<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31,1996 Commission File Number 0-16637
BROAD NATIONAL BANCORPORATION
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2395057
- ------------------------------ -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
905 Broad Street, Newark NJ 07102
- ------------------------------ -----------------
(Address of principal executive offices) (Zip Code)
Registrant telephone number, including area code (201) 624-2300
--------
N/A
- ---------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO______
------
Number of shares outstanding of Broad National Bancorporation class of Common
Stock, as of April 30, 1996:
Common Stock, $1.00 par value - 4,235,735
1
<PAGE>
BROAD NATIONAL BANCORPORATION
Index to Form 10-Q Financial Information
For the Three Months Ended March 31,1996
---------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART 1 - FINANCIAL INFORMATION 3
- ------------------------------
Consolidated Statements of Condition
as of March 31, 1996 and December 31, 1995 4
Consolidated Statements of Income for the
Three Month Periods Ended March 31, 1996 and 1995 5
Consolidated Statements of Cash Flows for the Three
Month Periods Ended March 31, 1996 and 1995 7
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART 2 - OTHER INFORMATION 20
- --------------------------
Items 1 to 3 Not Applicable or Negative
Item 4 20
Item 5 Not Applicable or Negative
Item 6 20
Signatures 21
Exhibit 1 - Computation of Net Income
per Common Share 22
Exhibit 2 - Independent Auditor's Review Report of Interim
Financial Information 23
Exhibit 3 - Restated Certificate of Incorporation of Broad
National Bancorporation 24
Exhibit 27 - Financial Data Schedule 45
</TABLE>
2
<PAGE>
BROAD NATIONAL BANCORPORATION
PART 1 - FINANCIAL INFORMATION
The following consolidated financial statements of Broad National Bancorporation
as of March 31, 1996 and December 31, 1995 as well as the three month periods
ended March 31, 1996 and 1995 have been prepared by Broad National
Bancorporation without audit, and reflect all normal, recurring adjustments and
disclosures which are, in the opinion of management, necessary for a fair
statement of results for the interim periods presented. These statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted. For further clarification and
understanding, these interim statements should be read in conjunction with the
annual report on Form 10-K of Broad National Bancorporation for the year ended
December 31, 1995.
The results of operations for the periods presented are not necessarily an
indication of the results which can be expected for 1996.
The registrant's independent public accountants, KPMG Peat Marwick LLP, have
performed a limited review of these interim statements in accordance with the
standards for such reviews promulgated by the American Institute of Certified
Public Accountants. See page 23 for their report on this limited review.
3
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
-------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
CASH AND DUE FROM BANKS $ 22,929 $ 25,810
FEDERAL FUNDS SOLD 28,225 61,300
SECURITIES HELD-TO-MATURITY
(aggregate market value $66,870)
and $59,948, respectively) 67,977 60,266
SECURITIES AVAILABLE-FOR-SALE 67,767 55,946
LOANS, Net of unearned income & deferred loan fees 273,316 267,130
LESS -
Allowance for possible loan losses 7,446 7,402
- ---------------------------------------------------------------------------------------
NET LOANS 265,870 259,728
- ---------------------------------------------------------------------------------------
PREMISES AND EQUIPMENT, net 9,386 9,418
ACCRUED INTEREST RECEIVABLE 3,256 2,819
OTHER ASSETS 5,995 5,898
- ---------------------------------------------------------------------------------------
TOTAL ASSETS $471,405 $481,185
- ---------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS
Non-interest bearing demand $ 88,093 $102,207
Savings and interest bearing demand 228,134 220,058
Time deposits less than $100,000 86,964 86,509
Time deposits of $100,000 or more 24,195 20,907
- ---------------------------------------------------------------------------------------
Total Deposits 427,386 429,681
SHORT-TERM BORROWINGS 1,272 782
ACCRUED TAXES, INTEREST AND OTHER LIABILITIES 7,945 16,193
- ---------------------------------------------------------------------------------------
TOTAL LIABILITIES 436,603 446,656
- ---------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Preferred stock-1985 class, $10 par value,
authorized and outstanding 0 shares at 3/31/96
and 17,124 shares at 12/31/95 0 171
8 1/2% Cumulative Convertible Preferred Stock-1992
class, $1 par value, authorized 690,000 shares,
outstanding 66,298 shares at 3/31/96
and 562,553 shares at 12/31/95
(preference on liquidation of $663) 66 563
Common stock, $1 par value, authorized
5,500,000; outstanding 4,115,754 shares at 3/31/96
and 3,059,203 shares at 12/31/95 4,116 3,059
Capital surplus 22,744 23,145
Retained earnings 8,047 7,307
Unrealized gain (loss) on securities available-for-sale, net ( 171) 284
- ---------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 34,802 34,529
- ---------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $471,405 $481,185
- ---------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
3 MONTH PERIOD ENDED
---------------------
MARCH 31
1996 1995
(Unaudited)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $5,789 $6,093
Interest and dividends on investments -
Taxable 1,789 1,646
Exempt from federal income taxes 17 9
Interest on federal funds sold 509 251
- -----------------------------------------------------------
TOTAL INTEREST INCOME 8,104 7,999
- -----------------------------------------------------------
INTEREST EXPENSE:
Interest on savings & interest bearing
demand deposits 1,199 1,164
Interest on time certificates of
deposit of $100,000 or more 284 214
Interest on other time deposits 1,112 647
Interest on short-term borrowings 18 117
- -----------------------------------------------------------
TOTAL INTEREST EXPENSE 2,613 2,142
- -----------------------------------------------------------
NET INTEREST INCOME 5,491 5,857
- -----------------------------------------------------------
PROVISION FOR POSSIBLE LOAN LOSSES 225 100
- -----------------------------------------------------------
INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 5,266 5,757
- -----------------------------------------------------------
NON-INTEREST INCOME
Service charges on deposit accounts 855 814
Other income 217 196
Gain on sale of loans held for sale 0 3
- -----------------------------------------------------------
TOTAL NON-INTEREST INCOME 1,072 1,013
- -----------------------------------------------------------
NON-INTEREST EXPENSES:
Salaries and wages 2,031 1,972
Employee benefits 534 561
Occupancy expense 474 472
Furniture and equipment expense 290 312
Data processing fees 268 278
Legal fees 195 126
Professional fees 141 185
Postage, delivery and communication 164 153
FDIC and OCC assessments 28 248
Other real estate expense 9 19
Other expenses 566 705
- -----------------------------------------------------------
TOTAL NON-INTEREST EXPENSES 4,700 5,031
- -----------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
3 MONTH PERIOD ENDED
-------------------
MARCH 31
1996 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
INCOME BEFORE INCOME TAXES 1,638 1,739
PROVISION FOR INCOME TAXES 601 731
- ---------------------------------------------------------------------
NET INCOME $ 1,037 $ 1,008
- ---------------------------------------------------------------------
NET INCOME APPLICABLE TO COMMON STOCK $ 1,037 $ 855
- ---------------------------------------------------------------------
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
PRIMARY 3,932,288 2,903,999
ASSUMING FULL DILUTION 4,325,892 4,259,887
- ---------------------------------------------------------------------
NET INCOME PER COMMON SHARE
PRIMARY EARNINGS PER COMMON SHARE $ 0.26 $ 0.29
FULLY DILUTED EARNINGS PER COMMON SHARE $ 0.24 $ 0.24
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED MARCH 31
1996 1995
---------- ---------
<S> <C> <C>
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,037 $ 1,008
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 298 293
Amortization of securities premium net 187 107
Amortization of deferred points and fees
and deferral of loan origination costs (65) (101)
Provision for possible loan losses 225 100
Deferred tax benefit (305) (16)
Decrease in accrued taxes
interest, and other liabilities (8,248) (37)
Gain on sale of loans held for sale 0 (3)
Loss on sale of other real estate owned 0 9
(Increase) decrease in accrued interest receivable (437) 135
Other Net 250 (72)
- -------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities $( 7,058) $ 1,423
- ------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of other real estate owned $ 0 $ 166
Net (increase) in loan balances (6,077) (67)
Proceeds from sale of loans held for sale 0 293
Proceeds from maturities of securities
held-to-maturity 2,281 1,687
Proceeds from maturities of securities
available-for-sale 5,013 192
Purchase of securities held-to-maturity (10,093) (395)
Purchase of securities available-for-sale (17,607) 0
Capital expenditures (266) (159)
- -------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities $(26,749) $ 1,717
- -------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in certificates of deposit $ 3,743 $ 18,441
Net (decrease) in demand deposit, savings
and interest bearing demand accounts (6,038) (19,333)
Net increase in short-term borrowings 490 900
Redemption of preferred stock (12) 0
Dividends paid (332) (225)
- -------------------------------------------------------------------------------------
Net cash used in financing activities (2,149) $ (217)
- -------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $(35,956) $ 2,923
CASH AND CASH EQUIVALENTS, beginning of period 87,110 38,295
- -------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 51,154 $ 41,218
- -------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for
Interest $ 2,870 $ 1,952
Taxes $ 128 $ 298
- ------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
7
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
(1) Principles of consolidation -
The consolidated financial statements include the accounts of Broad
National Bancorporation, its wholly owned subsidiary Broad National Bank
and the Bank's wholly owned subsidiaries BNB Investment Corporation, Broad
National Realty Corporation and Bronatoreo, Inc. All intercompany accounts
and transactions have been eliminated.
As used in this report, the term "Company" relates to Broad National
Bancorporation and its subsidiaries on a consolidated basis; the term
"Bancorporation" relates to Broad National Bancorporation (parent company
only); and the term "Bank" relates to Broad National Bank and its
subsidiaries on a consolidated basis.
(2) Net income per share -
Primary net income per common share is computed by dividing net income,
less dividends on preferred stock, by the weighted average number of common
shares outstanding during each period adjusted for stock options. Fully
diluted per common share amounts are computed by dividing net income by the
weighted average number of common shares outstanding adjusted for shares
issuable upon conversion of preferred st ock and stock options.
(3) Redemption of Preferred Stock
On January 7, 1996, the Company completed the redemption of its Preferred
Stock - 1985 Class (1985 Preferred Stock). In lieu of redemption, 16,927
shares of 1985 Preferred Stock were converted into 109,916 shares of common
stock. The remaining 197 shares of 1985 Preferred Stock were redeemed at
the price of $38 per share, for a total redemption price of $7,486. Cash
was paid for fractional shares resulting from conversion.
On February 2, 1996, the Company completed the redemption of 250,000 shares
of its Preferred Stock - 1992 Class (1992 Preferred Stock). In lieu of
redemption, 249,683 of the 250,000 shares of 1992 Preferred Stock called
for redemption were converted into 476,601 shares of common stock. The
remaining 317 shares of the 250,000 shares of 1992 Preferred Stock called
for redemption were redeemed at the price of $10.60 per share, for a total
redemption price of $3,360. In addition to those shares which were called
for redemption but converted into common stock in lieu of redemption, on
February 2, 1996 another 244,219 shares of 1992 Preferred Stock were also
converted into 466,148 shares of common stock. Cash was paid for fractional
shares resulting from conversion.
8
<PAGE>
Additionallly, on January 18, 1996, the Board of Directors of the Company
called for redemption all of the remaining 68,334 shares of the 1992
Preferred Stock. The date set for this redemption was April 8, 1996. In
lieu of redemption, holders of the 1992 Preferred Stock could present their
shares for conversion into common stock on the basis of 1.909 common shares
for each share of 1992 Preferred Stock at any time prior to April 8, 1996.
Prior to April 8, 1996, 2,036 shares of 1992 Preferred Stock were converted
into 3,886 shares of common stock. On April 8, 1996, in lieu of redemption,
62,865 shares of 1992 Preferred Stock were converted into 119,981 shares of
common stock. The remaining 3,433 shares of 1992 Preferred Stock were
redeemed at the price of $10.60 per share, for a total redemption price of
$36,390. Cash was paid for fractional shares resulting from conversion.
(4) Reclassification -
Certain amounts in the consolidated financial statements presented for
prior periods have been reclassified to confirm with the 1996 presentation.
9
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
- ---------------------------------
SUMMARY
-------
The Company reported net income of $1,037,000 or $0.24 per fully diluted common
share for the first quarter of 1996 compared to net income of $1,008,000 or
$0.24 per fully diluted common share for the first quarter of 1995.
Total assets of $471,405,000 at March 31, 1996 represent a decrease of
$9,780,000 or 2% from the December 31, 1995 balance of $481,185,000. Total
deposits declined $2,295,000 or 0.5% from $429,681,000 at December 31, 1995 to
$427,386,000 at March 31, 1996.
Total shareholders' equity increased $273,000 during the first three months of
1996 as the result of net income of $1,037,000, reduced by dividends of $297,000
paid to shareholders, redemption of preferred stock of $12,000 and a net
decrease of $455,000 in the unrealized gain (loss) on securities available-for-
sale.
The Company's annualized return on average assets and annualized return on
average shareholders' equity were .89% and 11.9%, respectively, for the first
three months of 1996, compared to annualized returns of .94% and 13.1%,
respectively, for the comparable 1995 period.
10
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Net Interest Income
- -------------------
Net interest income, the primary source of earnings for the Company, is the
difference between interest and fees earned on loans and other earning assets,
and interest paid on deposits and other interest bearing liabilities. Earning
assets include loans, investment securities and federal funds sold. Interest
bearing liabilities include savings, interest bearing demand and time deposits,
and short-term borrowings.
The table on the following page sets forth the Company's consolidated average
balance of assets, liabilities, and shareholders' equity as well as the amount
of interest income or interest expense and the average rate for each category of
interest-earning assets and interest-bearing liabilities. Non-accrual loans are
included in average loans, and interest on loans includes loan fees which were
not material. Non-taxable income from investment securities and loans is
presented on a tax-equivalent basis assuming a 34% tax rate.
NOTES TO NET INTEREST INCOME TABLE
(1) Interest income for investments in states and political subdivisions
include tax equivalent adjustments at 34% tax rate.
(2) Average rates reflect the tax equivalent adjusted yields on nontaxable
investments and loans.
(3) Represents the difference between interest earned and interest paid,
divided by total interest-earning assets.
(4) Annualized
11
<PAGE>
NET INTEREST INCOME
Three Months Ended March 31
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995
-------- --------
Average Interest Average Average Interest Average
Balance and Fees Rate (4) Balance and Fees Rate (4)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Federal Funds Sold $ 38,458 $ 509 5.24% $17,277 $ 251 5.81%
-------- ------ ---- ------- ------ ----
Investment Securities
U.S. Treasury 16,895 263 6.23 22,730 339 5.97
U.S. Government Agencies 102,748 1,497 5.83 86,060 1,295 6.02
States and political subdivisions (1) 1,861 29 6.23 1,356 20 5.90
Other Bonds 1,683 26 6.18 373 6 6.43
-------- ------ ---- ------- ------ ----
Total Investment Securities 123,187 1,815 5.89(2) 110,519 1,660 6.01(2)
------- ----- ---- ------- ----- ----
Loans
Mortgage 144,008 2,998 8.33 133,677 3,055 9.14
Installment 35,163 821 9.39 35,216 842 9.70
Commercial 89,583 1,948 8.72 100,174 2,172 8.79
State and political subdivisions (1) 1,072 33 11.29 1,200 37 12.33
------- ----- ----- ------- ----- -----
Total Loans 269,826 5,800 8.65 270,267 6,106 9.16
------- ----- ----- ------- ----- -----
Total interest earning assets 431,471 $ 8,124 7.57%(2) 398,063 $ 8,017 8.17%(2)
------- ------- ---- ------- ------- ----
Less - Allowance for possible loan losses 7,510 7,588
All other assets 44,105 45,025
------- ------
Total Assets $468,066 $435,500
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Time Deposits
Savings and interest bearing
demand deposits $221,892 $ 1,199 2.17% $215,306 $1,164 2.19%
Certificate of Deposits
Under $100,000 86,696 1,112 5.16 64,340 647 4.08
Over $100,000 23,067 284 4.95 18,671 214 4.65
-------- ------- ------ -------- ------ ----
Total Time Deposits 331,655 2,595 3.15 298,317 2,025 2.75
Short term borrowings 1,364 18 5.22 7,946 117 5.89
-------- ------- ------ -------- ------ ----
Total Interest Bearing Liabilities 333,019 $ 2,613 3.16% 306,263 $2,142 2.84%
-------- ------- ------ -------- ------ ----
Other liabilities 8,163 5,949
Demand deposits 91,879 92,087
Shareholders' equity 35,005 31,201
-------- ---------
Total liabilities and
shareholders' equity $468,066 $4 35,500
-------- ---------
NET INTEREST INCOME; NET INTEREST SPREAD $ 5,511 4.41% $ 5,875 5.33%
NET INTEREST MARGIN $5.14%(3) 5.99%(3)
</TABLE>
12
<PAGE>
Rate/Volume Analysis Of Net Interest Income
- -------------------------------------------
The effect of changes in average balance and rate from the corresponding prior
period on interest income, interest expense and net interest income for the
three months ended March 31, 1996 is set forth below. The effect of a change in
average balance has been determined by applying the average rate for the earlier
period to the change in average balance for the later period, as compared with
the earlier period. The effect of a change in the average rate has been
determined by applying the average balance for the earlier period to the change
in average rate for the later period, as compared with the earlier period. The
variances attributable to simultaneous balance and rate changes have been
allocated in proportion to the relationship of the dollar amount of change in
each category.
<TABLE>
<CAPTION>
Increase (Decrease) Due to a
Change in the
-----------------------------------------
Average Balance Average Rate Total
---------------- ------------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
Interest Earned on:
Loans $ 1 $(307) $ (306)
Investment securities 190 (35) 155
Federal funds sold 285 (27) 258
---- ----- -------
Total interest income $476 $(369) $ 107
---- ----- -------
Interest paid on:
Savings and interest
bearing demand deposits $ 43 $ (8) $ 35
Certificates of deposit:
Under $100,000 264 201 465
Over $100,000 56 14 70
Short term borrowings (87) (12) (99)
---- ----- -------
Total Interest expense $276 $ 195 $ 471
---- ----- -------
Change in net interest income $201 $(565) $ (364)
Percent increase in net interest ---- ----- -------
income over the prior period (6.20)%
-------
</TABLE>
Total tax equivalent interest income of $8,124,000 for the first three months of
1996 represents an increase of $107,000 or 1.3% over total tax equivalent
interest income of $8,017,000 for the comparable 1995 period. This improvement
is primarily due to an increase of $33,408,000 in the average balance of total
interest earning assets for the first quarter of 1996 as compared to the first
quarter of 1995. This increase in average balances, particularly federal funds
sold, which average balance increased $21,181,000, and investment securities,
which average balance increased $12,668,000 resulted in a $476,000 increase in
total interest income. However, a decline of 60 basis points in the average rate
earned on total interest earning assets resulted in a decrease of $369,000 in
total interest income, offsetting all but $107,000 of the $476,000 increase in
total interest income resulting from the increased average balances of total
interest earning assets. Decreases in the federal funds rate and the prime rate
are the primary reasons for the decline in the average rates earned on total
interest earning assets.
13
<PAGE>
Total interest expense of $2,613,000 for the first quarter of 1996 was $471,000
or 22% higher than the comparable prior year period. Increases in both the
average balance of interest bearing liabilities and the average rate paid on
interest bearing liabilities contributed to the increase in total interest
expense. The total average balance of interest bearing liabilities increased
$26,756,000 or 8.7% and resulted in an increase of $276,000 in total interest
expense. The most significant component of the increase in total interest
expense is represented by certificates of deposit under $100,000, for which
interest expense for the first quarter of 1996 was $465,000 higher than the
first quarter of 1995. The average balance of certificates of deposit under
$100,000 was $22,356,000 higher for the first three months of 1996 as compared
to the first three months of 1995. The average rate paid on these certificates
of deposit during the first quarter of 1996 was 108 basis points higher than the
comparable prior year period. The increase in the average balance resulted from
the bank's effort to increase its deposit base and reduce its reliance on
borrowed funds, which borrowed funds balance was as high as $21,345,000 during
the first quarter of 1995. The increase in the average rate is the result of
the need to pay more in order to attract these additional deposits.
Tax equivalent net interest income for the first three months of 1996 was
$364,000 or 6.2% lower than for the first three months of 1995, and the net
interest margin for the first quarter of 1996 was 85 basis points lower than the
comparable 1995 period. This decline is primarily attributable to the decline in
the average rate earned on interest earning assets coupled with the increase in
the average balance and cost of interest bearing liabilities.
PROVISION FOR POSSIBLE LOAN LOSSES
- ----------------------------------
In determining the provision for possible loan losses, management considers
historical loan loss experience, changes in composition and volume of the
portfolio, the level and composition of non-performing loans, the adequacy of
the allowance for possible loan losses, and prevailing economic conditions. The
provision for possible loan losses was $225,000 for the first quarter of 1996
compared to $100,000 for the comparable 1995 period. Actual net loan charge-offs
for the first three months of 1996 were $181,000 or 0.28% (annualized) of
average total loans, as compared to net loan charge-offs of $205,000 or 0.30%
(annualized) of average total loans for the comparable 1995 period.
NON-INTEREST INCOME AND NON-INTEREST EXPENSES
- ---------------------------------------------
Total non-interest income of $1,072,000 for the first quarter of 1996 was
$59,000 or 5.8% higher than the year-ago period. Service charges on deposit
accounts were $41,000 or 5% higher than the first quarter of 1995, while other
non-interest income was $21,000 or 10.7% higher than the first quarter of 1995.
Total non-interest expense of $4,700,000 for the first three months of 1996 was
$331,000 or 6.6% lower than the comparable 1995 period. The most significant
components of this decrease are represented by FDIC and OCC assessments, which
are $220,000 or 88.7% lower than the prior year period, and other expenses,
which are $139,000 or 19.7% lower than the prior year period. The reduction in
FDIC and OCC assessments reflects the reduction in the deposit insurance
assessment by the FDIC, which is $220,000 lower than the first quarter of 1995.
The largest components of the decrease in other
14
<PAGE>
expenses are declines in expenses associated with a data processing conversion.
FINANCIAL CONDITION
- -------------------
Loans
Total loans, net of unearned income and deferred loan fees, of $273,316,000 at
March 31, 1996 represent an increase of $6,186,000 or 2.3% from the December 31,
1995 balance of $267,130,000. The most significant components of the increase in
loan balances were an increase of $3,240,000 or 2.7% in commercial mortgages and
an increase of $2,531,000 or 3.5% in commercial loans. For the first three
months of 1996, average loans of $269,826,000 represented 62.5% of total average
interest earning assets, as compared to 67.9% of total average interest earning
assets for the first three months of 1995.
Allowance for Possible Loan Losses
The following table summarizes the activity in the allowance for possible loan
losses for the periods presented. Also presented are certain key ratios
regarding the allowance.
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1996 March 31,1995
--------------- --------------
(Dollars In Thousands)
<S> <C> <C>
Balance, beginning of period $ 7,402 $ 7,602
Provision charged to operations 225 100
Loans charged off (403) (399)
Recoveries of charged-off loans 222 194
-------- --------
Balance, end of period $ 7,446 $ 7,497
-------- --------
Average gross loans outstanding
during period..................... $269,826 $270,267
-------- --------
Total gross loans at period end.... $273,598 $267,021
-------- --------
Net loans charged-off. $ 181 $ 205
-------- --------
Ratio of net loans charged-off to
average loans outstanding
during period (annualized)...... 0.28% 0.30%
----- ------
Allowance for possible loan losses as
a percentage of total gross loans.. 2.72% 2.81%
----- ------
</TABLE>
15
<PAGE>
The amount of allowance applicable to non-classified loans was $3,564,000 and
$3,778,000 at March 31, 1996 and December 31, 1995, respectively.
Asset Quality
Non-performing assets consist of (i)non-performing loans, which include non-
accrual loans and loans past due 90 days or more as to interest or principal
payments but not placed on non-accrual status; (ii) loans that have been
renegotiated due to a weakening in the financial position of the borrower
(restructured loans) and (iii) other real estate owned ("OREO"), net of
reserves.
The following table reflects the components of non-performing assets at March
31, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
--------------- ------------------
(Dollars In Thousands)
<S> <C> <C>
Past due 90 days or more:
Mortgage....................... $ 2,028 $ 1,938
Commercial..................... 946 1,167
Installment.................... 10 18
------- -------
Total....................... $ 2,984 $ 3,123
------- -------
Non-accrual loans:
Mortgage....................... $ 6,455 $ 4,042
Commercial..................... 3,613 3,049
Installment.................... 0 0
------- -------
Total....................... $10,068 $ 7,091
------- -------
TOTAL NON-PERFORMING LOANS....... $13,052 $10,214
Restructured loans (excluding
amounts classified as
non-performing loans) 4,214 5,105
Other real estate owned,
net of reserve................. 772 772
------- -------
TOTAL NON-PERFORMING ASSETS...... $18,038 $16,091
------- -------
Non-performing loans as a
percent of total gross loans 4.78% 3.82%
------- -------
Non-performing loans as a
percent of total assets....... 2.77% 2.12%
------- -------
Non-performing assets as a
percent of loans and other
real estate owned.............. 6.58% 6.00%
------- -------
Allowance for possible loan
losses......................... $ 7,446 $ 7,402
------- -------
Allowance for possible loan
losses as a percent of
non-performing loans........... 57.05% 72.47%
------- -------
</TABLE>
In addition to the non-performing and restructured loans as of March 31, 1996,
the Company had classified an additional $4,009,000 and $4,932,000,
respectively, as substandard loans. A loan loss reserve has been allocated to
such loans in accordance with the Company's policies.
16
<PAGE>
At March 31, 1996, the recorded investment in loans that are considered to be
impaired under SFAS 114 was $9,808,000 for which the related allowance for
credit losses is $309,000. The impaired loan portfolio is primarily collateral
dependent, as defined by SFAS 114. Although impaired loans increased during the
quarter, there was no related allowance for credit losses associated with the
loans classified as impaired during the quarter. The change in the allowance
for impaired loans during the first quarter of 1996 represented a recovery of
$461,000. The average recorded investment in impaired loans during the first
quarter of 1996 was approximately $7,629,000. For the first quarter of 1996,
the Company recognized cash basis interest income on these impaired loans of
$35,000.
The level of non-performing loans and assets is heavily dependent upon local
economic conditions. The March 31, 1996 total non-performing assets of
$18,038,000 represents an increase of $1,947,000 or 12.1% over the total at
December 31, 1995. The increase in non-performing assets is represented
primarily by an increase in non-accrual loans, which in turn is primarily
attributable to loans of a single customer, whose businesses were adversely
affected by the severe winter weather conditions. There can be no assurance
that non-performing assets will not continue to increase.
Investment Securities and Federal Funds Sold
Federal funds sold of $28,225,000 at March 31, 1996 represent a decrease of
$33,075,000 from the balance at December 31, 1995. Most of this decline is
attributable to the transfer of funds into the investment portfolio. Average
Federal Funds sold of $38,458,000 during the first three months of 1996
represented 8.9% of total average interest earning assets, as compared to 4.3%
during the first three months of 1995.
Total average investment securities of $123,187,000 for the first three months
of 1996 represent 28.6% of total average interest-earning assets, as compared to
27.8% for the comparable 1995 period.
Total investment securities, which include securities classified as held-to-
maturity and available-for-sale, of $135,744,000 at March 31, 1996 represent an
increase of $19,532,000 or 16.8% over the balance at December 31, 1995. As
mentioned above, this growth was funded from the transfer of funds from federal
funds sold. There were no sales of securities available-for-sale during the
first three months of 1996 or 1995.
Deposits
The March 31, 1996 total deposit balance of $427,386,000 represents a decrease
of $2,295,000 or 0.5% over total deposits of $429,681,000 at December 31, 1995.
In addition to the decline, there was a change in the deposit mix during the
first quarter of 1996. Non-interest bearing demand deposits, primarily business
demand deposits, declined $14,114,000 while savings and interest bearing demand
deposits increased $8,076,000 and time deposits of $100,000 or more increased
$3,288,000.
Short Term Borrowings
Short-term borrowings represent federal funds purchased and securities sold
under agreements to repurchase. The majority of these instruments have terms
ranging from one to thirty days. These balances increased $490,000 to
$1,272,000 at March 31, 1996 from the December 31, 1995 balance of $782,000.
17
<PAGE>
Liquidity of the Bank
The Bank actively monitors its liquidity position to ensure that it has
sufficient funds to provide for cash outflows without incurring losses from the
premature liquidation of assets or the unexpected acquisition of costly
liabilities. The Bank's cash outflows encompass interest paid to depositors and
other creditors, deposit withdrawals, and disbursements to acquire assets and
pay general operating costs. The Bank obtains cash from customers in the form
of interest and principal payments on loans, fees paid for services, and from
new deposits. Investment maturities also provide a source of cash.
Many different measurements of liquidity are used in the banking industry. The
ratios of cash and cash equivalents (including federal funds sold) and short-
term securities to total assets and net loans to total deposits are among some
of the more commonly used indicators. These measurements are set forth below as
of March 31, 1996 and December 31, 1995.
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
--------------- ------------------
<S> <C> <C>
Cash and cash equivalents
and securities maturing in
one year to total assets 13.4% 22.1%
Net loans to total deposits 62.2% 60.4%
</TABLE>
To assist in the management of its liquidity, the bank has available $22,000,000
in lines of credit for federal funds. However, none of these lines were in use
during the first quarter of 1996.
In summary, managing the Bank's liquidity position involves a significant degree
of analytical estimation and other objective factors. Although customer demand
for funds, in the form of loans or deposit withdrawals, is largely dependent on
general economic factors outside of the Bank's control, management believes that
its present liquidity structure is adequate to meet such needs.
Liquidity of Bancorporation
Bancorporation's ability to meet its cash requirements, including dividend
payments, is generally dependent upon the declaration and payment of dividends
by the Bank to Bancorporation. Under Federal law, the approval of the
Comptroller of the Currency is required for the payment of dividends in any
calendar year by Broad National Bank to Broad National Bancorporation if the
total of all dividends declared in any calendar year exceeds the net income for
that year combined with the retained net income for the preceding two calendar
years. As of December 31, 1995, retained earnings of the Bank of $6,642,000
were available for payment of dividends to the parent company without regulatory
approval. Additionally, at March 31, 1996 Bancorporation had $816,000 of cash
for the purpose of paying operating costs and dividends. However, a change in
circumstances, such as changes in regulatory requirements or in the Bank's
financial condition, could result in the Bank's inability to pay dividends to
Bancorporation or could result in Bancorporation being required by regulatory
authorities to utilize its funds to increase the Bank's capital. In such event,
Bancorporation may not
18
<PAGE>
have sufficient cash for operations or to make dividend payments and may be
required to seek other sources of capital and liquidity, if available.
INTEREST RATE SENSITIVITY
Management of interest rate sensitivity involves matching the maturity and
repricing dates of interest-earning assets with interest-bearing liabilities in
an effort to reduce the impact of fluctuating net interest margins and to
promote consistent growth of net interest income during periods of changing
interest rates.
Interest rate sensitivity is measured as the difference between the volume of
assets and liabilities from the Company's existing portfolio that are subject to
repricing in a future period of time. These differences, known as interest
sensitivity gaps, are usually calculated cumulatively for blocks of time.
Companies that are asset sensitive (a positive gap) have more assets than
liabilities subject to early repricing and these banks generally benefit in
periods of rising interest rates, but generally suffer as rates decrease.
Companies that are liability sensitive (a negative gap) generally benefit in
periods of declining rates, but generally suffer as rates increase.
At March 31, 1996 the Company maintained negative sensitivity gaps of 72:1, 67:1
and 68:1 at the cumulative 3 month, 6 month and 12 month periods.
Management will continue to monitor the interest rate sensitivities of assets
and liabilities in an effort to minimize interest rate exposure and maintain a
relatively stable net interest spread.
Capital Adequacy
At March 31, 1996, the Company had total capital equal to 12.05% of risk-based
assets which included tier one capital equal to 10.79% of risk-based assets.
These compare to minimum regulatory capital requirements of 8% and 4%,
respectively. At March 31, 1996, the Company had tier one capital equal to
7.33% of adjusted total assets. This compares to a minimum regulatory capital
requirement of 4% to 5%.
At March 31, 1996, the Bank had total capital equal to 11.92% of risk-based
assets, which included tier one capital equal to 10.65% of risk-based assets.
These compare to minimum regulatory capital requirements of 8% and 4%,
respectively. At March 31, 1996, the Company had tier one capital equal to
7.24% of adjusted total assets. This compares to a minimum regulatory capital
requirement of 4% to 5%.
19
<PAGE>
BROAD NATIONAL BANCORPORATION
PART 2 - OTHER INFORMATION
- --------------------------
4. Submission of Matters to a Vote of Security Holders
(a) The annual shareholders meeting of Broad National Bancorporation was
held on April 18, 1996.
(b) The Directors elected at this meeting were:
<TABLE>
<CAPTION>
Affirmative Withheld
Votes Authority
----------- ---------
<S> <C> <C>
Mr. Licinio Cruz 3,346,259 2,058
Mr. John A. Dorman 3,346,259 2,058
Mr. Arthur Fischman 3,346,259 2,058
Mr. John J. Iannuzzi 3,346,259 2,058
Mr. Donald M. Karp 3,346,259 2,058
Mr. James J. Lazarus 3,345,229 3,088
Mr. Edward J. Lenihan 3,346,259 2,058
Mr. Stanley J. Lesnik 3,345,039 3,278
Ms. Catherine McFarland 3,346,154 2,163
Mr. Louis J. Owen 3,345,124 3,193
Mr. A. Harold Schwartz 3,345,229 3,088
Mr. Peter D. Sudler 3,345,039 3,278
Mr. Hubert Williams 3,344,934 3,383
</TABLE>
(C) KPMG Peat Marwick LLP was appointed as the Corporation's independent
auditors for the year ending December 31, 1996 by holders of shares of common
stock, as follows:
FOR 3,341,162
---------
AGAINST 4,828
---------
ABSTAIN 2,327
---------
6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Statements re: computation of per share earnings is part of this
Form 10-Q as Exhibit I.
(b) No report on Form 8-K has been filed during the three month period
ended March 31, 1996.
20
<PAGE>
BROAD NATIONAL BANCORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BROAD NATIONAL BANCORPORATION
-----------------------------
(registrant)
Date: May 10, 1996 /s/ Donald M. Karp
-------------------
Donald M. Karp
Chairman and CEO
/s/ James Boyle
-------------------
James Boyle
Treasurer
21
<PAGE>
BROAD NATIONAL BANCORPORATION
Computation of Net Income Per Share
(Unaudited)
<TABLE>
<CAPTION>
THREE-MONTH PERIOD
ENDED MARCH 31
1996 1995
------------------ --------------
<S> <C> <C>
PRIMARY:
--------
Average number of common
shares outstanding 3,852,249 2,884,358
Assumed exercise of options
outstanding 80,039 19,641
---------- ----------
Average number of common shares and
common share equivalents outstanding 3,932,288 2,903,999
---------- ----------
Net Income $1,036,650 $1,007,958
Less: Cumulative Preferred Dividends 0 152,718
---------- ----------
Net income available to common shareholders
$1,036,650 $ 855,240
Primary earnings per common share ---------- ----------
$0.26 $ 0.29
========== ==========
FULLY DILUTED:
- --------------
Average number of common shares of
outstanding 3,852,249 2,884,358
Assumed exercise of options outstanding 88,422 23,857
Assumed conversion of preferred shares 385,221 1,351,672
---------- ----------
Adjusted average number of common shares 4,325,892 4,259,887
---------- ----------
Net Income $1,036,650 $1,007,958
---------- ----------
Fully diluted earnings per common share $0.24 $ 0.24
========== ==========
</TABLE>
22
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
Broad National Bancorporation:
We have reviewed the accompanying consolidated condensed statement of condition
of Broad National Bancorporation and subsidiaries (the Company) as of March 31,
1996, and the related consolidated condensed statements of income, and cash
flows for the three-month periods ended March 31, 1996 and 1995. These
consolidated condensed financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated condensed financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of condition of the Company as of December
31, 1995, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated January 18, 1996, except as to Note 14, which
is as of February 2, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated statement of condition as of December 31, 1995, is
fairly presented, in all material respects, in relation to the consolidated
statement of condition from which it has been derived.
/s/ KPMG Peat Marwick LLP
Short Hills, New Jersey
May 10, 1990
23
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
BROAD NATIONAL BANCORPORATION
-----------------------------
The undersigned, Broad National Bancorporation, a New Jersey
corporation, for the purpose of restating the Certificate of Incorporation of
the corporation, in accordance with the New Jersey Business Corporation Act,
does hereby make and execute this Restated Certificate of Incorporation and does
hereby certify that:
I. The name of the corporation is Broad National Bancorporation.
II. Resolutions setting forth the Restated Certificate of
Incorporation of the corporation were duly adopted at a meeting of the board of
directors of the corporation duly called and held on June 15, 1995, at which a
quorum of the directors was at all times present.
III. The Restated Certificate of Incorporation of the corporation
approved by a resolution of the board of directors read as follows:
FIRST. The name of the corporation is:
Broad National Bancorporation
SECOND. The address of its current registered office in the state of
New Jersey is 905 Broad Street, Newark, Essex County, New Jersey 07102, and the
name of its current registered agent at such address is Donald M. Karp.
THIRD. The total number of shares of all classes of stock which the
corporation shall have authority to issue is 7,020,000 shares, divided into:
5,500,000 shares of Common Stock, par value
$1.00 per share;
20,000 shares of Preferred Stock 1985 Class,
par value $10.00 per share; and
1,500,000 shares of Preferred Stock, par value $1.00 per share, to be
divided into one or more series or classes of series as the
corporation's board of directors may from time to time approve, as
hereinafter set forth.
Unless approved by at least two-thirds of the whole board of directors
of the corporation then in office, no shares of the corporation's authorized but
unissued Common Stock shall be issued by the corporation except (i) for the
purposes of effecting the conversion of shares of Preferred Stock 1985 Class
pursuant to subsection A.6 of this ARTICLE THIRD, (ii) for the purpose of paying
dividends on the corporation's Common Stock, or (iii) for options granted and
exercised under the corporation's Incentive Stock Option Plan and the
corporation's Non-Statutory Stock Option Plan.
Prior to the effectiveness of the amendment to this Certificate of
Incorporation filed and recorded with the Secretary of State of New Jersey on
December 2, 1992, the corporation was authorized to issue two classes of stock
in the following amounts: (1) 3,128,148 shares of $5.00 par value Common Stock,
of which 2,678,585 authorized shares were issued and
24
<PAGE>
outstanding, and (2) 20,000 shares of $10.00 par value Preferred Stock 1985
Class, of which 17,182 authorized shares were issued and outstanding.
From and after the effectiveness of the amendment to this Certificate
of Incorporation filed and recorded with the Secretary of State of New Jersey on
December 2, 1992, each stock certificate formerly representing shares of the
corporation's $5.00 par value Common Stock issued and outstanding shall, without
further action by the corporation, represent the same number of shares of the
corporation's $1.00 par value Common Stock.
The board of directors of the corporation is authorized to divide the
shares of Preferred Stock, par value $1.00 per share, into classes and into
series of any class or classes, to determine the designation and the number of
shares of any such class or series and to determine the relative rights,
preferences and limitations of the shares of any such class or series, subject
to complying with any requirements of the New Jersey Business Corporation Act
with respect to making such divisions and determinations; provided, however,
shares of Preferred Stock, par value $1.00 per share, shall possess no voting
rights, and shall have no right to vote at any shareholders' meeting, except as
required by law and except for such limited voting rights as are provided
herein. The board of directors of the corporation is authorized to provide
that, with respect to the shares of any class or series of Preferred Stock, par
value $1.00 per share, whenever dividends payable on shares of any such class or
series of Preferred Stock entitled thereto shall not have been paid in full, in
an aggregate amount equal to six full quarterly dividends on the shares of such
class or series of Preferred Stock then outstanding, the number of directors
then constituting the board of directors of the corporation shall ipso facto be
increased by two, and the holders of such class or series of Preferred Stock
shall have the exclusive and special right, voting separately as a class, to
elect two directors of the corporation to fill such newly created directorships.
Whenever such right of the holders of any such class or series of Preferred
Stock, par value $1.00 per share, shall have vested, such right may be exercised
initially either at a special meeting of such shareholders, which special
meeting shall be called by the board of directors of the corporation, or at any
annual meeting of shareholders, and thereafter at annual meetings of
shareholders. The right of the holders of any such class or series of Preferred
Stock, par value $1.00 per share, voting separately as a class to elect members
of the board of directors of the corporation as aforesaid shall continue until
such time as all dividends accumulated on such class or series of Preferred
Stock to the dividend payment date next preceding the date of any such
determination have been paid in full, or declared and set apart in trust for
payment, at which time the special rights of the holders of such class or series
of Preferred Stock to vote separately as a class for the election of two
directors shall terminate, subject to revesting in the event of each and every
subsequent failure to make dividend payments in an aggregate amount equal to six
full quarterly dividends as above provided, and the number of directors
constituting the Board of Directors shall be reduced as provided accordingly.
A. The Preferred Stock 1985 Class
------------------------------
1. Voting Rights. The holders of shares of the Preferred Stock
-------------
1985 Class shall possess no voting rights, and shall have no right to vote at
any shareholders' meeting, except as otherwise required by law; provided,
however, that in the event that the laws of the State of New Jersey expressly
require a separate vote by class of the holders of Preferred Stock 1985 Class
and of the holders of Common Stock in order to take the following actions, then
the affirmative vote of the holders of two-thirds of the outstanding shares of
Preferred Stock 1985 Class and of the holders of
25
<PAGE>
two-thirds of the outstanding shares of Common Stock shall be necessary to take
such actions:
(i) amend the Certificate of Incorporation in any respect which
would be required under the laws of the State of New Jersey to be submitted
to a vote at a meeting of the holders of shares of stock of the
corporation;
(ii) merge or consolidate the corporation with or into any other
corporation or corporations;
(iii) dissolve or liquidate the corporation; or
(iv) sell, lease, exchange or otherwise dispose of all, or
substantially all, the assets of the corporation.
2. Liquidation. In the event of a voluntary or involuntary
-----------
liquidation, dissolution or winding up of the corporation, the holders of shares
of the Preferred Stock 1985 Class shall be paid, out of the net assets of the
corporation, the liquidation value of the Preferred Stock 1985 Class before any
distribution or payment is made to the holders of shares of the Common Stock.
In case the net assets of the corporation remaining available for
distribution to the holders of Preferred Stock 1985 Class are insufficient to
pay the holders of all outstanding shares of Preferred Stock 1985 Class the full
amounts to which they are entitled, the entire amount of such remaining net
assets of the corporation shall be distributed to the holders of the Preferred
Stock 1985 Class in proportion to the full amounts to which they are entitled.
The liquidation value of each share of Preferred Stock 1985 Class
shall be established by the corporation's board of directors in accordance with
the laws of the State of New Jersey; provided, however, that in no event shall
such liquidation value be established at an amount greater than the price per
share at which such stock is issued.
3. Redemption. The corporation, at its option, by resolution
----------
of the board of directors, may from time to time redeem, as hereinafter
provided, all or any part of the shares of Preferred Stock 1985 Class, at any
time after December 31, 1992, at a per share redemption price in cash equal to
the liquidation value per share as of the date of redemption; provided, however,
that no shares of Preferred Stock 1985 Class as to which a notice of conversion
shall have been received by the corporation prior to the redemption date
specified in the notice of redemption may be redeemed.
Written notice of such redemption shall be mailed by registered or
certified mail at least 20 days before the date of redemption to each holder of
record of shares of Preferred Stock 1985 Class to be redeemed at his last known
post office address as shown by the stock record books of the corporation on a
date not more than 30 days in advance of the date of redemption (which place
shall be a bank in Newark, New Jersey).
If such notice of redemption shall have been duly mailed as aforesaid
and if the funds necessary for payment for the shares being redeemed shall have
been deposited in trust with the bank which was named as the place of redemption
to be applied to the redemption of Preferred Stock 1985 Class called for
redemption, then from and after the later of (a) the date fixed for redemption,
or (b) the date of such deposit, the redemption of
26
<PAGE>
the shares of the Preferred Stock 1985 Class so called shall be deemed to have
been fully effected and all rights of the holders of such shares as shareholders
of the corporation owning such shares of Preferred Stock 1985 Class shall cease
and terminate, except only the right to receive the redemption price so
deposited upon surrender of the certificate or certificates evidencing the
shares of Preferred Stock 1985 Class so redeemed. All money so deposited shall,
immediately following the date of such redemption and to the extent permitted by
law, be deposited in a time deposit or savings account at the bank where such
funds were deposited as aforesaid and any of such monies which are unclaimed at
the end of five years from the date of such redemption shall be repaid to the
corporation. Such holders of such shares of Preferred Stock 1985 Class so
redeemed as shall not have received the price therefor prior to such repayment
to the corporation shall thereafter look only to the corporation for payment
thereof, without interest.
4. Dividends. The holders of shares of Preferred Stock 1985
---------
Class shall be entitled to receive, as and when declared by the board of
directors, out of funds legally available therefor, dividends accrued from the
date of issuance, at such rate and payable on such dates as shall be established
by the board of directors in accordance with the laws of the State of New
Jersey; provided, however, that the per annum dividend rate shall not exceed 12%
of the liquidation value.
5. Restrictions on Dividends and on Sale of Preferred Stock
--------------------------------------------------------
1985 Class. So long as any shares of the Preferred Stock 1985 Class are
- ----------
outstanding, the corporation shall not, without the consent given in person or
by proxy, either in writing or at a meeting called for that purpose, of the
holders of a majority of the outstanding shares of Preferred Stock 1985 Class,
declare or pay any dividends on the Common Stock, or redeem, purchase or
otherwise acquire any shares of the Common Stock unless there shall be no
accumulated dividends in arrears as of the date of such payment, redemption,
purchase or other acquisition.
No shares of Preferred Stock 1985 Class shall be issued by the
corporation after February 28, 1986.
6. Conversion. Any holder of shares of Preferred Stock 1985
----------
Class may at any time and from time to time at his option convert any or all of
such shares into fully paid and nonassessable shares of Common Stock at such
conversion rate as shall be established by the board of directors in accordance
with the laws of the State of New Jersey; provided, however, that such
conversion rate shall not be greater than one share of Common Stock received for
each share of Preferred Stock 1985 Class surrendered for conversion. Such
conversion rate established by the board of directors shall be subject to
adjustment as hereinafter provided.
Any such conversion of shares of Preferred Stock 1985 Class shall be
effected by mailing, by registered or certified mail to the corporation at its
principal executive office, written notice of election to convert shares of such
stock at least 180 days in advance of the date on which the shares of such stock
are to be converted, which notice of conversion shall specify the number of
shares of stock to be converted and the number(s) of the certificate(s)
representing such shares, and by surrendering the certificate(s) representing
the shares to be converted on or before the date on which the shares are to be
converted. In the event that any shares of Preferred Stock 1985 Class shall be
called for redemption, pursuant to subsection A.3 of this ARTICLE THIRD, the
right of conversion shall expire at the close of business on the redemption date
specified in the
27
<PAGE>
notice of redemption unless a notice of conversion shall have been received
prior to the redemption date.
The shares of Preferred Stock 1985 Class which have been converted
under this subsection A.6 of this ARTICLE THIRD shall be retired and shall not
be held as an asset of the corporation.
The conversion rate for shares of Preferred Stock 1985 Class
established by the board of directors shall be subject to appropriate
adjustments from time to time as may be necessary to prevent dilution or
enlargement of the conversion right in the event of a stock dividend, stock
split, reverse stock split, a merger or consolidation of the corporation with or
into any other corporation or corporations, a reorganization or recapitalization
of the corporation, or any event similar to any of the foregoing.
The corporation shall at all times reserve and keep available, out of
its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of shares of Preferred Stock 1985 Class, such number of shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all shares of Preferred Stock 1985 Class then outstanding. The corporation
shall from time to time, in accordance with the laws of the State of New Jersey,
increase the authorized amount of its shares of Common Stock if at any time the
number of shares of Common Stock remaining unissued shall not be sufficient to
permit the conversion of all of the then outstanding shares of Preferred Stock
1985 Class.
7. Preemptive Rights. Except as specifically provided by
-----------------
subsection C.8 of this ARTICLE THIRD, no holder of any shares of Preferred Stock
1985 Class shall be entitled as such, as a matter of right, to subscribe for or
purchase any shares of stock of the corporation of any class, whether now or
hereafter authorized or whether issued for cash, property or services or as a
dividend or otherwise, or to subscribe for or purchase any obligations, bonds,
notes, debentures, other securities or stock convertible into shares of stock of
the corporation of any class or carrying or evidencing any right to purchase
shares of stock of any class.
B. Common Stock
------------
1. Voting Rights. Except as may be otherwise specifically
-------------
provided by law, holders of shares of Common Stock shall possess full voting
rights and shall be entitled to one vote per share in all matters voted upon by
the shareholders of the corporation, other than the election of directors, as to
which cumulative voting shall prevail. At such election of directors, each
holder of shares of Common Stock shall have the right to cast as many votes in
the aggregate as shall equal the number of his shares of such stock multiplied
by the number of directors to be elected at such election, and he may cast the
whole number of such votes for one candidate or distribute them among two or
more candidates.
The affirmative vote of the holders of two-thirds of the outstanding
shares of Common Stock shall be necessary to take the following actions, or, in
the event that the laws of the State of New Jersey expressly require a separate
vote by class of the holders of Common Stock and the holders of Preferred Stock
1985 Class in order to take such actions, then the affirmative vote of the
holders of two-thirds of the outstanding shares of Common Stock and of the
holders of two-thirds of the outstanding shares of Preferred Stock 1985 Class
shall be necessary to take the following actions:
28
<PAGE>
(i) amend the Certificate of Incorporation in any respect which
would be required under the laws of the State of New Jersey to be submitted
to a vote at a meeting of the holders of shares of stock of the
corporation;
(ii) merge or consolidate the corporation with or into any other
corporation or corporations;
(iii) dissolve or liquidate the corporation; or
(iv) sell, lease, exchange or otherwise dispose of all, or
substantially all, the assets of the corporation.
2. Liquidation. In the event of a voluntary or involuntary
-----------
liquidation, dissolution or winding up of the corporation, the holders of shares
of the Common Stock shall be entitled to receive, after the prior rights of the
shares of the Preferred Stock 1985 Class have been satisfied, all of the
remaining assets of the corporation available for distribution, if any.
3. Dividends. Subject only to the prior rights of the
---------
Preferred Stock 1985 Class, holders of shares of the Common Stock shall be
entitled to dividends thereon, when, as and if declared by the board of
directors, out of funds legally available therefor.
The corporation shall at all times reserve and keep available, out of
its authorized and unissued Common Stock, solely for the purpose of paying
dividends on its Common Stock, all of the corporation's authorized and unissued
Common Stock which is not reserved solely for the purpose of effecting the
conversion of shares of Preferred Stock 1985 Class pursuant to the last
paragraph of subsection A.6 of this ARTICLE THIRD.
4. Preemptive Rights. Except as specifically provided by
-----------------
subsection C.8 of this ARTICLE THIRD, no holder of any shares of Common Stock
shall be entitled as such, as a matter of right, to subscribe for or purchase
any shares of stock of the corporation of any class, whether now or hereafter
authorized or whether issued for cash, property or services or as a dividend or
otherwise, or to subscribe for or purchase any obligations, bonds, notes,
debentures, other securities or stock convertible into shares of stock of the
corporation of any class or carrying or evidencing any right to purchase shares
of stock of any class.
C. The Preferred Stock 1992 Class.
------------------------------
1. Designation. The preferred stock created and authorized
-----------
hereby shall be designated as the "8-1/2% Cumulative Convertible Preferred Stock
1992 Class." The number of shares constituting the Preferred Stock 1992 Class
shall be 690,000 and no more.
2. Voting Rights. The holders of shares of the Preferred Stock
-------------
1992 Class shall possess no voting rights, and shall have no right to vote at
any shareholders' meeting, except as otherwise required by law; provided,
however, that:
(a) whenever dividends payable on shares of Preferred Stock 1992
Class shall not have been paid in full, in an aggregate amount equal to six
full quarterly dividends on such shares of Preferred Stock 1992 Class then
outstanding, the number of directors then constituting the board of
directors of the corporation shall ipso facto be increased by two, and
29
<PAGE>
the holders of such shares of Preferred Stock 1992 Class shall have the
exclusive and special right, voting separately as a class with the holders
of shares of any one or more class or series of Preferred Stock ranking on
a parity with the Preferred Stock 1992 Class either as to payment of
dividends or upon liquidation, dissolution or winding up and upon which
like voting rights have been conferred and are exercisable, to elect two
directors of the corporation to fill such newly created directorships;
provided, however, that in no event shall the holders of such shares of
Preferred Stock 1992 Class voting separately as a class as aforesaid have
the right to elect more than two directors. Whenever such right of the
holders of such shares of Preferred Stock 1992 Class shall have vested,
such right may be exercised initially either at a special meeting of such
shareholders, which special meeting shall be called by the board of
directors of the corporation, or at any annual meeting of shareholders, and
thereafter at annual meetings of shareholders. The right of the holders of
such shares of Preferred Stock 1992 Class, voting separately as a class to
elect members of the board of directors of the corporation as aforesaid
shall continue until such time as all dividends accumulated on such shares
of Preferred Stock 1992 Class to the dividend payment date next preceding
the date of any such determination have been paid in full, or declared and
set apart in trust for payment, at which time the special rights of the
holders of such shares of Preferred Stock 1992 Class to vote separately as
a class for the election of two directors shall terminate, subject to
revesting in the event of each and every subsequent failure to make
dividend payments in an aggregate amount equal to six full quarterly
dividends as above provided, and the number of directors constituting the
board of directors shall be reduced as provided accordingly; and
(b) in the event that the laws of the State of New Jersey expressly
require a separate vote by class of the holders of Preferred Stock 1992
Class, of the holders of Preferred Stock 1985 Class and of the holders of
Common Stock in order to take the following actions, then the affirmative
vote of the holders of a majority of the outstanding shares of Preferred
Stock 1992 Class, of the holders of two-thirds of the outstanding shares of
Preferred Stock 1985 Class, and of the holders of two-thirds of the
outstanding shares of Common Stock shall be necessary to take such actions:
(i) amend the Certificate of Incorporation in any respect which
would be required under the laws of the State of New Jersey to be
submitted to a vote at a meeting of the holders of shares of stock of
the corporation;
(ii) merge or consolidate the corporation with or into any other
corporation or corporations;
(iii) dissolve or liquidate the corporation; or
(iv) sell, lease, exchange or otherwise dispose of all, or
substantially all, the assets
30
<PAGE>
of the corporation.
3. Liquidation. In the event of a voluntary or involuntary
-----------
liquidation, dissolution or winding up of the corporation, the holders of shares
of the Preferred Stock 1992 Class shall be paid, out of the net assets of the
corporation, the liquidation value of the Preferred Stock 1992 Class before any
distribution or payment is made to the holders of shares of the Common Stock or
any other shares of stock of the corporation ranking as to such distribution or
payment junior to the Preferred Stock 1992 Class. No class or series of stock
shall be issued which ranks senior to the Preferred Stock 1992 Class as to the
distribution or payment of the liquidation value thereof without the affirmative
vote of the holders of a majority of the outstanding shares of Preferred Stock
1992 Class.
In the event the net assets of the corporation remaining available for
distribution to the holders of shares of the Preferred Stock 1992 Class and any
other shares of stock of the corporation ranking as to any such distribution on
a parity with the Preferred Stock 1992 Class (including the Preferred Stock 1985
Class) are insufficient to pay the holders of all outstanding shares of
Preferred Stock 1992 Class and of such other shares the full amounts to which
they are entitled, the entire amount of such remaining net assets of the
corporation shall be distributed to the holders of shares of the Preferred Stock
1992 Class and of such other shares in proportion to the full respective
distributable amounts to which they are entitled.
The liquidation value of each share of Preferred Stock 1992 Class
shall be $10.00, plus any accumulated unpaid dividends thereon which are due as
of the date of liquidation.
4. Redemption. The corporation, at its option, by resolution
----------
of the board of directors, may from time to time redeem, as hereinafter
provided, all or any part of the shares of Preferred Stock 1992 Class, at any
time after February 1, 1996, at a per share redemption price as set forth in the
table below; provided, however, that no shares of Preferred Stock 1992 Class as
to which a notice of conversion shall have been received by the corporation, and
the certificate(s) representing such shares shall have been surrendered, prior
to the redemption date specified in the notice of redemption may be redeemed.
The redemption price of each share of Preferred Stock 1992 Class shall be as set
forth in the following table, together in each case with accrued and unpaid
dividends to the date fixed for redemption, if redeemed during the 12-month
period beginning February 1 of the year indicated:
<TABLE>
<CAPTION>
Year Redemption Price
- ---- ----------------
<S> <C>
1996 $10.60
1997 10.50
1998 10.40
1999 10.30
2000 10.20
2001 10.10
2002 and thereafter 10.00
</TABLE>
Written notice of such redemption shall be mailed by registered or
certified mail at least 60 days before the date of redemption to each holder of
record of shares of Preferred Stock 1992 Class to be redeemed at his last known
post office address as shown by the stock record books of the corporation. The
notice of redemption shall state the redemption price and the date and place of
redemption (which place of redemption shall be a bank in Newark, New Jersey).
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<PAGE>
If such notice of redemption shall have been duly mailed as aforesaid
and if the funds necessary for payment for the shares being redeemed shall have
been deposited in trust with the bank which was named as the place of redemption
to be applied to the redemption of Preferred Stock 1992 Class called for
redemption, then from and after the later of (a) the date fixed for redemption,
or (b) the date of such deposit, the redemption of the shares of the Preferred
Stock 1992 Class so called shall be deemed to have been fully effected and all
rights of the holders of such shares as shareholders of the corporation owning
such shares of Preferred Stock 1992 Class shall cease and terminate, except only
for the right to receive the redemption price so deposited upon surrender of the
certificate or certificates evidencing the shares of Preferred Stock 1992 Class
so redeemed. All money so deposited shall, immediately following the date of
such redemption and to the extent permitted by law, be deposited in a time
deposit or savings account at the bank where such funds were deposited as
aforesaid and any of such monies which are unclaimed at the end of five years
from the date of such redemption shall be repaid to the corporation. Such
holders of such shares of Preferred Stock 1992 Class so redeemed as shall not
have received the price therefor prior to such repayment to the corporation
shall thereafter look only to the corporation for payment thereof, without
interest. If less than all the outstanding shares of Preferred Stock 1992 Class
are to be redeemed, the board of directors of the corporation shall select those
to be redeemed pro rata, by lot or by a substantially equivalent method.
If a dividend upon any share of Preferred Stock 1992 Class is past
due, no shares of Preferred Stock 1992 Class shall be redeemed, except by means
of a redemption pursuant to which all the outstanding shares of Preferred Stock
1992 Class are simultaneously redeemed, and the corporation shall not purchase
or otherwise acquire any shares of the Preferred Stock 1992 Class, except
pursuant to a purchase or exchange offer made on the same terms to all holders
of the Preferred Stock 1992 Class.
5. Dividends. The holders of shares of Preferred Stock 1992
---------
Class shall be entitled to receive, as and when declared by the board of
directors, out of funds legally available therefor, dividends accrued from the
date of issuance, at the rate of $0.85 per share per annum (8-1/2%), and payable
quarterly in arrears on January 15, April 15, July 15 and October 15 of each
year, commencing April 15, 1993, at such annual rate. Each such dividend shall
be payable to holders of record as they appear on the stock record books of the
corporation on such record date, not exceeding 60 days preceding the payment
date thereof, as shall be fixed by the board of directors of the corporation.
Dividends shall be cumulative from the date of original issue. Dividends
payable on the Preferred Stock 1992 Class for any period greater or less than a
full dividend period shall be computed on the basis of a 360-day year consisting
of twelve 30-day months. Dividends payable on the Preferred Stock 1992 Class
for each full dividend period shall be computed by dividing the annual dividend
rate by four. Holders of shares of the Preferred Stock 1992 Class shall not be
entitled to any dividend, whether payable in cash, property or securities, in
excess of full cumulative dividends on the Preferred Stock 1992 Class. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments which may be in arrears. Dividends paid on
shares of Preferred Stock 1992 Class in an amount less than the total amount of
such dividends at the time accumulated and payable on such shares shall be
allocated pro rata among all such shares at the time outstanding. No class or
series of stock shall be issued which ranks senior to the Preferred Stock 1992
Class as to dividends without the affirmative vote of the holders of a majority
of the outstanding shares of Preferred Stock 1992 Class.
32
<PAGE>
If there shall be outstanding shares of any other class or series of
preferred stock of the corporation ranking junior to or on a parity with the
Preferred Stock 1992 Class as to dividends (including the Preferred Stock 1985
Class), no full dividends shall be declared or paid or set apart for payment on
any such other class or series for any period unless full cumulative dividends
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the Preferred
Stock 1992 Class for all dividend payment periods terminating on or prior to the
date of the payment of such full cumulative dividends. If dividends are not
paid in full or are in arrears on the Preferred Stock 1992 Class and on any
other class or series of preferred stock of the corporation ranking on a parity
as to dividends with the Preferred Stock 1992 Class, all dividends declared upon
all outstanding shares of the Preferred Stock 1992 Class and shares of such
other class or series of preferred stock shall be declared pro rata so that the
amount of dividends declared per share on the Preferred Stock 1992 Class and
such other class or series of preferred stock shall in all cases bear to each
other the same ratio that accrued and unpaid dividends per share on the
Preferred Stock 1992 Class and such other class or series of preferred stock to
the date of such dividend payment bear to each other.
Unless full cumulative dividends on all outstanding shares of
Preferred Stock 1992 Class shall have been paid or declared and set apart for
payment for all past dividend payment periods, no dividends may be paid or
declared and set apart for payment, or other distribution made (other than
dividends or distributions in Common Stock, Preferred Stock 1985 Class or any
other stock ranking junior to the Preferred Stock 1992 Class as to dividends or
upon liquidation, dissolution or winding up) upon the Common Stock, the
Preferred Stock 1985 Class or any other stock of the corporation ranking junior
to the Preferred Stock 1992 Class as to dividends or upon liquidation, nor may
the Common Stock, the Preferred Stock 1985 Class or any other stock of the
corporation ranking junior to, or on a parity with, the Preferred Stock 1992
Class as to dividends or upon liquidation, be redeemed, purchased or otherwise
acquired for any consideration (or any payment made to or made available for a
sinking fund for the redemption of any shares of such stock) by the corporation
(except for conversion of such junior or parity stock into, or exchange of such
junior or parity stock for, stock ranking junior to the Preferred Stock 1992
Class as to dividends and upon liquidation).
6. Restrictions on Dividends and on Sale of Preferred Stock
--------------------------------------------------------
1992 Class. So long as any shares of the Preferred Stock 1985 Class or of the
- ----------
Preferred Stock 1992 Class are outstanding, the corporation shall not declare or
pay any dividends on the Common Stock, nor redeem, purchase or otherwise acquire
any shares of the Common Stock unless there shall be no accumulated dividends in
arrears on either the Preferred Stock 1985 Class or the Preferred Stock 1992
Class as of the date of such payment, redemption, purchase or other acquisition,
except that the holders of a majority of the outstanding Preferred Stock 1985
Class and Preferred Stock 1992 Class then in arrears may consent to such
payment, redemption, purchase or other acquisition, in person or by proxy,
either in writing or at a meeting called for that purpose.
No shares of Preferred Stock 1992 Class shall be issued by the
corporation after March 31, 1993.
7. Conversion. Any holder of shares of Preferred Stock 1992
----------
Class may at any time and from time to time at his option convert any or all of
such shares into fully paid and nonassessable shares of Common Stock at the
conversion rate of 1.818 shares of Common Stock for each share of
33
<PAGE>
Preferred Stock 1992 Class surrendered for conversion, subject to adjustment as
hereinafter provided.
Any such conversion of shares of Preferred Stock 1992 Class shall be
effected by mailing by registered or certified mail to the corporation at its
principal executive office written notice of election to convert shares of such
stock at least 45 days in advance of the date on which the shares of such stock
are to be converted, which notice of conversion shall specify the number of
shares of stock to be converted, the number(s) of the certificate(s)
representing such shares and the date on which the shares are to be converted,
and by surrendering the certificate(s) representing the shares to be converted
on or before the date on which the shares are to be converted. In the event
that any shares of Preferred Stock 1992 Class shall be called for redemption,
pursuant to subsection C.4 of this ARTICLE THIRD, the right of conversion with
respect to such shares shall expire at the close of business on the redemption
date specified in the notice of redemption (provided that no default by the
corporation in the payment of the applicable redemption price (including any
accrued and unpaid dividends) shall have occurred and be continuing on the date
fixed for such redemption), unless a notice of conversion shall have been
received, and the certificate(s) representing the shares to be converted shall
have been surrendered, prior to such time.
The shares of Preferred Stock 1992 Class which have been converted
under this subsection C.7 of this ARTICLE THIRD shall be retired and shall not
be held as an asset of the corporation.
The holder of record of a share of Preferred Stock 1992 Class on a
record date with respect to the payment of a dividend on the Preferred Stock
1992 Class shall be entitled to receive such dividend on such share of Preferred
Stock 1992 Class on the corresponding dividend payment date notwithstanding the
conversion thereof after such record date or default by the corporation in the
payment of the dividend payable on such dividend payment date. No payment or
adjustment is to be made on conversion for dividends accrued on the shares of
Preferred Stock 1992 Class or for dividends on the Common Stock issued on
conversion.
The conversion rate is subject to adjustment in certain events,
including: (i) the issuance of Common Stock as a dividend or distribution on
any class of capital stock of the corporation; (ii) the combination, subdivision
or reclassification of the Common Stock; (iii) the issuance to all holders of
Common Stock of rights or warrants entitling them to subscribe for or purchase
Common Stock at less than the then current market price (as defined below) of
the Common Stock; or (iv) the distribution to all holders of Common Stock of (A)
evidences of the corporation's indebtedness and/or (B) cash or other assets
(including securities, but excluding the rights, warrants, dividends and
distributions referred to above and any regular quarterly dividend payable
solely in cash out of the retained earnings of the corporation that may from
time to time be fixed by the board of directors). No such adjustment of less
than 1% of the conversion price will be required; however, any such adjustment
not made due to this limitation will be carried forward and taken into account
in any subsequent adjustment. For purposes of this subsection C.7 of this
ARTICLE THIRD, the term "current market price" shall mean (a) the average of the
closing sale price per share of the Common Stock for the five trading days
immediately preceding the date of issuance of such rights or warrants, if the
Common Stock is then listed on the automated quotation system operated by the
National Association of Securities Dealers, Inc. (NASDAQ), the American Stock
Exchange or the New York Stock Exchange, or (b) the appraised fair market
34
<PAGE>
value of each share of Common Stock as determined by a reputable investment
banking firm selected by the board of directors, if the Common Stock is not so
listed.
Fractional shares of Common Stock will not be delivered upon
conversion of shares of Preferred Stock 1992 Class, but a cash adjustment will
be paid in respect of such fractional interests, based on the then current
market price of the Common Stock.
In case of any consolidation or merger to which the corporation is a
party other than a merger or consolidation in which the corporation is the
continuing corporation, or in case of any sale or conveyance to another
corporation of the property of the corporation as an entirety or substantially
as an entirety, or in case of any statutory exchange of securities with another
corporation, there shall be no adjustment to the conversion rate but the holder
of each share of Preferred Stock 1992 Class then outstanding shall have the
right thereafter to convert each such share into the kind and amount of
securities, cash and other property which such holder would have owned or have
been entitled to receive immediately after such consolidation, merger, sale,
conveyance or exchange, had such share been converted immediately prior to the
effective date of such consolidation, merger, sale, conveyance or exchange.
The corporation shall at all times reserve and keep available, out of
its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of shares of Preferred Stock 1992 Class, such number of shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all shares of Preferred Stock 1992 Class then outstanding. The corporation
shall from time to time, in accordance with the laws of the State of New Jersey,
increase the authorized amount to its shares of Common Stock if at any time the
number of shares of Common Stock remaining unissued shall not be sufficient to
permit the conversion of all of the then outstanding shares of Preferred Stock
1992 Class.
8. Preemptive Rights. Except as specifically provided by this
-----------------
subsection C.8 of this ARTICLE THIRD, no holder of any shares of Preferred Stock
1992 Class shall be entitled as such, as a matter of right, to subscribe for or
purchase any shares of stock of the corporation of any class, whether now or
hereafter authorized or whether issued for cash, property or services or as a
dividend or otherwise, or to subscribe for or purchase any obligations, bonds,
notes, debentures, other securities or stock convertible into shares of stock of
the corporation of any class or carrying or evidencing any right to purchase
shares of stock of any class.
In the event the corporation hereafter issues additional shares of
Common Stock or securities convertible into Common Stock, then each of the
holders of Common Stock, Preferred Stock 1985 Class or Preferred Stock 1992
Class as of such record date (not exceeding 50 days preceding the date for the
allotment of rights) as shall be fixed therefor by the board of directors shall
have the preemptive right, without distinction as to class, to subscribe for and
to purchase at the issue price fixed therefor by the board of directors an
amount of such shares of Common Stock or securities convertible into Common
Stock which bears the same proportion to the total amount then proposed to be
issued as the total combined number of shares of Common Stock held by him on
such record date plus the number of shares of Common stock into which all shares
of Preferred Stock 1985 Class and of Preferred Stock 1992 Class held by him on
such record date would be convertible, bears to the total number of shares of
Common Stock which would be outstanding on such record date if all outstanding
shares of Preferred Stock 1985 Class and of Preferred Stock 1992 Class had been
converted into
35
<PAGE>
Common Stock as of such record date; provided, however, that neither the holders
of Common Stock, of Preferred Stock 1985 Class or of Preferred Stock 1992 Class
shall have any preemptive right to subscribe for or to purchase additional (i)
shares of Common Stock issued as dividends on any class of stock, (ii) shares of
Common Stock issued upon conversion of either Preferred Stock 1985 Class or
Preferred Stock 1992 Class of the corporation, (iii) shares of Common Stock
issued as authorized by options granted under any stock option or other benefit
plan of the corporation heretofore or hereafter approved by the corporation's
shareholders, (iv) shares of Common Stock or securities convertible into Common
Stock issued for the primary purpose of raising funds to be invested in any
banking subsidiary of the corporation to provide such subsidiary with capital,
or (v) shares of Common Stock or securities convertible into Common Stock issued
for the primary purpose of increasing the corporation's equity capital or to
retire indebtedness of the corporation, when in the case of issuance of shares
under clause (iv) or (v) it is the judgment of at least three-fourths of the
whole board of directors of the corporation then in office that such issuance is
necessary or appropriate to satisfy any regulatory requirement then applicable
to the corporation or such banking subsidiary or otherwise is, in the judgment
of the board, desirable to permit the corporation or such banking subsidiary to
favorably respond to concerns expressed by any governmental or regulatory
authority with regard to any such regulatory requirement. A "regulatory
requirement" is any current or proposed requirement of law, regulation, order,
consent order, supervisory agreement, written directive or written request
issued by any governmental authority. The board of directors by resolution may
fix the period within which such right may be exercised, which period, however,
shall extend for not less than seven days nor more than 31 days after notice of
such right is mailed to the shareholders. Unless such right be exercised within
such period, such right shall, upon the expiration of such period, be deemed to
be terminated for all purposes in respect of the Common Stock, or securities
convertible into Common Stock, then proposed to be issued.
FOURTH. The corporation shall not issue shares of stock except for
money paid, labor done or property actually received; provided, however, that
shares may be issued in consideration of valid, bona fide antecedent debts. No
note or obligation given by any shareholder, whether secured by deed of trust,
mortgage or otherwise, shall be considered as payment of any part of any share
or shares, and no loan of money for the purpose of such payment shall be made by
the corporation.
FIFTH. The number of directors to constitute the current board of
directors of the corporation is 13. Thereafter the number of directors shall be
fixed by, or in the manner provided in, the bylaws of the corporation. Any
change in the number of directors shall be reported to the Secretary of State
within 30 calendar days of such change, or within such other period, if any, as
may then be required by law. Directors need not be shareholders unless the
bylaws require them to be shareholders.
The names and addresses of the persons who constitute the current
board of directors, each of whom shall hold office until his or her successor
shall have been elected and qualified, are as follows:
Name Address
---- -------
Licinio Cruz 905 Broad Street
Newark, New Jersey 07102
John A. Dorman 905 Broad Street
Newark, New Jersey 07102
36
<PAGE>
Arthur Fischman 905 Broad Street
Newark, New Jersey 07102
John J. Iannuzzi 905 Broad Street
Newark, New Jersey 07102
Donald M. Karp 905 Broad Street
Newark, New Jersey 07102
James J. Lazarus 905 Broad Street
Newark, New Jersey 07102
Edward J. Lenihan 905 Broad Street
Newark, New Jersey 07102
Stanley J. Lesnik 905 Broad Street
Newark, New Jersey 07102
Catherine McFarland 905 Broad Street
Newark, New Jersey 07102
Louis J. Owen 905 Broad Street
Newark, New Jersey 07102
A. Harold Schwartz 905 Broad Street
Newark, New Jersey 07102
Peter D. Sudler 905 Broad Street
Newark, New Jersey 07102
Hubert Williams 905 Broad Street
Newark, New Jersey 07102
SIXTH. The duration of the corporation is perpetual.
SEVENTH. The corporation is formed for the following purposes and
shall have the following powers:
(a) To provide financial and management consultation to banks and
other businesses.
(b) To engage in any activity within the purposes for which
corporations may be organized under the "New Jersey Business Corporation Act."
NJS 14A:1-1 et seq.
In addition to the powers and privileges conferred upon the
corporation by law and those incidental thereto, the corporation shall possess
and may exercise all the powers and privileges which are necessary or convenient
to the conduct, promotion or attainment of the business or purposes of the
corporation. NJS 14A:1-1 et seq.
EIGHTH.
(a) Except as may be otherwise specifically provided by statute, or
the Certificate of Incorporation or the bylaws of the corporation, as from time
to time amended, all powers of management, direction and control of the
corporation shall be, and hereby are, vested in the board of directors.
(b) The original bylaws of the corporation shall be adopted by the
board of directors at its organizational meeting. Thereafter, the bylaws of
37
<PAGE>
the corporation may from time to time be altered, amended or repealed, or new
bylaws may be adopted, in any of the following ways: (i) by the affirmative
vote, at any annual or special meeting of the shareholders, of the holders of
two-thirds of the outstanding shares of stock of the corporation entitled to
vote; or (ii) by resolution adopted by a majority of the full board of directors
at a meeting thereof; or (iii) by unanimous written consent of all the
shareholders or all the directors in lieu of a meeting; provided, however, that
the power of the directors to alter, amend, suspend or repeal the bylaws or any
portion thereof may be denied as to any bylaws or portion thereof enacted by the
shareholders if at the time of such enactment the shareholders shall so
expressly provide.
(c) The corporation may agree to the terms and conditions upon which
any director, officer, employee or agent accepts his office or position and in
its bylaws or otherwise may agree to indemnify and protect any director,
officer, employee or agent of the corporation, or any person who serves at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, to the
extent permitted by the Certificate of Incorporation and laws of New Jersey.
NINTH.
(a) General. In addition to and without limiting the rights to
-------
indemnification and advancement of expenses specifically provided for in the
other paragraphs of this ARTICLE NINTH, the corporation shall indemnify and
advance expenses to each person who is or was a director or officer of the
corporation or who is or was serving at the request of the corporation as a
director, officer, employee or agent of any Other Enterprise (as hereafter
defined) to the full extent permitted or authorized by the laws of the State of
New Jersey as in effect on the date of the adoption of this ARTICLE NINTH and as
may hereafter be amended.
(b) Indemnification in Actions by Third Parties. The corporation
-------------------------------------------
shall indemnify each person who has been or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, investigative or appellate (other than
an action by or in the right of the corporation) by reason of the fact that such
person is or was an officer or director of the corporation or is or was serving
at the corporation's request as a director, officer, trustee, employee or agent
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise ("Other Enterprise") against all liabilities and expenses,
including, without limitation, judgments, amounts paid in settlement, attorneys'
fees, ERISA excise taxes or penalties, fines and other litigation expenses
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; provided, however, that
the corporation shall not be required to indemnify or advance expenses to any
such person or persons seeking indemnification or advancement of expenses in
connection with an action, suit or proceeding initiated by such person unless
the initiation of such action, suit or proceeding was approved in advance by the
board of directors of the corporation. The termination of any such action, suit
or proceeding by judgment, order, settlement, conviction or under a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation, and
with respect to any criminal action or
38
<PAGE>
proceeding that he had reasonable cause to believe that such person's conduct
was unlawful.
(c) Indemnification in Derivative Actions. The corporation shall
-------------------------------------
indemnify each person who has been or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
such person is or was an officer or director of the corporation or is or was
serving at the corporation's request as a director, officer, trustee, employee
or agent of any Other Enterprise against amounts paid in settlement of actions
or suits which the board of directors has determined are frivolous or not in the
best interests of the corporation, incurred by such person in connection with
the defense or settlement of such suit or action and against all expenses
(including attorneys' fees) actually and reasonably incurred by such person if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, except that no
indemnification under this paragraph (c) shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged liable to the
corporation unless and only to the extent that the court in which the action or
suit is brought determines upon application that, despite the adjudication of
liability and in view of all the circumstances of the case, the person is fairly
and reasonably entitled to such indemnification.
(d) Determination of Right to Indemnification. Prior to indemnifying
-----------------------------------------
a person pursuant to the provisions of paragraphs (b) and (c) of this ARTICLE
NINTH, unless ordered by a court, the corporation shall determine that such
person has met the specified standard of conduct entitling such person to
indemnification as set forth under paragraphs (b) or (c) of this ARTICLE NINTH.
Any determination that a person shall or shall not be indemnified under the
provisions of paragraphs (b) or (c) of this ARTICLE NINTH shall be made by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to the action, suit or proceeding, or if such quorum is not
obtainable, or even if obtainable, if a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion or by the
shareholders, and such determination shall be final and binding upon the
corporation; provided, however, that notwithstanding any other provision of this
ARTICLE NINTH, to the extent permitted by law, in the event that such
determination is adverse to the person or persons to be indemnified hereunder,
such person or persons shall have the right to maintain an action in any court
of competent jurisdiction against the corporation to determine whether or not
such person or persons has met the requisite standard of conduct and is entitled
to such indemnification hereunder. If such court action is successful and the
person or persons is determined to be entitled to such indemnification, such
person or persons shall be reimbursed by the corporation for all fees and
expenses (including attorneys' fees) incurred in connection with any such
action.
(e) Advancement of Expenses. To the extent permitted or authorized by
-----------------------
the laws of the State of New Jersey, expenses (including attorneys' fees)
actually and reasonably incurred by a person who may be entitled to
indemnification hereunder in defending an action, suit or proceeding, whether
civil, criminal, administrative, investigative or appellate, shall be paid by
the corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he is not entitled
to indemnification by the corporation. In no event shall any advance be made in
instances where the board, stockholders or independent legal counsel reasonably
determine that such person would not be entitled to indemnification hereunder.
39
<PAGE>
(f) Non-Exclusivity. The indemnification and advancement of expenses
---------------
provided by this ARTICLE NINTH shall not be exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any statute, under the Certificate of Incorporation, bylaws, agreement,
vote of shareholders or disinterested directors, policy of insurance or
otherwise, both as to action in their official capacity and as to action in
another capacity while holding their respective offices, and shall not limit in
any way any right which the corporation may have to make additional
indemnifications with respect to the same or different persons or classes of
persons. The indemnification and advancement of expenses provided by, or
granted pursuant to, this ARTICLE NINTH shall continue as to a person who has
ceased to be a director or officer of the corporation and as to a person who has
ceased serving at the corporation's request as a director, officer, employee or
agent of any Other Enterprise and shall inure to the benefit of the heirs,
executors, administrators and estate of such a person.
(g) Insurance. The corporation may purchase and maintain insurance on
---------
behalf of any person who is or was a director or officer of the corporation, or
is or was serving at the request of the corporation as a director, officer,
trustee, employee or agent of any Other Enterprise, against any liabilities
asserted against such person and expenses incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify such person against such expenses
and liabilities under the provisions of this section.
(h) Vesting of Rights. The rights granted by this ARTICLE NINTH shall
-----------------
be vested in each person entitled to indemnification hereunder as a bargained-
for, contractual condition of such person's acceptance of his election or
appointment as a director or officer of the corporation and while this ARTICLE
NINTH may be amended or repealed, no such amendment or repeal shall release,
terminate or adversely affect the rights of such person under this ARTICLE NINTH
with respect to any act taken or the failure to take any act by such person
prior to such amendment or repeal or with respect to any action, suit or
proceeding with respect to such act or failure to act filed after such amendment
or repeal.
(i) Definitions. For purposes of this ARTICLE NINTH, references to:
-----------
(1) "the corporation" shall include, if and only if the board of
directors shall determine, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that any person who is or was a director or officer of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, trustee, employee or agent of any Other
Enterprise, shall stand in the same position under the provisions of this
ARTICLE NINTH with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its separate
existence had continued;
(2) "Other Enterprises" or "Other Enterprise" shall include
employee benefit plans;
(3) "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan;
(4) "defense" shall include investigations of any threatened,
40
<PAGE>
pending or completed action, suit or proceeding, as well as appeals thereof, and
shall also include any defensive assertion of a cross-claim or a counterclaim;
and
(5) "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries.
As referred to in this ARTICLE NINTH, a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation." For the purpose
of this ARTICLE NINTH, unless the board of directors of the corporation shall
determine otherwise, any director or officer of the corporation who shall serve
as an officer, director, employee or agent of any Other Enterprise of which the
corporation, directly or indirectly, is a shareholder or creditor, or in which
the corporation is in any way interested, shall be presumed to be serving as
such director, officer, employee or agent at the request of the corporation. In
all other instances where any person shall serve as a director, officer,
employee or agent of any Other Enterprise, if it is not otherwise established
that such person is or was serving as such director, officer, employee or agent
at the request of the corporation, the board of directors of the corporation
shall determine whether such person is or was serving at the request of the
corporation, and it shall not be necessary to show any actual or prior request
for such service, which determination shall be final and binding on the
corporation and the person seeking indemnification.
(j) Severability. If any provision of this ARTICLE NINTH or the
------------
application of any such provision to any person or circumstance is held invalid,
illegal or unenforceable for any reason whatsoever, the remaining provisions of
this ARTICLE NINTH and the application of such provision to other persons or
circumstances shall not be affected thereby and to the fullest extent possible
the court finding such provision invalid, illegal or unenforceable shall modify
and construe the provision so as to render it valid and enforceable as against
all persons or entities and to give the maximum possible protection to persons
subject to indemnification hereby within the bounds of validity, legality and
enforceability. Without limiting the generality of the foregoing, if any person
who is or was an officer or director of the corporation or any person who is or
was serving at the request of the corporation as a director, officer, employee
or agent of any Other Enterprise, is entitled under any provision of this
ARTICLE NINTH to indemnification by the corporation for some or a portion of the
judgments, amounts paid in settlement, attorneys' fees, ERISA excise taxes or
penalties, fines or other expenses actually and reasonably incurred by such
person in connection with any threatened, pending or completed action, suit or
proceeding (including, without limitation, the investigation, defense,
settlement or appeal of such action, suit or proceeding) but not, however, for
all of the total amount thereof, the corporation shall nevertheless indemnify
such person for the portion thereof to which such person is entitled.
(k) Personal Liability. Without limiting the generality of the
------------------
foregoing provisions of this ARTICLE NINTH, to the fullest extent permitted or
authorized by the laws of the State of New Jersey, including without limitation
the provisions of Chapter 35 of the 1987 New Jersey Session Laws as now in
effect and as it may from time to time hereafter be amended, no director or
officer of the corporation shall be personally liable to the
41
<PAGE>
corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director or officer.
TENTH. Insofar as it is permitted under the laws of New Jersey and
except as may be otherwise provided by the bylaws of the corporation, no
contract or other transaction between the corporation and any other firm or
corporation shall be affected or invalidated solely by reason of the fact that
any director of officer of the corporation is interested in, or is a member,
shareholder, director or officer of such other firm or corporation; and any
director or officer of the corporation, individually or jointly with one or more
other directors or officers of the corporation, may be a party to, or may be
interested in, any contract or transaction of the corporation or in which the
corporation is interested, and no such contract or transaction shall be
invalidated thereby.
ELEVENTH. The directors shall have power to keep the books (except
any books required to be kept in the state of New Jersey, pursuant to the laws
thereof) at any place within or without the state of New Jersey.
TWELFTH. The corporation shall be entitled to treat the registered
holder of any shares of the corporation as the owner of such shares and of all
rights derived from such shares for all purposes. The corporation shall not be
obligated to recognize any equitable or other claim to or interest in such
shares or rights on the part of any other person, including, but without
limiting the generality of the term "person," a purchaser, pledgee, assignee or
transferee of such shares or rights, unless and until such person becomes the
registered holder of such shares, and the foregoing shall apply whether or not
the corporation shall have either actual or constructive notice of the interest
of such person.
THIRTEENTH. The corporation reserves the right to alter, amend or
repeal any provision contained in its Certificate of Incorporation in the manner
now or hereafter prescribed by the statutes of New Jersey, and all rights and
powers conferred herein are granted subject to this reservation; and, in
particular, the corporation reserves the right and privilege to amend its
Certificate of Incorporation from time to time so as to authorize other or
additional classes of shares (including preferential shares), to increase or
decrease the number of shares of any class now or hereafter authorized, to
establish, limit or deny to shareholders of any class the right to purchase or
subscribe for any shares of stock of the corporation of any class, whether now
or hereafter authorized or whether issued for cash, property or services or as a
dividend or otherwise, or to purchase or subscribe for any obligation, bonds,
notes, debentures or securities or stock convertible into shares of stock of the
corporation or carrying or evidencing any right to purchase shares of stock of
any class, and to vary the preferences, priorities, special powers,
qualifications, limitations, restrictions and the special or relative rights or
other characteristics in respect of the shares of each class, and to accept and
avail itself of, or subject itself to, the provisions of any statutes of New
Jersey hereafter enacted pertaining to general and business corporations, to
exercise all the rights, powers and privileges conferred upon corporations
organized thereunder or accepting the provisions thereof and to assume the
obligations and duties imposed therein, upon the affirmative vote of the holders
of the shares of stock of the corporation as provided in ARTICLE THIRD of this
Certificate of Incorporation.
IV. The Restated Certificate of Incorporation restates and integrates
and does not substantively amend the provisions of the corporation's Certificate
of Incorporation as theretofore amended or supplemented, and there is no
substantive discrepancy between those
42
<PAGE>
provisions and the provisions of the restated articles.
V. This restatement has been duly adopted in accordance with the
provisions of Section 14A:9-5 of the New Jersey Business Corporation Act, as
amended.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has
been executed on behalf of the corporation by its President and attested by its
Secretary, and each of them does hereby affirm and acknowledge that this
Restated Certificate of Incorporation is the act and deed of the corporation as
of June 22, 1995.
BROAD NATIONAL BANCORPORATION
By /s/ John A. Dorman
-------------------
Name: John A. Dorman
Title: President
(Corporate Seal)
ATTEST:
/s/ Fred S. Campo
--------------------
Name: Fred S. Campo
Title: Secretary
43
<PAGE>
STATE OF NEW JERSEY )
) ss.
COUNTY OF ESSEX )
I, Margaret Nurnberger, a Notary Public, do hereby certify that
on this 22nd day of June, 1995, John A. Dorman, personally came before me
and this person acknowledged under oath, to my satisfaction, that (a) this
person signed, sealed and delivered the foregoing certificate as President
of the corporation named in the foregoing certificate; (b) the proper
corporate seal was affixed; and (c) the foregoing was signed and made by
the corporation as its voluntary act and deed by virtue of authority from
its board of directors.
/s/ Margaret Nurnberger
---------------------------
Notary Public
My Commission Expires:
Margaret R. Nurnberger
A Notary Public of New Jersey
My Commission Expires June 3, 1998
44
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BROAD
NATIONAL BANCORPORATION'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 22,929
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 28,225
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 67,767
<INVESTMENTS-CARRYING> 67,977
<INVESTMENTS-MARKET> 66,870
<LOANS> 273,316
<ALLOWANCE> 7,446
<TOTAL-ASSETS> 471,405
<DEPOSITS> 427,386
<SHORT-TERM> 1,272
<LIABILITIES-OTHER> 7,945
<LONG-TERM> 0
0
66
<COMMON> 4,116
<OTHER-SE> 30,620
<TOTAL-LIABILITIES-AND-EQUITY> 471,405
<INTEREST-LOAN> 5,789
<INTEREST-INVEST> 1,806
<INTEREST-OTHER> 509
<INTEREST-TOTAL> 8,104
<INTEREST-DEPOSIT> 2,595
<INTEREST-EXPENSE> 2,613
<INTEREST-INCOME-NET> 5,491
<LOAN-LOSSES> 225
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,700
<INCOME-PRETAX> 1,638
<INCOME-PRE-EXTRAORDINARY> 1,638
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,037
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.24
<YIELD-ACTUAL> 5.14
<LOANS-NON> 10,068
<LOANS-PAST> 2,984
<LOANS-TROUBLED> 4,214
<LOANS-PROBLEM> 4,009
<ALLOWANCE-OPEN> 7,402
<CHARGE-OFFS> 403
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