10-K 1 y07193e10vk.txt BRUNSWICK BANCORP UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ________ Commission file number 0-14403 BRUNSWICK BANCORP ----------------- (Exact name of Registrant as specified in its Charter) NEW JERSEY 22-2610694 ---------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 439 LIVINGSTON AVENUE NEW BRUNSWICK, NJ 08901 ----------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (732) 247-5800 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, no value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. yes [X] no [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K. [X] Indicate by check mark if whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). yes [ ] no [X] The aggregate market value of the voting stock held by non-affiliates of the Registrant, as of February 8, 2005 was $31,950,568. The number of shares of Registrant's Common Stock, no par value, outstanding as of February 8, 2005 was 2,173,508. DOCUMENTS INCORPORATED BY REFERENCE Certain information required by Part III of this report (Items 10, 11, 12, 13 and 14) is incorporated by reference from the registrant's proxy statement to be filed pursuant to Regulation 14A with respect to the registrant's 2005 annual meeting of stockholders. BRUNSWICK BANCORP FORM 10-K ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004 PART I Item 1. Business 1 Item 2. Properties 6 Item 3. Legal Proceedings 7 Item 4. Submission of Matters to a Vote of Security Holders Executive Officers of the Registrant 7 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 7 Item 6. Selected Financial Data 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-21 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 21 Item 8. Financial Statements and Supplementary Data 21 Item 9. Change in and Disagreements with Accountants on Accounting and Financial Disclosure 21 Item 9A. Controls and Procedures 21 PART III Item 10. Directors and Executive Officers of the Registrant 22 Item 11. Executive Compensation 23 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 23 Item 13. Certain Relationships and Related Transactions 23 Item 14. Principal Accountant Fees & Services 23 PART IV Item 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K 24 Signatures 25

PART I ITEM 1. BUSINESS (a) General Development of Business Brunswick Bancorp ("BB", "Registrant" or "Company") is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the "Bank Holding Company Act"). BB was organized under the laws of New Jersey in 1984 by Brunswick Bank and Trust Company (the "Bank") for the purpose of creating a holding company for the Bank. Effective January 16, 1986, BB acquired all the outstanding shares of the Bank. The Bank was incorporated as a state-chartered New Jersey bank in 1970 under the name of Bank of Manalapan. That entity merged with New Brunswick Trust Company in 1977, forming Brunswick Bank and Trust Company. The Bank in 2002 created a wholly owned subsidiary to manage the Bank's investment portfolio. BTB Investment Corp. Inc. now manages the Bank's investments. The Bank maintains its head office and 6 branches in Monmouth and Middlesex Counties, New Jersey. Regulatory Matters There are a variety of statutory and regulatory restrictions governing BB, the Bank, and the relations between BB and its subsidiaries. Proposals to change the laws and regulations governing the banking industry are frequently introduced in Congress, in the state legislatures and before the various bank regulatory agencies. The likelihood and timing of any such changes and the impact such changes might have on BB cannot be determined at this time. Federal Deposit Insurance - The FDIC is an independent federal agency that insures the deposits, up to prescribed statutory limits, of federally insured banks and savings institutions and safeguards the safety and soundness of the banking and savings industries. Two separate insurance funds, the Bank Insurance Fund ("BIF") for commercial banks, state savings banks and some federal savings banks, and the SAIF for savings associations, are maintained and administered by the FDIC. The Bank is a member of the BIF and its deposit accounts are insured by the FDIC, up to the prescribed limits. The FDIC has examination authority over all insured depository institutions, including the Bank, and has, under certain circumstances, authority to initiate enforcement actions against federally insured savings institutions to safeguard safety and soundness and the deposit insurance fund. Assessments - For the deposit insurance coverage provided by the FDIC, the Bank pays assessments to the FDIC under a risk-based assessment system that takes into account its capital and supervisory considerations. The FDIC sets assessments for deposits insured by the SAIF or the BIF to maintain the targeted designated reserve ratio in that fund. In addition, the FDIC is authorized to levy emergency special assessments on BIF and SAIF members. The FDIC set the annual deposit insurance assessment rates for BIF-member institutions for 2004 at 0% of insured deposits for well-capitalized institutions with the highest supervisory ratings to .27% of insured deposits for institutions in the worst risk assessment classification. In addition, all FDIC-insured institutions are required to pay assessments to the FDIC to fund interest payments on bonds issued by the Financing Corporation ("FICO"), an agency of the federal government established to re-capitalize the predecessor to the SAIF. The FICO assessment rates, which are determined quarterly, averaged .0165% of insured deposits in 2004. These assessments will continue until the FICO bonds mature in 2017. 1 The USA Patriot Act - In response to the events of September 11, 2001, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the USA Patriot Act, was signed into law on October 26, 2001. The USA Patriot Act gives the federal government new powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. By way of amendments to the Bank Secrecy Act, Title III of the USA Patriot Act takes measures intended to encourage information sharing among bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents and parties registered under the Commodity Exchange Act. Among other requirements, Title III of the USA Patriot Act imposes the following requirements with respect to financial institutions: Pursuant to Section 352, all financial institutions must establish anti-money laundering programs that include, at minimum: (i) internal policies, procedures, and controls; (ii) specific designation of an anti-money laundering compliance officer; (iii) ongoing employee training programs; and (iv) an independent audit function to test the anti-money laundering program. Section 326 authorizes the Secretary of the Department of Treasury, in conjunction with other bank regulators, to issue regulations by October 26, 2002 that provide for minimum standards with respect to customer identification at the time new accounts are opened. Section 312 requires financial institutions that establish, maintain, administer, or manage private banking accounts or correspondence accounts in the United States for non-United States persons or their representatives (including foreign individuals visiting the United States) to establish appropriate, specific, and, where necessary, enhanced due diligence policies, procedures, and controls designed to detect and report money laundering. Effective December 25, 2001, financial institutions are prohibited from establishing, maintaining, administering or managing correspondent accounts for foreign shell banks (foreign banks that do not have a physical presence in any country), and will be subject to certain record keeping obligations with respect to correspondent accounts of foreign banks. Bank regulators are directed to consider a holding company's effectiveness in combating money laundering when ruling on Federal Reserve Act and Bank Merger Act applications. The federal banking agencies have begun to propose and implement regulations pursuant to the USA Patriot Act. These regulations may increase the Company's compliance costs. Sarbanes-Oxley Act of 2002 - On July 30, 2002, the President signed into law the Sarbanes-Oxley Act of 2002 (the "Act"), which implemented legislative reforms intended to address corporate and accounting fraud. In addition to the establishment of a new accounting oversight board that will enforce auditing, quality control and independence standards and will be funded by fees from all publicly traded companies, the Act places certain restrictions on the scope of services that may be provided by accounting firms to their public company audit clients. Any non-audit services being provided to a public company audit client will require preapproval by the company's audit committee. In addition, the Act makes certain changes to the requirements for partner rotation after a period of time. The Act requires chief executive officers and chief financial officers, or their equivalent, to certify to the accuracy of periodic reports filed with the Securities and Exchange Commission, subject to civil and criminal penalties if they knowingly or willingly violate this certification requirement. In addition, under the Act, counsel will be required to report evidence of a material violation of the securities laws or a breach of fiduciary duty by a company to its chief executive officer or its chief legal officer, and, if such officer does not appropriately respond, to report such evidence to the audit committee or other similar committee of the board of directors or the board itself. 2 Under the Act, longer prison terms will apply to corporate executives who violate federal securities laws; the period during which certain types of suits can be brought against a company or its officers is extended; and bonuses issued to top executives prior to restatement of a company's financial statements are now subject to disgorgement if such restatement was due to corporate misconduct. Executives are also prohibited from insider trading during retirement plan "blackout" periods, and loans to company executives (other than loans by financial institutions permitted by federal rules and regulations) are restricted. In addition, a provision directs that civil penalties levied by the Securities and Exchange Commission as a result of any judicial or administrative action under the Act be deposited to a fund for the benefit of harmed investors. The Federal Accounts for Investor Restitution provision also requires the Securities and Exchange Commission to develop methods of improving collection rates. The legislation accelerates the time frame for disclosures by public companies, as they must immediately disclose any material changes in their financial condition or operations. Directors and executive officers must also provide information for most changes in ownership in a company's securities within two business days of the change. The Act also increases the oversight of, and codifies certain requirements relating to audit committees of public companies and how they interact with the company's "registered public accounting firm." Audit Committee members must be independent and are absolutely barred from accepting consulting, advisory or other compensatory fees from the issuer. In addition, companies must disclose whether at least one member of the committee is a "financial expert" (as such term will be defined by the Securities and Exchange Commission) and if not, why not. Under the Act, a company's registered public accounting firm will be prohibited from performing statutorily mandated audit services for a company if such company's chief executive officer, chief financial officer, comptroller, chief accounting officer or any person serving in equivalent positions had been employed by such firm and participated in the audit of such company during the one-year period preceding the audit initiation date. The Act also prohibits any officer or director of a company or any other person acting under their direction from taking any action to fraudulently influence, coerce, manipulate or mislead any independent accountant engaged in the audit of the company's financial statements for the purpose of rendering the financial statements materially misleading. The Act also requires the Securities and Exchange Commission to prescribe rules requiring inclusion of any internal control report and assessment by management in the annual report to shareholders. The Act requires the company's registered public accounting firm that issues the audit report to attest to and report on management's assessment of the company's internal controls. We have and anticipate that we will continue to incur additional expense in complying with the provisions of the Sarbanes-Oxley Act and the resulting regulations. CAPITAL REQUIREMENTS Bank holding companies must comply with the Federal Reserve Board's risk-based capital guidelines. Under the guidelines, risk weighted assets are calculated by assigning assets and certain off-balance sheet items to broad risk categories. The level of risk associated with each category then weights the total dollar value of each category. A minimum total qualifying capital to risk-based assets ratio (Total Capital ratio) of 8 % is required. At least 4% of an institution's qualifying capital must consist of Tier 1 capital, and the rest may consist of Tier 2 capital. Tier 1 capital consists primarily of common stockholders' equity and certain qualifying hybrid instruments minus goodwill. Tier 2 capital consists of an institution's allowance for possible loan losses, subject to limitation, hybrid capital instruments and certain subordinated debt. The allowance for possible loan losses, which may be considered Tier 2 capital, is limited to 1.25% of risk-based assets. As of December 31, 2004, the Company's Total risk weighted capital ratio was 42.14% and its Tier one risk weighted capital ratio was 41.11%. Such ratios exceed the current regulatory requirements. 3 In addition, the Federal Reserve Board has promulgated a leverage capital standard, with which bank holding companies must comply. Bank holding companies must maintain a minimum Tier 1 capital to total assets ratio of 3%. However, institutions, which are not among the most highly rated by federal regulators, or those experiencing significant growth, must maintain a ratio of 100-200 basis points above the 3% minimum. As of December 31, 2004, the consolidated Company had a leverage capital ratio of 24.47%. The FDIC also imposes risk based and leverage capital guidelines on the Bank. These guidelines and the ratios to be met are substantially similar to those imposed by the Federal Reserve Board. If a bank does not satisfy the FDIC's capital requirements, it will be deemed to be operated in an unsafe and unsound manner and will be subject to regulatory action. The Bank met all the FDIC capital requirements at December 31, 2004. As of December 31, 2004, the Bank had a risk weighted capital ratio of 42.14% and a leverage capital ratio of 24.47%. The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA") required each federal banking agency to revise its risk-based capital standards to ensure that those standards take adequate account of interest rate risk, concentration of credit risk and the risks of non-traditional activities. In addition, pursuant to FDICIA, each federal banking agency has promulgated regulations, specifying the levels at which a financial institution would be considered "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," or "critically undercapitalized" and requiring the agency to take certain mandatory and discretionary supervisory actions based on the capital level of the institution. The FDIC's regulations implementing these provisions of FDICIA provide that an institution will be classified as "well capitalized" if it (i) has a risk-based capital ratio of at least 10.0 percent, (ii) has a Tier 1 risk-based capital ratio of at least 6.0 percent, (iii) has a Tier 1 ratio of at least 5.0 percent, and (iv) meets certain requirements. An institution will be classified as "adequately capitalized" if it (i) has a total risk-based capital ratio of at least 8.0 percent (ii) has a Tier 1 ratio of at lest 4.6 percent, (iii) has a Tier 1 leverage ratio (a) at least 4.0 percent or (b) at least 3.0 percent if the institution was rated I in its most recent examination, and (iv) does not meet the definition of "well capitalized." An institution will be classified as "undercapitalized" if it (i) has a total risk-based capital ratio of less than 8.0 percent (ii) has a Tier 1 risk based capital of less than 4.0 percent, or (iii) has a Tier 1 leverage ratio of (a) less than 4.0 percent or (b) less than 3.0 percent is the institution was rated 1 in its most recent examination. An institution will be classified as "significantly undercapitalized" if it (i) has a total risk-based capital ratio of less than 6.0 percent, (ii) has a Tier 1 risk-based capital ratio of less than 3.0 percent, (iii) has a Tier 1 leverage ratio of less than 3.0 percent. An institution will be classified as "critically undercapitalized" if it has a tangible equity to total assets ratio that is equal to or less than 2.0 percent. An insured depository institution may be deemed to be in a lower capitalization category if it receives an unsatisfactory examination. HOLDING COMPANY SUPERVISION Generally, the Bank Holding Company Act (BHCA) limits the business of a bank holding company and its affiliates to banking, managing or controlling banks, and furnishing or performing services for banks controlled by the holding company. The major exception to this rule is that a bank holding company directly or through a subsidiary may engage in non-banking activities which the Federal Reserve Board has determined to be so closely related to banking of managing or controlling banks so as to be a proper incident thereto. The Federal Reserve Board under its Regulation "Y" has restricted such activities to things such as lease financing, mortgage banking, investment advice, certain data processing services and securities brokerage services. BB is not currently conducting these activities. Under the Bank Holding Company Act, BB may not acquire directly or indirectly more than 5 percent of the voting shares of, or substantially all of the assets of, any bank without the prior approval of the Federal Reserve Board. Satisfactory capital ratios and Community Reinvestment Act ratings are generally prerequisites to obtaining federal regulatory approval to make acquisitions. 4 In addition, the BHCA was amended through the Gramm-Leach-Bliley Financial Modernization Act of 1999 (the "GLBA"). Under the terms of the GLBA, bank holding companies whose subsidiary banks meet certain capital, management and Community Reinvestment Act standards and which elect to be classified as "financial holding companies" are permitted to engage in a substantially broader range of non-banking activities than is permissible for bank holding companies under the BHCA. These activities include certain insurance, securities and merchant banking activities. In addition, the GLBA amendments to the BHCA remove the requirement for advance regulatory approval for a variety of activities and acquisitions by financial holding companies. As our business is currently limited to activities permissible for a bank, we have not elected to become a financial holding company. Acquisitions through the Bank require approval of the Federal Deposit Insurance Corporation (the FDIC). Statewide branching is permitted in New Jersey. The Holding Company Act does not place territorial restrictions on the activities on non-banking subsidiaries of bank holding companies. (b) Industry Segment The Registrant has one industry segment: commercial banking. (c) Narrative Description of Business Brunswick Bancorp exists primarily to hold the stock of its active subsidiary, Brunswick Bank & Trust. BB also owns 100% of the common stock of Brunscor Realty, a corporation that holds one of the Bank's parking lots as a rental property. As a secondary function, BB purchases loan participations. The Federal Reserve Bank of New York approved this activity. BB is a legal entity separate from the Bank. The Bank is BB's principal asset. Dividends from the Bank are BB's primary source of income. As explained under Item 5, legal and regulatory limitations are imposed on the amount of dividends that may be paid by the Bank to BB. The Bank maintains its head office in New Brunswick, New Jersey. The Bank operates out of its head office and 6 branch offices in Monmouth and Middlesex Counties. At December 31, 2004, BB and its subsidiary Bank had deposits of $98,476,920, total loans of $65,675,788 and total assets of $131,749,454. The Bank is a full service commercial bank and offers the services generally performed by commercial banks of similar size and character. Such services include: checking, savings and time deposit accounts, certificates of deposit, secured and unsecured personal loans, commercial loans, residential and commercial real estate loans and internet banking. The Bank also provides trust services. BB and its subsidiary Bank had the equivalent of 51 full-time employees as of December 31, 2004. The primary emphasis of the Company's lending activities is in the commercial lending area. As of December 31, 2004, 67.30% of the loan portfolio is in commercial loans, 3.88% in construction first mortgage loans, 12.22% in commercial first mortgage loans, 15.31% in residential loans, and 1.29% in installment loans. The composition of the loan portfolio represents a shift from the year 2003. During 2004 a substantial portion of new commercial loans were made, there was an increase in construction first mortgage loans and a substantial increase in residential real estate loans. There was a reduction in commercial real estate loans. The Company's lending base is generally in the commercial area, concentrating both in commercial first mortgage loans and commercial loans secured by certificates of deposit, equity, securities, and other forms of collateral. Commercial loans secured by certificates of deposit provide the lowest risk to the Company as the collateral is under full control of the Company and faces no risk of deterioration. First mortgage loans and commercial loans secured by real estate provide security with risk tied to real estate market fluctuations. As the Company lends in a relatively compact geographical area, management is better able to measure the risk of real estate market deterioration and risk of asset deterioration than it would be if it had to assess real estate conditions in numerous, disparate geographical areas. However, the concentration of the Company's real estate collateral in a compact geographical area can subject the Company to greater fluctuations in delinquencies if local market conditions vary from those in a broader area. Due to the uncertainty in both the local and state real estate markets, the Company maintains liquid investments in Federal funds sold with short-term maturity dates. 5 There are numerous commercial banks throughout New Jersey, many of which have offices in Monmouth and Middlesex Counties, New Jersey. In common with the entire banking industry, the Bank experiences strong competition for banking business in its market area. The Bank competes both for deposits and loans with other national and state banks, mutual savings banks, finance companies, credit unions and other financial institutions. While many of the Bank's competitors are larger and have greater financial resources, in the opinion of the Bank, the size of its financial resources has imposed no substantial impediment to its normal lending functions. The Bank is limited, however, in making commercial loans to an amount not in excess of fifteen percent of its capital in most circumstances. The Bank has, on occasion, arranged for participation by other institutions when it has made larger loans. Additionally, BB participates in certain loans with the Bank as permitted by the Federal Reserve Bank of New York. The Company does not rely on any one customer for an amount in excess of 10% of income. (d) Financial information about foreign and domestic operations and export sales. The Company operates only in New Jersey. No income is derived from foreign persons or entities. ITEM 2. PROPERTIES The Bank currently operates from its main office and six branch offices. The Bank leases the main office and one branch. The Bank owns four of the branch offices. The following is a list of offices the Bank owns:

The following is a list of offices, which the Bank leases:

6 ITEM 3. LEGAL PROCEEDINGS In the normal course of business, lawsuits and claims may be brought by and may arise against BB and the Bank. In the opinion of management, no legal proceedings which are presently pending or threatened against BB or the Bank, when resolved, will have a material adverse effect on the business or financial condition of BB or its subsidiary. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of shareholders of BB during the fourth quarter of 2004. PART II ITEM 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED SHAREHOLDER MATTERS BB had 277 shareholders of record as of December 31, 2004. Brunswick Bancorp is listed on the American Stock Exchange under the symbol "BRB". The quarterly information represents the high and low sales price as it is reported by the exchange.

The Company has not historically paid cash dividends. Since the Bank is the Company's only substantial asset and source of income, the Company would be dependent upon dividends from the Bank to pay dividends to its shareholders. Payment of dividends by Brunswick Bank and Trust Company to BB are restricted. Under the New Jersey Banking Act of 1948, as amended, the Bank may pay dividends only out of retained earnings, and out of surplus to the extent that exceeds fifty percent of stated capital. Under the Financial Institutions Supervisory Act, the FDIC has the authority to prohibit a state-chartered bank from engaging in conduct that, in the FDIC's opinion, constitutes an unsafe or unsound banking practice. Under certain circumstances, the FDIC could claim that the payment of a dividend or other distribution by a bank to its sole shareholder constitutes an unsafe or unsound practice. As of December 31, 2004, approximately $13.6 million is currently available, without restriction, for the Bank to pay the Registrant in dividends. The Registrant issued a 20% stock dividend in 1999 and a 10% stock dividend in 2002. The Board of Directors will review its dividend policy on an ongoing basis. STOCK SPLIT The Board of Directors declared a Two Shares for One Share stock split payable on January 14, 2001 to stockholders of record on December 31, 1999. The stock split resulted in the Company issuing 902,266 shares. These financial statements give retroactive effect to the stock split. Earnings per share have been restated to reflect the stock split declared. 7 In November 2004, the Company's Board of Directors approved a stock repurchase program whereby up to $5,000,000 of common stock may be purchased from time to time at the discretion of management. The following table provides information on stock repurchases during the fourth quarter of 2004: ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 6. SELECTED FINANCIAL DATA The following table sets forth certain selected consolidated financial data concerning BB:

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following financial review of Brunswick Bancorp (the "Company") is presented on a consolidated basis and is intended to provide a comparison of the financial performance of the Company and its wholly owned subsidiary, Brunswick Bank & Trust Company (the "Bank") for the years ended December 31, 2004, 2003 and 2002. The information presented below should be read in conjunction with the Company's consolidated financial statements and accompanying notes appearing elsewhere in this report. FORWARD-LOOKING STATEMENTS Certain statements in this Form 10-K are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. The words "estimate," "plan," "intend," "expect," "anticipate," "believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are found at various places throughout this report and in the documents incorporated herein by reference. Brunswick Bancorp disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our goals will be achieved, and these statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Those risks and uncertainties include changes in interest rates, the ability to control costs and expenses and general economic conditions nationally and in our trade area, as well as the continuing credit worthiness of our customers and the strength of the real estate market in our primary trade area. CRITICAL ACCOUNTING MATTERS Note 1 to the Company's consolidated financial statements lists significant accounting policies used in the development and presentation of its financial statements. This discussion and analysis, the significant accounting policies, and other financial statement disclosures identify and address key variables and other qualitative and quantitative factors that are necessary for an understanding and evaluation of the Company and its results of operation. The provision for loan losses charged to operating expense reflects the amount deemed appropriate by management to provide for known and inherent losses in the existing loan portfolio. Management's judgment is based on the evaluation of individual loans, past experience, the assessment of current economic conditions and other relevant factors. Loan losses are charged directly against the allowance for loan losses and recoveries on previously charged-off loans are added to the allowance. Management uses significant estimates to determine the allowance for loan losses. 9 Consideration is given to a variety of factors in establishing these estimates including current economic conditions, diversification of the loan portfolio, delinquency statistics, borrowers' perceived financial and managerial strengths, the adequacy of underlying collateral, if collateral dependent, or present value of future cash flows and other relevant factors. Since the sufficiency of the allowance for loan losses is dependent, to a great extent on conditions that may be beyond our control, it is possible that management's estimates of the allowance for loan losses and actual results could differ in the near term. In addition, regulatory authorities, as an integral part of their examination, periodically review the allowance for loan losses. They may require additions to the allowance based upon their judgments about information available to them at the time of examination. Future increases to our allowance for loan losses, whether due to unexpected changes in economic conditions or otherwise, would adversely affect our future results of operation. OVERVIEW Our results of operations are primarily dependent on our net interest income. Net interest income is a function of the balances of loans and investments outstanding in any one period, the yields earned on those loans and investments and the interest paid on deposits and borrowed funds that were outstanding in the same period. To a lesser extent, the relative levels of our non-interest income and operating expenses also affect our results of operations. Our non-interest income consists primarily of fees and service charges. The operating expenses consist primarily of employee compensation and benefits, occupancy and equipment expenses, data processing costs, marketing costs, professional fees, office supplies, and telephone. Our results of operations are significantly impacted by the amount of provisions for loan losses which in turn, are dependent upon, among other things, the size and makeup of the loan portfolio, loan quality and loan trends. Our results of operations are affected by general economic, regulatory and competitive conditions, including changes in prevailing interest rates and the policies of regulatory agencies. BUSINESS STRATEGY Our business strategy has been to operate as a well-capitalized, traditional independent community bank, dedicated to providing convenient access and quality service at competitive prices. Generally, we have sought to implement this strategy by maintaining a substantial part of our assets in loans secured by commercial real estate or residential real estate located in our market area. To the extent that new deposits have exceeded loan originations, we have invested these deposits primarily in investment securities and cash and cash equivalents. We intend to continue to emphasize a variety of deposit and loan products, with the latter consisting primarily of commercial loans, non-residential mortgages, residential mortgages, home equity loans and consumer loans. We intend to grow our branch office network, which will expand our geographic reach and will consider the acquisition of other financial institutions. We do not however, have any current understandings, agreements or arrangements for expansion of our business, other than opening new branch office locations. RESULTS OF OPERATIONS The Company's 2004 net income amounted to $1,504,579, or $0.68 per diluted share, which was $334,835, or 18.2%, lower than income of $1,839,414, or $0.88 per diluted share in 2003. Net income for 2003 was $104,576 lower than 2002 income of $1,943,990, or $0.95 per diluted share. Basic net income per share was $.70, $.91 and $.96, respectively in 2004, 2003 and 2002. The decrease in net income in 2004 is due mainly to the net interest income decrease of $62,000 as interest income declined by $242,500, or 3.6%, while interest expense declined by $180,372 or 36.10%. In addition, other income and provision for credit recoveries decreased by $167,168. Also expenses in 2004 increased by $127,000 to $4.653 million in 2004 from $4.526 million in 2003, while Income tax expense decreased $22,000 compared to 2003. 10 The Company's 2003 net income amounted to $1,839,414, or $0.88 per diluted share, which was $104,576, or 5.38%, lower than income of $1,943,990, or $0.95 per diluted share in 2002. The declines in both interest income and interest expense during all periods reflect continuing declines in market rates of interest as the Federal Reserve engaged in aggressive rate cuts and then maintained rates at historically low levels. Due to its historically low levels of loan charge-offs, during each of 2004, 2003 and 2002, the Company did not take any provision for loan losses. In each of the last three years, the Company recognized recoveries on previously charged-off assets. Return on assets for the years ended December 31, 2004, 2003 and 2002 was 1.18%, 1.48% and 1.64%, respectively while the return on equity recorded during the same periods amounted to 4.77%, 6.30% and 7.14% (average). Management believes it has created a market-niche as a local commercial bank, servicing small businesses and individuals in its targeted geographical areas. It is the Company's intention to continue servicing that market. The Company will consider future expansion through additional branches, geographic areas or a possible acquisition if the opportunity arises. Income Statement Analysis, 2004 vs. 2003 Our net income has been adversely impacted during the three-year period ended December 31, 2004 by declines in market rates of interest on interest earning assets like loans and investment securities. Although our cost of interest bearing liabilities has also declined during this period, the reduction has not kept pace with the decline in yield on interest earning assets, due in large measure to the low level of cost of interest bearing deposits at the start of the period. For the year ended December 31, 2003, our cost of interest bearing liabilities was .78%, and it declined by 26 basis points to 0.52%. At the same time, our yield on interest earning assets declined by 38 basis points, from 5.96% for the year ended December 31, 2003 to 5.58% in the current year. Although we have experienced volume increases in earning assets during this period, they have not been sufficient to offset the reduction in yield. In 2004 income before income taxes decreased from 2003 by $356,000. This decrease occurred mainly because of a decrease in net interest income, which was lower due to a substantial decrease in interest rates on loans, deposits and investments. Interest income decreased by $242,000 and interest expense decreased by $180,000 which resulted in a $63,000 overall decrease in net interest income. The following table illustrates how volume and interest rates affected net interest income. Interest income: Effect of increased volume $ 543,000 Effect of decreased interest rates (785,000) Interest expense: Effect of decreased volume 11,000 Effect of decreased interest rates 169,000 --------- Decrease in net interest income $ 62,000 =========

In the current year, other income which consists of service fees and credit recoveries, decreased by $167,000 and other expenses were up $127,000. The increase in other expenses was due mainly to increase of salaries and employee benefits of $35,000 and occupancy expenses increasing $101,000, offsetting the increases were equipment and other expenses decreasing by $9,000. The decline in the Company's income tax expense reflects the company's reduced level of earnings in 2004. Income Statement Analysis, 2003 vs. 2002 In 2003 income before income taxes decreased from 2002 by $432,000. This decrease occurred mainly because of a decrease in net interest income, which was lower due to a substantial decrease in interest rates on loans, deposits and investments. 11 Interest income decreased by $855,000 and interest expense decreased by $220,000 which resulted in a $635,000 overall decrease in net interest income. The following table illustrates how volume and interest rates affected net interest income. Interest income: Effect of increased volume $ 446,000 Effect of decreased interest rates (1,301,000) Interest expense: Effect of decreased volume (10,000) Effect of decreased interest rates 230,000 ----------- Increase in net interest income $ 635,000 ===========

In 2003, other income decreased by $14,000 and other expenses declined by $221,000 compared to 2002. The decrease in other expenses reflects reductions in equipment and other expenses of $250,000 offsetting an increase of $31,000 in salary and employee benefit expense. The decline of other expenses, which consists of various operating expenses, was primarily due to management reviewing all expense categories and reducing expense in light of the Company's level of business. The decline in the Company's income tax expense reflects the company's reduced level of earnings in 2003. Balance Sheet Analysis Total assets increased by $11 million from December 31, 2003 to December 31, 2004. This was due primarily to an increase in customer deposits of $9 million. The most notable change in 2004 was the increase in Federal funds of $13 million compared to the previous year. Management's decision to shift back to Federal funds from money market with corresponding banks was due to the increase of Federal funds rate over the money market rates available from the corresponding banks, and deposit inflows continuing to exceed new loan demand. During 2004, securities increased by $3,374,000, and loans increased by $4,208,000 compared to the year-end 2003. The increase in investment securities reflects management's decision to invest excess liquidity in longer-term investments, while still maintaining a strong cash and equivalents position. The Company has sought to emphasize commercial lending to enhance its interest income. Since 1999, commercial loans, mostly consisting of loans to finance the purchase of equipment and renovation and expansion of business premises have increased from $4.8 million, or 12% of the loan portfolio, to $44.8 million, or 67.3% of the loan portfolio. On the liability side of the balance sheet total deposits increased by $9,062,000 for the year ending December 31, 2004 compared to the prior year ending December 31, 2003. Non-interest bearing demand deposits increased by $728,000, savings and NOW deposits increased by $8,905,000 and time deposits decreased by $570,000. The most substantial increase was the increase of NOW accounts, which is connected to the deposit balances of a single governmental entity customer. This customer's account balances traditionally vary depending upon the timing and amount of tax collections. Stockholders' equity, increased by $2,335,000 with the addition of 2004 net income of $1,505,000, proceeds from exercised employee stock options of $664,000, amortization of deferred stock compensation of $105,000, in addition tax benefit of the exercised stock option plan of $207,000 less the purchase of treasury stock of $146,000. Liquidity The liquidity of the Company is measured by how well it can meet the financial needs of its depositors and borrowers and provide a cushion against unforeseeable and unforeseen liquidity needs. Sources of liquidity are provided primarily by the maturity of assets and by acquiring additional deposits. Secondarily, liquidity may be provided by the sales of assets and by other borrowings. 12 The Company's liquidity consists of cash in other banks, federal funds sold, and investment securities and loans maturing in one year or less. At December 31, 2004, cash and due from banks totaled $6.9 million; Federal funds totaled $22 million, and investment securities maturing within one year totaled $650 thousand. In the past three years, the Company has continually derived positive cash flows from its operating activities. Specifically, cash provided by operating activities totaled approximately $1.6 million in 2004, $1.4 million in 2003 and $2.1 million in 2002. In 2004, investing activities used $7.8 million primarily to purchase of investment securities in excess of maturities resulting in a net purchase of securities of $3.4 million, net increase of the loans receivable $4.1 million and purchase of fixed assets of $333,000. Financing activities provided cash of approximately $9.2 million due to the increases in non-interest bearing deposits of $700,000, interest bearing deposits of $8.3 million and proceeds from issuance of common stock from stock option plan of $664,000, less decrease in borrowed funds of $328,000 and purchase of treasury stock of $146,000. Due to the capital structure of BB and the Bank, capital management, the process of providing equity and debt for current and future financial positioning, is closely aligned with liquidity management. As the Company currently has no long-term debt and management does not contemplate undertaking such debt in the future, all financial positioning is done through liquid funds. OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL COMMITMENTS The Company's financial statements do not reflect off-balance sheet arrangements that are made in the normal course of business. These off-balance sheet arrangements consist of unfunded loans and letters of credit made under the same standards as on-balance sheet instruments. These unused commitments, consisting of commitments to extend credit, letters of credit, commercial lines of credit and consumer lines of credit, totaled $9,507,000 at December 31, 2004. These instruments have fixed maturity dates, and because many of them will expire without being drawn upon, they do not generally present any significant liquidity risk the Company. Management believes that any amounts actually drawn upon can be funded in the normal course of operations. The Company has no investment in or financial relationship with any unconsolidated entities that are reasonably likely to have a material effect on liquidity or the availability of capital resources. The following table represents the Company's contractual obligations to make future payments.

The following table sets forth the Company's capital ratios at each of the periods indicated as well as the required minimum regulatory ratios.

(1) Lesser of the allowance for loan loss or 1/80 of risk-weighted assets. 13 The following table sets forth the maturity distribution for the above loan portfolio at December 31, 2004. Maturities and Sensitivities of Loans to Changes in Interest Rates:

Risk Elements in Loan Portfolio Commercial and installment loans are placed on a non-accrual status when a default of principal or interest has existed for a period of 90 days and when a return to current status is not imminent. Real estate loans are placed on non-accrual status when a default of principal or interest has existed for 90 days or more. Subsequent to the change in classification to non-accrual, management assesses the loan for market value of collateral, credit position of the debtor and potential operation of any property involved. Foreclosure proceedings are instituted, as applicable, at that time. Construction loans are first mortgage loans in all cases delinquency, non-accrual, and foreclosure proceedings are handled in the same manner as other loans secured by real estate. Once a loan is placed on non-accrual, interest previously accrued and uncollected is reversed and charged against current earnings. Subsequent interest income would be recognized on these loans only to the extent collections exceed principal outstanding. Due to our historic low level of non-performing assets, we have not recognized an additional provision for possible loan losses since 2000. At December 31, 2004, our allowance for loan losses equaled 1.20% of our outstanding loans and 86.3% of the total of non-accrual loans and loans past due 90 days or more and still accruing. The following table sets forth information on non-accrual, past due (other than non-accrual), and other real estate owned (there were no restructured loans) for the periods indicated (in thousands):

If the above non-accrual loans at December 31, 2004 had been current, interest income for 2004 would have been approximately $129 greater than that recorded. Delinquency rates at December 31, 2004 were substantially higher then 2003 and 2002. Management believes the Bank will not incur substantial losses because of this trend, because the delinquent loans are well collateralized. 14 Interest Rate Sensitivity Management The accompanying table, a quantification of the Company's interest rate exposure at December 31, 2004, is based upon the known repricing dates of certain assets and liabilities and the assumed repricing dates of others.

*Variable rate balances are reported based on their repricing dates. Fixed-rate balances are reported based on their scheduled contractual maturity dates. (a) Prime priced loans are included in the Within Three Months category; nonaccrual loans and reserve for possible loan losses are included in the Noninterest-Bearing category. (b) Savings accounts are included in the After One but Within Five Years category. 15 Unadopted Financial Accounting Standards Board Statements As of December 31, 2004, there are no unadopted Financial Accounting Standards Board Statements which, if adopted, would have a material effect on the Company's financial statements. Distribution of Assets, Liabilities, and Stockholders' Equity; Interest Rates and Interest Differential

(1) Non-accrual loans, overdrafts, property and equipment, and other non-interest earning assets are included in Other. (2) Average balance sheet computed based on monthly balances. 16 Analysis of Changes in Net Interest and Dividend Income The following table shows the approximate effect on the Company's net interest income of volume and rate changes in interest-earning assets and interest-bearing liabilities for the years ended December 31, 2004, 2003, and 2002 calculated on a tax-equivalent basis, using a 34% Federal rate. Any change in interest income or interest expense attributable to both changes in volume and changes in rate has been allocated in proportion to the relationship of the absolute dollar amount of change in each category.

Investment Portfolio The following table shows the net carrying value of the Company's investment portfolio as of December 31. Investment securities are held to maturity and are stated at cost, adjusted for amortization of premium and accretion of discount (in thousands).

17 Maturities and Average Weighted Yields of Investment Securities The following table shows the maturities and average weighted yields for the above investment portfolio at December 31, 2004 (in thousands). Yields on tax exempt securities are presented on fully tax-equivalent basis using a 34% Federal tax rate.

Loan Portfolio The following tables set forth the composition of the Company's gross loan portfolio as of the dates indicated (in thousands):

18 Except for loans included in the above table there were no loans at December 31, 2004 where the known credit problems of a borrower caused the Bank to have serious doubts as to the ability of such borrower to comply with the then present loan repayment terms and which would result in such loan being included as a non-accrual, past due, or restructured loan at some future date. The Bank has not made loans to borrowers outside the United States. As of December 31, 2004, the total loan portfolio was approximately $66.6 million. As of the same date, the commercial loan portfolio totaled approximately $44.8 million. There are no concentrations exceeding ten percent of total loans. A concentration is defined as amounts loaned to a multiple number of borrowers engaged in similar activities that would cause them to be similarly affected by changes in economic or other conditions. Summary of Loan Loss Experience For the periods indicated, the following table summarizes loan balances, changes in the allowance for loan losses arising from loans charged-off and recoveries on loans previously charged-off and additions to the allowance that has been charged to income.

19 Allocation of the Allowance for Loan Losses

Through management assessment each accounting period, the allowance for credit losses is maintained at a level considered adequate to absorb probable losses. Management determines the adequacy of the allowance based upon reviews of individual credits, recent loss experience, current economic conditions, the risk characteristics of various categories of loans and other pertinent factors. Credits deemed uncollectible are charged to the allowance. Provisions for credit losses and recoveries on loans previously charged off are added to the allowance. Deposits The amounts of deposits, as of December 31, are summarized below (in thousands):

The maturities of time deposits of $100,000 or more at December 31, 2004 are summarized as follows: ~~Under 3 months $1,511 3 to 6 months 1,152 6 to 12 months 2,440 Over 12 months 311 ------ $5,414 ======~~

20 Return on Equity and Assets The Following are selected ratios for the years ended December 31,

Short-term borrowing Borrowed funds consist of United States treasury tax and loan deposits, and generally mature within one to 120 days from the transaction date. At no time during the three-year period ended December 31, 2004, did outstanding treasury tax and loan deposits exceed 30% of stockholders' equity. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's primary market risk is interest rate risk. This information is included with item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations Interest Rate Sensitivity Management. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements for the years ended December 31, 2004, 2003 and 2002 contain the information required by Item 8 and that information is incorporated herein following corporate officers corporate certifications page 24. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES With the participation of our Chief Executive Officer and Chief Financial Officer, management has carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the period reported on in this report. There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the fourth quarter of fiscal 2004 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 21 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Apart from certain information set forth below, the information required by this Item is incorporated herein by reference to the applicable information in the proxy statement for our 2004 annual meeting, including the information set forth under the captions "Election of Directors, Section 16(a) Beneficial Ownership Reporting Compliance" and "Governance of the Company - Audit and Finance Committee-Audit Committee Financial Expert." The following table sets forth information about our executive officers that are not also directors:

We have a code of conduct that applies to all Directors, officers and employees, including our principal executive officer and principal financial officer (who is also our principal accounting officer). Our code of conduct governs such matters as conflicts of interest, use of corporate opportunity, confidentiality, compliance with law and the like. A copy of our code of conduct is incorporated by reference into this annual report on Form 10-K. Our Board of Directors has adopted Corporate Governance Guidelines and charters for the Audit and Finance, Compensation and Nominating/Governance Committees of the Board of Directors. You can obtain a printed copy of any of the materials referred to above by contacting us at the following address: Brunswick Bank & Trust C/o Brunswick Bancorp 439 Livingston Avenue New Brunswick, NJ 08901 Telephone: 1-732-247-5800 22 ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated herein by reference to the applicable information in the proxy statement for our 2005 annual meeting, including the information set forth under the captions "Executive Compensation," "Compensation of Directors" and "Compensation Committee Interlocks and Insider Participation." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTS The Proxy Statement for our 2005 Annual Meeting will contain under the caption "Beneficial Ownership of Common Stock by Management and Principal Shareholders" the information required by Item 12 and that information is incorporated herein by reference. The following table sets forth information with respect to the Company's equity compensation plans as of the end of the most recently completed fiscal year. Equity Compensation Plan Information

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Proxy Statement for our 2005 Annual Meeting will contain under the caption "Certain Transactions with Management and the caption "Compensation Committee Interlocks and Insider Participation" the information required by Item 13 and that information is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES & SERVICES The information required by this Item is incorporated by reference to the applicable information in the proxy statement for our 2005 annual meeting, including the information set forth under the caption "Our Relationship with Our Independent Auditors." 23 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a)(1)&(2) Financial Statements and Financial Statements Schedules The below listed financial statements and report of independent auditors of BB and subsidiaries for the years ended December 31, 2004, 2003 and 2002 are following signature page number 25. Independent Auditors' Report Consolidated Statements of Financial Condition - Years Ended December 31, 2004 and 2003 Consolidated Statements of Income - Years Ended December 31, 2004, 2003 and 2002 Consolidated Statements of Stockholders' Equity - Years Ended December 31, 2004, 2003 and 2002 Consolidated Statements of Cash Flows - Years Ended December 31, 2004, 2003 and 2002 Notes to Financial Statements - Years Ended December 31, 2004 and 2003 Schedules to the Consolidated of Financial Condition required under Article 9 of Regulation S-X are not required under the related instructions or are inapplicable, and therefore have been omitted. (b) Exhibits List of Exhibits (3) (a) Certificate of Incorporation of Brunswick Bancorp Incorporated by reference to Registration Statement on Form S-14 filed on June 20, 1985. (b) By-laws of Brunswick Bancorp. Incorporated by reference to Registration Statement on Form S-14 filed on June 20, 1985. (10) (a) Non-qualified Deferred Compensation Plan dated as of December 5, 1995. Incorporated by reference to Form 10-K for the year ended December 31, 1995. (b) Non-Qualified Deferred Compensation Plan dated as of January 1, 2001 for Carmen J. Gumina. Incorporated by reference to Form 10-K for the year ended December 31, 2001. (c) Non-Qualified Deferred Compensation Plan dated as of January 1, 2001 for Roman T. Gumina. Incorporated by reference to Form 10-K for the year ended December 31, 2001. (14) Code of Ethics. Incorporated by reference to Form 10-K for the year Ended December 31, 2003. (21) Subsidiaries of Brunswick Bancorp, Incorporated by reference to Registration Statement on Form S-14 filed on June 20, 1985. (31.1) Certification of Chief Executive Officer pursuant to Rule 13a-14(a)* (31.2) Certification of Chief Financial Officer pursuant to Rule 13a-14(a)* (32.1) Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350* (32.2) Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350* (c) Not applicable 24 SIGNATURES Pursuant to the requirements of Section 13 or 13 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. BRUNSWICK BANCORP /s/ Carmen Gumina ---------------------- By: Carmen Gumina Chairman of the Board March 22, 2005 Dated: Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed-below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. Signature Title Date /s/ Frederick Perrine ------------------------------ March 22, 2005 Frederick Perrine Director, Vice Chairman /s/ Joseph DeMarco ------------------------------ March 22, 2005 Joseph DeMarco Director /s/ Dominick Faraci ------------------------------ March 22, 2005 Dominick Faraci Director /s/ Carmen J. Gumina ------------------------------ March 22, 2005 Carmen J. Gumina Chief Executive Officer, Chairman of the Board (Principal Executive Officer) /s/ Phillip W. Barrood ------------------------------ March 22, 2005 Phillip W. Barrood Director /s/ Michael Kaplan ------------------------------ March 22, 2005 Michael Kaplan Director /s/ Richard A. Malouf ------------------------------ March 22, 2005 Richard A. Malouf Director /s/ James V. Gassaro ------------------------------ March 22, 2005 James V. Gassaro Director /s/ Robert Sica ------------------------------ March 22, 2005 Robert Sica Director 25 /s/ Frank Gumina Jr. ------------------------------ March 22, 2005 Frank Gumina Jr. Director /s/ Gary S. Russo ------------------------------ March 22, 2005 Gary S. Russo Director /s/ Thomas A. Fornale ------------------------------ March 22, 2005 Thomas A. Fornale Secretary-Treasurer Controller, (Principal Accounting/Financial Officer) 26 BRUNSWICK BANCORP AND SUBSIDIARIES FINANCIAL STATEMENT YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 TABLE OF CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors BRUNSWICK BANCORP AND SUBSIDIARIES I have audited the accompanying consolidated Balance Sheets of Brunswick Bancorp and Subsidiaries as of December 31, 2004 and 2003 and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 2004. These consolidated financial statements are the responsibility of the Bancorp's management. My responsibility is to express an opinion on these consolidated financial statements based on my audits. I conducted my audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Brunswick Bancorp and Subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. Michael R. Ferraro, CPA February 7, 2005 Matawan, NJ 1 BRUNSWICK BANCORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2004 AND 2003

See accompanying notes and accountant's report. 2 BRUNSWICK BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

See accompanying notes and accountant's report. 3 BRUNSWICK BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

See accompanying notes and accountant's report. 4 BRUNSWICK BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

See accompanying notes and accountant's report. 5 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Brunswick Bancorp (the Company) is a bank holding company whose principal activity is the ownership and management of its wholly owned subsidiaries Brunswick Bank & Trust Company (the Bank) and Brunscor Realty, Inc. The Bank also has a wholly owned investment subsidiary BTB Investment Corp. Inc. The Bank generates commercial, mortgage and consumer loans and receives deposits from customers located primarily in central New Jersey with primary emphasis on Middlesex and Monmouth Counties; services are provided at six locations. The Bank operates under a state bank charter and provides full banking services. As a state bank, the Bank is subject to regulation by the New Jersey Department of Banking and Insurance and the Federal Deposit Insurance Corporation. Basis of Consolidation The consolidated financial statements include the accounts of Brunswick Bancorp and its wholly owned subsidiaries, Brunswick Bank & Trust Company, and Brunscor Realty Inc. after elimination of all material inter-company transactions and balances. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Investment Securities Debt securities are classified as held-to-maturity when the Bank has the positive intent and ability to hold securities to maturity. Securities held-to-maturity are carried at amortized cost. The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period of maturity. The investment portfolio of the Bank is held in the operating subsidiary BTB Investment Corp. Inc. In December 2003, the Emerging Issues Task Force issued EITF 03-01, "The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments." This statement from the EITF addresses disclosure requirements regarding information about temporarily impaired investments. The requirements are effective for fiscal years ending after December 15, 2003 for all entities that have investments in debt and marketable equity securities that are accounted for under Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The required disclosure has been made in the annual financial statements. Loans Loans are stated at unpaid principal balances, less the allowance for loan losses and net deferred loan fees and unearned discounts. The accrual of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days delinquent unless the credit is well secured and in process of collection. Installment and other personal loans are typically charged off no later than 180 days past due. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful. 6 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loan Impairment The Bank applies the provisions of SFAS No. 114," Accounting by Creditors for Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures," in it's evaluation of the loan portfolio. SFAS 114 requires that certain impaired loans be measured based on present value of expected future cash flows, net of disposal costs, discounted at the loan's original effective interest rate. As a practical matter, impairment may be measured based on the loan's observable market price or the fair value of the collateral, net of disposal costs, if the loan is collateral dependent. When the measure of the impaired loan is less than the recorded investment in the loan, the impairment is recorded through a valuation allowance. Allowance for Loan Losses The allowance for loan losses is maintained at a level, which, in management's judgment, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management's evaluation of the collectibility of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, economic conditions and other risks inherent in the portfolio. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. Although management uses available information to recognize losses on loans, because of uncertainties associated with local economic conditions, collateral values and future cash flows on impaired loans, it is reasonable that a material change could occur in the allowance for loan losses in the near term. However, the amount of the change that is reasonably possible cannot be estimated. The allowance is increased by a provision for loan losses, which is charged to expense and reduced by charge-offs, net of recoveries. Changes in the allowance relating to impaired loans are charged or credited to the provision for loan losses. Loan Fees Loan origination and commitment fees, as well as certain direct loan origination costs, are deferred and the net amount is amortized as an adjustment of the related loan's yield. The Bank is generally amortizing these amounts over the life of the related loans except for residential mortgage loans, where the timing and amount of prepayments can be reasonably estimated. For these mortgage loans, the net deferred fees are amortized over an estimated average life of 7.5 years. Amortization of deferred loan fees is discontinued when a loan is placed on nonaccrual status. Premises and Equipment Land is carried at cost. Bank premises and equipment are carried at cost net of accumulated depreciation. Depreciation is computed using the straight-line and the declining balance methods based principally on the estimated useful lives of the assets. Maintenance and repairs are expensed as incurred while major additions and improvements are capitalized. Gains and losses on dispositions are included in current operations. Other Real Estate Owned Real estate properties acquired through or in lieu of loan foreclosure are initially recorded at the lower of the Bank's carrying amount or fair value less estimated selling cost at the date of foreclosure. Any write-downs based on the asset's fair value at the date of acquisition are charged to the allowance for loan losses. 7 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS After foreclosure, these assets are carried at the lower of their new cost basis or fair value less cost to sell. Costs of significant property improvements are capitalized, whereas costs relating to holding property are expensed. The portion of interest costs relating to development of real estate is capitalized. Valuations are periodically performed by management and any subsequent write-downs are recorded as a charge to operations, if necessary, to reduce the carrying value of a property to the lower of its cost or fair value less cost to sell. Advertising Costs Advertising costs are charged to operations in the year incurred and totaled $57,312, $16,615 and $29,641 in 2004, 2003 and 2002, respectively. Income Taxes Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of the allowance for loan losses and accumulated depreciation. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets and liabilities are reflected at income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. The Bancorp files consolidated income tax returns with its subsidiaries. Statements of Cash Flows The Bancorp considers all cash amounts due from depository institutions, interest-bearing deposits in other banks and federal funds sold to be cash equivalents for purposes of the statements of cash flows. Net Income Per Share Basic net earnings per common share is computed by dividing net earnings applicable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options. Stock Repurchase Program In November 2003, the Company's Board of Directors approved a stock repurchase program whereby up to $5,000,000 of common stock may be purchased from time to time at the discretion of management. On December 29, 2004 the company purchased 11,239 shares. The repurchased shares are held as treasury stock and are available for general corporate purposes. Reclassification Certain amounts for the year ended December 31, 2002, have been reclassified to conform to the current year's presentation. Impact of New Accounting Standards FIN 45 - In November 2002, the FASB issued FASB Interpretation (FIN) No .45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires a guarantor to recognize a liability at the inception of the guarantee for the fair value of obligations it has undertaken in issuing the guarantee and also requires more detailed disclosures with respect to guarantees. 8 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS FIN 45 is effective for guarantees issued or modified after December 31, 2002 and requires additional disclosures for existing guarantees. The adoption of FIN 45 did not have a material impact on the Company's results of operations or financial position. The Company has provided additional disclosure with respect to guarantees in Note 13. FIN 46 - In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities" and amended it in October 2003, such that it was effective for the Company in the first fiscal quarter of 2004. This standard clarifies the application of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," and addresses consolidation by business enterprise of variable interest entities. FIN No. 46 requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if involved. FIN No. 46 also enhances the disclosure requirements related to variable interest entities. This interpretation was effective for any variable interest entities. The adoption of FIN No. 46 did not have any significant effect on the Company's consolidated financial statements. SFAS 149 - In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The adoption of SFAS 149 in the fiscal fourth quarter of 2003 did not have a material impact on the Company's results of operation or financial position. SFAS 150 - In May 2003, the FASB issued SFAS No.150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS 150, establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The adoption of SFAS 150 in the fiscal fourth quarter of 2003 did not have a material impact on the company's results of operation or financial position. SFAS 132 (Revised) - In December 2003, the FASB issued SFAS No. 132 (Revised), Amendment of Statement 132 on Employers' Disclosures about Pensions and Other Postretirement Benefits. This amends FASB Statements No. 87, 88, and 106. This Statement revises employers' disclosures about pension plans and other postretirement benefit plans. It does not change the measurement or recognition of those plans required by FASB Statements No. 87, Employers' Accounting for Pensions, No. 88, Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, and No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. This Statement retains the disclosure requirements contained in SFAS Statement No. 132, Employers' Disclosures about Pensions and Other Postretirement Benefits, which it replaces. It requires additional disclosures to those in the original Statement 132 about the assets, obligations, cash flows, and net periodic benefits cost of defined benefit pension plans and other defined benefit postretirement plans. The required information should be provided separately for pension plans and for other postretirement benefit plans. The adoption of SFAS 132 (Revised) in the fiscal fourth quarter of 2003 did not have a material impact on the Company's results of operation or financial position. SFAS 123 (Revised) - In December 2004, the FASB issued SFAS No. 123 (Revised), "Share-Based Payment", which would require all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values, effective for public companies for interim or periods beginning after June 15, 2005. 9 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS The company intends to adopt SFAS No.123 (Revised) effective July 1, 2005. This statement permits public companies to adopt its requirements using either the modified prospective or retrospective method. The Company is currently evaluating the alternative methods of adoption. The impact of adoption of SFAS No. 123 (Revised) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS 123 (Revised) in prior periods, the impact of that standard would have approximated the proforma impact of SFAS 123 (Revised) as disclosed in Note 10-Stock Option Plan. SFAS No.123 (Revised) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as financing cash flow, rather than as an operating cash flow as required under current literature. NOTE 2 - SECURITIES HELD TO MATURITY The amortized cost of securities and their approximate fair values are as follows:

At December 31, 2004 the Company had unrealized losses in its securities portfolio which occurred in the past year. The Company has the ability and intent to hold these securities until such time as the value recovers or the securities mature and are repaid. Further, the Company believes the deterioration in value is attributable to changes in the market interest rates and not credit quality of the issuer. The maturities of securities held-to-maturity at December 31, 2004 and 2003 are as follows:

Securities held to maturity with a carrying value of $4,000,000 and $6,000,000 at December 31, 2004 and 2003, respectively, were pledged to secure public deposits and for other purposes required or permitted by law. 10 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 - LOANS Loans at December 31, 2004 and 2003 are summarized as follows:

An analysis of the change in the allowance for credit losses follows:

At December 31, 2004 and 2003, the total recorded investment in impaired loans, all of which had allowances determined in accordance with FASB No. 114 and No. 118, amounted to approximately $178,103 and $396,183, respectively. The average recorded investment in impaired loans amounted to approximately $287,143, $858,971 and $1,526,559 for the years ended December 31, 2004, 2003 and 2002, respectively. The allowance for loan losses related to impaired loans amounted to approximately $43,403 and $7,312 at December 31, 2004 and 2003, respectively. Interest income on impaired loans of $129, $21,519 and $15,703, was recognized for cash payments received in 2004, 2003 and 2002, respectively. The Bank has no commitments to loan additional funds to borrowers whose loans have been modified. NOTE 4 - PREMISES AND EQUIPMENT, NET A summary of premises and equipment at December 31, 2004 and 2003 follows:

11 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 - DEPOSITS Deposit account balances at December 31, 2004 and 2003, are summarized as follows:

Certificates of deposit over $100,000 are not insured by the Federal Deposit Insurance Corporation (FDIC) At December 31, 2004, scheduled maturities of certificate of deposits are as follows:

NOTE 6 - BORROWED FUNDS Borrowed funds consist of United States treasury tax and loan deposits and generally mature within one to 120 days from the transaction date. All borrowed funds are collateralized with mortgage backed securities. NOTE 7 - EMPLOYEE BENEFIT PLANS The Bank has a profit sharing plan for substantially all full-time employees. The Plan consists of employer contributions and voluntary employee contributions, and an annually determined employer match of employee contributions. Contributions under the profit sharing plan are made at the discretion of the board of directors, and have totaled approximately 5% of gross eligible salaries for the past five years. The Bank contributed $136,962, $133,906 and $124,282, for 2004, 2003 and 2002, respectively. The Bank established a non-qualified deferred compensation plan covering key employees of the bank. This plan makes discretionary incentive contributions and the benefits are vested over a 5 year period. The amount funded was $192,000, for each of years 2004, 2003 and 2002. The Bank has a Restricted Stock Award Plan, covering 100,000 shares of common stock, whose purpose is to permit grants of shares, subject to restrictions, to key employees of the Company as a means of retaining and rewarding them for long-term performance and to increase their ownership in the Company. Shares awarded under the plan entitle the shareholder to all rights of common stock ownership except that the shares may not be sold, transferred, pledged, exchanged or otherwise disposed of during the restriction period. The restriction period is determined by a committee that is appointed by the Board of Directors and the period may not exceed ten years. During the years ended December 31, 2001 and 2000, 40,000 shares and 60,000 shares respectively, were granted with restriction periods of ten years. The shares do not vest over time; all restrictions lapse at the end of this period. 12 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The shares were recorded at the market values on the dates of issuance as deferred compensation and the related amounts are being amortized to operations over the respective vesting periods. Compensation expense for the years ended December 31, 2004, 2003 and 2002 related to these shares of restricted stock, was $105,300 for each year. NOTE 8 - INCOME TAXES The consolidated provision for income taxes consists of the following:

The provision for federal income tax differs from that computed by applying federal statutory rates to income before federal income tax expense, as indicated in the following analysis:

During 2004, the Company recognized certain tax benefits related to the stock option plan in the amount $207,664. Such benefits were recorded as a reduction of income taxes payable and an increase in additional paid-in capital. A cumulative net deferred tax asset is included in other assets. The components of the asset are as follows:

13 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 9 - STOCK SPLITS AND DIVIDENDS The Board of Directors declared two shares for one share stock split on December 14, 1999 to stockholders of record on December 31, 1999 payable on January 14, 2000. On March 12, 2002 the Board of Directors declared a 10% stock dividend to stockholders of record on March 21, 2002 payable on May 15, 2002. These financial statements give retroactive effect to the stock split and stock dividend in the computation of earnings per share. NOTE 10 - STOCK OPTION PLAN The Company adopted on April 26, 2000 a new stock option plan for officers, key employees and Directors that provides for nonqualified and incentive options. The Board of Directors determines the option price at the date of grant. The options generally expire five years from the date of grant and are exercisable over the period stated in each option. In April 2000 the Company granted stock options for 191,500 shares at an exercise price of $10.00 per share, this grant was adjusted, in March 2002 to reflect the 10% stock dividend paid to the shareholders. This created a total granted stock options of 210,650 shares at an exercise price of $9.09 per share. During 2004, 149,700 shares were available to be exercised, and 73,025 shares were exercised. The stock options expire in 5 years from the date they are granted and vest over service periods that range from one to five years. The fair value of the options granted were estimated on the grant date using the Black-Scholes Model. The following assumptions were made in estimating fair value:

The Company applies APB Opinion 25 in accounting for stock options. Accordingly, no compensation cost has been recognized for the plan. Had compensation cost been determined on the basis of fair value pursuant to FASB Statement No. 123, Pro forma net income and earnings per share would be as follows:

14 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS The following table summarizes the options granted and exercised under the Plan, during the periods indicated and their respective weighted average exercise price:

NOTE 11 - RELATED PARTIES The Bank has entered into transactions with its directors, principal officers, their immediate families, and affiliated companies in which directors are principal stockholders. These transactions are as follows: Loans - Related parties were indebted to the Company for loans as follows:

On December 29, 2004 the Company purchased from the Estate of Josephine Gumina 11,239 shares at a price of $13 per share, totaling $146,107. The market value at the time of the sale was $14.80. The Board of Directors approved this transaction. In July 2003, the Company sold the Monroe property to its chief executive officer for $330,000 in cash, which was approved by the Company's Board of Directors. The sales price was close to book value, resulting in a small gain and was in excess of the appraised values by approximately $50,000. Loan participations sold - Certain loans and loan participations, which the Bank services, were sold to a related party without recourse. As of December 31, 2004 and 2003, these loans totaled $1,869,615 and $1,598,172, respectively. 15 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS Rent - Three operating locations of the Bank are leased from a related party. Rent paid to that party totaled $527,594, $455,869 and $444,417 for the years ended December 31, 2004, 2003 and 2002, respectively, at terms which are considered by management to be no less favorable than an arm's length agreement. Future minimum lease payments to these related parties as of December 31, 2004, are as follows:

Deposits - The Company is indebted to certain related parties for bank deposits made in the ordinary course of business. Rates and terms of these deposits are comparable to those offered to unrelated depositors. Other - The Company engages in routine operating transactions with entities related to directors. These transactions are in the normal course of business and are immaterial to operations. NOTE 12 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK In the normal course of business, the Bank has outstanding commitments and contingent liabilities, such as commitments to extend credit and standby letters of credit, which are not included, in the accompanying consolidated financial statements. The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet. Financial instruments whose contract amount represents credit risk are as follows at December 31, 2004. Commitments to extend credit $ 2,264,000 Letters of credit 410,932 Commercial lines of credit 4,918,936 Consumer lines of credit 1,913,442 ------------ $ 9,507,310 ============

16 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 13 - COMMITMENTS AND CONTINGENT LIABILITIES The Company is party to litigation and claims arising during the normal course of business. Management, after consultation with legal counsel, believes that the liabilities, if any, arising from such litigation and claims will not be material to the consolidated financial statements. Commitments to extend credit are agreements to lend to a customer as long as no violation of any condition established in the contract exists. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on Managements' credit evaluation. Collateral held varies, but may include accounts receivable, inventory, property and equipment, and income-producing commercial properties. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank's policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved in making commitments to extend credit. The Bank has not been required to perform on any financial guarantees during the past two years. The Bank has not incurred any losses on its commitments in either 2004 or 2003. The Bank entered into an agreement in September 1996 to purchase a parcel of land in Monroe Township, New Jersy, for the purpose of constructing an additional branch office. As mentioned in Note-11, the property has been sold to the chief executive officer. The Bank leases the Metroplex Branch, Aaron Road Branch, Applegarth Road Branch, Livingston Avenue Branch and corporate office facility under operating lease arrangements expiring at various times through the year 2024. Minimum annual rental commitments under non-cancelable leases are as follows at December 31, 2004:

17 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 14 - CONCENTRATIONS OF RISK Cash Concentrations: The Bank maintains cash balances at several correspondent banks. The aggregate cash balances represent federal funds and demand deposits. The cash balances are guaranteed by the Federal Deposit Insurance Corporation up to $100,000. At December 31, 2004 and 2003, the Bank had approximately $27,463,000 and $23,783,000, respectively, in excess of FDIC limits. Loan Concentrations: All of the Company's loans and loan commitments have been granted to customers in the Bank's market area. The majority of such customers are depositors of the Bank. Of a total commercial loan portfolio of $44,835,243 and $40,013,237 as of December 31, 2004 and 2003, respectively, approximately $909,857 and $221,224, respectively, of those loans are collateralized by stock in one publicly traded company. The market value of stock collateralizing those loans totals approximately $1,344,326 and $623,987, as of December 31, 2004 and 2003, respectively. The distribution of commitments to extend credit approximates the distribution of loans outstanding (Note 3). Commercial and standby letters of credit were granted primarily to commercial borrowers. The Company, as a matter of policy, requires collateral on all real estate exposures and generally requires loans to value ratios of no greater than 75%. Interest-Rate Risk: The Bank is principally engaged in the business of attracting deposits from the general public and using these deposits to make loans secured by real estate and commercial loans, and to a lesser extent, consumer loans and to purchase investment securities. The potential of interest-rate risk exists as a result of the shorter duration of the Bank's interest-sensitive liabilities compared to the generally longer duration of interest-sensitive assets. NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS SFAS No. 107 requires disclosure of the estimated fair value of an entity's assets and liabilities considered to be financial instruments. For the Bank, as for most financial institutions, the majority of its assets and liabilities are considered financial instruments as defined in SFAS No. 107. However, many such instruments lack an available trading market, as characterized by a willing buyer and seller engaging in an exchange transaction. Therefore, the Bank had to use significant estimates and present value calculations to prepare this disclosure, as required by SFAS No. 107. Accordingly, the information presented below does not purport to represent the aggregate net fair value of the Bank. Changes in the assumptions or methodologies used to estimate fair values may materially affect the estimated amounts. Also, management is concerned that there may not be reasonable comparability between institutions due to the wide range of permitted assumptions and methodologies in the absence of active markets. This lack of uniformity gives rise to a high degree of subjectivity in estimating financial instrument fair values. Estimated fair values have been determined by the Bank using what management believes to be the best available data and an estimation methodology suitable for each category of financial instruments. The estimation methodologies used, the estimated fair values, and recorded book balances at December 31, 2004 and 2003 are set forth below. 18 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS For cash and due from banks and interest-bearing deposits with banks, the recorded book values are deemed to approximate fair values at December 31, 2004 and 2003, respectively. The estimated fair values of investment and mortgage-backed securities are based on quoted market prices, if available. If quoted market prices are not available, the estimated fair values are based on quoted market prices of comparable instruments. The fair values of loans are estimated based on a discounted cash flow analysis using interest rates currently offered for loans with similar terms to borrowers of similar credit quality. The carrying value of accrued interest is deemed to approximate fair value.

The estimated fair values of demand deposits (i.e., interest and non-interest bearing checking accounts, passbook savings and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of variable-rate, fixed term money market accounts and certificates of deposit approximate their fair values at the reporting date. The fair values of fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered to a schedule of aggregated expected monthly time deposit maturities. The carrying amount of accrued interest payable approximates its fair value.

The fair value of commitments to extend credit is estimated based on the amount of unamortized deferred loan commitment fees. The fair value of letters of credit is based on the amount of unearned fees plus the estimated cost to terminate the letters of credit. Fair value of unrecognized financial instruments including commitments to extend credit and the fair value of letters of credit are considered immaterial. 19 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 16 - REGULATORY MATTERS The Company is subject to various regulatory capital requirements administered by its primary federal regulator, the Federal Deposit Insurance Corporation (FDIC). Failure to meet the minimum regulatory capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators, that if undertaken, could have a direct material effect on the Company and the consolidated financial statements. Under the regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines involving quantitative measure of the Company's assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company's capital amounts and classification under the prompt corrective action guidelines are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of: total risk-based capital and Tier 1 capital to risk-weighted assets (as defined in the regulations), and of Tier 1 capital to adjusted total assets (as defined). Management believes, as of December 31, 2004, that the Company meets all the capital adequacy requirements to which it is subject. As of December 8, 2004, the most recent notification from the Regulators, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To remain categorized as well capitalized, the Bank will have to maintain minimum total risk-based, Tier 1 leverage ratios as disclosed in the table below. There are no conditions or events since the most recent notification that management believes have changed the Bank's prompt corrective action category. The Company's actual and required capital amounts and ratios are as follows (in thousands):

20 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENT NOTE 17 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Selected unaudited quarterly data is presented as follows (in thousands except for per share amounts):

During the fourth quarter of 2004 and 2003, the Company completed comprehensive review of its loan loss reserves. As a result of these reviews, there were some reversals of allowance for credit losses in the fourth quarters. 21 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 18 - CONDENSED FINANCIAL INFORMATION OF BRUNSWICK BANCORP (PARENT ONLY) BALANCE SHEET

STATEMENTS OF INCOME

22 BRUNSWICK BANCORP AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS STATEMENT OF CASH FLOWS

Certain bank regulatory limitations exist on the availability of subsidiary bank undistributed net assets for the payment of dividends to Brunswick Bancorp without the prior approval of the bank regulatory authorities. Substantially all undistributed net assets of the Bank are limited in availability for dividends to Brunswick Bancorp as of December 31, 2004. 23

BRUNSWICK BANCORP 10-K