SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
February 7, 1997
-------------
COMMISSION FILE NO.: 1-13936
BOSTONFED BANCORP, INC.
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1940834
- ---------------------------------------------------------- ------------------
(State or other Jurisdiction of Incorporation (IRS Employer or
organization) Identification No.)
17 New England Executive Park, Burlington, Massachusetts 01803
- ---------------------------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 273-0300
------------------
<PAGE>
ITEM 2. Acquisition or disposition of Assets
--------------------------------------------
On February 7, 1997 BostonFed Bancorp, Inc. completed its
acquisition of Broadway Capital Corp. for approximately
$22 million in cash. This Form 8-k/A is filed to furnish
financial statements regarding Broadway Capital Corporation.
ITEM 7. Financial Statements and Exhibits
----------------------------------------
a) Financial Statements of Business Acquired
Financial Statement
Index to Financial Statements Page
Independent Auditors' Report 3
Consolidated Balance Sheets --
December 31, 1996 and 1995 4
Consolidated Statements of Income --
Years ended December 31, 1996 and 1995 5
Consolidated Statements of Changes in
Stockholders' Equity --
Years ended December 31, 1996 and 1995 6
Consolidated Statements of Cash Flows --
Years ended December 31, 1996 and 1995 7
Notes to Consolidated Financial Statements 8
b) Pro Forma Financial Information
Unaudited Consolidated Pro Forma Balance Sheet --
December 31, 1996 21
Unaudited Consolidated Statement of Income for the
year ended December 31, 1996 22
Notes to Unaudited Consolidated
Financial Statements 23
2
<PAGE>
To The Board of Directors
and Stockholders
Broadway Capital Corporation
Chelsea, Massachusetts
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Broadway
Capital Corporation and Subsidiary as of December 31, 1996 and 1995 and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated 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 audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated 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 consolidated financial position of
Broadway Capital Corporation and Subsidiary as of December 31, 1996 and 1995,
and the consolidated results of their operations and their cash flows for the
years then ended, in conformity with generally accepted accounting principles.
SHATSWELL, MacLEOD & COMPANY, P.C.
January 7, 1997, except for
Notes 7 and 13, as to which
the dates are February 8, 1997
3
<PAGE>
<TABLE>
BROADWAY CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
<CAPTION>
ASSETS 1996 1995
- ------ ------------ ------------
<S> <C> <C>
Cash and due from banks $ 7,618,892 $ 5,968,966
Federal funds sold 11,400,000 3,200,000
------------ ------------
Cash and cash equivalents 19,018,892 9,168,966
Interest bearing time deposits with other banks 100,000 100,000
Investments in available-for-sale securities (at fair value) 35,304,000 36,501,000
Investments in held-to-maturity securities (fair values of $4,545,310 as of
December 31, 1996 and $2,835,586 as of December 31, 1995) 4,548,761 2,837,430
Federal Reserve Bank stock, at cost 69,000 69,000
Loans, net 65,723,950 67,984,822
Premises and equipment 1,083,034 1,198,037
Other real estate owned 180,000 60,000
Accrued interest receivable 900,167 893,204
Other assets 1,084,650 638,955
------------ ------------
$128,012,454 $119,451,414
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits $ 32,473,964 $ 26,234,401
Savings and NOW deposits 78,144,551 76,716,282
Time deposits 101,992 96,855
------------ ------------
Total deposits 110,720,507 103,047,538
Other liabilities 1,635,334 1,507,715
------------ ------------
Total liabilities 112,355,841 104,555,253
------------ ------------
Stockholders' equity:
Common stock, par value $.01 per share, authorized 400,000 shares;
issued 61,350 shares in 1996 and 60,000 shares in 1995;
outstanding 46,160 shares in 1996 and 44,810 shares in 1995 614 600
Paid-in capital 2,471,228 2,299,400
Retained earnings 15,154,355 14,413,826
Treasury stock, at cost (15,190 shares) (1,933,558) (1,933,558)
Net unrealized holding gain (loss) on available-for-sale securities (36,026) 115,893
------------ ------------
Total stockholders' equity 15,656,613 14,896,161
$128,012,454 $119,451,414
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
<TABLE>
BROADWAY CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1996 and 1995
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Interest and dividend income:
Interest and fees on loans $5,621,707 $5,587,074
Interest and dividends on securities 2,444,779 2,383,827
Other interest 264,537 282,248
---------- ----------
Total interest and dividend income 8,331,023 8,253,149
---------- ----------
Interest expense:
Interest on deposits 1,751,838 1,747,785
Interest on other borrowed funds 148 2,872
---------- ----------
Total interest expense 1,751,986 1,750,657
---------- ----------
Net interest and dividend income 6,579,037 6,502,492
Provision for loan losses 9,345 9,864
---------- ----------
Net interest and dividend income after provision for loan losses 6,569,692 6,492,628
---------- ----------
Other income:
Service charges on deposit accounts 207,312 209,907
Other income 544,524 514,934
---------- ----------
Total other income 751,836 724,841
---------- ----------
Other expense:
Salaries and employee benefits 3,510,435 2,699,992
Occupancy expense 225,171 226,034
Equipment expense 200,628 188,811
Loss (gain) on sales of other real estate owned, net 15,000 (18,022)
Other expense 1,374,783 1,421,703
---------- ----------
Total other expense 5,326,017 4,518,518
---------- ----------
Income before income taxes 1,995,511 2,698,951
Income taxes 717,262 1,139,774
---------- ----------
Net income $1,278,249 $1,559,177
========== ==========
Earnings per share:
Primary shares outstanding 52,535 52,790
========== ==========
Net income per share $ 24.33 $ 29.54
========== ==========
Fully diluted shares outstanding 53,086 52,790
========== ==========
Net income per share $ 24.08 $ 29.54
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
<TABLE>
BROADWAY CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1996 and 1995
<CAPTION>
Net Unrealized
Holding Gain
(Loss) On
Common Paid-in Retained Treasury Available-For-
Stock Capital Earnings Stock Sale Securities Total
------ ---------- ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $600 $2,299,400 $13,392,369 $(1,933,558) $ (929,350) $12,829,461
Net income 1,559,177 1,559,177
Dividends declared ($12.00
per share) (537,720) (537,720)
Net change in unrealized
holding loss on available-
for-sale securities 1,045,243 1,045,243
---- ---------- ----------- ----------- ------------- -----------
Balance, December 31, 1995 600 2,299,400 14,413,826 (1,933,558) 115,893 14,896,161
Exercise of stock options 14 171,828 171,842
Net income 1,278,249 1,278,249
Dividends declared ($12.00
per share) (537,720) (537,720)
Net change in unrealized
holding gain on available-
for-sale securities (151,919) (151,919)
---- ---------- ----------- ----------- ------------- -----------
Balance, December 31, 1996 $614 $2,471,228 $15,154,355 $(1,933,558) $ (36,026) $15,656,613
==== ========== =========== =========== ============= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
<TABLE>
BROADWAY CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996 and 1995
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,278,249 $ 1,559,177
Adjustments to reconcile net income to net cash provided by operating
activities:
Loss (gain) on sales of other real estate owned, net 15,000 (18,022)
Change in unearned income (14,291) 75,732
Increase in interest payable 47,166
Increase in accrued expenses 236,718 158,438
Depreciation and amortization 148,120 133,271
Provision for loan losses 9,345 9,864
Deferred tax expense (benefit) (105,783) 15,121
Decrease in taxes payable (214,856) (1,329)
(Increase) decrease in interest receivable (6,963) 65,589
(Increase) decrease in prepaid expenses 4,897 (16,612)
Amortization, net of accretion of securities 27,694 101,232
Increase (decrease) in other liabilities (182,359) 196,256
(Increase) decrease in other assets 8,180 (6,842)
----------- -----------
Net cash provided by operating activities 1,251,117 2,271,875
----------- -----------
Cash flows from investing activities:
Purchases of available-for-sale securities (16,352,093) (5,299,734)
Proceeds from maturities of available-for-sale securities 17,300,000 10,500,000
Purchases of held-to-maturity securities (3,253,890) (510,810)
Proceeds from maturities of held-to-maturity securities 1,500,000 3,000,000
Proceeds from sales of other real estate owned 45,000 192,750
Capital expenditures (33,117)
Net (increase) decrease in loans 2,059,421 (2,258,782)
Recoveries of previously charged-off loans 26,397 41,460
----------- -----------
Net cash provided by investing activities 1,291,718 5,664,884
----------- -----------
Cash flows from financing activities:
Exercise of stock options 171,842
Dividends paid (537,720) (537,720)
Increase (decrease) in demand deposits, NOW and
savings accounts 7,667,832 (7,331,070)
Increase in time deposits 5,137 2,891
----------- -----------
Net cash provided by (used in) financing activities 7,307,091 (7,865,899)
----------- -----------
Net increase in cash and cash equivalents 9,849,926 70,860
Cash and cash equivalents at beginning of year 9,168,966 9,098,106
----------- -----------
Cash and cash equivalents at end of year $19,018,892 $ 9,168,966
=========== ===========
Supplemental disclosures:
Loans transferred to other real estate owned $ 180,000 $ 115,000
Interest paid 1,704,820 1,750,657
Income taxes paid 1,037,901 1,125,982
Disposal of fully depreciated fixed asset 11,687
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
BROADWAY CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1996 and 1995
NOTE 1 - NATURE OF OPERATIONS
Broadway Capital Corporation (Company) is a Massachusetts corporation that was
organized in 1982 primarily to become the holding company of Broadway National
Bank (Bank). The Bank is a federally chartered bank, which was incorporated
in 1910 and is headquartered in Chelsea, Massachusetts. The Bank operates its
business from two banking offices located in Massachusetts. The Bank is
engaged principally in the business of attracting deposits from the general
public and investing those deposits in residential real estate, consumer and
small business loans.
NOTE 2 - ACCOUNTING POLICIES
The accounting and reporting policies of the Company and its Subsidiary conform
to generally accepted accounting principles and predominant practices within
the banking industry. The consolidated financial statements of the Company
were prepared using the accrual basis of accounting. The significant
accounting policies of the Company and its subsidiary are summarized below to
assist the reader in better understanding the consolidated financial statements
and other data contained herein.
PERVASIVENESS OF 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 the
estimates.
BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, the Bank. All significant intercompany
accounts and transactions have been eliminated in the consolidation.
CASH AND CASH EQUIVALENTS:
For the purposes of reporting cash flows, cash and cash equivalents
include cash on hand, cash items, due from banks and federal funds sold.
SECURITIES:
Investments in debt securities are adjusted for amortization of premiums
and accretion of discounts computed on the straight-line method which has
substantially the same effect as using the interest method. Gains or
losses on sales of investment securities are computed on a specific
identification basis.
The Company classifies debt and equity securities into one of three
categories: held-to-maturity, available-for-sale or trading. This
security classification may be modified after acquisition only under
certain specified conditions. In general, securities may be classified as
held-to-maturity only if the Company has the positive intent and ability
to hold them to maturity. Trading securities are defined as those bought
and held principally for the purpose of selling them in the near term.
All other securities must be classified as available-for-sale.
8
<PAGE>
-- Held-to-maturity securities are measured at amortized cost in
the balance sheet. Unrealized holding gains and losses are
not included in earnings or in a separate component of capital.
They are merely disclosed in the notes to the consolidated
financial statements.
-- Available-for-sale securities are carried at fair value on the
balance sheet. Unrealized holding gains and losses are not
included in earnings but are reported as a net amount (less
expected tax) in a separate component of capital until
realized.
-- Trading securities are carried at fair value on the balance
sheet. Unrealized holding gains and losses for trading
securities are included in earnings.
LOANS:
Loans receivable that management has the intent and ability to hold for
the foreseeable future or until maturity or payoff are reported at their
outstanding principal balances reduced by amounts due to borrowers on
unadvanced loans, any charge-offs, the allowance for loan losses and any
deferred fees or costs on originated loans, or unamortized premiums or
discounts on purchased loans.
Interest on loans is generally recognized on a simple interest basis.
Cash receipts of interest income on impaired loans is credited to principal
to the extent necessary to eliminate doubt as to the collectibility of the
net carrying amount of the loan. Some or all of the cash receipts of
interest income on impaired loans is recognized as interest income if the
remaining net carrying amount of the loan is deemed to be fully
collectible. When recognition of interest income on an impaired loan on a
cash basis is appropriate, the amount of income that is recognized is
limited to that which would have been accrued on the net carrying amount of
the loan at the contractual interest rate. Any cash interest payments
received in excess of the limit and not applied to reduce the net carrying
amount of the loan are recorded as recoveries of charge-offs until the
charge-offs are fully recovered.
ALLOWANCE FOR POSSIBLE LOAN LOSSES:
An allowance is available for losses which may be incurred in the future
on loans in the current portfolio. The allowance is increased by
provisions charged to current operations and is decreased by loan losses,
net of recoveries. The provision for loan losses is based on management's
evaluation of current and anticipated economic conditions, changes in the
character and size of the loan portfolio and other indicators. The balance
in the allowance for possible loan losses is considered adequate by
management to absorb any reasonably foreseeable loan losses.
As of January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of
a Loan," as amended by SFAS No. 118. According to SFAS No. 114, a loan
is impaired when, based on current information and events, it is probable
that a creditor will be unable to collect all amounts due according to the
contractual terms of the loan agreement. The Statement requires that
impaired loans be measured on a loan by loan basis by either the present
value of expected future cash flows discounted at the loan's effective
interest rate, the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent.
The Statement is applicable to all loans, except large groups of smaller
balance homogeneous loans that are collectively evaluated for impairment,
loans that are measured at fair value or at the lower of cost or fair
value, leases, convertible or nonconvertible debentures, bonds and other
debt securities. The Company considers its residential real estate loans
and consumer loans that are not individually significant to be large groups
of smaller balance homogeneous loans.
9
<PAGE>
Factors considered by management in determining impairment include payment
status, net worth and collateral value. An insignificant payment delay or
an insignificant shortfall in payment does not in itself result in the
review of a loan for impairment. The Company applies SFAS No. 114 on a
loan-by-loan basis. The Company does not apply SFAS No. 114 to
aggregations of loans that have risk characteristics in common with other
impaired loans. Interest on a loan is not generally accrued when the loan
becomes ninety or more days overdue. The Company may place a loan on
nonaccrual status but not classify it as impaired, if (i) it is probable
that the Company will collect all amounts due in accordance with the
contractual terms of the loan or (ii) the loan is an individually
insignificant residential mortgage loan or consumer loan. Impaired loans
are charged-off when management believes that the collectibility of the
loan's principal is remote. Substantially all of the Company's loans that
have been identified as impaired have been measured by the fair value of
existing collateral.
The financial statement impact of adopting the provisions of this Statement
was not material.
PREMISES AND EQUIPMENT:
Premises and equipment are stated at cost, less accumulated depreciation
and amortization. Cost and related allowances for depreciation and
amortization of premises and equipment retired or otherwise disposed of
are removed from the respective accounts with any gain or loss included in
income or expense. Depreciation and amortization are calculated
principally on the straight-line method over the estimated useful lives of
the asset.
OTHER REAL ESTATE OWNED AND IN-SUBSTANCE FORECLOSURES:
Other real estate owned includes properties acquired through foreclosure
and properties classified as in-substance foreclosures in accordance with
Financial Accounting Standards Board Statement No. 15, "Accounting by
Debtors and Creditors for Troubled Debt Restructuring." These properties
are carried at the lower of cost or estimated fair value less estimated
costs to sell. Any write down from cost to estimated fair value required
at the time of foreclosure or classification as in-substance foreclosure
is charged to the allowance for possible loan losses. Expenses incurred
in connection with maintaining these assets, subsequent write downs and
gains or losses recognized upon sale are included in other expense.
Beginning in 1995, in accordance with Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan,"
the Company classifies loans as in-substance repossessed or foreclosed if
the Company receives physical possession of the debtor's assets regardless
of whether formal foreclosure proceedings take place.
EMPLOYEE BENEFITS:
The Bank has a 401(k) plan covering substantially all employees.
INCOME TAXES:
The Company recognizes income taxes under the asset and liability method.
Under this method, deferred tax assets and liabilities are established for
the temporary differences between the accounting basis and the tax basis of
the Company's assets and liabilities at enacted tax rates expected to be in
effect when the amounts related to such temporary differences are realized
or settled.
10
<PAGE>
FAIR VALUES OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires that the Company disclose
estimated fair value for its financial instruments. Fair value methods
and assumptions used by the Company in estimating its fair value
disclosures are as follows:
Cash and cash equivalents: The carrying amounts reported in the balance
sheet for cash and federal funds sold approximate those assets' fair
values.
Securities (including mortgage-backed securities): Fair values for
securities are based on quoted market prices, where available. If quoted
market prices are not available, fair values are based on quoted market
prices of comparable instruments.
Loans receivable: For variable-rate loans that reprice frequently and
with no significant change in credit risk, fair values are based on
carrying values. The fair values for other loans are estimated using
discounted cash flow analyses, using interest rates currently being offered
for loans with similar terms to borrowers of similar credit quality. The
carrying amount of accrued interest approximates its fair value.
Deposit liabilities: The fair values disclosed for demand deposits (e.g.,
interest and non-interest checking, passbook savings and money market
accounts) are, by definition, equal to the amount payable on demand at the
reporting date (i.e., their carrying amounts). Fair values for fixed-rate
certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly maturities on
time deposits.
Off-balance sheet instruments: The fair value of commitments to originate
loans is estimated using the fees currently charged to enter similar
agreements, taking into account the remaining terms of the agreements and
the present creditworthiness of the counterparties. For fixed-rate loan
commitments and the unadvanced portion of loans, fair value also considers
the difference between current levels of interest rates and the committed
rates. The fair value of letters of credit is based on fees currently
charged for similar agreements or on the estimated cost to terminate them
or otherwise settle the obligation with the counterparties at the reporting
date.
STOCK BASED COMPENSATION:
SFAS No. 123, "Accounting for Stock-Based Compensation," was issued in
October 1995 and introduces a fair value method of accounting for employee
stock options, restricted stock grants, stock appreciation rights or
similar equity instruments. In accordance with SFAS No. 123, entities can
recognize stock-based compensation expense in the basic financial
statements using either (i) the intrinsic value approach set forth in APB
Opinion No. 25 or (ii) the fair value method introduced in SFAS No. 123.
Entities electing to continue to follow the provisions of APB Opinion
No. 25 must make pro forma disclosure of net income and earnings per share,
as if the fair value method of accounting defined in SFAS No. 123 had been
applied. Management will continue to measure stock-based compensation
costs in accordance with APB Opinion No. 25 and has described the pro forma
disclosure effect of SFAS No. 123 for 1996.
11
<PAGE>
NOTE 3 - SECURITIES
Debt securities have been classified in the consolidated balance sheets
according to management's intent. The carrying amount of securities and their
approximate fair values are as follows as of December 31:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Cost Holding Holding Fair
Basis Gains Losses Value
----------- -------- -------- -----------
<S> <C> <C> <C> <C>
Available-for-sale securities:
December 31, 1996:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies $35,365,831 $102,636 $164,467 $35,304,000
=========== ======== ======== ===========
December 31, 1995:
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies $36,298,873 $291,526 $ 89,399 $36,501,000
=========== ======== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Cost Holding Holding Fair
Basis Gains Losses Value
----------- -------- -------- -----------
<S> <C> <C> <C> <C>
Held-to-maturity securities:
December 31, 1996:
Debt securities issued by foreign governments $ 300,000 $ $ $ 300,000
Corporate debt securities 4,248,761 6,078 9,529 4,245,310
----------- -------- ------- ----------
$ 4,548,761 $ 6,078 $ 9,529 $4,545,310
=========== ======== ======= ==========
December 31, 1995:
Debt securities issued by foreign governments $ 300,000 $ $ $ 300,000
Corporate debt securities 2,034,602 1,320 3,912 2,032,010
Other debt securities 502,828 748 503,576
----------- -------- ------- -----------
$ 2,837,430 $ 2,068 $ 3,912 $ 2,835,586
=========== ======== ======= ===========
</TABLE>
The scheduled maturities of held-to-maturity securities and available-for-sale
securities were as follows as of December 31, 1996:
<TABLE>
<CAPTION>
Held-to-maturity Available-for-sale
securities: securities:
----------------------------- --------------------------------
Amortized Amortized
Cost Fair Cost Fair
Basis Value Basis Value
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Due within one year $1,755,138 $1,753,625 $ 7,987,258 $ 7,990,250
Due after one year through five years 2,743,623 2,741,685 27,378,573 27,313,750
Due after five years through ten years 50,000 50,000
---------- ---------- ----------- -----------
$4,548,761 $4,545,310 $35,365,831 $35,304,000
========== ========== =========== ===========
</TABLE.
There were no sales of securities classified as held-to-maturity during 1996 or
1995.
There were no sales of securities classified as available-for-sale during 1996
or 1995.
12
<PAGE>
There were no securities of issuers whose aggregate carrying amount exceeded
10% of stockholders' equity as of December 31, 1996.
A total par value of $1,300,000 of debt securities was pledged to secure
treasury tax and loan and public funds on deposit as of December 31, 1996
and 1995.
NOTE 4 - LOANS
Loans consisted of the following as of December 31:
1996 1995
----------- -----------
Commercial, financial and agricultural $ 3,350,602 $ 3,471,521
Real estate - residential 51,335,120 52,580,929
Real estate - commercial 7,266,057 7,559,666
Consumer 4,464,187 5,138,908
Other 225,439 279,385
----------- -----------
66,641,405 69,030,409
Allowance for possible loan losses (619,848) (733,689)
Unearned income (297,607) (311,898)
----------- -----------
Net loans $65,723,950 $67,984,822
=========== ===========
Certain directors and executive officers of the Company and companies in which
they have significant ownership interest were customers of the Bank during 1996.
Total loans to such persons and their companies amounted to $286,286 as of
December 31, 1996. During the year ended December 31, 1996, $188,038 of
advances were made and repayments totaled $185,535.
Changes in the allowance for possible loan losses were as follows for the
years ended December 31:
1996 1995
-------- --------
Balance at beginning of period $733,689 $856,317
Provision for loan losses 9,345 9,864
Loans charged off (149,583) (173,952)
Recoveries of loans previously charged off 26,397 41,460
-------- --------
Balance at end of period $619,848 $733,689
======== ========
As of December 31, 1996, loans restructured in a troubled debt restructuring
before the January 1, 1995 effective date of SFAS No. 114 that are not impaired
based on the terms specified by the restructuring agreement totaled $218,761.
The gross interest income that would have been recorded in the year ended
December 31, 1996 if such restructured loans had been current in accordance
with their original terms was $35,226. The amount of interest income on such
restructured loans that was included in net income for the year ended
December 31, 1996 was $15,400.
13
<PAGE>
Information about loans that meet the definition of an impaired loan in
Statement of Financial Accounting Standards No. 114 is as follows as of
December 31:
</TABLE>
<TABLE>
<CAPTION>
1996 1995
--------------------------- ---------------------------
Recorded Related Recorded Related
Investment Allowance Investment Allowance
In Impaired For Credit In Impaired For Credit
Loans Losses Loans Losses
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Loans for which there is a related allowance for credit losses $ 0 $0 $ 0 $0
Loans for which there is no related allowance for credit losses 209,616 0 116,413 0
-------- -- -------- --
Totals $209,616 $0 $116,413 $0
======== == ======== ==
Average recorded investment in impaired loans during the
year ended December 31 $333,775 $111,179
======== ========
Related amount of interest income recognized during the time,
in the year ended December 31, that the loans were
impaired
Total recognized $ 0 $ 0
======== ========
Amount recognized using a cash-basis method of
accounting $ 0 $ 0
======== ========
</TABLE>
NOTE 5 - PREMISES AND EQUIPMENT
The following is a summary of premises and equipment as of December 31:
1996 1995
---------- ----------
Land $ 367,161 $ 367,161
Buildings 1,196,438 1,196,438
Furniture and equipment 714,534 740,421
---------- ----------
2,278,133 2,304,020
Accumulated depreciation and amortization (1,195,099) (1,105,983)
---------- ----------
$1,083,034 $1,198,037
========== ==========
NOTE 6 - INCOME TAXES
The components of income tax expense are as follows for the years ended
December 31:
1996 1995
Current: -------- ----------
Federal $590,925 $ 799,736
State 232,120 324,917
-------- ----------
823,045 1,124,653
-------- ----------
Deferred:
Federal (59,479) 6,957
State (46,304) 8,164
-------- ----------
(105,783) 15,121
-------- ----------
Total income tax expense $717,262 $1,139,774
======== ==========
14
<PAGE>
The reasons for the differences between the statutory federal income tax rates
and the effective tax rates are summarized as follows for the years ended
December 31:
1996 1995
------ ------
% of % of
Income Income
------ ------
Federal income tax at statutory rate 34.0% 34.0%
Increase (decrease) in tax resulting from:
Exercise of nonstatutory stock options (5.6)
Unallowable expenses 1.4 .1
State tax, net of federal tax benefit 6.1 8.1
------ ------
35.9% 42.2%
====== ======
The Company had gross deferred tax assets and gross deferred tax liabilities
as follows as of December 31:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $102,736 $146,525
Interest payable on nonperforming loans 20,265 12,559
Accrued deferred compensation 632,363 491,714
Net unrealized holding loss on available-for-sale securities 25,805
-------- --------
Gross deferred tax assets 781,169 650,798
-------- --------
Deferred tax liabilities:
Prepaid pension expense (27,613) (29,190)
Net unrealized holding gain on available-for-sale securities (84,905)
-------- --------
Gross deferred tax liabilities (27,613) (114,095)
-------- --------
Net deferred tax assets $753,556 $536,703
======== ========
</TABLE>
Deferred tax assets as of December 31, 1996 and 1995 have not been reduced by a
valuation allowance because management believes that it is more likely than not
that the full amount of deferred tax assets will be realized.
As of December 31, 1996, the Company had no operating loss and tax credit
carryovers for tax purposes.
NOTE 7 - STOCK COMPENSATION PLANS
As of December 31, 1996, the Company has two stock-based compensation plans,
which are described below. The Company applies APB Opinion 25 and related
Interpretations in accounting for its plans. Compensation cost has been
recognized for the compensation cost of stock appreciation rights. In
April 1996 the Company modified the terms of its stock compensation plans to
provide that the dates upon which options outstanding may be exercised are
extended. Compensation expense, as measured by APB Opinion 25, was immaterial
for the modification. Under SFAS No. 123 pro forma disclosure requirements, the
extensions constitute new grants measurable under SFAS No. 123 as of the date
of extension. Had compensation cost for the Company's plans been determined
based on the fair value at the grant dates for the extension under those plans
consistent with the method of FASB Statement 123, the Company's net income and
earnings per share for 1996 would have been reduced to the pro forma amounts
indicated below:
Net income As reported $1,278,249
Pro forma $1,156,371
Primary earnings per share As reported $24.33
Pro forma $23.60
Fully diluted earnings per share As reported $24.08
Pro forma $23.18
15
<PAGE>
The Company's stock-based compensation plans are the 1987 and 1989 Stock Option
and Stock Appreciation Rights Plans. They are incentive stock option plans.
Under the 1987 Plan, the Company may grant options to its key employees for up
to 8,760 shares of common stock. Under the 1989 Plan, the Company may grant
options to its key employees for up to 6,000 shares of common stock. Under
both plans, the exercise price of each option equals not less than the market
price of the Company's stock on the date of grant. Under both plans, for every
two stock options granted, one stock appreciation right is also granted.
At the annual meeting of the shareholders of the Company on April 10, 1996 the
shareholders amended the Company's 1987 and 1989 Stock Option and Stock
Appreciation Rights Plans to extend the dates upon which options may be
exercised from February 1997 to February 2007, for options issued pursuant to
the 1987 plan and to extend the dates upon which options may be exercised from
November 1999 until November 2009 for options issued pursuant to the 1989 Plan.
The fair value of each option extended in 1996 is estimated on the date of
extension using the Black-Scholes option-pricing model with the following
weighted-average assumptions: dividend yield of 3.20 percent; expected
volatility of 3 percent, risk-free interest rates of 5.28 percent; and expected
lives of 8 years.
A summary of the status of the Company's two fixed stock option plans as of
December 31, 1996 and 1995 and changes during the years ending on those dates
is presented below:
<TABLE>
<CAPTION>
1996 1995
-------------------------------- --------------------------------
Weighted-Average Weighted-Average
Fixed Options Shares Exercise Price Shares Exercise Price
------ ---------------- ------ ----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 14,760 $140.56 14,760 $140.56
Granted 0 0
Exercised (1,350) $127.29 0
Forfeited 0 0
------ ------
Outstanding at end of year 13,410 $141.89 14,760 $140.56
====== ======
Options exercisable at year-end 13,410 $141.89 14,760 $140.56
Weighted-average fair value of
options extended during the year $147.46 N/A
</TABLE>
The options exercisable at December 31, 1996 were exercised in February 1997 in
connection with the subsequent event merger described in Note 13.
The following table summarizes information about fixed stock options outstanding
as of December 31, 1996:
Options Outstanding and Exercisable
------------------------------------------------------
Weighted-Average
Number Remaining
Exercise Prices Outstanding Contractual Life
--------------- ----------- -------------------
$127.29 7,410 10 years, 2 months
$159.93 6,000 12 years, 11 months
------
13,410
======
Plan participants are deemed to have exercised one right for every two shares of
Company stock such participant purchases pursuant to an option. The value of
rights so deemed exercised is paid to the participant in cash when the options
are exercised. The stock appreciation rights granted are accounted for under
APB opinion 25. The compensation cost charged against income and credited to
accrued expenses for stock appreciation rights was $467,154 and $75,719 for
1996 and 1995, respectively. Compensation cost is measured as the amount by
which the market value of the Company's stock exceeds the option price.
Changes, either increases or decreases, in the market value of those shares
result in a change in the measure of compensation for the right.
16
<PAGE>
NOTE 8 - EMPLOYEE BENEFITS
The Company has a defined benefit pension plan covering substantially all of its
employees who meet certain eligibility requirements. Benefits are generally
based on years of credited service and annual salary. The Company's funding
policy is to contribute at least the minimum contribution required by ERISA.
The following table sets forth the funded status of the plan and amounts
recognized in the Company's balance sheet as of December 31:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation (including vested benefits of $2,289,888
and $2,195,851, respectively) $ 2,312,456 $ 2,214,875
=========== ===========
Projected benefit obligation for services rendered to date $(2,480,353) $(2,417,759)
Plan assets at fair value, invested primarily in common stocks and bonds 2,989,280 2,644,357
----------- -----------
Plan assets greater than projected benefit obligation 508,927 226,598
Unrecognized net gain from past experience different from that assumed
and effects of changes in assumptions (466,997) (184,364)
Unrecognized prior service cost (3,981) (4,338)
Unrecognized net obligation being amortized over 15.78 years since 1/1/88
transition date 24,574 28,198
----------- -----------
Prepaid pension included in other assets on the balance sheet $ 62,523 $ 66,094
=========== ===========
Net periodic pension cost included the following components for the years
ended December 31:
1996 1995
-------- --------
Service cost-benefits earned during the period $ 72,718 $ 62,926
Interest cost on projected benefit obligation 157,429 155,753
Actual return on plan assets (404,057) (186,169)
Net amortization and deferral 177,481 3,267
-------- --------
Net periodic pension cost $ 3,571 $ 35,777
======== ========
</TABLE>
The weighted-average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligation were 7.0% and 4.0%, respectively in 1996 and 7.0% and 5.0%,
respectively, in 1995. The expected long-term rate of return on assets was
9.0%.
Employees who have completed one full year of service and attained age 21 are
eligible for membership in the 401(k) plan during the first quarter after the
completion of such service and age requirements.
The provisions of the 401(k) plan allow eligible employees to contribute up to
10% of their annual salary with a matching contribution by the Bank equal to an
amount determined as of December 31 at the discretion of the Board of Directors.
The Bank's expense under this plan was $31,607 and $32,354 for 1996 and 1995,
respectively.
17
<PAGE>
NOTE 9 - COMMITMENTS AND CONTINGENT LIABILITIES
The Company is obligated under various lease agreements covering equipment.
These agreements are considered to be operating leases. The terms expire in
1997. The total minimum rental due in future periods under these existing
agreements is as follows as of December 31, 1996:
Total minimum lease payments $5,218
======
The total rental expense amounted to $34,816 for 1996 and $36,264 for 1995.
NOTE 10 - FINANCIAL INSTRUMENTS
The Company is party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to originate loans, standby
letters of credit and unadvanced funds on loans. The instruments involve, to
varying degrees, elements of credit risk in excess of the amount recognized in
the balance sheets. The contract amounts of those instruments reflect the
extent of involvement the Company has in particular classes of financial
instruments.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for loan commitments and standby letters
of credit is represented by the contractual amounts of those instruments. The
Company uses the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.
Commitments to originate loans are agreements to lend to a customer provided
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary by the Company upon extension of credit, is based on
management's credit evaluation of the borrower. Collateral held varies, but may
include secured interests in mortgages, accounts receivable, inventory,
property, plant and equipment and income-producing properties.
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance by a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. Of the total standby letters of
credit outstanding as of December 31, 1996, $386,093 is secured by deposit
accounts held by the Bank.
The provisions of Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments," as amended by SFAS
No. 119, became effective for the Company as of December 31, 1995.
The disclosures are the estimated fair values of the Company's financial
instruments, all of which are held or issued for purposes other than trading,
which are as follows as of December 31:
<TABLE>
<CAPTION>
1996 1995
------------------------- -------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 19,018,892 $19,018,892 $ 9,168,966 $ 9,168,966
Interest bearing time deposits
with other bank 100,000 100,000 100,000 100,000
Available-for-sale securities 35,304,000 35,304,000 36,501,000 36,501,000
Held-to-maturity securities 4,548,761 4,545,310 2,837,430 2,835,586
Federal Reserve Bank stock 69,000 69,000 69,000 69,000
Loans 65,723,950 65,609,000 67,984,822 68,295,430
Accrued interest receivable 900,167 900,167 893,204 893,204
Financial liabilities:
Deposits 110,720,507 110,720,507 103,047,538 103,047,538
</TABLE>
18
<PAGE>
The carrying amounts of financial instruments shown in the above table are
included in the consolidated balance sheets under the indicated captions.
Accounting policies related to financial instruments are described in Note 2.
Notional amounts of financial instrument liabilities with off-balance sheet
credit risk are as follows as of December 31:
1996 1995
----------- ------------
Commitments to originate loans $ 762,600 $ 1,406,630
Standby letters of credit 867,398 930,264
Unadvanced portions of consumer loans
(including credit card loans) 2,052,136 2,184,457
Unadvanced portions of home equity loans 6,205,462 6,625,089
Unadvanced portions of commercial lines
of credit 1,424,198 883,204
Unadvanced portions of construction loans 284,000
----------- -----------
$11,595,794 $12,029,644
=========== ===========
There is no material difference between the notional amounts and the estimated
fair values of the off-balance sheet liabilities.
The Company has no derivative financial instruments subject to the provisions
of SFAS No. 119, "Disclosure About Derivative Financial Instruments and Fair
Value of Financial Instruments."
NOTE 11 - SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
Most of the Bank's business activity is with customers located within the state.
There are no concentrations of credit to borrowers that have similar economic
characteristics. The majority of the Bank's loan portfolio is comprised of
loans collateralized by real estate located in the state of Massachusetts.
NOTE 12 - REGULATORY MATTERS
The Bank, as a National Bank is subject to the dividend restrictions set forth
by the Comptroller of the Currency. Under such restrictions, the Bank may not,
without the prior approval of the Comptroller of the Currency, declare dividends
in excess of the sum of the current year's earnings (as defined) plus the
retained earnings (as defined) from the prior two years. The dividends, as of
December 31, 1996, that the Bank could declare, without the approval of the
Comptroller of the Currency, amounted to approximately $3,286,461.
The Company and its subsidiary the Bank are 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 and the Bank's financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Company and the Bank must meet specific capital
guidelines that involve quantitative measures of their assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. Their capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of
December 31, 1996, that the Company and the Bank meet all capital adequacy
requirements to which they are subject.
As of December 31, 1996, the most recent notification from the Office of the
Comptroller of the Currency categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain minimum total risk-based, Tier I risk-based
and Tier I leverage ratios as set forth in the table. There are no conditions
or events since that notification that management believes have changed the
institution's category.
19
<PAGE>
<TABLE>
<CAPTION>
The Company's and the Bank's actual capital amounts and ratios are also
presented in the table.
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
---------------- ------------------ ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital (to Risk Weighted Assets):
Consolidated $16,313 29.35% $4,447 >8% N/A
Broadway National Bank 17,123 31.16 4,396 >8 $5,494 >10%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated 15,693 28.23 2,223 >4 N/A
Broadway National Bank 16,503 30.04 2,198 >4 3,297 >6
Tier 1 Capital (to Average Assets):
Consolidated 15,693 12.77 4,915 >4 N/A
Broadway National Bank 16,503 13.49 4,892 >4 6,115 >5
As of December 31, 1995:
Total Capital (to Risk Weighted Assets):
Consolidated 15,514 25.22 4,920 >8 N/A
Broadway National Bank 16,233 26.61 4,880 >8 6,100 >10
Tier 1 Capital (to Risk Weighted Assets):
Consolidated 14,780 24.03 2,460 >4 N/A
Broadway National Bank 15,499 25.41 2,440 >4 3,660 >6
Tier 1 Capital (to Average Assets):
Consolidated 14,780 12.24 4,830 >4 N/A
Broadway National Bank 15,499 12.88 4,812 >4 6,015 >5
</TABLE>
NOTE 13 - SUBSEQUENT EVENT, MERGER
On September 20, 1996, the Bank entered into an agreement and Plan of Merger
with BostonFed Bancorp, Inc. This agreement was voted upon and approved by the
shareholders of Broadway Capital Corporation on December 30, 1996. Pursuant to
the merger agreement BostonFed Bancorp, Inc. acquired all of the outstanding
shares of Broadway Capital Corporation on February 8, 1997.
NOTE 14 - RECLASSIFICATION
Certain amounts in the prior year have been reclassified to be consistent with
the current year's statement presentation.
20
<PAGE>
<TABLE>
<CAPTION>
BOSTONFED BANCORP,INC.
CONSOLIDATED PRO FORMA BALANCE SHEET
DECEMBER 31,1996
Broadway
BostonFed Capital Pro Forma
Bancorp, Inc. Corporation Adjustments Combined
------------- ----------- ----------- ---------
(In Thousands)
(Unaudited)
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 18,278 $ 19,019 $ (8,097) F1 $ 29,200
Investment securities available for sale 1,085 35,304 36,389
Investment securities held to maturity 19,170 4,649 23,819
Mortgage-backed securities available for sale 23,593 0 23,593
Mortgage-backed securities held to maturity 43,019 0 43,019
Mortgage loans held for sale 3,970 0 3,970
Loans, net of allowance for loan losses 676,670 65,724 742,394
Accrued interest receivable 4,067 900 4,967
Stock in FHLB of Boston/Federal Reserve Bank 16,295 69 16,364
Premises and equipment 4,979 1,083 900 F2 6,962
Real estate held for sale or development 874 0 874
Real estate owned 2,668 180 2,848
Goodwill 0 0 3,038 F3 3,038
Other assets 5,899 1,084 1,148 F4 8,131
----------- ---------- ---------- ---------
Total assets $ 820,567 $ 128,012 $ (3,011) $ 945,568
=========== ========== ========== =========
Liabilities and Stockholders' Equity
Liabilities:
Deposit accounts $ 428,818 $ 110,721 $ $ 539,539
Federal Home Loan Bank advances 296,500 0 296,500
Other borrowed money 3,500 0 12,000 F1 15,500
Accrued expenses and other liabilities 5,394 1,635 645 F5 7,674
----------- ---------- ---------- ---------
Total liabilities 734,212 112,356 12,645 859,213
----------- ---------- ---------- ---------
Stockholders' equity;
Common stock and additional paid- in- capital 64,527 2,472 (2,472) F6 64,527
Retained earnings 32,809 15,118 (15,118) F6 32,809
----------- ---------- ---------- ---------
Net stockholders' equity 97,336 17,590 (17,590) 97,336
Less unallocated ESOP shares (3,929) 0 (3,929)
Less unearned 1996 Stock-Based Incentive Plan (2,313) 0 (2,313)
Less Treasury Stock (4,739) (1,934) 1,934 F6 (4,739)
----------- ---------- ---------- ---------
Total stockholders' equity 86,355 15,656 (15,656) 86,355
----------- ---------- ---------- ---------
Total liabilities and stockholders' equity $ 820,567 $ 128,012 $ (3,011) $ 945,568
=========== ========== ========== =========
</TABLE>
See accompanying notes to unaudited consolidated Pro Forma Financial Statements.
21
<PAGE>
<TABLE>
<CAPTION>
BOSTONFED BANCORP,INC.
CONSOLIDATED PRO FORMA STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31,1996
Broadway
BostonFed Capital Pro Forma
Bancorp,Inc. Corporation Adjustments Combined
------------ ----------- ----------- ---------
(In Thousands)
(Unaudited)
<S> <C> <C> <C> <C>
Interest income:
Loans $ 45,513 $ 5,600 $ $ 51,113
Mortgage-backed securities 4,998 0 4,998
Investment securities 2,167 2,709 4,876
----------- ---------- ---------
Total interest income 52,678 8,309 60,987
----------- ---------- ---------
Interest expense:
Deposit accounts 15,698 1,752 17,450
Borrowed funds 13,193 0 13,193
----------- ---------- ---------
Total interest expense 28,891 1,752 30,643
----------- ---------- ---------
Net interest income 23,787 6,557 30,344
Provision for loan losses 1,294 9 1,303
----------- ---------- ---------
Net interest income after provision 22,493 6,548 29,041
Non-interest income:
Loan processing and servicing fees 1,330 19 1,349
Gain on sale of loans 668 0 668
Other 1,569 754 2,323
----------- ---------- ---------
Total non-interest income 3,567 773 4,340
----------- ---------- ---------
Non-interest expense:
Compensation and benefits 9,841 3,510 (613) F1 12,738
Occupancy and equipment 2,479 426 24 F2 2,929
Federal deposit insurance premiums 916 2 918
SAIF Special Assessment 2,670 0 2,670
Real estate operations 561 15 576
Amortization of goodwill 0 0 203 F3 203
Other 4,573 1,373 (102) F4 5,844
----------- ---------- ---------- ---------
Total non-interest expense 21,040 5,326 (488) 25,878
----------- ---------- ---------- ---------
Income before income taxes 5,020 1,995 488 7,503
Income tax expense 2,083 717 241 F5 3,041
----------- ---------- ---------- ---------
Net income $ 2,937 $ 1,278 $ 247 $ 4,462
=========== ========== ========== =========
Earnings per share, F6 $0.48 $24.33 $0.04 $0.73
</TABLE>
See accompanying notes to unaudited consolidated Pro Forma Financial Statements.
22
<PAGE>
Notes to Unaudited Consolidated Pro-Forma Financial Statements
Unaudited Consolidated Pro-Forma Balance Sheet:
F1 To record purchase price of $22 million, of which $10 million was
funded by cash and cash equivalents and $12 million was funded by
securities sold under agreements to repurchase. Approximately $1.9
million of proceeds from the exercise of stock options offset the
decrease in cash equivalents.
F2 To record difference between book value and fair value of buildings.
F3 To record the excess of purchase price over the fair value of net assets
acquired after reflecting adjustments described in F1, F2 and F4
through F6.
F4 To record income tax benefit receivable regarding deduction for exercise
of stock options and stock appreciation rights.
F5 To record $370,000 deferred taxes applicable to F2 and $275,000 of
acquisition costs.
F6 To eliminate Broadway Capital Corporation's equity.
Unaudited Consolidated Pro-Forma Statements of Income:
F1 To record a reduction in compensation expense related to the payment of
a lump sum benefit regarding an employment agreement with an
executive officer and the exercise of stock appreciation rights as a
result of the acquisition.
F2 To record amortization of adjustment to fair value of buildings over a 39
year period.
F3 To record amortization of goodwill over a fifteen year period.
F4 To eliminate acquisition related expenses.
F5 To record income tax expense on Items F1 and F2.
F6 The pro-forma per share data gives effect to the Acquisition but does
not reflect anticipated expenses and non recurring charges which may
result from the transaction. The pro-forma information presented does
not reflect anticipated Acquisition and integration costs, nor does it
reflect potential savings or revenue enhancements which may result
from the Acquisition. BostonFed Bancorp, Inc. dividends per share
represent historical dividends per share.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
By: /s/ John A. Simas
-------------------------------
John A. Simas
Senior Vice-President and Chief
Financial Officer
Dated: April 18, 1997
24
<PAGE>
EXHIBIT INDEX
Exhibit Number Exhibit Name Page
23 Consent of Experts and Counsel 26
25
<PAGE>
SHATSWELL, MacLEOD & COMPANY, P.C.
certified public accountants
83 Pine Street
West Peabody, Massachusetts 01960-3635
(508) 535-0208
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
BostonFed Bancorp, Inc.
We consent to the inclusion of our report dated January 7, 1997, except for
Notes 7 and 13, as to which the dates are February 8, 1997, with respect to the
consolidated balance sheets of Broadway Capital Corporation and Subsidiary as
of December 31, 1996 and 1995, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the years then ended,
which report appears in the Form 8-K of BostonFed Bancorp, Inc. dated
April 18, 1997.
/s/ Shatswell, MacLeod & Company, P.C.
SHATSWELL, MacLEOD & COMPANY, P.C.
West Peabody, Massachusetts
April 17, 1997
26
