<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1999 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 (IRS 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 (973) 624-2300
----------------
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO______
------
Number of shares outstanding of Broad National Bancorporation class of Common
Stock, as of April 30, 1999:
Common Stock, $1.00 par value - 4,985,728
1
<PAGE>
BROAD NATIONAL BANCORPORATION
Index to Form 10-Q Financial Information
For the Three Months Ended March 31, 1999
--------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART 1 - FINANCIAL INFORMATION 3
- ------------------------------
Item 1 . Financial Statements
Consolidated Statements of Condition
as of March 31, 1999 and December 31, 1998 4
Consolidated Statements of Income for the
Three Month Periods Ended March 31, 1999 and 1998 5
Consolidated Statements of Cash Flows for the Three
Month Periods Ended March 31, 1999 and 1998 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
PART 2 - OTHER INFORMATION 23
- --------------------------
Items 1 to 5 Not Applicable or Negative
Item 6 23
Signatures 24
Exhibit 1 - Computation of Net Income per Common Share 25
Exhibit 2 - Independent Auditor's Review Report of Interim
Financial Information 26
</TABLE>
2
<PAGE>
BROAD NATIONAL BANCORPORATION
PART 1 - FINANCIAL INFORMATION
The following consolidated financial statements of Broad National Bancorporation
as of March 31, 1999 and December 31, 1998 as well as the three month periods
ended March 31, 1999 and 1998 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, 1998.
The results of operations for the periods presented are not necessarily an
indication of the results which can be expected for 1999.
The registrant's independent public accountants, KPMG 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 26 for their report on this limited review.
3
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(Unaudited)
ASSETS
- ------
<S> <C> <C>
CASH AND DUE FROM BANKS $ 21,507 $ 45,793
FEDERAL FUNDS SOLD 8,135 0
-------- --------
CASH AND CASH EQUIVALENTS 29,642 45,793
SECURITIES HELD-TO-MATURITY
(aggregate market value $27,904 and $33,083, respectively) 27,757 32,949
SECURITIES AVAILABLE-FOR-SALE 238,149 231,828
LOANS, Net of deferred loan fees 366,069 360,142
LESS - Allowance for possible loan losses 8,592 8,246
- ------------------------------------------------------------------------------------------------------------------------
NET LOANS 357,477 351,896
- ------------------------------------------------------------------------------------------------------------------------
PREMISES AND EQUIPMENT, net 9,877 9,862
ACCRUED INTEREST RECEIVABLE 4,477 4,227
OTHER ASSETS 8,949 8,238
- ------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $676,328 $684,793
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
DEPOSITS
Non-interest bearing demand $118,493 $114,266
Savings, money market and interest bearing demand 241,925 252,973
Time deposits less than $100,000 114,981 112,945
Time deposits of $100,000 or more 101,320 94,880
- ------------------------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS 576,719 575,064
SHORT-TERM BORROWING 29,646 40,651
COMPANY-OBLIGATED MANDATORILY REDEEMABLE CUMULATIVE TRUST PREFERRED 11,500 11,500
SECURITIES OF A SUBSIDIARY TRUST HOLDING SOLELY JUNIOR SUBORDINATED
DEBENTURES OF BANCORPORATION
ACCRUED TAXES, INTEREST AND OTHER LIABILITIES 12,641 12,889
- ------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 630,506 640,104
- ------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, authorized 10,000,000 shares; issued 5,282,228 5,282 5,213
shares at 3/31/99 and 5,212,519 shares at 12/31/98
Capital surplus 36,196 35,131
Retained earnings 9,769 8,717
Common Stock in treasury at cost; 296,500 shares at 3/31/99 and 12/31/98 (5,089) (5,089)
Accumulated other comprehensive (loss) income (336) 717
- ------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 45,822 44,689
- ------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $676,328 $684,793
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
3 MONTH PERIOD ENDED
--------------------
MARCH 31
1999 1998
(UNAUDITED)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 7,507 $ 7,188
Interest on securities held - to - maturity
Taxable 416 930
Tax exempt 8 17
Interest on securities available - for -sale 3,584 2,335
Interest on federal funds sold 201 508
- ------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 11,716 10,978
- ------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on savings, money market & interest
bearing demand deposits 1,157 1,130
Interest on time certificates of
deposit of $100,000 or more 1,278 1,419
Interest on other time deposits 1,468 1,337
Interest on short-term borrowings 494 192
Interest on long-term debt 0 123
Interest on 9.5% Cumulative Trust Preferred Securities 273 273
- ------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 4,670 4,474
- ------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 7,046 6,504
- ------------------------------------------------------------------------------------------------------
PROVISION FOR POSSIBLE LOAN LOSSES 120 300
- ------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 6,926 6,204
- ------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Service charges on deposit accounts 1,458 1,438
Other income 383 331
Gain on sale of securities available-for-sale 0 90
- ------------------------------------------------------------------------------------------------------
TOTAL NON-INTEREST INCOME 1,841 1,859
- ------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSES:
Salaries and wages 2,405 2,395
Employee benefits 630 557
Occupancy expense 600 493
Furniture and equipment expense 419 320
Data processing fees 245 241
Legal fees 160 165
Professional fees 218 174
Postage, delivery and communication 222 179
FDIC and OCC assessments 53 48
Other real estate expense 18 20
Other expenses 1,044 616
- ------------------------------------------------------------------------------------------------------
TOTAL NON-INTEREST EXPENSES 6,014 5,208
- ------------------------------------------------------------------------------------------------------
</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
--------------------
MARCH 31
1999 1998
(UNAUDITED)
<S> <C> <C>
INCOME BEFORE INCOME TAXES 2,753 2,855
PROVISION FOR INCOME TAXES 1,103 1,050
- ----------------------------------------------------------------------------------------------
NET INCOME 1,650 1,805
- ----------------------------------------------------------------------------------------------
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING /1/
BASIC 4,961,915 4,943,309 (1)
DILUTED 5,177,617 5,164,651 (1)
- ----------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE /1/
- ----------------------------------------------------------------------------------------------
BASIC $ 0.33 $ 0.37 (1)
DILUTED $ 0.32 $ 0.35 (1)
</TABLE>
See accompanying notes to consolidated financial statements.
_____________________
/1/ 1998 share and per share amounts have been restated to reflect the effect
of the 5% stock dividend declared December 17, 1998.
6
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED MARCH 31
1999 1998
---- ----
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 1,650 $ 1,805
Adjustments to reconcile net income to net cash
provided by (used in ) operating activities:
Depreciation and amortization 368 315
Amortization of securities premium, net 251 197
Amortization of deferred points and fees
and deferral of loan origination costs (84) (57)
Provision for possible loan losses 120 300
Deferred tax benefit (307) (395)
Decrease in accrued taxes
interest, and other liabilities (248) (269)
Gain on sale of securities available-for-sale 0 (90)
Gain on sale of other real estate owned 0 (18)
Increase in accrued interest receivable (250) (132)
Other assets, net 276 441
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 1,776 $ 2,097
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of other real estate owned $ 0 $ 346
Net increase in loan balances (5,731) (1,450)
Proceeds from the sale of loans 0 182
Proceeds from maturities of securities held-to-maturity 5,909 10,839
Purchase of securities held-to-maturity (759) (479)
Proceeds from maturities of securities available-for-sale 15,771 11,159
Proceeds from the sale of securities available-for-sale 0 12,590
Purchase of securities available-for-sale (23,916) (40,059)
Capital expenditures (383) (119)
- -----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities $ (9,109) $ (6,991)
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in certificates of deposit $ 8,476 $ 16,194
Net decrease in demand deposit, savings, money market
and interest bearing demand accounts (6,821) (12,436)
Net (decrease) increase in short-term borrowings (11,005) 300
Dividends paid (602) (518)
Decrease in long-term debt 0 (3,000)
Issuance of Common Stock 1,134 0
Purchase of Treasury Stock 0 (21)
- -----------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities $ (8,818) $ 519
- -----------------------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS $(16,151) $ (4,375)
CASH AND CASH EQUIVALENTS, beginning of period 45,793 59,233
- -----------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 29,642 $ 54,858
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for
Interest $ 4,515 $ 4,365
Taxes $ 0 $ 40
- -----------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
7
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
(1) Agreement and Plan of Merger -
On February 1, 1999 the Company entered into a definitive agreement with
Independence Community Bank Corp. ("Independence") of Brooklyn , N.Y.
pursuant to which Independence will acquire the Company. Upon completion of
the acquisition, the Company's wholly owned banking subsidiary, Broad
National Bank, will merge into Independence Community Bank, Independence's
wholly owned subsidiary. The transaction, which is subject to regulatory
and shareholder approvals, is expected to be completed in the third quarter
of 1999.
(2) 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.
(3) Net income per share -
Basic earnings per common share is computed by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per
common share includes any additional common shares as if all potentially
dilutive common shares were issued (e. g. stock options).
Below is a reconciliation of the weighted average common stock outstanding
for both the basic and diluted earnings per share:
March 31, 1999 March 31, 1998
-------------- --------------
Weighted average common shares
outstanding - Basic 4,961,915 4,943,309
Effect of dilutive securities
Stock options 199,541 221,342
Contingently issuable shares 16,161 -
--------- ---------
Weighted average common shares
Outstanding - Diluted 5,177,617 5,164,651
Share and per share amounts for 1998 have been restated to reflect the 5%
stock dividend declared in December 1998.
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 $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.
(5) Comprehensive Income -
For the three month period ended March 31, 1999 and 1998, the Company
recorded comprehensive income of $597,000 and $1,583,000, respectively,
consisting of net income of $1,650,000 and other comprehensive losses of
$1,053,000 for the three month period ended March 31, 1999, and net income
of $1,805,000 and other comprehensive losses of $222,000 for the three
month period ended March 31, 1998. In each instance, the comprehensive
losses represent unrealized holding losses on securities available for
sale, net of tax.
(6) Reclassification -
Certain amounts in the consolidated financial statements presented for
prior periods have been reclassified to conform with the 1999 presentation.
9
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
- ---------------------------------
SUMMARY
-------
The Company reported net income of $1,650,000 or $0.32 per diluted common share
for the first quarter of 1999 compared to net income of $1,805,000 or $0.35 per
diluted common share for the first quarter of 1998. Basic per share earnings
were $0.33 for the first quarter of 1999 and $0.37 for the first quarter of
1998.
Per share data for the first quarter of 1998 has been restated to reflect the
effect of a 5% stock dividend declared December 17, 1998.
As compared to December 31, 1998, total assets decreased $8.5 million or 1.2% to
$676.3 million at March 31, 1999; loans, net of deferred fees, increased $5.9
million or 1.6% to $366.1 million; deposits increased $1.7 million or .3% to
$576.7 million; and shareholders' equity increased $1.1 million or 2.5% to $45.8
million.
The Company's annualized return on average assets and annualized return on
average shareholders' equity were .98% and 14.68%, respectively, for the first
three months of 1999, compared to annualized returns of 1.21% and 18.42%,
respectively, for the comparable 1998 period.
On February 1, 1999 the Company entered into a definitive agreement with
Independence Community Bank Corp. ("Independence") of Brooklyn, N. Y. pursuant
to which Independence will acquire the Company. Upon completion of the
acquisition, the Company's wholly owned banking subsidiary, Broad National Bank,
will merge into Independence Community Bank, Independence's wholly owned
subsidiary. The transaction, which is subject to regulatory and shareholder
approvals, is expected to be completed in the third quarter of 1999.
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, money market, interest bearing demand and
time deposits, and short-term and long-term borrowings.
The table on the following page sets forth the Company's consolidated average
balance of assets, liabilities, and shareholders' equity as well as the amount
of interest income or interest expense and the average rate for each category of
interest-earning assets and interest-bearing liabilities. Non-accrual loans are
included in average loans, and interest on loans includes loan fees which were
not material. Non-taxable income from investment securities and loans is
presented on a tax-equivalent basis assuming a 34% tax rate.
NOTES TO NET INTEREST INCOME TABLE
(1) Average rates reflect the tax equivalent adjusted yields on nontaxable
investments.
(2) Represents the difference between interest earned and interest paid,
divided by total interest-earning assets.
(3) Annualized
11
<PAGE>
NET INTEREST INCOME
Three Months Ended March 31
(Dollars in Thousands)
<TABLE>
<CAPTION>
1999 1998
---- ----
Average Interest Average Average Interest Average
Balance and Fees Rate (3) Balance and Fees Rate (3)
------- -------- -------- -------- -------- --------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Federal Funds Sold $ 17,411 $ 201 4.62% $ 36,011 $ 508 5.64%
-------- ------- -------- -------
Investment Securities (1)
Securities held - to - maturity 29,265 428 5.85% 61,557 958 6.23%
Securities available - for - sale 235,634 3,584 6.08% 148,501 2,335 6.29%
-------- ------- -------- -------
Total Investment Securities 264,899 4,012 6.06% (1) 210,058 3,293 6.27% (1)
-------- ------- -------- -------
Loans
Mortgage 208,553 4,314 8.27% 187,802 4,200 8.95%
Installment 68,254 1,335 7.93% 46,000 1,005 8.86%
Commercial 85,507 1,858 8.81% 88,937 1,983 9.04%
-------- ------- -------- -------
Total Loans 362,314 7,507 8.40% 322,739 7,188 9.03%
-------- ------- -------- -------
Total interest earning assets 644,624 $11,720 7.37% (2) 568,808 $10,989 7.84% (2)
-------- ------- -------- -------
Less - Allowance for possible loan losses 8,451 6,772
All other assets 43,620 41,332
-------- --------
Total Assets $679,793 $603,368
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Deposits
Savings, money market and interest bearing
demand deposits $238,107 $ 1,157 1.97% $217,362 $ 1,130 2.11%
Time Deposits
Under $100,000 118,497 1,468 5.02% 103,925 1,337 5.22%
Over $100,000 104,743 1,278 4.95% 100,762 1,419 5.71%
-------- ------- -------- -------
Total interest bearing deposits 461,347 3,903 3.43% 422,049 3,886 3.73%
-------- ------- -------- -------
Short term borrowings 36,565 494 5.40% 13,024 192 5.90%
Long term debt - - - 7,937 123 6.20%
9.5% Cumulative Trust Preferred Securities 11,500 273 9.50% 11,500 273 9.50%
-------- ------- -------- -------
Total Interest Bearing Liabilities 509,412 $ 4,670 3.72% 454,510 $4,,474 3.94%
-------- ------- -------- -------
Other liabilities 10,945 9,998
Demand deposits 113,847 99,107
Shareholders' equity 45,589 39,753
-------- --------
Total liabilities and shareholders' equity $679,793 $603,368
-------- --------
NET INTEREST INCOME; NET INTEREST SPREAD $7,050 3.65% $6,515 3.90%
NET INTEREST MARGIN 4.44% (2) 4.65% (2)
</TABLE>
12
<PAGE>
Rate/Volume Analysis Of Net Interest Income
- -------------------------------------------
The effect of changes in average balance and rate from the corresponding prior
period on interest income, interest expense and net interest income for the
three months ended March 31, 1999 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)
Interest Earned on:
<S> <C> <C> <C>
Loans $ 933 $(614) $ 319
Investment securities 860 (141) 719
Federal funds sold (215) (92) (307)
------ ----- -----
Total interest income $1,578 $(847) $ 731
------ ----- -----
Interest paid on:
Savings, money market and interest
bearing demand deposits $ 114 $ (87) $ 27
Certificates of deposit:
Under $100,000 188 (57) 131
Over $100,000 56 (197) (141)
Short term borrowings 347 (45) 302
Long term debt (123) 0 (123)
9.5% Cumulative Trust Preferred Securities 0 0 0
------ ----- -----
Total Interest expense $ 582 $(386) $ 196
------ ----- -----
Change in net interest income $ 996 $(461) $ 535
------ ----- -----
Percent increase in net interest
income over the prior period 8.21%
-----
</TABLE>
Total tax equivalent interest income of $11,720,000 for the first three months
of 1999 represents an increase of $731,000 or 6.7% over total tax equivalent
interest income of $10,989,000 for the comparable 1998 period. This improvement
is primarily due to an increase of $75,816,000 in the average balance of total
interest earning assets for the first three months of 1999 as compared to the
first three months of 1998. The average balance of total investment securities
was $54,841,000 higher for the first three months of 1999 as compared to the
first three months of 1998, while the average balance of total loans was
$39,575,000 higher. These increases were offset by a decline of $18,600,000 in
the average balance of federal funds sold. The increase in the average balance
of interest earning assets contributed $1,578,000 to the increase in total tax
equivalent interest income. This increase was partially offset by a decrease of
$847,000 in total tax equivalent interest income due to a 47 basis point
decrease in the average rate earned
13
<PAGE>
on interest earning assets as compared to the first three months of 1998.
Total interest expense of $4,670,000 for the first three months of 1999 was
$196,000 or 4.4% higher than the comparable prior year period. An increase of
$54,902,000 in average total interest bearing liabilities is the primary reason
for this increase, resulting in an additional $582,000 of interest expense for
the first three months of 1999 as compared to the first three months of 1998.
This increase in interest expense was partially offset by a decrease of
$386,000 in interest expense due to a 22 basis point decrease in the average
rate paid on interest bearing liabilities as compared to the first three months
of 1998.
Tax equivalent net interest income for the first three months of 1999 was
$7,050,000, an increase of $535,000 or 8.2% from $6,515,000 for the comparable
1998 period, primarily due to the average balance of interest earning assets
increasing more than the average balance of interest bearing liabilities. The
net interest spread on a tax equivalent basis declined 25 basis points to 3.65%
for the first three months of 1999, and the net interest margin, which is tax
equivalent net interest income expressed as a percentage of average interest
earning assets, declined 21 basis points to 4.44% for the first three months of
1999. This is attributable to the fact that rates earned on interest earning
assets declined to a greater degree than rates paid on interest bearing
liabilities, as well as to the greater use of relatively higher cost borrowings
to fund the growth of interest earning assets.
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 $120,000 for the first quarter of 1999
compared to $300,000 for the comparable 1998 period. The decreased provision for
possible loan losses is primarily due to the improvement in the Company's asset
quality as compared to the year-ago period. Actual net loan recoveries for the
first three months of 1999 were $226,000 or 0.25% (annualized) of average total
loans, as compared to net loan charge-offs of $600,000 or 0.74% (annualized) of
average total loans for the comparable 1998 period.
NON-INTEREST INCOME AND NON-INTEREST EXPENSES
- ---------------------------------------------
Total non-interest income of $1,841,000 for the first quarter of 1999 was
$18,000 or .97% lower than the comparable 1998 period. First quarter 1998 non-
interest income included a gain of $90,000 from the sale of securities
available-for -sale. No such income was derived during the first quarter of
1999. The decrease in gains from the sale of securities available-for sale was
partially offset by an increase of $52,000 in other income primarily
attributable to ATM non-customer convenience fees and a $20,000 increase in
service charge income.
Total non-interest expense of $6,014,000 for the first three months of 1999 was
$806,000 or 15.5% higher than the comparable 1998 period. Acquisition costs
expensed by the Company in connection with its pending acquisition by
Independence, increased occupancy expenses and furniture and equipment expenses
were the significant factors contributing to the increase in non-interest
expense.
Acquisition costs representing professional fees associated with the
Independence acquisition totaled $245,000 for the first quarter of 1999 compared
to $0 for the first quarter of 1998. These costs are reflected in the "Other
expenses" category in the Statement of Income.
Occupancy expenses totaling $600,000 for the first quarter of 1999 were $107,000
higher than the comparable 1998 period, reflecting increased costs associated
with the addition of four new branches.
14
<PAGE>
Furniture and equipment expenses totaling $419,000 for the first quarter of 1999
were $99,000 higher than the comparable 1998 period, also reflecting increased
costs associated with the addition of four new branches.
FINANCIAL CONDITION
- -------------------
Loans
Total loans, net of deferred loan fees, were $366,069 at March 31, 1999 which
represents an increase of $5,927,000 or 1.6% from the December 31, 1998 balance
of $360,142,000. Increases of approximately $4,700,000 in commercial mortgages,
$2,300,000 in equity credit loans, and $2,200,000 in residential mortgages were
offset by a decrease of $3,200,000 in commercial loans. For the first three
months of 1999, average loans of $362,314,000 represented 56.2% of total average
interest earning assets, as compared to 56.8% of total average interest earning
assets for the first three months of 1998.
Allowance for Possible Loan Losses
The following table summarizes the activity in the allowance for possible loan
losses for the periods presented. Also presented are certain key ratios
regarding the allowance.
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1999 March 31, 1998
-------------- --------------
(Dollars In Thousands)
<S> <C> <C>
Balance, beginning of period $ 8,246 $ 6,974
Provision charged to operations 120 300
Loans charged off (80) (779)
Recoveries of charged-off loans 306 179
-------- --------
Balance, end of period $ 8,592 $ 6,674
-------- --------
Average gross loans outstanding
during period $362,314 $322,739
-------- --------
Total gross loans at period end $366,289 $323,389
-------- --------
Net loans (recovered) charged-off $ (226) $ 600
-------- --------
Ratio of net loans (recovered) charged-off to average loans (0.25)% 0.74%
outstanding during period (annualized) -------- --------
Allowance for possible loan losses as
a percentage of total gross loans 2.35% 2.06%
-------- --------
</TABLE>
The amount of allowance applicable to non-classified loans was $7,413,000 and
$6,937,000 at March 31, 1999 and December 31, 1998, respectively.
15
<PAGE>
Asset Quality
Non-performing assets consist of (i)non-performing loans, which include non-
accrual loans and loans past due 90 days or more as to interest or principal
payments but not placed on non-accrual status; (ii) loans that have been
renegotiated due to a weakening in the financial position of the borrower
(restructured loans) and (iii) other real estate owned ("OREO"), net of
reserves.
The following table reflects the components of non-performing assets at March
31, 1999 and December 31, 1998:
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
(Dollars In Thousands)
Past due 90 days or more:
<S> <C> <C>
Mortgage........................ $ 822 $ 1,132
Commercial...................... 161 159
Installment..................... 85 75
------- -------
Total........................... $ 1,068 $ 1,366
------- -------
Non-accrual loans:
Mortgage........................ $ 1,049 $ 697
Commercial...................... 9 11
Installment..................... 2 8
------- -------
Total........................... $ 1,060 $ 716
------- -------
Total non-performing loans.......... $ 2,128 $ 2,082
Restructured loans (excluding amounts classified as 3,699 3,701
non-performing loans)
Other real estate owned, 293 293
net of reserve.................... ------- -------
Total non-performing assets. $ 6,120 $ 6,076
------- -------
Non-performing loans as a 0.58% 0.58%
percent of total gross loans..... ------- -------
Non-performing loans as a 0.31% 0.30%
percent of total assets.......... ------- -------
Non-performing assets as a 1.67% 1.69%
percent of loans and other ------- -------
real estate owned.................
Allowance for possible loan $ 8,592 $ 8,246
losses............................ ------- -------
Allowance for possible loan 403.76% 396.06%
losses as a percent of ------- -------
non-performing loans .............
</TABLE>
In addition to the non-performing and restructured loans as of March 31, 1999
and December 31, 1998, the Company
16
<PAGE>
had classified an additional $3,351,000 and $3,425,000, respectively, as
substandard loans. Substandard loans are classified according to the Company's
internal loan classification system. A loan loss reserve has been allocated to
such loans in accordance with the Company's policies.
At March 31, 1999, the recorded investment in loans that are considered to be
impaired was $4,299,000 as compared to $4,526,000 at December 31, 1998. The
related allowance for credit losses was 0 as of March 31, 1999 and December 31,
1998. The impaired loan portfolio is primarily collateral dependent. There was
no change in the allowance for impaired loans. The average recorded investment
in impaired loans during the first quarter of 1999 was approximately $4,413,000.
For the first three months of 1999, the Company recognized cash basis interest
income on these impaired loans of $57,600 compared to $55,200 for the first
three months of 1998.
The level of non-performing loans and assets is heavily dependent upon local
economic conditions. The March 31, 1999 total non-performing assets of
$6,120,000 represents an increase of $44,000 or .07% over the total at December
31, 1998. There can be no assurance that the level of non-performing assets
will not increase in the future.
Investment Securities and Federal Funds Sold
Federal funds sold of $8,135,000 at March 31, 1999, represent an increase of
$8,135,000 from the balance at December 31, 1998. Average Federal Funds sold of
$17,411,000 during the first three months of 1999 represented 2.7% of total
average interest earning assets, as compared to 6.3% during the first three
months of 1998.
Total average investment securities of $264,899,000 for the first three months
of 1999 represent 41.1% of total average interest-earning assets, as compared to
36.9% for the comparable 1998 period.
Total investment securities, which include securities classified as held-to-
maturity and available-for-sale, of $265,906,000 at March 31, 1999 represent an
increase of $1,129,000 or .4% over the balance at December 31, 1998. During the
first quarter of 1998, securities available-for-sale of $12,590,000 were sold
and a net gain of $90,000 was realized as compared to no sales during the first
quarter of 1999.
Deposits
The March 31, 1999 total deposit balance of $576,719,000 represents an increase
of $1,655,000 or .3% over total deposits of $575,064,000 at December 31, 1998.
Non-interest bearing demand deposits of $118,493,000 at March 31, 1999
represented an increase of $4,227,000 or 3.7% from the December 31, 1998 balance
of $114,266,000. Time deposits of $100,000 or more were $6,440,000 or 6.8%
higher at March 31, 1999 than at December 31, 1998. This increase is primarily
attributable to municipal deposits. Savings, money market and interest bearing
demand deposits of $241,925,000 at March 31, 1999 represented a decrease of
$11,048,000 or 4.6% from the December 31, 1998 balance of $252,973. This
decrease is primarily attributable to the reduced account balance of a single
municipal depositor.
Short Term Borrowings
Short-term borrowings represent Federal Home Loan Bank (FHLB) advances and
securities sold under agreements to repurchase, which are used to supplement the
Bank's deposit base as a source of funding. The FHLB advances have remaining
maturities of less than one year, while securities sold under agreement to
repurchase generally have terms ranging from one to ninety days.
The average balance of short-term borrowings was $36,565,000 for the first three
months of 1999 as compared to $13,024,000 for the first three months of 1998,
and the average cost of short-term borrowings was 5.40% for the first three
months of 1999 as compared to 5.90% for the first three months of 1998. The
increase in the average balance of
17
<PAGE>
short term borrowings is primarily attributable to additional FHLB advances
which the Company added to its balance sheet in the fourth quarter of 1998.
During the first quarter of 1999 the actual balance of short term borrowings
declined by $11,005,000, primarily due to
the repayment of the FHLB advances.
Liquidity of the Bank
The Bank actively monitors its liquidity position to ensure that it has
sufficient funds to provide for cash outflows without incurring losses from the
premature liquidation of assets or the unexpected acquisition of costly
liabilities. The Bank's cash outflows encompass interest paid to depositors and
other creditors, deposit withdrawals, and disbursements to acquire assets and
pay general operating costs. The Bank obtains cash from customers in the form
of interest and principal payments on loans, fees paid for services, and from
new deposits. Investment maturities also provide a source of cash.
Many different measurements of liquidity are used in the banking industry. The
ratios of cash and cash equivalents (including federal funds sold) and short-
term securities to total assets and net loans to total deposits are among some
of the more commonly used indicators. These measurements are set forth below as
of March 31, 1999 and December 31, 1998.
March 31, 1999 December 31, 1998
Cash and cash equivalents
and securities maturing in
one year to total assets 6.0% 8.1%
Net loans to total deposits 62.0% 61.2%
The Consolidated Statements of Cash Flows present the change in cash from
operating, investing and financing activities. During the first three months of
1999, cash and cash equivalents decreased by $16,151,000, primarily due to
funding the growth in the loan and investment portfolios and the repayment of
short term borrowings.
Net cash provided by operating activities was $1,776,000 for the first quarter
of 1999, representing primarily the results of operations adjusted for
depreciation, amortization and the provision for possible loan losses, as well
as an increase in deferred tax benefits and accrued taxes, interest and other
liabilities.
Net cash used in investing activities was $9,109,000 which was used primarily to
fund growth in loans and the securities portfolio.
Net cash used in financing activities was $8,818,000, reflecting a decrease in
short term debt and payment of dividends to shareholders partially offset by a
net increase in deposits and issuance of common stock.
To assist in the management of its liquidity, the bank has available $31,000,000
in lines of credit for federal funds. However, none of these lines were in use
at March 31, 1999.
Managing the Bank's liquidity position involves a significant degree of
analytical estimation and other objective
18
<PAGE>
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 interest and
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, 1998, retained earnings of the Bank of $12,695,000
were available for payment of dividends to the parent company without regulatory
approval. Additionally, at March 31, 1999 Bancorporation had $2,440,000 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 interest and dividend payments and may be required to seek other sources of
capital and liquidity, if available.
Capital Adequacy
At March 31, 1999, the Company had total capital equal to 14.36% of risk-based
assets which included tier one capital equal to 13.10% of risk-based assets.
These compare to minimum regulatory capital requirements of 8% and 4%,
respectively. At March 31, 1999, the Company had tier one capital equal to
8.36% of adjusted total assets. This compares to a minimum regulatory capital
requirement of 4% to 5%.
At March 31, 1999, the Bank had total capital equal to 13.72% of risk-based
assets, which included tier one capital equal to 12.46% of risk-based assets.
These compare to minimum regulatory capital requirements of 8% and 4%,
respectively. At March 31, 1999, the Company had tier one capital equal to
7.95% of adjusted total assets. This compares to a minimum regulatory capital
requirement of 4% to 5%.
Recent Accounting Pronouncements and Other Matters
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, and for hedging activities.
SFAS 133 supercedes the disclosure requirements in SFAS 80, 105 and 119 and is
effective for periods after June 15, 1999.
The adoption of SFAS No. 133 is not expected to have a material impact on the
financial position or results of operations of the Company.
Year 2000
- ---------
Company State of Readiness
- --------------------------
Awareness Phase
19
<PAGE>
In 1997, the Company conducted a review of its computer systems to determine the
systems that would be affected by the Year 2000 issue. A steering committee
comprised of senior management was formed to ensure that adequate resources are
allocated to this project and to monitor the progress and testing of the Year
2000 transition. This committee provides monthly reports to the Board of
Directors.
Assessment Phase
Management has completed an inventory of all hardware, software, network, ATM,
and other processing systems covering both information technology and non-
information technology systems. Applying the Federal Banking Regulatory
definition of "mission critical" applications, management has identified the
Company's mission critical information technology systems to be limited to those
applications supported by the Company's third party data processing company
("third party processor").
Management has evaluated non information technology ("Non IT") systems such as
environmental systems dependent on imbedded micro chips, including security
systems, elevators and vaults. With the exception of the security and
telecommunication systems, none of the Company's other Non IT systems were
determined to be dependent on imbedded micro chip technology.
In 1998, management conducted a mailing to third party vendors to determine
their Year 2000 state of readiness. After receiving a response rate of 50%, the
Company restricted its mailing to those third party relationships considered to
pose a significant risk. This limited the review to the Company's major
utilities and telecommunications companies. These parties have indicated that
they will be Year 2000 ready by June 30, 1999.
The Company has recently completed a review of its major loan customers' Year
2000 state of readiness. This review was conducted for all existing customers
with loan commitments exceeding $250,000. This review has also become part of
the Company's underwriting for all new loans.
Renovation Phase
This phase includes code enhancements which are primarily the responsibility of
the Company's third party data processing company. This third party processor
is responsible during the renovation phase for assuring that any such code
enhancements, hardware and software upgrades, system replacements, vendor
certification, and other associated changes which impact the Company are
completed in a timely and effective manner. The third party processor intends to
achieve Year 2000 compliance through a combination of replacement and
renovation. This phase has been completed.
Validation Phase
This phase includes independent transactional testing by the company to verify
that the renovations and replacements made by its third party processor during
the renovation phase are year 2000 compliant. The Bank commenced the validation
phase in August, 1998, and completed its transactional testing by March 31,
1999. This phase also includes testing the software used to access the
Company's wide area network and its third party processor' s applications. This
testing has also been completed.
Costs of Remediation
- --------------------
20
<PAGE>
Since implementing its review of the Year 2000 issue, the Company's Year 2000
remediation costs have been approximately $118,000. Expected future costs
relating to fixing Year 2000 issues, such as modifying and replacing hardware
and software, are not expected to exceed $200,000.
Risks of Company's Year 2000 Issues
- -----------------------------------
Management believes that its efforts to address its Year 2000 issues are
adequate, and that year 2000 compliance will be achieved in accordance with the
schedule outlined above. However, the Company is heavily dependent on its
automated systems to process its customers' transactions in a timely and
accurate manner. If the modifications and/or conversions required for Year 2000
compliance are not made, or are not completed timely, the Company could be
rendered unable to process transactions for its customers, which, in turn, could
have a materially adverse effect on the Company.
Additionally, major customers may experience Year 2000 related problems which
may adversely affect their ability to repay their loans. While the Company is
assessing the Year 2000 readiness of certain borrowers, it cannot currently know
whether its borrowers will be Year 2000 compliant. Consequently, the Company
may experience increases in its problem loans and loan charge-offs in future
years. However, such losses cannot be quantified and the potential impact of
such losses cannot be determined at the present time.
Contingency Plan
- ----------------
The Company has a formal contingency plan for all "mission critical"
applications.
If it is determined that an application is incapable of providing services in
the Year 2000, the Bank has a formal contingency plan which provides for
conversion to an alternate processing software. This conversion would take place
in the second quarter of 1999. The Company has evaluated its contingency plan
software and management deemed it to be an acceptable replacement.
Based upon the results of testing completed as of March 31, 1999 the Company
does not believe that it will have to implement its contingency plan.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 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.
21
<PAGE>
At March 31, 1999 the Company had a one year cumulative negative gap of 28.9%,
as compared to a one year cumulative negative gap of 24.6% at December 31, 1998.
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 involves 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 prepayments of loans and investment securities as well as
to the repricing of deposit accounts. The impact of actual repayments,
repricings and changes in interest rates may differ from the implications
derived from the interest sensitivity gap analysis. Consequently, these static
measurements are best used as early indicators of potential interest rate
exposure.
The Company also uses a simulation model to analyze net interest income
sensitivity to movements in interest rates. The simulation model projects net
interest income based on both an immediate rise or fall of 200 basis points in
interest rates (rate shock) over a twelve month period. Management believes
that a 200 basis point rate shock over a twelve month period, up or down, would
not significantly affect the Company's annualized net interest income.
There has been no material change in the Company's market risk exposures since
December 31, 1998.
* * * *
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.
22
<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) Reports on Form 8-K
On February 8, 1999, the Company filed a form 8-K Item 5 (date of
earliest event - February 1, 1999), to announce that on February 1,
1999, the Company had entered into an Agreement and Plan of Merger
(the "Merger Agreement") by and between Independence Community Bank
Corp., a Delaware corporation ("ICBC") and the Company. The Merger
Agreement provides, among other things, that the Company will be
merged with and into ICBC, with ICBC being the surviving
corporation. The Company and ICBC publicly announced the Merger in
a press release dated February 1, 1999. Both the Merger Agreement
and the press release were included by exhibit.
The transaction is subject to the satisfaction of certain conditions
precedent, including obtaining approval of the Company's
shareholders as well as regulatory approval, and it is anticipated
that the transaction would be consummated in the third quarter of
1999.
23
<PAGE>
BROAD NATIONAL BANCORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BROAD NATIONAL BANCORPORATION
-----------------------------
(registrant)
Date: May 13, 1999 /s/ Donald M. Karp
--------------------
Donald M. Karp
Chairman and CEO
/s/ James Boyle
------------------
James Boyle
Treasurer
24
<PAGE>
BROAD NATIONAL BANCORPORATION
Computation of Net Income Per Share
(Unaudited)
<TABLE>
<CAPTION>
THREE-MONTH PERIOD
ENDED MARCH 31
1999 1998/1/
---- -------
BASIC:
<S> <C> <C>
Net Income available to common $1,650,309 $1,805,250
Shareholders ---------- ----------
Weighted average number of common 4,961,915 4,943,309
shares outstanding ---------- ----------
Basic Earnings Per Common Share $ 0.33 $ 0.37
========== ==========
DILUTED:
Net income available to common $1,650,309 $1,805,250
shareholders ---------- ----------
Weighted average number of common 4,961,915 4,943,309
shares outstanding
Effects of dilutive securities 199,541 221,342
Stock options
Contingently issuable shares 16,161 0
---------- ----------
Adjusted average number of common 5,177,617 5,164,651
shares outstanding ---------- ----------
Diluted earnings per common share $ 0.32 $ 0.35
========== ==========
</TABLE>
_______________________
/1/ Restated to reflect the effect of the 5% stock dividend declared in
December 1998.
25
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
Broad National Bancorporation:
We have reviewed the accompanying consolidated condensed statement of condition
of Broad National Bancorporation and subsidiaries (the Company) as of March 31,
1999, and the related consolidated condensed statements of income, and cash
flows for the three-month periods ended March 31, 1999 and 1998. 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, 1998, 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 21, 1999, 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, 1998, is fairly presented, in all material respects, in relation
to the consolidated statement of condition from which it has been derived.
/s/ KPMG LLP
Short Hills, New Jersey
May 13, 1999
______________________________
26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BROAD
NATIONAL BANCORPORATION'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 21,507
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 8,135
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 238,149
<INVESTMENTS-CARRYING> 27,757
<INVESTMENTS-MARKET> 27,904
<LOANS> 366,069
<ALLOWANCE> 8,592
<TOTAL-ASSETS> 676,328
<DEPOSITS> 576,719
<SHORT-TERM> 29,646
<LIABILITIES-OTHER> 12,641
<LONG-TERM> 11,500
0
0
<COMMON> 5,282
<OTHER-SE> 40,540
<TOTAL-LIABILITIES-AND-EQUITY> 676,328
<INTEREST-LOAN> 7,507
<INTEREST-INVEST> 4,008
<INTEREST-OTHER> 201
<INTEREST-TOTAL> 11,716
<INTEREST-DEPOSIT> 3,903
<INTEREST-EXPENSE> 4,670
<INTEREST-INCOME-NET> 7,046
<LOAN-LOSSES> 120
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,014
<INCOME-PRETAX> 2,753
<INCOME-PRE-EXTRAORDINARY> 2,753
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,650
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.32
<YIELD-ACTUAL> 4.44
<LOANS-NON> 1,060
<LOANS-PAST> 1,068
<LOANS-TROUBLED> 3,699
<LOANS-PROBLEM> 3,351
<ALLOWANCE-OPEN> 8,246
<CHARGE-OFFS> 80
<RECOVERIES> 306
<ALLOWANCE-CLOSE> 8,592
<ALLOWANCE-DOMESTIC> 8,592
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 7,413
</TABLE>
