<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13
OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
------------ ------------
Commission file number 0-14403
BRUNSWICK BANCORP
(Exact name of Registrant as specified in its Charter)
-------------------------
New Jersey 22-2610694
- ---------- ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
439 Livingston Avenue
New Brunswick, NJ 08901
- ------------------------------ ----------
(Address of principal executive offices) (Zip Code)
(908) 247-5800
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
Common Stock, $2 par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. yes [X] no [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non affiliates
of the Registrant, as of January 30, 1996 was $10,828,800.
The number of shares of Registrant's Common Stock, $2 par value,
outstanding as of January 30, 1996 was 721,920.
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DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
PART(S) INTO
DOCUMENTS WHICH INCORPORATED
<S> <C>
Proxy Statement is expected to be completed and filed with the SEC within
120 days of the end of the registrant's fiscal year end, in connection
with the Registrant's 1996 Annual Meeting ("Proxy Statement"). The
information in the Proxy Statement under the captions "Proposal No. 1 -
Election of Directors," "Executive Compensation," "Beneficial Ownership of
Common Stock by Management and Principal Shareholders," "Certain
Transactions with Management," and "Compensation Committee Interlocks and
Insider Participation," is the only information incorporated by reference
in this Annual Report on Form 10-K. Information in the Proxy Statement
required by Paragraphs (k) and (l) of Item 402 of Regulation S-K is not
incorporated by reference into any portion of the Annual Report on Form
10K. III
</TABLE>
With the exception of information specifically incorporated by
reference, the Proxy Statement is not deemed part of this report.
<PAGE> 3
BRUNSWICK BANCORP
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
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<S> <C> <C> <C>
PART I
Item 1 - Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2 - Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 3 - Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 4 - Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II
Item 5 - Market for Registrant's Common Equity and
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 6 - Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . 10
Item 8 - Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . 22
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 22
PART III
Item 10 - Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Item 11 - Compensation of Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Item 12 - Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Item 13 - Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . 23
PART IV
Item 14 - Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SIGNATURES
EXHIBITS
</TABLE>
<PAGE> 4
BRUNSWICK BANCORP
Form 10-K Annual Report
For the Fiscal Year Ended December 31, 1995
PART I
Item 1. BUSINESS.
(a) General Development of Business.
Brunswick Bancorp ("BB", "Registrant" or "Company") is a bank holding
company registered under the Bank Holding Company Act of 1956, as amended (the
"Bank Holding Company Act"). BB was organized under the laws of New Jersey in
1984 by Brunswick Bank and Trust Company (the "Bank") for the purpose of
creating a holding company for the Bank. Effective January 16, 1986, BB
acquired all of the outstanding shares of the Bank.
The Bank was incorporated as a state-chartered New Jersey bank in 1970
under the name Bank of Manalapan. That entity merged with New Brunswick Trust
Company in 1977, forming Brunswick Bank and Trust Company.
The Bank maintains its head office and 5 branches in Monmouth and
Middlesex Counties, New Jersey.
There are a variety of statutory and regulatory restrictions governing
BB, the Bank, and the relations among BB and its subsidiaries. Proposals to
change the laws and regulations governing the banking industry are frequently
introduced in Congress, in the state legislatures and before the various bank
regulatory agencies. The likelihood and timing of any such changes and the
impact such changes might have on BB cannot be determined at this time.
The policy of the Board of Governors of the Federal Reserve System
provides that BB is expected to act as a source of financial strength to its
subsidiary bank and to commit resources to support such subsidiary bank in
circumstances in which it might not do so absent of such policy.
The Banking Affiliates Act of 1982, as amended, severely restricts
loans and extensions of credit by Brunswick Bank and Trust Company to BB and
its affiliates (except affiliates which are banks). All such loans must be
secured by collateral having a market value ranging from 100% to 130% of the
loan, depending upon the type of collateral. Furthermore, the aggregate of all
loans from the Bank to BB and its affiliates may not exceed 20% of the Bank's
capital stock and surplus and, singly, to BB or any affiliate, may not exceed
10% of the Bank's capital stock and surplus. Similarly, the Banking Affiliates
Act of 1982 also restricts the Bank in the purchase of securities issued by,
the acceptance as loan collateral of securities issued by, the purchase of
assets from, and the issuance of a guarantee or standby letter-of-credit on
behalf of, BB or any of its affiliates.
Generally, the Bank Holding Company Act limits the business of a bank
holding company and its affiliates to banking, managing or controlling banks,
and furnishing or performing services for banks controlled by the holding
company. The major exception to this rule is that a bank holding company
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directly or through a subsidiary may engage in non-banking activities which the
Federal Reserve Board has determined to be so closely related to banking or
managing or controlling banks so as to be a proper incident thereto. The
Federal Reserve Board under its Regulation "Y" has restricted such activities
to things such as lease financing, mortgage banking, investment advice, certain
data processing services and, more recently, discount brokerage services. BB
is not currently conducting these activities.
Under the Bank Holding Company Act, BB may not acquire directly or
indirectly more than 5 percent of the voting shares of, or substantially all of
the assets of, any bank without the prior approval of the Federal Reserve
Board. Under current law, a new Jersey based bank holding company, like BB, is
permitted to acquire banks located in New Jersey and in certain other states if
the states had enacted laws specifically to permit acquisitions of banks by
out-of-state bank holding companies having the largest proportion of their
deposits in New Jersey. Satisfactory capital ratios and Community Reinvestment
Act ratings are generally prerequisites to obtaining federal regulatory
approval to make acquisitions. Acquisitions through the Bank require approval
of the Federal Deposit Insurance Corporation (the FDIC). Statewide branching
is permitted in New Jersey. The Holding Company act does not place territorial
restrictions on the activities of non-bank subsidiaries of bank holding
companies.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Interstate Banking and Branching Act") passed by Congress and signed
into law on September 29, 1994, significantly changed interstate banking rules.
Pursuant to the Interstate Banking and Branching Act, a bank holding company
will be able to acquire banks in states other than its home state beginning
September 29, 1995, regardless of applicable state law. Until such provisions
are effective, interstate acquisitions by bank holding companies will continue
to be subject to current state law restrictions.
The Interstate Banking and Branching Act also authorizes banks to
merge across state lines, thereby creating interstate branches, beginning June
1, 1997. Under such legislation, each state has the opportunity either to
"opt-out" of this provision, thereby prohibiting interest branching in such
states, or to "opt-in" at an earlier time, thereby allowing interstate
branching within that state prior to June 1, 1997. Furthermore, a state may
"opt-in" with respect to de novo branching, thereby permitting a bank to open
new branches in a state in which the bank does not already have a branch.
Without de novo branching, an out-of-state bank can enter the state only by
acquiring an existing bank.
On February 29, 1996 the New Jersey General Assembly unanimously
passed an Interstate Banking/Branching bill which "opts in," under the
Interstate Banking and Branching Act, but the method of entry would require
domestic out-of-state and international banks to acquire a bank or branch. The
method of entry into New Jersey would not be "de novo" under the legislation.
The bill has been sent to the Governor, but as of March 20, 1996, it had not
yet been signed into law. There can be no assurance that the bill will become
law.
Bank holding companies must comply with the Federal Reserve Board's
risk-based capital guidelines. Under the guidelines, risk weighted assets are
calculated by assigning assets and certain off-balance sheet items to
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broad risk categories. The total dollar value of each category is then
weighted by the level of risk associated with each category. A minimum total
qualifying capital to risk-based assets ratio (Total Capital ratio) of 8.00% is
required beginning December 31, 1992. At least 4% of an institution's
qualifying capital must consist of Tier 1 capital, and the rest may consist of
Tier 2 capital. Tier 1 capital consists primarily of common stockholder's
equity minus goodwill. Tier 2 capital consists of an institution's allowance
for possible loan losses, subject to limitation, hybrid capital instruments and
certain subordinated debt. The allowance for possible loan losses which may be
considered Tier 2 capital is limited to 1.25% of risk-based assets. As of
December 31, 1995, the Company's Total Capital ratio was 34.76%, consisting of
a Tier 1 ratio of 33.50% and Tier 2 ratio of 1.26%. Such ratios exceed the
current regulatory requirements.
In addition, the Federal Reserve Board has promulgated a leverage
capital standard, with which bank holding companies must comply. Bank holding
companies must maintain a minimum Tier 1 capital to total assets ratio of 3%.
However, institutions which are not among the most highly rated by federal
regulators must maintain a ratio 100-200 basis points above the 3% minimum. As
of December 31, 1995, the consolidated Company had a leverage capital ratio of
17.92%.
The FDIC also imposes risk based and leverage capital guidelines on
the Bank. These guidelines and the ratios to be met are substantially similar
to those imposed by the Federal Reserve Board. If a bank does not satisfy the
FDIC's capital requirements, it will be deemed to be operated in an unsafe and
unsound manner and will be subject to regulatory action. The Bank met all the
FDIC capital requirements at December 31, 1995. As of December 31, 1995, the
Bank had a risk weighted capital ratio of 28.55% and a leverage capital ratio
of 14.12%.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), which became law in December of 1991, required each federal banking
agency to revise its risk-based capital standards to ensure that those
standards take adequate account of interest rate risk, concentration of credit
risk and the risks of non-traditional activities. In addition, pursuant to
FDICIA, each federal banking agency has promulgated regulations, specifying the
levels at which a financial institutions would be considered "well
capitalized," "adequately capitalized," undercapitalized," "significantly
undercapitalized," or "critically undercapitalized," and requiring the agency
to take certain mandatory and discretionary supervisory actions based on the
capital level of the institution.
The FDIC's regulations implementing these provisions of FDICIA provide
that an institution will be classified as "well capitalized" if it (i) has a
total risk-based capital ratio of at least 10.0 percent, (ii) has a Tier 1
risk-based capital ratio of at least 6.0 percent, (iii) has a Tier 1 leverage
ratio of at least 5.0 percent, and (iv) meets certain other requirements. An
institution will be classified as "adequately capitalized" if it (i) has a
total risk-based capital ratio of at least 8.0 percent, (ii) has a Tier 1
risk-based capital ratio of at least 4.0 percent, (iii) has a Tier 1 leverage
ratio of (a) at least 4.0 percent or (b) at least 3.0 percent if the
institution was rated 1 in its most recent examination, and (iv) does not meet
the definition of "well capitalized." An institution will be classified as
"undercapitalized" if it (i) has a total risk-based capital ratio of less
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than 8.0 percent, (ii) has a Tier 1 risk-based capital ratio of less than 4.0
percent, or (iii) has a Tier 1 leverage ratio of (a) less than 4.0 percent or
(b) less than 3.0 percent if the institution was rated 1 in its most recent
examination. An institution will be classified as "significantly
undercapitalized" if it (i) has a total risk-based capital ratio of less than
6.0 percent, (ii) has a Tier 1 risk-based capital ratio of less than 3.0
percent, (iii) has a Tier 1 leverage ratio of less than 3.0 percent. An
institution will be classified as "critically undercapitalized" it has a
tangible equity to total assets ratio that is equal to or less than 2.0
percent. An insured depository institution may be deemed to be in a lower
capitalization category if it receives an unsatisfactory examination.
Insured institutions are generally prohibited from paying dividends or
management fees if after making such payments, the institutions would be
"undercapitalized." An "undercapitalized" institution also is required to
develop and submit to the appropriate federal banking agency a capital
restoration plan, and each company controlling such institution must guarantee
the institution's compliance with such plan. The liability of a holding
company under any such guarantee is limited to the lesser of five percent of
the institution's total assets at the time it became undercapitalized or the
amount needed to comply with all applicable capital standards. The FDIC is
accorded a priority over the claims of unsecured creditors in any bankruptcy
proceeding of a holding company that has guaranteed an institution's compliance
with a capital restoration plan. Further, "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized" institutions are subject
to increasingly extensive requirements and limitations, including mandatory
sale of stock, forced mergers, and ultimately receivership and conservatorship.
A "critically undercapitalized" institution, beginning 60 days after it becomes
"critically undercapitalized," generally is prohibited from making any payment
of principal or interest on the institution's subordinated debt.
Under FDICIA, only "well capitalized" banks and those "adequately
capitalized" banks which have obtained a waiver from the FDIC may accept
brokered deposits. Those "adequately capitalized" banks that are permitted to
accept brokered deposits may not pay rates that significantly exceed the rates
paid on deposits of similar maturity from the bank's normal market area or the
national rate on deposits of comparable maturity, as determined by the FDIC,
for deposits from outside the bank's normal market area. In addition, the FDIC
will no longer insure accounts established under certain qualified employee
benefit plans if, at the time such deposits are accepted, the institution could
not accept brokered deposits.
FDICIA also required that the FDIC insurance assessments move from
flat-rate premiums to a new system of risk-based premium assessments, in order
to recapitalize the Bank Insurance Fund ("BIF") at a reserve ratio specified in
FDICIA. For the first three quarters of 1995, BIF-member institutions paid
deposit insurance premiums based on a schedule from $0.23 to $0.31 per $100 of
deposits. In August, 1995, the FDIC, in anticipation of BIF's imminent
achievement of a required 1.25% reserve ration, reduced the deposit insurance
premium rates paid by BIF-insured banks from a range of $0.23 to $0.31 per $100
of deposits to a range of $0.04 to $0.31 per $100 deposits. The new rate
schedule for the BIF was made effective June 1, 1995. The FDIC refunded to
BIF-insured institutions the premiums they had paid for the period beginning on
June 1, 1995. On November 14, 1995, the FDIC voted to reduce
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annual assessments for the semi-annual period beginning January 1, 1996 to the
legal minimum of $2,000 for BIF-insured institutions, except for institutions
that are not well capitalized and are assigned to the higher supervisory risk
categories.
FDICIA also contains the Truth in Savings Act, which requires certain
disclosures to be made in connection with deposit accounts offered to
consumers. The FRB has adopted regulations implementing the provisions of the
Truth in Savings Act.
In addition, significant provisions of FDICIA required federal banking
regulators to draft standards in a number of other areas to assure bank safety
and soundness, including internal controls, information systems and internal
audit systems, credit underwriting, asset growth, compensation, loan
documentation and interest rate exposure. FDICIA also required the regulators
to establish maximum ratios of classified assets to capital, and minimum
earnings sufficient to absorb losses without impairing capital. The
legislation also contained provisions which tighten independent auditing
requirements, restricted the activities of state-chartered banks, amended
various consumer banking laws, limited the ability of "undercapitalized" banks
to borrow from the Federal Reserve's discount window, and required federal
banking regulators to perform annual on-site bank examinations and set
standards for real estate lending.
(b) Industry Segments.
The Registrant has one industry segment: commercial banking.
(c) Narrative Description of Business.
Brunswick Bancorp exists primarily to hold the stock of its active
subsidiary, Brunswick Bank and Trust. BB also owns 100% of the common stock of
Brunscor Realty, an inactive corporation. As a secondary function, BB began
commercial lending activity in 1988. Such activity was approved by the Federal
Reserve Bank of New York.
BB is a legal entity separate from the Bank. The Bank is BB's
principal asset. Dividends from the Bank are BB's primary source of income;
loan interest and fees are secondary. As explained under Item 5, legal and
regulatory limitations are imposed on the amount of dividends that may be paid
by the Bank to BB.
The Bank maintains its head office in New Brunswick, New Jersey. The
Bank operates out of its head office and 5 branch offices in Monmouth and
Middlesex Counties.
At December 31, 1995, BB and its subsidiary Bank had deposits of
$73,325,224, total loans of $46,408,294 and total assets of $92,437,436. The
Bank is a full service commercial bank and offers the services generally
performed by commercial banks of similar size and character. Such services
include: checking, savings and time deposit accounts, certificates of deposit,
secured and unsecured personal loans, commercial loans, and residential and
commercial real estate loans. The Bank also provides trust services. BB and
its subsidiary Bank had the equivalent of 59 full-time employees as of December
31, 1995.
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The primary emphasis of the Company's lending activities is in the
commercial lending area. As of December 31, 1995, 41% of the loan portfolio is
in commercial loans, 7% in construction first mortgage loans, 26% in commercial
first mortgage loans, 24% in residential loans, and 2% in installment loans and
leases. The Company's current trend is moving away from installment loans as a
result of increased competition from savings banks and finance companies.
Additionally, relative administrative costs and risk of asset deterioration
have proven unfavorable in this area. The Company's lending base is generally
in the commercial area, concentrating both in commercial first mortgage loans
and commercial loans secured by real estate, certificates of deposit, and other
forms of collateral. Commercial loans secured by certificates of deposit
provide the lowest risk to the Company as the collateral is under full control
of the Company and faces no risk of deterioration. First mortgage loans and
commercial loans secured by real estate provide strong security with risk tied
to the real estate market fluctuations. As the Company lends in a relatively
compact geographical area, management is better able to measure the risk of
real estate market deterioration and risk of asset deterioration than it would
be if it had to assess real estate conditions in numerous, disparate
geographical areas. However, the concentration of the Company's real estate
collateral in a compact geographical area can subject the Company to greater
fluctuations in delinquencies if local market conditions vary from those in a
broader area. Due to the uncertainty in both the local and state real estate
markets, the Company maintains liquid investments in Federal funds sold with
short term maturity dates.
There are numerous commercial banks throughout New Jersey, many of
which have offices in Monmouth and Middlesex Counties, New Jersey. In common
with the entire banking industry, the Bank experiences strong competition for
banking business in its market area. The Bank competes both for deposits and
loans with other national and state banks, mutual savings banks, savings and
loan associations, finance companies, credit unions, and other financial
institutions. While many of the Bank's competitors are larger and have greater
financial resources than the Bank, in the opinion of the Bank, the size of its
financial resources has imposed no substantial impediment to its normal lending
functions. The Bank is limited, however, in making commercial loans to an
amount not in excess of fifteen percent of its capital in most circumstances.
The Bank has, on occasion, arranged for participation by other institutions
when it has made larger loans. Additionally, BB participates in certain loans
with the Bank as permitted by the Federal Reserve Bank of New York.
The Company does not rely on any one customer for an amount in excess
of 10% of income.
(d) Financial information about foreign and domestic operations
and export sales.
The Company operates only in New Jersey. No income is derived from
foreign persons or entities.
(e) Executive Officers of the Registrant.
The following table sets forth information as to each executive
officer of BB who is not a director. All executive officers of BB serve at the
pleasure of the Board of Directors.
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<TABLE>
<CAPTION>
Name,
Position with Officer of Principal Occupation
BB, and Age BB Since During Past Five Years
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<S> <C> <C>
Roman T. Gumina 1987 Vice President
Chief Operating Officer Brunswick Bank and Trust
36
Thomas A. Fornale 1989 Controller
Secretary/Treasurer Brunswick Bank and Trust
Controller
57
</TABLE>
(f) Statistical Disclosure Required Pursuant to Securities
Exchange Act, Industry Guide 3.
Set forth on the following pages are the statistical disclosure
for a bank holding company required pursuant to Industry Guide
3.
<TABLE>
<S> <C> <C>
I. Distribution of Assets,
Liabilities and Stockholders'
Equity; Interest Rates and
Interest Differential 16-17
II. Investment Portfolio 17-18
III. Loan Portfolio 18-19
IV. Summary of Loan Loss Experience 20-21
V. Deposits 21
VI. Return on Equity and Assets 22
VII. Short-Term Borrowings 22
</TABLE>
Item 2. PROPERTIES.
The Bank currently operates from its main office, and five branch
offices. The main office and two branches are leased by the Bank. Three of
the branch offices are owned by the Bank.
The following is a list of offices which the Bank owns:
<TABLE>
<CAPTION>
Approximate
Branch Address Square Feet
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<S> <C> <C>
George Street 352 George Street
New Brunswick, NJ 08901 4,700
South Brunswick - Monmouth Junction Road
Monmouth Junction and Kingston Lane
South Brunswick, NJ 2,000
Freehold 444 West Main Street
Freehold, NJ 07728 2,000
</TABLE>
The following is a list of offices which the Bank leases:
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<TABLE>
<CAPTION>
Expiration
Date
Branch Address Square Feet of Lease
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<S> <C> <C> <C>
Manalapan (1) Manalapan Mall 4,170 July 1996
Shopping Center
U.S. Route 9 and
Symmes Road
Manalapan Township, NJ
</TABLE>
Management intends to vacate the Manalapan premises upon lease
expiration in July 1996.
<TABLE>
<S> <C> <C> <C>
Main Office 439 Livingston Avenue 8,400 and 2005
New Brunswick, NJ 08901 4,000 (basement)
North Brunswick U.S. Route One 1,400 June 1997
North Brunswick, NJ 08902 renewable for one
additional three
year period
Edison Plainfield Avenue and 3,400 February 2001
Metroplex Drive
Edison, NJ 08817
</TABLE>
Item 3. LEGAL PROCEEDINGS.
In the normal course of business, lawsuits and claims may be brought
by and may arise against BB and the Bank. In the opinion of management, no
legal proceedings which are presently pending or threatened against BB or the
Bank, when resolved, will have a material adverse effect on the business or
financial condition of BB or its subsidiary. These actions and proceedings
include the following:
Rubin (formerly Bentson) v. Brunswick Bank & Trust, Civil Action No.
93-3184 (NHP), is pending in the United States District Court for the District
of New Jersey. The July 1993 action arises from alleged violations in 1986 and
1987 of the Bank Secrecy Act of 1970. The United States Treasury Department
(Treasury) alleges that Brunswick Bank and Trust wilfully failed to file
approximately fifteen currency transaction reports on deposits by one of its
customers. Treasury alleges that Brunswick Bank and Trust should have grouped
or aggregated certain deposits made by this customer and should have considered
them to be single transactions exceeding the ten thousand dollar regulatory
reporting threshold. Treasury is seeking to collect $472,000, plus interest,
in civil monetary penalties that it assessed against Brunswick for wilful
violation of the Bank Secrecy Act of 1970. Management is vigorously defending
against this litigation. Management has instructed counsel to explore the
legal and factual basis of Treasury's claims. Brunswick Bank and Trust
contends that it committed no wilful violations of the currency transaction
reporting requirements. If the Bank is found to have negligently violated the
Bank Secrecy Act of 1970, damages will be limited to $7,500. As of December
31, 1995, the outcome of this matter is not determinable. However, after
consultation with legal counsel, management believes the ultimate effect on the
company will not be material in relation to its overall financial position.
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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of shareholders of BB during the
fourth quarter of 1995.
Item 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
BB had 499 shareholders of record as of December 31, 1995.
The common stock of BB is traded on the over-the-counter market. The
stock is thinly traded and there can be no assurance that a more active trading
market will develop. Ryan, Beck & Co., located at 80 Main Street, West Orange,
New Jersey 07052, periodically issues information about stocks of small and
large commercial banks in New Jersey and acts as a market maker for small New
Jersey bank stocks. The following quotations were provided by Ryan, Beck & Co.
and represent the high and low bid prices for each quarter during the last two
years. These quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commissions and do not necessarily reflect actual transactions.
All quotations are retroactively adjusted to take into account BB's 20% stock
dividends issued in 1995 and 1994.
<TABLE>
<CAPTION>
1995
------------------------------
Bid
-----
High Low
--------- ---------
<S> <C> <C>
1st Quarter $12 1/ 2 $11 15/16
2nd Quarter 11 15/16 11 1/ 2
3rd Quarter 12 7/ 8 11 1/ 2
4th Quarter 15 12 7/ 8
</TABLE>
<TABLE>
<CAPTION>
1994
------------------------------
Bid
-----
High Low
--------- ---------
<S> <C> <C>
1st Quarter 8 5/ 8 $ 8 3/ 8
2nd Quarter 8 1/ 2 8 3/ 8
3rd Quarter 8 7/ 8 8 1/ 2
4th Quarter 12 1/ 2 8 7/ 8
</TABLE>
Payments of dividends by Brunswick Bank and Trust Company to BB is
restricted. Under the New Jersey Banking Act of 1948, as amended, the Bank may
pay dividends only out of retained earnings, and out of surplus to the extent
that surplus exceeds fifty percent of stated capital. Under the Financial
Institutions Supervisory Act, the FDIC has the authority to prohibit a state-
chartered bank from engaging in conduct which, in the FDIC's opinion,
constitutes an unsafe or unsound banking practice. Under certain
circumstances, the FDIC could claim that the payment of a dividend or other
distribution by a bank to its sole shareholder constitutes an unsafe or unsound
practice. As of December 31, 1995, approximately $2.5 million is currently
available, without restriction, for the Bank to pay the Registrant in
dividends. A Federal Reserve Board capital requirement of 8.0% would still be
maintained in the event of said dividend. The Registrant issued 20% stock
dividends in 1995 and 1994; cash was paid in lieu of fractional shares. The
Registrant paid a dividend of $.50 per share ($300,976 in aggregate) in 1991.
No dividends were paid in 1992 or 1993. The Board of Directors is considering
a dividend in 1996 but has not yet determined if cash dividends will be
reinstituted.
9
<PAGE> 13
Item 6. SELECTED FINANCIAL DATA.
The following table sets forth certain selected consolidated financial
data concerning BB:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------
(Dollars in Thousands Except Per Share Data)
----------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Interest income $ 7,222 $ 6,396 $ 5,805 $ 5,867 $ 6,190
Interest expense 1,823 1,366 1,525 1,719 2,200
Net interest income 5,399 5,030 4,280 4,148 3,990
Provision for loan
losses - 400 355 692 865
Net interest income
after provision for
loan losses 5,399 4,630 3,925 3,456 3,125
Other income 841 845 712 644 548
Other expenses 4,328 3,872 3,600 3,779 3,419
Income before income
taxes 1,912 1,603 1,037 321 254
Income taxes 756 626 336 107 77
Net income 1,156 977 701 214 177
Earnings per share 1.60 1.35 .97 .30 .22
Cash dividends per
share 0 0 0 0 .42
</TABLE>
<TABLE>
<CAPTION>
Summary Consolidated Statements of Condition
----------------------------------------------------------------------------
(Dollars in Thousands Except Per Share Data)
----------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OTHER INFORMATION
Total assets $ 92,437 $105,751 $ 97,216 $ 88,043 $ 82,817
Deposits 73,325 87,703 80,401 71,928 66,469
Other liabilities 1,222 1,309 1,049 1,050 1,497
Stockholders' equity 17,890 16,739 15,766 15,065 14,851
Total shareholder's
equity per share 24.78 23.19 21.83 20.86 20.57
======== ======== ======== ======== ========
</TABLE>
Per share amounts have been retroactively restated to give effect to the 20%
stock dividend declared in 1995.
Item 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis should be read in conjunction
with Consolidated Financial Statements, their related notes, beginning after
the signature page, and the Selected Financial Data presented in Item 6.
Overview
In general, the increase in the Company's profitability in 1995 has
been the result of increases in the prime lending rate and a decline in the
provision for credit losses. As real estate collateralizes a large portion of
the Company's loan portfolio, the declines in real estate market values in the
early 1990's caused increases in prior years' provision for credit losses.
During 1995, resolution occurred on several loans collateralized by
10
<PAGE> 14
real estate resulting in recovery of credits previously charged off in the
amount of approximately $441,000. Management has changed its focus over the
last several years, relying less on anticipated growth in real estate values in
its commercial lending practices. Management has also maintained a highly
liquid balance sheet in order to meet changing market conditions.
From 1990 through 1992, the Company's net interest income after
provision for credit losses was diminished due to declining loan interest
rates, static deposit interest rates, and increased provisions for credit
losses. In 1993 and 1994, the interest spread improved due to declines in
deposit interest rates and marked declines in credit loss provisions. During
1995, interest rates for both loans and deposits increased; however, a
favorable interest spread remained although narrowed. In 1994, net interest
income was $6.4 million or 78.6% of total interest income. In 1995, net
interest income was $5.4 million or 74.67% of total interest income.
Management believes it has created a market-niche as a local commercial bank,
servicing small businesses and individuals in its targeted geographical areas.
It is the Company's intention to continue servicing that market. The Company
will consider future expansion into additional branches, geographic areas or a
possible acquisition if the opportunity arises.
Income Statement Analysis, 1995 vs. 1994
For the year of 1995, income before income taxes increased by $309,000
over 1994. This increase of 19% is attributed to the following factors:
Interest income and interest expense increased by $826,000 and
$457,000, respectively, resulting in a $369,000 increase in net interest
income. During 1995, average volume and average interest rates, for both
interest earning assets and interest bearing liabilities, increased over 1994
amounts. The following table illustrates the effect of these increases on net
interest income.
<TABLE>
<S> <C>
Interest income:
Effect of increased volume $355,000
Effect of increased interest rates 471,000
--------
Interest expense:
Effect of increased volume (13,000)
Effect of increased interest rates (444,000)
--------
Increase in net interest income $369,000
========
</TABLE>
In 1995, the Company recorded $441,000 in recoveries of credits previously
charged off. Based on the level of recoveries and management analyis, which
includes assessing quality of credits, underlying collateral, specific issues
relating to individual loans, and overall economic conditions, management
deemed a provision for credit losses unnecessary in 1995. The Company recorded
a $400,000 provision for credit losses in 1994.
Other income experienced a net decrease of approximately $5,000
resulting from increases in service fees of $129,000 and trust fees of $55,000
and a decrease of $189,000 in gains from sales of other real estate. The
increase in service fees is attributable to a $79,000 increase in credit card
application fees and a $50,000 increase in bank service charges to customers,
the result of a modification in service charges structure. Credit card
application fees increased due to a direct mail campaign promoting credit card
products. Approximately $55,000 in trust fees were received
11
<PAGE> 15
during 1995 for trust services related to the liquidation and distributions of
two trust accounts. In 1994, $189,000 in gains from sales of other real estate
were realized.
Salaries and employee benefits increased by $300,000 which represents
an increase of approximately 18% from 1994. Certain positions were added
during the year including an internal auditor, a mortgage loan originator, and
a loan officer; salaries and benefits for these positions totalled
approximately $50,000. Compensation to the Chief Executive officer increased
approximately $136,000 including $120,000 paid into a trust for a
newly-implemented deferred compensation plan. The remaining increase is
attributable to increased salaries.
Other expenses were $1,540,000, a net increase of $191,000 or 14% from
1994. Additional expenses over 1994 of $266,000 were incurred relating to
advertising and postage costs for the promotion of credit card products. The
Bank's FDIC assessment decreased due to rate changes by $69,000. Bank security
costs also decreased due to installation of security equipment during the year.
Costs incurred relating to credit card promotions were primarily start-up
costs; the Bank does not expect to incur similar costs at this level in future
years.
Income Statement Analysis, 1994 vs. 1993
For the year of 1994, income before income taxes increased by $566,000
over 1993. This increase of 55% is attributed to the following factors.
Although interest income increased by $591,000, interest expense
decreased by $159,000 which resulted in an increase in net interest income of
$750,000. Management was successful in decreasing interest rates on deposit
accounts even though interest rates on earning assets increased. The following
table illustrates the effects of changes in interest rates and volume.
<TABLE>
<S> <C>
Interest income:
Effect of increased volume $369,000
Effect of increased interest rates 222,000
Interest expense:
Effect of decreased volume 76,000
Effect of decreased interest rates 83,000
--------
$750,000
========
</TABLE>
Non-interest income increased by $134,000. Although service fees
decreased by $55,000, the Company realized gains totaling $189,000 from sales
of two properties obtained through foreclosure.
Several advertising campaigns were launched in 1994 in an effort to
attract new customers. These resulted in an increase in advertising expense of
$47,000.
Salaries and employee benefits increased by $52,000 mainly because
bonuses totaling $41,000 were awarded during December of 1994. No such bonuses
were given during 1993 and 1992.
12
<PAGE> 16
Balance Sheet Analysis
The most notable changes in the balance sheet, from December 31, 1994
to December 31, 1995, are decreases in Federal funds sold ($7.8 million or
27%), investment securities ($7.6 million or 35%) and deposits ($14.4 million
or 16%). Cash and due from banks increased by $2.3 million or 56%. All other
assets and liabilities were comparable to 1994 amounts.
The decrease in investment securities is primarily due to maturing
U.S. Treasury securities totaling $13,000,000 which were partially replaced
with purchased U.S. Treasury Notes totaling $5,000,000.
The allowance for credit losses decreased from $1,000,159 at December
31, 1994 to $867,189 at December 31, 1995. An analysis of this decrease can be
found in Note 4 to the Consolidated Financial Statements. Management analyzes
the loan portfolio during the year. The ultimate condition of nonperforming
loans determines whether the loan is written off or simply reserved for in the
allowance for credit losses. When a loan is deemed questionable, it is
reserved for in the allowance for credit losses. If management deems a loan
worthless, it is written off.
There was little change in demand deposits from December 31, 1994 to
December 31, 1995. However, interest bearing deposits decreased by
$13,800,000. The main reason for this substantial decrease is that, at the end
of 1994, there was a large concentration of public funds on deposit. These
were short term time deposits and NOW deposits, a substantial portion of which
was withdrawn during January of 1995 in conjunction with local governments'
cash requirements.
Liquidity
The liquidity of the Company is measured by how well it can meet the
financial needs of its depositors and borrowers and provide a cushion against
unforeseeable and unforeseen liquidity needs. Sources of liquidity are
provided primarily by the maturity of assets and by acquiring additional
deposits. Secondarily, liquidity may be provided by the sale of assets and by
other borrowings.
The Company's asset liquidity consists of cash in other banks, federal
funds sold, and investment securities and loans maturing in one year or less.
At December 31, 1995, cash and due from banks totalled $6.3 million; federal
funds totalled $21 million. Investment securities and loans maturing within
one year totalled $7 million and $25 million, respectively.
In the past three years, the Company has continually derived positive
cash flows from its operating activities. Specifically, cash provided by
operating activities totalled approximately $800,000 in 1995, $1.3 million in
1994, and $1 million in 1993. In 1995, investing activities provided $16
million including $13 million from maturities of short term securities and
approximately $8 million from a net decrease in federal funds sold, offset by
purchases of investment securities of approximately $5 and other investing
activity.
In light of the past cash flows provided from operating, financing,
and investing activities, management feels it is in a strong position to meet
both short and long term liquidity needs. The Company has been able to
13
<PAGE> 17
maintain favorable and adequate liquidity in the past and does not foresee
impairment of that liquidity in the future.
Due to the capital structure of BB and the Bank, capital management,
the process of providing equity and debt for current and future financial
positioning, is closely aligned with liquidity management. As the Company
currently has no long term debt and management does not contemplate its
undertaking in the future, all financial positioning is done through liquid
funds.
Brunswick Bancorp is subject to the capital adequacy requirements of
the Federal Reserve Board. At December 31, 1995, the Company was in compliance
with the minimum capital requirements and is expected to remain in compliance
in the future. Capital ratios are as follows:
<TABLE>
<CAPTION>
December 31, Minimum
------------ Regulatory
1995 1994 Guidelines
------- ------- ----------
<S> <C> <C> <C>
Risk-based capital ratios
Tier I 33.50% 29.95% 4.000%
Total capital 34.76% 31.18% 8.000%
Capital (in thousands)
Tier I capital $17,758 $16,100
Tier II capital (1) 665 662
------- -------
$18,423 $16,762
======= =======
</TABLE>
(1) Lesser of the allowance for loan loss or 1/80 of risk-weighted assets.
Interest Rate Sensitivity Management
The accompanying table, a quantification of the Company's interest
rate exposure at December 31, 1995, is based upon the known repricing dates of
certain assets and liabilities and the assumed repricing dates of others.
Interest Rate Sensitivity*
<TABLE>
<CAPTION>
After Three
Within but Within After One
Three Twelve but Within After Noninterest-
Months Months Five Years Five Years Bearing Total
------- ----------- ---------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Assets
Cash & due from banks $ - $ - $ - $ - $ 6,348 $ 6,348
Federal funds sold 21,000 - - - - 21,000
Investment securities 7,009 - 5,908 1,213 - 14,130
Loans, net (a) 20,504 4,851 15,304 3,509 1,373 45,541
Other assets - - - - 5,418 5,418
------- ------- ------- ------- ------- -------
$48,513 $ 4,851 $21,212 $ 4,722 $13,139 $92,437
======= ======= ======= ======= ======= =======
Liabilities and Stockholders' Equity
Total deposits (b) $28,229 $6,311 $14,495 $ - $24,290 $73,325
Borrowed funds 368 - - - - 368
Other liabilities - - - - 854 854
Stockholders' equity - - - - 17,890 17,890
------- ------- ------ ------- ------- -------
$28,597 $ 6,311 $14,495 $ 0 $43,034 $92,437
======= ======= ======= ======= ======= =======
Interest rate
sensitivity gap 19,916 (1,460) 6,717 4,722 (29,895) -
Cumulative interest
rate sensitivity gap $19,916 $18,456 $25,173 $29,895 $ 0 $ -
</TABLE>
14
<PAGE> 18
* Variable rate balances are reported based on their repricing
dates. Fixed-rate balances are reported based on their
scheduled contractual maturity dates.
(a) Prime priced loans are included in the Within Three
Months category; nonaccrual loans and reserve for
possible loan losses are included in the
Noninterest-Bearing category.
(b) Savings accounts are included in the After One but
Within Five Years category.
Unadopted Financial Accounting Standards Board Statements
The Financial Accounting Standards Board has issued Statement No. 121
which addresses the accounting for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used, and for long-lived assets and certain identifiable intangibles to be
disposed of. The Statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
The Company is required to adopt the Statement beginning January 1,
1996. The Company has completed its assessment of adopting Statement No. 121
and has determined the effect to be immaterial to the financial statements.
15
<PAGE> 19
Distribution of Assets, Liabilities, and Stockholders' Equity; Interest Rates
and Interest Differential
<TABLE>
<CAPTION>
(In Thousands)
Year Ended December 31,
1995 1994 1993
-------- -------- --------
Average Average Average
Balance Interest Annual Balance Interest Annual Balance Interest Annual
Sheet(3) Income Rate Sheet(3) Income Rate Sheet(3) Income Rate
-------- -------- ------ -------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning Assets
Federal funds
sold $19,710 $1,162 5.90% $22,633 $1,066 4.71% $29,508 $ 904 3.06%
Investment securities-
taxable 19,535 1,225 6.27% 10,739 778 7.24% 7,336 762 10.39%
Investment securities-
nontaxable (1) 178 14 11.92% 215 18 12.68% 254 21 12.53%
Loans, net 41,328 4,821 11.67% 42,182 4,534 10.75% 39,500 4,118 10.43%
------- ------ ----- ------- ------ ------ ------- ------ -----
80,751 7,222 8.94% 75,769 6,396 8.44% 76,598 5,805 7.58%
Noninterest-earning assets
Deposits in bank 5,358 5,851 4,973
Other real estate
owned 3,744 4,079 3,349
Other (2) 4,259 4,063 4,154
------- ------- -------
$94,112 $7,222 7.67% $89,762 $6,396 7.13% $89,074 $5,805 6.52%
======= ====== ===== ======= ====== ====== ======= ====== =====
Interest-bearing liabilities
Savings deposits $15,138 $ 375 2.48% $14,830 $ 373 2.52% $12,952 $ 398 3.07%
Demand deposits 14,237 536 3.76% 11,465 284 2.48% 12,017 271 2.26%
Time deposits 20,049 890 4.44% 20,858 694 3.33% 24,450 843 3.45%
Short term debt 494 22 4.45% 592 15 2.53% 730 13 1.78%
------- ------ ----- ------- ------ ------ ------- ------ -----
49,918 1,823 3.65% 47,745 1,366 2.86% 50,149 1,525 3.04%
Noninterest-bearing liabilities
Demand deposits 26,056 25,154 22,970
Other 957 682 521
------- ------ ----- ------- ------ ------ ------- ------ -----
76,931 1,823 2.37% 73,581 1,366 1.86% 73,640 1,525 2.07%
Stockholders'
equity 17,181 16,181 15,434
------- ------- ------- ------ -----
$94,112 $1,823 1.94% $89,762 $1,366 1.52% $89,074 $1,525 1.71%
======= ====== ===== ======= ====== ====== ======= ====== =====
Net yield on total
earning assets $80,751 $5,399 6.69% $75,769 $5,030 6.64% $76,598 $4,280 5.59%
======= ====== ===== ======= ====== ====== ======= ====== =====
</TABLE>
(1) The rate is presented on a tax equivalent basis using the Federal rate
of 34%.
(2) Non-accrual loans, overdrafts, property and equipment, and other
non-interest earning assets are included in Other.
(3) Average balance sheet computed based on monthly balances.
16
<PAGE> 20
Analysis of Changes in Net Interest and Dividend Income
The following table shows the approximate effect on the Company's net
interest income of volume and rate changes in interest-earning assets and
interest-bearing liabilities for the years ended December 31, 1995, 1994, and
1993 calculated on a tax- equivalent basis, using a 34% Federal rate. Any
change in interest income or interest expense attributable to both changes in
volume and changes in rate has been allocated in proportion to the relationship
of the absolute dollar amount of change in each category.
<TABLE>
<CAPTION>
(In thousands)
1995 Versus 1994 1994 Versus 1993
Increase (Decrease) Increase (Decrease)
Due to Changes in Due to Changes in
------------------- -------------------
Average Total Average Total
Interest and dividend Average Yield/ Increase Average Yield/ Increase
income Volume Ratio (Decrease) Volume Ratio (Decrease)
------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold $(264) $ 360 $ 96 $(199) $ 361 $ 162
Investment securities
taxable 670 (223) 447 254 (238) 16
Investment securities
nontaxable ( 3) ( 1) ( 4) ( 3) - ( 3)
Loans, net ( 48) 335 287 317 99 416
----- ----- ----- ----- ----- -----
Total interest
income 355 471 826 369 222 591
----- ----- ----- ----- ----- -----
Interest expense
Savings deposits 5 ( 3) 2 26 ( 51) ( 25)
Demand deposits 32 220 252 30 ( 17) 13
Time deposits ( 23) 219 196 (131) ( 18) (149)
Short term debt ( 1) 8 7 ( 1) 3 2
----- ----- ----- ----- ----- -----
Total interest
expense 13 444 457 ( 76) ( 83) (159)
----- ----- ----- ----- ----- -----
Changes to net
interest income $ 342 $ 27 $ 369 $ 445 $ 305 $ 750
===== ===== ===== ===== ===== =====
</TABLE>
Investment Portfolio
The following table shows the carrying value of the Company's
investment portfolio as of December 31. Investment securities are held to
maturity and are stated at cost, adjusted for amortization of premium and
accretion of discount (in thousands).
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
U.S. Treasury securities $ 5,014 $12,465 $ 9,980 $ 4,055 $19,926
Obligations of other U.S.
Government agencies 7,572 7,885 1,350 2,913 3,599
Obligations of state and
other political subdivisions 152 195 234 271 349
Other securities 1,392 1,139 736 734 250
------- ------- ------- ------- -------
Total investment
securities $14,130 $21,684 $12,300 $ 7,973 $24,124
======= ======= ======= ======= =======
</TABLE>
17
<PAGE> 21
Maturities and Average Weighted Yields of Investment Securities
The following table shows the maturities and average weighted yields
for the above investment portfolio at December 31, 1995 (in thousands). Yields
on tax exempt securities are presented on fully tax-equivalent basis using a
34% Federal tax rate.
<TABLE>
<CAPTION>
Due Under 1 Year Due 1-5 Years Due 5-10 Years Due Over 10 Years
---------------- ------------- -------------- -----------------
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities $ - - $5,014 5.62% $ - - $ - -
Obligations of other U.S.
Government agencies 7,009 8.25% - - 2 7.75% 561 11.58%
Obligations of states and
other political
subdivision - - 152 11.78% - - - -
Other securities - - 742 8.86% 650 7.52% - -
------ ---- ------ ----- ---- ---- ---- -----
Total investment
securities $7,009 8.25% $5,908 6.19% $652 7.52% $561 11.58%
====== ==== ====== ===== ==== ==== ==== =====
</TABLE>
Loan Portfolio
The following tables set forth the composition of the Company's loan
portfolio as of the dates indicated (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Types of loans
Commercial and financial $19,168 $19,430 $19,638 $19,170 $22,143
Real estate - mortgage 22,918 25,465 21,656 19,775 14,327
Real estate - construction 3,256 1,134 1,448 3,493 1,575
Installment 1,121 737 669 916 1,458
------ ------ ------ ------ ------
Total loans $46,463 $46,766 $43,411 $43,354 $39,503
====== ====== ====== ====== ======
</TABLE>
The following table sets forth the maturity distribution for the above
loan portfolio at December 31, 1995:
Maturities and Sensitivities of Loans to Changes in Interest Rates
<TABLE>
<CAPTION>
After 1
Within year with- After 5
1 Year in 5 Years Years Total
------ --------- ------- -------
<S> <C> <C> <C> <C>
Commercial and financial
Fixed rate $1,924 $3,429 $ 879 $ 6,232
Variable rate 8,123 4,453 360 12,936
Real estate-mortgage
Fixed rate 3,934 11,144 2,630 17,708
Variable rate 3,049 0 2,161 5,210
Real estate-construction
Fixed rate 0 0 0 0
Variable rate 272 2,984 0 3,256
Installment
Fixed rate 107 731 0 838
Variable rate $ 283 $ 0 $ 0 $ 283
</TABLE>
18
<PAGE> 22
Rollover Policy
The Company's overall practice in this area is to limit the rollover
of loans to any of its customers. Occasionally, borrowers to whom credit has
been extended experience unanticipated changes in cash flow or other
circumstances which precipitate a decision to roll over their loan. When this
is done, it is based upon the continued favorable credit position of the
borrower and does not indicate a problem loan.
Risk Elements in Loan Portfolio
Commercial and installment loans are placed on a non-accrual status
when a default of principal or interest has existed for a period of 90 days and
when a return to current status is not imminent. Real estate loans are placed
on non-accrual status when a default of principal or interest has existed for
90 days or more. Subsequent to the change in classification to nonaccrual,
management assesses the loan for market value of collateral, credit position of
the debtor and potential operation of any property involved. Foreclosure
proceedings are instituted, as applicable, at that time. Construction loans
are first mortgage loans in all cases; delinquency, non-accrual, and
foreclosure proceedings are handled in the same manner as other loans secured
by real estate. Once a loan is placed on non-accrual, interest previously
accrued and uncollected is reversed and charged against current earnings.
Subsequent interest income would be recognized on these loans only to the
extent collections exceed principal outstanding.
The following table sets forth information on non-accrual, past due
(other than non-accrual), and other real estate owned (there were no
restructured loans) for the periods indicated (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $2,295 $2,743 $2,945 $2,301 $2,930
Loans, past due 90 days or more 1,773 614 265 178 35
Other real estate owned 3,613 3,708 3,907 3,227 3,138
Percentage of non-performing loan
to gross loans outstanding 8.76% 7.18% 7.39% 5.72% 7.52%
</TABLE>
If the above nonaccrual loans at December 31, 1995 had been
current, interest income for 1995 would have been approximately $140,000
greater than that recorded. Interest included in income on these loans
totalled approximately $250,000 for the year. Delinquency rates were higher in
1995 than in the prior four years primarily due to a small number of commercial
loans in the process of resolution. Two delinquent loans totalling
approximately $2 million are related to separate corporations in Chapter 11
bankruptcy; timely payments are being made in accordance with the Chapter 11
agreements. A third loan totalling approximately $500,000 was transferred to
other real estate owned during February 1996.
Except for loans included in the above table there were no
loans at December 31, 1995 where the known credit problems of a borrower caused
the Bank to have serious doubts as to the ability of such borrower to comply
with the then present loan repayment terms and which would result in such loan
being included as a non-accrual, past due, or restructured loan at some future
date. The Bank has not made loans to borrowers outside the United States. At
December 31, 1995, there was no concentration exceeding ten
19
<PAGE> 23
percent of total loans. A concentration is defined as amounts loaned to a
multiple number of borrowers engaged in similar activities which would cause
them to be similarly affected by changes in economic or other conditions.
Summary of Loans Loss Experience
For the periods indicated, the following table summarizes loan
balances, changes in the allowance for loan losses arising from loans
charged-off and recoveries on loans previously charged-off and additions to the
allowance which have been charged to income.
<TABLE>
<CAPTION>
(In thousands)
Year Ended December 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $1,000 $ 793 $679 $675 $381
Charge-offs
Commercial & financial 77 109 250 563 545
Real estate-mortgage 495 336 185 29 2
Real estate-construction - - - - -
Installment 2 5 10 14 49
------ ------ --- --- ---
574 450 445 706 596
Recoveries
Commercial & financial 217 166 171 3 11
Real estate-mortgage 220 88 21 - 2
Real estate-construction - - - - -
Installment 4 3 12 15 12
------ ------ --- --- ---
Net charge-offs 133 257 241 688 571
Additional charges to
operations - 400 355 692 865
------ ------ --- --- ---
Balance at end of period $ 867 $1,000 $793 $679 $675
====== ====== === === ===
Ratio of net charge-offs
during the period to average
loans outstanding during the
period .32% .46% .61% 1.22% 1.48%
</TABLE>
20
<PAGE> 24
Allocation of the Allowance for Loan Losses
In Thousands
<TABLE>
<CAPTION>
Real Real
Commercial Estate Estate
December 31, & Financial Mortgage Construction Installment Total
- ----------------------- ----------- -------- ------------ ----------- ------
<S> <C> <C> <C> <C> <C>
1995
Amount $486 $303 $69 $ 9 $ 867
Percentage of total 56% 35% 8% 1% 100%
1994
Amount 580 360 50 10 1,000
Percentage of total 58% 36% 5% 1% 100%
1993
Amount 500 238 48 7 793
Percentage of total 63% 30% 6% 1% 100%
1992
Amount 407 190 68 14 679
Percentage of total 60% 28% 10% 2% 100%
1991
Amount 479 169 14 13 675
Percentage of total 71% 25% 2% 2% 100%
</TABLE>
Construction loans comprise approximately 7% of the total loan portfolio as
of December 31, 1995. As of the same date, 8% of the allowance for loan losses
is allocated to construction loans. Construction loans received a slightly
greater percentage of the allowance allocation due to the risk involved with
this type of loan; construction lending bears a higher risk weight than do
other types of loans in the portfolio.
Through management assessment each accounting period, the allowance for
credit losses is maintained at a level adequate to absorb probable losses.
Management determines the adequacy of the allowance based upon reviews of
individual credits, recent loss experience, current economic conditions, the
risk characteristics of various categories of loans, and other pertinent
factors. Credits deemed uncollectible are charged to the allowance.
Provisions for credit losses and recoveries on loans previously charged off are
added to the allowance.
Deposits
The amounts of deposits, for the years indicated, are summarized below (in
thousands).
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Non-interest bearing:
Demand deposits $24,290 $24,841 $25,859 $25,925 $19,450
Interest bearing:
Savings deposits 14,412 15,644 14,143 12,785 10,562
Time deposits 20,959 27,587 25,816 22,838 22,811
NOW demand deposits 13,664 19,631 14,583 10,380 13,646
------- ------- ------- ------- -------
Total deposits $73,325 $87,703 $80,401 $71,928 $66,469
-====== ======= ======= ======= =======
</TABLE>
21
<PAGE> 25
The maturities of time deposits of $100,000 or more at December 31,
1995 are summarized as follows:
<TABLE>
<S> <C>
Under 3 months $ 4,877
3 to 6 months 1,130
6 to 12 months 3,917
Over 12 months -
-------
Total $ 9,924
=======
</TABLE>
Return on Equity and Assets
The following are selected ratios for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Return on assets 1.09% 1.01% .80% .26% .23%
Return on equity 6.91% 6.20% 4.66% 1.44% 1.18%
Average equity to
average assets 17.47% 18.03% 17.33% 17.83% 19.44%
Dividend payout ratio 0.00% 0.00% 0.00% 0.00% 166.67%
</TABLE>
Short-term Borrowings
Borrowed funds consist of United States treasury tax and loan
deposits, and generally mature within one to 120 days from the transaction
date. At no time during the three-year period ended December 31, 1995, did
outstanding treasury tax and loan deposits exceed 30% of stockholders' equity.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Financial Statements for the years ended
December 31, 1995, 1994 and 1993 contain the information required by Item 8 and
that information is incorporated herein following signature page number 25.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Proxy Statement will contain under the caption "Proposal
No. 1-Election of Directors" the information required by Item 10 with respect
to directors of BB and that information is incorporated herein by reference.
Information regarding executive officers of BB who are not also directors
appears under sub-section (e) of Item 1 of this Form 10-K.
Item 11. COMPENSATION OF EXECUTIVE OFFICERS
The Proxy Statement will contain under the caption "Executive
Compensation" and the caption "Compensation Committee Interlocks and Insider
Participation" information required by Item 11 and that information is
incorporated herein by reference. Information in the Proxy Statement required
by Paragraphs (k) and (l) of Item 402 of Regulation S-K is not incorporated by
reference into any portion of this Annual Report on Form 10K.
22
<PAGE> 26
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Proxy Statement will contain under the caption "Beneficial
Ownership of Common Stock by Management and Principal Shareholders" the
information required by Item 12 and that information is incorporated herein by
reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Proxy Statement will contain under the caption "Certain
Transactions with Management" and the caption "Compensation Committee
Interlocks and Insider Participation" the information required by Item 13 and
that information is incorporated herein by reference.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) & (2) Financial Statements and
Financial Statement Schedules
The below listed financial statements and report of
independent auditors of BB and subsidiaries for the years
ended December 31, 1995, 1994 and 1993 are following signature
page number 24.
Independent Auditors' Report
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Income - Years Ended December 31,
1995, 1994 and 1993
Consolidated Statements of Stockholders' Equity - Years Ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows - Years Ended December
31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements - Years Ended
December 31, 1995, 1994 and 1993
Schedules to the Consolidated Financial Statements required
under Article 9 of Regulation S-X are not required under the
related instructions or are inapplicable, and therefore have
been omitted.
(b) Reports on Form 8-K
BB did not file any reports on Form 8-K for the three
months ended December 31, 1995.
23
<PAGE> 27
(c) Exhibits
<TABLE>
<CAPTION>
List of Exhibits
----------------
<S> <C>
(3) (a) Certificate of
Incorporation of Brunswick
Bancorp. Incorporated by
reference to Registration
Statement on Form S-14 filed
on June 20, 1985. (Exhibit III)
(b) By-laws of Brunswick Bancorp.
Incorporated by reference to
Registration Statement on
Form S-14 filed on June 20,
1985. (Exhibit IV)
(10) Non-qualified Deferred
Compensation Plan dated as of
December 5, 1995. (Exhibit V)
(21) Subsidiaries of Brunswick
Bancorp. Incorporated by
reference to Registration
Statement on Form S-14 filed
on June 20, 1985. (Exhibit VI)
(27) Financial Data Schedule.
(Exhibit VII)
</TABLE>
24
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereto duly authorized.
BRUNSWICK BANCORP
- ----------------------------------
By: Carmen J. Gumina
President
Dated: , 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
- -------------------------- Director
Bruce Arbeiter
- -------------------------- Director
Joseph DeMarco
- -------------------------- Director
Dominick Faraci
- -------------------------- President and Chairman
Carmen J. Gumina of the Board of Directors
Principal Executive Officer
- -------------------------- Director
Josephine Gumina
- -------------------------- Director
Michael Kaplan
- -------------------------- Director
John Maltese
- -------------------------- Director
Frederick Perrine
- -------------------------- Secretary-Treasurer
Thomas A. Fornale Controller
Principal Accounting/
Financial Officer
</TABLE>
25
<PAGE> 29
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<PAGE> 30
BRUNSWICK BANCORP AND SUBSIDIARIES
TABLE OF CONTENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Consolidated Statements of Condition 2
Consolidated Statements of Income 3
Consolidated Statements of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
</TABLE>
<PAGE> 31
[FERRARO, WOOD & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
BRUNSWICK BANCORP AND SUBSIDIARIES
We have audited the accompanying consolidated statements of condition of
Brunswick Bancorp and Subsidiaries as of December 31, 1995 and 1994 and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three year period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Brunswick Bancorp
and Subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and cash flows for each of the years in the three year period ended
December 31, 1995, in conformity with generally accepted accounting principles.
FERRARO, WOOD & CO.
January 30, 1996
North Brunswick, NJ
1
<PAGE> 32
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Assets
Cash and due from banks $ 6,348,014 $ 4,072,796
Federal funds sold 21,000,000 28,800,000
Investment securities to be held
to maturity (Note 2) 14,129,902 21,683,507
Loans (Notes 3, 4) 46,408,294 46,710,693
Less allowance for credit losses 867,189 1,000,159
----------- ------------
Net loans 45,541,105 45,710,534
Properties and equipment (Note 5) 769,788 850,918
Other real estate owned 3,613,007 3,708,920
Accrued interest receivable and other
assets 1,035,620 924,131
----------- ------------
$92,437,436 $105,750,806
=========== ============
Liabilities and Stockholders' Equity
Liabilities
Deposits
Demand $24,290,027 $ 24,840,551
Savings and NOW deposits 28,076,300 35,275,195
Other time (Note 8) 20,958,897 27,587,386
----------- ------------
73,325,224 87,703,132
Borrowed funds (Note 6) 368,247 532,730
Accrued expenses, taxes and other
liabilities (Note 9) 853,885 775,921
----------- ------------
74,547,356 89,011,783
Stockholders' equity
Common stock - par value $2.00 per share-
3,000,000 shares authorized, 721,920 and
601,770 issued and outstanding at
December 31, 1995 and 1994, respectively 1,443,840 1,203,540
Additional paid-in-capital 4,284,804 2,722,854
Retained earnings 12,161,436 12,812,629
----------- ------------
17,890,080 16,739,023
----------- ------------
$92,437,436 $105,750,806
=========== ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
2
<PAGE> 33
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest income
Interest and fees on loans $4,820,722 $4,534,096 $4,118,145
Interest on investment securities
to be held to maturity 1,239,099 794,900 773,453
Interest on federal funds sold 1,161,657 1,066,363 904,029
Interest on deposits with banks - 516 9,676
---------- ---------- ----------
Total interest income 7,221,478 6,395,875 5,805,303
Interest expense
Interest on deposits 1,800,844 1,350,988 1,512,272
Interest on borrowed funds 21,976 15,262 12,603
---------- ---------- ----------
Total interest expense 1,822,820 1,366,250 1,524,875
---------- ---------- ----------
Net interest income 5,398,658 5,029,625 4,280,428
Provision for credit losses (Note 4) - 400,000 355,000
---------- ---------- ----------
Net interest income after provision
for credit losses 5,398,658 4,629,625 3,925,428
---------- ---------- ----------
Other income
Service fees 784,591 655,503 710,404
Gain on sale of other real estate
owned - 188,760 -
Other 56,300 1,697 1,732
---------- ---------- ----------
840,891 845,960 712,136
---------- ---------- ----------
Other expenses
Salaries and employee benefits (Note 7) 2,003,466 1,702,898 1,650,725
Occupancy expenses 610,707 638,558 601,524
Equipment expenses 173,871 182,297 191,001
Other 1,539,532 1,348,369 1,157,177
---------- ---------- ----------
4,327,576 3,872,122 3,600,427
---------- ---------- ----------
Income before income taxes 1,911,973 1,603,463 1,037,137
Income tax expense (Note 9) 755,816 626,291 335,653
---------- ---------- ----------
Net income $1,156,157 $ 977,172 $ 701,484
========== ========== ==========
Net income per share of common stock
(Note 10) $ 1.60 $ 1.35 $ .97
========= ========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
3
<PAGE> 34
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
COMMON ADDITIONAL RETAINED
STOCK PAID-IN-CAPITAL EARNINGS TOTAL
<S> <C> <C> <C> <C>
Balance at December 31, 1992 $1,003,252 $1,420,982 $12,640,663 $15,064,897
Net income for 1993 - - 701,484 701,484
---------- ---------- ----------- -----------
Balance at December 31, 1993 $1,003,252 $1,420,982 $13,342,147 $15,766,381
20% stock dividend (Note 10) 200,288 1,301,872 ( 1,506,690) ( 4,530)
Net income for 1994 - - 977,172 977,172
---------- ---------- ----------- -----------
Balance at December 31, 1994 $1,203,540 $2,722,854 $12,812,629 $16,739,023
20% stock dividend (Note 10) 240,300 1,561,950 ( 1,807,350) ( 5,100)
Net income for 1995 - - 1,156,157 1,156,157
---------- ---------- ----------- -----------
Balance at December 31, 1995 $1,443,840 $4,284,804 $12,161,436 $17,890,080
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
4
<PAGE> 35
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,156,157 $ 977,172 $ 701,484
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 95,625 118,993 144,089
Net accretion of securities discounts
and premiums (417,896) (191,688) (384,662)
Provision for credit losses - 400,000 355,000
Benefit for deferred taxes (20,871) (7,557) (50,468)
(Increase) decrease in accrued interest
receivable and other assets (90,618) (310,213) 249,334
Increase (decrease) in accrued expenses,
taxes and other liabilities 77,964 266,066 (33,158)
------------ ------------ -----------
Cash provided by operating activities 800,361 1,252,773 981,619
Cash flows from investing activities:
(Increase) decrease in federal funds
sold 7,800,000 600,000 (1,800,000)
Maturities of investment securities 13,000,000 10,000,000 10,000
Principal repayments on investment
securities 226,966 1,016,605 2,011,815
Purchase of investment securities (5,255,465) (20,207,987) (5,964,767)
Net increase in loans (161,771) (4,168,116) (500,425)
Acquisitions of property & equipment (14,494) (128,124) -
Net (increase) decrease in other real
estate owned 427,112 816,239 (468,875)
------------ ------------ -----------
Cash provided by (used in) investing
activities 16,022,348 (12,071,383) (6,712,252)
Cash flows from financing activities:
Dividends paid (5,100) (4,530) -
Increase (decrease) in demand deposits (550,524) (1,018,845) (65,679)
Increase (decrease) in savings and
NOW deposits (7,198,895) 6,549,494 5,560,926
Increase (decrease) in other time deposits (6,628,489) 1,771,621 2,977,930
Decrease in borrowed funds (164,483) (78,128) (11,715)
------------ ------------ -----------
Cash provided by (used in)
financing activities (14,547,491) 7,219,612 8,461,462
------------ ------------ -----------
Increase (decrease) in cash and cash
equivalents 2,275,218 (3,598,998) 2,730,829
Cash and cash equivalents at January 1 4,072,796 7,671,794 4,940,965
------------ ------------ -----------
Cash and cash equivalents at December 31 $ 6,348,014 $ 4,072,796 $ 7,671,794
============ ============ ===========
Interest paid $ 1,730,496 $ 1,349,700 $ 1,675,330
============ ============ ===========
Income taxes paid $ 820,246 $ 633,970 $ 398,225
============ ============ ===========
</TABLE>
Supplemental Disclosures - Noncash Investing and Financing Activities
During the years ended December 31, 1995, 1994 and 1993, $249,927,
$617,699, and $212,114, respectively, in loan balances were transferred to
other real estate owned as a result of foreclosure proceedings.
The accompanying notes are an integral part
of these financial statements.
5
<PAGE> 36
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Brunswick Bancorp and
Subsidiaries are in accordance with generally accepted accounting
principles and conform to general practices within the banking
industry. The more significant of the principles used in preparing the
financial statements are briefly described below.
Principles of Consolidation
The consolidated financial statements include the accounts of Brunswick
Bancorp and its wholly-owned subsidiaries Brunswick Bank & Trust
Company (the Bank) and Brunscor Realty, Inc. (inactive), together
referred to as the Company. All significant intercompany accounts and
transactions have been eliminated.
Nature of Operations
The Bank operates under a state bank charter and provides full banking
services. The Bank is subject to regulation of the Federal Deposit
Insurance Corporation and the New Jersey Department of Banking. The
area served by the Bank is Central New Jersey with primary emphasis on
Middlesex and Monmouth Counties; services are provided at six branch
offices.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Reclassifications
Certain reclassifications of prior years' amounts have been made to
conform with the current year's presentation.
Cash and Cash Equivalents
For the purpose of presentation in the Statements of Cash Flows, cash
and cash equivalents are defined as those amounts included in the
statement of condition caption "Cash and due from banks."
Investment Securities To Be Held to Maturity
Under the provisions of Statement on Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity
Securities," the Company's investments in securities are classified as
Securities Held to Maturity. The Company has the ability and positive
intent to hold all investments in bonds, notes and debentures until
maturity date. Investments are reported at cost, adjusted for
amortization of premiums and accretion of discounts which are
recognized in interest income over the period to maturity.
Loans Receivable
Loans receivable that management has the intent and ability to hold for
the foreseeable future or until maturity or pay-off are reported at
their outstanding principal adjusted for any charge-offs, the allowance
for loan loses, and any deferred fees or costs on originated loans and
unamortized premiums or discounts on purchased loans.
6
<PAGE> 37
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, 1993
Loans receivable which management has the intent to sell prior to
maturity in the secondary market are carried at the lower of cost or
estimated market value in the aggregate.
Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield of the related
loan.
Interest on loans is accrued and credited to income based on the
principal amount outstanding. The accrual of interest income is
ordinarily discontinued when a loan becomes 90 days past due as to
principal or interest; however, management may elect to continue the
accrual when the estimated net realizable value of collateral is
sufficient to cover the principal balance and the accrued interest.
When interest accruals are discontinued, interest credited to income in
the current year is reversed. When the loan is determined to be
uncollectible, interest accrued in prior years and the principal are
charged to the allowance for loan losses.
Allowance for Credit Losses
The allowance is maintained at a level adequate to absorb probable
losses. Management determines the adequacy of the allowance based upon
reviews of individual credits, recent loss experience, current economic
conditions, the risk characteristics of the various categories of
loans, and other pertinent factors. Credits deemed uncollectible are
charged to the allowance. Provisions for credit losses and recoveries
on loans previously charged off are added to the allowance.
Properties and Equipment
Properties and equipment are stated at cost, less accumulated
depreciation. The provision for depreciation is computed by the
straight-line method.
Other Real Estate Owned
Other real estate owned, acquired through partial or total satisfaction
of loans, is carried at the lower of cost or fair market value. At the
date of acquisition, losses are charged to the allowance for loan
losses, and subsequent write downs are charged to expense in the period
they are incurred.
Pension Costs
The Bank has a defined contribution profit-sharing plan covering all
employees who meet the eligibility requirements. To be eligible, an
employee must be twenty-one years of age and have completed one year of
continuous service. The Bank's funding policy is to make discretionary
contributions based on a percentage of annual employee compensation.
Income Taxes
Provisions for income taxes are based on taxes payable or refundable
for the current year (after exclusion of nontaxable income such as
interest on state and municipal securities) and deferred taxes on
temporary differences between the tax bases of assets and liabilities
and their reported amounts in the financial statements. Deferred tax
assets and liabilities are included in the financial statements at
currently enacted income tax rates applicable to the period in which
the deferred tax asset and liabilities are expected to be realized or
settled as prescribed in SFAS No. 109, Accounting for Income Taxes. As
changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes. The
companies file a consolidated federal income tax return.
7
<PAGE> 38
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, 1993
Net Income Per Share of Common Stock
Net income per share of common stock is computed by dividing net income
by the weighted average number of shares of common stock outstanding
during the period, after giving retroactive effect to stock dividends.
Common Stock Rights
The Company has non-expiring rights outstanding to purchase 3,018
shares of common stock at an aggregate price of $45,270.
Trust Fees
Trust fees are recorded on the accrual basis.
Off-Balance-Sheet Financial Instruments
In the ordinary course of business, the Bank has entered into
agreements involving commitments to extend credit, commitments under
credit card arrangements, commercial letters of credit and standby
letters of credit. Such financial instruments are recorded in the
financial statements when they become payable.
Effect of New Financial Accounting Standards
The Financial Accounting Standards Board has issued a Statement of
Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors
for Impairment of a Loan. SFAS No. 114, as amended by No. 118, is
effective for the Company for the year beginning January 1, 1995 and
requires that impaired loans that are within the scope of this
Statement be measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the fair
value of the collateral if the loan is collateral dependent.
In December 1991, the Financial Accounting Standards Board issued SFAS
No. 107. Disclosures about Fair Value of Financial Instruments. SFAS
No. 107 is effective beginning in 1995. SFAS No. 107 requires
disclosure of the fair value of financial instruments, both assets and
liabilities recognized and not recognized in the statements of
financial position, for which it is practical to estimate fair value.
The Company adopted SFAS No. 114 and No. 107 as of January 1, 1995 The
effects of adoption have not been material to the financial position or
results of operations.
(2) INVESTMENT SECURITIES TO BE HELD TO MATURITY
The carrying amounts of investment securities as shown in the
consolidated statements of condition of the Company and their
approximate fair values at December 31 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- -------- ---------- -----------
<S> <C> <C> <C> <C>
December 31, 1995
U.S. Government and
agency securities $12,586,415 $493,919 $885 $13,079,449
Municipal securities 151,564 - - 151,564
Other securities 1,391,923 57,582 - 1,449,505
----------- -------- ---- -----------
Totals $14,129,902 $551,501 $885 $14,680,518
=========== ======== ==== ===========
</TABLE>
8
<PAGE> 39
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, 1993
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- -------- ---------- -----------
<S> <C> <C> <C> <C>
December 31, 1994
U.S. Government and
agency securities $20,349,683 $224,985 $183,134 $20,391,534
Municipal securities 194,594 - - 194,594
Other securities 1,139,230 22,330 - 1,161,560
----------- -------- -------- -----------
Totals $21,683,507 $247,315 $183,134 $21,747,688
=========== ======== ======== ===========
</TABLE>
Securities, carried at $9,010,466 at December 31, 1995 and $17,229,183
at December 31, 1994 were pledged to secure public deposits and for
other purposes required or permitted by law.
The maturities of investment securities at December 31, 1995 are shown
below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with
or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
----------- -----------
<S> <C> <C>
Due in one year or less $ 7,009,300 $ 7,008,440
Due after one year through five years 5,907,586 5,992,319
Due after five years through ten years 650,000 650,000
Due after ten years - -
Mortgage-backed securities 563,016 1,029,759
----------- -----------
Totals $14,129,902 $14,680,518
=========== ===========
</TABLE>
(3) LOANS
The components of loans in the consolidated statements of condition are
as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Commercial $19,168,053 $19,430,183
Real estate construction 3,256,448 1,133,967
Commercial real estate 11,860,404 14,059,027
Residential real estate 11,057,255 11,405,763
Consumer 1,120,594 737,494
----------- -----------
46,462,754 46,766,434
Less
Allowance for credit losses 867,189 1,000,159
Unearned fees 54,460 55,741
----------- -----------
$45,541,105 $45,710,534
=========== ===========
</TABLE>
Impairment of loans having recorded investments of $136,000 at December
31, 1995 has been recognized in conformity with SFAS No. 114. The
allowance for credit losses includes $77,000 related to impaired loans.
As of December 31, 1995 and 1994, loans on which the accrual of
interest had been discontinued totalled $2,294,820 and $2,742,554,
respectively. If interest on nonaccrual loans had been accrued, such
income would have approximated $141,000, $153,000 and $419,000 for
1995, 1994, and 1993, respectively.
9
<PAGE> 40
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, 1993
(4) ALLOWANCE FOR CREDIT LOSSES
An analysis of the change in the allowance for credit losses follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Balance at January 1 $1,000,159 $ 793,342 $ 678,886
Credits charged off (573,660) (450,229) (444,429)
Recoveries 440,690 257,046 203,885
---------- ---------- ---------
Net credit charged off (132,970) (193,183) (240,544)
Provision for credit losses - 400,000 355,000
---------- ---------- ---------
Balance at December 31 $ 867,189 $1,000,159 $ 793,342
========== ========== =========
</TABLE>
(5) PROPERTIES AND EQUIPMENT
Components of properties and equipment included in the consolidated
statements of condition at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Estimated
Lives 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Cost
Land $ 300,705 $ 300,705
Bank premises 25-35 years 562,049 562,049
Furniture and equipment 5-10 years 635,739 914,501
Leasehold improvements 5-25 years 284,456 284,456
---------- ----------
1,782,949 2,061,711
Less accumulated depreciation 1,013,161 1,210,793
---------- ----------
Net book value $ 769,788 $ 850,918
========== ==========
</TABLE>
Certain Bank facilities are leased under various operating leases.
Rental expense was $404,149, $410,929, and $419,059 in 1995, 1994 and
1993, respectively. Future minimum rental commitments under
noncancelable leases are:
<TABLE>
<S> <C>
1996 $ 320,972
1997 256,303
1998 251,205
1999 257,112
2000 243,711
Thereafter 1,067,334
----------
$2,396,637
==========
</TABLE>
(6) BORROWED FUNDS
Borrowed funds consist of United States treasury tax and loan deposits
and generally mature within one to 120 days from the transaction date.
(7) EMPLOYEE BENEFITS
The Bank has a profit sharing plan for substantially all full-time
employees. The Plan consists of employer contributions and voluntary
employee contributions, and an annually-determined employer match on
employee contributions. Contributions under the profit sharing plan are
made at the discretion of the board of directors, and have totalled
approximately 5% of gross eligible salaries for the past five years.
The Bank contributed $64,542, $78,255, and $68,300 for 1995, 1994, and
1993, respectively.
10
<PAGE> 41
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, 1993
(8) COMPOSITION OF DEPOSITS
Certificates of deposit of $100,000 or more included in other time
deposits totalled $9,924,280 and $18,164,037 at December 31, 1995 and
1994, respectively.
(9) INCOME TAXES
The consolidated provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Currently payable
Federal $ 599,187 $ 462,248 $ 277,921
State 177,500 171,600 108,200
--------- --------- ---------
776,687 633,848 386,121
Deferred (20,871) (7,557) (50,468)
--------- --------- ---------
$ 755,816 $ 626,291 $ 335,653
========= ========= =========
</TABLE>
As of December 31, 1995 and 1994, the principal temporary differences
resulting in deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
Deferred tax assets 1995 1994
-------- --------
<S> <C> <C>
Loans $142,306 $203,251
Deferred compensation 48,000 -
Deferred tax liabilities
Properties & equipment 111,410 145,226
-------- --------
Net deferred tax asset $ 78,896 $ 58,025
======== ========
</TABLE>
The principal reasons for the difference in the effective tax rate and
the federal statutory rate are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 34% 34% 34%
Effect on tax rate of:
Tax-exempt securities (1) (1) (1)
Tax-exempt loan income (3) (3) (6)
State taxes 5 5 5
Nondeductible items 5 4 -
Other (1) - -
--- --- ---
Effective tax rate 39% 39% 32%
=== === ===
</TABLE>
(10) STOCK DIVIDEND
The Board of Directors declared a 20% stock, dividend payable on
December 8, 1995 to stockholders of record on October 6, 1995. The
stock dividend resulted in the Company issuing 120,150 shares with a
per share value of $15. Cash dividends were paid in lieu of fractional
shares resulting from the stock dividend.
The Board of Directors declared a 20% stock dividend payable on
December 9, 1994 to stockholders of record on October 7, 1994. The
stock dividend resulted in the Company issuing 100,144 shares with a
per share value of $15. Cash dividends were paid in lieu of fractional
shares resulting from the stock dividend.
Earnings per share have been restated to reflect the stock dividends
declared.
11
<PAGE> 42
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, 1993
(11) RELATED PARTIES
The Bank has entered into transactions with its directors, principal
officers, their immediate families, and affiliated companies in which
directors are principal stockholders. These transactions are as
follows:
Loans
Related parties were indebted to the Company for loans totalling
$6,326,495 as of December 31, 1994. During 1995, additional advances of
$1,594,128 were made and $1,539,989 was retired for a balance of
$6,380,634 as of December 31, 1995.
Rent
One operating location of the Bank is leased from a related party. Rent
paid to that party totalled $267,911, $259,727, and $255,886 for the
years ended December 31, 1995, 1994 and 1993, respectively.
Loan participations sold
Certain loans and loan participations were sold to a related party
without recourse, in prior years. As of December 31, 1995 and 1994,
said instruments totalled $464,741 and $539,116, respectively.
Deposits
The Company is indebted to certain related parties for bank deposits
made in the ordinary course of business. Rates and terms of said
deposits are comparable to those offered to unrelated depositors.
Other
The Company engages in routine non-banking operating transactions with
entities related to directors. Said transactions are in the normal
course of business and are immaterial to operations.
(12) CONTINGENT LIABILITIES AND COMMITMENTS
The Bank's consolidated financial statements do not reflect various
commitments and contingent liabilities which arise in the normal course
of business and which involve elements of credit risk, interest rate
risk, and liquidity risk. These commitments and contingent liabilities
are commitments to extend credit, commercial letters of credit, and
standby letters of credit. A summary of the Bank's commitments and
contingent liabilities at December 31, 1995 is as follows:
<TABLE>
<S> <C>
Commitments to extend credit $4,370,597
Commercial letters of credit 73,140
Standby letters of credit 940,008
Commercial lines of credit available 2,781,176
Consumer lines of credit available 1,766,375
----------
$9,931,296
==========
</TABLE>
Commitments to extend credit, commercial letters of credit, and standby
letters of credit all include exposure to some credit loss in the event
of nonperformance of the customer. The Bank's credit policies and
procedures for credit commitments and financial guarantees are the same
as those extensions of credit that are recorded on the consolidated
statements of condition. Because these instruments have fixed maturity
dates, and because many of them expire without being drawn upon, they
do not generally present any significant liquidity risk to the Bank.
12
<PAGE> 43
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, 1993
The Bank is a defendant in legal actions arising from alleged
violations in 1986 and 1987 of the Bank Secrecy Act of 1970. Management
contends that the Bank committed no wilful violations of the currency
transaction reporting requirements, and is vigorously defending against
this litigation. The United States Department of Treasury is seeking to
collect approximately $472,000, plus interest, in civil penalties. As
of December 31, 1995, the outcome of this matter is not determinable.
However, after consultation with legal counsel, management believes the
ultimate effect on the Company will not be material in relation to its
overall financial position.
The Company is party to other litigation and claims arising in the
normal course of business. Management, after consultation with legal
counsel, believes that the liabilities, if any, arising form such
litigation and claims will not be material to the consolidated
financial statements.
(13) CONCENTRATIONS OF CREDIT
All of the Company's loans and loan commitments have been granted to
customers in the Bank's market area. The majority of such customers are
depositors of the Bank. Investments in state and municipal securities
also involve governmental units within the Bank's market area. The
distribution of commitments to extend credit approximates the
distribution of loans outstanding (Note 3). Commercial and standby
letters of credit were granted primarily to commercial borrowers. The
Company, as a matter of policy, requires collateral on all real estate
exposures and generally requires loan to value ratios of no greater
than 75%.
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is the amount at which an asset
or obligation could be exchanged in a current transaction between
willing parties, other than in a forced liquidation. Fair value
estimates are made at a specific point in time based on the type of
financial instrument and relevant market information.
Because no quoted market price exists for a significant portion of
Brunswick Bancorp's financial instruments, the fair values of such
financial instruments are derived based on the amount and timing of
future cash flows, estimated discount rates, as well as management's
best judgment with respect to current economic conditions. Many of
those estimates involved uncertainties and matters of significant
judgment and cannot be determined with precision.
The fair value information provided is indicative of the estimated fair
values of those financial instruments and should not be interpreted as
an estimate of the value of Brunswick Bancorp taken as a whole. The
disclosures do not address the value of recognized and unrecognized
non-financial assets and liabilities or the value of future anticipated
business.
The following methods and assumptions were used to estimate the fair
values of significant financial instruments at December 31, 1995.
Cash and Due from Banks and Federal Funds Sold
The carrying amounts of cash and due from banks and Federal funds sold
approximate fair value.
13
<PAGE> 44
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, 1993
Investment Securities Held to Maturity
Fair values of securities are based on quoted market prices.
Loans
For variable rate loans that reprice frequently and have no significant
change in credit risk, fair values are based on carrying values. Fair
values for certain mortgage loans (for example, one-to-four family
residential), credit card loans, and other consumer loans are based on
quoted market prices of similar loans. Fair values of commercial real
estate and commercial loans are estimated using discounted cash flows
analyses, using interest rates currently being offered with similar
terms to borrowers of similar credit quality. Fair values of impaired
loans are estimated using discounted cash flow analyses or underlying
collateral values, where applicable.
Deposits
The fair values disclosed for demand deposits are, by definition, equal
to the amount payable on demand at the reporting date (carrying
amounts). The carrying amount of variable-rate savings and NOW accounts
approximate their fair values at the reporting date. Fair values of
fixed-rate certificates of deposit are estimated by discounting
estimated cash flows using current rates offered for deposits of
similar remaining maturities.
Other
The estimated fair values of accrued interest receivable, accrued
interest payable, debt (treasury tax and loan deposits), and other
assets and liabilities are deemed to be equal to the amounts recognized
in the consolidated statements of financial position.
Off Balance-sheet Items
The estimated fair values of commitments to extend credit and letters
of credit would approximate fees currently charged to enter into
similar agreements.
The following table presents the carrying amounts and estimated fair
values of financial instruments at December 31, 1995:
<TABLE>
<CAPTION>
Carrying Fair
(In thousands) Value Value
----- -----
<S> <C> <C>
Financial assets
Cash and due from banks $ 6,348 $ 6,348
Federal funds sold 21,000 21,000
Investment securities to be held to maturity 14,130 14,681
Loans, net 45,541 46,190
Accrued interest receivable 810 810
Financial liabilities
Deposit liabilities 73,325 74,170
Borrowed funds 368 368
Accrued interest payable 284 284
Off-balance-sheet liability instruments
Loan commitments n/a 44
Standby letters of credit n/a 9
Commercial letters of credit n/a 1
</TABLE>
14
<PAGE> 45
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, 1993
(15) REGULATORY MATTERS
The Federal Deposit Insurance Corporation has issued regulations
classifying and defining capital for all banks into the following
components: (1) Tier I capital which includes tangible shareholders'
equity for common stock and certain perpetual preferred stock and (2)
Tier II capital which includes a portion of the allowance for possible
loan losses and preferred stock which does not qualify for Tier I
capital.
The regulators have implemented risk-based capital guidelines which
require holding companies and banks to maintain certain minimum capital
as a percent of assets and certain off-balance sheet items adjusted for
predefined credit risk factors (risk- adjusted assets). As of December
31, 1995, holding companies and banks are required to have minimum Tier
1 and Total capital ratios of 4.00% and 8.00%, respectively. The
Company's actual Tier 1 and Total capital ratios were 33.50% and
34.76%, respectively, as of December 31, 1995. The Bank's actual Tier 1
and total capital ratios were 27.29% and 28.55%, respectively, as of
December 31, 1995. Additionally, the Company's leverage ratio at
December 31, 1995 was 17.92%.
(16) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected unaudited quarterly data is presented as follows (in thousands
except for per share amounts):
<TABLE>
<CAPTION>
1995
----------------------------------------
March June September December
------ ------ --------- --------
<S> <C> <C> <C> <C>
Interest income $1,852 $1,809 $1,808 $ 1,753
Interest expense 378 480 458 507
------ ------ ------ -------
Net interest income 1,474 1,329 1,350 1,246
Provision for loan
losses 175 125 50 (350)
------ ------ ------ -------
Net interest income
after provision for
loan losses 1,299 1,204 1,300 1,596
Non interest income 165 276 196 204
Non interest expenses 1,046 1,135 1,139 1,008
------ ------ ------ -------
Income before income
taxes 418 345 357 792
Applicable income taxes 195 196 202 163
------ ------ ------ -------
Net income $ 223 $ 149 $ 155 $ 629
====== ====== ====== =======
Net income per share $ .31 $ .21 $ .21 $ .87
====== ====== ====== =======
</TABLE>
15
<PAGE> 46
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, 1993
<TABLE>
<CAPTION>
1994
-----------------------------------------
March June September December
------ ------ --------- --------
<S> <C> <C> <C> <C>
Interest income $1,432 $1,564 $1,581 $1,819
Interest expense 360 326 317 363
------ ------ ------ ------
Net interest income 1,072 1,238 1,264 1,456
Provision for loan
losses 150 165 135 (50)
------ ------ ------ ------
Net interest income
after provision for
loan losses 922 1,073 1,129 1,506
Non interest income 150 348 159 188
Non interest expenses 830 1,082 929 1,031
------ ------ ------ ------
Income before income
taxes 242 339 359 663
Applicable income taxes 99 117 141 269
------ ------ ------ ------
Net income $ 143 $ 222 $ 218 $ 394
====== ====== ====== ======
Net income per share $ .20 $ .31 $ .30 $ .54
====== ====== ====== ======
</TABLE>
16
<PAGE> 47
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, 1993
(17) CONDENSED FINANCIAL INFORMATION OF BRUNSWICK BANCORP (PARENT ONLY)
Balance Sheets
<TABLE>
<CAPTION>
December 31,
-------------------------
1995 1994
----------- -----------
<S> <C> <C>
Assets
Cash in banks - demand deposits with
the Bank $ 380,810 $ 159,750
Investments - certificate of deposit
with the Bank 467,059 447,888
Investment in the Bank 13,639,388 12,718,224
Other real estate owned 3,474,455 3,397,750
Accrued interest receivable and other assets 11,068 74,711
----------- -----------
$17,972,780 $16,798,323
=========== ===========
Liabilities and Stockholders' Equity
Accrued expenses, taxes, and other liabilities $ 82,700 $ 59,300
Common stock - par value $2 per share - 3,000,000
shares authorized, 721,920 and 601,770 issued
at December 31, 1995 and 1994, respectively 1,443,840 1,203,540
Additional paid-in-capital 4,284,804 2,722,854
Retained earnings 12,161,436 12,812,629
----------- -----------
17,890,080 16,739,023
$17,972,780 $16,798,323
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Statements of Income
Year Ended December 31,
----------------------------------
1995 1994 1993
---------- -------- --------
<S> <C> <C> <C>
Interest income $ 22,796 $ 23,566 $ 46,686
Dividends from subsidiary 197,518 - -
Other income 34,231 7,446 5,035
Other expenses (11,452) (13,927) (17,747)
---------- -------- --------
Income before income taxes and
equity in undistributed net
income of subsidiary 243,093 17,085 33,974
Applicable income tax 8,100 (20,163) 13,700
---------- -------- --------
Income before equity in undistri-
buted net income of subsidiary 234,993 37,248 20,274
Equity in undistributed net income
of the Bank 921,164 939,924 681,210
---------- -------- --------
Net income $1,156,157 $977,172 $701,484
========== ======== ========
Net income per share common stock $ 1.60 $ 1.35 $ .97
========== ======== ========
</TABLE>
17
<PAGE> 48
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, 1993
Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $1,156,157 $ 977,172 $ 701,484
Adjustments to reconcile net income
to cash provided by operating
activities
(Increase) decrease in other
assets 63,643 (65,265) 1,859
Increase (decrease) in other
liabilities 23,400 47,407 (18,465)
Equity in undistributed income
of the Bank (921,164) (939,924) (681,210)
---------- --------- ---------
Cash provided by operating activities 322,036 19,390 3,668
Cash flows from investing activities
Net decrease in loans - 134,700 -
Net (increase) decrease in
certificates of deposit (19,171) (17,073) 505,835
Acquisition of other real estate
owned (76,705) - (528,875)
---------- --------- ---------
Cash provided by (used in)
investing activities (95,876) 117,627 (23,040)
Cash flows from financing activities
Cash dividends paid (5,100) (4,530) -
---------- --------- ---------
Cash used in financing activities (5,100) (4,530) 0
---------- --------- ---------
Increase (decrease) in cash 221,060 132,487 (19,372)
Cash and cash equivalents, beginning
of year 159,750 27,263 46,635
---------- --------- ---------
Cash and cash equivalents, end of
year $ 380,810 $ 159,750 $ 27,263
========== ========= =========
</TABLE>
Certain bank regulatory limitations exist on the availability of subsidiary bank
undistributed net assets for the payment of dividends to Brunswick Bancorp
without the prior approval of the bank regulatory authorities.
18
<PAGE> 49
EXHIBIT INDEX
-------------
Exhibit
No. Description
--------- -----------
(3) (a) Certificate of Incorporation of Brunswick Bancorp.
Incorporated by reference to Registration Statement
on Form S-14 filed on June 20, 1985. (Exhibit III)
(b) By-laws of Brunswick Bancorp. Incorporated by
reference to Registration Statement on Form S-14
filed on June 20, 1985. (Exhibit IV)
(10) Non-qualified Deferred Compensation Plan dated as of
December 5, 1995. (Exhibit V)
(21) Subsidiaries of Brunswick Bancorp. Incorporated by
reference to Registration Statement on Form S-14 filed
on June 20, 1985. (Exhibit VI)
(27) Financial Data Schedule. (Exhibit VII)
<PAGE> 1
THE BRUNSWICK BANK AND TRUST COMPANY
NON-QUALIFIED DEFERRED COMPENSATION PLAN
ADOPTION AGREEMENT
1. EMPLOYER INFORMATION
A. The name of the Plan is the Brunswick Bank and Trust Company
Non-Qualified Deferred Compensation Plan;
B. The name and address of the employer sponsoring the Plan is:
Brunswick Bancorp and
Brunswick Bank and Trust Company ("The Company")
P.O. Box 29
New Brunswick, NJ 08903
C. The first day of the twelve month period for which the Company
pays taxes is January 1, 1995.
2. PLAN INFORMATION
A. The effective date of the Plan is January 1, 1995;
B. The Plan year ends December 31st.
3. ELIGIBLE EMPLOYEES
Those key employees of the Company selected by the Compensation
Committee of the Board of Directors, specifically, Carmen J. Gumina,
at the date of adoption and key employees, if any, subsequently
designated.
4. CONTRIBUTIONS
Discretionary Incentive Contributions
The Company may make Discretionary Incentive Contributions in any
amounts the Company's Compensation Committee of the Board of Directors
shall designate.
The Company currently intends to make Discretionary Incentive
Contributions for Carmen J. Gumina as follows:
<TABLE>
<CAPTION>
Plan Year Ended Amount
--------------- ----------
<S> <C>
December 31, 1995 $120,000.00
December 31, 1996 120,000.00
December 31, 1997 120,000.00
December 31, 1998 120,000.00
December 31, 1999 120,000.00
</TABLE>
<PAGE> 2
These contributions will be subject to the vesting schedule selected
as designated in Section 5 below. Vesting schedules for subsequent
Discretionary Incentive Contributions shall be determined at the time
designated by the Compensation Committee of the Board of Directors.
5. VESTING OF DISCRETIONARY INCENTIVE CONTRIBUTIONS
<TABLE>
<CAPTION>
Date Percentage
---- ----------
<S> <C>
December 31, 1995 20%
December 31, 1996 40%
December 31, 1997 60%
December 31, 1998 80%
December 31, 1999 100%
</TABLE>
6. ACCOUNTS
The Trustee can invest each Participant's Account Balance as a
separate account, in which case the Trustee can, but is not required
to, take into consideration the investment preferences of the
Participants.
7. ADMINISTRATION
Plan Administrator
The Plan Administrator is legally responsible for the operation of the
Plan, including:
A. Keeping track of which employees are eligible to participate
in the Plan and the date each employee becomes eligible to
participate;
B. Maintaining Participants' Accounts, including all sub-accounts
required for different contribution types and payment
elections, and keeping track of all elections made by
Participants under the Plan and any other relevant
information;
C. Transmitting important communications to the Participants, and
obtaining relevant information from Participants such as
changes in investment selections; and
D. Filing important reports required to be submitted to
governmental agencies.
<PAGE> 3
THE BRUNSWICK BANK AND TRUST COMPANY
NON-QUALIFIED DEFERRED COMPENSATION PLAN
TRUST AGREEMENT
<PAGE> 4
THIS TRUST AGREEMENT, made and entered into this 5th day of December,
1995, by and among Brunswick Bank and Trust Company (the "Bank"), Brunswick
Bancorp (the "Bancorp"), and Brunswick Bank and Trust Company together with
Brunswick Bancorp (the "Company") and Thomas Fornale (the "Trustee").
WITNESSETH THAT:
WHEREAS, the Company heretofore established the Brunswick Bank and
Trust Company Non-Qualified Deferred Compensation Plan for Officers (the
"Plan") for the purpose of retaining the continued employment of certain key
employees of the Company; and
WHEREAS, the Company wishes to establish a trust fund to aid it in
accumulating the amounts necessary to satisfy its contractual liability to pay
such benefits; and
WHEREAS, the Company may make contributions to this trust from time to
time, which contributions (if made) will be applied in payment of the Company's
obligations to pay such benefits; and
WHEREAS, the Plan provides for the Company to pay all benefits
thereunder from its general assets, and the establishment of this trust shall
not reduce or otherwise affect the Company's continuing liability to pay
benefits from such assets except that the Company's liability shall be offset
by actual benefit payments made by this trust; and
WHEREAS, the trust established by this Trust Agreement is intended to
be classified for income tax purposes as a "grantor trust" with the
<PAGE> 5
result that the income of the trust will be treated as income of the Company
pursuant to Subpart E of Subchapter J of Chapter 1, of Subtitle A of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Company and the Trustee declare and agree as follows:
SECTION 1. ESTABLISHMENT AND TITLE OF THE TRUST.
1.1 The Company hereby establishes with the Trustee a trust (the
"Trust"), to accept such sums of money and other property acceptable to the
Trustee as from time to time may be paid or delivered to the Trustee. All such
money and other property, all investments and reinvestments made therewith or
proceeds thereof and all earnings and profits thereon that are not paid to the
Company as provided in Section 7.1 of this Trust Agreement, less all payments
and charges as authorized herein, are hereinafter referred to as the "Trust
Fund". The Trust Fund shall be held by the Trustee IN TRUST and shall be dealt
with in accordance with the provisions of this Trust Agreement. The Trust Fund
shall be held for the exclusive purpose of providing payments to the
participants of the Plan and their beneficiaries and defraying reasonable
expenses of administration in accordance with the provisions of this Trust
Agreement until all such payments have been made; provided, however, that the
Trust Fund shall at all times be subject to the claims of the creditors of the
Company as set forth in Section 8 of this Trust Agreement.
<PAGE> 6
SECTION 2. ACCEPTANCE BY THE TRUSTEE.
2.1 The Trustee accepts the Trust established under this Trust
Agreement on the terms and subject to the provisions set forth herein, and it
agrees to discharge and perform fully and faithfully all of the duties and
obligations imposed upon it under this Trust Agreement.
SECTION 3. LIMITATION ON USE OF FUNDS.
3.1 No part of the corpus of the Trust Fund shall be recoverable
by the Company or used for any purpose other than for the exclusive purpose of
providing payments to participants of the Plan and their beneficiaries and
defraying reasonable expenses of administration in accordance with the
provisions of this Trust Agreement until all such payments required by this
Trust Agreement have been made; provided, however, that (i) nothing in this
Section 3.1 shall be deemed to limit or otherwise prevent the payment from the
Trust Fund of expenses and other charges as provided in Section 10.1 and 10.2
of this Trust Agreement or the application of the Trust Fund as provided in
Section 6.4 of this Trust Agreement if the Trust is finally determined not to
constitute a grantor trust and (ii) the Trust Fund shall at all times be
subject to the claims of creditors of the Company as set forth in Section 8 of
this Trust Agreement.
SECTION 4. DUTIES AND POWERS OF THE TRUSTEE WITH RESPECT TO INVESTMENTS.
4.1 The Trustee shall invest and reinvest the principal and income
of the Trust Fund and keep the Trust Fund invested, without distinction between
principal and income, in accordance with the
<PAGE> 7
directions of the Company or such investment guidelines as the Company may
provide to the Trustee from time to time.
SECTION 5. ADDITIONAL POWERS AND DUTIES OF THE TRUSTEE.
5.1 Subject to the provisions of Section 4.1, the Trustee shall
have the following additional powers and authority with respect to all property
constituting a part of the Trust Fund:
a. To sell, exchange or transfer any such property at public or
private sale for cash or on credit and grant options for the purchase
or exchange thereof, including call options for property held in the
Trust Fund and put options for the purchase of property.
b. To participate in any plan of reorganization, consolidation,
merger, combination, liquidation or other similar plan relating to any
such property, and to consent to or oppose any such plan or any action
thereunder, or any contract, lease, mortgage, purchase, sale or other
action by any corporation or other entity.
c. To deposit any such property with any protective,
reorganization or similar committee; to delegate discretionary power
to any such committee; and to pay part of the expenses and
compensation of any such committee and any assessments levied with
respect to any property so deposited.
d. To exercise any conversion privilege or subscription right
available in connection with any such property; to oppose or to
<PAGE> 8
consent to the reorganization, consolidation, merger or readjustment
of the finances of any corporation, company or association, or to the
sale, mortgage, pledge or lease of the property of any corporation,
company or association any of the securities of which may at any time
be held in the Trust Fund and to do any act with reference thereto,
including the exercise of options, the making of agreements or
subscriptions and the payment of expenses, assessments or
subscriptions, which may be deemed necessary or advisable in
connection therewith, and to hold and retain any securities or other
property which it may so acquire.
e. To commence or defend suits or legal proceedings and to
represent the Trust in all suits or legal proceedings; to settle,
compromise or submit to arbitration, any claims, debts or damages, due
or owing to or from the Trust.
f. To exercise, personally or by general or limited power of
attorney, any right, including the right to vote, appurtenant to any
securities or other such property.
g. To borrow money from any lender in such amounts and upon such
terms and conditions as shall be deemed advisable or proper to carry
out the purposes of the Trust and to pledge any securities or other
property for the repayment of any such loan.
h. To engage any legal counsel, including counsel to the Company,
any enrolled actuary, or any other suitable agents, to consult with
such counsel, enrolled actuary, or agents with respect to the
construction of this Trust Agreement, the duties of
<PAGE> 9
the Trustee hereunder, the transactions contemplated by this Trust
Agreement or any act which the Trustee proposes to take or omit, to
rely upon the advice of such counsel, enrolled actuary or agents, and
to pay its reasonable fees, expenses and compensation.
i. To register any securities held by it in its own name or in
the name of any custodian of such property or of its nominee,
including the nominee of any system for the central handling of
securities, with or without the addition of words indicating that such
securities are held in a fiduciary capacity, to deposit or arrange for
the deposit of any such securities with such a system and to hold any
securities in bearer form.
j. To make, execute and deliver, as Trustee, any and all deeds,
leases, notes, bonds, guarantees, mortgages, conveyances, contracts,
waivers, releases or other instruments in writing necessary or proper
for the accomplishment of any of the foregoing powers.
k. To transfer assets of the Trust Fund to a successor trustee as
provided in Section 12.4.
l. To exercise, generally, any of the powers which an individual
owner might exercise in connection with property either real, personal
or mixed held by the Trust Fund, and to do all other acts that the
Trustee may deem necessary or proper to carry out any of the powers
set forth in this Section 5 or otherwise in the best interest of the
Trust Fund.
<PAGE> 10
SECTION 6. PAYMENTS BY THE TRUSTEE.
6.1 The establishment of the Trust and the payment or delivery to
the Trust of money or other property acceptable to the Trustee shall not vest
in Plan participants or their beneficiaries any right, title or interest in and
to any assets of the Trust, except as otherwise set forth in this Section 6.
6.2 The Trustee shall make payment of Plan benefits to
participants and beneficiaries of the Plan from the assets held in their
respective Accounts, if any, to the extent such assets are available for
distribution, in accordance with the terms and conditions set forth in the Plan
and subject to the election, if any, of the participant or his beneficiary
thereunder. In no event shall the Account of any participant or beneficiary be
used for the purpose of providing benefits to any other participant or
beneficiary of the Plan.
6.3 If the participant's Account is not sufficient to make one or
more payments of benefits due under the Plan to such participant or his
beneficiary in accordance with the terms of the Plan, the Company shall make
the balance of each such payment as it falls due.
6.4 Notwithstanding anything contained in this Trust Agreement to
the contrary, if at any time the Trust finally is determined by the Internal
Revenue Service ("IRS") not to be a "grantor trust" with the result that the
income of the Trust Fund is not treated as income of the Company pursuant to
Subpart E of Subchapter J of the Code, or if a tax is finally determined by the
IRS or is determined by counsel to the Trustee to be payable by any Plan
participant or beneficiary in respect
<PAGE> 11
of any vested interest in the Trust Fund prior to payment of such interest to
such participant or beneficiary, then the Trust shall immediately terminate and
the full fair market value of the assets in the Trust Fund shall be returned to
the Company. The Company shall fully reimburse each participant and their
beneficiaries for any tax liability they may incur pursuant to the operation of
this Section. For purposes of this Section, a final determination of the IRS
shall be a decision rendered by the IRS which is no longer subject to
administrative appeal within the IRS.
6.5 Notwithstanding any provision herein to the contrary, with
respect to each participant of the Plan, in the event of a change in control of
the Company, the Trustee shall immediately distribute in one lump sum to such
participant (or his beneficiary in the event of the participant's death) the
entire value of such participant's Account. Within thirty (30) days following
payment of the value of the participant's Account pursuant to this Section 6.5,
the Company shall determine the excess, if any, of the participant's lump sum
benefit payable, determined as of the date of the change in control of the
Company, over the amount of such participant's Account actually distributed
hereunder, and the Company shall immediately thereafter pay such excess to the
participant (or his beneficiary in the event of his death) in one lump sum cash
payment. In the event the amount of the participant's Account paid to him or
his beneficiary exceeds the participant's lump sum benefit payable, determined
as of the date of the change in control of the Company, the participant or his
beneficiary shall return such excess to the Company. The Trustee shall be
indemnified and held harmless by the Company in making a payment pursuant to
such notification. The Trustee shall not be required to
<PAGE> 12
make an independent inquiry or decision with respect to the amount of any
payment which may be made pursuant to this Section 6.5 or the validity of any
notice hereunder.
For purpose of this Section 6.5, the term "change in control" shall
mean (a) the purchase or other acquisition in one or more transaction other
than from the Company, by any individual, entity or group of persons, within
the meaning of section 13(d)(3) or 14(d) of the Securities Exchange Act of 1934
or any comparable successor provisions, or beneficial ownership (within the
meaning of Rule 13d-3 of Securities Exchange Act of 1934) of 30 percent or more
of either the outstanding shares of common stock or the combined voting power
of the Company's then outstanding voting securities entitled to vote generally,
or (b) the approval by the stockholders of the Company of a reorganization,
merger, or consolidation, in each case, with respect to which persons who were
stockholders of the Company immediately prior to such reorganization, merger or
consolidation do not immediately thereafter own more than 50 percent of the
combined voting power of the reorganized, merged or consolidated Company's then
outstanding securities that are entitled to vote generally in the election of
directors or (c) the sale of substantially all of the Company's assets;
provided however, if any event described in (a) (b) or (c) shall be approved by
a two-thirds vote of the full Board, then it shall not constitute a Change of
Control.
6.6 Notwithstanding anything in this Trust Agreement to the
contrary, the Company shall remain primarily liable under the Plan to pay
benefits. However, the Company's liability under the Plan shall be reduced or
offset to the extent and by the value of any benefit payments
<PAGE> 13
under the Plan made from the Trust.
6.7 The Trustee shall deduct from each payment under this Trust
Agreement any Federal, state or local withholding or other taxes or charges
which the Trustee may be required to deduct under applicable laws.
SECTION 7. FUNDING OF THE TRUST.
7.1 Amounts held for the benefit of each participant and
beneficiary in the Trust shall be maintained in a separate account (the
"Account") which shall be held, administered and accounted for separately for
each participant or beneficiary. Separate accounting records shall be
maintained so that the amount held in each participant's and beneficiary's
Account shall be identifiable at all times. Each Account shall consist of, and
be increased by, contributions made by the Company which are designated by the
Company as the property of such Account and shall be decreased by distributions
made therefrom. The Company shall make contributions to such Accounts from
time to time in accordance with such funding method and policy as will permit
the Trust to make payment of benefits provided by the Plan. In addition, the
Trustee shall allocate and credit the Net Income of the Trust to the Accounts
of participants and beneficiaries on the last day of each calendar year (the
"Allocation Date"), pro rata based on the respective Account balances of each
participant and beneficiary on such date; provided, however that in no event
shall the Account of any participant or beneficiary at any time exceed the
maximum lump sum benefit payable under the Plan to such participant or
beneficiary. If as a result of the foregoing, all or a portion of any Net
Income
<PAGE> 14
otherwise allocable to the Account of any participant or beneficiary on the
Allocation Date cannot be so allocated, such Net Income shall be allocated and
credited to the Accounts for all other participants and beneficiaries whose
Accounts do not exceed the maximum lump sum benefit payable to them under the
Plan pro rata based on the respective Account balances of each such participant
and beneficiary on such Allocation Date (determined without regard to the
allocation of any Net Income to such Accounts on such date). To the extent
that any Net Income cannot be allocated to the Accounts of participants and
beneficiaries pursuant hereto, such Net Income shall be paid to the Company.
For purposes of the foregoing, Net Income shall mean the net gain or loss of
the Trust from investments, as reflected by interest payments, dividends,
realized and unrealized gains and losses on securities, other investment
transactions and expenses paid from the Trust. In determining the Net Income
of the Trust as of any date, assets shall be valued on the basis of their then
fair market value.
SECTION 8. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO PARTICIPANTS AND
BENEFICIARIES WHEN COMPANY IS INSOLVENT.
8.1 It is the intent of the parties hereto that the Trust assets
are and shall remain at all times subject to the claims of the general creditors
of the Company. Accordingly, the Company shall not create a security interest in
the Trust assets in favor of the participants and beneficiaries of the Plan or
any creditor. If the Trustee receive the notice provided for in Section 8.2
hereof, or otherwise receives actual notice that the Company is insolvent or
bankrupt as defined in Section 8.2 hereof, the Trustee will make no further
distributions from the Trust to any of the participants or beneficiaries of the
Plan but will deliver the entire amount of the Trust assets only as a court of
<PAGE> 15
competent jurisdiction, or duly appointed receiver or other person authorized
to act by such a court, may direct to make the Trust assets available to
satisfy the claims of the Company's general creditors. The Trustee shall
resume distributions from the Trust to the participants and beneficiaries of
the Plan under the terms hereof, upon no less than thirty (30) days' advance
notice to the Company, if it determines that the Company was not, or is no
longer, bankrupt or insolvent. Unless the Trustee has actual knowledge of the
Company's bankruptcy or insolvency, the Trustee shall have no duty to inquire
whether the Company is bankrupt or insolvent.
8.2 The Company, through its Board or Chief Financial Officer,
shall advise the Trustee promptly in writing of the Company's bankruptcy or
insolvency. The Company shall be deemed to be bankrupt or insolvent upon the
occurrence of any of the following:
a. The Company or the Bank shall make an assignment for the
benefit of creditors, file a petition in bankruptcy, petition or apply
to any tribunal for the appointment of a custodian, receiver,
liquidator, sequestrator, or any trustee for it or a substantial part
of its assets, or shall commence any case under any bankruptcy,
reorganization, arrangement, readjustment or debt, dissolution, or
liquidation law or statute of any jurisdiction (federal or state),
whether now or hereafter in effect; or if there shall have been filed
any such petition or application, or any such case shall have been
commenced against it, in which an order for relief is entered or which
remains undismissed; or the Company or the Bank by any act or
commission shall indicate its consent to, approval of or acquiescence
in any such petition,
<PAGE> 16
application or case or order for relief or to the appointment of a
custodian, receiver or any trustee for it or any substantial part of
any of its property, or shall suffer any such custodianship,
receivership, or trusteeship to continue undischarged; or
b. The Company or the Bank shall generally not pay its debts as
such debts become due or shall cease to pay its debts in the ordinary
course of business; or
c. A conservator or receiver shall be appointed for the Company
or the Bank by any Federal or State regulatory agency.
8.3 If the Trustee discontinues payments of benefits under the
Plan from the Trust pursuant to Section 8.1 of this Trust Agreement and
subsequently resumes such payments, the first payment to a participant or
beneficiary following such discontinuance shall include the aggregate amount of
all payments which would have been made to the participant or beneficiary in
accordance with the Plan during the period of such discontinuance, less the
aggregate amount of payments of benefits under the Plan made to the participant
or his beneficiary by the Company during any such period of discontinuance.
SECTION 9. THIRD PARTIES.
9.1 A third party dealing with the Trustee shall not be required
to make inquiry as to the authority of the Trustee to take any action nor be
under any obligation to see to the proper application by the Trustee of the
proceeds of sale of any property sold by the Trustee or
<PAGE> 17
to inquire into the validity or propriety of any act of the Trustee.
SECTION 10. TAXES, EXPENSES AND COMPENSATION.
10.1 The Company shall from time to time pay taxes of any and all
kinds whatsoever which at any time are lawfully levied or assessed upon or
become payable in respect of the Trust Fund, the income or any property forming
a part thereof, or any security transaction pertaining thereto. To the extent
that any taxes lawfully levied or assessed upon the Trust Fund are not paid by
the Company, the Trustee shall pay such taxes out of the Trust Fund. The
Trustee shall withhold Federal, State and local taxes from any payments made to
a participant or beneficiary in accordance with the provisions of applicable
law. The Trustee shall contest the validity of taxes in any manner deemed
appropriate by the Company or its counsel, but at the Company's expense, and
only if it has received an indemnity bond or other security satisfactory to it
to pay any such expenses. In the alternative, the Company may itself contest
the validity of any such taxes.
10.2 The Company shall pay the Trustee such reasonable compensation
for its services as may be agreed upon in writing from time to time by the
Company and the Trustee. The Company shall also pay the reasonable expenses
incurred by the Trustee in the performance of its duties under this Trust
Agreement, including brokerage commissions and fees of counsel engaged by the
Trustee. Such compensation and expenses shall be charged against and paid from
the Trust Fund to the extent that the Company does not pay such compensation.
<PAGE> 18
SECTION 11. ADMINISTRATION AND RECORDS.
11.1 The Trustee shall keep or cause to be kept accurate and
detailed accounts of any investments, receipts, disbursements and other
transactions hereunder and all necessary and appropriate records required to
identify correctly and reflect accurately the interest of each participant or
beneficiary, and all accounts, books and records relating thereto shall be open
to the inspection and audit at all reasonable times by any person designated by
the Company. All such accounts, books and records shall be preserved (in
original form, or on microfilm, magnetic tape or any other similar process) for
such period as the Trustee may determine, but the Trustee may only destroy such
accounts, books and records after first notifying the Company in writing of its
intention to do so and transferring to the Company any of such accounts, books
and records requested.
11.2 Within 120 days after the close of each calendar year, and
within 120 days after the removal or resignation of the Trustee or the
termination of the Trust, the Trustee shall file with the Company a written
account setting forth all investments, receipts, disbursements and other
transactions effected by it during the preceding calendar year, or during the
period from the close of the preceding calendar [year] to the date of such
removal, resignation or termination, including a description of all investments
and securities purchased and sold with the cost or net proceeds of such
purchases or sales and showing of all cash, securities and other property held
at the end of such calendar year or other period.
<PAGE> 19
11.3 The Trustee shall from time to time permit an independent
public accountant selected by the Company (except one to whom the Trustee has
reasonable objection) to have access during ordinary business hours to such
records as may be necessary to audit the Trustee's accounts.
11.4 As of the last day of each calendar year, the fair market
value of the assets held in the Trust Fund shall be determined. Within 120
days after the close of each calendar year, the Trustee shall file with the
Company the written report of the determination of such fair market value of
the assets held in the Trust Fund.
11.5 Nothing contained in this Trust Agreement shall be construed
as depriving the Trustee, the Company or any participant of beneficiary of the
right to have a judicial settlement of the Trustee's accounts, and upon any
proceeding for a judicial settlement of the Trustee's account or for
instructions the only necessary parties hereto in addition to the Trustee shall
be the Company and the participants or their beneficiaries.
11.6 In the event of the removal or resignation of the Trustee, the
Trustee shall deliver to the successor Trustee all records which shall be
required by the successor Trustee to enable it to carry out the provisions of
this Trust Agreement.
11.7 In addition to any returns required of the Trustee by law, the
Trustee shall prepare and file such tax reports and other returns as the
Company and the Trustee may from time to time agree.
<PAGE> 20
SECTION 12. REMOVAL OR RESIGNATION OF THE TRUSTEE AND DESIGNATION OF
SUCCESSOR TRUSTEE.
12.1 At any time the Company may remove the Trustee with or without
cause, upon at least 60 days' notice in writing to the Trustee. A copy of such
notice shall be sent to the Trustee.
12.2 The Trustees may resign at any time upon at least 60 days'
notice in writing to the Company.
12.3 In the event of such removal or resignation, the Trustee shall
duly file with the Company a written account as provide in Section 11.2 of this
Trust Agreement for the period since the last previous annual accounting,
listing the investments of the Trust and any uninvested cash balance thereof,
and setting forth all receipts, disbursements, distributions and other
transactions respecting the Trust not included in any previous account.
12.4 Within 60 days after any such notice of removal or resignation
of the Trustee, the Company shall designate a successor Trustee qualified to
act hereunder. Each successor Trustee, during each period as it shall act as
such, shall have the powers and duties herein conferred upon the Trustee, and
the word "Trustee" wherever used herein, except where context otherwise
requires, shall be deemed to include any successor Trustee. Upon designation
of a successor Trustee and deliver to the resigned or removed Trustee of
written acceptance by the successor Trustee of such designation, such resigned
or removed Trustee shall promptly assign, transfer, deliver and pay over to
such Trustee, in conformity with the requirements of applicable law, the funds
and
<PAGE> 21
properties in its control or possession then constituting the Trust Fund.
SECTION 13. ENFORCEMENT OF TRUST AGREEMENT AND LEGAL PROCEEDINGS.
13.1 The Company shall have the right to enforce any provision of
this Trust Agreement, and any participant or beneficiary of the Plan shall have
the right to enforce any provision of this Trust Agreement that affects the
right, title and interest of such participant or beneficiary, if any, in the
Trust. In any action or proceedings affecting the Trust the only necessary
parties shall be the Company, the Trustee and participants and beneficiaries of
the Plan and, except as otherwise required by applicable law, no other person
shall be entitled to any notice or service of process. Any judgement entered
in such an action or proceeding shall to the maximum extent permitted by
applicable law be binding and conclusive on all persons having or claiming to
have any interest in the Trust.
SECTION 14. TERMINATION AND SUSPENSION.
14.1 The Trust shall terminate when all payments which have or may
become payable pursuant to the terms of the Trust have been made and any
remaining assets shall then be paid by Trustee to the Company.
SECTION 15. AMENDMENTS.
15.1 The Company may from time to time amend or modify, in whole or
in part, any or all of the provisions of this Trust Agreement (except Sections
1.1, 3.1, 6, 11, 12.4, 13, 14, 15 and 17) with the written
<PAGE> 22
consent of the Trustee, but without the consent of any participant or
beneficiary of the Plan, provided that any such amendment shall not adversely
affect the rights of any participant or beneficiary hereunder, or cause the
Trust to cease to constitute a grantor trust as described in Section 6.4 of
this Trust Agreement.
15.2 The Company and the Trustee shall execute such supplements to,
or amendments of, this Trust Agreement as shall be necessary to give effect to
any such amendment or modification.
SECTION 16. NONALIENATION.
16.1 Except insofar as applicable law may otherwise require and
subject to Sections 1.1, 3.1 and 8 of this Trust Agreement, (i) no amount
payable to or in respect of any participant or beneficiary at any time under
the Trust shall be subject in any manner to alienation by anticipation, sale,
transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of
any kind, and any attempt to so alienate, sell transfer, assign, pledge,
attach, charge or otherwise encumber any such amount, whether presently or
thereafter payable, shall be void; and (ii) the Trust Fund shall in no manner
be liable for or subject to the debts or liabilities of a participant or
beneficiary.
SECTION 17. COMMUNICATIONS.
17.1 Communications to the Company shall be addressed to Brunswick
Bank and Trust, P.O. Box 29, New Brunswick, NJ 08903, Attention: Chief
Financial Officer; provided, however, that upon the Company's written request,
such communications shall be sent to such other address as the
<PAGE> 23
Company may specify.
17.2 Communications to the Trustee shall be addressed to Brunswick
Bank and Trust, P.O. Box 29, New Brunswick, NJ 08903, Attention: Roman Gumina;
provided, however, that upon the Trustee's written request, such communications
shall be sent to such other address as the Trustee may specify.
17.3 No communication shall be binding on the Trustee until it is
received by the Trustee, no communication shall be binding on the Company until
it is received by the Company, and no communication shall be binding on any
participant or beneficiary until it is received by the participant or
beneficiary.
17.4 Any action of the Company pursuant to this Trust Agreement,
including all order, requests, directions, instructions, approvals and
objections of the Company to the Trustee, shall be in writing, signed on behalf
of the Company by any duly authorized officer of the Company. Any action by
any participant or beneficiary shall be in writing. The Trustee may rely on,
and will be fully protected with respect to any such action taken or omitted in
reliance on, any information, order, request, direction, instruction, approval,
objection, and list delivered to the Trustee by the Company or, to the extent
applicable under this Trust Agreement, by a participant or beneficiary.
SECTION 18. MISCELLANEOUS PROVISIONS.
18.1 This Trust Agreement shall be binding upon and inure to the
benefit of the Company and the Trustee and their respective successors
<PAGE> 24
and assigns and the personal representatives of individuals.
18.2 The Trustee assumes no obligation or responsibility with
respect to any action required by this Trust Agreement on the part of the
Company.
18.3 Each participant or beneficiary shall file with the Trustee
such pertinent information concerning himself, and any other person as the
Trustee shall specify, and the participant or beneficiary shall have no rights
nor be entitled to any benefits under the Trust unless such information is
filed by or with respect to him.
18.4 Any corporation into which the Trustee may be merged or with
which it may be consolidated, or any corporation resulting from any merger,
reorganization or consolidation to which the Trustee may be a party, or any
corporation to which all or substantially all the trust business of the Trustee
may be transferred shall be the successor of the Trustee hereunder without the
execution of filing of any instrument or the performance of any act.
18.5 Title to the Sections of this Trust Agreement are included for
convenience only and shall not control the meaning or interpretation of any
provision of this Trust Agreement.
18.6 This Trust Agreement and the Trust established hereunder shall
be governed by and construed, enforced and administered in accordance with the
law of the State of New Jersey, and the Trustee shall be liable to account only
in the courts of the State of New Jersey.
<PAGE> 25
18.7 This Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed to be the original although the
others shall not be produced.
IN WITNESS WHEREOF, this Trust Agreement has been duly executed by the
parties hereto as of the day and year first above written.
By:
--------------------------------
Brunswick Bank and Trust Company
Attest
- ---------------------------
Assistant Secretary
By:
--------------------------------
Brunswick Bancorp
Attest
- ---------------------------
By:
--------------------------------
Thomas Fornale
Attest
- ---------------------------
<PAGE> 26
THE BRUNSWICK BANK AND TRUST COMPANY
NON-QUALIFIED DEFERRED
COMPENSATION PLAN
<PAGE> 27
The Brunswick Bank and Trust Company Non-Qualified
Deferred Compensation Plan
ARTICLE 1 - INTRODUCTION
1.1 PURPOSE OF PLAN
The Company has adopted the Brunswick Bank and Trust Company Non-Qualified
Deferred Compensation Plan set forth herein to provide a means by which to
retain the continued employment of certain key employees by offering the
special incentive of a deferred compensation plan.
1.2 STATUS OF PLAN
The Plan is intended to be "a plan which is unfunded and is maintained by an
employer primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees" within the meaning
of Sections 201(2) and 301(a)(3) of the Employee Retirement Income Security Act
of 1974 ("ERISA"), and shall be interpreted and administered to the extent
possible in a manner consistent with that intent.
ARTICLE 2 - DEFINITIONS
Wherever used herein, the following terms have the meanings set forth below,
unless a different meaning is clearly required by the context:
2.1 ACCOUNT means, for each Participant, the account established for his
or her benefit under Section 5.1.
<PAGE> 28
2.2 CHANGE OF CONTROL means (a) the purchase or other acquisition in one
or more transaction other than from the Company, by any individual, entity or
group of persons, within the meaning of section 13(d)(3) or 14(d) of the
Securities Exchange Act of 1934 or any comparable successor provisions, or
beneficial ownership (within the meaning of Rule 13d-3 of Securities Exchange
Act of 1934) of 30 percent or more of either the outstanding shares of common
stock or the combined voting power of the Company's then outstanding voting
securities entitled to vote generally, or (b)the approval by the stockholders
of the Company of a reorganization, merger, or consolidation, in each case,
with respect to which persons who were stockholders of the Company immediately
prior to such reorganization, merger or consolidation do not immediately
thereafter own more than 50 percent of the combined voting power of the
reorganized, merged or consolidated Company's then outstanding securities that
are entitled to vote generally in the election of directors or (c) the sale of
substantially all of the Company's assets, provided, however, if any event
described in (a) (b) or (c) shall be approved by a two-thirds vote of the full
Board, then it shall not constitute a Change of Control.
2.3 CODE means the Internal Revenue Code of 1986, as amended from time to
time. Reference to any section or subsection of the Code includes reference to
any comparable or succeeding provisions of any legislation which amends,
supplements or replaces such section or subsection.
2.4 EFFECTIVE DATE means the date chosen in the Adoption Agreement as of
which the Plan first becomes effective.
<PAGE> 29
2.5 ELIGIBLE EMPLOYEE means, on the Effective Date or on any Entry Date
thereafter, each employee of the Company designated in the Adoption Agreement,
or subsequently designated by the Compensation Committee of the Board of
Directors.
2.6 BANK means Brunswick Bank and Trust Company, any successor to all or a
major portion of the Bank's assets or business which assumes the obligations of
the Bank, and each other entity that is affiliated with the Bank which adopts
the Plan with the consent of the Bank, provided that the Bank that signs the
Adoption Agreement shall have sole power to amend this Plan and shall be the
Plan Administrator if no other person or entity is so serving at any time.
2.7 BANCORP means Brunswick Bancorp.
2.8 COMPANY means Brunswick Bancorp together with Brunswick Bank and Trust
Company.
2.9 ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time. Reference to any section or subsection of ERISA
includes reference to any comparable or succeeding provisions of any
legislation which amends, supplements or replaces such section or subsection.
2.10 INCENTIVE CONTRIBUTION means a discretionary additional contribution
made by the Company as described in Section 4.1.
<PAGE> 30
2.11 INSOLVENT means the occurrence of any of the following:
a. The Company or the Bank shall make an assignment for the benefit of
creditors, file a petition in bankruptcy, petition or apply to any
tribunal for the appointment of a custodian, receiver, liquidator,
sequestrator, or any trustee for it or a substantial part of its
assets, or shall commence any case under any bankruptcy,
reorganization, arrangement, readjustment or debt, dissolution, or
liquidation law or statute of any jurisdiction (federal or state),
whether now or hereafter in effect; or if there shall have been filed
any such petition or application, or any such case shall have been
commenced against it, in which an order for relief is entered or which
remains undismissed; or the Company or the Bank by any act or
commission shall indicate its consent to, approval of or acquiescence
in any such petition, application or case or order for relief or to
the appointment of a custodian, receiver or any trustee for it or any
substantial part of any of its property, or shall suffer any such
custodianship, receivership or trusteeship to continue undischarged;
or
b. The Company or the Bank shall generally not pay its debts as such
debts become due or shall cease to pay its debts in the ordinary
course of business; or
c. A conservator or receiver shall be appointed for the Company or the
Bank by any Federal or State regulatory agency.
2.12 PARTICIPANT means any individual who participates in the Plan in
accordance with Article 3.
<PAGE> 31
2.13 PLAN means the Brunswick Bank and Trust Company Non-Qualified Deferred
Compensation plan for Select Employees and the Adoption Agreement and all
amendments thereto.
2.14 PLAN ADMINISTRATOR means the person, persons or entity designated by
the Company in the Adoption Agreement to administer the Plan and to serve as
the agent with respect to the Trust as contemplated by the agreement
establishing the Trust. If no such person or entity is so serving at any time,
the Company shall be the Plan Administrator.
2.15 PLAN YEAR means the 12-month period chosen in the Adoption Agreement.
2.16 TOTAL AND PERMANENT DISABILITY means the inability of a Participant to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months, and the permanence and degree of which shall be
supported by medical evidence satisfactory to the Plan Administrator.
2.17 TRUST means the trust established by the Company that identifies the
Plan as a plan with respect to which assets are to be held by the Trustee.
2.18 TRUSTEE means the trustee or trustees under the Trust.
2.19 YEAR OF SERVICE means the computation period and service requirement
elected in the Adoption Agreement.
<PAGE> 32
ARTICLE 3 - PARTICIPATION
3.1 COMMENCEMENT OF PARTICIPATION
Any individual designated through a corporate resolution in accordance with
Section 4.1 shall become a Participant in the Plan as of such date in
accordance with Section 4.1. Any individual who is not already a Participant
and whose Account is credited with an Incentive Contribution shall become a
Participant as of the date such amount is credited.
3.2 CONTINUED PARTICIPATION
A Participant in the plan shall continue to be a Participant so long as any
amount remains credited to his or her Account.
ARTICLE 4 - CONTRIBUTIONS
4.1 INCENTIVE CONTRIBUTIONS
The Company may, in its sole discretion, select one or more Eligible Employees
to receive an Incentive Contribution to his or her Account on such terms as the
Company shall specify at the time it makes the contribution. For example, the
Company may contribute an amount to a Participant's Account and condition the
payment of that amount and accrued earnings thereon upon the Participant
remaining employed by the Company for an additional specified period of time.
The terms specified by the Company shall supersede any other provision of this
Plan as regards Incentive Contribution and earnings with respect thereto. The
Company, in its discretion, may permit the Participant to designate a
distribution schedule for a particular Incentive Contribution provided that
such designation is made prior to the time that the Company finally determines
that the Participant will receive the Incentive Contribution.
<PAGE> 33
ARTICLE 5 - ACCOUNTS
5.1 ACCOUNTS
The Plan Administrator shall establish an Account for each Participant
reflecting Incentive Contributions made for the Participant's benefit together
with any adjustments for income, gain or loss and any payments from the
Account. The Plan Administrator may cause the Trustee to maintain and invest
separate assets accounts corresponding to each Participant's Account. The Plan
Administrator shall establish sub-accounts for each Participant that has more
than one election in effect under Section 7.1 and such other sub- accounts as
are necessary for the proper administration of the Plan. As of the last
business day of each calendar quarter, the Plan Administrator shall provide the
Participant with a statement of his or her Account reflecting the income, gains
and losses (realized and unrealized), amounts of deferrals, and distributions
of such Account since the prior statement.
5.2 INVESTMENTS
The assets of the Trust shall be invested in such investments as the Trustee
shall determine. The Trustee may (but is not required to) consider the
Company's or a Participant's investment preferences when investing the assets
attributable to a Participant's Account.
ARTICLE 6 - VESTING
6.1 GENERAL
A Participant shall become vested in the portion of his or her Account
attributable to Incentive Contributions and income and gain attributable
thereto in accordance with the schedule selected by the Company in the Adoption
Agreement, subject to earlier vesting in accordance with Section 6.3, 6.4, and
6.5.
<PAGE> 34
6.2 VESTING SERVICE
For purposes of applying the vesting schedule, a Participant shall be
considered to have completed a Year of Service for each complete year of
full-time service with the Company or an Affiliate, measured from the
Participant's first date of such employment, unless the Company also maintain a
401(k) plan that is qualified under section 401(a) of the Internal Revenue Code
in which the Participant participates, in which case the rules governing
vesting service under that plan shall also be controlling under this Plan.
6.3 CHANGE OF CONTROL
A Participant shall become fully vested in his or her Account immediately prior
to a Change of Control of the Company.
6.4 DEATH OR DISABILITY
A Participant shall become fully vested in his or her Account immediately prior
to termination of the Participant's employment by reason of the Participant's
death or Total and Permanent Disability. Whether a Participant's termination
of employment is by reason of the Participant's Total and Permanent Disability
shall be determined by the Plan Administrator in its sole discretion.
6.5 INSOLVENCY
A Participant shall become fully vested in his or her Account immediately prior
to the Company or the Bank becoming Insolvent, in which case the Participant
will have the same rights as a general creditor of the Company with respect to
his or her Account balance.
<PAGE> 35
ARTICLE 7 - PAYMENTS
7.1 ELECTION AS TO TIME AND FORM OF PAYMENT
A Participant shall elect the date at which the vested Incentive Contributions
(including any earnings attributable thereto) will commence to be paid to the
Participant. The Participant shall also elect thereon for payments to be paid
in either:
a. a single lump-sum payment; or
b. annual installments over a period elected by the Participant up to 10
years, the amount of each installment to equal the balance of his or
her Account immediately prior to the installment divided by the number
of installments remaining to be paid.
Each such election will be effective for the Plan Year for which it is made and
succeeding Plan Years, unless changed by the Participant. Any change will be
effective only for Incentive Contributions made for the first Plan Year
beginning after the date on which the Election Form containing the change is
filed with the Plan Administrator. Except as provided in Sections 7.2, 7.3,
7.4, or 7.5, payment of a Participant's Account shall be made in accordance
with the Participant's election under this Section 7.1.
7.2 CHANGE OF CONTROL
As soon as possible following a Change of Control of the Company, each
Participant shall be paid his or her entire Account balance (including any
amount vested pursuant to Section 6.3) in a single lump sum.
<PAGE> 36
7.3 TERMINATION OF EMPLOYMENT
Upon termination of a Participant's employment for any reason other than death,
the vested portion of the Participant's Account (including any portion vested
pursuant to Section 6.4 as a consequence of the Participant's Total and
Permanent Disability) shall be paid to the Participant in a single lump sum as
soon as practicable following the date of such termination; provided, however,
that the Plan Administrator, in its sole discretion, may pay out a
Participant's Account balance in annual installments if the Participant's
employment terminates by reason of the Participant's Total and Permanent
Disability.
7.4 DEATH
If a Participant dies prior to the complete distribution of his or her Account,
the balance of the Account shall be paid as soon as practicable in a single
lump sum payment to the estate of the Participant.
7.5 UNFORESEEN EMERGENCY
If a Participant suffers an unforeseen emergency, as defined herein, the Plan
Administrator, in its sole discretion, may pay to the Participant only that
portion, if any, of the vested portion of his or her Account which the Plan
Administrator determines is necessary to satisfy the emergency need, including
any amounts necessary to pay any federal, state or local income taxes
reasonably anticipated to result from the distribution. A Participant
requesting an emergency shall apply for the payment in writing in a form
approved by the Plan Administrator and shall provide such additional
information as the Plan Administrator may require.
<PAGE> 37
For purposes of this paragraph, "unforeseen emergency" means an immediate and
heavy financial need resulting from any of the following:
a. expenses which are not covered by insurance and which the Participant
or his or her spouse or dependent has incurred as a result of, or is
required to incur in order to receive, medical care;
b. the need to prevent eviction of a Participant from his or her
principal residence or foreclosure on the mortgage of the
Participant's principal residence; or
c. any other circumstance that is determined by the Plan Administrator in
its sole discretion to constitute an unforeseen emergency which is not
covered by insurance and which cannot reasonably be relieved by the
liquidation of the Participant's assets.
7.6 FORFEITURE OF NON-VESTED AMOUNTS
To the extent that any amounts credited to a Participant's Account are not
vested at the time such amounts are otherwise payable under Sections 7.1 or
7.3, such amounts shall be forfeited and shall be used to satisfy the
Employer's obligation to make contributions to the Trust under the Plan.
7.7 TAXES
All federal, state or local taxes that the Plan Administrator determines are
required to be withheld from any payments made pursuant to this Article 7 shall
be withheld.
<PAGE> 38
ARTICLE 8 - PLAN ADMINISTRATOR
8.1 PLAN ADMINISTRATION AND INTERPRETATION
The Plan Administrator shall oversee the administration of the Plan. The Plan
Administrator shall have complete control and authority to determine the rights
and benefits and all claims, demands and actions arising out of the provisions
of the Plan of any Participant, beneficiary, deceased Participant, or other
person having or claiming to have any interest under the Plan. The Plan
Administrator shall have complete discretion to interpret the Plan and to
decide all matters under the Plan. Such interpretation and decision shall be
final, conclusive and binding on all Participants and any person claiming under
or through any Participant, in the absence of clear and convincing evidence
that the Plan Administrator acted arbitrarily and capriciously. Any
individual(s) serving as Plan Administrator who is a Participant will not vote
or act on any matter relating solely to himself or herself. When making a
determination or calculation, the Plan Administrator shall be entitled to rely
on information furnished by a Participant, a beneficiary, the Company or the
Trustee. The Plan Administrator shall have the responsibility for complying
with any reporting and disclosure requirements of ERISA.
8.2 POWERS, DUTIES, PROCEDURES, ETC.
The Plan Administrator shall have such powers and duties, may adopt such rules,
may act in accordance with such procedures, may appoint such officers or
agents, may delegate such powers and duties, may receive such reimbursements
and compensation, and shall follow such claims and appeal procedures with
respect to the Plan as it may establish.
<PAGE> 39
ARTICLE 9 - AMENDMENT AND TERMINATION
9.1 AMENDMENTS
The Company shall have the right to amend the Plan from time to time, subject
to Section 9.3, by an instrument in writing which has been executed on the
Company's behalf by its duly authorized officer.
9.2 TERMINATION OF PLAN
This Plan is strictly a voluntary undertaking on the part of the Company. The
Company reserves the right to terminate the Plan at any time, subject to
Section 9.3, by an instrument in writing which has been executed on the
Company's behalf by its duly authorized officer. Upon termination, the Company
may (a) elect to continue to maintain the Trust to pay benefits hereunder as
they become due as if the Plan had not terminated or (b) direct the Trustee to
pay promptly to Participants (or their beneficiaries) the vested balance of
their Accounts. For purposes of the preceding sentence, in the event the
Company chooses to implement clause (b), the Account balances of all
Participants who are in the employ of the Company at the time the Trustee is
directed to pay such balances shall become fully vested and nonforfeitable.
After Participants and their beneficiaries are paid all Plan benefits to which
they are entitled, all remaining assets of the Trust attributable to
Participants who terminated employment with the Company prior to termination of
the Plan and who were not fully vested in their Accounts under Article 6 at
that time shall be returned to the Company.
9.3 EXISTING RIGHTS
No amendment or termination of the Plan shall adversely affect the rights of
any Participant with respect to amounts that have been credited to his or her
Account prior to the date of such amendment or termination.
<PAGE> 40
ARTICLE 10 - MISCELLANEOUS
10.1 NO FUNDING
The Plan constitutes a mere promise by the Company to make payments in
accordance with the terms of the Plan and Participants and beneficiaries shall
have the status of general unsecured creditors of the Company. Nothing in the
Plan will be construed to give any employee or any other person rights to any
specific assets of the Company or of any other person. In all events, it is
the intent of the Company that the Plan be treated as unfunded for tax purposes
and for purposes of Title I of ERISA.
10.2 NON-ASSIGNABILITY
None of the benefits, payments, proceeds or claims of any Participant or
beneficiary shall be subject to any claim of any creditor of any Participant or
beneficiary and, in particular, the same shall not be subject to attachment or
garnishment or other legal process by any creditor of such Participant or
beneficiary, nor shall any Participant or beneficiary have any right to
alienate, anticipate, commute, pledge, encumber or assign any of the benefits
or payments or proceeds which he or she may expect to receive, contingently or
otherwise, under the Plan.
10.3 LIMITATION OF PARTICIPANTS' RIGHTS
Nothing contained in the Plan shall confer upon any person a right to be
employed or to continue in the employ of the Company, or interfere in any way
with the right of the Company to terminate the employment of a Participant at
any time, with or without cause.
<PAGE> 41
10.4 PARTICIPANTS BOUND
Any action with respect to the Plan taken by the Plan Administrator or the
Company or the Trustee or any action authorized by or taken at the direction of
the Plan Administrator, the Company or the Trustee shall be conclusive upon all
Participants and beneficiaries entitled to benefits under the Plan.
10.5 RECEIPT AND RELEASE
Any payment to any Participant or beneficiary in accordance with the provisions
of the Plan shall, to the extent thereof, be in full satisfaction of all claims
against the Company, the Plan Administrator and the Trustee under the Plan, and
the Plan Administrator may require such Participant of beneficiary, as a
condition precedent to such payment, to execute a receipt and release to such
effect. If any Participant of beneficiary is determined by the Plan
Administrator to be incompetent by reason of physical or mental disability
(including minority) to give a valid receipt and release, the Plan
Administrator may cause the payment or payments becoming due to such person to
be made to another person for his or her benefit without responsibility on the
part of the Plan Administrator, the Company or the Trustee to follow the
application of such funds.
10.6 GOVERNING LAW
The Plan shall be construed, administered, and governed in all respects under
and by the laws of the State of New Jersey. If any provision shall be held by
a court of competent jurisdiction to be invalid or unenforceable, the remaining
provisions hereof shall continue to be fully effective.
<PAGE> 42
10.7 HEADINGS AND SUBHEADINGS
Headings and subheadings in this Plan are inserted for convenience only and are
not to be considered in the construction of the provisions hereof.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 6,348,014
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 21,000,000
<TRADING-ASSETS> 0
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<INVESTMENTS-CARRYING> 14,129,902
<INVESTMENTS-MARKET> 14,680,518
<LOANS> 46,808,294
<ALLOWANCE> 867,189
<TOTAL-ASSETS> 92,437,436
<DEPOSITS> 73,325,224
<SHORT-TERM> 368,247
<LIABILITIES-OTHER> 853,885
<LONG-TERM> 0
0
0
<COMMON> 1,443,840
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<TOTAL-LIABILITIES-AND-EQUITY> 92,437,436
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<INTEREST-TOTAL> 7,221,478
<INTEREST-DEPOSIT> 1,800,844
<INTEREST-EXPENSE> 1,822,820
<INTEREST-INCOME-NET> 5,398,658
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<EXPENSE-OTHER> 4,327,576
<INCOME-PRETAX> 1,911,973
<INCOME-PRE-EXTRAORDINARY> 1,156,157
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,156,157
<EPS-PRIMARY> 1.60
<EPS-DILUTED> 1.60
<YIELD-ACTUAL> 0
<LOANS-NON> 2,249,820
<LOANS-PAST> 1,772,632
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 1,000,159
<CHARGE-OFFS> 573,660
<RECOVERIES> 440,690
<ALLOWANCE-CLOSE> 867,189
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