<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1997 Commission File Number 0-16637
BROAD NATIONAL BANCORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2395057
- ------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
905 Broad Street, Newark NJ 07102
- ------------------------------ -------------------
(Address of principal executive offices) (Zip Code)
Registrant telephone number, including area code (201) 624-2300
--------
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------ ------
Number of shares outstanding of Broad National Bancorporation class of Common
Stock, as of October 31, 1997:
Common Stock, $1.00 par value - 4,473,697
1
<PAGE>
BROAD NATIONAL BANCORPORATION
Index to Form 10-Q Financial Information
For the Three Months and Nine Months Ended September 30,1997
------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART 1 - FINANCIAL INFORMATION 3
- ------------------------------
Consolidated Statements of Condition
as of September 30, 1997 and December 31, 1996 4
Consolidated Statements of Income for the
Three Month and Nine Month Periods Ended September 30, 1997
and 1996 5
Consolidated Statements of Cash Flows for the Nine
Month Periods Ended September 30, 1997 and 1996 7
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
</TABLE>
PART 2 - OTHER INFORMATION 24
- --------------------------
Items 1 to 5 Not Applicable or Negative
<TABLE>
<CAPTION>
<S> <C>
Item 6 24
Signatures 25
Exhibit 1 - Computation of Net Income
per Common Share 26
Exhibit 2 - Independent Auditor's Review Report of Interim
Financial Information 27
Exhibit 27 - Financial Data Schedule 28
</TABLE>
2
<PAGE>
BROAD NATIONAL BANCORPORATION
PART 1 - FINANCIAL INFORMATION
The following condensed consolidated financial statements of Broad National
Bancorporation as of September 30, 1997 and December 31, 1996 as well as the
three month and nine month periods ended September 30, 1997 and 1996 have been
prepared by Broad National Bancorporation without audit, and reflect all normal,
recurring adjustments and disclosures which are, in the opinion of management,
necessary for a fair statement of results for the interim periods presented.
These statements have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted. For further clarification and
understanding, these interim statements should be read in conjunction with the
annual report on Form 10-K of Broad National Bancorporation for the year ended
December 31, 1996.
The results of operations for the periods presented are not necessarily an
indication of the results which can be expected for 1997.
The registrant's independent public accountants, KPMG Peat Marwick LLP, have
performed a limited review of these interim statements in accordance with the
standards for such reviews promulgated by the American Institute of Certified
Public Accountants. See page 27 for their report on this limited review.
3
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
CASH AND DUE FROM BANKS $ 23,279 $ 19,782
FEDERAL FUNDS SOLD 44,935 57,075
-------- --------
CASH AND CASH EQUIVALENTS 68,214 76,857
SECURITIES HELD-TO-MATURITY
(aggregate market value $76,480)
and $89,482, respectively) 76,729 90,170
SECURITIES AVAILABLE-FOR-SALE 115,195 69,044
LOANS, Net of deferred loan fees 311,899 287,116
LESS -
Allowance for possible loan losses 9,000 8,531
- ------------------------------------------------------------------------------
NET LOANS 302,899 278,585
- ------------------------------------------------------------------------------
PREMISES AND EQUIPMENT, net 8,859 8,888
ACCRUED INTEREST RECEIVABLE 4,175 3,351
OTHER ASSETS 8,032 6,720
- ------------------------------------------------------------------------------
TOTAL ASSETS $584,103 $533,615
- ------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
DEPOSITS
Non-interest bearing demand $ 98,670 $100,945
Savings and interest bearing demand 215,290 217,250
Time deposits less than $100,000 95,270 85,714
Time deposits of $100,000 or more 95,799 81,164
- ------------------------------------------------------------------------------
TOTAL DEPOSITS 505,029 485,073
SHORT-TERM BORROWINGS 2,706 1,000
FHLB ADVANCES 18,000 0
ACCRUED TAXES, INTEREST AND OTHER LIABILITIES 8,921 9,184
COMPANY - OBLIGATED MANDATORILY REDEEMABLE
CUMULATIVE TRUST PREFERRED SECURITIES OF A
SUBSIDIARY TRUST HOLDING SOLELY JUNIOR
SUBORDINATED DEBENTURES OF THE COMPANY 11,500 0
- ------------------------------------------------------------------------------
TOTAL LIABILITIES 546,156 495,257
- ------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, authorized
10,000,000 shares at 9/30/97 and 5,500,000 shares
at 12/31/96; issued 4,679,288 shares at 9/30/97
and 4,677,188 shares at 12/31/97 4,679 4,677
Capital surplus 26,600 26,589
Retained earnings 10,451 7,004
Common Stock in treasury at cost; 242,000 shares
at 9/30/97 and 5,000 shares at 12/31/96 (4,111) (58)
Unrealized gain on securities
available-for-sale, net 328 146
- ------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 37,947 38,358
- ------------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $584,103 $533,615
- ------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
3 MONTH PERIOD ENDED 9 MONTH PERIOD ENDED
-------------------- --------------------
SEPTEMBER 30 SEPTEMBER 30
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 6,974 $6,150 $20,004 $18,013
Interest on securities held-to-maturity
Taxable 1,253 1,287 4,095 3,302
Tax Exempt 17 10 43 40
Interest on securities available -
for sale 1,467 885 3,820 2,757
Interest on federal funds sold 705 728 2,149 1,526
- -------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 10,416 9,060 30,111 25,638
- -------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on savings & interest bearing
demand deposits 1,208 1,226 3,539 3,675
Interest on time certificates of
deposit of $100,000 or more 1,256 851 3,880 1,531
Interest on other time deposits 1,309 1,028 3,632 3,137
Interest on FHLB Advances 19 0 19 0
Interest on 9.5% Cumulative Trust
Preferred Securities 273 0 273 0
Interest on short-term borrowings 30 13 63 46
- -------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 4,095 3,118 11,406 8,389
- -------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 6,321 5,942 18,705 17,249
- -------------------------------------------------------------------------------------------------------
PROVISION FOR POSSIBLE LOAN LOSSES 450 450 1,350 900
- -------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 5,871 5,492 17,355 16,349
- -------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Service charges on deposit accounts 1,401 1,451 4,487 3,428
Other income 257 234 790 682
Gain on sale of loans held for sale 3 0 3 0
Gain (Loss) on sale of securities available-for-sale (3) 0 54 (47)
- -------------------------------------------------------------------------------------------------------
TOTAL NON-INTEREST INCOME 1,658 1,685 5,334 4,063
- -------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSES:
Salaries and wages 1,995 2,027 6,027 6,100
Employee benefits 547 593 1,784 1,751
Occupancy expense 516 500 1,506 1,424
Furniture and equipment expense 325 261 840 825
Data processing fees 266 271 831 794
Legal fees 195 195 582 583
Professional fees 188 413 656 878
Postage, delivery and communication 187 170 513 499
FDIC and OCC assessments 45 29 134 84
Other real estate expense (38) 57 (82) 170
Other expenses 600 491 1,781 1,675
- -------------------------------------------------------------------------------------------------------
TOTAL NON-INTEREST EXPENSES 4,826 5,007 14,572 14,783
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
3 MONTH PERIOD ENDED 9 MONTH PERIOD ENDED
SEPTEMBER 30 SEPTEMBER 30
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCOME BEFORE INCOME TAXES 2,703 2,170 8,117 5,629
PROVISION FOR INCOME TAXES 1,208 908 3,302 2,203
- ------------------------------------------------------------------------------------
NET INCOME $ 1,495 $ 1,262 $ 4,815 $ 3,426
- ------------------------------------------------------------------------------------
NET INCOME APPLICABLE TO COMMON
STOCK $ 1,495 $ 1,262 $ 4,815 $ 3,426
- ------------------------------------------------------------------------------------
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
PRIMARY 4,715,201 4,758,716 4,769,637 4,605,984
ASSUMING FULL DILUTION 4,725,277 4,764,092 4,806,652 4,742,800
- ------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE
PRIMARY EARNINGS PER COMMON SHARE $ 0.32 $ 0.26 $ 1.01 $ 0.74
FULLY DILUTED EARNINGS PER
COMMON SHARE $ 0.32 $ 0.26 $ 1.00 $ 0.72
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTH PERIOD
ENDED SEPTEMBER 30
1997 1996
---- ----
(Unaudited)
<S>
CASH FLOWS FROM OPERATING ACTIVITIES: <C> <C>
Net Income $ 4,815 $ 3,426
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 989 914
Amortization of securities premium net 508 551
Amortization of deferred points and fees
and deferral of loan origination costs (304) (227)
Provision for possible loan losses 1350 900
Deferred tax (benefit) expense 841 (266)
Decrease in accrued taxes
interest, and other liabilities (262) (8,295)
(Gain) Loss on sale of securities available-for-sale (54) 47
(Gain) Loss on sale of other real estate owned (174) 96
Increase in accrued interest receivable (824) (377)
Other Net (2,792) (668)
- -------------------------------------------------------------------------------
Net cash provided by (used in) operating activities $ 4,093 $ (3,899)
- -------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of other real estate owned $ 721 $ 292
Net increase in loan balances (25,361) (11,597)
Proceeds from maturities of securities
held-to-maturity 19,891 7,927
Proceeds from maturities of securities
available-for-sale 8,583 13,481
Proceeds from the sale of securities
available-for-sale 19,081 14,703
Purchase of securities held-to-maturity (6,716) (28,176)
Purchase of securities available-for-sale (73,728) (31,907)
Capital expenditures (960) (570)
- -------------------------------------------------------------------------------
Net cash (used in) investing activities $(58,489) $(35,847)
- -------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in certificates of deposit $ 24,191 $ 51,337
Net (decrease) in demand deposit, savings
and interest bearing demand accounts (4,236) (323)
Net increase in short-term borrowings 1,706 218
Issuance of common stock 13 98
Redemption of preferred stock 0 (47)
Issuance of 9.5% Cumulative Trust Preferred
Securities 11,500 0
Purchase of Treasury Stock (4,053) 0
Dividends paid (1,368) (922)
Advances from FHLB 18,000 0
- -------------------------------------------------------------------------------
Net cash provided by financing activities $ 45,753 $ 50,361
- -------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ (8,643) $ 10,615
CASH AND CASH EQUIVALENTS, beginning of period 76,857 87,110
- -------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 68,214 $ 97,725
- -------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for
Interest $ 11,164 $ 8,599
Taxes $ 4,703 $ 2,042
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
(1) Principles of consolidation -
The consolidated financial statements include the accounts of Broad
National Bancorporation, its wholly owned subsidiaries BNB Capital Trust
and Broad National Bank (the Bank) and the Bank's wholly owned subsidiaries
BNB Investment Corporation, Broad National Realty Corporation and
Bronatoreo, Inc. All intercompany accounts and transactions have been
eliminated.
As used in this report, the term "Company" relates to Broad National
Bancorporation and its subsidiaries on a consolidated basis; the term
"Bancorporation" relates to Broad National Bancorporation (parent company
only); and the term "Bank" relates to Broad National Bank and its
subsidiaries on a consolidated basis.
(2) Net income per share -
Primary net income per common share is computed by dividing net income by
the weighted average number of common shares outstanding during each period
adjusted for dilutive stock options. Fully diluted per common share amounts
are computed by dividing net income by the weighted average number of
common shares outstanding adjusted for shares issuable upon conversion of
preferred stock and dilutive stock options.
(3) Stock buy back program -
On November 21, 1996, the Board of Directors of the Company authorized the
repurchase of up to 100,000 of its outstanding common shares. Additionally,
on June 19, 1997, the Board of Directors of the Company authorized the
purchase, through open market transactions, of up to an additional
$4,000,000 market value of the Company's common stock. Management was given
discretion to determine the number and pricing of the shares to be
purchased, as well as, the timing of any purchases.
At September 30, 1997, the Company had repurchased 242,000 shares of
common stock at a cost of $4,110,813.
8
<PAGE>
(4) Company - obligated mandatorily redeemable 9.5% Cumulative Trust Preferred
Securities of a subsidiary trust holding solely junior subordinated
debentures of Bancorporation (9.5% Cumulative Trust Preferred Securities) -
On June 30, 1997, $11.5 million of 9.5% Cumulative Trust Preferred
Securities were issued by BNB Capital Trust, a Delaware statutory business
trust formed and wholly - owned by Bancorporation. The net proceeds from
this issuance were invested in Bancorporation in exchange for
Bancorporation's junior subordinated debentures. The sole asset of BNB
Capital Trust, the obligor on the 9.5% Cumulative Trust Preferred
Securities, is 9.5% Junior Subordinated Debentures of Bancorporation due
June 30, 2027. Bancorporation has entered into several contractual
arrangements for the purpose of fully and unconditionally supporting BNB
Capital Trust's payment of distributions on, payments on any redemption of,
and any liquidation distribution with respect to, the 9.5% Cumulative Trust
Preferred Securities. These contractual arrangements constitute a full and
unconditional guarantee by Bancorporation of BNB Capital Trust's
obligations under the 9.5% Cumulative Trust Preferred Securities.
(5) Reclassification -
Certain amounts in the consolidated financial statements presented for
prior periods have been reclassified to conform with the 1997 presentation.
9
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
- ------------------------------------
SUMMARY
-------
The Company reported net income of $1,495,000 or $0.32 per fully diluted common
share for the third quarter of 1997 compared to net income of $1,262,000 or
$0.26 per fully diluted common share for the third quarter of 1996. The most
significant components of the improvement in net income for the third quarter of
1997 as compared to the third quarter of 1996 were net interest income, which
was $379,000 higher, primarily due to an increase in the balances of interest
earning assets, and non-interest expenses, which were $181,000 lower, primarily
due to the reduction in professional fees, which were higher in the 1996 period
due to a reengineering project.
For the first nine months of 1997, the Company reported net income of $4,815,000
or $1.00 per fully diluted common share, compared to net income of $3,426,000 or
$0.72 per fully diluted common share for the first nine months of 1996.
Total assets of $584,103,000 at September 30, 1997 represent an increase of
$50,488,000 or 9.5% from the December 31, 1996 balance of $533,615,000. Loans,
net of deferred fees, increased $24,783,000 or 8.6% to $311,899,000 during the
first nine months of 1997. Total deposits increased $19,956,000 or 4.1% to
$505,029,000 at September 30, 1997.
Total shareholders' equity declined $411,000 during the first nine months of
1997 primarily as the result of the purchase of Treasury Stock in the amount of
$4,053,000, offset by net income of $4,815,000 reduced by dividends declared to
shareholders of $1,368,000, proceeds of $13,000 from the exercise of stock
options and a net increase of $182,000 in the unrealized gain on securities
available-for-sale.
The Company's annualized return on average assets and annualized return on
average shareholders' equity were 1.16% and 16.4%, respectively, for the first
nine months of 1997, compared to annualized returns of .94% and 12.85%,
respectively, for the comparable 1996 period.
10
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Net Interest Income
- -------------------
Net interest income, the primary source of earnings for the Company, is the
difference between interest and fees earned on loans and other earning assets,
and interest paid on deposits and other interest bearing liabilities. Earning
assets include loans, investment securities and federal funds sold. Interest
bearing liabilities include savings, interest bearing demand and time deposits,
short-term borrowings, FHLB Advances and 9.5% Cumulative Trust Preferred
Securities.
The table on the following page sets forth the Company's consolidated average
balance of assets, liabilities, and shareholders' equity as well as the amount
of interest income or interest expense and the average rate for each category of
interest-earning assets and interest-bearing liabilities. Non-accrual loans are
included in average loans, and interest on loans includes loan fees which were
not material. Non-taxable income from investment securities and loans is
presented on a tax-equivalent basis assuming a 34% tax rate.
NOTES TO NET INTEREST INCOME TABLE
(1) Interest income for investments in states and political subdivisions
include tax equivalent adjustments at 34% tax rate.
(2) Average rates reflect the tax equivalent adjusted yields on nontaxable
investments and loans.
(3) Represents the difference between interest earned and interest paid,
divided by total interest-earning assets.
(4) Annualized
11
<PAGE>
NET INTEREST INCOME
NINE MONTHS ENDED SEPTEMBER 30
(Dollars in Thousands)
<TABLE>
<CAPTION>
1997 1996
-------- --------
Average Interest Average Average Interest Average
Balance and Fees Rate (4) Balance and Fees Rate (4)
-------- -------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Federal Funds Sold $ 52,453 $ 2,149 5.40% $ 38,545 $ 1,526 5.20%
-------- ------- -------- -------- ------- -----
Investment Securities
Securities held - to - maturity 87,561 4,160 6.39 72,486 3,361 6.18
Securities available - for - sale 80,162 3,820 6.30 62,088 2,757 5.92
-------- ------- -------- -------- ------- -----
Total Investment Securities 167,723 7,980 6.34 134,574 6,118 6.06
-------- ------- -------- -------- -----
Loans
Mortgage 174,875 11,628 8.87 164,816 10,623 8.59
Installment 42,400 2,894 9.13 35,773 2,504 9.35
Commercial 82,380 5,481 8.89 74,538 4,829 8.65
State and political subdivisions (1) 7 1 11.76 995 86 11.52
-------- ------- -------- -------- ------- -----
Total Loans 299,662 20,004 8.92 276,122 18,042 8.73
-------- ------- -------- -------- ------- ------
Total interest earning assets 519,838 $30,133 7.75% (2) 449,241 $ 25,686 7.64%(2)
-------- ------- -------- -------- -------- -----
Less - Allowance for possible loan losses 8,928 7,706
All other assets 43,808 45,964
--------- --------
Total Assets $554,718 $487,499
========= ========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Interest Bearing Deposits
<S> <C> <C> <C> <C> <C> <C>
Savings and interest bearing
demand deposits $214,033 $ 3,539 2.21% $223,450 $ 3,675 2.20%
Certificate of Deposits
Under $100,000 94,716 3,632 5.13 83,147 3,137 5.04
Over $100,000 92,984 3,880 5.58 41,468 1,531 4.93
--------- -------- -------- -------- -------- -----
Total interest bearing deposits 401,733 11,051 3.68 348,065 8,343 3.20
Short term borrowings 1,645 63 5.05 1,200 46 5.03
FHLB Advances 429 19 5.92 0 0 0
Trust Preferred Securities 3,840 273 9.50 0 0 0
Total Interest Bearing Liabilities 407,647 $11,406 3.74% 349,265 $8,389 3.21%
--------- -------- -------- -------- -------- -----
Other liabilities 8,782 7,534
Demand deposits 99,035 95,141
Shareholders' equity 39,254 35,559
--------- --------
Total liabilities and
shareholders' equity $554,718 $487,499
========= ========
NET INTEREST INCOME; NET INTEREST SPREAD $18,727 4.01% $ 17,297 4.43%
NET INTEREST MARGIN 4.82% (3) 5.14% (3)
</TABLE>
12
<PAGE>
Rate/Volume Analysis Of Net Interest Income
- -------------------------------------------
The effect of changes in average balance and rate from the corresponding prior
period on interest income, interest expense and net interest income for the nine
months ended September 30, 1997 is set forth below. The effect of a change in
average balance has been determined by applying the average rate for the earlier
period to the change in average balance for the later period, as compared with
the earlier period. The effect of a change in the average rate has been
determined by applying the average balance for the earlier period to the change
in average rate for the later period, as compared with the earlier period. The
variances attributable to simultaneous balance and rate changes have been
allocated in proportion to the relationship of the dollar amount of change in
each category.
<TABLE>
<CAPTION>
Increase (Decrease) Due to a
Change in the
----------------------------------------
Average Balance Average Rate Total
---------------- ------------ --------
(Dollars in Thousands)
<S> <C> <C> <C>
Interest Earned on:
Loans $1,562 $400 $1,962
Investment securities 1,577 285 1,862
Federal funds sold 564 59 623
------ ---- -------
Total interest income $3,703 $744 $4,447
====== ==== =======
Interest paid on:
Savings and interest
bearing demand deposits $ (234) $ 98 $ (136)
Certificates of deposit:
Under $100,000 439 56 495
Over $100,000 2,146 203 2,349
Short term borrowings 17 0 17
FHLB Advances 19 0 19
9.5% Cumulative Trust Preferred Securities 273 0 273
------ ---- -------
Total Interest expense $2,660 $357 $3,017
====== ==== =======
Change in net interest income $1,043 $387 $1,430
Percent increase in net interest ------ ---- -------
income over the prior period 8.27%
-------
</TABLE>
Total tax equivalent interest income of $30,133,000 for the first nine months of
1997 represents an increase of $4,447,000 or 17.3% over total tax equivalent
interest income of $25,686,000 for the comparable 1996 period. This improvement
is primarily due to an increase of $70,597,000 in the average balance of total
interest earning assets for the first nine months of 1997 as compared to the
first nine months of 1996. This increase in the average balance of total
interest earning assets resulted in a $3,703,000 increase in the total tax
equivalent interest income. Additionally, an increase of 9 basis points in the
average rate earned on total interest earning assets contributed $744,000 to the
increase in total tax equivalent interest income. The mix of interest earning
assets changed for the first nine months of 1997 as compared to the first nine
months of 1996.
13
<PAGE>
Higher yielding loans declined to 57.6% of total average interest earning assets
for the first nine months of 1997 from 61.4% of total average interest earning
assets for the comparable 1996 period. Relatively lower yielding federal funds
sold and investment securities represented a combined 42.4% of total average
interest earning assets for the first nine months of 1997 as compared to 38.6%
of total average interest earning assets for the comparable 1996 period. This
shift in the mix of interest earning assets is primarily attributable to the
investment of short term public fund time deposits greater than $100,000 into
relatively more liquid federal funds sold and investment securities.
Total interest expense of $11,406,000 for the first nine months of 1997 was
$3,017,000 or 36.0% higher than the comparable prior year period. An increase
of $58,382,000 in the average balance of total interest bearing liabilities is
the primary reason for this increase, resulting in an additional $2,660,000 of
interest expense for the first nine months of 1997 as compared to the first nine
months of 1996. The most significant growth in the average balance of total
interest bearing liabilities occurred in time deposits over $100,000, which
average balance was $51,516,000 higher for the first nine months of 1997 than
for the first nine months of 1996. This growth originated from new or expanded
relationships with municipal units within markets served by the Bank.
Tax equivalent net interest income for the first nine months of 1997 was
$1,430,000 or 8.27% higher than for the first nine months of 1996. This
increase is primarily attributable to the increase in the average balance of
interest earning assets. However, the change in the mix of interest earning
assets, with a larger percentage of interest earning assets in relatively lower
yielding investments and federal funds sold, contributed to the decline in the
net interest margin for the first nine months of 1997 as compared to the first
nine months of 1996. Additionally, the cost of the 9.5% Cumulative Trust
Preferred Securities has contributed to the increase in the cost of funds and a
reduction of the net interest margin during the third quarter of 1997 and for
the nine months of 1997.
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 loan
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 $1,350,000 for the first nine months of
1997 compared to $900,000 for the comparable 1996 period. The increase in the
provision for possible loan losses is attributable to the increase in loans
outstanding, as well as an increase in loans charged off during the first nine
months of 1997 as compared to the first nine months of 1996. Actual net loan
charge-offs for the first nine months of 1997 were $881,000 or 0.39%
(annualized) of average total loans, as compared to net loan charge-offs of
$166,000 or 0.08% (annualized) of average total loans for the comparable 1996
period.
14
<PAGE>
NON-INTEREST INCOME AND NON-INTEREST EXPENSES
- ---------------------------------------------
Total non-interest income of $5,334,000 for the first nine months of 1997 was
$1,271,000 or 31.3% higher than the comparable 1996 period. This increase is
primarily attributable to service charges on deposit accounts which were
$1,059,000 or 30.9% higher for the nine months of 1997 as compared to the nine
months of 1996. This increase in service charge income is not necessarily
indicative of the results which can be expected for the fourth quarter of 1997.
At current levels, service charge income for the fourth quarter of 1997 is not
anticipated to match the $1,942,000 of service charge income recorded in the
fourth quarter of 1996. In addition to service charge income, 1997 non-interest
income includes a gain of $54,000 from the sale of securities available-for-
sale, which represents an improvement of $101,000 from the loss of $47,000
recorded from the sale of securities available-for-sale during the first nine
months of 1996.
Total non-interest expense of $14,572,000 for the first nine months of 1997 was
$211,000 lower than the comparable 1996 period. Significant factors
contributing to this improvement are professional fees, which are $222,000 lower
than the comparable 1996 period, and other real estate expense, which reflects
an improvement of $252,000 when compared to 1996. This improvement in other
real estate expense is attributable to a non-recurring gain of $123,000 from the
sale in 1997 of a property classified as other real estate owned.
FINANCIAL CONDITION
- -------------------
Loans
Total loans, net of deferred loan fees,of $311,899,000 at September 30, 1997
represent an increase of $24,783,000 or 8.6% from the December 31, 1996 balance
of $287,116,000. The significant components of this growth are commercial
mortgages, which increased $10,258,000 or 8.1%, consumer loans, which increased
$6,460,000 or 34.2% and commercial loans, which increased $8,578,000 or 10.7%.
For the first nine months of 1997, average loans of $299,662,000 represented
57.6% of total average interest earning assets, as compared to 61.4% of total
average interest earning assets for the first nine months of 1996.
Allowance for Possible Loan Losses
The following table summarizes the activity in the allowance for possible loan
losses for the periods presented. Also presented are certain key ratios
regarding the allowance.
15
<PAGE>
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30,1997 September 30,1996
----------------- -----------------
(Dollars In Thousands)
<S> <C> <C>
Balance, beginning of period $ 8,531 $ 7,402
Provision charged to operations 1,350 900
Loans charged off (1,297) (945)
Recoveries of charged-off loans 416 779
-------- --------
Balance, end of period $ 9,000 $ 8,136
======== ========
Average gross loans outstanding
during period..................... $299,662 $276,122
-------- --------
Total gross loans at period end.... $311,899 $279,688
-------- --------
Net loans charged-off. $ 881 $ 166
======== ========
Ratio of net loans charged-off to
average loans outstanding
during period (annualized)...... 0.39% 0.08%
------- --------
Allowance for possible loan losses as
a percentage of total gross loans.. 2.89% 2.91%
-------- --------
</TABLE>
The amount of allowance applicable to non-classified loans was $6,109,000 and
$5,819,000 at September 30, 1997 and December 31, 1996, respectively.
Asset Quality
Non-performing assets consist of (i)non-performing loans, which include non-
accrual loans and loans past due 90 days or more as to interest or principal
payments but not placed on non-accrual status; (ii) loans that have been
renegotiated due to a weakening in the financial position of the borrower
(restructured loans) and (iii) other real estate owned ("OREO"), net of
reserves.
16
<PAGE>
The following table reflects the components of non-performing assets at
September 30, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------- ------------------
(Dollars In Thousands)
<S> <C> <C>
Past due 90 days or more:
Mortgage....................... $ 950 $ 1,068
Commercial..................... 741 247
Installment.................... 38 34
------- -------
Total....................... $ 1,729 $ 1,349
======= =======
Non-accrual loans:
Mortgage....................... $ 1,330 $ 2,800
Commercial..................... 3,616 5,584
Installment.................... 7 0
------- -------
Total....................... $ 4,953 $ 8,384
======= =======
Total non-performing loans....... $ 6,682 $ 9,733
Restructured loans (excluding
amounts classified as
non-performing loans)........... 3,821 3,934
Other real estate owned,
net of reserve................. 660 841
------- -------
Total non-performing assets...... $11,163 $14,508
Non-performing loans as a
percent of total gross loans... 2.14% 3.39%
------- -------
Non-performing loans as a
percent of total assets........ 1.14% 1.82%
------- -------
Non-performing assets as a
percent of loans and other
real estate owned.............. 3.57% 5.03%
------- -------
Allowance for possible loan
losses......................... $ 9,000 $ 8,531
------- -------
Allowance for possible loan
losses as a percent of
non-performing loans........... 134.69% 87.65%
------- -------
</TABLE>
In addition to the non-performing and restructured loans as of September 30,
1997 and December 31, 1996, the Company had classified an additional $3,527,000
and $3,088,000, respectively, as substandard loans. A portion of the allowance
for possible loan losses has been allocated to such loans in accordance with the
Company's policies.
At September 30, 1997, the recorded investment in loans that are considered to
be impaired under SFAS 114 was $9,475,000 as compared to $9,525,000 at September
30, 1996. The related allowance for possible loan losses was $820,000 as of
September 30, 1997 as compared to $96,700 as of September 30, 1996. The
impaired loan portfolio is primarily collateral dependent, as defined by SFAS
114. The change in the allowance for impaired loans during the first nine
months of 1997 represented a provision of $350,000 as compared to a recovery of
$673,000 for the first nine months of 1996. The average recorded investment in
impaired loans during the first nine months of 1997 was approximately $9,760,750
as compared to $9,300,000 for the first nine months of 1996. For the first nine
months of 1997, the Company recognized cash basis interest income on these
impaired loans of $134,447 as compared to $141,000 for the first nine months of
1996.
17
<PAGE>
The level of non-performing loans and assets is heavily dependent upon local
economic conditions. The September 30, 1997 total non-performing assets of
$11,163,000 represents a decrease of $3,345,000 or 23.1% over the total at
December 31, 1996. There can be no assurance that non-performing assets will not
increase in the future.
Investment Securities and Federal Funds Sold
Federal funds sold of $44,935,000 at September 30, 1997 represent a decrease of
$12,140,000 from the balance at December 31, 1996. Average Federal Funds sold
of $52,453,000 during the first nine months of 1997 represented 10.1% of total
average interest earning assets, as compared to 8.6% during the first nine
months of 1996.
Total average investment securities of $167,723,000 for the first nine months of
1997 represent 32.3% of total average interest earning assets, as compared to
30.0% for the comparable 1996 period.
Total investment securities, which include securities classified as held-to-
maturity and available-for-sale, of $191,924,000 at September 30, 1997 represent
an increase of $32,710,000 or 20.5% over the balance at December 31, 1996.
During the first nine months of 1997, securities available-for-sale of
$19,081,000 were sold and a net gain of $54,000 was realized as compared to
sales of $14,703,000 and a loss of $47,000 for the first nine months of 1996.
The proceeds from the sales were reinvested in higher yielding securities in an
effort to improve the overall yield of the investment portfolios.
Deposits
The September 30, 1997 total deposit balance of $505,029,000 represents an
increase of $19,956,000 or 4.1% over total deposits of $485,073,000 at December
31, 1996. Time deposits were responsible for this increase. A special fifteen
month time deposit promotion provided $11,700,000 in balances, contributing to
the increase of $9,556,000 in time deposits less than $100,000. Time deposits
of $100,000 or more were $14,635,000 higher at September 30, 1997 than at
December 31, 1996. Much of this increase is attributable to municipal deposits.
Short Term Borrowings
Short-term borrowings represent securities sold under agreements to repurchase.
The majority of these instruments have terms ranging from one to thirty days.
These balances increased $1,706,000 to $2,706,000 at September 30, 1997 from the
December 31, 1996 balance of $1,000,000.
18
<PAGE>
Federal Home Loan Bank Advances
Federal Home Loan Bank Advances represent a series of eighteen (18) $1,000,000
advances with interest rates ranging from 5.74% to 6.20% and maturities from
October 31, 1997 to March 31, 1999. The proceeds from these advances have been
invested in securities available-for-sale.
Company - Obligated Mandatorily Redeemable Cumulative Trust Preferred Securities
of a Subsidiary Trust Holding Solely Junior Subordinated Debentures of the
Company (9.5% Cumulative Trust Preferred Securities)
On June 30, 1997, $11.5 million of 9.5% Cumulative Trust Preferred Securities
were issued by BNB Capital Trust, a Delaware statutory business trust formed and
wholly - owned by Bancorporation. The net proceeds from this issuance were
invested in Bancorporation in exchange for Bancorporation's junior subordinated
debentures. The sole asset of BNB Capital Trust, the obligor on the 9.5%
Cumulative Trust Preferred Securities, is $11,855,670 principal amount of 9.5%
Junior Subordinated Debentures of Bancorporation due June 30, 2027.
Bancorporation has entered into several contractual arrangements for the purpose
of fully and unconditionally supporting BNB Capital Trust's payment of
distributions on, payments on any redemption of, and any liquidation
distribution with respect to, the 9.5% Cumulative Trust Preferred Securities.
These contractual arrangements constitute a full and unconditional guarantee by
Bancorporation of BNB Capital Trust's obligations under the 9.5% Cumulative
Trust Preferred Securities.
The proceeds have been used by Bancorporation to fund stock repurchases and for
general corporate purposes as well as to meet debt service obligations pursuant
to the junior subordinated debentures. Additionally, some of the proceeds have
been invested in both long-term and short-term securities with yields
substantially less than the cost of the 9.5% Cumulative Trust Preferred
Securities. The cost of the 9.5% Cumulative Trust Preferred Securities has
contributed to the increase in the cost of funds and a reduction of the net
interest margin during the third quarter of 1997 and for the nine months of
1997.
Liquidity of the Bank
The Bank actively monitors its liquidity position to ensure that it has
sufficient funds to provide for cash outflows without incurring losses from the
premature liquidation of assets or the unexpected acquisition of costly
liabilities. The Bank's cash outflows encompass interest paid to depositors and
other creditors, deposit withdrawals, and disbursements to acquire assets and
pay general operating costs. The Bank obtains cash from customers in the form
of interest and principal payments on loans, fees paid for services, and from
new deposits. Investment maturities also provide a source of cash.
19
<PAGE>
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 September 30, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------- ------------------
<S> <C> <C>
Cash and cash equivalents
and securities maturing in
one year to total assets 12.7% 14.9%
Net loans to total deposits 60.0% 57.4%
</TABLE>
To assist in the management of its liquidity, the bank has available $26,000,000
in lines of credit for federal funds. However, none of these lines were in use
during the first nine months of 1997.
In summary, managing the Bank's liquidity position involves a significant degree
of analytical estimation and other objective factors. Although customer demand
for funds, in the form of loans or deposit withdrawals, is largely dependent on
general economic factors outside of the Bank's control, management believes that
its present liquidity structure is adequate to meet such needs.
Liquidity of Bancorporation
Bancorporation's ability to meet its cash requirements, including dividend
payments, is generally dependent upon the declaration and payment of dividends
by the Bank to Bancorporation. Under Federal law, the approval of the
Comptroller of the Currency is required for the payment of dividends in any
calendar year by Broad National Bank to Broad National Bancorporation if the
total of all dividends declared in any calendar year exceeds the net income for
that year combined with the retained net income for the preceding two calendar
years. As of December 31, 1996, retained earnings of the Bank of $6,942,000
were available for payment of dividends to the parent company without regulatory
approval. Additionally, at September 30, 1997 Bancorporation had $741,876 of
cash for the purpose of paying operating costs, interest and dividends. However,
a change in circumstances, such as changes in regulatory requirements or in the
Bank's financial condition, could result in the Bank's inability to pay
dividends to Bancorporation or could result in Bancorporation being required by
regulatory authorities to utilize its funds to increase the Bank's capital. In
such event, Bancorporation may not have sufficient cash for operations or to
make dividend payments and may be required to seek other sources of capital and
liquidity, if available.
20
<PAGE>
INTEREST RATE SENSITIVITY
Management of interest rate sensitivity involves matching the maturity and
repricing dates of interest earning assets with interest bearing liabilities in
an effort to reduce the impact of fluctuating net interest margins and to
promote consistent growth of net interest income during periods of changing
interest rates.
Interest rate risk arises from mismatches (i.e., the interest sensitivity gap)
between the dollar amount of repricing or maturing assets and liabilities, and
is measured in terms of the ratio of the interest rate sensitivity gap to total
assets. More assets repricing or maturing than liabilities over a given time
period is considered asset-sensitive and is reflected as a positive gap, and
more liabilities repricing or maturing than assets over a given time period is
considered liability-sensitive and is reflected as a negative gap. An asset-
sensitive position (i.e., a positive gap) will generally enhance earnings in a
rising interest rate environment and will negatively impact earnings in a
falling interest rate environment, while a liability-sensitive position
(i.e., a negative gap) will generally enhance earnings in a falling interest
rate environment and negatively impact earnings in a rising interest rate
environment. Fluctuations in interest rates are not predictable or controllable.
At September 30, 1997, the Company had a one year cumulative negative gap of
25.8%. This negative one year gap position may, as noted above, have a negative
impact on earnings in a rising interest rate environment.
The calculation of these interest sensitivity gap positions involve certain
assumptions as to the repricing period of interest earning assets and interest
bearing liabilities. These gap positions are significantly impacted by
assumptions made as to the repricing of, among other items, NOW accounts,
savings accounts, and money market accounts. Consequently, the actual impact of
changes in interest rates may differ from that indicated above.
The Company also uses simulation modeling techniques which apply alternative
interest rate scenarios to forecasts of future business activity. The results
of such simulation modeling techniques may differ from the implications derived
from the interest sensitivity gap analysis.
Capital Adequacy
At September 30, 1997, the Company had total capital equal to 14.54% of risk-
based assets which included tier one capital equal to 13.27% of risk-based
assets. These compare to minimum regulatory capital requirements of 8% and 4%,
respectively. At September 30, 1997, the Company had tier one capital equal to
8.47% of adjusted total assets. This compares to a minimum regulatory capital
requirement of 4% to 5%.
21
<PAGE>
At September 30, 1997, the Bank had total capital equal to 12.42% of risk-based
assets, which included tier one capital equal to 11.15% of risk-based assets.
These compare to minimum regulatory capital requirements of 8% and 4%,
respectively. At September 30, 1997, the Company had tier one capital equal to
7.12% of adjusted total assets. This compares to a minimum regulatory capital
requirement of 4% to 5%.
Recent Accounting Developments
Statement of Financial Accounting Standards No. 128,"Earnings per Share" ("SFAS
128") establishes standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. SFAS 128 replaces the presentation of primary EPS with a
presentation of basic EPS and requires dual presentation of basic and diluted
EPS on the face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted EPS
computation. SFAS 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods; earlier application
is not permitted and requires restatement of all prior-period EPS data
presented.
The pro forma basic EPS for the three month and nine month periods ended
September 30, 1997 were $0.33 and $1.05 per share, respectively. The pro forma
basic EPS for the three month and nine month periods ended September 30, 1996
were $0.27 and $0.76 per share, respectively. The diluted EPS is not expected
to be materially different from the fully diluted earnings per share disclosed
in the income statement.
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("SFAS 130") establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and losses)
in a full set of general - purpose financial statements. SFAS 130 requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. SFAS 130 does
not require a specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive income for the
period in that financial statement. SFAS 130 requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid in capital in the equity
section of a statement of financial position. SFAS 130 is effective for fiscal
years beginning after December 15, 1997. Reclassification of financial
statements for earlier periods provided for comparative purposes is required.
* * * *
22
<PAGE>
Except for the historical information contained herein, the matters discussed in
this Form 10-Q are forward looking statements that involve risks and
uncertainties, including risks and uncertainties associated with quarterly
fluctuations in results, the impact of changes in interest rates on the Bank's
net interest income, the quality of the Bank's loans and other assets and the
credit risk associated with lending activities, the fluctuations in the general
economic and real estate climate in the Bank's primary market area of New
Jersey, the impact of competition from other banking institutions and financial
service providers and the increasing consolidation of the banking industry, the
enforcement of federal and state bank regulations and the effect of changes in
such regulations, and other risks and uncertainties detailed from time to time
in the Company's SEC reports. Actual results may vary materially from those
expressed in any forward-looking statements herein.
23
<PAGE>
BROAD NATIONAL BANCORPORATION
PART 2 - OTHER INFORMATION
- --------------------------
6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Statements re: computation of per share earnings is part of this Form 10-Q
as Exhibit I.
(b) No report on Form 8-K has been filed during the three month period ended
September 30, 1997.
24
<PAGE>
BROAD NATIONAL BANCORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BROAD NATIONAL BANCORPORATION
-----------------------------
(registrant)
Date: November 14, 1997 /s/ Donald M. Karp
-------------------
Donald M. Karp
Chairman and CEO
/s/ James Boyle
------------------
James Boyle
Treasurer
25
<PAGE>
BROAD NATIONAL BANCORPORATION
Computation of Net Income Per Share
(Unaudited)
<TABLE>
<CAPTION>
THREE-MONTH PERIOD NINE-MONTH PERIOD
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY:
--------
Average number of common
shares outstanding 4,510,225 4,677,410 4,591,600 4,522,710
Assumed exercise of options
outstanding 204,976 81,306 178,037 83,274
---------- ---------- ---------- ----------
Average number of common shares and
common share equivalents outstanding 4,715,201 4,758,716 4,769,637 4,605,984
---------- ---------- ---------- ----------
Net income available to common shareholders $1,494,884 $1,262,303 $4,814,571 $3,426,015
---------- ---------- ---------- ----------
Primary earnings per common share $ 0.32 $ 0.26 $ 1.01 $ 0.74
========== ========== ========== ==========
FULLY DILUTED:
- --------------
Average number of common shares of
outstanding 4,510,225 4,677,410 4,591,600 4,522,710
Assumed exercise of options outstanding 215,052 86,682 215,052 86,682
Assumed conversion of preferred shares 0 0 0 133,408
---------- ---------- ---------- ----------
Adjusted average number of common shares 4,725,277 4,764,092 4,806,652 4,742,800
---------- ---------- ---------- ----------
Net Income $1,494,884 $1,262,303 $4,814,571 $3,426,015
---------- ---------- ---------- ----------
Fully diluted earnings per common share $ 0.32 $ 0.26 $ 1.00 $ 0.72
========== ========== ========== ==========
</TABLE>
26
<PAGE>
Independent Auditors' Review Report
-----------------------------------
The Board of Directors
Broad National Bancorporation:
We have reviewed the accompanying consolidated condensed statement of condition
of Broad National Bancorporation and subsidiaries (the Company) as of September
30, 1997, and the related consolidated condensed statements of income, and cash
flows for the three and nine month periods ended September 30, 1997 and 1996.
These consolidated condensed financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated condensed financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of condition of the Company as of December
31, 1996, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated January 15, 1997, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated statement of condition as
of December 31, 1996, is fairly presented, in all material respects, in relation
to the consolidated statement of condition from which it has been derived.
/s/ KPMG Peat Marwick LLP
Short Hills, New Jersey
November 14, 1997
27
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BROAD
NATIONAL BANCORPORATION'S FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 23,279
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 44,935
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 115,195
<INVESTMENTS-CARRYING> 76,729
<INVESTMENTS-MARKET> 76,480
<LOANS> 311,899
<ALLOWANCE> 9,000
<TOTAL-ASSETS> 584,103
<DEPOSITS> 505,029
<SHORT-TERM> 2,706
<LIABILITIES-OTHER> 8,921
<LONG-TERM> 29,500
0
0
<COMMON> 4,679
<OTHER-SE> 33,268
<TOTAL-LIABILITIES-AND-EQUITY> 584,103
<INTEREST-LOAN> 20,004
<INTEREST-INVEST> 7,958
<INTEREST-OTHER> 2,149
<INTEREST-TOTAL> 30,111
<INTEREST-DEPOSIT> 11,051
<INTEREST-EXPENSE> 11,406
<INTEREST-INCOME-NET> 18,705
<LOAN-LOSSES> 1,350
<SECURITIES-GAINS> 54
<EXPENSE-OTHER> 14,572
<INCOME-PRETAX> 8,117
<INCOME-PRE-EXTRAORDINARY> 4,815
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,815
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.00
<YIELD-ACTUAL> 4.82
<LOANS-NON> 4,953
<LOANS-PAST> 1,729
<LOANS-TROUBLED> 3,821
<LOANS-PROBLEM> 3,527
<ALLOWANCE-OPEN> 8,531
<CHARGE-OFFS> 1,297
<RECOVERIES> 416
<ALLOWANCE-CLOSE> 9,000
<ALLOWANCE-DOMESTIC> 9,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 6,109
</TABLE>
