EXHIBIT 13
<PAGE>
FARNSWORTH BANCORP, INC.
2000 ANNUAL REPORT TO STOCKHOLDERS
<PAGE>
FARNSWORTH BANCORP, INC.
2000 ANNUAL REPORT
TABLE OF CONTENTS
Page
Letter to Stockholders........................................................1
Corporate Profile ............................................................2
Stock Price Information.......................................................2
Selected Financial Ratios and Other Data......................................3
Management's Discussion and Analysis..........................................4
Independent Auditor's Report................................................F-1
Consolidated Statements of Financial Condition............................. F-2
Notes to Consolidated Financial Statements..................................F-6
Corporate Information........................................................12
1
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[FARNSWORTH BANCORP, INC. LETTERHEAD]
To Our Stockholders:
On behalf of our Board of Directors and employees, we are pleased to
present our 2000 Annual Report to Stockholders. As you will see in the Annual
Report, our net income decreased during fiscal 2000 due, in large part, to the
expenses we incurred in connection with the opening in April 2000 of our new
branch in Mt. Laurel, New Jersey. We are happy with progress this branch is
making and we feel the added expenses associated with this branch opening
represent a good investment in the future.
For the fiscal year ended September 30, 2000, the Company earned
$124,051or $.36 per share, as compared to net income of $224,191 or $.66 per
share, for the fiscal year ended September 30, 1999. At September 30, 2000, the
Company's assets totaled $58.1 million, as compared to $56.0 million at
September 30, 1999. Stockholders' equity was $5.4 million or $14.17 per share at
September 30, 2000, as compared to stockholders' equity of $5.3 million or
$13.92 per share, at September 30, 1999. The increase in assets and
stockholders' equity was primarily attributable to net income from operations.
In November 2000, the Company organized Peoples Financial Services,
Inc., a new subsidiary of the Company that will offer brokerage and investment
advisory services, through a third party, to all of the Bank's customers and to
the general public. The Company has entered into a networking agreement with
Investors Capital Corporation, a brokerage and investment advisory firm, which
will directly provide these new services to our customers and the general public
at the Bank's offices. We also plan to offer insurance products, such as life,
health, property and casualty insurance, through Peoples Financial Services,
Inc. In addition to offering a wider array of products and services to our
customers and the general public, the Company hopes this new line of business
will increase non-interest income.
Our goal remains the same as it has always been, to enhance your
investment in our Company.
Sincerely,
/s/Gary N. Pelehaty
--------------------------------------
Gary N. Pelehaty
President and Chief Executive Officer
<PAGE>
Corporate Profile
Farnsworth Bancorp, Inc. (the "Company") is the parent company for Peoples
Savings Bank (the "Bank"). The Company was formed as a New Jersey corporation in
May 1998 at the direction of the Bank in connection with the Bank's conversion
from a mutual to stock form of ownership. The Company acquired all of the
capital stock issued by the Bank upon its conversion. On September 29, 1998, the
Bank completed its conversion in connection with a $3.8 million initial public
offering of the Company's common stock. The Company is a grandfathered unitary
savings and loan holding company which, under existing laws, generally is not
restricted in the types of business activities in which it may engage provided
that the Bank retains a specified amount of its assets in housing-related
investments. At the present time, the Company conducts no significant business
or operations of its own other than holding all of the outstanding stock of the
Bank and investing the Company's portion of the net proceeds obtained in the
mutual-to-stock conversion.
Peoples Savings Bank, founded in 1880 under the name of "The Bordentown Building
and Loan Association," is a federally chartered stock savings bank headquartered
in Bordentown, New Jersey. The Bank is subject to examination and comprehensive
regulation by the Office of Thrift Supervision (the "OTS") and its deposits are
federally insured by the Federal Deposit Insurance Corporation (the "FDIC")
under the Savings Association Insurance Fund (the "SAIF"). The Bank is a member
of, and owns capital stock in, the Federal Home Loan Bank (the "FHLB") of New
York, which is one of the twelve regional banks in the FHLB system.
The Bank operates a traditional savings bank business, attracting deposit
accounts from the general public and using those deposits, together with other
funds, primarily to originate and invest in loans secured by one- to four-family
residential real estate.
Stock Price Information
The Company's common stock has been traded on the OTC-Electronic Bulletin Board
under the trading symbol of "FNSW" since it commenced trading on September 30,
1998. The number of shareholders of record of common stock as of December 18,
2000, was approximately 415. This does not reflect the number of persons or
entities who held stock in nominee or "street" name through various brokerage
firms. At December 18, 2000, there were 360,866 shares outstanding. There were
no dividends paid by the Company during the fiscal year ended September 30,
2000. The Company's ability to pay dividends to stockholders is largely
dependent upon the dividends it receives from the Bank. The Bank may not declare
or pay a cash dividend on any of its stock if the effect thereof would cause the
Bank's regulatory capital to be reduced below (1) the amount required for the
liquidation account established in connection with the Conversion, or (2) the
regulatory requirements imposed by the OTS.
2
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Selected Financial Ratios and Other Data
At or For the Years Ended
September 30,
---------------------------
2000 1999
---- ----
Return on average assets........................ .22% .45%
Return on average equity........................ 2.31 4.11
Average equity to average assets ratios......... 9.39 10.96
Equity to assets at period end.................. 9.26 9.44
Net interest rate spread........................ 2.80 3.08
Net yield on average interest-earning assets.... 3.29 3.65
Non-performing loans to total assets............ .55 1.09
Allowance for loan loss to total loans.......... .46 .45
3
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations of
the Company and the Bank should be read in conjunction with the accompanying
Consolidated Financial Statements.
General
The following discussion relates only to the Bank's financial condition
and results of operations.
The Bank's results of operations depend primarily on net interest
income, which is determined by (i) the difference between rates of interest the
Bank earns on its interest-earning assets and the rates the Bank pays on
interest-bearing liabilities (interest rate spread), and (ii) the relative
amounts of interest-earning assets and interest-bearing liabilities. The Bank's
results of operations are also affected by non-interest income, including,
primarily, income from customer deposit account service charges, gains and
losses from the sale of investments and mortgage-backed securities and
non-interest expense, including, primarily, compensation and employee benefits,
federal deposit insurance premiums, office occupancy cost, and data processing
cost. The Bank's results of operations are also affected significantly by
general and economic and competitive conditions, particularly changes in market
interest rates, government policies and actions of regulatory authorities, all
of which are beyond the Bank's control.
Market Risk Analysis
Qualitative Analysis. The Bank's assets and liabilities may be analyzed
by examining the extent to which they are interest rate sensitive and by
monitoring the expected effects of interest rate changes on the Bank's net
portfolio value.
An asset or liability is interest rate sensitive within a specific time
period if it will mature or re-price within that time period. If the Bank's
assets mature or re-price more quickly or to a greater extent than its
liabilities, the Bank's net portfolio value and net interest income would tend
to increase during periods of rising interest rates but decrease during periods
of falling interest rates. Conversely, if the Bank's assets mature or re-price
more slowly or to a lesser extent than its liabilities, the Bank's net portfolio
value and net interest income would tend to decrease during periods of rising
interest rates but increase during periods of falling interest rates. The Bank's
policy has been to address the interest rate risk inherent in the typical
savings institution business of originating long-term loans funded by short-term
deposits by maintaining sufficient liquid assets for material and prolonged
changes in interest rates and by originating loans with shorter terms to
maturity such as construction, commercial and consumer loans. In addition, the
Bank has invested in adjustable-rate mortgage-backed securities as an interest
rate risk management strategy.
4
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Quantitative Analysis. In order to encourage savings associations to
reduce their interest rate risk, the OTS adopted a rule incorporating an
interest rate risk ("IRR") component into the risk-based capital rules. The IRR
component is a dollar amount that will be deducted from total capital for the
purpose of calculating an institution's risk-based capital requirement and is
measured in terms of the sensitivity of its net portfolio value ("NPV") to
changes in interest rates. NPV is the difference between incoming and outgoing
discounted cash flows from assets, liabilities, and off-balance sheet contracts.
An institution's IRR is measured as the change to its NPV as a result of a
hypothetical 200 basis point ("bp") change in market interest rates. A resulting
change in NPV of more than 2% of the estimated present value of total assets
("PV") will require the institution to deduct from its capital 50% of that
excess change. The rules provide that the OTS will calculate the IRR component
quarterly for each institution. Based on the Bank's asset size and risk-based
capital, the Bank has been informed by the OTS that it is exempt from this rule.
Nevertheless, the following table presents the Bank's NPV at September 30, 2000,
as calculated by the OTS, based on quarterly information voluntarily provided to
the OTS.
Changes Net Portfolio Value
In Market ---------------------------------------
Interest Rates $ Amount $ Change % Change NPV Ratio(1)
-------------- ---------- ------------- --------- ----------------
(basis points) (Dollars in Thousands)
+300 2,459 -3,342 -58% 4.51%
+200 3,566 -2,325 -39% 6.38%
+100 4,729 -1,161 -20% 8.25%
0 5,891 10.03%
-100 6,895 1,005 +17% 11.49%
-200 7,692 1,802 +31% 12.59%
-300 8,426 2,535 +43% 13.55%
(1) Calculated as the estimated NPV divided by present value of total assets.
Computations of prospective effects of hypothetical interest rate
changes are based on numerous assumptions, including relative levels of market
interest rates, prepayments and deposit run-offs and should not be relied upon
as indicative of actual results. Certain shortcomings are inherent in such
computations. Although certain assets and liabilities may have similar
maturities or periods of re-pricing, they may react at different times and in
different degrees to changes in market rates of interest. The interest rates on
certain types of assets and liabilities may fluctuate in advance of changes in
market interest rates, while rates on other types of assets and liabilities may
lag behind changes in market interest rates. In the event of a change in
interest rates, prepayments and early withdrawal levels could deviate
significantly from those assumed in
5
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making the calculations set forth above. Additionally, an increased credit risk
may result as many borrowers may be unable to service their debt in the event of
an interest rate increase.
The Bank's Board of Directors review the Bank's asset and liability
policies on an annual basis. The Board of Directors meets quarterly to review
interest rate risk and trends, as well as liquidity and capital ratios and
requirements. Management administers the policies and determinations of the
board of directors with respect to the Bank's asset and liability goals and
strategies. The Bank expects that its asset and liability policies and
strategies will continue as described so long as competitive and regulatory
conditions in the financial institution industry and market interest rates
continue as they have in recent years.
Financial Condition
Total assets increased $2.1 million or 3.8% to $58.1 million at
September 30, 2000 from $56.0 million at September 30, 1999. The increase was
primarily attributable to a $1.0 million increase in the Bank's loans
receivable, net, a $100,000 increase in available for sale securities, and a
$1.3 million increase in cash and due from banks, partially offset by a decrease
in mortgage-backed securities of $300,000. The Bank's total liabilities
increased $2.0 million or 3.9%, to $52.7 million at September 30, 2000 from
$50.7 million at September 30, 1999. The increase was primarily attributable to
a $2.2 million increase in deposits, offset by a $100,000 decrease in FHLB
advances and a $100,000 decrease in other liabilities. Deposits increased
primarily due to increased marketing efforts through greater advertising and the
opening of a new branch office in Mt. Laurel, New Jersey. The increase in loans
receivable was due to greater marketing and increased demand in the Bank's
primary market area. The decrease in securities held-to-maturity was a result of
maturing instruments.
Retained earnings increased $124,000 to $2.6 million or 4.5% of total
assets at September 30, 2000, as compared to $2.5 million or 4.4% of total
assets at September 30, 1999. The increases in retained earnings are primarily
attributable to net income.
6
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Average Balance Sheet
The following table sets forth a summary of average balances of assets
and liabilities as well as average yield and rate information. Average balances
are based upon month-end balances, however, the Bank does not believe the use of
month-end balances differs significantly from an average based upon daily
balances. There have been no tax equivalent adjustments made to yields.
<TABLE>
<CAPTION>
Year Ended September 30,
2000 1999
---------------------------------- -----------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ----
(Dollar in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable(1).................... $ 39,951 $ 3,151 7.88% $35,051 $ 2,809 8.01
Mortgage-backed securities............. 1,609 104 6.48 1,785 113 6.33
Investment securities(2)............... 10,902 566 5.19 8,565 355 4.14
Other interest-earning assets.......... 1,953 60 3.08 1,901 86 4.52
-------- ------- ------ ------- ------- ----
Total interest-earning assets....... 54,415 3,881 7.13 47,302 3,363 7.11
------
Noninterest-earning assets............... 2,739 -- 2,436 --
-------- ------- ------- -------
Total assets........................ $ 57,154 $ 3,881 $49,738 $ 3,363
======== ======= ======= =======
Interest-bearing liabilities:
NOW accounts........................... $ 6,245 $ 109 1.75 $ 5,093 $ 99 1.94
Savings accounts....................... 7,760 187 2.40 7,277 178 2.45
Money market accounts.................. 3,063 82 2.67 2,582 69 2.67
Certificates of deposit................ 23,059 1,209 5.25 21,652 1,096 5.06
FHLB - Advances........................ 8,184 505 6.17 3,962 193 4.87
-------- ------- ------ ------- ------- ------
Total interest-bearing liabilities.. 48,311 2,092 4.33 40,566 1,635 4.03
------ ------
Noninterest-bearing liabilities.......... 3,476 3,720
-------- -------
Total liabilities................... 51,787 44,286
-------- -------
Stockholders' equity..................... 5,367 5,452
-------- -------
Total liabilities and
Retained earnings................ $ 57,154 $ 2,092 $49,738 $ 1,635
======== ======= ======= =======
Net interest income...................... $ 1,789 $ 1,728
======= ======
Interest rate spread(3).................. 2.80% 3.08%
====== ======
Net yield on interest-earning assets(4).. 3.29% 3.65%
====== ======
Ratio of average interest-earning
assets to average interest-bearing
liabilities............................ 112.63% 116.61%
====== ======
</TABLE>
-----------------
(1) Average balances include non-accrual loans.
(2) Includes interest-bearing deposits in other financial institutions.
(3) Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net yield on interest-earning assets represents net interest income as a
percentage of average interest-earning assets.
7
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Rate/Volume Analysis
The table below sets forth certain information regarding changes in the
Bank's interest income and interest expense for the periods indicated. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume
(changes in average volume multiplied by old rate); (ii) changes in rates
(changes in rate multiplied by old average volume); (iii) changes in rate-volume
(changes in rate multiplied by the change in average volume).
<TABLE>
<CAPTION>
Year Ended September 30,
2000 vs. 1999
----------------------------------
Increase (Decrease)
Due to
----------------------------------
Rate/
Volume Rate Volume Net
-------- ------ ------- -----
(In thousands)
<S> <C> <C> <C> <C>
Interest income:
Loans receivable .......................................... $ 392 $ (46) $ (4) $ 342
Mortgage-backed securities ................................ (11) 3 (1) (9)
Investment securities ..................................... 96 90 25 211
Other interest-earning assets ............................. 2 (27) (1) (26)
----- ----- ----- -----
Total interest income .................................. $ 479 $ 20 $ 19 $ 518
===== ===== ===== =====
Interest expense:
NOW accounts .............................................. $ 22 $ (10) $ (2) $ 10
Savings account ........................................... 12 (3) -- 9
Money market accounts ..................................... 13 -- -- 13
Certificates of deposit ................................... 70 40 3 113
Other liabilities ......................................... 206 52 54 312
----- ----- ----- -----
Total interest expense ................................. 323 79 55 457
===== ===== ===== =====
Change in net interest income ............................... $ 156 $ (59) $ (36) $ 61
===== ===== ===== =====
</TABLE>
8
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Results of Operations
Net Income. The Bank's net income decreased $100,000 for the year ended
September 30, 2000, to $124,000 from $224,000 for the year ended September 30,
1999. This decrease was primarily attributable to a $278,000 increase in
non-interest expense, partially offset by increases in net interest income and
non-interest income.
Net Interest Income. Net interest income is the most significant
component of the Bank's income from operations. Net interest income is the
difference between interest the Bank received on its interest-earning assets,
primarily loans, investment and mortgage-backed securities and interest the Bank
pays on its interest-bearing liabilities, primarily deposits and borrowings. Net
interest income depends on the volume of and rates earned on interest-earning
assets and the volume of and rates paid on interest-bearing liabilities.
Net interest income after provision for loan losses increased $111,000
or 6.7%, to $1.8 million for the year ended September 30, 2000, as compared to
$1.7 million for the year ended September 30, 1999. The increase was primarily
due to the growth in the average balance of interest-earning assets to $54.4
million in 2000 from $47.3 million in 1999.
The increase in the average balance of interest-earning assets of $7.1
million primarily reflects increases of $4.9 million in the Bank's average
balance of loans and $2.3 million in investment securities, partially offset by
a decrease of $100,000 in the mortgage-backed average balance of securities and
other assets.
The increase in average interest-bearing liabilities of $7.7 million
reflects increases of $1.2 million in the Bank's average balance of
interest-bearing NOW accounts and $2.4 million in the average balance of
savings, money market and certificates of deposit and an increase of $4.2
million in the average balance of FHLB borrowings.
Provision for Loan Losses. Provision for loan losses was $10,000 for
the year ended September 30, 2000, as compared to $60,000 for the year ended
September 30, 1999. The provision is established to adjust the balance of the
allowance for loan losses to a level management feels is sufficient based on the
risk characteristics of the loan portfolio.
Management believes the allowance for loan losses is at a level that is
adequate to provide for estimated losses. However, there can be no assurance
that further additions will not be made to the allowance and that such losses
will not exceed the estimated amount.
Noninterest Income. Noninterest income increased $20,000 or 8.5% from
$235,000 for the year ended September 30, 1999 to $255,000 for 2000. This
increase in the Bank's noninterest income was due to a gain on the sale of real
estate owned of $36,000, partially offset by a decrease in fees and other
service charges of $13,000 and a decrease in gain on available for sale
securities of $3,000.
9
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Noninterest Expense. Noninterest expense increased $278,000 or 17.7%
from $1.6 million for the year ended September 30, 1999, to $1.9 million for
2000. The increase in the Bank's noninterest expense was due to a $105,000
increase in the Bank's occupancy and equipment expense, a $66,000 increase in
other noninterest expense and an increase of $116,000 in the Bank's compensation
and benefits, partially offset by a decrease of $9,000 in the Bank's federal
insurance premiums. The category of non-interest expense described as "Other" is
comprised of expenses related to advertising, fees charged by banks, loan
processing fees, NOW expenses, costs related to supplies and various
professional fees. The highest of these expenses was $85,000 for bank processing
fees. The increase in occupancy and equipment expense was attributable in part
to expenses associated with the opening of the Bank's new Mt. Laurel branch
office in April 2000. The increase in compensation and benefits expense was due
in part to additional personnel required to support the Bank's growth.
Income Tax Expense. Income tax expense decreased $47,000 from $109,000
for the year ended September 30, 1999 to $61,000 for 2000. This decrease in
income tax expense is due to the decrease in the Bank's pretax income of
$147,000 from $333,000 for 1999 to $186,000 for 2000. The Bank's effective tax
rate was 33% for both the year ended September 30, 2000 and 1999.
Liquidity and Capital Resources
The Bank is required to maintain minimum levels of liquid assets as
defined by OTS regulations. This requirement, which varies from time to time
depending upon economic conditions and deposit flows, is based upon a percentage
of the Bank's deposits and short-term borrowings. The required ratio currently
is 4.0% and the Bank's regulatory liquidity ratio average was 14.8% and 17.5% at
September 30, 2000 and 1999, respectively.
The Bank's primary sources of funds are deposits, repayment of loans
and mortgage-backed securities, maturities of investment securities and
interest-bearing deposits with other banks, advances from the FHLB of New York,
and funds provided from operations. While scheduled repayments of loans and
mortgage-backed securities and maturities of investment securities are
predictable sources of funds, deposit flows, and loan prepayments are greatly
influenced by the general level of interest rates, economic conditions and
competition. The Bank uses its liquidity resources principally to fund existing
and future loan commitments, maturing certificates of deposit and demand deposit
withdrawals, to invest in other interest-earning assets, to maintain liquidity,
and meet operating expenses.
Net cash provided by the Bank's operating activities (the cash effects
of transactions that enter into the Bank's determination of net income e.g.,
non-cash items, amortization and depreciation, provision for loan losses) for
the year ended September 30, 2000 totaled $141,000, a decrease of $9,000 as
compared to 1999.
Net cash used by the Bank's investing activities (i.e., cash
disbursements, primarily for the purchase of the Bank's investment securities
and mortgage-backed securities portfolios and the Bank's loan portfolio) for the
year ended September 30, 2000, totaled $805,000, a decrease of $15.7 million.
The decrease in cash used was primarily attributable to funding net loan
10
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growth of $1.2 million in 2000 as compared to $7.9 million in 1999 as well as no
investment purchases in 2000 as compared to $10.8 million in 1999. The decrease
in cash used was partially offset by paydowns and maturities of investment and
mortgage-backed securities of $287,000 in 2000 as compared to $2.5 million in
1999.
Net cash provided in the Bank's financing activities (i.e., cash
receipts primarily from net proceeds from stock issuance and from net increases
in deposits and net increases in FHLB advances) for the year ended September 30,
2000, totaled $1.9 million, a decrease of $12.3 million as compared to the year
ended September 30, 1999. This increase in cash was primarily attributable to
increased deposits of $2.2 million offset by repayment of FHLB advances of
$116,000 and a purchase of treasury stock of $185,000.
Approximately $19.1 million of the Bank's time deposits mature within
the next 12 months. The Bank expects such deposits to be renewed at market
rates. In addition to this source of continuing funding, the Bank has total
borrowing capacity of 50% of total first mortgage loans through the FHLB of New
York.
11
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xxxx
To the Board of Directors
Farnsworth Bancorp, Inc. and Subsidiary
INDEPENDENT AUDITORS' REPORT
----------------------------
We have audited the accompanying consolidated statements of financial condition
of Farnsworth Bancorp, Inc. and Subsidiary as of September 30, 2000 and 1999,
and the related consolidated statements of income and comprehensive income,
changes in stockholders' equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Farnsworth Bancorp,
Inc. and Subsidiary at September 30, 2000 and 1999, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/Kronick Kalada Berdy & Co.
Kingston, Pennsylvania
November 16, 2000
F-1
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FARNSWORTH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 2000 and 1999
<TABLE>
<CAPTION>
September 30,
-----------------------------------
ASSETS 2000 1999
------ --------------- ---------------
<S> <C> <C>
Cash and due from banks $ 3,163,345 $ 1,883,104
Securities available for sale 8,760,132 8,672,614
Securities held to maturity (fair value approximates
$2,129,650 at September 30, 2000) 2,273,068 2,267,216
Mortgage backed securities held to maturity (fair value
approximates $1,443,053 at September 30, 2000) 1,468,438 1,755,110
Loans receivable, net 39,850,070 38,832,141
Accrued interest receivable 419,459 423,706
Federal Home Loan Bank of New York stock at
cost, substantially restricted 457,800 418,700
Premises and equipment 1,575,974 1,516,252
Deferred income taxes 66,611 99,359
Real estate owned - 88,013
Other assets 60,594 72,236
--------------- ---------------
Total assets $ 58,095,491 $ 56,028,451
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits
Non Interest Bearing $ 2,336,530 $ 3,989,352
Interest Bearing 42,398,105 38,500,810
Federal Home Loan Bank advances 7,597,286 7,712,940
Advances by borrowers for taxes and insurance 212,302 213,653
Accrued income taxes 469 78,160
Accrued interest payable 72,492 97,119
Accounts payable and other accrued expenses 97,298 149,254
--------------- ---------------
Total liabilities 52,714,482 50,741,288
--------------- ---------------
Preferred stock $.10 par value, 1,000,000 shares
authorized; none issued and outstanding
Common stock $.10 par value, 5,000,000 shares
authorized; 379,858 shares issued 37,985 37,985
Additional paid in capital 3,396,262 3,396,262
Treasury stock at cost 18,992 shares (185,172) -
Retained earnings substantially restricted 2,575,605 2,451,554
Common stock acquired by employee stock
ownership plan (ESOP) (235,154) (303,880)
Common stock acquired by restricted stock
plan (RSP) (127,764) (159,364)
Accumulated other comprehensive income,
unrealized depreciation on available for sale
securities, net of taxes (80,753) (135,394)
--------------- ---------------
Total stockholders' equity 5,381,009 5,287,163
--------------- ---------------
Total liabilities and stockholders' equity $ 58,095,491 $ 56,028,451
=============== ===============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-2
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
------------- -----------
<S> <C> <C>
Interest income:
Loans receivable $ 3,150,544 $2,809,244
Securities 705,684 500,293
Federal funds sold 24,734 53,774
------------- -----------
Total interest income 3,880,962 3,363,311
------------- -----------
Interest expense:
Deposits 1,586,914 1,441,946
Federal Home Loan Bank advances 505,024 192,962
------------- -----------
Total interest expense 2,091,938 1,634,908
------------- -----------
Net interest income 1,789,024 1,728,403
Provision for loan losses 10,000 60,579
------------- -----------
Net interest income after provision
for loan losses 1,779,024 1,667,824
------------- -----------
Noninterest income:
Fees and other service charges 219,635 232,123
Gain on sale of REO 35,664 -
Net realized gains on sale of available for sale securities - 3,359
------------- -----------
Total noninterest income 255,299 235,482
------------- -----------
Noninterest expense:
Compensation and benefits 869,584 752,890
Occupancy and equipment 411,782 307,337
Federal insurance premiums and assessments 12,682 21,897
Other 554,356 488,302
------------- -----------
Total noninterest expense 1,848,404 1,570,426
------------- -----------
Income before provision for income taxes 185,919 332,880
Provision for income taxes 61,868 108,689
------------- -----------
Net income 124,051 224,191
------------- -----------
Other comprehensive income
Unrealized gain (loss) on securities available
for sale, net of taxes $30,736, 2000; $122,081,1999 54,641 (217,033)
Reclassification adjustment for gains included in net income - (3,359)
------------- -----------
Comprehensive income $ 178,692 $ 3,799
============= ===========
Net Income per common share: Basic $ 0.36 $ 0.66
============= ===========
Weighted average number of shares outstanding during the year $ 337,336 $ 337,314
============= ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-3
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
September 30, 2000 and 1999
<TABLE>
<CAPTION>
Appreciation
Retained Common Common (Depreciation)
Additional Earnings Stock Stock on Securities Total
Common Paid in Treasury Substantially Acquired Acquired Available for Stockholders'
Stock Capital Stock Restricted By ESOP By RSP Sale, Net of Tax Equity
-------- ----------- ---------- ------------- ----------- ----------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
September 30, 1998 $37,985 $3,396,262 $ - $2,227,363 $(303,880) $ - 84,998 $5,442,728
Net income for the
year ended
September 30, 1999 - - - 224,191 - - - 224,191
Acquisition of common
stock by RSP - - - - - (159,364) - (159,364)
Change in unrealized
(depreciation)
on securities
available for sale,
net of tax - - - - - - (220,392) (220,392)
------- ---------- --------- ----------- --------- --------- --------- ----------
Balance at
September 30, 1999 37,985 3,396,262 - 2,451,554 (303,880) (159,364) (135,394) 5,287,163
Net income for the
year ended
September 30, 2000 - - - 124,051 - - - 124,051
Acquisition of
treasury stock - - (185,172) - - - (185,172)
RSP shares allocated 31,600 31,600
ESOP shares allocated 68,726 68,726
Change in unrealized
(depreciation)
on securities
available for sale,
net of tax - - - - - - 54,641 54,641
------- ---------- --------- ----------- --------- --------- --------- ----------
Balance at
September 30, 2000 $37,985 $3,396,262 $(185,172) $2,575,605 $(235,154) $(127,764) $ (80,753) $5,381,009
======= ========== ========= =========== ========= ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 124,051 $ 224,191
------------- -------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 82,651 78,468
Provision for loan losses 10,000 45,579
Net gain on sale of assets (35,664) (3,359)
Stock compensation 100,326
(Increase)decrease in accrued interest receivable 4,247 (196,388)
(Increase) decrease in prepaid expenses and other assets 9,248 (6,541)
(Decrease) in advances from borrowers (1,351) (1,231)
(Decrease) in accrued income taxes (75,671) (82,954)
Increase(decrease) in accrued interest payable (24,627) 58,427
Increase (decrease) in other accrued liabilities (51,956) 33,363
------------- -------------
Total adjustments 17,203 (74,636)
------------- -------------
Net cash provided by operations 141,254 149,555
------------- -------------
Cash flows from investing activities:
Net increase in loans receivable (1,234,804) (7,924,181)
Redemption and principal payments
of securities held to maturity 287,148 1,133,776
Purchase of securities to be held to maturity - (503,574)
Purchase of securities available for sale - (10,342,453)
Proceeds from sale of real estate owned 330,000
Proceeds from sale of securities available for sale - 1,464,532
Purchase of Federal Home Loan Bank stock (39,100) (157,400)
Purchase of premises and equipment (147,904) (131,111)
------------- -------------
Net cash used in investing activities (804,660) (16,460,411)
------------- -------------
Cash flows from financing activities:
Increase in savings accounts and demand deposits 2,244,473 6,712,307
Federal Home Loan Bank advances 102,299,893 7,712,940
Federal Home Loan Bank advances, repayments (102,415,547)
Purchase of RSP shares - (159,364)
Purchase of treasury stock (185,172)
------------- -------------
Net cash provided by financing activities 1,943,647 14,265,883
------------- -------------
Net increase (decrease) in cash and due from banks 1,280,241 (2,044,973)
Cash and due from banks at beginning of year 1,883,104 3,928,077
------------- -------------
Cash and due from banks at end of year $ 3,163,345 $ 1,883,104
============= =============
Supplemental disclosure:
Cash paid during the year for:
Interest $ 2,116,565 $ 1,576,481
============= =============
Income taxes $ 138,092 $ 64,000
============= =============
Non cash items:
Unrealized gain (loss) on securities available for
sale, net of deferred income taxes $ 54,641 $ (220,392)
============= =============
Acquisition of real estate in settlement of loans $ 195,625 $ 88,013
============= =============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-5
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Operations and Summary of Significant Accounting Policies
---------------------------------------------------------
Nature of Operations
--------------------
Farnsworth Bancorp, Inc. and Subsidiary (together the "Company") operate
three branches in Burlington County, New Jersey. The Bank offers customary
banking services, including accepting of checking, savings and time
deposits and the making of commercial, real estate and consumer loans, to
customers who are predominantly small and middle-market businesses and
middle-income individuals. Subsequent to September 30, 2000, the Company
formed a new subsidiary, Peoples Financial Services, Inc. Peoples
Financial Services, Inc. was organized for the purpose of providing
securities brokerage and investment advisory services and products to
customers of the Bank.
Basis of Financial Statement Presentation
-----------------------------------------
The consolidated financial statements, which have been prepared in
conformity with generally accepted accounting principles, include the
accounts of the Company and its wholly owned subsidiary, Peoples Savings
Bank (the "Bank"). All significant intercompany accounts and transactions
have been eliminated in consolidation. In preparing the financial
statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the statements of
financial condition and the reported amounts of revenues and expenses for
the reporting periods. Actual results could differ significantly from
those estimates. Material estimates that are particularly susceptible to
significant changes in the near term relate to the determination of the
allowance for loan losses, the valuation of foreclosed real estate and the
assessment of prepayment risks associated with mortgage-backed securities.
Management believes that the allowance for loan losses is adequate,
foreclosed real estate is appropriately valued and prepayment risks
associated with mortgage-backed securities are properly recognized. While
management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowance for loan losses
or further writedowns of foreclosed real estate may be necessary based on
changes in economic conditions in the market area. Additionally,
assessments of prepayment risks related to mortgage-backed securities are
based upon current market conditions, which are subject to frequent
change.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for loan
losses and foreclosed real estate. Such agencies may require the Bank to
recognize additions to the allowance for loan losses or additional
writedowns on foreclosed real estate based on their judgements about
information available to them at the time of their examination.
Concentration of Risk
---------------------
The Bank's lending and real estate activity is concentrated in real estate
and loans secured by real estate located in the State of New Jersey. The
Bank's loan portfolio is predominantly made up of 1 to 4 family unit first
mortgage loans in Burlington County. These loans are typically secured by
first lien positions on the respective real estate properties and are
subject to the Bank's loan underwriting policies. In general, the Bank's
loan portfolio performance is dependent upon the local economic
conditions.
Interest-rate Risk
------------------
The Bank is principally engaged in the business of attracting deposits
from the general public and using these deposits to make loans secured by
real estate and, to a lesser extent, consumer loans and to purchase
investment securities. The potential for interest-rate risk exists as a
result of the shorter duration of the Bank's interest-sensitive
liabilities compared to the generally longer duration of
interest-sensitive assets. In a rising interest rate environment,
liabilities will reprice faster than assets, thereby reducing the market
value of long-term assets and net interest income. For this reason,
management regularly monitors the maturity structure of the Bank's assets
and liabilities in order to measure its level of interest-rate risk and to
plan for future volatility.
F-6
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Operations and Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------
Cash Equivalents
----------------
For the purpose of presentation in the statements of cash flows, cash and
cash equivalents are defined as those amounts included in the statement of
financial condition caption "cash and due from banks."
Investment Securities
---------------------
The Bank's investments in securities are classified in two categories and
accounted for as follows:
o Securities Held to Maturity. Bonds, notes, debentures and mortgages
for which the Bank has the positive intent and ability to hold to
maturity are reported at cost, adjusted for amortization of premiums
and accretion of discounts which are recognized in interest income
using the interest method over the period to maturity.
o Securities Available for Sale. Securities available for sale are
reported at market value and consist of certain debt and equity
securities not classified as trading or securities to be held to
maturity.
Declines in the fair value of individual held to maturity and available
for sale securities below their cost that are other than temporary will
result in write-downs of the individual securities to their fair value.
The related write-downs will be included in earnings as realized losses.
Unrealized holding gains and losses, net of tax, on securities available
for sale are reported as a net amount in a separate component of equity
until realized.
Gains and losses on the sale of securities available for sale are
determined using the specific-identification method.
Loans Receivable
----------------
Loans receivable that management has the intent and ability to hold until
maturity or pay-off are reported at their outstanding principal adjusted
for any charge-offs, the allowance for loan losses, and any deferred fees
or costs on originated loans and unamortized premiums or discounts on
purchased loans.
Loan origination fees and certain direct origination costs are capitalized
and recognized as an adjustment of the yield over the contractual life of
the loan.
Loans classified as impaired, if any, are measured based on the present
value of expected future cash flows discounted at the loan's effective
interest rate, or as a practical expedient, at the loan's observable
market price or the fair value of the collateral if the loan is collateral
dependent. A loan evaluated for impairment is deemed to be impaired when
based on current information and events, it is probable that the Bank will
be unable to collect all amounts due according to the contractual terms of
the loan agreement. All loans identified as impaired are evaluated
independently. The accrual of interest on impaired loans is discontinued
when, in management's opinion, the borrower may be unable to meet payments
as they become due. When interest accrual is discontinued, all unpaid
accrued interest is reversed. Interest income is subsequently recognized
only to the extent cash payments are received. No loans were identified as
impaired as of September 30, 2000 and 1999, respectively.
F-7
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Operations and Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------
Loans Receivable (continued)
----------------
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Bank's past
loan loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay, the estimated
value of any underlying collateral, and current economic conditions.
Premises and Equipment
----------------------
Land is carried at cost. Bank premises and equipment are carried at cost
less accumulated depreciation. Significant renovations and additions are
capitalized. When assets are retired or otherwise disposed of, the cost
and related accumulated depreciation are removed from the accounts and any
resulting gain or loss is reflected in income for the period. The cost of
maintenance and repairs is charged to expense as incurred. The Bank
computes depreciation on a straight-line basis over the estimated useful
lives of the assets.
Real Estate Owned:
------------------
Real estate properties acquired through, or in lieu of, loan foreclosure
are initially recorded at the lower of cost or fair value at the date of
foreclosure. Costs relating to development and improvement of property are
capitalized, whereas costs relating to the holding of property are
expensed. Management periodically performs valuations, and an allowance
for losses is established by a charge to operations if the carrying value
of a property exceeds its fair value less estimated selling cost. Gains
and losses from sale of these properties are recognized as they occur.
Income Taxes
------------
Deferred tax assets and liabilities are reflected at income tax rates
applicable to the period in which the deferred tax assets or liabilities
are expected to be realized or settled. As changes in tax laws or rates
are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes or as an adjustment to accumulated other
comprehensive income.
2. Stockholders' Equity
--------------------
On March 2, 1998, the Board of Directors of the Bank adopted a Plan of
Conversion, pursuant to which the Bank converted from a federally
chartered mutual savings bank to a federally chartered stock savings bank,
with the concurrent formation of a holding company.
At the time of the conversion, the Bank, in order to grant priority to
eligible depositors in the event of future liquidation, established a
liquidation account of $2,225,315, an amount equal to its total net worth
as of June 30, 1998, the date of the latest statement of financial
condition appearing in the final prospectus. The liquidation account will
be maintained for the benefit of eligible account holders who continue to
maintain their accounts at the bank after the conversion. The liquidation
account will be reduced annually to the extent that eligible account
holders have reduced their qualifying deposits. Subsequent increases in
the deposit account will not restore an eligible account holder's interest
in the liquidation account. In the unlikely event of a complete
liquidation, each eligible account holder will be entitled to receive a
distribution from the liquidation account in an amount proportionate to
the account holder's current adjusted qualifying balances. The balance of
the liquidation account on September 30, 2000 and 1999 has not been
determined.
F-8
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Stockholders' Equity (Continued)
--------------------
The ability of Farnsworth Bancorp, Inc. to pay dividends to stockholders
is dependent upon the receipt of income from the Bank. The Bank may not
declare or pay any dividend on or repurchase any of its capital stock if
the effect thereof would cause its net worth to be reduced below: (1) the
amount required for the liquidation account, or (2) the net worth
requirements contained in section 563.13 (b) of the rules and regulation
of the Office of Thrift Supervision (the "OTS").
3. Held to Maturity and Available for Sale Securities
--------------------------------------------------
The carrying amounts and fair values of these investments at September 30,
2000 and 1999 are summarized as follows:
<TABLE>
<CAPTION>
2000
Gross Unrealized
Amortized ----------------------------------- Fair
Held to maturity: Cost Gains Losses Value
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
U.S. Government and
Agency securities $2,173,738 $ - $ 152,388 $2,021,350
Municipal securities 99,330 8,970 - 108,300
--------------- -------------- --------------- ---------------
$2,273,068 $ 8,970 $ 152,388 $2,129,650
=============== ============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
1999
Gross Unrealized
Amortized ----------------------------------- Fair
Held to maturity: Cost Gains Losses Value
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
U.S. Government and
Agency securities $2,167,944 $ 14,442 $ 111,974 $2,070,412
Municipal securities 99,272 7,707 - 106,979
--------------- -------------- --------------- ---------------
$2,267,216 $ 22,149 $ 111,974 $2,177,391
=============== ============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
2000
Gross Unrealized
Amortized ----------------------------------- Fair
Available for sale securities: Cost Gains Losses Value
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
U.S. Government and
Agency securities $8,462,833 $ - $ 234,447 $8,228,386
Corporate bonds 419,525 - 33,965 385,560
Equity securities 3,339 142,847 - 146,186
--------------- -------------- --------------- ---------------
$8,885,697 $ 142,847 $ 268,412 $8,760,132
=============== ============== =============== ===============
</TABLE>
F-9
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. Held to Maturity and Available for Sale Securities (Continued)
--------------------------------------------------
<TABLE>
<CAPTION>
1999
Gross Unrealized
Amortized ----------------------------------- Fair
Available for sale securities: Cost Gains Losses Value
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
U.S. Government and
agency securities $8,461,272 $ - $ 320,551 $8,140,721
Corporate bonds 419,490 - 28,205 391,285
Equity securities 3,339 137,269 140,608
--------------- -------------- --------------- ---------------
$8,884,101 $ 137,269 $ 348,756 $8,672,614
=============== ============== =============== ===============
</TABLE>
The schedule of maturities of available for sale and held to maturity
securities at September 30, 2000 is as follows:
<TABLE>
<CAPTION>
Amortized Fair
Available for Sale Securities: Cost Value
--------------------------------------------------------
<S> <C> <C>
Due in one year or less $ - $ -
Due from one to five years 4,499,738 4,391,500
Due from five to ten years 3,000,000 2,939,886
Due after ten years 1,382,620 1,282,560
-------------------- --------------------
$8,882,358 $8,613,946
==================== ====================
</TABLE>
<TABLE>
<CAPTION>
Amortized Fair
Held to Maturity Securities: Cost Value
--------------------------------------------------------
<S> <C> <C>
Due in one year or less $ - $ -
Due from one to five years 1,976,419 1,844,750
Due from five to ten years 197,319 176,600
Due after ten years 99,330 108,300
-------------------- --------------------
$ 2,273,068 $ 2,129,650
==================== ====================
</TABLE>
4. Mortgage Backed Securities Held to Maturity
-------------------------------------------
Investments in mortgage backed securities are stated at cost, adjusted for
amortization of premiums and accretion of fees and discounts. The Bank has
adequate liquidity and capital, and it is generally management's intention
to hold such assets to maturity. The carrying values and fair values of
mortgage backed securities are summarized as follows:
<TABLE>
<CAPTION>
2000
-----------------------------------------------------------------------
Principal Unamortized Unearned Carrying
Balance Premiums Discounts Value
---------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
GNMA Certificates $ 499,160 $ 7,125 $ - $ 506,285
FHLMC and FNMA Certificates 962,568 3,160 3,575 962,153
---------------- --------------- ------------- ---------------
$1,461,728 $10,285 $ 3,575 $1,468,438
================ =============== ============= ===============
</TABLE>
F-10
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. Mortgage Backed Securities, Held to Maturity (Continued)
--------------------------------------------
<TABLE>
<CAPTION>
2000
-----------------------------------------------------------------------
Gross Unrealized
Carrying ----------------------------------- Fair
Value Gains Losses Value
---------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
GNMA Certificates $ 506,285 $ 1,240 $ 4,017 $ 503,508
FHLMC and FNMA Certificates 962,153 - 22,608 939,545
---------------- --------------- ------------- ---------------
$ 1,468,438 $ 1,240 $ 26,625 $1,443,053
================ =============== ============= ===============
</TABLE>
<TABLE>
<CAPTION>
1999
-----------------------------------------------------------------------
Principal Unamortized Unearned Carrying
Balance Premiums Discounts Value
---------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
GNMA Certificates $ 586,416 $ 8,697 $ - $ 595,113
FHLMC and FNMA Certificates 1,161,508 3,563 5,074 1,159,997
---------------- --------------- ------------- ---------------
$1,747,924 $ 12,260 $ 5,074 $1,755,110
================ =============== ============= ===============
</TABLE>
<TABLE>
<CAPTION>
1999
-----------------------------------------------------------------------
Gross Unrealized
Carrying ----------------------------------- Fair
Value Gains Losses Value
---------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
GNMA Certificates $ 595,113 $ 2,240 $ 1,756 $ 595,597
FHLMC and FNMA Certificates 1,159,997 - 27,528 1,132,469
---------------- --------------- ------------- ---------------
$1,755,110 $ 2,240 $ 29,284 $1,728,066
================ =============== ============= ===============
</TABLE>
Mortgage-backed securities with a carrying value and fair value of
$365,500 and $361,483 at September 30, 2000 and $412,303 and $419,064 at
September 30, 1999 are pledged as security for deposits of governmental
entities under the provisions of Governmental Unit Deposit Protection Act.
F-11
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Loans Receivable
----------------
Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
2000 1999
--------------- -----------------
<S> <C> <C>
First mortgage loans Principal balances:
Secured by one to four family residence $ 26,507,971 $ 27,443,330
Construction loans 861,398 1,885,900
Commercial real estate 4,801,539 3,742,753
--------------- -----------------
32,170,908 33,071,983
--------------- -----------------
Less:
Loans in process - real estate (377,442) (829,891)
Unearned discounts - (12,466)
Deferred loan origination fees net of
costs of $106,313 and $104,234 (196,243) (180,497)
--------------- -----------------
Total first mortgage loans 31,597,223 32,049,129
--------------- -----------------
Consumer and other loans Principal balances:
Home equity 7,897,375 6,261,368
Personal loans 253,542 205,224
Loans secured by savings 161,113 171,908
Commercial business loans 70,672 270,512
Automobile 56,145 50,000
--------------- -----------------
Total consumer and other loans 8,438,847 6,959,012
--------------- -----------------
Total loans 40,036,070 39,008,141
Less allowance for loan losses (186,000) (176,000)
--------------- -----------------
$ 39,850,070 $ 38,832,141
============== ================
</TABLE>
At September 30, 2000 and 1999, nonaccrual loans for which interest had
been discontinued totaled approximately $125,000 and $404,000,
respectively. Interest income actually recognized is summarized as
follows:
2000 1999
----------- ------------
Interest income that would have
been recorded $ 10,097 $ 46,127
Interest income recognized - 1,099
----------- ------------
Interest income foregone $ 10,097 $ 45,028
=========== ============
F-12
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Loans Receivable (Continued)
-------------------------
An analysis of the change in the allowance for loan losses:
2000 1999
----------- ------------
Allowance for loan losses:
Beginning of year $ 176,000 $ 135,000
Additional provisions 10,000 45,579
Charge offs - (4,579)
----------- ------------
End of year $ 186,000 $ 176,000
=========== ============
The activity with respect to loans to directors, officers and associates
of such persons is summarized as follows:
2000 1999
----------- -----------
Beginning of year $ 603,931 $ 217,274
Loans originated 117,850 402,682
Collection of principal (87,710) (16,025)
----------- -----------
End of year $ 634,071 $ 603,931
=========== ===========
All loans to directors, officers and associates of such persons are
collateralized by deposits and/or real estate.
6. Accrued Interest Receivable
---------------------------
Accrued interest receivable is summarized as follows:
2000 1999
----------- ------------
Loans receivable $ 239,367 $ 242,138
Mortgage backed securities 7,854 9,330
Investments 172,238 172,238
----------- ------------
$ 419,459 $ 423,706
=========== ============
7. Premises and Equipment
----------------------
Premises and equipment are summarized by major classification as follows:
2000 1999
------------ ------------
Land $ 126,435 $ 126,435
Office building (Bordentown) 1,355,912 1,352,051
Office building (Florence) 53,032 39,015
Office building (Mount Laurel)) 36,376 29,077
Furniture, fixtures and equipment 561,015 438,288
------------ ------------
2,132,770 1,984,866
Less accumulated depreciation 556,796 468,614
------------ ------------
$ 1,575,974 $ 1,516,252
============ ============
Depreciation charged to operations was $88,182 and $77,324 for the years
ended 2000 and 1999, respectively.
F-13
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
8. Deposits
--------
Deposits as of September 30 are summarized as follows:
2000 1999
------------ -------------
NOW accounts $ 7,884,822 $ 5,192,051
Money market accounts 3,079,901 3,045,330
Passbook and club accounts 7,505,056 7,481,882
Non Interest Bearing 2,336,530 3,989,352
------------ -------------
Subtotal 20,806,309 19,708,615
------------ -------------
Certificates of deposit:
3.01% to 4.0% 300,148 1,016,360
4.01% to 5.0% 2,246,837 11,198,720
5.01% to 6.0% 11,362,374 9,919,282
6.01% to 7.0% 10,018,967 647,185
------------ -------------
Subtotal 23,928,326 22,781,547
------------ -------------
$44,734,635 $ 42,490,162
============ =============
Deposits of officers and directors totaled $298,000 in 2000. The aggregate
amount of jumbo certificates of deposit with a minimum denomination of
$100,000 was approximately $3,740,000 and $1,562,000 at September 30, 2000
and 1999. These certificates of deposit do not receive preferential rates
of interest. Deposits in excess of $100,000 are not federally insured.
As of September 30, 2000 and 1999, scheduled maturities of certificates of
deposit (rounded to the nearest $1,000) are summarized as follows:
2000 1999
------------ -------------
3 months or less $ 5,074,000 $ 4,444,000
From 3 months to 1 year 14,060,000 11,812,000
From 1 year to 3 years 4,462,000 5,748,000
From 3 years to 5 years 332,000 778,000
------------ -------------
$23,928,000 $ 22,782,000
============ =============
Interest expense on deposits for the years ended September 30, 2000 and
1999 is summarized as follows:
2000 1999
------------ -------------
NOW accounts $ 109,252 $ 98,793
Money market accounts 81,659 69,057
Passbook and club accounts 186,535 178,418
Certificates of deposit 1,209,468 1,095,678
------------ -------------
$ 1,586,914 $ 1,441,946
============ =============
F-14
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
9. Federal Home Loan Bank Advances
-------------------------------
These advances bear fixed interest rates ranging from 5.9% to 6.9%. They
are collateralized by FHLB stock and investment securities. The Bank has
$9,404,651 available for borrowing as of September 30, 2000.
Principal payments are as follows:
2001 $ 5,872,680
2002 630,132
2003 138,038
2004 146,423
2005 155,318
Thereafter 654,695
-----------
Total $ 7,597,286
===========
10. Gains on Sale of Interest Earning Assets
----------------------------------------
Realized gain on sales of available-for-sale securities was $ 0 and $
3,359 for the years ended September 30, 2000 and 1999, respectively.
11. Income Taxes
------------
The Bank has qualified as a Savings Institution under provisions of the
Internal Revenue Code. Prior to January 1, 1996 the Bank was permitted to
deduct from taxable income an allowance for bad debts based on a
percentage-of taxable income. Such percentage was 8% before such
deduction. Retained earnings at September 30, 2000 and 1999 included
untaxed earnings of approximately $355,800 and $381,500, representing such
bad debt deductions.
Retained earnings at September 30, 2000 and 1999 includes approximately
$153,850 of tax bad debt deductions which are considered a permanent
difference between the book and income tax basis of loans receivable, and
for which income taxes have not been provided. If such amount is used for
purposes other than bad debt losses, including distributions in
liquidation, it will be subject to income tax at the then current rate.
The provision for federal and state income taxes differs from that computed
at the statutory rate as follows:
2000 1999
----------- ------------
Statutory tax rate 34% 34%
Tax at statutory rate $ 63,212 $ 113,179
New Jersey Savings Institution Tax 6,200 3,395
(Decrease) increase in tax:
Low tax bracket savings (7,454) -
Tax exempt income (2,000) (2,000)
Miscellaneous 1,910 (5,885)
----------- ------------
$ 61,868 $ 108,689
=========== ============
F-15
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11. Income Taxes (Continued)
------------
The tax provision is summarized as follows:
2000 1999
----------- ------------
Current federal $ 55,500 $ 128,567
Deferred federal 168 (31,927)
Current state 5,050 15,000
Deferred state 1,150 (2,951)
----------- ------------
$ 61,868 $ 108,689
=========== ============
The following temporary differences gave rise to deferred tax assets and
liabilities:
2000 1999
----------- -----------
Deferred tax assets:
Allowance for loan losses $ 66,923 $ 67,640
Deferred loan origination fees, net 13,429 17,580
Accrued compensation 24,444 18,426
Unrecorded depreciation on investments 45,178 76,093
----------- -----------
Total deferred tax assets 149,974 179,739
----------- -----------
Deferred tax liabilities:
Premises and equipment 37,215 27,930
Tax reserve for loan losses 46,148 52,450
----------- -----------
Total deferred tax liabilities 83,363 80,380
----------- -----------
Net deferred tax asset $ 66,611 $ 99,359
=========== ===========
F-16
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12. Commitments
------------
At September 30, 2000 the Bank had the following commitments outstanding.
Mortgage commitments are for 45 days. Home equity commitments are for 60
days. Commitments on other loans are for 90 days. The commitments are
summarized as follows:
Amounts Rate Term
---------- ----------------- ------------
Mortgages (fixed rate) $ 337,500 7.375% to 7.875% 7 years
0 to 2 points
Home Equity loans 150,500 7.25% to 7.5% 3 to 5 years
0 points
Other loans 175,000 9.50% to 13.25% 1 to 3 years
0 to 1 points
-------------
$ 663,000
=============
There are two letters of credit outstanding at September 30, 2000. An
annual fee of 1/2 to 1 point is due on each of the letters of credit.
Interest is due at various rates if the letters of credit are utilized.
The amount of both letters totals $37,600. The Bank also has lines of
credit with undrawn balances of $624,000.
The bank has available two lines of credit through the Federal Home Loan
Bank. An overnight line of credit is available in the amount of
$2,565,150. Additionally, a one month overnight repricing line of credit
is available in the amount of $2,565,150.
Future minimum lease payments under a noncancellable operating lease for
one branch building is as follows:
2001 $ 57,000
2002 59,000
2003 60,000
2004 62,000
2005 64,000
Thereafter 216,000
----------
Total $ 518,000
==========
13. Financial Instruments
---------------------
Fair Values of Financial Instruments
------------------------------------
The following methods and assumptions were used in estimating fair values
of financial instruments as disclosed herein:
Cash and Due from Banks
-----------------------
The carrying amounts of cash and due from banks approximate their fair
value.
F-17
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
13. Financial Instruments (Continued)
---------------------
Available for Sale and Held to Maturity Securities and FHLB Stock
-----------------------------------------------------------------
Fair values for securities, excluding FHLB securities, are based on
quoted market prices. The carrying values of FHLB securities
approximate fair values.
Loans Receivable
----------------
For variable-rate loans that reprice frequently and have no significant
change in credit risk, fair values are based on carrying values. Fair
values for fixed rate mortgage loans and other consumer loans are based
on quoted market prices of similar loans sold in conjunction with
securitization transactions, adjusted for differences in loan
characteristics. Fair values for commercial real estate and commercial
loans are estimated using discounted cash flow analyses, using interest
rates currently being offered for loans with similar terms to borrowers
of similar credit quality.
Deposit Liabilities
-------------------
The fair values disclosed for demand deposits are, by definition, equal
to the amount payable on demand at the reporting date. The carrying
amounts of variable-rate, fixed-term money-market accounts and
certificates of deposit (CDs) approximate their fair values at the
reporting date. Fair values for fixed-rate CDs are estimated using a
discounted cash flow calculation that applies interest rates currently
being offered on certificates to a schedule of aggregated expected
monthly maturities on time deposits.
Accrued Interest
----------------
The carrying amounts of accrued interest approximate their fair values.
FHLB Advances
-------------
The fair value of FHLB advances is estimated based on rates currently
available to the Bank for debt with similar terms.
Other Liabilities
-----------------
The carrying amounts of other liabilities approximate their fair
values.
Other Off-Balance-Sheet Instruments
-----------------------------------
The Bank is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing need of
its customers. These financial instruments consist of commitments to
extend credit. Commitments to extend credit are agreements to lend to
a customer as long as there is no violation of any condition
established in the loan agreement. These commitments are comprised of
the undisbursed portion of loans and letters of credit. The Bank's
exposure to credit loss from nonperformance by the other party to the
financial instruments for commitments to extend credit is represented
by the contractual amount of those instruments. The Bank uses the same
credit policies in making commitments as it does for on-balance-sheet
instruments. Generally, collateral, usually in the form of real
estate, is required to support financial instruments with credit risk.
Commitments generally have fixed expirations dates or other
termination clauses and may require a payment of a fee. Since many of
the commitments are expected to expire without being drawn upon by
customers, the total commitment amounts do not necessarily represent
future cash requirements. The Bank evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained,
if it is deemed necessary by the Bank upon extension of credit, is
based on management's credit valuation of the counterparty. The fair
value of commitments is not considered significant.
F-18
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
13. Financial Instruments (Continued)
------------------------------
The carrying amounts and estimated fair values of the financial
instruments were as follows:
<TABLE>
<CAPTION>
2000 1999
----------------------------- -----------------------------
Carrying Fair Carrying Fair
Financial Assets Amount Value Amount Value
------------------------------------- ------------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Cash and due from banks $ 3,163 $ 3,163 $ 1,883 $ 1,883
Securities held to maturity 3,741 3,573 4,022 3,905
Securities available for sale 8,760 8,760 8,673 8,673
FHLB stock 458 458 419 419
Loans receivable 39,850 40,771 38,832 38,116
Accrued interest receivable 419 419 424 424
Financial Liabilities
-------------------------------------
Deposit liabilities 44,735 44,680 42,491 42,323
FHLB advances 7,597 7,774 7,713 7,583
Accrued interest payable 72 72 97 97
Other Liabilities 310 310 441 441
</TABLE>
14. Benefit Plans
-------------
Defined Contribution Plan
Employer contributions were $15,118 and $12,882 for 2000 and 1999,
respectively.
ESOP
----
Effective upon conversion, an ESOP was established for all eligible
employees. The ESOP used $303,880 of proceeds from a term loan from the
Company to purchase 30,388 shares of Company common stock in the initial
offering. The term loan from the Company to the ESOP, including interest,
is payable over one-hundred-eighty (180) equal monthly installments. The
initial interest rate is 8.25% and is subject to semi-annual adjustment
based on the prime rate (currently 9.50%). The Bank intends to make
contributions to the ESOP which will be equal to the principal and
interest payment required from the ESOP on the term loan. Shares purchased
with the loan proceeds are pledged as collateral for the term loan and are
held in a suspense account for future allocation among participants.
Contributions to the ESOP and shares released from the suspense account
will be allocated among the participants on the basis of compensation, as
described by the plan in the year of allocation. ESOP shares pledged as
collateral are reported as common stock acquired by ESOP in the
consolidated statements of financial condition. As shares are committed to
be released from collateral, the Company reports compensation expense
equal to the current market price of the shares, and the shares become
outstanding for basic net income per common share computations. Dividends
on allocated ESOP shares are recorded as a reduction of retained earnings.
Contributions equivalent to dividends on unallocated ESOP shares are
recorded as a reduction of debt.
F-19
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDARY
NOTES TO CONSOLIDATE FINANCIAL STATEMENTS
(Continued)
14. Benefit Plans (Continued)
-------------------------
2000 1999
----------- ------------
Allocated shares 6,076 3,038
Unallocated shares 24,312 27,350
=========== ============
Total ESOP shares unreleased 30,388 30,388
=========== ============
Fair value of unreleased shares $ 234,030 $ 276,915
=========== ============
Restricted Stock Plan (RSP)
---------------------------
On April 16 1999 the Bank established a RSP to provide both key employees
and outside directors with a proprietary interest in the Company in a
manner designed to encourage such person to remain with the Bank. A total
of 15,194 restricted shares were purchased at an average market value of
$10.48. Initially the total market value of the shares is treated as
unearned compensation and is charged to expense over the vesting period. A
total of 10,631 shares were issued to the board of directors and two
executive officers. These shares will be charged to expense over the five
years vesting period. During the year ended September 30, 2000, 2,120
shares vested with a value of $31,600.
The awards become fully vested upon termination of employment due to death
or disability.
Stock-based compensation plan
-----------------------------
The Company has a stock option plan that provides for the granting of
non-qualified stock options. In April 1999, the Company issued 26,587
options at an exercise practice of $10.63 per share to key Bank employees
and non-employee members of its Board of Directors. The options vest
ratably on the anniversary date over five years. The options expire ten
years after the initial grant date. At September 30, 2000, 7,976 options
are vested and none were exercised.
15. Net Income Per Common Share
---------------------------
Basic net income per common share is calculated by dividing net income by
the number of shares of common stock outstanding, adjusted for the
unallocated portion of shares held by the Company's ESOP. Diluted net
income per share is calculated by adjusting the number of shares of common
stock outstanding to include the effect of stock options, stock-based
compensation grants and other securities, if diluted, generally using the
treasury stock method. The Company has no potentially diluted securities
for either year.
<TABLE>
<CAPTION>
2000 1999
-------------------------------------------- -------------------------------------
Weighted Per- Weighted Per-
Average Share Average Share
Income Share Amount Income Share Amount
--------------- -------------- ----------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income available to
common shareholders $ 124,051 375,782 $ 224,191 379,858
ESOP shares (24,312) (27,350)
RSP shares (14,134) (15,194)
--------------- -------------- ----------- ------------ ----------- ---------
$ 124,051 $337,336 $ 0.36 $ 224,191 337,314 $ 0.66
=============== ============== =========== ============ =========== =========
</TABLE>
F-20
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
16. Regulatory Capital Requirement
------------------------------
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory -- and possibly
additional discretionary -- actions by regulators that, if undertaken,
could have a direct material effect on the Bank's financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Bank's assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk
weightings, and other factors.
The Office of Thrift Supervision ("OTS") has prescribed capital
requirements which include three separate measurements of capital
adequacy: a leverage-ratio capital standard ("core"), a tangible capital
standard and a risk-based capital standard (collectively known as the
"Capital Rule"). The Capital Rule requires each savings institution to
maintain tangible capital equal to at least 1.5% of its adjusted total
assets and core capital equal to at least 4.0% of its adjusted total
assets. The Capital Rule further requires each savings institution to
maintain total capital equal to at least 8.0% of its risk-weighted assets.
The Bank at September 30, 2000 and 1999 meets the regulatory core capital,
tangible capital, and risk based capital requirements as summarized:
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------------ ----------------------- ------------------------
Amount Ratio Amount Ratio Amount Ratio
---------- ------------ ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
As of September 30,
2000:
Risk-based capital 4,805 16.71 2,300 8.00 2,875 10.00
Tier 1 capital 4,805 16.71 N/A N/A 1,725 6.00
Core capital 4,805 8.31 2,312 4.00 2,890 5.00
Tangible capital 4,805 8.31 867 1.50 N/A N/A
As of September 30,
1999:
Risk-based capital 4,571 16.84 2,255 8.00 2,819 10.00
Tier 1 capital 4,571 16.22 N/A N/A 1,691 6.00
Core capital 4,571 8.22 2,226 4.00 2,783 5.00
Tangible capital 4,571 8.22 834 1.50 N/A N/A
</TABLE>
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") imposes increased requirements on the operations of financial
institutions and mandated the development of regulations designed to
empower regulators to take prompt corrective action with respect to
institutions that fall below certain capital standards. FDICIA stipulates
that an institution with less than 4% core capital is deemed to be
undercapitalized. Quantitative measures established by FDICIA to ensure
capital adequacy require the Bank to maintain minimum amounts and ratios
of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital to average assets
(as defined). Management believes, as of September 30, 2000, that the Bank
meets all capital adequacy requirements to which it is subject.
F-21
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
16. Regulatory Capital Requirement (Continued)
------------------------------------------
As of March 1999, the date of the most recent notification from the OTS,
the Bank was categorized as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain risk based capital, Tier I capital and
core capital ratios of 10%, 6%, and 5%, respectively. There are no
conditions existing or events which have occurred since notification that
management believes have changed the Bank's category.
Management believes that, under the current regulations, the Bank will
continue to meet its minimum capital requirements in the foreseeable
future. However, events beyond the control of the Bank could adversely
affect its future minimum capital requirements.
17. Parent Only Financial Information
---------------------------------
Farnsworth operates one wholly owned subsidiary, the Bank. The earnings of
the Bank are recognized by Farnsworth using the equity method of
accounting. Accordingly, the earnings of the Bank are recorded as
increases in Farnsworth's investment in the subsidiary. The following are
the condensed financial statements for Farnsworth (parent company only) as
of September 30, 2000 and 1999 and for the year then ended.
<TABLE>
<CAPTION>
Statement of Financial Condition 2000 1999
--------------- -------------
<S> <C> <C>
Assets
Cash $ 81,255 $ 70,679
Investments available for sale 481,500 480,938
ESOP loan receivable 243,104 281,089
Investment in subsidiary 2,941,477 2,807,322
Other assets 19,155 6,859
Accrued interest receivable 7,784 13,662
--------------- -------------
Total assets $ 3,774,275 $ 3,660,549
=============== =============
Liabilities
Accrued expenses $ 18,543 $ 14,314
Loan payable to the bank 170,625 -
--------------- -------------
Total liabilities 189,168 14,314
--------------- -------------
Stockholders' equity 3,585,107 3,646,235
--------------- -------------
Liabilities and stockholders' equity $ 3,774,275 $ 3,660,549
=============== =============
</TABLE>
F-22
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Parent Only Financial Information(Continued)
---------------------------------
2000 1999
----------- ------------
Income from subsidiary $ 134,155 $ 258,847
Interest income 54,813 56,311
----------- ------------
Total income 188,968 315,158
----------- ------------
Meeting expenses 17,682 21,939
Stock transfer fees 2,570 2,206
Professional fees 53,337 66,522
Other expenses 4,193 300
----------- ------------
Total expenses 77,782 90,967
----------- ------------
Income before provision for income taxes 111,186 224,191
Provision for income taxes 12,865 -
----------- ------------
Net Income $ 124,051 $ 224,191
=========== ============
F-23
<PAGE>
FARNSWORTH BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
17. Parent Only Financial Information(Continued)
------------------------------------------
<TABLE>
<CAPTION>
2000 1999
--------------- ----------------
<S> <C> <C>
Statement of Cash Flows
Cash flows from operations activities:
Net Income $ 124,051 $ 224,191
Adjustments to reconcile net income to net cash
Used in operating activities:
Increase(decrease)in accrued expenses 4,229 (50,175)
Equity in undistributed earnings of
Subsidiary (134,155) (258,847)
(Increase) decrease in accrued
Interest receivable 5,878 (5,973)
Increase in other assets (12,865) -
------------------ ---------------------
Net cash used in operating
activities (12,862) (90,804)
------------------ ---------------------
Cash flows from investing activities:
Purchase of investment - (500,000)
Repayment of loan to Bank - 638,692
Repayment of ESOP loan 37,985 22,791
------------------ ---------------------
Net cash provided by
investing activities 37,985 161,483
------------------ ---------------------
Cash flows from financing activities:
Purchase of treasury stock (185,172) -
Loan from the bank 170,625 -
------------------ ---------------------
Net cash used in
financing activities (14,547) -
------------------ ---------------------
Net increase in cash 10,576 70,679
Cash - beginning 70,679 -
------------------ ---------------------
Cash - ending $ 81,255 $ 70,679
================== =====================
Supplement disclosure:
Non cash items:
Unrealized gain (loss) on securities available for
Sale, net of deferred income taxes $ 371 $ (12,581)
================== =====================
</TABLE>
F-24
<PAGE>
<TABLE>
<CAPTION>
Corporate Information
---------------------
<S> <C> <C>
FARNSWORTH BANCORP, INC.
789 Farnsworth Avenue
Bordentown, New Jersey 08505
(609) 298-0723
PEOPLES SAVINGS BANK
Main Office Florence Office Mt. Laurel Office
789 Farnsworth Avenue 4 Broad Street 101 Gaither Drive
Bordentown, New Jersey Florence, New Jersey Mt. Laurel, New Jersey
Board of Directors
Herman Gutstein G. Edward Koenig, Jr.
Chairman of the Board President - E.J.Koenig, Inc. (petroleum
Retired - Self Employed products/heating & air-conditioning)
George G. Aaronson, Jr. Edgar N. Peppler
Realtor - Falconer & Bell President - Peppler Funeral Home
Charles E. Adams William H. Wainwright, Jr.
Retired - Florence Township Administrator Retired - Loan Officer
Gary N. Pelehaty
President and Chief Executive Officer
Executive Officers
Gary N. Pelehaty Charles Alessi
President and Chief Executive Officer Vice President, Chief Financial
Officer, Secretary and Treasurer
Officers
Elaine C. Denelsbeck Christopher Nunn
Assistant Secretary Assistant Treasurer
---------------------------
Local Counsel Independent Auditor
Wells, Singer, Rubin & Musulin Kronick Kalada Berdy & Co.
6 East Park Street 190 Lathrop Street
Bordentown,New Jersey 08505 Kingston, Pennsylvania 18704
Special Counsel Transfer Agent and Registrar
Malizia Spidi & Fisch, PC Computer Share Investor Services
1100 New York Avenue, N.W. 1825 Lawrence Street, Suite 444
Suite 340 West Denver, Colorado 80201
Washington, D.C. 20005
</TABLE>
The Company's Annual Report on Form 10-KSB for the fiscal year ended September
30, 2000 is available without charge upon written request. For a copy of the
Form 10-KSB, please write or call Mr. Charles Alessi, Vice President at the
Company's Office. The Annual Meeting of Stockholders will be held on February
20, 2001 at 10:00 a.m. at the Days Inn, 1073 Route 206, Bordentown, New Jersey.
