<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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM January 1, 1999 TO December 31, 1999
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 (IRS employer
incorporation or organization) identification number)
439 Livingston Avenue
New Brunswick NJ 08901
(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 per 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 the Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, as of February 17, 2000 was $19,849,852.
The number of shares of Registrant's Common Stock, $2 per value, outstanding as
of February 17, 2000 was 1,804,532.
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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", "Directors' Compensation", "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
(1) of Item 402 of Regulation S-K is not incorporated by reference into
any portion of the Annual Report on Form 10-K.
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
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<S> <C>
PART I
Item 1. Business 1
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of
Security Holders 6
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 8
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 19
Item 8. Financial Statements and Supplementary Data 19
Item 9. Changes in and Disagreements with Accountant
on Accounting and Financial Disclosure 19
PART III
Item 10. Directors and Executive Officers of the Registrant 19
Item 11. Compensation of Executive Officers 19
Item 12. Security Ownership of Certain Beneficial Owners
and Management 19
Item 13. Certain Relationships and Related Transactions 20
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports
on Form 8-K 20
SIGNATURE
EXHIBITS 21
</TABLE>
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BRUNSWICK BANCORP
Form 10-K Annual Report
For the Fiscal Year Ended December 31, 1999
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 the
outstanding shares of the Bank.
The Bank was incorporated as a state-chartered New Jersey bank in 1970 under the
name of 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 that 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 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.
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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 portion 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 on non-banking subsidiaries of bank holding companies.
The Riegle-Neal Interstate Banking and Branching Act of 1994 (the "Interstate
Banking and Branching Act") enabled bank holding companies to acquire banks in
states other than its home state regardless of applicable state law. The
Interstate Banking and Branching Act also authorized banks to merge across state
lines, thereby creating interstate branches. Under such legislation, each state
had the opportunity either to "opt-out" of this provision, thereby prohibiting
interest branching in such states. 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. The vast majority of states have allowed inter-state banking by
merger but have not authorized de novo branching.
New Jersey has 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.
On November 12, 1999, the President signed the Gramm-Leach-Bliley Financial
Modernization Act of 1999 into law. The Modernization Act will:
allow bank holding companies meeting management, capital and Community
Reinvestment Act standards to engage in a substantially broader range
of nonbanking activities than currently is permissible, including
insurance underwriting and making merchant banking investments in
commercial and financial companies; if a bank holding company elects to
become a financial holding company, it files a certification, effective
in 30 days, and thereafter may engage in certain financial activities
without further approvals;
allows insurers and other financial services companies to acquire
banks;
remove various restrictions that currently apply to bank holding
company ownership of securities firms and mutual fund advisory
companies; and
establish the overall regulatory structure applicable to bank companies
that also engage in insurance and securities operations.
This part of the Modernization Act became effective on March 13, 2000.
The Modernization Act also modifies other current financial laws, including laws
related to financial privacy and community reinvestment.
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
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of Tier 1 capital, and the rest may consist of Tier 2 capital. Tier 1 capital
consist primarily of common stockholders' equity minus goodwill.
Tier 2 capital consists of an institution's allowances 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, 1999, the Company's
Total Capital ratio was 33.20% consisting of a Tier 1 ratio of 32.05% and Tier 2
ratio of 1.15%. 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, 1999, the consolidated Company had a leverage capital ratio of 21.02%.
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, 1999. As of December 31, 1999, the Bank had
a risk weighted capital ratio of 25.96% and a leverage capital ratio of 20.76%.
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 institution 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 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 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 ratio of at least 4.0 percent, (iii) has a
Tier 1 leverage ratio (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 of less than 4.0 percent, or
(iii) has a Tier 1 leverage ratio of (a) less than 4.0 percent or (b) less than
3.0 percent if the institution was rated 1 in its most recent examination. An
institution will be classified as "significantly undercapitalized" if it (i) has
a total risk-based capital ratio of less than 6.0 percent, (ii) has a Tier 1
risk-based capital ratio of less than 3.0 percent, (iii) has a Tier 1 leverage
ratio of less than 3.0 percent. An institution will be classified as "critically
undercapitalized" if 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 regulation,
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
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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 Segment
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 & 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. 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, 1999, BB and its subsidiary Bank had deposits of $85,298,529,
total loans of $44,010,038, and total assets of $108,872,878. 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 48 full-time employees as of December 31, 1999.
The primary emphasis of the Company's lending activities is in the commercial
lending area. As of December 31, 1999, 24.2% of the loan portfolio is in
commercial loans, 9.8% is construction first mortgage loans, 26.5% in commercial
first mortgage loans, 36.7% in residential loans, and 2.8% in installment loans.
The composition of the loan portfolio represents a shift from December 31, 1998.
During 1999 a portion of the Commercial Loan portfolio was paid off and
additional new Residential Real Estate loans were made. The Company's lending
base is generally in the commercial area, concentrating both in commercial first
mortgage loans and commercial loans secured by 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 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 area. 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
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associations, finance companies, credit unions, and other financial
institutions. While many of the Bank's competitors are larger and have greater
financial resources 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 to each executive office of BB who is
not a director. All executive officers of BB serve at the pleasure of the Board
of Directors.
<TABLE>
<CAPTION>
Name,
Position with Officer of Principal Occupation
BB, and Age BB Since During Past Five Years
- ----------- -------- ----------------------
<S> <C> <C>
Roman Gumina 1987 President
Chief Operating Officer Brunswick Bank & Trust
40
Thomas A. Fornale 1989 Controller
Secretary/Treasurer Brunswick Bank & Trust
Controller
61
</TABLE>
(f) Statistical Disclosure Required Pursuant to Securities Exchange
Act, Industry Guide 3.
Set forth on the following pages are the statistical disclosure for a bank
holding company required pursuant to Industry Guide 3.
<TABLE>
<S> <C>
I. Distribution of Assets
Liabilities and Stockholders'
Equity; Interest Rates and
Interest Differential 13-14
II. Investment Portfolio 14-15
III. Loan Portfolio 15-16
IV. Summary of Loan Loss Experience 17-18
V. Deposits 18
VI. Return on Equity and Assets 19
VII. Short-Term Borrowings 19
</TABLE>
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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 the Bank owns:
<TABLE>
<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
Monmouth Jct. NJ 08852 2,000
Freehold 444 West Main Street
Freehold NJ 07728 2,000
</TABLE>
The following is a list of offices which the Bank leases:
<TABLE>
<CAPTION>
Expiration
Branch Address Square Feet Date of Lease
- ------ ------- ----------- -------------
<S> <C> <C> <C>
Main Office 439 Livingston Avenue 8,400 and
New Brunswick NJ 08901 4,000 (basement) 2010
North Brunswick U.S. Route One
North Brunswick NJ 08902 1,400 February 2001
Edison Plainfield Avenue and
Metroplex Drive
Edison NJ 08817 3,400 February 2001
</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 1999.
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PART II
ITEM 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
BB had 381 shareholders of record as of December 31, 1999.
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>
Bid
-----------------------------------------------
1999 1998
------------------- ----------------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1st Quarter 16.00 12.00 11 1/16 9 1/2
2nd Quarter 13.00 12.00 13 9/16 13 1/4
3rd Quarter 12.00 12.00 14 9/16 13 1/4
4th Quarter 12.00 11.50 14 13/16 13 1/4
</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 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 that, 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, 1999, approximately $6 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 1999, 1995 and 1994; cash was paid in lieu of fractional shares. No
dividends were paid in 1998, 1997 or 1996. The Board of Directors is considering
a dividend in 2000, but has not yet determined if cash dividends will be
reinstituted.
STOCK SPLIT
The Board of Directors declared a Two Shares for One Share stock split payable
on January 14, 2000 to stockholders of record on December 31, 1999. The stock
split resulted in the Company issuing 902,266 shares. These financial statements
give retroactive effect to the stock split.
Earnings per share have been restated to reflect the stock split declared.
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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)
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Interest income $ 7,269 $ 7,946 $ 7,762 $ 7,150 $ 7,222
Interest expense 1,857 2,111 1,972 1,984 1,823
Net interest income 5,412 5,835 5,790 5,166 5,399
Provision for credit losses 61 100 (157) 410 --
Net interest income after
provision for credit losses 5,351 5,735 5,947 4,756 5,399
Non-interest income 1,008 877 875 720 841
Other expenses 4,265 4,089 4,830 4,143 4,328
Income before income taxes 2,094 2,523 1,992 1,333 1,912
Income tax expense 773 987 747 570 756
Net income 1,321 1,536 1,245 763 1,156
Net income per share .75 .85 .69 .43 .64
Cash dividends per share 0 0 0 0 0
Weighted average
Number of shares outstanding 1,764,188 1,797,566 1,803,572 1,774,400 1,806,250
</TABLE>
<TABLE>
<CAPTION>
Summary Consolidated Balance Sheets
----------------------------------------------------------------
(Dollars in Thousands Except Per Share Data)
----------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total Assets $108,873 $109,141 $101,640 $101,337 $ 92,437
Deposits 85,299 86,955 80,758 81,798 73,325
Other Liabilities 916 845 1,056 886 1,222
Stockholders' equity 22,658 21,341 19,826 18,653 17,890
Total shareholder's equity
per outstanding share $ 12.56 $ 11.83 $ 10.99 $ 10.34 $ 9.91
======== ======== ======== ======== ========
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following financial review of Brunswick Bancorp (the "Company" is presented
on a consolidated basis and is intended to provide a comparison of the financial
performance of the Company and its wholly-owned subsidiary, Brunswick Bank &
Trust Company (the "Bank") for the years ended December 31, 1999, 1998, and
1997. The information presented below should be read in conjunction with the
Company's consolidated financial statements and accompanying notes appearing
elsewhere in this report. All share and per share data has been restated to
reflect the two for one stock split declared on December 14, 1999 paid on
January 14, 2000 and the five shares for four shares stock split paid on
February 11,1999.
Overview:
The Company's 1999 net income amounted to $1,320,702, which was $215,150, or
14%, lower than the year before 1998 of $1,535,852. The net income for 1998 was
$291,310 higher then the year before 1997, which was $1,244,542. On a per share
basis, net income was $.75, $.85,and $.69, respectively in 1999, 1998, and 1997.
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The decrease in net income recorded in 1999 can be attributed to the reduction
of net interest income of $423,000 and an increase in other expenses of $176,000
mostly due to an increase in administrative personnel salaries and additions to
staff. These factors were partially offset by a decrease in provisions of credit
losses of $39,000 and increase in other income of $131,000.
The $291,310 or 23.4% increase in 1998 over the 1997 earnings can be attributed
to the increase in net income increase of $45,000, an increase in other income
of $2,000 and a significant reduction in other expenses of $741,000 over the
prior year, offset by an increase in provision of credit losses of $257,000.
Return on assets for the years ended December 31,1999, 1998, and 1997 was 1.21%,
1.40% and 1.23%, respectively while the return on beginning of the year equity
recorded during the same periods amounted to 6.19%, 7.75 % and 6.67%.
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, 1999, 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, 1999 vs. 1998
For the year of 1999 income before income taxes decreased from 1998 by $429,000.
This decrease occurred mainly because of a decrease in net interest income, most
of which resulted from a decrease in loan volume. The commercial loan portfolio
decreased at the end of 1998 primarily due to a $6 million loan being refinanced
by a major auto dealership program.
Interest income decreased by $677,000 and interest expense decreased by $254,000
which resulted in a $423,000 overall decrease in net interest income. The
following table illustrates how decrease in loan volume and interest rates
affected net interest income.
<TABLE>
<S> <C>
Interest Income:
Effect of decreased volume $(452,000)
Effect of decreased interest rates (225,000)
Interest expense:
Effect of decreased volume 10,000
Effect of decreased interest rates 244,000
---------
Decrease in net interest income $ 423,000
=========
</TABLE>
Although other expenses increased by $176,000, the increased expenses were
offset by a $39,000 decrease in the provision for credit losses and an increase
in other income of $131,000.
The increase in other expenses was primarily due to an increase in
administrative and staff salaries.
The increase in other income is due primarily to increase in various service
fees in 1999.
Income Statement Analysis, 1998 vs. 1997
For the year of 1998 income before income taxes increased from 1997 by $531,000.
This increase occurred because of several major factors, which are described as
follows:
9
<PAGE> 12
During 1997 a $399,000 loss resulted from the sales of a large foreclosed
commercial property and approximately $150,000 in expenses were incurred from
the complete renovation of our branch located in downtown New Brunswick. These
events resulted in a $549,000 negative impact on 1997 earnings in comparison to
1998.
During 1998 a $75,000 insurance settlement was received. This settlement was for
water damage that occurred at our downtown New Brunswick branch during 1997 and
was applied against 1998 expenses.
Interest income increased by $184,000 and interest expense decreased by
$139,000, which resulted in a $45,000 increase in net interest income. The
following table illustrates how changes in interest rates and volume effected
net income.
<TABLE>
<S> <C>
Interest income:
Effect of increased volume $ 448,000
Effect of decreased interest rates (264,000)
Interest expense:
Effect of increased volume (167,000)
Effect of decreased interest rates 28,000
---------
Increase in net interest income $ 45,000
=========
</TABLE>
During 1997 no loan loss provision was required and a recapture of $157,000 of
loan loss provisions of prior years was recorded. During 1998 $100,000 in loan
loss provisions were required thereby producing a $257,000 negative impact on
1998 earnings when compared to that of 1997.
Balance Sheet Analysis
There were no substantial changes in the balance sheet. All components of total
assets at December 31, 1999 were comparable to the amounts at the end of 1998.
For additional details on securities, loans and premises and equipment, refer to
the Notes to Consolidated Financial Statements.
The $368,000 increase in premises and equipment was primarily due to
pre-construction and construction costs related to two branch offices under
construction.
Although savings and NOW balances decreased by $6,942,000, the decrease was
partially offset by increases in demand and time deposits of $766,000 and
$4,520,000, respectively, resulting in a $1,656,000 decrease in total deposits.
Stockholders' equity, with the addition of 1999 net income, increased by
$1,316,146.
Year 2000 Issues
The Company has assessed the potential impact of the year 2000 on its computer
operations and on related costs. Management formulated and implemented a plan,
the cost of which was not material to the consolidated financial statements.
Since December 31, 1999 the Company's computer system has experienced no Y2K
computer problems.
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 sales of assets and by other
borrowings.
10
<PAGE> 13
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, 1999, cash and due from banks totaled $5.9 million; federal funds
totaled $34.6 million. Investment securities and loans maturing within one year
totaled $15.1 million and $16.8 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 totaled approximately $1.4 million in 1999, $1.5 million in 1998 and
$1.4 million in 1997. In 1999, investing activities provided $182,000 due
primarily to proceeds from sale of foreclosed real estate. Financing activities
used approximately $1.5 million from decreases in savings and NOW 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
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 undertaking such debt in the
future, all financial positioning is done through liquid funds.
<TABLE>
<CAPTION>
Minimum
Regulatory
December 31 Guidelines
------------------------ ----------
1999 1998
---- ----
<S> <C> <C> <C>
Risk-based capital ratios
Tier 1 33.20% 31.19% 4.000%
Total Capital 32.05% 32.38% 8.000%
Capital (in thousands)
Tier 1 capital $22,363 $ 20,945
Tier II capital (1) 800 801
------- ----------
$23,163 $ 21,746
======= ==========
</TABLE>
(1) Lesser of the allowance for loan loss or 1/80 of risk-weighted assets.
Statements Regarding Forward-Looking Information
This document contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1955. Forward-looking statements can
be identified by the use of words such as "believes", "expects", and similar
words or variations. Such statements are not historical facts and involve
certain risks and uncertainties. Actual results may differ materially from the
results discussed in these forward-looking statements. Factors that might cause
a difference include, but are not limited to, changes in interest rates,
economic conditions, deposit and loan growth, loan loss provisions, and customer
retention.
11
<PAGE> 14
Interest Rate Sensitivity Management
The accompanying table, a quantification of the Company's interest rate
exposure at December 31, 1999, 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 After
Three One but
Within but Within Within After
Three Twelve Five Five Noninterest
Months Months Years Years Bearing Total
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Assets
Cash & due from banks $ -- $ -- $ -- $ -- $ 5,905 $ 5,905
Federal funds sold 34,600 -- -- -- -- 34,600
Investment securities -- 15,101 7,300 262 -- 22,663
Loans, net (a) 3,669 13,121 21,978 4,335 -- 43,103
Other assets -- -- -- -- 2,602 2,602
--------- --------- --------- --------- --------- ---------
$ 38,269 $ 28,222 $ 29,278 $ 4,597 $ 8,507 $ 108,873
========= ========= ========= ========= ========= =========
Liabilities and Stockholders Equity
Total deposits (b) $ 37,486 $ 9,557 $ 12,903 $ -- $ 25,353 $ 85,299
Borrowed funds 631 -- -- -- -- 631
Other liabilities -- -- -- -- 285 285
Stockholders equity -- -- -- -- 22,658 22,658
--------- --------- --------- --------- --------- ---------
$ 38,117 $ 9,557 $ 12,903 $ -- $ 48,296 $ 108,873
========= ========= ========= ========= ========= =========
Interest rate sensitivity gap
Cumulative interest 152 18,665 16,375 4,597 (39,789) --
--------- --------- --------- --------- --------- ---------
$ 152 $ 18,817 $ 35,192 $ 39,789 $ -- $ --
========= ========= ========= ========= ========= =========
</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.
12
<PAGE> 15
Unadopted Financial Accounting Standards Board Statements
As of December 31, 1999, 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
(In Thousands)
Year Ended December 31,
<TABLE>
<CAPTION>
1999 1998
--------------------------------- ------------------------------------
Average Average Average Average
Balance Yield Balance Yield
Sheet (3) Interest Rate Sheet (3) Interest Rate
-------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning Assets
Federal funds sold $ 34,254 $1,727 5.04% $ 37,610 $ 2,019 5.37%
Investment securities
taxable 22,900 1,388 6.06% 11,052 669 6.05%
Investment securities
non-taxable (1) -- -- -- 34 3 8.82%
Loans, net 41,430 4,154 10.03% 47,557 5,255 11.05%
-------- ------ ------ -------- -------- ------
$ 98,584 $7,269 7.04% $ 96,253 $ 7,946 7.82%
Noninterest-earning assets
Deposits in bank 6,928 6,684
Other real estate
owned 46 81
Other (2) 2,716 2,543
-------- ------ ------ -------- -------- ------
$108,274 $7,269 7.04% $105,561 $ 7,946 7.53%
======== ====== ====== ======== ======== ======
Interest-bearing liabilities
Savings deposits $ 13,453 $ 271 2.01% $ 13,311 $ 326 2.45%
Demand deposits 30,970 897 2.90% 29,431 1,014 3.45%
Time deposits 15,284 679 4.44% 16,347 759 4.64%
Short term debt 252 10 3.97% 231 12 5.19%
-------- ------ ------ -------- -------- ------
59,959 1,857 3.10% 59,320 2,111 3.56%
Noninterest-bearing liabilities
Demand deposits 25,818 25,019
Other 628 739
-------- ------ ------ -------- -------- ------
86,405 1,857 2.15% 85,078 2,111 2.48%
Stockholders' equity 21,869 20,483
-------- ------ ------ -------- -------- ------
$108,274 $1,857 1.72% $105,561 $ 2,111 2.00%
======== ====== ====== ======== ======== ======
Net yield on total
earning assets $ 98,584 $5,412 5.49% $ 96,253 $ 5,835 6.06%
======== ====== ====== ======== ======== ======
</TABLE>
<TABLE>
<CAPTION>
1997
------------------------------------
Average Average
Balance Yield
Sheet (3) Interest Rate
-------- -------- -------
<S> <C> <C> <C>
Interest-earning Assets
Federal funds sold $ 21,792 $ 1,204 5.52%
Investment securities
taxable 14,975 1,003 6.70%
Investment securities
non-taxable (1) 86 7 9.50%
Loans, net 51,329 5,548 10.81%
-------- -------- ------
$ 88,182 $ 7,762 8.13%
Noninterest-earning assets
Deposits in bank 6,193
Other real estate
owned 1,802
Other (2) 3,570
-------- -------- ------
$ 99,747 $ 7,762 7.78%
======== ======== ======
Interest-bearing liabilities
Savings deposits $ 13,338 $ 328 2.46%
Demand deposits 20,326 713 3.51%
Time deposits 19,925 917 4.60%
Short term debt 284 14 4.92%
-------- -------- ------
53,873 1,972 3.66%
Noninterest-bearing liabilities
Demand deposits 26,318
Other 658
-------- -------- ------
80,849 1,972 2.44%
Stockholders' equity 18,898
-------- -------- ------
$ 99,747 $ 1,972 1.98%
======== ======== ======
Net yield on total
earning assets $ 88,182 $ 5,790 6.57%
======== ======== ======
</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.
13
<PAGE> 16
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, 1999, 1998, and
1997 calculated on a tax-equivalent basis, using a 34% Federal rate. Any change
in interest income or interest expense attributable to both changes in volume
and changes in rate has been allocated in proportion to the relationship of the
absolute dollar amount of change in each category.
<TABLE>
<CAPTION>
(In thousands)
1999 Versus 1998 1998 Versus 1997
Increase (Decrease) Increase (Decrease)
Due to Changes in Due to Changes in
-------------------------------------------------------------------------------
Average Total Average Total
Average Yield/ Increase Average Yield/ Increase
Volume Ratio (Decrease) Volume Ratio (Decrease)
------ ----- ---------- ------ ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest and dividend income
Federal funds sold $ (176) $ (116) $ (292) $ 871 $ (56) $ 815
Investment securities
taxable 717 2 719 (257) (77) (334)
Investment securities
nontaxable (3) -- (3) (4) -- (4)
Loans, net (990) (111) (1,101) (162) (131) (293)
------- ------- ------- ------- ------- -------
Total interest income (452) (225) (677) 448 (264) 184
------- ------- ------- ------- ------- -------
Interest expense
Savings deposits 3 (58) (55) (1) (2) (3)
Demand deposits 47 (164) (117) 319 (18) 301
Time deposits (61) (19) (80) (148) (9) (157)
Short term debt 1 (3) (2) (3) 1 (2)
------- ------- ------- ------- ------- -------
Total interest expense (10) (244) (254) 167 (28) 139
------- ------- ------- ------- ------- -------
Changes to net interest income $ (442) $ 19 $ (423) $ 281 $ (236) $ 45
======= ======= ======= ======= ======= =======
</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>
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
U.S. Treasury securities $ -- $ -- $ -- $12,007 $ 5,014
Obligations of other U.S.
Government agencies 21,013 21,016 13,168 382 7,572
Obligations of state and
other political subdivisions -- -- 55 105 152
Other securities 1,650 2,050 1,897 1,395 1,392
------- ------- ------- ------- -------
Total investment
securities $22,663 $23,066 $15,120 $13,889 $14,130
======= ======= ======= ======= =======
</TABLE>
14
<PAGE> 17
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, 1999 (in thousands). Yields on
tax exempt securities are presented on fully tax-equivalent basis using a 34%
Federal tax rate.
<TABLE>
<CAPTION>
Due Under 1 Year Due 1-5 Years Due 5-10 Years Due Over 10 Years
------------------ ------------------ ------------------ -----------------
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
Obligations of other U.S.
Government agencies 15,001 5.13% 6,000 5.36% 12 8.50%
Obligations of states and
other political
subdivision -- -- -- -- -- -- -- --
Other securities 100 6.25% 1,300 7.23% 250 6.70% -- --
------- ---- ------- ---- ------- ---- ------- ----
Total investment
securities $15,101 5.13% $ 7,300 5.69% $ 250 6.70% $ 12 8.50%
======= ==== ======= ==== ======= ==== ======= ====
</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,
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Types of loans
Commercial and financial $10,634 $16,307 $19,891 $27,511 $19,168
Real estate-mortgage 27,785 24,406 21,546 22,985 22,918
Real estate-construction 4,332 2,034 10,921 2,206 3,256
Installment 1,259 1,329 1,329 1,112 1,121
------- ------- ------- ------- -------
Total loans $44,010 $44,076 $53,687 $53,814 $46,463
======= ======= ======= ======= =======
</TABLE>
15
<PAGE> 18
The following table sets forth the maturity distribution for the above
loan portfolio at December 31, 1999;
Maturities and Sensitivities of Loans to Charges in Interest Rates
<TABLE>
<CAPTION> After
1 Year
Within with-in After 5
1 Year 5 Years Years Total
------ ------- ------- -------
<S> <C> <C> <C> <C>
Commercial and financial
Fixed rate $1,264 $1,632 $ 212 $ 3,108
Variable rate 4,352 3,048 126 7,526
Real estate-mortgage
Fixed rate 659 9,410 1,798 11,867
Variable rate 6,624 7,099 2,195 15,918
Real estate-construction
Fixed rate 2,285 -- -- 2,285
Variable rate 1,132 915 -- 2,047
Installment
Fixed rate 76 746 5 827
Variable rate $ 425 $ 7 $ -- $ 432
</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 that
precipitate a decision to roll over their loan. When this is done, it is based
upon the continued favorable credit position of the borrower and does not
indicate a problem loan.
Risk Elements in Loan Portfolio
Commercial and installment loans are placed on a non-accrual status when a
default of principal or interest has existed for a period of 90 days and when a
return to current status is not imminent. Real estate loans are placed on
non-accrual status when a default of principal or interest has existed for 90
days or more. Subsequent to the change in classification to non-accrual,
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,
----------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Non-accrual loans $ 829 $ 325 $ 682 $2,370 $2,295
Loans, past due 90 days or more 519 754 303 283 1,773
Other real estate owned -- 133 60 3,577 3,613
Percentage of non-performing loans to gross loans
outstanding 3.06% 2.75% 1.95% 5.13% 8.76%
</TABLE>
16
<PAGE> 19
If the above non-accrual loans at December 31, 1999 had been current, interest
income for 1999 would have been approximately $84,000 greater than that
recorded. Interest included in income on these loans totaled approximately
$82,000 for the year. Delinquency rates at December 31, 1999 primarily were
higher than 1998 and 1997 but lower than 1996 and 1995. The delinquency rate was
higher in 1999 due to the increase in non-accrual loans. One commercial loan for
$385,000 became part of this category.
Except for loans included in the above table there were no loans at December 31,
1999 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,
1999, the total loan portfolio was approximately $44 million. As of the same
date, the commercial loan portfolio totaled approximately $10.6 million; $1.1
million of these commercial loans were collateralized by the stock of a
publicly-traded company, the market value of the stock collateralizing these
loans totaled approximately $4 million as of December 31, 1999. Other than that
concentration, there were no other concentrations exceeding ten percent of total
loans. A concentration is defined as amounts loaned to a multiple number of
borrowers engaged in similar activities that 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 that has been
charged to income.
<TABLE>
<CAPTION>
(In thousands)
Year Ended December 31,
-------------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 801 $ 820 $ 842 $ 867 $1,000
Charge-offs
Commercial & financial -- 112 34 317 77
Real estate-mortgage 56 49 140 134 495
Real estate-construction -- -- -- -- --
Installment 3 -- 18 2 2
------ ------ ------ ------ ------
59 161 192 453 574
Recoveries
Commercial & financial 65 26 1 -- 217
Real estate-mortgage 22 16 322 14 220
Real estate-construction -- -- -- -- --
Installment 34 -- 4 4 4
------ ------ ------ ------ ------
Net charge-offs (62) 119 (135) 435 133
Additional charges to operations 61 100 (157) 410 --
------ ------ ------ ------ ------
Balance at end of period $ 800 $ 801 $ 820 $ 842 $ 867
------ ------ ------ ------ ------
Ratio of net charge-offs during
the period to average loans
outstanding during the period (.002%) 0.41% (1.55%) 0.92% 0.32%
</TABLE>
17
<PAGE> 20
Allocation of the Allowance for Loan Losses
<TABLE>
<CAPTION>
Real Real
Commercial & Estate Estate
December 31, Financial Mortgage Construction Installment Total
------------ --------- -------- ------------ ----------- -----
<S> <C> <C> <C> <C> <C>
1999
Amount $408 $288 $ 80 $ 24 $800
Percentage of total 51% 36% 10% 3% 100%
1998
Amount 505 272 16 8 801
Percentage of total 63% 33% 3% 1% 100%
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%
</TABLE>
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>
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Non-interest bearing:
Demand deposits $25,353 $24,588 $25,177 $25,622 $24,290
Interest bearing:
Savings deposits 12,728 15,217 12,707 13,777 14,412
Time deposits 21,066 16,546 24,426 20,754 20,959
NOW demand deposits 26,151 30,604 18,448 21,645 13,664
------- ------- ------- ------- -------
Total deposits $85,298 $86,955 $80,758 $81,798 $73,325
======= ======= ======= ======= =======
</TABLE>
The maturities of time deposits of $100,000 or more at December 31, 1999 are
summarized as follows:
<TABLE>
<S> <C>
Under 3 months $ 8,609
3 to 6 months 1,809
6 to 12 months 3,368
Over 12 months --
-------
$13,786
=======
</TABLE>
18
<PAGE> 21
Return on Equity and Assets
The following are selected ratios for the years ended December 31,
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Return on Assets 1.21% 1.40% 1.23% 0.83% 1.09%
Return on Equity 6.19% 7.75% 6.67% 4.26% 6.91%
Average equity to
average assets 20.20% 19.40% 18.96% 18.78% 7.47%
Dividend payout ratio 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
Short-term borrowing
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, 1999, did outstanding treasury
tax and loan deposits exceed 30% of stockholders' equity.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This information is included with item 7 - Management's discussion and analysis
of financial condition and results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements for the years ended December 31, 1999,
1998, and 1997 contain the information required by Item 8 and that information
is incorporated herein following signature page 21.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
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 the Form 10-K.
ITEM 11. COMPENSATION OF EXECUTIVE OFFICERS
The Proxy Statement will contain under the caption "Directors' Compensation",
the caption and "Executive Compensation" and the caption "Compensation Committee
Interlocks and Inside Participation" information required by Item 11 and that
information is incorporated herein by reference. Information in the Proxy
Statement required by Paragraphs (k) and (1) of Item 402 of Regulation S-K is
not incorporated by reference into any portion of this Annual Report Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTS.
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.
19
<PAGE> 22
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.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) & (2) Financial Statements and
Financial Statements Schedules
The below listed financial statements and report of independent auditors of BB
and subsidiaries for the years ended December 31, 1999, 1998, and 1997 are
following signature page number 21.
Independent Auditors' Report
Consolidated Statements of Income- Years Ended December 31, 1999, 1998, and 1997
Consolidated Statements of Stockholders' Equity - Years Ended December 31, 1999,
1998, and 1997
Consolidated Statements of Cash Flows - Years Ended December 31, 1999, 1998, and
1997
Notes to Consolidated Balance Sheets - Years Ended December 31, 1999 and 1998
Schedules to the Consolidated Balance Sheets 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, 1999.
(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) Subsidiaries of Brunswick Bancorp,
Incorporated by reference to Registration
Statement on Form S-14 filed on June 20,
1985.
(27) Financial Data Schedule.
20
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 or 13 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereto duly authorized.
BRUNSWICK BANCORP
/s/ Carmen Gumina
- ------------------------------
By: Carmen Gumina
March 14, 2000
- ------------------------------
Dated:
Pursuant to the requirement 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>
- -------------------------- --------------
Bruce Arbeiter Director
/s/ Joseph DeMarco March 14, 2000
- -------------------------- --------------
Joseph DeMarco Director
/s/ Dominick Faraci March 14, 2000
- -------------------------- --------------
Dominick Faraci Director
/s/ Carmen J. Gumina March 14, 2000
- -------------------------- --------------
Carmen J. Gumina Chief Executive Officer,
Chairman of the Board
(Principal Executive Officer)
/s/ Josephine Gumina March 14, 2000
- -------------------------- --------------
Josephine Gumina Director
/s/ Michael Kaplan March 14, 2000
- -------------------------- --------------
Michael Kaplan Director
/s/ Richard Malouf March 14, 2000
- -------------------------- --------------
Richard Malouf Director
/s/ John Maltese March 14, 2000
- -------------------------- --------------
John Maltese Director
/s/ Frederick Perrine March 14, 2000
- -------------------------- --------------
Frederick Perrine Director
/s/ Robert Sica March 14, 2000
- -------------------------- --------------
Robert Sica Director
/s/ Thomas A. Fornale March 14, 2000
- -------------------------- --------------
Thomas A. Fornale Secretary-Treasurer Controller
(Principal Accounting/Financial Officer)
</TABLE>
21
<PAGE> 24
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
<PAGE> 25
BRUNSWICK BANCORP AND SUBSIDIARIES
FINANCIAL STATEMENT
FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets 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> 26
[MICHAEL R. FERRARO LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
BRUNSWICK BANCORP AND SUBSIDIARIES
We have audited the accompanying consolidated Balance Sheets of Brunswick
Bancorp and Subsidiaries as of December 31, 1999 and 1998 and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1999. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Brunswick Bancorp
and Subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.
/S/ MICHAEL R. FERRARO
Michael R. Ferraro, CPA
February 17, 2000
Matawan, NJ
1
<PAGE> 27
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
ASSETS
<S> <C> <C>
Cash and due from banks $ 5,905,416 $ 6,448,304
Federal funds sold 34,600,000 34,000,000
------------- -------------
Total cash and cash equivalents 40,505,416 40,448,304
Securities held to maturity 22,663,091 23,065,507
Loans receivable, net of allowance for
loan losses of $800,000 in 1999
and $ 801,059 in 1998 43,102,803 43,166,736
Accrued interest receivable 336,349 377,627
Premises and equipment, net 1,870,994 1,503,332
Foreclosed real estate -- 132,615
Other assets 394,225 447,167
------------- -------------
$ 108,872,878 $ 109,141,288
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing $ 25,353,409 $ 24,587,736
Interest bearing 59,945,120 62,367,173
------------- -------------
Total deposits 85,298,529 86,954,909
Borrowed funds 631,258 511,512
Accrued expenses and other liabilities 285,395 333,317
------------- -------------
86,215,182 87,799,738
Commitments and contingencies (Note 12)
Stockholders' equity
Common stock - par value $2.00 per share -
3,000,000 shares authorized, 902,266 and
721,920 shares issued at December 31, 1999
and 1998; 1,804,532 shares issued
after the stock split. (Note 9) 1,804,532 1,443,840
Additional paid-in capital 3,924,112 4,284,804
Retained earnings 17,020,826 15,704,680
Treasury stock at cost, 4,650
shares in 1999 and 3,720 shares
in 1998 (91,774) (91,774)
------------- -------------
22,657,696 21,341,550
------------- -------------
$ 108,872,878 $ 109,141,288
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements. 2
<PAGE> 28
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR YEARS ENDED
DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Interest income
Loans receivable $ 4,153,754 $ 5,254,959 $ 5,548,068
Securities held to maturity 1,388,261 671,529 1,010,125
Federal funds sold 1,727,226 2,019,208 1,203,810
----------- ----------- -----------
Total interest income 7,269,241 7,945,696 7,762,003
----------- ----------- -----------
Interest expense
Deposits 1,846,458 2,098,798 1,957,411
Borrowed funds 10,476 11,888 14,205
----------- ----------- -----------
Total interest expense 1,856,934 2,110,686 1,971,616
----------- ----------- -----------
Net interest income 5,412,307 5,835,010 5,790,387
Provision for (reversal of)
credit losses 61,077 100,000 (156,922)
----------- ----------- -----------
Net interest income after provision
for credit losses 5,351,230 5,735,010 5,947,309
----------- ----------- -----------
Noninterest income
Service charges on deposit accounts 669,357 631,799 686,758
Other services charges and fees 313,949 226,063 180,086
Other income 25,185 19,555 7,367
----------- ----------- -----------
Total other income 1,008,491 877,417 874,220
----------- ----------- -----------
Other expenses
Salaries and employee benefits 2,280,044 2,147,682 2,077,182
Occupancy expenses 609,100 573,645 893,976
Loss on foreclosed real estate -- -- 398,681
Equipment expenses 211,688 219,771 208,625
Other 1,164,403 1,148,428 1,251,534
----------- ----------- -----------
4,265,235 4,089,526 4,829,998
----------- ----------- -----------
Income before income taxes 2,094,486 2,522,901 1,991,531
Income tax expense 773,784 987,049 746,989
----------- ----------- -----------
Net income $ 1,320,702 $ 1,535,852 $ 1,244,542
=========== =========== ===========
Net income per share of common stock $ 0.75 $ 0.85 $ 0.69
=========== =========== ===========
Average shares outstanding 1,764,188 1,797,566 1,803,572
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements. 3
<PAGE> 29
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
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)
------------ ------------ ------------ ------------ ------------
Balance December 31, 1997 1,443,840 4,284,804 14,168,828 (71,897) 19,825,575
Net income for 1998 -- -- 1,535,852 -- 1,535,852
Purchase of
treasury stock -- -- -- (19,877) (19,877)
------------ ------------ ------------ ------------ ------------
Balance December 31, 1998 1,443,840 4,284,804 15,704,680 (91,774) 21,341,550
Net income for 1999 -- -- 1,320,702 -- 1,320,702
Stock Split for 1999 360,692 (360,692) (4,556) -- (4,556)
------------ ------------ ------------ ------------ ------------
Balance December 31, 1999 $ 1,804,532 $ 3,924,112 $ 17,020,826 $ (91,774) $ 22,657,696
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements. 4
<PAGE> 30
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,320,702 $ 1,535,852 $ 1,244,542
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 146,356 137,617 200,758
Net accretion of securities discounts and premiums (157,914) (198,233) (52,565)
Provision for (reversal of) credit losses 61,077 100,000 (156,922)
Provision for deferred income taxes 2,375 (85,719) (126,714)
Loss on foreclosed real estate -- -- 398,681
(Increase) decrease in accrued interest receivable 57,391 208,199 (7,662)
(Increase) decrease in other assets 34,454 21,541 (173,784)
Increase (decrease) in accrued expenses,
taxes and other liabilities (47,922) (211,757) 101,618
------------ ------------ ------------
Cash provided by operating activities 1,416,519 1,507,500 1,427,952
Cash flows from investing activities:
Maturities of investment securities 650,000 16,009,840 23,010,000
Principal repayments on investment securities 160,330 322,820 215,934
Purchase of investment securities (250,000) (24,079,870) (24,404,100)
Net change in loans receivable 2,856 9,302,090 245,092
Acquisitions of premises and equipment (514,018) (388,621) (471,653)
Proceeds from sale of foreclosed real estate 132,615 64,258 3,121,647
------------ ------------ ------------
Cash used in investing activities 181,783 1,230,517 1,716,920
Cash flows from financing activities:
Increase (decrease) in demand deposits 765,673 (589,334) (445,158)
Increase in savings and NOW deposits (6,942,143) 14,666,747 (4,267,504)
Increase (decrease) in other time deposits 4,520,090 (7,880,455) 3,672,484
Increase (decrease) in borrowed funds 119,746 (137) 209,708
Purchase of treasury stock -- (19,877) (71,897)
Cash in lieu of fractional shares (4,556) -- --
------------ ------------ ------------
Cash provided by financing activities (1,541,190) 6,176,944 (902,367)
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents 57,112 8,914,961 2,242,505
Cash and cash equivalents at January 1 40,448,304 31,533,343 29,290,838
------------ ------------ ------------
Cash and cash equivalents at December 31 $ 40,505,416 $ 40,448,304 $ 31,533,343
============ ============ ============
Interest paid $ 1,848,681 $ 2,192,117 $ 1,965,781
============ ============ ============
Income taxes paid $ 795,989 $ 943,916 $ 817,185
============ ============ ============
</TABLE>
During the years ended December 31, 1999, 1998, and 1997, $62,242, $136,793,
$60,080, 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 consolidated financial
statements. 5
<PAGE> 31
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(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 inter-company 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 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 and
federal funds sold.
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> 32
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
Interest on loans is accrued and credited to income based on the
principal amount outstanding. The accrual of interest income is
ordinarily discontinued when a loan becomes 90 days past due as to
principal or interest; however, management may elect to continue the
accrual when the estimated net realizable value of collateral is
sufficient to cover the principal balance and the accrued interest.
When interest accruals are discontinued, interest credited to income in
the current year is reversed. When the loan is determined to be
uncollectible, interest accrued in prior years and the principal are
charged to the allowance for loan losses.
Allowance for Credit Losses
The allowance for loan losses is increased by charges to income and
decreased by charge-off's (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. Depreciation is computed using the straight-line method
based principally on the estimated useful life of the asset.
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 policy is to fund the contribution
annually before the due date of the corporate income tax return.
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> 33
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
Loans
For variable rate loans that re-price 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 analysis,
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
analysis 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.
Investment Securities Held to Maturity
Fair values of securities are based on quoted market prices.
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
and splits. Basic and diluted earnings per share 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 $69,414.
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.
8
<PAGE> 34
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
(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:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
December 31, 1999
U.S.Government and
agency securities $21,013,091 $ -- $ 12,560 $21,000,531
Other securities 1,650,000 -- -- 1,650,000
----------- ----------- ----------- -----------
Totals $22,663,091 $ -- $ 12,560 $22,650,531
=========== =========== =========== ===========
December 31, 1998
U.S.Government and
agency securities $21,015,507 $ 484,286 $ 30,844 $21,468,949
Other securities 2,050,000 12,735 -- 2,062,735
----------- ----------- ----------- -----------
Totals $23,065,507 $ 497,021 $ 30,844 $23,531,684
=========== =========== =========== ===========
</TABLE>
The scheduled maturities of investment securities as of December 31,
1999 were as follows:
<TABLE>
<CAPTION>
1999
----
Amortized Fair
Cost Value
----------- -----------
<S> <C> <C>
Due in one year or less $15,101,100 $14,936,500
Due after one year through five years 7,050,150 6,934,573
Due after five years through ten years 500,000 500,000
Due after ten years 11,841 279,458
----------- -----------
Totals $22,663,091 $22,650,531
=========== ===========
</TABLE>
Securities, carried at $21,001,100 and $21,015,140 at December 31, 1999
and 1998, 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>
1999 1998
----------- -----------
<S> <C> <C>
Commercial $10,634,153 $16,306,888
Real estate construction 4,332,357 2,033,974
Commercial real estate 11,652,643 17,647,271
Residential real estate 16,132,006 6,758,501
Consumer 1,258,879 1,328,750
----------- -----------
44,010,038 44,075,384
Less
Allowance for credit losses 800,000 801,059
Unearned fees 107,235 107,589
----------- -----------
$43,102,803 $43,166,736
=========== ===========
</TABLE>
9
<PAGE> 35
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
An analysis of the change in the allowance for credit losses follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1 $ 801,059 $ 820,254 $ 842,103
Credits charged off (120,992) (161,200) (191,530)
Recoveries 58,856 42,005 326,603
--------- --------- ---------
Net credit charged off (62,136) (119,195) 135,073
Provision for (reversal of)
credit losses 61,077 100,000 (156,922)
--------- --------- ---------
Balance at December 31 $ 800,000 $ 801,059 $ 820,254
========= ========= =========
</TABLE>
Impairment of loans have been recognized in conformity with FASB
Statement No.114, as amended by FASB Statement No. 118. Recorded
investments in other impaired loans were $853,714 and $1,065,831 at
December 31, 1999 and 1998 respectively. The average recorded investment
in impaired loans during 1999, 1998, and 1997 was approximately
$1,330,000, $1,649,000 and $1,227,000 respectively. Interest income of
approximately $94,558, $119,000 and $220,000, on impaired loans was
recognized for cash payments received in 1999, 1998, and 1997,
respectively. The total allowance for loan loses related to these loans
was $0 and $110,000 on December 31, 1999 and 1998 respectively.
(4) PREMISES AND EQUIPMENT
Components of premises and equipment included in the consolidated
statements of condition at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
Estimated 1999 1998
Lives
------------------ ------------------ ------------------
<S> <C> <C> <C>
Cost
Land $828,372 $850,372
Bank premises 25-35 years 983,001 562,049
Furniture and equipment 5-10 years 1,127,121 1,089,121
Leasehold improvements 5-25 years 70,137 70,137
------------------ ------------------
3,008,631 2,571,679
Less accumulated depreciation 1,137,637 1,068,347
------------------ ------------------
Net book value $ 1,870,994 $ 1,503,332
================== ==================
</TABLE>
Certain Bank facilities are leased under various operating leases. Rental
expense was $415,603, $406,152, and $394,906, in 1999, 1998, and 1997
respectively. Future minimum rental under noncancelable leases are:
<TABLE>
<CAPTION>
<S> <C> <C>
2000 $ 371,637
2001 355,042
2002 358,796
2003 367,841
2004 382,505
Thereafter 3,543,101
------------------
$ 5,378,922
==================
</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.
All borrowed funds are collateralized with mortgaged back securities.
10
<PAGE> 36
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
(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 of
employee contributions. Contributions under the profit sharing plan are
made at the discretion of the board of directors, and have totaled
approximately 5% of gross eligible salaries for the past five years.
The Bank contributed $96,300, $106,500, and $103,000, for 1999, 1998,
and 1997, respectively.
(7) COMPOSITION OF DEPOSITS
The aggregate amount of certificates of deposits with minimum balances
of $100,000 was $13,786,592 and $8,786,851 at December 31, 1999 and
1998, 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>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Currently payable
Federal $ 596,609 $ 822,168 $ 663,203
State 174,800 250,600 210,500
----------- ----------- -----------
771,409 1,072,768 873,703
Deferred Tax Benefit 2,375 (85,719) (126,714)
----------- ----------- -----------
$ 773,784 $ 987,049 $ 746,989
=========== =========== ===========
</TABLE>
The principal reasons for the difference in the effective tax rate and
the federal statutory rate are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------- ---------------- ---------------
<S> <C> <C> <C>
Statutory federal income tax rate 34% 34% 34%
Effect on tax rate of:
Tax-exempt securities - - (1)
Tax-exempt loan income (1) (1) (1)
State taxes 6 6 6
Nondeductible items - - 1
Other (2) - (1)
--------------- ---------------- ---------------
Effective tax rate 37% 39% 38%
=============== ================ ===============
</TABLE>
The components of the net deferred tax asset, included in other assets
are as follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Deferred tax assets
Allowance for credit losses $ 209,524 $ 224,820
Deferred Compensation 222,000 192,000
Deferred tax liabilities
Depreciation (37,299) (20,220)
--------- ---------
Net deferred tax assets $ 394,225 $ 396,600
========= =========
</TABLE>
11
<PAGE> 37
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
The components of the provision for deferred tax expense (benefit) are
as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Allowance for loan losses $ 15,296 $ 2,991
Deferred Compensation (30,000) (48,000)
Depreciation 17,079 (80,710)
State tax NOL carryover -- 40,000
-------- --------
Deferred tax (benefit) $ 2,375 $(85,719)
======== ========
</TABLE>
(9) STOCK SPLITS
The Board of Directors declared a Five Shares for Fours Shares stock
split payable on February 11, 1999 to stockholders of record on
December 14, 1998. The stock split resulted in the Company issuing
180,346 shares. The Board determined that cash will be paid in lieu of
fractional shares resulting from the stock split at a value of $34.00
per share. The amount paid out was $4556. On December 14, 1999 The
Board of Directors declared a two shares for one share stock split
payable on January 14, 2000 to stockholders of record on December 31,
1999. These financial statements give retroactive effect to the stock
split in the computation of earnings per share.
(10) STOCK OPTION PLAN
The Company has a stock option plan for officers and key employees that
provides for nonqualified and incentive options. The Board of Directors
determines the option price (not to be less than fair market value for
incentive options) at the date of grant. The options generally expire
five years from the date of grant and are exercisable over the period
stated in each option.
In May 1998 the Company granted stock options for 137,500 shares at an
exercise price of $12.80 per share, and as of December 31, 1999, 55,000
shares were available to be exercised; as of that time no options were
exercised. The Stock options expire in 5 years from the date they are
granted and vest over service periods that range from one to five
years. The fair value of option granted is estimated on the grant date
using the Black-Scholes Model. The following assumptions were made in
estimating fair value:
<TABLE>
<CAPTION>
Assumption 1999 1998
---------- ---- ----
<S> <C> <C>
Dividend yield .0% .0%
Risk-free Interest Rate 4.25%
4.25%
Expected volatility 41.34% 53.587%
Expected Life 5 years
</TABLE>
The Company applies APB opinion 25 in accounting for stock options.
Accordingly, no compensation cost has been recognized for the plan. Had
compensation cost been determined on the basis of fair value pursuant
to FASB Statement No. 123, Pro forma net income and earnings per share
would be as follows:
12
<PAGE> 38
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Net Income 1999 1998
---------- ---- ----
<S> <C> <C>
As reported $ 1,320,702 $ 1,535,852
============= =============
Pro forma 819,675 $ 989,925
============= =============
Basic earnings per share
As reported $ .75 $ .85
============= =============
Pro forma $ .47 $ .55
============= =============
Diluted earnings per share
As reported $ .73 $ .85
============= =============
Pro forma $ .47 $ .53
============= =============
</TABLE>
The diluted earnings per share are based on the Treasury stock method
that creates a 9,300 shares dilution.
(11) RELATED PARTIES
The Bank has entered into transactions with its directors, principal
officers, their immediate families, and affiliated companies in which
the directors are principal stockholders. These transactions are as
follows:
Loans
Related parties were indebted to the Company for loans totaling
$4,489,482 as of December 31, 1998. During 1999, additional advances of
$210,773 were made and $2,877,300 was retired for a balance of
$1,822,955 as of December 31, 1999.
Rent
One operating location of the Bank is leased from a related party. Rent
paid to that party totaled $319,139, $309,544, and $302,521 for the
years ended December 31, 1999, 1998 and 1997, respectively, at terms
which are considered by management to be no less favorable than an
arm's length agreement.
Loan participation's sold
Certain loans and loan participations, which the Bank services, were
sold to a related party without recourse. As of December 31, 1999 and
1998, these loans totaled $588,601 and $313,305, 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.
13
<PAGE> 39
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
(12) CONTINGENT LIABILITIES AND COMMITMENTS
The Bank's consolidated financial statements do not reflect various
commitments and contingent liabilities which arise in the normal course
of business and which involve elements of credit risk, interest rate
risk, and liquidity risk. These commitments and contingent liabilities
at December 31, 1999 are as follows:
<TABLE>
<S> <C>
Commitments to extend credit $ 6,685,143
Standby letters of credit 1,609,325
Commercial lines of credit 5,062,562
Consumer lines of credit 2,097,726
-------------
$ 15,454,756
=============
</TABLE>
Commitments to extend credit, commercial letters of credit, and standby
letters of credit all include exposure to some credit loss in the event
of nonperformance of the customer. The Bank's credit policies and
procedures for credit commitments and financial guarantees are the same
as those extensions of credit that are recorded on the consolidated
statements of condition.
Because these instruments have fixed maturity dates, and because many
of them expire without being drawn upon, they do not generally present
any significant liquidity risk to the Bank.
The Company is party to litigation and claims arising during the normal
course of business. Management, after consultation with legal counsel,
believes that the liabilities, if any, arising from 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 has begun 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 was $293,000. The Bank intends to construct a permanent office
building on the site. As of the date of these financial statements the
Bank has obtained regulatory approvals for the branch office relocation
and the building is under construction.
Year 2000 Issues
The Company has assessed the potential impact of the year 2000 on its
computer operations and on related costs. Management formulated and
implemented a plan, the cost of which was not material to the
consolidated financial statements. Since December 31, 1999 the
Company's computer system has experienced no Y2K problems.
14
<PAGE> 40
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
(13) 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
$10,634,153 and $16,306,888 as of December 31, 1999 and 1998,
respectively, approximately $1,159,920 and $1,160,000, respectively, of
those loans are collateralized by stock in one publicly traded company.
The market value of stock collateralizing those loans totals
approximately $4,036,507 and $3,763,749, respectively. 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 loans to value ratios of no greater than 75%. The Bank
maintains cash balances at several correspondent banks. The cash
balances are in excess of the limit covered by the Federal Deposit
Insurance Corporation.
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
------------------------- -----------------------
Carrying Fair Carrying Fair
(In thousands) Value Value Value Value
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Financial assets
Cash and due from banks $ 5,905 $ 5,905 $ 6,448 $ 6,448
Federal funds sold 34,600 34,600 34,000 34,000
Securities held to maturity 22,663 22,650 23,066 23,532
Loans, net 43,103 43,569 43,167 44,730
Accrued interest receivable 321 321 378 378
Financial liabilities
Deposit liabilities 85,299 85,238 86,955 86,969
Borrowed funds 631 631 512 512
Accrued interest payable 221 221 211 211
Off-balance-sheet liability instruments
Loan commitments N/A 13,845 N/A 10,849
Standby letters of credit N/A 1,609 N/A 270
Commercial letters of credit N/A - N/A 103
</TABLE>
15
<PAGE> 41
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
(15) 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 regulator
framework for prompt corrective actions, the Company must meet specific
capital guidelines that involve quantitative measure 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 insure 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.
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, 1999
Total Capital $ 22,658 $ 5,460 $ 6,825
% of risk-weighted assets 33.20% 8.00% 10.00%
Tier I Capital 22,363 2,791 4,187
% of risk-weighted assets 32.05% 4.00% 6.00%
Tier I Capital 22,363 4,255 5,319
% of average assets 21.02% 4.00% 5.00%
December 31, 1998
Total Capital $ 21,342 $ 5,373 $ 6,716
% of risk-weighted assets 31.78% 8.00% 10.00%
Tier I Capital 20,945 2,686 4,030
% of risk-weighted assets 31.19% 4.00% 6.00%
Tier I Capital 20,945 4,145 5,182
% of average assets 20.21% 4.00% 5.00%
</TABLE>
16
<PAGE> 42
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
(16) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected unaudited quarterly data is presented as follows (in thousands
except for per share amounts):
<TABLE>
<CAPTION>
1999
-----------------------------------------------------
March June September December
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income $ 1,812 $ 1,855 $ 1,841 $ 1,761
Interest expense 485 451 460 461
------- ------- ------- -------
Net interest income 1,327 1,404 1,381 1,300
Provision for credit losses 25 50 75 (89)
------- ------- ------- -------
Net interest income after
provision for credit losses 1,302 1,354 1,306 1,389
Non interest income 231 273 231 274
Non interest expenses 1,044 1,157 1,096 968
------- ------- ------- -------
Income before income taxes 489 470 441 695
Income tax expense 198 192 215 169
------- ------- ------- -------
Net income $ 291 $ 278 $ 226 $ 526
======= ======= ======= =======
Net income per share $ 0.16 $ 0.16 $ 0.13 $ 0.30
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1998
-----------------------------------------------------
March June September December
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income $ 1,951 $ 1,971 $ 2,058 $ 1,965
Interest expense 475 511 512 612
------- ------- ------- -------
Net interest income 1,476 1,460 1,546 1,353
Provision for credit losses 75 75 75 (125)
------- ------- ------- -------
Net interest income after
provision for credit losses 1,401 1,385 1,471 1,478
Non interest income 205 221 200 251
Non interest expenses 1,042 1,043 1,035 969
------- ------- ------- -------
Income before income taxes 564 563 636 760
Income tax expense 212 246 288 241
======= ======= ======= =======
Net income $ 352 $ 317 $ 348 $ 519
======= ======= ======= =======
Net income per share $ 0.19 $ 0.18 $ 0.19 $ 0.29
======= ======= ======= =======
</TABLE>
During the fourth quarter of 1999 and 1998, the Company completed a
comprehensive review of its loan loss reserve. As a result of that
review there were some reversals of allowance for loan losses in the
fourth quarter.
17
<PAGE> 43
BRUNSWICK BANKCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(17) CONDENSED FINANCIAL INFORMATION OF BRUNSWICK BANCORP (PARENT ONLY)
BALANCE SHEET
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Assets
Due from banks - demand deposits with
the Bank $ 4,858,005 $ 4,389,825
Investments - certificate of deposit
with the Bank 75,017 71,866
Loans receivable -- 500,000
Investment in the Bank 17,696,132 16,363,842
Accrued interest receivable and other assets 28,542 27,387
------------ ------------
$ 22,657,696 $ 21,352,920
============ ============
Liabilities and Stockholders' Equity
Accrued expenses and other liabilities $ -- $ 11,370
Common stock 1,804,532 1,443,840
Additional paid-in capital 3,924,112 4,284,804
Retained earnings 17,020,826 15,704,680
Treasury stock at cost (91,774) (91,774)
------------ ------------
22,657,696 21,341,550
------------ ------------
$ 22,657,696 $ 21,352,920
============ ============
</TABLE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Interest income $ 9,213 $ 355,678 $ 111,640
Dividends from the Bank -- 150,000 450,000
Other expenses (20,800) (13,051) (63,915)
Loss on foreclosed real estate -- -- (398,681)
----------- ----------- -----------
Income before income
before income taxes and
equity in undistributed net
income of the Bank (11,587) 492,627 99,044
Income tax expense -- 136,400 (108,041)
----------- ----------- -----------
Income before equity in
undistributed net income
of the bank (11,587) 356,227 207,085
Equity in undistributed net
income of the Bank 1,332,289 1,179,625 1,037,457
----------- ----------- -----------
Net income $ 1,320,702 $ 1,535,852 $ 1,244,542
=========== =========== ===========
Net income per share of
common stock $ 0.75 $ 0.85 $ 0.69
=========== =========== ===========
</TABLE>
18
<PAGE> 44
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31,1999, 1998 AND 1997
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31, 1999
---------------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,320,702 $ 1,535,852 $ 1,244,542
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 57,000
Loss on foreclosed real estate 398,681
(Increase) decrease in other assets (1,155) 60,694 (82,537)
Increase (decrease) in other
liabilities (11,370) (18,990) (75,040)
Equity in undistributed net income
of the Bank (1,332,290) (1,179,625) (1,037,457)
----------- ----------- -----------
Cash provided by operating activities: (24,113) 397,931 505,189
Cash flows from investing activities:
Net (increase) decrease in loans 500,000 2,900,000 (3,000,000)
Net (increase) decrease in certificates
of deposit (3,151) 921,332 (808,206)
Proceeds from sale of foreclosed
real estate -- -- 2,952,960
----------- ----------- -----------
Cash provided by (used in) investing
activities 496,849 3,821,332 (855,246)
Cash flows from financing activities:
Cash in lieu of fractional shares (4,556) -- --
----------- ----------- -----------
Purchase of treasury stock -- (19,877) (71,897)
----------- ----------- -----------
Cash used in financing activities: (4,556) (19,877) (71,897)
----------- ----------- -----------
Increase (decrease) in cash 468,180 4,199,386 (421,954)
Cash and cash equivalents, beginning
of year 4,389,825 190,439 612,393
----------- ----------- -----------
Cash and cash equivalents, end of year $ 4,858,005 $ 4,389,825 $ 190,439
=========== =========== ===========
</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 asses of the Bank are
limited in availability for dividends to Brunswick Bancorp as of
December 31, 1999.
19
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,905,416
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 34,600,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 22,663,091
<INVESTMENTS-MARKET> 22,650,531
<LOANS> 43,902,803
<ALLOWANCE> 800,000
<TOTAL-ASSETS> 108,872,818
<DEPOSITS> 85,298,529
<SHORT-TERM> 631,258
<LIABILITIES-OTHER> 285,395
<LONG-TERM> 0
0
0
<COMMON> 1,804,532
<OTHER-SE> 20,853,164
<TOTAL-LIABILITIES-AND-EQUITY> 108,812,878
<INTEREST-LOAN> 4,153,754
<INTEREST-INVEST> 1,388,261
<INTEREST-OTHER> 1,727,226
<INTEREST-TOTAL> 7,269,241
<INTEREST-DEPOSIT> 1,846,458
<INTEREST-EXPENSE> 1,856,934
<INTEREST-INCOME-NET> 5,412,307
<LOAN-LOSSES> 61,077
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,265,235
<INCOME-PRETAX> 2,094,486
<INCOME-PRE-EXTRAORDINARY> 1,320,702
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,320,702
<EPS-BASIC> .75
<EPS-DILUTED> .75
<YIELD-ACTUAL> 0
<LOANS-NON> 334,667
<LOANS-PAST> 519,047
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 801,059
<CHARGE-OFFS> 120,992
<RECOVERIES> 58,856
<ALLOWANCE-CLOSE> 800,000
<ALLOWANCE-DOMESTIC> 800,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
