of 2001 and for the full year 2002
continues to be adversely impacted by the economy. Before the tragic events of
September 11, 2001, we were seeing signs that the economy in certain sectors was
stabilizing with indications that future prospects were becoming more positive.
However, since September 11, 2001, uncertainty has replaced the previously
indicated stabilization. This uncertainty has caused Greater Bay to critically
review its previously disclosed performance goals for the balance of 2001 and
into 2002.
For 2001 Greater Bay believes there is no change required in its earnings,
return on equity, return on assets or growth performance guidance; however, net
charge-offs are anticipated to be in the 55 basis point to 65 basis point range
of average loans, with the increase exclusively centered in our continued
aggressive review of the non-relationship shared national credit portfolio,
which is now less than 3.5% of the total loan portfolio.
Based on current economic conditions, and in anticipation of a continuing slow
economy through much of 2002, Greater Bay's outlook is as follows:
o Earnings Growth: Greater Bay continues to see its earnings growth
being at the top end of its peer group range, as the bank analyst
group covering Greater Bay Bancorp (Lehman Bros., Inc., Dain Rauscher
Wessels, Salomon Smith Barney, Legg Mason Wood Walker, Inc., US
Bancorp Piper Jaffray, Inc., Hoefer & Arnett, Inc. and Sandler O'Neill
& Partners, L.P.)/1/ indicates mid-cap banks will generate earnings
per share growth averaging 8% to 10%. Based on the current economic
environment and incorporating an additional 25 basis point to 50 basis
point decline in market interest rates, Greater Bay anticipates
earnings per share growth in the range of 11% to 17% for 2002.
/1/ Jefferies & Company, Inc. and Keefe, Bruyette & Woods, Inc. did not
currently have this information available.
o Revenue Growth: Greater Bay also sees its revenue growth being at the
top end of its peer group range, as the bank analyst group believes
mid-cap banks will generate revenue growth averaging 6% to 9%. Based
on the current economic environment and incorporating an additional 25
basis points to 50 basis points decline in market interest rates,
Greater Bay sees its revenue growth in the range of 9% to 15% for
2002.
o Net Interest Margin: Greater Bay Bancorp's net interest margin
continues to be adversely impacted by slower economic growth and the
continued downward pressure on market interest rates.
As previously indicated in a Form 8-K filed on June 26, 2001, during
periods of declining market interest rates, the Company's net interest
margin is pressured, as many of its loan assets which are tied to the
prime rate move downward immediately upon a market rate decline,
compared to its interest bearing liabilities, which do not re-price
downward as quickly.
Our previous discussions detailed in the Company's Form 8-K filed June
26, 2001 related to our shift in funding and restructuring of the
investment portfolio continue to be valid. During the third quarter of
2001, we completed approximately 80% of our investment portfolio
restructuring and the wholesale financing of our specialty finance
businesses. The continued impact of this change has been threefold.
First, it has increased the overall net interest income from
---------
operations, second it has allowed the Company to improve liquidity and
-----------------
reduce the duration of its investment portfolio and third it has
slightly reduced the Company's asset sensitive balance sheet. On a
-------
combined basis, this change has positioned the Company to slightly
reduce its exposure to declining interest rates, while also
effectively restructuring its balance sheet to take advantage of
market interest rates when they move upward.
The following table highlights the change in composition of the
Company's balance sheet at June 30, 2001 when compared to September
30, 2001:
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($ in 000's) % of Total Assets
Assets 6/30/01 9/30/01
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Loans 61.2% 56.9%
Investments 32.8% 37.1%
Other Assets 6.0% 6.0%
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100.0% 100.0%
------------------------------
Total Assets $6,224,977 $6,843,524
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-----------------------------------------------------------------------
($ in 000's) % of Total Deposits
Deposits 6/30/01 9/30/01
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Demand, Non-interest Bearing 19.6% 19.7%
NOW,MMDA and Savings 47.7% 46.8%
Time Certificates 32.7% 33.5%
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100.0% 100.0%
------------------------------
Total Deposits $4,316,752 $4,314,351
-----------------------------------------------------------------------
-----------------------------------------------------------------------
($ in 000's) % of Total Liabilities & Equity
Liabilities & Equity 6/30/01 09/30/00
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Total Deposits 69.3% 63.1%
Other Borrowings 21.6% 25.9%
Other Liabilities 3.1% 5.1%
Equity 6.0% 5.9%
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100.0% 100.0%
-----------------------------
Total Liabilities & Equity $6,224,977 $6,843,524
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The impact on the Company's net interest margin from this change in
balance sheet mix has been a reduction in the net interest margin,
offset by the increase in average interest earning assets. The overall
-------
impact on the Company's net interest income and interest rate risk
------
profile has been positive, as pro forma total net interest income
--------
increased from the restructuring, while the asset sensitive nature of
the balance sheet has been slightly reduced.
The following table details the Company's actual net interest margin
for the second quarter of 2001 compared to the Company's net interest
margin for the third quarter of 2001. The "no mix change" column
assumes that the composition and mix of the balance sheet had remained
constant from the second quarter of 2001, while the "current position"
column, details the Company's actual average net interest margin for
the third quarter of 2001.
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Q2 2001 Actual Q3 2001 Actual
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No Mix Change Current Position
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Average Average Average
($ in 000's) Balance Yield Balance Yield Balance Yield
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Loans & leases $3,759,152 9.03% $3,838,288 8.54% $3,838,288 8.54%
Investments 1,561,260 6.71% 1,601,394 6.49% 2,219,737 6.52%
Cash and cash equivalents 87,805 4.65% 82,386 4.14% 82,386 4.14%
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Interest-earning assets $5,408,217 8.29% $5,522,068 7.86% $6,140,411 7.73%
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Deposits $3,396,149 3.71% $3,488,586 3.38% $3,488,586 3.38%
Borrowings 957,798 4.89% 897,810 4.61% 1,516,153 4.50%
Non-interest bearing deposits and
other free funds 1,054,270 1,135,672 1,135,672
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Cost of funds $5,408,217 3.19% $5,522,068 2.88% $6,140,411 3.03%
------------------------------------------------------------------------------------------------------------
Net interest margin 5.10% 4.98% 4.70%
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Pro forma Net Interest
Income - Annualized $ 275,819 $ 274,999 $ 288,599
------------------------------------------------------------------------------------------------------------
The table above indicates that the balance sheet mix change reduced
the margin 28 basis points, while the impact of market interest rate
declines reduced the net interest margin by 12 basis points.
While the change in balance sheet mix and market rates have combined
to reduce the net interest margin, it has actually increased pro forma
net interest income by $13 million on an annualized basis. This has
been accomplished while still allowing the Company's balance sheet to
take advantage of the economy when interest rates rise.
The net interest margin table above details the impact on the
Company's average quarterly net interest margin, while the following
table details the end of period or static net interest margins for
June 30, 2001 compared to September 30, 2001:
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June 30, 2001 September 30, 2001
Actual Forecast
------------------------------------------------------------------------
No Mix Change Current Position
----------------------------------------------
End of End of End of
Period Period Period
($ in 000's) Balance Yield Balance Yield Balance Yield
-----------------------------------------------------------------------------------------------------------
Loans & leases $3,778,584 8.88% $3,866,637 8.46% $3,866,637 8.46%
Investments 1,841,621 6.81% 1,882,823 6.51% 2,360,603 6.52%
Cash and cash equivalents 66,982 4.12% 70,256 4.02% 70,256 4.02%
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Interest-earning assets $5,687,187 8.15% $5,819,716 7.81% $6,297,496 7.72%
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Deposits $3,456,424 3.55% $3,492,165 3.18% $3,492,165 3.18%
Borrowings 1,200,488 4.65% 1,114,011 4.46% 1,591,791 4.39%
Non-interest bearing deposits and
other free funds 1,030,275 1,213,540 1,213,540
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Cost of funds $5,687,187 3.14% $5,819,716 2.76% $6,297,496 2.87%
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Net interest margin 5.01% 5.04% 4.84%
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Pro forma Net Interest
Income - Annualized $ 284,928 $ 293,314 $ 304,799
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The table above indicates that the end of period no mix change net
interest margin for September 30, 2001 actually increases slightly
from the end of the second quarter. This is due to funds cost
declining slightly more than yields on interest earning assets. The
end of period current mix net interest margin declines by 17 basis
points to 4.84%, due to a combination of lower asset yields and higher
funds costs. However, once again pro forma net interest income is
enhanced by the current balance sheet as pro forma annualized net
interest income based on the third quarter net interest margin
compared to the second quarter increased by $20 million.
On a prospective basis, the Company believes its net interest margin
will decline to the 4.55% to 4.60% range once the impact of the rate
changes in late September and early October are fully accounted for.
For every additional 25 basis point reduction in market interest
rates, the Company anticipates a corresponding 10 basis point to 15
basis point decline in its net interest margin. This relationship is
estimated to be reasonable through an additional 50 basis point
decline in market interest rates, assuming the mix and composition of
the balance sheet remains similar.
As previously indicated, the restructuring of the balance sheet has
reduced a small portion of the downward pressure on the Company's net
interest margin, but it has not substantially reduced the upside when
market interest rates begin their upward
trend. For every 25 basis point increase in rates, it is anticipated
that the Company's net interest margin will increase by approximately
10 to 12 basis points. Again, this assumes a similar mix in loans and
deposits. However, in an improving economy, our clients' demand for
loans should also increase, thus having the effect of increasing the
net interest margin at a more rapid pace.
o ROE: Greater Bay continues to see return on equity exceeding 20% for
2002.
o ROA: Greater Bay sees its return on assets goal of 1.4% being at the
upper end of its target range for 2002, given the current and
anticipated economic environment and the related impact of market
interest rates on the net interest margin. Based on this we currently
believe our return on assets for 2002 will be in the 1.3% to 1.4%
range, with upside potential when the economy recovers and rates begin
to increase.
o Loan Growth: Greater Bay's loan growth for 2002 will continue to
reflect our conservative underwriting approach, as we believe economic
conditions will continue to be difficult, at least until late 2002.
Based on these factors, we anticipate loan growth in the 10% range.
Currently the bank analysts who cover Greater Bay believe mid-cap
banks will have average loan growth in the 5% to 7% range for 2002.
o Deposit Growth: Greater Bay continues to focus on deposit growth and
we believe deposit growth for the full year 2002 will be in the 5% to
10% range. Currently the bank analysts who cover Greater Bay believe
mid-cap banks will generate average deposit growth in the 6% to 8%
range for 2002.
o Credit Quality: Credit quality continues to be a primary focus as we
believe this is an area where our style of relationship banking can
mitigate loss exposure. Our goal is to maintain non-performing assets
at less than 0.50% of total assets. This is lower than the Uniform
Bank Performance Report ratio of 0.62% at June 30, 2001 for peer banks
of Greater Bay.
o Net Charge-Offs: We recognize that credit quality is critical to
future performance. Based on our current review of economic conditions
and trends in our loan portfolio we believe Greater Bay will incur net
charge-offs in the range of 45 basis points to 55 basis points of
average loans in 2002. This is slightly below the 55 basis points to
65 basis points range projected for 2001. The reduction from 2001 is
predicated on the fact that the majority of the 2001 losses were in
the shared national credit (SNC) portfolio, which we believe will slow
in 2002 as this portfolio in our company continues to shrink as a
percentage of loans outstanding. We anticipate that the reduction of
losses in the shared national credit portfolio will be offset by
slightly higher charge-offs in other sectors of the loan portfolio.
o Summary: Greater Bay anticipates continuing to report operating
results on a historical basis that will place it in the top 10% of its
peers for 2002. We believe Greater Bay is positioned to take advantage
of the economic growth everyone hopes will occur in late 2002;
however, our plans and current goals do not assume a turn around
occurs. Should the economy strengthen, we believe loan and deposit
growth will increase, market interest rates will increase and our net
interest margin will expand, which will correspondingly have a
substantial increase in our net interest income. However, we also
recognize that should economic growth falter and our economy enter a
protracted recessionary period that Greater Bay and many other
companies would have to revisit their forecasts for 2002.
Our ability to continue providing excellent returns to our
shareholders during one of the sharpest declines in the economy and
market interest rates in our history is positive recognition of the
success of our clients, our people and our strategy.
Safe Harbor
Certain matters discussed in this Form 8-K constitute forward looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward looking statements relate to the Company's current expectations
regarding future operating results, growth in loans, deposits and assets, asset
quality, net loan charge-offs, level of loan loss reserves, loan quality,
continued success of its Super Community Banking strategy and the strength of
the local economy. These forward looking statements are subject to certain risks
and uncertainties that could cause the actual results, performance or
achievements to differ materially from those expressed, suggested or implied by
the forward looking statements. These risks and uncertainties include, but are
not limited to: (1) the impact of changes in interest rates, a decline in
economic conditions at the international, national and local levels and
increased competition among financial service providers on the Company's results
of operations, the Company's ability to continue its internal growth at
historical rates, the Company's ability to maintain its net interest spread, and
the quality of the Company's earning assets; (2) when and if any pending mergers
are consummated, as well as any difficulties that may be encountered in
integrating newly acquired businesses and in realizing operating efficiencies;
(3) government regulation; (4) the risks relating to the Company's warrant
positions; and (5) the other risks set forth in the Company's reports filed with
the Securities and Exchange Commission, including its Annual Report on Form 10-K
for the year ended December 31, 2000.