<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
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)
(732) 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, 1998 was $18,690,906.
The number of shares of Registrant's Common Stock, $2 par value,
outstanding as of January 30, 1998 was 718,881.
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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>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
PART I
Item 1 - Business............................................................................ 1
Item 2 - Properties.......................................................................... 6
Item 3 - Legal Proceedings................................................................... 7
Item 4 - Submission of Matters to a Vote of
Security Holders.................................................................... 7
PART II
Item 5 - Market for Registrant's Common Equity and
Stockholder Matters................................................................. 7
Item 6 - Selected Financial Data............................................................ 8
Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations....................................... 9
Item 7A - Quantitative and Qualitative Disclosures About
Market Risk...........................................................................20
Item 8 - Financial Statements and Supplementary Data......................................... 20
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.............................................. 20
PART III
Item 10 - Directors and Executive Officers of the
Registrant.......................................................................... 20
Item 11 - Compensation of Executive Officers.................................................. 20
Item 12 - Security Ownership of Certain Beneficial Owners
and Management...................................................................... 20
Item 13 - Certain Relationships and Related Transactions...................................... 21
PART IV
Item 14 - Exhibits, Financial Statement Schedules and
Reports on Form 8-K................................................................. 21
SIGNATURES
EXHIBITS
</TABLE>
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BRUNSWICK BANCORP
Form 10-K Annual Report
For the Fiscal Year Ended December 31, 1997
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 is
able to acquire banks in states other than its home state 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 had 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, 1997, the Company's
Total Capital ratio was 29.48%, consisting of a Tier 1 ratio of 29.02% and Tier
2 ratio of .46%. 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, 1997, the consolidated Company had a leverage capital ratio of
19.10%.
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, 1997. As of December 31, 1997, the
Bank had a risk weighted capital ratio of 24.63% and a leverage capital ratio of
15.04%.
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.
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 public disclosure of their CRA
ratings. Brunswick Bank & Trust Co. received a "1" (Satisfactory) CRA rating in
its most recent examination.
(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, 1997, BB and its subsidiary Bank had deposits of
$80,757,951, total loans of $53,687,006 and total assets of $101,640,249. 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 56 full-time employees as of December 31,
1997.
The primary emphasis of the Company's lending activities is in the
commercial lending area. As of December 31, 1997, 42% of the loan portfolio is
in commercial loans, 16% in construction first mortgage loans, 24% in commercial
first mortgage loans, 16% in residential loans, and 2% in
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installment loans. The composition of the loan portfolio represents a shift from
December 31, 1996. During 1997, a significant portion of the commercial loan
portfolio changed from commercial loans secured by equity securities to
construction first mortgage loans. The shift has occurred primarily due to one
short-term construction loan totaling approximately $4 million and the maturity
of approximately $6 million in loans secured by equity securities. The Company's
lending base is generally in the commercial area, concentrating both in
commercial first mortgage loans and commercial loans secured by real estate,
certificates of deposit, 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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<TABLE>
<CAPTION>
Name,
Position with Officer of Principal Occupation
BB, and Age BB Since During Past Five Years
------------------- ------------ ----------------------
<S> <C> <C>
Roman T. Gumina 1987 Executive Vice President
Chief Operating Officer Brunswick Bank and Trust
38
Thomas A. Fornale 1989 Controller
Secretary/Treasurer Brunswick Bank and Trust
Controller
59
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(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 14-15
II. Investment Portfolio 15-16
III. Loan Portfolio 16-18
IV. Summary of Loan Loss Experience 18-19
V. Deposits 19
VI. Return on Equity and Assets 20
VII. Short-Term Borrowings 20
</TABLE>
Item 2. PROPERTIES.
The Bank currently operates from its main office, and five branch
offices. The main office and two branches are leased by the Bank. Three of the
branch offices are owned by the Bank.
The following is a list of offices which the Bank owns:
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<CAPTION>
Approximate
Branch Address Square Feet
------ ------- -----------
<S> <C> <C>
George Street 352 George Street
New Brunswick, NJ 08901 4,700
South Brunswick - Monmouth Junction Road
Monmouth Junction and Kingston Lane
South Brunswick, NJ 2,000
Freehold 444 West Main Street
Freehold, NJ 07728 2,000
</TABLE>
The following is a list of offices which the Bank leases:
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<TABLE>
<CAPTION>
Expiration
Date
Branch Address Square Feet of Lease
------ ------- ----------- -----------
<S> <C> <C> <C>
Main Office 439 Livingston Avenue 8,400 and 2010
New Brunswick, NJ 08901 4,000 (basement)
North Brunswick U.S. Route One 1,400 month to month
North Brunswick, NJ 08902
Edison Plainfield Avenue and 3,400 February 2001
Metroplex Drive
Edison, NJ 08817
</TABLE>
As described in Note 11 to the financial statements, the company has purchased
property to relocate its North Brunswick branch office, and it has purchased
property to construct a new branch in Monroe, New Jersey.
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 1997.
Item 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS.
BB had 429 shareholders of record as of December 31, 1997.
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.
<TABLE>
<CAPTION>
1997
--------------------------------------------
Bid
---
High Low
---- ---
<S> <C> <C>
1st Quarter $ 20 3/4 $ 18
2nd Quarter 23 1/2 20 3/4
3rd Quarter 24 1/4 23 1/2
4th Quarter 26 24 1/4
</TABLE>
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<TABLE>
<CAPTION>
1996
-----------------------------------------
Bid
---
High Low
---- ---
<S> <C> <C>
1st Quarter $ 18 3/4 $ 15
2nd Quarter 18 3/4 17 3/4
3rd Quarter 18 17 3/4
4th Quarter 18 15
</TABLE>
Payments of dividends by Brunswick Bank and Trust Company to BB is
restricted. Under the New Jersey Banking Act of 1948, as amended, the Bank may
pay dividends only out of retained earnings, and out of surplus to the extent
that surplus exceeds fifty percent of stated capital. Under the Financial
Institutions Supervisory Act, the FDIC has the authority to prohibit a
state-chartered bank from engaging in conduct which, in the FDIC's opinion,
constitutes an unsafe or unsound banking practice. Under certain circumstances,
the FDIC could claim that the payment of a dividend or other distribution by a
bank to its sole shareholder constitutes an unsafe or unsound practice. As of
December 31, 1997, approximately $4 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. No dividends were paid in 1997, 1996, or
1993. The Board of Directors is considering a dividend in 1998 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:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------------------
(Dollars in Thousands Except Per Share Data)
-------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Interest income $ 7,762 $ 7,150 $ 7,222 $ 6,396 $ 5,805
Interest expense 1,972 1,984 1,823 1,366 1,525
Net interest income 5,790 5,166 5,399 5,030 4,280
Provision for credit
losses (157) 410 -- 400 355
Net interest income
after provision for
credit losses 5,947 4,756 5,399 4,630 3,925
Noninterest income 875 720 841 845 712
Other expenses 4,830 4,143 4,328 3,872 3,600
Income before income
taxes 1,992 1,333 1,912 1,603 1,037
Income tax expense 747 570 756 626 336
Net income 1,245 763 1,156 977 701
Net income per share 1.73 1.06 1.60 1.35 .97
Cash dividends per
share 0 0 0 0 0
</TABLE>
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<TABLE>
<CAPTION>
Summary Consolidated Statements of Condition
----------------------------------------------------------------------------------------
(Dollars in Thousands Except Per Share Data)
----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OTHER INFORMATION
Total assets $101,640 $101,337 $ 92,437 $105,751 $ 97,216
Deposits 80,758 81,798 73,325 87,703 80,401
Other liabilities 1,056 886 1,222 1,309 1,049
Stockholders' equity 19,826 18,653 17,890 16,739 15,766
Total shareholder's
equity per outstanding
share 27.58 25.84 24.78 23.19 21.83
======== ======== ======== ======== ========
</TABLE>
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 1997 net income of $1,244,542 increased $481,692 or 63%
from its 1996 net income of $762,850. In 1997, there was a significant recovery
of loans previously written off, thereby precluding the need for an addition to
the loan loss reserve. The recovery, coupled with a slightly lower computed
reserve balance, generated $156,922 in income. In 1996, there were no such
recoveries, and the provision for credit losses was $410,000. Additionally,
management found increased competition in 1996 for loans and deposits, causing
it to pay slightly higher interest rates on deposits and charge slightly lower
rates on loans. This trend continued in 1997 on deposit rates, but loan rates
edged up slightly, following market trends.
In 1993 and 1994, the Company's net interest income after provision for
credit losses showed steady increases, as a percentage of interest income, due
to relatively static provisions for loan losses and static deposit interest
rates. By 1995, the favorable interest spread had narrowed, despite a lack of
provision for loan losses that year. In 1996, the interest spread narrowed
further. In 1997, the interest spread improved, and there was recapture of the
previously recorded loan loss reserve. In 1996, net interest income was $4.8
million or 66.52% of total interest income. In 1997, net interest income was
$5.9 million or 76.62% 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,
1997, 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, 1997 vs. 1996
For the year ended December 31, 1997, income before income taxes
increased from 1996 by $658,000. The main reason for this increase in
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earnings is that during 1997, management completed a comprehensive review of the
loan portfolio and the related loan loss reserve. That review resulted in a
reduced loan loss reserve balance. The reduced balance coupled with $135,000 of
net recoveries during 1997 resulted in no required 1997 loan loss provision and
a recapture of $157,000 of loan loss provisions recorded during prior years,
compared with net chargeoffs of $435,000 and a provision of $410,000 in 1996.
In 1997, interest income increased by $612,000 and interest expense
decreased by $12,000 which resulted in a $624,000 increase in net interest
income over 1996. This occurred primarily because of an increase in average
interest rates on interest-earning assets and increased loan volume. The
following table illustrates how changes in interest rates and volume affected
net interest income.
<TABLE>
<S> <C>
Interest income:
Effect of increased volume $ 292,000
Effect of increased interest rates 320,000
Interest expense:
Effect of increased volume (50,000)
Effect of decreased interest rates 62,000
---------
Increase in net interest income $ 624,000
=========
</TABLE>
Other income increased by $154,000 mainly because of a $65,000 increase
in service charges on deposit accounts and increases in credit card and ATM
service fees totaling $91,000.
Other expenses increased by $687,000 primarily because, during 1997, a
$399,000 valuation loss was taken on foreclosed commercial property. In
addition, approximately $150,000 in expenses were incurred performing repairs of
the branch office in downtown New Brunswick.
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.
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.
<TABLE>
<S> <C>
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)
=========
</TABLE>
10
<PAGE> 13
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.
Balance Sheet Analysis
From December 31, 1996 to December 31, 1997 Federal funds sold
increased by $6,500,000 (32%) and investment securities increased by $1,231,000
(9%), while cash decreased by approximately $4,257,000 (46%) and foreclosed real
estate decreased by $3,500,000 (98%). Deposits remained relatively unchanged
from the prior year with an overall decrease of approximately $1,000,000.
The Company disposed of a piece of foreclosed real estate which
generated cash of over $3,000,000. Cash was invested in overnight Federal funds
sold and the investment securities.
The loan portfolio remained relatively static in overall outstanding
principal balances from December 31, 1996 to 1997. As of December 31, 1996,
there was approximately $8,000,000 in outstanding loans receivable which were
secured by one particular common stock. Of that amount, $6,000,000 in principal
matured and was retired during 1997. Loan closings during 1997 occurred
primarily in the construction sector, with growth in this area totaling
approximately $8.7 million. One construction loan totaling approximately $4
million is a significant portion of this increase. This loan is a short-term
loan for the construction of an automobile dealership showroom; permanent
financing will be provided to the borrower by the related automobile
manufacturer.
Deposits showed a shift in composition. Savings and NOW deposits
increased approximately $4,300,000 or 12%. Time deposits decreased
approximately $3,700,000 or 18%. Management continues to encourage growth in
11
<PAGE> 14
noninterest-bearing demand deposits and NOW deposits which bear interest at an
average rate lower than that of certificates of deposit.
Stockholders' equity, with the addition of 1996 net income, increased
by $762,850 or 4% which represents net income less treasury stock purchased of
approximately $72,000.
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, 1997, cash and due from banks totalled $4.9 million; federal funds
totalled $26.6 million. Investment securities and loans maturing within one year
totalled $55,000 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 $1.4 million in 1997, $1.3 million
in 1996, and $800,000 in 1995. In 1997, investing activities used $4.8 million
due primarily to increases in federal funds sold. Financing activities used
approximately $1 million from decreases in deposits.
In light of the past cash flows provided from operating, financing, and
investing activities, management believes 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.
Brunswick Bancorp is subject to the capital adequacy requirements of
the Federal Reserve Board. At December 31, 1997, the Company was in compliance
with the minimum capital requirements and is expected to remain in compliance in
the future. Capital ratios are as follows:
<TABLE>
<CAPTION>
December 31, Minimum
------------------------ Regulatory
1997 1996 Guidelines
------ ------ ----------
<S> <C> <C> <C>
Risk-based capital ratios
Tier I 29.16% 31.50% 4.000%
Total capital 30.38% 31.70% 8.000%
Capital (in thousands)
Tier I capital $19,515 $18,538
Tier II capital (1) 820 736
------ ------
$20,335 $19,274
====== ======
</TABLE>
12
<PAGE> 15
(1) Lesser of the allowance for loan loss or 1/80 of risk-weighted assets.
Readiness for Year 2000
The Company has taken actions to understand the nature and extent of
the work required to make its systems and infrastructure Year 2000 compliant. To
date, management has ascertained that the majority of related operating issues
will be addressed through routine, annual computer software and hardware
updates, which the Company performs in the normal course of business. The
Company continues to evaluate the estimated costs associated with these efforts
based on actual experience. While these efforts will involve additional costs,
management believes, based on available information, that it will be able to
manage its total Year 2000 transition without any material adverse effect on its
operations.
Interest Rate Sensitivity Management
The accompanying table, a quantification of the Company's interest rate
exposure at December 31, 1997, 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 $ -- $ -- $ -- $ -- $ 4,933 $ 4,933
Federal funds sold 26,600 -- -- -- -- 26,600
Investment securities -- 55 13,658 1,407 -- 15,120
Loans, net (a) 20,250 5,383 22,929 4,443 (299) 52,706
Other assets -- -- -- -- 2,281 2,281
--------- --------- --------- --------- --------- ---------
$ 46,850 $ 5,438 $ 36,587 $ 5,850 $ 6,915 $ 101,640
========= ========= ========= ========= ========= =========
Liabilities and Stockholders' Equity
Total deposits (b) $ 32,202 $ 10,672 $ 12,707 $ -- $ 25,177 $ 80,758
Borrowed funds 511 -- -- -- -- 511
Other liabilities -- -- -- -- 545 545
Stockholders' equity -- -- -- -- 19,826 19,826
--------- --------- --------- --------- --------- ---------
$ 32,713 $ 10,672 $ 12,707 $ 0 $ 45,548 $ 101,640
========= ========= ========= ========= ========= =========
Interest rate
sensitivity gap 14,137 (5,234) 23,880 5,850 (38,633) --
Cumulative interest
rate sensitivity gap $ 14,137 $ 8,903 $ 32,783 $ 38,633 $ 0 $ --
</TABLE>
* Variable rate balances are reported based on their repricing
dates. Fixed-rate balances are reported based on their
scheduled contractual maturity dates.
(a) Prime priced loans are included in the Within Three
Months category; nonaccrual loans and reserve for
possible loan losses are included in the
Noninterest-Bearing category.
(b) Savings accounts are included in the After One but
Within Five Years category.
13
<PAGE> 16
Unadopted Financial Accounting Standards Board Statements
As of December 31, 1997, 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,
1997 1996 1995
---------- ---------- -------
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 $21,792 $1,204 5.52% $21,560 $1,158 5.37% $19,710 $1,162 5.90%
Investment securities-
taxable 14,975 1,003 6.70% 14,152 839 5.93% 19,535 1,225 6.27%
Investment securities-
nontaxable (1) 86 7 9.50% 134 11 9.50% 178 14 11.92%
Loans, net 51,329 5,548 10.81% 47,084 5,142 10.92% 41,328 4,821 11.67%
------ ----- ------ ------ ----- ------ ------ ----- ------
88,182 7,762 8.80% 82,930 7,150 8.62% 80,751 7,222 8.94%
Noninterest-earning assets
Deposits in bank 6,193 5,636 5,358
Other real estate
owned 1,802 3,953 3,744
Other (2) 3,570 4,266 4,259
------ ------ ------
$99,747 $7,762 7.78% $96,785 $7,150 7.39% $94,112 $7,222 7.67%
====== ===== ===== ====== ===== ===== ====== ===== =====
Interest-bearing liabilities
Savings deposits $13,338 $ 328 2.46% $14,083 $ 347 2.46% $15,138 $ 375 2.48%
Demand deposits 20,326 713 3.51% 16,974 610 3.59% 14,237 536 3.76%
Time deposits 19,925 917 4.60% 21,007 1,013 4.82% 20,049 890 4.44%
Short term debt 284 14 4.92% 271 14 5.17% 494 22 4.45%
------ ----- ----- ------ ----- ----- ------ ----- -----
53,873 1,972 3.66% 52,335 1,984 3.79% 49,918 1,823 3.65%
Noninterest-bearing liabilities
Demand deposits 26,318 25,334 26,056
Other 658 935 957
------ ----- ----- ------ ----- ----- ------ ----- -----
80,849 1,972 2.44% 78,604 1,984 2.52% 76,931 1,823 2.37%
Stockholders'
equity 18,898 18,181 17,181
------ ------ ------
$99,747 $1,972 1.98% $96,785 $1,984 2.05% $94,112 $1,823 1.94%
====== ===== ===== ====== ===== ===== ====== ===== =====
Net yield on total
earning assets $88,182 $5,790 6.57% $82,930 $5,166 6.23% $80,751 $5,399 6.69%
====== ===== ===== ====== ===== ===== ====== ===== =====
</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.
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, 1997, 1996, and
1995 calculated on a tax-equivalent basis, using a 34% Federal rate. Any change
in interest income or interest expense attributable to both changes in
14
<PAGE> 17
volume and changes in rate has been allocated in proportion to the relationship
of the absolute dollar amount of change in each category.
<TABLE>
<CAPTION>
(In thousands)
1997 Versus 1996 1996 Versus 1995
Increase (Decrease) Increase (Decrease)
Due to Changes in Due to Changes in
----------------------------------- --------------------------------------
Average Total Average Total
Interest and dividend Average Yield/ Increase Average Yield/ Increase
income Volume Ratio (Decrease) Volume Ratio (Decrease)
------ ----- ---------- ------ ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold $ 13 $ 33 $ 46 $104 $(108) $ (4)
Investment securities
taxable 53 111 164 (335) (51) (386)
Investment securities
nontaxable (4) 0 (4) (3) 0 (3)
Loans, net 230 176 406 621 (300) 321
--- --- --- --- --- ---
Total interest
income 292 320 612 387 (459) (72)
--- --- --- --- --- ---
Interest expense
Savings deposits (18) (1) (19) (26) (1) (27)
Demand deposits 120 (17) 103 102 (28) 74
Time deposits (53) (43) (96) 26 96 122
Short term debt 1 (1) 0 (10) 2 (8)
--- --- --- --- --- ---
Total interest
expense 50 (62) (12) 92 69 161
--- --- --- --- --- ---
Changes to net
interest income $242 $382 $624 $295 $(528) $(233)
=== === === === === ===
</TABLE>
Investment Portfolio
The following table shows the carrying value of the Company's
investment portfolio as of December 31. Investment securities are held to
maturity and are stated at cost, adjusted for amortization of premium and
accretion of discount (in thousands).
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
U.S. Treasury securities $ - $12,007 $5,014 $12,465 $9,980
Obligations of other U.S.
Government agencies 13,168 382 7,572 7,885 1,350
Obligations of state and
other political subdivisions 55 105 152 195 234
Other securities 1,897 1,395 1,392 1,139 736
------ ------ ------ ------ -----
Total investment
securities $15,120 $13,889 $14,130 $21,684 $12,300
====== ====== ====== ====== ======
</TABLE>
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, 1997 (in thousands). Yields
on tax exempt securities are presented on fully tax-equivalent basis using a 34%
Federal tax rate.
15
<PAGE> 18
<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 $ - - $ - - $ - - $ - -
Obligations of other U.S.
Government agencies - - 12,911 6.23% - - 257 12.00%
Obligations of states and
other political
subdivision 55 9.5% - - - - - -
Other securities - - 747 8.83% 1,150 7.38% - -
------ - --- ----- ----- ---- --- ----
Total investment
securities $ 55 9.5% $13,658 6.37% $1,150 7.38% $257 12.00%
====== === ====== ===== ===== ==== === =====
</TABLE>
Loan Portfolio
The following tables set forth the composition of the Company's loan
portfolio as of the dates indicated (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Types of loans
Commercial and financial $19,891 $27,511 $19,168 $19,430 $19,638
Real estate - mortgage 21,546 22,985 22,918 25,465 21,656
Real estate - construction 10,921 2,206 3,256 1,134 1,448
Installment 1,329 1,112 1,121 737 669
------ ------ ------ ------ ------
Total loans $53,687 $53,814 $46,463 $46,766 $43,411
====== ====== ====== ====== ======
</TABLE>
The following table sets forth the maturity distribution for the above
loan portfolio at December 31, 1997:
Maturities and Sensitivities of Loans to Changes in Interest Rates
<TABLE>
<CAPTION>
After 1
Within year with- After 5
1 Year in 5 Years Years Total
------ ---------- ----- -----
<S> <C> <C> <C> <C>
Commercial and financial
Fixed rate $ 3,814 $ 1,825 $ 404 $ 6,043
Variable rate 9,756 3,627 465 13,848
Real estate-mortgage
Fixed rate 2,838 13,106 2,030 17,974
Variable rate 1,676 -- 1,896 3,572
Real estate-construction
Fixed rate -- 1,785 -- 1,785
Variable rate 7,195 1,941 -- 9,136
Installment
Fixed rate 112 645 5 762
Variable rate $ 567 $ -- $ -- $ 567
</TABLE>
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
16
<PAGE> 19
this is done, it is based upon the continued favorable credit position of the
borrower and does not indicate a problem loan.
Risk Elements in Loan Portfolio
Commercial and installment loans are placed on a non-accrual status
when a default of principal or interest has existed for a period of 90 days and
when a return to current status is not imminent. Real estate loans are placed on
non-accrual status when a default of principal or interest has existed for 90
days or more. Subsequent to the change in classification to nonaccrual,
management assesses the loan for market value of collateral, credit position of
the debtor and potential operation of any property involved. Foreclosure
proceedings are instituted, as applicable, at that time. Construction loans are
first mortgage loans in all cases; delinquency, non-accrual, and foreclosure
proceedings are handled in the same manner as other loans secured by real
estate. Once a loan is placed on non-accrual, interest previously accrued and
uncollected is reversed and charged against current earnings. Subsequent
interest income would be recognized on these loans only to the extent
collections exceed principal outstanding.
The following table sets forth information on non-accrual, past due
(other than non-accrual), and other real estate owned (there were no
restructured loans) for the periods indicated (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 682 $2,370 $2,295 $2,743 $2,945
Loans, past due 90 days or more 303 283 1,773 614 265
Other real estate owned 60 3,577 3,613 3,708 3,907
Percentage of non-performing loan
to gross loans outstanding 1.95% 5.13% 8.76% 7.18% 7.39%
</TABLE>
If the above nonaccrual loans at December 31, 1997 had been
current, interest income for 1996 would have been approximately $90,000 greater
than that recorded. Interest included in income on these loans totalled
approximately $135,000 for the year. Delinquency rates at December 31, 1997 were
lower than they have been in the past five years. During 1997, three commercial
loans, with combined outstanding principal of approximately $1.2 million, were
taken off nonaccrual and remained current through the year. 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, 1997.
Except for loans included in the above table there were no
loans at December 31, 1997 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, 1997, the total loan portfolio was approximately $53.7 million. As
of the same date, the commercial loan portfolio totaled approximately $22.5
million; $2 million of those commercial loans were collateralized by stock in
one publicly-traded company. The market value of stock collateralizing those
loans totaled approximately $6 million as of December 31, 1997. Other than that
concentration, there were no other
17
<PAGE> 20
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.
<TABLE>
<CAPTION>
(In thousands)
Year Ended December 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 842 $ 867 $1,000 $ 793 $ 679
Charge-offs
Commercial & financial 34 317 77 109 250
Real estate-mortgage 140 134 495 336 185
Real estate-construction -- -- -- -- --
Installment 18 2 2 5 10
------ ------ ------ ------ ------
192 453 574 450 445
Recoveries
Commercial & financial 1 -- 217 166 171
Real estate-mortgage 322 14 220 88 21
Real estate-construction -- -- -- -- --
Installment 4 4 4 3 12
------ ------ ------ ------ ------
Net charge-offs (135) 435 133 193 241
Additional charges to
operations (157) 410 -- 400 355
------ ------ ------ ------ ------
Balance at end of period $ 820 $ 842 $ 867 $1,000 $ 793
====== ====== ====== ====== ======
Ratio of net charge-offs
during the period to average
loans outstanding during the
period (1.55%) .92% .32% .46% .61%
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
Allocation of the Allowance for Loan Losses
In Thousands
Real Real
Commercial Estate Estate
December 31, & Financial Mortgage Construction Installment Total
-------------------- ----------- -------- ------------ ----------- -----
<S> <C> <C> <C> <C> <C>
1997
Amount $336 $271 $205 8 $ 820
Percentage of total 41% 33% 25% 1% 100%
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%
</TABLE>
Construction loans comprise approximately 20% of the total loan portfolio
as of December 31, 1997. As of the same date, 25% 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).
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Non-interest bearing:
Demand deposits $25,177 $25,622 $24,290 $24,841 $25,859
Interest bearing:
Savings deposits 12,707 13,777 14,412 15,644 14,143
Time deposits 24,426 20,754 20,959 27,587 25,816
NOW demand deposits 18,448 21,645 13,664 19,631 14,583
------ ------ ------ ------ ------
Total deposits $80,758 $81,798 $73,325 $87,703 $80,401
====== ====== ====== ====== ======
</TABLE>
The maturities of time deposits of $100,000 or more at December 31,
1997 are summarized as follows:
<TABLE>
<S> <C>
Under 3 months $10,424
3 to 6 months 1,576
6 to 12 months 4,087
Over 12 months -
------
Total $16,087
</TABLE>
19
<PAGE> 22
Return on Equity and Assets
The following are selected ratios for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Return on assets 1.23% .83% 1.09% 1.01% .80%
Return on equity 6.67% 4.26% 6.91% 6.20% 4.66%
Average equity to
average assets 18.96% 18.78% 17.47% 18.03% 17.33%
Dividend payout ratio 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
Short-term Borrowings
Borrowed funds consist of United States treasury tax and loan deposits,
and generally mature within one to 120 days from the transaction date. At no
time during the three-year period ended December 31, 1997, did outstanding
treasury tax and loan deposits exceed 30% of stockholders' equity.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Financial Statements for the years ended
December 31, 1997, 1996 and 1995 contain the information required by Item 8 and
that information is incorporated herein following signature page number 23.
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.
20
<PAGE> 23
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, 1997, 1996 and 1995 are following signature
page number 24.
Independent Auditors' Report
Consolidated Balance Sheets - December 31, 1997 and 1996
Consolidated Statements of Income - Years Ended December 31,
1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity - Years Ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows - Years Ended December
31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements - Years Ended
December 31, 1997, 1996 and 1995
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, 1997.
(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.
21
<PAGE> 24
(21) Subsidiaries of Brunswick Bancorp.
Incorporated by reference to
Registration Statement on Form S-14
filed on June 20, 1985.
(27) Financial Data Schedule.
22
<PAGE> 25
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereto duly authorized.
BRUNSWICK BANCORP
By: Carmen J. Gumina
President
Dated: , 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Director
Bruce Arbeiter
Director
Joseph DeMarco
Director
Dominick Faraci
President and Chairman
Carmen J. Gumina of the Board of Directors
(Principal Executive Officer)
Director
Josephine Gumina
Director
Michael Kaplan
Director
Richard Malouf
Director
John Maltese
Director
Frederick Perrine
Director
Robert Sica
Secretary-Treasurer
Thomas A. Fornale Controller
(Principal Accounting/Financial Officer)
</TABLE>
23
<PAGE> 26
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<PAGE> 27
BRUNSWICK BANCORP AND SUBSIDIARIES
TABLE OF CONTENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<S> <C>
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
</TABLE>
<PAGE> 28
[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, 1997 and 1996 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, 1997. 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, 1997 and 1996, and the results of their
operations and cash flows for each of the years in the three year period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/S/ FERRARO, WOOD & COMPANY
January 24, 1998
North Brunswick, NJ
1
<PAGE> 29
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Assets
Cash and due from banks $ 4,933,343 $ 9,190,838
Federal funds sold 26,600,000 20,100,000
Securities held to maturity (Note 2) 15,120,064 13,889,332
Loans receivable, net of allowance for
loan losses of $820,254 in 1997 and
$842,103 in 1996 (Note 3) 52,705,619 52,853,869
Accrued interest receivable 585,826 578,164
Premises and equipment, net (Note 4) 1,252,328 924,433
Foreclosed real estate 60,080 3,577,329
Other assets 382,989 222,991
------------- -------------
$ 101,640,249 $ 101,336,956
============= =============
Liabilities and Stockholders' Equity
Liabilities
Deposits
Demand $ 25,177,070 $ 25,622,228
Savings and NOW deposits 31,154,437 35,421,941
Other time (Note 7) 24,426,444 20,753,960
------------- -------------
80,757,951 81,798,129
Borrowed funds (Note 5) 511,649 301,941
Accrued expenses and other
liabilities (Note 8) 545,074 583,956
------------- -------------
81,814,674 82,684,026
Stockholders' equity
Common stock - par value $2.00 per share-
3,000,000 shares authorized, 721,920
issued 1,443,840 1,443,840
Additional paid-in capital 4,284,804 4,284,804
Retained earnings 14,168,828 12,924,286
Treasury stock at cost, 3,939 shares (71,897) --
------------- -------------
19,825,575 18,652,930
------------- -------------
$ 101,640,249 $ 101,336,956
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 30
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Interest income
Loans receivable $ 5,548,068 $ 5,142,003 $ 4,820,722
Securities held to maturity 1,010,125 849,626 1,239,099
Federal funds sold 1,203,810 1,158,089 1,161,657
----------- ----------- -----------
Total interest income 7,762,003 7,149,718 7,221,478
----------- ----------- -----------
Interest expense
Deposits 1,957,411 1,969,950 1,800,844
Borrowed funds 14,205 13,635 21,976
----------- ----------- -----------
Total interest expense 1,971,616 1,983,585 1,822,820
----------- ----------- -----------
Net interest income 5,790,387 5,166,133 5,398,658
Provision for (reversal of)
credit losses (Note 3) (156,922) 410,000 --
----------- ----------- -----------
Net interest income after provision
for credit losses 5,947,309 4,756,133 5,398,658
----------- ----------- -----------
Noninterest income
Service charges on deposit accounts 686,758 621,801 624,980
Other services charges and fees 180,086 96,238 159,611
Other income 7,376 2,000 1,500
Income from fiduciary activities -- -- 54,800
----------- ----------- -----------
874,220 720,039 840,891
----------- ----------- -----------
Other expenses
Salaries and employee benefits (Note 6) 2,077,182 2,109,921 2,003,466
Occupancy expenses 893,976 637,765 610,707
Loss on foreclosed real estate 398,681 -- --
Equipment expenses 208,625 185,051 173,871
Other 1,251,534 1,210,056 1,539,532
----------- ----------- -----------
4,829,998 4,142,793 4,327,576
----------- ----------- -----------
Income before income taxes 1,991,531 1,333,379 1,911,973
Income tax expense (Note 8) 746,989 570,529 755,816
----------- ----------- -----------
Net income $ 1,244,542 $ 762,850 $ 1,156,157
=========== =========== ===========
Net income per share of common stock
(Note 9) $ 1.73 $ 1.06 $ 1.60
=========== =========== ===========
Average shares outstanding 721,440 721,920 721,920
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 31
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock Total
----- ------- -------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance
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
December 31, 1995 1,443,840 4,284,804 12,161,436 -- 17,890,080
Net income for 1996 -- -- 762,850 -- 762,850
------------ ------------ ------------ ------------ ------------
Balance
December 31, 1996 1,443,840 4,284,804 12,924,286 -- 18,652,930
Net income for 1997 -- -- 1,244,542 -- 1,244,542
Purchase of
treasury stock -- -- -- (71,897) (71,897)
------------ ------------ ------------ ------------ ------------
$ 1,443,840 $ 4,284,804 $ 14,168,828 ($ 71,897) $ 19,825,575
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 32
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,244,542 $ 762,850 $ 1,156,157
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 200,758 195,726 95,625
Net accretion of securities discounts
and premiums (52,565) (79,133) (417,896)
Provision for (reversal of)
credit losses (156,922) 410,000 --
Benefit for deferred income taxes (126,714) (105,271) (20,871)
Loss on foreclosed real estate 398,681 -- --
(Increase) decrease in accrued interest
receivable (7,662) 231,337 (138,653)
(Increase) decrease in other assets (173,784) 87,773 48,035
Increase (decrease) in accrued expenses,
taxes and other liabilities 101,618 (242,963) 77,964
------------ ------------ ------------
Cash provided by operating activities 1,427,952 1,260,319 800,361
Cash flows from investing activities:
(Increase) decrease in federal funds sold (6,500,000) 900,000 7,800,000
Maturities of investment securities 23,010,000 7,000,000 13,000,000
Principal repayments on investment
securities 215,934 284,703 226,966
Purchase of investment securities (24,404,100) (6,965,000) (5,255,465)
Net change in loans 245,092 (8,619,148) (161,771)
Acquisitions of premises & equipment (471,653) (282,112) (14,494)
Proceeds from sale of foreclosed real
estate 3,121,647 857,463 427,112
------------ ------------ ------------
Cash provided by (used in) investing
activities (4,783,080) (6,824,094) 16,022,348
Cash flows from financing activities:
Dividends paid -- -- (5,100)
Increase (decrease) in demand deposits (445,158) 1,332,201 (550,524)
Increase (decrease) in savings and
NOW deposits (4,267,504) 7,345,641 (7,198,895)
Increase (decrease) in other time deposits 3,672,484 (204,937) (6,628,489)
Increase (decrease) in borrowed funds 209,708 (66,306) (164,483)
Purchase of treasury stock (71,897) -- --
------------ ------------ ------------
Cash provided by (used in)
financing activities (902,367) 8,406,599 (4,547,491)
------------ ------------ ------------
Increase (decrease) in cash and cash
equivalents (4,257,495) 2,842,824 2,275,218
Cash and cash equivalents at January 1 9,190,838 6,348,014 4,072,796
------------ ------------ ------------
Cash and cash equivalents at December 31 $ 4,933,343 $ 9,190,838 $ 6,348,014
============ ============ ============
Interest paid $ 1,965,781 $ 1,982,583 $ 1,730,496
============ ============ ============
Income taxes paid $ 817,185 $ 598,096 $ 820,246
============ ============ ============
</TABLE>
Supplemental Disclosures - Noncash Investing and Financing Activities During the
years ended December 31, 1997, 1996 and 1995, $60,080, $896,384 and
$249,927, 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> 33
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 regulations 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" which is
comprised of cash on hand and demand deposits in other institutions.
Securities Held to Maturity
Bonds, notes and debentures for which the Bank has the positive intent
and ability to hold to maturity are reported at cost, adjusted for
premiums and discounts that are recognized in interest income using the
interest method 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.
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.
6
<PAGE> 34
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, 1995
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.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Bank's past
loan loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral, and current economic
conditions.
Premises and Equipment
Land is carried at cost. Bank premises, furniture and equipment, and
leasehold improvements are carried at cost, less accumulated
depreciation and amortization computed principally by the straight-line
method.
Foreclosed Real Estate
Real estate properties acquired through, or in lieu of, loan
foreclosure are to be sold and are initially recorded at fair value at
the date of foreclosure establishing a new cost basis. After
foreclosure, valuations are periodically performed by management and
the real estate is carried at the lower of carrying amount or fair
value less estimated cost to sell.
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
Deferred tax assets and liabilities are reflected at currently enacted
income tax rates applicable to the period in which the deferred tax
assets or liabilities are expected to be realized or settled. As
changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
Fair Values of Financial Instruments
The following methods and assumptions were used to estimate the fair
values of significant financial instruments as disclosed herein.
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.
7
<PAGE> 35
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, 1995
Loans
For variable rate loans that reprice frequently and have no
significant change in credit risk, fair values are 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.
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.
Basic and diluted earnings per share amounts are the same.
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.
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.
(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:
8
<PAGE> 36
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, 1995
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
December 31, 1997
-----------------
U.S. Government and
agency securities $13,168,184 $ 479,499 $ 17,066 $13,630,617
Municipal securities 54,572 -- -- 54,572
Other securities 1,897,308 26,022 -- 1,923,330
----------- ----------- ----------- -----------
Totals $15,120,064 $ 505,521 $ 17,066 $15,608,519
=========== =========== =========== ===========
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
=========== =========== =========== ===========
</TABLE>
The scheduled maturities of investment securities as of December 31,
1997 were as follows:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
----------- -----------
<S> <C> <C>
Due in one year or less $ 54,572 $ 54,572
Due after one year through five years 13,657,966 13,732,750
Due after five years through ten years 1,150,000 1,150,000
Due after ten years 257,526 671,197
----------- -----------
Totals $15,120,064 $15,608,519
=========== ===========
</TABLE>
Securities, carried at $10,157,646 and $9,725,327 at December 31, 1997
and 1996, 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:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Commercial $19,891,202 $27,511,401
Real estate construction 10,920,920 2,205,863
Commercial real estate 13,080,520 13,519,317
Residential real estate 8,465,712 9,465,725
Consumer 1,328,652 1,111,539
----------- -----------
53,687,006 53,813,845
Less
Allowance for credit losses 820,254 842,103
Unearned fees 161,133 117,873
----------- -----------
$52,705,619 $52,853,869
=========== ===========
</TABLE>
9
<PAGE> 37
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, 1995
An analysis of the change in the allowance for credit losses follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Balance at January 1 $ 842,103 $ 867,189 $ 1,000,159
Credits charged off (191,530) (453,075) (573,660)
Recoveries 326,603 17,989 440,690
----------- ----------- -----------
Net credit charged off 135,073 (435,086) (132,970)
Provision for (reversal of)
credit losses (156,922) 410,000 --
----------- ----------- -----------
Balance at December 31 $ 820,254 $ 842,103 $ 867,189
=========== =========== ===========
</TABLE>
Impairment of loans having recorded investments of $132,600 at December
31, 1996 have been recognized in conformity with FASB Statement No.
114, as amended by FASB Statement No. 118. Recorded investments in
other impaired loans were $1,387,823 and $2,370,382 at December 31,
1997 and 1996, respectively. The average recorded investment in
impaired loans during 1997 and 1996 was approximately $1,900,000 and
$2,450,000, respectively. The total allowance for loan losses related
to these loans was $75,000 and $79,500 on December 31, 1997 and 1996,
respectively. Interest income of approximately $220,000, $160,000, and
$165,000, on impaired loans was recognized for cash payments received
in 1997, 1996 and 1995, respectively.
(4) PREMISES AND EQUIPMENT
Components of premises and equipment included in the consolidated
statements of condition at December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
Estimated
Lives 1997 1996
--------- -------- ------
<S> <C> <C> <C>
Cost
Land $ 537,927 $ 300,705
Bank premises 25-35 years 562,049 562,049
Furniture and equipment 5-10 years 1,058,097 854,394
Leasehold improvements 5-25 years 70,137 70,137
---------- ----------
2,228,210 1,787,285
Less accumulated depreciation 975,882 862,852
---------- ----------
Net book value $ 1,252,328 $ 924,433
========== ==========
</TABLE>
Certain Bank facilities are leased under various operating leases.
Rental expense was $394,906, $424,152, and $404,149, in 1997, 1996 and
1995 respectively. Future minimum rental commitments under
noncancelable leases are:
<TABLE>
<S> <C>
1998 $ 321,175
1999 332,212
2000 284,177
2001 292,715
2002 301,496
Thereafter 2,761,434
---------
$4,293,209
==========
</TABLE>
(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.
10
<PAGE> 38
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, 1995
(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 $103,000, $84,000, and $64,542, for 1997, 1996,
and 1995, respectively.
(7) COMPOSITION OF DEPOSITS
The aggregate amount of certificates of deposit with minimum balances
of $100,000 was $16,086,920, and $10,434,279 at December 31, 1997 and
1996, respectively. All certificates of deposit mature within one year
of issuance.
(8) INCOME TAXES
The consolidated provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Currently payable
Federal $ 663,203 $ 511,800 $ 599,187
State 210,500 164,000 177,500
--------- --------- ---------
873,703 675,800 776,687
Deferred (126,714) (105,271) (20,871)
--------- --------- ---------
$ 746,989 $ 570,529 $ 755,816
========= ========= =========
</TABLE>
As of December 31, 1997 and 1996, the principal temporary differences
resulting in deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
Deferred tax assets 1997 1996
-------- --------
<S> <C> <C>
Loans $227,811 $237,182
Deferred compensation 144,000 96,000
State net operating loss carryforward
(parent company) 40,000 --
Deferred tax liabilities
Properties & equipment 100,930 149,015
-------- --------
Net deferred tax asset $310,881 $184,167
======== ========
</TABLE>
The principal reasons for the difference in the effective tax rate and
the federal statutory rate are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--- --- ---
<S> <C> <C> <C>
Statutory federal income tax rate 34% 34% 34%
Effect on tax rate of:
Tax-exempt securities (1) (1) (1)
Tax-exempt loan income (1) (1) (3)
State taxes 6 6 5
Nondeductible items 1 4 5
Other (1) -- (1)
--- --- ---
Effective tax rate 38% 42% 39%
=== === ===
</TABLE>
11
<PAGE> 39
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, 1995
(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.
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:
Loans
Related parties were indebted to the Company for loans totalling
$5,808,693 as of December 31, 1996. During 1997, additional advances of
$7,463,546 were made and $3,278,933 was retired for a balance of
$9,993,307 as of December 31, 1997.
Rent
One operating location of the Bank is leased from a related party. Rent
paid to that party totalled $302,521, $290,360, and $267,911, for the
years ended December 31, 1997, 1996 and 1995, respectively.
Loan participations sold
Certain loans and loan participations which the Bank services were sold
to a related party without recourse. As of December 31, 1997 and 1996,
these loans totalled $818,305 and $400,783, 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 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, 1997 is as follows:
<TABLE>
<S> <C>
Commitments to extend credit $ 6,384,080
Standby letters of credit 154,030
Commercial lines of credit available 3,678,012
Consumer lines of credit available 2,191,052
-----------
$12,407,174
===========
</TABLE>
12
<PAGE> 40
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, 1995
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.
The Bank entered into an agreement in September 1996 to purchase a
parcel of land in Monroe Township, New Jersey, for the purpose of
constructing an additional branch office. As of the date of these
financial statements, all regulatory and zoning approvals have been
obtained. The Bank is pursuing engineering and pre-construction phases
of the building.
The Bank purchased a parcel of property on January 2, 1998 in North
Brunswick, New Jersey, for the purpose of relocating its current North
Brunswick branch office. The purchase price of the property is
$293,000. The Bank intends to construct a permanent office building on
the site and operate this branch from a temporary facility during the
construction phase. As of the date of these financial statements, the
Bank has obtained regulatory approvals for the branch office
relocation. Municipal applications have been made for land use and
construction.
The Company has assessed the potential impact of the arrival of the
year 2000 on its computer operations and on related costs. Management
has formulated a plan, the cost of which, will not be material to the
consolidated financial statements. Additionally, management does not
anticipate any interruption in operations.
(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
$19,891,202 and $27,511,401 as of December 31, 1997 and 1996,
respectively, approximately $2,000,000 and $8,000,000, respectively, of
those loans are collateralized by stock in one publicly-traded company.
The market value of stock collateralizing those loans totals
approximately $6,000,000 and $16,000,000, respectively as of the same
date. 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
<PAGE> 41
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, 1995
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair
values of financial instruments at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------- -----------------
Carrying Fair Carrying Fair
(In thousands) Value Value Value Value
----- ----- ----- -----
<S> <C> <C> <C> <C>
Financial assets
Cash and due from banks $ 4,933 $ 4,933 $ 9,191 $ 9,191
Federal funds sold 26,600 26,600 20,100 20,100
Securities held to maturity 15,120 15,609 13,889 14,270
Loans, net 52,706 53,418 52,854 53,626
Accrued interest receivable 586 586 578 578
Financial liabilities
Deposit liabilities 80,758 80,738 81,798 81,765
Borrowed funds 512 512 302 302
Accrued interest payable 293 293 277 277
Off-balance-sheet liability instruments
Loan commitments n/a 12,253 n/a 16,554
Standby letters of credit n/a 154 n/a 719
Commercial letters of credit n/a -- n/a 147
</TABLE>
(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 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 established 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 that the Company meets all capital adequacy requirements to
which it is subject.
14
<PAGE> 42
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, 1995
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, 1997
Total Capital $ 19,826 $ 5,380 $ 6,725
% of risk-weighted assets 29.48% 8.00% 10.00%
Tier I Capital 19,515 2,690 4,035
% of risk-weighted assets 29.02% 4.00% 6.00%
Tier I Capital 19,515 4,088 5,109
% of average assets 19.10% 4.00% 5.00%
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%
</TABLE>
(15) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected unaudited quarterly data is presented as follows (in thousands
except for per share amounts):
<TABLE>
<CAPTION>
1997
----------------------------------------------------------------
March June September December
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income $ 1,799 $ 2,003 $ 1,981 $ 1,979
Interest expense 486 488 508 490
------- ------- ------- -------
Net interest income 1,313 1,515 1,473 1,489
Provision for (reversal
of) credit losses 170 190 75 (592)
------- ------- ------- -------
Net interest income
after provision for
credit losses 1,143 1,325 1,398 2,081
Other income 189 236 227 223
Other expenses 994 1,084 1,560 1,192
------- ------- ------- -------
Income before income
taxes 338 477 65 1,112
Income tax expense 157 200 52 338
------- ------- ------- -------
Net income $ 181 $ 277 $ 13 $ 774
======= ======= ======= =======
Net income per share $ .25 $ .38 $ .02 $ 1.08
======= ======= ======= =======
</TABLE>
During the fourth quarter 1997, the Company completed a comprehensive
review of its loan loss reserve. As a result of that review and a the
recovery of a significant loan previously charged off, there is a
reversal of credit losses in the fourth quarter.
15
<PAGE> 43
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, 1995
<TABLE>
<CAPTION>
1996
------------------------------------------------------------
March June September December
<S> <C> <C> <C> <C>
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
====== ====== ====== ======
</TABLE>
(16) CONDENSED FINANCIAL INFORMATION OF BRUNSWICK BANCORP (PARENT ONLY)
Balance Sheets
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Assets
Due from banks - demand deposits with
the Bank $ 190,439 $ 612,393
Investments - certificate of deposit
with the Bank 993,198 184,992
Loans receivable 3,400,000 400,000
Investment in the Bank 15,184,217 14,146,760
Foreclosed real estate -- 3,408,641
Accrued interest receivable and other assets 88,081 5,544
------------ ------------
$ 19,855,935 $ 18,758,330
============ ============
Liabilities and Stockholders' Equity
Accrued expenses and other liabilities $ 30,360 $ 105,400
Common stock - par value $2 per share -
3,000,000 shares authorized, 721,920
issued 1,443,840 1,443,840
Additional paid-in capital 4,284,804 4,284,804
Retained earnings 14,168,828 12,924,286
Treasury stock at cost, 3,039 shares (71,897) --
------------ ------------
19,825,575 18,652,930
------------ ------------
$ 19,855,935 $ 18,758,330
============ ============
</TABLE>
16
<PAGE> 44
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, 1995
Statements of Income
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Interest income $ 111,640 $ 49,475 $ 22,796
Dividends from the Bank 450,000 250,000 197,518
Other income -- -- 34,231
Other expenses (63,915) (12,303) (11,452)
Loss on foreclosed real estate (398,681) -- --
----------- ----------- -----------
Income before income taxes and
equity in undistributed net
income of the Bank 99,044 287,172 243,093
Income tax expense (benefit) (108,041) 31,694 8,100
----------- ----------- -----------
Income before equity in undistri-
buted net income the Bank 207,085 255,478 234,993
Equity in undistributed net income
of the Bank 1,037,457 507,372 921,164
----------- ----------- -----------
Net income $ 1,244,542 $ 762,850 $ 1,156,157
=========== =========== ===========
Net income per share of common stock $ 1.73 $ 1.06 $ 1.60
=========== =========== ===========
</TABLE>
17
<PAGE> 45
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, 1995
Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 1,244,542 $ 762,850 $ 1,156,157
Adjustments to reconcile net income
to cash provided by operating
activities
Depreciation 57,000 74,599 --
Loss on foreclosed real estate 398,681 -- --
(Increase) decrease in other
assets (82,537) 5,524 63,643
Increase (decrease) in other
liabilities (75,040) 22,700 23,400
Equity in undistributed net
income of the Bank (1,037,457) (507,372) (921,164)
----------- ----------- -----------
Cash provided by operating activities 505,189 358,301 322,036
Cash flows from investing activities
Net (increase) decrease in loans (3,000,000) (400,000) --
Net (increase) decrease in
certificates of deposit (808,206) 282,067 (19,171)
Proceeds from sale of foreclosed
real estate 2,952,960 -- --
Acquisition of foreclosed real
estate -- (8,785) (76,705)
----------- ----------- -----------
Cash provided by (used in)
investing activities (855,246) (126,718) (95,876)
Cash flows from financing activities
Cash dividends paid -- -- (5,100)
Purchase of treasury stock (71,897) -- --
----------- ----------- -----------
Cash used in financing activities (71,897) -- (5,100)
----------- ----------- -----------
Increase (decrease) in cash (421,954) 231,583 221,060
Cash and cash equivalents, beginning
of year 612,393 380,810 159,750
----------- ----------- -----------
Cash and cash equivalents, end of
year $ 190,439 $ 612,393 $ 380,810
=========== =========== ===========
</TABLE>
Certain bank regulatory limitations exist on the availability of subsidiary bank
undistributed net assets for the payment of dividends to Brunswick Bancorp
without the prior approval of the bank regulatory authorities. Substantially all
undistributed net assets of the Bank are limited in availability for dividends
to Brunswick Bancorp as of December 31, 1997.
18
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,933,343
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 26,600,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 15,120,064
<INVESTMENTS-MARKET> 15,608,519
<LOANS> 53,525,873
<ALLOWANCE> 820,254
<TOTAL-ASSETS> 101,640,249
<DEPOSITS> 80,757,951
<SHORT-TERM> 511,649
<LIABILITIES-OTHER> 545,074
<LONG-TERM> 0
0
0
<COMMON> 1,443,840
<OTHER-SE> 18,381,735
<TOTAL-LIABILITIES-AND-EQUITY> 101,640,249
<INTEREST-LOAN> 5,548,068
<INTEREST-INVEST> 1,010,125
<INTEREST-OTHER> 1,203,810
<INTEREST-TOTAL> 7,762,003
<INTEREST-DEPOSIT> 1,957,411
<INTEREST-EXPENSE> 14,205
<INTEREST-INCOME-NET> 5,790,387
<LOAN-LOSSES> (156,922)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,829,998
<INCOME-PRETAX> 1,991,531
<INCOME-PRE-EXTRAORDINARY> 1,991,531
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,244,542
<EPS-PRIMARY> 1.73
<EPS-DILUTED> 1.73
<YIELD-ACTUAL> 6.57
<LOANS-NON> 682,000
<LOANS-PAST> 303,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 842,103
<CHARGE-OFFS> 191,530
<RECOVERIES> 326,603
<ALLOWANCE-CLOSE> 820,254
<ALLOWANCE-DOMESTIC> 820,254
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
