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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
FOR THE FISCAL YEAR ENDED December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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, 1997 was $12,994,560.
The number of shares of Registrant's Common Stock, $2 par value,
outstanding as of January 30, 1997 was 721,920.
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BRUNSWICK BANCORP
DOCUMENTS INCORPORATED BY REFERENCE
Part(s) Into
Documents Which Incorporated
The 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. 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 10-K. III
With the exception of information specifically incorporated by reference,
the Proxy Statement is not deemed part of this report.
TABLE OF CONTENTS PAGE
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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........................................ 8
PART II
Item 5 - Market for Registrant's Common Equity and
Stockholder Matters..................................... 8
Item 6 - Selected Financial Data................................ 9
Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 10
Item 8 - Financial Statements and Supplementary Data............. 21
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.................. 21
PART III
Item 10 - Directors and Executive Officers of the
Registrant.............................................. 21
Item 11 - Compensation of Executive Officers...................... 21
Item 12 - Security Ownership of Certain Beneficial Owners
and Management.......................................... 21
Item 13 - Certain Relationships and Related Transactions.......... 22
PART IV
Item 14 - Exhibits, Financial Statement Schedules and
Reports on Form 8-K..................................... 22
SIGNATURES
EXHIBITS
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BRUNSWICK BANCORP
Form 10-K Annual Report
For the Fiscal Year Ended December 31, 1996
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.
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 April 17, 1996, New Jersey enacted legislation to opt-in with respect to
earlier interstate banking and branching and the entry into New Jersey of
foreign country banks. New Jersey did not authorize de novo branching into the
state.
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 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. 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.
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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, 1996, the Company's
Total Capital ratio was 32.82%, consisting of a Tier 1 ratio of 31.57% and Tier
2 ratio of 1.25%. 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, 1996, the consolidated Company had a leverage capital ratio of 18.74%.
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, 1996. As of December 31, 1996, the
Bank had a risk weighted capital ratio of 26.57% and a leverage capital ratio of
15.39%.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") 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 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
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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.
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 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.
Under the Community Reinvestment Act ("CRA"), as implemented by FDIC
regulations, a federally insured bank has a continuing and affirmative
obligation consistent with its safe and sound operation to help meet the credit
needs of its entire community, including low and moderate income neighborhoods.
The CRA does not establish specific lending requirements or programs for
financial institutions nor does it limit an institution's discretion to develop
the types of products and services that it believes are best suited to its
particular community, consistent with the CRA. The CRA requires the FDIC, in
connection with its examination of a federally insured bank, to assess the
bank's record of meeting the credit needs of its community and to take such
record into account in its evaluation of certain applications by such bank. The
CRA also requires all institutions to make
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public disclosure of their CRA ratings. Brunswick Bank & Trust Co. received
a "2" (Satisfactory) CRA rating in its most recent examination.
In April 1995, the FDIC and the other federal banking agencies adopted
amendments revising their CRA regulations. Among other things, the amended CRA
regulations substitute for the prior process-based assessment factors a new
evaluation system that would rate an institution based on its actual performance
in meeting community needs. In particular, the proposed system would focus on
three tests: (i) a lending test, to evaluate the institution's record of making
loans in its service areas; (ii) an investment test, to evaluate the
institution's record of investing in community development projects, affordable
housing and programs benefiting low or moderate income individuals and
businesses; and (iii) a service test, to evaluate the institution's delivery of
services through its branches, ATMs and other offices. The amended CRA
regulations also clarify how an institution's CRA performance would be
considered in the application process.
(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, 1996, BB and its subsidiary Bank had deposits of
$81,798,129, total loans of $53,813,845 and total assets of $101,336,956. 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 60 full-time employees as of December 31,
1996.
The primary emphasis of the Company's lending activities is in the
commercial lending area. As of December 31, 1996, 51% of the loan portfolio is
in commercial loans, 4% in construction first mortgage loans, 25% 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
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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, equity securities, 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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Name,
Position with Officer of Principal Occupation
BB, and Age BB Since During Past Five Years
- ------------- ---------- ----------------------
Roman T. Gumina 1987 Vice President
Chief Operating Officer Brunswick Bank and Trust
37
Thomas A. Fornale 1989 Controller
Secretary/Treasurer Brunswick Bank and Trust
Controller
58
(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.
I. Distribution of Assets,
Liabilities and Stockholders'
Equity; Interest Rates and
Interest Differential 15-16
II. Investment Portfolio 16-17
III. Loan Portfolio 17-19
IV. Summary of Loan Loss Experience 19-20
V. Deposits 20
VI. Return on Equity and Assets 20
VII. Short-Term Borrowings 20
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:
Approximate
Branch Address Square Feet
------ ------- -----------
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
The following is a list of offices which the Bank leases:
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Expiration
Date
Branch Address Square Feet of Lease
------ ------- ----------- -----------
Main Office 439 Livingston Avenue 8,400 and 2010
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
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.
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 1996.
Item 5. Market for the Registrants' Common Equity and Related Shareholder
Matters.
BB had 490 shareholders of record as of December 31, 1996.
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
dividend issued in 1995.
1996
--------------------------------------
Bid
High ---- Low
---- ---
1st Quarter $ 18 3/4 $ 15
2nd Quarter 18 3/4 17 3/4
3rd Quarter 18 17 3/4
4th Quarter 18 15
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1995
--------------------------------------
Bid
---
High Low
---- ---
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
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, 1996, 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 1997 but has not yet
determined if cash dividends will be reinstituted.
Item 6. Selected Financial Data.
The following table sets forth certain selected consolidated financial
data concerning BB:
Year Ended December 31,
-----------------------------------------------------
(Dollars in Thousands Except Per Share Data)
-----------------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ -----
Interest income $7,150 $7,222 $6,396 $5,805 $5,867
Interest expense 1,984 1,823 1,366 1,525 1,719
Net interest income 5,166 5,399 5,030 4,280 4,148
Provision for loan
losses 410 - 400 355 692
Net interest income
after provision for
loan losses 4,756 5,399 4,630 3,925 3,456
Other income 720 841 845 712 644
Other expenses 4,143 4,328 3,872 3,600 3,779
Income before income
taxes 1,333 1,912 1,603 1,037 321
Income taxes 570 756 626 336 107
Net income 763 1,156 977 701 214
Earnings per share 1.06 1.60 1.35 .97 .30
Cash dividends per
share 0 0 0 0 0
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Summary Consolidated Statements of Condition
(Dollars in Thousands Except Per Share Data)
--------------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ -----
Other information
Total assets $101,337 $92,437 $105,751 $97,216 $88,043
Deposits 81,798 73,325 87,703 80,401 71,928
Other liabilities 886 1,222 1,309 1,049 1,050
Stockholders' equity 18,653 17,890 16,739 15,766 15,065
Total shareholder's
equity per share 25.84 24.78 23.19 21.83 20.86
======== ======= ======== ======= =======
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
The Company's 1996 net income of $762,850 decreased $393,307 or 34% from
its 1995 net income of $1,156,157. In 1995, there was a significant recovery of
loans previously written off, thereby precluding the need for an addition to the
loan loss reserve. In 1996, there were no such recoveries, and the provision for
credit losses was $410,000. Additionally, management has found increased
competition for loans and deposits, causing it to pay slightly higher interest
rates on deposits and charge slightly lower rates on loans.
In 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, 1994 and
1995, the interest spread improved due to declines in deposit interest rates and
marked declines in credit loss provisions. By 1995, however, the favorable
interest spread had narrowed. In 1996, the interest spread narrowed further. In
1995, net interest income was $5.4 million or 74.76% of total interest income.
In 1996, net interest income was $4.8 million or 66.52% 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. As of December 31,
1996, the Company has been approved by the Federal Deposit Insurance Corporation
and the New Jersey Department of Banking for an additional branch. The Company
is planning the branch location for southern Middlesex County (Monroe Township),
New Jersey.
Income Statement Analysis, 1996 vs. 1995
For 1996, income before income taxes decreased from 1995 by $579,000. This
decrease occurred because of the following factors.
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A significant portion of this earnings decrease is due to a $410,000
provision for credit losses taken during 1996. In 1995, due to significant
recoveries of loans previously written off, no provision for credit losses was
recorded.
In 1996 compared to 1995, interest income decreased by approximately
$72,000 or 1%, and interest expense increased by approximately $161,000 or 9%
which resulted in an approximate decrease of $233,000 or 4% in net interest
income. This occurred primarily because of a decline in average interest rates
on interest earning assets. The following table (which summarizes more detailed
information set forth on page 16) illustrates how changes in interest rates and
volume affected net interest income.
Interest income:
Effect of increased volume $ 387,000
Effect of decreased interest rates (459,000)
----------
Interest expense:
Effect of increased volume (92,000)
Effect of increased interest rates (69,000)
----------
Decrease in net interest income $ (233,000)
==========
In 1996 compared to 1995, other income decreased by approximately $121,000
or 14%. This decrease resulted primarily from the absence in 1996 of $55,000 in
non-recurring trust fees received for 1995 trust services related to the
liquidation and distribution of two trust accounts and a $76,000 decrease in
credit card application fees. Credit card application fees in 1995 were
significantly higher than their past or anticipated future levels due to the
launch of the Bank's credit card products in 1995.
Salaries and employee benefits increased by approximately $106,000 or 5%
in 1996 compared to 1995 due to base rate increases in salaries and additions to
staff. Specifically, a second full-time lending officer was on staff for all of
1996; he began with the Bank during the last three months of 1995.
In 1996 compared to 1995, other expenses decreased by $329,000 or 21% for
several reasons. During 1995, expenses of approximately $180,000 were incurred
in the solicitation of credit card customers relating to the launch of the
Bank's credit cards while similar expenses in 1996 totalled approximately
$20,000. The credit card volume continues to grow with less cost than was
incurred with the initial launch. Legal fees decreased approximately $150,000 in
1996 compared with 1995 as a result of the settlement of a significant
litigation matter; the settlement was an amount which was not material to the
Company's financial statements. The Federal Deposit Insurance Corporation
assessment rate decreased for all BIF-insured banks in 1996 (refer to Item 1,
page 4), reducing the Bank's premium expense from $88,000 in 1985 to $1,500 in
1996, a decrease of $86,500. Various operating expenses increased in 1996
compared with 1995, thereby netting the $329,000 decrease in other expenses.
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:
11
<PAGE> 14
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.
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
========
In 1995, the Company recorded $441,000 in recoveries of credits previously
charged off. Based on the level of recoveries and management analysis, 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 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 approximately $180,000 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.
12
<PAGE> 15
Balance Sheet Analysis
From December 31, 1995 to December 31, 1996, loans receivable and deposits
increased by $7,313,000 and $8,473,000, respectively. Cash and due from banks
increased by $2,843,000.
The increase in loans receivable resulted from additional volume in
commercial lending, attributable primarily to a second loan officer who joined
the Bank's staff late in 1995. Refer to Note #3 to the Consolidated Financial
Statements for information on the components of the loan portfolio.
There was little change in demand deposits and time deposits from December
31, 1995 to December 31, 1996. However, savings and NOW deposits increased by
$7,346,000 or 26%, due primarily to a large concentration of public funds NOW
deposits at December 31, 1996. The level of public funds on deposit fluctuates
during the year based on local governments' timing of receipts and payments,
largely surrounding collection of property tax assessments (quarterly).
Stockholders' equity, with the addition of 1996 net income, increased by
$762,850 or 4%.
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, 1996, cash and due from banks totalled $9.2 million; federal funds
totalled $20 million. Investment securities and loans maturing within one year
totalled $12 million and $26 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 $1.3 million in 1996, $800,000 in 1995, and
$1.3 million in 1994. In 1996, investing activities used $6.8 million due
primarily to the funding of additional loans. Financing activities provided
approximately $8.4 million from increases in deposits.
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 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.
13
<PAGE> 16
Brunswick Bancorp is subject to the capital adequacy requirements of the
Federal Reserve Board. At December 31, 1996, 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:
December 31, Minimum
----------------- Regulatory
1996 1995 Guidelines
---- ---- ----------
Risk-based capital ratios
Tier I 31.50% 34.06% 4.000%
Total capital 31.70% 34.31% 8.000%
Capital (in thousands)
Tier I capital $18,538 $ 17,758
Tier II capital (1) 736 665
------- --------
$19,274 $ 18,423
======= ========
(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, 1996, is based upon the known repricing dates of
certain assets and liabilities and the assumed repricing dates of others.
<TABLE>
<CAPTION>
Interest Rate Sensitivity*
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 $ - $ - $ - $ - $ 9,191 $ 9,191
Federal funds sold 20,100 - - - - 20,100
Investment securities 6,997 5,011 850 1,031 - 13,889
Loans, net (a) 20,729 5,471 18,663 6,355 1,636 52,854
Other assets - - - - 5,303 5,303
------- ------- ------- ------- --------- --------
$47,826 $10,482 $19,513 $ 7,386 $ 16,130 $101,337
======= ======= ======= ======= ========= ========
Liabilities and
Stockholders' Equity
Total deposits (b) $35,191 $ 7,208 $13,777 $ - $ 25,622 $ 81,798
Borrowed funds 302 - - - - 302
Other liabilities - - - - 584 584
Stockholders' equity - - - - 18,653 18,653
------- ------- ------- ------- --------- --------
$35,493 $ 7,208 $13,777 $ 0 $ 44,859 $101,337
======= ======= ======= ======= ========= ========
Interest rate
sensitivity gap 12,333 3,274 5,736 7,386 (28,729) -
Cumulative interest
rate sensitivity gap $12,333 $15,607 $21,343 $28,729 $ 0 $ -
</TABLE>
* Variable rate bala nces 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.
14
<PAGE> 17
Unadopted Financial Accounting Standards Board Statements
As of December 31, 1996, there are no unadopted Financial Accounting
Standards Board Statements which, if adopted, would have a material effect on
the Company's financial statements.
Distribution of Assets, Liabilities, and Stockholders' Equity; Interest Rates
and Interest Differential
<TABLE>
<CAPTION>
(In Thousands)
Year Ended December 31,
1996 1995 1994
---------- ---------- ----------
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 $ 21,560 $ 1,158 5.37% $ 19,710 $ 1,162 5.90% $ 22,63 $1,066 4.71%
Investment securities-
taxable 14,152 839 5.93% 19,535 1,225 6.27 10,739 778 7.24%
Investment securities-
nontaxable (1) 134 11 9.50% 178 14 11.92 215 18 12.68%
Loans, net 47,084 5,142 10.92% 41,328 4,821 11.67 42,182 4,534 10.75%
--------- ------- ----- -------- ------- ---- -------- ------ ----
82,930 7,150 8.62% 80,751 7,222 8.94 75,769 6,396 8.44%
Noninterest-earning assets
Deposits in bank 5,636 5,358 5,851
Other real estate
owned 3,953 3,744 4,079
Other (2) 4,266 4,259 4,063
-------- -------- --------
$ 96,785 $ 7,150 7.39% $ 94,112 $ 7,222 7.67% $ 89,769 $6,396 7.13%
======== ======= ===== ======== ======= ==== ======== ====== ====
Interest-bearing liabilities
Savings deposits $ 14,083 347 2.46% $ 15,138 $ 375 2.48% $ 14,830 $ 373 2.52%
Demand deposits 16,974 610 3.59% 14,237 536 3.76 11,465 284 2.48%
Time deposits 21,007 1,013 4.82% 20,049 890 4.44 20,858 694 3.33%
Short term debt 271 14 5.17% 494 22 4.45 592 15 2.53%
--------- ------- ----- -------- ------- ---- -------- ------ ----
52,335 1,984 3.79% 49,918 1,823 3.65 47,745 1,366 2.86%
Noninterest-bearing liabilities
Demand deposits 25,334 26,056 25,154
Other 935 957 682
--------- ------- ----- -------- ------- ---- -------- ------ ----
78,604 1,984 2.52% 76,931 1,823 2.37 73,581 1,366 1.86%
Stockholders'
equity 18,181 17,181 16,181
-------- -------- --------
$ 96,785 $ 1,984 2.05% $ 94,112 $ 1,823 1.94% $ 89,762 $1,366 1.52%
======== ======= ===== ======== ======= ==== ======== ====== ====
Net yield on total
earning assets $ 82,930 $ 5,166 6.23% $ 80,751 $ 5,399 6.69% $ 75,769 $5,030 6.64%
======== ======= ===== ======== ======= ==== ======== ====== ====
</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.
15
<PAGE> 18
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, 1996, 1995, and
1994 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.
(In thousands)
1996 Versus 1995 1995 Versus 1994
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)
Federal funds sold $ 104 $(108) $ (4) $(264) $ 360 $ 96
Investment securities
taxable (335) (51) (386) 670 (223) 447
Investment securities
nontaxable (3) 0 (3) (3) (1) (4)
Loans, net 621 (300) 321 (48) 335 287
----- ----- ----- ----- ----- ----
Total interest
income 387 (459) (72) 355 471 826
----- ----- ----- ----- ----- ----
Interest expense
Savings deposits (26) (1) (27) 5 (3) 2
Demand deposits 102 (28) 74 32 220 252
Time deposits 26 96 122 (23) 219 196
Short term debt (10) 2 (8) (1) 8 7
----- ----- ----- ----- ----- ----
Total interest
expense 92 69 161 13 444 457
----- ----- ----- ----- ----- ----
Changes to net
interest income $ 295 $(528) $(233) $ 342 $ 27 $369
===== ===== ===== ===== ===== ====
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).
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
U.S. Treasury securities $12,007 $5,014 $12,465 $9,980 $4,055
Obligations of other U.S.
Government agencies 382 7,572 7,885 1,350 2,913
Obligations of state and
other political subdivisions 105 152 195 234 271
Other securities 1,395 1,392 1,139 736 734
------- ------- ------- ------- -------
Total investment
securities $13,889 $14,130 $21,684 $12,300 $ 7,973
======= ======= ======= ======= =======
16
<PAGE> 19
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, 1996 (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 $12,007 5.11% $ -- -- $ -- -- $ -- --
Obligations of other U.S.
Government agencies -- -- 1 7.75% -- -- 381 11.58%
Obligations of states and
other political
subdivision -- -- 105 8.00% -- -- -- --
Other securities -- -- 745 8.86 650 7.52% -- --
------- ---- ------- ---- ------ ---- ------- -----
Total investment
securities $12,007 5.11% $ 851 8.75% $ 650 7.52% $ 381 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):
December 31,
-------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Types of loans
Commercial and financial $27,511 $19,168 $19,430 $19,638 $19,170
Real estate - mortgage 22,985 22,918 25,465 21,656 19,775
Real estate - construction 2,206 3,256 1,134 1,448 3,493
Installment 1,112 1,121 737 669 916
------- ------- ------- ------- -------
Total loans $53,814 $46,463 $46,766 $43,411 $43,354
======= ======= ======= ======= =======
The following table sets forth the maturity distribution for the above
loan portfolio at December 31, 1996:
Maturities and Sensitivities of Loans to Changes in Interest Rates
After 1
Within year with- After 5
1 Year in 5 Years Years Total
------- ---------- ------- -----
Commercial and financial
Fixed rate $ 2,338 $ 2,678 $ 427 $ 5,443
Variable rate 17,458 3,742 869 22,069
Real estate-mortgage
Fixed rate 4,809 10,580 3,132 18,521
Variable rate 2,191 346 1,927 4,464
Real estate-construction
Fixed rate 0 0 0 0
Variable rate 1,445 761 0 2,206
Installment
Fixed rate 97 556 0 653
Variable rate $ 458 $ 0 $ 0 $ 458
17
<PAGE> 20
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):
December 31,
------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Nonaccrual loans $2,370 $2,295 $2,743 $2,945 $2,301
Loans, past due 90 days or more 283 1,773 614 265 178
Other real estate owned 3,577 3,613 3,708 3,907 3,227
Percentage of non-performing loan
to gross loans outstanding 5.13% 8.76% 7.18% 7.39% 5.72%
If the above nonaccrual loans at December 31, 1996 had been current,
interest income for 1996 would have been approximately $160,000 greater than
that recorded. Interest included in income on these loans totalled approximately
$160,000 for the year. Delinquency rates at December 31, 1996 were lower than
they have been in the past five years. During 1996, three commercial loans, with
combined outstanding principal of approximately $1.2 million, were paid in full.
Those loans had been delinquent as of December 31, 1995. The retirement of these
loans contributed to the reduced delinquency rate as of December 31, 1996.
Except for loans included in the above table there were no loans at
December 31, 1996 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. As of
December 31, 1996, the total loan portfolio was approximately $53.8 million. As
of the same date, the commercial loan portfolio totaled
18
<PAGE> 21
approximately $27.5 million; $8 million of those commercial loans were
collateralized by stock in one publicly-traded company. The market value of
stock collateralizing those loans totaled approximately $16 million as of
December 31, 1996. Other than that concentration, there were no other
concentrations exceeding ten 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.
(In thousands)
Year Ended December 31,
-------------------------------------
1996 1995 1994 1993 1992
------ ----- ------ ------ -----
Balance at beginning of period $867 $1,000 $793 $679 $675
Charge-offs
Commercial & financial 317 77 109 250 563
Real estate-mortgage 134 495 336 185 129
Real estate-construction -- -- -- -- --
Installment 2 2 5 10 14
---- ------ ------ ---- ----
453 574 450 445 706
Recoveries
Commercial & financial -- 217 166 171 3
Real estate-mortgage 14 220 88 21 --
Real estate-construction -- -- -- -- --
Installment 4 4 3 12 15
---- ------ ------ ---- ----
Net charge-offs 435 133 193 241 688
Additional charges to
operations 410 -- 400 355 692
---- ------ ------ ---- ----
Balance at end of period $842 $ 867 $1,000 $793 $679
==== ====== ====== ==== ====
Ratio of net charge-offs
during the period to average
loans outstanding during the
period.92% .92% .32% .46% .61% 1.22%
19
<PAGE> 22
Allocation of the Allowance for Loan Losses
In Thousands
Real Real
Commercial Estate Estate
December 31, & Financial Mortgage Construction InstallmentTotal
-------------------- ----------------------------------------------
1996
Amount $497 $286 $ 51 $ 8 $ 842
Percentage of total 59% 34% 6% 1% 100%
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%
Construction loans comprise approximately 4% of the total loan portfolio
as of December 31, 1996. As of the same date, 6% 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 considered 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, as of December 31, are summarized below (in
thousands).
1996 1995 1994 1993 1992
------ ------ ------ ------ -----
Non-interest bearing:
Demand deposits $25,622 $24,290 $24,841 $25,859 $25,925
Interest bearing:
Savings deposits 13,777 14,412 15,644 14,143 12,785
Time deposits 20,754 20,959 27,587 25,816 22,838
NOW demand deposits 21,645 13,664 19,631 14,583 10,380
------- ------- ------- ------- -------
Total deposits $81,798 $73,325 $87,703 $80,401 $71,928
======= ======= ======= ======= =======
The maturities of time deposits of $100,000 or more at December 31, 1996
are summarized as follows:
Under 3 months $ 5,151
3 to 6 months 1,380
6 to 12 months 3,903
Over 12 months -
------
Total $10,434
=======
20
<PAGE> 23
Return on Equity and Assets
The following are selected ratios for the years ended December 31:
1996 1995 1994 1993 1992
------ ------ ------ ------ -----
Return on assets .83% 1.09% 1.01% .80% .26%
Return on equity 4.26% 6.91% 6.20% 4.66% 1.44%
Average equity to
average assets 18.78% 17.47% 18.03% 17.33% 17.83%
Dividend payout ratio 0.00% 0.00% 0.00% 0.00% 0.00%
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, 1996, 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, 1996, 1995 and 1994 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 10-K.
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.
21
<PAGE> 24
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,
1996, 1995 and 1994 are following signature page number 24.
Independent Auditors' Report
Consolidated Balance Sheets - December 31, 1996 and 1995
Consolidated Statements of Income - Years Ended December 31, 1996,
1995 and 1994
Consolidated Statements of Stockholders' Equity - Years Ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows - Years Ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements - Years Ended December
31, 1996, 1995 and 1994
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, 1996.
(c) Exhibits
List of Exhibits
(3) (a) Certificate of Incorporation of Brunswick
Bancorp. Incorporated by reference to
Registration Statement on Form S-14 filed on
June 20, 1985.
(b) By-laws of Brunswick Bancorp.
Incorporated by reference to Registration
Statement on Form S-14 filed on June 20, 1985.
(10) Non-qualified Deferred Compensation Plan
dated as of December 5, 1995. Incorporated
by reference to Form 10-K for the year ended
December 31, 1995.
22
<PAGE> 25
(21) Subsidiaries of Brunswick Bancorp.
Incorporated by reference to Registration
Statement on Form S-14 filed on June 20, 1985.
(27) Financial Data Schedule.
23
<PAGE> 26
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
/s/ Carmen J. Gumina
- -----------------------
By: Carmen J. Gumina
President
Dated: March 11, 1997
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.
Signature Title Date
--------- ----- ----
/s/ Bruce Arbeiter
- --------------------- Director March 11, 1997
Bruce Arbeiter
/s/ Joseph DeMarco
- --------------------- Director March 11, 1997
Joseph DeMarco
/s/ Dominick Faraci
- --------------------- Director March 11, 1997
Dominick Faraci
/s/ Carmen J. Gumina
- --------------------- President and Chairman March 11, 1997
Carmen J. Gumina of the Board of Directors
(Principal Executive Officer)
/s/ Josephine Gumina
- --------------------- Director March 11, 1997
Josephine Gumina
/s/ Michael Kaplan
- --------------------- Director March 11, 1997
Michael Kaplan
/s/ Richard Malouf
- --------------------- Director March 11, 1997
Richard Malouf
/s/ John Maltese
- --------------------- Director March 11, 1997
John Maltese
/s/ Frederick Perrine
- --------------------- Director March 11, 1997
Frederick Perrine
/s/ Robert Sica
- --------------------- Director March 11, 1997
Robert Sica
/s/ Thomas A. Fornale
- --------------------- Secretary-Treasurer March 11, 1997
Thomas A. Fornale Controller
(Principal Accounting/Financial Officer)
24
<PAGE> 27
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<PAGE> 28
BRUNSWICK BANCORP AND SUBSIDIARIES
TABLE OF CONTENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Consolidated Statements of Condition 2
Consolidated Statements of Income 3
Consolidated Statements of Shareholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
<PAGE> 29
[LETTERHEAD OF FERRARO, WOOD & COMPANY]
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, 1996 and 1995 and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the years in the three year period ended December 31, 1996. 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, 1996 and 1995, and the results of their
operations and cash flows for each of the years in the three year period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/ Ferraro, Wood & Co.
-----------------------
January 24, 1997
North Brunswick, NJ
1
<PAGE> 30
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31, 1996 and 1995
1996 1995
---- ----
Assets
Cash and due from banks $ 9,190,838 $ 6,348,014
Federal funds sold 20,100,000 21,000,000
Securities held to maturity (Note 2) 13,889,332 14,129,902
Loans receivable, net of allowance for
loan losses of $842,103 in 1996 and
$867,189 in 1995 (Note 3) 52,853,869 45,541,105
Premises and equipment, net (Note 4) 924,433 769,788
Foreclosed real estate 3,577,329 3,613,007
Other assets 801,155 1,035,620
------------ -----------
$101,336,956 $92,437,436
============ ===========
Liabilities and Stockholders' Equity
Liabilities
Deposits
Demand $ 25,622,228 $24,290,027
Savings and NOW deposits 35,421,941 28,076,300
Other time (Note 7) 20,753,960 20,958,897
------------ -----------
81,798,129 73,325,224
Borrowed funds (Note 5) 301,941 368,247
Accrued expenses and other
liabilities (Note 8) 583,956 853,885
------------ -----------
82,684,026 74,547,356
Stockholders' equity
Common stock - par value
$2.00 per share-
3,000,000 shares authorized, 721,920
issued and outstanding 1,443,840 1,443,840
Additional paid-in capital 4,284,804 4,284,804
Retained earnings 12,924,286 12,161,436
------------ -----------
18,652,930 17,890,080
------------ -----------
$101,336,956 $92,437,436
============ ===========
The accompanying notes are an integral part
of these financial statements.
2
<PAGE> 31
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
---- ---- ----
Interest income
Loans receivable $5,142,003 $4,820,722 $4,534,612
Securities held to maturity 849,626 1,239,099 794,900
Federal funds sold 1,158,089 1,161,657 1,066,363
---------- ---------- ----------
Total interest income 7,149,718 7,221,478 6,395,875
---------- ---------- ----------
Interest expense
Interest on deposits 1,969,950 1,800,844 1,350,988
Interest on borrowed funds 13,635 21,976 15,262
---------- ---------- ----------
Total interest expense 1,983,585 1,822,820 1,366,250
---------- ---------- ----------
Net interest income 5,166,133 5,398,658 5,029,625
Provision for credit losses (Note 3) 410,000 - 400,000
---------- ---------- ----------
Net interest income after
provision
for credit losses 4,756,133 5,398,658 4,629,625
---------- ---------- ----------
Other income
Service fees 718,039 784,591 655,503
Gain on sale of other real estate
owned - - 188,760
Other 2,000 56,300 1,697
---------- ---------- ----------
720,039 840,891 845,960
---------- ---------- ----------
Other expenses
Salaries and employee benefits
(Note 6) 2,109,921 2,003,466 1,702,898
Occupancy expenses 637,765 610,707 638,558
Equipment expenses 185,051 173,871 182,297
Other 1,210,056 1,539,532 1,348,369
---------- ---------- ----------
4,142,793 4,327,576 3,872,122
---------- ---------- ----------
Income before income taxes 1,333,379 1,911,973 1,603,463
Income tax expense (Note 8) 570,529 755,816 626,291
---------- ---------- ----------
Net income $ 762,850 $1,156,157 $ 977,172
========== ========== ==========
Net income per share of common stock
(Note 9) $ 1.06 $ 1.60 $ 1.35
========== ========== ==========
The accompanying notes are an integral part
of these financial statements.
3
<PAGE> 32
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON ADDITIONAL RETAINED
STOCK PAID-IN CAPITAL EARNINGS TOTAL
------ --------------- -------- --------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $1,003,252 $ 1,420,982 $ 13,342,147 $ 15,766,381
Net income for 1994 - - 977,172 977,172
20% stock dividend (Note 9) 200,288 1,301,872 (1,506,690) (4,530)
----------- ------------ ------------ -----------
Balance at December 31, 1994 1,203,540 2,722,854 12,812,629 16,739,023
Net income for 1995 - - 1,156,157 1,156,157
20% stock dividend (Note 9) 240,300 1,561,950 (1,807,350) (5,100)
----------- ------------ ------------ -----------
Balance at December 31, 1995 1,443,840 4,284,804 12,161,436 17,890,080
Net income for 1996 - - 762,850 762 850
----------- ------------ ------------ -----------
$ 1,443,840 $ 4,284,804 $ 12,924,286 $18,652,930
=========== ============ ============ ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
4
<PAGE> 33
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 762,850 $ 1,156,157 $ 977,172
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 195,726 95,625 118,993
Net accretion of securities discounts
and premiums (79,133) (417,896) (191,688)
Provision for credit losses 410,000 -- 400,000
Benefit for deferred income taxes (105,271) (20,871) (7,557)
(Increase) decrease in accrued interest
receivable and other assets 319,110 (90,618) (310,213)
Increase (decrease) in accrued expenses,
taxes and other liabilities (242,963) 77,964 266,066
----------- ------------ ------------
Cash provided by operating activities 1,260,319 800,361 1,252,773
Cash flows from investing activities:
Decrease in federal funds sold 900,000 7,800,000 600,000
Maturities of investment securities 7,000,000 13,000,000 10,000,000
Principal repayments on investment
securities 284,703 226,966 1,016,605
Purchase of investment securities (6,965,000) (5,255,465) (20,207,987)
Net increase in loans (8,619,148) (161,771) (4,168,116)
Acquisitions of premises & equipment (282,112) (14,494) (128,124)
Net decrease in foreclosed real estate 857,463 427,112 816,239
----------- ------------ ------------
Cash provided by (used in) investing
activities (6,824,094) 16,022,348 (12,071,383)
Cash flows from financing activities:
Dividends paid -- (5,100) (4,530)
Increase (decrease) in demand deposits 1,332,201 (550,524) (1,018,845)
Increase (decrease) in savings and
NOW deposits 7,345,641 (7,198,895) 6,549,494
Increase (decrease) in other time deposits (204,937) (6,628,489) 1,771,621
Decrease in borrowed funds (66,306) (164,483) (78,128)
----------- ------------ ------------
Cash provided by (used in)
financing activities 8,406,599 (14,547,491) 7,219,612
----------- ------------ ------------
Increase (decrease) in cash and cash
equivalents 2,842,824 2,275,218 (3,598,998)
Cash and cash equivalents at January 1 6,348,014 4,072,796 7,671,794
----------- ------------ ------------
Cash and cash equivalents at December 31 $ 9,190,838 $ 6,348,014 $ 4,072,796
=========== ============ ============
Interest paid $ 1,982,583 $ 1,730,496 $ 1,349,700
=========== ============ ============
Income taxes paid $ 598,096 $ 820,246 $ 633,970
=========== ============ ============
</TABLE>
Supplemental Disclosures - Noncash Investing and Financing Activities
During the years ended December 31, 1996, 1995 and 1994, $896,384,
$249,927, and $617,699, 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> 34
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, 1994
(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 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."
Securities 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> 35
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, 1994
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.
Premises and Equipment
Properties and equipment are stated at cost, less accumulated depreciation. The
provision for depreciation is computed by the straight-line method.
Foreclosed Real Estate
Foreclosed real estate, 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> 36
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, 1994
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, was 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 was
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.
Fair Values of Financial Instruments
The following methods and assumptions were used to estimate the fair values of
significant financial instruments at December 31, 1996.
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.
Investment Securities Held to Maturity
Fair values of securities are based on quoted market prices.
8
<PAGE> 37
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, 1994
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.
(2) Securities 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:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
December 31, 1996
U.S. Government and
agency securities $12,389,729 $347,012 $3,684 $12,733,057
Municipal securities 104,988 - - 104,988
Other securities 1,394,615 37,640 - 1,432,255
----------- -------- ------ -----------
Totals $13,889,332 $384,652 $3,684 $14,270,300
=========== ======== ====== ===========
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
=========== ======== ====== ===========
9
<PAGE> 38
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, 1994
The scheduled maturities of investment securities as of December 31, 1996
were as follows:
Amortized Fair
Cost Value
---------- ---------
Due in one year or less $12,007,366 $12,009,420
Due after one year through five years 850,657 888,243
Due after five years through ten years 650,000 650,000
Due after ten years 381,309 722,637
----------- -----------
Totals $13,889,332 $14,270,300
=========== ===========
Securities, carried at $9,725,327 and $9,010,466 at December 31, 1996 and
1995, respectively, were pledged to secure public deposits and for other
purposes required or permitted by law.
For purposes of the maturity table, mortgage-backed securities, which are
not due at a single maturity date, have been classified based on their
ultimate maturity dates. The mortgage-backed securities will mature earlier
because of principal repayments.
(3) Loans
The components of loans in the consolidated statements of condition are as
follows:
1996 1995
-------- -------
Commercial $27,511,401 $19,168,053
Real estate construction 2,205,863 3,256,448
Commercial real estate 13,519,317 11,860,404
Residential real estate 9,465,725 11,057,255
Consumer 1,111,539 1,120,594
----------- -----------
53,813,845 46,462,754
Less
Allowance for credit losses 842,103 867,189
Unearned fees 117,873 54,460
----------- -----------
$52,853,869 $45,541,105
=========== ===========
An analysis of the change in the allowance for credit losses follows:
1996 1995 1994
-------- -------- --------
Balance at January 1 $867,189 $1,000,159 $ 793,342
Credits charged off (453,075) (573,660) (450,229)
Recoveries 17,989 440,690 257,046
-------- ---------- ---------
Net credit charged off (435,086) (132,970) (193,183)
Provision for credit losses 410,000 - 400,000
-------- ---------- ---------
Balance at December 31 $842,103 $ 867,189 $1,000,159
======== ========== ==========
Impairment of loans having recorded investments of $132,600 and $136,000 at
December 31, 1996 and 1995, respectively, have been recognized in
conformity with FASB Statement No. 114, as amended by FASB Statement No.
118. Recorded investments in other impaired loans were $2,370,382 and
$2,294,820 at December 31, 1996 and 1995, respectively. The average
recorded investment in impaired loans during 1996 and 1995 was
approximately $2,450,000 and $2,500.00, respectively. The total allowance
for loan losses related to these loans was $79,500 and $77,000 on December
31, 1996 and 1995, respectively. Interest income of approximately $160,000,
$165,000, and
10
<PAGE> 39
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, 1994
$25,000 on impaired loans was recognized for cash payments received in
1996, 1995 and 1994, respectively.
(4) Premises and Equipment Components of premises and equipment included in the
consolidated statements of condition at December 31, 1996 and 1995 were as
follows:
Estimated
Lives 1996 1995
--------- -------- ------
Cost
Land $ 300,705 $ 300,705
Bank premises 25-35 years 562,049 562,049
Furniture and equipment 5-10 years 854,394 635,739
Leasehold improvements 5-25 years 70,137 284,456
---------- ----------
1,787,285 1,782,949
Less accumulated depreciation 862,852 1,013,161
---------- ----------
Net book value $ 924,433 $ 769,788
========== ==========
Certain Bank facilities are leased under various operating leases. Rental
expense was $424,152, $404,149, and $410,929, in 1996, 1995 and 1994
respectively. Future minimum rental commitments under noncancelable leases are:
1997 $ 324,306
1998 321,175
1999 332,212
2000 341,477
2001 350,015
Thereafter 1,503,025
----------
$3,172,210
==========
(5) 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.
(6) 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 $84,000, $64,542, and $78,255 for 1996, 1995, and 1994,
respectively.
(7) Composition of Deposits The aggregate amount of certificates of deposit
with miniumum balances of $100,000 was $10,434,279 and $9,924,280 at
December 31, 1996 and 1995, respectively. All certificates of deposit
mature within one year of issuance.
11
<PAGE> 40
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, 1994
(8) Income Taxes
The consolidated provision for income taxes consists of the following:
1996 1995 1994
---- ---- ----
Currently payable
Federal $511,800 $599,187 $462,248
State 164,000 177,500 171,600
-------- -------- --------
675,800 776,687 633,848
Deferred (105,271) (20,871) (7,557)
-------- -------- --------
$570,529 $755,816 $626,291
======== ======== ========
As of December 31, 1996 and 1995, the principal temporary differences
resulting in deferred tax assets and liabilities are as follows:
Deferred tax assets 1996 1995
------ -----
Loans $237,182 $142,306
Deferred compensation 96,000 48,000
Deferred tax liabilities
Properties & equipment 149,015 111,410
-------- --------
Net deferred tax asset $184,167 $ 78,896
======== ========
The principal reasons for the difference in the effective tax rate and the
federal statutory rate are as follows:
1996 1995 1994
-------- -------- ------
Statutory federal income tax rate 34% 34% 34%
Effect on tax rate of:
Tax-exempt securities (1) (1) (1)
Tax-exempt loan income (1) (3) (3)
State taxes 6 5 5
Nondeductible items 4 5 4
Other - (1) -
--- --- ---
Effective tax rate 42% 39% 39%
=== === ===
(9) 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.
(10) 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:
12
<PAGE> 41
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, 1994
Loans
Related parties were indebted to the Company for loans totalling $6,380,634
as of December 31, 1995. During 1996, additional advances of $3,297,187
were made and $3,059,327 was retired for a balance of $6,618,494 as of
December 31, 1996.
Rent
One operating location of the Bank is leased from a related party. Rent
paid to that party totalled $290,360, $267,911, and $259,727, for the years
ended December 31, 1996, 1995 and 1994, respectively.
Loan participations sold
Certain loans and loan participations were sold to a related party without
recourse, in prior years. As of December 31, 1996 and 1995, said
instruments totalled $400,783 and $464,741, 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.
(11) 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, 1996 is as follows:
Commitments to extend credit $ 9,795,427
Commercial letters of credit 147,231
Standby letters of credit 718,748
Commercial lines of credit available 4,838,603
Consumer lines of credit available 1,920,289
------------
$ 17,420,298
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.
The Company is party to 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
<PAGE> 42
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, 1994
The Bank entered into an agreement on September 3, 1996 to purchase a
parcel of land in Monroe Township, New Jersey, for the purpose of
constructing an additional branch office. The contract price is $235,000; a
deposit of $1,000 has been made. The property purchase is contingent upon
receiving regulatory, zoning, and building approvals. As of the date of
these financial statements, regulatory approvals have been received; zoning
and building approvals are pending. Upon receipt of the outstanding
approvals, the remainder of the contract price will become due and payable
within the ensuing six-month time period.
(12) Concentrations of Credit Risk 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. Of a total
commercial loan portfolio of $27,511,401 as of December 31, 1996,
approximately $8,000,000 of those loans are collateralized by stock in one
publicly-traded company. The market value of stock collateralizing those
loans totals approximately $16,000,000 as of the same date. 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%.
(13) Fair Value of Financial Instruments The following table presents the
carrying amounts and estimated fair values of financial instruments at
December 31, 1996 and 1995:
December 31, 1996 December 31, 1995
----------------- -----------------
Carrying Fair Carrying Fair
(In thousands) Value Value Value Value
-------- ----- -------- -----
Financial assets
Cash and due from banks $ 9,191 $ 9,191 $ 6,348 $ 6,348
Federal funds sold 20,100 20,100 21,000 21,000
Securities held to maturity 13,889 14,270 14,130 14,681
Loans, net 52,854 53,626 45,541 46,190
Accrued interest receivable 578 578 810 810
Financial liabilities
Deposit liabilities 81,798 81,765 73,325 74,170
Borrowed funds 302 302 368 368
Accrued interest payable 277 277 284 284
Off-balance-sheet liability
instruments
Loan commitments n/a 16,554 n/a 8,918
Standby letters of credit n/a 719 n/a 940
Commercial letters of credit n/a 147 n/a 73
(14) Regulatory Matters
The Company is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory - and possibly
additional discretionary - actions by regulators that, if undertaken, could
have a direct material effect on the Company's
14
<PAGE> 43
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, 1994
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective actions, the Company must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Company's capital amounts and
classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
Quantitative measures extablished by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios (set forth in
the table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital
(as defined) to average assets (as defined). Management believes, as of
December 31, 1996, that the Company meets all capital adequacy requirements
to which it is subject.
The Company's actual capital amounts and ratios compared to regulatory
minimum ratios and amounts are presented as follows (in thousands):
<TABLE>
<CAPTION>
For Capital
Adequacy Well
Actual Purposes Capitalized
------ ----------- ----------
<S> <C> <C> <C>
December 31, 1996
Total Capital $ 18,653 $ 4,708 $ 5,885
% of risk-weighted assets 31.70% 8.00% 10.00%
Tier I Capital 18,538 2,354 3,531
% of risk-weighted assets 31.50% 4.00% 6.00%
Tier I Capital 18,538 3,958 4,947
% of average assets 18.74% 4.00% 5.00%
December 31, 1995
Total Capital $ 17,890 $ 4,171 $ 5,214
% of risk-weighted assets 34.31% 8.00% 10.00%
Tier I Capital 17,758 2,086 3,128
% of risk-weighted assets 34.06% 4.00% 6.00%
Tier I Capital 17,758 3,690 4,612
% of average assets 19.25% 4.00% 5.00%
</TABLE>
15
<PAGE> 44
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, 1994
(15) Selected Quarterly Financial Data (Unaudited) Selected unaudited quarterly
data is presented as follows (in thousands except for per share amounts):
1996
-----------------------------------------
March June September December
------ ------ --------- --------
Interest income $1,660 $1,856 $1,788 $ 1,846
Interest expense 487 487 515 495
------ ------ ------ -------
Net interest income 1,173 1,369 1,273 1,351
Provision for credit
losses 75 135 140 60
------ ------ ------ -------
Net interest income
after provision for
credit losses 1,098 1,234 1,133 1,291
Other income 192 192 211 125
Other expenses 1,035 1,093 1,021 994
------ ------ ------ -------
Income before income
taxes 255 333 323 422
Income tax expense 114 138 138 180
------ ------ ------ -------
Net income $ 141 $ 195 $ 185 $ 242
====== ====== ====== =======
Net income per share $ .20 $ .27 $ .25 $ .34
====== ====== ====== =======
1995
-----------------------------------------
March June September December
----- ----- --------- --------
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 credit
losses 175 125 50 (350)
------ ------ ------ -------
Net interest income
after provision for
credit losses 1,299 1,204 1,300 1,596
Other income 165 276 196 204
Other expenses 1,046 1,135 1,139 1,008
------ ------ ------ -------
Income before income
taxes 418 345 357 792
Income tax expense 195 196 202 163
------ ------ ------ -------
Net income $ 223 $ 149 $ 155 $ 629
====== ====== ====== =======
Net income per share $ .31 $ .21 $ .21 $ .87
====== ====== ====== =======
16
<PAGE> 45
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, 1994
(16) Condensed Financial Information of Brunswick Bancorp (Parent Only) Balance
Sheets
December 31,
--------------------------
1996 1995
----------- -----------
Assets
Due from banks - demand
deposits with
the Bank $ 612,393 $ 380,810
Investments - certificate
of deposit
with the Bank 184,992 467,059
Loans receivable 400,000 -
Investment in the Bank 14,146,760 13,639,388
Foreclosed real estate 3,408,641 3,474,455
Accrued interest receivable and other assets 5,544 11,068
----------- -----------
$18,758,330 $17,972,780
=========== ===========
Liabilities and Stockholders' Equity
Accrued expenses and other liabilities $ 105,400 $ 82,700
Common stock - par value $2 per share -
3,000,000 shares authorized, 721,920
issued and outstanding 1,443,840 1,443,840
Additional paid-in capital 4,284,804 4,284,804
Retained earnings 12,924,286 12,161,436
----------- -----------
18,652,930 17,890,080
---------- ----------
$18,758,330 $17,972,780
=========== ===========
Statements of Income
Year Ended December 31,
----------------------------------
1996 1995 1994
-------- -------- ---------
Interest income $ 49,475 $ 22,796 $ 23,566
Dividends from the Bank 250,000 197,518 --
Other income -- 34,231 7,446
Other expenses (12,303) (11,452) (13,927)
-------- ---------- ---------
Income before income taxes and
equity in undistributed net
income of the Bank 287,172 243,093 17,085
Income tax expense 31,694 8,100 (20,163)
-------- ---------- ---------
Income before equity in undistri-
buted net income the Bank 255,478 234,993 37,248
Equity in undistributed net income
of the Bank 507,372 921,164 939,924
-------- ---------- ---------
Net income $762,850 $1,156,157 $977,172
======== ========== =========
Net income per share of common stock $ 1.06 $ 1.60 $ 1.35
======== ========== =========
17
<PAGE> 46
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, 1994
Statements of Cash Flows
Year Ended December 31,
-----------------------------------
1996 1995 1994
--------- ----------- ---------
Cash flows from operating activities
Net income $ 762,850 $ 1,156,157 $ 977,172
Adjustments to reconcile net income
to cash provided by operating
activities
Depreciation 74,599 -- --
(Increase) decrease in other
assets 5,524 63,643 (65,265)
Increase in other liabilities 22,700 23,400 47,407
Equity in undistributed net
income of the Bank (507,372) (921,164)
--------- ----------- ---------
Cash provided by operating activities 358,301 322,036 19,390
Cash flows from investing activities
Net (increase) decrease in loans (400,000) -- 134,700
Net (increase) decrease in
certificates of deposit 282,067 (19,171)
Acquisition of other real estate
owned (8,785) (76,705) --
--------- ----------- ---------
Cash provided by (used in)
investing activities (126,718) (95,876) 117,627
Cash flows from financing activities
Cash dividends paid -- (5,100) (4,530)
--------- ----------- ---------
Cash used in financing activities -- (5,100) (4,530)
--------- ----------- ---------
Increase (decrease) in cash 231,583 221,060 132,487
Cash and cash equivalents, beginning
of year 380,810 159,750 27,263
--------- ----------- ---------
Cash and cash equivalents, end of
year $ 612,393 $ 380,810 $ 159,750
========= =========== =========
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. Substantially all
undistributed net assets of the Bank are limited in availability for dividends
to Brunswick Bancorp as of December 31, 1996.
18
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 9,190,838
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 20,100,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 13,889,332
<INVESTMENTS-MARKET> 14,270,300
<LOANS> 53,695,972
<ALLOWANCE> 842,103
<TOTAL-ASSETS> 101,336,956
<DEPOSITS> 81,798,129
<SHORT-TERM> 301,941
<LIABILITIES-OTHER> 583,956
<LONG-TERM> 0
1,443,840
0
<COMMON> 0
<OTHER-SE> 17,209,090
<TOTAL-LIABILITIES-AND-EQUITY> 101,336,956
<INTEREST-LOAN> 5,142,003
<INTEREST-INVEST> 849,626
<INTEREST-OTHER> 1,158,089
<INTEREST-TOTAL> 7,149,718
<INTEREST-DEPOSIT> 1,969,950
<INTEREST-EXPENSE> 13,635
<INTEREST-INCOME-NET> 5,166,133
<LOAN-LOSSES> 410,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,142,793
<INCOME-PRETAX> 1,333,379
<INCOME-PRE-EXTRAORDINARY> 762,850
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 762,850
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.06
<YIELD-ACTUAL> 6.23
<LOANS-NON> 2,370,382
<LOANS-PAST> 283,000
<LOANS-TROUBLED> 132,600
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 867,189
<CHARGE-OFFS> 453,075
<RECOVERIES> 17,989
<ALLOWANCE-CLOSE> 842,103
<ALLOWANCE-DOMESTIC> 842,103
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
