THE YEAR OF CHANGE

Transcription

THE YEAR OF CHANGE

THE YEAR
OF
2014 ANNUAL REPORT
CHANGE
2
–
WAWEL BANK
SELECTED Financial Highlights
Total Equity
Total Assets
20,000
120,000
80,000
60,000
86,676
94,754
95,880
93,856
72,620
40,000
millions ($)
millions ($)
100,000
17,523
15,000
13,275
10,000
5,000
14,977
15,454
2012
2011
8,163
20,000
–
–
2014
2013
2012
2011
2010
2014
100,000
80,000
64,775
45,577
49,784
millions ($)
millions ($)
2010
Total Deposits
Total Loans (Net)
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
–
2013
53,675
35,076
60,000
63,505
72,048
76,436
76,416
75,364
2013
2012
2011
2010
40,000
20,000
–
2014
2013
2012
2011
2014
2010
2
YEAR ENDING DECEMBER 31
2014
–
2013
2012
2011
2010
BAlAnce sheet DAtA ($000)
2
Total Assets
72,620
86,676
94,754
95,880
93,856
Investments
–
19,025
29,273
22,659
15,219
Total Loans (Net)
35,076
45,577
49,784
53,675
64,775
Allowance for Loan Losses
1,192
1,943
2,087
1,239
734
Total Deposits
63,505
72,048
76,436
76,416
75,364
Shareholder's Equity
8,163
13,275
14,977
15,454
17,523
Net Interest Income
2,449
3,012
3,776
4,020
4,079
Provision (Credit) for Loan Losses
(992)
1,240
1,385
4,270
642
Net Income (Loss)
(5,112)
(1,695)
(511)
(2,018)
211
Earnings (Loss) Per Common Share (Basic)
(2.38)
(0.79)
(0.24)
(0.95)
0.10
Book Value per Common Share
3.81
6.19
6.98
7.21
8.17
Return on Average Assets
-6.42%
-1.86%
-0.53%
-2.09%
0.22%
Return on Average Equity
-47.70%
-11.81%
-3.27%
-11.43%
1.20%
Net Interest Margin
4.91%
4.27%
4.56%
4.79%
4.90%
Equity Capital to Assets
11.24%
15.32%
15.81%
16.12%
18.67%
Allowance for Loan Losses to Total Loans
3.29%
4.09%
4.01%
2.24%
1.11%
Non-Performing Loans to Total Loans
9.05%
16.39%
6.57%
6.60%
7.31%
–
income stAtement DAtA ($000)
2
–
peR shARe DAtA
opeRAting RAtios (%)
Asset QuAlity RAtios (%)
WAWEL BANK | 2014 Annual Report
3
CORPORATE OFFICES
WALLINGTON BRANCh
GARFIELD BRANCh
935 River Drive
Garfield, NJ 07026
Phone: 201-468-9100
Fax: 973-928-3676
104 Main Avenue
Wallington, NJ 07057
Phone: 973-777-1028
Fax: 973-777-6472
935 River Road
Garfield, NJ 07026
Phone: 973-478-9295
Fax: 973-478-7006
WAWEL BANK
a MESSagE To our SHarEHoLDErS
Dear Shareholders and Customers,
In 2014, Wawel Bank made great strides toward reducing the risk of the Bank
and bringing the Bank back to profitability. Our total assets decreased by $14.1
million or 16.22%, from $86.7 million as of December 31, 2013 to $72.6 million
as of December 31, 2014. Total deposits decreased $8.5 million or 11.86%, from
$72.0 million as of December 31, 2013 to $63.5 million as of December 31, 2014.
is strategic reduction was done for a second straight year to strengthen our capital ratios, reduce the risk of the Bank, and maintain our core depositors. As of
year-end, the Bank had Tier 1 capital of 11.24%, Tier 1 risk-based capital of 18.67%
and total risk-based capital of 19.94%.
e Bank’s total net loans decreased $10.5 million or 23.04%, from $45.6 million as of December 31, 2013
to $35.1 million as of December 31, 2014. e Bank completed a bulk loan sale in December 2014 of roughly
$4.2 million in problem loans. As of December 31, 2013 the Bank had 33 non-accrual loans totaling $7.8 million.
As of December 31, 2014 the Bank had 16 non-accrual loans totaling roughly $3.3 million. e Bank continues
to work through all of the problem loans and is well on its way to cleaning up the loan portfolio. A decision was
made to sell the Bank’s Investment Portfolio in December 2014. e decision was made to increase liquidity by
roughly $16.8 million and reduce the interest rate risk of the Bank. e Bank will use the liquidity in our plans
to grow the loan portfolio.
2014 was a challenging year “clearing the deck” by liquidating non-performing mortgages, which were bundled and sold off in the last quarter of 2014. With the funds generated by these sales and the sale of our held to
maturity investment portfolio last year, we are now in the position to offer residential and commercial mortgages
at competitive rates. Each member of the Board of Directors is committed to initiate new loan customers. As a
shareholder, your help would be appreciated as well. We also approved a residential loan purchase policy and
purchased a total of $7.1 million of New Jersey residential mortgages. Our staff, with the leadership of CEO
George Niemczyk, has initiated many new loan customers.
With the approval of our federal regulators, two new members were appointed to the Board of Directors.
Mr. Adam Bak, President and owner of Adamba Imports International of Brooklyn, New York, and Jeffrey Slemrod, a major original stockholder of Wawel Bank who has a vast knowledge of banking and financial securities.
Your Board of Directors is actively attending training and seminars focusing on compliance issues and current banking rules and regulations. Our management team, led by our Chief Executive Officer, George Niemczyk, is working like a well-oiled machine, handling our regulatory, new business and competitive issues in a
professional manner.
In closing, I want to personally thank our dedicated employees for making a difference in turning Wawel
Bank into a proud institution servicing the Polish American Community, our local residents and businesses, and
the public-at-large. e “NEW” Wawel is focusing on generating loans and increasing deposits. As a community
bank, we cherish the close relationships our personnel have formed with those that we serve. All of us are energized to a successful 2015.
I would like to thank our customers and stockholders for their loyal support.
Walter Wargacki,
Chairman of the Board
5
WAWEL BANK
BoarD oF DIrECTorS
Standing le to right: Dieter P. Lerch, omas J. Duch, henry J. Monkowski,
Walter G. Wargacki (Chairman of the Board) , henry C. Walentowicz, Adam M. Bak, Jeffrey E. Slemrod.
WAWEL BANK
MaNagEMENT TEaM
GEORGE E. NIEMCzYk
President &
Chief Executive Officer
6
DIANA HOPPIN
Compliance Officer
GARY MCELDOwNEY
Chief Credit Officer
VINCENT VARCADIPANE
Chief Financial Officer
WAWEL BANK AND SUBSIDIARY
CoNSoLIDaTED FINaNCIaL STaTEMENTS
December 31, 2014 and 2013
(WITH INDEPENDENT AUDITOR’S REPORT THEREON)
INDEX
Page
Independent Auditors’ Report
8
Consolidated Statement of Financial Condition
9
Consolidated Statement of Operations
10
Consolidated Statement of Comprehensive Loss
11
Consolidated Statement of Stockholders’ Equity
11
Consolidated Statement of Cash Flows
12-13
Notes to Consolidated Financial Statements
14-36
Products & Services
37
Corporate Information
38
7
Independent Auditors’ Report
Board of Directors
Wawel Bank and Subsidiary
Baker Tilly Virchow Krause, LLP
100 Walnut Ave., Ste 200
Clark, NJ 07066-1255
Tel: 732-388-5210
Tel: 800-267-9405
Fax: 888-264-9617
bakertilly.com
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of Wawel Bank and Subsidiary,
which comprise the consolidated statement of financial condition as of December 31, 2014, and the
related consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows
for the year then ended, and the related notes to the consolidated financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in the United States of America;
this includes the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on the auditor's judgment,
including the assessment of the risks of material misstatement of the consolidated financial statem ents,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no
such opinion. An audit also includes evaluating the appropriateness of accounting policies used and in
the reasonableness of significant accounting estimates made by management, as well as evaluating the
overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Wawel Bank and Subsidiary, as of December 31, 2014, and the results
of their operations and their cash flows for the year then ended in accordance with accounting principles
generally accepted in the United States of America.
Other Matter
The consolidated financial statements of Wawel Bank and Subsidiary as of and for the year ended
December 31, 2013 were audited by another auditor whose report dated April 11, 2014 contained an
unmodified opinion on those statements.
Clark, New Jersey
April 13, 2015
CoNSoLIDaTED STaTEMENT oF FINaNCIaL CoNDITIoN
Assets
YEAR ENDED DECEMBER 31
2014
Cash and amounts due from depository institutions
$
7,438,862
2013
$
653,352
Interest bearing deposits in other depository institutions
19,296,791
6,184,146
cash and cash equivalents
26,735,653
6,837,498
Investment securities held to maturity (fair value 2013 $17,819,368)
–
19,025,444
Loans, net of allowance for loan losses (2014 $1,191,774; 2013 $2,045,445)
35,076,242
45,576,519
Foreclosed real estate owned
434,000
748,000
Premises and equipment, net
6,032,316
6,060,287
Restricted stocks, at cost
285,200
364,200
Cash surrender value of officer and director life insurance
3,489,852
3,674,138
Deferred income taxes
–
3,569,036
Interest receivable
153,847
255,733
Prepaid expenses and other assets
412,821
565,080
total assets
$ 72,619,931
$ 86,675,935
Deposits: Non-interest bearing
$ 11,643,074
$
Deposits: Interest-bearing
51,862,229
62,921,528
total deposits
63,505,303
72,047,779
Interest payable
170
10
Other liabilities
951,260
1,352,979
total liabilities
64,456,733
73,400,768
Common stock, $0.01 par value; authorized 9,000,000 shares;
issued 2014 and 2013: 2,144,701 shares
21,447
21,447
Additional paid-in capital
8,225,790
8,225,790
Retained earnings (accumulated deficit)
(84,039)
5,027,930
total stockholders' equity
8,163,198
13,275,167
total liabilities and stockholders' equity
$ 72,619,931
$ 86,675,935
liABilities AnD stockholDeRs' eQuity
LIABILITIES
9,126,251
STOCkHOLDERS' EquITY
9
CoNSoLIDaTED STaTEMENT oF oPEraTIoNS
INTEREST INCOME
Loans receivable, including fees
2014
$
2,321,484
2013
$
2,590,950
Securities, taxable
478,388
874,900
Other
13,598
17,734
total interest income
2,813,470
3,483,584
Deposits
364,560
466,413
Borrowed funds
–
5,196
Net interest income
2,448,910
3,011,975
provision (credit) for loan losses
(992,000)
1,240,000
Net interest income after provision (credit) for loan losses
3,440,910
1,771,975
Fees and service charges
137,765
109,123
Loss on sale of securities
(94,174)
(487,045)
Gain (loss) on sale of loans
(656,748)
2,433
Gain on sale of foreclosed real estate owned
241,050
27,884
Income on cash surrender value of officer and director life insurance
100,789
99,463
total non-interest income (losses)
271,318
248,142
Salaries and employee benefits
1,640,859
1,858,534
Net occupancy expense of premises
276,286
243,504
Equipment
86,210
254,939
Professional fees
691,449
225,687
Advertising
59,873
30,844
Federal insurance premium
172,620
152,700
Foreclosed real estate owned
234,185
319,676
Other
1,525,827
1,340,839
total other expenses
4,687,309
4,426,723
Loss before income taxes (benefit)
(1,517,717)
(2,902,890)
income tax expense (Benefit)
3,594,252
(1,208,117)
net loss
$ (5,111,969)
$ (1,694,773)
INTEREST ExPENSE
NON-INTEREST INCOME (LOSSES)
NON-INTEREST ExPENSES:
10
CoNSoLIDaTED STaTEMENT oF CoMPrEHENSIVE LoSS
2014
2013
$ (1,694,773)
$ (1,694,773)
unrealized holding losses on securities available for sale,
net of income tax benefit of $199,183 for 2013
–
(299,523)
Reclassification adjustment for losses realized in net loss,
net of income tax benefit of $194,525 for 2013
–
292,520
Other comprehensive loss
–
(7,003)
comprehensive income (loss)
$ (5,111,969)
$ (1,701,776)
Net Loss
other comprehensive loss
CoNSoLIDaTED STaTEMENT oF SToCKHoLDErS’ EQuITY
Additional
paid-in
capital
Retained
earnings
Accumulated
Deficit
Accumulated
other
comprehensive
income
21,447
$ 8,225,790
$ 6,722,703
$
Net loss
–
–
Other comprehensive loss
–
Balance at December 31, 2013
Net loss
common
stock
Balance, December 31, 2012
Balance, December 31, 2014
$
$
total
7,003
$ 14,976,943
(1,694,773)
–
(1,694,773)
–
–
(7,003)
(7,003)
21,447
8,225,790
5,027,930
–
13,275,167
–
–
(5,111,969)
–
(5,111,969)
21,447
$ 8,225,790
–
$ 8,163,198
$
(84,039)
$
11
CoNSoLIDaTED STaTEMENT oF CaSH FLoWS
2014
2013
$ (5,111,969)
$ (1,694,773)
Amortization of premiums and accretion of discounts, net
24,837
34,734
Loss on sale of securities
94,174
487,045
Provision (credit) for loan losses
(992,000)
1,240,000
Amortization (accretion) of deferred loan fees, discounts and premiums, net
357
(6,119)
(Gain) loss on sale of loans
656,748
(2,433)
Gain on sale of foreclosed real estate owned
(241,050)
(27,884)
Income on cash surrender value of officer and director life insurance
(100,789)
(99,463)
Depreciation of premises and equipment
150,087
131,055
Deferred income taxes
3,569,036
(1,153,890)
Decrease in interest receivable
101,886
147,172
(Increase) decrease in prepaid expenses and other assets
152,259
(260,249)
Increase (decrease) interest payable
160
(27)
Increase (decrease) in other liabilities
(401,719)
512,028
net cash used in operating activities
(2,097,983)
(692,804)
Proceeds from calls/maturity/principal repayments of securities held to maturity
2,720,226
5,967,370
Purchase of securities held to maturity
–
(250,000)
Proceeds from sales of securities held to maturity
16,186,207
313,043
Proceeds from calls/maturity/principal repayments of securities available for sale
–
55,844
Purchase of securities available for sale
–
(1,510,938)
Proceeds from sales of securities available for sale
–
5,139,260
Net decrease in loans receivable
6,764,932
1,890,190
Proceeds from sale of loans
3,636,240
579,433
Proceeds from sale of foreclosed real estate
989,050
361,033
Purchases of premises and equipment
(122,116)
(134,631)
Proceeds from life insurance death benefit
285,075
153,383
Net proceeds from redemption of restricted stock
79,000
99,700
net cash provided by investing activities
$ 30,538,614
$ 12,663,687
cAsh Flows FRom opeRAting Activities
Net loss
ADjuSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
cAsh Flows FRom investing Activities
12
CoNSoLIDaTED STaTEMENT oF CaSH FLoWS
cAsh Flows FRom FinAncing Activities
Net decrease in deposits
$ (8,542,476)
$ (4,388,093)
Net decrease in short term borrowings
–
(2,500,000)
net cash used in financing activities
(8,542,476)
(6,888,093)
Net increase in cash and cash equivalents
19,898,155
5,082,790
cash and cash equivalents, Beginning
6,837,498
1,754,708
cash and cash equivalents, ending
$ 26,735,653
$
6,837,498
Interest paid
$
364,400
$
471,636
Income taxes paid (refunded)
$
–
$
(54,000)
$
434,000
$
505,988
supplementARy cAsh Flows inFoRmAtion
supplementARy scheDule oF noncAsh investing Activities
Transfer of loans to foreclosed real estate owned
13
NoTES To CoNSoLIDaTED FINaNCIaL STaTEMENTS
1. SuMMARY OF SIGNIFICANT ACCOuNTING POLICIES
Basis of financial statement presentation
e consolidated financial statements include the accounts of Wawel Bank and its wholly-owned subsidiary,
WSB Investment Company, Inc. (collectively the “Bank”). e primary business of the Bank is to provide deposit
and lending services to individuals, small to medium-sized business and professional practices. e Bank is subject
to the regulation of the Office of Controller of the Currency and the Federal Deposit Insurance Corporation.
e subsidiary was formed in August 2002 for the purpose of holding investment securities. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
e preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ 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, the determination of otherthan-temporary impairment on securities, the valuation of deferred tax assets, and foreclosed real estate owned.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Bank considers all cash and amounts due from depository institutions and interest-bearing deposits in other depository institutions with original maturities of three months or
less to be cash equivalents.
Securities
Securities are classified as either held to maturity or available for sale or trading. At the years ended December
31, 2014 and 2013, the Bank did not maintain an available for sale or a trading portfolio. At December 31, 2014,
the Bank also did not maintain a held to maturity portfolio. Securities classified as held to maturity at December
31, 2013 were stated at cost, adjusted for amortization of premiums and accretion of discounts. e Bank had
both the ability and the positive intent to hold these securities to maturity. In December 2014, the Bank decided
to sell its entire held to maturity portfolio and will be prohibited from classifying future securities purchased as
held to maturity for a prescribed period of time. Securities available for sale would be carried at fair value, with
unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive income or
loss, which is included in stockholders' equity. Securities held to maturity would be carried at cost. Amortization
and accretion of premiums and discounts are reflected as an adjustment to interest income over the life of the
security using the effective interest method. Realized gains and losses would be recognized when securities are
sold or called using the specific identification method. e estimated fair value of substantially all of these securities would be determined by the use of quoted market prices obtained from brokers. e Bank would conduct
a periodic review and evaluation of the securities portfolio to determine if a decline in the fair value of any security
below its cost basis is other-than-temporary. e evaluation of other-than-temporary impairment considers the
duration and severity of the impairment, the Bank's intent and ability to hold the securities and assessments of
the reason for the decline in value and the likelihood of a nearterm recovery. If such a decline is deemed otherthan-temporary, the security would be written-down to a new cost basis and the resulting loss is charged to income as a component of non-interest expense.
14
Loans and Allowance for Loan Losses
Loans receivable are stated at unpaid principal balances less the allowance for loan losses, and deferred loan
fees. Loans held for sale are carried at the lower of cost or fair value. e Bank had no loans held for sale at December 31, 2014 and 2013.
e loans receivable portfolio is segmented into one to four family residential loans secured by real estate,
multifamily loans secured by real estate, construction loans secured by real estate, commercial industrial and
commercial real estate, consumer passbook or certificates, consumer equity, and consumer automobile loans.
Recognition of interest on the accrual method is generally discontinued when interest or principal payments
are ninety days or more in arrears, or when other factors indicate that the collection of such amounts is doubtful.
At the time a loan is placed on a nonaccrual status, previously accrued and uncollected interest is reversed against
interest income in the current period. Payments on such loans are generally applied to the principal balance. A
loan is returned to an accrual status when factors indicating doubtful collectability no longer exist, the obligation
is bought current, and has performed in accordance with contractual terms for a reasonable period of time. e
past due status of all classes of loans receivable is determined based on contractual due dates for loan payments.
e Bank defers loan origination fees and certain direct loan origination costs and amortizes such amounts,
as an adjustment of yield over the contractual life of the related loans.
e allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of
the balance sheet date and is recorded as a reduction to loans. e allowance for loan losses is increased by the
provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are
charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All,
or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined
that the repayment of all, or part, of the principal balance is highly unlikely. Because all identified losses are immediately charged off, no portion of the allowance for loan losses is restricted to any individual loan or groups
of loans, and the entire allowance is available to absorb any and all loan losses.
e allowance for loan losses is maintained at a level considered adequate to provide for losses that can be
reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. e allowance is based on the Bank’s past loan loss and industry experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral,
composition of the loan portfolio, current economic conditions and other relevant factors. is evaluation is
inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.
e allowance consists of specific, general and unallocated components. e specific component relates to
loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when
the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the
carrying value of that loan. e general component covers pools of loans by loan class including commercial
loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate, home
equity and other consumer loans. ese pools of loans are evaluated for loss exposure based upon historical loss
rates for each of these categories of loans, adjusted for qualitative factors. ese qualitative risk factors include:
15
1. Lending policies and procedures, including experience, ability and depth of lending managements and staff,
underwriting standards and collection, charge-off, and recovery practices.
2. National, regional, and local economic and business conditions as well as the condition of various market
segments, including the value of underlying collateral for collateral dependent loans.
3. Nature and volume of the portfolio and terms of loans.
4. Volume and severity of past due, classified and nonaccrual loans as well as and other loan modifications.
5. Existence and effect of any concentrations of credit and changes in the level of such concentrations.
6. Effect of external factors, such as competition and legal and regulatory requirements.
Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s
best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are
supported through documentation of changes in conditions in a narrative accompanying the allowance for loan
loss calculation.
e Bank’s credit policies determine advance rates against the different forms of collateral that can be pledged
against commercial loans. Typically, the majority of loans will be limited to a percentage of their underlying collateral values such as real estate values, equipment, eligible accounts receivable and inventory. Individual loan
advance rates may be higher or lower depending upon the financial strength of the borrower and/or term of the
loan. e assets financed through commercial loans are used within the business for its ongoing operation. Repayment of these kinds of loans generally comes from the cash flow of the business or the ongoing conversions
of assets. Commercial real estate loans include long-term loans financing commercial properties. Repayment of
this kind of loan is dependent upon either the ongoing cash flow of the borrowing entity or the resale of or lease
of the subject property. Commercial real estate loans typically require a loan to value ratio of not greater than
80% and vary in terms.
One to four family residential loans, multifamily loans, and home equity loans are secured by the borrower’s
real estate in either a first or second lien position. One to four family residential loans and multifamily loans and
home equity loans have varying loan rates depending on the financial condition of the borrower and the loan to
value ratio. One to four family residential and multifamily loans have amortizations up to 30 years and home
equity loans have maturities up to 15 years.
Other consumer loans include passbook or certificate loans and automobile loans. e majority of these
loans are unsecured.
An unallocated component is maintained to cover uncertainties that could affect management’s estimate of
probable losses. e unallocated component of the allowance reflects the margin of imprecision inherent in the
underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.
A loan is considered impaired when, based on current information and events, it is probable that the Bank
will be unable to collect the scheduled payments of principal or interest when due according to the contractual
terms of the loan agreement. Factors considered by management in determining impairment include payment
status, collateral value and the probability of collecting scheduled principal and interest payments when due.
Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking
into consideration all of the circumstances surrounding the loan and the borrower, including the length of the
delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation
to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and industrial
loans, commercial real estate loans and commercial construction loans by either the present value of expected
future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.
16
An allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair
value. e estimated fair values of substantially all of the Bank’s impaired loans are measured based on the estimated fair value of the loan’s collateral.
For one to four family, multifamily, construction and commercial loans secured by real estate, estimated fair
values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired,
a decision is made regarding whether an updated certified appraisal of the real estate is necessary. is decision
is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based
on the original appraisal and the condition of the property. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. e discounts also include
estimated costs to sell the property.
For commercial and industrial loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory
reports, accounts receivable agings or equipment appraisals or invoices. Indications of value from these sources
are generally discounted based on the age of the financial information or the quality of the assets.
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly,
the Bank does not separately identify individual residential mortgage loans, home equity loans and other consumer
loans for impairment disclosures, unless such loans are the subject of a troubled debt restructuring agreement.
Loans whose terms are modified are classified as troubled debt restructurings if the Bank grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions
granted under a troubled debt restructuring generally involve a temporary reduction in interest rate or an extension of a loan’s stated maturity date. Non-accrual troubled debt restructurings are restored to accrual status if
principal and interest payments, under the modified terms, are current for six consecutive months aer modification. Loans classified as troubled debt restructurings are designated as impaired.
e allowance calculation methodology includes further segregation of loan classes into risk rating categories.
e borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate,
are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments,
for commercial and consumer loans. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans criticized special mention has potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment
prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation
of the debt. ey include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent
in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of
current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are
charged to the allowance for loan losses. Loans not classified are rated pass.
In addition, Federal regulatory agencies, as an integral part of their examination process, periodically review
the Bank’s allowance for loan losses and 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, which may not be currently
available to management. Based on management’s comprehensive analysis of the loan portfolio, management
believes the current level of the allowance for loan losses is adequate.
e Bank accounts for its transfers and servicing of financial assets in accordance with FASB guidance. Transfers of financial assets for which the Bank has surrendered control of the financial assets are accounted for as
sales to the extent that consideration other than beneficial interests in the transferred assets is received in exchange.
Retained interests in a sale or securitization of financial assets are measured at the date of transfer by allocating
17
the previous carrying amount between the assets transferred and based on their relative estimated fair values.
e fair values of retained servicing rights and any other retained interests are determined based on the present
value of expected future cash flows associated with those interests and by reference to market prices for similar
assets. ere were no transfers of financial assets to related or affiliated parties. As of December 31, 2014 and
2013, the Bank has not recorded mortgage servicing assets due to the immateriality of the amount that would
have been capitalized based upon the limited amount of assets secured by the Bank.
Restricted Stocks
As a member of the Federal Home Loan Bank of New York ("FHLB"), the Bank is required to acquire and
hold shares of FHLB Class B stock. e holding requirement varies based on the Bank's activities, primarily its
outstanding borrowings, with the FHLB. e investment in FHLB stock is carried at cost. e Bank conducts
a periodic review and evaluation of its FHLB stock to determine if any impairment exists. e FHLB stock was
carried at $215,200 and $294,200 for the years ended December 31, 2014 and 2013, respectively.
Restricted stocks also includes stock of the Atlantic Community Bankers Bank in the amount of $70,000 at December 31, 2014 and 2013.
Foreclosed Real Estate Owned
When properties are acquired through foreclosure, they are transferred at the lower of the carrying value or
estimated fair value of the collateral and any required write-downs are charged to the allowance for loan losses.
Subsequently, such properties are carried at the lower of the adjusted cost or fair value less estimated selling costs.
Estimated fair value of the property is generally based on an appraisal. e Bank maintains an allowance for real
estate owned losses for subsequent declines in estimated fair value if required. Expenses of holding foreclosed
properties, net of other income, are charged to operations as incurred. Gains and losses from sales of such properties are recognized at the time of sale.
Premises and Equipment
Premises and equipment are comprised of land, at cost, building, improvements, and furnishings and equipment, at cost, less accumulated depreciation. Depreciation charges are computed on the straight-line method
over the following estimated useful lives:
Years
Building and improvements
15 - 40
Furnishings and equipment
3 - 10
Significant renewals and betterments are charged to the premises and equipment account. Maintenance and
repairs are charged to operations in the year incurred.
Bank-Owned Life Insurance
Bank-owned life insurance ("BOLI") is accounted for in accordance with FASB guidance. e cash surrender
value of BOLI is recorded on the consolidated statement of financial condition as an asset and the change in the
cash surrender value is recorded as non-interest income. e amount by which any death benefits received exceeds
a policy's cash surrender value is recorded in non-interest income at the time of receipt. A liability is also recorded
on the consolidated statement of financial condition for postretirement death benefits provided by the splitdollar endorsement policy. A corresponding expense is recorded in non-interest expense for the accrual of benefits
over the period during which employees provide services to earn the benefits.
18
Income Taxes
e Bank and its subsidiary file a consolidated federal income tax return. Income taxes are allocated based
on their respective contribution of income or loss to the consolidated federal income tax return. Separate state
income tax returns are filed.
Federal and state income taxes have been provided on the basis of reported income. e amounts reflected
on the Bank's and subsidiary's tax returns differ from these provisions due principally to temporary differences
in the reporting of certain items for financial reporting and income tax reporting purposes.
ere are two components of income tax expense: current and deferred. Current income tax reflects taxes
to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of declaration over revenues. Deferred income tax expense or benefit is determined by recognizing
deferred tax assets and liabilities for the estimated future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. e effect on deferred tax assets and
liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. e
realization of deferred tax assets is assessed and a valuation allowance provided, when necessary, for the portion
of any assets which are not likely to be realized.
e Bank accounts for uncertainty in income taxes recognized in the consolidated financial statements in accordance with ASC Topic 740, Income Taxes; which prescribes 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, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As a result of the Bank's evaluation, no significant income tax uncertainties
have been identified. erefore, the Bank recognized no adjustment for unrecognized income tax benefits for the
years ended December 31, 2014 and 2013. e Bank's policy is to recognize interest and penalties on unrecognized
tax benefits in income tax expense in the consolidated statement of income. e Bank did not recognize any interest and penalties for the years ended December 31, 2014 and 2013. e tax years subject to examination by
the taxing authorities are the years ended December 31, 2013, 2012, and 2011 for federal and state purposes.
Concentration of Credit Risk and Interest-Rate Risk
e Bank is principally engaged in the business of attracting deposits from the general public and using these
deposits, together with borrowings and other funds, to make loans secured by real estate and, to a lesser extent,
consumer loans in the northern New Jersey area. Although the Bank has a diversified loan portfolio, its debtors'
ability to honor its contracts is influenced by the region's economy. e Bank does not have any significant concentrations to any one industry or customer. e potential for interest-rate risk exists as a result of the shorter
duration of the Bank's interest-sensitive liabilities compared to the generally longer duration of interest-sensitive
assets. In a rising rate environment, liabilities will reprice faster than assets, thereby reducing net interest income.
For this reason, management regularly monitors the maturity structure of the Bank's assets and liabilities in order
to measure its level of interest-rate risk and to plan for future volatility.
Comprehensive Income
Accounting principles generally require that recognized revenue, expenses, gains and losses be included in
net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available
for sale securities, are reported as a separate component of the equity section of the balance sheet, such items,
along with net income, are components of comprehensive income.
19
Stock-Based Compensation
e Bank expenses the fair value of all options and restricted stock granted over their requisite service periods.
e Bank has established an Employee Stock Ownership Plan ("ESOP") covering eligible employees as defined
by the ESOP. e Bank accounts for the ESOP in accordance with FASB guidance. Compensation expense for
the ESOP is recorded at an amount equal to the shares allocated by the ESOP multiplied by the average fair market
value of the shares during the year. e Bank recognizes compensation expense ratably over the year for the ESOP
shares to be allocated based upon the Bank's current estimate of the number of shares expected to be allocated by
the ESOP during each calendar year. e difference between the average fair market value and the cost of the
shares allocated by the ESOP is recorded as an adjustment to additional paid-in-capital. Dividends on allocated
ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce debt and accrued interest.
Fair Value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions.
Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or in
market conditions could significantly affect the estimates.
Off-Balance Sheet Financial Instruments
In the ordinary course of business, the Bank has entered into 0ff-balance sheet financial instruments consisting of commitments to extend credit and letters of credit. Such financial instruments are recorded in the balance sheets when they are funded.
Advertising costs
It is the Bank's policy to expense advertising costs in the period in which they are incurred.
Reclassifications
Certain amounts in the 2013 financial statements have been reclassified to conform with 2014 presentation.
ese reclassifications had no effect on 2013 net loss.
Subsequent events
e Bank has evaluated events and transactions occurring subsequent to the balance sheet date of December 31, 2014, for items that should potentially be recognized or disclosed in these consolidated financial
statements. e evaluation was conducted through April 13, 2015, the date these financial statements were
available to be issued.
20
2. SECuRITIES HELD TO MATuRITY
At December 31, 2014, the Bank had no securities held to maturity. e carrying value and fair value of securities held to maturity with gross unrealized gains and losses at December 31, 2013 are as follows:
DECEMBER 31, 2013
gross unrealized
carrying
value
losses
Fair
value
–
$ 1,150,248
$ 7,322,539
gains
u.S. Government agencies
$ 8,472,787
Small Business Administration
26,572
–
15
26,557
Government National Mortgage Association
82,980
3,093
–
86,073
Federal National Mortgage Association
10,193,105
195,690
254,596
10,134,199
Certificate of deposit
250,000
–
–
250,000
198,783
$ 1,404,859
$ 17,819,368
$ 19,025,444
$
$
e following table summarizes the fair values and unrealized losses of investment securities held-to-maturity
with an unrealized loss at December 31, 2013, and if the unrealized loss position was for a continuous period of
less than one year, or one year or more.
DECEMBER 31, 2013
under one year
Fair value
u.S. Government Agencies
$ 5,528,929
Small Business Administration
Federal National Mortgage Association
one year or more
gross
unrealized
loss
$
gross
unrealized
loss
Fair value
821,996
$ 1,793,609
$
26,572
15
–
–
6,528,181
254,596
–
–
$ 12,083,682
$ 1,076,607
$ 1,793,609
$
328,252
328,252
e unrealized losses are primarily due to changes in market interest rates subsequent to purchase. At December 31, 2013, a total of 13 securities were in an unrealized loss position. e Bank only purchases securities
issued by Government Sponsored Enterprises or states and political subdivisions and does not own any unrated
or private label securities or other high-risk securities such as those backed by sub-prime loans. Accordingly, it is
expected that the securities would not be settled at a price less than the Bank's amortized cost basis. e Bank
did not consider these investments to be other-than-temporarily impaired at December 31, 2013 since the decline
in market value was attributable to changes in interest rates and not credit quality and the Bank had the ability
to hold these investments until there is a full recovery of the unrealized loss, which may be at maturity. As a result,
no impairment loss had been recognized during the year ended December 31, 2013.
Gross gains and gross losses on the sales of securities held to maturity were $247,809 and $341,983 for the
year ended December 31, 2014. Gross gains on the sales of securities held to maturity were $10,000 for the year
ended December 31, 2013. e sale of these securities in 2013 occurred aer the Bank had already collected a
substantial portion (at least 85%) of the principal outstanding at acquisition on the securities. Gross losses on
the sales of securities available for sale were $497,045 for the year ended December 31, 2013.
21
3. LOANS AND ALLOwANCE FOR LOAN LOSSES
DECEMBER 31
2014
2013
One to four family residential - real estate mortgage
$ 13,947,537
24,948,191
Multifamily - real estate mortgage
2,411,352
3,925,281
Construction - real estate mortgage
–
315,000
Commercial - commercial industrial and real estate mortgage
17,316,369
14,876,053
33,675,258
44,064,525
Passbook or certificate
–
72,074
Equity
2,484,102
3,362,450
Automobile
108,656
122,915
2,592,758
3,557,439
total loans
36,268,016
47,621,964
Less allowance for loan losses
1,191,774
2,045,445
$ 35,076,242
$ 45,576,519
CONSuMER:
e following tables present the composition of the loan portfolio by credit quality indicator at the date indicated:
CREDIT RISK PROFILE BY INTERNALLY ASSIGNED GRADE AT DECEMBER 31, 2014
1-4 family
Residential
Pass
$ 12,600,687
Special mention
749,204
Substandard
multi family
construction
$
$
consumer
–
$13,1981,227
–
–
597,646
50,939
Doubtful
–
Loss
–
total
$ 13,947,537
$
2,360,413
commercial
2,314,719
$ 30,467,046
1,547,417
–
2,296,621
–
2,577,725
278,039
3,504,349
–
–
–
–
–
–
–
–
–
–
–
$ 17,316,369
2,592,758
$ 36,268,016
2,411,352
$
$
total
$
CREDIT RISK PROFILE BY INTERNALLY ASSIGNED GRADE AT DECEMBER 31, 2013
1-4 family
Residential
22
Pass
$ 16,052,400
Special mention
2,722,221
Substandard
multi family
construction
$
$
consumer
315,000
$ 11,393,809
–
–
6,173,570
390,867
Doubtful
–
Loss
–
total
$ 24,948,191
$
3,534,414
commercial
3,003,792
$ 34,299,415
–
–
2,722,221
–
3,482,244
553,647
10,600,328
–
–
–
–
–
–
–
–
–
–
315,000
$ 14,876,053
3,557,439
$ 47,621,964
3,925,281
$
$
total
$
e allowance calculation methodology includes further segregation of loan classes into risk rating categories.
e borrower's overall financial condition, repayment sources, guarantors and value of collateral, if appropriate,
are evaluated when credit deficiencies arise, such as delinquent loan payments. Credit quality risk ratings include
regulatory classifications of pass, special mention, substandard, doubtful and loss.
Loan Classifications are Defined as follows:
Pass - ese loans are well protected by the current net worth and paying capacity of the obligor (or guarantors,
if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner.
Special Mention - ese loans have potential weaknesses that deserve management's close attention. If le
uncorrected, these potential weaknesses may result in deterioration of repayment prospects.
Substandard - ese loans are inadequately protected by the current net worth and paying capacity of the
obligor or by the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses that jeopardize the liquidation of the debt. ey are characterized by the distinct possibility that the
Bank will sustain some loss if the deficiencies are not corrected.
Doubtful - ese loans have all the weaknesses inherent in a loan classified substandard with the added characteristic that the weaknesses make the full recovery of our principal balance highly questionable and improbable on the basis of currently known facts, conditions, and values. e likelihood of a loss on an asset
or portion of an asset classified as doubtful is high. Its classification as Loss is not appropriate, however, because pending events are expected to materially affect the amount of loss.
Loss - ese loans are considered uncollectible and of such little value that a charge-off is warranted. is
classification does not necessarily mean that an asset has no recovery or salvage value; but rather, there is
much doubt about whether, how much, or when the recovery will occur.
e following tables provide information about loan delinquencies at the dates indicated:
DECEMBER 31, 2014
30-59 Days
Past Due
Residential 1-4 family
$
383,705
60-89 Days
Past Due
$
240,761
90 Days or
More Past Due
$
606,243
Total Past Due
$
1,230,709
Current Loans
$
12,716,828
Total Loans
$
13,947,537
90 Days or More Past
Due and Accruing
$
–
Multifamily
–
–
–
–
2,411,352
2,411,352
–
Commercial
848,971
–
2,455,737
3,304,708
14,011,661
17,316,369
–
Consumer
211,268
–
218,961
2,162,529
2,592,758
–
$ 31,302,370
$ 36,268,016
$ 1,443,944
$
240,761
$
3,280,941
430,229
$
4,965,646
$
–
DECEMBER 31, 2013
30-59 Days
Past Due
Residential 1-4 family
$
–
60-89 Days
Past Due
$
–
90 Days or
More Past Due
$
5,603,025
Total Past Due
$
5,603,025
Current Loans
$
19,354,166
Total Loans
$
24,948,191
90 Days or More Past
Due and Accruing
$
–
Multifamily
–
–
390,867
390,867
3,534,414
3,925,281
–
Construction
–
–
–
–
315,000
315,000
–
Commercial
402,303
–
1,302,924
1,705,227
13,170,826
14,876,053
–
Consumer
–
–
490,668
490,668
3,066,771
3,557,439
–
8,189,787
$ 39,432,177
$ 47,621,964
$
402,303
$
–
$
7,787,484
$
$
–
23
ere were no loans modified in a troubled debt restructuring during the years ended December 31, 2014
and 2013. Loans modified in a troubled debt restructuring totaled approximately $705,000 and $1,300,000 at
December 31, 2014 and 2013, respectively. All loans, at December 31, 2014, were over 90 days delinquent and
on non-accrual status and are included in residential one to four family loans.
e following table is a summary of loans, by loan type, on which the accrual of income has been discontinued at December 31, 2014 and 2013:
DECEMBER 31
NON-ACCRuAL LOANS:
1-4 family residential
2014
$
2013
606,243
$
5,603,025
Multifamily
–
390,867
Commercial real estate
2,455,737
1,302,924
Consumer
218,961
490,668
total non-accrual loans
3,280,941
7,787,484
e total amount of interest income on non-accrual loans that would have been recognized if interest on all
such loans had been recorded based upon original contract terms amounted to approximately $85,000 and
$330,000 for 2014 and 2013, respectively. e total amount of interest income received during the year on nonaccrual loans amounted to approximately $-0- during 2014 and 2013.
e following table presents loans evaluated for impairment by loan type:
AT AND FOR THE YEAR ENDED DECEMBER 31, 2014
Recorded
investment
unpaid principal
Balance
Related
Allowance
Average Recorded investment
interest income
Recognized
$
$
wITHOuT AN ALLOwANCE:
$
$
606,243
$
–
3,104,634
–
Multifamily
50,939
50,939
–
220,903
–
Commercial
3,225,809
3,225,809
–
2,264,367
–
Consumer
278,039
278,039
–
384,354
–
4,161,030
4,161,030
–
5,974,258
–
None
None
None
None
None
wITH AN ALLOwANCE:
total
24
606,243
$
4,161,030
$
4,161,030
$
–
$
5,974,258
$
–
AT AND FOR THE YEAR ENDED DECEMBER 31, 2013
Recorded
investment
unpaid principal Related specific
Balance
Allowance
Average Recorded investment
interest income
Recognized
$
$
$
wITHOuT AN ALLOwANCE:
$
5,603,025
5,603,025
$
–
3,115,701
–
Multifamily
390,867
390,867
–
141,439
Commercial
1,302,924
1,302,924
–
1,265,635
$
–
Consumer
490,668
490,668
–
370,126
$
–
7,787,484
7,787,484
–
4,892,901
–
272,584
272,584
150
358,787
–
Commercial real estate
431,205
431,205
163,704
389,524
–
703,789
703,789
163,854
748,311
–
5,641,212
–
–
wITH AN ALLOwANCE:
total
$
8,491,273
$
8,491,273
$
163,854
$
An analysis of the allowance for loan losses follows:
2014
Balance, beginning
$
2013
2,045,445
$
2,087,105
Provision (credit) charged to operations
(992,000)
1,240,000
Loans charged-off, net of recoveries
138,329
(1,281.660)
Balance, ending
$
1,191,774
$
2,045,445
e following tables present the activity in the allowance for loan losses by loan type for the years ended
December 31, 2014 and 2013:
YEAR ENDED DECEMBER 31, 2014
Balance, beginning
1-4 Family
Residential
multifamily
construction
commercial
$
$
$
8,773
$ 1,185,074
640,332
117,758
consumer
$
unallocated
93,508
$
total
–
$ 2,045,445
Provision (credit)
(214,179)
(108,080)
(8,773)
(679,192)
18,224
–
(992,000)
Charge-offs, net
38,328
–
–
100,001
–
–
138,329
Balance, ending
$ 464,481
9,678
–
$
$
605,883
$
111,732
$
–
$1,191,774
$
3,379
$ 2,087,105
YEAR ENDED DECEMBER 31, 2013
Balance, beginning
$
782,842
$
53,139
$
121,228
$ 1,075,928
$
50,589
Provision
364,179
64,619
(130,005)
837,237
107,349
(3,379)
1,240,000
Charge-offs, net
(506,689)
–
17,550
(728,091)
(64,430)
–
(1,281,660)
Balance, ending
$ 640,332
8,773
$ 1,185,074
$
117,758
$
$
93,508
$
–
$2,045,445
25
e Bank has granted loans to its officers and directors and to their associates. Related party loans are made
on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than normal risk of collectibility. e aggregate dollar amount of these loans totaled approximately $998,000 and $1,574,000, at December 31, 2014
and 2013, respectively, with repayments during the year ended 2014 totaling $576,000.
Loans serviced for the benefit of others totaled approximately $5,919,000 and $6,916,000 at December 31,
2014 and 2013, respectively.
4. PREMISES AND EquIPMENT, NET
e components of premises and equipment, net are as follows:
DECEMBER 31
2014
Land
$
3,249,878
2013
$
3,249,878
Building and improvements
3,497,335
3,487,874
Less accumulated depreciation
961,413
871,548
2,535,922
2,616,326
Furniture and equipment
812,161
783,219
Less accumulated depreciation
565,516
589,136
245,516
194,083
$
6,032,316
$
6,060,287
5. INTEREST RECEIVABLE
e components of interest receivables are as follows:
DECEMBER 31
2014
Loans
$
Securities
153,847
2013
$
184,022
–
$
153,847
71,711
$
255,733
6. DEPOSITS
DECEMBER 31
e components of deposits are as follows:
(In Thousands)
26
2014
2013
Demand
$ 12,242,217
$
9,126,251
Savings and club accounts
25,755,290
29,863,459
Time deposits
25,507,796
33,058,069
total
$ 63,505,303
$ 72,047,779
DECEMBER 31
A summary of time deposits by maturity follows:
(In Thousands)
One year or less
2014
$
15,414
2013
$
19,644
After one year through three years
7,542
9,627
After three years
2,552
3,787
total
$
25,508
$
33,058
Certificates of deposit of $100,000 or more totaled approximately $10,583,000 and $14,630,000, at December 31, 2014 and 2013, respectively. Certificates of deposit of $250,000 (FDIC insurance limit) or more totaled approximately $2,121,000 and $4,429,000 at December 31, 2014 and 2013, respectively.
7. BORROwED FuNDS
At December 31, 2014 and 2013, the Bank had the capability to borrower from the Federal Home Loan
Bank of New York ("FHLB") up to 30% of the Bank's total assets. At December 31, 2014 and 2013, there
were -0- outstanding borrowings.
Advances are secured by FHLB stock, qualifying real estate first mortgage loans, investment securities and
mortgage backed securities.
8. REGuLATORY CAPITAL
e Bank is subject to various regulatory capital requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material adverse effect on the Bank. Under
capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities and certain off-balance
sheet items, as calculated under regulatory accounting practices. e Bank's capital amounts and classification
are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain
minimum amounts and ratios (set forth in the table below) of tangible and core capital (as defined) to total
assets, and of total capital (as defined) to risk-weighted assets (as defined). Management believes, as of December
31, 2014 and 2013, that the Bank meets all capital adequacy requirements to which it is subject.
e following table presents a reconciliation of capital per GAAP and regulatory capital at the dates indicated:
DECEMBER 31
(In Thousands)
GAAP capital
$
8,163
2013
$
13,275
Less disallowed deferred tax asset
–
(3,569)
Core and tangible capital
8,163
9,706
General allowance for loan losses
554
737
total regulatory capital
2014
$
8,717
$
10,443
27
e Bank's actual capital amounts and ratios are presented in the table below:
(Dollars in Thousands)
For capital
Adequacy purposes
Actual
Amount
Ratio
Amount
to be well capitalized under
prompt corrective Action
provisions
Ratio
Amount
Ratio
As of December 31, 2014:
Tangible capital
$
8,163
11.24%
Tier 1 (core) capital
8,163
Risk-based capital, Tier 1
Risk-based capital, Total
$
≥1,089
≥1.50%
11.24%
≥6,536
8,163
18.67%
8,717
19.94%
9,706
11.68%
Tier 1 (core) capital
9,706
Risk-based capital, Tier 1
Risk-based capital, Total
$
≥–
≥–%
≥9.00%
≥3,631
≥5.00%
≥5,718
≥12.00%
≥2,859
≥6.00%
≥6,671
≥14.00%
≥4,765
≥10.00%
≥1,247
≥1.50%
≥–
≥–%
11.68%
≥7,481
≥9.00%
≥4,156
≥5.00%
9,706
16.83%
≥6,922
≥12.00%
≥3,461
≥6.00%
10,443
18.10%
≥8,076
≥14.00%
≥5,769
≥10.00%
As of December 31, 2013:
Tangible capital
$
$
$
As of December 31, 2014, the most recent notification from regulators, the Bank was categorized as well
capitalized under the regulatory framework for prompt corrective action. ere are no conditions existing or
events which have occurred since notification that management believes have changed the Bank's category.
e OCC has imposed individual minimum capital requirements for the Bank due to continued decline in
capital levels due to deficient earning, asset quality and management. e OCC considers the Bank's capital to
be less than satisfactory as of their March 2014 examination.
9. REGuLATORY MATTER
On September 29, 2010, the Bank became subject to a cease and desist order (the "Order") issued by the
Office of ri Supervision, now the Office of Controller of the Currency ("OCC") the Bank's primary federal
regulator, which restricted the Bank's ability to engage in certain lending activities and required the Bank to take
various corrective actions. e Bank consented to the issuance of the Order. e Order required, among other
things, that the Bank refrain from making or purchasing any new commercial loans, commercial real estate loans,
land, or construction or development loans without the prior written non-objection of the OCC. e Order further required the Bank to adopt a plan and strategy for reducing its problem loans, especially those greater than
$500,000. In addition, the Bank was required to adopt a new loan loss allowance policy and correct loan underwriting and credit administration weakness cited in the most recent examination report. e Order also required
the Bank to revise its Bank Secrecy Act policy and Anti-Money Laundering program and develop and implement
a comprehensive business continuity plan. is Order was terminated by the OCC and superseded by a new consent order (the "new order") on October 26, 2011.
e new order, among other things, requires the Bank to establish a compliance committee of the Board of
Directors (the "Board") to monitor and coordinate the Bank's adherence to the provisions of the new order; to
add a new independent director and appoint him or her to the Compliance and Audit Committees of the Board;
to ensure the Bank has capable management in place to carry out the Board's policies and manage the day-today
operations of the Bank in a safe and sound manner; ensure the Bank's Audit Committee is effectively performing
its duties; prepare, implement, and ensure adherence to a written three-year business plan; to adopt and implement a conflict of interest policy, an overdra policy, and a credit policy; cease granting overdra extensions of
credit to insiders; ensure the adequacy of the allowance for loan losses in accordance with regulatory guidelines;
28
employ a loan workout specialist and establish loan workout processes designed to restore and retain classified
assets consistent with regulatory guidelines; and amend its executive employment contracts to comply with regulatory guidelines. e new order will remain in effect until terminated by the OCC.
10. INCOME TAx
e components of income tax expense (benefit) are summarized as follows:
CuRRENT TAx ExPENSE (BENEFIT):
Federal income
2014
$
State income
18,633
2013
$
(61,552)
6,583
7,325
25,216
(54,227)
Federal income
(494,766)
(866,900)
State income
(161,247)
(286,990)
(656,013)
(1,153,890)
Federal
3,183,492
–
State
1,041,557
–
4,225,049
–
3,594,252
$ (1,208,117)
DEFERRED TAx ExPENSE (BENEFIT):
VALuATION ALLOwANCE:
income tax expense (benefit)
$
DECEMBER 31
e components of the net deferred tax asset are as follows:
2014
2013
DEFERRED TAx ASSETS:
Stock compensation plans
$
12,863
$
12,863
Loan losses
158,862
649,633
Accrued expenses
224,203
311,328
Charitable contribution carryover
4,469
3,511
Net operating loss carryovers
3,890,947
2,643,761
4,281,344
3,621,096
Depreciation
(56,295)
(46,686)
Discounts
–
(375)
Prepaid expenses
–
(4,999)
(56,295)
(52,060)
Net deferred tax asset
4,225,049
3,569,036
Valuation allowance
(4,225,049)
–
DEFERRED TAx LIABILITIES:
total net deferred tax asset
$
–
$
3,569,036
Differences between the federal statutory income tax to the income tax expense (benefit) are from permanent
differences including income on bank owned life insurance and meals and entertainment as well as the effect of
the valuation allowance.
At December 31, 2014 and 2013, the Bank had available net operating loss carryovers of $7,996,000 and
$6,478,000 for federal tax purposes and $7,564,000 and $7,427,000 for state tax purposes expiring in the years
2031 through 2034.
e net deferred tax asset represents the anticipated federal and state tax benefits expected to be realized in
future years upon the utilization of the underlying tax attributes comprising this balance. In management's opinion, in view of the Bank's previous and projected future earnings trends, such net deferred tax asset will not morelikely-than-not be fully realized. Accordingly, a valuation allowance of $4,225,049 was deemed to be required
at December 31, 2014.
11. BENEFIT PLANS
Defined Benefit Retirement Plan
e Bank participates in a multiemployer defined benefit pension plan covering all full-time employees who
had attained a minimum age of 21 years and completed 12 months of service. In October 2013, the Board of
Directors authorized a freeze to the entry of newly-hired employees into the defined benefit retirement plan, together with any additional benefit accruals for existing employees.
e risks of participating in this multiemployer plan are different from single-employer plans in the following
aspects:
a. Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees
of other participating employers.
b. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne
by the remaining participating employers.
c. If the Bank chooses to stop participating in the plan, the Bank may be required to pay the plan an amount
based on the underfunded status of the plan, referred to as a withdrawal liability.
e Bank’s participation in the plan is outlined in the table below. e “EIN/Pension Plan Number” column provides the Employer Identification Number (“EIN”) and the three-digit plan number, if applicable. Unless otherwise noted, the most recent Pension Protection Act (“PPA”) zone status available in 2014 and 2013
is for the plan’s year-end at December 31, 2014 and December 31, 2013, respectively. e zone status is based
on information that the Bank received from the plan and is certified by the plan’s actuary. Among other factors,
plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent
funded, and plans in the green zone are at least 80 percent funded. e “FIP/RP Status Pending/Implemented”
column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either
pending or has been implemented. ere have been no significant changes that affect the comparability of 2014
and 2013 contributions.
Pension Protection Act
Zone Status
Pension Fund
EIN/Pension
Plan Number
2014
2013
FIP/RP Status
Pending /
Implemented
Defined Benefit Plan for Financial Institutions
xxxxx
Green
Green
No
Contributions of the Bank for
the Years Ended December 31
(In Thousands)
2014
$
93
2013
$
235
Surcharge
Imposed
No
e Bank was not listed in the plan’s Form 5500 as providing 5% or more of contributions in 2013. e
Form 5500 for 2014 is not yet available.
30
Directors and officers Supplemental retirement Plans
Directors Retirement Plan and Officers' Phantom Stock and Option Plan
e Bank maintains a directors retirement plan. e Plan provides the Directors with a retirement benefit
of up to 75% of the regular Board fees for 5 years and provides each Director's beneficiary with a pre-retirement
death benefit equal to the stated benefits (if the Director is insurable) and a post-retirement death benefit which
continues the payments for the balance of the 5-year benefit period. e percentage of final Board fees to be
paid is determined by the number of years on the Board, utilizing a formula of 5% of fees for each year of Board
service. e maximum percentage is 75% and the minimum percentage is 50%. To be eligible, the Board member
must be in this retirement plan for 5 years.
e Bank maintains an officer phantom stock and option plan. e Plan is designed to provide top officers
with a retirement benefit based upon the performance of hypothetical (or "phantom") stock in the Bank. e
benefits are directly tied to the annual performance of the phantom stock. Benefits are accrued over the working
life of the participants and are paid out over a 15-year period, beginning at retirement age. In addition, if any
participant dies (either pre- or post-retirement) before receiving the full benefits, the designated beneficiary will
receive the benefits for the remaining period.
e accrued liability under the plans was $581,348 and $598,790 at December 31, 2014 and 2013, respectively. e amount charged to expense for the plans totaled approximately $11,000 and $33,000, for the years
ended December 31, 2014 and 2013, respectively.
Employee Stock Ownership Plan
Effective upon the consummation of the Bank's stock offering, an Employee Stock Ownership Plan
("ESOP") was established for all eligible employees who had completed a 12-month period of employment with
the Bank and at least 1,000 hours of service, and had attained the age of 21. e ESOP used $639,450 in proceeds
from a term loan to purchase 63,945 shares of the Bank's common stock during the stock offering. e term
loan principal was payable in equal quarterly installments. Interest on the term loan was variable. Loan payments
were principally funded by cash contributions from the Bank, subject to federal tax law limits. e loan was paid
in full and all remaining shares in the Plan were allocated during 2012.
Shares purchased with the loan proceeds were initially pledged as collateral for the loan and are held in a
suspense account for future allocation among participants. Contributions to the ESOP and shares released from
the suspense account are in an amount proportional to the loan repayment. Shares were allocated among the
participants on the basis of compensation, as described by the Plan, in the year of allocation. As shares were committed to be released from collateral, the Bank reported compensation expense equal to the current market price
of the shares, and the shares became outstanding for basic net income per common share computations. ESOP
expense was $-0- for the years ended December 31, 2014 and 2013.
Stock Option Plan
On April 25, 2005, the Bank adopted a "2005 Stock Based Incentive Plan," pursuant to which an aggregate
of 103,070 shares of common stock have been reserved for issuance to certain key employees and the directors
of the Bank. On October 26, 2005, options totaling 60,165 were granted. Under this plan, the options were
granted at the fair market value of the Bank's common stock on the date of grant. ese options expire in not
more than 10 years aer the date of grant. Options granted to officers and directors become exercisable at 20%
per year beginning 1-year from the date of grant. On April 6, 2007 additional options totaling 28,575 were
granted under this plan.
31
e following table summarizes the options granted and exercised under the plan and exercise price
2013
2012
weighted
Average
exercise price
shares
Balance at beginning of year
88,410
Granted
$
weighted
Average
exercise price
shares
10.22
88,410
$
10.22
–
–
–
–
Exercised
–
–
–
–
Forfeited or expired
–
–
–
–
Balance at end of year
88,410
$
10.22
88,410
$
10.22
options exercisable at year end
88,410
$
10.22
88,410
$
10.22
weighted average remaining contractual life
1.3 years
2.3 years
e aggregate intrinsic value of all options outstanding and options exercisable was $-0- at December 31,
2014 and 2013.
For the years ended December 31, 2014 and 2013, the Bank recognized $-0- of compensation expense related
to the stock option plan.
As of December 31, 2014 and 2013, there were no remaining unvested stock options and, as a result, there
was no remaining unrecognized compensation cost.
12. COMMITMENTS AND CONTINGENCIES
e Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to
meet the financing needs of its customers. ese financial instruments primarily include standby letters of credit
and commitments to extend credit. ese instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the statement financial condition. e contract or notional amounts
of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments.
Commitments to extend credit are agreements to lend to a customer 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 many of the commitments are expected to expire without being
drawn upon, the total commitment amounts do not necessarily represent future cash requirements. e Bank
evaluates each customer's creditworthiness on a case-by-case basis. e amount of collateral obtained, if deemed
necessary by the Bank, upon extension of credit, is based on management's credit evaluation of the counter-party.
Collateral held varies but primarily includes residential real estate.
DECEMBER 31
e Bank had commitments outstanding to extend credit as follows (in thousands)
2014
Commitments to grant loans
unfunded commitments under lines of credit
32
$
303
2013
$
5
358
1,448
661
1,453
e Bank also has, in the normal course of business, commitments for services and supplies. Management
does not anticipate losses on any of these transactions.
In the conduct of the Bank's business, it is involved in normal litigation matters. In the opinion of management, the ultimate disposition of such litigation should not have a material adverse effect on the financial condition of the Bank.
13. FAIR VALuE MEASuREMENTS AND DISCLOSuRES
Fair Value Measurements
e Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures; defines
fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.
ASC Topic 820 applies only to fair value measurements already required or permitted by other accounting standards and does not impose requirements for additional fair value measures. ASC Topic 820 was issued to increase
consistency and comparability in reporting fair values.
e Bank uses fair value measurements to record fair value adjustments to certain assets and to determine
fair value disclosures. e Bank did not have any liabilities that were measured at fair value at December 31,
2014 and 2013. Additionally, from time to time, the Bank may be required to record at fair value other assets or
liabilities on a non-recurring basis, such as foreclosed real estate owned and certain impaired loans. ese nonrecurring fair value adjustments generally involve the write-down of individual assets due to impairment losses.
In accordance with ASC Topic 820, the Bank groups its assets at fair value in three levels, based on the markets
in which the assets are traded and the reliability of the assumptions used to determine fair value. ese levels are:
Level 1- Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2- Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for
identical or similar instruments in markets that are not active and model-based valuation techniques
for which all significant assumptions are observable in the market.
Level 3- Valuation is generated from model-based techniques that use significant assumptions not observable
in the market. ese unobservable assumptions reflect the Bank's own estimates of assumptions that
market participants would use in pricing the asset or liability. Valuation techniques include the use
of option pricing models, discounted cash flow models and similar techniques. e results cannot be
determined with precision and may not be realized in an actual sale or immediate settlement of the
asset or liability.
e Bank bases its fair values on the price that would be received to sell an asset in an orderly transaction
between market participants at the measurement date. ASC Topic 820 requires the Bank to maximize the use
of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Assets that are measured on a recurring basis are limited to the available for sale securities portfolio. e
available for sale portfolio is carried at estimated fair value with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income or loss in stockholders' equity. Substantially all of the available for sale portfolio consists of investment securities issued by government-sponsored enterprises. e fair
values for substantially all of these securities are obtained from an independent broker. Based on the nature of
the securities, the broker provides the Bank with prices which are categorized as Level 2 since quoted prices in
active markets for identical assets are generally not available for the majority of securities in the portfolio.
ere were no assets measured at fair value on a recurring basis at December 31, 2014 and 2013.
Assets that were measured at fair value on a non-recurring basis at December 31, 2014 and 2013 were limited
to impaired loans with specific allowances and real estate owned.
33
Loans evaluated for impairment in accordance with FASB guidance which required a specific allowance
amounted to $-0- million and $539,935 at December 31, 2014 and 2013, respectively. ese impaired loans are
individually assessed to determine that the loan's carrying value is not in excess of the fair value of the collateral,
less estimated selling costs. Since these impaired loans are secured by real estate, fair value is estimated through
current appraisals, where practical, or an inspection and a comparison of the property securing the loan with
similar properties in the area by either a licensed appraiser or real estate broker and, as such, are classified as Level
3. Discounts on the appraised values plus an estimate for selling costs were at a range of 10% to 24% of the appraised value at the years ended December 31, 2014 and 2013, respectively.
Real estate owned represents real estate acquired as a result of foreclosure or by deed in lieu of foreclosure
and is carried, net of an allowance for losses if needed, at the lower of cost or fair value less estimated selling costs.
Fair value is estimated through current appraisals, where practical, or an inspection and a comparison of the
property securing the loan with similar properties in the area by either a licensed appraiser or real estate broker
and, as such, is classified as Level 3. Real estate owned at December 31, 2014 and 2013 amounted to $434,000
and $748,000, respectively. ere were no reserve allowances or real estate owned at December 31, 2014 and
2013. Discounts on the appraised values plus an estimate for selling costs were at a range of 10% to 25% of the
appraised value at the years ended December 31, 2014 and 2013, respectively.
e following table provides the level of valuation assumptions used to determine the carrying value of assets
measured at fair value on a non-recurring basis at December 31, 2014 and 2013.
FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2014
Description
Real estate owned
$
Impaired loans
carrying
value
Quoted prices in Active
markets for identical
Assets (level 1)
434,000
$
–
–
significant other
observable inputs
(level 2)
$
–
–
significant
unobservable inputs
(level 3)
$
434,000
–
–
FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2013
Description
Real estate owned
Impaired loans
$
carrying
value
Quoted prices in Active
markets for identical
Assets (level 1)
748,000
$
539,935
–
–
significant other
observable inputs
(level 2)
$
–
–
significant
unobservable inputs
(level 3)
$
748,000
539,935
Fair Value Disclosures
e following methods and assumptions were used by the Bank in estimating fair values of financial instruments as disclosed herein.
Cash and Cash Equivalents (Level 1)
e carrying amounts of cash and short-term instruments approximate their fair value.
Securities (Level 2)
Fair values for securities are determined by matrix pricing.
Loans Receivable (Level 3)
For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values are
based on carrying values. Fair values for certain mortgage loans and other consumer loans are based on
quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. Fair values for commercial real estate and commercial loans are estimated using
34
discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for impaired loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.
Restricted Stock (Level 2)
Restricted stocks are valued at cost.
Interest Receivable and Payable (Level 2)
e carrying amounts of accrued interest receivable and payable approximate their fair values.
Deposit Liabilities (Level 3)
e fair value of demand deposits, deposits and money market accounts were the amounts payable on demand. e fair values of certificates of deposit were based on the discounted value of contractual cash flows.
e discount rate was estimated using the rate currently offered for deposits of similar remaining maturities.
Off-Balance-Sheet Instruments
In the ordinary course of business the Bank has entered into off-balance-sheet financial instruments consisting
of commitments to extend credit. Such financial instruments are recorded in the financial statements when
they are funded. eir fair value would approximate fees currently charged to enter into similar agreements.
e carrying values and estimated fair values of financial instruments are as follows (in thousands):
DECEMBER 31, 2014
carrying
Amount
DECEMBER 31, 2013
carrying
Amount
Fair value
Fair value
FINANCIAL ASSETS
Cash and cash equivalents
$
26,736
$
26,736
$
6,837
$
6,837
Securities
–
–
19,025
17,819
Loans receivable
35,076
36,269
45,577
46,392
Restricted stock
285
285
364
364
Interest receivable
154
154
256
256
63,505
63,760
72,048
72,123
FINANCIAL LIABILITIES
Deposits
e fair value estimates are made at a discrete point in time based on relevant market information and information about the financial instruments. Fair value estimates are based on judgments regarding future expected
loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. ese estimates are subjective in nature and involve uncertainties and matters of significant judgment and,
therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Further, the foregoing estimates may not reflect the actual amount that could be realized if all or substantially
all of the financial instruments were offered for sale.
35
In addition, the fair value estimates were based on existing on-and-off balance sheet financial instruments
without attempting to value the anticipated future business and the value of assets and liabilities that are not
considered financial instruments. Other significant assets and liabilities that are not considered financial assets
and liabilities include premises and equipment, cash surrender value of officer and director life insurance, and
advances from borrowers for taxes and insurance. In addition, the tax ramifications related to the realization of
the unrealized gains and losses have a significant effect on fair value estimates and have not been considered in
any of the estimates.
Finally, reasonable comparability between financial institutions may not be likely due to the wide range of
permitted valuation techniques and numerous estimates which must be made given the absence of active secondary markets for many of the financial instruments. e lack of uniform valuation methodologies introduces
a greater degree of subjectivity to these estimated fair values.
a
36
ProDuCTS & SErVICES
COMMERCIAL BANKING
PRODuCTS & SERvICES
CONSuMER BANKING
PRODuCTS & SERvICES
BuSINESS ChECKING ACCOuNTS
Business Interest Checking (earnings credits)
Escrow Accounts
IOLTA Accounts
Landlord / Tenant Security Accounts
Municipal Accounts
Small Business Checking
Money Market Accouns
PERSONAL ChECKING ACCOuNTS
Interest Checking
Regular Checking
Senior Checking
Money Market Accouns
BuSINESS SAvINGS ACCOuNTS
Business Statement Savings
Business Passbook Savings
COMMERCIAL LOANS
Commercial Real Estate Loan
Letters of Credit
Lines of Credit
Commercial Construction Loan
CONvENIENCE SERvICES
FOR BuSINESSES
Merchant Credit Card Services
Notary Service
On-Line Banking & Bill Pay
Wawel Debit Card
Wire Transfers – Domestic & Foreign
PERSONAL SAvINGS ACCOuNTS
Certificates of Deposit
Statement Savings
Passbook Savings
Club Accounts
IRA Accounts
CONSuMER LOANS
home Equity Lines of Credit
home Equity Loans
Residential Mortgages 1-4 Family
Multi Family Mortgages
Personal Loans
Auto Loans
CONvENIENCE SERvICES
FOR CONSuMERS
ATMs – Walk-up
Direct Deposit
Money Orders
Notary Service
On-Line Banking & Bill Pay
Wawel Debit Card
Wire Transfers – Domestic & Foreign
37
CorPoraTE INForMaTIoN
CORPORATE OFFICES
935 River Drive
Garfield, NJ 07026
Phone: 201-468-9100
Fax: 973-928-3676
INDEPENDENT PuBLIC ACCOuNTANTS
Baker Tilly Virchow Krause, LLP
100 Walnut Ave., Ste 200
Clark, NJ 07066-1255
Phone: 732-388-5210 / Fax: 888-264-9617
BRANCh OFFICES
935 River Road
Garfield, NJ 07026
Phone: 973-478-9295
Fax: 973-478-7006
GENERAL COuNSEL
Law Offices of Patrick J. Spina, Esq.
97 Lackawanna Avenue, Suite 201
Totowa, NJ 07512
Phone: 973-837-0010
104 Main Avenue
Phone: 973-777-1028
Fax: 973-777-6472
ANNuAL ShAREhOLDERS MEETING
Cracovia Manor
196 Main Avenue
INTERNET INFORMATION
Website: www.wawelbank.com
ANNuAL DISCLOSuRE STATEMENT
is Annual Report serves as the Bank’s Annual Disclosure
Statement as required by FDIC rules. is Annual Report
has not been reviewed or confirmed for accuracy or relevance by the Federal Deposit Insurance Corporation.
BANK OFFICERS
TRANSFER AGENT
Computershare
480 Washington Boulevard, 29th Floor
Jersey City, NJ 07310
Phone: 201-680-2313 / Fax: 201-680-2026
STOCK LISTING
Wawel Bank Common
Stock is traded on the OTC Bulletin Board
Under the Symbol WAWL
BOARD OF DIRECTORS
GEORGE E. NIEMCzYK
WALTER G. WARGACKI
President & Chief Executive Officer
Chairman of the Board
Mayor, Borough of Wallington; CEO, Merchants Alarm Systems, Inc.
vINCENT vARCADIPANE, CPA
Chief Financial Officer
ADAM M. BAK
GARY MCELDOWNEY
CEO of Importing Company
Chief Credit Officer
ThOMAS J. DuCh
DIANA hOPPIN, CCBCO
City Manager, Garfield, NJ; Attorney at Law
Compliance Officer
DIETER P. LERCh
MARGARET PARzECKI
Certified Public Accountant at Lerch, Vinci & Higgins, LLP
Assistant Controller
hENRY J. MONKOWSKI
MONIKA SADEJ
Independent Consultant
Assistant Secretary, Treasurer
JEFFREY E. SLEMROD
vITO BARI
Retired
Branch Administrator
hENRY C. WALENTOWICz
CAREN FARRELLY, CCLO
Attorney at Law at Celentano, Stadtmauer & Walentowicz
Consumer Loan Officer
38
CORPORATE OFFICES
935 River Drive
Garfield, NJ 07026
Phone: 201-468-9100
Fax: 973-928-3676
Wallington Branch
Garfield Branch
104 Main Avenue
Phone: 973-777-1028
Fax: 973-777-6472
935 River Road
Garfield, NJ 07026
Phone: 973-478-9295
Fax: 973-478-7006
WWW.WAWELBANK.COM
WAWEL BANK MEMBER FDIC

THE YEAR OF CHANGE

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