UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE
[X] ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
[ ] EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
.
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 (I.R.S. Employer
of incorporation or organization) Identification Number)
905 Broad Street, Newark, New Jersey 07102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201)
624-2300
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $1.00 per share
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the 2,774,559 shares of voting
stock of the Registrant held by non-affiliates of the Registrant
on February 29, 1996, computed by reference to the closing sale
price of such stock as reported on NASDAQ, was approximately
$30,520,000. As of February 29, 1996, there were 4,115,754
shares of the Registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document are incorporated by reference
into the indicated parts of this report: definitive Proxy
Statement for the 1996 Annual Meeting of Shareholders to be filed
with the Commission pursuant to Regulation 14A - Part III.PART I
<PAGE>
ITEM 1. BUSINESS.
BUSINESS OF BANCORPORATION
GENERAL
Broad National Bancorporation ("Bancorporation") is a
bank holding company registered under the Bank Holding Company
Act of 1956, as amended (the "BHC Act"). Although Bancorporation
was incorporated under the laws of the State of New Jersey on
April 7, 1981, it did not engage in any business activity until
February 1, 1983. On that date, it acquired all of the issued
and outstanding capital stock of Broad National Bank, a national
banking association (the "Bank") pursuant to a corporate
reorganization involving an exchange of shares. Bancorporation's
activities currently are limited to ownership of the outstanding
capital stock of the Bank and to performing certain services for
the Bank. Except as otherwise provided herein, references herein
to "Bancorporation" include Bancorporation and its consolidated
subsidiaries.
Bancorporation's principal executive offices are
located at 905 Broad Street, Newark, New Jersey 07102, and its
telephone number is (201) 624-2300.
DESCRIPTION OF BUSINESS
BANCORPORATION
Bancorporation is a bank holding company registered
under the BHC Act. Bancorporation's activities currently are
limited to ownership of the outstanding capital stock of the Bank
and to performing certain services for the Bank.
THE BANK
The Bank is a national banking association organized in
1925 under the laws of the United States with offices in Newark
(7 offices), East Orange, Millburn, North Arlington, Livingston,
Perth Amboy, Kearny and Elizabeth (2 offices), New Jersey. The
Bank is a full service commercial bank and offers a broad range
of commercial and retail banking services. It offers checking
accounts, savings accounts, money market accounts and individual
retirement accounts (IRAs), as well as various other types of
time deposits which are insured by the Bank Insurance Fund
("BIF") administered by the Federal Deposit Insurance Corporation
<PAGE> ("FDIC") to the full extent provided by law. The Bank also
provides typical bank services such as cashiers checks, United
States Savings Bonds and travelers checks. The Bank had total
deposits of $391,466,000 as of December 31, 1994 and of
$429,681,000 as of December 31, 1995. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operation."
The Bank makes and services both secured and unsecured
loans which totaled $259,446,000 as of December 31, 1994 and
$259,728,000 as of December 31, 1995, in each case, net of
unearned income and deferred loan fees and the allowance for
possible loan losses. Commercial lending operations include
various types of credit for the Bank's commercial and industrial
customers. The Bank's installment loan department makes direct
loans to individuals and purchases installment obligations from
retailers both with and without recourse. The Bank's mortgage
loan department makes a variety of residential, industrial, and
commercial loans secured by real estate. See "Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operation."
The Bank also provides agency and custody services for
individuals and institutional accounts, serves as fiscal and
paying agent, and as escrow agent. The Bank has trust powers
which permit it to administer trusts and estates, although the
Bank has no trust accounts at this time.
The Bank currently has fourteen branch banking
facilities in addition to its main location. See "Item 2.
Properties."
EMPLOYEES
Bancorporation and the Bank have approximately 240
full-time employees and 30 part-time employees. Neither
Bancorporation nor the Bank is a party to any collective
bargaining agreement and employee relations are deemed to be
satisfactory.
SERVICE AREA AND COMPETITION
The principal market is defined as all of Essex County,
the southern quadrant of Bergen County, the northeast quadrant of
Union County and the northeast quadrant of Middlesex County, New
Jersey. This market area is highly competitive with many banks
and financial institutions vying for the same business. Most of
the Bank's competitors are institutions of far greater size and
<PAGE> the Bank's deposits constitute less than one percent of the
commercial bank deposits in its market area.
The Bank encounters intense competition in local and
national markets from non-banking as well as banking sources in
all of its activities, including many competitors which have
substantially greater resources, name recognition and market
presence than the Bank. As a lender it competes not only with
other banks but also with savings and loan associations, savings
banks, credit unions, finance companies, mortgage companies,
factoring companies, insurance companies, and other financial
institutions, many of which have higher legal lending limits. It
competes for deposits with other banks, savings banks, savings
and loan associations, credit unions, mutual funds, money market
funds, and issuers of commercial paper and other securities.
Such competition is particularly intense from the Bank's Newark,
New Jersey-based competitors. Trends toward the consolidation of
the banking industry may make it more difficult for smaller banks
and financial institutions, such as the Bank, to compete with
large, national and regional banking institutions.
SUPERVISION AND REGULATION
FEDERAL BANK HOLDING COMPANY ACT
GENERAL. Bancorporation is a registered bank holding
company within the meaning of the BHC Act, subject to the
supervision of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"). Bancorporation is required
to file with the Federal Reserve Board an annual report and such
other additional information as the Federal Reserve Board may
require pursuant to the BHC Act. Also, the Federal Reserve Board
periodically examines Bancorporation and its non-bank
subsidiaries. The Federal Reserve Board has authority to issue
cease and desist orders against bank holding companies if it
determines that their actions represent unsafe and unsound
practices or violations of law. In addition, the Federal Reserve
Board is empowered to impose substantial civil money penalties
for violations of banking statutes and regulations. Regulation
by the Federal Reserve Board is intended to protect depositors of
the Bank, not shareholders of Bancorporation.
SOURCE OF STRENGTH. Federal Reserve Board policy
requires a bank holding company to serve as a source of financial
and managerial strength to its subsidiary banks. Under this
policy, a bank holding company is expected to stand ready to use
its available resources to provide adequate capital funds to its
subsidiary banks during periods of financial stress or adversity,
<PAGE> and to maintain resources and the capacity to raise capital which
it can commit to its subsidiary banks. It is the Federal Reserve
Board's position that the failure of a bank holding company to
serve as a source of strength to a distressed subsidiary bank is
an unsafe and unsound banking practice. This has become known as
the "source of strength doctrine." It is not clear whether the
source of strength doctrine is legally enforceable by the Federal
Reserve Board.
LIMITATION ON ACQUISITIONS. The BHC Act requires every
bank holding company to obtain the prior approval of the Federal
Reserve Board before (i) taking any action that causes a bank to
become a controlled subsidiary of the bank holding company, (ii)
acquiring direct or indirect ownership or control of voting
shares of any bank or bank holding company, if the acquisition
results in the acquiring bank holding company having control of
more than 5% of the outstanding shares of any class of voting
securities of such bank or holding company and such bank or bank
holding company is not majority-owned by the acquiring bank
holding company prior to the acquisition, (iii) the acquisition
by a bank holding company or any nonbank subsidiary thereof of
all or substantially all of the assets of a bank, or (iv) a
merger or consolidation with another bank holding company.
In determining whether to approve a proposed
acquisition, merger or consolidation, the Federal Reserve Board
is required to take into account the competitive effects of the
proposed acquisition, the convenience and needs of the community
to be served, and the financial and managerial resources and
future prospects of the bank holding companies and banks
concerned. If a proposed acquisition, merger or consolidation
might have the effect in any section of the United States to
substantially lessen competition or to tend to create a monopoly,
or if such proposed acquisition, merger, or consolidation
otherwise would be in restraint of trade, then the Federal
Reserve Board may not approve it unless it finds that the
anticompetitive effects are clearly outweighed in the public
interest by the probable effect of the proposed transaction in
meeting the convenience and needs of the community to be served.
Bancorporation has no current plans to acquire any interest in
the voting stock or assets of any bank or other financial
institution, although such an acquisition may be considered in
the future.
LIMITATION ON CERTAIN ACTIVITIES. The BHC Act also
prohibits a bank holding company, with certain exceptions, from
engaging in, and from acquiring direct or indirect ownership or
control of the voting shares or assets of any company engaged in
any activity other than banking or managing or controlling banks,
<PAGE> and any activity which the Federal Reserve Board determines to be
so closely related to banking, or managing or controlling banks,
as to be a proper incident thereto. In acting on an application
to engage in such an activity, the Federal Reserve Board is
required to weigh the expected benefits to the public, such as
greater convenience, increased competition or gains in
efficiency, against the risks of possible adverse effects, such
as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices.
This consideration includes an evaluation of the financial and
managerial resources of the applicant, including its
subsidiaries, and any company to be acquired, and the effect of
the proposed transaction on those resources.
To date, the Federal Reserve Board, by regulation, has
determined that, subject to expressed limitations, certain
activities are permissible for bank holding companies and their
subsidiaries and may be engaged in upon notice to the Federal
Reserve Board without prior approval. These permissible
activities include furnishing or providing services for the
internal operations of the bank holding company and its
subsidiaries, operating a safe deposit business, making and
servicing loans, operating an industrial bank, performing certain
trust company functions, acting as an investment or financial
advisor in certain capacities, leasing certain real or personal
property, making certain investments to promote community
development, providing certain data processing services,
performing certain insurance agency and underwriting functions,
owning, controlling and operating a savings association,
providing specified courier services, providing management
consulting advice to nonaffiliated banks and nonbank depository
institutions, selling certain money orders, United States savings
bonds and traveler's checks, performing appraisals of real and
personal property, arranging certain commercial real estate
equity financing, providing certain securities brokerage
services, underwriting and dealing in certain government
obligations and money market instruments, providing foreign
exchange advisory and transactional services, acting as a futures
commission merchant, providing investment advice on financial
futures and options on futures, providing consumer financial
counseling, providing tax planning and preparation services,
providing certain check guaranty services, operating a collection
agency and operating a credit bureau.
The Federal Reserve Board has also determined that
certain other activities, including real estate brokerage and
syndication, land development, property management, management
consulting, underwriting of life insurance not sold in connection
with a credit transaction, and insurance premium funding are
<PAGE> improper activities for bank holding companies and their
subsidiaries. In the future the Federal Reserve Board may take
additional actions adding and refusing to add particular
activities to the list of activities that the Federal Reserve
Board deems to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. Certain
bank holding companies and their subsidiaries possess
"grandfather rights" giving them authority to engage in one or
more of the activities which are not generally permissible
because they were engaged in such activities prior to the
adoption of legislation restricting such activities.
Under cross-guaranty provisions of the Federal Deposit
Insurance Act (the "FDIA"), bank subsidiaries of a bank holding
company are liable for any loss incurred (or reasonably
anticipated to be incurred) by the Bank Insurance Fund (the
"BIF"), the federal deposit insurance fund for banks, in
connection with the failure of any other bank subsidiary of the
bank holding company. Liability under such cross-guarantee would
be junior to deposit liabilities and most secured obligations,
but senior to obligations to shareholders and most obligations to
affiliates. The Federal Deposit Insurance Corporation (the
"FDIC") has authority to prospectively waive the cross-guarantee
provision. Currently the Bank is the only subsidiary of
Bancorporation.
A bank holding company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in
connection with the extension of credit or the lease or sale of
any property or the furnishing of services. Subsidiary banks of
a bank holding company are also subject to certain restrictions
imposed by the Federal Reserve Act on any extensions of credit to
the bank holding company or any of its subsidiaries, or
investment in the stock or other securities thereof, and on the
taking of such stocks or securities as collateral for loans.
REGULATORY CAPITAL REQUIREMENTS. The Federal Reserve
Board has promulgated "capital adequacy guidelines" for use in
its examination and supervision of bank holding companies. A
holding company's ability to pay dividends and expand its
business through the acquisition of new banking subsidiaries can
be restricted if its capital falls below levels established by
these guidelines. In addition, holding companies whose capital
falls below specified levels can be required to implement a plan
to increase capital.
The Federal Reserve Board's capital adequacy guidelines
provide for three types of capital: Tier 1 capital (also
referred to as core capital), Tier 2 capital (also referred to as
<PAGE> supplementary capital) and Total capital. A bank holding
company's Tier 1 capital generally includes the following
elements: common shareholders' equity, qualifying noncumulative
perpetual preferred stock and related surplus, qualifying
cumulative perpetual preferred stock and related surplus (limited
to a maximum of 25% of Tier 1 capital elements) and minority
interests in the equity accounts of consolidated subsidiaries.
Goodwill is generally excluded from Tier 1 capital. Most
intangible assets also are deducted from Tier 1 capital. A bank
holding company's Tier 2 capital generally includes allowances
for loan and lease losses (limited to 1.25% of risk-weighted
assets), most perpetual preferred stock and any related surplus
(noncumulative and cumulative, without percentage limits),
certain hybrid capital instruments, perpetual debt and mandatory
convertible debt securities, and certain intermediate-term
preferred stock and subordinated debt instruments (to a maximum
of 50% of Tier 1 capital excluding goodwill, but phased-out as
the instrument matures). The maximum amount of supplementary
capital that qualifies as Tier 2 capital is limited to 100% of
Tier 1 capital (net of goodwill). For purposes of calculating
the total risk-based capital ratio, Total capital generally
includes Tier 1 capital, plus qualifying Tier 2 capital, minus
investments in unconsolidated subsidiaries, reciprocal holdings
of bank holding company capital securities, certain deferred tax
assets and other deductions as determined by the Federal Reserve
Board.
The Federal Reserve Board has issued a regulation which
limits the amount of intangible assets which may be included in
Tier 1 capital. Under the regulation, mortgage servicing rights
("MSRs") and purchased credit card relationships ("PCCRs") would
be included in Tier 1 capital to the extent that, in the
aggregate, they do not exceed 50% of Tier 1 capital and, to the
further extent that PCCRs, individually, do not exceed 25% of
Tier 1 capital. MSRs and PCCRs in excess of these limits, as
well as core deposit intangibles ("CDI") and all other identified
intangible assets, must be deducted in determining Tier 1
capital. As of December 31, 1995, Bancorporation did not have
MSRs, PCCRs, CDIs or other identified intangible assets.
The Federal Reserve Board's capital adequacy guidelines
require a bank holding company to satisfy a Tier 1 Leverage
Ratio, a total risk-based capital ratio and a Tier 1 risk-based
capital ratio. Under the Tier 1 Leverage Ratio capital
guideline, a bank holding company must have and maintain Tier 1
capital in an amount equal to at least 3.0% of its average total
consolidated assets. In general, average total consolidated
assets means the quarterly average total assets (net of the
allowance for loan and lease losses) reported on a bank holding
<PAGE> company's Consolidated Financial Statements (FR Y-9C Report),
minus goodwill and any other intangible assets or investments in
subsidiaries which are deducted from Tier 1 capital. The 3.0%
minimum Tier 1 Leverage Ratio is considered the absolute minimum
amount of Tier 1 capital which the most highly rated bank holding
companies (those rated composite 1 under the BOPEC rating system
for bank holding companies) are required to maintain. All other
bank holding companies must maintain a minimum Tier 1 Leverage
Ratio of 3.0% plus an additional cushion of at least 100 to 200
basis points.
Under the Federal Reserve Board's capital adequacy
guidelines, a bank holding company must have and maintain a ratio
of Total capital to risk-weighted assets of 8.00%, and a ratio of
Tier 1 capital to risk-weighted assets of 4.00%. The amount of a
bank holding company's risk-weighted assets is determined by
multiplying the balance sheet amount of each of the bank holding
company's consolidated assets by a specified risk-weight factor
of 0%, 20%, 50% or 100%, in accordance with the relative risk
level of the asset. In determining risk-weighted assets, off-
balance sheet items, such as standby letters of credit, are
converted to an on-balance sheet credit equivalent amount by
multiplying the face amount of the off-balance sheet item by a
credit conversion factor of 0%, 20%, 50% or 100%, in accordance
with the probability that the off-balance sheet item will become
a credit extended by the bank holding company. In general,
intangible assets and other assets which are deducted in
determining Tier 1 capital and Total capital must also be
excluded from risk-weighted assets.
On December 31, 1995, Bancorporation was in compliance
with all of the Federal Reserve Board's capital guidelines. On
such date, Bancorporation had a Tier 1 Leverage Ratio of 7.17%
(compared with a requirement of 4% to 5%), and a ratio of total
capital to risk-weighted assets of 11.85% (compared with a
requirement of 8%) and a ratio of Tier 1 capital to risk-weighted
assets of 10.58% (compared with a requirement of 4%). There can
be no assurance, however, that Bancorporation will remain in
compliance with regulatory capital requirements. For additional
information on Bancorporation capital, see "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Financial Condition--Capital Adequacy."
LIMITATION ON INCURRED DEBT. Bancorporation currently
has no plans to incur any indebtedness. If Bancorporation
determines to do so in the future, it will be subject to the
general statutory and regulatory restrictions and, in addition,
to certain commitments made by it to the Federal Reserve Board at
the time Bancorporation received approval to become a bank
<PAGE> holding company. One such commitment which remains in effect is
an agreement by Bancorporation that it will not incur debt
without the prior approval of the Federal Reserve Bank of New
York. In the past, Bancorporation, with the approval of the
Federal Reserve Bank of New York, has incurred indebtedness for
the purpose of augmenting the Bank's capital to support growth.
INTERSTATE BANKING AND BRANCHING. Under the recently
enacted Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the "Riegle-Neal Act"), which became effective on
September 29, 1995, bank holding companies may acquire the stock
or substantially all of the assets of banks located in any state
regardless of whether such transaction is prohibited under the
laws of any state. The Federal Reserve Board, however, may not
approve an interstate acquisition if as a result of the
acquisition the bank holding company would control more than 10%
of the total amount of insured deposits in the United States or
would control more than 30% of the insured deposits in the home
state of the acquired bank. The 30% of insured deposits state
limit does not apply if the acquisition is the initial entry into
a state by a bank holding company or if the home state waives
such limit.
Under the Riegle-Neal Act, individual states may
restrict interstate acquisitions in two ways. First, a state may
prohibit an out-of-state bank holding company from acquiring a
bank located in the state unless the target bank has been in
existence for a specified minimum period of time (not to exceed
five years). Second, a state may establish limits on the total
amount of insured deposits within the state which are controlled
by a single bank holding company (a "deposit cap"), provided that
such deposit limit does not discriminate against out-of-state
bank holding companies. As of March 1, 1996, a bill was proposed
to the New Jersey state legislature regarding the interstate
banking and interstate branching provisions of the Riegle-Neal
Act (the "NJ Branching Bill"). The proposed bill contains
neither a provision establishing a deposit cap nor a minimum age
requirement.
The Riegle-Neal Act now permits affiliated banks in
different states to act as agents for each other for purposes of
receiving deposits, renewing time deposits, closing loans,
servicing loans and receiving payments on loans and other
obligations. A bank acting as an agent for an affiliated bank is
not considered a branch of the affiliated bank.
Beginning on June 1, 1997, the Riegle-Neal Act
authorizes interstate branching by a merger of banks with
different home states which results in a single bank with
<PAGE> branches in both states. The Riegle-Neal Act gives states the
right to "opt out" and prohibit interstate mergers by passing
legislation before June 1, 1997 that expressly prohibits all
merger transactions with out-of-state banks. The Riegle-Neal Act
also gives states the right to "opt in" and authorize early
interstate mergers by passing legislation that expressly permits
interstate merger transactions with all out-of-state banks. The
Riegle-Neal Act authorizes banks to establish and operate a de
novo branch in a state (other than the bank's home state) only if
the host state "opts in" to authorize de novo interstate banking
by passing legislation that expressly permits all out-of-state
banks to establish de novo branches in the state. As of March 1,
1996, approximately 25 states had acted on the Riegle-Neal Act;
all of those states except Texas have opted into the interstate
branching provisions in some form. The state legislature in each
of New York, Connecticut, Pennsylvania, Delaware and Maryland has
taken action to opt into the Riegle-Neal Act. Of these states,
Connecticut, Pennsylvania, and Maryland each enacted an opt-in
statute which permits de novo interstate branching for banks
located in any state which enacts a reciprocal statute. As of
March 1, 1996, New Jersey had not enacted any such legislation.
The proposed NJ Branching Bill would allow interstate branching
by merger and by acquisition of an existing branch, but would
prohibit de novo interstate branching.
STATE BRANCHING LIMITATIONS
In general, New Jersey law permits a bank, with prior
regulatory approval, to establish a full branch office, a
mini-branch office or a communications terminal branch office
anywhere in the State. A bank, however, generally may not
establish a full branch office or a mini-branch office (except in
connection with a bank merger or an acquisition from a bank in
liquidation or in danger of liquidation) in a municipality, other
than in the municipality in which it maintains its principal
office, which has a population of less than 10,000 and in which
another banking institution maintains its principal office. For
this purpose the principal office of a bank that is a subsidiary
of a bank holding company which controls two or more banking
institutions is deemed to be a branch office.
FEDERAL BANK REGULATION
GENERAL. As a national bank, the Bank is subject to
regulation and examination primarily by the Office of the
Comptroller of the Currency (the "OCC"). The Bank is also
regulated by the Federal Reserve Board and the FDIC. Regulation
by these agencies is designed to protect depositors of the Bank
rather than shareholders of Bancorporation. The OCC has the
<PAGE> authority to issue cease and desist orders if it determines that
activities of the Bank represent unsafe and unsound banking
practices or violations of law. In addition, the OCC is
empowered to impose substantial civil money penalties for
violations of banking statutes and regulations.
REGULATORY CAPITAL REQUIREMENTS. The OCC has adopted
minimum capital requirements applicable to national banks which
are substantially similar to the capital adequacy guidelines
established by the Federal Reserve Board for bank holding
companies. There are, however, technical differences in the
methodologies used to calculate the capital ratios.
On December 31, 1995, the Bank was in compliance with
all of the OCC's minimum capital requirements. On such date, the
Bank had a Tier 1 Leverage Ratio of 7.00% (compared with a
requirement for the Bank of 4% to 5%), and a ratio of Total
capital to risk-weighted assets of 11.60% (compared with a
requirement of 8%), and a ratio of Tier 1 capital to
risk-weighted assets of 10.34% (compared with a requirement of
4%).
CLASSIFICATION OF BANKS. Federal banking laws classify
financial institutions in one of the following five categories,
depending upon the amount of their capital: well-capitalized,
adequately capitalized, undercapitalized, significantly
undercapitalized or critically undercapitalized. Under OCC
regulations, a bank is deemed to be (i) "well capitalized" if it
has a total risk-based capital ratio of 10% or greater, a Tier 1
risk-based capital ratio of 6% or greater and a Tier 1 leverage
ratio of 5% or greater (and is not subject to any order or
written directive specifying any higher capital ratio), (ii)
"adequately capitalized" if it has a total risk-based capital
ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4%
or greater and a Tier 1 leverage ratio of 4% or greater (or a
Tier 1 leverage ratio of 3% or greater, if the bank has a CAMEL
rating of 1), (iii) "undercapitalized" if it has a total
risk-based capital ratio that is less than 8%, a Tier 1
risk-based capital ratio that is less than 4% or a Tier 1
leverage ratio that is less than 4% (or a Tier 1 leverage ratio
that is less than 3%, if the bank has a CAMEL rating of 1), (iv)
"significantly undercapitalized" if it has a total risk-based
capital ratio that is less than 6%, a Tier 1 risk based capital
ratio that is less than 3% or a Tier 1 leverage ratio that is
less than 3%, and (v) "critically undercapitalized" if it has a
Tier 1 leverage ratio that is equal to or less than 2%. Federal
banking laws require the federal regulatory agencies to take
prompt corrective action against undercapitalized financial
<PAGE> institutions. Under OCC regulations, the Bank was a well
capitalized institution as of December 31, 1995.
On August 2, 1995, the OCC adopted new regulations
amending its risk-based guidelines to account for interest rate
risk. The risk-based capital guidelines now specifically include
a bank's exposure to declines in the economic value of its
capital due to changes in interest rates as a factor that bank
regulatory agencies will consider in evaluating a bank's capital
adequacy. The new guidelines, which became effective September
1, 1995, do not create an explicit measurement for assessing a
level of a bank's interest rate risk exposure. The OCC has
stated its intention to issue a proposed regulation to establish
an explicit minimum capital charge for interest rate risk in the
near future. Until such proposed regulation is issued, the Bank
cannot determine what amount of additional capital may be
required by bank regulatory agencies to cover its interest rate
risk exposure.
RESTRICTIONS ON UNDERCAPITALIZED INSTITUTIONS. Federal
banking laws subject an undercapitalized financial institution to
increased monitoring by the appropriate federal banking
regulatory agency and periodic review of the institution's
efforts to restore its capital. They require an undercapitalized
financial institution to submit a capital restoration plan to the
appropriate federal regulatory agency within 45 days of becoming
undercapitalized. The appropriate federal regulatory agency for
the Bank is the OCC. The agency may not approve a plan unless it
determines, among other things, that the plan is based on
realistic assumptions, the plan is likely to succeed in restoring
the financial institution's capital and any holding company
controlling the financial institution has guaranteed that the
financial institution will comply with the capital plan. Federal
banking laws limit the aggregate liability for all holding
company guarantees to the lesser of 5% of the financial
institution's total assets at the time it became
undercapitalized, or the amount necessary to bring the financial
institution into capital compliance.
Federal banking laws also place restrictions on capital
distributions and the operations of an undercapitalized financial
institution. All insured financial institutions are prohibited,
with limited exceptions, from declaring any dividends, making any
other capital distributions or paying management fees to any
person or company who controls the financial institution if after
such distribution or payment the financial institution would be
undercapitalized. An undercapitalized financial institution is
not permitted to increase its total average assets, make
acquisitions, establish new branch offices or engage in any new
<PAGE> line of business unless certain statutory conditions have been
met, including prior approval by the FDIC of the financial
institution's capital restoration plan. Federal banking laws
also give the appropriate federal regulatory agency discretion to
take any of the corrective actions authorized for significantly
undercapitalized financial institutions (see below), if the
agency determines that such actions are necessary to protect the
deposit insurance funds.
RESTRICTIONS ON SIGNIFICANTLY UNDERCAPITALIZED
INSTITUTIONS. Federal banking laws impose even more severe
restrictions on significantly undercapitalized financial
institutions and undercapitalized financial institutions that
fail to submit and implement an acceptable capital restoration
plan. Significantly undercapitalized institutions must restrict
the payment of bonuses and raises to senior executive officers of
the institution in addition to implementing the provisions
described above for undercapitalized institutions. In addition,
the appropriate federal regulatory agency must impose one or more
restrictions on an institution that is significantly under-
capitalized unless the agency determines that such actions would
not further the purposes of federal banking laws. These
discretionary actions: (i) require the financial institution to
sell enough shares or obligations of the institution so that it
will be adequately capitalized after the sale, or if one or more
grounds exist for appointing a receiver or conservator for the
financial institution, require that the financial institution be
acquired by a depository institution holding company or combine
with another insured depository institution; (ii) restrict
certain transactions between the financial institution and
affiliates of the financial institution; and (iii) restrict the
interest rates that the financial institution pays on deposits to
the prevailing rates of interest on deposits of comparable
amounts and maturities in the region where the financial
institution is located.
Federal banking laws also give the appropriate federal
regulatory agency the discretion with respect to significantly
undercapitalized institutions and undercapitalized financial
institutions that fail to submit and implement an acceptable
capital restoration plan to take any of the following actions:
(i) further restrict the financial institution's transactions
with affiliates; (ii) restrict the financial institution's asset
growth or require the institution to reduce its total assets;
(iii) require the financial institution or any of its
subsidiaries to alter, reduce, or terminate any activity that the
agency determines poses excessive risk to the financial
institution; (iv) order a new election for the financial
institution's board of directors; (v) require the financial
<PAGE> institution to dismiss from office any director or senior
executive officer who had held office for more than 180 days
immediately before the financial institution became
undercapitalized; (vi) require the financial institution to
employ qualified senior executive officers; (vii) prohibit the
financial institution from accepting deposits from correspondent
depository financial institutions, including renewals and
rollovers; (viii) prohibit any bank holding company having
control of the financial institution from making any capital
distributions without the prior approval of the Federal Reserve
Board; (ix) require the financial institution to divest itself of
or liquidate any subsidiary if the agency determines that the
subsidiary is in danger of becoming insolvent and poses a
significant risk to the financial institution, or is likely to
cause a significant dissipation of the financial institution's
assets or earnings; (x) require any company having control of the
financial institution to divest itself of or liquidate any
affiliate other than an insured depository institution if the
appropriate federal regulatory agency for the institution
determines that the affiliate is in danger of becoming insolvent
and poses a significant risk to the institution;(xi) require any
company having control of the financial institution to divest
itself of the financial institution, if the appropriate federal
regulatory agency for the company determines that divestiture
would improve the financial institution's assets or earnings; and
(xii) take any other action that the appropriate federal
regulatory agency determines will better carry out the purpose of
the prompt corrective action provisions described by federal
banking laws.
RESTRICTIONS ON CRITICALLY UNDERCAPITALIZED
INSTITUTIONS. A critically undercapitalized institution is
subject to all of the restrictions applicable to a significantly
undercapitalized institution and, beginning 60 days after it
becomes critically undercapitalized, is generally prohibited from
paying principal or interest on subordinated debt without prior
regulatory approval. In addition, a critically undercapitalized
institution may not, without the prior written approval of the
FDIC: (i) enter into any material transaction outside of the
ordinary course of business, (ii) extend credit in any highly
leveraged transaction, (iii) amend its charter or bylaws, (iv)
make any material change in accounting method, (v) engage in any
covered transaction with any affiliate, (vi) pay any excessive
compensation or bonuses or (vii) pay rates on liabilities
significantly in excess of market rates.
The appropriate federal regulatory agency is required
to appoint a conservator or receiver for a critically
undercapitalized institution not more than 90 days after the
<PAGE> institution becomes critically undercapitalized, unless such
agency and the FDIC jointly determine and document that another
course of action would better protect the deposit insurance fund.
In general, if the institution continues to be critically
undercapitalized 270 days after the date on which it first became
critically undercapitalized, then the appropriate federal
regulatory agency must appoint a receiver for the institution
unless such agency and the FDIC jointly determine that the
institution meets stringent statutory requirements and certify
that the institution is viable and is not expected to fail.
DOWNGRADING OF FINANCIAL INSTITUTIONS. Federal banking
laws provide that if an insured depository institution receives a
less than satisfactory examination rating for asset quality,
management, earnings or liquidity, the examining agency may deem
such financial institution to be engaging in an unsafe or unsound
practice. The potential consequences of being found to have
engaged in an unsafe or unsound practice are significant, because
under FDICIA the appropriate federal regulatory agency may: (i)
if the financial institution is well-capitalized, reclassify the
financial institution as adequately capitalized; (ii) if the
financial institution is adequately capitalized, take any of the
prompt corrective actions authorized for undercapitalized
financial institutions and impose restrictions on capital
distributions and management fees; and (iii) if the financial
institution is undercapitalized, take any of the prompt
corrective actions authorized for significantly undercapitalized
financial institutions.
DEPOSIT INSURANCE AND ASSESSMENTS. The deposits of the
Bank are insured by the BIF administered by the FDIC, in general,
to a maximum of $100,000 per insured depositor. Under FDIA and
FDIC regulations, the Bank is required to pay annual assessments
to the FDIC for deposit insurance. The FDIC has adopted a
risk-based assessment system. Under the risk-based assessment
system, BIF members pay varying assessment rates depending upon
the level of the institution's capital and the degree of
supervisory concern over the institution. The assessment rates
are set by the FDIC semiannually. On August 8, 1995, the FDIC
substantially reduced the assessment rates covering the period
from July 1, 1995 to December 31, 1995 from a range of 23 cents
to 31 cents per $100 of insured deposits to a range of 4 cents to
31 cents per $100 of insured deposits. The Bank's assessment
rate for that period was reduced from 23 cents to 4 cents. On
November 14, 1995, the FDIC reduced the assessment rates for the
period from January 1, 1996 to June 30, 1996 to a range of 0
cents to 31 cents per $100 of insured deposits. Institutions
qualifying for the $0 assessment rate will be required to pay the
statutory minimum deposit premium payment of $2,000 annually. As
<PAGE> of January 1, 1996, the Bank's assessment rate was 0 cents per
$100 of insured deposits. The FDIC has authority to increase the
annual assessment rate if it determines that a higher assessment
rate is necessary to increase BIF's reserve ratio. There is no
cap on the annual assessment rate which the FDIC may impose.
INTEREST RATES. The rate of interest a bank may charge
on certain classes of loans is limited by state and federal law.
At certain times in the past, these limitations, in conjunction
with national monetary and fiscal policies that affect the
interest rates paid by banks on deposits and borrowings, have
resulted in reductions of net interest margins on certain classes
of loans. Such circumstances may recur in the future, although
the trend of recent federal and state legislation has been to
eliminate restrictions on the rates of interest which may be
charged on some types of loans and to allow maximum rates on
other types of loans to be determined by market factors.
LOANS TO ONE BORROWER. In addition to limiting the
rate of interest chargeable by banks on certain loans, federal
law imposes additional restrictions on a national bank's lending
activities. Under federal law the maximum amount that a national
bank may lend to one borrower (and certain related interests of
such borrower) generally is limited to 15% of the bank's
unimpaired capital and unimpaired surplus, plus an additional 10%
for loans fully secured by readily marketable collateral. There
are certain exceptions to the general rule including loans fully
secured by government securities or deposit accounts in the bank.
As of December 31, 1995, the Bank's lending limit under this
regulation was approximately $6,027,000.
PAYMENT OF DIVIDENDS. The National Bank Act restricts
the payment of dividends by a national bank as follows: (i) no
dividends may be paid if the bank has no undivided profits or
retained earnings then on hand; (ii) until the surplus fund of
the bank is equal to its capital stock, no dividends may be
declared unless there has been carried to the surplus fund not
less than one-tenth of the bank's net profits of the preceding
half-year period in the case of quarterly or semiannual
dividends, or not less than one-tenth of the net profits of the
preceding two consecutive half-year periods in the case of annual
dividends; and (iii) the approval of the OCC is required if
dividends declared by the bank in any year would exceed the total
of net profits for that year combined with retained net profits
for the preceding two years, less any required transfers to
surplus.
As of December 31, 1995, retained earnings of the Bank
of $6,642,000 were available for payment of dividends to
<PAGE> Bancorporation without regulatory approval. For additional
information on the Bank's capital, see "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Financial Condition--Capital Adequacy--Bank Capital."
COMMUNITY REINVESTMENT ACT. On May 4, 1995, the
Federal Reserve Board, the FDIC and the OCC adopted new
regulations relating to the Community Reinvestment Act (the
"CRA"). The purpose of the CRA regulations is to establish the
framework and criteria by which the bank regulatory agencies
assess an institution's record of helping to meet the credit
needs of its community, including low- and moderate-income
neighborhoods, and to provide that the agencies' assessment shall
be taken into account in reviewing certain applications. The new
regulations seek to emphasize an institution's performance rather
than the process, to promote consistency in evaluation of
institutions, and to eliminate unnecessary reporting burdens.
The new regulations replace the previous twelve assessment
factors for large banks with three tests: (i) a lending test,
(ii) a service test, and (iii) an investment test. While
documentation requirements have been substantially reduced, the
safe harbors from CRA protest have also been eliminated.
OTHER REGULATORY LIMITATIONS. Bancorporation and the
Bank are "affiliates" within the meaning of the Federal Reserve
Act. As such, the amount of loans or extensions of credit which
the Bank may make to Bancorporation or to third parties secured
by securities or obligations of Bancorporation are substantially
limited by the Federal Reserve Act and the FDIA. Such acts
further restrict the range of permissible transactions between a
bank and an affiliated company. A bank and its subsidiaries may
engage in certain transactions, including loans and purchases of
assets, with an affiliated company only if the terms and
conditions of the transaction, including credit standards, are
substantially the same as, or at least as favorable to the bank
as, those prevailing at the time for comparable transactions with
non-affiliated companies or, in the absence of comparable
transactions, on terms and conditions that would be offered to
non-affiliated companies.
The Bank is also authorized to invest in a service
corporation that can offer the same services as the banking
related services that bank holding companies are authorized to
provide. However, prior regulatory approval must generally be
obtained prior to making such an investment or performing such
services.
BANKING ACTIVITIES. The investments and activities of
the Bank are subject to substantial regulation by the OCC and the
<PAGE> FDIC, including without limitation investments in subsidiaries,
investments for their own account (including limitations on
investments in junk bonds and equity securities), investments in
loans, loans to officers, directors and affiliates, security
requirements, truth-in-lending, community reinvestment, the types
of interest bearing deposit accounts which they can offer, trust
department operations, brokered deposits, audit requirements,
issuance of securities, branching and mergers and acquisitions.
MONETARY POLICY AND ECONOMIC CONDITIONS. The principal
sources of funds essential to the business of banks and bank
holding companies are deposits, shareholders' equity, and
borrowed funds. The availability of these various sources of
funds and other potential sources such as preferred stock or
commercial paper and the extent to which they are utilized depend
on many factors, the most important of which are the monetary
policies of the Federal Reserve Board and the relative costs of
different types of funds.
An important function of the Federal Reserve Board is
to regulate the national supply of bank credit in order to combat
recession and curb inflationary pressures. Among the instruments
of monetary policy used by the Federal Reserve Board to implement
these objectives are open market operations in U.S. Government
securities, changes in the discount rate on bank borrowings, and
changes in reserve requirements against bank deposits.
The Bank is subject to regulations issued by the
Federal Reserve Board which require depository institutions to
maintain non-interest-bearing reserves against their transaction
accounts and non-personal time deposits. These regulations
currently require depository institutions to maintain reserves
equal to 3% of transaction accounts up to $52.0 million plus 10%
(subject to adjustment by the Federal Reserve Board between 8%
and 14%) of the total over $52.0 million. In addition, reserves,
subject to adjustment by the Federal Reserve Board between 0% and
9%, must be maintained on non-personal time deposits. This
reserve percentage is currently 0%. Depository institutions may
designate and exempt up to $4.3 million of reservable liabilities
from the above reserve requirements. Because these reserves must
generally be maintained in cash or non-interest-bearing accounts,
the effect of the reserve requirements is to increase the cost of
funds to depository institutions. As of December 31, 1995, the
Bank was required to maintain a reserve balance of $9.1 million.
Substantially all of the restrictions on the maximum
interest rates banks are permitted to pay on deposits have been
removed, although banks are still prohibited from paying interest
on demand deposits. Consequently, banks and thrift organizations
<PAGE> are substantially free to pay interest at any rate. Deregulation
has increased competition among such institutions for attracting
deposits and has resulted in an overall increase in such
institutions' cost of funds.
The monetary policies of the Federal Reserve Board have
had a significant effect on the operating results of commercial
banks in the past and are expected to continue to do so in the
future. In view of continuing changes in regulations affecting
commercial banks and other actions and proposed actions by the
Federal government and its monetary and fiscal authorities,
including proposed changes in the structure of banking in the
United States and general economic conditions, no prediction can
be made as to future changes in interest rates, credit
availability, deposit levels, loan demand, or the overall
performance of banks generally and of the Bank and Bancorporation
in particular.
The references in the foregoing discussion to various
aspects of statutes and regulations are merely summaries which do
not purport to be complete and which are qualified in their
entirety by reference to the actual statutes and regulations.
ITEM 2. PROPERTIES.
The main offices of both the Bank and Bancorporation
are located at 905 Broad Street, Newark, New Jersey 07102. The
building, which is owned by the Bank, is a two-story structure
constructed in 1960. It has approximately 18,000 square feet of
usable office space, which currently are used for the Bank's
operations. During 1987, a wholly-owned subsidiary of the Bank
purchased the five-story (approximately 45,000 square feet)
Western Union Building at 909 Broad Street in Newark, New Jersey,
adjacent to its main office. During 1994, the Bank and
Bancorporation increased the amount of space available for the
Bank's use in this building from approximately 55% to 81% of the
building. Approximately 19% of the building is leased to
nonaffiliated companies.
The Bank currently has fourteen branch banking
facilities as described below in addition to its main location:
<TABLE>
<CAPTION>
Approximate Expiration
Location Square Feet Date of Lease
<S> <C> <C>
Plaza Banking Center 5,092 December 31,
745 Broad Street 1998 <F1>
Newark, New Jersey
Ironbound Banking Center 4,100 February 28,
7 Wheeler Point Road 1999 <F1>
Newark, New Jersey
North Newark Banking Center 3,500 December 31,
466 Bloomfield Avenue 1997 <F1>
Newark, New Jersey
Millburn Banking Center 2,600 March 31, 2001
225 Millburn Avenue
Millburn, New Jersey
Gateway III Banking Center 2,076 September 7,
100 Mulberry Street 1999 <F1>
Newark, New Jersey
North Arlington Banking Center 1,700 October 6,
65 River Road 1996
North Arlington, New Jersey
Jackson Street Banking Center 10,900 Owned
123-133 Jackson Street
Newark, New Jersey
Bayway Banking Center 3,700 April 30,
1000 South Elmora Avenue 2008 <F2>
Elizabeth, New Jersey
Livingston Banking Center 3,450 November 30,
30 W. Mt. Pleasant Avenue 2001 <F3>
Livingston, New Jersey
Perth Amboy Banking Center 3,400 August 31,
Convery Plaza, Route 35 1997 <F4>
Perth Amboy, New Jersey
East Orange Central 6,070 Owned
Banking Center
554 Central Avenue
East Orange, New Jersey
Elizabeth Banking Center 3,190 Owned
826 Elizabeth Avenue
Elizabeth, New Jersey
Kearny Banking Center 700 March 31,
180 Schuyler Ave. 2000 <F5>
Kearny, New Jersey
East Ferry Office 800 November 30,
290 Ferry Street 2000 <F2>
Newark, New Jersey
_______________________
<FN>
<F1>
The Bank has the option to extend the term of the lease for
one additional five year period.
<F2>
The Bank has the option to extend the term of the lease for
up to four additional five year periods.
<F3>
The Bank has the option to extend the term of the lease for
up to one additional five year period and one additional ten
year period.
<F4>
The Bank has the option to extend the term of the lease for
three additional five year periods.
<F5>
The Bank has the option to extend the term of the lease for
two additional five year periods.
</TABLE>
The Bank also owns an 18,000 square foot building
located at 465 Bloomfield Avenue, Bloomfield, New Jersey. On
March 31, 1994, the Bank closed its Bloomfield Banking Center
which was located in this building and transferred the accounts
from this Banking Center to its North Newark Banking Center.
Under a lease agreement dated August 1993 between the Bank and
Newtrend, L.P., all of the space in the Bloomfield Avenue
building is being leased to Newtrend, L.P., which uses the space
to provide data processing services, related professional
services, information processing and related outsourcing services
to the Bank and other financial institutions.
During 1995, the Bank opened a new full-service banking
center in Kearny, New Jersey and converted its Gateway III
Banking Center to a fully electronic branch, featuring multiple
ATM's and a video banking link. During 1996, the Bank plans to
open a new full-service banking center in Newark, New Jersey.
Bancorporation neither owns nor leases any property.
<page.
ITEM 3. LEGAL PROCEEDINGS.
Neither Bancorporation nor the Bank is involved in any
material pending legal proceedings, other than routine litigation
incidental to their respective businesses.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of Bancorporation's
shareholders during the fourth quarter of the year ended December
31, 1995.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
Executive officers of Bancorporation and of the Bank
are elected annually and serve until their successors are elected
and qualified at the next annual meeting of the directors of the
respective corporations. The following table sets forth
information with respect to the executive officers of
Bancorporation and of the Bank.
<TABLE>
<CAPTION>
Position with
Bancorporation
and Bank and Year Principal
Name Age First Elected Occupation <F1>
<S> <C> <C> <C>
Donald M. Karp 59 Chairman of Position with
the Board of Bancorporation
Bancorporation (1985) and the Bank <F2>
and the Bank (1985);
Chief Executive Officer
of Bancorporation (1991)
and the Bank (1991);
Vice Chairman of the
Board of Bancorporation
(1981-1985) and the
Bank (1978-1985);
Director (1972)
John A. Dorman 56 President of Position with
Bancorporation (1992) Bancorporation
and the Bank (1992); and the Bank <F3>
Director (1992)
Fred S. Campo 46 Senior Vice Position with
President of the Bank Bancorporation
(1986); Secretary of and the Bank <F4>
Bancorporation (1982)
and the Bank (1991)
Fred Perry, Jr. 66 Senior Vice Position with
President of the Bank
the Bank (1978)
Peter Kenny 50 First Vice Position with
President of the Bank <F5>
the Bank (1991);
Senior Vice
President of the
Bank (1992)
James Boyle 45 Treasurer of Position with
Bancorporation; Bancorporation
Vice President and and the Bank <F6>
Comptroller of the
Bank (1988); Senior
Vice President of the
Bank (1992)
Ellen Rogoff 46 First Vice President Position with
of the Bank (1993); the Bank <F7>
Senior Vice President
of the Bank (1994)
<FN>
<F1>
Unless otherwise indicated, each of the persons listed has
been employed in the indicated principal occupation during
the last five years.
<F2>
Mrs. Donald M. Karp is the niece of Stanley J. Lesnik and
the daughter of Harriet M. Alpert, a principal shareholder
of Bancorporation.
<F3>
Prior to joining Bancorporation and the Bank, Mr. Dorman was
an executive vice president of Chemical Bank New Jersey
where he managed the Statewide Commercial Lending division.
For the two years prior to the merger in 1989 of Horizon
Bank Corp. and Chemical Bank, Mr. Dorman served as President
and Chief Executive Officer of Chemical New Jersey
Corporation, Chemical Banking Corporation's loan production
office in New Jersey.
<F4<
Mr. Campo joined the Bank in December 1978 as an internal
auditor. In 1982, Mr. Campo became secretary of
Bancorporation. In 1986, he was promoted to senior vice
president of the Bank. In 1991, he became secretary of the
Bank.
<F5>
For at least five years prior to joining Bancorporation, Mr.
Kenny was executive vice president and secretary of United
Jersey Bank, Northwest.
<F6>
Prior to joining Bancorporation, from April 1982 to December
1988 Mr. Boyle was a vice president and project director at
National Westminister Bancorporation NJ (formerly First
Jersey National Bank).
<F7>
For the three years prior to joining the Bank, Ms. Rogoff
was Manager of Human Resources for Bristol Myers. For at
least two years prior to joining Bristol Myers, Ms. Rogoff
was Manager of Human Resources for Action Tungsram.
</TABLE>
There are no arrangements or understandings between any
of the executive officers or any other persons pursuant to which
any of the executive officers have been selected to their
respective positions.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS.
Shares of the Common Stock of Broad National Bancorporation have
been traded under the symbol BNBC on the NASDAQ National Market
System since June 2, 1988, and in the over-the-counter market
prior to this date. The following table sets forth the range of
high and low closing sale price quotations per share for
Bancorporation's Common Stock as reported by NASDAQ, together
with cash dividends per share paid on Bancorporation's Common
Stock, during the periods indicated.
<PAGE>
The market price information does not include retail
markups, markdowns or commissions, but are based on actual
transactions.
<TABLE>
<CAPTION>
Bancorporation High* Low* Dividends
<S> <C> <C> <C> <C>
1995 1st Quarter $ 8 1/4 $6 3/4 $.03
2nd Quarter 10 7 .05
3rd Quarter 10 3/4 8 3/4 .06
4th Quarter 13 1/4 9 .06
1994 1st Quarter 7 5/32 5 15/32 $.02
2nd Quarter 6 29/32 5 15/32 .02
3rd Quarter 7 7/8 6 7/16 .02
4th Quarter 7 7/8 6 .12
</TABLE>
* The market prices and dividends have been restated to give
effect to the 5% stock dividend which was distributed December 16,
1994.
As of February 2, 1996, there were 4,111,868 shares of
Bancorporation's Common Stock outstanding and approximately 560
holders of record of such stock.
As of February 2, 1996, there were no shares outstanding of
Bancorporation's Preferred Stock 1985 class, par value $10.00 per
share. As of February 2, 1996, there were 68,334 shares
outstanding of Bancorporation's 8-1/2% Cumulative Convertible
Preferred Stock 1992 class, $1.00 par value per share, and
approximately 65 holders of record of such Preferred Stock.
Refer to Note 14 for information regarding the redemption of Preferred
Stock. Bancorporation paid dividends on its Preferred Stock 1985 class
in the amount of 1.71 per share in January and July 1995.
Bancorporation paid dividends on its Preferred Stock 1992 class
in the amounts of $0.2125 in January, April, July and October,
1995, respectively.
<PAGE>
PRINCIPAL MARKET MAKERS
RYAN, BECK & CO.
80 MAIN STREET
WEST ORANGE, NJ 07052
(201) 325-3000
HERZOG, HEINE, GEDULD, INC. R.A. MACKIE & CO., INC.
26 BROADWAY P.O. BOX 380
NEW YORK, NY 10004 IRVINGTON, N.Y. 10591
(212) 908-4000 (800) 328-1550
SANDLER O'NEILL & PARTNERS F.J. MORRISSEY & CO., INC.
2 WORLD TRADE CENTER 1700 MARKET STREET
104TH FLOOR SUITE 1420
NEW YORK, NEW YORK, 10048 PHILADELPHIA, PA 19103
(212) 466-7740 (800)842-8928
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth certain historical financial data with
respect to Bancorporation on a consolidated basis. The information
contained in this table should be read in conjunction with Bancorporation's
historical Consolidated Financial Statements and related notes thereto
included elsewhere in this Report.
<PAGE>
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED STATEMENT OF
CONDITION INFORMATION:
Total assets $481,185 $428,630 $438,532 $405,634 $493,191
Loans, gross 267,419 267,422 265,920 256,293 294,780
Investment securities 116,212 110,933 102,165 99,654 116,217
Total deposits 429,681 391,466 406,066 378,699 418,358
Short-term borrowings and long-term
debt 782 177 342 3,660 21,672
Shareholders' equity 34,529 30,266 27,421 18,975 17,341
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
INFORMATION:
Interest income $ 33,398 $ 29,795 $ 28,313 $ 30,441 $ 38,971
Interest expense 10,082 7,464 8,082 11,817 20,293
Net interest income 23,316 22,331 20,231 18,624 18,678
Provision for possible loan losses 720 450 900 2,435 12,911
Net interest income after provision
for possible loan losses 22,596 21,881 19,331 16,189 5,767
Non-interest income 4,491 3,649 4,023 4,405 3,517
Other expense 19,536 20,073 19,813 17,590 18,077
Income tax provision (benefit) 3,131 768 1,491 1,311 (1,489)
Net income (loss) before cumulative
effect of a change in accounting
principle 4,420 4,689 2,050 1,693 (7,304)
Cumulative effect of a change in
accounting principle 0 0 1,086 0 0
Net income (loss) $4,420 $4,689 $3,136 $1,693 $(7,304)
Per Share Data
Net income (loss) per common share
Primary
Before cumulative effect of a
change in accounting principle $1.28 $1.41 $0.50 $0.57 $(2.62)
Cumulative effect of a change in
accounting principle 0.00 0.00 0.38 0.00 0.00
Primary earnings (loss) per common
share $1.28 $1.41 $0.88 $0.57 $(2.62)
Fully diluted
Before cumulative effect of a change
in accounting principle $1.03 $1.10 $0.50 $0.57 <F1>
Cumulative effect of a change in
accounting principle 0.00 0.00 0.27 0.00 0.00
Fully diluted earnings (loss) per
common share $1.03 $1.10 $0.77 $0.57 <F1>
Cash dividends per common share 0.19 0.18 0.00 0.00 0.00
Book value per common share 8.14 7.87 6.89 6.48 5.86
Dividend payout ratio 26.58% 19.27% 18.05% 0.00% 0.00%
Weighted average number of common
shares outstanding (in thousands):
Primary 3,002 2,880 2,837 2,812 2,812
Assuming full dilution 4,304 4,251 4,139 2,924 2,812
<PAGE>
December 31,
1995 1994 1993 1992 1991
(Dollars in thousands)
FINANCIAL RATIOS
Return on average assets 0.97% 1.04% 0.48% 0.39% (1.59)%
Return on average shareholders' equity 13.52 16.16 7.83 9.27 (32.10)
Average equity to average assets 7.14 6.44 6.12 4.24 4.95
Earnings to fixed charges <F2> 1.71 1.68 1.30 1.25 0.59
Net interest margin 5.59 5.41 5.12 4.68 4.49
Net interest spread 4.88 4.92 4.55 4.05 3.64
ASSET QUALITY RATIOS
Non-performing loans as a % of gross
loans 3.82% 3.63% 7.72% 7.57%10.16%
Non-performing loans as a % of total
assets 2.12 2.26 4.68 4.79 6.07
Allowance for possible loan losses as
a % of gross loans 2.77 2.84 4.23 4.94 4.08
Allowance for possible loan losses as
a % of non-performing loans 72.47 78.32 54.81 65.21 40.16
Net chargeoffs as a % of average gross
loans 0.35 1.56 0.90 0.67 3.27
Non-performing assets as a % of loans
and OREO 6.00 5.81 10.03 10.98 10.20
CAPITAL RATIOS
Leverage capital 7.17% 7.00% 6.23% 4.34% 3.69%
Tier 1 capital to total risk-weighted
assets 10.58 9.87 9.16 6.55 5.15
Total capital to total risk-weighted
assets 11.85 11.13 10.45 7.84 6.43
<FN>
<F1> Anti-dilutive
<F2> The ratio of earnings to fixed charges is computed by dividing the sum of income
before taxes, fixed charges and preferred stock dividends by the sum of fixed charges and
preferred stock dividends. Fixed charges represent interest expense and payment of debt.
For the year ended December 31, 1991 Bancorporation's earnings were insufficient to cover
its fixed charges by $8.8 million. In this period, it was necessary for Bancorporation to
rely upon other funding sources to cover its fixed charges.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis is intended to provide
information about the financial condition and results of
operations of Bancorporation and its subsidiaries on a
consolidated basis and should be read in conjunction with the
Consolidated Financial Statements and their related notes. As
used in the following discussion, the term "Company" refers to
Broad National Bancorporation and its subsidiaries on a
consolidated basis; the term "Bank" refers to Broad National Bank
and its subsidiaries on a consolidated basis; and the term
"Bancorporation" refers to Broad National Bancorporation on a
parent company only basis. When necessary, reclassifications
have been made to prior years' data throughout the following
discussion and analysis for purposes of comparability with 1995
data.
SUMMARY
The Company recorded net income of $4,420,000 or $1.03 per
fully diluted common share in 1995, compared to net income of
$4,689,000 or $1.10 per fully diluted common share in 1994. Net
income for 1994 included tax benefits of $1,500,000 as well as a
one-time recovery of $875,000 ($578,000 tax effected) of legal
expenses in conjunction with an insurance settlement. In 1993,
the Company recorded net income of $3,136,000 or $0.77 per fully
diluted common share.
An improved net interest rate margin, an increase in non-
interest income and a decline in non-interest expense contributed
to the increase in income, before income taxes, for 1995 as
compared to 1994. The increase in income tax expense offset
these improvements and resulted in the overall decrease of net
income for 1995 as compared to 1994.
The improved earnings performance for 1994 as compared to
1993 was attributable to an improved net interest rate margin, a
lower provision for possible loan losses, the one-time recovery
of legal expenses and the tax benefit realized.
The Company's return on average assets and return on average
shareholders' equity were 0.97% and 13.52%, respectively, for
1995. The Company's comparable return on average assets was
1.04% for 1994, and 0.48%, exclusive of the cumulative effect of
the change in accounting principle, for 1993. The return on
average shareholders' equity was 16.16% for 1994, and 7.83%,
exclusive of the cumulative effect of the change in accounting
principle, for 1993.
<PAGE>
The Company's total assets increased $52,555,000 or 12.3% in
1995, following a decline of $9,902,000 or 2.3% in 1994. Total
deposits of $429,681,000 at December 31, 1995 represent an
increase of $38,215,000 or 9.8% from the December 31,1994
balance. Total deposits had declined $14,600,000 or 3.6% during
1994. Total shareholders' equity increased $4,263,000 or 14.1%
between 1995 and 1994, following an increase of $2,845,000 or
10.4% between 1994 and 1993.
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, short-term borrowings and long-term debt.
The following table shows 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. Nontaxable income from investment securities and
loans is presented on a tax-equivalent basis assuming a 34% tax
rate.
<PAGE>
<TABLE>
<CAPTION>
NET INTEREST INCOME
ASSETS
1995 1994 1993
Average Interest Average Average Interest Average Average Interest Average
Balance and Fees Rate Balance and Fees Rate Balance and Fees Rate
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal funds sold $38,383 $2,253 5.87% $ 44,509 $ 1,836 4.13% $ 42,284 $ 1,262 2.98%
Investment securities
Securities held-to-
maturity <F1> 87,128 5,154 5.92 83,861 4,588 5.47 86,802 4,727 5.45
Securities available-
for-sale 27,029 1,682 6.22 23,548 1,257 5.34 11,505 593 5.15
Total investment
securities 114,157 6,836 5.99 <F2> 107,409 5,845 5.44 <F2> 98,307 5,320 5.41 <F2>
Loans
Mortgage 160,797 14,657 9.11 156,604 13,660 8.72 155,276 13,756 8.86
Installment 11,328 1,125 9.93 9,251 870 9.40 9,809 1,131 11.53
Commercial 92,822 8,459 9.11 94,912 7,498 7.90 89,116 6,756 7.58
States and political
subdivisions <F1> 1,148 146 12.72 1,286 154 11.98 1,433 162 11.31
Total Loans 266,095 24,387 9.16 262,053 22,182 8.46 255,634 21,805 8.53
Total interest
earning assets $418,635 $33,476 8.00% <F2> $413,971 $ 29,863 7.21% <F2> $396,225 $28,387 7.16% <F2>
Less-Allowance for
possible loan losses 7,558 9,691 12,542
All other assets 46,749 46,336 44,034
TOTAL ASSETS $457,826 $450,616 $427,717
LIABILITIES AND SHAREHOLDERS' EQUITY
Time Deposits
Savings and interest
bearing demand
deposits $221,749 $4,900 2.21% $248,752 $ 5,018 2.02% $223,709 $ 5,119 2.29%
Time deposits:
Under $100,000 78,511 3,973 5.06 63,118 1,949 3.09 76,285 2,654 3.48
Over $100,000 20,279 1,040 5.13 13,875 491 3.54 8,741 264 3.02
Total time deposits 320,539 9,913 3.09 325,745 7,458 2.29 308,735 8,037 2.60
Short-term borrowings 2,808 169 6.02 275 6 2.18 863 45 5.21
Total interest bearing
liabilities $323,347 $10,082 3.12% 326,020 $ 7,464 2.29% $309,598 $8,082 2.61%
Other liabilities 6,516 5,905 4,895
Demand deposits 95,264 89,683 87,031
Shareholders' equity 32,699 29,008 26,193
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $457,826 $450,616 $427,717
NET INTEREST INCOME $23,394 $22,399 $20,305
NET INTEREST SPREAD 4.88% 4.92% 4.55%
NET INTEREST MARGIN 5.59% <F3> 5.41% <F3> 5.12% <3>
<FN>
<F1>
Interest income for investments in states and political
subdivisions include tax-equivalent adjustments at a 34%
rate.
<F2>
Average rates reflect the tax-equivalent adjusted yields on
non-taxable investments and loans.
<F3>
Represents the difference between interest earned and
interest paid, divided by total average interest-earning
assets.
</TABLE>
<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 years ended December 31, 1995 and
1994 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>
1995 Compared with 1994 1994 Compared with 1993
Increase (Decrease) Increase (Decrease)
Due to a Change in Due to a Change in
Average Average Average Average
Balance Rate Total Balance Rate Total
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans $438 $1,767 $2,205 $585 $(208) $377
Investment securities 381 610 991 496 29 525
Federal funds sold (288) 705 417 417 66 508 574
Total interest income 531 3,082 3,613 1,147 329 1,476
Interest paid on:
Savings and interest
bearing demand (657) 539 (118) 520 (621) (101)
Time deposits:
Under $100,000 568 1,456 2,024 (403) (302) (705)
Over $100,000 278 271 549 175 52 227
Short-term borrowings 136 27 163 (36) (3) (39)
Total interest expense 325 2,293 2,618 256 (874) (618)
Change in net interest income $206 $789 $995 $891 $1,203 $2,094
Percent increase (decrease) in
net interest income over the
prior period 4.44% 10.31%
</TABLE>
<PAGE>
During 1995, total interest income, on a tax equivalent
basis, increased $3,613,000 or 12.1% compared to 1994. The mix
of average interest earning assets changed slightly for 1995 as
compared to 1994. Average federal funds sold declined to 9.2% of
average interest earning assets, as compared to 10.8% for 1994,
while total investment securities increased to 27.3% of average
interest earning assets for 1995 as compared to 25.9% for 1994.
Total loans remained relatively unchanged, representing 63.5% of
average interest earning assets for 1995, as compared to 63.3%
for 1994. The increase of $3,613,000 in total interest income
for 1995 as compared to 1994 is primarily attributable to an
increase of 79 basis points in the average rate earned on total
average interest earning assets, and to a lesser extent, an increase of
$4,664,000 in total average interest earnings assets. An
increase of $4,042,000 in the average balance of loans combined
with an increase of 70 basis points in the average rate earned on
loans to result in an increase of $2,205,000 in interest income
earned on loans. Similarly, an increase of $6,748,000 in the
average balance of investment securities combined with a 55 basis
point increase in the average rate earned on investment
securities to result in an increase of $991,000 in interest
income earned on investment securities. Interest income earned
on federal funds sold increased $417,000, primarily as the result
of an increase of 174 basis points in the average rate earned on
federal funds sold, which increase was partially offset by a
decrease of $6,126,000 in the average balance of federal funds
sold.
Total interest expense of $10,082,000 for 1995 was
$2,618,000 or 35% higher than 1994. The increase in interest
expense is primarily attributable to an increase in the average
rates paid on interest bearing liabilities, and to a lesser
extent due to the change in the mix of interest bearing
liabilities. The average rate paid for interest bearing
liabilities during 1995 was 83 basis points higher than 1994,
with the largest increase in rates reflected in time deposits and
short-term borrowings. In addition to the increase in average
rates, the average balance of relatively higher costing time
deposits and short-term borrowings increased during 1995.
Average rates on time deposits under $100,000 were 197 basis
points higher for 1995 as compared to 1994, while average rates
on time deposits over $100,000 were 159 basis points higher for
1995 than for 1994. The average rate on short-term borrowings
for 1995 was 384 basis points higher than 1994. The increase in
the average rate paid on all interest bearing liabilities was
responsible for an increase of $2,293,000 in total interest
expense. Additionally, increases in the average balance of time
deposits and short-term borrowings contributed to an additional
$325,000 increase in total interest expense for 1995 as compared
to 1994.
<PAGE>
Tax equivalent net interest income for 1995 increased
$995,000 or 4.4% from 1994, and the net interest margin for 1995
was 18 basis points higher than that for 1994. The increase is
primarily attributable to the fact that average rates earned on
interest earning assets increased more quickly than rates paid on
interest bearing liabilities.
During 1994, total interest income, on a tax equivalent
basis, increased $1,476,000 or 5.2% compared to 1993. The mix of
average interest earning assets remained relatively unchanged for
1994 as compared to 1993. Average federal funds sold, investment
securities and loans represented 10.8%, 25.9% and 63.3%,
respectively, of average interest earning assets for 1994, as
compared to 10.7%, 24.8% and 64.5%, respectively, of average
interest earning assets for 1993. The increase of $1,476,000 in
total interest income for 1994 as compared to 1993 is primarily
attributable to an increase of $17,746,000 in total average
interest earning assets, and to a lesser extent, an increase of 5
basis points in the average rate earned on total interest earning
assets. An increase of $6,419,000 in the average balance of
loans was partially offset by a decline of 7 basis points in the
average rate earned on loans, resulting in a net increase of
$377,000 in interest income earned on loans. An increase of
$9,102,000 in the average balance of investment securities
combined with a 3 basis point increase in the average rate earned
on investment securities to result in an increase of $525,000 in
interest income earned on investment securities. Interest income
on federal funds sold increased $574,000, primarily as the result
of an increase of 115 basis points in the average rate earned on
federal funds sold, and to a lesser extent, an increase of
$2,225,000 in the average balance of federal funds sold.
Total interest expense of $7,464,000 for 1994 was $618,000
or 7.6% lower than 1993. The composition of interest bearing
liabilities changed slightly during 1994 as compared to 1993,
with relatively lower yielding savings, IMMA and NOW deposits
comprising 76.3% of total interest bearing liabilities for 1994
as compared to 72.3% of interest bearing liabilities for 1993.
Conversely, certificates of deposit as a percentage of average
interest bearing liabilities declined to 23.6% for 1994 as
compared to 27.4% for 1993. The $618,000 decrease in interest
expense for 1994 as compared to 1993 is primarily attributable to
a decline of 32 basis points in the average rate paid on interest
bearing liabilities, which offset an increase of $16,422,000 in
the average balance of interest bearing liabilities. The most
significant component of the decline in interest expense for 1994
is represented by certificates of deposit under $100,000, for
which a $13,167,000 decline in the average balance combined with
a 39 basis point decline in the average rate paid, to result in a
total decrease of $705,000 in interest expense for certificates
of deposit under $100,000. While the volume and rate of
<PAGE>
certificates of deposit under $100,000 declined for 1994, the
average balance of certificates of deposit over $100,000
increased $5,134,000 and the average rate paid on these deposits
increased 52 basis points, resulting in an increase of $227,000
in interest expense. On a combined basis, interest expense for
certificates of deposit decreased $478,000 for 1994 as compared
to 1993. The average balance of savings and interest bearing
demand deposits increased $25,043,000 for 1994 as compared to
1993. However, the average rate paid on these deposits declined
27 basis points, resulting in an overall decrease of $101,000 in
interest expense for these categories of deposits for 1994.
Net interest income for 1994 increased $2,094,000 or 10.3%
from 1993. The Company attributes most of this increase to the
increase in the balance of average interest earning assets as
well as the decline in the average rate paid for 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
$720,000,$450,000 and $900,000 for 1995, 1994 and 1993,
respectively.
Actual net loan charge-offs were $920,000 or .35% of average
total loans, $4,100,000 or 1.56% of average total loans and
$2,307,000 or 0.90% of average total loans for 1995, 1994 and
1993, respectively. Included in the net charge-off figure of
$4,100,000 for 1994 are charge-offs for approximately $2,696,000
related to the sale of $5,651,000 of troubled loans, including
approximately $4,500,000 of non-performing loans, which was
completed during the second quarter of 1994. The net charge-off
figure for 1994 also includes a $500,000 recovery received in
conjunction with a previously announced insurance settlement.
NON-INTEREST INCOME AND NON-INTEREST EXPENSES
Total non-interest income increased $842,000 or 23.1% for
1995 as compared to 1994. The most significant changes were
represented by investment security and loan sale transactions.
During 1995, the Company recorded a gain of $71,000 from the sale
of securities available-for-sale. This gain represented an
improvement of $240,000 over the loss of $169,000 recorded from
the sale of securities available-for-sale in 1994. Additionally,
during 1995 the Company recorded gains of $18,000 from the sale
of residential mortgages. These gains represented an improvement
of $314,000 over the loss of $296,000 realized from the sale of
residential mortgages during 1994. Increases of $40,000 in ATM
fee income and $36,000 in credit card fees represented the larger
components of the $166,000 increase in other income.
<PAGE>
Total non-interest income declined $374,000 or 9.3% for 1994
as compared to 1993. Service charges on deposit accounts, which
represents the largest component of non-interest income,
increased $560,000 or 19.8% in 1994 as compared to 1993 as the
result of increased volume and increased fees. However, this
increase was offset by a decline of $713,000 in income generated
from investment security and loan sale transactions. The 1994
loss of $465,000 on the sale of securities/mortgages included a
loss of $169,000 from the sale of securities available-for-sale
and a loss of $296,000 from the sale of residential mortgages.
The Company had realized a gain of $248,000 from the sale of
securities during 1993. There were no sales of residential
mortgages during 1993.
Total non-interest expenses of $19,536,000 for 1995 are
$537,000 or 2.7% lower than 1994. 1995 salaries and wages are
$292,000 or 3.9% higher than those for 1994. This increase is
attributable in part to an increase of approximately $112,000 in
incentive salary programs as well as payments of approximately
$60,000 to selected employees who qualified for and elected to
participate in an early retirement program. The remaining
increase is primarily attributable to merit increases. Employee
benefits expenses increased $260,000 or 13% during 1995 as
compared to 1994. The most significant component of this
increase was additional pension expense of $150,000 related to
the early retirement program for selected employees. 1995 legal
fees of $547,000 represent an increase of $411,000 over 1994
legal fees, however, 1994 legal fees were reduced by a one-time
recovery of $875,000 resulting from the settlement of an
insurance claim. FDIC and OCC assessments are $586,000 lower in
1995 than 1994 as the result of the reduction of the FDIC
assessment during 1995. The largest component of the decrease in
other expenses are declines in expenses associated with a data
processing conversion that occurred during 1994.
In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), which is
effective beginning in 1996. SFAS 123 allows companies either to
continue to account for stock-based employee compensation plans
under existing accounting standards or adopt a fair value based
method of accounting for stock options as compensation expense
over the service period, as defined in the new standard. SFAS
123 requires that if a company continues to account for stock
options under APB 25 it must provide pro-forma net income and
earnings per share information as if the new fair value approach
had been adopted. The Company will continue to follow the
existing accounting standards for these plans and will make the
required disclosures in 1996.
<PAGE>
Total non-interest expenses of $20,073,000 for 1994 were
$260,000 or 1.3% higher than 1993. Salaries and wages were
$631,000 or 9.3% higher than 1993 as the result of merit
increases for officers and employees, an increase in the
management bonus plan for 1994 and the accrual of severance pay
for a small reduction in force resulting from management's
efforts to improve efficiency and reduce costs for future
periods. Data processing fees of $1,256,000 for 1994 represented
an increase of $393,000 or 45.5% over 1993. In addition to
computer fees, data processing fees also include item processing
expenses paid to a third party resulting from the Company's
outsourcing of its item processing operations in August of 1993.
These item processing fees were $610,000 for the full twelve
months of 1994 as compared to $225,000 for the last four months
of 1993. The decline in legal fees was primarily due to the
recovery of $875,000 of legal expenses in 1994 in conjunction
with the previously announced settlement of certain claims made
under the Company's insurance policy. Other real estate expense
of $169,000 for 1994 was $264,000 or 61% lower than 1993 primarily
as the result of the reduction in the provision for possible
losses on other real estate owned from $325,000 for 1993 to
$75,000 for 1994. 1994 advertising expenses were $151,000 or
72.2% higher than the prior year period due to advertising
campaigns to reinforce the Bank's image in the communities in
which it serves, as well as a campaign to promote its consumer
lending products. The largest component of the increase in
"other" non-interest expenses were temporary help and related
expenses as the result of additional resources used by the
Company to assist with a data processing conversion during 1994.
INCOME TAXES
In 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS 109"), which became effective for
financial reporting periods beginning after December 15, 1992.
Effective January 1, 1993, the Company adopted SFAS 109, and
has reported $1,086,000 as the cumulative effect of that change
in the method of accounting for income taxes in the December 31,
1993 consolidated statement of income.
The effective tax rate was 41.5% in 1995, 14.1% in 1994 and
42.1% in 1993. The decrease in the effective rate to 14.1% for
1994 was primarily due to the recognition of tax benefits
resulting from the adjustment of the valuation allowance for
deferred tax assets.
The valuation allowance for deferred tax assets as of
December 31, 1993 was $1,930,000. The net change in the total
valuation allowance for 1994 was a decrease of $1,500,000, which
was the result of the accelerated recognition of temporary
differences related to the sale of non-performing loans in 1994
and improvement in the Bank's core earnings. Income tax expense
was reduced $1,500,000 as a result of the change in the valuation
allowance.
<PAGE>
FINANCIAL CONDITION
LOANS
Total gross loans of $267,419,000 at December 31, 1995 were relatively
unchanged from the December 31, 1994 balance of $267,422,000. For 1995,
average loans of $266,095,000 represented 63.5% of total average interest
earning assets as compared to 63.3% of total average interest earning
assets for 1994.
The following table shows the classification of loans by major category,
at December 31, for each of the past five years.
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Real estate loans:
Construction $4,097 $3,913 $5,209 $6,602 $15,061
Mortgage
Residential 90,831 81,237 72,484 77,273 86,988
Commercial 94,950 85,819 76,554 77,377 75,475
Commercial loans 69,025 90,430 95,671 88,751 105,698
Installment loans 7,828 5,022 4,400 6,019 10,599
Other loans 688 1,001 559 271 959
Loans held for sale
(market value $11,153) 0 0 11,043 0 0
Total loans $267,419 $267,422 $265,920 $256,293 $294,780
</TABLE>
Real estate loans include construction mortgages,
residential mortgages (including home equity loans), and
commercial mortgages.
Construction loans are predominately floating rate loans and
the term thereof generally does not exceed one year. The
majority of the Bank's construction loans consist of loans
secured by single- or multi- family dwellings located in the
Bank's primary market area.
Residential mortgage loans include mortgages for the
purchase or refinancing of residential properties and are secured
by first liens on those properties. This category also includes
home equity loans which are secured by either a first or second
lien on real estate.
Commercial mortgages include mortgages on owner occupied
buildings and investment properties, secured by first mortgages
on these properties. Maturities are generally five years or less,
although amortization is generally based on terms of 15 years or less.
Commercial loans primarily represent loans to commercial
borrowers for working capital and other short-term needs and term
loans for the acquisition of assets. The terms of such loans
generally range from one to five years.
<PAGE>
Installment loans are granted primarily to individuals on an
installment basis, may be secured by liens on personally held
assets or may be unsecured, and include auto loans, home
improvement loans, student loans, revolving credit plans and
personal loans.
The following table summarizes the maturities of certain
loan categories at December 31, 1995:
<TABLE>
<CAPTION>
Within 1-5 Over
One Year Years 5 Years Total
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Real estate loans:
Construction $4,097 $ 0 $ 0 $4,097
Mortgage 24,151 81,744 79,886 185,781
Commercial loans 27,610 28,991 12,424 69,025
</TABLE>
The table below presents the fixed and variable rate loans
at December 31, 1995 on loans with a term of greater than one
year in the following categories:
<TABLE>
<CAPTION>
Fixed Variable
Interest Rates Interest Rates
(Dollars in Thousands)
<S> <C> <C>
Real Estate loans:
Mortgage $105,606 $56,024
Commercial loans 16,980 24,435
</TABLE>
The Company's loan portfolio is varied, with no undue
concentration in any single industry, although most of the loans
in the Company's loan portfolio have been made to borrowers in
New Jersey. The Company's home equity loan portfolio (which is
included in real estate mortgages in the table above) and a
substantial portion of its commercial loan portfolio have
interest rates that reprice with changes in the prime rate.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is maintained at an
amount considered adequate by management and the Board of
Directors to provide for potential credit losses based upon a
periodic evaluation of the risk characteristics of the loan
portfolio.
<PAGE>
Management and the Board of Directors of the Company review
the allowance for possible loan losses on a regular basis.
Management and the Board evaluate a number of factors in
determining the appropriate level of the allowance for possible
loan losses. Weakening credits are evaluated individually and
factors such as the creditworthiness of the borrower, the
adequacy of underlying collateral and the probable impact of
business and economic conditions upon the borrower are examined.
The review process also takes into consideration the possibility
that there may be losses in the loan portfolio which cannot
currently be identified, and the degree of risk inherent in the
composition of the loan portfolio. The volume of non-performing
and other classified loans and their relationship to the loan
portfolio, as well as historical charge-off experience, are also
examined.
<PAGE>
The following table summarizes the activity in the allowance
for possible loan losses over each of the past five years. Also
presented are certain key ratios regarding the allowance.
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Average loans outstanding
during the year $266,095 $262,053 $255,634 $270,994 $316,469
Total gross loans at period end 267,419 267,422 265,920 256,293 294,780
Allowance, beginning of year 7,602 11,252 12,659 12,030 9,470
Loans charged-off during the year:
Commercial 1,952 2,184 2,047 1,551 9,052
Mortgage 80 2,809 379 136 296
Installment 91 148 157 584 1,503
Total loans charged-off during
the year 2,123 5,141 2,583 2,271 10,851
Recoveries during the year:
Commercial 1,005 890 111 354 191
Mortgage 142 10 0 2 142
Installment 56 141 165 109 167
Total recoveries during the year 1,203 1,041 276 465 500
Net loans charged-off during
the year 920 4,100 2,307 1,806 10,351
Provision charged to operations 720 450 900 2,435 12,911
Allowance, end of year $7,402 $7,602 $11,252 $12,659 $12,030
Ratio of net loans charged-off to
average loans outstanding during year 0.35% 1.56% 0.90% 0.67% 3.27%
Allowance for possible loan losses as
percentage of total gross loans 2.77% 2.84% 4.23% 4.94% 4.08%
</TABLE>
<PAGE>
The following table reflects the allowance for possible loan
losses by category as of December 31, for each of the past five
years:
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
Percent Percent Percent Percent Percent
of Loans of Loans of Loans of Loans of Loans
to to to to to
Dollar Total Dollar Total Dollar Total Dollar Total Dollar Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
(Dollar in Thousands)
<S>
Real Estate Loans: <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Construction $ 163 2% $ 163 2% $ 817 2% $ 1,538 2% $ 1,723 5%
Mortgage 1,765 69 1,984 62 3,370 60 2,999 61 1,369 55
Commercial loans 5,052 26 5,147 34 6,664 36 7,466 35 8,227 36
Installment loans 271 3 308 2 401 2 406 2 458 4
Other 151 * 0 * 0 * 250 * 253 *
Total $7,402 100% $7,602 100% $11,252 100% $12,659 100% $12,030 100%
* Less than 1.0%
</TABLE>
As previously discussed under "PROVISION FOR POSSIBLE LOAN
LOSSES", approximately $2,696,000 of the $5,141,000 of loans
charged-off during 1994 resulted from the sale of troubled loans.
The allowance for possible loan losses includes an
allocation for all loans classified as special mention,
substandard, doubtful or loss (See "Asset Quality" below for
definitions of such classifications). After allocating the
allowance for classified loans, an allocation is made for all
non-classified loans. The allocation for non-classified loans is
made by loan category, based upon the historical loss experience
for each loan category as well as perceived risk of loss for each
loan category. The amount of the allowance applicable to
non-classified loans was $3,778,000 and $4,621,000 at December
31, 1995 and December 31, 1994, respectively. Since these
factors are subject to change, the allocation of the allowance
for possible loan losses should not be interpreted as an
indication that such amounts or proportions will continue or
indicate future trends.
The specific amount of the allowance in any particular
category may prove excessive or inadequate and consequently may
be reallocated in the future to reflect current conditions.
Accordingly, the Company considers the entire reserve to be
available to absorb losses in any category.
<PAGE>
ASSET QUALITY
Various degrees of credit risk are associated with
substantially all investing activities. Management believes that
the lending function, however, carries the greatest risk of loss.
The Bank's credit due diligence begins at the time a
borrower and the Bank begin to discuss the origination of a loan.
Documentation including a borrower's credit history, materials
establishing the value and liquidity of potential collateral, the
purpose of the loan, the source and timing of the repayment of
the loan and other factors are analyzed before a loan is
submitted for approval.
The Company attempts to minimize overall credit risk through
loan diversification. The Company's loan portfolio is varied,
with no undue concentration in any single industry, although most
of the loans in the Company's loan portfolio have been made to
borrowers in New Jersey.
Individual loan officers are assigned to monitor
non-installment and non-residential mortgage loans and are
responsible for the periodic updating of their reviews of such
loans. Loan officers are actively encouraged to identify
potential deteriorating loan situations through a self-reporting
system.
Installment and residential mortgage loans are primarily
monitored through an analysis of their payment status.
Classified loan reports are prepared and reviewed regularly
by the problem loan committee. Classified loans are categorized
into one of several categories, depending upon the condition of
the borrower and the strength and amount of collateral.
Classifications consist of "other loans especially
mentioned," defined as loans with only modest deficiencies in
documentation and with potentially weakening credit features;
"substandard loans," defined as loans that have a well-defined
credit weakness; "doubtful loans," defined as loans that have a
significantly higher probability of loss than substandard loans;
and "loss" loans which are charged-off when they are deemed
uncollectible.
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 restructured due to
a weakening in the financial position of the borrower (restructured
loans) and (iii) other real estate owned ("OREO"), net of reserves.
<PAGE>
The following table reflects the components of non-performing assets at
December 31, for each of the past five years:
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Past due, 90 days or more:
Mortgage $1,938 $1,388 $4,535 $5,112 $9,743
Commercial 1,167 714 1,434 1,607 1,693
Installment 18 23 53 163 218
Total $3,123 $2,125 $6,022 $6,882 $11,654
Non-accrual loans:
Mortgage $4,042 $4,357 $9,858 $6,316 $4,402
Commercial 3,049 3,222 4,641 6,180 13,816
Installment 0 2 7 36 83
Total $7,091 $7,581 $14,506 $12,532 $18,301
Total non-performing loans $10,214 $9,706 $20,528 $19,414 $29,955
Restructured loans (excluding
amounts classified as non-
performing loans) 5,105 5,445 5,721 8,380 0
Other real estate owned, net 772 400 461 402 129
Total non-performing assets $16,091 $15,551 $26,710 $28,196 $30,084
Non-performing loans as a
percent of total gross loans 3.82% 3.63% 7.72% 7.57% 10.16%
Non-performing loans as a
percent ot total assets 2.12% 2.26% 4.68% 4.79% 6.07%
Non-performing assets as a
percent of loans and other
real estate owned 6.00% 5.81% 10.03% 10.98% 10.20%
Allowance for possible
loan losses $7,402 $7,602 $11,252 $12,659 $12,030
Allowance for possible loan
losses as a percent of non-
performing loans 72.47% 78.32% 54.81% 65.21% 40.16%
<PAGE>
It is the Company's general policy to discontinue the
accrual of interest and reverse previously accrued but unpaid
interest as to a particular loan when interest or principal is
more than 90 days past due on such loan or other circumstances
indicate that full collection is questionable, unless the loan is
adequately secured and in the process of collection. Income on
non-accrual loans is recognized only in the period in which it is
collected.
In addition to the non-performing loans as of December 31,
1995 and 1994, the Company had classified an additional
$4,932,000 and $3,675,000, respectively, as substandard loans.
Also, at December 31, 1995 the Company had classified a $650,000
letter of credit as substandard. A loan loss reserve has been
allocated to such loans and letter of credit in accordance with
the Company's policies.
In the course of resolving non-performing loans, the Bank
may restructure the contractual terms of its loans with its
borrowers. If, prior to such restructuring, the loan was
classified as non-accrual, it is the Bank's policy to continue to
carry these restructured loans on non-accrual status for a period
of time (typically six months) before management considers their
return to accrual status. At December 31, 1995, loans
aggregating $5,105,000 were categorized as restructured. These
loans are currently performing in accordance with their modified
terms.
The level of non-performing assets is heavily dependent upon
local economic conditions. The December 31, 1995 total
non-performing assets of $16,091,000 represents an increase of
$540,000 or 3.5% from December 31, 1994. There can be no
assurance that the level of the Company's non-performing assets
will not continue to increase.
In May of 1993, FASB issued Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan" and Statement of Financial Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosure" which apply to financial
statements for fiscal years beginning after December 15, 1994.
These statements require that impaired loans be measured based on
the present value of expected future cash flows discounted at the
loan's effective interest rate or, as a practical expedient, at
the loan's observable market price or at the fair value of the
collateral if the loan is collateral dependent. There was no
material impact on the financial position or results of
operations as a result of the Company adopting these statements
during 1995.
<PAGE>
INVESTMENT SECURITIES AND FEDERAL FUNDS SOLD
The Company invests a portion of its available funds in
short-term and longer-term instruments, including federal funds
sold and investment securities.
Federal funds sold are used primarily for daily cash
management purposes. Average federal funds sold of $38,383,000
for 1995 represented 9.2% of total average interest earning
assets, as compared to 10.8% for 1994.
Investment securities include obligations of the U.S.
Government or its agencies, obligations of states and political
subdivisions, Federal Reserve Bank stock and debt securities.
The Company's investment securities portfolio is utilized to
collateralize certain of the Bank's lines of credit and public
and fiduciary deposits. It also provides liquidity through
proceeds from scheduled maturities. The majority of the
Company's investment securities carry fixed interest rates.
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115"). The
financial impact of the adoption was $57,000, net of tax, which
was recorded as an increase to shareholders' equity.
SFAS 115 requires companies to divide their securities
holdings among three categories: held-to-maturity,
available-for-sale, and trading securities. The accounting
standard provides a different accounting treatment for each
category.
The Company does not have trading securities, but does
differentiate between held-to-maturity securities and
available-for-sale securities. Management determines the
appropriate classification of securities at the time of purchase.
If management has the positive intent and the Company has
the ability at the time of purchase to hold securities until
maturity, they are classified as held-to-maturity securities.
Such securities are stated at amortized cost, adjusted for
unamortized purchase premiums and discounts.
Securities in the available-for-sale category are those for
which the Company does not have the positive intent and ability
to hold to maturity. Available-for-sale securities are reported
at fair value. Any unrealized appreciation or depreciation in
the available-for-sale securities, net of tax effects, is
reported as a separate component of equity capital. At December
31, 1995 and 1994, the Company reported net unrealized securities
gains (losses) of $284,000 and ($716,000), respectively, in the
Shareholders' Equity section of the consolidated statement of
condition.
<PAGE>
On November 15, 1995, the Financial Accounting Standards
Board (FASB) issued a Special Report, "A Guide to Implementation
of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities." The guidance in this Special Report
became effective November 15, 1995.
Included within the Special Report is guidance that
permitted banking organizations to perform a one-time assessment
to determine the appropriateness of the designations of all
securities currently held. Any resulting redesignations were to
be made in conjunction with the guidance allowed banking
organizations to transfer debt securities from the held-to-
maturity portfolio before year-end 1995, without calling into
question their intent to hold other debt securities to maturity.
In accordance with the guidance contained within the Special
Report, effective December 1, 1995, the Company transferred
securities with a book value of $37,911,000 from held-to-maturity
to available-for-sale. These securities had a market value of
$38,238,000 which resulted in the Company recording an unrealized
gain on securities available-for-sale, net of tax, within
Shareholders' Equity of $216,000.
Total average investment securities of $114,157,000 for 1995
represented 27.3% of total average interest-earning assets as
compared to 25.9% for 1994.
<PAGE>
The table below presents the amortized cost and total
estimated market values of securities held-to-maturity as of year
end for each of the past five years:
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
U.S. Treasury $ 0 $11,795 $8,804 $54,107 $81,918
U.S. Government agencies 11,055 3,080 1,089 151 199
Mortgage-backed securities 46,108 73,204 59,670 44,915 32,590
States and political subdivisions 1,875 1,336 1,009 100 1,054
Other bonds 1,228 374 376 381 456
Amortized Cost $60,266 $89,789 $70,948 $99,654 $116,217
Estimated market value $59,948 $84,188 $70,759 $99,817 $117,513
</TABLE>
Maturities and weighted average yields of securities
held-to-maturity at December 31, 1995, segregated by maturity
ranges, are illustrated below:
<TABLE>
<CAPTION>
Maturing
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years Total
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
agencies $6,996 6.84% $4,059 6.38% $ 0 --% $ 0 --% $11,055 6.67%
Mortgage-backed
securities 0 -- 41,234 5.90 4,804 6.26 70 8.46 46,108 5.94
States and political
subdivisions <F1> 1,298 4.21 326 4.64 251 4.80 0 -- 1,875 4.36
Other bonds 0 -- 0 -- 0 -- 1,228 6.69 1,228 6.69
Total book value $8,294 6.43% $45,619 5.93% $5,055 6.19% $1,298 6.79% $60,266 6.04%
<FN>
<F1>
The weighted average yields have been computed based on a tax-equivalent basis,
assuming a 34% income tax rate.
</TABLE>
<PAGE>
The table below presents the amortized cost and total
estimated market values of securities available-for-sale at
December 31, 1995, 1994 and 1993. There were no such securities
available-for-sale for years prior to 1993:
<TABLE>
<CAPTION>
December 31
1995 1994 1993
(Dollars in Thousands)
<S> <C> <C> <C>
U.S. Treasury $14,745 $10,932 $14,008
U.S. Government agencies 1,000 0 0
Mortgage-backed securities 39,774 11,297 17,209
Amortized cost $55,519 $22,229 $31,217
Estimated market value $55,946 $21,144 $31,303
</TABLE>
Maturities and weighted average yields of securities
available-for-sale at December 31, 1995, segregated by maturity
ranges, are illustrated below:
<TABLE>
<CAPTION>
Maturing
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years Total
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $10,807 5.89% $ 3,938 7.54% $ 0 --% $ 0 --% $14,745 6.33%
U.S. Government
agencies 0 -- 1,000 5.76 0 -- 0 -- 1,000 5.76
Mortgage-backed
securities 0 -- 12,460 6.06 14,436 6.73 12,878 6.49 39,774 6.44
Total book value $10,807 5.89% $17,398 6.38% $14,436 6.73% $12,878 6.49% $55,519 6.39%
</TABLE>
Realized gains (losses) from the sale of securities available-for-sale
were $71,000, ($169,000) and $248,000 for 1995, 1994 and 1993, respectively.
<PAGE>
DEPOSITS
The Bank's deposit base is its primary source of funds. The
Bank offers a broad range of deposit products, including
non-interest bearing demand deposits, NOW accounts, savings
accounts, IMMAs and certificates of deposit.
The December 31, 1995 total deposit balance of $429,681,000
represents an increase of $38,215,000 or 9.8% from the December
31, 1994 balance of $391,466,000. The most significant portion
of this increase is represented by time deposits which were
$32,028,000 or 42.5% higher at December 31, 1995 than at December
31, 1994. This increase resulted primarily from the Bank's
effort during the first half of 1995 to offer more competitive
rates in order to increase its deposit base and reduce its short-
term borrowings which it had relied upon during the first quarter
of 1995.
The following table shows a breakdown of the average balances and
average rates paid on the following deposit categories for each of the
past three years:
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $ 95,264 -- % $ 89,683 -- % $87,031 -- %
Savings, and interest-
bearing demand deposits 221,749 2.21 248,752 2.02 223,709 2.29
Time deposits 98,790 5.07 76,993 3.17 85,026 3.43
Total average deposits $415,803 2.38% 415,428 1.79% $395,766 2.03%
</TABLE>
The following is a breakdown of the maturity of time
certificates of deposit and other time deposits in excess of
$100,000 as of December 31, 1995 and December 31, 1994,
respectively:
<TABLE>
<CAPTION>
Dec. 31, 1995 Dec. 31, 1994
(Dollars in Thousands)
<S> <C> <C>
Under three months $12,463 $ 8,653
Three to six months 4,904 1,798
Six to twelve months 2,057 1,934
Over twelve months 1,483 1,436
Total $20,907 $13,821
<PAGE>
SHORT-TERM BORROWINGS
Short-term borrowings represent federal funds purchased and
securities sold under agreements to repurchase, which are used to
supplement the Bank's deposit base as a source of funding. The
majority of these instruments have terms ranging from one to
thirty days. These balances increased $605,000 to $782,000 at
December 31, 1995 from $177,000 at December 31, 1994.
Additionally, the average balance of short-term borrowings was
$2,808,000 during 1995, as the Bank drew down certain of its
lines of credit for repurchase agreements to supplement its
liquidity management program during the first quarter of 1995.
The maximum balance outstanding also occurred during the first
quarter of 1995. The increase in the outstanding balance coupled
with the increased cost of borrowed funds contributed to an
increase of $163,000 in interest expense on short-term borrowings
for 1995 as compared to 1994.
Information regarding the levels of short-term borrowings
for each of the past three years is as follows:
</TABLE>
<TABLE>
<CAPTION>
December 31,
1995 1994 1993
(Dollars in Thousands)
<S> <C> <C> <C>
Balance, end of year $782 $177 $342
Maximum outstanding during
the year at any month end $21,345 $177 $342
Average interest rate, end
of year 5.69% 2.95% 3.09%
Average outstanding during
the year $2,808 $275 $190
Average interest rate for
the year 6.02% 2.18% 3.16%
</TABLE>
The average amounts outstanding were computed from daily
averages and the average interest rates for the period were
computed by dividing the respective interest expense by the
average balance outstanding.
<PAGE>
LIQUIDITY OF THE BANK
The Bank actively monitors its liquidity position to insure
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 December 31, 1995 and 1994.
<TABLE>
<CAPTION>
Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C>
Cash and cash equivalents
and securities maturing in
one year to total assets 22.1% 9.2%
Net loans to total deposits 60.4% 66.3%
</TABLE>
The increase in the ratio of cash and cash equivalents and
securities maturing in one year to total assets is primarily
attributable to the increase in federal funds sold at December
31, 1995 as compared to December 31, 1994. Contributing to this
increase in short-term investible funds was an increase of
approximately $18,000,000 in NOW account balances at December 31,
1995 as compared to December 31, 1994 (included in savings and
interest bearing demand deposits on the Consolidated Statement of
Condition) which due to their volatile, short-term nature, are
invested in federal funds sold. An additional $8,100,000 was
invested in federal funds sold at December 31, 1995 pending the
settlement in January 1996 of securities purchased in December
1995.
To assist in the management of its liquidity, the Bank had
available $13,000,000 in lines of credit with correspondent
banks, which lines were not in use at December 31, 1995.
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.
<PAGE>
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 are available
for payment of dividends to the parent company without regulatory
approval.
Additionally, at December 31, 1995, Bancorporation had
available $220,000 of cash for the purpose of paying future
dividends and operating costs. However, a change in
circumstances, such as changes in regulatory requirements or in
the Bank's financial condition, 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 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
those of interest-bearing liabilities in an effort to manage the
impact of fluctuating net interest rates on net interest margins.
The Company's Asset/Liability Committee (the "Committee")
meets at least monthly to establish, communicate, coordinate and
control asset/liability management procedures. The purpose of
the Committee is to monitor the volume and mix of the Company's
interest sensitive assets and liabilities consistent with the
Company's overall liquidity, capital, growth, risk and
profitability goals.
Interest rate sensitivity is measured as the difference
between the percentage of assets and liabilities in the Company's
existing portfolio that are subject to repricing within specified
time periods. 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 repricing within
specified time periods and these companies are likely to benefit
in periods of rising interest rates, but suffer as rates
decrease. Companies that are liability-sensitive (a negative
gap) are likely to benefit in periods of declining rates, but
suffer as rates increase.
<PAGE>
An interest sensitivity table is not a complete picture of
the possible effect of interest rate changes on net interest
income. First, changes in the general level of interest rates
will not affect all categories of assets and liabilities equally
or simultaneously. Second, the table represents a one-day
position: variations occur daily as the Company adjusts its
interest sensitivity throughout the year. Third, the repricing
distribution of interest sensitive assets may not be indicative
of the liquidity of those assets. Finally, since this table is
based on contractual maturities, it does not include required
principal payments or estimates of early principal payments on
residential mortgages, installment loans and investment
securities.
<PAGE>
The table below indicates as of December 31, 1995 the time period in
which interest-earning assets and interest-bearing liabilities are scheduled
to mature or reprice in accordance with their contractual terms.
<TABLE>
<CAPTION>
After After After
Three Six One
Three Through Through Through After
Months Six Twelve Five Five
Or Less Months Months Years Years Total
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment securities $7,185 $1,870 $14,618 $63,122 $29,417 $116,212
Loans 94,741 1,496 5,614 89,617 75,951 267,419
Federal funds sold 61,300 0 0 0 0 61,300
Other assets 0 0 0 0 36,254 36,254
Total assets $163,226 $3,366 $20,232 $152,739 $141,622 $481,185
LIABILITIES AND SHAREHOLDERS' EQUITY
NOW and savings accounts $194,023 $ 0 $ 0 $ 0 $ 0 $194,023
Money market accounts 26,035 0 0 0 0 26,035
Time deposits 46,132 36,752 15,924 8,242 366 107,416
Short-term borrowings 600 182 0 0 0 782
Other liabilities
and shareholders' equity 0 0 0 0 152,929 152,929
Total liabilities
and shareholders' equity $266,790 $36,934 $15,924 $8,242 $153,295 $481,185
Sensitivity gap $(103,564) $(33,568) $ 4,308 $144,497 $(11,673) $ 0
Gap as a percentage of assets -21.52% -6.98% 0.90% 30.03% -2.43% 0%
Cumulative sensitivity gap $(103,564)$(137,132)$(132,824) $11,673 $ 0 $ 0
Cumulative gap as a percentage
of assets -21.52% -28.50% -27.60% 2.43% 0% 0%
Cumulative sensitivity ratio 61.18% 54.85% 58.45% 103.56% 0% 0%
</TABLE>
<PAGE>
CAPITAL ADEQUACY
Capital adequacy for the Company is measured against
guidelines established by the Federal Reserve Board. The Federal
Reserve Board measures capital adequacy for bank holding
companies by using a risk-based capital framework and by
monitoring compliance with minimum leverage guidelines.
Effective December 31, 1992, bank holding companies were required
to maintain a ratio of at least 8.00% between capital and
risk-weighted assets, of which approximately one-half (4.00%)
must be in Tier 1 capital. In addition, the Federal Reserve
Board has established minimum leverage ratio guidelines for
bank holding companies. These guidelines provide for a minimum
leverage ratio (Tier 1 capital to quarterly average total assets
less goodwill) of 3% for bank holding companies that meet certain
criteria, including that they maintain the highest regulatory
rating. All other bank holding companies are required to
maintain a leverage ratio of 3% plus an additional cushion of at
least 100 to 200 basis points.
The Bank is subject to generally similar capital
requirements adopted by the OCC.
<PAGE>
The tables below present in summary form the risk-based and
leverage capital ratios of the Company and the Bank as of
December 31, 1995, compared to the required minimum levels
established in regulations promulgated by the Federal Reserve
Board and the OCC.
<TABLE>
<CAPTION>
Risk-Based Capital Ratios
(Dollars in Thousands)
The Company The Bank
At December 31, 1995 At December 31, 1995
Amount Ratio Amount Ratio
<S> <C> <C> <C> <C>
Tier 1 Capital $33,545 10.58% $32,779 10.34%
Tier 1 Capital -
Minimum Required 12,680 4.00 12,680 4.00
Excess $20,865 6.58% $20,099 6.34%
Total Capital $37,550 11.85% $36,784 11.60%
Total Capital -
Minimum Required 25,360 8.00 25,360 8.00
Excess $12,190 3.85% $11,424 3.60%
Risk-Weighted Assets $316,995 $316,995
Leverage Ratios
(Dollars in Thousands)
The Company The Bank
At December 31, 1995 At December 31, 1995
Amount Ratio Amount Ratio
Tier 1 Capital to
Total Adjusted Assets $33,545 7.17% $32,779 7.00%
Tier 1 Capital to Total
Adjusted Assets-Minimum
Required 23,404 5.00 23,404 5.00
Excess $10,141 2.17% $9,375 2.00%
Total Adjusted Assets $468,088 $468,088
</TABLE>
At December 31, 1994, the Company had total capital equal to
11.22% of risk-based assets, which included Tier 1 capital equal
to 9.96% of risk-based assets. These compared to minimum
regulatory capital requirements of 8.00% and 4.00%, respectively.
At December 31, 1994, the Company had Tier 1 capital equal to
7.00% of adjusted total assets. This compares with a minimum
regulatory capital requirement of 5.00%.
At December 31, 1994, the Bank had total capital equal to
11.13% of risk-based assets, which included Tier 1 capital equal
to 9.87% of risk-based assets. These compare to minimum
regulatory capital requirements of 8.00% and 4.00%, respectively.
At December 31, 1994 the Bank had Tier 1 capital equal to 6.94%
of adjusted total assets. This compares with a minimum
regulatory capital requirement of 5.00%.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Broad National Bancorporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CONDITION
December 31, 1995 and 1994
(In thousands, except share amounts)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS (Note 9) $25,810 $24,485
FEDERAL FUNDS SOLD 61,300 13,810
SECURITIES HELD-TO-MATURITY
(aggregate market value $59,948
and $84,188, respectively) (Note 2) 60,266 89,789
SECURITIES AVAILABLE-FOR-SALE (Note 2) 55,946 21,144
LOANS, net of unearned income and
deferred loan fees (Note 3) 267,130 267,048
LESS -
Allowance for possible loan
losses (Note 4) 7,402 7,602
NET LOANS 259,728 259,446
PREMISES AND EQUIPMENT, net (Note 5) 9,418 9,526
ACCRUED INTEREST RECEIVABLE 2,819 2,860
OTHER ASSETS (Note 6) 5,898 7,570
TOTAL ASSETS $481,185 $428,630
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS
Non-interest bearing demand $102,207 $100,289
Savings and interest bearing demand 220,058 215,789
Time deposits less than $100,000 86,509 61,567
Time deposits of $100,000 or more 20,907 13,821
Total deposits 429,681 391,466
SHORT-TERM BORROWINGS (Note 8) 782 177
ACCRUED TAXES, INTEREST AND OTHER
LIABILITIES
(Notes 6 and 7) 16,193 6,721
TOTAL LIABILITIES 446,656 398,364
COMMITMENTS AND CONTINGENCIES (Note 9)
SHAREHOLDERS' EQUITY (Notes 10 and 14)
Preferred stock-1985 class, $10 par value,
authorized and outstanding 17,124 shares
in 1995 and 1994 and (preference on
liquidation of $651) 171 171
8 1/2% Cumulative Convertible Preferred
Stock-1992 class, $1 par value, authorized
690,000 shares, outstanding 562,553 shares
in 1995 and 653,375 shares in 1994
(preference on liquidation of $5,626) 563 653
Common stock, $1 par value, authorized
5,500,000 shares; outstanding 3,059,203
shares in 1995 and 2,882,592 shares in
1994 3,059 2,883
Capital surplus 23,145 23,213
Retained earnings 7,307 4,062
Unrealized gain (loss) on securities
available-for-sale, net 284 (716)
TOTAL SHAREHOLDERS' EQUITY 34,529 30,266
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $481,185 $428,630
</TABLE>
<PAGE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
Broad National Bancorporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1995, 1994 and 1993
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans (Note 3) $24,337 $22,130 $21,750
Interest and dividends on
investments
Taxable 6,753 5,801 5,287
Exempt from federal income taxes 55 28 14
Interest on federal funds sold 2,253 1,836 1,262
TOTAL INTEREST INCOME 33,398 29,795 28,313
INTEREST EXPENSE
Interest on savings and interest
bearing demand deposits 4,900 5,018 5,119
Interest on time certificates of
deposit of $100,000 or more 1,040 491 264
Interest on other time deposits 3,973 1,949 2,654
Interest on short-term borrowings 169 6 45
TOTAL INTEREST EXPENSE 10,082 7,464 8,082
NET INTEREST INCOME 23,316 22,331 20,231
PROVISION FOR POSSIBLE LOAN LOSSES
(Note 4) 720 450 900
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 22,596 21,881 19,331
NON-INTEREST INCOME
Service charges on deposit accounts 3,515 3,393 2,833
Other income 887 721 942
Gain (loss) on sale of securities
available-for-sale (Note 2) 71 (169) 248
Gain (Loss) on sale of loans (Note 3) 18 (296) 0
TOTAL NON-INTEREST INCOME 4,491 3,649 4,023
NON-INTEREST EXPENSES
Salaries and wages 7,735 7,443 6,812
Employee benefits (Note 7) 2,255 1,995 2,018
Occupancy expense (Note 9) 1,975 1,927 1,961
Furniture and equipment expense 1,213 1,361 1,386
Advertising 425 360 209
Data processing fees 1,086 1,256 863
Legal fees 547 136 1,426
Professional fees 819 806 845
Insurance 415 374 471
Postage, delivery and communication 624 589 503
FDIC and OCC assessments 567 1,153 1,189
Other real estate expense 99 169 238
Other expenses 1,776 2,504 1,892
TOTAL NON-INTEREST EXPENSES 19,536 20,073 19,813
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 7,551 5,457 3,541
PROVISION FOR INCOME TAXES (Note 6) 3,131 768 1,491
INCOME BEFORE CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE 4,420 4,689 2,050
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 0 0 1,086
NET INCOME $4,420 $4,689 $3,136
NET INCOME APPLICABLE TO COMMON STOCK
(Note 10) $3,840 $4,075 $2,527
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (Note 10)
PRIMARY 3,002 2,880 2,837
ASSUMING FULL DILUTION 4,304 4,251 4,139
NET INCOME PER COMMON SHARE
(Notes 10 and 14)
PRIMARY:
Before cumulative effect of a
change in accounting principle $1.28 $1.41 $0.50
Cumulative effect of a change
in accounting principle 0.00 0.00 0.38
PRIMARY EARNINGS PER COMMON SHARE $1.28 $1.41 $0.88
FULLY DILUTED:
Before cumulative effect of a change
in accounting principle $1.03 $1.10 $0.50
Cumulative effect of a change in
accounting principle 0.00 0.00 0.27
FULLY DILUTED EARNINGS PER COMMON SHARE $1.03 $1.10 $0.77
</TABLE>
<PAGE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
Broad National Bancorporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the years ended December 31, 1995, 1994, and 1993
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Unrealized
Gain
(Loss) On
Retained Securities
Preferred Preferred Common Capital Earnings Available-
Stock-1985 Stock-1992 Stock Surplus (Deficit) for-Sale,Net Total
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 $172 -- $2,679 $17,040 $ (916) $18,975
NET INCOME - 1993 -- -- -- -- 3,136 3,136
ISSUANCE OF 1992 PREFERRED STOCK -- 690 -- 5,259 -- 5,949
CONVERSION OF 1992 PREFERRED STOCK -- (33) 59 (26) -- --
CASH DIVIDENDS
PREFERRED STOCK-1992 - $0.82
PER SHARE -- -- -- -- (551) (551)
PREFERRED STOCK-1985 - $5.13
PER SHARE -- -- -- -- (88) (88)
BALANCE, DECEMBER 31, 1993 $172 $657 $2,738 $22,273 $1,581 $27,421
NET INCOME - 1994 -- -- -- -- 4,689 4,689
UNREALIZED GAIN ON SECURITIES
AVAILABLE-FOR-SALE -- -- -- -- -- 57 57
CONVERSION OF 1992 PREFERRED STOCK -- (4) 7 (3) -- -- --
CONVERSION OF 1985 PREFERRED STOCK (1) -- 1 -- -- -- --
EFFECT OF 5% STOCK DIVIDEND -- -- 137 943 (1,080) -- --
CASH DIVIDENDS
COMMON STOCK - $0.18 PER SHARE -- -- -- -- (511) -- (511)
PREFERRED STOCK - 1992 - $0.85
PER SHARE -- -- -- -- (558) -- (558)
PREFERRED STOCK - 1985 - $3.42
PER SHARE -- -- -- -- (59) -- (59)
NET CHANGE IN UNREALIZED GAIN (LOSS)
ON SECURITIES AVAILABLE-FOR-SALE -- -- -- -- -- (773) (773)
BALANCE, DECEMBER 31, 1994 $171 $653 $2,883 $23,213 $4,062 (716) $30,266
NET INCOME - 1995 -- -- -- -- 4,420 -- 4,420
CONVERSION OF 1992 PREFERRED STOCK -- (90) 173 (83) -- -- --
EXERCISE OF STOCK OPTIONS -- -- 3 15 -- -- 18
CASH DIVIDENDS
COMMON STOCK-$0.19 PER SHARE -- -- -- -- (595) -- (595)
PREFERRED STOCK - 1992 - $0.85
PER SHARE -- -- -- -- (521) -- (521)
PREFFERED STOCK - 1985 - $3.42
PER SHARE -- -- -- -- (59) -- (59)
NET CHANGE IN UNREALIZED GAIN (LOSS)
ON SECURITIES AVAILABLE-FOR-SALE -- -- -- -- -- 1,000 1,000
BALANCE, DECEMBER 31, 1995 $171 $563 $3,059 $23,145 $7,307 $284 $34,529
</TABLE>
<PAGE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
Broad National Bancorporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994 and 1993
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,420 $4,689 $3,136
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,185 1,255 1,474
Amortization of securities premium,
net 440 749 858
Amortization of deferred points
and fees and deferral of loan
origination costs (571) (229) (492)
Provision for possible loan losses 720 450 900
Deferred tax (benefit) provision 899 (1,051) 179
Increase in accrued taxes,
interest, and other liabilities 9,472 2,018 403
(Gain) loss on sale of securities
available-for-sale (71) 169 (248)
(Gain) loss on sale of loans (18) 296 0
Write down of other real estate
owned 0 151 370
Loss on the sale of other real
estate owned 23 18 168
(Increase) decrease in accrued
interest receivable 41 (456) 644
Other, net (3,040) 482 (2,924)
Net cash provided by operating
activities $13,500 $8,541 $4,468
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of other
real estate owned $ 308 $ 737 $ 471
Net (increase) decrease in loan
balances 1,144 (20,079) (12,522)
Proceeds from the sale of loans 1,432 14,499 0
Proceeds from the maturities of
securities held-to-maturity 8,936 20,386 29,690
Purchase of securities held-to-
maturity (17,722) (39,854) (61,164)
Proceeds from the maturities of
securities available-for-sale 1,846 6,137 13,000
Proceeds from the sale of
securities available-for-sale 18,896 11,670 23,355
Purchase of securities available-
for-sale (16,093) (8,941) (8,002)
Capital expenditures (1,077) (1,307) (669)
Net cash (used in) investing
activities $ (2,330) $(16,752) $(15,841)
<PAGE>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in
time deposits $32,028 $ (4,913) $(9,045)
Net increase (decrease) in demand
deposit, savings and interest
bearing demand accounts 6,187 (9,687) 36,412
Net (decrease) increase in short
term borrowings 605 (165) (89)
Dividends paid (1,175) (1,071) (639)
Repayment of long-term debt 0 0 (3,229)
Net proceeds from the issuance of
preferred stock 0 0 5,949
Net cash provided by (used in)
financing activities $37,645 $(15,836) $29,359
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 48,815 (24,047) 17,986
CASH AND CASH EQUIVALENTS,
beginning of year 38,295 62,342 44,356
CASH AND CASH EQUIVALENTS,
end of year 87,110 38,295 62,342
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 8,823 $ 7,430 $ 8,281
Income taxes 3,031 1,002 2,198
NONCASH OPERATING ACTIVITIES:
Transfer of loans to other real
estate owned $ 702 $ 390 $ 115
Transfer of securities
held-to-maturity to securities
available-for-sale $37,911 $ 0 $59,383
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE>
Broad National Bancorporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The more significant accounting policies not described
elsewhere in these notes are as follows:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts
of Broad National Bancorporation (the Company), its wholly owned
subsidiary Broad National Bank (the Bank) and the Bank's wholly
owned subsidiaries BNB Investment Corporation, Broad National
Realty Corporation and Bronatoreo. All intercompany accounts and
transactions have been eliminated.
BASIS OF FINANCIAL STATEMENT PRESENTATION
In preparing the consolidated financial statements,
management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the
date of the statements of condition and results of operations for
the periods indicated. Actual results could differ significantly
from those estimates.
Material estimates that are particularly susceptible to
significant change in the near-term relate to the determination
of the allowance for possible loan losses and the valuation of
other real estate owned. In connection with the determination of
these allowances, management generally obtains independent
appraisals.
A substantial portion of the Company's loans are secured by
real estate in New Jersey. Accordingly, as with most financial
institutions in the market area, the ultimate collectibility of a
substantial portion of the Company's loan portfolio is
susceptible to changes in market conditions.
While management uses available information to recognize
losses on loans and other real estate owned, future additions may
be necessary based on changes in economic conditions. In
addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Company's
allowances for losses on loans, and other real estate owned.
Such agencies may require the Company to recognize additions to
the allowance based on their judgments of information available
to them at the time of their examination.
INVESTMENT SECURITIES
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115"). The
financial impact of the adoption was $57,000, net of tax, which
was recorded as an increase to shareholders' equity. SFAS 115
requires companies to divide their securities holdings among
three categories: held-to-maturity, available-for-sale, and
trading securities. The accounting standard provides a different
accounting treatment for each category.
The Company does not have trading securities, but does
differentiate between held-to-maturity securities and
available-for-sale securities. Management determines the
appropriate classification of securities at the time of purchase.
If management has the positive intent and the Company has
the ability at the time of purchase to hold securities until
maturity, they are classified as held-to-maturity securities.
Such securities are stated at amortized cost, adjusted for
unamortized purchase premiums and discounts.
Securities in the available-for-sale category are those for
which the Company does not have the positive intent and ability
to hold to maturity. Available-for-sale securities are reported
at fair value. Any unrealized appreciation or depreciation in
the available-for-sale securities, net of tax effects, is
reported as a separate component of equity capital. Realized
gains or losses on the sale of securities available-for-sale are
recognized on the specific identification method.
<PAGE>
LOANS AND LOAN FEES
Loans are stated at their principal amount outstanding, net
of unearned income and deferred loan fees and costs.
Non-refundable fees and costs associated with originating or
acquiring loans are deferred and amortized over the expected
remaining life of the related loans by use of a method which
approximates the level yield method.
Effective January 1, 1995 the Bank adopted Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan" ("SFAS 114"). SFAS 114 requires that
the value of an impaired loan be measured based upon the present
value of expected future cash flows discounted at the loan's
effective interest rate, or the fair value of the collateral if
the loan is collateral dependant. Smaller balance homogeneous
loans that are collectively evaluated for impairment, such as
residential mortgage loans and installment loans, are
specifically excluded from the impaired loans analysis. The
impaired loan portfolio is primarily collateral dependant, as
defined by SFAS 114. Impaired loans are assessed to determine
that each loan's carrying value is not in excess of the fair
value of the related collateral or the present value of expected
future cash flows. The Bank has identified the population of
loans to be evaluated for impairment to be non-accrual loans and
loans internally classified as substandard or below and in each
instance above an established dollar threshold. All loans below
the established dollar threshold are considered homogeneous and
are considered in the Bank's normal credit evaluation process.
Interest on commercial, real estate and installment loans is
credited to operations based upon the principal amount
outstanding. Interest on certain installment loans is taken into
income on scheduled payment dates by use of the sum-of-the-months
digits method.
It is the policy of the Bank to discontinue the accrual of
interest and reverse previously accrued but unpaid interest where
interest or principal is more than 90 days past due or when other
circumstances indicate that collection is questionable, unless
the loans are adequately secured and in the process of
collection. Income on these loans is recognized only in the
period in which it is collected.
Effective January 1, 1995, the Bank adopted Statement of
Financial Accounting Standards No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures"
("SFAS 118"). The Bank has chosen to maintain existing income
recognition policies with respect to non-accrual loans.
<PAGE>
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is maintained at a
level considered adequate to provide for potential loan losses.
The allowance is increased by provisions charged to expense and
reduced by net charge-offs. The level of the allowance is based
upon management's evaluation of potential losses in the loan
portfolio, after consideration of prevailing economic conditions.
OTHER REAL ESTATE OWNED
Other real estate owned is comprised of foreclosed
properties where the Bank has actually received title. Such
properties are carried at the lower of cost or the fair value of
the asset less estimated cost to sell. The fair value of such
assets is determined based upon independent appraisals and other
relevant factors. Operating expenses, and gains or losses from
the sale of other real estate owned are charged or credited to
other operating expenses.
Other real estate owned is included in "Other Assets" in the
Consolidated Statements of Condition.
PREMISES AND EQUIPMENT
These assets are stated at cost less accumulated
depreciation and amortization, which are computed primarily using
the straight-line method over the estimated useful lives of the
assets. Gains or losses on dispositions are reflected in current
operations. Maintenance and repairs are charged to expense as
incurred.
INCOME TAXES
Bancorporation and the Bank file a consolidated federal
income tax return. State income tax returns are filed on a
separate basis.
The Company uses the asset and liability method of
accounting for income taxes. Under this method, the temporary
differences between the basis of assets and liabilities for
financial reporting and tax purposes are measured as of the
balance sheet date. Deferred tax liabilities or recognizable
deferred tax assets are calculated on such differences, using
current statutory rates which result in future taxable or
deductible amounts. The effect on deferred taxes of a change in
tax rates is recognized in income in the period that includes the
enactment date.
Effective January 1, 1993, the Company adopted the asset and
liability method, and reported $1,086,000 as the cumulative
effect of that change in the method of accounting for income
taxes in the December 31, 1993 consolidated statement of income.
Prior periods' financial statements were not restated.
<PAGE>
NET INCOME PER SHARE
Primary net income per share is computed by dividing net
income, less dividends on preferred stock, by the weighted
average number of common shares outstanding during each year
adjusted for dilutive stock options. Fully diluted per 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 stock and dilutive stock
options.
All share and per-share amounts have been restated to reflect
the 5% stock dividend distributed in December 1994.
STATEMENT OF CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, noninterest bearing amounts due from banks, and
federal funds sold.
RECLASSIFICATIONS
Certain amounts in the consolidated financial statements presented
for prior periods have been reclassified to conform with the 1995
presentation.
NOTE 2: INVESTMENT SECURITIES
The amortized costs, gross unrealized gains and losses and estimated
market values of debt securities held-to-maturity are as follows (in
thousands):
<TABLE>
<CAPTION>
December 31
1995 1994
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States Treasury $ 0 $ 0 $ 0 $ 0 $11,795 $0 $ (343) $11,452
United States Government 11,055 35 (39) 11,051 3,080 0 (316) 2,764
Mortgage-Backed Securities 46,108 50 (376) 45,782 73,204 0 (4,901) 68,303
States and Political
Subdivisions 1,875 12 0 1,887 1,336 0 (40) 1,296
Other Bonds 1,228 0 0 1,228 374 0 (1) 373
Totals $60,266 $97 $(415) $59,948 $89,789 $0 $(5,601) $84,188
</TABLE>
The amortized cost and estimated market value of debt securities
held-to-maturity at December 31, 1995, by contractual maturity, are
shown below (in thousands):
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
<S> <C> <C>
Due in one year or less $ 8,294 $ 8,308
Due in one year through five years 45,619 45,296
Due after five years through ten years 5,055 5,043
Due after ten years 1,298 1,301
$60,266 $59,948
</TABLE>
<PAGE>
On November 15, 1995, the Financial Accounting Standards Board (FASB)
issued a Special Report, "A Guide to Implementation of Statement 115 on
Accounting for Certain Investments in Debt and Equity Securities."
The guidance in this Special Report became effective November 15, 1995.
In accordance with the guidance contained within the Special
Report, effective December 1, 1995, the Company transferred securities with
a book value of $37,911,000 from held-to-maturity to available-for-sale.
These securities had a market value of $38,238,000 which resulted in the
Company recording an unrealized gain on securities available-for-sale,
net of tax, within Shareholder's Equity of $216,000.
The amortized costs, gross unrealized gains and losses and estimated
fair values of debt securities available-for-sale are as follows (in
thousands):
<TABLE>
<CAPTION>
December 31
1995 1994
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States Treasury $14,745 $200 $ (8) $14,937 $10,932 $0 $(280) $10,652
U. S. Government Agency 1,000 1 0 1,001 0 0 0 0
Mortgage-Backed Securities 39,774 310 (76) 40,008 11,297 0 (805) 10,492
$55,519 $511 $(84) $55,946 $22,229 $0 $(1,085) $21,144
</TABLE>
The amortized cost and estimated fair value of debt
securities available-for-sale at December 31, 1995, by
contractual maturity, are shown below (in thousands):
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
<S> <C> <C>
Due in one year or less $10,807 $10,872
Due in one year through five years 17,398 17,501
Due after five years through ten years 14,436 14,696
Due after ten years 12,878 12,877
$55,519 $55,946
</TABLE>
Gross realized gains (losses) from the sale of securities
during 1995, 1994 and 1993 were $71,000, $(169,000)and $248,000,
respectively.
<PAGE>
At December 31, 1995 and 1994, securities having a book
value of $49,509,000 and $46,058,000, respectively, were pledged
to secure lines of credit, letters of credit, public deposits and
for other purposes as required by law.
NOTE 3: LOANS
Loans are summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1995 1994
<S> <C> <C>
Real Estate loans
Construction $ 4,097 $ 3,913
Secured conventional
Residential 90,831 81,237
Nonresidential 94,950 85,819
Commercial and industrial loans 69,025 90,430
Loans to individuals
Automobile 2,440 2,094
Revolving credit 286 325
Other installment loans 5,102 2,603
All other loans 688 1,001
Total loans $267,419 $267,422
Less:
Unearned income and deferred
loan fees (289) (374)
Total loans net of unearned
income and deferred loan
fees $267,130 $267,048
</TABLE>
Non-performing loans include the following (in thousands):
<TABLE>
<CAPTION>
December 31
1995 1994
<S> <C> <C>
Non-accrual loans $ 7,091 $7,581
Accruing loans past due
90 days or more 3,123 2,125
$10,214 9,706
</TABLE>
If the non-accrual loans had continued to accrue interest in
accordance with their original contract terms, interest income
would have increased approximately $689,000, $475,000 and
$1,176,000, in 1995, 1994 and 1993, respectively. No interest
income was collected on these loans subsequent to their
classification as non-accrual in 1995, 1994 and 1993.
In addition to non-performing loans, the Bank had classified
$5,105,000 of loans as restructured loans as of December 31,
1995. These loans are currently performing in accordance with
their modified terms.
<PAGE>
At December 31, 1995, the recorded investment in loans that
are considered to be impaired under SFAS 114 was $6,622,000 for
which the related allowance for credit losses is $770,000. The
change in the allowance for impaired loans during 1995
represented a provision of $123,000. The average recorded
investment in impaired loans during the year ended December 31,
1995 was approximately $5,213,000. For the year ended December
31, 1995, the Company recognized cash basis interest income on
these impaired loans of $70,000.
All loans to directors, executive officers, significant
shareholders and their related interests (which are primarily
unsecured), are current as to principal and interest payments at
December 31, 1995. The following summarizes the activity for
related party loans for the year ended December 31, 1995 (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Balance, beginning of year $2,046
Additions 771
Payments 639
Balance, end of year $2,178
</TABLE>
The Bank is party to financial instruments with
off-balance-sheet risk in the normal course of business to meet
the financial needs of its customers. These financial
instruments include commercial and standby letters of credit and
unused lines of credit and involve, to varying degrees, elements
of credit risk in excess of the amount recognized in the
statements of condition. The contract or notional amounts of
these instruments express the extent of involvement the Bank has
in each class of financial instruments.
The Bank's exposure to credit loss from non-performance by
the other party to the above mentioned financial instruments is
represented by the contractual amount of those instruments. The
Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet
instruments.
Unless otherwise noted, the Bank does not require collateral
or other security to support financial instruments with
off-balance-sheet credit risk.
<TABLE>
<CAPTION>
Financial Instruments Whose Contract Contract or
Amounts Represent Credit Risk Notional Amount
at December 31, 1995
(in thousands)
<S> <C>
Commercial and standby letters of credit $ 5,993
Outstanding loan commitments $67,949
</TABLE>
<PAGE>
Commercial and standby letters of credit are conditional
commitments issued by the Bank guaranteeing performance by a
customer to a third party. Outstanding loan commitments
represent the unused portion of loan commitments available to
individuals and companies as long as there is no violation of any
condition established in the contract. Outstanding loan
commitments generally have a fixed expiration date of one year or
less, except for home equity loan commitments which generally
have an expiration date of 15 years. The Bank evaluates each
customer's credit worthiness on a case-by-case basis. The amount
of collateral obtained if deemed necessary by the Bank upon
extension of credit is based upon management's credit evaluation
of the customer. Various types of collateral may be held,
including property and marketable securities.
The credit risk involved in these financial instruments is
essentially the same as that involved in extending loan
facilities to customers.
The Bank's loans are primarily to residents of the State of
New Jersey.
NOTE 4: ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is based upon
estimates, and ultimate losses may vary from the current
estimates. These estimates are reviewed periodically and, as
adjustments become necessary, they are reported in earnings in
the periods in which they become known.
The following summarizes the activity in the allowance for
possible loan losses (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Balance, beginning of year $ 7,602 $11,252 $12,659
Provisions charged to operations 720 450 900
Loans charged-off (2,123) (5,141) (2,583)
Recoveries of charged-off loans 1,203 1,041 276
Balance, end of year $ 7,402 $ 7,602 $11,252
</TABLE>
Approximately $2,696,000 of the $5,141,000 of loans charged-
off during 1994 resulted from the sale of troubled loans.
Additionally, approximately $500,000 of the $1,041,000 of
recoveries resulted from the settlement of certain claims made
under the Company's insurance policy for reimbursement of losses
arising from alleged loan irregularities discovered in February
1991.
The allowance for loan losses for Federal income tax
purposes was $3,151,000 at December 31, 1995, $2,505,000 at
December 31, 1994, and $2,089,000 at December 31, 1993.
<PAGE>
NOTE 5: PREMISES AND EQUIPMENT
The detail of premises and equipment is as follows (in
thousands):
<TABLE>
<CAPTION>
December 31
1995 1994
<S> <C> <C>
Land $ 1,309 $ 1,139
Building 8,416 8,369
Furniture and equipment 7,153 6,645
Leasehold improvements 3,981 3,750
$20,859 $19,903
Less-Accumulated depreciation
and amortization 11,441 10,377
$ 9,418 $ 9,526
</TABLE>
NOTE 6: INCOME TAXES
The provision for income taxes (benefit) is comprised of the
following components (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Federal
Current tax expense $2,126 $1,434 $1,194
Deferred tax expense (benefit) 563 (1,051) 179
State
Current tax expense 106 164 118
Deferred tax expense 336 221 0
$3,131 $768 $1,491
</TABLE>
In accordance with SFAS 115 (See Note 1), deferred tax
expense (benefit) of $143,000 and ($436,000) has been provided
through shareholders' equity to reflect unrealized gains (losses)
on available-for-sale securities at December 31, 1995 and 1994.
<PAGE>
The following is a reconciliation of the Federal income tax
expense as reported with the statutory Federal tax on income
before income taxes (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Tax at statutory rate $2,567 $1,855 $1,204
Tax exempt interest income (38) (31) (26)
State income taxes, net of
Federal tax benefit 292 254 78
Amortization of intangibles 0 0 99
Increase of liabilities
resulting from IRS exams 0 0 106
Contributions and other 34 0 0
FASB 109 valuation allowance 0 (1,500) 0
Other, net 276 190 30
Total $3,131 $ 768 $1,491
Effective tax rate 41.5% 14.1% 42.1%
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1995 1994
<S> <C> <C>
Deferred tax assets:
Deferred fee income $ 145 244
Allowance for possible loan losses 1,708 2,048
Nonaccrual loan interest 1,040 1,383
Allowance for losses on OREO 38 38
Pension expense 383 350
Premises and equipment, principally
due to differences in depreciation 696 583
Net operating loss carryforwards 140 256
Unrealized loss-securities
available-for-sale 0 436
Other 518 689
Total gross deferred tax asset 4,668 $6,027
Valuation allowance (430) (430)
Total Net deferred tax asset $4,238 $5,597
Deferred tax liabilities:
Investment securities, principally
due to accretion of discounts $ 42 $ 36
Unrealized gain-securities
available-for-sale $ 143 $ 0
Total gross deferred tax liabilities $ 185 $ 36
Net deferred tax asset $4,053 $5,561
</TABLE>
<PAGE>
In order to fully realize the net deferred tax asset, the
Company will need to generate future taxable income. Management
believes it is more likely than not that the Company will realize
the benefit of net deductible temporary differences and that such
net deductible temporary differences will reverse during periods
in which the Company generates net taxable income. Management
has projected that the Company will generate sufficient taxable
income to utilize the net deferred tax asset. There can be no
assurance, however, that the Company will generate any earnings
or any specific level of continuing earnings.
The valuation allowance for deferred tax assets as of
December 31, 1993 was $1,930,000. The net change in the total
valuation allowance for 1994 was a decrease of $1,500,000, which
is the result of accelerated recognition of temporary differences
related to the sale of non-performing loans in 1994 and
improvement in the Bank's core earnings. The valuation allowance
for deferred tax assets as of December 31, 1995 was $430,000.
There was no change in the valuation allowance for 1995.
The Bank has a net operating loss carryforward of
approximately $2,267,000 for New Jersey state income tax purposes
at December 31, 1995, which expires between 1998 and 2001.
NOTE 7: BENEFIT PLANS
PENSION PLAN:
The Bank has a noncontributory defined benefit pension plan
which covers substantially all employees. Past service costs are
amortized over a 15-year period. Actuarial gains and losses, if
any, are amortized on a straight line basis over the average
expected future service of the active employees. The Company
makes annual contributions to the plan equal to the amount
accrued for pension expense if deductible for tax purposes.
The following table sets forth the plan's funded status and
amounts recognized in the Company's consolidated financial
statements (in thousands):
<PAGE>
<TABLE>
<CAPTION>
December 31
1995 1994
<S> <C> <C>
Actuarial present value benefit obligation -
Accumulated benefit obligations,
including vested benefits of $1,662,000
and $1,602,000 in 1995 and 1994,
respectively $1,797 $1,695
Plan assets at fair value, primarily
listed stocks, U.S. Bonds, and
commingled funds $3,387 $2,642
Projected benefit obligation for service
rendered to date 3,375 3,059
Plan assets greater (less) than projected
benefit obligation 12 (417)
Unrecognized net loss due to past experience
different from assumptions made and effects
of changes in assumptions (801) (330)
Unrecognized prior service cost 238 162
Unrecognized transition asset being amortized
over 15 years (170) (195)
Accrued pension cost included in
other liabilities $(721) $(780)
</TABLE>
Net pension cost for 1995, 1994 and 1993 included the
following components (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Service cost-benefits earned
during the year $ 387 $ 386 $ 396
Interest cost on projected
benefit obligation 250 222 222
Actual (return) loss
on plan assets (697) 124 (282)
Net deferral and amortization 448 (403) 35
Net pension cost $388 $ 329 $ 371
</TABLE>
In determining the projected benefit obligation, the
weighted average assumed discount rate was 8% for 1995, 1994 and
1993, respectively, while the rate of increase in future salary
levels was 5% for 1995, 1994 and 1993, respectively. The
expected long-term rate of return on assets used in determining
the net period pension cost was 8%.
Effective in 1995, the Bank established a non-qualified
deferred compensation plan for certain officers. All benefits
provided under this plan are unfunded. As of December 31, 1995,
approximately $87,000 was included in accrued expense for this
plan. For the year ended December 31, 1995, expense related to
this plan was $87,000.
<PAGE>
401K PLAN:
The Bank sponsors a 401k Plan which provides several tax
deferred investment opportunities to salaried employees of the
Bank who have satisfied the service requirements of the Plan.
The Plan allows eligible employees to make periodic contributions
of certain percentages of their salary, subject to the Internal
Revenue Code limits on maximum annual contributions. The Bank
matches part of these contributions. The Bank's matching
contribution expense was $65,100, $61,000, and $54,000, for 1995,
1994, and 1993, respectively.
STOCK OPTION PLANS:
The Company maintains stock option plans pursuant to which
an aggregate of 353,717 shares of common stock have been
authorized for issuance to certain key employees and to directors
of the Company and its subsidiaries upon exercise of stock
options.
Under all plans, options are granted at not less than the
fair market value of the Company's stock at the date of grant,
and options may be exercised over periods not to exceed ten years
from the date of grant.
Stock option transactions are as follows (adjusted to
reflect prior periods' stock dividends and stock splits):
<PAGE>
<TABLE>
<CAPTION>
Shares Under Option Price
Option Per Share
<S> <C> <C>
Outstanding and exercisable at
December 31, 1992 35,298 $5.77 to $12.10
Granted during 1993 125,211 $6.43 to $ 7.08
Expired unexercised in 1993 (5,087) $5.77 to $12.10
Outstanding at December 31, 1993 155,422 $5.77 to $11.01
Granted during 1994 66,325 $6.78 to $ 7.72
Expired unexercised in 1994 (5,023) $5.77 to $11.01
Outstanding at December 31, 1994 216,724 $5.77 to $11.01
Exercised in 1995 (3,248) $5.77
Expired unexercised in 1995 (1,949) $5.77 to $11.01
Granted during 1995 75,500 $7.75 to $9.50
Outstanding at December 31, 1995 287,027 $5.77 to $11.01
Exercisable at December 31, 1995 131,146 $5.77 to $11.01
NOTE 8: SHORT-TERM BORROWINGS
Details with respect to short-term borrowings are as follows (in
thousands):
</TABLE>
<TABLE>
<CAPTION>
December 31
1995 1994
<S> <C> <C>
Balance, end of year $ 782 $ 177
Maximum outstanding during the year
at any month end $21,345 $ 177
Average interest rate, end of year 5.69% 2.95%
Average outstanding during the year $ 2,808 $ 275
Average interest rate for the year 6.02% 2.18%
</TABLE>
The average amounts outstanding were computed primarily from
daily averages and the average interest rate for the year and at
the end of the year were computed by dividing the respective
interest expenses by the average balances outstanding.
The Bank has available $13,000,000 in lines of credit with
correspondent banks. At December 31, 1995, these lines of credit
were not in use.
<PAGE>
NOTE 9: COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company and the Bank
may be a party to outstanding legal proceedings and claims. In
its judgement, management does not believe that the Company's
consolidated financial position or results of operations will be
materially affected by any of these present proceedings.
Cash balances reserved to meet the requirements of the bank
regulatory authorities amounted to $9,107,000 at December 31,
1995.
The Bank has lease commitments on certain of its branches
expiring at various dates through 2006. Rental expense on these
leases charged to operations amounted to $567,000, $519,000, and
$498,000 for the years ended December 31, 1995, 1994, and 1993
respectively. The minimum annual rentals under the terms of the
leases as of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1996 $456,000
1997 421,000
1998 335,000
1999 266,000
2000 244,000
Thereafter 579,000
</TABLE>
NOTE 10: SHAREHOLDERS'S EQUITY
On November 17, 1994, the Board of Directors of the Company
declared a 5% stock dividend which was distributed December 16,
1994 to shareholders of record two weeks prior thereto.
All per share data included in the accompanying financial
statements and notes thereto, as well as the common shares
reserved for future conversion of preferred stock (and the
applicable conversion ratios) set forth below reflect the effect
of the stock dividend.
PREFERRED STOCK 1992 CLASS:
On January 29, 1993 the Company completed its Rights
Offering of 8-1/2% Cumulative Convertible Preferred Stock-1992
Class, $1.00 par value ("1992 Preferred Stock"). All 690,000
shares of the 1992 Preferred Stock were sold at a price of $10.00
per share.
Holders of the 1992 Preferred Stock are entitled to convert
their stock upon 45 days prior notification to the Company, on
the basis of 1.909 shares of common stock for each share of 1992
Preferred Stock, subject to adjustment upon certain events.
Holders of the 1992 Preferred Stock are also entitled to $10.00
per share in the event of liquidation, plus any accumulated
unpaid dividends which are due as of the date of liquidation.
The 1992 Preferred Stock is redeemable at the Company's option,
in whole or in part, at any time or from time to time, in cash at
$10.60 per share after February 1, 1996, and prior to February 1,
1997, and at decreasing prices thereafter to $10.00 per share on
and after February 1, 2002, plus in each case, accrued and unpaid
dividends.
<PAGE>
At December 31, 1995, 1,073,913 common shares have been
reserved for possible conversion of the 1992 Preferred Stock.
Holders of the 1992 Preferred Stock will be entitled to
receive, when, as and if declared by the Company's Board of
Directors, out of funds legally available therefor, cumulative
cash dividends at the rate of $0.85 per share per annum (8-1/2%).
Dividends are payable quarterly in arrears on January 15, April
15, July 15 and October 15 of each year.
PREFERRED STOCK 1985 CLASS:
On December 31, 1985, the Company issued 20,000 shares of
nonvoting, 9% Cumulative Convertible Preferred Stock-1985 Class
("1985 Preferred Stock"). Holders of 1985 Preferred Stock are
entitled to convert their stock upon six months prior
notification to the Company, on the basis of 6.4969 common shares
for each share of 1985 Preferred Stock held. Shareholders are
also entitled to $38.00 per share in the event of liquidation,
plus any accumulated unpaid dividends which are due as of the
date of liquidation. The 1985 Preferred Stock is subject to a
right of redemption by the Company commencing January 1, 1993, at
a price of $38.00 per share.
At December 31, 1995, 111,252 common shares were reserved
for possible conversion of the 1985 Preferred Stock.
Holders of the 1985 Preferred Stock will be entitled to
receive, when, as and if declared by the Company's Board of
Directors, out of funds legally available therefor, cumulative
cash dividends at the rate of $3.42 per share per annum.
Dividends are payable semi-annually on January 31 and July 31.
The Company may not declare cash dividends on its common
stock or its preferred stock-1985 class unless dividends,
including accumulated unpaid dividends for all dividend periods,
have been paid on the 1992 Preferred Stock.
See Note 14 for subsequent events related to the redemption
of the 1985 and the 1992 Preferred Stock.
NOTE 11: SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following quarterly financial information for the two years
ended December 31, 1995 and 1994, is unaudited. However, in the
opinion of management, all adjustments, which include only normal
recurring adjustments necessary to present fairly the results of
operations for the periods, are reflected.
<PAGE>
Results of operations for these three-month periods are not
necessarily indicative of the results for the entire year or any
other interim period (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1995
March June September December
<S> <C> <C> <C> <C>
Interest income $7,999 $8,400 $8,500 $8,499
Interest expense 2,142 2,612 2,690 2,638
Provision for possible
loan losses 100 120 120 380
Non-interest income 1,013 1,103 1,176 1,199
Non-interest expenses 5,031 5,085 4,690 4,730
Net income $1,008 $ 973 $1,279 $1,160
Net income per common
share:
Primary earnings per
common share $0.29 $0.28 $0.38 $0.33
Fully diluted earnings
per common share $0.24 $0.22 $0.30 $0.27
1994
March June September December
Interest income $6,915 $7,303 $7,514 $8,063
Interest expense 1,817 1,845 1,922 1,880
Provision for possible loan
losses 100 100 100 150
Non-interest income 728 944 1,087 890
Non-interest expenses 4,229 5,293 5,134 5,417
Net income $ 843 $998 $1,924 $ 924
Net income per common
share:
Primary earnings per
common share $0.24 $0.29 $ 0.61 $0.27
Fully diluted earnings
per common share $0.20 $0.24 $ 0.45 $0.21
</TABLE>
NOTE 12: FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107,
Disclosures About Fair Value of Financial Instruments ("SFAS No.
107") requires that the Company disclose estimated fair values
for its financial instruments whether or not recognized in the
Statement of Financial Condition.
<PAGE>
Limitations: The fair value estimates made at December 31,
1995 and 1994 were based on pertinent market data and relevant
information on the financial instrument at that time. These
estimates do not reflect any premium or discount that could
result from offering for sale at one time the entire portion of
the financial instruments. Because no market exists for a
portion of the financial instruments, fair value estimates may be
based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various
financial instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the
estimates.
Fair value estimates are based on existing on- and off-
balance sheet financial instruments without attempting to
estimate the value of anticipated future business and the value
of assets and liabilities that are not considered financial
instruments. In addition, the tax implications related to the
realization of the unrealized gains and losses can have a
significant effect on fair value estimates and have not been
considered in many of the estimates.
Fair value estimates, methods and assumptions are set forth
below for the Company's financial instruments (in thousands):
<TABLE>
<CAPTION>
At December 31,
1995 1994
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Financial Assets
Cash and short-term
investments $ 87,110 $ 87,110 $ 38,295 $ 38,295
Investment securities 116,212 115,894 110,933 105,332
Loans, net 259,728 261,858 259,446 256,636
Financial Liabilities
Deposits 429,681 429,995 391,466 390,974
Short-term borrowings 782 782 177 177
</TABLE>
The following methods and assumptions were used to estimate
the fair value of each class of financial instrument:
CASH AND SHORT-TERM INVESTMENTS
The carrying amount approximates fair value.
INVESTMENT SECURITIES
The fair values are based on market prices.
<PAGE>
LOANS
The fair value of the loan portfolio was estimated using the
discounted value of the future cash flows expected to be received
using a market discount rate at December 31. For loans that have
short-term maturities or that reprice to market rates the
carrying value was used as an estimate of fair value.
DEPOSIT LIABILITIES
The fair value of deposits is equal to the amount payable on
demand at the reporting dates except for the fair value of fixed
maturity certificates of deposit which were estimated by
discounting the value of the future cash flows expected to be
paid on deposits.
SHORT-TERM BORROWINGS
The carrying amount approximates fair value.
COMMITMENTS TO EXTEND CREDIT AND LETTER OF CREDIT
The fair market value of unearned fees associated with
financial instruments with off-balance sheet risk at December 31,
1995 approximates the contract amount.
NOTE 13: CONDENSED FINANCIAL INFORMATION OF BANCORPORATION
(PARENT COMPANY ONLY)
Condensed Statements of Condition (in thousands):
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Assets
Cash, principally on deposit with
subsidiary bank $ 220 $ 591
Investment in subsidiary 33,479 30,697
Other assets 975 0
Total Assets $34,674 $31,288
Liabilities and Shareholders' Equity
Other liabilities $ 429 $ 306
Shareholders' equity 34,245 30,982
Total Liabilities and Shareholders'
Equity $34,674 $31,288
</TABLE>
<PAGE>
Condensed Statements of Income for the years ended
December 31, 1995, 1994, and 1993 (in thousands):
<TABLE>
<CAPTION>
December 31,
1995 1994 1993
<S> <C> <C> <C>
Income
Equity in undistributed income
of subsidiary before cumulative
effect of a change in accounting
principle $2,782 $3,860 $2,219
Dividends received from banking
subsidiary 1,818 945 0
$4,600 $4,805 $2,219
Expenses
Salaries and related benefits $ 39 $ 39 $ 39
Other 141 77 130
$ 180 $ 116 $ 169
Net income before cumulative
effect of a change in
accounting principle $4,420 $4,689 $2,050
Cumulative effect of a change in
accounting principle 0 0 1,086
Net Income $4,420 $4,689 $3,136
</TABLE>
<PAGE>
Condensed Statements of Cash Flows for the years ended
December 31, 1995, 1994, and 1993 (in thousands):
<TABLE>
<CAPTION>
December 31,
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 4,420 $ 4,689 $ 3,136
Less-
Equity in undistributed income
of subsidiary before cumulative
effect of a change in accounting
principle (2,782) (3,860) (2,219)
Cumulative effect of a change in
accounting principle 0 0 (1,086)
Increase in other liabilities 123 73 90
Other, net (975) (56) 9
Net cash provided by (used in)
operating activities $ 786 $ 846 $ (70)
Cash flows from investing activities:
Investments in and advances to
subsidiary $ 0 $ (600) $(2,251)
Net cash used in investing
activities $ 0 $ (600) $(2,251)
Cash flows from financing activities
Proceeds from issuance of preferred
stock $ 0 $ 0 $ 5,949
Proceeds from issuance of common
stock 18 0 0
Dividends to shareholders (1,175) (1,071) (639)
Repayment of long-term debt 0 0 (1,601)
Net cash provided by (used in)
financing activities $(1,157) $(1,071) $ 3,709
Net (decrease) increase in cash and
cash equivalents (371) (825) 1,388
Cash and cash equivalents-beginning
of year 591 1,416 28
Cash and cash equivalents-end of year $ 220 $ 591 $ 1,416
Supplemental disclosures of cash flow
information
Cash paid during the year for
interest $ 0 $ 0 $ 2
</TABLE>
NOTE 14: SUBSEQUENT EVENT: REDEMPTION OF
PREFERRED STOCK
At its meeting of November 16, 1995, the Board of Directors of
the Company called for redemption all outstanding shares of the
Preferred Stock - 1985 Class (1985 Preferred Stock) and 250,000
shares of the Preferred Stock - 1992 Class (1992 Preferred
Stock). The Board of Directors set January 7, 1996 as the
redemption date for the 1985 Preferred Stock and February 2, 1996
as the redemption date for the 250,000 shares of the 1992
Preferred Stock.
<PAGE>
In lieu of redemption, holders of the 1985 Preferred Stock could
present their shares for conversion into common stock on the
basis of 6.4969 common shares for each share of 1985 Preferred
Stock at any time prior to January 7, 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 February 2, 1996.
On January 7, 1996, 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, 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 converted in lieu
of redemption, 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.
The following table presents the pro-forma 1995 primary earnings
per share, giving effect to the conversion/redemption of 1985 and
1992 Preferred Stock noted above as if such conversion/redemption
were included in primary earnings per share from the beginning of
1995:
<TABLE>
<CAPTION>
As Reported Pro-Forma <F1>
<S> <C> <C>
Net income applicable to common stock $3,840 $4,320
Average number of common shares outstanding 3,002 4,054
Primary earnings per common share $ 1.28 $ 1.07
<FN>
<F1>
Reflects only shares converted through February 2, 1996.
</TABLE>
Additionally, 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 is
April 8, 1996. In lieu of redemption, holders of the 1992
Preferred Stock can 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.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
Broad National Bancorporation:
We have audited the accompanying consolidated statements of
condition of Broad National Bancorporation and subsidiaries as of
Decemeber 31, 1995 and 1994 and the related consolidated
statements of income, changes in shareholders' equity and cash
flows for each of the years in the three-year period ended
December 31, 1995. These consolidated financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Broad National Bancorporation and
subsidiaries as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the years in
the three-year period ended December 31, 1995 in conformity with
generally accepted accounting principles.
As discussed in note 1 to the consolidated financial
statements, Broad National Bancorporation and subsidiaries
adopted the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities" in 1994 and Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" in 1993.
/s/ KPMG Peat Marwick LLP
<PAGE>
Short Hills, New Jersey
January 18, 1996, except as to note 14,
which is as of February 2, 1996
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Pursuant to General Instruction G(3) to Form 10-K, the
information required by this Item (except for the information set
forth in Item 4A of Part I hereof with respect to the
Registrant's executive officers) is incorporated herein by
reference to (i) the information under the caption "Election of
Directors" (except that the information set forth under the
following subcaptions thereunder is expressly excluded from such
incorporation: "Compensation of Directors" and "Meetings of the
Board and Committees") and (ii) the information under the caption
"Compliance with Section 16(a) of the Securities Exchange Act of
1934," in each case, in the Registrant's definitive Proxy
Statement for its 1996 Annual Meeting of Shareholders to be filed
pursuant to Regulation 14A.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
Pursuant to General Instruction G(3) to Form 10-K, the
information required by this Item is incorporated herein by
reference to the information under the caption "Executive
Compensation and Other Information" (except that the information
set forth under the following subcaptions thereunder is expressly
excluded from such incorporation: "Compensation Committee and
Board of Directors Report on Executive Compensation" and "Company
Performance") in the Registrant's definitive Proxy Statement for
its 1996 Annual Meeting of Shareholders to be filed pursuant to
Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Pursuant to General Instruction G(3) to Form 10-K, the
information required by this Item is incorporated herein by
reference to the information under the caption "Ownership of
Bancorporation Capital Stock" in the Registrant's definitive
Proxy Statement for its 1996 Annual Meeting of Shareholders to be
filed pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Pursuant to General Instruction G(2) to Form 10-K, the
information required by this Item is incorporated herein by
reference to the information under the caption "Transactions With
Management and Others" in the Registrant's definitive Proxy
Statement for its 1996 Annual Meeting of Shareholders to be filed
pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) Exhibits and Financial Statement Schedules:
1. The following consolidated financial statements of the
Registrant and subsidiaries and report of the Registrant's
independent auditors, included in the Registrant's Annual Report
to Shareholders for the year ended December 31, 1995, appear
in Item 8 to this report:
<PAGE>
Independent Auditors' Report as of December 31,
1995 and 1994 and for the years ended December 31,
1995, 1994 and 1993.
Consolidated Statements of Condition as of
December 31, 1995 and 1994.
Consolidated Statements of Income for each of the
years ended December 31, 1995, 1994 and 1993.
Consolidated Statements of Changes in
Shareholders' Equity for the years ended December 31,
1995, 1994 and 1993.
Consolidated Statements of Cash Flows for each of
the years ended December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements
2. Financial Statement Schedules: All schedules are
omitted because they are not applicable, or not required, or
because the required information is included in the financial
statements or the notes thereto.
3. Exhibits:
<TABLE>
<CAPTION>
<S> <C>
Number Description
3.1 Restated Certificate of Incorporation of the Registrant
as amended through and including December 29, 1992
(filed with Amendment No. 1 to the Registrant's
Registration Statement No. 33-53658 as Exhibit 3.1 and
incorporated herein by reference).
3.2 Amendment to Article THIRD of the Restated Certificate
of Incorporation of the Registrant respecting the
designation of the Registrant's 8 1/2% Cumulative
Convertible Preferred Stock 1992 Class (filed with
Amendment No. 3 to the Registrant's Registration
Statement No. 33-53658 as Exhibit 3.2 and incorporated
herein by reference).
3.3 Amendment to Article THIRD of the Restated Certificate
of Incorporation of the Registrant respecting the
preemptive rights of the holders of the Registrant's
Common Stock, Preferred Stock 1985 Class and Preferred
Stock 1992 Class (filed as Exhibit 3.3 to the
<PAGE>
Registrant's Form 10-K Report for the fiscal year ended
December 31, 1994 and incorporated herein by
reference).
3.4 Bylaws of the Registrant, as amended to date (filed as
Exhibit 3(d) to the Registrant's Form 10-K Report for
the fiscal year ended December 31, 1989 and
incorporated herein by reference).
10.1 Lease between The Prudential Insurance Company of
America and Broad National Bank dated as of December
15, 1988 (filed as Exhibit 3(e) to the Registrant's
Form 10-K Report for the fiscal year ended December 31,
1989 and incorporated herein by reference).
10.1.1 Amendment of Lease between The Prudential Insurance
Company of America and Broad National Bank dated as of
February 7, 1996.
10.2 Lease between Third Newark Gateway Urban Renewal
Association and Broad National Bank, dated September 7,
1984 (filed as Exhibit 10(b) to Registration Statement
No. 33-01560 and incorporated herein by reference).
10.3 Lease between O. Navigador Bar, Inc. and Broad National
Bank (filed as Exhibit 10(c) to Amendment No. 1 to
Registration Statement No. 2-78220 and incorporated
herein by reference).
10.4 Lease between Millburn Common Associates and Broad
National Bank dated June 16, 1976, and Amendment to
such Lease, dated September 10, 1985 (filed as Exhibit
10(d) to Registration Statement No. 33-01560 and
incorporated herein by reference).
10.5 Lease between Cada Holding Corp. and Broad National
Bank dated October 8, 1976 (filed as Exhibit 10(e) to
Amendment No. 1 to Registration Statement No. 2-78220
and incorporated herein by reference).
10.6 Lease between Euro Associates and Broad National Bank
acknowledged by the parties on December 12, 1985 and
December 10, 1985 (filed with Amendment No. 2 to the
Registrant's Registration Statement No. 33-53658 as
Exhibit 10.6 and incorporated herein by reference).
<PAGE>
10.7 Workletter Agreement between Euro Associates and Broad
National Bank (filed with Amendment No. 2 to the
Registrant's Registration Statement No. 33-53658 as
Exhibit 10.7 and incorporated herein by reference).
10.8 Lease between 1000 South Elmora Associates and Broad
National Bank dated May 18, 1986 (filed with Amendment
No. 2 to the Registrant's Registration Statement No.
33-53658 as Exhibit 10.8 and incorporated herein by
reference).
10.9 Lease between Convery Associates and Broad National
Bank dated July 1, 1987, and Rider to Lease Agreement,
dated September 1, 1992 (filed with Amendment No. 2 to
the Registrant's Registration Statement No. 33-53658 as
Exhibit 10.10 and incorporated herein by reference).
10.10 Lease Agreement and Amendment between 466 Bloomfield
Avenue Associates, Inc. and Broad National Bank dated
February 9, 1988 (filed as Exhibit 10(l) to the
Registrant's Form 10-K Report for the fiscal year ended
December 31, 1989 and incorporated herein by
reference).
10.11 Lease Agreement between George Zeik and Broad National
Bank dated September 1, 1989 (filed as Exhibit 10(m) to
the Registrant's Form 10-K Report for the fiscal year
ended December 31, 1989 and incorporated herein by
reference).
10.12 Lease between Broad National Realty Corporation and
Broad National Bank dated May 1, 1990 (filed as Exhibit
10(n) to the Registrant's Form 10-K for the fiscal year
ended December 31, 1990 and incorporated by reference
herein).
10.12.1 Rider to Lease Agreement between Broad National Realty
and Broad National Bank dated December 21, 1993 (filed
as Exhibit 10.13.1 to the Registrant's Form 10-K for
the fiscal year ended December 31, 1993 and
incorporated herein by reference).
10.13 Broad National Bank Employees' Retirement Plan (filed
as Exhibit 10(g) to Registration Statement No. 2-78220
and as Exhibit 10(f) to Amendment No. 1 to Registration
<PAGE>
Statement No. 2-78220 and incorporated herein by
reference). <F1>
10.14 Form of Amendment to Sections 2.1 and 3.1(c) of the
Broad National Bank Employees' Retirement Plan (filed
as Exhibit 10(p) to the Registrant's Form 10-K for the
fiscal year ended December 31, 1990 and incorporated by
reference herein). <F1>
10.15 Description of Bonus Plan for Designated Officers and
Employees (appears on page 10 of the Registrant's
definitive proxy statement for its 1991 Annual Meeting
of Shareholders and is incorporated herein by
reference). <F1>
10.16 Incentive Stock Option Plan for certain employees
adopted on March 26, 1987, and amended April 27, 1989
(filed as Exhibit 10.18 to the Registrant's Form 10-K
for the fiscal year ended December 31, 1992 and
incorporated by reference herein). <F1>
10.17 Non-Statutory Stock Option Plan for directors adopted
on March 26, 1987 (filed with Amendment No. 2 to the
Registrant's Registration Statement No. 33-53658 as
Exhibit 10.19 and incorporated herein by reference). <F1>
10.18 Employment Agreement between Donald M. Karp and the
Registrant dated October 16, 1995. <F1>
10.19 Employment Agreement by and between John A. Dorman,
Broad National Bank and the Registrant, dated October
1, 1995. <F1>
10.20 Consultant Agreement between Stanley J. Lesnik and the
Registrant dated November 16, 1995. <F1>
10.21 Lease between Broad National Bank, landlord, and
Newtrend L.P., tenant, dated August 10, 1993 (filed as
Exhibit 10.22 to the Registrant's Form 10-K for the
fiscal year ended December 31, 1993 and incorporated
herein by reference).
10.22 Newtrend Service Bureau Agreement between Newtrend,
Inc. and Broad National Bank dated August 10, 1993
(filed as Exhibit 10.23 to the Registrant's Form 10-K
<page.
for the fiscal year ended December 31, 1993 and
incorporated herein by reference).
10.23 Newtrend Item Processing Addendum between Newtrend,
Inc. and Broad National Bank dated August 10, 1993
(filed as Exhibit 10.24 to the Registrant's Form 10-K
for the fiscal year ended December 31, 1993 and
incorporated herein by reference).
10.24 1993 Broad National Incentive Stock Option Plan for
certain employees adopted on September 19, 1994 (filed
as Exhibit 10.24 to the Registrant's Form 10-K Report
for the fiscal year ended December 31, 1994 and
incorporated herein by reference). <F1>
10.25 1993 Broad National Directors Non-Statutory Stock
Option Plan for directors adopted on September 19, 1994
(filed as Exhibit 10.25 to the Registrant's Form 10-K
Report for the fiscal year ended December 31, 1994 and
incorporated herein by reference). <F1>
10.26 Lease between Lucky Realty LLC and Broad National Bank
dated February 26, 1996.
10.27 Lease between A.J. Seabra Supermarkets V, Inc. and
Broad National Bank dated as of April 20, 1995.
11 Statement re Computation of Net Income Per Share.
22 List of Subsidiaries (filed with Amendment No. 3 to the
Registrant's Registration Statement No. 33-53658 as
Exhibit 22 and incorporated herein by reference).
24 Consent of KPMG Peat Marwick LLP with regard to
Bancorporation's Registration Statement on Form S-8
(Reg. No. 33-28183).
27 Financial Data Schedule.
<FN>
<F1>
Management contracts or compensatory plans or arrangements
required to be identified by Item 14(a)(3).
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last
quarter of 1995.
(c) Exhibits
See Exhibits identified above under Item 14(a)(3).
(d) Financial Statement Schedules
See Item 14(a)(2) above.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) 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
By /s/ Donald M. Karp
Donald M. Karp
Chairman of the Board and
Chief Executive Officer
Dated: March 21, 1996
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
Signature and Title Date
/s/ Donald M. Karp March 21, 1996
Donald M. Karp, Director, Chairman
of the Board and Chief Executive
Officer (Principal Executive Officer)
/s/ John A. Dorman March 21, 1996
John A. Dorman, Director, President
and Chief Operating Officer
/s/ James Boyle March 21, 1996
James Boyle, Treasurer and Comptroller
(Principal Financial and Accounting
Officer)
/s/ Licinio Cruz March 21, 1996
Licinio Cruz, Director
/s/ Arthur Fischman March 21, 1996
Arthur Fischman, Director
/s/ John J. Iannuzzi March 21, 1996
John J. Iannuzzi, Director
March , 1996
James J. Lazarus, Director
/s/ Edward J. Lenihan March 21, 1996
Edward J. Lenihan, Director
/s/ Stanley J. Lesnik March 21, 1996
Stanley J. Lesnik, Director
/s/ Louis J. Owen March 21, 1996
Louis J. Owen, Director
/s/ Catherine McFarland March 21, 1996
Catherine McFarland, Director
/s/ A. Harold Schwartz March 21, 1996
A. Harold Schwartz, Director
/s/ Peter D. Sudler March 21, 1996
Peter D. Sudler, Director
/s/ Hubert Williams March 21, 1996
Hubert Williams, Director
Exhibit 10.1.1
<PAGE>
AMENDMENT OF LEASE
AGREEMENT, made as of February 7, 1996, between THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey
corporation, having an office at 213 Washington Street, Newark,
New Jersey 07102 (hereinafter "Landlord"), and BROAD NATIONAL
BANK, a National Banking Association, having its principal office
at 905 Broad Street, Newark, New Jersey 07102 (hereinafter
"Tenant").
W I T N E S S E T H
WHEREAS:
A. Landlord and tenant entered into a written lease dated
December 15, 1988 (hereinafter "Lease"), covering approximately
2,126 rentable square feet on the ground floor and approximately
2,966 rentable square feet in the first basement (hereinafter
"Premises") in Landlord's building known as the Plaza Building
and located at 751 Broad Street, Newark, New Jersey.
B. Landlord and Tenant desire to amend the Lease.
NOW, THEREFORE, in consideration of the following mutual
terms and conditions, the Lease is hereby amended as follows:
FIRST: Subject to the provisions of Article SECOND below,
effective March 1, 1996 and for the balance of the term of the
Lease to December 31, 1998, Article 4. RENT of the Lease is
hereby amended as follows:
(i) Under paragraph a), the amount of the minimum annual
rent shall be changed from Sixty-five Thousand Two
Hundred Sixty and 80/100 Dollars ($65,260.80) to
Twenty-Seven Thousand and 00/100 Dollars ($27,000.00)
per annum, payable in equal monthly instalments of Two
Thousand Two Hundred fifty and 00/100 Dollars
($2,250.00) per month, in advance on the 1st day of
each month, without setoff or deduction whatsoever; and
(ii) The provisions of paragraph b) covering Consumer Price
Index ("CPI") increases in minimum annual rent shall
not apply to the reduced minimum annual rent.
<PAGE>
SECOND: Tenant expressly understands and agrees that
Landlord's agreement to reduce the minimum annual rent under
Article FIRST above is subject to and conditioned upon Tenant's
continuing fulfillment of the following conditions:
(i) Broad National Bank continues to use, occupy and
operate the entire Premises "as a banking
institution", in accordance with the provisions of
Article 6 of the Lease; and
(ii) Tenant does not sublease any portion or all of the
Premises, whether or not in accordance with the
provisions of the Lease.
THIRD: Except for the provisions of this First Amendment of
Lease, all the terms, covenants and conditions contained in the
Lease shall remain in full force and effect.
IN WITNESS WHEREOF, this First Amendment of Lease has been
executed as of the day and year first above written.
Landlord: THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ William Yontz
William L. Yontz
Vice President
Tenant: BROAD NATIONAL BANK
By: /s/ John A. Dorman
John A. Dorman, for
Donald M. Karp
President
Chairman of the Board
Chief Executive Officer
Exhibit 10.18
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is made the 16th day of October, 1995 by and among
DONALD M. KARP (hereinafter referred to as "Karp") and BROAD NATIONAL
BANCORPORATION, a corporation organized under the laws of the State of New
Jersey (hereinafter, together with any successor entity, referred to as the
"Corporation").
WITNESSETH:
WHEREAS, Karp has for a number of years been employed as Chairman
and Chief Executive Officer of the Corporation and its subsidiary, Broad
National Bank, a national banking association (hereinafter, together with any
successor entity, referred to as the "Bank").
WHEREAS, the Board of Directors of the Corporation believes that
the continued leadership and productivity of Karp will be extremely beneficial
and will significantly contribute to the continued growth and financial
security of the Corporation and the Bank; and
WHEREAS, the Corporation wishes to assure itself and the Bank of
the services of Karp as an employee, officer and, if elected, director of the
Corporation and the Bank for the period provided in this Agreement, and Karp
has agreed to serve in the employ of the Corporation and the Bank in such
capacities on the terms and conditions hereinafter set forth; and
WHEREAS, the Board of Directors of the Corporation has determined
that the best interests of the Corporation would be served by providing Karp
with protection and special benefits following any change of control of the
Corporation;
NOW, THEREFORE, for and in consideration of the employment of Karp
with the Corporation, the compensation to be paid and the other benefits to be
provided to Karp by the Corporation for his services and the mutual covenants
set forth in this Agreement, the parties hereto hereby agree as follows:
1. EMPLOYMENT
1.1 The Corporation agrees to the continued employment of
Karp, and Karp agrees to continue to be employed by the Corporation and the
Bank for the period stated in Section 2.1 hereof and upon the other terms and
conditions herein provided.
<PAGE>
2. TERM, POSITION AND RESPONSIBILITIES
2.1 Term of Employment. The period of Karp's employment
under this Agreement shall be deemed to have commenced as of October 1, 1995
and shall continue for a period of sixty (60) full calendar months thereafter
and any extensions thereafter, unless this Agreement is earlier terminated in
accordance with the terms hereof (the "Employment Period"). After twenty-four
months of such term of employment and continuing each month thereafter until
Karp shall have attained the age of sixty-two (62), this Agreement shall be
deemed extended for one additional calendar month, so that at all times until
Karp attains the age of sixty-two, this Agreement shall have a minimum term of
thirty-six (36) months. Notwithstanding the foregoing, if at any time during
the Employment Period the shareholders of the Corporation vote either (I) to
approve an agreement to merge or consolidate the Corporation with or into
another corporation or (ii) to sell or otherwise dispose of all or
substantially all of its or their assets, in either case, in a transaction in
which a majority of the outstanding stock of the surviving or acquiring
corporation following such merger, consolidation or sale of assets shall not
be held by persons holding a majority of the outstanding shares of the
Corporation immediately prior to such transaction, the period of Karp's
employment shall automatically be extended without further action by the
respective parties for such number of full additional calendar months as shall
be necessary to cause the term hereof to be extended to sixty (60) calendar
months beginning with the month immediately following the month in which such
vote is taken, provided that such term shall not be extended past Karp's
sixty-fifth (65th) birthday.
2.2 Duties During Employment. During the Employment
Period, Karp shall serve as the Chairman and Chief Executive Officer of the
Corporation and the Bank and shall have the customary duties and
responsibilities of each such officer; provided, however, that if the term of
Karp's employment is extended pursuant to Section 2.1 hereof, then during that
portion of the extended term which shall be after the effective date of a
merger, consolidation or sale of assets as to which a vote of shareholders
shall have been taken, Karp's duties shall be such as shall be agreed upon by
Karp and his then employer in writing. In addition, during the Employment
Period, if elected, Karp shall also serve, without any additional compensation
or
<PAGE>
fees, as a member of the Board of Directors and as a member of the Executive
Committees of the Corporation and of the Bank.
3. COMPENSATION AND REIMBURSEMENT OF EXPENSES
3.1 Compensation - Base Salary.
A. The compensation specified under this Agreement
shall constitute the salary and benefits paid Karp for his services as
described in Section 2.2 by the Corporation and the Bank. Effective October
1, 1995, the Corporation shall pay or cause the Bank to pay Karp as
compensation an annual salary ("Base Salary") at the combined rate of not less
than two hundred thousand dollars $200,000 per year; the same salary approved
by the Board in 1994 as Karp's salary for 1995.. During the period of this
Agreement it is understood and agreed that Karp's Base Salary shall be
reviewed by the Board of Directors of the Corporation or the Bank or a
committee or committees thereof at least annually. The first such review
shall be made no later than December 31, 1995. The Board of Directors of the
Corporation or the Bank or the committee or committees thereof may, in their
sole discretion, increase the Base Salary to be paid to Karp from time to
time, to reflect Karp's performance and to maintain a compensation level
comparable to that of similarly situated executives in the financial
institutions industry, but the Base Salary may not be decreased below the Base
Salary specified above in this paragraph A without the written consent of
Karp. Karp's salary shall be payable in accordance with the customary payroll
practices of the Bank and the Corporation, respectively, but in no event less
frequently than monthly.
B. From time to time, the Boards of Directors of
the Corporation and Bank shall apportion between the Bank and the Corporation
amounts payable hereunder without affecting Karp's rights hereunder. Such
apportionment shall be made (I) on the basis of the judgment of such Boards of
Directors as to Karp's relative responsibilities and contributions with
respect to the Bank and the Corporation, and (ii) on the basis of such other
factors as such Boards of Directors may deem appropriate. Any amounts not
allocated to the Bank hereunder shall be allocated to the Corporation.
<PAGE>
3.2 Participation in Bonus Plan. Karp shall be entitled
to participate in such bonus or other incentive compensation plan(s) as
currently is or may hereafter be established by the Corporation or the Bank
for their respective executive officers during the Employment Period. Any
such bonus shall be payable in the manner specified by the appropriate Board
of Directors, or committee of such Board of Directors, at the time such bonus
is awarded.
3.3 Participation in Benefit Plans. The payments provided
for in Sections 3, 5 and 6 hereof, except where specifically provided
otherwise, are in addition to any other benefits to which Karp may be, or may
become, -entitled under any roup hospitalization, health, dental care, or
sick-leave plan, life or other insurance or death benefit plan, travel or
accident insurance, retirement income or pension plan or program of the
Corporation or Bank, or other present or future group employee benefit plan or
program of the Bank or Corporation, for which their executive officers are or
shall become eligible to receive during the Employment Period, and during any
subsequent period for which Karp shall be entitled to receive payments from
the Corporation under sections 5 and 6 to the extent permissible under the
general terms and provisions of such plans or programs and in accordance with
the provisions thereof. Karp shall contribute such amounts towards such
benefits as are required of all employees so long as he receives such
benefits. Nothing contained in this Agreement shall prevent the Board of
Directors of the Corporation or the Bank from amending or otherwise altering
any such plan, program or arrangement so long as such amendment or alteration
equitably affects all executive officers of the Bank or Corporation.
3.4 Salary Following Change-in-Control. In the event any
Change in Control of the Corporation, as defined in Section 4.1C, shall occur
and Karp shall not terminate this Agreement, Karp's Base Salary shall be
increased by an amount equal to his average bonus paid during the most recent
two full calendar years prior to such transaction. In that event, any bonus
to which Karp would thereafter otherwise be entitled may be reduced (but not
to less than zero) by the amount of the increase in Base Salary resulting from
the operation of this paragraph.
3.5 Additional Benefits. The Corporation recognizes that
it is essential to the performance by Karp of his duties and responsibilities
that the Corporation, it its cost,
<PAGE>
provide him with the use of certain facilities and that the Corporation incur
certain expenses during the Employment Period, as follows:
A. An office commensurate with his position, and a
secretary, as he requires, and the continued nonexclusive use of the offices
and facilities on the second floor of the Bank's building previously used by
Karp.
B. The exclusive use of an automobile comparable to
that now being used by Karp now or previously, which vehicle shall be no more
than two years old at any time hereunder.
C. Payment of or reimbursement to Karp, in
accordance with such policies and procedures as the respective Boards of
Directors of the Bank or the Corporation may establish from time to time, for
all reasonable travel, entertainment, country club dues and other expenses
incurred by Karp in the performance of his obligations under this Agreement;
except that country club dues shall not be paid for Karp unless there is a
change in control as defined herein or as otherwise specified by the Board.
D. Karp shall be entitled to four (4) weeks' paid
vacation per calendar year (prorated in any calendar year or in which Karp is
employed hereunder for less than such entire year).
E. Participation in the Bank's Split Dollar Life
Insurance Plan with coverage of $500,000 per a policy previously purchased.
4. TERMINATION OF EMPLOYMENT
4.1 Termination of Employment. Karp's employment under
this Agreement may be terminated by the Corporation or Karp as follows:
A. Disability. If, as a result of Karp's
incapacity due to physical or mental illness or injury, Karp shall have been
absent from his duties with the Corporation on a full time basis or he is
unable to substantially perform the services required for his employment for a
period of six (6) consecutive months, or shorter periods aggregating one
hundred eighty (180) days within any consecutive twelve (12) month period, and
within thirty (30) days after written notice of potential termination is given
by either the Bank or the Corporation he shall not have
<PAGE>
returned to the full-time performance of his duties within such notice period,
then Karp's employment under this Agreement will terminate for "Disability".
B. Death. If Karp dies while employed under this
Agreement, his employment with the Corporation under this Agreement will
terminate as of the date of his death ("Date of Death").
C. Termination by Karp. Karp shall be entitled to
terminate his employment with the Corporation (I) if the Corporation defaults
or otherwise commits a breach of a material term or condition of this
Agreement, or (ii) for "Good Reason" as defined below or (iii) upon the
occurrence of a "Change in Control" as defined below.
For purposes of this Agreement "Good Reason" shall mean any
of the following:
1. The assignment to Karp of any duties
inconsistent with, or the reduction of powers or functions associated with
Karp's position, title, duties, responsibilities and status with the
Corporation as set forth herein, or as later agreed upon by Karp and the
Corporation;
2. Any removal of Karp from, or any failure
to re-elect Karp to, any position(s) or office(s) Karp held immediately prior
to such action;
3. A reduction by the Corporation in Karp's
annual base Compensation;
4. The Corporation's transfer of Karp to
another geographic location from his present office location, except for
required travel on the Corporation's business to an extent substantially
consistent with Karp's business travel obligations immediately prior to the
date hereof,
5. The failure by the Corporation to continue
in effect any employee benefit plan, program or arrangement (including,
without limitation the Corporation's retirement plan, benefit equalization
plan, life insurance plan, health and accident plan, disability plan, deferred
compensation plan or long term stock incentive plan) in which Karp is
participating immediately prior to the date hereof (except that the
Corporation may institute or continue plans, programs or arrangements
providing Karp with substantially similar benefits); the
<PAGE>
taking of any action by the Corporation which would adversely affect Karp's
participation in or materially reduce Karp's benefits under, any of such
plans, programs or arrangements; the failure to continue, or the taking of any
action which would deprive Karp, of any material fringe benefit enjoyed by Karp
immediately prior to the date hereof;
6. Any purported termination of Karp's
employment by the Corporation during the term of this Agreement which is not
effected pursuant to all of the requirements of this Agreement; and, for
purposes of this Agreement, no such purported termination shall be effective.
For purposes of this Agreement, a "Change in Control" shall
mean and shall be deemed to have occurred, if at any time during the
Employment Period, directly or indirectly, in one or a series of transactions,
1. any person or group (as defined in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended,
(15 U.S.C. Section 78m(d) and 15 U.S.C. Section 78n(d) as in effect on the
date hereof other than the Corporation or Karp has acquired:
(a) more than twenty (20%) percent of
the outstanding common stock of the Corporation, or equivalent in voting power
of any class or classes of outstanding securities of the Corporation
ordinarily entitled to vote in elections of directors;
(b) irrevocable proxies representing
more than twenty (20%) percent of any class of voting stock of the
Corporation;
(c) any combination of voting stock and
irrevocable proxies representing more than twenty (20%) percent of any class
of voting stock of the Corporation; or
(d) the ability to control in any manner
the election of a majority of the directors of the Corporation.
2. Prior to any Change in Control, the
Karp/Lesnik family sells or otherwise disposes of fifty (50%) percent or more
of the voting securities of the Corporation owned by such family as of the
date hereof to a nonfamily member or members.
<PAGE>
3. Any merger or consolidation of the Bank or
the Corporation into or with another entity has occurred or a sale of
substantially all of the Corporation shall have occurred following which a
majority of the voting stock of the surviving or acquiring corporation shall
be held by persons other than those persons who held a majority of the voting
stock of the Corporation immediately prior thereto.
D. Termination by Corporation. notwithstanding any
other provisions of this Agreement, the Corporation shall be entitled to
terminate Karp's employment with or without "cause". For purposes of this
Agreement, "cause" shall mean (I) willful and continued failure by Karp to
perform his duties for the Corporation under this Agreement (as it may be
modified or supplemented in the event of a Change-in-Control) after at least
one warning in writing from the Corporation's Board of Directors identifying
specifically any such failure; (ii) the willful engaging by Karp in misconduct
which causes material injury to the Corporation as specified in a written
notice to Karp from the Board of Directors; or (iii) conviction of a crime,
other than a traffic violation, habitual drunkenness, drug abuse, or excessive
absenteeism other than for illness, after a warning (with respect to
drunkenness or absenteeism only) in writing from the Board of Directors to
refrain from such behavior. No act or failure to act on the part of Karp
shall be considered willful unless done, or omitted to be done, by Karp not in
good faith and without reasonable belief that the action or omission was in
the best interest of the Corporation.
4.2 Notice of Termination. Any purported termination by
the Corporation or by Karp in accordance with Section 4.1, (excluding Section
4.1B) shall be communicated by written Notice of Termination to the other
party or parties hereto in accordance with this Section 4.2. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Karp's employment under the provision so
indicated.
4.3 Date of Termination, etc. "Date of Termination" shall
mean (a) if Karp's employment is terminated for Disability, thirty (30) days
after a Notice of Termination is given (provided that he shall not have
returned to the performance of his duties on a full time basis during such
30-day period), and (b) if his employment is terminated for any other reason,
the
<PAGE>
date specified in the Notice of Termination; provided, that if within
thirty (30) days after a Notice of Termination is given the party receiving
such Notice of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the earlier of:
(I) the date upon which the dispute is finally determined by mutual agreement
of the parties or by a binding arbitration award entered in accordance with
Section 9 hereof; or, (ii) the expiration of the Employment Period then
existing under this Agreement; provided, further, that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable dispatch and diligence. Notwithstanding the pendency of any
such dispute, the Corporation will continue to pay Karp his full compensation
in effect when the notice giving rise to the dispute was given (including, but
not limited to, Base Salary) and continue him as a participant in all
compensation, benefit and insurance plans in which he was participating when
the notice giving rise to the dispute was given as though termination had not
occurred, until the dispute is finally resolved in accordance with this
Section at which time the parties shall adjust for any overpayment or
underpayment made. Amounts paid under this Section are in addition to other
amounts due under this Agreement and unless specifically provided otherwise
shall not be offset against to reduce any other amounts due under this
Agreement.
5. TERMINATION BENEFITS
5.1 Disability Termination Benefits. Upon the termination
of Karp's employment with the Corporation as a result of "Disability" pursuant
to Section 4.1A, the Corporation shall pay to Karp a monthly disability
benefit equal to one hundred (100%) percent of his Base Salary, at the rate in
effect on the "Date of Termination", for a period of one year from and after
said date; provided, however, that any amounts payable under this Section 5.1
shall be reduced by any amounts paid to Karp under any other disability
program or policy (other than Social Security) maintained by the Bank or the
Corporation. If the amount of such disability insurance payments exceed the
amount otherwise payable under this Section 5.1, Karp may retain the entire
amount of such disability insurance payments inclusive of the excess, if any.
Such payments shall be made by the Corporation to Karp, or in the event of his
subsequent death, to his
<PAGE>
beneficiary or beneficiaries, or his estate, as the case may be, in accordance
with the customary payroll practices of the Corporation.
During the period Karp is entitled to receive payments from the
Corporation under this Section 5.1, the Corporation shall maintain or cause to
be maintained life and health insurance benefits for Karp at least equivalent
to those he had at the Date of Termination with any amendments and/or
alterations subsequently made equitably to all executive officers of the Bank
and/or the Corporation. During the period Karp is entitled to receive payment
from the Corporation under this Section 5.1 he shall not be an agent of the
Corporation, and shall not be considered an "employee" of the Corporation
except as respects any requirements specifically imposed by law or as may
otherwise be required to continue any insurance benefits provided for in this
Section 5.1.
5.2 Benefits Payable Upon Death. Within thirty (30) days
after the Date of Death, the Corporation shall pay to Karp's beneficiary or
beneficiaries, or his estate, as the case may be, a lump sum benefit equal to
one full year salary from the date of death.
5.3 Benefits Pavable Upon Termination by Karp. In the
event that Karp terminates his employment with the Corporation under Section
4.1C of this Agreement, the Corporation shall pay to Karp within thirty (30)
days of such termination as severance a lump sum equal to 2.99 times the
highest annual cash compensation, consisting solely of salary and bonus, paid
to Karp during any calendar year in each of the three calendar years
immediately prior to the Change-in-Control. The Corporation also shall
continue to provide Karp during the remainder of the Contract Period with
health, hospitalization and medical insurance, as were provided at the time of
the termination of his employment with the Corporation, at the Corporation's
cost; provided, however, if Karp enters into a new employment agreement with
the Corporation or such entity as survives the Change of Control, and at an
equal or greater rate of compensation and benefits to that which is provided
to Karp by the Corporation hereunder, or, if such surviving entity shall
assume the Corporation's obligations under this Agreement, which assumption
shall include but not be limited to obligations as to future Changes in
Control, with duties as agreed upon between Karp and such successor entity,
then, in either such event, the Corporation shall
<PAGE>
have no obligation to provide, and Karp shall not be entitled to receive, any
of the foregoing benefits or the benefits provided under Section 6 hereof.
5.4 Termination by the Corporation for Cause. If Karp's
employment under this Agreement is terminated by the Corporation for "cause"
(as defined in Section 4.1D), or if Karp voluntarily resigns his employment
other than pursuant to Section 4.1C, the Corporation shall pay to Karp his
Base Salary as then in effect that has accrued to the Date of Termination.
Unless otherwise determined by the Board of Director of the Corporation, Karp
shall have no right to receive compensation or other benefits under this
Agreement after such a termination for "cause" or following a voluntary
resignation except as otherwise provided in this Agreement.
5.5 Termination by the Corporation for Other than Cause.
If during the Employment Period the Bank or the Corporation or both of them
terminate Karp's employment other than for "cause" (as defined in Section
4.1D) or other than for the reasons specified in Sections 1.3, 1.4, 1.5 and
1.6 of this Agreement, then in such event the Corporations shall, within
thirty (30) days following such termination, pay Karp, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance a lump sum equal to the aggregate amount of the future
Base Salary and bonus payments Karp would have received if he continued in the
employ of the Corporation for the remainder of the then existing Employment
Period of this Agreement at the highest rate of Base Salary and bonus paid to
Karp at any time under this Agreement or within two years prior to the date
hereof. Karp shall not be required to mitigate damages by seeking other
employment and payments required to be made hereunder shall not be reduced by
any other income which Karp may receive or by any set-offs or claims which may
exist against Karp for any reason whatsoever.
5.6 Certain Reduction of Payments by the Corporation.
A. Anything in this Agreement to the contrary
notwithstanding, prior to the payment of any lump sum amount payable
hereunder, the certified public accountants of the Corporation immediately
prior to a Change of Control (the "Certified Public Accountants) shall
determine as promptly as practical and in any event within 20 business days
following the termination of employment of Karp whether any payment or
distribution by the Corporation to or
<PAGE>
for the benefit of Karp (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) (a
"Payment") would more likely than not be nondeductible by the Corporation for
Federal income purposes because of Section 28OG of the Internal Revenue Code
of 1986, as amended (the "Code"), and if it is then the aggregate present
value of amounts payable or distributable to or for the benefit of Karp
pursuant to this Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as "Agreement Payments") shall be reduced
(but not below zero) to the reduced Amount. For purposes of this paragraph,
the "Reduced Amount" shall be an amount expressed in present value which
maximizes the aggregate present value of Agreement Payments without causing any
Payment to be nondeductible by the Corporation because of said Section 280G of
the Code.
B. If under paragraph A. of this section the
Certified Public Accountants determine that any Payment would more likely than
not be nondeductible by the Corporation because of Section 280G of the Code,
the Corporation shall promptly give Karp notice to that effect and a copy of
the detailed calculation thereof and of the Reduced Amount, and Karp may then
elect, in his sole discretion, which and how much of the Agreement Payments
shall be eliminated or reduced (as long as after such election the aggregate
present value of the Agreement Payments equals the Reduced Amount), and shall
advise the Corporation in writing of his election within 20 business days of
his receipt of notice. If no such election is made by Karp within such 20-day
period, the Corporation may elect which and how much of the Agreement Payments
shall be eliminated or reduced (as long as after such election the aggregate
present Value of the Agreement Payments equals the Reduced Amount) and shall
notify Karp promptly of such election. For purposes of this paragraph,
present Value shall be determined in accordance with Section 280G(d)(4) of the
Code. All determinations made by the Certified Public Accountants shall be
binding upon the Corporation and Karp shall be made within 20 business days of
a termination of employment of Karp. With the consent of Karp, the
Corporation may suspend part or all of the lump sum payment due Karp hereunder
until the Certified Public Accountants finish the determination and Karp (or
the Corporation, as the case may be) elect how to reduce the Agreement
Payments, if necessary. As promptly as practicable following such
determination and the elections hereunder, the Corporation shall pay to or
distribute to or for the
<PAGE>
benefit of Karp, such amounts as are then due to Karp under this Agreement and
shall promptly pay to or distribute for the benefit of Karp in the future such
amounts as become due to Karp under this Agreement. It is hereby stipulated
that a reasonable and practicable time for payment to Karp shall be no later
than 10 days after a written request for payment is made by Karp.
C. As a result of the uncertainty in the application of
Section 280G of the Code, it is possible that Agreement Payments may have been
made by the Corporation which should not have been made ("Overpayment") or that
additional Agreement Payments which will have not been made by the Corporation
could have been made ("Underpayment"), in each case, consistent with the
calculation of the Reduced Amount hereunder. In the event that the Certified
Public Accountants, based upon the assertion of a deficiency by the Internal
Revenue Service against the Corporation or Karp which said Certified Public
Accountants believe has a high probability of success, determines that an
Overpayment has been made, any such Overpayment shall be treated for all
purposes as a loan to Karp which Karp shall repay to the Corporation together
with interest at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code; provided, however, that no amount shall be payable
by Karp to the Corporation in and for the extent such payment would not reduce
the amount which is subject to taxation under Section 4999 of the Code. In
the event that the Certified Public Accountants, based upon controlling
precedent, determine that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Corporation to or for the benefit
of Karp together with interest at the applicable Federal rate provided for in
Section 7872(f)(2)(A) of the Code.
6. OTHER TERMINATION BENEFITS
6.1 Insurance. If Karp's employment with the Corporation
shall be terminated either by Karp pursuant to the provisions of Section 4.1C
or by the Corporation without "cause"', the Corporation will continue or cause
to be continued the life and health insurance coverage substantially identical
to the coverage maintained by the Corporation for Karp prior to his severance.
Karp shall contribute such amounts toward such benefits as are required of all
employees of the Corporation so long as he receives such benefits.
<PAGE>
6.2 Special Retirement Benefits. If Karp's employment
with the Corporation shall be terminated either by Karp pursuant to the
provisions of Section 4.1C or by the Corporation or either of them without
"cause", Karp shall be entitled to receive "Special Retirement Benefits" from
the Corporation so that the total retirement benefits Karp receives from the
Corporation will approximate the total retirement benefits Karp would have
received under all qualified retirement plans (which shall not include
severance plans) of the Corporation in which Karp participates were Karp fully
vested under such qualified retirement plans as if Karp had continued in the
employ of the Corporation for the remaining term of this Agreement or until
his retirement. The benefits specified in this Section 6.2 will include all
ancillary benefits, such as early retirement and survivor rights and benefits
available at retirement. The amount payable to Karp or his beneficiary(s)
under this Section 6.2 shall equal the excess of (1) the benefits that would
be paid to Karp or his beneficiaries, under all retirement plans of the
Corporation in which Karp participates if Karp were fully vested under such
plans over (2) the benefits that are payable to Karp or his beneficiaries
under all retirement plans of the Corporation in which Karp participates.
These Special Retirement Benefits are provided on an unfunded basis, are not
intended to meet the qualification requirements of Section 401 of the Internal
Revenue Code and shall be payable solely from the general assets of the
Corporation. These Special Retirement Benefits shall be payable at all times
and in the manner provided in the applicable retirement plans to which they
relate.
6.3 Split Dollar Insurance. If Karp's employment with the
Corporation shall be terminated by him pursuant to Section 4.1C or by the
Corporation, or if the Corporation shall terminate Karp's employment otherwise
than for cause, the Corporation shall continue to pay the premium for and
maintain the Broad National Bank Split Dollar Life Insurance or comparable
plan for and on behalf of Karp with coverage of $500,000 until such time as
said policy is fully paid.
6.4 Use of Vehicle. If Karp shall terminate his
employment with the Corporation pursuant to Section 4.1C or if the Corporation
shall terminate his employment otherwise than for cause, the Corporation shall
at its option provide Karp with the use of the late model car specified in
Section 3.4B for a period of twenty-four (24) months following the Date of
<PAGE>
Termination or the reasonable value corresponding to such usage; provided,
however, that notwithstanding the foregoing Karp may in lieu thereof elect to
purchase said vehicle at its then present value by providing the Corporation
with written notice of such election.
6.5 Payments Upon Termination. Termination of this
Agreement on any grounds whatsoever will not affect the obligations of the
parties to make payment of any sums that have accrued or remain unpaid at
effective date of such termination.
7. FEDERAL INCOME TAX WITHHOLDING
The Corporation may withhold from any benefits payable under
this Agreement all federal, state, city or other taxes as shall be required
pursuant to any law or governmental regulation or ruling.
8. ARBITRATION
In the event that any claim, controversy, issue or other
dispute arises under this Agreement, the breach thereof, the termination of
Karp's employment by the Corporation under Section 4 of this Agreement,
including, any claim based in whole or in part on federal or state
constitutions, statutes or regulations, local ordinances, the common law or
public policy, including, but not limited to Title VII of the Civil Rights Act
of 1964, the Age Discrimination in Employment Act of 1967, the Employee
Retirement Income Security Act of 1974, Americans with Disabilities Act, the
Worker Adjustment and Retraining Notification Act, the Employee Polygraph
Protection Act of 1988, the Occupational Safety and Health Act, the Fair Labor
Standards Act, the Civil Rights Act of 1971, the Rehabilitation Act of 1973
and the Vietnam Era Veterans Readjustment Assistance Act of 1974, or the
amount of any payments under Sections 5 or 6, if the claim, controversy, issue
or dispute is not settled by agreement among the parties, the dispute shall be
settled by a panel of three (3) arbitrators in the State of New Jersey, the
arbitrators to be chosen by The American Arbitration Association, under the
auspices of, and in accordance with the applicable rules of, the American
Arbitration Association then in effect, and the decision of the three
arbitrators shall be final and conclusive on the parties and judgment upon
such decision may be entered in any court having jurisdiction thereof. The
award of the arbitrators shall be in writing and shall specify the factual and
legal basis for the award. Karp shall be entitled to reimbursement by the
Corporation for all reasonable, legal and other professional
<PAGE>
fees and expenses incurred by him in such arbitration or in enforcing the
award, including the reasonable attorneys' fees. The parties agree that
resolution of any such claim, controversy, issue or other dispute pursuant to
the foregoing arbitration proceeding is intended to be final and binding on
them and any award rendered by such arbitrator shall constitute a complete,
final and binding adjudication of any and all legal or factual issues
pertaining to or arising out of the matter that gave rise to the controversy
or dispute. The provisions of this Article 8 shall survive the termination of
this Agreement for any reason whatsoever.
9. ENTIRE AGREEMENT
This writing shall constitute the entire Agreement of the
parties as to the employment and compensation of Karp by the Corporation, and
shall supersede any and all prior agreements and understandings, whether they
be oral or in writing.
10. SEVERABILITY
If, for any reason, any provision of this Agreement is held
invalid, such invalidity shall not effect any other provision of this
Agreement not held so invalid, and each such other provision shall to the full
extent consistent with law continue in full force and effect. If any
provision of this Agreement shall be held invalid in part, such invalidity
shall in no way affect the rest of such provision not held so invalid and the
rest of such provision together with all provisions of this Agreement shall to
the full extent consistent with law continue in full force and effect.
11. AMENDMENT OF AGREEMENT
This Agreement may not be modified or amended except by
instrument in writing signed by the parties hereto.
12. WAIVER
No term or condition of this Agreement shall be deemed to
have been waived, or shall there be any estoppel against the enforcement of
any provision of this Agreement, except by a written instrument executed by
the party charged with such waiver or estoppel. No such written waiver shall
be deemed a continuing waiver unless specifically stated therein, and each
waiver shall operate as to the specific term or condition waived and shall not
constitute a
<PAGE>
waiver of such term or condition for the future nor as to any act other than
that specifically waived.
13. HEADINGS
Headings used in this Agreement are for convenience only and
shall not affect the construction of this Agreement.
14. BINDING EFFECT AND GOVERNING LAW
All of the terms and provisions of this Agreement shall be
binding upon, shall inure to the benefit of, and be enforceable by and against
Karp and his executors, administrators and heirs and the Corporation and their
respective permitted successors and assigns. This Agreement has been executed
and delivered in the State of New Jersey and its validity, interpretation,
performance and enforcement shall be governed by the laws of said State.
15. NO ATTACHMENT
Except as required by law, no right to receive payments
under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or
to execution, attachment, levy or similar process or assignment by operation
of law, and any attempt to voluntary or involuntary, to affect any such action
shall be null, void and of no effect.
16. NONASSIGNABILITY
Neither this Agreement nor any right or interest hereunder
shall be assignable by Karp, his beneficiaries or legal representatives
without the Corporation's prior written consent; provided, however, that
nothing in this Section 19 shall preclude (a) Karp from designating a
beneficiary to receive any benefit payable hereunder upon his death, or (b)
the executors, administrators or other legal representatives of Karp or his
estate from assigning any rights hereunder to the person or persons entitled
thereto.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Agreement
to be executed and their respective seals to be affixed hereunto by their
duly authorized officers, and Karp, has signed this Agreement, all as of
the date first written above.
ATTEST: BROAD NATIONAL BANCORPORATION
/s/ James Boyle By /s/ John A. Dorman
Secretary
WITNESS:
/s/ Margaret R. Nurnberger /s/ Donald M. Karp
DONALD M. KARP
BROAD NATIONAL BANK, a national banking association organized under
the laws of the United States of America, hereby acknowledges and agrees to be
bound to the extent applicable by the terms of the Employment Agreement dated
October 16, 1995 between DONALD M. KARP and BROAD NATIONAL BANCORPORATION and
guarantees payment and performance of the terms of said agreement to the
extent permitted by the laws of New Jersey and the laws of the United States
of America.
ATTEST: BROAD NATIONAL BANK
/s/ James Boyle By /s/ John A. Dorman
Secretary John A. Dorman
President & COO
WITNESS:
/s/ Margaret R. Nurnberger Dated: 10/16/95
Exhibit 10.19
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is made the lst day of October, 1995, by and among JOHN A
DORMAN, who currently resides at 44 Fairmount Road, Ridgewood, New Jersey
07450 (hereinafter referred to as "Dorman"), BROAD NATIONAL BANK, a national
banking association organized under Acts of Congress, with its principal
office located at 905 Broad Street in the City of Newark, County of Essex and
State of New Jersey (hereinafter referred to as the "Bank"), and BROAD
NATIONAL BANCORPORATION, the holding company for the Bank, a corporation
organized under the laws of the State of New Jersey, with its principal office
located at 905 Broad Street in the City of Newark, County of Essex and State
of New Jersey (hereinafter referred to as the "Bancorp"). The Bank and
Bancorp are sometimes referred to herein collectively as the "Corporations".
In any instance where reference is made to both the Bank and Bancorp or the
Corporations, unless the context clearly requires otherwise, conditions,
practices or actions referred to shall be identical or joint.
W I T N E S S E T H:
WHEREAS, Dorman has since April 9, 1992 been employed as President and
Chief Operating Officer of the Bank and of Bancorp; and
WHEREAS, the Boards of Directors of the Corporations believe that the
continued leadership and productivity of Dorman will be extremely beneficial
and will significantly contribute to the growth and financial security of the
corporations; and
WHEREAS, the Corporations wish to assure themselves of the services of
Dorman as a employee, officer and, if elected, director of the Corporations
for the period provided in this
<PAGE>
Agreement, and Dorman had agreed to serve in the employ of the Corporations on
a full-time basis in such capacities on the terms and conditions hereinafter
set forth; and
WHEREAS, the Boards of Directors of the Corporation have determined that
the best interests of the Corporations would be served by providing Dorman
with protection and special benefits following any change of control of the
Corporations;
NOW, THEREFORE, for and in consideration of the employment of Dorman
with the Corporations, the compensation to be paid and the other benefits to
be provided to Dorman by the Corporations for his services and the mutual
covenants set forth in the Agreement, the parties hereto hereby agree as
follows:
1. EMPLOYMENT
1.1 The Corporation agrees to the continued employment of Dorman, and
Dorman agrees to continue to be employed by the Corporations for the period
stated in Section 2.1 hereof and upon the other terms and conditions herein
provided.
1.2 If Dorman is suspended from office and/or temporarily prohibited
from participating in the conduct of the affairs of the Bank or Bancorp, or
both of them, by a notice served under section 1818(e)(3) or section
1818(g)(1) of the Federal Deposit Insurance Act(12 U.S.C. 1818(e)(3), or
1818(g)(1), all obligations of the Corporations under this Agreement shall be
suspended as of the date of service of the notice, unless stayed by
appropriate proceedings. If the charges specified in the notice are
dismissed, Dorman shall be reinstated in his employment with the Corporations
and the Corporations may in their discretion (i) pay Dorman all or part of the
compensation withheld while their obligations under this Agreement were
suspended, and/or (ii) reinstate (in whole or in part) any of their
obligations which were suspended.
<PAGE>
1.3 If Dorman is removed and/or permanently prohibited from
participating in the conduct of the affairs of the Bank or Bancorp, or both of
them, by an order issued under section 8(e)(4) or section (g)(1) of the
Federal Deposit Insurance Act (12 U.S.C. 1818(e)(4) or 1818(g)(1), all
obligations of the Corporations under this Agreement shall terminate as of the
effective date of the order, and Dorman shall not have the right to receive
compensation or any of the other benefits provided for hereunder, unless and
then only to the extent required by law, for any period after such removal or
prohibition.
1.4 If the Bank is in default (as defined in section 1813(x)(1) of the
Federal Deposit Insurance Act, 12 U.S.C. 1813(x)(1), all obligations of
Corporations under this Agreement shall terminate as of the date of default,
but this section shall not affect any vested rights of the parties.
1.5 All obligations of the Corporation under this Agreement shell be
terminated, except to the extent it is determined that continuation of this
Agreement is necessary for the continued operation of the Bank, (i) by the
Federal Deposit Insurance Corporation ("FDIC"), at any time the FDIC enters
into an agreement to provide assistance to or on behalf of the3 Bank under the
authority of section 1823(c) of the Federal Deposit Insurance Act (12 U.S.C.
1823(C)), or (ii) by the FDIC at any time the FDIC approves a supervisory
merger to resolve problems related to the operation of the Bank or when the
Bank is determined by FDIC to be in an unsafe or unsound condition, but, in
any of the above-described events, the vested rights of Dorman shall not be
affected.
1.6 In the event of receipt of any notice or order, a default, an
agreement to provide assistance, or an approval of the supervisory merger as
such are described in Sections 1.2, 1.3, 1.4 or 1.5 hereof, the suspension or
termination of the obligations of the Corporations hereunder shall
<PAGE>
be automatic and shall not be conditioned upon any further action by the
Corporations or delivery of notice to Dorman and shall be deemed a suspension
or termination of employment jointly and severally by the Bank, Bancorp and
the regulatory body providing or delivering such document; provided, however,
that such suspension or termination shall not prejudice Dorman's vested rights
under this Agreement.
2. TERMS, POSITION AND RESPONSIBILITIES
2.1 Term of Employment. The period of Dorman's employment under this
Agreement with the Bank and with Bancorp, respectively, shall commence as of
October 1, 1995 and shall continue for a period of fifteen (15) full calendar
months thereafter and any extension thereafter, unless this Agreement is
earlier terminated in accordance with the terms hereof (the "Employment
Period"). Notwithstanding the foregoing, if at any time during the Employment
Period the shareholders of Bancorp vote either (i) to approve an agreement to
merge or consolidate Bancorp or the Bank with or into another corporation or
(ii) to sell or otherwise dispose of all or substantially all of its or their
assets, in either case, in a transaction in which a majority of the
outstanding stock of the surviving or acquiring corporation following such
merger, consolidation or sale of assets shall not be held by persons who held
a majority of the outstanding shares of Bancorp immediately prior to such
transaction the period of Dorman's employment shall automatically be extended
without further action by the respective parties for an additional twenty-four
(24) calendar months. In such event, the Employment Period of this Agreement
shall for all purposes hereunder be deemed to include the foregoing
twenty-four (24) calendar month extension.
<PAGE>
2.2 Duties During Employment. During the Employment Period, Dorman
shall serve as the President and Chief Operating Officer of Broad National
Bank and of Broad National Bancorporation, and shall have the customary duties
and responsibilities of each such office. The employment of Dorman in such
foregoing capacities is a material condition of this Agreement for purposes of
Section 4.1C. In addition, during the Employment Period, if elected, Dorman
shall also serve, without any additional compensation or fees, as a member of
the Boards of Directors and as a member of the Executive Committees of the
Corporations.
3. COMPENSATION AND REIMBURSEMENT OF EXPENSES
3.1 Compensation - Base Salary.
A. The compensation specified under this Agreement shall
constitute the salary and benefits paid Dorman for his services as described
in Section 2.2 by the Bank and Bancorp. The Corporations shall pay Dorman as
compensation an annual salary ("Base Salary") at the combined rate of the One
Hundred Fifty Seven Thousand Five Hundred Dollars ($157,500) for the remainder
of the calendar year 1995. During the period of this Agreement it is
understood and agreed that Dorman's Base Salary shall be reviewed by the Board
of Directors of the Corporation or the Bank or a committee or committees
thereof at least annually. The first such review shall be made no later than
December 31, 1995. The Board of Directors of the Corporation or the Bank or
the committee or committees thereof may, in their sole discretion, increase
the Base Salary to be paid to Dorman from time to time, to reflect Dorman's
performance and to maintain a compensation level comparable to that of
similarly situated executives in the financial institutions industry, but the
Base Salary may not be decreased below the Base Salary specified above in this
paragraph A without the written consent of Dorman.
<PAGE>
B. From time to time, the Boards of Directors of the
Corporations shall apportion between the Bank and Bancorp the amounts payable
hereunder without affecting Dorman's rights hereunder. Such apportionment
shall be made (i) on the basis of the judgment of such Boards of Directors as
to Dorman's relative responsibilities and contributions with respect to the
Bank and Bancorp, and (ii) on the basis of such other factors as such Boards
of Directors may deem appropriate.
3.2 Participation in Bonus Plan. Dorman shall be entitled to
participate in such bonus or other incentive compensation plan(s) as currently
is or may hereafter be established by the Corporations for their respective
executive officers during the Employment Period. Any such bonus shall be
payable in the manner specified by the appropriate Board of Directors, or
committee of such Board of Directors, at the time such bonus is awarded.
3.3 Participation in Benefit Plans. The payments provided for in
Section 3, 5 and 6 hereof, except where specifically provided otherwise, are
in addition to any other benefits to which Dorman may be, or may become,
entitled under any group hospitalization, health, dental care, or sick-leave
plan, life or other insurance or death benefit plan, travel or accident
insurance, retirement income or pension plan or program of the Corporations,
or other present or future group employee benefit plan or program of the Bank
or Bancorp, for which their executive officers are or shall become eligible to
receive during the Employment Period, and during any subsequent period for
which Dorman shall be entitled to receive payments from the Corporations under
sections 5 and 6 to the extent permissible under the general terms and
provisions of such plans or programs and in accordance with the provisions
thereof. Dorman shall contribute such amounts towards such benefits as are
required of all employees so long as he receives such
<PAGE>
benefits. Nothing contained in this Agreement shall prevent the Boards of
Directors of the Corporations from amending or otherwise altering any such
plan, program or arrangement so long as such amendment or alteration equitably
affects all executive officers of the Bank or Bancorp.
3.4 Additional Benefits. The Corporations recognize that it is
essential to the performance by Dorman of his duties and responsibilities that
the Corporations, at their cost, provide him with the use of certain
facilities and that the Corporations incur certain expenses during the
Employment Period, as follows:
A. An office commensurate with his position, and a secretary,
as he requires.
B. The nonexclusive use of a late model Buick or Oldsmobile or
comparable car which shall be used by other personnel of the Corporations when
not used by Dorman.
C. Payment of or reimbursement to Dorman, in accordance with
such policies and procedures as the respective Boards of Directors of the Bank
or the Corporation may establish from time to time, for all reasonable travel,
entertainment, country club dues and other expenses incurred by Dorman in the
performance of his obligations under this Agreement; except that country club
dues shall not be paid for Dorman unless there is a change in control as
defined herein or as otherwise specified by the Board.
D. Dorman shall be entitled to four (4) weeks paid vacation per
calendar year, or such longer period as the Corporations may from time to time
determine (prorated in any calendar year in such longer period during which
Dorman is employed hereunder for less than such entire year or longer period).
E. Participation in the Bank's Split Dollar Life Insurance Plan
with coverage of $500,000.
<PAGE>
4. TERMINATION OF EMPLOYMENT
4.1 Termination of employment. Dorman's employment under this
Agreement may be terminated by the Corporation or Dorman as follows:
A. Disability. If, as a result of Dorman's incapacity due to
physical or mental illness or injury, Dorman shall have been absent from his
duties with the Corporation(s) on a full time basis or he is unable to
substantially perform the services required for his employment for a period of
six (6) consecutive months, or shorter periods aggregating one hundred eighty
(180) days within any consecutive twelve (12) month period, and within thirty
(30) days after written notice of potential termination is given by either the
Bank or Bancorp he shall not have returned to the full-time performance of his
duties within such notice period, then Dorman's employment under this
Agreement will terminate for "Disability".
B. Death. If Dorman dies while employed under this Agreement,
his employment with the Corporations under this Agreement will terminate as of
the date of his death ("Date of Death").
C. Termination By Dorman. Dorman shall be entitled to
terminate his employment with the Corporation (i) if the Corporation defaults
or otherwise commits a breach of a material term or condition of this
Agreement, or (ii) for "Good Reason" as defined below or (iii) upon the
occurrence of a "Change of Control".
For purposes of this Agreement "Good Reason" shall mean any
of the following:
1. The assignment to Dorman of any duties inconsistent
with, or the reduction of powers or functions associated with Dorman's
position, title, duties, responsibilities
<PAGE>
and status with the Corporation as set forth herein, or as later agreed upon by
Dorman and the Corporation;
2. Any removal of Dorman from, or any failure to re-elect
Dorman to, any position(s) or office(s) Dorman held immediately prior to such
action;
3. A reduction by the Corporation in Dorman's annual base
Compensation;
4. The Corporation's transfer of Dorman to another
geographic location from his present office location, except for required
travel on the Corporation's business to an extent substantially consistent
with Dorman's business travel obligations immediately prior to the date
hereof;
5. The failure by the Corporation to continue in effect
any employee benefit plan, program or arrangement (including, without
limitation the Corporation's retirement plan, benefit equalization plan, life
insurance plan, health and accident plan, disability plan, deferred
compensation plan or long term stock incentive plan) in which Dorman is
participating immediately prior to the date hereof (except that the
Corporation may institute or continue plans, programs or arrangements
providing Dorman with substantially similar benefits); the taking of any
action by the Corporation which would adversely affect Dorman's participation
in or materially reduce Dorman's benefits under, any of such plans, programs
or arrangements; the failure to continue, or the taking of any action which
would deprive Dorman, of any material fringe benefit enjoyed by Dorman
immediately prior to the date hereof;
6. Any purported termination of Dorman's employment by
the Corporation during the term of this Agreement which is not effected
pursuant to all of the
<PAGE>
requirements of this Agreement; and, for purposes of this Agreement, no such
purported termination shall be effective.
For purposes of this Agreement, a "Change in Control" shall
mean and shall be deemed to have occurred, if at any time during the
Employment Period, directly or indirectly, in one or a series of transactions.
1. any person or group (as defined in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended, (15 U.S.C. 78m(d)
and 15 U.S.C. 78(d)) or under the rules or regulations of the Federal Home
Loan Bank Board or of the Federal Deposit Insurance Corporations) as in effect
on the date hereof other than Bancorp or Donald Karp has acquired:
a) more than twenty (20%) percent of the
outstanding common stock of the Bank or Bancorp, or equivalent in voting power
of any class or classes of outstanding securities of the Bank or Bancorp
ordinarily entitled to vote in elections of directors;
b) irrevocable proxies representing more than
twenty (20%) percent of any class of voting stock of the Bank or Bancorp;
c) any combination of voting stock and irrevocable
proxies representing more than twenty (20%) percent of any class of voting
stock of the Bank or Bancorp.
d) the ability to control in any manner the
election of a majority of the directors of the Bank or Bancorp;
<PAGE>
2. The Karp/Lesnik family sells or otherwise disposes of
fifty (50%) percent or more of the voting securities of the Bank or Bancorp
owned by such family as of the date Dorman first became employed by the
Corporations to a nonfamily member or members.
3. Any merger or consolidation of the Bank or Bancorp
into or with another entity has occurred and the holders of a majority of the
voting stock of the surviving entity shall not have been shareholders of
Bancorp immediately prior to such transaction; or
4. Any transfer or sale of all or substantially all of
the assets of the Bank or Bancorp has occurred.
D. Termination by Corporations. Notwithstanding any other
provisions of this Agreement, the Corporation shall be entitled to terminate
Dorman's employment with or without "cause". For purposes of this Agreement,
"cause" shall mean (i) willful and continued failure by Dorman to perform his
duties for the Corporation under this Agreement (as it may be modified or
supplemented in the event of a Change-in-Control) after at least one warning
in writing from the Corporation's Board of Directors identifying specifically
any such failure; (ii) the willful engaging by Dorman in misconduct which
causes material injury to the Corporation as specified in a written notice to
Dorman from the Board of Directors; or (iii) conviction of a crime, other than
a traffic violation, habitual drunkenness, drug abuse, or excessive
absenteeism other than for illness, after a warning (with respect to
drunkenness or absenteeism only) in writing from the Board of Directors to
refrain from such behavior. No act or failure to act on the part of Dorman
shall be considered willful unless done, or omitted to be done, by Dorman not
in good faith and without reasonable belief that the action or omission was in
the best interest of the Corporation.
<PAGE>
4.2 Notice of Termination. Any purported termination by the
Corporations or by Dorman in accordance with Section 4.1, (excluding Section
4.1B) shall be communicated by written Notice of Termination to the other
party or parties hereto in accordance with this Section 4.2. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Dorman's employment under the provision so
indicated.
4.3 Date of Termination, etc. "Date of Termination" shall mean
(a) if Dorman's employment is terminated for Disability, thirty (30) days
after a Notice of Termination is given (provided that he shall not have
returned to the performance of his duties on a full time basis during such
30-day period), and (b) if his employment is terminated for any other reason,
the date specified in the Notice of Termination; provided that if within
thirty (30) days after a Notice of Termination is given the party receiving
such Notice of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the earlier of:
(I) the date upon which the dispute is finally determined by mutual agreement
of the parties or by a binding arbitration award entered in accordance with
Section 9 hereof; or, (ii) the expiration of the Employment Period then
existing under this Agreement; provided, further, that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable dispatch and diligence. Notwithstanding the pendency of such
dispute, the Corporations will continue to pay Dorman his full compensation in
effect when the notice giving rise to dispute was given (including, but not
limited to, base salary) and continue him as a participant in all
compensation,
<PAGE>
benefit and insurance plans in which he was participating when
the notice giving rise to the dispute was given as though termination had not
occurred, until the dispute is finally resolved in accordance with this
Section at which time the parties shall adjust for any overpayment or
underpayment made. Amounts paid under this Section are in addition to the
other amounts due under this Agreement and unless specifically provided
otherwise shall not be offset against to reduce any other amounts due under
this Agreement.
5. TERMINATION BENEFITS
5.1 Disability Termination Benefits. Upon the termination of Dorman's
employment with the Corporations as a result of "Disability" pursuant to
Section 4.1A, the Corporations shall pay to Dorman a monthly disability
benefit equal to one hundred (100%) percent of his Base Salary, at the rate in
effect on the "Date of Termination", for a period of one year from and after
said date; provided, however, that any amounts payable under this Section 5.1
shall be reduced by any amounts paid to Dorman under any other disability
program or policy (other than Social Security) maintained by the Bank or
Bancorp. If the amount of such disability insurance payments exceed the
amount otherwise payable under this Section 5.1, Dorman may retain the entire
amount of such disability insurance payments inclusive of the excess, if any.
Such payments shall be made by the Corporations to Dorman, or in the event of
his subsequent death, to his beneficiary or beneficiaries, or his estate, as
the case may be, in accordance with the customary payroll practices of the
Corporations.
During the period Dorman is entitled to receive payments from the
Corporations under this Section 5.1, the Corporations shall maintain or cause
to be maintained life and health insurance benefits for Dorman at least
equivalent to those he had at the Date of Termination with
<PAGE>
any amendments and/or alterations subsequently made equitably to all executive
officers of the Bank and/or Bancorp. During the period Dorman is entitled to
receive payments from the Corporations under this Section 5.1 he shall not be
considered an "employee" of the Corporations except as respects any
requirements specifically imposed by law or as may otherwise be required to
continue any insurance benefits provided for this Section 5.1.
5.2 Benefits Payable Upon Death. Within thirty (30) days after the
Date of Death, the Corporations shall pay to Dorman's beneficiary or
beneficiaries or his estate, as the case may be, a lump sum benefit equal to
three (3) times the monthly rate of Dorman's Base Salary as in effect on the
Date of Death.
5.3 Benefits Payable Upon Termination by Dorman. In the event that
Dorman terminates his employment with the Corporations under Section 4.1 of
this Agreement, the Corporations shall pay to Dorman within thirty (30) days
of such termination as severance a lump sum equal to the aggregate amount of
the future Base Salary, at the monthly rate then in effect, Dorman would have
received if he continued in the employ of the Corporations for the remainder
of the Employment Period then existing under this Agreement plus, if the
Employment Period shall not have been already extended pursuant to the terms
of Section 2.1 by reason of a vote of shareholders, an additional twenty-four
(24) months and the incentive bonuses to which he would have otherwise been
entitled during such period of time, based on the average incentive bonus
received by him during the then two most recent fiscal years of the
Corporations; provided, however, that if the Bank, Bancorp or such entity as
survives the Change of Control shall offer to assume the obligations of the
Corporations under this Agreement, and to extend this Agreement, if necessary,
to cause the remaining term to equal at least twenty-four (24) months; and in
<PAGE>
connection therewith shall offer Dorman a position which in Dorman's
reasonable judgment is of equal or greater responsibility, importance or scope
than described in Section 2.2 above, or if Dorman shall enter into a new
Employment Agreement with the Bank, Bancorp or such entity as survives the
Change of Control, then in such event, the Corporations shall have no
obligation to, and Dorman shall not be entitled to, receive any of the
foregoing benefits or the benefits provided under Section 6 hereof.
5.4 Termination by the Corporations for Cause. If Dorman's
employment under this Agreement is terminated by either the Bank or Bancorp
for "cause" (as defined in Section 4.1D), or if Dorman voluntarily resigns his
employment other than pursuant to Section 4.1C, the Corporations shall pay to
Dorman his Base Salary as then in effect that has accrued to the Date of
Termination. Unless otherwise determined by the Boards of Directors of the
Corporations, Dorman shall have no right to receive compensation or other
benefits under this Agreement after such a termination for "cause" or
following a voluntary resignation.
5.5 Termination by the Corporations for Other than Cause. If
during the Employment Period the Bank or Bancorp or both of them terminate
Dorman's employment other than for "cause" (as defined in Section 4.1D) or
other than for the reasons specified in Sections 1.3, 1.4, 1.5 and 1.6 of this
Agreement, then in such event the Corporations shall pay Dorman, or in the
event of his subsequent death, his beneficiary or beneficiaries, or his
estate, as the case may be, as severance a lump sum equal to the aggregate
amount of the future Base Salary payments Dorman would have received if he
continued in the employ of the Corporations for the remainder of the then
existing Employment Period of this Agreement plus twenty-four (24) months at
the highest rate of Base Salary and bonus paid to Dorman at any time under
this Agreement or within
<PAGE>
two years prior to the date hereof. Dorman shall not be required to mitigate
damages by seeking other employment and payments required to be made hereunder
shall not be reduced by any other income which Dorman may receive or by any
setoffs or claims which may exist against Dorman for any reason whatsoever.
5.6 Certain Reduction of Payments by the Corporations.
A. Anything in this Agreement to the contrary
notwithstanding, prior to the payment of any lump sum amount payable
hereunder, the certified public accountants of the Corporations immediately
prior to a Change of Control (the "Certified Public Accountants) shall
determine as promptly as practical and in any event within 20 business days
following the termination of employment of Dorman whether any payment or
distribution by the Corporations to or for the benefit of Dorman (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise) (a "Payment") would more likely than not be
nondeductible by the Corporations for Federal income purposes because of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
and if it is then the aggregate present value of amounts payable or
distributable to or for the benefit of Dorman pursuant to this Agreement (such
payments or distributions pursuant to this Agreement are hereinafter referred
to as "Agreement Payments") shall be reduced (but not below zero) to the
"Reduced Amount" For purposes of this paragraph, the "Reduced Amount" shall
be an amount expressed in present value which maximizes the aggregate present
value of Agreement Payments without causing any Payment to be nondeductible by
the Corporations because of said Section 280G of the Code.
B. If under paragraph A. of this section the Certified
Public Accountants determine that any Payment would more likely than not be
nondeductible by the
<PAGE>
Corporations because of Section 280G of the Code, the Corporations shall
promptly give Dorman notice to that effect and a copy of the detailed
calculation thereof and of the Reduced Amount, and Dorman may then elect, in
his sole discretion, which and how much of the Agreement Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Agreement Payments equals the Reduced Amount), and shall advise
the Corporations in writing of his election within 20 business days of his
receipt of notice. If no such election is made by Dorman within such 20-day
period, the Corporations may elect which and how much of the Agreement Payments
shall be eliminated or reduced (as long as after such election the aggregate
present value of the Agreement Payments equals the Reduced Amount) and shall
notify Dorman promptly of such election. For purposes of this paragraph,
present value shall be determined in accordance with Section 280G(d)(4) of the
Code. All determinations made by the Certified Public Accountants shall be
binding upon the Corporations and Dorman and shall be made within 20 business
days of a termination of employment of Dorman. With the consent of Dorman, the
Corporations may suspend part or all of the lump sum payment due Dorman
hereunder until the Certified Public Accountants finish the determination and
Dorman (or the Corporations, as the case may be) elect how to reduce the
Agreement Payments, if necessary. As promptly as practicable following such
determination and the elections hereunder, the Corporations shall pay to or
distribute to or for the benefit of Dorman such amounts as are then due to
Dorman under this Agreement and shall promptly pay to or distribute for the
benefit of Dorman in the future such amounts as become due to Dorman under
this Agreement.
C. As a result of the uncertainty in the application of
Section 280G of the Code, it is possible that Agreement Payments may have been
made by the Corporations which
<PAGE>
should not have been made ("Overpayment") or that additional Agreement Payments
which will have not been made by the Corporations could have been made
("Underpayment"), in each case, consistent with the calculation of the Reduced
Amount hereunder. In the event that the Certified Public Accountants, based
upon the assertion of a deficiency by the Internal Revenue Service against the
Corporations or Dorman which said Certified Public Accountants believe has a
high probability of success, determines that an Overpayment has been made, any
such Overpayment shall be treated for all purposes as a loan to Dorman which
Dorman shall repay to the Corporations together with interest at the applicable
Federal rate provided for in Section 7872(f)(2)(B) of the Code; provided,
however, that no amount shall be payable by Dorman to the Corporations to the
extent such payment would not reduce the amount which is subject to taxation
under Section 4999 of the Code. In the event that the Certified Public
Accountants, based upon controlling precedent, determine that an Underpayment
has occurred, any such Underpayment shall be promptly paid by the Corporations
to or for the benefit of Dorman together with interest at the applicable
Federal rate provided for in Section 7872(f)(2)(B) of the Code.
6. OTHER TERMINATION BENEFITS
6.1 Insurance. If Dorman's employment with the Corporations shall be
terminated either by Dorman pursuant to the provisions of Section 4.1C or by
the Corporations or either of them without "cause", the Corporations will
continue or cause to be continued the life and health insurance coverage
substantially identical to the coverage maintained by the Corporations for
Dorman prior to his severance. Dorman shall contribute such amounts towards
such benefits as are required of all employees of the Corporations so long as
he receives such benefits.
<PAGE>
6.2 Special Retirement Benefits. If Dorman's employment with the
Corporations shall be terminated either by Dorman pursuant to the provisions
of Section 4.1C or by the Corporations or either of them without "cause",
Dorman shall be entitled to receive "Special Retirement Benefits" from the
Corporations so that the total retirement benefits Dorman receives from the
Corporations will approximate the total retirement benefits Dorman would have
received under all qualified retirement plans (which shall not include
severance plans) of the Corporations in which Dorman participates were Dorman
fully vested under such qualified retirement plans as if Dorman had continued
in the employ of the Corporations for at least sixty (60) consecutive months
in the absence of early termination or until his retirement. The benefits
specified in this Section 6.2 will include all ancillary benefits, such as
early retirement and survivor rights and benefits available at retirement.
The amount payable to Dorman or his beneficiary(s) under this Section 6.2
shall equal the excess of (1) the benefits that would be paid to Dorman or his
beneficiaries, under all retirement plans of the Corporations in which Dorman
participates if Dorman were fully vested under such plans or (2) the benefits
that are payable to Dorman or his beneficiaries under all retirement plans of
the Corporations in which Dorman participates. These Special Retirement
Benefits are provided on an unfunded basis, are not intended to meet the
qualification requirements of Section 401 of the Internal Revenue Code and
shall be payable solely from the general assets of the Corporations. These
Special Retirement Benefits shall be payable at the times and in the manner
provided in the applicable retirement plans to which they relate.
6.3 Split Dollar Insurance. If pursuant to Section 4.1C Dorman's
employment with the Corporations following a "Change of Control" shall
terminate, the Corporations shall continue
<PAGE>
to pay the premium for and maintain the Broad National Bank Split Dollar Life
Insurance for and on behalf of Dorman with coverage of $500,000 until such
time as said policy is fully paid.
6.4 Use of Vehicle. If pursuant to Section 4.IC Dorman shall
terminate his employment with the Corporations following a "Change of
Control", the Corporations shall at their option provide Dorman with the use
of the late model car specified in Section 3.4B for a period of twenty-four
(24) months following the Date of Termination or the reasonable value
corresponding to such usage; provided, however, that notwithstanding the
foregoing Dorman may in lieu thereof elect to purchase said vehicle at its
then present value by providing the Corporations with written notice of such
election.
6.5 Payments Upon Termination. Termination of this Agreement on any
grounds whatsoever will not affect the obligations of the parties to make
payment of any sums that have accrued but remain unpaid at effective date of
such termination.
7. SOURCE OF FUNDS
Except for those benefits payable directly from the qualified retirement
or pension plan of the Corporations or either of them, all payments and
benefits provided in Sections 3, 5 or 6 shall be paid to Dorman or paid for on
behalf of Dorman from the general funds of the Corporations and no special or
separate funds shall be established and no other segregation of assets shall
be made to assure payment. Dorman shall have no right, title or interest
whatsoever in or to any investments which the Corporations may make to aid
them in meeting their obligations hereunder.
8. FEDERAL INCOME TAX WITHHOLDING
<PAGE>
The Corporations may withhold from any benefits payable under this
Agreement all federal, state, city or other taxes as shall be required
pursuant to any law or governmental regulation or ruling.
9. ARBITRATION
In the event that any claim, controversy, issue or other dispute arises
under this Agreement, the breach thereof, the termination of Dorman's
employment by the Corporations under Section 4 of this Agreement, including
any claim based in whole or in part on federal or state constitutions,
statutes or regulations, local ordinances, the common law or public policy,
including, but not limited to Title VII of the Civil Rights Act of 1964, the
Age Discrimination in Employment Act of 1967, the Employee Retirement Income
Security Act of 1974, Americans with Disabilities Act, the Worker Adjustment
and Retraining Notification Act, the Employee Polygraph Protection Act of
1988, the Occupational Safety and Health Act, the Fair Labor Standards Act,
the Civil Rights Act of 1971; the Rehabilitation Act of 1973 and the Vietnam
Era Veterans Readjustment Assistance Act of 1974, or the amount of any
payments under Sections 5 or 6, if the claim, controversy, issue or dispute is
not settled by agreement among the parties, the dispute shall be settled by a
single arbitration in the State of New Jersey, under the auspices of, and in
accordance with the applicable rules of, the American Arbitration Association
then in effect, and the decision of the arbitrator shall be final and
conclusive on the parties and judgment upon such decision may be entered in
any court having jurisdiction thereof. The award of the arbitrator shall be
in writing and shall specify the factual and legal basis for the award.
Dorman shall be entitled to reimbursement by the Corporations for all
reasonable, legal and other professional fees and expenses incurred by him in
such arbitration or in enforcing the award,
<PAGE>
including the reasonable attorneys' fees. The parties agree that resolution of
any such claim, controversy, issue or other dispute pursuant to the foregoing
arbitration proceeding is intended to be final and binding on them and any
award rendered by such arbitration shall constitute a complete, final and
binding adjudication of any and all legal or factual issues pertaining to
or arising out of the matter that gave rise to the controversy or dispute.
The provisions of this Article 9 shall survive the termination of this
Agreement for any reason whatsoever.
10. CONSOLIDATION, MERGER OR SALE OF ASSETS
Nothing in this Agreement shall preclude the Corporations or either of
them from consolidating or merging into or with, or transferring all or
substantially all of their assets to, another corporation which assumes this
Agreement and all obligations and undertakings of the Corporations hereunder.
11. POST-TERMINATION COVENANTS
11.1 Covenant Not to Compete. Dorman covenants and agrees that, in
consideration of the amounts to be paid and benefits to be provided to Dorman
hereunder, for a period of twelve (12) months following the termination of his
employment with the Corporations pursuant to Section 4.1A, 4.1C or Section
4.1D, Dorman shall not be employed as an executive officer of, shall not
control, manage or otherwise participate in the management of, any other
financial institution having its principal headquarters and/or executive
offices in the County of Essex, State of New Jersey, or of a company that owns
or controls a majority of the voting securities of any such financial
institution. The term "financial institution" shall mean and include any
bank, savings bank, savings and loan association or credit union.
<PAGE>
11.2 In the event of a Change of Control, either before or after a Date
of Termination, Article 11 shall in its entirety become legally inoperative
and Dorman will no longer be bound by any of the covenants contained therein.
11.3 Solicitation of Employees. Dorman covenants and agrees that, in
consideration of the amounts to be paid and benefits to be provided to Dorman
hereunder, for a period of twelve (12) months following the termination of his
employment with the Corporations irrespective of the time, manner or cause of
said termination, Dorman shall not solicit any employee of the Bank or Bancorp
to leave its or their employ or join the employment of, or employ, or permit
any business of which he is an owner, partner, substantial shareholder or
principal executive to solicit the employment of or employ, any person who is
employed by the Bank or Bancorp or has been employed by the Bank or Bancorp
within two (2) years prior to the time of such solicitation of employment.
11.4 Covenants to Survive. The parties hereto agree and acknowledge
that except as provided in Section 11.2 above, the terms of this Article 11
and of Article 20 shall survive the termination of this Agreement for any
reason whatsoever.
12. ENTIRE AGREEMENT
This writing shall constitute the entire Agreement of the parties as to
the employment
This writing shall constitute the entire Agreement of the parties as to
the employment and compensation of Dorman by the Corporations, and shall
supersede any and all prior agreements and understandings, whether they be
oral or in writing.
<PAGE>
13. SEVERABILITY
If, for any reason, any provision of this Agreqment is held invalid,
such invalidity shall not effect any other provision of this Agreement not
held so invalid, and each such other provision shall to the full extent
consistent with law continue in full force and effect. If any provision of
this Agreement shall be held invalid in part, such invalidity shall in no way
affect the rest of such provision together with all provisions of this
Agreement shall to the full extent consistent with law continue in full force
and effect.
14. AMENDMENT OF AGREEMENT
This Agreement may not be modified or amended except by an instrument in
writing signed by the parties hereto.
15. WAIVER
No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by a written instrument executed by the
party charged with such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver unless specifically stated therein, and each waiver
shall operate as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future nor as to any act
other than that specifically waived.
16. HEADINGS
Headings used in this Agreement are for convenience only and shall not
affect the construction of this Agreement.
<PAGE>
17. BINDING EFFECT AND GOVERNING LAW
All of the terms and provisions of this Agreement shall be binding upon,
shall inure to the benefit of, and be enforceable by and against Dorman and
his executors, administrators and heirs and Broad National Bank and Broad
National Bancorporation and their respective permitted successors and assigns.
This Agreement has been executed and delivered in the State of New Jersey and
its validity, interpretation, performance and enforcement shall be govemed by
the laws of said State.
18. NO ATTACHMENT
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, communication, alienation, sale,
assignment, encumbrance, charge, pledge or hypothecation or to execution,
attachment, levy or similar process or assignment by operation of law, and any
attempt to voluntary or involuntary, to affect any such action shall be null,
void and of no effect.
19. NONASSIGNABILITY
Neither this Agreement nor any right or interest hereunder shall be
assignable by Dorman, his beneficiaries or legal representative without the
Corporations' prior written consent; provided, however, that nothing in this
Section 19 shall preclude (a) Dorman from designating a beneficiary to receive
any benefit payable hereunder upon his death, or (b) the executors,
administrators or other legal representatives of Dorman or his estate from
assigning any rights hereunder to the person or persons entitled thereto.
<PAGE>
20. CONFIDENTIAL INFORMATION
20.1 Dorman shall not, directly or indirectly, during the term of his
employment hereunder and any time after termination of his employment for any
reason, to the detriment of the Corporations, knowingly divulge, disclose,
disseminate, publish, reveal or otherwise communicate to any unauthorized
person any Confidential Information relating to the Corporations or to any of
the businesses operated by them.
20.2 Dorman confirms that the Confidential Information constitutes the
exclusive property of the Corporations. Upon termination of his employment
hereunder, Dorman will promptly return to the Corporations all materials
(whether prepared by Dorman or others) containing, constituting, embodying or
illustrating Confidential Information, and all other property of the
Corporations then in his possession or custody.
20.3 As used in this Article 20, the following terms shall have the
following meanings:
A. The term "Confidential Information" means information
disclosed to Dorman or known to Dorman as a consequence of or through his
employment by the Corporations and not generally known in the banking
industry. Such information includes, but is not limited to, information
relating to the Corporations' products, research, developments, accounting,
finances, marketing, merchandising and selling, and specifically includes
future business plans, client list, applicant list, and training and operating
methods and techniques. The term "Confidential Information" does not include
information which (I) at the time it was received by Dorman was generally
available to the public; (ii) prior to its use by Dorman, becomes generally
available to the public through no act or failure of Dorman; (iii) prior to
its becoming known to Dorman as a consequence of or through his employment by
the Corporations, was
<PAGE>
otherwise known to Dorman; or (iv) is received by Dorman from a person who is
not a party to this Agreement and he was not under an obligation of confidence
with respect to such information.
B. "Materials" includes, but is not limited to, books,
notebooks, documents, records, photographs, films, video tapes, audio
recordings, discs, diskettes, or other electronic or optical storage media,
software and support materials, and similar or other materials.
20.4 Dorman shall not otherwise knowingly act or conduct himself (a) to
the material detriment of the Corporations, or (b) in a manner which is
inimical or contrary to the interest thereof.
IN WITNESS WHEREOF, the Corporations have caused this Agreement to be
executed and their respective seals to be affixed hereunto by their duly
authorized officers, and Dorman, has signed this Agreement, all as of the date
first written above.
BROAD NATIONAL BANK, a national banking association organized under the
laws of the United States of America, hereby acknowledges and agrees to be
bound to the extent applicable by the terms of the Employment Agreement dated
October 1, 1995 between JOHN A. DORMAN and BROAD NATIONAL BANCORPORATION and
guarantees payments and performance of the terms of said agreement to the
extent permitted by the laws of New Jersev and the laws of the United States
of America.
ATTEST: BROAD NATIONAL BANCORPORATION
/s/ Fred S. Campo By: /s/ Donald M. Karp
Secretary Donald M. Karp
Chairman & CEO
ATTEST: BROAD NATIONAL BANK
/s/ Fred S. Campo By: /s/ Donald M. Karp
Secretary Donald M. Karp
Chairman & CEO
WITNESS:
/s/ Margaret R. Nurnberger /s/ John A. Dorman 10/1/95
JOHN A. DORMAN (Dated)
Exhibit 10.20
<PAGE>
CONSULTANT AGREEMENT
This Agreement, dated as of the 16th day of November, 1995, by and
between STANLEY J. LESNIK, residing at 24 Springhill Drive, in the Township of
West Orange, County of Essex, and State of New Jersey (herein referred to as
"Lesnik") and BROAD NATIONAL BANCORPORATION, a corporation organized under the
laws of New Jersey (herein referred to as "Bancorporation"), with principal
offices at 905 Broad Street, in the City of Newark, County of Essex, and State
of New Jersey.
WITNESSETH:
WHEREAS, Bancorporation is the owner of all of the outstanding
shares of Broad National Bank, a national banking association organized under
the laws of the United States of America (the "Employing Subsidiary" or the
"Bank"); and
WHEREAS, Lesnik has served as the Chairman of the Board of
Directors and the Chief Executive Officer of the Employing Subsidiary and of
Bancorporation; and
WHEREAS, the leadership and productivity of Lesnik have
significantly contributed to the growth and financial security of
Bancorporation and the Employing Subsidiary; and
WHEREAS, Bancorporation and the Employing Subsidiary desire that
Lesnik continue his activities on behalf of the Employing Subsidiary as a
consultant, officer and, if elected,
<PAGE>
director, and Lesnik has agreed to continue to service Bancorporation and the
Employing Subsidiary pursuant to the terms and conditions of this Employment
Agreement.
NOW, THEREFORE, in consideration of mutual covenants hereinafter
set forth, the parties agree as follows:
1. Employment, Term and Compensation. Bancorporation agrees to
employ Lesnik and Lesnik hereby accepts and agrees to be a consultant for
Bancorporation and the Subsidiary for the term, in the capacities, at the
compensation and in accordance with the terms and conditions of this and the
following paragraphs of this Agreement:
A. The term hereunder shall be a period of three
(3) years commencing January 2, 1996 and ending December 31, 1998.
In the event of a sale of all or substantially all of the assets
of Bancorporation or the merger or consolidation of Bancorporation
with any other institution during the term of this Agreement,
following which the holders of a majority of the voting stock in
the surviving entity shall be persons other than those who owned a
majority of the voting stock of Bancorporation immediately prior
to such transaction, then the term of this Agreement shall be
extended to a date ending three (3) years from the effective date
of any such sale or merger. Any such transaction is referred to
herein as a "Control Change".
<PAGE>
B. Lesnik shall serve as a Special Consultant to
Bancorporation and the Employing Subsidiary and shall be
reasonably available to management to provide to their respective
officers and key personnel the benefit of his experience and
judgment and to establish, produce and continue important customer
banking relationships.
C. Bancorporation or the Employing Subsidiary shall
compensate Lesnik for his services as a Special Consultant to
Bancorporation and the Employing Subsidiary at the rate of Eighty-
Six Thousand Dollars ($86,000) a year, payable monthly in arrears
during the initial term and any extended term hereof.
D. Lesnik, if elected, shall serve as a member of
the Board of Directors and of the Executive Committee of
Bancorporation and the Employing Subsidiary at no additional
compensation.
E. In addition to all other compensation payable to
Lesnik during the term of this Agreement, Bancorporation or the
Employing Subsidiary shall pay to Lesnik, or provide for his
benefit such medical and dental insurance benefits as
Bancorporation and the Employing Subsidiary provide to any other
personnel of Bancorporation or the Subsidiary.
<PAGE>
F. Pending the commencement of the term hereof, the
provisions of the Consultant Agreement between Lesnik and
Bancorporation dated January 2, 1995 shall continue in effect, but
shall be superseded by this Agreement as of January 2, 1996.
2. Termination of Employment. This Agreement shall be
terminated prior to the expiration of its term upon the date of the first to
occur of the following events:
A. A determination by Lesnik's physician and by a
physician designated by Bancorporation or the Subsidiary that
Lesnik shall not be able to substantially perform the services
required for his consultantship as set forth in subparagraph B of
paragraph 1 because of a physical or mental illness or injury and
such disability prevents Lesnik from substantially performing the
services required for his employment for a period of six
consecutive months. If the two physicians cannot agree, they
shall select a third physician and the determination of the
majority of them shall prevail. If the two physicians shall not
agree on the selection of a third physician within thirty (30)
days of their disagreement, the third physician shall be such
physician as shall be selected by the Essex County Medical Society
or by the Chief of Medicine of the New Jersey College of Medicine
and Dentistry, in that order.
<PAGE>
B. The death of Lesnik.
3. Compensation After Termination of Agreement.
A. If this Agreement shall be terminated because of
Lesnik's disability as determined in accordance with subparagraph
A of paragraph 2, or if Lesnik shall determine to retire from his
position as a consultant, Bancorporation or the Subsidiary shall
pay to Lesnik, or to his legal representative, fifty percent (50%)
of the compensation as would otherwise be payable to Lesnik for
the remainder of the term of this Agreement in accordance with
subparagraph C of paragraph 1, provided that the amount of such
payment shall be reduced by an amount equal to any insurance
benefits actually paid under any disability policy maintained and
paid for by Bancorporation or the Subsidiary and provided,
further, that if Lesnik shall retire or become disabled following
a Control Change, then, in lieu of fifty percent (50%) of the
compensation which would otherwise be payable during the remainder
of the term hereof, he shall be entitled to eighty-five (85%) of
such compensation. If any disability insurance payments actually
made to Lesnik exceed the amount of compensation provided herein,
such excess may be retained by Lesnik. Any retirement payments
made hereunder shall be paid during the remainder of the term
hereof, or until ninety (90) days following Lesnik's death,
whichever shall first occur.
<PAGE>
B. If services of Lesnik shall terminate prior to
the expiration of the term hereof, because of his death,
Bancorporation or the Subsidiary shall pay to his surviving widow,
but if she is not surviving, then to his legal representative,
compensation at the applicable rate set forth in subparagraph C of
paragraph 1 for a period of ninety (90) days after his death.
C. So long as Lesnik shall be receiving payments
hereunder, Bancorporation shall continue to provide medical
insurance for Lesnik and his wife at Bancorporation's cost in such
amounts and on such terms as are provided for other employees.
Thereafter, if under the terms of Bancorporation's or the Bank's
health insurance plan Lesnik and/or his wife are eligible for
inclusion, such insurance shall be made available to them at their
cost.
4. Additional Benefits. Bancorporation and the Subsidiary
recognize that it is essential to the satisfactory performance by Lesnik of
his duties and responsibilities that Bancorporation and the Subsidiary, at
their cost, provide him with certain facilities and the Subsidiary or
Bancorporation incur certain expenses during the period of his employment as
follows:
A. An office commensurate with his position, and a
secretary, as he may require.
<PAGE>
B. Use of a Bank vehicle.
C. Reimbursement for reasonable expenses incurred
by him for business travel and entertainment any and other
expenses relating to Bancorporation's or the Subsidiary's
businesses, as may be incurred by him.
5. Termination of Employment and/or Payments Without Benefits.
A. In the event that during the term hereof, Lesnik
shall fail on a continuing basis to perform consulting services
hereunder substantially as such services were performed during the
two years prior to the date hereof, the Board of Directors of
Bancorporation may notify Lesnik of such failure, stating those
areas in which the Board shall have determined that Lesnik's
performance shall have been deficient. If within 60 days
thereafter Lesnik shall not have corrected the deficiency, the
Board may place Lesnik on retirement and he shall thereafter
receive only the amount provided herein for such retirement.
B. If at any time during the period that Lesnik
shall be receiving payments (including retirement payments) under
this Agreement he shall engage in competition against the Bank and
shall fail to discontinue such competition within thirty (30) days
after written notice of demand by the Bank to
<PAGE>
discontinue such competition, then Bancorporation shall not be required
to make any further payments under this Agreement.
6. Automatic Extension. This Agreement shall be extended
automatically for one additional year on each December 31 during the term
hereof or any extended term unless on or before December 1 of any year during
the term hereof or any extended term, Bancorporation shall notify Lesnik that
it has elected not to extend such term or Lesnik shall have notify
Bancorporation that he desires that such term not be extended.
7. Entire Agreement. This writing shall constitute the entire
Agreement of the parties as to the employment and compensation of Lesnik by
Bancorporation and the Employing Subsidiary and shall supersede any and all
prior agreements and understandings, whether they be oral or in writing.
8. Severability. If any provision hereof shall be determined
by a court of competent jurisdiction to be unenforceable, such determination
shall not affect the validity or enforceability of the remaining provisions
hereof.
9. Governing Law. This Agreement shall be binding upon the
parties hereto, and all persons who succeed to their rights and obligations
such as their successors and permitted assigns, and it shall be construed in
accordance with the laws of and in the Courts of New Jersey.
<PAGE>
IN WITNESS WHEREOF, Bancorporation has caused this Agreement to be
signed and sealed by its duly authorized officers and Lesnik has signed and
sealed this Agreement.
ATTEST: BROAD NATIONAL BANCORPORATION
/s/ Fred S. Campo By: /s/ Donald M. Karp
Fred S. Campo Donald M. Karp, Chairman
Secretary and Chief Executive Officer
WITNESS:
/s/ Margaret R. Nurnberger /s/ Stanley J. Lesnik
Stanley J. Lesnik
THIS LEASE AGREEMENT, made the day of 1996,
Between
LUCKY REALTY LLC residing or located at 290 Ferry Street in
the City of Newark in the County of Essex and State of New
Jersey, herein designated as the Landlord,
And
BROAD NATIONAL BANK, a National Banking Association residing
or located at 905 Broad Street in the City of Newark in the
County of Essex and State of New Jersey, herein designated as the
Tenant;
WITNESSETH THAT, the Landlord does hereby lease to the
Tenant and the Tenant does hereby rent from the Landlord, the
following described premises:
Approximately 800 sq. ft. with parking spaces located
at 290 Ferry Street, Newark, New Jersey.
for a term of five (5) years commencing on December 1 1995, and
ending on November 30 2,000, to be used and occupied only and for
no other purpose than a banking facility
UPON THE FOLLOWING CONDITIONS AND COVENANTS:
1st: The Tenant covenants and agrees to pay to the
Landlord, as rent for and during the term hereof, the sum of $
1st year: $1,000 monthly 3rd year: $1,500 monthly
2nd year: $1,250 monthly 4th year: $1,650 monthly
5th year: $1,750 monthly
2nd: The Tenant has examined the premises and has entered
into this lease without any representation on the part of the
Landlord as to the condition thereof. The Tenant shall take good
care of the premises and shall at the Tenant's own cost and
expense, make all repairs, including painting and decorating, and
shall maintain the premises in good condition and state of
repair, and at the end or other expiration of the term hereof,
shall deliver up the rented premises in good order and condition,
wear and tear from a reasonable use thereof, and damage by the
elements not resulting from the neglect or fault of the tenant,
excepted. The Tenant shall neither encumber nor obstruct the
sidewalks, driveways, yards, entrances, hallways and stairs, but
shall keep and maintain the same in a clean condition, free from
debris, trash, refuse, snow and ice.
3rd: In case of the destruction of or any damage to the
glass in the leased premises, or the destruction of or damage of
<PAGE>
any kind whatsoever to the said premises, caused by the
carelessness, negligence or improper conduct on the part of the
Tenant or the Tenant's agents, employees, guests, licensees,
invitees, subtenants, assignees or successors, the Tenant shall
repair the said damage or replace or restore any destroyed parts
of the premises, as speedily as possible, at the Tenant's own
cost and expense.
4th: No alterations, additions or improvements shall be
made, and no climate regulating, air conditioning, cooling,
heating or sprinkler systems, television or radio antennas, heavy
equipment, apparatus and fixtures, shall be installed in or
attached to the leased premises, without the written consent of
the Landlord. Unless otherwise provided herein, all such
alterations, additions or improvements and systems, when made,
installed in or attached to the said premises, shall belong to
and become the property of the Landlord and shall be surrendered
with the premises and as part thereof upon the expiration or
sooner termination of this lease, without hindrance, molestation
or injury.
5th: The Tenant shall not place nor allow to be placed any
signs of any kind whatsoever, upon, in or about the said premises
or any part thereof, except of a design and structure and in or
at such places as may be indicated and consented to by the
Landlord in writing. In case the Landlord or the Landlord's
agents, employees or representatives shall deem it necessary to
remove any such signs in order to paint or make any repairs,
alterations or improvements in or upon said premises or any part
thereof, they may be so removed, but shall be replaced at the
Landlord's expense when the said repairs, alterations or
improvements shall have been completed. Any signs permitted by
the Landlord shall at all times conform with all municipal
ordinances or other laws and regulations applicable thereto.
6th: The Tenant shall pay when due all the rents or charges
for water or other utilities used by the Tenant, which are or may
be assessed or imposed upon the leased premises or which are or
may be charged to the Landlord by the suppliers thereof during
the term hereof, and if not paid, such rents or charges shall be
added to and become payable as additional rent with the
installment of rent next due or within 30 days of demand
therefor, whichever occurs sooner.
7th: The Tenant shall promptly comply with all laws,
ordinances, rules, regulations, requirements and directives of
the Federal, State and Municipal Governments or Public
Authorities and of all their departments, bureaus and
subdivisions, applicable to and affecting the said premises,
their use and occupancy, for the correction, prevention and
abatement of nuisances, violations or other grievances in, upon
or connected with the said premises, during the term hereof; and
<PAGE>
shall promptly comply with all orders, regulations, requirements
and directives of the Board of Fire Underwriters or similar
authority and of any insurance companies which have issued or are
about to issue policies of insurance covering the said premises
and its contents, for the prevention of fire or other casualty,
damage or injury, at the Tenant's own cost and expense.
8th: The Tenant, at Tenant's own cost and expense, shall
obtain or provide and keep in full force for the benefit of the
Landlord, during the term hereof, general public liability
insurance, insuring the Landlord against any and all liability or
claims of liability arising out of, occasioned by or resulting
from any accident or otherwise in or about the leased premises,
for injuries to any person or persons, for limits of not less
than $500,000 for injuries to one person and $500,000 for
injuries to more than one person, in any one accident or
occurrence, and for loss or damage to the property of any person
or persons, for not less than $250,000. The policy or policies
of insurance shall be of a company or companies authorized to do
business in this State and shall be delivered to the Landlord,
together with evidence of the payment of the premiums therefor,
not less than fifteen days prior to the commencement of the term
hereof or of the date when the Tenant shall enter into
possession, whichever occurs sooner. At least fifteen days prior
to the expiration or termination date of any policy, the Tenant
shall deliver a renewal or replacement policy with proof of the
payment of the premium therefor. The Tenant also agrees to and
shall save, hold and keep harmless and indemnify the Landlord
from and for any and all payments, expenses, costs, attorney fees
and from and for any and all claims and liability for losses or
damage to property or injuries to persons occasioned wholly or in
part by or resulting from any acts or omissions by the Tenant or
the Tenant's agents, employees, guests, licensees, invitees,
subtenants, assignees or successors, or for any cause or reason
whatsoever arising out of or by reason of the occupancy by the
Tenant and the conduct of the Tenant's business.
9th: The Tenant shall not, without the written consent of
the Landlord, assign, mortgage or hypothecate this lease, nor
sublet or sublease the premises or any part thereof.
10th: The Tenant shall not occupy or use the leased
premises or any part thereof, nor permit or suffer the same to be
occupied or used for any purpose other than as herein limited,
nor for any purpose deemed unlawful, disreputable, or extra
hazardous, on account of fire or other casualty.
11th: This lease shall not be a lien against the said
premises in respect to any mortgages that may hereafter be placed
upon said premises. The recording of such mortgage or mortgages
shall have preference and precedence and be superior and prior in
lien to this lease, irrespective of the date of recording and the
<PAGE>
Tenant agrees to execute any instruments, without cost, which may
be deemed necessary or desirable, to further effect the
subordination of this lease to any such mortgage or mortgages. A
refusal by the Tenant to execute such instruments shall entitle
the Landlord to the option of cancelling this lease, and the term
hereof is hereby expressly limited accordingly.
12th: If the land and premises leased herein, or of which
the leased premises are a part, or any portion thereof, shall be
taken under eminent domain or condemnation proceedings, or if
suit or other action shall be instituted for the taking or
condemnation thereof, or if in lieu of any formal condemnation
proceedings or actions, the Landlord shall grant an option to
purchase and or shall sell and convey the said premises or any
portion thereof, to the governmental or other public authority,
agency, body or public utility, seeking to take said land and
premises or any portion thereof, then this lease, at the option
of the Landlord, shall terminate, and the term hereof shall end
as of such date as the Landlord shall fix by notice in writing;
and the Tenant shall have no claim or right to claim or be
entitled to any portion of any amount which may be awarded as
damages or paid as the result of such condemnation proceedings or
paid as the purchase price for such option, sale or conveyance in
lieu of formal condemnation proceedings; and all rights of the
Tenant to damages, if any, are hereby assigned to the Landlord.
The Tenant agrees to execute and deliver any instruments, at the
expense of the Landlord, as may be deemed necessary or required
to expedite any condemnation proceedings or to effectuate a
proper transfer of title to such governmental or other public
authority, agency, body or public utility seeking to take or
acquire the said lands and premises or any portion thereof. The
Tenant covenants and agrees to vacate the said premises, remove
all the Tenant's personal property therefrom and deliver up
peaceable possession thereof to the Landlord or to such other
party designed by the Landlord in the aforementioned notice.
Failure by the Tenant to comply with any provisions in this
clause shall subject the Tenant to such costs, expenses, damages
and losses as the Landlord may incur by reason of Tenant's breach
hereof.
13th: In case of fire or other casualty, the Tenant shall
give immediate notice to the Landlord. If the premises shall be
partially damaged by fire, the elements or other casualty, the
Landlord shall repair the same as speedily as practicable, but
the Tenant's obligation to pay the rent hereunder shall not
cease. If, in the opinion of the Landlord, the premises be so
extensively and substantially damaged as to render them
untenantable, then the rent shall cease until such time as the
premises shall be made tenantable by the Landlord. However, if,
in the option of the Landlord, the premises be totally destroyed
or so extensively and substantially damaged as to require
practically a rebuilding thereof, then the rent shall be paid up
<PAGE>
to the time of such destruction and then and from thenceforth
this lease shall come to an end. [Last two sentences deleted.]
14th: If the Tenant shall fail or refuse to comply with and
perform any conditions and covenants of the within lease, the
Landlord may, if the Landlord so elects, carry out and perform
such conditions and covenants, at the cost and expense of the
Tenant, and the said cost and expense shall be payable on demand,
or at the option of the Landlord shall be added to the
installment of rent due immediately thereafter but in no case
later than one month after such demand, whichever occurs sooner,
and shall be due and payable as such. This remedy shall be in
addition to such other remedies as the Landlord may have
hereunder by reason of the breach by the Tenant of any of the
covenants and conditions in this lease contained.
15th: The Tenant agrees that the Landlord and the
Landlord's agents, employees or other representatives, shall have
the right to enter into and upon the said premises or any part
thereof, at all reasonable hours, for the purpose of examining
the same or making such repairs or alterations therein as may be
necessary for the safety and preservation thereof. This clause
shall not be deemed to be a covenant by the Landlord nor be
construed to create an obligation on the part of the Landlord to
make such inspection or repairs.
16th: The Tenant agrees to permit the Landlord and the
Landlord's agents, employees or other representatives to show the
premises to persons wishing to rent or purchase the same, and
Tenant agrees that on and after next preceding the expiration of
the term hereof, the Landlord or the Landlord's agents, employees
or other representatives shall have the right to place notices on
the front of said premises or any part thereof, offering the
premises for rent or for sale; and the Tenant hereby agrees to
permit the same to remain thereon without hindrance or
molestation.
17th: If for any reason it shall be impossible to obtain
fire and other hazard insurance on the buildings and improvements
on the leased premises, in an amount and in the form and in
insurance companies acceptable to the Landlord, the Landlord may,
if the Landlord so elects at any time thereafter, terminate this
lease and the term hereof, upon giving to the Tenant fifteen days
notice in writing of the Landlord's intention so to do, and upon
the giving of such notice, this lease and the term thereof shall
terminate. If by reason of the use to which the premises are put
by the Tenant or character of or the manner in which the Tenant's
business is carried on, the insurance rates for fire and other
hazards shall be increased, the Tenant shall upon demand, pay to
the Landlord, as rent, the amounts by which the premiums for such
insurance are increased. Such payment shall be paid with the
<PAGE>
next installment of rent but in no case later than one month
after such demand, whichever occurs sooner.
18th: Any equipment, fixtures, goods or other property of
the Tenant, not removed by the Tenant upon the termination of
this lease, or upon any quitting, vacating or abandonment of the
premises by the Tenant, or upon the Tenant's eviction, shall be
considered as abandoned and the Landlord shall have the right,
without any notice to the Tenant, to sell or otherwise dispose of
the same, at the expense of the Tenant, and shall not be
accountable to the Tenant for any part of the proceeds of such
sale, if any.
19th: If there should occur any default on the part of the
Tenant in the performance of any conditions and covenants herein
contained, or if during the term hereof the premises or any part
thereof shall be or become abandoned or deserted, vacated or
vacant, or should the Tenant be evicted by summary proceedings or
otherwise, the Landlord, in addition to any other remedies herein
contained or as may be permitted by law, may either by force or
otherwise, without being liable for prosecution therefor, or for
damages, re-enter the said premises and the same have and again
possess and enjoy; and as agent for the Tenant or otherwise, re-
let the premises and receive the rents therefor and apply the
same, first to the payment of such expenses, reasonable attorney
fees and costs, as the Landlord may have been put to in re-
entering and repossessing the same and in making such repairs and
alterations as may be necessary; and second to the payment of the
rents due hereunder. The Tenant shall remain liable for such
rents as may be in arrears and also the rents as may accrue
subsequent to the re-entry by the Landlord, to the extent of the
difference between the rents reserved hereunder and the rents, if
any, received by the Landlord during the remainder of the
unexpired term hereof, after deducting the aforementioned
expenses, fees and costs; the same to be paid as such
deficiencies arise and are ascertained each month.
20th: Upon the occurrence of any of the contingencies set
forth in the preceding clause, or should the Tenant be
adjudicated a bankrupt, insolvent or placed in receivership, or
should proceedings be instituted by or against the Tenant for
bankruptcy, insolvency, receivership, agreement of composition or
assignment for the benefit of creditors, or if this lease or the
estate of the Tenant hereunder shall pass to another by virtue of
any court proceedings, writ of execution, levy, sale, or by
operation of law, the Landlord may, if the Landlord so elects, at
any time thereafter, terminate this lease and the term hereof,
upon giving to the Tenant or to any trustee, receive, assignee or
other person in charge of or acting as custodian of the assets or
property of the Tenant, five days notice in writing, of the
Landlord's intention so to do. Upon the giving of such notice,
this lease and the term hereof shall end on the date fixed in
<PAGE>
such notice as if the said date was the date originally fixed in
this lease for the expiration hereof; and the Landlord shall have
the right to remove all persons, goods, fixtures and chattels
therefrom, by force or otherwise, without liability for damages.
21st: The Landlord shall not be liable for any damage or
injury which may be sustained by the Tenant or any other person,
as a consequence of the failure, breakage, leakage or obstruction
of the water, plumbing, steam, sewer, waste or soil pipes, roof,
drains, leaders, gutters, valleys, downspouts or the like or of
the electrical, gas, power, conveyor, refrigeration, sprinkler,
airconditioning or heating systems, elevators or hoisting
equipment; or by reason of the elements; or resulting from the
carelessness, negligence or improper conduct on the part of any
other Tenant or of the Landlord or the Landlord's or this or any
other Tenant's agents, employees, guests, licensees, invitees,
subtenants, assignees or successors; or attributable to any
interference with, interruption of or failure, beyond the control
of the landlord, of any services to be furnished or supplied by
the Landlord.
22nd: The various rights, remedies, options and elections
of the Landlord, expressed herein, are cumulative, and the
failure of the Landlord to enforce strict performance by the
Tenant of the conditions and covenants of this lease or to
exercise any election or option or to resort or have recourse to
any remedy herein conferred or the acceptance by the Landlord of
any installment of rent after any breach by the Tenant, in any
one or more instances, shall not be construed or deemed to be a
waiver or a relinquishment for the future by the Landlord of any
such conditions and covenants, options, elections or remedies,
but the same shall continue in full force and effect.
23rd: This lease and the obligation of the Tenant to pay
the rent hereunder and to comply with the covenants and
conditions hereof, shall not be affected, curtailed, impaired or
excused because of the Landlord's inability to supply any service
or material called for herein, by reason of any rule, order,
regulation or preemption by any governmental entity, authority,
department, agency or subdivision or for any delay which may
arise by reason of negotiations for the adjustment of any fire or
other casualty loss or because of strikes or other labor trouble
or for any cause beyond the control of the Landlord.
24th: The terms, conditions, covenants and provisions of
this lease shall be deemed to be severable. If any clause or
provision herein contained shall be adjudged to be invalid or
unenforceable by a court of competent jurisdiction or by
operation of any applicable law, it shall not affect the validity
of any other clause or provision herein, but such other clauses
or provisions shall remain in full force and effect.
<PAGE>
25th: All notices required under the terms of this lease
shall be given and shall be complete by mailing such notices by
certified or registered mail, return receipt requested, to the
address of the parties as shown at the head of this lease, or to
such other address as may be designated in writing, which notice
of change of address shall be given in the same manner.
26th: The Landlord covenants and represents that the
Landlord is the owner of the premises herein leased and has the
right and authority to enter into, execute and deliver this
lease; and does further covenant that the Tenant on paying the
rent and performing the conditions and covenants herein
contained, shall and may peaceably and quietly have, hold and
enjoy the leased premises for the term aforementioned.
27th: This lease contains the entire contract between the
parties. No representative, agent or employee of the Landlord
has been authorized to make any representations or promises with
reference to the within letting or to vary, alter or modify the
terms hereof. No additions, changes or modifications, renewals
or extensions hereof, shall be binding unless reduced to writing
and signed by the Landlord and the Tenant.
28th: [Section deleted.]
29th: If any mechanic's or other liens shall be created or
filed against the leased premises by reason of labor performed or
materials furnished for the Tenant in the erection, construction,
completion, alteration, repair or addition to any building or
improvement, the Tenant shall upon demand, at the Tenant's own
cost and expense, cause such lien or liens to be satisfied and
discharged of record together with any Notices of Intention that
may have been filed. Failure so to do, shall entitle the
Landlord to resort to such remedies as are provided herein in the
case of any default of this lease, in addition to such as are
permitted by law.
30th: [Section deleted.]
31st: The Tenant has this day deposited with the Landlord
the sum of $1,500 as security for the payment of the rent
hereunder and the full and faithful performance by the Tenant of
the covenants and conditions on the part of the Tenant to be
performed. Said sum shall be returned to the Tenant, without
interest, after the expiration of the term hereof, provided that
the Tenant has fully and faithfully performed all such covenants
and conditions and is not in arrears in rent. During the term
hereof, the Landlord may, if the Landlord so elects, have
recourse to such security, to make good any default by the
Tenant, in which event the Tenant shall, on demand, promptly
restore said security to its original amount. Liability to repay
said security to the Tenant shall run with the reversion and
<PAGE>
title to said premises, whether any change in ownership thereof
be by voluntary alienation or as the result of judicial sale,
foreclosure or other proceedings, or the exercise of a right of
taking or entry by any mortgagee. The Landlord shall assign or
transfer said security, for the benefit of the Tenant, to any
subsequent owner or holder of the reversion or title to said
premises, in which case the assignee shall become liable for the
repayment thereof as herein provided, and the assignor shall be
deemed to be released by the Tenant from all liability to return
such security. This provision shall be applicable to every
alienation or change in title and shall in no wise be deemed to
permit the Landlord to retain the security after termination of
the Landlord's ownership of the reversion or title. The Tenant
shall not mortgage, encumber or assign said security without the
written consent of the Landlord.
The Landlord may pursue the relief or remedy sought in any
invalid clause, by conforming the said clause with the provisions
of the statutes or the regulations of any governmental agency in
such case made and provided as if the particular provisions of
the applicable statutes or regulations were set forth herein at
length.
In all references herein to any parties, persons, entities
or corporations the use of any particular gender or the plural or
singular number is intended to include the appropriate gender or
number as the text of the within instrument may require. All the
terms, covenants and conditions herein contained shall be for and
shall inure to the benefit of and shall bind the respective
parties hereto, and their heirs, executors, administrators,
personal or legal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have hereunto set
their hands and seals, or caused these presents to be signed by
their proper corporate officers and their proper corporate seal
to be hereto affixed, the day and year first above written.
SIGNED, SEALED AND DELIVERED LUCKY PLAZA LLC
IN THE PRESENCE OF
OR ATTESTED BY
By: Landlord
BROAD NATIONAL BANK
By: Tenant
STATE OF NEW JERSEY, COUNTY OF SS.:
I CERTIFY that on , 19 ,
<PAGE>
personally came before me
and acknowledged under oath, to my satisfaction, that this person
(or if more than one, each person):
(a) is named in and personally signed this document; and
(b) signed, sealed and delivered this document as his or
her act and deed.
(Print name and title below signature)
STATE OF NEW JERSEY, COUNTY OF SS.:
I CERTIFY that on , 19 ,
personally came before me, and this person acknowledged under
oath, to my satisfaction, that:
(a) this person is the secretary of
the corporation named in this document;
(b) this person is the attesting witness to the signing of
this document by the proper corporate officer who is
the President of the
corporation;
(c) this document was signed and delivered by the
corporation as its voluntary act duly authorized by a proper
resolution of its Board of Directors;
(d) this person knows the proper seal of the corporation
which was affixed to this document; and
(e) this person signed this proof to attest to the truth of
these facts.
Signed and sworn to before me on , 19 .
(Print name of attesting witness below signature)
LEASE
TO
Dated, ,19
Expires,
Rent, $
Prepared by:
<PAGE>
ASSIGNMENT OF LEASE
For one dollar and other good and valuable consideration,
the Tenant as Assignor, assigns this Lease and all the Assignor's
rights and privileges therein, including any and all monies
deposited with the Landlord as security, subject to all the
terms, covenants and conditions contained therein; and the
Assignee accepts this Assignment of Lease and assumes and agrees
to comply with and be bound by the terms, covenants and
conditions in said Lease contained. The signature of the
Landlord hereto is evidence of the Landlord's consent to and
acceptance of this Assignment of Lease.
Assignee Assignor
Landlord
<PAGE>
<PAGE>
RIDER TO LEASE
BETWEEN LUCKY PLAZA LLC, AS LANDLORD
AND
BROAD NATIONAL BANK, AS TENANT
1. In the event of any inconsistency between a provision
of this Rider and any provision of the printed portion of the
Lease to which this Rider is attached, this Rider shall be
controlling.
2. Paragraph 2nd is hereby amended to add the following at
the end thereof:
"The Landlord represents that at the time of
commencement of this Lease and during the Term, all building
systems serving the Premises including all HVAC systems will be
in good working order and the roof of the building will be free
from leaks. Landlord shall be responsible for the care, repair
and maintenance of the structural, HVAC and exterior of the
premises."
3. Paragraph 4th is hereby amended to add the following at
the end thereof:
"Landlord expressly consents to all improvements
necessary for operation of the premises as a banking facility.
Tenant shall have the right to remove its equipment, alterations,
improvements, personal property and fixtures, provided the Tenant
repairs all damage caused by such removal. In addition,
alterations or improvements which costs less than $25,000 shall
not require the Landlord's consent, provided the Tenant complies
with all municipal ordinances in connection therewith."
4. Paragraph 9th is hereby amended to add the following at
the end thereof:
"Without the Landlord's consent, such consent not to be
unreasonably withheld or delayed. Notwithstanding anything to
the contrary contained herein, the Tenant shall have the right,
without the Landlord's consent, at any time during the term of
this Lease to assign this Lease or sublet all or portions of the
premises to any entity (i) owned and/or controlled by the Tenant
or which shall hold the majority of the Tenant's stock; (ii)
which is the result of any merger, consolidation or
reorganization of the Tenant; or (iii) which shall purchase
substantially all of the assets of the Tenant (collectively,
"Business Assignment"); provided, however, in the event of any
Business Assignment, the entity which is either owned and/or
<PAGE>
controlled by the Tenant or which holds a majority of the
Tenant's stock, or the entity resulting from a merger,
consolidation or reorganization of the Tenant or, which shall
purchase substantially all the assets of the Tenant shall execute
an assumption of this Lease, which assumption will provide that
such entity has assumed each and every obligation of this Lease.
Further, the Tenant shall have the right, from time to time, to
sublet the Premises without the Landlord's consent solely to a
banking related use or entity."
5. Paragraph 11th is hereby amended to add the following
at the end thereof:
"Notwithstanding the foregoing, the Tenant's
subordination to any existing or future mortgage or ground lease
shall be conditioned upon the receipt by the Tenant of
nondisturbance agreements in form and substance reasonably
satisfactory to the Tenant, the mortgagee and/or the ground
lessor. With respect to any existing mortgage, if a fully
executed nondisturbance agreement, as aforesaid, is not delivered
to the Tenant prior to the Commencement Date, the Tenant shall
have the right to terminate this Lease upon twenty (20) days'
written notice to the Landlord and this Lease shall terminate as
of the date set forth in such notice, unless prior to such date,
a fully executed nondisturbance agreement is delivered to the
Tenant.
6. Paragraph 12th is hereby amended to add the following
at the end thereof:
"In the event of a condemnation which materially
affects the Tenant's use of the premises, the Tenant shall have
the right to terminate this Lease upon giving the Landlord sixty
(60) days' written notice of its intention. In the event of a
partial condemnation, Basic Rent shall be adjusted in proportion
to the premises remaining as part of the tenancy.
7. Paragraph 13th is hereby amended to add the following
to the end thereof:
"Notwithstanding the foregoing, if the damage cannot be
repaired or the Landlord has not completed, or caused to be
completed, the repair and restoration of the casualty damage
within sixty (60) days after the casualty, the Tenant shall have
the right to terminate this Lease upon thirty (30) days' written
notice to the Landlord."
8. Paragraph 15th is hereby amended to add the following
sentence after the first sentence:
"The Landlord shall cause such repairs to be performed
in such a way as to cause the minimum of inconvenience to the
<PAGE>
Tenant in the operation of the Tenant's business in the Premises
and to cause said work to be accomplished in as expeditious a
manner as is reasonably practical."
9. Paragraph 19th is hereby amended to add to the end
thereof:
"Landlord shall not be entitled to exercise any of its
remedies hereunder or by law upon a default by Tenant unless and
until Landlord shall provide Tenant with written notice of such
default, and Tenant shall have a period of thirty (30) days from
the date of receipt of notice of such default to cure such
default, or to diligently commence curing such default if the
default cannot with reasonable diligence be cured within such
thirty (30) day period."
10. Paragraph 21st is hereby amended to add the following
to the end thereof:
"If the interior of the Premises become substantially
untenantable for more than seventy-two (72) consecutive hours for
reasons not attributable to the Tenant, its agents, employees or
invitees, and, as a result, the Tenant does not open for
business, the Basic Rent shall abate until the Tenant is open for
business."
11. Landlord's Insurance and Indemnity.
(a) Throughout the term of this Lease, the Landlord
shall maintain, or cause to be maintained, (i) full replacement
value extended coverage casualty insurance with respect to the
Condominium and the Premises; and (ii) comprehensive general
public liability insurance in commercially reasonable amounts.
(b) Anything in this Lease to the contrary
notwithstanding, the Landlord covenants and agrees that it will
indemnify, defend and save harmless the Tenant against and from
all liabilities, obligations, damages, penalties, claims, costs,
charges and expenses, including without limitation, reasonable
attorneys' fees which may be imposed upon or incurred by the
Tenant by reason of the following occurring during the term of
this Lease:
(i) Any matter, cause or thing arising out of the
Landlord's use, occupancy, control or management of the Premises;
(ii) Any negligence on the part of the Landlord or any
of its agents, contractors, servants, employees, licensees or
invitees;
<PAGE>
(iii) Any accident, injury, or damage to any person or
property occurring in or about the exterior areas of the Premises
or anywhere caused by the Landlord;
(iv) Any failure on the part of the Landlord to perform
or comply with any of the covenants, agreements, terms or
conditions contained in the Lease on its part to be performed or
complied with; and
(v) The discovery of any Hazardous Material (as
hereinafter defined) in the Premises or the Condominium, where
the presence of such Hazardous Material is attributable to the
Landlord or any prior tenant of the Premises. The term
"Hazardous Material" means any materials or substances defined or
included in the definition of "hazardous substances", "hazardous
wastes" and/or "hazardous materials" under any federal, state or
local environmental laws, rules, regulations or ordinances.
12. Landlord Repairs: Except as otherwise expressly set
forth herein, the Landlord agrees, at its sole cost and expense,
during the term of this Lease and so long as this Lease shall be
in full force and effect to (i) make, or cause to be made, all
structural and exterior repairs or replacements to the Premises.
13. Lease Construction: If any term or provision of this
Lease or the application thereof to any person or circumstance
shall, to any extent, be invalid or unenforceable, the remainder
of this Lease, or the application of such term or provision to
persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby and each
term and provision of this Lease shall be valid and be enforced
to the fullest extend permitted by law. As used throughout this
document, the terms "Premises", "leased premises" and "unit" are
interchangeable and shall have the same meaning.
14. ISRA Compliance. Tenant's use of the Premises shall be
limited to retail banking purposes and/or general office purposes
and all related and ancillary uses. Landlord represents that the
Premises comply with the Industrial Site Recovery Act N.J.S.A.
13:1K-6 et seq. and the regulations promulgated thereunder (ISRA)
by the New Jersey Department of Environmental Protection
("NJDEP"). If compliance with ISRA becomes necessary because of
any action or inaction on the part of the Landlord, including but
not limited to, the Landlord's execution of a contract for the
sale of the Premises, any change in ownership of the Premises,
initiation of bankruptcy proceedings, the Landlord's assets or
any other event which triggers ISRA, then the Landlord shall
comply with ISRA and all requirements of the NJDEP at the
Landlord's sole expense.
15. Right of Early Termination. Tenant shall have the
absolute right, at its option, to terminate this Lease inclusive
<PAGE>
of any renewal terms at any time upon 120 days' prior written
notice whereupon this Lease shall terminate on the date specified
in the notice.
16. Brokerage. The Landlord and the Tenant each represent
to the other that it has dealt with no real estate broker in
connection with this Lease and agree that if any claim should be
made for commissions by any broker by reason of the acts of the
Landlord or the Tenant or the acts of their representatives, such
party will indemnify and save harmless the other from any and all
claims, demands, losses, liabilities, judgments, costs, expense,
attorneys' fees or other damages resulting from, arising out of,
or in connection therewith.
17. Option to Renew. Tenant is hereby granted four (4)
consecutive five (5) year options to renew this Lease (each a
"Renewal Term", collectively, the "Renewal Terms"). The same
terms of the Lease shall apply, except that the Basic Rent for
each Renewal Term shall be negotiated between the parties and in
the event the parties cannot agree upon a new rental, then either
party can declare the Lease terminated. The renewal terms shall
be automatically effectuated unless the tenant shall advise the
landlord in writing within sixty (60) days of the commencement of
the renewal term of Tenant's intention not to renew.
18. Drive Through Teller. Notwithstanding anything to the
contrary herein, the Landlord agrees that the Tenant shall have
the right to install a drive through facility or banking kiosk
either annexed to the exterior of the building. In addition, the
Tenant shall have the right to install an automatic teller
machine either attached to the exterior of the building or in
conjunction with the drive through facility or the banking kiosk.
The Tenant will pay all costs in connection with the installation
and maintenance of such accessory banking facilities including
any costs incurred in obtaining governmental approvals for same,
however, the Landlord agrees to cooperate with the Tenant in
connection therewith. If the Tenant installs any accessory
banking facilities, same shall be deemed to be part of the
Premises, however, no Basic Rent or additional rent shall be
payable by the Tenant in connection therewith.
19. Tenant's Contingencies. This lease is expressly
subject to and contingent upon the Tenant obtaining any and all
regulatory and banking approvals ("Banking Approvals") from state
or federal entities having jurisdiction in order to permit the
Tenant to occupy the Premises and carry on its business
operations therein as contemplated by this Lease. In the event
Banking Approvals are not obtained by the Tenant within one (1)
month from the date this Lease is fully executed or are not in
full force and effect upon the Commencement Date, then Tenant
shall have the right at its option, to terminate this Lease upon
<PAGE>
fifteen (15) days notice to the Landlord, whereupon there shall
be no further liability between the parties under this Lease.
20. Landlord Representations and Warranties.
(a) The Landlord, to its knowledge, hereby represents
and warrants to the Tenant upon which warranties and
representations the Tenant has relied in executing and delivering
this Lease that:
(i) The Landlord has no actual knowledge of, and
has rejected no notice of, any outstanding violation of any
governmental law, rule, statute, ordinance, or regulation
affecting the Premises.
(ii) No other person, firm or entity shall have
any rights in or right to acquire any fee or leasehold interest
in the Premises or any part thereof from the Landlord.
(iii) All required federal, state and local
permits, consents and approvals, if any, concerning or related to
environmental protection and regulation of the Premises have been
secured and are current and shall be properly maintained.
(iv) There are no pending actions against the
Landlord, or any prior tenant of the Premises with respect to any
such tenant's activities in the Leased Premises, under any
Environmental Law, and the Landlord has not received any notice
in any form of such an action, or of a possible action.
(v) There have not been nor are there now any
releases of hazardous substances (as that term is defined in any
of the Environmental Laws) or hazardous substances present in,
on, over, at, from, into or onto any portion of the Premises or
the Condominium other than in de minimis quantities solely in
connection with the operation of the Building.
(vi) The Landlord shall promptly notify the Tenant
in the event it receives:
A. Any notices or correspondence from the
Environmental Protection Agency or the New Jersey Department of
Environmental Protection alleging the presence or release of any
hazardous substances or environmental contaminants, in, on,
around or under the Premises or the Condominium; or
B. Any information suggesting or
demonstrating the release or presence of any hazardous substances
or environmental contaminants in, on, around or under the
Premises or the Condominium.
<PAGE>
(vii) The Landlord has no actual knowledge of the
existence of any asbestos in or on the premises.
(b) The Landlord hereby indemnifies and holds harmless
(and shall, at the Tenant's option, defend) the Tenant, its
employees, agents, guests, visitors and invitees, of from and
against any and all costs, expense (including without limitation
reasonable attorneys' and environmental consultants' fees) loss,
damage, or liability arising directly or indirectly from a breach
by the Landlord of any of the representations or warranties
contained in this Paragraph or this Lease.
21. Waiver of Distraint.
(a) Notwithstanding anything to the contrary contained
in this Lease, the Tenant may, from time to time, without
Landlord's consent, secure financing or general credit lines and
grant the lenders as security therefor a security interest in the
Tenant's trade fixtures, personalty, inventory and equipment.
(b) The Landlord hereby expressly waives any and all
rights to be granted by or under any present or future laws to
levy or distrain for rent, in arrears, in advance or both, on any
goods, merchandise, equipment, fixtures, furniture, or other
personal property of the Tenant, or any subtenant or licensee of
the Tenant in the Premises or to be delivered thereto.
22. Tenant's Self Help. If the Landlord shall default in
the performance or observance of any agreement or condition in
this Lease contained on its part to be performed or observed, or
shall default in the payment of any tax or other charge which
shall be a lien upon the Premises, and if the Landlord shall not
cure such default within thirty (30) days after notice from the
Tenant specifying the default (or shall not within said period
commence to cure such default and thereafter prosecute the curing
of such default to completion with due diligence), the Tenant may
at its option, without waiving any claim for damages for breach
of agreement, at any time thereafter cure such default for the
account of the Landlord and any amount paid or any contractual
liability incurred by the Tenant in so doing shall be deemed paid
or incurred for the account of the Landlord, and the Landlord
agrees to reimburse the Tenant therefor or save the Tenant
harmless therefrom; provided that the Tenant may cure any such
default as aforesaid prior to the expiration of said waiting
period to protect the real estate or the Tenant's interest
therein, to prevent injury or damage to persons or property, or
to enable the Tenant to conduct its business in the Premises.
Notwithstanding anything to the contrary contained
herein, in the case of emergency, notice required pursuant to
this Paragraph may be given orally, or in any other reasonably
due and sufficient manner having regard to the emergency and the
<PAGE>
attending circumstances. If any such notice shall not be given
in the manner described in this Lease, then, as soon thereafter
as may be practicable such notice shall be followed up by notice
given in the manner described in herein.
23. Memorandum of Lease. Upon the execution of this Lease,
the Landlord and the Tenant shall execute a Memorandum of Lease
in form and substance satisfactory to counsel for each party,
which Memorandum of Lease may be recorded, at the Tenant's sole
cost and expense.
24. Tenant's Exclusive. Landlord shall not, during the
term of this Lease, lease any part of the building in which the
premises is located to any other banking, financial institutions
or securities or brokerage institutions and the Landlord shall
not lease space to any tenant who would in the Tenant's
reasonable opinion violate such exclusive (including for example
Merrill Lynch or similar operations). If the granting of the
foregoing exclusive by the Landlord to the Tenant is violative of
any state or federal rules, laws, regulations, ordinances or the
like or if it is determined that the foregoing exclusive is
unenforceable, at the present time or any time in the future,
said exclusive shall be void ab initio and of no further force
and effect.
25. Alarm Systems. Notwithstanding anything to the
contrary herein, the Tenant shall have the right at its sole cost
and expense to install a security system in the Premises of a
type which is deemed necessary by the Tenant in its sole
discretion.
26. Tenant is authorized to install two (2) flag poles of
Tenant's choosing outside of the premises.
27. Landlord agrees to pay all real estate taxes and
assessment on the subject premises without contribution from the
Tenant.
28. The Landlord is a Tenant of the owner of the premises.
Pursuant to the terms of the Landlord's lease with the owner.
Landlord is duly authorized to sub-let the premises to tenant
herein.
29. Tenant shall have the right, subject to compliance with
municipal ordinances, to place signage upon the interior and
exterior of the premises, including the roof.
WITNESS:
LUCKY PLAZA LLC
<PAGE>
BY:
BROAD NATIONAL BANK
BY:
THIS LEASE AGREEMENT, made the 20th day of April 1995,
Between
A. J. SEABRA SUPERMARKETS V, INC. residing or located at 283
E. Kinny Street in the City of Newark in the County of Essex and
State of New Jersey, herein designated as the Landlord,
And
BROAD NATIONAL BANK, A National Banking Association residing
or located at 905 Broad Street in the City of Newark in the
County of Essex and State of New Jersey, herein designated as the
Tenant;
WITNESSETH that, the Landlord does hereby lease to the
Tenant and the Tenant does hereby rent from the Landlord, the
following described premises:
Approximately 700 square feet in premises located at
180 Schuyler Avenue, Kearny, New Jersey.
for a term of Five (5) years commencing on April 1, 1995, and
ending on March 31, 2000, to be used and occupied only and for no
other purpose than a banking facility, and all related
operations.
Upon the following Conditions and Covenants:
1st: The Tenant covenants and agrees to pay to the
Landlord, as rent for and during the term hereof, the sum of
$210,000.* in the following manner:
$3,500.00 monthly commencing April 1, 1995. *525 square feet @
$80.00 for five years.
2nd: The Tenant has examined the premises and has
entered into this lease without any representation on the part of
the Landlord as to the condition thereof. The Tenant shall take
good care of the premises and shall at the Tenant's own cost and
expense, make all repairs, including painting and decorating, and
shall maintain the premises in good condition and state of
repair, and at the end or other expiration of the term hereof,
shall deliver up the rented premises in good order and condition,
wear and tear from a reasonable use thereof, and damage by the
elements not resulting from the neglect or fault of the Tenant,
excepted. The Tenant shall neither encumber nor obstruct the
sidewalks, driveways, yards, entrances, hallways and stairs,
[balance of sentence has been crossed out]
<PAGE>
3rd: In case of the destruction of or any damage to
the glass in the leased premises, or the destruction of or damage
of any kind whatsoever to the said premises, caused by the
carelessness, negligence or improper conduct on the part of the
Tenant or the Tenant's agents, employees, guests, licensees,
invitees, subtenants, assignees or successors, the Tenant shall
repair the said damage or replace or restore any destroyed parts
of the premises, as speedily as possible, at the Tenant's own
cost and expense.
4th: No alterations, additions or improvements shall
be made, and no climate regulating, air conditioning, cooling,
heating or sprinkler systems, television or radio antennas, heavy
equipment, apparatus and fixtures, shall be installed in or
attached to the leased premises, without the written consent of
the Landlord. Unless otherwise provided herein, all such
alterations, additions or improvements and systems, when made,
installed in or attached to the said premises, shall belong to
and become the property of the Landlord and shall be surrendered
with the premises and as part thereof upon the expiration or
sooner termination of this lease, without hindrance, molestation
or injury.
5th: The Tenant shall not place nor allow to be placed
any signs of any kind whatsoever, upon, in or about the said
premises or any part thereof, except of a design and structure
and in or at such places as may be indicated and consented to by
the Landlord in writing. In case the Landlord or the Landlord's
agents, employees or representatives shall deem it necessary to
remove any such signs in order to paint or make any repairs,
alterations or improvements in or upon said premises or any part
thereof, they may be so removed, but shall be replaced at the
Landlord's expense when the said repairs, alterations or
improvements shall have been completed. Any signs permitted by
the Landlord shall at all times conform with all municipal
ordinances or other laws and regulations applicable thereto.
6th: The Tenant shall pay when due all the rents or
charges for other utilities used by the Tenant, which are or may
be assessed or imposed upon the leased premises or which are or
may be charged to the Landlord by the suppliers thereof during
the term hereof, and if not paid, such rents or charges shall be
added to and become payable as additional rent with the
installment of rent next due or within 30 days of demand
therefor, whichever occurs sooner.
7th: The Tenant shall promptly comply with all laws,
ordinances, rules, regulations, requirements and directives of
the Federal, State and Municipal Governments or Public
Authorities and of all their departments, bureaus and
subdivisions, applicable to and affecting the said premises,
their use and occupancy, for the correction, prevention and
<PAGE>
abatement of nuisances, violations or other grievances in, upon
or connected with the said premises, during the term hereof; and
shall promptly comply with all orders, regulations, requirements
and directives of the Board of Fire Underwriters or similar
authority and of any insurance companies which have issued or are
about to issue policies of insurance covering the said premises
and its contents, for the prevention of fire or other casualty,
damage or injury, at the Tenant's own cost and expense.
8th: The Tenant, at Tenant's own cost and expense,
shall obtain or provide and keep in full force for the benefit of
the Landlord, during the term hereof, general public liability
insurance, insuring the Landlord against any and all liability or
claims of liability arising out of, occasioned by or resulting
from any accident or otherwise in or about the leased premises,
for injuries to any person or persons, for limits of not less
than $ 500,000 for injuries to one person and $ 1,000,000 for
injuries to more than one person, in any one accident or
occurrence, and for loss or damage to the property of any person
or persons, for not less than $ 250,000 . The policy or policies
of insurance shall be of a company or companies authorized to do
business in this State and shall be delivered to the Landlord,
together with evidence of the payment of the premiums therefor,
not less than fifteen days prior to the commencement of the term
hereof or of the date when the Tenant shall enter into
possession, whichever occurs sooner. At least fifteen days prior
to the expiration or termination date of any policy, the Tenant
shall deliver a renewal or replacement policy with proof of the
payment of the premium therefor. The Tenant also agrees to and
shall save, hold and keep harmless and indemnify the Landlord
from and for any and all payments, expenses, costs, attorney fees
and from and for any and all claims and liability for losses or
damage to property or injuries to persons occasioned wholly or in
part by or resulting from any acts or omissions by the Tenant or
the Tenant's agents, employees, guests, licensees, invitees,
subtenants, assignees or successors, or for any cause or reason
whatsoever arising out of or by reason of the occupancy by the
Tenant and the conduct of the Tenant's business.
23rd. [entire paragraph crossed out.]
24th. The terms, conditions, covenants and provisions
of this lease shall be deemed to be severable. If any clause or
provision herein contained shall be adjudged to be invalid or
unenforceable by a court of competent jurisdiction or by
operation of any applicable law, it shall not affect the validity
of any other clause or provision herein, but such other clauses
or provisions shall remain in full force and effect.
25th. All notices required under the terms of this
lease shall be given and shall be complete by mailing such
notices by certified or registered mail, return receipt
<PAGE>
requested, to the address of the parties as shown at the head of
this lease, or to such other address as may be designated in
writing, which notice of change of address shall be given in the
same manner.
26th: The Landlord covenants and represents that the
Landlord is the owner of the premises herein leased and has the
right and authority to enter into, execute and deliver this
lease; and does further covenant that the Tenant on paying the
rent and performing the conditions and covenants herein
contained, shall and may peaceably and quietly have, hold and
enjoy the leased premises for the term aforementioned.
27th. This lease contains the entire contract between
the parties. No representative, agent or employee of the
Landlord has been authorized to make any representations or
promises with reference to the within letting or to vary, alter
or modify the terms hereof. No additions, changes or
modifications, renewals or extensions hereof, shall be binding
unless reduced to writing and signed by the Landlord and the
Tenant.
28th. [Entire paragraph has been crossed out.]
29th. If any mechanics' or other liens shall be
created or filed against the leased premises by reason of labor
performed or materials furnished for the Tenant in the erection,
construction, completion, alteration, repair or addition to any
building or improvement, the Tenant shall upon demand, at the
Tenant's own cost and expense, cause such lien or liens to be
satisfied and discharged of record together with any Notices of
Intention that may have been filed. Failure so to do, shall
entitle the Landlord to resort to such remedies as are provided
herein in the case of any default of this lease, in addition to
such as are permitted by law.
30th. [Entire paragraph has been crossed out.]
31st. [Entire paragraph has been crossed out.]
Subject to the terms of the Lease Rider, annexed hereto and made
a part hereof.
The Landlord may pursue the relief or remedy sought in any
invalid clause, by confirming the said clause with the provisions
of the statutes or the regulations of any governmental agency in
such case made and provided as if the particular provisions of
the applicable statutes or regulations were set forth herein at
length.
In all references herein to any parties, persons, entities
or corporations the use of any particular gender or the plural or
<PAGE>
singular number is intended to include the appropriate gender or
number as the text of the within instrument may require. All the
terms, covenants and conditions herein contained shall be for and
shall innure to the benefit of and shall bind the respective
parties hereto, and their heirs, executors, administrators,
personal or legal representatives, successors and assigns.
In Witness Whereof, the parties hereto have hereunto set
their hands and seals, or caused these presents to be signed by
their proper corporate officers and their proper corporate seal
to be hereto affixed, the day and year first above written.
A. J. SEABRA SUPERMARKETS V, INC.
Signed, Sealed and Delivered
in the presence of
or Attested by BY: ALBANO SEABRA Landlord
BROAD NATIONAL BANK
ANTONIO SEABRA, SECRETARY BY: DONALD M. KARP, CEO Tenant
MARGARET NURNBERGER,
ASSISTANT CASHIER
<PAGE>
<PAGE>
RIDER TO LEASE AGREEMENT
Dated this 20th day of April, 1995 by and between
A.J. SEABRA SUPERMARKETS, V., INC., (Landlord)
and
BROAD NATIONAL BANK (Tenant).
This Lease Agreement is amended pursuant to the terms of
this Rider. In the event any term of the Lease shall conflict
with any term of this Rider, the term (s) of this Rider shall
control.
Paragraph 4 is amended to add the following:
Landlord consents to the installation of an air-conditioning
unit in the Tenant's demised premises at Tenant's expense.
Paragraph 5 is amended to add the following:
Landlord shall not unreasonably withhold consent to signage
requested by Tenant. Tenant shall not have any signage in the
windows.
Paragraph 6 is amended to add the following:
Landlord shall provide Tenant with a separate electric meter
for the leased premises.
Paragraph 7 is amended to add the following:
Landlord represents that occupancy of the leased premises by
both Landlord and Tenant has been approved by the Municipality of
Kearny.
Paragraph 9 is amended to add the following:
<PAGE>
Tenant shall have the absolute right to assign this lease to
any successor in interest.
Paragraph 11 is amended to add the following:
Any mortgagee requesting a subordination agreement from the
tenant shall provide tenant with a letter of non-disturbance and
quiet enjoyment.
Paragraph 12 is amended to add the following:
In the event of condemnation proceedings, Landlord shall
indemnify Tenant for the costs of Tenants fit-up based upon a
five (5) year amoritzation.
Paragraph 14 is amended to add the following:
Landlord shall furnish written notice to the Tenant of any
breach and afford Tenant a reasonable opportunity to cure such
breach.
Paragraph 15 is amended to add the following:
Landlord shall make a good-faith effort to give Tenant prior
notice of any need for access to the demised premises.
Paragraph 25 is amended to add the following: All notices
shall be as follows:
If to Landlord:
A.J. Seabra Supermarkets, Inc.,
283 E. Kinney Street,
Newark, New Jersey; with copy to
Francis Giantomasi, Esq.,
292 Lafayette Street,
Newark, New Jersey 07105.
If to Tenant:
Broad National Bank
ATTN.: Donald M. Karp, CEO
<PAGE>
905 Broad Street
Newark, New Jersey 07102; with copy to
Michael O. Bertone, P.A.
217 Chestnut Street
Newark, New Jersey 07105
Paragraph 26 is modified as follows:
The Landlord covenants and represents that
the Landlord (Seabra) is a sub-tenant under a
certain Agreement of Sublease dated January
25, 1995 by and between Seabra (Sub-Tenant)
and The Great Atlantic & Pacific Tea Company,
Inc. (Sub-Landlord). Pursuant to the terms
of said Agreement of Sub-Lease, Seabra
warrants that Seabra has the right and
authority to enter into, execute and deliver
this Lease with Broad National Bank; and does
further covenant that Broad National Bank,
upon paying the rent and performing the
conditions and covenants herein contained,
shall and may peaceably and quietly have,
hold, and enjoy the leased premises for the
aforementioned term, together with the term
(s) provided by the exercise of any automatic
renewals hereunder.
Seabra shall indemnify and hold Broad
National Bank harmless from any and all
damages sustained by Broad National Bank as a
result of the breach or default by Seabra
under the terms of the aforesaid Agreement of
Sub-Lease. In the event of any breach or
default by Seabra under the terms of
aforesaid agreement of sub-lease, Seabra
agrees to reimburse Broad National Bank for
its costs of fit-up which costs shall be
amortized on a 5 year basis.
Seabra shall, upon execution of this Lease,
shall request letters of non-disturbance and
quiet enjoyment from both The Greater
Atlantic & Pacific Tea Company, Inc. and from
William Yeskel, et als. co-partnership.
Paragraph 32. AUTOMATIC RENEWALS:
There shall be two (2) automatic renewals of
this lease for terms of five (5) years each.
<PAGE>
a) The "first automatic renewal term" shall
commence on April 1, 1995 through March 31,
2005. The monthly rent during the "first
automatic renewal term" shall be $4,375.00.
b) The "second automatic renewal term" shall
commence on April 1, 2005 and continue
through March 31, 2010. The monthly rent
during the "second automatic renewal term"
shall be $5,250.00.
c) Each automatic renewal term shall become
effective unless the Tenant shall inform the
Landlord of Tenant's intention not to renew
at least ninety (90) days before the
commencement of the renewal term. All terms
and conditions of this Lease shall remain the
same during such period of automatic renewal
except for the rental increases provided
herein.
Paragraph 33. Tenant's employees and agents shall during
the term of this Lease and any automatic renewals thereof, have
the right to conduct promotions and to develop business from
Landlord's customers in Tenant's premises, Landlord's premises
and in the common areas, provided that such activities do not
materially interfere with the conduct of Landlord's business
operations. Tenant shall have direct access to and is authorized
to utilize Landlord's public address system for Tenant's
marketing purposes.
Paragraph 34. Landlord shall be responsible for the
maintenance of the building, parking area, sidewalks and common
areas. Tenant shall be responsible for the maintenance of the
equipment and fixtures installed by Tenant.
Paragraph 35. Landlord agrees that, during the term of this
Lease and any automatic extensions thereof, Landlord shall
neither lease to nor otherwise allow any other bank, savings and
<PAGE>
loan, credit union, or other financial to utilize any portion of
the premises located at 180 Schuyler Avenue, Kearny, New Jersey.
Tenant shall have the exclusive right to install and operate
Automated Teller Machines (ATM's) on the leased premises.
Paragraph 36. Landlord shall provide Tenant with means of
emergency access to the premises on a twenty-four (24) hour,
seven (7) day a week basis.
Paragraph 38. In the event that Landlord shall implement a
Bank Card or other automated payment system in Landlord's
supermarket operation, Tenant shall have the right of first
refusal to contract for such services. Tenant shall have 90 days
from receipt of the proposed contract to accept the terms of the
proposed contract. In the event that Tenant shall fail to accept
the proposed contract within said 90 day period, this right of
first refusal shall be deemed void. The contract shall be
presented pursuant to the notice provisions of paragraph 25.
Paragraph 39. Landlord represents that it does not have any
authorization to record its sublease agreement with A & P and
accordingly, Landlord is unable to authorize Tenant to record
this lease.
ATTEST: A.J. SEABRA SUPERMARKETS V, INC.
BY:
ANTONIO SEABRA, SECRETARY ALBANO SEABRA, PRESIDENT
<PAGE>
ATTEST: BROAD NATIONAL BANK
BY:
MARGARET NURNBERGER DONALD M. KARP
ASSISTANT CASHIER CHIEF EXECUTIVE OFFICER
EXHIBIT 11
BROAD NATIONAL BANCORPORATION
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
(Dollars In Thousands,
Except Per Share Amounts)
<S> <C> <C> <C>
PRIMARY:
Average number of common shares
outstanding 2,950,074 2,876,570 2,836,051
Assumed exercise of options
outstanding 51,492 3,786 1,375
Average number of common shares and
common share equivalents
outstanding 3,001,566 2,880,356 2,837,426
Net income before cumulative
effect of a change in accounting
principle $4,419,660 $4,688,711 $2,050,649
Less: Cumulative Preferred Dividends 579,548 613,933 609,727
Net income available to common
shareholders before cumulative
effect of a change in accounting
principle 3,840,112 4,074,778 1,440,922
Cumulative effect of a change in
accounting principle 0 0 1,085,603
Net income available to
common shareholders $3,840,112 $4,074,778 $2,526,525
PRIMARY EARNINGS PER COMMON SHARE:
Before cumulative effect of a change
in accounting principle $ 1.28 $ 1.41 $ 0.50
Cumulative effect of a change in
accounting principle 0.00 0.00 0.38
Primary earnings per common share $ 1.28 $ 1.41 $ 0.88
ASSUMING FULL DILUTION:
Average number of common shares
outstanding 2,950,074 2,876,570 2,836,051
Assumed exercise of options outstanding 61,993 15,815 1,375
Assumed conversion of preferred shares 1,292,095 1,358,546 1,302,116
Adjusted average number of common
shares outstanding $4,304,162 4,250,931 4,139,542
Net income, before cumulative effect
of a change in accounting principle $4,419,660 $4,688,711 $2,050,649
Cumulative effect of a change in
accounting principle 0 0 1,085,603
Net income (loss) $4,419,660 $4,688,711 $3,136,252
FULLY DILUTED EARNINGS PER COMMON SHARE:
Before cumulative effect of a change in
accounting principle $ 1.03 $ 1.10 $ 0.50
Cumulative effect of a change in
accounting principle 0.00 0.00 0.27
Fully diluted earnings per
common share $ 1.03 $ 1.10 $ 0.77
</TABLE>
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Broad National Bancorporation:
We consent to incorporation by reference in the Registration
Statement No. 33-28183 on Form S-8 of Broad National
Bancorporation of our report dated January 18, 1996, except as to
Note 14, which is as of February 2, 1996 relating to the
consolidated statements of condition of Broad National
Bancorporation and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1995, which report appears in
the December 31, 1995 Annual Report on Form 10-K of Broad National
Bancorporation.
Our report refers to a change in accounting for certain
investments in debt and equity securities in 1994 and accounting
for income taxes in 1993.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Short Hills, New Jersey
March 27, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 25,810
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 61,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 55,946
<INVESTMENTS-CARRYING> 60,266
<INVESTMENTS-MARKET> 59,948
<LOANS> 267,130
<ALLOWANCE> 7,402
<TOTAL-ASSETS> 481,185
<DEPOSITS> 429,681
<SHORT-TERM> 782
<LIABILITIES-OTHER> 16,193
<LONG-TERM> 0
0
734
<COMMON> 3,059
<OTHER-SE> 30,736
<TOTAL-LIABILITIES-AND-EQUITY> 481,185
<INTEREST-LOAN> 24,337
<INTEREST-INVEST> 6,808
<INTEREST-OTHER> 2,253
<INTEREST-TOTAL> 33,398
<INTEREST-DEPOSIT> 9,913
<INTEREST-EXPENSE> 10,082
<INTEREST-INCOME-NET> 23,316
<LOAN-LOSSES> 720
<SECURITIES-GAINS> 71
<EXPENSE-OTHER> 19,536
<INCOME-PRETAX> 7,551
<INCOME-PRE-EXTRAORDINARY> 7,551
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,420
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.03
<YIELD-ACTUAL> 5.59
<LOANS-NON> 7,091
<LOANS-PAST> 3,123
<LOANS-TROUBLED> 5,105
<LOANS-PROBLEM> 4,932
<ALLOWANCE-OPEN> 7,602
<CHARGE-OFFS> 2,123
<RECOVERIES> 1,203
<ALLOWANCE-CLOSE> 7,402
<ALLOWANCE-DOMESTIC> 7,402
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,778
</TABLE>
