As
filed with the Securities and Exchange Commission on March 7, 2007
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
BANCORP OF NEW JERSEY, INC.
(Exact name of registrant as specified in its charter)
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New Jersey
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6022
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20-8444387
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(State or other jurisdiction
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(Primary Standard Industrial
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(I.R.S. Employer
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of incorporation or organization)
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Classification Code Number)
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Identification Number)
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204 Main Street
Fort Lee, New Jersey 07024
(201) 944-8600
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Albert F. Buzzetti
President and Chief Executive Officer
Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
(201) 944-8600
(Name, address, including zip code, and telephone number, including area code, of agent for service)
with a copy to:
Robert B. Murphy, Esq.
Pepper Hamilton LLP
Hamilton Square
600 Fourteenth Street, N.W.
Washington, DC 20005-2004
Approximate date of commencement of proposed sale to the public:
From time to time after this
registration statement is declared effective.
If the securities being registered on this Form are being offered in connection with the
formation of a holding company and there is compliance with General Instruction G, check the
following box.
þ
If this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.
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If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
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CALCULATION OF REGISTRATION FEE
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Title of each
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Proposed maximum
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Proposed maximum
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class of securities
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Amount to be
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offering price
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aggregate offering
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Amount of
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to be registered
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registered
(1)
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per unit
(2)
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price
(2)
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registration fee
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Common stock, no
par value per share
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2,898,967
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$
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17.94
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$
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52,007,467.98
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$
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1,596.63
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(1)
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Based on the approximate number of shares to be issued in respect of the same
number of outstanding shares of common stock of Bank of New Jersey, plus shares issuable
pursuant to outstanding exercisable options and warrants to acquire such stock.
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(2)
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Based on the book value of the common stock at December 31, 2006, in accordance with
Rules 457(f)(2).
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BANK OF NEW JERSEY
204 Main Street
Fort Lee, New Jersey 07024
March 27, 2007
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of Bank of New Jersey,
or the Bank, to be held on Monday, April 23, 2007 at 3:00 PM at the Fort Lee Hilton Hotel, 2117
Route 4 Eastbound, Fort Lee, New Jersey.
At the annual meeting, shareholders will be asked to consider and vote upon:
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The election of 18 directors to the Banks board of directors to serve until
the 2008 annual meeting of shareholders and until their successors are elected and
qualify.
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The 2007 Non-Qualified Stock Option Plan for Directors, which provides for
options to purchase shares of common stock to be issued to non-employee directors of
the Bank.
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A Plan of Acquisition pursuant to which the Bank would adopt a bank holding
company structure, the Bank would become a wholly-owned subsidiary of Bancorp of New
Jersey, Inc., a company formed solely for the purpose of becoming the holding company
of the Bank, and the shareholders of the Bank would become shareholders of the holding
company through a one-to-one exchange of their shares of common stock of the Bank for
shares of common stock of the holding company.
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The board of directors of the Bank believes that each of the proposals being submitted to the
shareholders is in the best interests of the Bank and its shareholders and urges you to vote in
favor of each of these proposals.
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Very truly yours,
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/s/ Albert F. Buzzetti
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ALBERT F. BUZZETTI
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President and Chief Executive Officer
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BANK OF NEW JERSEY
204 Main Street
Fort Lee, New Jersey 07024
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 23, 2007
Notice is hereby given that the Annual Meeting of Shareholders of Bank of New Jersey, or the
Bank, will be held at the Fort Lee Hilton Hotel, 2117 Route 4 Eastbound, Fort Lee, New Jersey on
Monday, April 23, 2007, at 3:00 PM, for the purpose of considering and voting upon the following
matters.
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The election of 18 directors to the Banks board of directors to serve until
the 2008 annual meeting of shareholders and until their successors are elected and
qualify.
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The 2007 Non-Qualified Stock Option Plan for Directors, which provides for
options to purchase shares of common stock to be issued to non-employee directors of
the Bank.
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A Plan of Acquisition pursuant to which the Bank would adopt a bank holding
company structure, the Bank would become a wholly-owned subsidiary of Bancorp of New
Jersey, Inc., a company formed solely for the purpose of becoming the holding company
of the Bank, and the shareholders of the Bank would become shareholders of the holding
company through a one-to-one exchange of their shares of common stock of the Bank for
shares of common stock of the holding company.
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Shareholders of record at the close of business on February 22, 2007 are entitled to notice of
and to vote at the annual meeting. Whether or not you contemplate attending the annual meeting,
the board of directors of the Bank recommends that you execute and return the enclosed proxy. You
may revoke your proxy at any time prior to the exercise of the proxy by delivering to the Bank a
later dated proxy, by delivering a later dated written notice of revocation to the Bank, or by
voting your shares in person at the annual meeting.
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BY ORDER OF THE BOARD OF DIRECTORS
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/s/ Connie Caltabellatta
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CONNIE CALTABELLATTA
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Secretary
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March 27, 2007
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BANK OF NEW JERSEY
204 Main Street
Fort Lee, New Jersey 07024
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD ON APRIL 23, 2007
This proxy statement is being furnished to shareholders of Bank of New Jersey, referred to as
the Bank, in connection with the solicitation by the board of directors of the Bank of proxies to
be voted at the annual meeting of shareholders to be held at the Fort Lee Hilton Hotel, 2117 Route
4 Eastbound, Fort Lee, New Jersey, at 3:00 PM on Monday, April 23, 2007, or such later date to
which the annual meeting may be adjourned or postponed.
At the annual meeting, you will be asked to consider and vote upon the following matters:
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The election of 18 directors to the Banks board of directors to serve until
the 2008 annual meeting of shareholders and until their successors are elected and
qualify.
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The 2007 Non-Qualified Stock Option Plan for Directors, which provides for
options to purchase shares of common stock to be issued to non-employee directors of
the Bank.
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A Plan of Acquisition pursuant to which the Bank would adopt a bank holding
company structure, the Bank would become a wholly-owned subsidiary of Bancorp of New
Jersey, Inc., a company formed solely for the purpose of becoming the holding company
of the Bank, and the shareholders of the Bank would become shareholders of the holding
company through a one-to-one exchange of their shares of common stock of the Bank for
shares of common stock of the holding company.
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Information regarding these proposals is included in this proxy statement, as well the exhibits
hereto. In accordance with the New Jersey Banking Act of 1948, as amended, referred to as the
Banking Act, and the by-laws of the Bank, no other business may be transacted at the annual
meeting. Shareholders should carefully read this proxy statement, as well as the exhibits hereto.
If the Plan of Acquisition is approved and the holding company reorganization is consummated,
shareholders of the Bank who do not dissent will receive shares of the common stock, no par value
per share, of the holding company. Exchanging your shares in the Bank for shares of holding
company common stock involves significant risks.
YOU SHOULD READ THE RISK FACTORS SECTION
BEGINNING ON PAGE 4 BEFORE VOTING ON THE PLAN OF ACQUISITION.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of the common stock of the holding company or passed upon the adequacy or
accuracy of this proxy statement. Any representation to the contrary is a criminal offense.
Neither the common stock of the Bank nor the common stock of the holding company are savings
accounts or savings deposits and will not be insured by the bank insurance fund of the federal
deposit insurance corporation or any other government agency. These securities are subject to
investment risk, including the possible loss of principal.
The first date on which this proxy statement and the enclosed form of proxy are being sent to
the shareholders of the Bank is on or about March 27, 2007.
TABLE OF CONTENTS
This proxy statement incorporates important business and financial information about the Bank that
is included in our 2006 Annual Report, a copy of which is being delivered with this proxy
statement. If you do not have a copy of our 2006 Annual Report, a copy is available without charge
to shareholders of the Bank upon written request to Bank of New Jersey, 204 Main Street, Fort Lee,
New Jersey 07024, Attention: Albert F. Buzzetti, President and CEO, or by telephone by calling
(201) 944-8600. To obtain timely delivery, shareholders must request the information no later than
five business days before the date of the annual meeting, or April 16, 2007, and should request the
information sooner if they intend to vote by proxy.
FORWARD-LOOKING STATEMENTS
The information in this proxy statement contains forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, which involve risks and
uncertainties. Such statements are not historical facts and include expressions about managements
confidence, strategies, and expectations about new and existing programs, products, relationships,
opportunities, technologies, and market conditions. These statements may be identified by the use
of such words as believe, expect, anticipate, should, may, potential, or similar
statements or variations of such terms. Examples of forward looking statements include, but are
not limited to, estimates with respect to the financial condition, results of operations, and
business of Bank of New Jersey, that are subject to various factors which could cause actual
results to differ materially from these estimates. These factors include: changes in general,
economic and market conditions, both in the Banks trade area and nationally, legislative and
regulatory conditions, or the development of an interest rate environment which adversely affects
Bank of New Jerseys interest rate margin or other income anticipated from operations and
investments, changes in monetary policy, the continued viability of the Banks customers and a
variety of other matters, most, if not at all of which, are beyond the Banks control. You should
not place undue reliance on any forward-looking statements, which only reflect managements
analysis as of the date of this proxy statement. We undertake no obligation to update
forward-looking statements or to make any public announcement when we consider forward-looking
statements in this proxy statement to no longer be accurate, whether as a result of new information
or future events.
SUMMARY
This summary highlights some of the information contained elsewhere in this proxy statement
regarding the proposal to adopt the Plan of Acquisition. This summary is not complete and does not
contain all of the information that you should consider before voting on the Plan of Acquisition.
You should read the entire proxy statement carefully, including Risk Factors, before you decide
to vote on the Plan of Acquisition.
Our Business
We are a New Jersey state-chartered commercial bank, having our principal office in Fort Lee
in Bergen County, New Jersey.
We provide a traditional range of financial products and services to meet the deposit and
credit needs of individual customers, small businesses and professionals in our local market area.
As a locally owned and operated community bank, we maintain a strong focus on service that is
highly personalized, efficient and responsive to local needs. To augment the provision of
community banking services, we provide for the alternate delivery of certain of our financial
products to our local customers and to a broader market through the use of mail, telephone and
internet banking.
It is our intention to deliver these products and services with the care and professionalism
expected of a community bank and with a special dedication to personalized service. To create this
environment, we employ a well-trained, highly motivated staff interested in providing quality
client relationships using state-of-the-art delivery systems and client service facilities.
The pursuit of this strategy is guided by a management team with extensive banking experience,
whose goal is to serve the financial needs of its clients and provide a profitable return to its
investors, consistent with safe and sound banking practices.
Plan of Acquisition
The board of directors of the Bank has approved a Plan of Acquisition that provides for the
establishment of a bank holding company structure. The Plan provides for the transfer and
contribution of all of the Banks stock by the shareholders to the holding company in a one for one exchange for
the stock of the holding company pursuant to the terms of the Banking Act. As a result, the
shareholders of the Bank would become the shareholders of the holding company, the holding company
would acquire the Bank and the Bank would be the wholly-owned subsidiary of the holding company.
You should refer to Proposal 2 Plan of Acquisition for more information.
Per Share Data
The following table sets forth certain per share data of the Bank at and for the period ended
December 31, 2006.
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Book value per sharebasic:
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$17.94
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Income (loss) per sharebasic:
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($ 0.24
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Cash dividends declared per share:
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$ 0.00
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After the holding company reorganization, the consolidated capitalization, assets, liabilities,
results of operations and other financial data of the holding company immediately following the
reorganization will be substantially the same as those of the Bank immediately prior to the holding
company reorganization. You should refer to Proposal 2 Plan of AcquisitionAccounting Treatment
for more information.
Market Value of Common Stock
Although our common stock is freely transferable, it is not traded on an exchange and no
active or liquid trading market for our common stock exists. Purchases and sales generally take
place pursuant to negotiated transactions. Based on approximately fifteen trades prior to November
30, 2006, the day prior to the adoption of the Plan of Acquisition, the market value of the common
stock of the Bank was $20.00 per share or, as adjusted for our ten percent stock distribution in
January 2007, $18.18. The holding company has been organized solely for the purpose of
consummating the holding company reorganization and unless and until the holding company
reorganization is consummated no shares of common stock of the holding company will be issued.
Votes Held by Our Directors and Executive Officers and Their Affiliates
As of February 22, 2007, our directors and executive officers and their respective affiliates
beneficially owned 612,537 shares of the common stock of the Bank, or approximately 24.30% of the
shares outstanding and entitled to vote on the Plan of Acquisition and shares issuable upon the
exercise of exercisable warrants and options held by our directors and executive officers and their
respective affiliates. We anticipate that all of our directors and executive officers and their
respective affiliates will vote
FOR
the Plan of Acquisition. The approval of the Plan requires the
affirmative vote of two-thirds of outstanding shares. Accordingly, the votes of our directors and
executive officers and their respective affiliates will have a significant influence on whether the
Plan is approved by our shareholders.
Regulatory Requirements
Consummation of the transactions contemplated by the Plan is subject to certain federal and
state regulatory requirements, namely the approval of the Commissioner of the New Jersey Department
of Banking and Insurance, which was received on January 16, 2007, and the approval of the Board of
Governors of the Federal Reserve System. The holding company has filed an application with the
Board of Governors of the Federal Reserve System and an action on the application is pending. You
should refer to Proposal 2 Plan of AcquisitionRegulatory Requirements and Other Conditions for
more information.
Dissenters Rights
You have the right to dissent from the Plan and demand and receive payment of the fair value
of shares of common stock of the Bank. You should refer to Rights of Dissenting Shareholders for
more information.
Material U.S. Federal Income Tax Consequences
It is expected that the holding company reorganization contemplated by the Plan of Acquisition
will not result in U.S. federal income tax to a holder of shares of Bank stock who exchanges his or
her shares solely for shares of holding company stock. You should refer to Material United States
Federal Income Tax Consequences for more information and consult with your own tax advisor for a
comprehensive explanation of the tax consequences of the Plan of Acquisition as it affects your
particular circumstances.
-2-
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR
THE PLAN OF ACQUISITION.
-3-
RISK FACTORS
You should carefully consider the risk factors listed below. This list includes only the risk
factors that we believe are most significant and is not a complete list of the risks associated
with an investment in the common stock of the Bank or of the holding company. You should read this
section together with the other information in this proxy statement and our 2006 Annual Report
which is incorporated into this proxy statement by reference.
Certain provisions of the holding companys certificate of incorporation will make it more
difficult to remove the board of directors or management of the holding company.
The holding companys certificate of incorporation provides for the classification of the
board of directors into three classes with each class serving a staggered three-year term. As a
result of this classification, only one third of the entire board of directors should stand for
election in any one year and a minimum of two annual meetings would be required to elect a majority
of the board of directors. This may have the effect of deterring or discouraging, among other
things, a proxy contest for control of the holding company, the assumption of control of the
holding company by a holder of a large block of the holding companys common stock, and the removal
of incumbent management.
Approval of the Plan will, in effect, constitute approval of the classified board of directors
by shareholders.
Certain provisions of New Jersey law, which would be applicable to the holding company but are not
applicable to the Bank, may have the effect of discouraging a future takeover attempt.
Certain provisions of the New Jersey Shareholders Protection Act may have the effect of
discouraging a future takeover attempt which is not approved by the board of directors, but which
you might deem to be in your best interests or in which you might receive a substantial premium for
your shares over the current market prices. As a result, shareholders who might desire to
participate in such a transaction may not have an opportunity to do so. A corporation may exempt
itself from the requirements of the statute by so specifying in its certificate of incorporation.
The certificate of incorporation of Bancorp of New Jersey, Inc. does not opt out of the New Jersey
Shareholders Protection Act.
We must obtain further governmental approvals to implement the Plan of Acquisition.
The holding company reorganization contemplated by the Plan may only be consummated if the
Federal Reserve approves the application filed by the holding company to undertake the holding
company reorganization. The holding company filed the application with the Federal Reserve Bank of
New York on January 24, 2007. There can be no assurance that the Federal Reserve will not deny our
application or impose conditions which we find objectionable.
We have a limited operating history.
We commenced operations in May 2006 and have less than one year of operating history. Our
operations are subject to the risks inherent in the establishment of a new business and,
specifically, of a new bank. There can be no assurance that we will generate sufficient revenue to
operate profitably. Because we are a new bank, we are only able to provided limited information
regarding our operations.
-4-
Our success will depend in significant part on managements business plan and ability to execute.
We believe that we have a favorable market area, that our focus on personalized services will
give us a competitive advantage, and that the experience and personal contacts of our directors and
officers will provide us with the ability to implement successfully our business plan. If these
views are not accurate, or if we are unable to execute this business model, our business, operating
results, and financial condition would be adversely affected.
The holding company reorganization would allow our board and management greater flexibility.
The holding company reorganization would provide our board of directors and management with
greater flexibility in connection with corporate governance and business operations. This greater
flexibility would increase our reliance of the judgments and actions of our board and management to
achieve effective corporate governance and to operate our business.
There is a limited public trading market for our securities.
While the common stock of the Bank is transferable and the common stock of the holding company
will be registered with the Securities and Exchange Commission, or SEC, there has been no prior
public market established for our securities, and there can be no assurance that either an
established or a liquid trading market will develop in the future. Shareholders wishing to sell
their securities may have to find buyers through their own efforts, and there can be no assurance
that any such buyer will be available.
Shareholders interests are subject to dilution and approval of the Plan will subject shareholders
interests to additional dilution.
In connection with the proposed holding company reorganization, we have proposed to increase
the number of authorized shares of common stock from 5,000,000 to 20,000,000. Generally, our board
of directors would have the ability to issue authorized shares without shareholder approval.
Certain issuances, such as issuances in connection with a stock dividend or distribution or a stock
split, are made pro-rata among existing shareholders. However, shareholders do not have preemptive
rights and the board is under no duty to issue shares pro-rata among existing shareholders.
Accordingly, any issuance that is not made pro-rata among existing shareholders would increase the
number of outstanding shares of common stock and the percentage ownership of existing shareholders
would be diluted accordingly. The dilutive effect of such an issuance could discourage a challenge
for control or make it less likely that such a challenge, if attempted, would be successful. Our
board would also have the ability to fix the consideration for any shares issued in connection with
a future capital raise. In the event that the per share consideration was fixed at an amount less
than the then-current book value per share, the issuance would be dilutive to the book value per
share of existing shareholders. Approval of the Plan will, in effect, constitute approval of
increase in the number of authorized shares of common stock by shareholders.
In addition to any dilution which may be related to an increase in the authorized number of
shares of common stock, we have granted and may grant additional options in the future to our
officers, directors, and employees. The exercise of these options at some time in the future will
result in further voting power dilution to other shareholders, and could result in further book
value dilution to shareholders if the exercise price of the options is less than the per share book
value on the date of exercise.
-5-
Warrants could dilute the value of our common stock.
In connection with the initial capitalization of the Bank, we issued one warrant to purchase
one additional share of common stock at a price of $24.00 per share for every five shares of common
stock purchased by subscribers in the offering, or warrants to purchase an aggregate of 435,736
shares. As a result of a ten percent stock distribution in January 2007, in accordance with the
terms of the warrants, the number of shares of common stock underlying the warrants has been
increased to 479,308 and the exercise price per share has been adjusted to $21.82. If the holding
company reorganization contemplated by the Plan is consummated, these warrants will be assumed by
the holding company. The warrants may be exercised at any time prior to May 9, 2009. When any of
the warrants are exercised, the purchase of shares of common stock at the exercise price will
result in stock value dilution to the then existing shareholders to the extent that the exercise
price of the warrants is less than the per share book value on the date of exercise.
We may require additional capital in the future.
We anticipate that our existing capital resources will adequately satisfy our capital
requirements through our first five years of operations. Future capital requirements, however,
depend on many factors, including our ability to attract new customers and provide additional
services. To the extent that our existing capital resources are insufficient to fund future
operating requirements, it may be necessary to raise additional funds through public or private
financings. Any equity or debt financings, if available at all, may be on terms which are not
favorable to us and, in the case of equity financings, could result in dilution of the interests of
our then-existing shareholders. If adequate capital is not available, we will be subject to an
increased level of regulatory supervision and our business, operating results, and financial
condition could be adversely affected.
We may incur additional losses during our start-up period.
Projections we provided in our application to the New Jersey Department of Banking and
Insurance for a charter indicate losses for the first year of operation and that we may become
profitable at some point during our second year of operation. While our results of operations
through December 31, 2006 have exceeded our initial projections, there can be no assurance that
they will continue to do so or that we will ever operate at a sustainable profit.
Our primary emphasis is on commercial-purpose loans to small businesses, professional persons
and individual consumers with appropriate collateral. We will focus on providing personalized
services and making use of the business and personal ties of our directors and officers. Our
ability to realize a profit will depend, among other things, upon the skillful execution of this
business plan by management, as well as external factors, including national and local economic
conditions, monetary and fiscal policies of the Federal government, and legislative and regulatory
developments, any of which may adversely affect the banking industry and our operations.
We may not be successful in opening new branches or managing growth.
We have received regulatory approval to open two new bank branches, both in Fort Lee, New
Jersey. We have also applied to open a third new bank branch in Hackensack, New Jersey, and may
consider other new bank branches in the future. We may not obtain regulatory approval to open the
Hackensack branch or be able to identify and hire qualified management to operate any of these
branches. In addition, the organizational and overhead costs may be greater than we anticipated.
New branches may take longer than expected to reach profitability, and we cannot assure that they
will become profitable. The additional costs of starting new branches may adversely impact our
financial results.
-6-
Our ability to manage growth successfully will depend on whether we can fund growth while
maintaining cost controls and asset quality, as well as on factors beyond our control, such as
national and regional economic conditions and interest rate trends. If we are not able to control
costs and maintain asset quality, such growth could adversely impact our earnings and financial
condition.
We face strong competition.
We face strong competition from many other banks, savings institutions, and other financial
organizations, as well as many other companies now offering a broad array of financial services.
Many of these competitors have greater financial resources, name recognition, market presence, and
operating experience than we do. While our strategy will be to attract customers by providing
personalized services and making use of the business community and personal ties of our directors
and officers, as well as by providing superior products and services, there can be no assurance
that we will be able to gain market acceptance and operate profitably. We expect that competition
will intensify in the future both from existing institutions as well as new institutions. We
believe that our ability to compete successfully depends upon a number of factors, including:
market presence; customer service and satisfaction; the pricing policies of our competitors; the
timing of introductions of new products and services by us and our competitors; and industry and
general economic trends.
Economic conditions and related uncertainties may adversely effect our financial condition and
results of operations.
Our success is largely dependent on the general economic conditions of our targeted market
area of Bergen and Hudson Counties, New Jersey. Unexpected changes in the national and local
economy may adversely affect our ability to attract deposits and to make loans. Economic downturns
could result in nonpayment of borrowers outstanding loans. A significant decline or a long-term
downtrend in one or more areas, including real estate and consumer spending, could have an adverse
impact on our ability to become or remain profitable. Such risks are beyond our control and may
have a material adverse effect on our financial condition and results of operations and, in turn,
the value of our securities.
Monetary policy and other economic factors may adversely effect our financial condition and results
of operations.
Changes in governmental economic and monetary policies and banking and credit regulations may
affect our ability to attract deposits and make loans. Our success will depend in significant part
upon our ability to earn income on loans and investments and to charge fees for services in amounts
that exceed the interest to be paid on deposits and borrowings. Rates of interest, both paid on
deposits and borrowings and earnings on loans and investments, and loan collectability are affected
by fiscal and monetary policies as well as by national, state, and local economic conditions. We
may not be successful in managing this risk.
Our operations are susceptible to adverse effects of changes in interest rates.
Our operations will be substantially dependent on our net interest income, which is the
difference between the interest income earned on our interest-earning assets and the interest
expense paid on our interest-bearing liabilities. As with most depository institutions, our
earnings will be affected by changes in market interest rates and other economic factors beyond our
control. If our interest-earning assets have longer effective maturities than our interest-bearing
liabilities, the yield on our interest-earning assets generally will adjust more slowly than the
cost of our interest-bearing liabilities, and, as a result, our net interest income generally will
be adversely affected by material and prolonged
-7-
increases
in interest rates and positively affected by comparable declines in interest rates. Conversely,
if liabilities reprice more slowly than assets, net interest income would be adversely affected by
declining interest rates, and positively affected by increasing interest rates. At any time, it is
likely that our assets and liabilities will reflect interest rate risk of some degree, and changes
in interest rates may therefore have a material adverse affect on our results of operations.
In addition to affecting interest income and expense, changes in interest rates also can
affect the value of our interest-earning assets, comprising fixed- and adjustable-rate instruments,
as well as the ability to realize gains from the sale of such assets. Generally, the value of
fixed-rate instruments fluctuates inversely with changes in interest rates.
With our focus on lending, we are subject to various lending risks.
The risk of non-payment (or delayed payment) of loans is inherent in commercial banking, and
such non-payment or delayed or deferred payment, if it occurs, may have a material adverse effect
on our earnings and overall financial condition as well as on the value of our securities.
Additionally, we must establish an allowance for loan losses through charges against earnings. Our
marketing focus on small businesses, professional persons and individual customers may result in
the assumption of certain lending risks that are different from and greater than those inherent in
loans made to larger companies. We will attempt to limit our credit risk exposure by developing
appropriate underwriting criteria and through monitoring procedures with respect to existing loan
portfolios, but there can be no assurance that such criteria and procedures will be effective to
limit loan losses. We may participate in loans originated by other financial institutions. Such
participations will be reviewed on essentially the same basis as loans we originate.
Our allowance for loan losses may not be sufficient to cover loan losses and any increase in our
allowance for loan losses would adversely effect earnings.
We believe we have established an allowance for loan losses to prudently cover the eventuality
of losses inherent in our loan portfolio. However, we cannot predict loan losses with certainty
and we cannot assure you that charge offs in future periods will not exceed the allowance for loan
losses. In addition, regulatory agencies, as an integral part of their examination process, review
our allowance for loan losses and may require additions to the allowance based on their judgment
about information available to them at the time of their examination. An increase in our allowance
for loan losses could reduce our earnings.
Government regulation significantly impacts our business.
We are subject to extensive supervision, regulation, and control and the holding company
reorganization contemplated by the Plan would result in additional regulation. Future legislation
and government policy could adversely affect the commercial banking industry and our operations.
The statutes and regulations governing financial institutions in general, and the commercial
banking industry in particular, are subject to change at any time and have been substantially
modified during recent years. Such governing laws can be anticipated to continue to be the subject
of future modification. We cannot predict what effect any such future modifications will have on
our operations.
The primary focus of Federal and state banking regulation is the protection of depositors and
not the shareholders of the regulated institutions. We may be required to pay FDIC deposit
insurance premiums that are risk-based, with higher premiums charged to banks that have lower
capital ratios or higher risk profiles. Consequently, failure to maintain high capital ratios, or
a negative evaluation by the
-8-
FDIC, the Banks primary Federal banking regulator, may also increase our net funding costs
and reduce our net income.
Our ability to pay dividends is restricted and we have no plans to pay dividends.
Our ability to pay cash dividends is subject to restrictions under applicable state and
Federal banking laws and regulations, including certain specific prohibitions against paying cash
dividends during our first three years of operations.
In addition, we presently intend to follow a policy of retaining earnings for the purpose of
increasing our net worth and reserves during our initial years of operation. Accordingly, we do
not anticipate that cash dividends will be declared during the early stages of our development, and
no assurance can be given we will declare dividends in the future.
We are dependent upon certain key personnel and need to hire additional qualified personnel.
Our success will depend in part upon the continued service of our executive team, including
Albert F. Buzzetti, Chairman of the Board, Chief Executive Officer and President, Michael Lesler,
our Chief Financial Officer, Leo J. Faresich, our Chief Lending Officer, and Diane M. Spinner, our
Chief Administrative Officer. Our success also will depend in part upon our ability to attract and
retain additional highly qualified personnel. Our employees may voluntarily terminate their
employment at any time, and competition for qualified employees is intense. The loss of the
services of key personnel, or the inability to attract and retain qualified personnel, could have a
material adverse effect upon our business, operating results, and financial condition.
Our directors and executive officers will have significant control of any vote of shareholders,
including any election of directors.
Our
directors and executive officers beneficially own 24.30% of our voting stock. Although our
directors and executive officers do not own a majority of our outstanding securities, as a
practical matter it would be difficult to undertake any corporate actions requiring shareholder
approval, or to elect a board of directors, without the support of our directors and executive
officers.
-9-
INFORMATION ABOUT VOTING
How are proxies being solicited?
This proxy solicitation is being made by and at the direction of the board of directors of the
Bank, and we will pay all expenses relating to the solicitation. In addition to the use of the
mails, proxies may be solicited personally, by telephone or by other electronic means by officers,
directors and employees of the Bank, who will not be compensated for such solicitation activities.
Arrangements may be made with brokerage houses and other custodians, nominees and fiduciaries for
forwarding solicitation materials to the beneficial owners of shares held of record by such
persons, and the Bank will reimburse those persons for their reasonable expenses.
What is on the agenda for the annual meeting?
The agenda for the annual meeting is:
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The election of 18 directors to the Banks board of directors to serve until
the 2008 annual meeting of shareholders and until their successors are elected and
qualify.
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The 2007 Non-Qualified Stock Option Plan for Directors, which provides for
options to purchase shares of common stock to be issued to non-employee directors of
the Bank.
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A Plan of Acquisition pursuant to which the Bank would adopt a bank holding
company structure, the Bank would become a wholly-owned subsidiary of Bancorp of New
Jersey, Inc., a company formed solely for the purpose of becoming the holding company
of the Bank, and the shareholders of the Bank would become shareholders of the holding
company through a one-to-one exchange of their shares of common stock of the Bank for
shares of common stock of the holding company.
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Who can vote?
You can vote at the annual meeting if you are a holder of our common stock on the record date.
The record date is the close of business on February 22, 2007. Each share of common stock you own
as of the record date entitles you to one vote for each director to be elected in the election of
directors and one vote on the Plan of Acquisition. As of February 22, 2007, there were 2,399,846
shares of common stock outstanding and entitled to vote.
How do I vote if shares are held directly in my name?
If you hold your shares in certificate form and not through a bank, brokerage firm or other
nominee, you may vote your shares in one of the following ways:
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Voting By Mail
. If you choose to vote by mail, complete the enclosed
proxy, date and sign it, and return it in the postage-paid envelope provided.
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In Person
. If you choose to vote in person, come to the annual meeting
and cast your vote. If you attend the meeting, you may vote your shares in person even
if you have previously submitted a proxy.
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How do I vote if shares are held through a bank, brokerage firm or other nominee?
If you hold your shares through a bank, brokerage firm or other nominee, you may vote your
shares in one of the following ways:
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Voting By Mail
. If you choose to vote by mail, complete and return to
your bank, brokerage firm or other nominee the voting instruction form provided to you
by your bank, brokerage firm or other nominee.
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In Person
. If you wish to vote in person at the annual meeting, you
must obtain a legal proxy from your bank, brokerage firm or other nominee. This will
authorize you to vote at the annual meeting. Only with a legal proxy from your bank,
brokerage firm or other nominee can you cast your vote in person at the annual meeting.
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How will my proxy be voted?
Unless you indicate differently on your proxy, we plan to vote signed and returned proxies
FOR
the election of the boards director nominees named in this
proxy statement,
FOR
the 2007 Non-Qualified Stock Option Plan
for Directors and
FOR
the Plan of
Acquisition. If you hold your shares of common stock in street name (that is, through a broker
or other nominee) and fail to instruct your broker or nominee as to how to vote your shares of
common stock, your broker or nominee may, in its discretion, vote your shares
FOR
the election of
the nominees for director named in this proxy statement, but cannot
vote on the 2007 Non-Qualified Stock Option Plan for Directors or the Plan of
Acquisition. At or after the annual meeting, a judge or judges of election will tabulate ballots
cast by shareholders present and voting in person and votes cast by proxy.
What is a broker non-vote?
A broker non-vote occurs when a bank or brokerage firm holding shares on behalf of a
shareholder does not receive voting instructions from the shareholder by a specified date before
the annual meeting and the bank or brokerage firm is not permitted to vote those undirected shares
on specified matters under applicable stock exchange rules. Thus, if you do not give your broker
specific instructions, your shares may not be voted on those matters (so-called broker non-votes)
and will not be counted in determining the number of shares necessary for approval. Any broker
non-votes have no effect on the outcome of the election of directors, as directors will be elected
by a plurality of the votes cast, but will effectively be a vote
against the 2007 Non-Qualified Stock Option Plan for Directors and the Plan of Acquisition,
each of which requires the affirmative vote of two-thirds of all outstanding shares of common stock for
approval. Shares represented by broker non-votes will be counted in determining the number of
shares of common stock represented in person or by proxy and entitled to vote.
Can I change my vote after submitting my proxy?
Yes. Any shareholder giving a proxy has the right to attend the annual meeting and vote in
person. A proxy may be revoked prior to the annual meeting if a later-dated proxy or a written
revocation is sent to the Bank at 204 Main Street, Fort Lee, New Jersey 07024, Attn: Secretary, and
received prior to the annual meeting. In addition, a proxy may be revoked at the annual meeting by
filing a later-dated proxy or by filing a written notice of such revocation with the Secretary of
the Bank at the annual meeting prior to the voting of such proxy.
-11-
What constitutes a quorum at the annual meeting and how are votes counted?
We need a quorum of shareholders to hold a valid annual meeting. A quorum will be present if
at least a majority of the outstanding shares of common stock are represented in person or by proxy
at the annual meeting. Abstentions and broker non-votes are counted as present for the purpose of
establishing a quorum but otherwise do not count.
How many votes are required for the election of directors?
Directors are elected by a plurality vote of shares of common stock cast in person or by proxy
at the annual meeting. A plurality means that the individuals who receive the largest number of
affirmative votes cast are elected as directors up to the maximum number of directors to be chosen
at the annual meeting. Because the election of directors is based on a plurality of the votes
cast, abstentions and broker non-votes have no effect on the outcome of the vote. Votes that are
withheld from a director nominee will be excluded entirely from the vote for such nominee and will
have no effect on the result. Shareholders are not entitled to cumulative voting in the election
of directors.
How many votes are required to approve the 2007 Non-Qualified Stock Option Plan for
Directors?
The 2007 Non-Qualified Stock Option Plan for Directors will be approved if two-thirds of
outstanding shares of common stock are voted
FOR
the 2007 Non-Qualified Stock Option Plan for
Directors. Because the vote necessary for approval is based on the number of shares of common
stock outstanding and not the number of votes cast at the annual meeting, abstentions and broker
non-votes on the 2007 Non-Qualified Stock Option Plan for Directors will effectively be votes
against the 2007 Non-Qualified Stock Option Plan for Directors.
How many votes are required to approve the Plan of Acquisition?
The Plan of Acquisition will be approved if two-thirds of outstanding shares of common stock
are voted
FOR
the Plan of Acquisition. Because the vote necessary for approval is based on the
number of shares of common stock outstanding and not the number of votes cast at the annual
meeting, abstentions and broker non-votes on the Plan of Acquisition will effectively be votes
against the Plan of Acquisition.
-12-
PROPOSAL 1
ELECTION OF DIRECTORS
The by-laws of the Bank provide that the number of directors shall not be less than 5 nor more
than 25 and permit the exact number to be determined from time to time by the board of directors.
The board of directors has fixed the number of directors constituting the entire board at 18.
It is intended that the proxies solicited by the board of directors will be voted
FOR
the 18
persons named below (unless the shareholder otherwise directs). If, for any reason, any nominee
becomes unavailable for election or service on the board, the proxy solicited by the board of
directors will be voted for such substituted nominee as is selected by the board of directors. The
board has no reason to believe that any of the named nominees are not available or will not serve
if elected.
Each director nominee has been nominated to serve a one year term until the 2008 annual
meeting of shareholders and thereafter until his or her successor shall have been duly elected and
qualified. Each nominee is an incumbent director and has served as a director of the Bank since
its opening. The names of the nominees for election and certain information about them are set
forth in the following table:
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Business Experience
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Director
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Name, Position and Age
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During Past Five Years
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Since
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Jack Alter, Director, 79
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Mayor of the Borough of Fort Lee
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2006
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Michael Bello, Director, 43
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President of the Michael Bello Insurance Agency
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2006
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Jay Blau, Director, 61
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Consultant to Dynamic Designs, Inc.
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2006
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Albert F. Buzzetti
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Chairman, President and CEO of Bank of New Jersey
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2006
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Chairman of the Board,
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since May 2006. Organizational activities related
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President & CEO, 67
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to the Bank, July 2005 to May 2006.
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Executive Vice President of Interchange Financial
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Services Corporation, May 2003 to August 2004.
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President and CEO of Bridge View Bancorp, 1989 to
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May 2003, until the sale of Bridge View Bancorp to
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Interchange Financial Services Corporation.
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Albert L. Buzzetti, Director, 37
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Managing Partner of the law firm of
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2006
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A. Buzzetti and Associates, LLC
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Stephen Crevani, Director, 64
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President of Aniero Concrete
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2006
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John K. Daily, Director, 48
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Executive Vice President of C.A. Shea & Co.
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2006
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Armand Leone, Jr., MD, JD
Vice Chairman, 49
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Partner in the law firm of Britcher, Leone and Roth
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2006
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Business Experience
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Director
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Name, Position and Age
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During Past Five Years
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Since
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Anthony M. Lo Conte
Director, 49
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President and CEO of Anthony L and S, LLC
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2006
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Carmelo Luppino, Director, 78
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General Contractor/Developer
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2006
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Rosario Luppino, Director, 73
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General Contractor/Developer
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2006
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Howard Mann, Director, 51
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President of Carolace Industries
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2006
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Josephine Mauro, Director, 73
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Realtor and owner of Mauro Realty Company
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2006
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Joel P. Paritz, Director, 63
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CPA and President of Paritz & Company, P.A.
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2006
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Christopher M. Shaari, MD
Director, 39
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Physician
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2006
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Anthony Siniscalchi
Director, 48
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Partner in the firm of A. Uzzo & Co., CPAs, P.C.
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2006
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Mark Sokolich, Director, 43
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Managing Partner of the law firm of Sokolich &
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2006
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Macri
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Diane M. Spinner, Director, 52
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Executive Vice President and Chief Administrative
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2006
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Officer of Bank of New Jersey since May 2006.
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Organizational activities related to the Bank,
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July 2005 to May 2006.
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President and CEO of Rock Community Bank, January
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2001 to December 2003.
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Director Albert L. Buzzetti is the son of Chairman of the Board, President & CEO, Albert F.
Buzzetti. Directors Carmelo Luppino and Rosario Luppino are brothers.
No director of the Bank is also a director of a company having a class of securities
registered under Section 12 of the Securities Exchange Act of 1934, as amended, or subject to the
requirements of Section 15(d) of such act, or any company registered as an investment company under
the Investment Company Act of 1940.
Board Meetings
During the fiscal year beginning May 10, 2006 and ended December 31, 2006, the board of
directors held eight meetings. All but two of our directors attended at least 75% of board
meetings and meetings of committees of the board on which such directors served. Mr. Alter
attended five board meetings and zero of one committee meetings. Mr. Carmelo Luppino attended five
board meetings and six of six committee meetings.
-14-
We have no formal policy with respect to director attendance at our annual meeting of
shareholders. As we commenced operations during 2006, the 2007 annual meeting will be our first
annual meeting of shareholders.
Board Committees
The board of directors of the Bank conducts much of its business through committees of the
board. During 2006, the board designated an audit committee and a compensation committee, as well
as an executive committee, a loan committee, an asset and liability/investment committee and a
compliance committee. The full board acted as a nominating committee in 2006.
Audit Committee
The audit committee of the board of directors consisted of Directors Siniscalchi (Chair),
Daily, Mauro and Paritz during the fiscal year ended December 31, 2006. Each member of the audit
committee would be independent under the requirements of the American Stock Exchange. The board of
directors has determined that each of Messrs. Siniscalchi and Paritz qualifies as an audit
committee financial expert, as defined under SEC rules. The audit committee met twice in 2006.
The designation of the audit committee is required by the by-laws of the Bank and the by-laws
set forth requirements for membership, certain provisions regarding meetings of the committee and
the duties of the committee. The audit committee has not adopted a formal charter. The primary
duties of the audit committee are:
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making suitable periodic examinations into the affairs of the Bank, or causing
such examinations to be made, including whether the Bank is in a sound and solvent
condition and whether adequate internal audit controls and procedures are being
maintained;
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recommending to the board such changes in the manner of doing business or
conducting the affairs of the Bank as shall be deemed advisable;
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upon its own recommendation, employing a qualified firm of certified public
accountants to make an audit and examination of the affairs of the Bank at least once
in each calendar year;
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reviewing in detail all examinations of Federal and state regulatory
authorities;
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reviewing any changes in accounting policy proposed by management, the internal
auditors or the certified public accountants; and
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making appropriate reports of its activities to the full board of directors.
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Audit Committee Report
The audit committee has considered and discussed the audited financial statements of the Bank
at and for the period ended December 31, 2006, with management. The audit committee has also
discussed with KPMG LLP, the Banks independent registered public accounting firm, the matters
required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit
Committees, as currently in effect. Finally, the audit committee has received the written
disclosures from KPMG LLP required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, as currently in effect, has considered whether the provision of
non-audit
-15-
services by KPMG LLP to the Bank is compatible with maintaining its independence and has
discussed with KPMG LLP its independence.
Based upon its review and the considerations and discussions referenced above, the audit
committee recommended to the board of directors that our audited financial statements be included
in the Banks 2006 Annual Report.
Submitted by the Audit Committee:
Anthony Siniscalchi, Chair
John K. Daily
Josephine Mauro
Joel P. Paritz
March 7, 2007
The foregoing Audit Committee Report shall not be deemed to be soliciting material, or to be
filed with the SEC, or incorporated by reference into any filing made by the holding company
under the Securities Act of 1933 or the Securities Exchange Act of 1934, notwithstanding any
general statement contained in any such filing incorporating this proxy statement by reference,
except to the extent report is incorporated by specific reference.
Compensation Committee
During 2006, the compensation committee of the board of directors consisted of Directors
Shaari (Chair), Bello, Blau, Leone and Lo Conte and met twice.
Certain provisions regarding the compensation committee, including requirements for
membership, certain provisions regarding meetings of the committee and the duties of the committee,
are set forth in the by-laws of the Bank. The compensation committee has not adopted a formal
charter. The primary duties of the compensation committee are:
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adopting compensation policy;
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reviewing and evaluating the compensation of the directors and executive
officers, and recommending any modification in any such compensation;
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approving and monitoring the Banks compensation system, including benefits and
other elements;
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requiring regular salary and benefit surveys comparing the Bank with its
competitors; and
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approving all changes in the compensation package of executive officers.
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In addition to the specific authorities of the compensation committee set forth in our
by-laws, our board of directors has delegated the sole authority to set the compensation of our
executive officers to the compensation committee. While the committee may seek input from the
chief executive officer with respect to the compensation of other executive officers, the committee
may not delegate the authority to set the compensation of executive officers.
-16-
Compensation Committee Interlocks and Insider Participation
As noted above, Directors Shaari, Bello, Blau, Leone and Lo Conte served as members of the
compensation committee during 2006. No member of the compensation committee has ever served as
and officer or employee of the Bank or the holding company. There are no compensation
committee interlocks between the Bank or the holding company and any other entity, involving the
Banks or the holding companys or such entitys executive officers or board members. The Bank has
made, and expects to continue to make, loans in the future to our directors, including members of
our compensation committee, and to their family members and to firms, corporations, and other
entities in which they and their family members maintain interests. You should refer to Certain
Transactions with Related Persons for additional information.
Compensation Committee Report
The compensation committee has reviewed and discussed the section of this proxy statement
titled, Compensation Discussion and Analysis, with management and, based on such review and
discussions, recommended to our board of directors that the Compensation Discussion and Analysis
section be included in this proxy statement.
Submitted by the Compensation Committee:
Christopher M. Shaari, Chair
Michael Bello
Jay Blau
Armand Leone, Jr.
Anthony M. Lo Conte
March 7, 2007
The foregoing Compensation Committee Report shall not be deemed to be soliciting material, or
to be filed with the SEC, or incorporated by reference into any filing made by the holding
company under the Securities Act of 1933 or the Securities Exchange Act of 1934, notwithstanding
any general statement contained in any such filing incorporating this proxy statement by reference,
except to the extent report is incorporated by specific reference.
Nomination Process
The Bank commenced operations in May 2006 and its current board of directors is comprised of
the organizers of the Bank. For this reason, the board has not yet had a need to identify or
evaluate new director candidates or to designate a nominating committee to consider new director
nominees. Until the board does designate such a committee, the entire board of directors will
participate in the consideration of director nominees.
The board of directors will consider director candidates recommended by shareholders. Any
shareholder who wishes to recommend a director candidate for consideration may send notice to 204
Main Street, Fort Lee, New Jersey 07024, Attention: Albert F. Buzzetti, Chairman of the Board.
The notice should contain: (1) the name of the shareholder making the recommendation; (2) the names
of all other shareholders who, directly or indirectly, are acting in concert with or have an
understanding with the recommending shareholder; (3) the number of shares which the recommending
shareholder reasonably anticipates may be voted in favor of the election of the recommended
director candidate; and (4) the name, address and business background of any recommended director
candidate. The board shall give
-17-
director candidates recommended by shareholders the same
consideration as director candidates recommended by other sources.
Other Committees
In addition to its audit and compensation committees, the Bank has designated an executive
committee, a loan committee, an asset and liability/investment committee and a compliance
committee, and may designate other committees in the future. The primary function of the executive
committee is to fulfill the duties and responsibilities the full board of directors between
meetings of the full board of directors. The primary duties of the loan committee are to recommend
loan policy to the board and to review and act upon matters related to the Banks lending
activities. The primary duties of the asset and liability/investment committee are to recommend
investment policy to the board and to review and act upon matters related to the Banks investment
activities. The primary duty of the compliance committee is oversight of our compliance with
applicable laws and regulations, including the Bank Secrecy Act and the Community Reinvestment Act.
Independence
Because the Banks common stock is not listed on a national securities exchange or in an
inter-dealer quotation system, the Bank is not considered a listed issuer and certain listing
standards regarding independence of directors do not apply to the Bank. However, we have
determined the independence of the members of our board and committees by reference to the listing
standards of the American Stock Exchange. Under the independence standards of the American Stock
Exchange, Jack Alter, Michael Bello, Jay Blau, Stephen Crevani, John K. Daily, Armand Leone, Jr.,
Anthony M. Lo Conte, Carmelo Luppino, Rosario Luppino, Howard Mann, Josephine Mauro, Joel P.
Paritz, Christopher M. Shaari, Anthony Siniscalchi and Mark Sokolich were determined to be
independent, and all of the members of our audit and compensation committees were determined to be
independent. During 2006, the entire board of directors functioned as the Banks nominating
committee. The members of the board who were determined to be not independent were Albert F.
Buzzetti, Albert L. Buzzetti and Diane M. Spinner.
Shareholder communications
Any shareholder who desires to send communications to our board of directors or to individual
directors may do so by directing his or her communication to the following address: 204 Main
Street, Fort Lee, New Jersey 07024, Attention: Albert F. Buzzetti, Chairman of the Board. All
shareholder communications, other than any communications we believe may pose a security risk, will
be sent directly to board members.
Executive Officers
The following table sets forth the name and age of each current executive officer of the Bank.
Select biographical information concerning these individuals appears below the table. The
executive officers are appointed to their respective offices annually.
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Name
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Age
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Position
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Albert F. Buzzetti
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67
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President and Chief Executive Officer
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Leo J. Faresich
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63
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Executive Vice President and Chief Lending Officer
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Michael Lesler
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36
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Executive Vice President and Chief Financial Officer
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Diane M. Spinner
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52
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Executive Vice President and Chief Administrative Officer
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-18-
See pages 13-14 for a description of the business background of Mr. Buzzetti and Ms. Spinner.
Leo J. Faresich has served as Executive Vice President and Chief Lending Officer of the Bank
since May 2006. Beginning in 1999, Mr. Faresich was employed by Greater Community Bancorp, Totowa,
New Jersey, and served as its Executive Vice President and Chief Lending Officer from 2003 to
September 2005, at which time he was engaged in connection with the organizational activities of
the Bank.
Michael Lesler has served as Executive Vice President and Chief Financial Officer of the Bank
since May 2006. Beginning in 1997, Mr. Lesler was employed by Bridge View Bancorp and served as
Senior Vice President and Chief Financial Officer of Bridge View Bancorp from 2000 until it was
acquired by Interchange Financial Services Corporation in May 2003. He served as Senior Vice
President of Interchange Capital Corp., a subsidiary of Interchange Financial Services Corporation
from May 2003 until August 2005, at which time he was engaged in connection with the organizational
activities of the Bank.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of February 22, 2007, certain information concerning the
ownership of shares of the common stock by (i) each person who is known by us to own beneficially
more than five percent (5%) of the issued and outstanding common stock, (ii) each director of the
Bank, (iii) each named executive officer identified below in the section captioned Executive
Compensation, and (iv) all directors and executive officers as a group.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
Name
|
|
Beneficially Owned
+
|
|
Percentage of Ownership
+
+
|
Jack
Alter
1
|
|
|
16,500
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Michael
Bello
2
|
|
|
33,000
|
|
|
|
1.38
|
%
|
|
|
|
|
|
|
|
|
|
Jay
Blau
3
|
|
|
33,000
|
|
|
|
1.38
|
%
|
|
|
|
|
|
|
|
|
|
Albert F.
Buzzetti
4
|
|
|
38,500
|
|
|
|
1.60
|
%
|
|
|
|
|
|
|
|
|
|
Albert L.
Buzzetti
5
|
|
|
20,460
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Stephen
Crevani
6
|
|
|
66,000
|
|
|
|
2.74
|
%
|
|
|
|
|
|
|
|
|
|
John K.
Daily
7
|
|
|
18,942
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Armand
Leone, Jr., MD, JD
8
|
|
|
49,500
|
|
|
|
2.06
|
%
|
|
|
|
|
|
|
|
|
|
Anthony M.
Lo Conte
9
|
|
|
33,000
|
|
|
|
1.38
|
%
|
|
|
|
|
|
|
|
|
|
Carmelo
Luppino
10
|
|
|
66,000
|
|
|
|
2.74
|
%
|
|
|
|
|
|
|
|
|
|
Rosario
Luppino
11
|
|
|
69,960
|
|
|
|
2.90
|
%
|
-19-
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
Name
|
|
Beneficially Owned
+
|
|
Percentage of Ownership
+
+
|
Howard
Mann
12
|
|
|
21,130
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Josephine
Mauro
13
|
|
|
33,000
|
|
|
|
1.37
|
%
|
|
|
|
|
|
|
|
|
|
Joel P.
Paritz
14
|
|
|
9,900
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Christopher
M. Shaari, MD
15
|
|
|
26,400
|
|
|
|
1.10
|
%
|
|
|
|
|
|
|
|
|
|
Anthony
Siniscalchi
16
|
|
|
18,480
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Mark
Sokolich
17
|
|
|
16,500
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Diane M.
Spinner
18
|
|
|
22,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Michael
Lesler
19
|
|
|
8,165
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Leo J.
Faresich
20
|
|
|
12,100
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
All directors and executive officers
as a group.
|
|
|
612,537
|
|
|
|
24.30
|
%
|
|
|
|
+
|
|
Any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship, or otherwise
has or shares: voting power, which includes the power to vote, or to direct the
voting of, our common stock; and/or, investment power, which includes the power
to dispose, or to direct the disposition of, our common stock, is determined to
be a beneficial owner of our common stock. All shares are subject to the named
persons sole voting and investment power unless otherwise indicated.
|
|
+
+
|
|
Shares beneficially owned include
warrants and options to purchase shares which are currently exercisable or
which will be exercisable within 60 days of February 22, 2007. Percentage
calculations presume that the identified individual or group exercise all of
his, her or their respective warrants and options and that no other holders of
warrants or options exercise their warrants or options.
|
|
*
|
|
Less than one percent.
|
|
1
|
|
Includes warrants to purchase 2,750 shares.
|
|
2
|
|
Includes warrants to purchase 5,500 shares.
|
|
3
|
|
Includes warrants to purchase 5,500 shares.
|
|
4
|
|
Includes warrants to purchase 5,500 shares and
options to purchase 5,500 shares.
|
|
5
|
|
Includes 550 shares owned by child and
warrants to purchase 3,410 shares.
|
|
6
|
|
Includes 27,500 shares owned by Mr.
Crevanis wife and warrants to purchase 11,000 shares.
|
|
7
|
|
Includes 2,035 shares owned by Mr.
Dailys wife and children and warrants to purchase 3,157 shares.
|
|
8
|
|
Includes 13,750 shares owned as custodian for
Dr. Leones children and warrants to purchase 8,250.
|
|
9
|
|
Includes warrants to purchase 5,500 shares.
|
|
10
|
|
Includes 27,500 shares owned by Mr. Carmelo
Luppinos wife and warrants to purchase 11,000 shares.
|
|
11
|
|
Includes 27,500 shares owned by Mr. Rosario
Luppinos wife, family trust and a company he controls and warrants to
purchase 11,660 shares.
|
|
12
|
|
Includes 12,375 shares owned by a family
partnership which Mr. Mann controls and 1,275 shares owned by Mr. Manns
son, as well as warrants to purchase 3,355 shares.
|
|
13
|
|
Includes warrants to purchase 5,500 shares.
|
-20-
|
|
|
|
14
|
|
Includes warrants to purchase 1,650 shares.
|
15
|
|
Includes 22,000 shares owned by a partnership
controlled by Dr. Shaari and warrants to purchase 4,400 shares.
|
|
16
|
|
Includes 4,400 shares held in custodial
accounts controlled by Mr. Siniscalchi and warrants to purchase 3,080 shares.
|
|
17
|
|
Includes warrants to purchase 2,750 shares.
|
|
18
|
|
Includes warrants to purchase 2,750 shares
and options to purchase 5,500 shares.
|
|
19
|
|
Includes warrants to purchase 330 shares and
options to purchase 5,500 shares.
|
|
20
|
|
Includes warrants to purchase 1,100 shares
and options to purchase 5,500 shares.
|
Compensation Discussion and Analysis
The Banks principal executive officer is Albert F. Buzzetti, President and Chief Executive
Officer, and its principal financial officer is Michael Lesler, Executive Vice President and Chief
Financial Officer. Messrs. Buzzetti and Lesler, together with Leo J. Faresich, Executive Vice
President and Chief Lending Officer, and Diane M. Spinner, Executive Vice President and Chief
Administrative Officer, are sometimes referred to as the named executive officers. No executive
officer other than the named executive officers received total compensation in excess of $100,000
during 2006.
We commenced operations in 2006 and the primary objective of our compensation programs has
been to attract well qualified individuals to form a management team with the skills to implement
our business plan and with the dedication to see us through our initial start-up period. With this
objective in mind, we believed it was necessary to offer each of our named executive officers a
competitive salary, a change in control agreement, option awards and benefits typical of an
organization like the Bank, which are offered to our employees, generally, such as medical
insurance, group term life insurance and a 401(k) plan, as well as an automobile allowance. Total
compensation involves certain subjective judgments and is not based solely upon any specific
objective criteria or weighting.
The base salaries of our named executive officers were set by our compensation committee after
an analysis which included a review of compensation surveys by the Community Bankers Association
and the American Bankers Association, as well as the experience and knowledge of our directors with
respect to the local and regional market. We believe the base salary levels for our named
executive officers are competitively set relative to companies in peer businesses. Without an
operating history, we could not evaluate performance in setting 2006 base salaries. However, we
anticipate that financial performance will be a significant factor in any future adjustments to
base salary, as well as in establishing any future incentive plans. We also expect that individual
experience and performance will be evaluated.
Options awards are intended to encourage our named executive officers and other key employees
to remain employed by the Bank by providing them with a long term interest in our overall
performance, as reflected by the performance of our common stock. In 2006, option awards were made
primarily to attract talented management to, and to remain with, the Bank. Accordingly, awards
were made shortly after our 2006 Stock Option Plan was approved by our shareholders in October
2006. We anticipate that any future option awards will take into account all prior option awards,
as well as the levels of other forms of compensation and the performance of the named executive
officers.
The benefits we offer to our named executive officers are the same benefits we offer to our
employees, generally. We believe the level of benefits is consistent other businesses, with whom
we compete for talented employees, and necessary for us to be able to attract and retain qualified
executive officers and other employees.
-21-
The compensation of our named executive officers is set by the compensation committee of our
board of directors. Our chief executive officer makes recommendations to the compensation
committee with respect the compensation of the other named executive officers.
Executive Compensation
The following tables set forth certain information regarding the compensation of our named
executive officers.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
Name and
|
|
|
|
|
|
|
|
|
|
Option Awards ($)
|
|
Compensation ($)
|
|
|
principal position
|
|
Year(1)
|
|
Salary ($)
|
|
(2)
|
|
(3)
|
|
Total ($)
|
Albert F. Buzzetti,
President & CEO
|
|
|
2006
|
|
|
|
114,423
|
|
|
|
13,850
|
|
|
|
7,200
|
|
|
|
135,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Lesler,
Exec. VP & CFO
|
|
|
2006
|
|
|
|
81,730
|
|
|
|
13,850
|
|
|
|
7,200
|
|
|
|
102,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leo J. Faresich,
Exec. VP & CLO
|
|
|
2006
|
|
|
|
101,346
|
|
|
|
13,850
|
|
|
|
7,200
|
|
|
|
122,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diane M. Spinner,
Exec. VP & CAO
|
|
|
2006
|
|
|
|
81,730
|
|
|
|
13,850
|
|
|
|
7,200
|
|
|
|
102,780
|
|
|
|
|
(1)
|
|
Compensation for 2006 includes all compensation for the period beginning on May 10, 2006,
when the Bank opened for business, and ended on December 31, 2006.
|
|
(2)
|
|
The fair value of each option granted is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions used for the 2006 grants:
dividend yield of 0.00%; expected volatility of 16.00%; risk-free interest rate of 4.77%; and
expected life of 2 years. The amount indicated represents 2006 expense. The effects of
applying these assumptions in determining net income may not be representative of the effects
on net income in future years.
|
|
(3)
|
|
Consists of payments made to the named executive officers as an automobile allowance.
|
Grants of Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Exercise or
|
|
Grant Date
|
|
|
|
|
|
|
Estimated Future Payouts Under Equity
|
|
Number of
|
|
Base Price of
|
|
Fair Value of
|
|
|
|
|
|
|
Incentive Plan Awards
|
|
Securities
|
|
Option
|
|
Stock and
|
|
|
|
|
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Underlying
|
|
Awards
|
|
Option
|
Name
|
|
Grant Date
|
|
(#)
|
|
(#)
|
|
(#)
|
|
Options (#)
|
|
($/Sh)
|
|
Awards
|
Albert F. Buzzetti
|
|
|
11/01/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000
|
|
|
$
|
18.18
|
|
|
$
|
27,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Lesler
|
|
|
11/01/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000
|
|
|
$
|
18.18
|
|
|
$
|
27,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leo J. Faresich
|
|
|
11/01/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000
|
|
|
$
|
18.18
|
|
|
$
|
27,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diane M. Spinner
|
|
|
11/01/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000
|
|
|
$
|
18.18
|
|
|
$
|
27,700
|
|
In order to align the personal financial interests of our named executive officers with
those of the Bank, each named executive officer received an option award to purchase 11,000 shares
of our common stock at an exercise price of $18.18 per share, as adjusted following our
-22-
ten percent (10%) stock distribution in January 2007. The referenced option awards were immediately
exercisable with respect to fifty percent (50%) of the shares underlying the options and will
become exercisable with respect to the remaining fifty percent (50%) of the shares underlying the
options on the first anniversary
of the grant date, or November 1, 2007, provided that each award recipient continues to be
employed. The option awards are not subject to the achievement of any performance conditions or
targets.
Outstanding Equity Awards At Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
|
|
|
|
|
Options (#)
|
|
Options (#)
|
|
Unearned Options
|
|
Option Exercise
|
|
Option Expiration
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
(#)
|
|
Price ($)
|
|
Date
|
Albert F. Buzzetti
|
|
|
5,500
|
|
|
|
5,500
|
|
|
|
|
|
|
$
|
18.18
|
|
|
|
11/01/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Lesler
|
|
|
5,500
|
|
|
|
5,500
|
|
|
|
|
|
|
$
|
18.18
|
|
|
|
11/01/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leo J. Faresich
|
|
|
5,500
|
|
|
|
5,500
|
|
|
|
|
|
|
$
|
18.18
|
|
|
|
11/01/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diane M. Spinner
|
|
|
5,500
|
|
|
|
5,500
|
|
|
|
|
|
|
$
|
18.18
|
|
|
|
11/01/2016
|
|
Change In Control Agreements
We have entered into change in control agreements with each of our named executive officers
and each such agreement is on substantially similar terms. Under the terms of the agreements, a
named executive officer may receive a change in control payment in the event that he or she
terminates his or her employment within 90 days following a change in control. As used in the
agreement, a change in control means:
|
|
|
Any person acquiring securities representing more than 50% of the voting power
of the securities of the Bank or the holding company;
|
|
|
|
|
Any sale of all or substantially all of the assets of the Bank or the holding
company to a third party;
|
|
|
|
|
Any reorganization, merger, consolidation or similar transaction, unless the
shareholders immediately prior to any such transaction hold securities representing a
majority of the voting power of the entity surviving the transaction and the directors
immediately prior to the transaction represent a majority of the directors of the
entity surviving the transaction; and
|
|
|
|
|
Another other event designated a change in control by our board of directors.
|
The change in control payment which any named executive officer would be entitled to receive
under his or her agreement would be a lump sum equal to 2.9 times the highest annual base salary he
or she received in the year of termination and the two years immediately preceding. Based on
current salaries, the estimated change in control payments which Mr. Buzzetti, Mr. Lesler, Mr.
Faresich and Ms. Spinner would be entitled to receive would be $331,827, $237,017, $293,903 and
$237,017, respectively.
-23-
Any change in control payment would be made within 30 days following the
recipients date of termination.
Director Compensation
Except for directors who are also officers of the Bank and received compensation as such, our
board of directors did not receive any compensation for services, including services as members of
any committees of the board or for attendance at meetings of the board or any committees of the
board during 2006. We do not anticipate providing any cash compensation to members of our board of
directors or committees unless and until we achieve a sustained level of profitability. However,
we may consider other forms of director compensation in 2007.
Certain Transactions with Related Persons
The Bank has made, and expects to continue to make, loans in the future to our directors and
executive officers and their family members, and to firms, corporations, and other entities in
which they and their family members maintain interests. All such loans require the prior approval
of our board of directors. None of such loans are, as of the date of this proxy statement, or were
at December 31, 2006, nonaccrual, past due, restructured or potential problems, and all of such
loans were made in the ordinary course of business, on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable loans with persons
not related to the Bank and did not involve more than the normal risk of collectibility or present
other unfavorable features.
Except for our policies and procedures related to the approval of loans, we have not yet
adopted any formal policies and procedures for the review, approval, or ratification of any
transaction with related persons.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR
THE ELECTION OF EACH OF ITS
NOMINEES TO THE BOARD OF DIRECTORS OF THE BANK TO SERVE UNTIL THE 2008 ANNUAL MEETING OF
SHAREHOLDERS AND UNTIL HIS OR HER SUCCESSOR IS ELECTED AND QUALIFIED.
-24-
PROPOSAL 2
2007 NON-QUALIFIED STOCK OPTION PLAN FOR DIRECTORS
General
The Banks board of directors has approved for submission to its shareholders the 2007
Non-Qualified Stock Option Plan for Directors attached to this proxy statement as
Exhibit A
and incorporated by reference, referred to as the Director Plan.
The board of directors believes that it will be in the best long-term interests of the
shareholders for non-employee directors of the Bank to have an equity interest in the Bank, thereby
tying the interests of the Banks non-employee directors to those of the shareholders. For these
reasons, the board of directors on March 7, 2007 approved the Director Plan, subject to shareholder
approval.
A summary of the Director Plan is set forth below. This summary is qualified in its entirety
by the full text of the Director Plan, which is set forth as
Exhibit A
to this proxy
statement.
Administration
The Director Plan will be administered by the Banks board of directors, which will have power
to designate the optionees and to determine the number of shares subject to each option, the date
of grant and the terms and conditions governing the option. All decisions made by the board
pursuant to the provisions of the Director Plan will be final and binding.
Eligibility
Non-employee directors of the Bank and its affiliates are eligible to be granted options under
the Director Plan.
Shares Subject to the Director Plan
The Director Plan authorizes the Bank to issue 240,000 shares of its common stock pursuant to
options. The Director Plan provides that the number and price of shares available for stock
options and the number of shares covered by outstanding stock options shall be adjusted equitably
for stock splits or combinations, stock dividends, recapitalizations, reorganization, mergers,
consolidations and other changes in the common stock.
Term
The term of each option will be fixed by the board of directors. No option may be exercised
by any person after expiration of the term of the option. No option may be awarded under the
Director Plan at any time after the date that is ten years after the Director Plan is approved by
shareholders.
Exercise Price
The Director Plan provides that options may be granted at a price no less than 100% of the
fair market value on the date of grant of the option. The Director Plan provides that the purchase
price for shares acquired pursuant to the exercise of any option is payable in full at the time of
exercise.
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Amendment and Termination of Director Plan
The Board may amend, alter or discontinue the Director Plan at any time, provided that no
amendment, alteration or discontinuation will be made which would increase the total number of
shares of common stock reserved for the purposes of the Director Plan (except in connection with a
recapitalization, reorganization, merger, consolidation, stock split or combination, stock dividend
or other similar event or transaction affecting the shares, in accordance with the terms of the
Director Plan ), or change the persons or class of persons eligible to receive options under the
Director Plan without the approval of shareholders.
Certain Federal Tax Effects
There will be no federal income tax consequences to the optionee or to the Bank upon the grant
of a non-qualified stock option under the Director Plan. When the optionee exercises a
non-qualified option, however, he or she will recognize ordinary income in an amount equal to the
excess of the fair market value of the common stock received upon exercise of the option at the
time of exercise over the exercise price, and the Bank will be allowed a corresponding deduction.
Any gain that the optionee realizes when he or she later sells or disposes of the option shares
will be short-term or long-term capital gain, depending on how long the shares were held.
Benefits to Directors
As of the date of this proxy statement, no awards have been granted under the Director Plan.
All awards under the Director Plan will be made at the discretion of the Banks board of directors.
Therefore, it is not presently possible to determine the benefits or amounts that will be received
by any individual director or group of directors pursuant to the Director Plan in the future, or
the benefits or amounts that would have been received by any individuals or groups for the last
completed fiscal year if the Director Plan had been in effect.
Vote Required for Adoption of the Director Plan
The affirmative vote of the holders of two-thirds of the issued and outstanding common stock
of the Bank is required to approve the Director Plan. Therefore, brokers non-votes and abstentions
will effectively count as votes against the Director Plan.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR
THE PLAN OF ACQUISITION.
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PROPOSAL 3
PLAN OF ACQUISITION
General
The Banks board of directors has determined that it is in the best interests of the Bank and
its shareholders that the Bank adopt a holding company structure whereby all of the outstanding
shares of the common stock of the Bank will be contributed to a newly formed holding company in
exchange for shares of the common stock of the holding company. This transaction is sometimes
referred to as the holding company reorganization. To achieve this objective, the Bank, through
its directors, has proposed the Plan of Acquisition attached to this proxy statement as
Exhibit
B
and incorporated by reference (referred to as the Plan), and has incorporated Bancorp of
New Jersey, Inc., a New Jersey corporation (referred to as the holding company). The holding
company has not and will not engage in any operations or issue any of its shares prior to
consummation of the holding company reorganization. The following is a summary of certain key
terms of the Plan, and is qualified in its entirety by reference to the Plan.
Plan of Acquisition
On November 16, 2006, the Banks board of directors unanimously adopted the Plan. The Plan
provides for the transfer and contribution of all of the Banks stock by the shareholders to the
holding company in exchange for the stock of the holding company pursuant to the terms of the
Banking Act. Each outstanding share of the common stock of the Bank will be exchanged for one
share of common stock of the holding company. The holding company will then be the sole
shareholder of the Bank. Upon consummation of the holding company reorganization, all of the
shareholders of the Bank will become shareholders of the holding company, except for those
shareholders who elect to exercise their dissenters rights. You should refer to Rights of
Dissenting Shareholders for more information.
Shareholders will exchange their present Bank share certificates for new certificates
evidencing shares of stock of the holding company. Further instructions on accomplishing this
exchange will be provided by the Bank or its transfer agent after the Plan is approved and the
holding company reorganization is consummated. After the holding company reorganization and until
Bank certificates are so exchanged, each certificate evidencing shares of Bank common stock (other
than those of shareholders who have exercised their dissenters rights) will represent an equal
number of shares of holding company common stock, and the holders of Bank stock certificates will
have all the rights of holders of shares of holding company common stock.
The holding company has been incorporated at the direction of the board of directors of the
Bank under the New Jersey Business Corporation Act, as amended, referred to as the Corporation
Act. A copy of the holding companys certificate of incorporation is attached to this proxy
statement as
Exhibit C
. The current directors of the Bank will constitute the initial
board of directors of the holding company. You should refer to Proposal 1 Election of Directors
for more information regarding the current directors of the Bank.
Regulatory Requirements and Other Conditions
Consummation of the transactions contemplated by the Plan is subject to several conditions,
including the approval of the Commissioner of the New Jersey Department of Banking and Insurance,
referred to as the Commissioner, the approval of the Board of Governors of the Federal Reserve
System, referred to as the Federal Reserve, and the approval of the Plan by the Banks
shareholders.
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Our application to the Commissioner for approval of the Plan was accepted by the Commissioner
on December 11, 2006 and the Plan was approved by the Commissioner on January 16, 2007. If the
Plan is approved by the Federal Reserve and the Banks shareholders and not terminated by the
Banks board of directors, we will file the Plan, a notice of effective date and certification of
shareholder approval with the Commissioner, but no further approval from the Commissioner is
required.
The holding company reorganization may only be consummated if the Federal Reserve approves the
application filed by the holding company to undertake the holding company reorganization. The
holding company filed the application with the Federal Reserve Bank of New York under the Bank
Holding Company Act of 1956, as amended, referred to as the BHCA, on January 24, 2007. Although
it is anticipated that the Federal Reserve will approve our application, there can be no assurance
that the Federal Reserve will not deny our application or impose conditions which we find
objectionable.
Approval of the Plan and, as a result, the consummation of the holding company reorganization,
will require the affirmative vote of holders of two-thirds of the shares of common stock of the
Bank outstanding on the record date for the annual meeting. The directors and executive officers
of the Bank and their affiliates beneficially own, as of February 22, 2007, approximately 24.30% of
the Banks issued and outstanding stock and, as a result, will have a significant influence on the
outcome of the vote. You should refer to Proposal 1 Election of DirectorsSecurity Ownership of
Certain Beneficial Owners and Management and Information About VotingHow many votes are required
to approve the Plan of Acquisition? for more information.
Notwithstanding the receipt of shareholder and regulatory approvals, the Banks board of
directors may terminate the Plan at any time prior to consummation if it believes that consummation
of the holding company reorganization would no longer be in the best interests of the Bank and its
shareholders. If the Banks board of directors terminates the Plan and elects not to consummate
the holding company reorganization after obtaining shareholder approval, the Bank will notify its
shareholders of such action in writing.
One of the factors which the board of directors will weigh heavily in determining whether to
proceed with the Plan is the number of shareholders who elect to exercise their dissenters rights.
The board of directors will consider it unwise to proceed with the Plan if the number of
shareholders who dissent from the transaction would require the Bank to pay an excessive amount in
cash to satisfy obligations to dissenting shareholders.
Reasons for Proposing the Plan
The Banks board of directors has proposed the Plan primarily because the holding company
structure will maximize the Banks flexibility in undertaking its current and future operations.
In addition, the holding company structure makes available to the board of directors a variety of
means to assist the holding company board in acting in the best interests of shareholders in the
face of an unsolicited takeover bid which are not available to the Bank. Except for the
classification of the holding companys board of directors, the holding companys certificate of
incorporation does not currently contain any defensive provisions. However, shareholders may be
asked to approve such provisions in the future. In addition, the protections afforded by the New
Jersey Shareholders Protection Act will be available to the holding company, although they are not
currently available to the Bank. You should refer to Comparison of Common Stock of Bank with
Common Stock of Holding CompanyShareholders Protection Act for more information.
The holding company structure provides greater flexibility in managing the current and future
operations of the Bank. For example, the holding company structure provides more flexibility in raising capital for the holding company, the Bank or any future subsidiary bank. This
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flexibility is available because the capital structure of the holding company will be subject to
the Corporation Act and Federal Reserve Board Regulation Y, and not the more restrictive Federal
and New Jersey laws and regulations pertaining to banks. In addition, the Corporation Act provides
greater flexibility than the Banking Act in issues of corporate governance.
The holding company structure should also permit future expansion through acquisitions of
banks or other financial institutions and the operation of such banks and financial institutions as
wholly-owned subsidiaries of the holding company. The operation of such institutions as
wholly-owned subsidiaries may permit the deposit base and customer relations of the acquired
institution to be maintained while the operations of the acquired institution are integrated with
those of the Bank. The Bank has not entered into any agreements for any acquisitions and is not
currently engaged in any negotiations or discussions for any acquisitions, although it may engage
in such negotiations or discussions in the future.
The bank holding company structure may also be utilized in the future to engage in certain
non-banking activities which are closely related to banking, either directly, through newly formed
subsidiaries or by acquiring companies already established in such activities. You should refer to
Bank Holding Company RegulationBank Holding Company Act for more information.
Finally, because the holding company will be governed by the Corporation Act, it has greater
flexibility to adopt alternative provisions for its certificate of incorporation which the Bank
would not be permitted to adopt under the Banking Act. Among the provisions which are available to
the holding company and not the Bank is a classified board of directors. Except for the
classification of the holding companys board of directors, the holding companys certificate of
incorporation does not currently contain any provision which would not be permitted under the
Banking Act. However, shareholders may be asked to adopt them in the future.
Adoption of a holding company structure may subject the holding company to certain additional
regulation to which the Bank is not currently subject. For example, the holding company will
become subject to oversight and regulation by the Federal Reserve. The Bank is not currently
subject to such oversight and regulation. In addition, issuances of securities by the holding
company will be subject to regulation by the SEC under the Securities Act of 1933, as amended,
referred to as the Securities Act. The issuance of securities by the Bank is currently exempt
from the Securities Act. This additional regulation could involve increased expense for the
holding company. You should refer to Consequences Under Federal Securities Laws for more
information.
Notwithstanding the additional regulatory oversight and the related additional costs of
compliance, due to the benefits of a holding company structure discussed above, the board of
directors believes that adoption of the Plan and the creation of a holding company structure is in
the best interests of the shareholders of the Bank.
Accounting Treatment
The holding company reorganization will be accounted for as a reorganization under common
control and the assets, liabilities and shareholders equity of the Bank immediately prior to the
holding company reorganization will be carried forward on either separate or consolidated financial
statements of the Bank and the holding company after the holding company reorganization at the
amounts carried on their respective books at the effective date of the holding company
reorganization. Therefore, the consolidated capitalization, assets, liabilities, results of
operations and other financial data of the holding company immediately following the reorganization
will be substantially the same as
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those of the Bank immediately prior to the holding company reorganization, and, after the reorganization,
will be shown in the holding companys consolidated financial statements at the Banks historical
recorded values.
Material United States Federal Income Tax Consequences
The following is a discussion of the material U.S. federal income tax consequences of the
holding company reorganization to Bank shareholders who exchange their shares of Bank stock solely
for shares of holding company stock in the reorganization. This discussion addresses only Bank
shareholders who are U.S. holders, as defined below, and hold their shares of Bank stock as a
capital asset. This discussion does not address all of the U.S. federal income tax consequences
that may be relevant to a particular Bank shareholder in light of that shareholders individual
circumstances or to a Bank shareholder who is subject to special rules, including, without
limitation:
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a financial institution or insurance company;
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a tax-exempt organization;
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a shareholder who is not a U.S. holder;
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a pass-through entity or an investor in such an entity;
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a dealer or broker in securities or foreign currencies;
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a trader in securities who elects to apply a mark-to-market method of accounting;
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a shareholder who holds Bank stock as part of a hedge, appreciated financial
position, straddle, constructive sale or conversion transaction;
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a shareholder who exercises dissenters rights; and
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a shareholder who acquired his shares of Bank stock pursuant to the exercise of
employee stock options or otherwise as compensation.
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This discussion is not binding on the Internal Revenue Service, or IRS, and there can be no
assurance that the IRS or a court will agree with the conclusions stated herein. No ruling has
been or will be sought from the IRS on the U.S. federal income tax consequences of the holding
company reorganization. This discussion is based on the Internal Revenue Code of 1986, as amended,
applicable Treasury regulations, administrative interpretations and court decisions, each as in
effect as of the date of this document and all of which are subject to change, possibly with
retroactive effect. This discussion does not address any state, local or foreign tax consequences
of the holding company reorganization.
BANK SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES
TO THEM OF THE HOLDING COMPANY REORGANIZATION IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, INCLUDING
THE APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
For purposes of this discussion, U.S. holder refers to a beneficial holder of Bank stock
that is, for U.S. federal income tax purposes:
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an individual citizen or resident of the United States;
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a corporation, or other entity taxable as a corporation for U.S. federal income
tax purposes, created or organized in or under the laws of the United States, any state
thereof or the District of Columbia;
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an estate, the income of which is subject to U.S. federal income taxation
regardless of its source; or
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a trust that is subject to the supervision of a court within the United States
and the control of one or more U.S. persons or that was in existence on August 20, 1996
and has a valid election in effect under applicable Treasury regulations to be treated
as a U.S. person.
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If an entity treated as a partnership for U.S. federal income tax purposes holds Bank stock,
the tax treatment of a partner generally will depend upon the status of the partner and the
activities of that partnership. A partner of a partnership holding Bank stock should consult its
tax advisor regarding the tax consequences of the holding company reorganization.
Subject to the foregoing, the following are the material U.S. federal income tax consequences
of the holding company reorganization to a Bank shareholder who exchanges shares of Bank stock
solely for shares of holding company stock:
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You will not recognize any gain or loss upon your exchange of shares of Bank
stock solely for shares of holding company stock;
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Your aggregate basis in your shares of holding company stock received in
exchange for your Bank stock pursuant to the reorganization will be equal to the
aggregate basis of the shares of Bank stock you surrendered in exchange for your shares
of holding company stock; and
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The holding period of your shares of holding company stock received in exchange
for your Bank stock pursuant to the reorganization will include the period during which
you held the shares of Bank stock you surrendered in exchange for your shares of
holding company stock.
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THE DISCUSSION OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS NOT INTENDED TO
BE A COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE
HOLDING COMPANY REORGANIZATION. MOREOVER, THE DISCUSSION SET FORTH ABOVE DOES NOT ADDRESS TAX
CONSEQUENCES THAT MAY VARY WITH, OR ARE CONTINGENT UPON, INDIVIDUAL CIRCUMSTANCES. IN ADDITION,
THE DISCUSSION SET FORTH ABOVE DOES NOT ADDRESS ANY NON-INCOME TAX OR ANY FOREIGN, STATE OR LOCAL
TAX CONSEQUENCES OF THE REORGANIZATION AND DOES NOT ADDRESS THE TAX CONSEQUENCES OF ANY TRANSACTION
OTHER THAN THE REORGANIZATION. A BANK SHAREHOLDER SHOULD CONSULT HIS OWN TAX ADVISOR AS TO THE
SPECIFIC TAX CONSEQUENCES TO HIM OF THE HOLDING COMPANY REORGANIZATION.
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Bank Holding Company Regulation
General
The Bank is, and the holding company will be, subject to extensive supervision and regulation
under both Federal and state laws and regulations. The regulation of the Bank is discussed in
greater detail in the 2006 Annual Report which accompanies this proxy statement. The following is
a discussion of certain additional regulations which would be applicable to the holding company.
Federal and state banking laws and regulations restrict permissible activities and investments
and require compliance with various consumer protection provisions applicable to lending, deposit,
brokerage and fiduciary activities. They also impose capital adequacy requirements and restrict
the holding companys ability to repurchase stock or to receive dividends from the Bank. The
holding company and the Bank will also be subject to comprehensive examination and supervision by
the Federal Reserve, the Commissioner and the FDIC. The holding company will be functionally
regulated by the SEC. These regulatory agencies generally have broad discretion to impose
restrictions and limitations on the operations of the holding company and the Bank. The
consequences of noncompliance with these laws and regulations can include substantial monetary and
administrative penalties and sanctions. This supervisory framework could materially impact the
conduct and profitability of the holding companys activities.
To the extent that the following information describes statutory and regulatory provisions, it
is qualified in its entirety by reference to the particular statutory and regulatory provisions. A
change in applicable statutes, regulations or regulatory policy may have a material effect on the
business of the holding company and the Bank.
Bank Holding Company Act
The holding company will be registered as a bank holding company under the BHCA, and will be
subject to regulation and supervision by the Federal Reserve. The BHCA requires the holding
company to secure the prior approval of the Federal Reserve before it owns or controls, directly or
indirectly, more than five percent (5%) of the voting shares or substantially all of the assets of,
any bank or thrift, or merges or consolidates with another bank or thrift holding company. In
addition, bank holding companies are restricted in the types of activities in which they may
engage, directly or indirectly through subsidiaries, and prior approval of the Federal Reserve may
be required before engaging in certain activities.
There are a number of restrictions imposed on the holding company and the Bank by Federal law
which are designed to reduce potential loss exposure to the depositors of the Bank and Federal
Deposit Insurance Corporation (FDIC) insurance funds in the event the Bank should become
insolvent. For example, Federal Reserve policy requires a bank holding company to serve as a
source of financial and managerial strength to its subsidiary banks and to commit resources to
support such institutions in circumstances where it might not do so otherwise. The Federal Reserve
has, in some cases, entered orders for bank holding companies to take affirmative action to
strengthen the finances or management of subsidiary banks.
New Jersey Regulation
In addition to Federal bank holding company regulation, the holding company will be required
to register as a bank holding company with the Commissioner. The holding company will be required to file copies of the reports it files with the Federal banking and securities
regulators, namely the Federal Reserve, FDIC and SEC, with the Commissioner.
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Capital Rules
Under risk-based capital requirements for bank holding companies, the holding company will be
required to maintain a minimum ratio of total capital to risk-weighted assets (including certain
off-balance sheet activities, such as standby letters of credit) of eight percent. At least half
of the total capital is to be composed of common equity, retained earnings and qualifying perpetual
preferred stock, less certain intangible assets, referred to as Tier 1 Capital. The remainder
may consist of certain subordinated debt, certain hybrid capital instruments and other qualifying
preferred stock, and a limited amount of the allowance for loan losses, referred to as Tier 2
Capital. Collectively, Tier 1 Capital and Tier 2 Capital are referred to as Total Capital.
In addition, the Federal Reserve has established minimum leverage ratio requirements for bank
holding companies. For bank holding companies that meet certain specified criteria, including
having the highest regulatory rating and not experiencing significant growth or expansion, these
requirements provide for a minimum leverage ratio of Tier 1 Capital to adjusted average assets,
equal to three percent. Other bank holding companies that fail to meet such criteria will
generally be required to maintain a leverage ratio of four to five percent.
The Federal Reserves risk-based capital standards explicitly identify concentrations of
credit risk and the risk arising from non-traditional activities, as well as an institutions
ability to manage these risks, as important factors to be taken into account by the agency in
assessing an institutions general capital adequacy. The capital guidelines also provide that an
institutions exposure to a decline in the economic value of its capital due to changes in interest
rates be considered by the agency as a factor in evaluating its capital adequacy. The Federal
Reserve has issued additional guidelines for certain bank holding companies that engage in trading
activities. We do not believe that consideration of these additional factors will
affect the regulators assessment of the holding companys capital position.
Limitations on Payment of Dividends
Under applicable New Jersey law, the holding company will not permitted to pay dividends on
its capital stock if, following the payment of the dividend, (1) it would be unable to pay its
debts as they become due in the usual course of business or (2) its total assets would be less than
its total liabilities. Further, it is the policy of the Federal Reserve that bank holding
companies should pay dividends only out of current earnings and only if future retained earnings
would be consistent with the holding companys capital, asset quality and financial condition.
Because it will have no significant independent sources of income, the ability of the holding
company to pay dividends will be dependent on its ability to receive dividends from the Bank.
Sarbanes-Oxley Act
The Sarbanes-Oxley Act of 2002 comprehensively revised the laws affecting corporate
governance, auditing and accounting, executive compensation and corporate reporting for entities
with securities registered under the Exchange Act, which will include the holding company. Among
other things, Sarbanes-Oxley and its implementing regulations have established new membership
requirements and additional responsibilities for the audit committee, imposed restrictions on the
relationship between the holding company and its outside auditors (including restrictions on the
types of non-audit services our auditors may provide to us), imposed additional responsibilities
for our external financial statements on our chief executive officer and chief financial officer,
expanded the disclosure requirements for our
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corporate insiders and required our management to evaluate our disclosure controls and
procedures. In addition, our management will be required to evaluate our internal control over
financial reporting, and will require our auditors to issue a report on our internal control over
financial reporting.
Other Laws, Legislation and Regulatory Changes
The holding company will be subject to a variety of laws and regulations which are not limited
to banking organizations. In addition, legislation and regulations may be enacted which increase
the cost of doing business, limit or expand permissible activities, or affect the competitive
balance between banks and other financial services providers. Proposals to change the laws and
regulations governing the operations and taxation of banks, bank holding companies, and other
financial institutions are frequently made in the U.S. Congress, the New Jersey State Legislature
and before various bank regulatory agencies. No prediction can be made as to the likelihood of any
major changes or the impact such changes might have on the holding company.
Consequences Under Federal Securities Laws
The holding company will file with the SEC a registration statement under the Securities Act
for the registration of the holding company common stock to be issued and exchanged pursuant to the
Plan of Acquisition. This proxy statement and the accompanying notice of annual meeting constitute
the prospectus of the holding company filed as part of such registration statement. Upon
completion of the holding company reorganization, the holding company will be required to comply
with the periodic reporting requirements under the Securities Exchange Act of 1934, as amended,
referred to as the Exchange Act. Based on the number of shareholders of the Bank, if the Bank
did not adopt a holding company structure, the Bank would be required to file substantially similar
reports with the FDIC beginning in 2007. The Bank has not previously filed any reports under these
requirements with either the SEC or FDIC. The holding company will also be subject to the general
anti-fraud provisions of the federal securities laws.
Filings made by the holding company after the reorganization will be available at the SECs
public reference room at 100 F Street NE, Washington, DC 20549. The holding companys filings
will also be available on the SECs internet site at http:\\www.sec.gov.
The registration under the Securities Act of shares of holding company common stock to be
issued in connection with the reorganization does not cover the resale of such shares. However,
holding company common stock acquired by persons who are not affiliates of the holding company or
the Bank may be resold without registration. Affiliates of the holding company and the Bank
include our directors and executive officers. Shares received by our affiliates will be subject to
the resale restrictions of Rule 145 under the Securities Act, which are substantially the same as
the restrictions of Rule 144 discussed below. The Rule 145 restrictions generally terminate after
one year if the holding company continues to comply with the reporting requirements under the
Exchange Act, but any affiliate of the Bank who becomes an affiliate of the holding company will
continue to be subject to the restrictions on sales by affiliates under Rule 144.
If the holding company meets the current public information requirements of Rule 144 under the
Securities Act, each affiliate of the Bank who complies with the other conditions of Rule 144,
including those that require the affiliates sales to be aggregated with those of certain other
persons, would be able to sell in the public market, without registration, in any three-month
period, a number of shares not to exceed the greater of:
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1.0% of the outstanding shares of the holding company, or
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the average weekly volume of trading in such shares during the preceding four
calendar weeks.
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Provision may be made in the future by the holding company to permit affiliates to have their
shares registered for sale under the Securities Act under certain circumstances.
Comparison of Common Stock of Bank with Common Stock of Holding Company
General
The rights of the holders of the securities of the holding company will differ in certain
respects from the rights of the holders of securities of the Bank. The following discussion
describes certain rights of the holders of common stock of the Bank and the holding company and
notes certain material differences which arise primarily because the Corporation Act provides
security holders with different rights than the rights provided for under the Banking Act. The
rights of security holders may also be affected because the holding company will be subject to
supervision and regulation by governmental agencies which will differ from the supervision and
regulation of the Bank. You should refer to Bank Holding Company Regulation for more
information. While the following discussion summarizes certain provisions of the holding companys
certificate of incorporation, any statements concerning the certificate of incorporation are
qualified in their entirety by reference to that document, which is attached to this proxy
statement as
Exhibit C
and incorporated by reference.
Neither the common stock of the Bank nor the common stock of the holding company has any
conversion, sinking fund or redemption provisions, subjects shareholders to liability to further
capital calls, or restricts the shareholders ability to transfer shares (subject to restrictions
on transfer under federal and state securities laws and regulations).
Capital Structure
The Banks certificate of incorporation currently provides for an authorized capitalization
consisting of 5,000,000 shares of common stock, par value $10.00 per share. The holding companys
certificate of incorporation provides for an authorized capitalization consisting of 20,000,000
shares of common stock, without par value. Because each share of common stock of the Bank will be
exchange for one share of common stock of the holding company and the holding company will be
authorized to issue more shares than the Bank is currently authorized to issue, each of the
existing shareholders of the Bank will be subject to potentially greater dilution upon consummation
of the holding company reorganization. However, the board of directors of the Bank believes that
the additional authorized shares will provide the holding company with greater flexibility to issue
common stock in connection with stock splits, stock dividends, employee benefit plans, public or
private offerings, financings, acquisitions, recapitalizations and other proper corporate purposes
by making additional shares available for issuance by the holding company, at such time or times as
its board of directors may approve, without the delay and expense associated with obtaining
shareholder approval each time an opportunity requiring the issuance of shares of common stock may
arise.
The Bank now has approximately 2,399,846 shares of common stock issued and outstanding,
119,992 shares of common stock reserved for issuance under the Banks existing stock option plan
and 479,308 shares of common stock reserved for issuance under outstanding warrants. Immediately
following the holding company reorganization, the holding company will have approximately 2,399,846
shares of common stock outstanding (fewer shares to the extent any shareholders exercise
dissenters rights). In addition, the holding company will assume the Banks stock option plans
and stock warrant obligations, reserving 599,300 shares for issuance thereunder.
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Dividend Rights
The holders of the Banks common stock are entitled to dividends when, as, and if declared by
the Banks board of directors, subject to the restrictions imposed by the Banking Act and certain
regulatory requirements. Under the Banking Act, dividends may be paid only if, after the payment
of the dividend, the capital stock of the Bank will be unimpaired and either the Bank will have a
surplus of not less than 50% of its capital stock or the payment of the dividend will not reduce
the Banks surplus. Applicable regulations limit the Banks ability to pay dividends as a result
of requirements to maintain adequate capital ratios. A discussion of the regulations affecting the
Bank is set forth in our 2006 Annual Report, which accompanies this proxy statement.
The holders of the holding companys common stock will be entitled to dividends, when, as, and
if declared by the holding companys board of directors, subject to the restrictions imposed by the
Corporation Act and certain regulatory requirements. The only statutory limitation applicable to
the holding company is that dividends may not be paid if the holding company is insolvent. In
addition, applicable regulations of the Federal Reserve will limit the holding companys ability to
pay dividends as a result of requirements to maintain adequate capital ratios and for other
reasons. You should refer to Bank Holding Company Regulation for more information. Moreover,
unless the holding company expands its activities, its only source of payment of dividends will be
the Bank. Therefore, the dividend restrictions applicable to the Bank described in the preceding
paragraph will continue to impact the holding companys ability to pay dividends.
Since its organization, the Bank has not declared or paid a cash dividend and we intend to
retain earnings, if any, to increase our net worth and reserves during our initial years of
operation. Our future dividend policy is subject to the discretion of the board of directors and
will depend upon a number of factors, including future earnings, financial condition, cash needs,
and general business conditions.
Voting Rights
Under the Banking Act and the Banks certificate of incorporation, each share of the Banks
common stock is entitled to one vote per share on each matter submitted to a vote of the
shareholders of the Bank. Under the Corporation Act and the holding companys certificate of
incorporation, each share of the holding companys common stock also will be entitled to one vote
per share on each matter submitted to a vote of the shareholders of the holding company.
While generally the voting rights of the shareholders are the same in the holding company as
they are in the Bank, there are several material differences. Among other things, the Banking Act
requires the affirmative vote of two-thirds of the outstanding shares to approve a merger or
consolidation. Except in connection with matters subject to the Protection Act (discussed below in
the section captioned, Shareholders Protection Act) and unless the certificate of incorporation
provides for a greater voting requirement, under the Corporation Act, the affirmative vote of a
majority of the votes cast at a meeting at which a quorum is present is required to approve any
merger, consolidation or disposition of substantially all of the holding companys assets.
Under the Banking Act, the Bank is authorized to have a minimum of 5 and a maximum of 25
directors. Within the limits prescribed by the Banking Act, the Banks certificate of
incorporation authorizes the Board of Directors to fix the exact number of directors. The Bank
currently has 18 directors.
Under the Corporation Act, the holding company is to have one or more directors and, subject
to any requirements contained in the certificate of incorporation or by-laws, the number of directors may be fixed by the board of directors. The holding companys certificate of
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incorporation provides for an initial board of directors consisting of eighteen members, with the
current directors of the Bank constituting the initial board of directors of the holding company.
Under the Banking Act, the Bank cannot have a classified board of directors and, as a result,
the shareholders of the Bank have the ability to elect all of the members of the board of directors
on an annual basis. Under the Corporation Act, the holding company is permitted to have a
classified board of directors and the certificate of incorporation of the holding company provides
for a classified board of directors. Specifically, the certificate of incorporation provides that
approximately one-third of the entire board of directors will be elected each year and each class
of directors will serve for approximately three years. As cumulative voting is not permitted under
the certificates of incorporation of either the Bank or the holding company in connection with the
election of directors, the classification will not impact a shareholders ability to cumulate his
votes.
The classification of the holding companys board of directors could have an effect of
delaying or deferring a change in control of the board of directors of the holding company and, as
a result, management or a change in control of the holding company itself.
Liquidation Rights
The rights of the holders of the common stock of the Bank and the holding company upon a
liquidation are substantially similar. In the event of liquidation, dissolution or winding up of
either the Bank or the holding company, holders of common stock are entitled to receive, on a pro
rata per share basis, any assets distributable to shareholders, after the payment of debts and
liabilities and after the distribution to holders of any outstanding shares hereafter issued which
have prior rights upon liquidation.
Preemptive Rights
Under the
Banking Act and the Corporation Act, shareholders may have preemptive rights if these
rights are provided in the certificate of incorporation; however, neither the certificate of
incorporation of the Bank nor the certificate of incorporation of the holding company provide for
preemptive rights.
Appraisal Rights
Under the Banking Act, shareholders of the Bank have appraisal rights upon certain mergers or
other reorganizations, including the holding company reorganization contemplated by the Plan. You
should refer to Rights of Dissenting Shareholders for more information.
Under the Corporation Act, shareholders of the holding company will have appraisal rights
(subject to the broad exception set forth in the next sentence) upon certain mergers or other
reorganizations. Unlike under the Banking Act, however, appraisal rights for shareholders of the
holding company will not be available in any such transaction if shares of the holding company are
listed for trading on a national securities exchange or held of record by more than 1,000 holders.
In addition, appraisal rights are not available to shareholders of an acquired corporation if, as a
result of the transaction, shares of the acquired corporation are exchanged for any of the
following: (i) cash; (ii) any securities listed on a national securities exchange or held of record
by more than 1,000 holders; or (iii) any combination of the above. The Corporation Act also
provides that a corporation may grant appraisal rights in other types of transactions or regardless
of the consideration received by providing for such rights in its certificate of incorporation;
however, the certificate of incorporation of the holding company does not provide for appraisal
rights beyond those required by the Corporation Act.
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Shareholders Protection Act
A provision of the Corporation Act referred to as the New Jersey Shareholders Protection Act
or, in this proxy statement, the Protection Act, prohibits certain business combinations
involving certain New Jersey corporations and an interested shareholder. An interested
shareholder is defined generally as one who is the beneficial owner, directly or indirectly, of
ten percent (10%) or more of the voting power of the outstanding stock of the corporation. The
Protection Act prohibits those business combinations subject to the Protection Act for a period of
five years after the date the interested shareholder acquired its stock, unless the transaction was
approved by the corporations board of directors prior to the time the interested shareholder
acquired its shares. After the five year period expires, the prohibition on business combinations
with an interested shareholder continues unless certain conditions are met. The conditions include
(i) that the business combination is approved by the board of directors of the target corporation;
(ii) that the business combination is approved by a vote of two-thirds of the voting stock not
owned by the interested shareholder; and (iii) that the shareholders of the corporation receive a
price in accordance with a fair price formula set forth in the Protection Act. Because the holding
company will be a reporting company under Section 12 of the Exchange Act, the Protection Act will
be applicable to holding company. The Protection Act as applicable to the holding company could
inhibit unsolicited offers to acquire the holding company.
While a party seeking control of the either the Bank or the holding company would be required
to comply with applicable federal and state banking laws and regulations, neither the Protection
Act, nor prohibitions and standards similar to those contained in the Protection Act, would be
applicable to a party seeking control of the Bank.
While your board of directors is not aware of any effort that might be made to obtain control
of the Bank or the holding company, the board believes the proposed provisions of the holding
companys certificate of incorporation and by-laws are appropriate to protect the interests of the
holding company and its shareholders from non-negotiated takeover attempts which your board of
directors might conclude are not in the best interests of the holding company or its shareholders.
Vote Required for Adoption of the Plan
The affirmative vote of the holders of two-thirds of the issued and outstanding common stock
of the Bank is required to approve the Plan. Therefore, brokers non-votes and abstentions will
effectively count as votes against the Plan.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR
THE PLAN OF ACQUISITION.
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RIGHTS OF DISSENTING SHAREHOLDERS
Under the Banking Act, shareholders may dissent from the Plan and, if they comply with the
applicable provisions of the Banking Act, be paid the fair value of their shares in lieu of
receiving holding company stock. A shareholder may not dissent with respect to less than all of
the shares owned beneficially by him. Shareholders contemplating the exercise of their dissenters
rights should review the procedures set forth in Sections 360 through 369 of the Banking Act, a
copy of which is attached to this proxy statement as
Exhibit D
. The following is a summary
of the steps which must be taken for shareholders to exercise their dissenters rights and is
qualified in its entirety by reference to the attached sections of the Banking Act.
Notice of Dissent
To be eligible to exercise his right of dissent, a shareholder must file with the Bank a
written notice of dissent, stating that he intends to demand payment for his shares if the Plan
becomes effective. The notice of dissent must be filed before the vote of the shareholders on the
Plan is taken, currently schedule to occur at the annual meeting on April 23, 2007. A vote against
the Plan by a shareholder does not constitute the exercise of the shareholders dissenters rights,
but a vote in favor of the Plan does constitute a waiver of such rights. Any shareholder wishing
to file a notice of dissent should deliver such notice to Connie Caltabellatta, Secretary, Bank of
New Jersey, 204 Main Street, Fort Lee, New Jersey 07024, prior to the annual meeting.
Written Demand for Payment
If the Plan is approved by the shareholders, within ten (10) days of such approval the Bank
will notify shareholders who have filed a notice of dissent and not voted in favor of the Plan by
certified mail that the Plan was approved. Within twenty (20) days after the Banks notice of
shareholder approval is mailed, any shareholder entitled to such notice may make a written demand
for the payment of the fair value of his shares. Such written demand should be delivered to the
Bank at the address set forth above. Upon making a written demand for payment, a shareholder will
cease to have any rights as a shareholder of the Bank or the holding company.
Delivery of Certificates for Notation
Within twenty (20) days after making a written demand for payment, a shareholder must deliver
the certificate or certificates representing his shares of the Banks common stock to the Bank.
The Bank will make a notation on the certificate or certificates that the shareholder has made a
demand to be paid the fair value of his shares and thereafter the certificate or certificates will
merely represent the rights of a dissenting shareholder, and will not represent shares of stock of
the Bank or the holding company.
Determination and Payment of Fair Value
Within ten (10) days of the later of (i) the expiration of the period within which dissenting
shareholders may make a written demand for payment or (ii) the effective date of the Plan, the Bank
will mail to each dissenting shareholder the balance sheet and surplus statement of the Bank as of
the latest available date and a profit and loss statement or statements of the Bank for not less
than a 12-month period ended on the balance sheet date or for such shorter period that the Bank
will have been in existence. The Bank may include a written offer to pay a specified price deemed
by the Bank to be the fair value of the shares, but the Bank is not obligated to do so. If any
dissenting shareholder and the Bank agree upon the fair value of the shares within a thirty (30)
days of the expiration of the 10-day period referred to in this paragraph, the Bank
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shall pay such dissenting shareholder the fair value
of his shares upon surrender of the certificate or certificates representing such shares.
If any dissenting shareholder and the Bank are unable to agree upon a price within thirty (30)
days of the expiration of the 10-day period referred to in the preceding paragraph, such dissenting
shareholder may serve a written demand on the Bank to commence an action in the Superior Court of
New Jersey for the determination of the fair value of his shares. The shareholders demand to
commence an action must be served not later than 30 days after the expiration of the 30 day period
shareholders have in which to agree upon a price with the Bank.
If any dissenting shareholder makes a demand to commence a proceeding in the Superior Court,
the Bank will have thirty (30) days after receipt of such demand to do so. If the Bank fails to
commence the proceeding, the demanding shareholder will have a period of sixty (60) days after
expiration of the Banks 30-day period to commence the proceeding in the name of the Bank.
If the fair value of shares is not agreed upon and no action to for the determination of fair
value by the Superior Court is commenced within the time provided, the rights of a dissenting
shareholder to receive the fair value of his shares will cease and his rights as a shareholder will
be reinstated.
If an action in the Superior Court is commenced to determine the fair value of the shares, all
dissenting shareholders who have preserved their right to receive the fair value of their shares
and have not agreed upon a price with the Bank will be made parties to the action. The Superior
Court shall render a judgment for the amount of the fair value of the shares, payable upon
surrender to the Bank of the certificate or certificates representing the shares, and may include
interest, costs and expenses.
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Shareholder Proposals
Assuming the consummation of the holding company reorganization, our 2008 Annual Meeting will
be an annual meeting of the shareholders of the holding company. A shareholder who wishes to
nominate an individual for election to the board of directors or make a proposal to have the
shareholders take an action at our 2008 Annual Meeting shall send a written notice to Bancorp of
New Jersey, Inc., 204 Main Street, Fort Lee, New Jersey 07024, Attention: Secretary, by registered
mail, return receipt requested, no earlier than January 24, 2008
and no later than February 23,
2008. Any such notice shall specify: (a) as to each individual whom the shareholder proposes to
nominate for election as a member of the board of directors: (1) all information relating to such
person that is required to be disclosed in solicitations of proxies for election of members of the
board of directors in an election or is otherwise required pursuant to Regulation 14A under the
Exchange Act, (2) a description of any arrangements or understandings among the shareholder and
each such person and any other person with respect to such nomination, and (3) the consent of each
such person to being named in the proxy statement as a nominee and to serving as a member of the
board of directors if so elected; (b) as to any other business that the shareholder proposes to
bring before the meeting, a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any material interest in such
business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the shareholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (1) the name and address of such shareholder, as they
appear on the corporations books, and of such beneficial owner; (2) the class and number of shares
of the corporation which are owned beneficially and of record by such shareholder and such
beneficial owner; and (3) a representation that such shareholder and beneficial owner intend to
appear in person or by proxy at the meeting. In order for a shareholder proposal to be included in
our proxy statement for 2008 Annual Meeting, in addition to meeting all of the requirements set
forth above, and all requirements of applicable securities laws, we must receive the proposal by
November 28, 2007.
By Order of the Board of Directors,
/s/ Connie Caltabellatta
CONNIE CALTABELLATTA
Secretary
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INDEX OF EXHIBITS
Exhibit A 2007 Non-Qualified Stock Option Plan for Directors
Exhibit B Plan of Acquisition
Exhibit C Certification of Incorporation of Bancorp of New Jersey, Inc.
Exhibit D Sections 360 through 369 of Banking Act
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EXHIBIT A
BANK OF NEW JERSEY
2007 NON-QUALIFIED STOCK OPTION PLAN
FOR DIRECTORS
SECTION 1.
Purpose; Definitions
.
The purposes of the Bank of New Jersey 2007
Non-Qualified Stock Option Plan for Directors (the
Plan
) are to enable the Bank of New
Jersey (the
Company
) and its affiliated companies to attract and retain Non-Employee
Directors, and to provide incentive compensation to Non-Employee Directors based upon the Companys
performance. All options granted hereunder are intended to be non-qualified stock options.
For purposes of the Plan, the following terms will have the meanings defined below, unless the
context clearly requires a different meaning:
(a)
Affiliate
means any Person that directly or indirectly controls, or is
controlled by, or is under common control with the Company (or its successors).
(b)
Award Agreement
means, with respect to any particular Option, the written
document that sets forth the terms of that particular Option.
(c)
Board
means the Board of Directors of the Company.
(d)
Change in Control
means the occurrence of any of the following, in one
transaction or a series of related transactions: (i) any person (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) becoming a beneficial owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company representing more than 50%
of the voting power of the Companys then outstanding securities; (ii) a consolidation, share
exchange, reorganization or merger of the Company resulting in the stockholders of the Company
immediately prior to such event not owning at least a majority of the voting power of the resulting
entitys securities outstanding immediately following such event; (iii) the sale or other
disposition of all or substantially all the assets of the Company, (iv) a liquidation or
dissolution of the Company, or (v) any similar event deemed by the Board to constitute a Change in
Control for purposes of this Plan.
(e)
Code
means the Internal Revenue Code of 1986, as amended from time to time, and
any successor thereto.
(f)
Disability
means a condition rendering a Participant Disabled.
(g)
Disabled
will have the same meaning as set forth in Section 22(e)(3) of the
Code.
(h)
Exchange Act
means the Securities Exchange Act of 1934, as amended.
A-1
(i)
Fair Market Value
means, as of any date: (i) if the Shares are not then publicly
traded, the value of such Shares on that date, as determined by the Board in its sole and absolute
discretion; or (ii) if the Shares are publicly traded, the closing price for a Share on the
principal national securities exchange on which the Shares are listed or admitted to trading or, if
the Shares are not listed or admitted to trading on any national securities exchange, but are
traded in the over-the-counter market, the closing sale price of a Share or, if no sale is publicly
reported, the average of the closing bid and asked quotations for a Share, as reported by The
Nasdaq Stock Market, Inc. (
NASDAQ
) or any comparable system or, if the Common Stock is
not listed on NASDAQ or a comparable system, the closing sale price of a Share or, if no sale is
publicly reported, the average of the closing bid and asked prices, as furnished by two members of
the National Association of Securities Dealers, Inc. who make a market in the Shares selected from
time to time by the Company for that purpose.
(j)
Non-Employee Director
will have the meaning set forth in Rule 16b-3(b)(3)(i)
promulgated by the Securities and Exchange Commission under the Exchange Act, or any successor
definition adopted by the Securities and Exchange Commission.
(k)
Option
means any non-qualified stock option to purchase Shares granted pursuant
to
Section 5
hereof.
(l)
Participant
means a Non-Employee Director of the Company or any of its
respective Affiliates to whom an Option is granted.
(m)
Person
means an individual, partnership, corporation, limited liability company,
trust, joint venture, unincorporated association, or other entity or association.
(n)
Shares
means shares of the Companys common stock, par value $10.00, subject to
substitution or adjustment as provided in
Section 3(c)
hereof.
SECTION 2.
Administration
.
The Plan will be administered by the Board.
The Board will have full authority to grant Options under this Plan and determine the terms of
such Options. Such authority will include the right to:
(a) determine the number of Shares, if any, to be covered by each Option;
(b) establish the other terms and conditions of each Option issued under the Plan (and any
Award Agreement);
(c) adopt, alter and repeal such administrative rules, guidelines and practices governing the
Plan as it, from time to time, deems advisable;
(d) interpret the terms and provisions of the Plan and any Option issued under the Plan (and
any Award Agreement); and
(e) correct any defect, supply any omission or reconcile any inconsistency in the Plan or in
any Award Agreement in the manner and to the extent it deems necessary to carry out the intent of
the Plan.
A-2
All decisions made by the Board pursuant to the provisions of the Plan will be final and
binding on all persons, including the Company and Participants. No member of the Board will be
liable for any good faith determination, act or omission in connection with the Plan or any Award.
SECTION 3.
Shares Subject to the Plan
.
(a)
Shares Subject to the Plan
. The Shares to be subject to or related to Options
under the Plan will be authorized and unissued Shares of the Company. The maximum number of Shares
that may be subject to Options under the Plan is 240,000. The Company will reserve for the
purposes of the Plan, out of its authorized and unissued Shares, such number of Shares.
(b)
Effect of the Expiration or Termination of Options
. If and to the extent that an
Option expires, terminates or is canceled or forfeited for any reason without having been exercised
in full, the Shares associated with that Option will again become available for grant under the
Plan. In addition, if any Share is tendered or the delivery of any Share is withheld in settlement
of a tax withholding obligation associated with an Option or in satisfaction of the exercise price
payable upon exercise of an Option, that Share will again become available for grant under the
Plan.
(c)
Other Adjustment
. In the event of any recapitalization, reorganization, merger,
consolidation, stock split or combination, stock dividend or other similar event or transaction
affecting the Shares, the Board will make such equitable substitutions or adjustments as it deems
appropriate in its sole and absolute discretion; (i) to the aggregate number, class and/or issuer
of securities reserved for issuance under the Plan; (ii) to the number, class and/or issuer of
securities subject to outstanding Options; and (iii) to the exercise price of outstanding Options,
which shall be conclusive and binding for all purposes of the Plan.
(d)
Change in Control
. Notwithstanding anything to the contrary set forth in the
Plan, upon or in anticipation of any Change in Control, the Board may, in its sole and absolute
discretion and without the need for the consent of any Participant, take one or more of the
following actions contingent upon the occurrence of that Change in Control:
(i) cause any or all outstanding Options to become vested and/or immediately
exercisable, in whole or in part;
(ii) cancel any Option in exchange for a substitute option in a manner consistent with
the requirements of Treas. Reg. §1.424-1(a) (notwithstanding the fact that the original
Option may never have been intended to satisfy the requirements for treatment as an
Incentive Stock Option);
(iii) cause any outstanding Option to become fully vested and immediately exercisable
for a reasonable period in advance of the Change in Control and, to the extent not exercised
prior to that Change in Control, cancel that Option upon closing of the Change in Control;
or
(iv) cancel any Option in exchange for cash and/or other substitute consideration with
a value equal to (A) the number of Shares subject to that
Option, multiplied by (B) the difference, if any, between the Fair Market Value per Share on
the date of the Change in
A-3
Control
and the exercise price of that Option; provided, that if
the Fair Market Value per Share on the date of the Change in Control does not exceed the
exercise price of any such Option, the Board may cancel that Option without any payment of
consideration therefore.
In the discretion of the Board, any cash or substitute consideration payable upon cancellation
or redemption of an Option may be subjected to vesting terms substantially identical to those that
applied to the cancelled or redeemed Option prior to the Change in Control.
SECTION 4.
Eligibility
.
Only Non-Employee Directors of the Company or its Affiliates
are eligible to be granted Options under the Plan.
SECTION 5.
Options
.
Only non-qualified stock options shall be granted under the Plan.
The Award Agreement evidencing any Option will incorporate the following terms and conditions and
will contain such additional terms and conditions as the Board deems appropriate in its sole and
absolute discretion:
(a)
Option Price
. The exercise price per Share purchasable under an Option will be
determined by the Board in its sole and absolute discretion and will not be less than 100% of the
Fair Market Value of a Share on the date of the grant.
(b)
Option Term
. The term of each Option will be fixed by the Board. No Option may be
exercised by any person after expiration of the term of the Option.
(c)
Exercisability
. Options will vest and be exercisable at such time or times and
subject to such terms and conditions as determined by the Board.
(d)
Method of Exercise
. Subject to the terms of the applicable Award Agreement, the
exercisability provisions of
Section 5(c)
and the cessation of employment provisions of
Section 6
, Options may be exercised in whole or in part from time to time during their term
by the delivery of written notice of exercise by the Participant to the Company specifying the
number of Shares to be purchased. Such notice will be accompanied by payment in full of the
purchase price, either by certified or bank check or such other means as the Board may accept. As
determined by the Board in its sole discretion on or after the date of grant, payment in full or in
part of the exercise price of an Option may be made in the form of previously acquired Shares based
on the Fair Market Value of the Shares on the date the Option is exercised.
No Shares will be issued upon exercise of an Option until full payment therefor has been made.
A Participant will not have the right to distributions or dividends or any other rights of a
stockholder with respect to Shares subject to the Option until the Participant has given written
notice of exercise, has paid in full for such Shares, if requested, has given the representation
described in
Section 8(a)
hereof and fulfills such other conditions as may be set forth in
the applicable Award Agreement.
(e)
Cessation of Service
. Unless otherwise specified in the applicable Award
Agreement, Options will be subject to the terms of
Section 6
with respect to exercise upon
or following cessation of service as a Non-Employee Director.
A-4
(f)
Transferability of Options
. Except as may otherwise be specifically determined by
the Board with respect to a particular Option: (i) no Option will be transferable by the
Participant other than by will or by the laws of descent and distribution, and (ii) during the
Participants lifetime, an Option will be exercisable only by the Participant (or, in the event of
the Participants Disability, by his or her personal representative).
SECTION 6.
Cessation of Service
.
Unless otherwise specified with respect to a
particular Option in the applicable Award Agreement, Options granted hereunder will remain
exercisable after cessation of service only to the extent specified in this
Section 6
.
(a)
Cessation of by Reason of Death
. If a Participants service as a Non-Employee
Director of the Company or any Affiliate ceases by reason of death, any Option held by such
Participant may thereafter be exercised, to the extent then exercisable or on such accelerated
basis as the Board may determine at or after grant, by the legal representative of the estate or by
the legatee of the Participant under the will of the Participant, for a period expiring (i) at such
time as may be specified by the Board at or after the time of grant, or (ii) if not specified by
the Board, then 12 months from the date of death, or (iii) if sooner than the applicable period
specified under (i) or (ii) above, upon the expiration of the stated term of such Option.
(b)
Cessation by Reason of Disability
. If a Participants service as a Non-Employee
Director of the Company or any Affiliate terminates by reason of Disability, any Option held by
such Participant may thereafter be exercised by the Participant or his personal representative, to
the extent it was exercisable at the time of termination, or on such accelerated basis as the Board
may determine at or after the time of grant, for a period expiring (i) at such time as may be
specified by the Board at or after grant, or (ii) if not specified by the Board, then 12 months
from the date of termination of service, or (iii) if sooner than the applicable period specified
under (i) or (ii) above, then upon the expiration of the stated term of such Option.
(c)
Other Cessations
. If a Participants service as a Non-Employee Director of the
Company or any Affiliate ceases for any reason other than death or Disability, any Option held by
such Participant may thereafter be exercised by the Participant, to the extent it was exercisable
at the time of such termination, or on such accelerated basis as the Board may determine at or
after grant, for a period expiring (i) at such time as may be specified by the Board at or after
the time of grant, or (ii) if not specified by the Board, then 90 days from the date of cessation
of service as a Non-Employee Director (irrespective of the manner or timing of the cessation and
without regards to whether there has been reasonable notice of cessation), or (iii) if sooner than
the applicable period specified under (i) or (ii) above, upon the expiration of the stated term of
such Option.
SECTION 7.
Amendments and Termination
.
The Board may amend, alter or discontinue the
Plan at any time, provided that no amendment, alteration or discontinuation will be made which,
without the approval of such amendment within twelve (12) months of its adoption by the Board, by
the Companys stockholders, would: (i) increase the total number of Shares reserved for the
purposes of the Plan (except as otherwise provided in Section 3), or (ii) change the persons or
class of persons eligible to receive Options.
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SECTION 8.
General Provisions
.
(a) The Board may require each Participant to represent to and agree with the Company in
writing that the Participant is acquiring securities of the Company for investment purposes and
without a view to distribution thereof and as to such other matters as the Board believes are
appropriate. The Award Agreement evidencing any Option and securities issued pursuant thereto may
include any legend which the Board deems appropriate to reflect any restrictions on transfer and
compliance with applicable securities laws.
(b) All certificates for Shares or other securities delivered under the Plan will be subject
to such share-transfer orders and other restrictions as the Board may deem advisable under the
rules, regulations and other requirements of any stock exchange upon which the Shares are then
listed, and any applicable securities laws, and the Board may cause a legend or legends to be put
on any such certificates to make appropriate reference to such restrictions.
(c) No later than the date as of which an amount first becomes includible in the gross income
of the Participant for federal income tax purposes with respect to any Option under the Plan, the
Participant will pay to the Company, or make arrangements satisfactory to the Board regarding the
payment of taxes of any kind required by law to be withheld with respect to such amount. The
obligations of the Company under the Plan will be conditioned on such payment or arrangements and
the Company will have the right to deduct any such taxes from any payment of any kind otherwise due
to the Participant. Unless otherwise determined by the Board, the minimum required withholding
obligation with respect to an Option may be settled in Shares, including the Shares that are
subject to that Option.
SECTION 9.
Effective Date of Plan
.
The Plan will become effective on the date that it
is approved by the affirmative vote of two-thirds of all outstanding Shares of the Company.
SECTION 10.
Term of Plan
.
No Option may be awarded under the Plan at any time after
the date that is ten years after the Effective Date;
provided, however
, that the Plan shall not be
deemed to have terminated until all Options have either expired, been exercised or have otherwise
terminated.
SECTION 11.
Invalid Provisions
.
In the event that any provision of this Plan is found
to be invalid or otherwise unenforceable under any applicable law, such invalidity or
unenforceability will not be construed as rendering any other provisions contained herein as
invalid or unenforceable, and all such other provisions will be given full force and effect to the
same extent as though the invalid or unenforceable provision was not contained herein.
SECTION 12.
Governing Law
.
The Plan and all Options granted hereunder will be
governed by and construed in accordance with the laws of the State of New Jersey, without regard to
the application of the principles of conflicts of laws.
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SECTION 13.
Board Action
.
Notwithstanding anything to the contrary set forth in the
Plan, any and all actions of the Board, taken under or in connection with the Plan and any
agreements, instruments, documents, certificates or other writings entered into, executed, granted,
issued and/or delivered pursuant to the terms hereof, will be subject to and limited by any and all
votes, consents, approvals, waivers or other actions of all or certain stockholders of the Company
or other persons required by:
(a) the Companys Certificate of Incorporation (as the same may be amended and/or restated
from time to time);
(b) the Companys Bylaws (as the same may be amended and/or restated from time to time); and
(c) any other agreement, instrument, document or writing now or hereafter existing, between or
among the Company and its stockholders or other persons (as the same may be amended from time to
time).
SECTION 14.
Notices
.
Any notice to be given to the Company pursuant to the provisions
of the Plan shall be given by registered or certified mail, postage prepaid, and addressed, if to
the Company to its principal executive office to the attention of its Chief Financial Officer (or
such other person as the Company may designate in writing from time to time), and, if to a
Participant, to the address contained in the Companys personnel records, or to such other address
as that Participant may hereafter designate in writing to the Company. Any such notice shall be
deemed given or delivered three days after the date of mailing.
A-7
EXHIBIT B
PLAN OF ACQUISITION
OF ALL THE OUTSTANDING STOCK
OF THE BANK OF NEW JERSEY
BY
BANCORP OF NEW JERSEY, INC.
THIS PLAN OF ACQUISITION (the Plan) is entered into as of this 1st day of December, 2006, by
the BANK OF NEW JERSEY, a commercial bank organized under the laws of the State of New Jersey, with
its principal office at 204 Main Street, Fort Lee, New Jersey 07024 (the Bank) and BANCORP OF NEW
JERSEY, INC., a corporation organized under the laws of the state of New Jersey, with its principal
office at 204 Main Street, Fort Lee, New Jersey 07024 (Corp).
WHEREAS, the Bank is desirous of forming a bank holding company because it believes that the
holding company will provide it with future flexibility in undertaking the Banks current
activities and future new activities and assist the Bank in remaining an independent institution,
if the Board determines that remaining independent is in the best interests of the Bank and its
stockholders; and
WHEREAS, the Banks Board of Directors has determined that the formation of a holding company
is in the best interest of the Banks stockholders; and
WHEREAS, Corp was formed under the New Jersey Business Corporation Act on behalf of the Bank
at the direction of the Banks Board of Directors; and
WHEREAS, N.J.S.A. 17:9A-355
et seq
. authorizes a New Jersey corporation and a state-chartered
bank to enter into a plan of acquisition to exchange shares in the bank for shares in the holding
company, to submit the plan to the New Jersey Department of Banking for approval and implement the
plan if it is approved by the banks stockholders, subject to the right of the banks stockholders
to dissent and receive the fair value of their shares; and
WHEREAS, the Boards of Directors of the Bank and Corp have adopted this Plan pursuant to the
provisions of N.J.S.A. 17:9A-357.
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. PLAN OF ACQUISITION REQUIRED BY SECTION 17:9A-357
1.1.
Name of Acquiring Corporation
. The name and the address of the acquiring
corporation is: Bancorp of New Jersey, Inc., 204 Main Street, Fort Lee, New Jersey 07024.
1.2.
Name of Participating Bank
. The name and address of the participating bank is:
the Bank of New Jersey, 204 Main Street, Fort Lee, New Jersey 07024.
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1.3.
Names and Address of Directors
. The names and addresses of the members of the
Board of Directors of Corp are:
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Name
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Address
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Jack Alter
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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Michael Bello
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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Jay Blau
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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Albert F. Buzzetti
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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Albert L. Buzzetti
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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Stephen Crevani
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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John K. Daily
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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Armand Leone, Jr., MD, JD
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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Anthony M. LoConte
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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Carmelo Luppino
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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Rosario Luppino
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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Howard Mann
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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Josephine Mauro
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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B-2
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Name
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Address
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Joel P. Paritz
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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Christopher M. Shaari, MD
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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Anthony Siniscalchi
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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Mark Sokolich
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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Diane M. Spinner
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c/o Bancorp of New Jersey, Inc.
204 Main Street
Fort Lee, New Jersey 07024
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1.4.
Shares of Other Banks Owned by Corp
. Corp does not own any shares of capital
stock of any other bank.
1.5.
Terms and Conditions of Acquisition
. The terms and conditions of the acquisition
are the terms set forth in Sections 2, 3, 5, and 6 hereof.
1.6.
Effective Date
. The effective date shall be the date determined under Section 7
hereof.
1.7.
Other Provisions
. There are no other provisions of the Plan except as set forth
herein.
Section 2. CAPITALIZATION; TERMS OF ACQUISITION
2.1.
Capitalization of Corp
. Corp is authorized to issue 20,000,000 shares of capital
stock without nominal or par value (Common Stock). Corp shall not issue any of its shares of
Common Stock prior to the Effective Date.
2.2.
Capitalization of the Bank
. The Bank is authorized to issue 5,000,000 shares of
common stock, par value $10.00 per share (the Bank Common Stock). As of November 16, 2006,
2,181,679 shares were issued and outstanding.
2.3.
Terms of Exchange
. Upon the Effective Date, each share of the Bank Common stock
shall be converted into a share of Common Stock (the Exchange Ratio), subject to the rights of
dissenting stockholders as provided in Section 4 hereof, and, to the extent applicable, each option
and warrant to purchase shares of Bank Common Stock shall be converted into an option or warrant to
purchase shares of Common Stock at the Exchange Ratio. In addition, the Corp shall assume all of
the Banks obligations under any outstanding stock option, stock warrant or benefit plan.
Section 3. MODE OF CARRYING INTO EFFECT THE PLAN OF EXCHANGE
3.1.
Exchange Effective Immediately
. Upon the Effective Date, each certificate
representing shares of the Bank Common Stock shall by virtue of the Plan, and without any
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action on the part of the holder thereof, be deemed to represent shares of Common Stock, and
shall no longer represent the Bank Common Stock. As set forth in Section 4 hereof, after the
Effective Date any dissenting stockholder who complies with the requirements of N.J.S.A. 17:9A-360
et seq
. shall have only the rights accorded dissenting stockholders and such stockholder
certificates shall not be deemed to represent shares of Common Stock or the Bank Common Stock.
3.2.
Issuance of Shares of Bank to Corp
. Upon the Effective Date, the Bank shall
issue to Corp one share of Bank Common Stock for each share of Bank Common Stock outstanding
immediately prior to the Effective Date.
3.3.
Means of Effecting Exchange of Certificates of Bank Stock for Certificates in
Corp
. Upon or immediately after the Effective Date, the Bank shall notify each Bank
stockholder of record on the Effective Date (except a holder who is a dissenting stockholder as
provided in Section 4 hereof) of the procedure by which certificates representing the Bank Common
Stock may be exchanged for certificates of Common Stock. American Stock Transfer & Trust Company
shall act as exchange agent in effecting the exchange of certificates. After receipt of such
notification, each holder shall be obligated to surrender the certificates representing the Bank
Common Stock for exchange into certificates of Common Stock as promptly as possible.
Section 4. DISSENTING SHAREHOLDER
4.1. Any stockholder of the Bank who desires to dissent from the transactions contemplated by
the Plan shall have the right to dissent by complying with all of the requirements set forth in
N.J.S.A. 17:9A-360
et seq
., and, if the transactions contemplated by the Plan are consummated,
shall be entitled to be paid the fair value of his shares in accordance with those provisions.
Section 5. CONDITIONS FOR CONSUMMATION OF THE PLAN AND RIGHT OF THE BANK TO TERMINATE THE PLAN
PRIOR TO CONSUMMATION
5.1.
Conditions for Consummation
. Consummation of the Plan is conditioned upon the
following:
(a) Approval of the Plan by the Commissioner of Banking and Insurance of the State of New
Jersey;
(b) Approval of the Plan by the holders of two-thirds (2/3) or more of the outstanding Bank
Common Stock entitled to vote;
(c) The non-objection of the Board of Governors of the Federal Reserve System to a
notification by Corp of its acquisition of Bank; and
(d) The Banks Board of Directors not terminating the Plan prior to the Effective Date as
permitted by Section 5.2 hereof.
5.2.
Right of Bank to Terminate Plan Prior to the Effective Date
. At any time prior
to the Effective Date, the Board of Directors of the Bank may terminate the Plan if in the judgment
of the Board of Directors the consummation of the Plan is inadvisable for any reason. To terminate
the Plan the Banks Board of Directors shall adopt a resolution terminating the Plan and in the
event such termination occurs after the stockholders of the Bank have voted on the Plan, promptly
give written notice that the Plan has been terminated to the stockholders of the Bank. Upon the
adoption of the Board resolution, the Plan shall be of no further force or effect and the Bank and
Corp shall not be liable to each
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other, to any stockholder of the Bank or to any other person by reason of the Plan or the
termination thereof. Without limiting the reasons for which the Banks Board may terminate the
Plan, the Board may terminate the Plan if:
(a) The number of stockholders dissenting from the Plan and demanding payment of the fair
value of their shares would in the judgment of the Board render the Plan inadvisable; or
(b) The Bank or Corp fails to receive, or fails to receive in form and substance satisfactory
to the Bank or Corp, any permit, license or qualification from any federal or state authority
required in connection with the consummation of the Plan.
Section 6. EXPENSES
Bank will bear all of the expenses incurred by the Bank and by Corp in connection with the
Plan, including, without limiting the foregoing, all attorneys, accountants, and printing fees and
all licensing fees incurred in connection with the Plan and the formation of Corp.
Section 7. EFFECTIVE DATE
The Plan shall become effective upon a date selected by the mutual agreement in writing of the
parties hereto (the Effective Date). The date so selected shall be within a reasonable period
after the conditions set forth in Section 5.1 have been complied with and the Bank has received any
approvals or consents without which it might terminate the Plan under Section 5.2. At least one
week prior to the agreed upon effective date, the Plan shall be filed with the Department of
Banking and Insurance of the State of New Jersey together with the writing specifying the Effective
Date and a certification by the president or a vice president of the Bank that the Banks
stockholders have approved the Plan.
IN WITNESS WHEREOF, the Boards of Directors of the Bank of New Jersey and Bancorp of New
Jersey, Inc., have authorized the execution of the Plan and caused the Plan to be executed as of
the date first written above.
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ATTEST:
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BANCORP OF NEW JERSEY, INC.
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Michael Lesler
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By:
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Albert F. Buzzetti
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Name:
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Albert F. Buzzetti
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Title:
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President and Chief Executive Officer
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ATTEST:
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BANK OF NEW JERSEY
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Michael Lesler
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By:
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Albert F. Buzzetti
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Name:
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Albert F. Buzzetti
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Title:
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President and Chief Executive Officer
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B-5
EXHIBIT C
CERTIFICATE OF INCORPORATION
OF
BANCORP OF NEW JERSEY, INC.
This is to certify that there is hereby organized a corporation under and by virtue of the New
Jersey Business Corporation Act (
N.J.S.A.
14A:1-1
et seq
.).
ARTICLE 1
The name of the Corporation is Bancorp of New Jersey, Inc.
ARTICLE 2
The address of this Corporations registered office is 204 Main Street, Fort Lee, New Jersey
07024, and the name of the Corporations registered agent at such address is Albert F. Buzzetti.
ARTICLE 3
The purpose for which this corporation is organized is to engage in any activity within the
purposes for which corporations may be organized under the New Jersey Business Corporation Act.
ARTICLE 4
The aggregate number of shares of stock that the Corporation shall have authority to issue is
twenty million (20,000,000) shares of common stock, no par value per share.
ARTICLE 5
The first board of directors of the Corporation shall consist of eighteen (18) directors whose
names are:
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Jack Alter
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John K. Daily
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Josephine Mauro
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Michael Bello
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Armand Leone
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Joel Paritz
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Jay William Blau
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Anthony LoConte
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Christopher Shaari
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Albert F. Buzzetti
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Carmelo Luppino
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Anthony Siniscalchi
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Albert L. Buzzetti
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Rosario Luppino
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Mark J. Sokolich
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Stephen Crevani, Sr.
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Howard Mann
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Diane Spinner
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Each member of the first board of directors has a business address at 204 Main Street, Fort Lee,
New Jersey 07024.
Effective as of the first annual meeting of the shareholders of the Corporation, the directors
of the Corporation shall be classified in respect to the time for which they shall severally hold
office into three classes, each class consisting of such number of directors as nearly equal
one-third (1/3) of the number of directors constituting the entire board of directors as possible.
At the first annual meeting of the shareholders, one class of directors will be elected for an
initial term to expire at the second annual meeting of shareholders, one class of directors will be
elected for an initial term to expire at the third annual meeting of shareholders, and one class of
directors
C-1
will be elected for an initial term to expire at the fourth annual meeting of shareholders.
Each director so elected will hold office until his or her successor is elected and qualified.
At the second annual meeting of shareholders and at each annual meeting of shareholders
thereafter, such number of directors as shall then constitute the class shall be elected to hold
office for a term to expire at the third annul meeting of shareholders after their election and
thereafter until their successors are elected and qualified, so that a number of directors as
nearly equal one-third (1/3) of the number of directors constituting the entire board as possible
shall be elected annually.
In the event of an increase in the number of directors constituting the entire board, new
directors shall be classified to maintain the number of directors in each class as nearly equal
one-third (1/3) of the number of directors constituting the entire board as possible. In the event
of a decrease in the number of directors constituting the entire board, no term of any incumbent
director may be shortened; however, at the next succeeding annual meeting of shareholders following
such decrease in the number of directors, any incumbent director or director nominee may be elected
for a term to expire at the first or second annul meeting of shareholders after their election, to
the extent necessary to maintain the number of directors in each class as nearly equal one-third
(1/3) of the number of directors constituting the entire board as possible.
ARTICLE 6
The name of the incorporator is Dennis R. Casale and the address of the incorporator is c/o
Pepper Hamilton LLP, 300 Alexander Park, Princeton, New Jersey 08543.
ARTICLE 7
Subject to the following, a director or officer of the Corporation shall not be personally
liable to the Corporation or its shareholders for damages for breach of any duty owed to the
Corporation or its shareholders. The preceding sentence shall not relieve a director or officer
from liability for any breach of duty based upon an act or omission (i) in breach of such persons
duty of loyalty to the Corporation or its shareholders, (ii) not in good faith or involving a
knowing violation of law, or (iii) resulting in receipt by such person of an improper personal
benefit. If the New Jersey Business Corporation Act is amended to authorize corporate action
further eliminating or limiting the personal liability of directors or officers, then the liability
of a director or officer or both of the Corporation shall be eliminated or limited to the fullest
extent permitted by the New Jersey Business Corporation Act as so amended. Any amendment to this
Certificate of Incorporation, or change in law which authorizes this Article shall not adversely
affect any then existing right or protection of a director or officer of the Corporation.
ARTICLE 8
The Corporation shall indemnify its officers, directors, employees, and agents and former
officers, directors, employees and agents, and any other persons serving at the request of the
Corporation as an officer, director, employee or agent of another corporation, association,
partnership, joint venture, trust, or other enterprise, against expenses (including attorneys
fees, judgments, fines, and amounts paid in settlement) incurred in connection with any pending or
threatened action, suit, or proceeding, whether civil, criminal, administrative or investigative,
with respect to which such officer, director, employee, agent or other person is a party, or is
threatened to be made a party, to the full extent permitted by the New Jersey Business Corporation
Act. The indemnification provided herein (i) shall not be deemed exclusive of any other right to
which any person seeking indemnification may be entitled under any bylaw, agreement, or vote of
shareholders or disinterested directors or otherwise, both as to action in his
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or her official capacity and as to action in any other capacity, and (ii) shall inure to the
benefit of the heirs, executors, and the administrators of any such person. The Corporation shall
have the power, but shall not be obligated, to purchase and maintain insurance on behalf of any
person or persons enumerated above against any liability asserted against or incurred by them or
any of them arising out of their status as corporate directors, officers, employees, or agents
whether or not the Corporation would have the power to indemnify them against such liability under
the provisions of this Article. When a board of directors does not consist of a majority of
disinterested directors, the board may nevertheless advance expenses to one or more directors or
all of them provided each executes the undertaking to repay required by law.
ARTICLE 9
The effective date of this Certificate of Incorporation shall be the date filed with the State
Treasurer of the State of New Jersey.
IN WITNESS WHEREOF, the incorporator, being at least 18 years of age, has signed this
Certificate this 15th day of November, 2006.
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Dennis R. Casale
Dennis R. Casale, Incorporator
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C-3
EXHIBIT D
SECTIONS 360 THROUGH 369 OF BANKING ACT
17:9A-360. Notice of dissent; dissenting stockholder defined
(1) Any stockholder of a participating bank electing to dissent from the plan of acquisition
may do so by filing with the participating bank of which he is a stockholder, a written notice of
such dissent, stating that he intends to demand payment for his shares if the plan of acquisition
becomes effective. Such dissent shall be filed before the taking of the vote of the stockholders
on the plan of acquisition pursuant to section 5.
(2) Within 10 days after the date on which the plan of acquisition is approved by stockholders
of a participating bank as provided in section 5 hereof, such bank shall give notice of such
approval by certified mail to each stockholder who has filed written notice of dissent pursuant to
subsection (1) of this section, except any who voted for or consented in writing to such plan of
acquisition.
(3) Within 20 days after the mailing of such notice, any stockholder to whom the
participating bank was required to give such notice, may make written demand on the participating
bank for the payment of the fair value of his shares. A stockholder who makes a demand pursuant
to this subsection (3) is hereafter in this act referred to as a dissenting stockholder. Upon
making such demand, the dissenting stockholder shall cease to have any rights of a stockholder
except the right to be paid the fair value of his shares and any other rights of a dissenting
stockholder under this act.
(4) Not later than 20 days after demanding payment for his shares pursuant to this section,
the stockholder shall submit the certificate or certificates representing such shares to the
participating bank of which he is a stockholder for notation thereon that such demand has been
made, whereupon such certificate or certificates shall be returned to him. If shares represented
by a certificate on which such notation has been made shall be transferred, each new certificate
issued therefor shall bear similar notation, together with the name of the original dissenting
holder of such shares, and a transferee of such shares shall acquire by such transfer no rights
other than those which the original dissenting stockholder had after making a demand for payment
of the fair value thereof.
(5) A stockholder may not dissent as to less than all of the shares owned beneficially by him.
A nominee or fiduciary may not dissent on behalf of any beneficial owner as to less than all of
the shares of such owner.
17:9A-361. Valuation date of fair value
For the purposes of this act, the fair value of the shares of a participating bank shall be
determined as of the day before the day on which the vote of stockholders of such bank was taken as
provided in section 5. In determining fair value, there shall be excluded any appreciation or
depreciation in value resulting from the consummation of the plan of acquisition.
D-1
17:9A-362. Termination of right of stockholder to be paid the fair value of his shares
(1) The right of a dissenting stockholder to be paid the fair value of his shares shall cease
if
(a) He has failed to present his certificates for notation as provided by subsection (4) of
section 6, unless a court having jurisdiction, for good and sufficient cause shown, shall otherwise
direct;
(b) His demand for payment is withdrawn with the written consent of the participating bank;
(c) The fair value of the shares is not agreed upon as provided in this act, and no action for
the determination of fair value by the Superior Court is commenced within the time provided in
this act;
(d) The Superior Court determines that the stockholder is not entitled to payment for his
shares;
(e) The plan of acquisition of shares is abandoned, rescinded, or otherwise terminated in
respect to the participating bank of which he is a stockholder; or
(f) A court having jurisdiction permanently enjoins or sets aside the acquisition of shares.
(2) In any case provided for in subsection (1) of this section the rights of the dissenting
stockholder as a stockholder shall be reinstated as of the date of the making of a demand for
payment pursuant to section 6 without prejudice to any corporate action which has taken place
during the interim period. In such event, he shall be entitled to any intervening pre-emptive
rights and the right to payment of any intervening dividend or other distribution, or if any such
rights have expired or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the participating bank, the fair value thereof in cash as of the
time of such expiration or completion.
17:9A-363. Rights of dissenting stockholder
(1) A dissenting stockholder may not withdraw his demand for payment of the fair value of his
shares without the written consent of the participating bank.
(2) The enforcement by a dissenting stockholder of his right to receive payment for his shares
shall exclude the enforcement by such dissenting stockholder of any other right to which he might
otherwise be entitled by virtue of share ownership, except as provided in subsection (2) of section
8 and except that this subsection shall not exclude the right of such dissenting stockholder to
bring or maintain an appropriate action to obtain relief on the ground that consummation of the
plan of acquisition will be or is ultra vires, unlawful or fraudulent as to such dissenting
stockholder.
17:9A-364. Determination of fair value by agreement
(1) Within 10 days after the expiration of the period within which stockholders may make
written demand to be paid the fair value of their shares, or within 10 days after the plan of
acquisition becomes effective, whichever is later, the participating bank shall mail to each
dissenting stockholder the balance sheet and the surplus statement of the participating bank as of
the latest available date, which shall not be earlier than 12 months prior to the making of the
offer of payment hereinafter referred to in this subsection, and a profit and loss statement or
statements for not less than a 12-month period ended
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on the date of such balance sheet or, if the participating bank was not in existence for such
12-month period, for the portion thereof during which it was in existence. The participating bank
may accompany such mailing with a written offer to pay each dissenting stockholder for his shares
at a specified price deemed by such bank to be the fair value thereof. Such offer shall be made
at the same price per share to all dissenting stockholders of the same class, or, if divided into
series, of the same series.
(2) If, not later than 30 days after the expiration of the 10-day period limited by subsection
(1) of this section, the fair value of the shares is agreed upon between any dissenting stockholder
and the participating bank, payment therefor shall be made upon surrender of the certificate or
certificates representing such shares.
17:9A-365. Procedure on failure to agree upon fair value; commencement of action to determine
fair value
(1) If the fair value of the shares is not agreed upon within the 30-day period limited by
subsection (2) of section 10, the dissenting stockholder may serve upon the participating bank a
written demand that it commence an action in the Superior Court for the determination of such fair
value. Such demand shall be served not later than 30 days after the expiration of the 30-day
period so limited and such action shall be commenced by the participating bank not later than 30
days after receipt by such bank of such demand, but nothing herein shall prevent such bank from
commencing such action at any earlier time.
(2) If a participating bank fails to commence the action as provided in subsection (1) of this
section a dissenting stockholder may do so in the name of such bank, not later than 60 days after
the expiration of the time limited by subsection (1) of this section in which such bank may
commence such an action.
17:9A-366. Action to determine fair value; jurisdiction of court; appointment of appraiser
In any action to determine the fair value of shares pursuant to this act:
(a) The Superior Court shall have jurisdiction and may proceed in the action in a summary
manner or otherwise;
(b) All dissenting stockholders, wherever residing, except those who have agreed with the
participating bank upon the price to be paid for their shares, shall be made parties thereto as an
action against their shares quasi in rem;
(c) The court in its discretion may appoint an appraiser to receive evidence and report to
the court on the question of fair value, who shall have such power and authority as shall be
specified in the order of his appointment; and
(d) The court shall render judgment against the participating bank and in favor of each
stockholder who is a party to the action for the amount of the fair value of his shares.
17:9A-367. Judgment in action to determine fair value
(1) A judgment for the payment of the fair value of shares shall be payable upon surrender to
the participating bank of the certificate or certificates representing such shares.
D-3
(2) The judgment shall include an allowance for interest at such rate as the court finds to
be equitable, from the day of the meeting of stockholders of the participating bank at which the
plan of acquisition was approved to the day of payment. If the court finds that the refusal of
any dissenting stockholder to accept any offer of payment made by the participating bank under
section 10 was arbitrary, vexatious or otherwise not in good faith, no interest shall be allowed
to him.
17:9A-368. Costs and expenses of action
The costs and expenses of bringing an action pursuant to section 11 shall be determined by
the court and shall be apportioned and assessed as the court may find equitable upon the parties
or any of them. Such expenses shall include reasonable compensation for and reasonable expenses
of the appraiser, if any, but shall exclude the fees and expenses of counsel for and experts
employed by any party; but if the court finds that the offer of payment made by the
participating bank under section 10 was not made in good faith, or if no such offer was made, the
court in its discretion may award to any dissenting stockholder who is a party to the action
reasonable fees and expenses of his counsel and of any experts employed by the dissenting
stockholder.
17:9A-369. Disposition of shares
Upon payment for shares pursuant to subsection (2) of section 10, or upon payment of a
judgment pursuant to subsection (1) of section 13, the participating bank making such payment shall
acquire all the right, title and interest in and to such shares, notwithstanding any other
provision of law. Shares so acquired by the participating bank shall be disposed of as a stock
dividend as provided by section 212 of the Banking Act of 1948, P.L.1948, chapter 67.
D-4
ANNUAL MEETING OF SHAREHOLDERS OF
BANK OF NEW JERSEY
April 23, 2007
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
ê
Please
detach along perforated line and mail in the envelope
provided.
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
x
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FOR
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AGAINST
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ABSTAIN
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1.
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Elect Directors: To elect as directors of Bank of New Jersey, each to hold office until the 2008 annual meeting.
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2.
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Approval of the 2007 Nonqualified Stock
Option Plan for Directors, as more fully described in the
accompanying Proxy Statement.
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NOMINEES:
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FOR ALL NOMINEES
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Jack Alter
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Joel P. Paritz
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FOR
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AGAINST
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ABSTAIN
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Michael Bello
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Christopher M. Shaari
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3.
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Approval of the Plan of Acquisition, as more fully described in the accompanying Proxy Statement.
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WITHHOLD AUTHORITY
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Jay Blau
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Anthony Siniscalchi
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FOR ALL NOMINEES
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Albert F. Buzzetti
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Mark Sokolich
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Albert L. Buzzetti
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Diane M. Spinner
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This proxy may be revoked at any time before it is voted
on by delivering to the secretary of Bank of New Jersey on or before the taking of the vote at the annual meeting, a written notice of revocation bearing a later date than the proxy or a later dated proxy relating to the same shares of Bank of New Jersey common stock, or by attending the annual meeting and voting in person. Attendance at the
annual meeting will not in itself constitute the revocation of a proxy.
If this proxy is properly revoked as described above, then the power of the persons named in this proxy
shall be deemed terminated and of no further force and
effect.
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FOR ALL EXCEPT
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Stephen Crevani
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(See instructions below)
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John K. Daily
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Should a director nominee be unable to serve as a director, an event the Bank of New Jersey does not currently
anticipate, the persons named in this proxy reserve the right, in their discretion to vote for a substitute
nominee designated by the Board of Directors.
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Armand Leone, Jr.
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Anthony M. Lo Conte
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Carmelo Luppino
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Rosario Luppino
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Howard Mann
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In order
to assist the Bank in providing proper accommodations
for the annual meeting, please advise whether you plan
to attend in person. Your response will not affect your
proxy, your ability to attend the meeting or your ability to vote your shares in person.
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¡
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Josephine Mauro
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INSTRUCTION:
To withhold authority to vote for any individual nominee(s), mark
FOR ALL EXCEPT
and fill in the circle next to each
nominee you wish to withhold, as shown here:
=
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The undersigned
acknowledges receipt from Bank of New Jersey prior to the execution of this proxy, of the Notice of Annual
Meeting scheduled to held on April 23, 2007, the Proxy Statement
dated March 27, 2007 and Bank of New
Jerseys 2006 Annual Report.
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MARK
X HERE IF YOU PLAN TO ATTEND THE MEETING.
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To change the address on your account, please check the box
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s)
on the account may not be submitted
via this method.
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Signature of Shareholder
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Date:
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Signature of Shareholder
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Date:
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n
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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BANK OF NEW JERSEY
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REVOCABLE PROXY FOR
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ANNUAL MEETING OF SHAREHOLDERS
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APRIL 23, 2007
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SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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The undersigned hereby appoints Albert F. Buzzetti and Michael Lesler, and each of them, with
full power of substitution, to vote, as designated on the reverse side, all the shares of Bank of
New Jersey common stock held of record by the undersigned at the close of business on February 22,
2007, at the annual meeting of shareholders, to be held April 23, 2007, and at any and all
adjournments or postponements thereof. The undersigned hereby revokes any and all earlier dated
proxies with respect to such annual meeting. This proxy, when properly executed, will be voted in
the manner directed herein by the undersigned. If no direction is made, this proxy will be voted
FOR each of proposals. The Board of Directors recommends a vote FOR each of the proposals.
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(Continued and to be signed on the reverse side.)
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Statutory Indemnification
. We refer you to Section 14A:3-5 of the New Jersey Business
Corporation Act, as amended (the NJBCA), which sets forth the extent to which a corporation is
authorized or required to indemnify its directors, officers and other corporate agents in various
proceedings. For purposes of such law, a corporate agent is any person who is or was a director,
officer, employee or agent of the indemnifying corporation or of any constituent corporation
absorbed by the indemnifying corporation in a consolidation or merger and any person who is or was
a director, officer, trustee, employee or agent of any other enterprise, serving as such at the
request of the indemnifying corporation, or of any such constituent corporation, or the legal
representative of any such director, officer, trustee, employee or agent. A proceeding is any
pending, threatened or completed civil, criminal, administrative or arbitrative action, suit, or
proceeding, any appeal, and any inquiry or investigation which could lead to such action, suit or
proceeding.
Generally, the NJBCA authorizes any New Jersey corporation to indemnify a corporate agent
against his or her expenses and liabilities incurred in connection with any proceeding involving
the corporate agent by reason of his or her being or having been a corporate agent if (a) the
corporate agent acted in good faith or in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of the corporation, and (b) with respect to any criminal proceeding,
the corporate agent had no reasonable cause to believe his or her conduct was unlawful.
In any proceeding by the corporation or in the right of the corporation (a derivative action),
the corporation is authorized to indemnify a corporate agent against his or her expenses if the
agent acted in good faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation, but the corporation is not authorized to indemnify a
corporate agent for any liabilities in such proceeding. However, the corporation is not authorized
to indemnify a corporate agent against expenses with respect to any claim, issue or matter as to
which the agent was adjudged liable to the corporation, unless and only to the extent that a court
deems such indemnification would be proper.
In the event the corporation is authorized but not required to indemnify a corporate agent,
the corporation may only do so if a determination is made that the applicable standard of conduct
was met by such corporate agent. The determination may be made by the board of directors of the
corporation, or a committee thereof, acting by a majority vote of a quorum consisting of
disinterested directors; by independent legal counsel, if there is not a quorum of disinterested
directors or if the disinterested quorum directs such counsel to make the determination; or by the
shareholders of the corporation.
A New Jersey corporation is required to indemnify a corporate agent to the extent that the
corporate agent is successful on the merits or otherwise in any proceeding of the types described
above, or in defense of any claim, issue or matter in the proceeding. If a corporation fails or
refuses to indemnify a corporate agent, whether the indemnification is permissive or mandatory, the
agent may apply to a court to grant him or her the requested indemnification. In advance of the
final disposition of any proceeding, the board of directors may direct the corporation to pay an
agents expenses if the agent agrees to repay the expenses in the event that it is ultimately
determined that he or she is not entitled to indemnification.
The indemnification and advance of expenses authorized or required by the NJBCA do not exclude
any other rights, including the right to be indemnified against liabilities and expenses incurred
in proceedings by or in the right of the corporation, to which a corporate agent may be entitled
under a certificate of incorporation, bylaw, agreement, vote of shareholders, or otherwise;
provided that no indemnification may be made to or on behalf of a corporate agent if a judgment or
other final adjudication adverse to the corporate agent establishes that his or her acts or
omissions (a) were in breach of his or her duty of loyalty to the corporation or its shareholders,
as defined in subsection 14A:2-7(3) of the NJBCA, (b) were not in good faith or involved a knowing
violation of law or (c) resulted in receipt by the corporate agent of an improper personal benefit.
II-1
The power to indemnify corporate agents granted to New Jersey corporations pursuant to the
NJBCA may be exercised notwithstanding the absence of any provision a corporations certificate of
incorporation or bylaws authorizing the exercise of such powers.
Except to the extent required by subsection 14A:3-5(4) of the NJBCA, no indemnification will
be provided by a corporation or ordered by a court, if it would be inconsistent with certificate of
incorporation, bylaw, resolution of the board of directors or shareholders, an agreement or other
proper corporate action in effect at the time of the accrual of the alleged cause of action
asserted in the proceeding, which prohibits, limits or otherwise conditions the exercise of
indemnification powers by the corporation or the rights of indemnification to which a corporate
agent may be entitled.
Indemnification Pursuant to Certificate of Incorporation of the Registrant
. In accordance
with the foregoing statutory provision, Article 8 of our certificate of incorporation provides as
follows:
The Corporation shall indemnify its officers, directors, employees, and agents and
former officers, directors, employees and agents, and any other persons serving at the
request of the Corporation as an officer, director, employee or agent of another
corporation, association, partnership, joint venture, trust, or other enterprise, against
expenses (including attorneys fees, judgments, fines, and amounts paid in settlement)
incurred in connection with any pending or threatened action, suit, or proceeding, whether
civil, criminal, administrative or investigative, with respect to which such officer,
director, employee, agent or other person is a party, or is threatened to be made a party,
to the full extent permitted by the New Jersey Business Corporation Act. The
indemnification provided herein (i) shall not be deemed exclusive of any other right to
which any person seeking indemnification may be entitled under any bylaw, agreement, or vote
of shareholders or disinterested directors or otherwise, both as to action in his or her
official capacity and as to action in any other capacity, and (ii) shall inure to the
benefit of the heirs, executors, and the administrators of any such person. The Corporation
shall have the power, but shall not be obligated, to purchase and maintain insurance on
behalf of any person or persons enumerated above against any liability asserted against or
incurred by them or any of them arising out of their status as corporate directors,
officers, employees, or agents whether or not the Corporation would have the power to
indemnify them against such liability under the provisions of this Article. When a board of
directors does not consist of a majority of disinterested directors, the board may
nevertheless advance expenses to one or more directors or all of them provided each executes
the undertaking to repay required by law.
Directors and Officers Liability Insurance
. We maintain a policy of directors and officers
liability insurance to cover certain potential liabilities of present or future directors and
officers, as well as employees, for actions taken in their capacities as such and in certain other
limited circumstances, including certain potential liabilities under the Securities Act.
Item 21. Exhibits.
See the Exhibit Index attached to this registration statement and incorporated herein by reference.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar
II-2
value of securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the Calculation of
Registration Fee table in the effective registration statement; and
(iii) to include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrants annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the
prospectus, to each person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where interim
financial information required to be presented by Article 3 of Regulation S-X are not set forth in
the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent
or given, the latest quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
(d) The undersigned registrant hereby undertakes as follows: that prior to any public
reoffering of the securities registered hereunder through the use of a prospectus which is a part
of this registration statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the other items of the
applicable form.
(e) The registrant undertakes that every prospectus: (i) that is filed pursuant to the
immediately preceding paragraph or (ii) that purports to meet the requirements of Section 10(a)(3)
of the Securities Act and is used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(f) Insofar as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions or otherwise, the registrant have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by a registrant of expenses incurred or paid by a
director, officer or controlling person in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in connection with the
securities being registered, such registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
(g) The undersigned registrant hereby undertakes to respond to requests for information that
is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of Form S-4,
within one business day of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date of responding to
the request.
(h) The undersigned registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the registration statement when it became
effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has
duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Fort Lee, New Jersey, on March 7, 2007.
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By:
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Albert F. Buzzetti
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Albert F. Buzzetti
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President and Chief Executive Officer
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POWER OF ATTORNEY
Each individual whose signature appears below constitutes and appoints Albert F. Buzzetti and
Michael Lesler his true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this registration statement, or any
registration statement for the same offering that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their substitutes or substitute may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration
statement has been signed by the following persons in the capacities and on the dates indicated.
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Name
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Title
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Date
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Albert F. Buzzetti
Albert F. Buzzetti
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Director, President and
Chief Executive Officer
(principal executive officer)
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March 7, 2007
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Michael Lesler
Michael Lesler
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Executive Vice President and
Chief Financial Officer
(principal financial officer and
principal accounting officer)
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March 7, 2007
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Director
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March 7, 2007
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Michael Bello
Michael Bello
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Director
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March 7, 2007
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Director
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March 7, 2007
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Albert L. Buzzetti
Albert L. Buzzetti
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Director
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March 7, 2007
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Stephen Crevani
Stephen Crevani
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Director
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March 7, 2007
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II-5
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Name
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Title
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Date
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John K. Daily
John K. Daily
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Director
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March 7, 2007
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Armand Leone, Jr., MD, JD
Armand Leone, Jr., MD, JD
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Director
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March 7, 2007
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Anthony M. Lo Conte
Anthony M. Lo Conte
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Director
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March 7, 2007
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Carmelo Luppino
Carmelo Luppino
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Director
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March 7, 2007
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Rosario Luppino
Rosario Luppino
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Director
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March 7, 2007
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Director
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March 7, 2007
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Josephine Mauro
Josephine Mauro
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Director
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March 7, 2007
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Joel P. Paritz
Joel P. Paritz
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Director
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March 7, 2007
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Christopher M. Shaari, MD
Christopher M. Shaari, MD
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Director
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March 7, 2007
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Anthony Siniscalchi
Anthony Siniscalchi
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Director
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March 7, 2007
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Mark Sokolich
Mark Sokolich
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Director
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March 7, 2007
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Diane M. Spinner
Diane M. Spinner
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Director
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March 7, 2007
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II-6
EXHIBIT INDEX
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Exhibit No.
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Description
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2.1
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Plan of Acquisition
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3.1
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Certificate of Incorporation
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3.2
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Amended and Restated Bylaws
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4.1
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Specimen form of stock certificate
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5.1
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Opinion of Pepper Hamilton LLP regarding legality
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8.1
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Opinion of Pepper Hamilton LLP regarding tax matters
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10.1
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Change In Control Agreement between the Bank and Albert F. Buzzetti*
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10.2
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Change In Control Agreement between the Bank and Michael Lesler*
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10.3
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Change In Control Agreement between the Bank and Leo J. Faresich*
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10.4
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Change In Control Agreement between the Bank and Diane M. Spinner*
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10.5
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|
2006 Stock Option Plan*
|
|
|
|
10.6
|
|
Form of Stock Option Award Agreement*
|
|
|
|
13.1
|
|
Annual report to stockholders
|
|
|
|
23.1
|
|
Consent of KPMG LLP
|
|
|
|
23.2
|
|
Consent of Pepper Hamilton LLP (included in Exhibit 5.1)
|
|
|
|
24.1
|
|
Powers of Attorney (included on Signature Page)
|
|
|
|
*
|
|
Management contract or compensatory plan, contract or arrangement.
|
II-7
Exhibit 3.2
AMENDED AND RESTATED
BYLAWS
OF
BANCORP OF NEW JERSEY, INC.
Adopted February 22, 2007
ARTICLE 1
LAW, CERTIFICATE OF INCORPORATION AND BYLAWS
Section 1.1. These bylaws are subject to the certificate of incorporation of the corporation.
In these bylaws, references to law, the certificate of incorporation and bylaws mean the law, the
provisions of the certificate of incorporation and the bylaws as from time to time in effect.
ARTICLE 2
SHAREHOLDERS
Section 2.1.
Annual Meetings
.
(a) A meeting of the shareholders for the election of directors and the transaction of such
other business as may properly be brought before the meeting shall be held once each calendar year
on such date and at such time as may be fixed by the board of directors.
(b) Nominations of persons for election to the board of directors and the proposal of business
to be considered by the shareholders at an annual meeting of shareholders may be made (i) by or at
the direction of the board of directors, or (ii) by any shareholder of the corporation who was a
shareholder of record at the time of giving of notice provided for in this Article 2, who is
entitled to vote at the meeting and who complies with the notice procedures set forth in this
Article 2.
(c) For nominations or other business to be properly brought before an annual meeting by a
shareholder pursuant to clause (ii) of Section 2.1(b), the shareholder must have given timely
notice thereof in writing to the secretary of the corporation and such other business must be a
proper matter for shareholder action and not otherwise excludable under the rules and regulations
of the Securities and Exchange Commission. To be timely, a shareholders notice must be received
by the secretary at the principal executive offices of the corporation no less than sixty (60) nor
more than ninety (90) days prior to the anniversary of the preceding years annual meeting;
provided
,
however
, that in the event that the date fixed for any annual meeting is more than thirty
(30) days before or after such anniversary date, notice by the shareholder must be received no
later than the date which is sixty (60) days prior to the date fixed for the annual meeting or the
date which is fifteen (15) days after the public announcement of the date fixed for the annual
meeting, which ever is later. In no event shall the public announcement of an adjournment or
postponement of an annual meeting commence a new time period for the giving of a shareholders
notice as described above. Notwithstanding the foregoing, if the corporation is
required under Rule 14a-8 under the Securities Exchange Act of 1934 (Exchange Act) to
include a shareholders proposal in its proxy statement, such shareholder shall be deemed to have
given timely notice for purposes of this Section 2.1(c) with respect to such proposal. A
shareholders notice shall set forth (i) as to each person whom the shareholder proposes to
nominate for election or reelection as a member of the board of directors: (1) all information
relating to such person that is required to be disclosed in solicitations of proxies for election
of members of the board of directors in an election contest or is otherwise required pursuant to
Regulation 14A under the Exchange Act, (2) a description of any arrangements or understandings
among the shareholder and each such person and any other person with respect to such nomination,
and (3) the consent of each such person to being named in the proxy statement as a nominee and to
serving as a member of the board of directors if so elected; (ii) as to any other business that the
shareholder proposes to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such shareholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (iii) as to the shareholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made (1) the name and address of such
shareholder, as they appear on the corporations books, and of such beneficial owner; (2) the class
and number of shares of the corporation which are owned beneficially and of record by such
shareholder and such beneficial owner; and (3) a representation that such shareholder and
beneficial owner intend to appear in person or by proxy at the meeting.
Section 2.2.
Special Meetings
. A special meeting of the shareholders for any purpose
or purposes shall be called only by the chairman of the board, the chief executive officer, or the
board of directors. Only such business shall be conducted at a special meeting of shareholders as
shall have been brought before the meeting pursuant to the corporations notice of meeting.
Section 2.3.
General
.
(a) The chairman of the board shall preside at each shareholders meeting, unless prior to such
meeting the board of directors shall have selected a different person to preside at such meeting.
(b) Only such persons who are nominated and qualified in accordance with the provisions set
forth in this Article 2, Section 3.3 and Section 3.4 shall be eligible to serve as members of the
board of directors and only such business shall be conducted at a meeting of shareholders as shall
have been properly brought before the meeting in accordance with the provisions set forth in this
Article 2. Except as otherwise provided by law, the certificate of incorporation or these bylaws,
the chairman of the meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was properly made or proposed, as the case may
be, and, if any proposed nomination or business has not been properly made or proposed, to declare
that such defective proposal or nomination shall be disregarded.
Section 2.4.
Place of Meeting
. All meetings of the shareholders for the election of
directors or for any other purpose shall be held at such place within or without the State of
New Jersey as may be determined from time to time by the board of directors. Any adjourned
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session of any meeting of the shareholders shall be held at the place designated in the vote of
adjournment.
Section 2.5.
Notice of Meetings
. Except as otherwise provided by law, a written
notice of each meeting of shareholders stating the place, day and hour thereof and, in the case of
a special meeting, the purposes for which the meeting is called, shall be given not less than one
(1) nor more than sixty (60) days before the meeting, to each shareholder entitled to vote at such
meeting, and to each shareholder who, by law, by the certificate of incorporation or by these
bylaws, is entitled to notice, by leaving such notice with him or at his residence or usual place
of business, or by depositing it in the United States mail, postage prepaid, and addressed to such
shareholder at his address as it appears in the records of the corporation. As to any adjourned
session of any meeting of shareholders, notice of the adjourned meeting need not be given if the
time and place thereof are announced at the meeting at which the adjournment was taken except that
if after the adjournment a new record date is set for the adjourned session, notice of any such
adjourned session of the meeting shall be given in the manner heretofore described. No notice of
any meeting of shareholders or any adjourned session thereof need be given to a shareholder if a
written waiver of notice, executed before or after the meeting or such adjourned session by such
shareholder, in person or by proxy, is filed with the records of the meeting or if the shareholder
attends such meeting, in person or by proxy, without objecting at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any meeting of the shareholders or any
adjourned session thereof need be specified in any written waiver of notice.
Section 2.6.
Quorum of Shareholders
. At any meeting of the shareholders a quorum as
to any matter shall consist of a majority of the votes entitled to be cast on the matter, except
where a larger quorum is required by law, by the certificate of incorporation or by these bylaws.
Any meeting may be adjourned from time to time by a majority of the votes properly cast upon the
question, whether or not a quorum is present. If a quorum is present at an original meeting, a
quorum need not be present at an adjourned session of that meeting. Shares of its own stock
belonging to the corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or indirectly, by the
corporation, shall neither be entitled to vote nor be counted for quorum purposes;
provided
,
however
, that the foregoing shall not limit the right of any corporation to vote stock, including
but not limited to its own stock, held by it in a fiduciary capacity.
Section 2.7.
Action by Vote
. When a quorum is present at any meeting, a plurality of
the votes properly cast for election to any office shall elect to such office and a majority of the
votes properly cast upon any question other than an election to an office shall decide the
question, except when a larger vote is required by law, by the certificate of incorporation or by
these bylaws. No ballot shall be required for any election unless requested by a shareholder
present or represented at the meeting and entitled to vote in the election. Broker non-votes and
abstentions shall not count as votes cast, but shall be counted to determine whether a quorum is
present.
-3-
Section 2.8.
Proxies
. Every shareholder entitled to vote at a meeting of the
shareholders or to express consent or dissent to a corporate action in writing may authorize
another person to act for him or her by proxy appointed by an instrument in writing (or transmitted
by electronic means which results in a writing) executed by such shareholder or by the
shareholders attorney thereunto authorized, and delivered to the Secretary. The presence of, or
vote or other action at a meeting of shareholders, or the expression of consent or dissent to
corporate action by a written proxy of a shareholder, shall constitute the presence of, or vote or
action by, or written consent or dissent of the shareholder. Every proxy shall be executed in
writing by the shareholder or by the shareholders duly authorized attorney-in-fact and filed with
the Secretary. A proxy, unless coupled with an interest, shall be revocable at will,
notwithstanding any other agreement or any provision in the proxy to the contrary, but the
revocation of a proxy shall not be effective until written notice of revocation has been given to
the Secretary. An unrevoked proxy shall not be valid after three (3) years from the date of its
execution, unless a longer time is expressly provided therein. A proxy shall not be revoked by the
death or incapacity of the maker unless, before the vote is counted or the authority is exercised,
written notice of such death or incapacity is given to the Secretary.
Section 2.9.
Inspectors
. The directors or the person presiding at the meeting may,
but need not, appoint one or more inspectors of election and any substitute inspectors to act at
the meeting or any adjournment thereof. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The inspectors, if any, shall
determine the number of shares of stock outstanding and the voting power of each, the shares of
stock represented at the meeting (in person or by proxy), the existence of a quorum, the validity
and effect of proxies, and shall receive votes, ballots or consents (except voice votes), hear and
determine all challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all shareholders. Without limiting the foregoing,
the inspectors may consider all relevant circumstances, including extrinsic evidence, in order to
determine whether or not there have been any over-votes, and if so, which portion, if any, of such
over-votes may be properly counted. After any meeting, the inspectors shall file with the
secretary of the meeting a certificate under their hands, certifying the result of any vote or
election, and in the case of an election, the names of the directors elected.
Section 2.10.
Voting List
. The officer or agent having charge of the stock transfer
books for the shares of the corporation shall make a complete list of the shareholders entitled to
vote at a shareholders meeting or any adjournment thereof. Such list shall be arranged
alphabetically within each class, series, or group of shareholders maintained by the corporation
for convenience of reference, with the address of, and the number of shares held by, each
shareholder; be produced (or available by means of a visual display) at the time and place of the
meeting; be subject to the inspection of any shareholder for reasonable periods during the meeting;
and be prima facie evidence as to who are the shareholders entitled to examine such list or to vote
at any meeting.
-4-
ARTICLE 3
BOARD OF DIRECTORS
Section 3.1.
Number
. The number of directors which shall constitute the entire board
of directors shall not be less than one nor more than twenty-five in number. Within the foregoing
limits, at any time or from time to time the board of directors shall fix the number of directors
which shall constitute the entire board of directors.
Section 3.2.
Classification
.
(a) Effective as of the first annual meeting of the shareholders of the corporation, the
directors of the corporation shall be classified in respect to the time for which they shall
severally hold office into three classes, each class consisting of such number of directors as
nearly equal one-third (1/3) of the number of directors constituting the entire board of directors
as possible.
(b) At the first annual meeting of the shareholders, one class of directors will be elected
for an initial term to expire at the second annual meeting of shareholders, one class of directors
will be elected for an initial term to expire at the third annual meeting of shareholders, and one
class of directors will be elected for an initial term to expire at the fourth annual meeting of
shareholders. Each director so elected will hold office until his or her successor is elected and
qualified.
(c) At the second annual meeting of shareholders and at each annual meeting of shareholders
thereafter, such number of directors as shall then constitute the class shall be elected to hold
office for a term to expire at the third annul meeting of shareholders after their election and
thereafter until their successors are elected and qualified, so that a number of directors as
nearly equal one-third (1/3) of the number of directors constituting the entire board as possible
shall be elected annually.
(d) In the event of an increase in the number of directors constituting the entire board, new
directors shall be classified to maintain the number of directors in each class as nearly equal
one-third (1/3) of the number of directors constituting the entire board as possible. In the event
of a decrease in the number of directors constituting the entire board, no term of any incumbent
director may be shortened; however, at the next succeeding annual meeting of shareholders following
such decrease in the number of directors, any incumbent director or director nominee may be elected
for a term to expire at the first or second annul meeting of shareholders after their election, to
the extent necessary to maintain the number of directors in each class as nearly equal one-third
(1/3) of the number of directors constituting the entire board as possible.
Section 3.3.
Nominations
. Director nominees shall be selected by the board of
directors or a committee of the board of directors to which the board of directors has delegated
the authority to make such selections. Director nominees may also be selected by shareholders,
provided that nominations are made in accordance with, and accompanied by the information required
by, Section 2.1(b) and Section 2.1(c). Only persons qualified to serve and duly
-5-
nominated for
election to the board of directors in accordance with this Section 3.4, Section
2.1(b) and Section 2.1(c), and other qualified persons with respect to whose nominations
proxies have been solicited pursuant to a proxy statement filed pursuant to the Exchange Act shall
be eligible for election to the board of directors.
Section 3.4.
Qualifications
. A person is not qualified to serve as a director if he
or she (a) is under indictment for, or has ever been convicted of, a criminal offense involving
dishonesty, breach of trust or money laundering; (b) is a person against whom a federal or state
bank regulatory agency has issued a cease and desist order for conduct involving an unsafe or
unsound practice in conducting the affairs of an insured depository institution, dishonesty, breach
of trust, or money laundering, which order is final and not subject to appeal; (c) has been found,
in a final and unappealable decision by any federal or state regulatory agency or by any court, to
have (i) breached a fiduciary duty involving personal profit or (ii) committed a reckless or
willful violation of any law, rule or regulation governing banking, securities, commodities or
insurance, or any final cease and desist order issued by a banking, securities, commodities or
insurance regulatory agency; (d) is a member of a group (within the meaning of section 13(d)(3) of
the Exchange Act) which includes a member who would be disqualified from serving as a director of
this corporation under subsection (a), (b) or (c), above; or (e) is a party (either directly or
through an affiliate) to litigation or an administrative proceeding adverse to the corporation or
any subsidiary of the corporation, except (x) derivative litigation brought in the name of the
corporation or any such subsidiary by such person in his or her capacity as a shareholder of the
corporation or (y) litigation arising out of a proxy fight concerning the election of directors of
the corporation or any subsidiary of the corporation or otherwise involving control of the
corporation or any such subsidiary. Each director of the corporation is obligated to inform the
corporation immediately of the existence of any circumstance described in the preceding sentence
which would disqualify such director. A director of the corporation who becomes disqualified under
this Section 3.4 shall forthwith cease to serve as a director of the corporation without the
necessity of action by the board to remove or suspend such director. In case of a director who
becomes disqualified under clause (e) of the first sentence of this Section 3.4, the director may
be considered for re-election to the Board after the conclusion of the litigation or administrative
proceeding.
Section 3.5.
Tenure
. Except as otherwise provided by law, by the certificate of
incorporation or by these bylaws, each director shall hold office until the third annual meeting
after his or her election and thereafter until his successor is elected and qualified, or until he
or she sooner dies, resigns, is removed or becomes disqualified.
Section 3.6.
Powers
. The business and affairs of the corporation shall be managed by
or under the direction of the board of directors who shall have and may exercise all the powers of
the corporation and do all such lawful acts and things as are not by law, the certificate of
incorporation or these bylaws directed or required to be exercised or done by the shareholders.
Section 3.7.
Vacancies
. Vacancies in the board of directors and newly-created
directorships may be filled exclusively by vote of a majority of the members of the board of
directors then in office, though less than a quorum, and shall not be filled by a vote of the
-6-
shareholders, unless there are no members of the board of directors remaining. Any member of the
board of directors so chosen shall be a member of the
same class of the board of directors as
the person whose vacancy he or she fills, and shall hold office until the annual meeting at
which his or her successor is duly elected and qualified or until his or her earlier death,
resignation or removal.
Section 3.8.
Resignation and Removal
. Any director may resign at any time by
delivering his resignation, orally or in writing, to the chairman of the board, if any, the president, or the
secretary or to a meeting of the board of directors. Such resignation shall be effective upon
receipt unless specified to be effective at some other time, and without in either case the
necessity of its being accepted unless the resignation shall so state. One or more or all the
directors of a corporation may be removed for cause by the shareholders by the affirmative vote of
the majority of the votes cast by the holders of shares entitled to vote for the election of
directors.
Section 3.9.
Committees
. The board of directors may, by vote of a majority of the
whole board, (i) designate, change the membership of or terminate the existence of any committee or
committees, each committee to consist of one or more of the directors; (ii) designate one or more
directors as alternate members of any such committee who may replace any absent or disqualified
member at any meeting of the committee; and (iii) determine the extent to which each such committee
shall have and may exercise the powers of the board of directors in the management of the business
and affairs of the corporation, including the power to authorize the seal of the corporation to be
affixed to all papers which require it and the power and authority to declare dividends or to
authorize the issuance of stock; excepting, however, such powers which by law, by the certificate
of incorporation or by these bylaws they are prohibited from so delegating. In the absence or
disqualification of any member of such committee and his alternate, if any, the member or members
thereof present at any meeting and not disqualified from voting, whether or not constituting a
quorum, may unanimously appoint another member of the board of directors to act at the meeting in
the place of any such absent or disqualified member. Except as the board of directors may
otherwise determine, any committee may adopt a charter or make rules for the conduct of its
business, but unless otherwise provided by the board or such charter or rules, its business shall
be conducted as nearly as may be in the same manner as is provided by these bylaws for the conduct
of business by the board of directors. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors upon request. Each committee of the Board shall
serve at the pleasure of the Board.
Section 3.10.
Regular Meetings
. Regular meetings of the board of directors may be
held without call or notice at such places within or without the State of New Jersey and at such
times as the board may from time to time determine, provided that notice of the first regular
meeting following any such determination shall be given to absent directors. A regular meeting of
the directors may be held without call or notice immediately after and at the same place as the
annual meeting of shareholders.
Section 3.11.
Special Meetings
. Special meetings of the board of directors may be
held at any time and at any place within or without the State of New Jersey designated in the
notice of the meeting, when called by the chairman of the board, if any, the president, or by
-7-
one-third or more in number of the directors, reasonable notice thereof being given to each
director by the secretary or by the chairman of the board, if any, the president or any one of the
directors calling the meeting.
Section 3.12.
Notice
. It shall be reasonable and sufficient notice to a director to
send notice by mail at least forty-eight hours or by facsimile at least twenty-four hours before
the meeting addressed to him at his usual or last known business or residence address or to give
notice to him in person or by telephone at least twenty-four hours before the meeting. Notice of a
meeting need not be given to any director if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any director who attends the
meeting without protesting prior thereto or at its commencement the lack of notice to him. Neither
notice of a meeting nor a waiver of a notice need specify the purposes of the meeting.
Section 3.13.
Quorum
. Except as may be otherwise provided by law, by the certificate
of incorporation or by these bylaws, at any meeting of the directors a majority of the directors
then in office shall constitute a quorum; a quorum shall not in any case be less than one-third of
the total number of directors constituting the whole board. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a quorum is present, and
the meeting may be held as adjourned without further notice.
Section 3.14.
Action by Vote
. Except as may be otherwise provided by law, by the
certificate of incorporation or by these bylaws, when a quorum is present at any meeting the vote
of a majority of the directors present shall be the act of the board of directors.
Section 3.15.
Action Without a Meeting
. Any action required or permitted to be taken
at any meeting of the board of directors or a committee thereof may be taken without a meeting if
all the members of the board or of such committee, as the case may be, consent thereto in writing,
and such writing or writings are filed with the records of the meetings of the board or of such
committee. Such consent shall be treated for all purposes as the act of the board or of such
committee, as the case may be.
Section 3.16.
Participation in Meetings by Conference Telephone
. Members of the board
of directors, or any committee designated by such board, may participate in a meeting of such board
or committee by means of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other or by any other means permitted by
law. Such participation shall constitute presence in person at such meeting.
Section 3.17.
Compensation
. In the discretion of the board of directors, each
director may be paid such fees for his services as director and be reimbursed for his reasonable
expenses incurred in the performance of his duties as director as the board of directors from time
to time may determine. Nothing contained in this Section 3.17 shall be construed to preclude any
director from serving the corporation in any other capacity and receiving reasonable compensation
therefor.
-8-
Section 3.18.
Voting Securities Owned by the Corporation
. Voting securities in any
other entity held by the corporation shall be voted by the chairman of the board, unless the board
of directors specifically confers authority to vote with respect thereto, which authority may be
general or confined to specific instances, upon some other person or officer. Any person
authorized to vote securities shall have the power to appoint proxies, with general power of
substitution.
ARTICLE 4
OFFICERS AND AGENTS
Section 4.1.
Enumeration; Qualification
. The officers of the corporation shall be a
president, a treasurer, a secretary and such other officers, if any, as the board of directors from
time to time may in its discretion elect or appoint including without limitation one or more vice
presidents and a controller. The corporation may also have such agents, if any, as the board of
directors from time to time may in its discretion choose. Any officer may be but none need be a
director or shareholder. Any two or more offices may be held by the same person. Any officer may
be required by the board of directors to secure the faithful performance of his duties to the
corporation by giving bond in such amount and with sureties or otherwise as the board of directors
may determine.
Section 4.2.
Powers
. Subject to law, to the certificate of incorporation and to the
other provisions of these bylaws, each officer shall have, in addition to the duties and powers
herein set forth, such duties and powers as are commonly incident to his office and such additional
duties and powers as the board of directors may from time to time designate.
Section 4.3.
Election
. The officers may be elected by the board of directors at their
first meeting following the annual meeting of the shareholders or at any other time. At any time
or from time to time the directors may delegate to any officer their power to elect or appoint any
other officer or any agents.
Section 4.4.
Tenure
. Each officer shall hold office until the first meeting of the
board of directors following the next annual meeting of the shareholders and until his respective
successor is chosen and qualified unless a shorter period shall have been specified by the terms of
his election or appointment, or in each case until he sooner dies, resigns, is removed or becomes
disqualified. Each agent shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent appointive power.
Section 4.5.
President and Vice President
. Unless the board of directors otherwise
specifies, the president shall be the chief executive officer and shall have direct charge of all
business operations of the corporation and, subject to the control of the directors, shall have
general charge and supervision of the business of the corporation.
Any vice presidents shall have such duties and powers as shall be set forth in these bylaws or
as shall be designated from time to time by the board of directors or by the president.
-9-
Section 4.6.
Treasurer and Assistant Treasurers
. The treasurer shall be the chief
financial officer of the corporation and shall be in charge of its funds and valuable papers, and
shall have such other duties and powers as may be designated from time to time by the board of
directors or by the president. If no controller is elected, the treasurer shall also have the
duties and powers of the controller.
Any assistant treasurers shall have such duties and powers as shall be designated from time to
time by the board of directors, the president or the treasurer.
Section 4.7.
Controller and Assistant Controllers
. If a controller is elected, he
shall be the chief accounting officer of the corporation and shall be in charge of its books of
account and accounting records, and of its accounting procedures. He shall have such other duties
and powers as may be designated from time to time by the board of directors, the president or the
treasurer.
Any assistant controller shall have such duties and powers as shall be designated from time to
time by the board of directors, the president, the treasurer or the controller.
Section 4.8.
Secretary and Assistant Secretaries
. The secretary shall record all
proceedings of the shareholders, of the board of directors and of committees of the board of:
directors in a book or series of books to be kept therefor and shall file therein all actions by
written consent of shareholders or directors. In the absence of the secretary from any meeting, an
assistant secretary, or if there be none or he is absent, a temporary secretary chosen at the
meeting, shall record the proceedings thereof. Unless a transfer agent has been appointed the
secretary shall keep or cause to be kept the stock and transfer records of the corporation, which
shall contain the names and record addresses of all shareholders and the number of shares
registered in the name of each shareholder. He shall have such other duties and powers as may from
time to time be designated by the board of directors or the president.
Any assistant secretaries shall have such duties and powers as shall be designated from time
to time by the board of directors, the president or the secretary.
Section 4.9.
Resignations And Removals
. Any officer may resign at any time by
delivering his resignation, orally or in writing, to the chairman of the board, if any, the president, or the
secretary or to a meeting of the board of directors. Such resignation shall be effective upon
receipt unless specified to be effective at some other time, and without in either case the
necessity of its being accepted unless the resignation shall so
state. The board of directors may remove the president, and the
board of directors or the president may remove any other officer, at
any time, either with or without cause.
Section 4.10.
Vacancies
. If the office of the president or the treasurer or the
secretary becomes vacant, the directors may elect a successor by vote of a majority of the
directors then in office. If the office of any other officer becomes vacant, any person or body
empowered to elect or appoint that officer may choose a successor. Each such successor shall hold
office for the unexpired term, and in the case of the president, the treasurer and the secretary
until his successor is chosen and qualified or in each case until he sooner dies, resigns, is
removed or becomes disqualified.
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ARTICLE 5
CAPITAL STOCK
Section 5.1.
Stock Certificates
. Each shareholder shall be entitled to a certificate
stating the number and the class and the designation of the series, if any, of the shares held by
him, in such form as shall, in conformity to law, the certificate of incorporation and the bylaws,
be prescribed from time to time by the board of directors. Such certificate shall be signed by the
chairman or vice chairman of the board, if any, or the president or a vice president and may be
countersigned by the treasurer or an assistant treasurer or by the secretary or an
assistant secretary. Any of or all the signatures on the certificate may be a facsimile. In
case an officer, transfer agent, or registrar who has signed or whose facsimile signature has been
placed on such certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the corporation with the same effect as if
he were such officer, transfer agent, or registrar at the time of its issue.
Section 5.2.
Loss of Certificates
. In the case of the alleged theft, loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may be issued in place
thereof, upon such terms, including receipt of a bond sufficient to indemnify the corporation
against any claim on account thereof, as the board of directors may prescribe.
ARTICLE 6
TRANSFER OF SHARES OF STOCK
Section 6.1.
Transfer on Books
. Subject to the restrictions, if any, stated or noted
on the stock certificate, shares of stock may be transferred on the books of the corporation by the
surrender to the corporation or its transfer agent of the certificate therefor properly endorsed or
accompanied by a written assignment and power of attorney properly executed, and with such proof of
the authenticity of signature as the board of directors or the transfer agent of the corporation
may reasonably require. Except as may be otherwise required by law, by the certificate of
incorporation or by these bylaws, the corporation shall be entitled to treat the record holder of
stock as shown on its books as the owner of such stock for all purposes, including the payment of
dividends and the right to receive notice and to vote or to give any consent with respect thereto
and to be held liable for such calls and assessments, if any, as may lawfully be made thereon,
regardless of any transfer, pledge or other disposition of such stock until the shares have been
properly transferred on the books of the corporation.
Section 6.2.
Record Date and Closing Transfer Books
. In order that the corporation
may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange of stock or for
the purpose of any other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days (or such longer period as may be required
by law) before the date of such meeting, nor more than sixty days prior to any other action.
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If no record date is fixed:
(a) The record date for determining shareholders entitled to notice of or to vote at a meeting
of shareholders shall be at the close of business on the day next preceding the day on which notice
is given, or, if notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(b) The record date for determining shareholders entitled to express consent to corporate
action in writing without a meeting, when no prior action by the board of directors is necessary,
shall be the day on which the first written consent is expressed.
(c) The record date for determining shareholders for any other purpose shall be at the close
of business on the day on which the board of directors adopts the resolution relating thereto.
A determination of shareholders of record entitled to notice of or to vote at a meeting of
shareholders shall apply to any adjournment of the meeting;
provided
,
however
, that the board of
directors may fix a new record date for the adjourned meeting.
ARTICLE 7
CORPORATE SEAL
Section 7.1. Subject to alteration by the directors, the seal of the corporation, if any,
shall consist of a flat-faced circular die with the word New Jersey and the name of the
corporation cut or engraved thereon, together with such other words, dates or images as may be
approved from time to time by the directors.
ARTICLE 8
EXECUTION OF PAPERS
Section 8.1. Except as the board of directors may generally or in particular cases authorize
the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes,
checks, drafts or other obligations made, accepted or endorsed by the corporation shall be signed
by the chairman of the board, if any, the president, a vice president or the treasurer.
ARTICLE 9
FISCAL YEAR
Section 9.1. The fiscal year of the corporation shall be determined from time to time by the
board of directors.
ARTICLE 10
INDEMNIFICATION
Section 10.1.
Indemnification of Directors and Officers
. The corporation shall, to the
fullest extent permitted by applicable law, indemnify any person (and the heirs, executors and
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administrators thereof) who was or is made, or threatened to be made, a party to an action, suit or
proceeding, whether civil, criminal, administrative or investigative, whether involving any actual
or alleged breach of duty, neglect or error, any accountability, or any actual or alleged
misstatement, misleading statement or other act or omission and whether brought or threatened in
any court or administrative or legislative body or agency, including an action by or in the right
of the corporation to procure a judgment in its favor and an action by or in the right of any other
corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust,
employee benefit plan or other enterprise, which any director or officer of the corporation is
serving or has served in any capacity at the request of the corporation, by reason of the fact that
he, his testator or intestate is or was a director or officer of the corporation, or is serving or
has served such other corporation, partnership, joint venture, trust, employee benefit plan or
other
enterprise in any capacity, against judgments, fines, amounts paid in settlement, and costs,
charges and expenses, including attorneys fees, incurred therein or in any appeal thereof.
Section 10.2.
Indemnification of Others
. The corporation shall indemnify other
persons and reimburse the expenses thereof, to the extent required by applicable law, and may
indemnify any other person to whom the corporation is permitted to provide indemnification or the
advancement of expenses, whether pursuant to rights granted pursuant to, or provided by, the New
Jersey Business Corporation Act or otherwise.
Section 10.3.
Advances or Reimbursement of Expenses
. The corporation shall, from time
to time, reimburse or advance to any person referred to in Section 10.1 the funds necessary for
payment of expenses, including attorneys fees, incurred in connection with any action, suit or
proceeding referred to in Section 10.1, upon receipt of a written undertaking by or on behalf of
such person to repay such amount(s) if a judgment or other final adjudication adverse to the
director or officer establishes that his acts or omissions (i) constitute a breach of his duty of
loyalty to the corporation or its shareholders, (ii) were not in good faith, (iii) involved a
knowing violation of law, (iv) resulted in his receiving an improper personal benefit, or (v) were
otherwise of such a character that New Jersey law would require that such amount(s) be repaid.
Section 10.4.
Service of Certain Entities Deemed
Requested
. Any director or
officer of the corporation serving (i) another corporation, of which a majority of the shares
entitled to vote in the election of its directors is held by the corporation, or (ii) any employee
benefit plan of the corporation or any corporation referred in clause (i), in any capacity shall be
deemed to be doing so at the request of the corporation.
Section 10.5.
Interpretation
. Any person entitled to be indemnified or to the
reimbursement or advancement of expenses as a matter of right pursuant to this Article 10 may elect
to have the right to indemnification (or advancement of expense) interpreted on the basis of the
applicable law in effect at the time of the occurrence of the event or events giving rise to the
action, suit or proceeding, to the extent permitted by applicable law, or on the basis of the
applicable law in effect at the time indemnification is sought.
Section 10.6.
Indemnification Right
. The right to be indemnified or to the
reimbursement or advancement of expenses pursuant to this Article 10 (i) is a contract right
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pursuant to which the person entitled thereto may bring suit as if the provisions hereof were set
forth in a separate written contract between the corporation and the director or officer, (ii) is
intended to be retroactive and shall be available with respect to events occurring prior to the
adoption hereof, (iii) shall continue to exist after any elimination of or amendment to this
Article 10 with respect to events occurring prior thereto, and (iv) and shall not be deemed
exclusive of any other rights to which any person claiming indemnification hereunder may be
entitled.
Section 10.7.
Indemnification Claims
. If a request to be indemnified or for the
reimbursement or advancement of expenses pursuant hereto is not paid in full by the corporation
within thirty days after a written claim has been received by the corporation, the claimant may at
any time thereafter bring suit against the corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant shall be entitled also to be paid the expenses
of prosecuting such claim. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel, or its shareholders) to have made a determination prior to
the commencement of such action that indemnification of or reimbursement or advancement of expenses
to the claimant is proper in the circumstances, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel, or its shareholders) that the
claimant is not entitled to indemnification or to the reimbursement or advancement of expenses,
shall be a defense to the action or create a presumption that the claimant is not so entitled.
ARTICLE 11
AMENDMENTS
Section 11.1. Except as provided in this Section 11.1, these bylaws may be adopted, amended or
repealed by vote of a majority of the directors then in office or by vote of a majority of the
stock outstanding and entitled to vote. Any bylaw, adopted, amended or repealed by the
shareholders may be amended or reinstated by the shareholders or the directors unless the
resolution of the shareholders adopting such bylaw prescribes in the bylaw that the bylaw made by
them shall not be altered or repealed by the directors.
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BANK OF NEW JERSEY
2006 ANNUAL REPORT
TO STOCKHOLDERS
TO OUR SHAREHOLDERS AND FRIENDS:
Our first seven months of operation have been extraordinary. We attribute this success to the
many recommendations from our shareholders, directors and employees and to the strong and
experienced staff which the bank was built around.
We have a lot to be proud of:
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The Banks initial capital of $43.6 million was the highest raised by any start-up
bank in the history of the state of New Jersey
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The Bank closed the year with $106.0 million in total
assets, $61.9 million in total
deposits and $80.6 million in total loans, and has no classified or non-performing
loans
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We have posted a monthly profit in every month since August, 2006 even after putting
aside $866 thousand in loan loss reserve
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Our new main office at 1365 Palisade Avenue and branch at 458 West Street, both in
Fort Lee, are well into construction and are likely to be ready to open in late second
quarter, 2007
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We have applied for a fourth location at: 401 Hackensack Avenue, Hackensack, NJ, in
the Continental Plaza complex which we expect to open in early second quarter, 2007
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Our risk-based capital ratios are among the highest in the country, providing a
safety cushion for our depositors and for future years growth
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In January, 2007 the Bank issued a 10% stock distribution to shareholders of record
date January 2, 2007
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We have followed what we believe to be a conservative lending and investment policy and will
continue to capitalize on the many safe and profitable opportunities for loans to individuals and
small businesses in Bergen and Hudson counties.
Our goals in 2007 are to recapture the remaining start up costs, and continue to grow deposits
and loans through our three new branches. We have formed a bank holding company: Bancorp of New
Jersey, Inc. and will bring this to the shareholders for approval along with this annual report.
With all this activity we hope to continue to focus on our tag line:
Its All About
Relationships
and to never lose sight of our customers.
We wish you and your families a healthy, happy and successful 2007.
Albert F. Buzzetti
President & CEO
BANK OF NEW JERSEY
2006 ANNUAL REPORT
TO STOCKHOLDERS
TABLE OF CONTENTS
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Cautionary Statement Regarding Forward Looking Statements
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1
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Description of Business
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1
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Description of Property
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8
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Legal Proceedings
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8
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Market Price and Dividends on Common Stock and Related Shareholder Matters
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8
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Selected Financial Data
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10
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Managements Discussion and Analysis of Financial Condition and Results of Operations
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11
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Quantitative and Qualitative Disclosures about Market Risk
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29
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
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29
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Financial Statements
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30
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Directors and Executive Officers
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55
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CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This annual report contains forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, which involve risks and uncertainties. Such statements
are not historical facts and include expressions about managements confidence, strategies, and
expectations about new and existing programs, products, relationships, opportunities, technologies,
and market conditions. These statements may be identified by the use of such words as believe,
expect, anticipate, should, may, potential, or similar statements or variations of such
terms. Examples of forward looking statements include, but are not limited to, estimates with
respect to the financial condition, results of operations, and business of Bank of New Jersey, that
are subject to various factors which could cause actual results to differ materially from these
estimates. These factors include: changes in general, economic and market conditions, both in the
Banks trade area and nationally, legislative and regulatory conditions, or the development of an
interest rate environment which adversely affects Bank of New Jerseys interest rate margin or
other income anticipated from operations and investments, changes in monetary policy, the continued
viability of the Banks customers and a variety of other matters, most, if not at all of which, are
beyond the Banks control. You should not place undue reliance on any forward-looking statements,
which only reflect managements analysis as of the date of this annual report. We undertake no
obligation to update forward-looking statements or to make any public announcement when we consider
forward-looking statements in this annual report to no longer be accurate, whether as a result of
new information or future events.
DESCRIPTION OF BUSINESS
General
Bank of New Jersey, sometimes referred to as we or the Bank, is a New Jersey state-chartered
bank, which currently operates from one office located at 204 Main Street, Fort Lee, NJ, 07024. We
have also received approval from the New Jersey Department of Banking and Insurance, referred to as
the Department, to open two additional locations. These offices will be located at 1365 Palisade
Avenue, Fort Lee, NJ and 458 West Street, Fort Lee, NJ. An application is currently pending with
the Department for a fourth office to be located at 401 Hackensack Avenue, Hackensack, NJ. All
current and proposed branches are in Bergen County, NJ.
We are subject to the supervision and regulation of the Department, as well as the Federal Deposit
Insurance Corporation, or FDIC. The Banks deposits are insured by the FDIC up to applicable
limits. The principal office of the Bank is located at 204 Main Street, Fort Lee, NJ, 07024 and
the telephone number is (201) 944-8600.
Business of the Bank
We conduct a traditional commercial banking business, accepting deposits from the general public,
including individuals, businesses, non-profit organizations, and governmental units. We make
commercial loans, consumer loans, and both residential and commercial real estate loans. In
addition, we provide other customer services and make investments in securities, as permitted by
law. We have sought to offer an alternative, community-oriented style of banking in an area, which
is presently dominated by larger, statewide and national institutions. Our goal is to establish
and retain customer relationships by offering a broad range of traditional financial services and
products, competitively-priced and delivered in a responsive manner to small businesses,
professionals and individuals in the local market. As a locally owned and operated community bank,
we seek to provide superior customer service that is highly personalized, efficient and responsive to local needs. To better serve our customers and expand
our market reach, we provide for the delivery of certain of our financial products and services to
local
customers and to a broader market through the use of mail, telephone and internet banking.
We strive to deliver these products and services with the care and professionalism expected of a
community bank and with a special dedication to personalized customer service.
The specific objectives of the Bank are:
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to provide local businesses, professionals and individuals with banking
services responsive to and determined by the local market;
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to attract deposits and loans by competitive pricing; and
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to provide a reasonable return to shareholders on capital invested.
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Market Area
Our principal market for deposit gathering and lending activities lies within Bergen and Hudson
Counties in New Jersey. Our market area is dominated by offices of large statewide and interstate
banking institutions. Our service and timely response to customer needs is expected to fill a
niche that has arisen due to a loss of local institutions. Additionally, our service area has a
relatively large affluent base for our services and a diversified mix of commercial businesses and
residential neighborhoods.
Extended Hours
We provide full-service banking from 7:00 am to 7:00 pm weekdays and 9:00 am to 1:00 pm on
Saturday. We provide this convenience for our customers at our current location and expect to
provide the same convenience at future locations.
Competition
We operate in a highly competitive environment competing for deposits and loans with commercial
banks, thrifts, and other financial institutions, many of which have greater financial resources
than we do. We compete with local, regional, and national commercial banks, savings banks, and
savings and loan associations. Other competitors include money market mutual funds, mortgage
bankers, insurance companies, stock brokerage firms, regulated small loan companies, credit unions,
and issuers of commercial paper and other securities.
Our larger competitors will have greater name recognition and greater financial resources than we
do to finance wide-ranging advertising campaigns. Although we contemplate limited media
advertising, the primary source of introduction to prospective customers remains in recommendations
and referrals from members of our board of directors, our shareholders and our executive officers
and from our staff business development. We seek to compete for business principally on the basis
of high quality, personal service to customers, customer access to decision-makers, and competitive
interest rates and fees.
We believe that opportunities continue to exist to satisfy the deposit and borrowing needs of small
and middle market businesses. We expect to attract and retain these small and middle market
business relationships by providing timely responses to this segment of the market.
Plan of Operation
During 2007, we will continue to work to recapture our net start-up and organizational expenses.
In this effort, we will strive to grow our customer base, continue to attract deposits and loans,
and maintain the monthly profitability that we have been able to achieve since
2
August, 2006. We
believe we can continue to capitalize on the sound and profitable loan opportunities in our market
as well as attract deposits by providing competitive deposit pricing. We believe this combination
of effort and focus will assist us in providing and building shareholder value.
We will also continue to develop our branch network. We have received FDIC approval during 2007
for a location in Hackensack, New Jersey. This branch will increase our branch network to four
locations. While we develop these branches, we will continue to evaluate additional strategic
locations which will grow our branch network and provide more convenient access and availability to
our customers.
We have formed a bank holding company, Bancorp of New Jersey, Inc. We believe that the holding
company structure will maximize the Banks flexibility in undertaking its current and future
operations. The Plan of Acquisition would permit the Bank to adopt a bank holding company
structure, which requires shareholder and regulatory approval. Under this structure, the Bank
would become a wholly-owned subsidiary of Bancorp of New Jersey, Inc., a company formed solely for
the purpose of becoming the holding company of the Bank, and the shareholders of the Bank would
become shareholders of the holding company through a one-to-one exchange of their shares of common
stock of the Bank for shares of common stock of the holding company.
Personnel
At December 31, 2006, we had sixteen full-time employees.
Supervision and Regulation
Banking is a complex and highly regulated industry. Banks are extensively regulated under both
federal and state law. These laws and regulations are designed primarily for the protection of
depositors and the FDIC, and not the Bank or its shareholders. Enforcement actions may include the
imposition of a conservator or receiver, cease and desist orders and written agreements, the
termination of insurance on deposits, the imposition of civil money penalties, and removal and
prohibition orders. If any enforcement action is taken by a banking regulator, the value of an
equity investment in the Bank could be substantially reduced or eliminated.
As a commercial bank organized under the banking laws of the State of New Jersey, and insured by
the FDIC, we are subject to regulation by the Department and the FDIC. Various regulations,
requirements, and restrictions under state and federal laws will affect our operations, including
requirements to maintain a minimum level of capital and reserves against deposits, restrictions on
the nature and the amount of loans which may be made and the interest which may be charged thereon,
restrictions on our ability to expand through new branches or acquisitions, restrictions on our
ability to pay dividends, regulations relating to permitted investments, and restrictions on other
activities.
To the extent that the following information describes statutory and regulatory provisions, it is
qualified in its entirety by reference to the particular statutory and regulatory provisions. Any
change in the applicable law or regulation may have a material effect on our business and
prospects.
Monetary Policies
The monetary policies of the Federal Reserve Board have a significant effect upon the operating
results of financial institutions, including commercial banks such as the Bank. The Federal
Reserve Board endeavors to regulate the availability of bank credit in order to combat declines in
the economy and to curb inflationary pressures. These policies may affect, directly or indirectly,
the funds of banks which would be available for loans and the interest rates paid on deposits.
3
The monetary policies of the Federal Reserve Board have had a material effect on the operating
results of both Federal Reserve member and non-member banks in the past and are expected to do so
in the future. In view of the changing conditions in the national economy, it is not possible to
predict the impact of monetary policies on the growth or future operations of the Bank. In
addition, fiscal policies of the United States Government may have a substantial effect on banks
generally.
Legal Lending Limit
Under current New Jersey law, our per customer legal lending limit is 15% of capital for most
loans. The lending limit can be increased to 25% of capital to the extent the additional 10% is
fully secured by readily marketable collateral. Accordingly, the size of the loans that we can
offer to potential customers is less than the size of loans that our competitors with more capital
are able to offer. We may engage in loan participations with other banks so that we may lend a
portion of loans in excess of our legal lending limits. However, no assurance can be given that
participations will be available to us or available on terms that are favorable to us and our loan
customers. It is expected that our lending limits will increase proportionately with our growth;
however, there can be no assurance that we will grow or that we will be successful in attracting or
maintaining customers seeking larger loans. To support growth, we may require additional capital.
Although there can be no assurance that we will be able to generate sufficient capital through
retained earnings or raise additional equity capital through public or private offerings, our
initial subscription provided the shareholders with warrants. The exercise of these warrants, if
exercised in full, would provide us with an additional $10.4 million in capital.
Insurance of Deposits
Our deposits are insured up to a maximum of $100,000 per depositor under the Bank Insurance Fund,
or BIF. The FDIC has established a risk-based assessment system for all insured depository
institutions. Under the risk-based assessment system, deposit insurance premium rates range from
0-27 basis points of insured deposits.
Dividend Restrictions
Under the New Jersey Banking Act of 1948, as amended, referred to as the Banking Act, a bank may
declare and pay dividends only if, after payment of the dividend, the capital stock of the bank
will be unimpaired and either the bank will have a surplus of not less than 50% of its capital
stock or the payment of the dividend will not reduce the banks surplus. The FDIC prohibits
payment of cash dividends if, as a result, the institution would be undercapitalized. Further,
during the first three years of operation, cash dividends shall only be paid from net operating
income, and only after an appropriate allowance for loan and lease losses is established and
overall capital is adequate.
Capital Adequacy Guidelines
The FDIC has promulgated risk-based capital guidelines that are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks, to account for off-balance
sheet exposure, and to minimize disincentives for holding liquid assets. Under those guidelines,
assets and off-balance sheet items are assigned to broad risk categories, each with appropriate
weights. The resulting capital ratios represent capital as a percentage of total risk-weighted
assets and off-balance sheet items.
4
Bank assets are given risk-weights of 0%, 20%, 50%, and 100%. In addition, certain off-balance
sheet items are given similar credit conversion factors to convert them to asset equivalent amounts
to which an appropriate risk-weighting will apply. Those computations result in the total
risk-weighted assets. Most loans are assigned to the 100% risk category, except for performing
first mortgage loans fully secured by residential property, which carry a 50% risk-weighting. Most
investment securities (including, primarily, general obligation claims of states or other political
subdivisions of the United States) are assigned to the 20% category, except for municipal or state
revenue bonds, which have a 50% risk-weighting, and direct obligations of the U.S. Treasury or
obligations backed by the full faith and credit of the U.S. Government, which have a 0%
risk-weighting. In converting off-balance sheet items, direct credit substitutes, including
general guarantees and standby letters of credit backing financial obligations, are given a 100%
risk-weighting. Transaction-related contingencies such as bid bonds, standby letters of credit
backing nonfinancial obligations, and undrawn commitments (including commercial credit lines with
an initial maturity of more than one year), have a 50% risk-weighting. Short-term commercial
letters of credit have a 20% risk-weighting, and certain short-term unconditionally cancelable
commitments have a 0% risk weighting.
The minimum ratio of total capital to risk-weighted assets (including certain off-balance sheet
activities, such as standby letters of credit) is 8%. At least 4% of the total capital is required
to be Tier 1 Capital, consisting of shareholders equity and qualifying preferred stock, less
certain goodwill items and other intangible assets. The remainder, or Tier 2 Capital, may
consist of (a) the allowance for loan losses of up to 1.25% of risk-weighted assets, (b) excess of
qualifying preferred stock, (c) hybrid capital instruments, (d) perpetual debt, (e) mandatory
convertible securities, and (f) qualifying subordinated debt and intermediate-term preferred stock
up to 50% of Tier 1 Capital. Total capital is the sum of Tier 1 Capital and Tier 2 Capital less
reciprocal holdings of other banking organizations capital instruments, investments in
unconsolidated subsidiaries, and any other deductions as determined by the FDIC.
In addition to the risk-based capital guidelines, the FDIC has adopted a minimum Tier 1 Capital
(leverage) ratio, under which a bank must maintain a minimum level of Tier 1 Capital to average
total consolidated assets of at least 3% in the case of a bank that has the highest regulatory
examination rating and is not contemplating significant growth or expansion. All other banks are
expected to maintain a leverage ratio of at least 100 to 200 basis points above the stated minimum.
We are expected to maintain a leverage ratio of at least 4%.
Prompt Corrective Action
In addition to the required minimum capital levels described above, Federal law establishes a
system of prompt corrective actions which Federal banking agencies are required to take, and
certain actions which they have discretion to take, based upon the capital category into which a
Federally regulated depository institution falls. Regulations set forth detailed procedures and
criteria for implementing prompt corrective action in the case of any institution which is not
adequately capitalized. Under the rules, an institution will be deemed well capitalized or
better if its leverage ratio exceeds 5%, its Tier 1 risk based capital ratio
exceeds 6%, and if the Total risk based capital ratio exceeds 10%. An institution will be deemed
to be adequately capitalized or better if it exceeds the minimum Federal regulatory capital
requirements. However, it will be deemed undercapitalized if it fails to meet the minimum
capital requirements; significantly undercapitalized if it has a total risk based capital ratio
that is less than 6%, a Tier 1 risk based capital ratio that is less than 3%, or a leverage ratio
that is less than 3%, and critically undercapitalized if the institution has a ratio of tangible
equity to total assets that is equal to or less than 2%.
The prompt corrective action rules require an undercapitalized institution to file a written
capital restoration plan, along with a performance guaranty by its holding company or a third
party. In addition, an undercapitalized institution becomes subject
to certain automatic restrictions
5
including a prohibition on payment of dividends, a limitation on asset growth and
expansion, in certain cases, a limitation on the payment of bonuses or raises to senior executive
officers, and a prohibition on the payment of certain management fees to any controlling
person. Institutions that are classified as undercapitalized are also subject to certain
additional supervisory actions, including: increased reporting burdens and regulatory monitoring; a
limitation on the institutions ability to make acquisitions, open new branch offices, or engage in
new lines of business; obligations to raise additional capital; restrictions on transactions with
affiliates; and restrictions on interest rates paid by the institution on deposits. In certain
cases, bank regulatory agencies may require replacement of senior executive officers or directors,
or sale of the institution to a willing purchaser. If an institution is deemed to be critically
undercapitalized and continues in that category for four quarters, the statute requires, with
certain narrowly limited exceptions, that the institution be placed in receivership.
At December 31, 2006, the Bank satisfied the ratios to be categorized as a well-capitalized
institution, which in the regulatory framework for prompt corrective action imposes the lowest
level of supervisory restraints.
Community Reinvestment Act
The Community Reinvestment Act of 1977, referred to as the CRA, requires that banks meet the
credit needs of all of their assessment area (as established for these purposes in accordance with
applicable regulations based principally on the location of branch offices), including those of low
income areas and borrowers. Our record in meeting the requirements of the CRA will be taken into
consideration in connection with any applications with Federal regulators to engage in certain
activities, including mergers or expansions into non-banking activities.
USA Patriot Act
Under the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism (USA PATRIOT) Act, financial institutions are subject to prohibitions
against specified financial transactions and account relationships as well as enhanced due
diligence and know your customer standards in their dealings with foreign financial institutions
and foreign customers. Under the USA PATRIOT Act, financial institutions must establish anti-money
laundering programs meeting the minimum standards specified by the Act and implementing
regulations. While we do not expect to have any significant international banking relationships,
and do not anticipate that the USA PATRIOT Act will have a material effect on its business or
operations, the effect of the compliance burden imposed by the Act on the Bank cannot be predicted
with certainty.
Future Legislation and Regulation
Various legislation and regulations, ranging from consumer protection legislation to additional
legislation proposing to substantially change the financial institutions regulatory system, are
considered by the U.S. Congress, the New Jersey State Legislature and Federal and State authorities
from time to time. Future legislation and regulation may change our regulatory and operating
environment in substantial and unpredictable ways. We cannot predict whether any legislation or
regulation will be enacted that would have a material effect upon our business.
Recent Developments
During 2007, the Bank has received FDIC approval and approval from the Department of Banking and
Insurance for a location in Hackensack, New Jersey. This location would be the banks fourth
office.
6
DESCRIPTION OF PROPERTY
We conduct our business through our office located at 204 Main Street, Fort Lee, New Jersey. This
office is leased. Two additional offices are being constructed at 1365 Palisade Avenue, Fort Lee,
New Jersey and 458 West Street, Fort Lee, New Jersey. The Palisade Avenue property is owned by the
Bank and the West Street facility is leased. All properties are located in Bergen County, New
Jersey.
During the first quarter of 2007, the Bank received approval from the FDIC and the New Jersey
Department of Banking and Insurance for a fourth branch to be located at 401 Hackensack Avenue,
Hackensack, New Jersey. This facility will be leased.
LEGAL PROCEEDINGS
We commenced operations in May 2006 and have not been involved in any legal proceedings. In
addition, we do not believe that there is any pending or threatened proceedings against us.
However, based on the nature of our operations, we may be, in the future, parties to or otherwise
involved in legal proceedings arising in the normal course of business.
MARKET PRICE AND DIVIDENDS ON COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Market Information
Our common stock is not listed for quotation on any exchange or market system and there is no
established public trading market for our common stock. However, there have been a limited number
of trades of our common stock since our initial offering and capitalization. The following table
sets forth the high and low prices at which trades of our common stock have occurred during the
indicated periods. The prices are adjusted to reflect our ten percent (10%) stock distribution in
January 2007.
|
|
|
|
|
|
|
|
|
|
|
High
|
|
Low
|
Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
Fourth quarter
|
|
$
|
18.18
|
|
|
$
|
18.18
|
|
Third quarter
|
|
|
18.18
|
|
|
|
18.18
|
|
Second quarter
|
|
|
18.18
|
|
|
|
18.18
|
|
First quarter
|
|
|
N/A
|
|
|
|
N/A
|
|
Holders
As of February 22, 2007, there were 1,172 shareholders of record of our common stock.
Dividends
We have not paid any cash dividends since our inception. The decision to pay, as well as the
timing and amount of any dividends to be paid by the Bank will be determined by our Board of
Directors, giving consideration to our earnings, capital needs, financial condition, and other
relevant factors.
7
Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth information, as of December 31, 2006, with respect to our 2006 Stock
Option Plan, which is the only compensation plan under which our common stock is authorized for
issuance. Share and exercise price information has been adjusted to reflect our ten percent (10%)
stock distribution in January 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares of
|
|
|
|
|
|
Number of shares of
|
|
|
common stock to be
|
|
|
|
|
|
common stock
|
|
|
issued upon exercise
|
|
Weighted-average
|
|
remaining available
|
|
|
of outstanding
|
|
exercise price of
|
|
for future issuance
|
|
|
options, warrants
|
|
outstanding options,
|
|
under equity
|
Plan Category
|
|
and rights
|
|
warrants and rights
|
|
compensation plans
|
Equity compensation
plans approved by
security holders
|
|
|
62,150
|
|
|
$
|
18.18
|
|
|
|
57,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans not approved
by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
62,150
|
|
|
$
|
18.18
|
|
|
|
57,841
|
|
8
SELECTED FINANCIAL DATA
Set forth below is selected historical financial data of the Bank. This information is derived in
part from and should be read in conjunction with the financial statements and notes thereto
included in this annual report. The financial information below is provided as of and for the year
ended December 31, 2006.
|
|
|
|
|
(in thousands, except per share data)
|
|
2006
|
|
Selected Operating Data:
|
|
|
|
|
Total interest income
|
|
$
|
3,685
|
|
Total interest expense
|
|
|
607
|
|
|
|
|
|
Net interest income
|
|
|
3,078
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
866
|
|
|
|
|
|
Net interest income after provision for loan loss
|
|
|
2,212
|
|
Other income
|
|
|
15
|
|
Other expenses
|
|
|
2,627
|
|
|
|
|
|
Income before income taxes
|
|
|
(400
|
)
|
Income tax expense
|
|
|
164
|
|
|
|
|
|
Net loss
|
|
$
|
(564
|
)
|
|
|
|
|
|
|
|
|
|
Basic Earnings per Share (1)
|
|
$
|
(0.24
|
)
|
|
|
|
|
|
Basic Earnings per Share (from operations
excluding start-up and organizational expenses)
(1)
|
|
$
|
(0.18
|
)
|
Average shares outstanding-basic (1)
|
|
|
2,399,657
|
|
|
|
|
(1)
|
|
Adjusted for the 10% 2007 stock distribution
|
|
|
|
|
|
Selected Financial Data:
|
|
2006
|
|
Total Assets
|
|
$
|
106,047
|
|
Net Loans
|
|
|
79,819
|
|
Total Deposits
|
|
|
61,867
|
|
Stockholders Equity
|
|
|
43,039
|
|
|
|
|
|
|
Selected Financial Ratios:
|
|
2006
|
|
Return on Average Assets (ROA)
|
|
|
(0.72
|
%)
|
Return on Average Equity (ROE)
|
|
|
(1.31
|
%)
|
Equity to Total Assets at Year-End
|
|
|
40.58
|
%
|
Dividend Payout Ratio
|
|
|
N/A
|
|
9
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations should be
read in conjunction with our financial statements and the notes thereto included in this annual
report.
Overview and Strategy
Our charter was approved in April 2006 and we opened for business on May 10, 2006. We currently
operate from one office located at 204 Main Street, Fort Lee, NJ 07024. We have also received
approval from the FDIC and the NJ Department of Banking and Insurance to open three additional
locations. These offices will be located at 1365 Palisade Avenue, Fort Lee, NJ, 458 West Street,
Fort Lee, NJ, and 401 Hackensack Avenue, Hackensack, NJ. All current and proposed branches are in
Bergen County, NJ.
We conduct a traditional commercial banking business, accepting deposits from the general public,
including individuals, businesses, non-profit organizations, and governmental units. We make
commercial loans, consumer loans, and both residential and commercial real estate loans. In
addition, we provide other customer services and make investments in securities, as permitted by
law. We have sought to offer an alternative, community-oriented style of banking in an area, which
is presently dominated by larger, statewide and national institutions. Our focus is on
establishing and retaining customer relationships by offering a broad range of traditional
financial services and products, competitively-priced and delivered in a responsive manner to small
businesses, professionals and individuals in the local market. As a locally owned and operated
community bank, we believe we can provide superior customer service that is highly personalized,
efficient and responsive to local needs. To better serve our customers and expand our market
reach, we provide for the delivery of certain financial products and services to local customers
and a broader market through the use of mail, telephone and internet banking. We endeavor to
deliver these products and services with the care and professionalism expected of a community bank
and with a special dedication to personalized customer service.
Our specific objectives are:
|
|
|
to provide local businesses, professionals and individuals with banking
services responsive to and determined by the local market;
|
|
|
|
|
to attract deposits and loans by competitive pricing; and
|
|
|
|
|
to provide a reasonable return to shareholders on capital invested.
|
Critical Accounting Policies and Judgments
Our financial statements are prepared based on the application of certain accounting policies, the
most significant of which are described in Note 1 Summary of Significant Accounting Policies in
the Notes to the Financial Statements. Certain of these policies require numerous estimates and
strategic or economic assumptions that may prove inaccurate or subject to variation and may
significantly affect our reported results and financial position for the period or in future
periods. The use of estimates, assumptions, and judgments are necessary when financial assets and
liabilities are required to be recorded at, or adjusted to reflect, fair value. Assets carried at
fair value inherently result in more financial statement volatility. Fair values and information
used to record valuation adjustments for certain assets and liabilities are based on
either quoted market prices or are provided by other independent
third-party sources, when
available. When such information is not
10
available, management estimates valuation adjustments.
Changes in underlying factors, assumptions, or estimates in any of these areas could have a
material impact on our future financial condition and results of operations.
Allowance for Loan Losses
The allowance for loan losses (ALLL) is established through periodic charges to income. Loan
losses are charged against the ALLL when management believes that the future collection of
principal is unlikely. Subsequent recoveries, if any, are credited to the ALLL. If the ALLL is
considered inadequate to absorb future loan losses on existing loans, based on, but not limited to,
increases in the size of the loan portfolio, increases in charge-offs or changes in the risk
characteristics of the loan portfolio, then the provision for loan losses is increased.
We consider the ALLL of $866 thousand adequate to cover potential losses inherent in the loan
portfolio that may become uncollectible. Our evaluation considers such factors as changes in the
composition and volume of the loan portfolio, the impact of changing economic conditions on the
credit worthiness of our borrowers, and the overall quality of the loan portfolio. For further
discussion, see the Provision for Loan Losses, Loan Portfolio, Loan Quality, and Allowance
for Loan Losses sections below as well as various sections of our Notes to Financial Statements.
Deferred Tax Assets and Valuation Allowance
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply in the period in which the deferred tax asset or liability is expected to
be settled or realized. The effect on deferred taxes of a change in tax rates is recognized in
income in the period in which the change occurs. Deferred tax assets are reduced, through a
valuation allowance, if necessary, by the amount of such benefits that are not expected to be
realized based on current available evidence. As of December 31, 2006, we have recorded a
valuation allowance against the state deferred tax asset and a portion of the Federal deferred tax
asset. At this time, we believe this valuation allowance is appropriate as there is some
uncertainty as to whether or not we will be able to generate sufficient taxable income to utilize
the net deferred tax asset.
Impairment of Assets
Loans are considered impaired when, based on current information and events, it is probable that
the Bank will be unable to collect all amounts due according to contractual terms of the loan
agreement. The collection of all amounts due according to contractual terms means both the
contractual interest and principal payments of a loan will be collected as scheduled in the loan
agreement. Impaired loans are measured based on the present value of expected future cash flows
discounted as the loans effective interest rate, or, as a practical expedient, at the loans
observable market price, or the fair value of the underlying collateral. The fair value of
collateral, reduced by costs to sell on a discounted basis, is used if a loan is collateral
dependent. Conforming one-to-four family residential mortgage loans, home equity and second
mortgages, and consumer loans are pooled together as homogeneous loans and, accordingly, are not
covered by Statement of Financial Accounting Standards (SFAS No.114 Accounting by Creditors for
Impairment of a Loan. At this time, we do not have any impaired loans.
11
Periodically, we may need to assess whether there have been any events or economic circumstances to
indicate that a security on which there is an unrealized loss is impaired on an
other-than-temporary basis. In any such instance, we would consider many factors including the
severity and duration of the impairment, our intent and ability to hold the security for a period
of time sufficient for a recovery in value, recent events specific to the issuer or industry, and
for debt securities, external credit ratings and recent downgrades. Securities on which there is
an unrealized loss that is deemed to be other-than-temporary are written down to fair value with
the write-down recorded as a realized loss is securities gains (losses). At this time, we do not
have any impaired securities.
Results of Operations 2006
Our results of operations depend primarily on our net interest income, which is the difference
between the interest earned on our interest-earning assets and the interest paid on funds borrowed
to support those assets, primarily deposits. Net interest margin is the difference between the
weighted average rate received on interest-earning assets and the weighted average rate paid on
interest-bearing liabilities, which is affected by the average level of interest-earning assets as
compared with that of interest-bearing liabilities. Net income reflects net interest income, as
well as non-interest income and non-interest expenses.
Net Loss
For the year ended December 31, 2006, net loss was $564 thousand. The net loss for the year ended
December 31, 2006 included $866 thousand in the provision for loan losses as well as $125 thousand
of net expenses related to pre-opening and organization costs. The expense recorded for the
provision for loan losses is the result of closing over $80 million in total loans for the period
May 10, 2006 to December 31, 2006.
On a per share basis, basic loss per share from May 10, 2006, the date operations commenced,
through December 31, 2006 was $0.18. All per share data has been restated to reflect the ten
percent (10%) stock distribution paid to shareholders during January 2007.
Analysis of Net Interest Income
Net interest income represents the difference between income on interest-earning assets and expense
on interest-bearing liabilities. Net interest income depends upon the volume of interest-earning
assets and interest bearing liabilities and the interest rate earned or paid on them. From May 10,
2006, the day operations commenced, to December 31, 2006, net interest income was $2,497,000.
Average Balance Sheet
The following table sets forth certain information relating to our average assets and liabilities
from the date operations commenced, May 10, 2006, to December 31, 2006, and reflects the average
yield on assets and average cost of liabilities for the period indicated. Such yields are derived
by dividing annualized income or annualized expense by the average balance of assets or
liabilities, respectively, for the periods shown. Securities available for sale are reflected in
the following table at amortized cost.
12
May 10, 2006 through December 31, 2006
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
Average
|
|
|
|
|
|
|
Average
|
|
|
|
Balance
|
|
|
Interest
|
|
|
Yield/Cost
|
|
ASSETS :
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Earning Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (net of unearned income)
|
|
$
|
43,971
|
|
|
$
|
1,983
|
|
|
|
6.77
|
%
|
Securities available for sale and
Investment Securities
|
|
|
7,815
|
|
|
|
260
|
|
|
|
4.99
|
|
Federal Funds Sold
|
|
|
21,752
|
|
|
|
818
|
|
|
|
5.64
|
|
Equity Securities
|
|
|
100
|
|
|
|
0
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest-earning Assets
|
|
|
73,638
|
|
|
|
3,061
|
|
|
|
6.26
|
%
|
|
|
|
|
|
|
|
|
|
|
Non-interest earning Assets
|
|
|
5,011
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
|
|
|
(486
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
78,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Bearing Liabilities :
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand Deposits
|
|
$
|
3,910
|
|
|
$
|
60
|
|
|
|
2.30
|
%
|
Savings Deposits
|
|
|
930
|
|
|
|
5
|
|
|
|
0.81
|
|
Money Market Deposits
|
|
|
16,216
|
|
|
|
422
|
|
|
|
3.89
|
|
Time Deposits
|
|
|
3,360
|
|
|
|
77
|
|
|
|
3.44
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest-Bearing Liabilities
|
|
|
24,416
|
|
|
|
564
|
|
|
|
3.46
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Non-Interest Bearing Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand Deposits
|
|
|
10,384
|
|
|
|
|
|
|
|
|
|
Other Liabilities
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Interest Bearing Liabilities
|
|
|
10,548
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
43,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY
|
|
$
|
78,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income
|
|
|
|
|
|
$
|
2,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Rate Spread
|
|
|
|
|
|
|
|
|
|
|
2.80
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Margin
|
|
|
|
|
|
|
|
|
|
|
3.39
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of Interest-Earning Assets to
Interest-Bearing Liabilities
|
|
|
3.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
Provision for Loan Losses
For the year ended December 31, 2006, our provision for loan losses was $866,000. The provision is
directly related to the growth and composition of the loan portfolio during our first year of
operation.
Other Income
Other income, which was primarily attributable to service fees received from deposit accounts, for
the year ended December 31, 2006, was $15,000.
Other Expenses
Other
expenses for the year ended December 31, 2006 amounted to $2,627,000. These costs were
related, primarily, to the opening and organizing of the bank, staff compensation, and occupancy
costs. Included in the other expenses for the year ended December 31, 2006 was approximately $701
thousand of expenses related to start-up and organizational costs.
Income Tax Expense
During 2006, we recorded income tax expense as a result of recording a valuation allowance for
state tax purposes and a portion for federal tax purposes. We believe this valuation allowance is
appropriate as there is some uncertainty as to whether or not we will be able to generate
sufficient taxable income to utilize the net deferred tax asset.
Financial Condition
At December 31, 2006, our total assets were $106,047,000. Total loans, including net deferred fees
and amortized costs, increased from no loans at the commencement of our operations to $80,685,000
at December 31, 2006. Total deposits were $61,867,000 at December 31, 2006. Including deposits,
we had total liabilities of $63,008,000 and our shareholders equity was $43,039,000.
Loan Portfolio
Our loan portfolio is the primary component of our assets. At December 31, 2006, our total loans,
excluding net deferred fees and costs, were $80,638,000, all of which were originated during 2006.
This growth in the loan portfolio was attributable to recommendations and referrals from members of
our board of directors, our shareholders, our executive officers, and selective marketing by our
management and staff. We believe that we will continue to have similar opportunities for loan
origination within the Bergen County and Hudson County markets within northern New Jersey, due to
the fact that, through mergers and acquisitions, our trade area is now primarily served by large
institutions, frequently headquartered out of state. We believe that it is not cost-efficient for
these larger institutions to provide the level of personal service to small business borrowers that
we intend to provide.
14
Our loan portfolio consists of commercial loans, real estate loans, and consumer loans. Commercial
loans are made for the purpose of providing working capital, financing the purchase of equipment or
inventory, as well as for other business purposes. Real estate loans consist of loans secured by
commercial or residential real property and loans for the construction of commercial or residential
property. Consumer loans are made for the purpose of financing the purchase of consumer goods,
home improvements, and other personal needs, and are generally secured by the personal property
being purchased.
Our loans
are primarily to businesses and individuals located in Bergen and
Hudson Counties, New Jersey.
We have not made loans to borrowers outside of the United States. Commercial lending activities
are focused primarily on lending to small business borrowers. We believes that our strategy of
customer service, competitive rate structures, and selective marketing have enabled us to gain
market entry to local loans. Bank mergers and lending restrictions at larger financial
institutions with which we compete have also contributed to the success of our efforts to attract
borrowers.
The following table sets forth the classification of our loans by major category as of December 31,
2006:
|
|
|
|
|
Commercial
|
|
$
|
14,678
|
|
Real Estate
|
|
|
50,787
|
|
Credit Lines
|
|
|
13,519
|
|
Consumer
|
|
|
1,654
|
|
|
|
|
|
|
|
|
|
|
Total Loans
|
|
$
|
80,638
|
|
|
|
|
|
The following table sets forth the maturity of fixed and adjustable rate loans as of December 31,
2006 (in thousands) :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within
|
|
|
|
|
|
|
|
|
One
|
|
1 to 5
|
|
After 5
|
|
|
|
|
Year
|
|
Years
|
|
Years
|
|
Total
|
Loans with Fixed Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
813
|
|
|
|
3,370
|
|
|
|
|
|
|
|
4,183
|
|
Real Estate
|
|
|
1,852
|
|
|
|
17,074
|
|
|
|
17,257
|
|
|
|
36,183
|
|
Credit Lines
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Consumer
|
|
|
|
|
|
|
391
|
|
|
|
291
|
|
|
|
682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans with Adjustable Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
10,496
|
|
|
|
|
|
|
|
|
|
|
|
10,496
|
|
Real Estate
|
|
|
11,371
|
|
|
|
2,482
|
|
|
|
750
|
|
|
|
14,603
|
|
Credit Lines
|
|
|
59
|
|
|
|
|
|
|
|
13,456
|
|
|
|
13,515
|
|
Consumer
|
|
|
972
|
|
|
|
|
|
|
|
|
|
|
|
972
|
|
15
Loan Quality
As mentioned above, our principal assets are our loans. Inherent in the lending function is the
risk of the borrowers inability to repay a loan under its existing terms. Risk elements include
non-accrual loans, past due and restructured loans, potential problem loans, loan concentrations,
and other real estate owned.
Non-performing assets include loans that are not accruing interest (non-accrual loans) as a result
of principal or interest being in default for a period of 90 days or more and accruing loans that
are 90 days past due. When a loan is classified as non-accrual, interest accruals discontinue and
all past due interest, including interest applicable to prior years, is reversed and charged
against current income. Until the loan becomes current, any payments received from the borrower
are applied to outstanding principal until such time as management determines that the financial
condition of the borrower and other factors merit recognition of such payments of interest.
We attempt to minimize overall credit risk through loan diversification and our loan approval
procedures. Due diligence begins at the time we begin to discuss the origination of a loan with a
borrower. Documentation, including a borrowers credit history, materials establishing the value
and liquidity of potential collateral, the purpose of the loan, the source and timing of the
repayment of the loan, and other factors are analyzed before a loan is submitted for approval.
Loans made are also subject to periodic audit and review.
At December 31, 2006, we had no non-performing assets and no information about possible credit
problems of borrowers which would cause us to have serious doubts as to the ultimate ability to
collect their loans. While we do attempt to minimize credit risk, these conditions are partially
attributable to our limited operating history.
As of December 31, 2006, there were no concentrations of loans exceeding 10% of the Banks total
loans and the Bank had no foreign loans. The Banks loans are primarily to businesses and
individuals located in Bergen and Hudson Counties, New Jersey.
The Bank maintains an external independent loan review auditor. The loan review auditor will
perform an examination of a sample of commercial loans after the Bank has extended credit. The
loan review auditor also monitors the integrity of our credit risk rating system. This review
process is intended to identify adverse developments in individual credits, regardless of payment
history. The loan review auditor reports directly to the audit committee of our Board of Directors
and provides the audit committee with reports on asset quality. The loan review audit reports are
also presented to our Board of Directors by the audit committee for review.
Allowance For Loan Losses
The allowance for loan losses represents a critical accounting policy. The allowance is a reserve
established through charges to earnings in the form of a provision for loan losses. We maintain an
allowance for loan losses which we believe is adequate to provide for probable losses inherent in
the loan portfolio. While we apply the methodology discussed below in connection with the
establishment of our allowance for loan losses, it is subject to critical judgments on the part of
management. Loan losses are charged directly to the allowance when they occur and any recovery is
credited to the allowance. Risks within the loan portfolio are analyzed on a continuous basis by
our officers, by external independent loan
review function, and by our audit committee. A risk system, consisting of multiple grading
categories, is utilized as an analytical tool to assess risk and appropriate reserves. In addition
to the risk system, management further evaluates risk characteristics
of the
16
loan portfolio under
current and anticipated economic conditions and considers such factors as the financial condition
of the borrower, past and expected loss experience, and other factors which management feels
deserve recognition in establishing an appropriate reserve. These estimates are reviewed at least
quarterly, and, as adjustments become necessary, they are realized in the periods in which they
become known. Additions to the allowance are made by provisions charged to the expense and the
allowance is reduced by net-chargeoffs, that is loans judged to be uncollectible, less any
recoveries on loans previously charged off. Although management attempts to maintain the allowance
at an adequate level, future additions to the allowance may be required due to the growth of our
loan portfolio, changes in asset quality, changes in market conditions and other factors.
Additionally, various regulatory agencies, primarily the FDIC, periodically review our allowance
for loan losses. These agencies may require additional provisions based upon their judgment about
information available to them at the time of their examination. Although management uses what it
believes to be the best information available, the level of the allowance for loan losses remains
an estimate which is subject to significant judgment and short term change.
Our allowance for loan losses totaled $866,000 at December 31, 2006, compared to no allowance at
the commencement of our operations. This growth of the allowance is due to the growth and
composition of the loan portfolio.
The following is an analysis summary of the allowance for loan losses for the period indicated:
|
|
|
|
|
|
|
2006
|
|
Balance, May 10, 2006
|
|
$
|
|
|
|
|
|
|
|
Charge-offs
|
|
|
|
|
Commercial
|
|
|
|
|
Real Estate
|
|
|
|
|
Credit Lines
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
Total Charge-offs
|
|
|
|
|
|
|
|
|
|
Recoveries
|
|
|
|
|
Commercial
|
|
|
|
|
Real Estate
|
|
|
|
|
Credit Lines
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
Total Recoveries
|
|
|
|
|
|
|
|
|
|
Net charge-offs
|
|
|
|
|
|
|
|
|
|
Provision charged to expense
|
|
|
866
|
|
|
|
|
|
Balance, December 31, 2006
|
|
$
|
866
|
|
|
|
|
|
|
|
|
|
|
Ratio of net charge-offs to average loans
outstanding
|
|
|
N/A
|
|
17
The following table sets forth, for each of our major lending areas, the amount and percentage of
our allowance for loan losses attributable to such category, and the percentage of total loans
represented by such category, as of the periods indicated:
Allocation of the Allowance for Loan Losses by Category
For the period ended December 31, 2006
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
Amount
|
|
|
% of ALL
|
|
|
Total Loans
|
|
Balance applicable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
197
|
|
|
|
22.75
|
%
|
|
|
18.20
|
%
|
Real Estate:
|
|
|
479
|
|
|
|
55.31
|
%
|
|
|
62.98
|
%
|
Credit Lines
|
|
|
69
|
|
|
|
7.97
|
%
|
|
|
16.77
|
%
|
Consumer
|
|
|
25
|
|
|
|
2.89
|
%
|
|
|
2.05
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
770
|
|
|
|
88.91
|
%
|
|
|
100.00
|
%
|
Unallocated Reserves
|
|
|
96
|
|
|
|
11.09
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
866
|
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
The allowance for loan losses represents our determination of the
amount necessary to bring the ALLL to a level that we consider adequate
to reflect the risk of estimated losses inherent in our loan portfolio
as of the balance sheet date. We evaluate the adequacy of the ALLL by
performing periodic, systematic reviews of the loan portfolio. While
allocations are made to specific loans and pools of loans, the total
allowance is available for loan losses. Although the ALLL is our best
estimate of the inherent loan losses as of the balance sheet date, the
process of determining the adequacy of the ALLL is judgmental and
subject to changes in external conditions. Accordingly, there can be no
assurance that existing levels of the ALLL will ultimately prove
adequate to cover actual loan losses. However, we have determined, and
believe, that the ALLL is at a level sufficient to cover the inherent
loan losses in our loan portfolio as of the balance sheet date.
18
Investment Securities
In addition to our loan portfolio, we maintain an investment portfolio to fund increased loan
demand or deposit withdrawals and other liquidity needs and to provide an additional source of
interest income. The portfolio is composed of U.S. Treasury Securities, obligations of U.S.
Government Agencies, and equity securities of Atlantic Central Bankers Bank.
Securities are classified as held-to-maturity, trading or available for sale, or AFS, at the time
of purchase. Securities are classified as held-to-maturity if management intends and we have the
ability to hold them to maturity. Such securities are stated at cost, adjusted for unamortized
purchase premiums and discounts. Securities which are bought and held principally for the purpose
of selling them in the near term are classified as trading securities, which are carried at market
value. Realized gains and losses, as well as gains and losses from marking trading securities to
market value, are included in trading revenue. We had no trading securities during 2006.
Securities not classified as held-to-maturity or trading securities are classified as AFS and are
stated at fair value. Unrealized gains and losses on AFS securities are excluded from results of
operations, and are reported as a component of accumulated other comprehensive income (loss), which
is included in stockholders equity. Securities classified as AFS include securities that may be
sold in response to changes in interest rates, changes in prepayment risks, the need to increase
regulatory capital, or other similar requirements.
At December 31, 2006, total securities were $11,692,000, $1,993,000 of which were classified as
held-to-maturity and $9,699,000 of which were classified as available for sale.
The following table sets forth the amortized cost and market value of our security portfolio at the
date indicated.
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2006
|
|
|
|
Amortized
|
|
|
Market
|
|
|
|
Cost
|
|
|
Value
|
|
Available for sale
|
|
|
|
|
|
|
|
|
U.S. Agency Obligations
|
|
|
9,560
|
|
|
|
9,599
|
|
Equity securities
|
|
|
100
|
|
|
|
100
|
|
|
|
|
|
|
|
|
Total available for sale
|
|
|
9,660
|
|
|
|
9,699
|
|
|
|
|
|
|
|
|
|
|
Held to Maturity
|
|
|
|
|
|
|
|
|
U.S. Treasury obligations
|
|
|
1,993
|
|
|
|
2,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity
|
|
|
1,993
|
|
|
|
2,002
|
|
|
|
|
|
|
|
|
|
|
Total Investment Securities
|
|
$
|
11,653
|
|
|
$
|
11,700
|
|
|
|
|
|
|
|
|
19
The following table sets forth the maturity distribution of our debt investment portfolio at
December 31, 2006.
Maturity of Debt Investment Securities
December 31, 2006
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
Held to Maturity
|
|
|
Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Amortized
|
|
|
Market
|
|
|
Average
|
|
|
Amortized
|
|
|
Market
|
|
|
Average
|
|
|
|
Cost
|
|
|
Value
|
|
|
Yield
|
|
|
Cost
|
|
|
Value
|
|
|
Yield
|
|
Within 1 year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 to 5 years
|
|
|
1,993
|
|
|
|
2,002
|
|
|
|
5.12
|
%
|
|
|
4,560
|
|
|
|
4,579
|
|
|
|
5.59
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 to 10 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
5,020
|
|
|
|
5.80
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over 10 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,993
|
|
|
$
|
2,002
|
|
|
|
|
|
|
$
|
9,560
|
|
|
$
|
9,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We did not sell any securities during 2006.
Deposits
Deposits are our primary source of funds. From the commencement of our operations, our deposits
grew to $61,867,000 at December 31, 2006. This deposit growth was accomplished as a result of the
combined effect of referrals from the members of our board of directors, shareholders and
management, as well as selective marketing by our staff during the year.
The following table sets forth the actual amount of various types of deposits at the date
indicated:
December 31,
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
Average
|
|
|
|
Amount
|
|
|
Yield/Rate
|
|
Non-interest Bearing Demand
|
|
$
|
10,244
|
|
|
|
|
|
Interest Bearing Demand
|
|
|
38,794
|
|
|
|
3.58
|
%
|
Savings
|
|
|
1,873
|
|
|
|
0.81
|
%
|
Time Deposits
|
|
|
10,956
|
|
|
|
3.44
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
61,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
The Bank does not actively solicit short-term deposits of $100,000 or more because of the liquidity
risks posed by such deposits. The following table summarizes the maturity of time deposits over
$100,000 (in thousands).
|
|
|
|
|
Three months or less
|
|
$
|
3,950
|
|
Over three months through six months
|
|
|
3,036
|
|
Over six months through twelve months
|
|
|
2,781
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
9,767
|
|
|
|
|
|
Contractual Obligations and Commitments
As of December 31, 2006, the Company had the following contractual obligations as provided in the
table below:
Contractual Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment due by Period
|
|
|
|
Less
|
|
|
|
|
|
|
|
|
|
|
After
|
|
|
Total
|
|
|
|
than 1
|
|
|
1 to 3
|
|
|
4 to 5
|
|
|
5
|
|
|
Amounts
|
|
|
|
year
|
|
|
years
|
|
|
years
|
|
|
years
|
|
|
Committed
|
|
Minimum annual rental under
Non-cancelable operating leases
|
|
|
304
|
|
|
|
618
|
|
|
|
424
|
|
|
|
3,464
|
|
|
$
|
4,810
|
|
Remaining contractual maturities
of time deposits
|
|
|
10,939
|
|
|
|
5
|
|
|
|
12
|
|
|
|
|
|
|
$
|
10,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Contractual Obligations
|
|
|
11,243
|
|
|
|
623
|
|
|
|
436
|
|
|
|
3,464
|
|
|
$
|
15,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additionally, the Bank had certain commitments to extend credit to customers. A summary of
commitments to extend credit at December 31, 2006 is provided as follows (in thousands):
|
|
|
|
|
Commercial real estate, construction, and
Land development secured by land
|
|
$
|
18,420
|
|
Home Equity Loans
|
|
|
5,073
|
|
Standby letters of credit and other
|
|
|
1,055
|
|
|
|
|
|
|
|
$
|
24,548
|
|
21
Liquidity
Our liquidity is a measure of our ability to fund loans, withdrawals or maturities of deposits, and
other cash outflows in a cost-effective manner. Our principal sources of funds are deposits,
scheduled amortization and prepayments of loan principal, maturities of investment securities, and
funds provided by operations. While scheduled loan payments and maturing investments are
relatively predictable sources of funds, deposit flow and loan prepayments are greatly influenced
by general interest rates, economic conditions, and competition. In addition, if warranted, we
would be able to borrow funds.
Our total deposits equaled $61,867,000 at December 31, 2006. The growth in funds provided by
deposit inflows during this period coupled with the amount of capital raised has been sufficient to
provide for our loan demand.
Through the investment portfolio, we have generally sought to obtain a safe, yet slightly higher
yield than would have been available to us as a net seller of overnight federal funds, while still
maintaining liquidity. Through our investment portfolio, we also attempt to manage our maturity
gap by seeking maturities of investments which coincide as closely as possible with maturities of
deposits. The investment portfolio also includes securities available for sale to provide
liquidity for anticipated loan demand and liquidity needs.
Although we were a net seller of federal funds during 2006, we obtained a $12 million overnight
line of credit with First Tennessee Bank and an $8 million overnight line of credit with Atlantic
Central Bankers Bank for the purchase of federal funds in the event that temporary liquidity needs
arise.
We believe that our current sources of funds provide adequate liquidity for our current cash flow
needs.
22
Interest Rate Sensitivity Analysis
We manage our assets and liabilities with the objectives of evaluating the interest-rate risk
included in certain balance sheet accounts; determining the level of risk appropriate given our
business focus, operating environment, capital and liquidity requirements; establishing prudent
asset concentration guidelines; and managing risk consistent with guidelines approved by our board
of directors. We seek to reduce the vulnerability of our operations to changes in interest rates
and to manage the ratio of interest-rate sensitive assets to interest-rate sensitive liabilities
within specified maturities or re-pricing dates. Our actions in this regard are taken under the
guidance of the asset/liability committee of our board of directors, or ALCO. ALCO generally
reviews our liquidity, cash flow needs, maturities of investments, deposits and borrowings, and
current market conditions and interest rates.
One of the monitoring tools used by ALCO is an analysis of the extent to which assets and
liabilities are interest rate sensitive and measures our interest rate sensitivity gap. An asset
or liability is said to be interest rate sensitive within a specific time period if it will mature
or re-price within that time period. A gap is considered positive when the amount of interest rate
sensitive assets exceeds the amount of interest rate sensitive liabilities. A gap is considered
negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate
sensitive assets. Accordingly, during a period of rising rates, a negative gap may result in the
yield on assets increasing at a slower rate than the increase in the cost of interest-bearing
liabilities, resulting in a decrease in net interest income. Conversely, during a period of
falling interest rates, an institution with a negative gap would experience a re-pricing of its
assets at a slower rate than its interest-bearing liabilities which, consequently, may result in
its net interest income growing.
23
The following table sets forth the amounts of interest-earning assets and interest-bearing
liabilities outstanding at the periods indicated which we anticipate, based upon certain
assumptions, will re-price or mature in each of the future time periods presented. Except as
noted, the amount of assets and liabilities which re-price or mature during a particular period
were determined in accordance with the earlier of the term to re-pricing or the contractual terms
of the asset or liability. Because we have no interest bearing liabilities with a maturity greater
than five years, we believe that a static gap for the over five year time period reflects an
accurate assessment of interest rate risk. Our loan maturity assumptions are based upon actual
maturities within the loan portfolio. Equity securities have been included in Other Assets as
they are not interest rate sensitive. At December 31, 2006, we were within the target gap range
established by ALCO.
Cumulative Rate Sensitive Balance Sheet
December 31, 2006
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 - 3
|
|
|
0 6
|
|
|
0 1
|
|
|
0 5
|
|
|
5 +
|
|
|
All
|
|
|
|
|
|
|
Months
|
|
|
Months
|
|
|
Year
|
|
|
Years
|
|
|
Years
|
|
|
Others
|
|
|
TOTAL
|
|
Securities, excluding
equity securities
|
|
|
|
|
|
|
1,001
|
|
|
|
5,004
|
|
|
|
11,591
|
|
|
|
|
|
|
|
|
|
|
|
11,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
10,417
|
|
|
|
11,108
|
|
|
|
11,230
|
|
|
|
14,539
|
|
|
|
139
|
|
|
|
|
|
|
|
14,678
|
|
Real Estate
|
|
|
15,478
|
|
|
|
15,478
|
|
|
|
15,706
|
|
|
|
33,518
|
|
|
|
4,810
|
|
|
|
12,459
|
|
|
|
50,787
|
|
Credit Lines
|
|
|
9,096
|
|
|
|
13,519
|
|
|
|
13,519
|
|
|
|
13,519
|
|
|
|
|
|
|
|
|
|
|
|
13,519
|
|
Consumer
|
|
|
299
|
|
|
|
299
|
|
|
|
971
|
|
|
|
1,362
|
|
|
|
30
|
|
|
|
262
|
|
|
|
1,654
|
|
Federal Funds Sold
|
|
|
6,986
|
|
|
|
6,986
|
|
|
|
6,986
|
|
|
|
6,986
|
|
|
|
|
|
|
|
|
|
|
|
6,986
|
|
Other Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,832
|
|
|
|
6,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
42,276
|
|
|
|
48,391
|
|
|
|
53,416
|
|
|
|
81,515
|
|
|
|
4,979
|
|
|
|
19,553
|
|
|
|
106,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction /
Demand Accounts
|
|
|
7,757
|
|
|
|
7,757
|
|
|
|
7,757
|
|
|
|
7,757
|
|
|
|
|
|
|
|
|
|
|
|
7,757
|
|
Money Market
|
|
|
31,037
|
|
|
|
31,037
|
|
|
|
31,037
|
|
|
|
31,037
|
|
|
|
|
|
|
|
|
|
|
|
31,037
|
|
Savings
|
|
|
1,873
|
|
|
|
1,873
|
|
|
|
1,873
|
|
|
|
1,873
|
|
|
|
|
|
|
|
|
|
|
|
1,873
|
|
Time Deposits
|
|
|
4,367
|
|
|
|
7,703
|
|
|
|
10,939
|
|
|
|
10,956
|
|
|
|
|
|
|
|
|
|
|
|
10,956
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,385
|
|
|
|
11,343
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,039
|
|
|
|
43,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
AND EQUITY
|
|
|
45,034
|
|
|
|
48,370
|
|
|
|
51,606
|
|
|
|
51,623
|
|
|
|
|
|
|
|
54,424
|
|
|
|
106,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar Gap
|
|
|
(2,758
|
)
|
|
|
21
|
|
|
|
1,810
|
|
|
|
29,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gap / Total Assets
|
|
|
(2.60
|
%)
|
|
|
0.02
|
%
|
|
|
1.70
|
%
|
|
|
28.13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Gap Range
|
|
|
+/-
35.00
|
|
|
|
+/-
30.00
|
|
|
|
+/-
25.00
|
|
|
|
+/-
25.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSA / RSL
|
|
|
93.88
|
%
|
|
|
100.05
|
%
|
|
|
103.51
|
%
|
|
|
157.91
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(Rate Sensitive Assets to
Rate Sensitive Liabilities)
24
Market Risk
Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk
arises primarily from interest rate risk inherent in our lending and deposit taking activities.
Thus, we actively monitor and manage our interest rate risk exposure.
Our profitability is affected by fluctuations in interest rates. A sudden and substantial increase
in interest rates may adversely impact our earnings to the extent that the interest rates borne by
assets and liabilities do not change at the same speed, to the same extent, or on the same basis.
We monitor the impact of changing interest rates on our net interest income using several tools.
One measure of our exposure to differential changes in interest rates between assets and
liabilities is shown in our Cumulative Rate Sensitive Balance Sheet under the Interest Rate
Sensitivity Analysis caption. As we mature, we will also perform a periodic shock analysis to
evaluate the effect of interest rates upon our operations and our financial condition.
Our primary objective in managing interest rate risk is to minimize the adverse impact of changes
in interest rates on our net interest income and capital, while structuring our asset-liability
structure to obtain the maximum yield-cost spread on that structure. We rely primarily on our
asset-liability structure to control interest rate risk.
We continually evaluate interest rate risk management opportunities. During 2006, we believed that
available hedging instruments were not cost-effective, and therefore, focused our efforts on
increasing our yield-cost spread through retail growth opportunities.
25
The following table discloses our financial instruments that are sensitive to change in interest
rates, categorized by expected maturity at December 31, 2006. Market risk sensitive instruments
are generally defined as on- and off- balance sheet financial instruments.
Expected Maturity/Principal Repayment
December 31, 2006
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Avg.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Int.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There-
|
|
|
|
|
|
Fair
|
|
|
Rate
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
After
|
|
Total
|
|
Value
|
Interest Rate
Sensitive Assets :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
6.77
|
%
|
|
|
24,046
|
|
|
|
5,099
|
|
|
|
249
|
|
|
|
85
|
|
|
|
3,354
|
|
|
|
47,805
|
|
|
$
|
80,638
|
|
|
$
|
80,465
|
|
Securities
available for sale,
net of equity
securities
|
|
|
4.99
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,016
|
|
|
|
564
|
|
|
|
5,019
|
|
|
$
|
9,599
|
|
|
$
|
9,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
Securities
|
|
|
4.99
|
%
|
|
|
|
|
|
$
|
1,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,993
|
|
|
$
|
2,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fed Funds
Sold
|
|
|
5.64
|
%
|
|
$
|
6,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,986
|
|
|
$
|
6,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate
Sensitive
Liabilities :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand Deposits
|
|
|
2.30
|
%
|
|
$
|
7,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,757
|
|
|
$
|
7,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings Deposits
|
|
|
0.81
|
%
|
|
$
|
1,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,873
|
|
|
$
|
1,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money Market
Deposits
|
|
|
3.89
|
%
|
|
$
|
31,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
31,037
|
|
|
$
|
31,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time Deposits
|
|
|
3.44
|
%
|
|
$
|
10,939
|
|
|
|
5
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
$
|
10,956
|
|
|
$
|
10,948
|
|
Although certain assets and liabilities may have similar maturities or periods of re-pricing,
they may react in different degrees to changes in market interest rates. The maturity of certain
types of assets and liabilities may fluctuate in advance of changes in market rates, while maturity
of other types of assets and liabilities may lag behind changes in market rates. In the event of a
change in interest rates, prepayment and early withdrawal levels could deviate significantly from
the maturities assumed in calculating this table.
26
Capital
A significant measure of the strength of a financial institution is its capital base. Our federal
regulators have classified and defined our capital into the following components: (1) Tier 1
Capital, which includes tangible shareholders equity for common stock and qualifying preferred
stock, and (2) Tier 2 Capital, which includes a portion of the allowance for possible loan losses,
certain qualifying long-term debt, and preferred stock which does not qualify for Tier 1 Capital.
Minimum capital levels are regulated by risk-based capital adequacy guidelines, which require
certain capital as a percent of our assets and certain off-balance sheet items, adjusted for
predefined credit risk factors, referred to as risk-adjusted assets.
We are required to maintain, at a minimum, Tier 1 Capital as a percentage of risk-adjusted assets
of 4.0% and combined Tier 1 and Tier 2 Capital, or Total Capital, as a percentage of
risk-adjusted assets of 8.0%.
In addition to the risk-based guidelines, our regulators require that an institution which meets
the regulators highest performance and operation standards maintain a minimum leverage ratio (Tier
1 Capital as a percentage of tangible assets) of 3.0%. For those institutions with higher levels
of risk or that are experiencing or anticipating significant growth, the minimum leverage ratio
will be evaluated through the ongoing regulatory examination process. Due to our limited operating
history and the growth of the Bank during 2006, we are currently required to maintain a leverage
ratio of 4%.
The following table summarizes our risk-based capital and leverage ratios at December 31, 2006, as
well as the applicable minimum ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
December 31,
|
|
Regulatory
|
|
|
2006
|
|
Requirements
|
Risk-Based Capital :
|
|
|
|
|
|
|
|
|
Tier 1 Capital Ratio
|
|
|
52.77
|
%
|
|
|
4.0
|
%
|
Total Capital Ratio
|
|
|
53.83
|
%
|
|
|
8.0
|
%
|
Leverage Ratio
|
|
|
55.01
|
%
|
|
|
4.0
|
%
|
The capital levels detailed above represent the effect of our successful stock subscription
combined with a short period of operations. As we employ our capital and continue to grow our
operations, we expect that our capital levels will decrease, but that we will remain a
well-capitalized institution.
27
Impact of Inflation and Changing Prices
The consolidated financial statements of the Bank and notes thereto, presented elsewhere herein,
have been prepared in accordance with generally accepted accounting principles, which require the
measurement of financial position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time and due to inflation.
The impact of inflation is reflected in the increased cost of the Banks operations. Unlike most
industrial companies, nearly all of the assets and liabilities of the Bank are monetary. As a
result, interest rates have a greater impact on the Banks performance than do the effects of
general levels of inflation. Interest rates do not necessarily move in the same direction or to
the same extent as the prices of goods and services.
Recently Issued Accounting Standards And Other Operational Issues
FASB Interpretation No. 48
In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes. The Interpretation clarifies the accounting for uncertainty in income taxes recognized in
an enterprises financial statements in accordance with FASB Statement 109 Accounting for Income
Taxes. This interpretation presents a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or expected to be taken in
a tax return. The interpretation is effective for fiscal years beginning after December 15, 2006.
We do not expect the adoption of Interpretation No. 48 to have a material impact of our financial
statements.
SEC Staff Accounting Bulletin No. 108
In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements (SAB 108), to address diversity in practice in quantifying financial
statement misstatements. SAB 108 requires that the Bank quantify misstatements based on their
impact on each of its financial statements and related disclosures. SAB 108 was effective as of
the end of our 2006 fiscal year, allowing a one-time transitional cumulative effect adjustment to
retained earnings as of January 1, 2006 for errors that were not previously deemed material, but
are material under the guidance in SAB 108. The adoption of SAB 108 did not have an impact on the
Banks financial statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See disclosures on market risk in Managements Discussion and Analysis on pages 26 and 27.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
28
BANK OF NEW JERSEY
FINANCIAL STATEMENTS
Index to Financial Statements
|
|
|
|
|
|
|
Page
|
Report of Independent Registered Public Accounting Firm
|
|
|
31
|
|
Statements of Financial Condition as of December 31, 2006 and 2005
|
|
|
32
|
|
Statements of Operations for the years ended December 31, 2006 and 2005
|
|
|
33
|
|
Statements of Stockholders Equity for the years ended December 31, 2006 and 2005
|
|
|
34
|
|
Statements of Cash Flows for the years ended December 31, 2006 and 2005
|
|
|
35
|
|
Notes to Financial Statements
|
|
|
36
|
|
29
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
Bank of New Jersey:
We have audited the accompanying statements of financial condition of Bank of New Jersey (the
Company) as of December 31, 2006 and 2005, and the related statements of operations,
stockholders equity, and cash flows for the years then ended. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of Bank of New Jersey as of December 31, 2006 and 2005, and the
results of its operations and its cash flows for the years then ended in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Short Hills, New Jersey
March 2, 2007
30
BANK OF NEW JERSEY
Statements of Financial Condition
December 31, 2006 and 2005
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
|
1,853
|
|
|
|
12
|
|
Federal funds sold
|
|
|
6,986
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
|
8,839
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
9,699
|
|
|
|
|
|
Investment securities, (estimated market value of
$2,002 at December 31, 2006)
|
|
|
1,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
80,638
|
|
|
|
|
|
Deferred loan fees & Unamortized Costs, net
|
|
|
47
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(866
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loans
|
|
|
79,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net
|
|
|
4,612
|
|
|
|
277
|
|
Accrued interest receivable
|
|
|
439
|
|
|
|
598
|
|
Other assets
|
|
|
646
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
106,047
|
|
|
$
|
887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
Deposits :
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand deposits
|
|
|
10,244
|
|
|
|
|
|
Interest bearing deposits:
|
|
|
|
|
|
|
|
|
Savings, money market and time deposits
|
|
|
41,856
|
|
|
|
|
|
Time deposits of $100,000 or more
|
|
|
9,767
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
61,867
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
1,141
|
|
|
|
88
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
63,008
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock subscribed
|
|
|
|
|
|
|
42,724
|
|
Subscription receivable
|
|
|
|
|
|
|
(42,724
|
)
|
Capital stock , $10 par value. Authorized
5,000,000 shares; issued and outstanding
2,399,846 at December 31, 2006
|
|
|
23,998
|
|
|
|
|
|
Additional Paid in Capital
|
|
|
19,667
|
|
|
|
900
|
|
Accumulated Deficit
|
|
|
(665
|
)
|
|
|
(101
|
)
|
Other comprehensive income
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
43,039
|
|
|
|
799
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
106,047
|
|
|
$
|
887
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
31
BANK OF NEW JERSEY
Statements of Operations
Years ended December 31, 2006 and 2005
(Dollars in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
Interest income:
|
|
|
|
|
|
|
|
|
Interest on escrow funds
|
|
$
|
624
|
|
|
$
|
598
|
|
Loans
|
|
|
1,983
|
|
|
|
|
|
Securities available for sale & Investment securities
|
|
|
260
|
|
|
|
|
|
Federal funds sold and FHLBNY income
|
|
|
818
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
3,685
|
|
|
|
598
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
Savings and money markets
|
|
|
487
|
|
|
|
|
|
Time deposits
|
|
|
77
|
|
|
|
|
|
Short term borrowings
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
3,078
|
|
|
|
598
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan
Losses
|
|
|
2,212
|
|
|
|
598
|
|
|
|
|
|
|
|
|
|
|
Other income principally fees and service charges
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses:
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
1,825
|
|
|
|
417
|
|
Occupancy and equipment expense
|
|
|
434
|
|
|
|
120
|
|
Advertising and marketing expenses
|
|
|
67
|
|
|
|
|
|
Legal fees
|
|
|
58
|
|
|
|
36
|
|
Bank application costs
|
|
|
|
|
|
|
78
|
|
Other operating expenses
|
|
|
243
|
|
|
|
48
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
|
2,627
|
|
|
|
699
|
|
Income before expense for income taxes
|
|
|
(400
|
)
|
|
|
(101
|
)
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(564
|
)
|
|
$
|
(101
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.24
|
)
|
|
|
N/A
|
|
All share data has been adjusted to reflect the 10% stock distribution paid during January, 2007.
See accompanying notes to financial statements.
32
BANK OF NEW JERSEY
Statements of Stockholders Equity
Years ended December 31, 2006 and 2005
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
Common
|
|
Stock
|
|
Subscription
|
|
Paid In
|
|
Accumulated
|
|
Comprehensive
|
|
|
|
|
Stock
|
|
subscribed
|
|
receivable
|
|
Capital
|
|
Deficit
|
|
income
|
|
Total
|
|
|
|
Balance at December 31, 2004
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subscribed
|
|
|
|
|
|
|
42,724
|
|
|
|
(42,724
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contribution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
900
|
|
|
|
|
|
|
|
|
|
|
|
900
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(101
|
)
|
|
|
|
|
|
|
(101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
$
|
|
|
|
$
|
42,724
|
|
|
$
|
(42,724
|
)
|
|
$
|
900
|
|
|
$
|
(101
|
)
|
|
$
|
|
|
|
$
|
799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock
|
|
|
21,811
|
|
|
|
(42,724
|
)
|
|
|
42,724
|
|
|
|
20,873
|
|
|
|
|
|
|
|
|
|
|
$
|
42,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of warrants
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
Recognition of stock option
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
69
|
|
Stock distribution
|
|
|
2,182
|
|
|
|
|
|
|
|
|
|
|
|
(2,182
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(564
|
)
|
|
|
|
|
|
|
(564
|
)
|
Unrealized gains on
securities available for
sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(525
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
$
|
23,998
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
19,667
|
|
|
|
(665
|
)
|
|
$
|
39
|
|
|
$
|
43,039
|
|
|
|
|
See accompanying notes to consolidated financial statements.
33
BANK OF NEW JERSEY
Statements of Cash Flows
Years ended December 31, 2006 and 2005
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
2005
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(564
|
)
|
|
|
(101
|
)
|
Adjustments to reconcile net income to net cash provided by Operating activities:
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
866
|
|
|
|
|
|
Deferred tax benefit
|
|
|
(147
|
)
|
|
|
|
|
Depreciation and amortization
|
|
|
55
|
|
|
|
|
|
Recognition of stock option expense
|
|
|
69
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Decrease(increase) in accrued interest receivable
|
|
|
159
|
|
|
|
(598
|
)
|
Increase in other assets
|
|
|
(646
|
)
|
|
|
|
|
Increase in accounts payable and accrued liabilities
|
|
|
1,053
|
|
|
|
88
|
|
|
|
|
Net cash provided by(used in) operating activities
|
|
|
845
|
|
|
|
(611
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of investment securities
|
|
|
(1,993
|
)
|
|
|
|
|
Purchases of securities available for sale
|
|
|
(11,560
|
)
|
|
|
|
|
Proceeds from called securities available for sale
|
|
|
2,000
|
|
|
|
|
|
Net increase in loans
|
|
|
(80,638
|
)
|
|
|
|
|
Purchases of premises and equipment
|
|
|
(4,390
|
)
|
|
|
(277
|
)
|
|
|
|
Net cash used in investing activities
|
|
|
(96,581
|
)
|
|
|
(277
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Net increase in deposits
|
|
|
61,867
|
|
|
|
|
|
Proceeds from issuance of common stock, net
|
|
|
42,684
|
|
|
|
|
|
Capital contribution
|
|
|
|
|
|
|
900
|
|
Warrants exercised
|
|
|
12
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
$
|
104,563
|
|
|
$
|
900
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
|
$
|
8,827
|
|
|
$
|
12
|
|
|
Cash and cash equivalents at beginning of year
|
|
$
|
12
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
8,839
|
|
|
$
|
12
|
|
|
|
|
|
|
|
|
|
|
Supplemental information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
568
|
|
|
$
|
|
|
Taxes
|
|
$
|
|
|
|
$
|
|
|
See accompanying notes to consolidated financial statements.
34
BANK OF NEW JERSEY
Notes to Financial Statements
December 31, 2006
(1)
|
|
Summary of Significant Accounting Policies
|
|
|
|
The accompanying financial statements represent the financial condition and results of
operations of Bank of New Jersey, or the Bank, at and for the years ended December 31, 2006
and 2005. For the periods presented prior to May 9, 2006, the Bank was a development state
organization.
|
|
|
|
Organization
|
|
|
|
The Bank is a commercial bank which provides a full range of banking services to individuals
and corporate customers in New Jersey. The Bank is subject to competition from other
financial institutions. The Bank is regulated by state and federal agencies and is subject to
periodic examinations by those regulatory authorities. The Bank conducts a traditional
commercial banking business, accepting deposits from the general public, including
individuals, businesses, non-profit organizations, and governmental units. The Bank makes
commercial loans, consumer loans, and both residential and commercial real estate loans. In
addition, the Bank provides other customer services and makes investments in securities, as
permitted by law. The Bank has sought to offer an alternative, community-oriented style of
banking in an area, which is presently dominated by larger, statewide and national
institutions. The Banks focus is on establishing and retaining customer relationships by
offering a broad range of traditional financial services and products, competitively-priced
and delivered in a responsive manner to small businesses, professionals and individuals in the
local market. As a locally owned and operated community bank, the Bank endeavors to provide
superior customer service that is highly personalized, efficient and responsive to local
needs. To better serve its customers and expand it market reach, the Bank provides for the
delivery of certain of its financial products and services to its local customers and to a
broader market through the use of mail, telephone and internet banking. The Bank delivers
these products and services with the care and professionalism expected of a community bank and
with a special dedication to personalized customer service.
|
|
|
|
The specific objectives of the Bank are:
|
|
|
|
to provide local businesses, professionals and individuals with banking
services responsive to and determined by the local market;
|
|
|
|
|
to attract deposits and loans by competitive pricing; and
|
|
|
|
|
to provide a reasonable return to shareholders on capital invested.
|
35
Start-Up and Organizational Expenses
The Bank was a development stage organization as of and for the year ended December 31, 2005
and for the period January 1, 2006 through May 9, 2006. On May 10, 2006, it began
operations as a New Jersey state-chartered commercial bank. The Bank initially issued
2,181,179 shares of common stock at $20 per share ($10 par value) in June of 2005. Net
organizational and pre-opening expenses for the period January 1, 2006 to May 9, 2006
(included in the statement of operations for the year ended December 31, 2006) are as
follows:
|
|
|
|
|
|
|
Development Stage
|
|
|
|
January 1, 2006 through
|
|
|
|
May 9, 2006
|
|
Interest Income
|
|
$
|
624,000
|
|
|
|
|
|
|
Interest on borrowings
|
|
|
43,000
|
|
Salaries, taxes, & benefits
|
|
|
459,000
|
|
Professional & Application fees
|
|
|
132,000
|
|
Occupancy
|
|
|
95,000
|
|
Other Expenses
|
|
|
20,000
|
|
|
|
|
|
Total Start-up & Organizational Expenses
|
|
$
|
749,000
|
|
|
|
|
|
|
NET
|
|
|
($125,000
|
)
|
36
|
|
Basis of Financial Statement Presentation
|
|
|
|
The financial statements have been prepared in conformity with U.S. generally accepted
accounting principles. In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and liabilities as of the
date of the statement of financial condition and revenues and expenses for the period
indicated. Actual results could differ significantly from those estimates.
|
|
|
|
Material estimates that are particularly susceptible to significant change in the near term
relate to the determination of the allowance for loan losses. While management uses available
information to recognize estimated losses on loans, future additions may be necessary based on
changes in economic conditions. In addition, various regulatory agencies, as an integral part
of their examination process, periodically review the Banks allowance for loan losses on
loans. These agencies may require the Bank to recognize additions to the allowance based on
their judgements of information available to them at the time of their examination.
|
|
|
|
Investment Securities and Securities Available for Sale
|
|
|
|
Investment securities purchased with the intent and ability to hold until maturity are
classified as securities held-to-maturity (HTM) and are carried at cost, adjusted for the
amortization of premiums and accretion of discounts. All other securities, including equity
securities, are classified as available-for-sale (AFS). These securities are reported at
fair value with changes in the carrying value included in accumulated other comprehensive
income(loss) which is a separate component of stockholders equity. Gains or losses on sales
of securities available for sale are based upon the specific identification method. The bank
does not acquire securities for the purpose of engaging in trading activities.
|
|
|
|
On a quarterly basis, securities are evaluated for other-than-temporary impairment. The
Company makes an assessment to determine whether there have been any events or economic
circumstances to indicate that a security on which there is an unrealized loss is impaired on
an other-than-temporary basis. Securities on which there is an unrealized loss that is deemed
to be other-than-temporary are written down to fair value with the write-down recorded as a
realized loss in securities gains (losses).
|
|
|
|
Premises and Equipment
|
|
|
|
Premises and equipment are stated at historical cost, less accumulated depreciation and
amortization. Depreciation of fixed assets is accumulated on a straight-line basis over the
estimated useful lives of the related asset. Leasehold improvements are amortized on a
straight-line basis over the shorter of their estimated useful lives or the term of the lease.
Maintenance and repairs are charged to expense in the year incurred.
|
37
|
|
Loans
|
|
|
|
Loans are stated at their principal amount outstanding, net of deferred loan origination fees
and costs. Interest income on loans is accrued and credited to interest income when earned.
A loan which is 90 days past due is placed on a nonaccrual status. Loans which are well
secured and in the process of collection are not placed on nonaccrual status. Once a loan is
placed on nonaccrual status, interest previously accrued and uncollected is charged against
current earnings, and interest is included in earnings thereafter to the extent received in
cash. Loan origination fees and certain direct loan origination costs are deferred and
recognized over the life of the loan as an adjustment to yield using the level-yield method.
|
|
|
|
Management, considering current information and events regarding the borrowers ability to
repay their obligations, considers a loan to be impaired when it is probable that the Bank
will be unable to collect all amounts due according to the contractual terms of the loan
agreement. The Bank has defined the population of impaired loans to be all non-accrual
commercial real estate, multi-family, land, construction, and commercial loans in excess of
$250,000. When a loan is considered to be impaired, the amount of impairment is measured
based on the present value of expected future cash flows discounted at the loans effective
interest rate or the fair value of the collateral. Impairment losses are included in the
allowance for loan losses through provisions charged to operations.
|
|
|
|
Allowance for Loan Losses
|
|
|
|
Losses on loans are charged to the allowance for loan losses. Additions to this allowance are
made by recoveries of loans previously charged off and by a provision charged to expense. The
determination of the balance of the allowance for loan losses is based on an analysis of the
loan portfolio, economic conditions and other factors warranting recognition. Management
believes that the allowance for loan losses is maintained at a sufficient level to provide for
losses inherent in the loan portfolio. While management uses available information to
recognize losses on loans, future additions may be necessary based on changes in economic
conditions, particularly in New Jersey. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Banks allowance for loan
losses. Such agencies may require the Bank to recognize additions to the allowance based on
their judgments about information available to them at the time of their examination.
|
|
|
|
Stock-Based Compensation
|
|
|
|
In December, 2004, the FASB issued Statement of Financial Accounting Standard (SFAS) No. 123
(revised 2004), Share-Based Payment, (SFAS No. 123(R)). SFAS No. 123(R) addresses the
accounting for share-based payment transactions in which an enterprise receives employee
service in exchange for (a) equity instruments of the enterprise or (b) liabilities that are
based on the fair value of the enterprises equity instruments or that may be settled by the
issuance of such equity instruments. SFAS No, 123(R) requires an entity to recognize the
grant-date fair value of stock options and other equity-based compensation issued to employees
within the income statement using a fair-value-based method, eliminating the intrinsic value
method of accounting previously permissible under APB No. 25, Accounting for Stock Issued to
Employees, and related interpretations. The Company accounts for stock options under the
recognition and measurement principles of SFAS No. 123(R).
|
|
|
|
During 2006, the Bank awarded Incentive Stock Options (ISO) which vested over a 2 year period
and ISO options which vested over a 3 year period. The per share weighted-average fair values
of stock options granted during 2006, which vested over a 2 year period and a 3 year period,
were $2.52 and $4.34, respectively, on the date of grant using the Black Scholes option-pricing
model, as
|
38
|
|
adjusted for the 2007 stock distribution. The options which vested over a 2 year
period used the following assumptions in determining the grant date fair value of the 2006
option grants: expected dividend yields of 0.00%, risk-free interest rates of 4.77%, expected
volatility of 16.00%; and average expected lives of 2 years. The options which vested over a
3 year period used the following assumptions used in determining the grant date fair value of
the 2006 option grants: expected dividend yields of 0.00%, risk-free interest rates of 4.77%,
expected volatility of 22.00%; and average expected lives of 3.5 years.
|
|
|
|
As a result of adopting SFAS No.123(R), the Bank recorded compensation expense of $69,000
during 2006. At December 31, 2006, the Bank had unrecognized compensation expense amounting
to approximately $120,000 related to un-vested options. The unrecognized expense will be
recognized over the remaining vesting terms.
|
|
|
|
Income Taxes
|
|
|
|
The Bank uses the asset and liability method of accounting for income taxes. Under this
method, deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
|
|
|
|
Earnings Per Share
|
|
|
|
Basic earnings per share excludes dilution and represents the effect of earnings upon the
weighted average number of shares outstanding for the period. Diluted earnings per share
reflects the effect of earnings upon weighted average shares including the potential dilution
that could occur if securities or contracts to issue common stock were converted or exercised,
utilizing the treasury stock method. All per share data has been restated to reflect changes
due to stock distributions.
|
|
|
|
Comprehensive Income
|
|
|
|
Comprehensive income consists of net income or loss for the current period and income,
expenses, or gains and losses not included in the income statement and which are reported
directly as a separate component of equity. The Bank includes the required disclosures in the
statement of stockholders equity.
|
|
|
|
Cash and Cash Equivalents
|
|
|
|
Cash and cash equivalents include cash and due from banks and federal funds sold, which are
generally sold for one-day periods.
|
39
(2)
|
|
Securities Available for Sale and Investment Securities
|
|
|
|
A summary of securities available for sale at December 31, 2006 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Market
|
2006
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
Government Sponsored
Enterprise obligations
|
|
$
|
9,560
|
|
|
|
39
|
|
|
|
|
|
|
$
|
9,599
|
|
Equity Securities
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
|
Total available for sale
|
|
$
|
9,660
|
|
|
|
39
|
|
|
|
|
|
|
$
|
9,699
|
|
|
|
|
A summary of investment securities at December 31, 2006 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Market
|
2006
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
Obligations of U.S.
Treasury
|
|
$
|
1,993
|
|
|
|
9
|
|
|
|
|
|
|
$
|
2,002
|
|
|
|
|
Total held to maturity
|
|
$
|
1,993
|
|
|
|
9
|
|
|
|
|
|
|
$
|
2,002
|
|
|
|
|
Securities available for sale and investment securities held at December 31, 2006 mature as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
Securities
|
|
|
|
Securities
|
|
|
Available for Sale
|
|
|
|
Amortized
|
|
|
Market
|
|
|
Amortized
|
|
|
Market
|
|
|
|
Cost
|
|
|
Value
|
|
|
cost
|
|
|
Value
|
|
Within one year
|
One to five years
|
|
|
1,993
|
|
|
|
2,002
|
|
|
|
4,560
|
|
|
|
4,579
|
|
Five to ten years
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
5,020
|
|
Over ten years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,993
|
|
|
|
2,002
|
|
|
|
9,560
|
|
|
|
9,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period ended December 31, 2006, no securities were sold during the period.
Securities with an amortized cost of $1.9 million were pledged to secure public funds on
deposit at December 31, 2006.
40
(3)
|
|
Loans and Allowance for Loan Losses
|
|
|
|
Loans at December 31, 2006 are summarized as follows (in thousands):
|
|
|
|
|
|
Real estate
|
|
$
|
50,787
|
|
Commercial
|
|
|
14,678
|
|
Credit lines
|
|
|
13,519
|
|
Consumer
|
|
|
1,654
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
80,638
|
|
|
|
|
|
The Bank grants commercial, mortgage and installment loans to those New Jersey residents and
businesses within its local trading area. Its borrowers abilities to repay their obligations
are dependent upon various factors, including the borrowers income and net worth, cash flows
generated by the underlying collateral, value of the underlying collateral and priority of the
Banks lien on the property. Such factors are dependent upon various economic conditions and
individual circumstances beyond the Banks control; the Bank is therefore subject to risk of
loss. The Bank believes its lending policies and procedures adequately minimize the potential
exposure to such risks and that adequate provisions for loan losses are provided for all known
and inherent risks.
The activity in the allowance for loan losses is as follows (in thousands):
|
|
|
|
|
|
|
2006
|
|
Balance at beginning of year
|
|
$
|
0
|
|
Provision charged to expense
|
|
|
866
|
|
Loans charged off
|
|
|
0
|
|
Recoveries
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
866
|
|
|
|
|
|
|
|
There were no impaired loans at December 31, 2006. As of December 31, 2006, the Bank also had
no non-accrual loans or non-performing loans.
|
41
(4)
|
|
Premises and Equipment, net
|
|
|
|
At December 31, premises and equipment consists of the following (in thousands):
|
|
|
|
|
|
|
|
2006
|
|
Land
|
|
$
|
3,350
|
|
Building
|
|
|
1,036
|
|
Furniture and equipment
|
|
|
184
|
|
Leasehold improvements
|
|
|
97
|
|
|
|
|
|
|
|
|
4,667
|
|
|
|
|
|
|
Less accumulated depreciation and amortization
|
|
|
55
|
|
|
|
|
|
Total premises and equipment, net
|
|
$
|
4,612
|
|
|
|
|
|
|
|
Depreciation expense amounted to $55,000 for the year ended
December 31, 2006. At December 31, 2005, construction in
progress was $277,000.
|
|
(5)
|
|
Deposits
|
|
|
|
At December 31, a summary of the maturity of time deposits of $100,000 or more (which includes
certificates of deposit and IRA certificates) is as follows (in thousands):
|
|
|
|
|
|
|
|
2006
|
|
Time deposits of $100,000 or more maturing:
|
|
|
|
|
Three months or less
|
|
$
|
3,950
|
|
Over three months through six months
|
|
|
3,036
|
|
Over six months through twelve months
|
|
|
2,781
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
$
|
9,767
|
|
|
|
|
|
42
(6)
|
|
Income Taxes
|
|
|
|
Income tax expense from operations for the years ended December 31 is as follows (in
thousands):
|
|
|
|
|
|
|
|
2006
|
|
Federal:
|
|
|
|
|
Current
|
|
$
|
564
|
|
Deferred
|
|
|
(564
|
)
|
State:
|
|
|
|
|
Current
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
164
|
|
|
|
|
|
The tax effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities as of December 31, 2006 are as follows (in
thousands):
|
|
|
|
|
|
|
2006
|
|
Deferred tax assets:
|
|
|
|
|
Start up expenses
|
|
$
|
503
|
|
Allowance for loan losses
|
|
|
346
|
|
Accrued expenses
|
|
|
54
|
|
Other
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Total gross deferred tax assets
|
|
|
905
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
Deferred loan costs
|
|
|
(32
|
)
|
Prepaid expenses
|
|
|
(26
|
)
|
Unrealized gains on available for sale securities
|
|
|
(16
|
)
|
Discount accretion
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Total gross deferred tax liabilities
|
|
|
(75
|
)
|
LESS:
|
|
|
|
|
Valuation Allowance
|
|
|
(282
|
)
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
548
|
|
At December 31, 2006, management believes that a valuation allowance for the state deferred
tax asset and a portion of the Federal deferred tax asset is necessary due to the uncertainty
of whether or not the Bank will be able to generate sufficient taxable income to utilize the
net deferred tax asset.
43
Income tax benefit from operations differed from the amounts computed by applying the U.S.
federal income tax rate (34% in 2006) to income taxes as a result of the following (in
thousands):
|
|
|
|
|
|
|
2006
|
|
Computed expected tax benefit from operations
|
|
$
|
(93
|
)
|
Increase(decrease) in taxes resulting from:
|
|
|
|
|
State taxes, net of federal income tax benefit
|
|
|
108
|
|
Stock-based compensation
|
|
|
24
|
|
Meals and entertainment
|
|
|
2
|
|
Change in valuation allowance
|
|
|
123
|
|
|
|
|
|
|
|
$
|
164
|
|
|
|
|
|
(7)
|
|
Leases
|
|
|
|
The Bank leases banking facilities under operating leases which expire at various dates
through December 31, 2025. These leases do contain certain options to renew the leases.
Rental expense amounted to $237,000 for the eight months ended December 31, 2006.
|
|
|
|
The following is a schedule of future minimum lease payments (exclusive of payments for
maintenance, insurance, taxes and any other costs associated with offices) for operating
leases with initial or remaining terms in excess of one year from December 31, 2006 (in
thousands):
|
|
|
|
|
|
Year ending December 31:
|
|
|
|
|
2007
|
|
$
|
303,600
|
|
2008
|
|
$
|
307,272
|
|
2009
|
|
$
|
311,016
|
|
2010
|
|
$
|
224,832
|
|
2011
|
|
$
|
198,732
|
|
Thereafter
|
|
$
|
3,463,488
|
|
44
(8)
|
|
Related-party Transactions
|
|
|
|
Officers and directors of the Bank are customers of and are engaged in transactions with the
Bank in the ordinary course of business on substantially the same terms (including interest
rates on loans, collateral, and collectibility considerations) as those prevailing at the time
for comparable transactions with other unaffiliated borrowers and suppliers. Such loans are
not on non-accrual, past due, or considered potential problem loans by the Bank.
|
|
|
|
The following table represents a summary of related-party loans during 2006.
|
|
|
|
|
|
|
|
(in 000s)
|
|
Outstanding loans at 12/31/05
|
|
$
|
0
|
|
New Loans
|
|
|
12,924
|
|
Repayments
|
|
|
(1,337
|
)
|
Un-advanced portion of related party loans
|
|
|
(1,258
|
)
|
|
|
|
|
Outstanding loans at 12/31/06
|
|
$
|
10,329
|
|
|
|
|
|
|
|
Two directors of the Bank have acted as the Banks counsel on several loan closings. The cost
of such work has been reimbursed by the respective loan customers and totals $62,000.
Additionally, one of these directors has acted as legal counsel to the Bank on several
matters. The total amount paid for legal fees, for non-loan related matters was less than
$10,000.
|
|
|
|
The Banks commercial insurance policy, as well as other policies, has been placed with
various insurance carriers by an insurance agency of which one of our directors is the
President. Gross insurance premiums paid to carriers through this agency was approximately
$37,000.
|
|
|
|
The Bank believes that all of the services obtained from and engaged with directors are at
arms length. In addition, the Board of Directors is required to approve all loans with
affiliated parties and has reviewed all relationships with affiliated parties.
|
45
(9)
|
|
Earnings Per Share Reconciliation
|
|
|
|
The Banks calculation of earnings per share is as follows (All share data has been adjusted
for the January, 2007 stock distribution) :
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Basic earnings per share :
|
|
|
|
|
Net Loss
|
|
($
|
564,000
|
)
|
|
|
|
|
Average number of shares outstanding
|
|
|
2,399,657
|
|
|
|
|
|
Basic loss per share
|
|
$
|
(0.24
|
)
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Basic earnings per share from operations :
|
|
|
|
|
Net Loss
|
|
($
|
564,000
|
)
|
LESS:
|
|
|
|
|
Start-up and organizational expenses, net
|
|
|
125,000
|
|
|
|
|
|
Net Loss for earnings per share calculation
|
|
($
|
439,000
|
)
|
|
|
|
|
|
Average number of shares outstanding
|
|
|
2,399,657
|
|
|
|
|
|
|
Basic loss per share from operations
|
|
$
|
(0.18
|
)
|
|
|
500 warrants to purchase shares of common stock were
exercised during 2006 and such shares were included in the average
number of shares outstanding. Additionally, the Banks shareholders currently hold warrants, which have not been exercised, to purchase an
additional 479,310 shares of common stock. Additionally, there have been 62,150 incentive
stock options granted to officers and employees of the bank. Diluted earnings per share has
not been calculated for the warrants and the options as they would have been anti-dilutive.
|
46
(10)
|
|
Stockholders Equity and Dividend Restrictions
|
|
|
|
The Bank declared a 10% stock distribution and paid that distribution during January 2007 by
issuing 218,168 shares.
|
|
|
|
Under the New Jersey Banking Act of 1948, as amended, the Bank may declare and pay cash
dividends only if, after payment of the cash dividend, the capital stock of the Bank will be
unimpaired and either the Bank will have a surplus of not less than 50% of its capital stock
or the payment of the dividend will not reduce the Banks surplus. The FDIC prohibits payment
of cash dividends if, as a result, the Bank would be undercapitalized. Further, during the
first three years of its operation, cash dividends shall only be paid by the Bank from its net
operating income, and only after an appropriate allowance for loan and lease losses is
established and overall capital is adequate.
|
|
(11)
|
|
Benefit Plans
|
|
|
|
During 2006, the Banks stockholders approved the 2006 Stock Option Plan. The plan allows
directors and employees of the Bank to purchase up to 119,992 shares of the Banks common
stock, in each case as adjusted following our ten percent (10%) stock distribution in January
2007. The option price per share is the market value of the Banks stock on the date of
grant. The option price and number of shares underlying options outstanding on the date of
our ten percent (10%) stock distribution in January 2007 have been equitably adjusted to
account for such stock distribution. At December 31, 2006, incentive stock options to
purchase 62,150 shares have been issued to employees of the Bank.
|
47
(12)
|
|
Benefit Plans, continued
|
|
|
|
A summary of the stock option plan for the period ended December 31, 2006 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Exercise
|
|
|
|
of
|
|
|
price per
|
|
|
|
Shares
|
|
|
share
|
|
Outstanding at December 31, 2005
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
62,150
|
|
|
$
|
18.18
|
|
Forfeited
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2006
|
|
|
62,150
|
|
|
$
|
18.18
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2006, the number of shares underlying outstanding options was 62,150 and the
weighted-average price of those options was $18.18. There were 20,000 incentive stock options
which had vested and are exercisable at December 31, 2006.
|
|
|
|
During 2006, the Bank awarded Incentive Stock Options (ISO) which vested over a 2 year period
and ISO options which vested over a 3 year period. The per share weighted-average fair values
of stock options granted during 2006, which vested over a 2 year period and a 3 year period,
were $2.52 and $4.34, respectively, on the date of grant using the Black Scholes
option-pricing model, as adjusted for the 2007 stock distribution. The options which vested
over a 2 year period used the following assumptions in determining the grant date fair value
of the 2006 option grants: expected dividend yields of 0.00%, risk-free interest rates of
4.77%, expected volatility of 16.00%; and average expected lives of 2 years. The options
which vested over a 3 year period used the following assumptions used in determining the grant
date fair value of the 2006 option grants: expected dividend yields of 0.00%, risk-free
interest rates of 4.77%, expected volatility of 22.00%; and average expected lives of 3.5
years.
|
|
|
|
The Bank currently offers a 401(k) profit sharing plan covering all full-time employees,
wherein employees can invest up to 15% of their pretax earnings. The Bank matches a
percentage of employee contributions at the boards discretion. The Bank did not make any
matching contributions during 2006.
|
48
(13)
|
|
Regulatory Capital Requirements
|
|
|
|
Regulations of Federal Deposit Insurance Corporation (FDIC) require banks to maintain minimum
levels of regulatory capital. Under the regulations in effect at December 31, 2006, the Bank
was required to maintain (i) a minimum leverage ratio of Tier 1 capital to total adjusted
assets of 4.0%, and (ii) minimum ratios of Tier 1 and total capital to risk-weighted assets of
4.0% and 8.0%, respectively.
|
|
|
|
Under its prompt corrective actions regulations, the FDIC is required to take certain
supervisory actions (and may take additional discretionary actions) with respect to an
undercapitalized institution. Such actions could have a direct material effect on the
institutions financial statements. The regulations establish a framework for the
classification of savings institutions into five categories: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized, and critically
undercapitalized. Generally, an institution is considered well capitalized if it has a
leverage (Tier 1 capital) ratio of at least 5.0%; a Tier 1 risk-based capital ratio of at
least 6.0%; and a total risk-based capital ratio of at least 10.0%.
|
|
|
|
The foregoing capital ratios are based in part on specific quantitative measures of assets,
liabilities and certain off-balance-sheet items as calculated under regulatory accounting
practices. Capital amounts and classifications are also subject to qualitative judgments by
the FDIC about capital components, risk weightings and other factors.
|
|
|
|
Management believes that, as of December 31, 2006, the Bank meets all capital adequacy
requirements to which it is subject. Further, the most recent FDIC notification categorized
the Bank as a well-capitalized institution under the prompt corrective action regulations.
There have been no conditions or events since that notification that management believes have
changed the Banks capital classification.
|
|
|
|
The following is a summary of the Banks actual capital amounts and ratios as of December 31,
2006, compared to the FDIC minimum capital adequacy requirements and the FDIC requirements for
classification as a well-capitalized institution:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FDIC requirements
|
|
|
|
|
|
|
|
|
|
|
Minimum capital
|
|
For classification
|
|
|
Bank actual
|
|
adequacy
|
|
as well capitalized
|
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leverage (Tier 1)
Capital
|
|
$
|
43,000
|
|
|
|
55.01
|
%
|
|
$
|
3,126
|
|
|
|
4.00
|
%
|
|
$
|
3,908
|
|
|
|
5.00
|
%
|
Risk-based capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1
|
|
$
|
43,000
|
|
|
|
52.77
|
%
|
|
$
|
3,260
|
|
|
|
4.00
|
%
|
|
$
|
4,889
|
|
|
|
6.00
|
%
|
Total
|
|
$
|
43,866
|
|
|
|
53.83
|
%
|
|
$
|
6,519
|
|
|
|
8.00
|
%
|
|
$
|
8,149
|
|
|
|
10.00
|
%
|
|
|
In addition to the above, as part of the Banks application for deposit insurance with the
FDIC and as part of the bank charter approval by the New Jersey Department of Banking, the
Bank is required to maintain not less than 8% Tier I Capital to total assets, as defined,
through the first three years of operation.
|
49
(14)
|
|
Commitments and Contingencies
|
|
|
|
The Bank is a party to transactions with off-balance-sheet risk in the normal course of
business in order to meet the financing needs of its customers. These transactions consist of
commitments to extend credit and involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the accompanying consolidated statements of
financial condition.
|
|
|
|
The Bank uses the same credit policies and collateral requirements in making commitments and
conditional obligations as it does for on-balance-sheet loans. Commitments to extend credit
are agreements to lend to customers as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since the commitments may expire
without being drawn upon, the total commitment amounts do not necessarily represent future
cash requirements. The Bank evaluates each customers 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 of the borrower. Outstanding available
loan commitments, primarily for commercial real estate, construction, and land development
loans at December 31, 2006 totaled $24.5 million.
|
|
|
|
Most of the Banks lending activity is with customers located in Bergen County, New Jersey.
At December 31, 2006, respectively, the Bank had outstanding letters of credit to customers
totaling $806,000 whereby the Bank guarantees performance to a third party. These letters of
credit generally have fixed expiration dates of one year or less. The fair value of these
letters of credits is estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements. At December 31, 2006,
such amounts were deemed not material.
|
50
(15)
|
|
Fair Value of Financial Instruments
|
|
|
|
Statement of Financial Accounting Standards No. 107, Disclosures About Fair Value of
Financial Instruments, requires that the Bank disclose the estimated fair value of its
financial instruments whether or not recognized in the consolidated balance sheet. Fair value
estimates and assumptions are set forth below for the Banks financial instruments at December
31, 2006 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
Carrying
|
|
Estimated Fair
|
|
|
amount
|
|
Value
|
Financial assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,853
|
|
|
|
1,853
|
|
Fed Funds Sold
|
|
|
6,986
|
|
|
|
6,986
|
|
Securities available for sale
|
|
|
9,699
|
|
|
|
9,699
|
|
Investment securities
|
|
|
1,993
|
|
|
|
2,002
|
|
Net loans
|
|
|
79,819
|
|
|
|
79,643
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
61,867
|
|
|
|
61,858
|
|
The following methods and assumptions were used to estimate the fair value of each class of
financial instruments:
Cash and Cash Equivalents
The carrying amount approximates fair value.
Fed Funds Sold
The carrying amount approximates fair value.
Securities available for sale
All securities are valued using quoted market prices.
Investment Securities
Investment securities are valued using quoted market prices.
Net loans
Net loans represent loans net of unamortized costs and deferred fees. Fair values are
estimated for portfolios of loans with similar financial characteristics. Loans are
segregated by type, such as residential and commercial real estate, commercial and other
consumer. The fair value of loans is estimated by discounting contractual cash flows
using estimated market discount rates which reflect the credit and interest rate risk
inherent in the loans.
51
(15), Continued
Deposits
The fair value of deposits with no stated maturity, such as noninterest-bearing demand
deposits, is equal to the amount payable on demand as of year end. The fair value of
certificates of deposit is based on the discounted value of contractual cash flows. The
discount rate is estimated using the rates currently offered for deposits of similar
remaining maturities.
Commitments to Extend Credit and Letters of Credit
The fair value of commitments to extend credit and letters of credit is estimated using
the fees currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements. At December 31, 2006, such amounts were not material.
Limitation
The preceding fair value estimates were made at December 31, 2006 based on pertinent
market data and relevant information on the financial instrument. These estimates do not
include any premium or discount that could result from an offer to sell at one time the
Banks entire holdings of a particular financial instrument or category thereof. Since no
market exists for a substantial portion of the Banks financial instruments, fair value
estimates were necessarily based on judgments regarding future expected loss experience,
current economic conditions, risk assessment of various financial instruments, and other
factors. Given the innately subjective nature of these estimates, the uncertainties
surrounding them and the matter of significant judgment that must be applied, these fair
value estimates cannot be calculated with precision. Modifications in such assumptions
could meaningfully alter these estimates.
Since these fair value approximations were made solely for on- and off-balance-sheet
financial instruments at December 31, 2006, no attempt was made to estimate the value of
anticipated future business. Furthermore, certain tax implications related to the
realization of the unrealized gains and losses could have a substantial impact on these
fair value estimates and have not been incorporated into the estimates.
52
(16)
|
|
Recent Accounting Pronouncements
|
|
|
|
FASB Interpretation No. 48
|
|
|
|
In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes. The Interpretation clarifies the accounting for uncertainty in income taxes
recognized in an enterprises financial statements in accordance with FASB Statement 109
Accounting for Income Taxes. This interpretation presents a recognition threshold and
measurement attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. The interpretation is effective for
fiscal years beginning after December 15, 2006. We do not expect the adoption of
Interpretation No. 48 to have a material impact of our financial statements.
|
|
|
|
SEC Staff Accounting Bulletin No. 108
|
|
|
|
In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No.
108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements (SAB 108), to address diversity in practice in quantifying
financial statement misstatements. SAB 108 requires that the Company quantify misstatements
based on their impact on each of its financial statements and related disclosures. SAB 108
was effective as of the end of our 2006 fiscal year, allowing a one-time transitional
cumulative effect adjustment to retained earnings as of January 1, 2006 for errors that were
not previously deemed material, but are material under the guidance in SAB 108. The adoption
of SAB 108 did not have an impact on the Companys financial statements.
|
|
(17)
|
|
Subsequent Event (unaudited)
|
|
|
|
The Bank has entered into a plan of acquisition pursuant to which the Bank would adopt a bank
holding company structure, the Bank would become a wholly-owned subsidiary of Bancorp of New
Jersey, Inc., a company formed solely for the purpose of becoming the holding company of the
Bank, and the shareholders of the Bank would become shareholders of the holding company
through a one-to-one exchange of their shares of common stock of the Bank for shares of common
stock of the holding company. Consummation of the holding company reorganization contemplated
by the plan of acquisition is subject to approval by the Federal Reserve Board and the
shareholders of Bank of New Jersey. Approvals of boards of directors of the Bank and the
holding company, as well as the New Jersey Department of Banking and Insurance, have been
received.
|
53
BANK OF NEW JERSEY
DIRECTORS AND EXECUTIVE OFFICERS
|
|
|
|
|
Board of Directors
|
|
|
|
|
|
|
|
|
|
Albert F. Buzzetti
Chairman of the Board
President and CEO,
Bank of New Jersey
|
|
John K. Daily
Executive Vice President
C.A. Shea & Co.
|
|
Josephine Mauro
Realtor and Owner,
Mauro Realty Company
|
|
|
|
|
|
Jack Alter
Mayor, Borough of Fort Lee, NJ
|
|
Armand Leone, Jr., MD, JD
Partner,
Britcher, Leone and Roth
|
|
Joel P. Paritz, CPA
President,
Paritz & Company, P.A.
|
|
|
|
|
|
Michael Bello
President,
Michael Bello Insurance Agency
|
|
Anthony M. Lo Conte
President and CEO,
Anthony L and S, LLC
|
|
Christopher M. Shaari, MD
Physician
|
|
|
|
|
|
Jay Blau
Consultant to
Dynamic Designs, Inc.
|
|
Carmelo Luppino
General Contractor/Developer
|
|
Anthony Siniscalchi, CPA
Partner,
A. Uzzo & Co., CPAs, P.C.
|
|
|
|
|
|
Albert L. Buzzetti, Esq.
Managing Partner,
A. Buzzetti and Associates, LLC
|
|
Rosario Luppino
General Contractor/Developer
|
|
Mark Sokolich, Esq.
Managing Partner,
Sokolich & Macri
|
|
|
|
|
|
Stephen Crevani
President, Aniero Concrete
|
|
Howard Mann
President, Carolace Industries
|
|
Diane M. Spinner
Executive Vice President and
Chief Administrative Officer,
Bank of New Jersey
|
|
|
|
|
|
Executive Officers
|
|
|
|
|
|
|
|
|
|
Albert F. Buzzetti
President and
Chief Executive Officer
|
|
Michael Lesler
Executive Vice President and
Chief Financial Officer
|
|
|
|
|
|
|
|
Leo J. Faresich
Executive Vice President and
Chief Lending Officer
|
|
Diane M. Spinner
Executive Vice President and
Chief Administrative Officer
|
|
|