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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(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, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
Commission file number 0-14403
BRUNSWICK BANCORP
-----------------
(Exact name of Registrant as specified in its Charter)
NEW JERSEY 22-2610694
---------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
439 LIVINGSTON AVENUE
NEW BRUNSWICK, NJ 08901
----------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (732) 247-5800
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, no 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]
Indicate by check mark if whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). yes [ ] no [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, as of February 8, 2005 was $31,950,568.
The number of shares of Registrant's Common Stock, no par value, outstanding as
of February 8, 2005 was 2,173,508.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Part III of this report (Items 10, 11, 12, 13
and 14) is incorporated by reference from the registrant's proxy statement to be
filed pursuant to Regulation 14A with respect to the registrant's 2005 annual
meeting of stockholders.
BRUNSWICK BANCORP
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
PART I
Item 1. Business 1
Item 2. Properties 6
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders
Executive Officers of the Registrant 7
PART II
Item 5. Market for Registrant's Common
Equity and Related Stockholder Matters 7
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-21
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 21
Item 8. Financial Statements and Supplementary Data 21
Item 9. Change in and Disagreements with Accountants
on Accounting and Financial Disclosure 21
Item 9A. Controls and Procedures 21
PART III
Item 10. Directors and Executive Officers of the Registrant 22
Item 11. Executive Compensation 23
Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters 23
Item 13. Certain Relationships and Related Transactions 23
Item 14. Principal Accountant Fees & Services 23
PART IV
Item 15. Exhibits, Financial Statements, Schedules and Reports
on Form 8-K 24
Signatures 25
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 in 2002 created a wholly owned subsidiary to manage the Bank's
investment portfolio. BTB Investment Corp. Inc. now manages the Bank's
investments.
The Bank maintains its head office and 6 branches in Monmouth and Middlesex
Counties, New Jersey.
Regulatory Matters
There are a variety of statutory and regulatory restrictions governing BB, the
Bank, and the relations between 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.
Federal Deposit Insurance - The FDIC is an independent federal agency that
insures the deposits, up to prescribed statutory limits, of federally insured
banks and savings institutions and safeguards the safety and soundness of the
banking and savings industries. Two separate insurance funds, the Bank Insurance
Fund ("BIF") for commercial banks, state savings banks and some federal savings
banks, and the SAIF for savings associations, are maintained and administered by
the FDIC. The Bank is a member of the BIF and its deposit accounts are insured
by the FDIC, up to the prescribed limits. The FDIC has examination authority
over all insured depository institutions, including the Bank, and has, under
certain circumstances, authority to initiate enforcement actions against
federally insured savings institutions to safeguard safety and soundness and the
deposit insurance fund.
Assessments - For the deposit insurance coverage provided by the FDIC, the Bank
pays assessments to the FDIC under a risk-based assessment system that takes
into account its capital and supervisory considerations. The FDIC sets
assessments for deposits insured by the SAIF or the BIF to maintain the targeted
designated reserve ratio in that fund. In addition, the FDIC is authorized to
levy emergency special assessments on BIF and SAIF members. The FDIC set the
annual deposit insurance assessment rates for BIF-member institutions for 2004
at 0% of insured deposits for well-capitalized institutions with the highest
supervisory ratings to .27% of insured deposits for institutions in the worst
risk assessment classification.
In addition, all FDIC-insured institutions are required to pay assessments to
the FDIC to fund interest payments on bonds issued by the Financing Corporation
("FICO"), an agency of the federal government established to re-capitalize the
predecessor to the SAIF. The FICO assessment rates, which are determined
quarterly, averaged .0165% of insured deposits in 2004. These assessments will
continue until the FICO bonds mature in 2017.
1
The USA Patriot Act - In response to the events of September 11, 2001, the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, or the USA Patriot Act, was signed
into law on October 26, 2001. The USA Patriot Act gives the federal government
new powers to address terrorist threats through enhanced domestic security
measures, expanded surveillance powers, increased information sharing and
broadened anti-money laundering requirements. By way of amendments to the Bank
Secrecy Act, Title III of the USA Patriot Act takes measures intended to
encourage information sharing among bank regulatory agencies and law enforcement
bodies. Further, certain provisions of Title III impose affirmative obligations
on a broad range of financial institutions, including banks, thrifts, brokers,
dealers, credit unions, money transfer agents and parties registered under the
Commodity Exchange Act.
Among other requirements, Title III of the USA Patriot Act imposes the following
requirements with respect to financial institutions:
Pursuant to Section 352, all financial institutions must establish
anti-money laundering programs that include, at minimum: (i) internal
policies, procedures, and controls; (ii) specific designation of an
anti-money laundering compliance officer; (iii) ongoing employee training
programs; and (iv) an independent audit function to test the anti-money
laundering program.
Section 326 authorizes the Secretary of the Department of Treasury, in
conjunction with other bank regulators, to issue regulations by October
26, 2002 that provide for minimum standards with respect to customer
identification at the time new accounts are opened.
Section 312 requires financial institutions that establish, maintain,
administer, or manage private banking accounts or correspondence accounts
in the United States for non-United States persons or their
representatives (including foreign individuals visiting the United States)
to establish appropriate, specific, and, where necessary, enhanced due
diligence policies, procedures, and controls designed to detect and report
money laundering.
Effective December 25, 2001, financial institutions are prohibited from
establishing, maintaining, administering or managing correspondent
accounts for foreign shell banks (foreign banks that do not have a
physical presence in any country), and will be subject to certain record
keeping obligations with respect to correspondent accounts of foreign
banks.
Bank regulators are directed to consider a holding company's effectiveness
in combating money laundering when ruling on Federal Reserve Act and Bank
Merger Act applications.
The federal banking agencies have begun to propose and implement regulations
pursuant to the USA Patriot Act. These regulations may increase the Company's
compliance costs.
Sarbanes-Oxley Act of 2002 - On July 30, 2002, the President signed into law the
Sarbanes-Oxley Act of 2002 (the "Act"), which implemented legislative reforms
intended to address corporate and accounting fraud. In addition to the
establishment of a new accounting oversight board that will enforce auditing,
quality control and independence standards and will be funded by fees from all
publicly traded companies, the Act places certain restrictions on the scope of
services that may be provided by accounting firms to their public company audit
clients. Any non-audit services being provided to a public company audit client
will require preapproval by the company's audit committee. In addition, the Act
makes certain changes to the requirements for partner rotation after a period of
time. The Act requires chief executive officers and chief financial officers, or
their equivalent, to certify to the accuracy of periodic reports filed with the
Securities and Exchange Commission, subject to civil and criminal penalties if
they knowingly or willingly violate this certification requirement. In addition,
under the Act, counsel will be required to report evidence of a material
violation of the securities laws or a breach of fiduciary duty by a company to
its chief executive officer or its chief legal officer, and, if such officer
does not appropriately respond, to report such evidence to the audit committee
or other similar committee of the board of directors or the board itself.
2
Under the Act, longer prison terms will apply to corporate executives who
violate federal securities laws; the period during which certain types of suits
can be brought against a company or its officers is extended; and bonuses issued
to top executives prior to restatement of a company's financial statements are
now subject to disgorgement if such restatement was due to corporate misconduct.
Executives are also prohibited from insider trading during retirement plan
"blackout" periods, and loans to company executives (other than loans by
financial institutions permitted by federal rules and regulations) are
restricted. In addition, a provision directs that civil penalties levied by the
Securities and Exchange Commission as a result of any judicial or administrative
action under the Act be deposited to a fund for the benefit of harmed investors.
The Federal Accounts for Investor Restitution provision also requires the
Securities and Exchange Commission to develop methods of improving collection
rates. The legislation accelerates the time frame for disclosures by public
companies, as they must immediately disclose any material changes in their
financial condition or operations. Directors and executive officers must also
provide information for most changes in ownership in a company's securities
within two business days of the change.
The Act also increases the oversight of, and codifies certain requirements
relating to audit committees of public companies and how they interact with the
company's "registered public accounting firm." Audit Committee members must be
independent and are absolutely barred from accepting consulting, advisory or
other compensatory fees from the issuer. In addition, companies must disclose
whether at least one member of the committee is a "financial expert" (as such
term will be defined by the Securities and Exchange Commission) and if not, why
not. Under the Act, a company's registered public accounting firm will be
prohibited from performing statutorily mandated audit services for a company if
such company's chief executive officer, chief financial officer, comptroller,
chief accounting officer or any person serving in equivalent positions had been
employed by such firm and participated in the audit of such company during the
one-year period preceding the audit initiation date. The Act also prohibits any
officer or director of a company or any other person acting under their
direction from taking any action to fraudulently influence, coerce, manipulate
or mislead any independent accountant engaged in the audit of the company's
financial statements for the purpose of rendering the financial statements
materially misleading. The Act also requires the Securities and Exchange
Commission to prescribe rules requiring inclusion of any internal control report
and assessment by management in the annual report to shareholders. The Act
requires the company's registered public accounting firm that issues the audit
report to attest to and report on management's assessment of the company's
internal controls.
We have and anticipate that we will continue to incur additional expense in
complying with the provisions of the Sarbanes-Oxley Act and the resulting
regulations.
CAPITAL REQUIREMENTS
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 level of risk associated with each category then weights the total dollar
value of each category. A minimum total qualifying capital to risk-based assets
ratio (Total Capital ratio) of 8 % is required. At least 4% of an institution's
qualifying capital must consist of Tier 1 capital, and the rest may consist of
Tier 2 capital. Tier 1 capital consists primarily of common stockholders' equity
and certain qualifying hybrid instruments minus goodwill.
Tier 2 capital consists of an institution's allowance for possible loan losses,
subject to limitation, hybrid capital instruments and certain subordinated debt.
The allowance for possible loan losses, which may be considered Tier 2 capital,
is limited to 1.25% of risk-based assets. As of December 31, 2004, the Company's
Total risk weighted capital ratio was 42.14% and its Tier one risk weighted
capital ratio was 41.11%. Such ratios exceed the current regulatory
requirements.
3
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,
or those experiencing significant growth, must maintain a ratio of 100-200 basis
points above the 3% minimum. As of December 31, 2004, the consolidated Company
had a leverage capital ratio of 24.47%.
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, 2004. As of December 31, 2004, the Bank had
a risk weighted capital ratio of 42.14% and a leverage capital ratio of 24.47%.
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 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 lest 4.6 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 I 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 is 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.
HOLDING COMPANY SUPERVISION
Generally, the Bank Holding Company Act (BHCA) 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 of
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 securities brokerage services. BB is not currently
conducting these activities.
Under the Bank Holding Company Act, BB may not acquire directly or indirectly
more than 5 percent of the voting shares of, or substantially all of the assets
of, any bank without the prior approval of the Federal Reserve Board.
Satisfactory capital ratios and Community Reinvestment Act ratings are generally
prerequisites to obtaining federal regulatory approval to make acquisitions.
4
In addition, the BHCA was amended through the Gramm-Leach-Bliley Financial
Modernization Act of 1999 (the "GLBA"). Under the terms of the GLBA, bank
holding companies whose subsidiary banks meet certain capital, management and
Community Reinvestment Act standards and which elect to be classified as
"financial holding companies" are permitted to engage in a substantially broader
range of non-banking activities than is permissible for bank holding companies
under the BHCA. These activities include certain insurance, securities and
merchant banking activities. In addition, the GLBA amendments to the BHCA remove
the requirement for advance regulatory approval for a variety of activities and
acquisitions by financial holding companies. As our business is currently
limited to activities permissible for a bank, we have not elected to become a
financial holding company.
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.
(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, a corporation that holds one of the Bank's parking lots as a rental
property. As a secondary function, BB purchases loan participations. The Federal
Reserve Bank of New York approved this activity.
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 6 branch offices in Monmouth and Middlesex
Counties.
At December 31, 2004, BB and its subsidiary Bank had deposits of $98,476,920,
total loans of $65,675,788 and total assets of $131,749,454. 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, residential and commercial real
estate loans and internet banking. The Bank also provides trust services. BB and
its subsidiary Bank had the equivalent of 51 full-time employees as of December
31, 2004.
The primary emphasis of the Company's lending activities is in the commercial
lending area. As of December 31, 2004, 67.30% of the loan portfolio is in
commercial loans, 3.88% in construction first mortgage loans, 12.22% in
commercial first mortgage loans, 15.31% in residential loans, and 1.29% in
installment loans. The composition of the loan portfolio represents a shift from
the year 2003. During 2004 a substantial portion of new commercial loans were
made, there was an increase in construction first mortgage loans and a
substantial increase in residential real estate loans. There was a reduction in
commercial real estate loans. 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 real
estate market fluctuations. As the Company lends in a relatively compact
geographical area, management is better able to measure the risk of real estate
market deterioration and risk of asset deterioration than it would be if it had
to assess real estate conditions in numerous, disparate geographical areas.
However, the concentration of the Company's real estate collateral in a compact
geographical area can subject the Company to greater fluctuations in
delinquencies if local market conditions vary from those in a broader area. Due
to the uncertainty in both the local and state real estate markets, the Company
maintains liquid investments in Federal funds sold with short-term maturity
dates.
5
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, finance companies, credit
unions and other financial institutions. While many of the Bank's competitors
are larger and have greater financial resources, 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.
ITEM 2. PROPERTIES
The Bank currently operates from its main office and six branch offices. The
Bank leases the main office and one branch. The Bank owns four of the branch
offices.
The following is a list of offices the Bank owns:
Approximate
Branch Address Square Feet
------ ------- -----------
George Street 352 George Street
New Brunswick, NJ 08901 4,700
South Brunswick- Monmouth Junction Road
Monmouth Junction and Kingston Lane
Monmouth Jct., NJ 08852 2,000
Freehold 444 West Main Street
Freehold, NJ 07728 2,000
The following is a list of offices, which the Bank leases:
Expiration
Branch Address Square Feet Date of Lease
------ ------- ----------- -------------
Main Office 439 Livingston Avenue 8,400 and
New Brunswick, NJ 08901 4,000 (basement) December 2010
Edison Plainfield Avenue and
Metroplex Drive
Edison, NJ 08817 3,400 February 2024
North Brunswick 1060 Aaron Road 3,000 April 2021
North Brunswick, NJ 08902
Monroe Township 249 Applegarth Road 3,400 June 2024
Monroe Township, NJ 08831
6
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 2004.
PART II
ITEM 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
BB had 277 shareholders of record as of December 31, 2004.
Brunswick Bancorp is listed on the American Stock Exchange under the symbol
"BRB". The quarterly information represents the high and low sales price as it
is reported by the exchange.
2004 2003
---------------- ----------------
High Low High Low
----- ----- ----- -----
1st Quarter 17.95 16.05 12.25 11.75
2nd Quarter 17.30 15.25 16.75 11.40
3rd Quarter 15.90 14.10 16.50 14.50
4th Quarter 15.00 14.00 17.10 15.50
The Company has not historically paid cash dividends. Since the Bank is the
Company's only substantial asset and source of income, the Company would be
dependent upon dividends from the Bank to pay dividends to its shareholders.
Payment of dividends by Brunswick Bank and Trust Company to BB are 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, 2004, approximately $13.6 million is currently available,
without restriction, for the Bank to pay the Registrant in dividends. The
Registrant issued a 20% stock dividend in 1999 and a 10% stock dividend in 2002.
The Board of Directors will review its dividend policy on an ongoing basis.
STOCK SPLIT
The Board of Directors declared a Two Shares for One Share stock split payable
on January 14, 2001 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.
7
In November 2004, the Company's Board of Directors approved a stock repurchase
program whereby up to $5,000,000 of common stock may be purchased from time
to time at the discretion of management. The following table provides
information on stock repurchases during the fourth quarter of 2004:
ISSUER PURCHASES OF EQUITY SECURITIES
(d) MAXIMUM
(c) TOTAL NUMBER (OR
NUMBER OF APPROXIMATE
(a)TOTAL SHARES (OR UNITS) DOLLAR VALUE) OF
NUMBER OF (b)AVERAGE PURCHASED AS SHARES (OR UNITS)
SHARES (OR PRICE PAID PART OF PUBLICLY THAT MAY YET BE
UNITS) PER SHARE ANNOUNCED PLAN PURCHASED UNDER
PERIOD PURCHASED (OR UNIT) OR PROGRAMS THE PLANS OR PROGRAM
- -------------- ---------- ---------- ----------------- --------------------
October, 2004 0 - - $5,000,000
November, 2004 0 - - $5,000,000
December, 2004 11,239 $ 13.00 11,239 $4,853,893
------ ---------- ------ ----------
Total 11,239 $ 13.00 11,239 $4,853,893
------ ---------- ------ ----------
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected consolidated financial data
concerning BB:
Year Ended December 31
------------------------------------------------------------------
(Dollars in Thousands Except Per Share Data)
------------------------------------------------------------------
2004 2003 2002 2001 2000
----------- ----------- ----------- ----------- ----------
Interest income $ 6,469 $ 6,711 $ 7,566 $ 8,198 $ 8,455
Interest expense 320 499 720 1,467 2,006
Net interest income 6,149 6,212 6,846 6,731 6,449
Provision for credit losses/
(recoveries on non-performing
assets) (93) (207) (212) (124) 258
Net interest income after
provision for credit losses/
(recoveries on non-performing
assets) 6,242 6,149 7,058 6,855 6,191
Non-interest income 901 953 968 946 1,087
Other expenses 4,653 4,526 4,747 4,802 4,425
Income before income taxes 2,490 2,846 3,278 2,999 2,853
Income tax expense 985 1,007 1,334 1,174 1,226
Net income 1,505 1,839 1,944 1,825 1,627
Net income per share .70 .91 .96 .91 .84
Diluted earnings per share .68 .88 .95 .90 .83
Cash dividends per share 0 0 0 0 0
Weighted average number
of shares outstanding-basic 2,162,200 2,021,597 2,019,256 2,009,572 1,925,543
-diluted 2,203,554 2,087,837 2,045,624 2,038,991 1,951,386
8
Summary Consolidated Balance Sheets
------------------------------------------------
(Dollars in Thousands Except Per Share Data)
------------------------------------------------
2004 2003 2002 2001 2000
-------- -------- -------- -------- --------
Total assets $131,749 $120,769 $122,707 $109,004 $118,499
Deposits 98,477 89,414 93,321 81,628 93,411
Other liabilities 454 872 1,097 1,130 762
Stockholders' equity 32,818 30,483 28,289 26,246 24,326
Total shareholder's equity
per outstanding share $ 15.02 $ 14.44 $ 13.50 $ 13.78 $ 13.05
======== ======== ======== ======== ========
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, 2004, 2003 and 2002.
The information presented below should be read in conjunction with the Company's
consolidated financial statements and accompanying notes appearing elsewhere in
this report.
FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-K are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of
the Securities Act of 1933, and Section 21E of the Securities Exchange Act of
1934. The words "estimate," "plan," "intend," "expect," "anticipate," "believe"
and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are found at various places throughout this
report and in the documents incorporated herein by reference. Brunswick Bancorp
disclaims any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Although we believe that our expectations are based on reasonable assumptions,
we can give no assurance that our goals will be achieved, and these statements
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those projected. Those risks and uncertainties include
changes in interest rates, the ability to control costs and expenses and general
economic conditions nationally and in our trade area, as well as the continuing
credit worthiness of our customers and the strength of the real estate market in
our primary trade area.
CRITICAL ACCOUNTING MATTERS
Note 1 to the Company's consolidated financial statements lists significant
accounting policies used in the development and presentation of its financial
statements. This discussion and analysis, the significant accounting policies,
and other financial statement disclosures identify and address key variables and
other qualitative and quantitative factors that are necessary for an
understanding and evaluation of the Company and its results of operation.
The provision for loan losses charged to operating expense reflects the amount
deemed appropriate by management to provide for known and inherent losses in the
existing loan portfolio. Management's judgment is based on the evaluation of
individual loans, past experience, the assessment of current economic conditions
and other relevant factors. Loan losses are charged directly against the
allowance for loan losses and recoveries on previously charged-off loans are
added to the allowance. Management uses significant estimates to determine the
allowance for loan losses.
9
Consideration is given to a variety of factors in establishing these estimates
including current economic conditions, diversification of the loan portfolio,
delinquency statistics, borrowers' perceived financial and managerial strengths,
the adequacy of underlying collateral, if collateral dependent, or present value
of future cash flows and other relevant factors. Since the sufficiency of the
allowance for loan losses is dependent, to a great extent on conditions that may
be beyond our control, it is possible that management's estimates of the
allowance for loan losses and actual results could differ in the near term. In
addition, regulatory authorities, as an integral part of their examination,
periodically review the allowance for loan losses. They may require additions to
the allowance based upon their judgments about information available to them at
the time of examination. Future increases to our allowance for loan losses,
whether due to unexpected changes in economic conditions or otherwise, would
adversely affect our future results of operation.
OVERVIEW
Our results of operations are primarily dependent on our net interest income.
Net interest income is a function of the balances of loans and investments
outstanding in any one period, the yields earned on those loans and investments
and the interest paid on deposits and borrowed funds that were outstanding in
the same period. To a lesser extent, the relative levels of our non-interest
income and operating expenses also affect our results of operations.
Our non-interest income consists primarily of fees and service charges. The
operating expenses consist primarily of employee compensation and benefits,
occupancy and equipment expenses, data processing costs, marketing costs,
professional fees, office supplies, and telephone. Our results of operations are
significantly impacted by the amount of provisions for loan losses which in
turn, are dependent upon, among other things, the size and makeup of the loan
portfolio, loan quality and loan trends. Our results of operations are affected
by general economic, regulatory and competitive conditions, including changes in
prevailing interest rates and the policies of regulatory agencies.
BUSINESS STRATEGY
Our business strategy has been to operate as a well-capitalized, traditional
independent community bank, dedicated to providing convenient access and quality
service at competitive prices. Generally, we have sought to implement this
strategy by maintaining a substantial part of our assets in loans secured by
commercial real estate or residential real estate located in our market area. To
the extent that new deposits have exceeded loan originations, we have invested
these deposits primarily in investment securities and cash and cash equivalents.
We intend to continue to emphasize a variety of deposit and loan products, with
the latter consisting primarily of commercial loans, non-residential mortgages,
residential mortgages, home equity loans and consumer loans. We intend to grow
our branch office network, which will expand our geographic reach and will
consider the acquisition of other financial institutions. We do not however,
have any current understandings, agreements or arrangements for expansion of our
business, other than opening new branch office locations.
RESULTS OF OPERATIONS
The Company's 2004 net income amounted to $1,504,579, or $0.68 per diluted
share, which was $334,835, or 18.2%, lower than income of $1,839,414, or $0.88
per diluted share in 2003. Net income for 2003 was $104,576 lower than 2002
income of $1,943,990, or $0.95 per diluted share. Basic net income per share was
$.70, $.91 and $.96, respectively in 2004, 2003 and 2002.
The decrease in net income in 2004 is due mainly to the net interest income
decrease of $62,000 as interest income declined by $242,500, or 3.6%, while
interest expense declined by $180,372 or 36.10%. In addition, other income and
provision for credit recoveries decreased by $167,168. Also expenses in 2004
increased by $127,000 to $4.653 million in 2004 from $4.526 million in 2003,
while Income tax expense decreased $22,000 compared to 2003.
10
The Company's 2003 net income amounted to $1,839,414, or $0.88 per diluted
share, which was $104,576, or 5.38%, lower than income of $1,943,990, or $0.95
per diluted share in 2002.
The declines in both interest income and interest expense during all periods
reflect continuing declines in market rates of interest as the Federal Reserve
engaged in aggressive rate cuts and then maintained rates at historically low
levels.
Due to its historically low levels of loan charge-offs, during each of 2004,
2003 and 2002, the Company did not take any provision for loan losses. In each
of the last three years, the Company recognized recoveries on previously
charged-off assets.
Return on assets for the years ended December 31, 2004, 2003 and 2002 was 1.18%,
1.48% and 1.64%, respectively while the return on equity recorded during the
same periods amounted to 4.77%, 6.30% and 7.14% (average).
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 through additional branches, geographic areas or
a possible acquisition if the opportunity arises.
Income Statement Analysis, 2004 vs. 2003
Our net income has been adversely impacted during the three-year period ended
December 31, 2004 by declines in market rates of interest on interest earning
assets like loans and investment securities. Although our cost of interest
bearing liabilities has also declined during this period, the reduction has not
kept pace with the decline in yield on interest earning assets, due in large
measure to the low level of cost of interest bearing deposits at the start of
the period. For the year ended December 31, 2003, our cost of interest bearing
liabilities was .78%, and it declined by 26 basis points to 0.52%. At the same
time, our yield on interest earning assets declined by 38 basis points, from
5.96% for the year ended December 31, 2003 to 5.58% in the current year.
Although we have experienced volume increases in earning assets during this
period, they have not been sufficient to offset the reduction in yield.
In 2004 income before income taxes decreased from 2003 by $356,000. This
decrease occurred mainly because of a decrease in net interest income, which was
lower due to a substantial decrease in interest rates on loans, deposits and
investments.
Interest income decreased by $242,000 and interest expense decreased by $180,000
which resulted in a $63,000 overall decrease in net interest income. The
following table illustrates how volume and interest rates affected net interest
income.
Interest income:
Effect of increased volume $ 543,000
Effect of decreased interest rates (785,000)
Interest expense:
Effect of decreased volume 11,000
Effect of decreased interest rates 169,000
---------
Decrease in net interest income $ 62,000
=========
In the current year, other income which consists of service fees and credit
recoveries, decreased by $167,000 and other expenses were up $127,000.
The increase in other expenses was due mainly to increase of salaries and
employee benefits of $35,000 and occupancy expenses increasing $101,000,
offsetting the increases were equipment and other expenses decreasing by $9,000.
The decline in the Company's income tax expense reflects the company's reduced
level of earnings in 2004.
Income Statement Analysis, 2003 vs. 2002
In 2003 income before income taxes decreased from 2002 by $432,000. This
decrease occurred mainly because of a decrease in net interest income, which was
lower due to a substantial decrease in interest rates on loans, deposits and
investments.
11
Interest income decreased by $855,000 and interest expense decreased by $220,000
which resulted in a $635,000 overall decrease in net interest income. The
following table illustrates how volume and interest rates affected net interest
income.
Interest income:
Effect of increased volume $ 446,000
Effect of decreased interest rates (1,301,000)
Interest expense:
Effect of decreased volume (10,000)
Effect of decreased interest rates 230,000
-----------
Increase in net interest income $ 635,000
===========
In 2003, other income decreased by $14,000 and other expenses declined by
$221,000 compared to 2002.
The decrease in other expenses reflects reductions in equipment and other
expenses of $250,000 offsetting an increase of $31,000 in salary and employee
benefit expense. The decline of other expenses, which consists of various
operating expenses, was primarily due to management reviewing all expense
categories and reducing expense in light of the Company's level of business.
The decline in the Company's income tax expense reflects the company's reduced
level of earnings in 2003.
Balance Sheet Analysis
Total assets increased by $11 million from December 31, 2003 to December 31,
2004. This was due primarily to an increase in customer deposits of $9 million.
The most notable change in 2004 was the increase in Federal funds of $13 million
compared to the previous year. Management's decision to shift back to Federal
funds from money market with corresponding banks was due to the increase of
Federal funds rate over the money market rates available from the corresponding
banks, and deposit inflows continuing to exceed new loan demand.
During 2004, securities increased by $3,374,000, and loans increased by
$4,208,000 compared to the year-end 2003.
The increase in investment securities reflects management's decision to invest
excess liquidity in longer-term investments, while still maintaining a strong
cash and equivalents position.
The Company has sought to emphasize commercial lending to enhance its interest
income. Since 1999, commercial loans, mostly consisting of loans to finance the
purchase of equipment and renovation and expansion of business premises have
increased from $4.8 million, or 12% of the loan portfolio, to $44.8 million, or
67.3% of the loan portfolio.
On the liability side of the balance sheet total deposits increased by
$9,062,000 for the year ending December 31, 2004 compared to the prior year
ending December 31, 2003.
Non-interest bearing demand deposits increased by $728,000, savings and NOW
deposits increased by $8,905,000 and time deposits decreased by $570,000. The
most substantial increase was the increase of NOW accounts, which is connected
to the deposit balances of a single governmental entity customer. This
customer's account balances traditionally vary depending upon the timing and
amount of tax collections.
Stockholders' equity, increased by $2,335,000 with the addition of 2004 net
income of $1,505,000, proceeds from exercised employee stock options of
$664,000, amortization of deferred stock compensation of $105,000, in addition
tax benefit of the exercised stock option plan of $207,000 less the purchase of
treasury stock of $146,000.
Liquidity
The liquidity of the Company is measured by how well it can meet the financial
needs of its depositors and borrowers and provide a cushion against
unforeseeable and unforeseen liquidity needs. Sources of liquidity are provided
primarily by the maturity of assets and by acquiring additional deposits.
Secondarily, liquidity may be provided by the sales of assets and by other
borrowings.
12
The Company's liquidity consists of cash in other banks, federal funds sold, and
investment securities and loans maturing in one year or less. At December 31,
2004, cash and due from banks totaled $6.9 million; Federal funds totaled $22
million, and investment securities maturing within one year totaled $650
thousand.
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 $1.6 million in 2004, $1.4 million in 2003 and
$2.1 million in 2002. In 2004, investing activities used $7.8 million primarily
to purchase of investment securities in excess of maturities resulting in a net
purchase of securities of $3.4 million, net increase of the loans receivable
$4.1 million and purchase of fixed assets of $333,000. Financing activities
provided cash of approximately $9.2 million due to the increases in non-interest
bearing deposits of $700,000, interest bearing deposits of $8.3 million and
proceeds from issuance of common stock from stock option plan of $664,000, less
decrease in borrowed funds of $328,000 and purchase of treasury stock of
$146,000.
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.
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL COMMITMENTS
The Company's financial statements do not reflect off-balance sheet arrangements
that are made in the normal course of business. These off-balance sheet
arrangements consist of unfunded loans and letters of credit made under the same
standards as on-balance sheet instruments. These unused commitments, consisting
of commitments to extend credit, letters of credit, commercial lines of credit
and consumer lines of credit, totaled $9,507,000 at December 31, 2004. These
instruments have fixed maturity dates, and because many of them will expire
without being drawn upon, they do not generally present any significant
liquidity risk the Company.
Management believes that any amounts actually drawn upon can be funded in the
normal course of operations. The Company has no investment in or financial
relationship with any unconsolidated entities that are reasonably likely to have
a material effect on liquidity or the availability of capital resources.
The following table represents the Company's contractual obligations to make
future payments.
Payments due by period
------------------------------------------
Less than More than
Total 1 year 1-3 years 3-5 years 5 years
------ --------- --------- --------- ---------
Operating lease obligations $7,776 $570 $1,180 $1,248 $4,778
------ ---- ------ ------ ------
Total $7,776 $570 $1,180 $1,248 $4,778
====== ==== ====== ====== ======
The following table sets forth the Company's capital ratios at each of the
periods indicated as well as the required minimum regulatory ratios.
December 31, Minimum
----------------------- Regulatory
2004 2003 Guidelines
------- ----------- ----------
Risk-based capital ratios
Tier 1 41.11% 43.98% 4.000%
Total capital 42.14% 45.16% 8.000%
Capital (in thousands)
Tier I capital $31,994 $ 29,912
Tier II capital (1) 800 800
------- -----------
$32,794 $ 30,712
======= ===========
(1) Lesser of the allowance for loan loss or 1/80 of risk-weighted assets.
13
The following table sets forth the maturity distribution for the above loan
portfolio at December 31, 2004.
Maturities and Sensitivities of Loans to Changes in Interest Rates:
After 1 After 5
Year Years Greater
Within within within then
1 Year 5 Years 15 Years 15 Years Total
------- ------- -------- -------- -------
Commercial
Fixed rate $ 5,956 $23,048 $ 8,087 $ - $37,091
Variable rate 3,874 3,397 473 - 7,744
Real estate mortgage
Fixed rate 4,120 13,438 625 - 18,183
Variable rate - - 155 - 155
Real estate construction
Fixed rate 500 351 - - 851
Variable rate - 1,736 - - 1,736
Installment
Fixed rate 35 816 - - 851
Variable rate 10 - - - 10
------- ------- -------- -------- -------
Total Loans $14,495 $42,786 $ 9,340 - 66,621
Less: Allowance for
credit losses 800
Unearned fees 145
-------
Net Loans $65,675
=======
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.
Due to our historic low level of non-performing assets, we have not recognized
an additional provision for possible loan losses since 2000. At December 31,
2004, our allowance for loan losses equaled 1.20% of our outstanding loans and
86.3% of the total of non-accrual loans and loans past due 90 days or more and
still accruing.
The following table sets forth information on non-accrual, past due (other than
non-accrual), and other real estate owned (there were no restructured loans) for
the periods indicated (in thousands):
December 31,
------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ------ ----
Non-accrual loans $113 $758 $654 $1,629 $698
Loans, past due 90 days or more 814 44 24 275 998
Other real estate owned 0 0 0 0 0
Percentage of non-performing loans to gross
loans outstanding 1.39% 1.29% 1.14% 3.34% 3.14%
If the above non-accrual loans at December 31, 2004 had been current, interest
income for 2004 would have been approximately $129 greater than that recorded.
Delinquency rates at December 31, 2004 were substantially higher then 2003 and
2002. Management believes the Bank will not incur substantial losses because of
this trend, because the delinquent loans are well collateralized.
14
Interest Rate Sensitivity Management
The accompanying table, a quantification of the Company's interest rate exposure
at December 31, 2004, is based upon the known repricing dates of certain assets
and liabilities and the assumed repricing dates of others.
Interest Rate Sensitivity*
--------------------------------------------------
After
After One After
Three but Five
Within but Within Within Years
Three Twelve Five within
Months Months Years 15 Years Total
-------- ---------- ------- -------- --------
Assets
Federal funds sold $ 22,000 $ - $ - $ - $ 22,000
Investment securities - 650 30,355 3,500 34,505
Loans, net (a) 3,068 10,481 42,787 9,340 65,676
-------- --------- ------- -------- --------
$ 25,068 $ 11,131 $73,142 $ 12,840 $122,181
======== ========= ======= ======== ========
Liabilities
Total deposits (b) $ 37,412 $ 6,986 $21,460 $ - $ 65,858
Borrowed funds 279 - - - 279
-------- --------- ------- -------- --------
$ 37,691 $ 6,986 $21,460 $ - $ 66,137
======== ========= ======= ======== ========
Interest rate sensitivity gap
Cumulative interest (12,623) 4,145 51,682 12,840
-------- --------- ------- -------- --------
$(12,623) $ (8,478) $43,204 $ 56,044 $ 56,044
======== ========= ======= ======== ========
*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.
15
Unadopted Financial Accounting Standards Board Statements
As of December 31, 2004, 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,
2004 2003 2002
---------------------------- ----------------------------- -----------------------------
Average Average Average Average Average Average
Balance Yield Balance Yield Balance Yield
Sheet (2) Interest Rate Sheet (2) Interest Rate Sheet (2) Interest Rate
--------- -------- ------- ---------- -------- ------- ---------- -------- -------
Interest-earning assets
Federal funds sold $ 20,098 $ 233 1.16% $ 19,877 $ 178 0.90% $ 20,092 $ 287 1.43%
Money market funds 399 4 1.00% 11,235 115 1.02% - -
Investment securities
taxable 33,504 1,406 4.20% 21,339 1,231 5.77% 31,438 1,879 5.98%
Loans, net 61,930 4,826 7.79% 60,203 5,187 8.62% 56,463 5,400 9.56%
--------- -------- ---- ---------- -------- ---- ---------- -------- ----
$ 115,931 $ 6,469 5.58% $ 112,654 $ 6,711 5.96% $ 107,993 $ 7,566 7.01%
-------- ---- -------- ---- -------- ----
Noninterest-earning assets
Deposits in bank 8,915 9,355 7,488
Other (1) 2,477 2,241 2,715
--------- ---------- ----------
$ 127,323 $ 124,250 $ 118,196
========= ========== ==========
Interest-bearing liabilities
Savings deposits $ 18,968 $ 48 0.25% $ 17,419 $ 86 0.49% $ 16,821 $ 138 0.82%
Demand deposits 31,543 109 0.35% 34,128 176 0.52% 32,667 272 0.83%
Time deposits 11,379 161 1.41% 11,969 236 1.97% 12,072 306 2.53%
Short term debt 208 2 0.96% 179 2 1.12% 277 4 1.44%
--------- -------- ---- ---------- -------- ---- ---------- -------- ----
62,098 320 0.52% 63,695 500 0.78% 61,837 720 1.16%
-------- ---- -------- ---- -------- ----
Noninterest-bearing
Demand deposits 32,913 30,801 28,475
Other 450 543 652
--------- ---------- ----------
95,461 95,039 90,964
Stockholders' equity 31,562 29,211 27,232
--------- ---------- ----------
$ 127,023 $ 124,250 $ 118,196
========= ========== ==========
Interest rate spread 5.06% 5.18% 5.85%
==== ==== ====
Net yield on total
earning assets $ 115,931 $ 6,149 5.30% $ 112,654 $ 6,211 5.51% $ 107,993 $ 6,846 6.34%
========= ======== ==== ========== ======== ==== ========== ======== ====
(1) Non-accrual loans, overdrafts, property and equipment, and other
non-interest earning assets are included in Other.
(2) Average balance sheet computed based on monthly balances.
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, 2004, 2003, and
2002 calculated on a tax-equivalent basis, using a 34% Federal rate. Any change
in interest income or interest expense attributable to both changes in volume
and changes in rate has been allocated in proportion to the relationship of the
absolute dollar amount of change in each category.
(In thousands)
2004 Versus 2003 2003 Versus 2002
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)
------- ------- ---------- ------- -------- ----------
Interest and dividend income
Federal funds sold & money mkt $ (105) $ 49 $ (56) $ 126 $ (120) $ 6
Investment securities
taxable 604 (429) 175 (45) (603) (648)
Loans, net 44 (405) (361) 365 (578) (213)
------ ------ --------- ------ ------- ---------
Total interest income 543 (785) (242) 446 (1,301) (855)
------ ------ --------- ------ ------- ---------
Interest expense
Savings deposits (4) 42 38 (3) 55 52
Demand deposits 10 57 67 (8) 104 96
Time deposits 5 70 75 - 70 70
Short term debt - - - 1 1 2
------ ------ --------- ------ ------- ---------
Total interest expense 11 169 180 (10) 230 220
------ ------ --------- ------ ------- ---------
Changes to net interest income $ 554 $ (616) $ (62) $ 436 $(1,071) $ (635)
------ ------ --------- ------ ------- ---------
Investment Portfolio
The following table shows the net 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).
2004 2003 2002 2001 2000
------- ------- ------- ------- -------
Obligations of other U.S.
Government agencies $29,105 $29,081 $25,969 $32,964 $20,410
Other securities 5,400 2,050 1,950 1,950 1,950
------- ------- ------- ------- -------
Total investment
securities $34,505 $31,131 $27,919 $34,914 $22,360
======= ======= ======= ======= =======
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, 2004 (in thousands). Yields on tax
exempt securities are presented on fully tax-equivalent basis using a 34%
Federal tax rate.
Due Under 1 Year Due 1-5 Years Due 5-10 Years Due Over 10 Years
---------------- --------------- --------------- ------------------
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- -------- ----- -------- ----- ------ -----
Obligations of other U.S.
Government agencies $ - 0.00% $ 25,605 3.76% $ 3,500 4.00% $ - 0.00%
Other securities 650 7.16% 4,750 4.33% - 0.00% - 0.00%
------ ---- -------- ---- -------- ---- ------ ----
Total investment
securities $ 650 6.75% $ 30,355 4.17% $ 3,500 0.00% $ - 0.00%
====== ==== ======== ==== ======== ==== ====== ====
Loan Portfolio
The following tables set forth the composition of the Company's gross loan
portfolio as of the dates indicated (in thousands):
December 31,
2004 2003 2002 2001 2000
------- ------- ------- ------- -------
Types of loans
Commercial and financial $44,835 $40,013 $31,362 $25,902 $18,484
Real estate - mortgage 18,338 20,928 25,543 25,650 25,383
Real estate - construction 2,587 626 1,855 4,571 9,073
Installment 861 807 681 847 1,017
------- ------- ------- ------- -------
Total loans $66,621 $62,374 $59,441 $56,970 $53,957
======= ======= ======= ======= =======
18
Except for loans included in the above table there were no loans at December 31,
2004 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,
2004, the total loan portfolio was approximately $66.6 million. As of the same
date, the commercial loan portfolio totaled approximately $44.8 million. There
are no 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 Loan 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.
(in thousands)
Year Ended December 31,
- -----------------------------------------------------------------------------------
2004 2003 2002 2001 2000
------ ----- ----- ----- ----
Balance at beginning of period $ 800 $ 800 $ 800 $ 800 $800
Charge-offs
Commercial & financial 43 9 - 130 196
Real estate - mortgage - - - - 50
Real estate - construction - - - - -
Installment 9 5 33 - 12
----- ----- ----- ----- ----
52 14 33 130 258
----- ----- ----- ----- ----
Recoveries
Commercial & financial 50 200 107 - -
Real estate - mortgage 95 20 136 254 -
Real estate - construction - - - - -
Installment - 1 2 - -
----- ----- ----- ----- ----
145 221 245 254 -
----- ----- ----- ----- ----
Net charge-offs (93) (207) (212) (124) 0
Additional charges (recoveries)
to operations (93) (207) (212) (124) 258
----- ----- ----- ----- ----
Balance at end of period $ 800 $ 800 $ 800 $ 800 $800
===== ===== ===== ===== ====
Ratio of net
charge-offs/(recoveries) during
the period to average loans
outstanding during the period (.15%) (.344%) (.375%) (.233%) .543%
===== ===== ===== ===== ====
19
Allocation of the Allowance for Loan Losses
Commercial
Real Real Real
Estate Estate Estate
December 31, Commercial Mortgage Mortgage Construction Installment Total
- ------------ ---------- ---------- -------- ------------ ----------- -----
2004
Amount $536 $ 96 $128 $ 32 $ 8 $800
Percentage of total 67% 12% 16% 4% 1% 100%
2003
Amount 512 200 72 8 8 800
Percentage of total 64% 25% 9% 1% 1% 100%
2002
Amount 424 184 160 24 8 800
Percentage of total 53% 23% 20% 3% 1% 100%
2001
Amount 360 192 168 64 16 800
Percentage of total 45% 24% 21% 8% 2% 100%
2000
Amount 272 192 184 136 16 800
Percentage of total 34% 24% 23% 17% 2% 100%
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):
2004 2003 2002 2001 2000
------- ------- ------- ------- -------
Non-interest bearing:
Demand deposits $32,618 $31,891 $32,931 $29,118 $27,906
Interest bearing:
Savings deposits 20,610 21,458 15,051 15,460 15,701
Time deposits 11,297 11,867 11,732 12,719 15,724
NOW demand
deposits 33,952 24,198 33,607 24,331 34,080
------- ------- ------- ------- -------
Total deposits $98,477 $89,414 $93,321 $81,628 $93,411
======= ======= ======= ======= =======
The maturities of time deposits of $100,000 or more at December 31, 2004 are
summarized as follows:
Under 3 months $1,511
3 to 6 months 1,152
6 to 12 months 2,440
Over 12 months 311
------
$5,414
======
20
Return on Equity and Assets
The Following are selected ratios for the years ended December 31,
2004 2003 2002 2001 2000
------ ------ ------ ------ ------
Return on assets 1.18% 1.48% 1.64% 1.62% 1.46%
Return on equity 4.77% 6.30% 7.14% 7.27% 6.96%
Average equity to
average assets 24.85% 23.51% 23.04% 22.27% 20.97%
Dividend payout ratio 0.00% 0.00% 0.00% 0.00% 0.00%
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, 2004, did outstanding treasury
tax and loan deposits exceed 30% of stockholders' equity.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk is interest rate risk. This information is
included with item 7-Management's Discussion and Analysis of Financial
Condition and Results of Operations Interest Rate Sensitivity Management.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements for the years ended December 31, 2004,
2003 and 2002 contain the information required by Item 8 and that information is
incorporated herein following corporate officers corporate certifications page
24.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
With the participation of our Chief Executive Officer and Chief Financial
Officer, management has carried out an evaluation of the effectiveness of our
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934). Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of the period reported on in this report.
There were no changes in our internal control over financial reporting (as
defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the
fourth quarter of fiscal 2004 that materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Apart from certain information set forth below, the information required by this
Item is incorporated herein by reference to the applicable information in the
proxy statement for our 2004 annual meeting, including the information set forth
under the captions "Election of Directors, Section 16(a) Beneficial Ownership
Reporting Compliance" and "Governance of the Company - Audit and Finance
Committee-Audit Committee Financial Expert."
The following table sets forth information about our executive officers that are
not also directors:
Name, Position with Registrant Principal Occupation During
And Age Officer Since Past Five Years
- ------------------------------ ------------- ----------------------------
Roman Gumina, Chief Operating 1987 Officer of the Bank
Officer, 45
Thomas A. Fornale, Secretary & 1989 Officer of the Bank
Treasurer, 66
We have a code of conduct that applies to all Directors, officers and employees,
including our principal executive officer and principal financial officer (who
is also our principal accounting officer). Our code of conduct governs such
matters as conflicts of interest, use of corporate opportunity, confidentiality,
compliance with law and the like. A copy of our code of conduct is incorporated
by reference into this annual report on Form 10-K.
Our Board of Directors has adopted Corporate Governance Guidelines and charters
for the Audit and Finance, Compensation and Nominating/Governance Committees of
the Board of Directors.
You can obtain a printed copy of any of the materials referred to above by
contacting us at the following address:
Brunswick Bank & Trust
C/o Brunswick Bancorp
439 Livingston Avenue
New Brunswick, NJ 08901
Telephone: 1-732-247-5800
22
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to the
applicable information in the proxy statement for our 2005 annual meeting,
including the information set forth under the captions "Executive Compensation,"
"Compensation of Directors" and "Compensation Committee Interlocks and Insider
Participation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTS
The Proxy Statement for our 2005 Annual Meeting 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.
The following table sets forth information with respect to the Company's equity
compensation plans as of the end of the most recently completed fiscal year.
Equity Compensation Plan Information
Number of
securities
remaining
available for
future
Weighted - issuance
average under equity
Number of securities exercise compensation
to be issued upon price of plans
exercise of outstanding (excluding
outstanding options, options, securities
warrants and warrants reflected in
Plan category rights and rights column
------------- -------------------- ----------- -------------
Equity compensation plans approved
by security holders 76,675 $ 9.09 -0-
Equity compensation plans not approved by
security holders -0- -0- -0-
------ ------ ------
Total 76,675 $ 9.09 -0-
====== ====== ======
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Proxy Statement for our 2005 Annual Meeting will contain under the caption
"Certain Transactions with Management and the caption "Compensation Committee
Interlocks and Insider Participation" the information required by Item 13 and
that information is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES & SERVICES
The information required by this Item is incorporated by reference to the
applicable information in the proxy statement for our 2005 annual meeting,
including the information set forth under the caption "Our Relationship with Our
Independent Auditors."
23
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(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, 2004, 2003 and 2002 are
following signature page number 25.
Independent Auditors' Report
Consolidated Statements of Financial Condition - Years Ended December 31, 2004
and 2003
Consolidated Statements of Income - Years Ended December 31, 2004, 2003 and 2002
Consolidated Statements of Stockholders' Equity - Years Ended December 31, 2004,
2003 and 2002
Consolidated Statements of Cash Flows - Years Ended December 31, 2004, 2003 and
2002
Notes to Financial Statements - Years Ended December 31, 2004 and 2003
Schedules to the Consolidated of Financial Condition required under Article 9 of
Regulation S-X are not required under the related instructions or are
inapplicable, and therefore have been omitted.
(b) 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) (a) 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.
(b) Non-Qualified Deferred Compensation Plan dated as of
January 1, 2001 for Carmen J. Gumina. Incorporated
by reference to Form 10-K for the year ended
December 31, 2001.
(c) Non-Qualified Deferred Compensation Plan dated as of
January 1, 2001 for Roman T. Gumina. Incorporated by
reference to Form 10-K for the year ended December
31, 2001.
(14) Code of Ethics. Incorporated by reference to Form
10-K for the year Ended December 31, 2003.
(21) Subsidiaries of Brunswick Bancorp, Incorporated by
reference to Registration Statement on Form S-14
filed on June 20, 1985.
(31.1) Certification of Chief Executive Officer pursuant
to Rule 13a-14(a)*
(31.2) Certification of Chief Financial Officer pursuant
to Rule 13a-14(a)*
(32.1) Certification of Chief Executive Officer pursuant
to 18 U.S.C. 1350*
(32.2) Certification of Chief Financial Officer pursuant
to 18 U.S.C. 1350*
(c) Not applicable
24
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
Chairman of the Board
March 22, 2005
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.
Signature Title Date
/s/ Frederick Perrine
- ------------------------------ March 22, 2005
Frederick Perrine Director,
Vice Chairman
/s/ Joseph DeMarco
- ------------------------------ March 22, 2005
Joseph DeMarco Director
/s/ Dominick Faraci
- ------------------------------ March 22, 2005
Dominick Faraci Director
/s/ Carmen J. Gumina
- ------------------------------ March 22, 2005
Carmen J. Gumina Chief Executive Officer,
Chairman of the Board
(Principal Executive Officer)
/s/ Phillip W. Barrood
- ------------------------------ March 22, 2005
Phillip W. Barrood Director
/s/ Michael Kaplan
- ------------------------------ March 22, 2005
Michael Kaplan Director
/s/ Richard A. Malouf
- ------------------------------ March 22, 2005
Richard A. Malouf Director
/s/ James V. Gassaro
- ------------------------------ March 22, 2005
James V. Gassaro Director
/s/ Robert Sica
- ------------------------------ March 22, 2005
Robert Sica Director
25
/s/ Frank Gumina Jr.
- ------------------------------ March 22, 2005
Frank Gumina Jr. Director
/s/ Gary S. Russo
- ------------------------------ March 22, 2005
Gary S. Russo Director
/s/ Thomas A. Fornale
- ------------------------------ March 22, 2005
Thomas A. Fornale Secretary-Treasurer
Controller, (Principal
Accounting/Financial
Officer)
26
BRUNSWICK BANCORP AND SUBSIDIARIES
FINANCIAL STATEMENT
YEARS ENDED
DECEMBER 31, 2004, 2003 AND 2002
TABLE OF CONTENTS
PAGE
----
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets 2
Consolidated Statements of Income 3
Consolidated Statements of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-23
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
BRUNSWICK BANCORP AND SUBSIDIARIES
I have audited the accompanying consolidated Balance Sheets of Brunswick Bancorp
and Subsidiaries as of December 31, 2004 and 2003 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the years in the three-year period ended December 31, 2004. These consolidated
financial statements are the responsibility of the Bancorp's management. My
responsibility is to express an opinion on these consolidated financial
statements based on my audits.
I conducted my audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I 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 consolidated 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. I believe that my
audits provide a reasonable basis for my opinion.
In my 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, 2004 and 2003, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2004 in conformity with accounting principles generally
accepted in the United States of America.
Michael R. Ferraro, CPA
February 7, 2005
Matawan, NJ
1
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2004 AND 2003
2004 2003
------------- -------------
ASSETS
Cash and due from banks $ 6,904,689 $ 16,842,265
Federal funds sold 22,000,000 9,000,000
------------- -------------
Total cash and cash equivalents 28,904,689 25,842,265
Securities held to maturity 34,505,000 31,131,046
Loans 66,475,788 62,268,161
Allowance for loan losses (800,000) (800,000)
------------- -------------
Net loans 65,675,788 61,468,161
Premises and equipment, net 992,910 799,922
Accrued interest receivable 678,327 536,161
Other assets 992,740 991,245
------------- -------------
TOTAL ASSETS $ 131,749,454 $ 120,768,800
============= =============
LIABILITIES AND STOCKHOLDERS EQUITY
Deposits
Non-interest bearing $ 32,618,470 $ 31,890,613
Interest bearing 65,858,450 57,523,877
------------- -------------
Total deposits 98,476,920 89,414,490
Borrowed funds 278,661 606,582
Accrued interest payable 65,620 76,953
Other liabilities 109,838 187,593
------------- -------------
TOTAL LIABILITIES 98,931,039 90,285,618
------------- -------------
STOCKHOLDERS' EQUITY
Preferred stock-no stated value
10,000,000 shares authorized and no shares
issued and outstanding at December 31, 2004 and 2003
Common stock - no par value
10,000,000 shares authorized; 2,184,747 and
2,111,722 shares issued and outstanding at
December 31, 2004 and 2003 4,369,494 4,223,444
Additional paid-in capital 3,437,550 2,712,139
Retained earnings 25,759,478 24,254,899
Deferred stock compensation (602,000) (707,300)
Treasury stock at cost, 11,239 and -0- shares
at December 31, 2004 and 2003 (146,107) -
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 32,818,415 30,483,182
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 131,749,454 $ 120,768,800
============= =============
See accompanying notes and accountant's report.
2
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
2004 2003 2002
----------- ----------- -----------
INTEREST INCOME
Interest on loans $ 4,825,606 $ 5,186,656 $ 5,400,235
Interest on investments 1,406,438 1,230,794 1,878,728
Interest on federal funds sold 232,954 178,452 287,243
Interest on deposits with banks 3,952 115,548 -
----------- ----------- -----------
TOTAL INTEREST INCOME 6,468,950 6,711,450 7,566,206
----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits 317,812 498,237 716,178
Interest on borrowed funds 1,736 1,683 3,902
----------- ----------- -----------
Total interest expense 319,548 499,920 720,080
----------- ----------- -----------
NET INTEREST INCOME 6,149,402 6,211,530 6,846,126
Provision for credit recoveries (93,219) (207,752) (211,885)
----------- ----------- -----------
NET INTEREST INCOME AFTER RECOVERY OF LOAN LOSSES 6,242,621 6,419,282 7,058,011
----------- ----------- -----------
OTHER INCOME
Service charges on deposit accounts 643,978 672,332 716,276
Other service charges and fees 237,740 231,684 222,373
Other income 19,086 49,423 29,064
----------- ----------- -----------
TOTAL OTHER INCOME 900,804 953,439 967,713
----------- ----------- -----------
OTHER EXPENSES
Salaries and employee benefits 2,653,497 2,618,575 2,587,379
Occupancy expenses 834,074 733,192 735,592
Equipment expenses 185,646 186,263 202,226
Other expenses 980,508 988,409 1,222,021
----------- ----------- -----------
TOTAL OTHER EXPENSES 4,653,725 4,526,439 4,747,218
----------- ----------- -----------
INCOME BEFORE INCOME TAX EXPENSE 2,489,700 2,846,282 3,278,506
Income tax expense 985,121 1,006,868 1,334,516
----------- ----------- -----------
NET INCOME $ 1,504,579 $ 1,839,414 $ 1,943,990
=========== =========== ===========
NET INCOME PER SHARE OF COMMON STOCK:
Basic Earnings per share $ 0.70 $ 0.91 $ 0.96
=========== =========== ===========
Diluted Earnings per share $ 0.68 $ 0.88 $ 0.95
=========== =========== ===========
Average shares outstanding-basic 2,162,200 2,021,597 2,019,256
=========== =========== ===========
Average shares outstanding-diluted 2,203,554 2,087,837 2,045,624
=========== =========== ===========
See accompanying notes and accountant's report.
3
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
ADDITIONAL DEFERRED
COMMON PAID-IN RETAINED STOCK TREASURY
STOCK CAPITAL EARNINGS COMPENSATION STOCK TOTAL
----------- ---------- ----------- ------------ ---------- ------------
Balance December 31, 2001 $ 3,809,064 $2,973,380 $20,473,038 $ (917,900) $ (91,774) $ 26,245,808
Net income for 2002 - - 1,943,990 - - 1,943,990
Stock dividend 380,686 (380,686) (1,543) - - (1,543)
Amortization of deferred stock
compensation - - - 105,300 - 105,300
Purchase of treasury stock - - - - (4,845) (4,845)
----------- ---------- ----------- ---------- ---------- ------------
Balance December 31, 2002 4,189,750 2,592,694 22,415,485 (812,600) (96,619) 28,288,710
Net income for 2003 - - 1,839,414 - - 1,839,414
Amortization of deferred stock
compensation - - - 105,300 - 105,300
Proceeds from issuance of
common stock-stock option plan 33,694 119,445 - - 96,619 249,758
----------- ---------- ----------- ---------- ---------- ------------
Balance December 31, 2003 4,223,444 2,712,139 24,254,899 (707,300) - 30,483,182
Net income for 2004 - - 1,504,579 - - 1,504,579
Amortization of deferred stock
compensation - - - 105,300 - 105,300
Proceeds from issuance of
common stock-stock option plan 146,050 517,747 - - - 663,797
Tax benefit from stock option
plan 207,664 207,664
Purchase of treasury stock - - - - (146,107) (146,107)
----------- ---------- ----------- ---------- ---------- ------------
Balance December 31, 2004 $ 4,369,494 $3,437,550 $25,759,478 $ (602,000) $ (146,107) $ 32,818,415
=========== ========== =========== ========== ========== ============
See accompanying notes and accountant's report.
4
BRUNSWICK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
2004 2003 2002
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,504,579 $ 1,839,414 $ 1,943,990
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 140,223 122,466 133,996
Net accretion of securities discounts and premiums (10,048) (171,958) (109,134)
Amortization of deferred stock compensation 105,300 105,300 105,300
Provision for credit recoveries (93,219) (207,752) (211,885)
Gain on sale of premises and equipment (400) (22,833) (10,664)
Tax benefit form stock option plan 207,664 - -
Net change in:
Accrued interest receivable (142,166) 273,656 329,557
Accrued interest payable (11,333) (35,951) (64,665)
Other assets (1,495) (317,203) (85,215)
Other liabilities (77,755) (185,987) 125,256
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,621,350 1,399,152 2,156,536
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of investment securities 46,160,000 46,725,000 24,000,000
Principal repayments on investment securities 91,094 60,134 87,830
Purchase of investment securities (49,615,000) (49,825,000) (16,984,326)
Net change in loans receivable (4,114,408) (2,740,479) (2,217,409)
Acquisitions of premises and equipment (333,211) (72,113) (150,735)
Proceeds from sale of premises and equipment 400 327,301 79,162
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (7,811,125) (5,525,157) 4,814,522
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock (146,107) - (4,845)
Proceeds from issuance of common stock-stock option plan 663,797 249,758 -
Cash paid in lieu of fractional shares - - (1,543)
Increase (decrease) in non-interest bearing deposits 727,857 (1,040,567) 3,813,014
Increase (decrease) in interest bearing deposits 8,334,573 (2,865,968) 7,880,510
Increase (decrease) in borrowed funds (327,921) (4,033) (93,867)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 9,252,199 (3,660,810) 11,593,269
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,062,424 (7,786,815) 18,564,327
Cash and cash equivalents at January 1 25,842,265 33,629,080 15,064,753
------------ ------------ ------------
Cash and cash equivalents at December 31 $ 28,904,689 $ 25,842,265 $ 33,629,080
============ ============ ============
SUPPLEMENTAL INFORMATION:
Cash paid during the year for interest $ 329,145 $ 535,871 $ 754,111
Cash paid during the year for income taxes $ 1,070,841 $ 1,078,641 $ 1,339,615
SUPPLEMENT DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Transfer of premises and equipment to other assets $ - $ 50,011 $ -
See accompanying notes and accountant's report.
5
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Brunswick Bancorp (the Company) is a bank holding company whose principal
activity is the ownership and management of its wholly owned subsidiaries
Brunswick Bank & Trust Company (the Bank) and Brunscor Realty, Inc. The Bank
also has a wholly owned investment subsidiary BTB Investment Corp. Inc. The Bank
generates commercial, mortgage and consumer loans and receives deposits from
customers located primarily in central New Jersey with primary emphasis on
Middlesex and Monmouth Counties; services are provided at six locations. The
Bank operates under a state bank charter and provides full banking services. As
a state bank, the Bank is subject to regulation by the New Jersey Department of
Banking and Insurance and the Federal Deposit Insurance Corporation.
Basis of Consolidation
The consolidated financial statements include the accounts of Brunswick Bancorp
and its wholly owned subsidiaries, Brunswick Bank & Trust Company, and Brunscor
Realty Inc. after elimination of all material inter-company transactions and
balances.
Use 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 revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Investment Securities
Debt securities are classified as held-to-maturity when the Bank has the
positive intent and ability to hold securities to maturity. Securities
held-to-maturity are carried at amortized cost. The amortization of premiums and
accretion of discounts are recognized in interest income using methods
approximating the interest method over the period of maturity. The investment
portfolio of the Bank is held in the operating subsidiary BTB Investment Corp.
Inc.
In December 2003, the Emerging Issues Task Force issued EITF 03-01, "The Meaning
of Other-Than-Temporary Impairment and its Application to Certain Investments."
This statement from the EITF addresses disclosure requirements regarding
information about temporarily impaired investments. The requirements are
effective for fiscal years ending after December 15, 2003 for all entities that
have investments in debt and marketable equity securities that are accounted for
under Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." The required disclosure
has been made in the annual financial statements.
Loans
Loans are stated at unpaid principal balances, less the allowance for loan
losses and net deferred loan fees and unearned discounts.
The accrual of interest on mortgage and commercial loans is discontinued at the
time the loan is 90 days delinquent unless the credit is well secured and in
process of collection. Installment and other personal loans are typically
charged off no later than 180 days past due. In all cases, loans are placed on
nonaccrual or charged off at an earlier date if collection of principal or
interest is considered doubtful.
6
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
All interest accrued but not collected for loans that are placed on nonaccrual
or charged off is reversed against interest income. The interest on these loans
is accounted for on the cash-basis or cost recovery method, until qualifying for
return to accrual. Loans are returned to accrual status when all the principal
and interest amounts contractually due are brought current and future payments
are reasonably assured.
Loan Impairment
The Bank applies the provisions of SFAS No. 114," Accounting by Creditors for
Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for Impairment
of a Loan-Income Recognition and Disclosures," in it's evaluation of the loan
portfolio. SFAS 114 requires that certain impaired loans be measured based on
present value of expected future cash flows, net of disposal costs, discounted
at the loan's original effective interest rate. As a practical matter,
impairment may be measured based on the loan's observable market price or the
fair value of the collateral, net of disposal costs, if the loan is collateral
dependent. When the measure of the impaired loan is less than the recorded
investment in the loan, the impairment is recorded through a valuation
allowance.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level, which, in management's
judgment, is adequate to absorb credit losses inherent in the loan portfolio.
The amount of the allowance is based on management's evaluation of the
collectibility of the loan portfolio, including the nature of the portfolio,
credit concentrations, trends in historical loss experience, specific impaired
loans, economic conditions and other risks inherent in the portfolio. Allowances
for impaired loans are generally determined based on collateral values or the
present value of estimated cash flows. Although management uses available
information to recognize losses on loans, because of uncertainties associated
with local economic conditions, collateral values and future cash flows on
impaired loans, it is reasonable that a material change could occur in the
allowance for loan losses in the near term. However, the amount of the change
that is reasonably possible cannot be estimated. The allowance is increased by a
provision for loan losses, which is charged to expense and reduced by
charge-offs, net of recoveries. Changes in the allowance relating to impaired
loans are charged or credited to the provision for loan losses.
Loan Fees
Loan origination and commitment fees, as well as certain direct loan origination
costs, are deferred and the net amount is amortized as an adjustment of the
related loan's yield. The Bank is generally amortizing these amounts over the
life of the related loans except for residential mortgage loans, where the
timing and amount of prepayments can be reasonably estimated. For these mortgage
loans, the net deferred fees are amortized over an estimated average life of 7.5
years. Amortization of deferred loan fees is discontinued when a loan is placed
on nonaccrual status.
Premises and Equipment
Land is carried at cost. Bank premises and equipment are carried at cost net of
accumulated depreciation. Depreciation is computed using the straight-line and
the declining balance methods based principally on the estimated useful lives of
the assets. Maintenance and repairs are expensed as incurred while major
additions and improvements are capitalized. Gains and losses on dispositions are
included in current operations.
Other Real Estate Owned
Real estate properties acquired through or in lieu of loan foreclosure are
initially recorded at the lower of the Bank's carrying amount or fair value less
estimated selling cost at the date of foreclosure. Any write-downs based on the
asset's fair value at the date of acquisition are charged to the allowance for
loan losses.
7
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
After foreclosure, these assets are carried at the lower of their new cost basis
or fair value less cost to sell. Costs of significant property improvements are
capitalized, whereas costs relating to holding property are expensed. The
portion of interest costs relating to development of real estate is capitalized.
Valuations are periodically performed by management and any subsequent
write-downs are recorded as a charge to operations, if necessary, to reduce the
carrying value of a property to the lower of its cost or fair value less cost to
sell.
Advertising Costs
Advertising costs are charged to operations in the year incurred and totaled
$57,312, $16,615 and $29,641 in 2004, 2003 and 2002, respectively.
Income Taxes
Income taxes are provided for the tax effects of the transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the basis of the allowance for loan
losses and accumulated depreciation. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or
settled. Deferred tax assets and liabilities are reflected at 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. The Bancorp files consolidated income tax returns with its
subsidiaries.
Statements of Cash Flows
The Bancorp considers all cash amounts due from depository institutions,
interest-bearing deposits in other banks and federal funds sold to be cash
equivalents for purposes of the statements of cash flows.
Net Income Per Share
Basic net earnings per common share is computed by dividing net earnings
applicable to common shareholders by the weighted-average number of common
shares outstanding during the period. Diluted net earnings per common share is
determined using the weighted-average number of common shares outstanding during
the period, adjusted for the dilutive effect of common stock equivalents,
consisting of shares that might be issued upon exercise of common stock options.
Stock Repurchase Program
In November 2003, the Company's Board of Directors approved a stock repurchase
program whereby up to $5,000,000 of common stock may be purchased from time to
time at the discretion of management. On December 29, 2004 the company purchased
11,239 shares. The repurchased shares are held as treasury stock and are
available for general corporate purposes.
Reclassification
Certain amounts for the year ended December 31, 2002, have been reclassified to
conform to the current year's presentation.
Impact of New Accounting Standards
FIN 45 - In November 2002, the FASB issued FASB Interpretation (FIN) No .45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 requires a guarantor to
recognize a liability at the inception of the guarantee for the fair value of
obligations it has undertaken in issuing the guarantee and also requires more
detailed disclosures with respect to guarantees.
8
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FIN 45 is effective for guarantees issued or modified after December 31, 2002
and requires additional disclosures for existing guarantees. The adoption of FIN
45 did not have a material impact on the Company's results of operations or
financial position. The Company has provided additional disclosure with respect
to guarantees in Note 13.
FIN 46 - In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities" and amended it in October 2003, such that it was effective
for the Company in the first fiscal quarter of 2004. This standard clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," and addresses consolidation by business enterprise of variable
interest entities. FIN No. 46 requires existing unconsolidated variable interest
entities to be consolidated by their primary beneficiaries if involved. FIN No.
46 also enhances the disclosure requirements related to variable interest
entities. This interpretation was effective for any variable interest entities.
The adoption of FIN No. 46 did not have any significant effect on the Company's
consolidated financial statements.
SFAS 149 - In April 2003, the FASB issued SFAS No. 149, Amendment of Statement
133 on Derivative Instruments and Hedging Activities, SFAS 149 amends and
clarifies financial accounting and reporting for derivative instruments and for
hedging activities under SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. The adoption of SFAS 149 in the fiscal fourth quarter of
2003 did not have a material impact on the Company's results of operation or
financial position.
SFAS 150 - In May 2003, the FASB issued SFAS No.150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. SFAS
150, establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. The
adoption of SFAS 150 in the fiscal fourth quarter of 2003 did not have a
material impact on the company's results of operation or financial position.
SFAS 132 (Revised) - In December 2003, the FASB issued SFAS No. 132 (Revised),
Amendment of Statement 132 on Employers' Disclosures about Pensions and Other
Postretirement Benefits. This amends FASB Statements No. 87, 88, and 106. This
Statement revises employers' disclosures about pension plans and other
postretirement benefit plans. It does not change the measurement or recognition
of those plans required by FASB Statements No. 87, Employers' Accounting for
Pensions, No. 88, Employers' Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits, and No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions. This
Statement retains the disclosure requirements contained in SFAS Statement No.
132, Employers' Disclosures about Pensions and Other Postretirement Benefits,
which it replaces. It requires additional disclosures to those in the original
Statement 132 about the assets, obligations, cash flows, and net periodic
benefits cost of defined benefit pension plans and other defined benefit
postretirement plans. The required information should be provided separately for
pension plans and for other postretirement benefit plans. The adoption of SFAS
132 (Revised) in the fiscal fourth quarter of 2003 did not have a material
impact on the Company's results of operation or financial position.
SFAS 123 (Revised) - In December 2004, the FASB issued SFAS No. 123 (Revised),
"Share-Based Payment", which would require all share-based payments to
employees, including grants of employee stock options, to be recognized in the
income statement based on their fair values, effective for public companies for
interim or periods beginning after June 15, 2005.
9
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
The company intends to adopt SFAS No.123 (Revised) effective July 1, 2005. This
statement permits public companies to adopt its requirements using either the
modified prospective or retrospective method. The Company is currently
evaluating the alternative methods of adoption.
The impact of adoption of SFAS No. 123 (Revised) cannot be predicted at this
time because it will depend on levels of share-based payments granted in the
future. However, had we adopted SFAS 123 (Revised) in prior periods, the impact
of that standard would have approximated the proforma impact of SFAS 123
(Revised) as disclosed in Note 10-Stock Option Plan. SFAS No.123 (Revised) also
requires the benefits of tax deductions in excess of recognized compensation
cost to be reported as financing cash flow, rather than as an operating cash
flow as required under current literature.
NOTE 2 - SECURITIES HELD TO MATURITY
The amortized cost of securities and their approximate fair values are as
follows:
Gross Gross
Net Carrying Unrealized Unrealized Fair
Value Gains Losses Value
------------ ---------- ---------- -----------
December 31, 2004
U.S. Government and
agency securities $ 29,105,000 $ - $(275,787) $28,829,213
Other securities 5,400,000 - (31,250) 5,368,750
------------ ---------- --------- -----------
Totals $ 34,505,000 $ - $(307,037) $34,197,963
============ ========== ========= ===========
December 31, 2003
U.S. Government and
agency securities $ 29,081,046 $ 130,673 $ (87,636) $29,124,083
Other securities 2,050,000 - - 2,050,000
------------ ---------- --------- -----------
Totals $ 31,131,046 $ 130,673 $ (87,636) $31,174,083
============ ========== ========= ===========
At December 31, 2004 the Company had unrealized losses in its securities
portfolio which occurred in the past year. The Company has the ability and
intent to hold these securities until such time as the value recovers or the
securities mature and are repaid. Further, the Company believes the
deterioration in value is attributable to changes in the market interest rates
and not credit quality of the issuer.
The maturities of securities held-to-maturity at December 31, 2004 and 2003 are
as follows:
2004 2003
------------------------------ ----------------------------
Net Carrying Fair Net Carrying Fair
Value Value Value Value
-------------- ------------ ------------ ------------
Due in one year or less $ 650,000 $ 650,000 $ 2,645,792 $ 2,710,625
Due after one year to five years 30,355,000 30,082,963 28,394,160 28,378,750
Due after five years to ten years 3,500,000 3,465,000 - -
Due after ten years - - 91,094 84,708
-------------- ------------ ------------ ------------
Totals $ 34,505,000 $ 34,197,963 $ 31,131,046 $ 31,174,083
============== ============ ============ ============
Securities held to maturity with a carrying value of $4,000,000 and $6,000,000
at December 31, 2004 and 2003, respectively, were pledged to secure public
deposits and for other purposes required or permitted by law.
10
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - LOANS
Loans at December 31, 2004 and 2003 are summarized as follows:
2004 2003
----------- -----------
Commercial $44,835,243 $40,013,237
Real estate construction 2,587,234 626,497
Commercial real estate 8,137,877 15,459,054
Residential real estate 10,199,918 5,468,782
Consumer 860,921 806,893
----------- -----------
66,621,193 62,374,463
Less
Allowance for credit losses 800,000 800,000
Unearned fees 145,405 106,302
----------- -----------
$65,675,788 $61,468,161
=========== ===========
An analysis of the change in the allowance for credit losses follows:
2004 2003 2002
--------- --------- ---------
Balances at beginning of year $ 800,000 $ 800,000 $ 800,000
Provision for losses (reversal of) (93,219) (207,752) (211,885)
Recoveries on loans 145,131 221,164 245,548
Loans charged-off (51,912) (13,412) (33,663)
--------- --------- ---------
Balances at year end $ 800,000 $ 800,000 $ 800,000
========= ========= =========
At December 31, 2004 and 2003, the total recorded investment in impaired loans,
all of which had allowances determined in accordance with FASB No. 114 and
No. 118, amounted to approximately $178,103 and $396,183, respectively. The
average recorded investment in impaired loans amounted to approximately
$287,143, $858,971 and $1,526,559 for the years ended December 31, 2004, 2003
and 2002, respectively. The allowance for loan losses related to impaired loans
amounted to approximately $43,403 and $7,312 at December 31, 2004 and 2003,
respectively. Interest income on impaired loans of $129, $21,519 and $15,703,
was recognized for cash payments received in 2004, 2003 and 2002, respectively.
The Bank has no commitments to loan additional funds to borrowers whose loans
have been modified.
NOTE 4 - PREMISES AND EQUIPMENT, NET
A summary of premises and equipment at December 31, 2004 and 2003 follows:
2004 2003
---------- ----------
Cost
Land $ 300,705 $ 300,705
Bank premises 646,826 646,826
Furniture and equipment 1,364,200 1,221,449
Leasehold improvements 232,594 183,023
---------- ----------
2,544,325 2,352,003
Accumulated depreciation 1,551,415 1,552,081
---------- ----------
$ 992,910 $ 799,922
========== ==========
11
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - DEPOSITS
Deposit account balances at December 31, 2004 and 2003, are summarized as
follows:
2004 2003
----------- -----------
Non-interest bearing $32,618,469 $31,890,613
Interest-bearing demand 33,951,734 24,198,183
----------- -----------
66,570,203 56,088,796
Savings deposits 20,609,861 21,458,393
Certificates of deposit under $100,000 5,882,406 6,534,474
Certificates of deposit over $100,000 5,414,450 5,332,827
----------- -----------
$98,476,920 $89,414,490
=========== ===========
Certificates of deposit over $100,000 are not insured by the Federal Deposit
Insurance Corporation (FDIC)
At December 31, 2004, scheduled maturities of certificate of deposits are as
follows:
Over three
Three months or months through Over one year
(in thousands) less twelve months through five years Total
- ------------------ --------------- -------------- ------------------ -----------
Less than $100,000 $ 1,949,121 $ 3,394,721 $ 538,564 $ 5,882,406
$100,000 or more 1,511,536 3,591,571 311,343 5,414,450
--------------- -------------- ----------- -----------
$ 3,460,657 $ 6,986,292 $ 849,907 $11,296,856
=============== ============== =========== ===========
NOTE 6 - BORROWED FUNDS
Borrowed funds consist of United States treasury tax and loan deposits and
generally mature within one to 120 days from the transaction date. All borrowed
funds are collateralized with mortgage backed securities.
NOTE 7 - EMPLOYEE BENEFIT PLANS
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 $136,962,
$133,906 and $124,282, for 2004, 2003 and 2002, respectively.
The Bank established a non-qualified deferred compensation plan covering key
employees of the bank. This plan makes discretionary incentive contributions and
the benefits are vested over a 5 year period. The amount funded was $192,000,
for each of years 2004, 2003 and 2002.
The Bank has a Restricted Stock Award Plan, covering 100,000 shares of common
stock, whose purpose is to permit grants of shares, subject to restrictions, to
key employees of the Company as a means of retaining and rewarding them for
long-term performance and to increase their ownership in the Company. Shares
awarded under the plan entitle the shareholder to all rights of common stock
ownership except that the shares may not be sold, transferred, pledged,
exchanged or otherwise disposed of during the restriction period. The
restriction period is determined by a committee that is appointed by the Board
of Directors and the period may not exceed ten years. During the years ended
December 31, 2001 and 2000, 40,000 shares and 60,000 shares respectively, were
granted with restriction periods of ten years. The shares do not vest over time;
all restrictions lapse at the end of this period.
12
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The shares were recorded at the market values on the dates of issuance as
deferred compensation and the related amounts are being amortized to operations
over the respective vesting periods. Compensation expense for the years ended
December 31, 2004, 2003 and 2002 related to these shares of restricted stock,
was $105,300 for each year.
NOTE 8 - INCOME TAXES
The consolidated provision for income taxes consists of the following:
2004 2003 2002
----------- ----------- -----------
Income tax expense
Current tax expense
Federal $ 825,350 $ 876,473 $ 1,214,883
State 171,357 190,602 211,100
Deferred tax (benefit) (11,586) (60,207) (91,467)
----------- ----------- -----------
$ 985,121 $ 1,006,868 $ 1,334,516
=========== =========== ===========
The provision for federal income tax differs from that computed by applying
federal statutory rates to income before federal income tax expense, as
indicated in the following analysis:
2004 2003 2002
----------- ----------- -----------
Federal Statutory income tax at 34% $ 846,498 $ 967,736 $ 1,114,692
Effect on tax rate of:
Tax-exempt securities (7,810) (7,374) (8,452)
State taxes 111,375 116,854 139,326
Other 35,058 (70,348) 88,950
----------- ----------- -----------
$ 985,121 $ 1,006,868 $ 1,334,516
=========== =========== ===========
During 2004, the Company recognized certain tax benefits related to the stock
option plan in the amount $207,664. Such benefits were recorded as a reduction
of income taxes payable and an increase in additional paid-in capital.
A cumulative net deferred tax asset is included in other assets. The components
of the asset are as follows:
2004 2003 2002
--------- --------- ---------
Deferred tax assets
Allowance for loan losses $ 198,162 $ 182,521 $ 195,300
Deferred compensation 548,160 429,240 358,134
Deferred tax liabilities
Depreciation (128,754) (5,779) (7,659)
--------- --------- ---------
Net deferred tax assets,
included in other assets $ 617,568 $ 605,982 $ 545,775
========= ========= =========
13
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - STOCK SPLITS AND DIVIDENDS
The Board of Directors declared two shares for one share stock split on December
14, 1999 to stockholders of record on December 31, 1999 payable on January 14,
2000. On March 12, 2002 the Board of Directors declared a 10% stock dividend to
stockholders of record on March 21, 2002 payable on May 15, 2002. These
financial statements give retroactive effect to the stock split and stock
dividend in the computation of earnings per share.
NOTE 10 - STOCK OPTION PLAN
The Company adopted on April 26, 2000 a new stock option plan for officers, key
employees and Directors that provides for nonqualified and incentive options.
The Board of Directors determines the option price 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 April 2000 the Company granted stock options for 191,500 shares at an
exercise price of $10.00 per share, this grant was adjusted, in March 2002 to
reflect the 10% stock dividend paid to the shareholders. This created a total
granted stock options of 210,650 shares at an exercise price of $9.09 per share.
During 2004, 149,700 shares were available to be exercised, and 73,025 shares
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 the options granted were estimated on the grant date using the
Black-Scholes Model. The following assumptions were made in estimating fair
value:
Assumptions
- -----------------------
Dividend yield 0%
Risk-free interest rate 6.75%
Expected volatility 50.085%
Expected life 5 years
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:
Net Income 2004 2003 2002
- ---------------------------------------------------------------- ----------- ----------- -------------
As reported $ 1,504,579 $ 1,839,414 $ 1,943,990
Less: Stock-based employee compensation expense determined under
fair value based method for all awards, net of related tax
effects. 142,854 142,854 142,854
----------- ----------- -------------
Pro forma $ 1,361,725 $ 1,696,560 $ 1,801,136
=========== =========== =============
Basic earnings per share
As reported $ .70 $ .91 $ .96
=========== =========== =============
Pro forma $ .63 $ .82 $ .89
=========== =========== =============
Diluted earnings per share
As reported $ .68 $ .88 $ .95
=========== =========== =============
Pro forma $ .62 $ .81 $ .88
=========== =========== =============
14
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
The following table summarizes the options granted and exercised under the Plan,
during the periods indicated and their respective weighted average exercise
price:
2004 2003 2002
------------------------- --------------------------- -------------------------
Weighted Weighted Weighted
Number of Average Number of Average Exercise Number of Average
Shares Exercise Price Shares Price Shares Exercise Price
--------- -------------- --------- ---------------- --------- --------------
Outstanding at beginning of
year 149,700 $ 9.09 188,375 $ 9.09 195,800 $ 9.09
Granted - - 7,425 9.09 - -
Exercised (73,025) 9.09 (27,400) 9.09 - -
Forfeited - - (18,700) 9.09 (7,425) 9.09
------- ------ --------- ------- -------- ------
Outstanding at end of year 76,675 $ 9.09 149,700 $ 9.09 188,375 $ 9.09
======= ====== ========= ======= ======== ======
Options exercisable at year
end 76,675 119,760 113,025
======= ========= ========
NOTE 11 - RELATED PARTIES
The Bank has entered into transactions with its directors, principal officers,
their immediate families, and affiliated companies in which directors are
principal stockholders. These transactions are as follows:
Loans - Related parties were indebted to the Company for loans as follows:
December 31,
-----------------------------
2004 2003
------------ ------------
Beginning balance $ 12,395,126 $ 9,670,458
Additional loans 2,316,891 10,250,466
Collection of principal (2,005,041) (7,525,798)
------------ ------------
Ending balance $ 12,706,976 $ 12,395,126
============ ============
On December 29, 2004 the Company purchased from the Estate of Josephine Gumina
11,239 shares at a price of $13 per share, totaling $146,107. The market value
at the time of the sale was $14.80. The Board of Directors approved this
transaction.
In July 2003, the Company sold the Monroe property to its chief executive
officer for $330,000 in cash, which was approved by the Company's Board of
Directors. The sales price was close to book value, resulting in a small gain
and was in excess of the appraised values by approximately $50,000.
Loan participations sold - Certain loans and loan participations, which the Bank
services, were sold to a related party without recourse. As of December 31, 2004
and 2003, these loans totaled $1,869,615 and $1,598,172, respectively.
15
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Rent - Three operating locations of the Bank are leased from a related party.
Rent paid to that party totaled $527,594, $455,869 and $444,417 for the years
ended December 31, 2004, 2003 and 2002, respectively, at terms which are
considered by management to be no less favorable than an arm's length agreement.
Future minimum lease payments to these related parties as of December 31, 2004,
are as follows:
Total
Year Amounts Aaron Road Livingston Avenue Applegarth Road
- ---------- ------------ ------------ ----------------- ---------------
2005 $ 506,053 $ 81,600 $ 329,453 $ 95,000
2006 518,384 84,048 339,336 95,000
2007 532,510 86,569 349,516 96,425
2008 548,486 89,166 360,002 99,318
2009 576,065 91,841 381,927 102,297
Thereafter 3,682,893 1,307,700 370,802 2,004,391
------------ ------------ ------------ ------------
$ 6,364,391 $ 1,740,924 $ 2,131,036 $ 2,492,431
============ ============ ============ ============
Deposits - The Company is indebted to certain related parties for bank deposits
made in the ordinary course of business. Rates and terms of these deposits are
comparable to those offered to unrelated depositors.
Other - The Company engages in routine operating transactions with entities
related to directors. These transactions are in the normal course of business
and are immaterial to operations.
NOTE 12 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Bank has outstanding commitments and
contingent liabilities, such as commitments to extend credit and standby letters
of credit, which are not included, in the accompanying consolidated financial
statements. The Bank's exposure to credit loss in the event of nonperformance by
the other party to the financial instruments for commitments to extend credit
and standby letters of credit is represented by the contractual or notional
amount of those instruments. The Bank uses the same credit policies in making
such commitments as it does for instruments that are included in the
consolidated balance sheet. Financial instruments whose contract amount
represents credit risk are as follows at December 31, 2004.
Commitments to extend credit $ 2,264,000
Letters of credit 410,932
Commercial lines of credit 4,918,936
Consumer lines of credit 1,913,442
------------
$ 9,507,310
============
16
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 13 - COMMITMENTS AND CONTINGENT LIABILITIES
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.
Commitments to extend credit are agreements to lend to a customer as long as no
violation of any condition established in the contract exists. 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 Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based on Managements'
credit evaluation. Collateral held varies, but may include accounts receivable,
inventory, property and equipment, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Standby letters of
credit generally have fixed expiration dates or other termination clauses and
may require payment of a fee. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan facilities to
customers. The Bank's policy for obtaining collateral, and the nature of such
collateral, is essentially the same as that involved in making commitments to
extend credit.
The Bank has not been required to perform on any financial guarantees during the
past two years. The Bank has not incurred any losses on its commitments in
either 2004 or 2003.
The Bank entered into an agreement in September 1996 to purchase a parcel of
land in Monroe Township, New Jersy, for the purpose of constructing an
additional branch office. As mentioned in Note-11, the property has been sold
to the chief executive officer.
The Bank leases the Metroplex Branch, Aaron Road Branch, Applegarth Road Branch,
Livingston Avenue Branch and corporate office facility under operating lease
arrangements expiring at various times through the year 2024.
Minimum annual rental commitments under non-cancelable leases are as follows at
December 31, 2004:
Year Ending
December 31 Amount
- ----------- -----------
2005 $ 570,483
2006 582,814
2007 596,940
2008 612,916
2009 635,347
Thereafter 4,777,956
-----------
$ 7,776,456
===========
17
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 14 - CONCENTRATIONS OF RISK
Cash Concentrations: The Bank maintains cash balances at several correspondent
banks. The aggregate cash balances represent federal funds and demand deposits.
The cash balances are guaranteed by the Federal Deposit Insurance Corporation up
to $100,000. At December 31, 2004 and 2003, the Bank had approximately
$27,463,000 and $23,783,000, respectively, in excess of FDIC limits.
Loan Concentrations: 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 $44,835,243
and $40,013,237 as of December 31, 2004 and 2003, respectively, approximately
$909,857 and $221,224, respectively, of those loans are collateralized by stock
in one publicly traded company. The market value of stock collateralizing those
loans totals approximately $1,344,326 and $623,987, as of December 31, 2004 and
2003, 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%.
Interest-Rate Risk: The Bank is principally engaged in the business of
attracting deposits from the general public and using these deposits to make
loans secured by real estate and commercial loans, and to a lesser extent,
consumer loans and to purchase investment securities. The potential of
interest-rate risk exists as a result of the shorter duration of the Bank's
interest-sensitive liabilities compared to the generally longer duration of
interest-sensitive assets.
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 requires disclosure of the estimated fair value of an entity's
assets and liabilities considered to be financial instruments. For the Bank, as
for most financial institutions, the majority of its assets and liabilities are
considered financial instruments as defined in SFAS No. 107. However, many such
instruments lack an available trading market, as characterized by a willing
buyer and seller engaging in an exchange transaction. Therefore, the Bank had to
use significant estimates and present value calculations to prepare this
disclosure, as required by SFAS No. 107. Accordingly, the information presented
below does not purport to represent the aggregate net fair value of the Bank.
Changes in the assumptions or methodologies used to estimate fair values may
materially affect the estimated amounts. Also, management is concerned that
there may not be reasonable comparability between institutions due to the wide
range of permitted assumptions and methodologies in the absence of active
markets. This lack of uniformity gives rise to a high degree of subjectivity in
estimating financial instrument fair values.
Estimated fair values have been determined by the Bank using what management
believes to be the best available data and an estimation methodology suitable
for each category of financial instruments. The estimation methodologies used,
the estimated fair values, and recorded book balances at December 31, 2004 and
2003 are set forth below.
18
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
For cash and due from banks and interest-bearing deposits with banks, the
recorded book values are deemed to approximate fair values at December 31, 2004
and 2003, respectively. The estimated fair values of investment and
mortgage-backed securities are based on quoted market prices, if available. If
quoted market prices are not available, the estimated fair values are based on
quoted market prices of comparable instruments.
The fair values of loans are estimated based on a discounted cash flow analysis
using interest rates currently offered for loans with similar terms to borrowers
of similar credit quality. The carrying value of accrued interest is deemed to
approximate fair value.
December 31,
----------------------------------------------------------
2004 2003
----------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
---------- ---------- ---------- ----------
Financial assets (in thousands)
- --------------------------- ----------------------------------------------------------
Cash and due from banks $ 6,905 $ 6,905 $ 16,842 $ 16,842
Federal funds sold 22,000 22,000 9,000 9,000
Securities held to maturity 34,505 34,198 31,131 31,174
Loans receivable, net 65,676 67,670 61,468 63,223
Accrued interest receivable 678 678 536 536
The estimated fair values of demand deposits (i.e., interest and non-interest
bearing checking accounts, passbook savings and certain types of money market
accounts) are, by definition, equal to the amount payable on demand at the
reporting date (i.e., their carrying amounts). The carrying amounts of
variable-rate, fixed term money market accounts and certificates of deposit
approximate their fair values at the reporting date. The fair values of fixed
rate certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered to a schedule of
aggregated expected monthly time deposit maturities. The carrying amount of
accrued interest payable approximates its fair value.
December 31,
----------------------------------------------------------
2004 2003
----------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
---------- ---------- ---------- ----------
Financial liabilities (in thousands)
--------------------- ----------------------------------------------------------
Deposits $ 98,477 $ 98,427 $ 89,414 $ 89,467
Borrowed funds 279 279 607 607
Accrued interest payable 66 66 77 77
The fair value of commitments to extend credit is estimated based on the amount
of unamortized deferred loan commitment fees. The fair value of letters of
credit is based on the amount of unearned fees plus the estimated cost to
terminate the letters of credit. Fair value of unrecognized financial
instruments including commitments to extend credit and the fair value of letters
of credit are considered immaterial.
19
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 16 - REGULATORY MATTERS
The Company is subject to various regulatory capital requirements administered
by its primary federal regulator, the Federal Deposit Insurance Corporation
(FDIC). Failure to meet the minimum regulatory capital requirements can initiate
certain mandatory and possible additional discretionary actions by regulators,
that if undertaken, could have a direct material effect on the Company and the
consolidated financial statements. Under the regulatory capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company must meet specific capital guidelines involving quantitative measure of
the Company's assets, liabilities and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Company's capital amounts
and classification under the prompt corrective action guidelines are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios of: total risk-based
capital and Tier 1 capital to risk-weighted assets (as defined in the
regulations), and of Tier 1 capital to adjusted total assets (as defined).
Management believes, as of December 31, 2004, that the Company meets all the
capital adequacy requirements to which it is subject.
As of December 8, 2004, the most recent notification from the Regulators, the
Bank was categorized as well capitalized under the regulatory framework for
prompt corrective action. To remain categorized as well capitalized, the Bank
will have to maintain minimum total risk-based, Tier 1 leverage ratios as
disclosed in the table below. There are no conditions or events since the most
recent notification that management believes have changed the Bank's prompt
corrective action category.
The Company's actual and required capital amounts and ratios are as follows (in
thousands):
To Be Well Capitalized
under the Prompt
For Capital Corrective Action
Actual Adequacy Purposes Provisions
-------------------------- -------------------------- --------------------------
Amount Ratio Amount Ratio Amount Ratio
---------- ---------- ---------- ---------- ---------- ----------
As of December 31, 2004
Total Risk-based Capital
(to Risk-weighted Assets) $ 32,794 42.14% $ 6,225 8.00% $ 7,782 10.00%
Tier I Capital
(to Risk-weighted Assets) $ 31,994 41.11% $ 3,113 4.00% $ 4,669 6.00%
Tier I Capital
(to Adjusted Total Assets) $ 31,994 24.47% $ 5,229 4.00% $ 6,536 5.00%
As of December 31, 2003
Total Risk-based Capital
(to Risk-weighted Assets) $ 30,712 45.16% $ 5,441 8.00% $ 6,801 10.00%
Tier I Capital
(to Risk-weighted Assets) $ 29,912 43.98% $ 2,720 4.00% $ 4,080 6.00%
Tier I Capital
(to Adjusted Total Assets) $ 29,912 23.05% $ 5,190 4.00% $ 6,487 5.00%
20
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENT
NOTE 17 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected unaudited quarterly data is presented as follows (in thousands except
for per share amounts):
2004
------------------------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------ ------------ ------------ ------------
Interest income $ 1,561 $ 1,576 $ 1,667 $ 1,665
Interest expense 77 79 79 85
------------ ------------ ------------ ------------
Net interest income 1,484 1,497 1,588 1,580
Provision for credit losses 45 45 45 (228)
------------ ------------ ------------ ------------
Net interest income after
provision for credit losses 1,439 1,452 1,543 1,808
Non interest income 241 249 217 194
Non interest expenses 1,178 1,142 1,191 1,143
------------ ------------ ------------ ------------
Income before income taxes 502 559 569 859
Income tax expense 235 174 281 295
------------ ------------ ------------ ------------
Net income $ 267 $ 385 $ 288 $ 564
============ ============ ============ ============
Net income per share $ 0.13 $ 0.18 $ 0.13 $ 0.26
============ ============ ============ ============
2003
------------------------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------ ------------ ------------ ------------
Interest income $ 1,724 $ 1,628 $ 1,630 $ 1,730
Interest expense 144 156 111 89
------------ ------------ ------------ ------------
Net interest income 1,580 1,472 1,519 1,641
Provision for credit losses 75 75 75 (433)
------------ ------------ ------------ ------------
Net interest income after
provision for credit losses 1,505 1,397 1,444 2,074
Non interest income 224 249 269 211
Non interest expenses 1,139 1,148 1,105 1,135
------------ ------------ ------------ ------------
Income before income taxes 590 498 608 1,150
Income tax expense 273 225 257 252
------------ ------------ ------------ ------------
Net income $ 317 $ 273 $ 351 $ 898
============ ============ ============ ============
Net income per share $ 0.16 $ 0.14 $ 0.17 $ 0.44
============ ============ ============ ============
During the fourth quarter of 2004 and 2003, the Company completed comprehensive
review of its loan loss reserves. As a result of these reviews, there were some
reversals of allowance for credit losses in the fourth quarters.
21
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 18 - CONDENSED FINANCIAL INFORMATION
OF BRUNSWICK BANCORP (PARENT ONLY)
BALANCE SHEET
December 31,
-----------------------------------
2004 2003
------------ ------------
Assets
Due from banks - demand deposits with
the Bank $ 6,164,303 $ 5,144,295
Investments - certificate of deposit
with the Bank 85,580 84,860
Loans receivable 1,707,055 1,864,008
Investment in Subsidiaries 24,482,865 23,305,562
Accrued interest receivable and other assets 170,948 84,457
------------ ------------
$ 32,610,751 $ 30,483,182
============ ============
Liabilities and Stockholders' Equity
Accrued expenses and other liabilities $ - $ -
Common stock 4,369,494 4,223,444
Additional paid-in capital 3,229,886 2,712,139
Retained earnings 25,759,478 24,254,899
Deferred stock compensation (602,000) (707,300)
Treasury stock at cost (146,107) -
------------ ------------
$ 32,610,751 $ 30,483,182
============ ============
STATEMENTS OF INCOME
Year Ended December 31,
-------------------------------------------------------
2004 2003 2002
----------- ----------- -----------
Interest income $ 111,190 $ 189,075 $ 178,997
Other expenses (115,950) (121,992) (124,650)
----------- ----------- -----------
Income before income
taxes and equity in
undistributed net income
of the Bank (4,760) 67,083 54,347
Income tax expense (17,965) (26,800) (24,775)
----------- ----------- -----------
Income before equity in
undistributed net income of
the Bank (22,725) 40,283 29,572
Equity in undistributed net
income of the Bank 1,527,304 1,799,131 1,914,418
----------- ----------- -----------
Net income $ 1,504,579 $ 1,839,414 $ 1,943,990
=========== =========== ===========
Net income per share of
common stock $ 0.70 $ 0.91 $ 0.96
=========== =========== ===========
22
BRUNSWICK BANCORP AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS
Year Ended December 31,
----------------------------------------------------------
2004 2003 2002
------------ ------------ ------------
Cash flows from operating activities:
Net income $ 1,504,579 $ 1,839,414 $ 1,943,990
Adjustments to reconcile net income to
net cash provided by operating activities
Amoritization of deferred stock compensation 105,300 105,300 105,300
(Increase) decrease in other assets (86,491) (10,303) (25,783)
Increase (decrease) in other liabilities - (24,575) 24,575
Equity in undistributed net income
of the Bank (1,527,303) (1,799,131) (1,914,418)
------------ ------------ ------------
Cash provided by operating activities: (3,915) 110,705 133,664
------------ ------------ ------------
Cash flows from investing activities:
Dividends from the Bank 350,000 350,000 600,000
Investment in subsidiary - (60,000)
Net (increase) decrease in loans 156,953 (346,356) 343,538
Net (increase) decrease in certificates
of deposit (720) (1,338) (1,682)
------------ ------------ ------------
Cash provided by (used in) investing
activities 506,233 2,306 881,856
------------ ------------ ------------
Cash flows from financing activities:
Purchase of treasury stock (146,107) - (4,845)
Proceeds from issuance of Common Stock-
Stock option plan 663,797 249,758 -
Cash in lieu of fractional shares - - (1,543)
------------ ------------ ------------
Cash used in financing activities: 517,690 249,758 (6,388)
------------ ------------ ------------
Increase (decrease) in cash 1,020,008 362,769 1,009,132
Cash and cash equivalents, beginning
of year 5,144,295 4,781,526 3,772,394
------------ ------------ ------------
Cash and cash equivalents, end of year $ 6,164,303 $ 5,144,295 $ 4,781,526
============ ============ ============
Certain bank regulatory limitations exist on the availability of subsidiary bank
undistributed net assets for the payment of dividends to Brunswick Bancorp
without the prior approval of the bank regulatory authorities. Substantially all
undistributed net assets of the Bank are limited in availability for dividends
to Brunswick Bancorp as of December 31, 2004.
23