U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
(Mark One)
|X| Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2003
|_| Transition report under Section 13 or 15 (d) of the Exchange Act
For the transition period from _____________ to _____________
Commission file number 000-26587
COMMUNITY BANCORP OF NEW JERSEY
(Exact name of registrant as specified in its charter)
New Jersey 22-3666589
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3535 Highway 9 North, Freehold, New Jersey 07728
(Address of principal executive offices)
(732) 863-9000
(Issuer's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.). Yes |_| No |X|
Common Stock, No Par Value-3,336,769 shares outstanding as of April 30, 2003
INDEX
COMMUNITY BANCORP OF NEW JERSEY
PART I. FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at March 31, 2003
(Unaudited) and December 31, 2002 3
Consolidated Condensed Statements of Income for the three
months ended March 31, 2003 and 2002 (Unaudited) 4
Consolidated Condensed Statement of Changes in Stockholders'
Equity at March 31, 2003 (Unaudited) 5
Consolidated Condensed Statements of Cash Flows for the three
months ended March 31, 2003 and 2002 (Unaudited) 6
Notes to Consolidated Condensed Financial Statements
(Unaudited) 7 - 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11 - 21
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
Item 4. Controls and Procedures 22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
Exhibit 99 26
Section 302 Certifications 24 - 25
SIGNATURES 27
2
COMMUNITY BANCORP OF NEW JERSEY
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31,
2003 December 31,
(Unaudited) 2002
----------- ------------
ASSETS (Dollars in thousands)
Cash and due from banks .......................................... $ 12,728 $ 9,424
Investment securities available-for-sale ......................... 152,573 131,676
Loans receivable ................................................. 194,462 182,967
Allowance for loan loss .......................................... (2,519) (2,406)
- ------------------------------------------------------------------ --------- ---------
Net loans receivable 191,943 180,561
- ------------------------------------------------------------------ --------- ---------
Premises and equipment, net ...................................... 6,190 6,280
Accrued interest receivable ...................................... 1,999 2,193
Other assets ..................................................... 2,081 2,085
- ------------------------------------------------------------------ --------- ---------
Total Assets $ 367,514 $ 332,219
================================================================== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing demand ................................ $ 56,013 $ 51,971
Interest bearing - NOW ..................................... 26,935 23,455
Savings and money market ................................... 110,780 100,784
Certificates of deposit, under $100,000 .................... 77,504 76,815
Certificates of deposit, $100,000 and over ................. 45,948 38,604
- ------------------------------------------------------------------ --------- ---------
Total deposits 317,180 291,629
- ------------------------------------------------------------------ --------- ---------
Short-term borrowings ............................................ 20,700 11,500
Accrued interest payable ......................................... 31 38
Other liabilities ................................................ 579 454
Guaranteed Preferred Beneficial Interest in the Company's
Subordinated Debt .......................................... 5,000 5,000
- ------------------------------------------------------------------ --------- ---------
Total liabilities 343,490 308,621
- ------------------------------------------------------------------ --------- ---------
Stockholders' equity
Common stock - authorized 10,000,000 shares of
no par value; issued and outstanding, net of treasury
shares, 3,173,224 at March 31, 2003 and 3,172,945
at December 31, 2002 .................................... 25,515 25,512
Accumulated deficit ........................................ (1,633) (2,239)
Accumulated other comprehensive income ..................... 505 688
Treasury stock, 22,357 shares, at cost ..................... (363) (363)
- ------------------------------------------------------------------ --------- ---------
Total stockholders' equity 24,024 23,598
- ------------------------------------------------------------------ --------- ---------
Total Liabilities and Stockholder's Equity $ 367,514 $ 332,219
================================================================== ========= =========
See accompanying notes to consolidated condensed financial statements.
3
COMMUNITY BANCORP OF NEW JERSEY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended
March 31,
----------------------
2003 2002
----------------------
(Dollars in thousands,
except per share data)
INTEREST INCOME
Loans, including Fees ............................... $3,125 $2,792
Federal funds sold .................................. 7 2
Investment securities - taxable ..................... 1,053 962
- -------------------------------------------------------- ------ --------
Total interest income 4,185 3,756
- -------------------------------------------------------- ------ --------
INTEREST EXPENSE
Interest bearing - NOW .............................. 54 42
Savings and money market ............................ 452 398
Certificates of deposit ............................. 862 811
Short-term borrowings ............................... 25 29
Long-term borrowings ................................ 59 --
- -------------------------------------------------------- ------ --------
Total interest expense 1,452 1,280
- -------------------------------------------------------- ------ --------
Net interest income ........................... 2,733 2,476
Provision for loan losses .............................. 113 90
- -------------------------------------------------------- ------ --------
Net interest income after provision
for loan losses 2,620 2,386
- -------------------------------------------------------- ------ --------
Non-interest income:
Service fees on deposit accounts .................... 118 96
Service fees on loans ............................... 66 136
Gains on sales of investment securities ............. 372 --
Other fees and commissions .......................... 148 154
- -------------------------------------------------------- ------ --------
Total non-interest income 704 386
- -------------------------------------------------------- ------ --------
Non-interest expense:
Salaries and wages .................................. 974 795
Employee benefits ................................... 161 134
Occupancy expense ................................... 242 160
Depreciation - occupancy, furniture & equipment ..... 233 217
Other ............................................... 755 621
- -------------------------------------------------------- ------ --------
Total non-interest expense 2,365 1,927
- -------------------------------------------------------- ------ --------
Income before income taxes .................... 959 845
Income tax expense ..................................... 353 292
- -------------------------------------------------------- ------ --------
Net Income $ 606 $ 553
======================================================== ====== ========
Per Common Share:
Net income - basic .................................. $ 0.18 $ 0.17
Net income - diluted ................................ $ 0.17 $ 0.16
Weighted average shares outstanding (in thousands):
Basic ............................................... 3,332 3,331
Diluted ............................................. 3,555 3,453
See accompanying notes to consolidated condensed financial statements.
4
COMMUNITY BANCORP OF NEW JERSEY
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Accumulated
(1) Other Total
Common Treasury Accumulated Comprehensive Comprehensive Stockholders'
Stock Stock Deficit Income Income Equity
------- -------- ----------- ------------- ------------- -------------
(Dollars in thousands)
Balance December 31, 2002 .............. $25,512 $(363) $(2,239) $ 688 $ 23,598
Options exercised ...................... 3 3
Comprehensive Income:
Net Income .......................... -- -- 606 -- $ 606 606
Decrease in unrealized holding
gains on securities, net ......... -- -- -- (183) (183) (183)
----- --------
Total Comprehensive Income ............. -- -- -- -- $ 423
------- ----- ------- ----- =====
Balance, March 31, 2003 (Unaudited) .... $25,515 $(363) $(1,633) $ 505 $ 24,024
======= ===== ======= ===== ========
(1) Includes accumulated charges for stock dividends of $5,825 at March 31,
2003 and December 31, 2002, respectively.
See accompanying notes to consolidated condensed financial statements.
5
COMMUNITY BANCORP OF NEW JERSEY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31,
----------------------------
2003 2002
--------- --------
(Dollars in thousands)
Cash flows from operating activities:
Net income ........................................................ $ 606 $ 553
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................... 233 217
Provision for loan losses ................................... 113 90
Accretion of investment discount ............................ -- (9)
Amortization of investment premium .......................... 401 2
Gain on sale of investment securities ....................... (372) --
Decrease (increase) in accrued interest receivable .......... 194 (151)
Decrease (increase) in other assets ........................ 4 (78)
Decrease in accrued interest payable ........................ (7) (620)
Increase in other liabilities ............................... 125 34
- ---------------------------------------------------------------------- --------- --------
Net cash provided by operating activities 1,297 38
- ---------------------------------------------------------------------- --------- --------
Cash flows from investing activities:
Purchases of investment securities available-for-sale ............. (112,508) (3,069)
Proceeds from sales of investment securities ...................... 55,485 --
Proceeds from maturities and calls and of investment securities ... 35,914 13,930
Net increase in loans ............................................. (11,495) (10,921)
Purchases of premises and equipment ............................... (143) (271)
- ---------------------------------------------------------------------- --------- --------
Net cash used in investing activities (32,747) (331)
- ---------------------------------------------------------------------- --------- --------
Cash flows from financing activities:
Net increase in demand deposits and savings accounts .............. 17,518 10,242
Net increase (decrease) in certificates of deposit ................ 8,033 (6,215)
Proceeds from exercise of stock options ........................... 3 --
Increase (decrease) in short-term borrowings ...................... 9,200 (1,600)
- ---------------------------------------------------------------------- --------- --------
Net cash provided by financing activities 34,754 2,427
- ---------------------------------------------------------------------- --------- --------
Net increase in cash and cash equivalents ............................ 3,304 2,134
Cash and cash equivalents as of beginning of year .................... 9,424 9,342
- ---------------------------------------------------------------------- --------- --------
Cash and cash equivalents as of end of period $ 12,728 $ 11,476
====================================================================== ========= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest .......................... $ 1,459 $ 1,900
Cash paid during the period for income taxes ...................... $ 84 $ 100
See accompanying notes to consolidated condensed financial statements.
6
COMMUNITY BANCORP OF NEW JERSEY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
NOTE A - BASIS OF PRESENTATION
The consolidated condensed financial statements of Community Bancorp of New
Jersey (the Company) included herein have been prepared without audit pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities as of the financial statement date and the
reported amounts of revenues and expenses during the reporting period. Since
management's judgment involves making estimates concerning the likelihood of
future events, the actual results could differ from those estimates which will
have a positive or negative effect on future period results. The accompanying
consolidated condensed financial statements reflect all adjustments which are,
in the opinion of management, necessary to a fair statement of the results for
the interim periods presented. Such adjustments are of a normal recurring
nature. These consolidated condensed financial statements should be read in
conjunction with the audited financial statements and the notes thereto as of
and for the year ended December 31, 2002. The results for the three months ended
March 31, 2003 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2003.
The consolidated condensed financial statements include the accounts of the
Company and its wholly owned subsidiary, the Community Bank of New Jersey. All
significant inter-company accounts and transactions have been eliminated.
NOTE B - EARNINGS PER SHARE
The Company follows the provisions of SFAS No. 128, Earnings Per Share. Basic
EPS excludes dilution and is computed by dividing income available to common
shareholders by the weighted average common shares outstanding during the
period. Diluted EPS takes into account the potential dilution that could occur
if securities or other contracts to issue common stock were exercised and
converted into common stock. EPS is computed based on the weighted average
number of shares of common stock outstanding.
NOTE C - STOCK DIVIDEND
On April 16, 2003 the Company's Board of Directors approved a 5% stock dividend
payable May 15, 2003 to shareholders of record as of April 28, 2003. Weighted
average shares outstanding and earnings per share were retroactively adjusted to
reflect the stock dividend.
NOTE D - RECENT ACCOUNTING PRONOUNCEMENTS
Off Balance Sheet Guarantee
The Company adopted FASB Interpretation 45 (FIN 45) Guarantor's Accounting and
Disclosure Requirements for Guarantees, including Indirect Guarantees of
Indebtedness of Others on January 1, 2003. FIN 45 requires a guarantor entity,
at the inception of a guarantee covered by the measurement provisions of the
interpretation, to record a liability for the fair value of the obligatioin
undertaken in issuing the guarantee. The Company has financial and performance
letters of credit. Financial letters of credit require the Company to make
payment if the customer's financial condition deteriorates, as defined in the
agreements. Performance letters of credit require the Company to make payments
if the customer fails to perform certain non-financial contractual obligations.
The Company previously did not record an initial liability, other than the fees
received for these letters of credit, when guaranteeing obligations unless it
became probable that the Company would have to perform under the guarantee. FIN
45 applies prospectively to letters of credit the Company issues of modifies
subsequent to December 31, 2002.
The Company defines the initial fair value of these letters of credit as the fee
received from the customer. The maximum potential undiscounted amount of future
payments of these letters of credit as of March 31, 2003 are $5.0 million and
they expire through April, 2005. Amounts due under these letters of credit would
be reduced by any proceeds that the Company would be able to obtain in
liquidating the collateral for the Loans, which varies depending on the
customer.
Variable Interest Entities
In January 2003, the FASB issued FASB Interpretation 46 (FIN 46), Consolidation
of Variable Interest Entities. Fin 46 clarifies the application of Accounting
Research Bulletin 51, Consolidated Financial Statements, for certain entities
that do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties
or in which equity investors do not have the characteristics of a controlling
financial interest ("variable interest entities"). Variable interest entities
within the scope of FIN 46 will be required to be consolidated by their primary
beneficiary. The primary beneficiary of a variable interest entity's is
determined to be the party that absorbs a majority of the entity's expected
losses, receives a majority of its expected returns, or both. FIN 46 applies
immediately to variable interest entities created after January 31, 2003, and to
variable interest entities in which an enterprise obtains an interest after that
date. It applies in the first fiscal year or interim period beginning after June
15, 2003, to variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. The Company has not acquired
any variable interest entities after February 1, 2003 through March 31, 2003.
The Company is in process of determing what impact, if any, the adoption of the
provisions of FIN 46 will have on entities held prior to the issuance of FIN 46
on its financial condition or results of operations. The Company does not
anticipate FIN 46 to have a material impact on the consolidated financial
position or results of operations.
8
COMMUNITY BANCORP OF NEW JERSEY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
Continued
NOTE E - INVESTMENT SECURITIES
The following tables present the book values, fair values and gross unrealized
gains and losses of the Company's investment securities portfolio as of March
31, 2003 and December 31, 2002 (Dollars in thousands).
March 31, 2003 (Unaudited)
---------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- --------
Securities available-for-sale:
U.S. Government and agency securities .... $150,205 $ 808 $ -- $151,013
Other securities ......................... 1,560 -- -- 1,560
-------- -------- -------- --------
$151,765 $ 808 $ -- $152,573
======== ======== ======== ========
December 31, 2002
---------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- --------
Securities available-for-sale:
U.S. Government and agency securities .... $128,937 $ 1,109 $ -- $130,046
Other securities ......................... 1,630 -- -- 1,630
-------- -------- -------- --------
$130,567 $ 1,109 $ -- $131,676
======== ======== ======== ========
The following table sets forth as of March 31, 2003 the maturity distribution of
the Company's investment portfolio (Dollars in thousands).
Available-for-sale
-------------------------
Amortized Fair
Cost Value
--------- --------
Due in one year or less .................. $ -- $ --
Due after one year through five years .... 123,551 124,179
Due after five years through ten years ... 27,154 27,334
Due after ten years ...................... 1,060 1,060
-------- --------
$151,765 $152,573
======== ========
9
COMMUNITY BANCORP OF NEW JERSEY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
Continued
NOTE F - LOANS RECEIVABLE and ALLOWANCE FOR LOAN LOSSES
The following table summarizes the components of the loan portfolio as of March
31, 2003 and December 31, 2002 (Dollars in thousands).
Loan Portfolio By Type of Loan
-----------------------------------------------
March 31, 2003
(Unaudited) December 31, 2002
--------------------- ---------------------
Amount Percent Amount Percent
-------- ------- -------- -------
Commercial and industrial loans ... $ 40,030 20.58% $ 46,998 25.69%
Commercial mortgage loans ......... 97,833 50.31% 94,067 51.41%
Residential mortgages ............. 3,531 1.82% 5,829 3.19%
Construction loans ................ 29,003 14.91% 13,295 7.26%
Consumer loans .................... 24,054 12.37% 22,193 12.13%
Other loans ....................... 11 0.01% 585 0.32%
-------- ------ -------- ------
$194,462 100.00% $182,967 100.00%
======== ====== ======== ======
The following table represents the activity in the allowance for loan losses for
the three month periods ended March 31, 2003 and 2002 and the year ended
December 31, 2002 (Dollars in thousands).
Allowance For Loan Losses
------------------------------------
Three Months Ended
March 31,
(Unaudited) Year Ended
------------------- December 31,
2003 2002 2002
------ ------- -------
Balance - beginning of period ............... $2,406 $ 1,964 $ 1,964
Recoveries .................................. -- -- 1
Charge-offs ................................. -- (1) (452)
Provision for loan losses ................... 113 90 893
------ ------- -------
Balance - end of period ..................... $2,519 $ 2,053 $ 2,406
====== ======= =======
Balance of Allowance at period-end as a %
of loans at period-end .................. 1.30% 1.30% 1.31%
====== ======= =======
NOTE G - STOCK-BASED COMPENSATION
The Company accounts for stock options under SFAS No. 123, Accounting for
Stock-Based Compensation, as amended by SFAS No. 148. Accounting for Stock-Based
Compensation - Transition and Disclosure, which contains a fair value-based
method for valuing stock-based compensation that entities may use, which
measures compensation cost at the grant date based on the fair value of the
award. Compensation is then recognized over the service period, which is usually
the vesting period. Alternatively, SFAS No. 123 permits entities to continue
accounting for employee stock options and similar equity instruments under APB
Opinion No. 25, Accounting for Stock Issued to Employees. Entities that continue
to account for stock options using APB Opinion No. 25 are required to make pro
forma disclosures of net income and earnings per share, as if the fair
value-based method of accounting defined in SFAS No. 123 had been applied.
At March 31, 2003, the Company had six stock-based compensation plans. The
Company accounts for these plans under the recognition and measurement
principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. Stock-based employee compensation costs are not
reflected in net income, as all options granted under the plans had an exercise
price equal to the market value of the underlying common stock on the date of
grant. The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of SFAS
No. 123, to stock-based employee compensation (in thousands, except per share
amounts).
March 31,
---------
2003 2002
---- ----
Net income, as reported .............................. $ 606 $ 553
Less stock-based compensation costs determined under
fair value based method for all awards ............. 43 45
------- -------
Net income, pro forma ................................ 563 508
Earnings per share - basic as reported ................. $ 0.18 $ 0.17
Earnings per share - basic proforma .................... 0.18 0.16
Earnings per share - diluted as reported ............... $ 0.17 0.16
Earnings per share - diluted proforma .................. $ 0.17 0.15
10
COMMUNITY BANCORP OF NEW JERSEY
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Critical Accounting Policies
The accounting and reporting policies of the Company conform to accounting
principles generally accepted in the United States of America (US GAAP) and
predominant practices within the banking industry. The accompanying consolidated
financial statements include the accounts of the Company, and all its wholly
owned subsidiaries. All intercompany balances and transactions have been
eliminated.
The principal estimate that is particularly susceptible to significant change in
the near term relates to the allowance for loan losses. The evaluation of the
adequacy of the allowance for loan losses includes an analysis of the individual
loans and overall risk characteristics and size of the different loan
portfolios, and takes into consideration current economic and market conditions,
the capability of specific borrowers to pay specific loan obligations, as well
as current loan collateral values. However, actual losses on specific loans,
which also are encompassed in the analysis, may vary from estimated losses.
The allowance for loan loss is maintained at an amount management deems adequate
to cover estimated losses. In determining the level to be maintained, management
evaluates many factors, including current economic trends, industry experience,
historical loss experience, industry loan concentrations, the borrowers' ability
to repay and repayment performance, and estimated collateral values. In the
opinion of management, the present allowance is adequate to absorb reasonable,
foreseeable loan losses. While management uses available information to
recognize losses on loans, future additions to the allowance may be necessary
based on changes in economic conditions or any of the other factors used in
management's determination. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Company's
allowance for losses on loans. Such agencies may require the Company to
recognize additions to the allowance based on their judgments about information
available to them at the time of their examination.
Loans are placed on non-accrual when a loan is specifically determined to be
impaired or when principal or interest is delinquent for 90 days or more. Any
unpaid interest previously accrued on those loans is reversed from income.
Interest income generally is not recognized on specific impaired loans unless
the likelihood of further loss is remote. Interest payments received on such
loans are applied as a reduction of the loan principal balance. Interest income
on other non-accrual loans is recognized only to the extent of interest payments
received.
The Company accounts for its impaired loans in accordance with SFAS No. 114.
This standard requires that a creditor measures impairment based on the present
value of future cash flows discounted at the loan's effective interest rate,
except that as a practical expedient, a creditor may measure impairment based on
a loan's observable market price, or the fair value of the collateral if the
loan is collateral dependent. Regardless of the measurement method, a creditor
must measure impairment based on the fair value of the collateral when the
creditor determines that foreclosure is probable.
The Company recognizes deferred tax assets and liabilities for the future tax
effects of temporary differences, net operating loss carryforwards and tax
credits. Deferred tax assets are subject to management's judgment based upon
available evidence that future realization is more likely than
11
not. In the event management determines the inability to realize all or part of
net deferred tax assets in the future, a direct charge to income tax expense may
be required to reduce the recorded value of the net deferred tax asset to the
expected realizable amount.
This financial review presents management's discussion and analysis of financial
condition and results of operations. It should be read in conjunction with the
consolidated condensed financial statements and the accompanying notes included
elsewhere herein.
FINANCIAL CONDITION
Total assets at March 31, 2003 increased by $35.3 million, or 10.6%, to $367.5
million compared to $332.2 million at December 31, 2002. Total assets averaged
$339.9 million in the first three months of 2003, a $60.0 million, or 21.4%,
increase from the 2002 full year average of $279.9 million. Average loans
increased $17.3 million, or 10.2%, to $186.6 million in the first three months
of 2003, from the 2002 full year average of $169.3 million. Average investment
securities increased by $39.7 million, or 42.3%, to $133.6 million; average
Federal funds sold increased by $2.3 million, or 383.3%, to $2.9 million; the
average of all other assets increased by $0.8 million, or 4.3%, to $19.2
million; and the loan loss reserve average increased $0.2 million, or 9.1%, to
$2.4 million during the first three months of 2003 compared to the full year
2002 averages.
These increases in average assets were funded primarily by a $55.5 million, or
22.4%, increase in average deposits, as average deposits for the first three
months of 2003 increased to $302.9 million from the full year 2002 average of
$247.4 million. Increases in average assets were further funded by a $4.8
million increase in average Trust preferred securities funding as a result of
the December 2002 $5.0 million Trust preferred offering, and was partially
offset by a reduction of $1.4 million, or 15.6%, as average short-term
borrowings for the first three months of 2003 decreased to $7.6 million from the
full year 2002 average of $9.0 million.
Lending Activity
Total loans at March 31, 2003 were $194.5 million, a 6.3%, or $11.5 million
increase from December 31, 2002. The loan portfolio consists primarily of loans
secured by real estate, and, to a lesser extent, commercial, construction and
consumer loans. Changes in the composition of the loan portfolio during the
comparative periods included increases of $3.8 million in commercial mortgage
loans, $15.7 million in construction loans, and $1.9 million in consumer loans
and were offset by reductions of $7.0 million in commercial and industrial
loans, $2.3 million in residential mortgage loans and $0.6 million in other
loans.
The 6.3% increase in loans at March 31, 2003 compared to December 31, 2002 is
partially attributable to greater penetration of our marketplace and continued
loan demand within our market area and targeted customer base. Since September
1997, we have opened six new offices. Management believes that the maturation of
these branch locations will continue to provide us with lending opportunities as
well as funding sources for the loans. Further enhancing loan growth has been
our desire to provide quality customer service. Our focus is on the continued
origination, retention and service of a high quality loan portfolio.
Our loans are primarily to businesses and individuals located in Monmouth,
Middlesex, and Ocean Counties, New Jersey. We believe that our strategy of
customer service, competitive rate
12
structures, and selective marketing will continue to enable us to gain market
entry to local loans and deposits. Bank mergers and consolidations have also
contributed to our efforts to attract borrowers and depositors. We intend to
continue to pursue quality loans in all lending categories within our market
area.
Allowance for Loan Losses
The allowance for loan losses was $2.5 million, or 1.30% of total loans, at
March 31, 2003 compared to $2.4 million, or 1.31% of total loans, at December
31, 2002. At March 31, 2003 and December 31, 2002 we had no non-accrual loans.
The increase in the balance of the allowance for loan losses is the result of
our review of several factors, including our assessment of economic conditions,
credit quality, and other loss factors that may be inherent in the existing loan
portfolio and our continued growth of our loan portfolio.
We attempt to maintain an allowance for loan losses at a sufficient level to
provide for potential losses in the loan portfolio. 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 outside, independent loan review auditors, our Directors Loan
Review Committee and the Board of Directors. A risk system, consisting of
multiple grading categories, is utilized as an analytical tool to assess risk
and set appropriate reserves. Along with the risk system, management further
evaluates risk characteristics of the 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
we feel 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 expense and the allowance is reduced
by net charge-offs (i.e. - loans judged to be uncollectible and charged against
the reserve, less any recoveries on such loans). Although we attempt to maintain
the allowance at a level deemed adequate, future additions to the allowance may
be necessary based upon changes in market conditions. In addition, various
regulatory agencies periodically review our allowance for loan losses. These
agencies may require us to take additional provisions based on their judgements
about information available to them at the time of their examination.
Investment Securities Activity
Investment securities increased by $20.9 million, or 15.9%, to $152.6 million at
March 31, 2003 compared to $131.7 million at December 31, 2002. During the first
quarter of 2003, we utilized our liquidity in excess of loan demand to fund
additional purchases of investment securities available-for-sale. This strategy
resulted from Asset/Liability management considerations arising from our
analysis of several economic scenarios including reduced loan growth and deposit
repricing opportunities. During the first three months of 2003, maturities and
calls of $35.9 million in investment securities and proceeds from sales of
investment securities amounting to $55.5 million were used to fund loan growth
of $11.5 million. We utilized excess liquidity to fund additional purchases of
investment securities of $112.5 million as we changed the maturity distribution
of the investment securities portfolio.
At March 31, 2003, investment securities of $152.6 million, or 100.0% of the
total investment securities portfolio, were classified as available-for-sale. We
had no investment securities
13
classified as held-to-maturity or as trading securities. The investment
portfolio is comprised primarily of U.S. Government and agency securities with
stated maturities of under six years and with call features of two years or
less. We currently maintain an investment portfolio of short duration in order
to fund projected increased loan volume and to provide for other liquidity uses
as needed, and secondarily as an additional source of interest income.
Deposits
Deposits are our primary source of funds. Total deposits increased by $25.6
million, or 8.8%, to $317.2 million at March 31, 2003 compared to $291.6 million
at December 31, 2002. The increase in deposits during this period was primarily
due to greater penetration of our marketplace and the continued growth of our
new locations. As we adjusted the mix of our deposit base through marketing and
pricing initiatives, lower costing demand deposits, savings accounts, money
market and NOW accounts increased by $17.5 million, while higher costing
certificates of deposit increased by $8.1 million.
Average total deposits increased by $55.5 million, or 22.4%, to $302.9 million
for the three months ended March 31, 2003 compared to the 2002 full year average
of $247.4 million. Changes in the deposit mix averages for the three months
ended March 31, 2003 compared to the 2002 full year averages include a $15.3
million, or 18.6%, increase in savings deposits; a $1.6 million, or 7.6%,
increase in NOW account deposits; a $28.8 million, or 31.8%, increase in time
deposits; a $3.4 million, or 46.6%, increase in money market deposits; and a
$6.4 million, or 13.9%, increase in non-interest bearing demand deposits. Short
duration certificate of deposit promotions, targeted to retain maturing deposits
and to gain market penetration, have contributed to deposit growth. Management
intends to continue to promote targeted deposit products as funding needs and
other balance sheet management considerations arise.
We emphasize relationships with commercial customers and seek to obtain
transactional accounts, which are frequently kept in non-interest bearing
deposits. We also emphasize the origination of savings and money market
deposits, which amounted to $110.7 million at March 31, 2003, by offering rates
higher than our peer group institutions. Our primary savings product is the
stepped rate savings account. The interest rate is based upon the amount on
deposit, and the deposit amount can be changed. We may modify the interest rate
paid without notice, and the depositor may withdraw their funds on demand. We
market this product as an alternative to time deposits and we believe it has
resulted in a higher rate of core deposits and lower cost of funds than our peer
group institutions. Deposits are obtained primarily from the market areas that
we serve.
Liquidity
Liquidity is a measurement of our ability to meet present and future funding
obligations and commitments. We adjust our liquidity levels in order to meet
funding needs for deposit outflows, repayment of borrowings, when applicable,
and the funding of loan commitments. We also adjust our liquidity level as
appropriate to meet our asset/liability objectives. Principal sources of
liquidity are deposit generation, access to purchased funds, including
borrowings from other financial institutions, repurchase agreements, maturities
and repayments of loans and investment securities, and net interest income and
fee income. Liquid assets (consisting of cash and Federal funds sold) comprised
3.5% and 2.8% of our total assets at March 31, 2003 and December 31, 2002,
respectively.
14
As shown in the Consolidated Condensed Statements of Cash Flows, our primary
source of funds at March 31, 2003 was increased targeted deposit products,
proceeds from maturities, calls and sales of investment securities, and to a
lesser extent, short-term borrowed funds. Deposit increases amounted to $25.6
million for the three months ended March 31, 2003 and proceeds from maturities,
calls and sales of investment securities amounted to $91.4 million. These
sources of funds were augmented with an increase of $9.2 million in short-term
borrowings as of March 31, 2003. During the first three months of 2003, we
utilized deposit growth, matured investment securities, and to a lesser extent,
short-term borrowings as funding sources for increased loans made to customers
amounting to $11.5 million and securities purchases amounting to $112.5 million.
We also have several additional sources of liquidity, including the
available-for-sale investment securities portfolio, which at March 31, 2003
amounted to $152.6 million. Also, many of our loans are originated pursuant to
underwriting standards which make them readily marketable to other financial
institutions or investors in the secondary market. In addition, in order to meet
liquidity needs on a temporary basis, we have established lines of credit with
other financial institutions to purchase up to $11.0 million in Federal funds
and may borrow funds at the Federal Reserve discount window, subject to our
ability to supply collateral. We are also a member of the Federal Home Loan Bank
of New York and have an additional combined overnight borrowing and term line of
$36.6 million. In addition, subject to certain Federal Home Loan Bank
requirements, we may also obtain longer-term advances of up to 30% of our
assets. As of March 31, 2003, we had $20.7 million in short-term borrowings.
We believe that our liquidity position is sufficient to provide funds to meet
future loan demand or the possible outflow of deposits, in addition to enabling
us to adapt to changing interest rate conditions.
Contracted Obligations and Other Commitments
During 2003, there have been no significant changes in the Company's contractual
obligations and other commitments from that reported "Management's Discussion
and Analysis of Financial Condition and Results of Operations-Contractual
Obligations and Other Commitments" in the Company's form 10-KSB for the year
ended December 31, 2002.
Capital Resources
Stockholder's equity increased by $426 thousand at March 31, 2003 compared to
December 31, 2002. The changes in stockholders' equity during the three months
ended March 31, 2003 were comprised of an increase from net income of $606
thousand and an increase of $3 thousand from exercised stock options, and was
partially offset by a decrease of $183 thousand in the unrealized gains, net of
taxes, in the available-for-sale investment securities portfolio.
Our regulators, the Board of Governors of the Federal Reserve System (which
regulates bank holding companies), and the Federal Deposit Insurance
Corporation, have issued guidelines classifying and defining capital.
The following table summarizes the risk-based and leverage capital ratios for
the Company and the Bank at March 31, 2003 as well as the regulatory required
minimum and "well capitalized" capital ratios:
March 31, 2003 Regulatory Requirement
---------------- -----------------------------
Company Bank Minimum "Well Capitalized"
------- ---- ------- ------------------
Risk-based Capital:
Tier I capital ratio .... 12.06% 9.94% 4.00% 6.00%
Total capital ratio ..... 13.12% 11.00% 8.00% 10.00%
Leverage ratio .......... 8.39% 6.92% 3.00%-5.00% 5.00% or greater
15
As noted in the above table, the Company's and the Bank's capital ratios exceed
the minimum regulatory and "well capitalized" requirements.
Impact of Inflation and Changing Prices
Our financial statements 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 our operations. Unlike most industrial
companies, nearly all of our assets and liabilities are monetary. As a result,
interest rates have a greater impact on our 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.
RESULTS OF OPERATIONS for the three months ended March 31, 2003 compared to the
three months ended March 31, 2002
Net Income
For the three months ended March 31, 2003, we earned $606 thousand compared to
$553 thousand in net income for the same period last year. Basic and diluted net
income per share for the three months ended March 31, 2003 was $0.18 and $0.17,
respectively, compared to basic and diluted net income per share of $0.17 and
$0.16, respectively, for the same prior year period. The increase in net income
was primarily due to a $257 thousand, or 10.4%, increase in net interest income
and a $318 thousand, or 82.4%, increase in non-interest income, and was
partially offset by an increase in loan loss provision of $23 thousand, or
25.6%, an increase in non-interest expense of $438 thousand, or 22.7%, and
increased income tax expense of $61 thousand, or 20.9%.
Net Interest Income
Net interest income increased $257 thousand, or 10.4%, to $2.7 million for the
three months ended March 31, 2003 from $2.5 million for the same prior year
period. The increase in net interest income was due primarily to volume related
increases amounting to $669 thousand as average interest earning assets, net of
average interest bearing liabilities, increased by $11.4 million, or 23.4%, for
the first three months of 2003 compared to the same prior year period. The
volume related increases in net interest income were partially offset by rate
related decreases in net interest income amounting to $412 thousand.
Our net interest margin (annualized net interest income divided by average
interest earning assets) for the three months ended March 31, 2003 decreased to
3.43% compared to 4.29% for the same prior year period. The decrease in net
interest margin of 86 basis points resulted from a change in the mix of average
interest earning assets, as average investment securities increased by 64.9% to
$133.6 million from $81.0 million. Excess liquidity was utilized in lower
yielding short-term investment securities as an alternative due to lower loan
funding needs. The changes in net interest margin resulted primarily from
implementation of asset/liability management
16
strategies as the Federal Reserve Bank reduced the target funds rate to 1.25% as
of March 31, 2003.
Interest income increased $429 thousand, or 11.4%, to $4.2 million for the three
months ended March 31, 2003 compared to $3.8 million for the same period in
2002. The improvement in interest income was primarily due to volume related
increases in income from the loan portfolio of $620 thousand, volume related
increases in income of $624 thousand in investment securities and volume related
increases in income from Federal funds sold of $12 thousand, as our growth
resulted in an increase in average earning assets of $88.9 million, or 38.0%, to
$323.1 million for the three months ended March 31, 2003 compared to $234.2
million for the same period in 2002.
In addition to the volume related net increase amounting to $1.3 million, total
interest income was reduced by $827 thousand from rate related decreases as
interest rates on earning assets repriced to current lower yields compared to
yields in the same period in 2002.
Interest expense for the first three months of 2003 increased $172 thousand, or
13.4%, compared to the same prior year period. The increase in interest expense
was due primarily to net rate related decreases in interest bearing deposits,
which accounted for $415 thousand of the expense decrease, and was offset by
$587 thousand attributable to net volume related increases. The volume related
increases in interest bearing liabilities and net expense rate decreases are the
result of marketing and pricing decisions made by management in response to
changing market rates and the need to provide cost effective sources of funds.
The following tables titled "Consolidated Average Balance Sheet with Resultant
Interest and Average Rates" and "Analysis of Changes in Consolidated Net
Interest Income" present by category the major factors that contributed to the
changes in net interest income for the quarter ended March 31, 2003 compared to
the quarter ended March 31, 2002.
17
CONSOLIDATED AVERAGE BALANCE SHEETS
With Resultant Interest And Average Rates
Three Months Ended Three Months Ended
March 31, 2003 March 31, 2002
------------------------------------ ------------------------------------
Average Interest Average Average Interest Average
Balance Income/Expense Rate Balance Income/Expense Rate
------- -------------- ------- ------- -------------- -------
(In thousands, except percentages)
ASSETS
Interest Earning Assets:
Federal Funds Sold .......................... $ 2,868 $ 7 0.99% $ 456 $ 2 1.93%
Investment Securities ....................... 133,639 1,053 3.15% 81,043 962 4.75%
Loans (net of unearned income) (1) (2) ...... 186,618 3,125 6.79% 152,719 2,792 7.41%
--------- ----- --------- ------
Total Interest Earning Assets ............ 323,125 4,185 5.25% 234,218 3,756 6.50%
--------- ----- --------- ------
Non-Interest Earning Assets:
Loan Loss Reserve ........................... (2,424) (1,978)
All Other Assets ............................ 19,193 17,713
--------- ---------
Total Assets ............................. $ 339,894 $ 249,953
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
Interest-Bearing Liabilities:
NOW Deposits ................................ $ 22,604 54 0.97% $ 18,432 42 0.93%
Savings Deposits ............................ 97,591 403 1.67% 70,712 360 2.06%
Money Market Deposits ....................... 10,692 49 1.86% 6,894 38 2.26%
Time Deposits ............................... 119,459 862 2.93% 83,245 811 3.95%
Trust preferred securities .................. 5,000 59 4.79% 0 -- 0.00%
Short-term Borrowings ....................... 7,630 25 1.33% 6,201 29 1.90%
--------- ----- --------- ------
Total Interest Bearing Liabilities ....... 262,976 1,452 2.24% 185,484 1,280 2.80%
--------- ----- --------- ------
Non-Interest Bearing Liabilities:
Demand Deposits ............................. 52,509 41,136
Other Liabilities ........................... 686 1,859
--------- ---------
Total Non-Interest Bearing Liabilities ... 53,195 42,995
--------- ---------
Stockholders' Equity ........................... 23,723 21,474
--------- ---------
Total Liabilities and Stockholders'
Equity ...................................... $ 339,894 $ 249,953
========= =========
NET INTEREST INCOME ............................ $2,733 $2,476
====== ======
NET INTEREST SPREAD (3) ........................ 3.01% 3.70%
NET INTEREST MARGIN (4) ........................ 3.43% 4.29%
(1) Included in interest income on loans are loan fees.
(2) Includes non-performing loans.
(3) The interest rate spread is the difference between the weighted average
yield on average interest earning assets and the weighted average cost of
average interest bearing liabilities.
(4) The interest rate margin is calculated by dividing annualized net interest
income by average interest earning assets.
18
ANALYSIS OF CHANGES IN CONSOLIDATED NET INTEREST INCOME
Three Months Ended March 31, 2003
Compared to Three Months Ended
March 31, 2002
---------------------------------
Increase (Decrease) Due To
-----------------------------
Volume Rate Net
------ ----- -----
(In thousands)
Interest Earned On:
Federal Funds Sold ............... $ 12 $ (7) $ 5
Investment Securities ............ 624 (533) 91
Loans (net of unearned income) ... 620 (287) 333
------ ----- -----
Total Interest Income ......... 1,256 (827) 429
------ ----- -----
Interest Paid On:
NOW Deposits ..................... 10 2 12
Savings Deposits ................. 137 (94) 43
Money Market Deposits ............ 21 (10) 11
Time Deposits .................... 353 (302) 51
Trust preferred securities ....... 59 -- 59
Short-term Borrowings ............ 7 (11) (4)
------ ----- -----
Total Interest Expense ........ 587 (415) 172
------ ----- -----
Net Interest Income ........... $ 669 $(412) $ 257
====== ===== =====
19
Provision for Loan Losses
The provision for loan losses increased to $113 thousand for the first three
months of 2003 compared to a provision of $90 thousand for the same period in
2002. The provision is the result of our review of several factors, including
increased loan balances and our assessment of economic conditions, credit
quality and other loss factors that may be inherent in the existing loan
portfolio. The allowance for loan losses totaled $2.5 million, or 1.30% of total
loans, at March 31, 2003.
Non-Interest Income
Total non-interest income was $704 thousand for the first three months of 2003
compared to $386 thousand for the first three months of 2002, an increase of
$318 thousand, or 82.4%. The increase was attributable to $372 thousand in
realized gain on sales of investment securities during the first quarter of 2003
compared to no realized gains as of March 31, 2002. The security gains were
realized as a result of our Asset/Liability Committee recommendation to shorten
the duration of our investment security portfolio. Other non-interest income
category changes include a decrease in non-interest service fees on loans, which
amounted to $66 thousand for the three months ended March 31, 2003 compared to
$136 thousand earned for the same prior year period, a decrease of $70 thousand,
or 51.5%. This decrease in non-interest service fees on loans resulted primarily
from reduced activity in loan participations. All other non-interest income
increased by $16 thousand, or 6.4%, to $266 thousand, and resulted from the
continued growth of the Company.
Non-Interest Expense
Total non-interest expense amounted to $2.4 million for the three months ended
March 31, 2003, an increase of $438 thousand, or 22.7%, over the same prior year
period. The increase was due primarily to increases in employment expenses as
well as increases in occupancy expenses, equipment expenses and other expenses
generally attributable to our growth. Of this increase, employment costs
increased $206 thousand, or 22.2%, and reflected increases in the number of
employees from 94 full-time equivalents for the period ended March 31, 2002 to
106 full-time equivalents for the period ended March 31, 2003. The increase in
personnel is primarily attributable to the acquisition of additional support
personnel required due to the Company's growth and the opening of our Millhurst,
New Jersey branch.
Occupancy and depreciation expenses increased $98 thousand, or 26.0%, for the
first three months of 2003 compared to the same period in 2002. The increase was
attributable primarily to increased lease expense and increased common area
maintenance costs due on new branch offices, in addition to increased
depreciation costs associated with new deposit services facilities and on
purchases of enhanced computer processing equipment.
Other expenses increased $134 thousand, or 21.6%, for the first three months of
2003 compared to the first three months of 2002. The increase was attributable
to increased other expenses resulting from our continued growth.
Income Tax Expense
For the three months ended March 31, 2003, we recognized $353 thousand in income
tax expense compared to $292 thousand in income tax expense during the first
three months of 2002.
20
The effective tax rate for the first three months of 2003 was 36.8% compared to
34.6% for the same period during 2002.
Return on Average Assets and Average Equity
Two industry measures of performance by a banking institution are its return on
average assets and return on average equity. Return on average assets ("ROA")
measures net income in relation to total average assets and indicates a
company's ability to employ its resources profitably. For the three months ended
March 31, 2003, our ROA was 0.71% compared to 0.72% for the year ended December
31, 2002. Return on average equity ("ROE") is determined by dividing annual net
income by average stockholders' equity and indicates how effectively a company
can generate net income on the capital invested by its stockholders. ROE
increased to 10.22% for the three months ended March 31, 2003, compared to 9.06%
for the year ended December 31, 2002.
21
PART I.
Item 3. Quantitive and Qualitative Disclosures about Market Risk
Market risk is the risk of loss from adverse changes in market
prices and rates. The company's market risk arises primarily from
interest rate risk inherent in its lending and deposit taking
activities. Thus, management actively monitors and manages its
interest rate risk exposure.
The company's profitability is affected by fluctuations in interest
rates. A sudden and substantial increase in interest rates may
adversely impact the company's 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. The company
monitors the impact of changing interest rates on its net interest
income using several tools. One measure of the company's exposure to
differential changes in interest rates between assets and
liabilities is shown in the Company's Cumulative Rate Sensitive
Balance Sheet under the Interest Rate Sensitivity Analysis caption.
The company's primary objective in managing interest rate risk is to
minimize the adverse impact of changes in interest rates on the
company's net interest income and capital, while structuring the
company's asset-liability structure to obtain the maximum yield-cost
spread on that structure. The company relies primarily on its
asset-liability structure to control interest rate risk.
The company continually evaluates interest rate risk management
opportunities. Management believes that hedging instruments
currently available are not cost-effective, and therefore, has
focused its efforts on increasing the company's yield-cost spread
through retail growth opportunities.
During 2003, there have been no significant changes in the Company's
assessment of its market risk, interest rate risk, from that
reported under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Interest Rate Risk
Management" in the Company's Form 10-KSB for the year ended December
31, 2002.
Item 4. CONTROLS AND PROCEDURES
(a) Within the 90 days prior to the date of this report, the Company
carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's
Chief Executive Officer, Chief Lending Officer, Chief Information
Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based upon that
evaluation, the Chief Executive Officer, Chief Lending Officer,
Chief Information Officer and Chief Financial Officer concluded that
the Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company
(including its consolidated subsidiaries) required to be included in
the Company's periodic SEC filings.
(b) Changes in internal controls
Not Applicable.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Bank is periodically involved in various legal proceedings as a
normal incident to its business. In the opinion of management, no
material loss is expected from any such pending lawsuit.
22
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 99 - Section 906 Certification
(b) Reports on Form 8-K
The Registrant filed no Form 8-K's during the first quarter
2003.
23
CERTIFICATION
I, Robert D. O'Donnell, President and CEO of Community Bancorp of New Jersey
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Community Bancorp of
New Jersey;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 12, 2003.............Robert D. O'Donnell
-------------------
24
CERTIFICATION
I, Michael Bis, Sr. Vice President and CFO of Community Bancorp of New Jersey
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Community Bancorp of
New Jersey;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 12, 2003.............Michael Bis
-----------
25
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITY BANCORP OF NEW JERSEY
(Issuer)
Date: May 12, 2003 By: Robert D. O'Donnell
-------------------------------------
ROBERT D. O'DONNELL
President and Chief Executive Officer
By: Michael Bis
-------------------------------------
MICHAEL BIS
Sr. Vice President and Chief
Financial Officer
26