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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 1
TO
FORM 10-SB
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GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B)
OR 12(G) OF THE SECURITIES ACT OF 1934
BRIDGE VIEW BANCORP
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(Name of Small Business Issuer in Its Charter)
NEW JERSEY 22-3461336
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(State or Other Jurisdiction of (I.R.S.Employer
Incorporation or Organization) Identification No.)
457 SYLVAN AVENUE, ENGLEWOOD CLIFFS, NEW JERSEY 07632
- ----------------------------------------------- -----------
(Address of Principal Executive Offices) (Zip Code)
201-871-7800
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(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
To be so Registered Each Class Is to be Registered
-------------------------- ------------------------------
Common Stock, No Par Value American Stock Exchange
Securities to be registered under Section 12(g) of the Act: NONE
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<PAGE>
PART I
ITEM 1 -- BUSINESS
General
Bridge View Bancorp (the "Company") is a New Jersey corporation organized
in May, 1996 at the direction of the Board of Directors of Bridge View Bank (the
"Bank") for the purpose of acquiring all the capital stock of the Bank (the
"Acquisition"). As part of the Acquisition, shareholders of the Bank will
receive shares of the Company's common stock, no par value per share (the
"Common Stock"), in a ratio of two shares of Common Stock for each outstanding
share of the common stock of the Bank, $5.00 per share par value (the "Bank
Common Stock"). The Acquisition is subject to the approval or non-objection of
the New Jersey Department of Banking (the "Department") and the Board of
Governors of the Federal Reserve System (the "FRB"). Upon consummation of the
Acquisition, the only significant asset of the Company will be its investment in
the Bank. The Company's main office is located at 457 Sylvan Avenue, Englewood
Cliffs, Bergen County, New Jersey 07632.
The Bank is a commercial bank formed under the laws of New Jersey on
October 11, 1988. The Bank received its Certificate of Authority to transact
business from the Commissioner of the Department on April 7, 1989 and the Bank
commenced operations on March 15, 1990.
The Bank's Board of Directors has proposed the formation of the Company and
the Acquisition because the holding company structure will maximize the Bank's
flexibility in undertaking its current and future operations. In addition, the
holding company structure makes available to the Board of Directors a variety of
means to assist the Company's Board in acting in the best interests of
shareholders in the face of an unsolicited takeover bid which are not available
to the Bank. Although the Company's Certificate of Incorporation does not
currently contain any such defensive provisions, shareholders may be asked to
approve such provisions in the future.
The holding company structure provides greater flexibility in managing the
current and future operations of the Bank. For example, the holding company
structure provides more flexibility in raising capital for the Company or for
subsidiary banks. This flexibility is available because the capital structure of
a holding company is subject to the general corporate laws and Federal Reserve
Board Regulation Y and not the Federal and New Jersey laws and regulations
pertaining to banks. In addition, because the New Jersey Business Corporation
Act is a more modern statute than the New Jersey Banking Act of 1948, as amended
(the "Banking Act"), a holding company structure provides greater flexibility in
issues of corporate government.
The Board of Directors of the Bank also believes that the creation of the
Company will maximize the Bank's ability to accomplish future expansion through
the acquisition of other financial institutions. The holding company structure
will permit the Bank to acquire other banks and financial institutions while
operating them as wholly-owned subsidiaries. The Bank's management believes that
the operation of such institutions as wholly owned subsidiaries permits the
deposit base and customer relations of the acquired institution to be maintained
while the operations of the acquired institution are integrated with those of
the Bank. The Bank has not entered into any binding agreements for any
acquisitions and is not currently engaged in any negotiations or discussions for
any acquisitions, although it may engage in such negotiations or discussions in
the future.
The bank holding company structure may also be utilized in the future to
engage in certain non-banking activities which are closely related to banking,
either directly, through newly formed subsidiaries or by acquiring companies
already established in such activities.
Finally, because the Company is governed by the New Jersey Business
Corporation Act, it has greater flexibility than does the Bank in adopting
alternative provisions for its Certificate of Incorporation which are not
permitted to the Bank, which is governed by the Banking Act. Among the
provisions which are
<PAGE>
available to the Company and not the Bank are a classified Board of Directors, a
super majority vote requirement for certain types of corporate transactions such
as mergers and asset sales which have not been previously approved by the
Company's Board of Directors. The Bank is not permitted to have these provisions
in its Certificate of Incorporation under the Banking Act. Although the
Company's Certificate of Incorporation does not currently contain these
provisions, shareholders may be asked to adopt them in the future. In addition,
the projections afforded by the New Jersey Shareholders Protection Act will be
available to the shareholders of the Company, although they are not available to
shareholders of the Bank. See "COMMON STOCK --Shareholders Protection Act."
Adoption of a holding company structure may subject the Company to certain
additional regulation to which the Bank is not currently subject. For example,
the Company will become subject to oversight and regulation by the Federal
Reserve Board. The Bank is not currently subject to such oversight and
regulation. In addition, issuances of securities by the Company will be subject
to regulation by the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended (the "Securities Act"). The issuance of
securities by the Bank is currently exempt from the Securities Act. This
additional regulation could involve increased expense for the Company. However,
due to the benefits of a holding company structure discussed above, the Board
believes that adoption of the Plan and the creation of a holding company
structure is in the best interests of the shareholders of the Bank.
On October 23, 1996, the Company submitted in final form to the Federal
Reserve Bank of New York its required notification to acquire the Bank and
become a registered bank holding company under the Bank Holding Company Act of
1956, as amended (the "BHCA"). The Company anticipates receiving the FRB's
non-objection to the Acquisition within 30 days of the filing, or by November
23, 1996, although no assurances can be given concerning whether the FRB will
raise any objections to the Acquisition or the timing of the FRB's
non-objection. The Company anticipates consummating the Acquisition shortly
after receipt of the FRB's non-objection.
Because two shares of Company stock will be exchanged for each share of
Bank Common Stock, the per share income and book value figures included in the
Bank's financial statements filed herein will be reduced by one-half. The Bank's
financial statements filed herein have not been adjusted to reflect this
reduction.
2
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As of May 2, 1996, the Bank Common Stock was held by 458 holders of record.
As of May 2, 1996, the Bank also had outstanding Non-Transferable Warrants
("Warrants") to purchase shares of Bank Common Stock. As described above, upon
consummation of the Acquisition, shareholders of the Bank will receive shares of
the Common Stock in exchange for their shares of Bank Common Stock. In addition,
the Company will assume the Bank's obligations under both its outstanding
options and Warrants. See "COMPENSATION OF DIRECTORS AND OFFICERS -- Stock
Option Plans" and "RECENT SALES OF SECURITIES."
The Bank operates from its main office at 457 Sylvan Avenue, Englewood
Cliffs, New Jersey and a branch office at 1605 Lemoine Avenue, Fort Lee, Bergen
County, New Jersey 07024. In addition, the Bank has recently opened a second
branch at 115 River Road, Edgewater, Bergen County, New Jersey 07020. See
"PROPERTIES."
The Bank engages in the general business of commercial banking. The Bank
offers traditional commercial banking services such as savings and checking
accounts and provides commercial, consumer and mortgage loans. Bank deposits are
insured by the Federal Deposit Insurance Corporation ("FDIC") up to applicable
limits. The Bank provides a wide range of commercial banking products and
services, including personal and business checking accounts and time deposits,
money market accounts and regular savings accounts. The Bank does not presently
have any trust powers and, therefore, does not offer any trust services.
3
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The Bank structures its specific services and charges in a manner designed
to attract the business of small and medium-sized businesses and the
professional community, as well as that of individuals, in the eastern Bergen
County, New Jersey area. As a general rule, specific banking services are
offered only on a basis believed to be profitable. Such services are charged for
fully unless other aspects of the account relationship provide sufficient
earnings to offset the cost of the services provided.
The Bank engages in a wide range of lending activities and offers
commercial, consumer, mortgage, construction and personal loans. All lending
decisions are made primarily on the basis of soundness and in compliance with
all applicable laws. The Bank from time to time participates in multi-bank
credit arrangements in order to take part in loans for amounts which are in
excess of the Bank's legal lending limit. In commercial lending, the Bank offers
loans for equipment and working capital needs, as well as for financing of
commercial real estate. The Bank also bids for tax anticipation notes and bond
anticipation notes for local governments. In consumer lending, the Bank offers
cash reserve credit lines and personal, automobile, bridge, home equity, home
improvement loans and Visa and Mastercard credit cards. The Bank also makes
one-to-four-family residential real estate loans. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Financial
Condition -- Loan Portfolio."
The Bank believes it offers competitive rates for its services, thereby
enabling consumers and business entities in its service area to avail themselves
of the Bank's credit and non-credit services. See "COMPETITION".
The Bank is fully computerized and outsources its data processing and
management information services to Electronic Data Systems, Inc. (EDS) of
Belpre, Ohio. All Bank departments are automated, and the Bank believes the data
processing services available to Bank customers compare favorably with those of
competing financial institutions. The Bank is also a member of the MAC(TM) money
access service.
As of May 2, 1996, the Bank had 35 full time employees and one part time
employee. The Bank's employees are not members of any collective bargaining
group.
Competition
The Bank faces stiff competition for deposits and credit worthy borrowers.
The Bank competes with commercial banks, savings banks and savings and loan
associations, most of which have assets, capital and lending limits greater than
the Bank. In addition to competing with local institutions, the Bank faces
competition for customers, many of whom work in New York City, from large money
center banks and other institutions based in New York. The Bank competes with
these established institutions, with regional and national insurance companies
and
4
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non-bank banks, with regulated small loan companies and local credit unions,
and with regional and national issuers of money market funds.
In addition to having established deposit bases and loan portfolios,
competitive institutions, particularly the large regional commercial and savings
banks, have the ability to finance extensive advertising campaigns and to
allocate considerable resources to locations and products perceived as
profitable. Significantly, these institutions have larger lending limits and, in
certain cases, lower funding costs (the price a bank must pay for deposits and
other borrowed monies used to make loans to customers). Many of these
institutions also offer certain services, such as trust services, which are not
currently offered by the Bank.
Supervision and Regulation
The Bank is subject to a variety of Federal and New Jersey statutes and
regulations applicable to commercial banks, all of which impact the operations
of the Bank. Since the Company's sole business initially will be ownership of
the Bank, any regulations which effect the operations of the Bank will effect
the Company's results. In addition, upon consummation of the Acquisition, the
Company will become a bank holding company subject to regulation under the BHCA.
General -- Recent Regulatory Enactments
On September 29, 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act (the "Interstate Act") was enacted. The Interstate Act generally
enhances the ability of bank holding companies to conduct their banking business
across state boarders. The Interstate Act has two main provisions. The first
provision generally provides that commencing on September 29, 1995, bank holding
companies may acquire banks located in any state regardless of the provisions of
state law. These acquisitions are subject to certain restrictions, including
caps on the total percentage of deposits that a bank holding company may control
both nationally and in any single state. New Jersey law currently allows
interstate acquisitions by bank holding companies whose home state has
"reciprocal" legislation which would allow acquisitions by New Jersey based bank
holding companies.
The second major provision of the Interstate Act permits, beginning on
June 1, 1997, banks located in different states to merge and continue to
operate as a single institution in more than one state. States may, by
legislation passed before June 1, 1997, opt out of the interstate bank merger
provisions of the Interstate Act. In addition, states may elect to opt in and
allow interstate bank mergers prior to June 1, 1997.
5
<PAGE>
A final provision of the Interstate Act permits banks located in one state
to establish new branches in another state without obtaining a separate bank
charter in that state, but only if the state in which the branch is located has
adopted legislation specifically allowing interstate de novo branching.
In April of 1996, the New Jersey legislature passed legislation which would
permit interstate bank mergers prior to June 1, 1997, provided that the home
state of the institution acquiring the New Jersey institution permits interstate
mergers prior to June 1, 1997. In addition, the legislation permits an
out-of-state institution to acquire an existing branch of a New Jersey based
institution, and thereby conduct business in New Jersey. The legislation does
not permit interstate de novo branching. This legislation is likely to enhance
competition in the New Jersey marketplace as bank holding companies located
outside of New Jersey become freer to acquire institutions located within the
State of New Jersey.
Bank Regulation
Insurance of Deposits
The deposits of the Bank are insured up to applicable limits by the FDIC.
Accordingly, the Bank is subject to deposit insurance assessments to maintain
the Bank Insurance Fund ("BIF") of the FDIC. Under the FDIC's insurance premium
assessment system, each institution will be assigned to one of nine assessment
risk classifications based on its capital ratios and supervisory evaluations.
Initially, the lowest risk institutions will only pay the statutory required
minimum premium of $2,000 while the highest risk institutions will be assessed
at the rate of .27% of domestic deposits. Each institution's classification
under the system is re-examined semiannually. In addition, the FDIC is
authorized to increase or decrease such rates on a semiannual basis.
Capital Adequacy Guidelines
The Bank is subject to capital adequacy guidelines promulgated by the FDIC.
The FDIC has issued regulations to define the adequacy of capital based upon the
sensitivity of assets and off-balance sheet exposures to risk factors. Four
categories of risk weights (0%, 20%, 50% and 100%) were established to be
applied to different types of balance sheet assets and off-balance sheet
exposures. The aggregate of the risk weighted items (risk-based assets) is the
denominator of the ratio, the numerator of which is defined risk-based capital.
Under the regulations, risk-based capital has been classified into two
categories. Tier 1 capital includes common and qualifying perpetual preferred
stockholders' equity, less goodwill. Tier 2 capital includes mandatory
convertible debt, allowance for loan losses, subject to certain limitations, and
certain subordinated and term debt securities. Total qualifying capital consists
of Tier 1 capital and Tier 2
6
<PAGE>
capital; however, the amount of Tier 2 capital may not exceed the amount of
Tier 1 capital in the computation of total qualifying capital. The minimum
capital ratio required under the above formula was 4% for Tier 1 capital and 8%
for total qualifying capital. The Bank at June 30, 1996 maintained a Tier 1
capital ratio of 11.05% and total qualifying capital ratio of 11.83%.
The FDIC has also issued leverage capital adequacy standards. Under these
standards, in addition to the risk-based capital ratios, a bank must also
maintain a ratio of Tier 1 capital (using the risk-based capital definition) to
total assets of at least 3%. Institutions which are not "top-rated" will be
expected to maintain a ratio 100 to 200 basis points above this ratio. The
Bank's leverage ratio at June 30, 1996 was 11.95%.
Bank Holding Company Regulation
The Company will be a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the "BHCA"). As a bank holding company,
the Company will be required to file with the Federal Reserve Board an annual
report and such additional information as the Board may require pursuant to the
BHCA. The Federal Reserve Board may also make examinations of the Company and
its subsidiaries.
A bank holding company is generally prohibited from engaging in, or
acquiring direct or indirect control of more than five percent of the
outstanding voting shares of any company engaged in, activities other than
banking and those deemed closely related to banking by the Federal Reserve
Board. Notice to or review by the Federal Reserve Board of such "closely
related" activities is necessary before the Company can engage in such
activities.
Federal Reserve Regulation "Y" sets out those activities which are regarded
as closely related to banking or managing or controlling banks and, thus, are
permissible activities that may be engaged in by bank holding companies subject
to approval by or notice to the Federal Reserve Board. These activities include,
among other things, operating savings associations, providing data processing
services, providing investment or financial advisory services, and, subject to
various restrictions, engaging in securities brokerage and underwriting
activities.
A holding company and its banking subsidiary are prohibited from engaging
in certain tie-in arrangements in connection with any extension of credit or
lease or sale of any property or the furnishing of services.
In addition to Federal bank holding company regulation, the Company will be
required to register as a bank holding company with the New Jersey Department of
Banking. The Company will be required to file copies of the reports it files
with the Federal banking and securities regulators with the Department.
7
<PAGE>
Federal Securities Regulation
Upon effectiveness of this Registration Statement, the Company will become
a reporting company under the Securities and Exchange Act of 1934 (the "34 Act")
and will therefore be required to file quarterly and annual reports, as well as
certain other material, with the SEC.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the Bank's financial statements
and the notes relating thereto including herein. When necessary,
reclassifications have been made to prior years' data throughout the following
discussion and analysis for purposes of comparability with 1995 data.
OVERVIEW AND STRATEGY
The Bank began full service operation as a commercial bank on March 15,
1990. The Bank accepts deposits from the general public, including individuals,
businesses, non-profit corporations and governmental units within its trade
area. The Bank makes commercial loans, consumer loans and both residential and
commercial real estate loans. In addition, the Bank provides other customer
services and makes investments in securities, as permitted by law. The Bank has
sought to offer an alternative, community-oriented style of banking in an area
which at present is mainly dominated by larger, statewide and national
institutions. The Bank has sought to be a positive force in the area by
assisting in the development of the residential sector, by serving the needs of
small and medium-sized businesses and the local professional community, and by
meeting the requirements of individuals residing, working and shopping in the
Bank's eastern Bergen County, New Jersey market area by extending consumer,
commercial and real estate loans and by offering depository services. The Bank
believes that the following attributes of the Bank have made the Bank attractive
to local business people and residents:
O competitively priced services;
O full-service business hours of 7:00 a.m. to 7:00 p.m. weekdays and
9:00 a.m. to 1:00 p.m. Saturdays;
O direct access to Bank management by members of the community, whether
during or after business hours;
O local conditions and needs are taken into account by the Bank when
deciding loan applications and making other business decisions
affecting members of the community;
O responsiveness of the Bank's personnel for requests for information
and services by depositors and others;
O positive involvement of the Bank in the community affairs of Eastern
Bergen County.
8
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Since opening in 1990, the Bank has established two branches in addition to
its main office. The Bank expects to continue to seek additional
strategically-located de novo branch locations within the Bank's eastern Bergen
County trade area. Particular emphasis will be placed on presenting an
alternative banking culture in communities which are dominated by larger
non-local competitors and where no community banking approach exists and in
locations which the Bank perceives to be economically emerging.
RESULTS OF OPERATIONS
The Bank's results of operations depend primarily on its net interest
income, which is the difference between the interest earned on its
interest-earning assets and the interest paid on funds borrowed to support those
assets, such as deposits. Net interest margin is a function of the difference
between the weighted average rate received on interest-earning assets and the
weighted average paid on interest-bearing liabilities, as well as the average
level of interest-bearing assets as compared with that of interest-bearing
liabilities. Net income is also affected by the amount of non-interest income
and operating expenses.
NET INCOME
For the six months ended June 30, 1996, net income increased by $294,000,
or 68.0%, to $726,000 from $432,000 for the comparable period of 1995. The
increase in net income is attributable to an increase in interest income of
$646,000, or 21.7%, partially offset by an $80,000, or 8.9%, increase in
interest expense. The increase in interest income was primarily attributable to
a 35% increase in total loans. In addition to the increases in net interest
income, other income, consisting primarily of service charges on deposit
accounts increased by $104,000, or 40.0%.
The Bank's net income increased from 1994 to 1995 by $495,000, or 66.9% to
$1,235,000 for the year ended December 31, 1995 from $740,000 for the year ended
December 31, 1994. This increase was primarily attributable to an increase in
net interest income of $851,000, or 23.1%, during 1995. The increase in net
interest income was attributable to an increase in interest income of
$1,334,000, or 26.4%, to $6,378,000 for the year ended December 31, 1995
compared to year ended December 31, 1994, primarily as a result of an increase
in the Bank's loan portfolio. The volume increases in the Bank's loan portfolio
were primarily funded through the maturation of lower yielding securities,
thereby increasing the Bank's average yield and net margin. The Bank's average
yield on interest earning assets decreased to 8.17% for the six months ended
June 30, 1996 from 8.18% for the year ended December 31, 1995 and 6.64% for the
year ended December 31, 1994, reflecting changes in market rates of interest.
9
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Interest expense rose $80,000, or 8.9%, for the six months ended June 30,
1996 compared to the comparable period of 1995, and $483,000, or 35.5%, from
1994 to 1995. This increase, at June 30, 1996, is attributable to an increase in
interest-bearing deposits of $8,039,000, or 13.4% compared to the June 30, 1995
interest bearing deposits.
Operating expenses increased by $157,000, or 10.1%, for the six months
ended June 30, 1996 compared to the comparable period of 1995. Operating
expenses increased by $107,000, or 3.7%, for the year ended December 31, 1995
compared to the year ended December 31, 1994. These increases in operating
expenses reflect the Bank's continued growth and, during the first six months of
1996, the opening of the Bank's new Edgewater branch.
On a per share basis, earnings were $1.39 for the six months ended June 30,
1996, $2.40 for the year ended December 31, 1995, and $1.50 for the year ended
December 31, 1994.
The following table sets forth certain information concerning certain of
the Bank's financial ratios at the periods presented:
At or for At or for
six month year
period ended period ended
June 30, December 31,
1996 1995 1995 1994
---- ---- ---- ----
Return on Assets 1.46% 1.00% 1.38% 0.89%
Return on Equity 12.83% 8.77% 12.06% 8.03%
Dividend Payout 3.26% 0.00% 0.00% 0.00%
Equity to Assets 11.47% 11.80% 11.67% 11.62%
COMPARATIVE AVERAGE BALANCE SHEETS
The following table reflects the components of the Bank's net interest
income, setting forth for the periods presented herein, (1) average assets,
liabilities and stockholders' equity, (2) interest income earned on
interest-earning assets and interest expenses paid on interest-bearing
liabilities, (3) average yields earned on interest-earning assets and average
rates paid on interest-bearing liabilities, (4) the Bank's net interest spread
(i.e., the average yield on interest-earnings assets less the average rate on
interest-bearing liabilities) and (5) the Bank's net yield on interest-earning
assets. Rates are computed on a taxable equivalent basis.
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<TABLE>
<CAPTION>
Year Ended December 31,
Six Months Ended June 30, ----------------------------------------------------------------
1996 1995 1994
(Unaudited)
------------------------------ ------------------------------- ------------------------------
Interest Average Interest Average Interest Average
Average Income/ Rates Average Income/ Rates Average Income/ Rates
Balance Expense Earned/Paid Balance Expense Earned/Paid Balance Expense Earned/Paid
------- ------- ----------- ------- -------- ----------- ------- -------- -----------
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-Earning Assets:
Taxable Loans (net of
unearned income) ............ $60,703 $2,779 9.16% $50,181 $4,712 9.39% $39,268 $3,383 8.62%
Tax Exempt Securities ......... 4,878 149 6.11 3,822 250 6.54 1,552 101 6.51
Taxable Investment
Securities .................. 21,654 623 5.75 22,410 1,207 5.39 32,881 1,462 4.45
Federal Funds Sold ............ 4,823 125 5.18 4,997 294 5.88 3,114 132 4.24
------- ------ ------- ------ ------- ------
Total Interest-Earning
Assets ..................... 92,058 3,676 7.99 81,410 6,463 7.94 76,815 5,078 6.61
------- ------ ------ ------
Non-Interest Earning
Assets ...................... 7,679 8,081 7,711
Allowance for possible
loan losses ................. (747) (695) (615)
------- ------- -------
Total Assets ................ $98,990 $88,796 $83,911
======= ======= =======
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
NOW Deposits .................. $13,846 $ 75 1.08% $12,381 $ 173 1.40% $12,557 $ 166 1.32%
Savings Deposits .............. 12,964 139 2.14 14,345 347 2.42 15,391 360 2.34
Money Market Deposits ......... 11,916 131 2.20 10,770 260 2.41 12,932 291 2.25
Time Deposits ................. 27,018 632 4.68 22,425 1,065 4.75 17,062 544 3.19
------- ------ ------- ------ ------- ------
Total Interest-Bearing
Liabilities ................. 65,744 977 2.97 59,921 1,845 3.08 57,942 1,361 2.35
Non-Interest Bearing Liabilities:
Demand Deposits ............... 21,245 18,108 15,774
Other Liabilities ............. 730 577 950
------- ------- -------
Total Non-Interest Bearing
Liabilities ................. 21,975 18,685 16,724
Shareholders' Equity .......... 11,271 10,190 9,245
Total Liabilities and
Shareholders' Equity ........ $98,990 $88,796 $83,911
======= ======= =======
Net Interest Income ........... $2,699 $4,618 $3,717
====== ====== ======
Net Interest Rate Spread ...... 5.01% 4.86% 4.26%
==== ==== ====
Net Interest Margin ........... 5.86% 5.67% 4.84%
==== ==== ====
Rate of Interest Earning
Assets to interest-bearing
liabilities ................. 1.40 1.36 1.33
==== ==== ====
</TABLE>
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The following table presents by category the major factors that
contributed to the changes in net interest income for each of the years ended
December 31, 1995 and 1994 and for the six months ended June 30, 1996, as
compared to each respective previous period. Amounts have been computed on a
fully tax-equivalent basis, assuming a Federal income tax rate of 39%.
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
1996 versus 1995 1995 versus 1994
(Unaudited)
-------------------------------- -----------------------------------
Increase (Decrease)
Due to Change in:
------------------------------------------------------------------------------
Average Average Average Average
Volume Rate Net Volume Rate Net
------- ------- --- ------- ------- -------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Taxable Loans (net of unearned income) ....... $591 $ (3) $588 $1,006 $323 $1,329
Tax Exempt Securities ........................ 52 (11) 41 149 - 149
Taxable Investment Securities ................ (52) 80 28 (517) 262 (255)
Federal Funds Sold ............................. 26 (16) 10 99 63 162
---- ---- ---- ------ ---- ------
Total Interest Income .......................... $617 $ 50 $667 $ 737 $648 $1,385
---- ---- ---- ------ ---- ------
Interest Expense:
NOW Deposits ................................. 12 (34) (22) (2) 9 7
Savings Deposits ............................. (14) (31) (45) (25) 12 (13)
Money Market Deposits ........................ 21 (16) 5 (52) 21 (31)
Time Deposits ................................ 122 15 137 204 317 521
---- ---- ---- ------ ---- ------
Total Interest Expense ......................... 141 (66) 75 125 359 484
---- ---- ---- ------ ---- ------
Increase (Decrease) in net interest income ..... $476 $116 $592 $ 612 $289 $ 901
==== ==== ==== ====== ==== ======
</TABLE>
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PROVISION FOR LOAN LOSSES
For the six months ended June 30, 1996, the Bank's provision for loan
losses was $113,000, an increase of $21,000 over the provision of $92,000 for
the six month period ended June 30, 1995. For the year ended December 31, 1995,
the Bank's provision for loan losses was $92,000, an increase of $17,000 over
the provision of $75,000 for the year ended December 31, 1994. The increased
provisions reflect the continued growth in the Bank's loan portfolio.
OTHER INCOME
Other income, which was primarily attributable to service fees received
from deposit accounts, amounted to $363,000 for the six months ended June 30,
1996 an increase of $104,000 or 40.0%, from the comparable period of 1995. Other
income for the year ended December 31, 1995 increased by $200,000 to $578,000
compared to $378,000 in 1994, an increase of 52.9%. These increases were
primarily related to the Bank's increasing levels of deposits.
OTHER EXPENSES
Other expenses for the six month period ended June 30, 1996 amounted to
$1,702,000, an increase of $157,000 from the comparable period of 1995. For the
year ended December 31, 1995, other expenses increased by $107,000 to $3,004,000
compared to the year ended December 31, 1994. These increases were primarily
attributable to customary increases in salary and employee benefits, occupancy
expenses and data processing expenses attributable to the Bank's continued
growth, partially offset by a reduction in FDIC insurance premiums and other
operating expenses.
INCOME TAX EXPENSE
The income tax provision, which includes both federal and state taxes, for
the six months ended June 30, 1996 and for the years ended December 31, 1995 and
1994 was $464,000, $781,000 and $349,000, respectively. Increase in income taxes
were primarily attributable to increases in income before taxes and all periods
reported.
13
<PAGE>
FINANCIAL CONDITION
At June 30, 1996, the Bank's total assets were $105,016,000, compared to
$96,794,000 at December 31, 1995 and $86,592,000 at December 31, 1994. Total
loans increased to $67,740,000 at June 30, 1996 from $56,141,000 at December 31,
1995 and $44,076,000 at December 31, 1994. Total deposits increased to
$90,105,000 at June 30, 1996 from $85,225,000 at December 31, 1995 and
$77,005,000 at December 31, 1994.
LOAN PORTFOLIO
At June 30, 1996, the Bank's total loans were $67,740,000, an increase of
$11,599,000, or 20.6%, over total loans at December 31, 1995. The Bank's loan
portfolio at December 31, 1995 totaled $56,141,000, an increase of $12,065,000,
or 27.4%, over total loans at December 31, 1994. The increases in the Bank's
loan portfolio represent increased penetration by the Bank of the local small
business market. Management believes the Bank's success in penetrating this
market is attributable to the fact that through mergers and acquisitions, the
Bank's trade area is primarily served through large institutions frequently
headquartered out of state. Management believes it is not cost efficient for
these larger institutions to provide the level of personal service to small
business borrowers that the Bank provides.
The Bank's loan portfolio consists of commercial and industrial loans, real
estate loans and consumer loans. Commercial and industrial loans are made for
the purpose of providing working capital, financing the purchase of equipment or
inventory and for other business purposes. Real estate loans consist of loans
secured by commercial or residential real property and loans for the
construction of commercial or residential property. Consumer loans are made for
the purpose of financing the purchase of consumer goods, home improvements, and
other personal needs, and are generally secured by the personal property being
purchased.
The Bank's loans are primarily to businesses and individuals located in
eastern Bergen County, New Jersey. The Bank has not made loans to borrowers
outside of the United States. Commercial lending activities are focused
primarily on lending to small business borrowers. The Bank believes that its
strategy of customer service, competitive rate structures and selective
marketing have enabled the Bank to gain market entry to local loans. Bank
mergers and lending curtailments at larger banks competing with the Bank have
also contributed to the Bank's efforts to attract borrowers.
The following table sets forth the classification of the Bank's loans by
major category at June 30, 1996 and as of December 31, 1995 and 1994,
respectively.
14
<PAGE>
<TABLE>
<CAPTION>
December 31,
June 30, ---------------------------------------------------
1996 1995 1994
-------------------- ---------------------- -----------------------
(Dollars in Thousands)
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Commercial and Industrial .... $14,698 21.6% $11,277 19.9% $ 9,347 21.2%
Real Estate--
Non-residential Properties .. 18,756 27.7 14,001 24.9 10,914 24.7
Residential Properties ...... 30,504 45.1 28,224 50.1 21,217 48.0
Construction ................ 2,163 3.2 1,320 2.3 549 1.2
Consumer ..................... 1,619 2.4 1,473 2.6 1,135 2.6
------- ----- ------- ----- -------- -----
Total Loans .................. $67,740 100.0% $56,295 100.0% $ 43,162 100.0%
======= ===== ======= ===== ======== =====
</TABLE>
The following table sets forth fixed and adjustable rate loans as of June
30, 1996 in terms of interest rate sensitivity.
<TABLE>
<CAPTION>
Within 1 Year 1 to 5 Years After 5 years Total
------------- ------------ ------------- -----
(In Thousands)
<S> <C> <C> <C> <C>
Loans with fixed rate .......... $ 2,627 $30,263 $3,745 $36,635
Loans with adjustable rate ..... $30,985 -- -- $30,985
</TABLE>
15
<PAGE>
ASSET QUALITY
The Bank's principal earning assets are its loans. Inherent in the lending
function is the risk of the borrower's inability to repay their loan under its
existing terms. Risk elements include non accrual loans, past due and
restructured loans, potential problem loans, loan concentrations and other real
estate.
Non-performing assets include loans that are not accruing interest
(non-accruing loans) as a result of principal or interest being in default for a
period of 90 days or more. When a loan is classified as non-accrual, interest
accruals discontinue and all past due interest, including interest applicable to
prior years, is reversed and charged against current income. Until the loan
becomes current, any payments received from the borrower are applied to
outstanding principal until such time as management determines that the
financial condition of the borrower and other factors merit recognition of such
payments as interest.
The Bank attempts to minimize overall credit risk through loan
diversification and its loan approval procedures. The Bank's due diligence
begins at the time a borrower and the Bank begin to discuss the origination of a
loan. Documentation, including a borrower's credit history, materials
establishing the value and liquidity of potential collateral, the purpose of the
loan, the source and timing of the repayment of the loan, and other factors are
analyzed before a loan is submitted for approval. Loans made are also subject to
periodic review.
The following table sets forth information concerning the Bank's
non-performing assets as of the dates indicated:
Non-Performing Loans
December 31,
-------------------
June 30, 1996 1995 1994
------------- ---- ----
(Unaudited)
(In Thousands)
Non-accrual loans ......................... $163 $163 $.00
Non-accrual loans to total loans .......... 0.24% 0.29% 0%
Non-performing assets to total assets ..... 0.16% 0.17% 0%
Allowance for possible loan losses as a
percentage of non-performing loans ....... 501% 424% N/A
16
<PAGE>
The $163,000 in non-accrual loans at June 30, 1996 and December 31, 1995
represents one non-accruing residential mortgage in process of foreclosure. The
Bank has no other non-performing loans, no loans contractually more than 90 days
past due, no REO and no restructured loans. If the above-described non-accruing
loan had been current, the Bank's interest income would have increased by
$1,000.
Other than as disclosed above, there are no loans where information about
possible credit problems of borrowers causes management to have serious doubts
as to the ability of such borrowers to comply with the present loan repayment
terms.
At the dates indicated in the above table, there were no concentrations of
loans exceeding 10% of the Bank's total loans and the Bank had no foreign loans.
ALLOWANCE FOR LOAN LOSSES
The Bank attempts to maintain allowance for loan losses at a sufficient
level to provide for potential losses in the loan portfolio. Loan losses are
charged directly to the allowance when they occur and any recovery is credited
to the allowance. Risks within the loan portfolio are analyzed on a continuous
basis by the Bank's officers, by outside, independent loan review auditors and
by the Bank's Audit Committee. A risk system, consisting of multiple grading
categories, is utilized as an analytical tool to assess risk and appropriate
reserves. Along with the risk system, management further evaluates risk
characteristics of the loan portfolio under current and anticipated economic
conditions and considers such factors as the financial condition of the
borrower, past and expected loss experience, and other factors management feels
deserve recognition in establishing an appropriate reserve. These estimates are
reviewed at least quarterly, and, as adjustments become necessary, they are
realized in the periods in which they become known. Additions to the allowance
are made by provisions charged to expense and the allowance is reduced by net
charge-offs (i.e. - loans judged to be uncollectible and charged against the
reserve, less any recoveries on such loans). Although management attempts to
maintain the allowance at a level deemed adequate, future additions to the
allowance may be necessary based upon changes in market conditions. In addition,
various regulatory agencies periodically review the Bank's allowance for loan
losses. These agencies may require the Bank to take additional provisions based
on their judgments about information available to them at the time of their
examination.
The Bank's allowance for possible loan losses totalled $817,000, $692,000
and $626,000 at June 30, 1996, December 31, 1995 and 1994, respectively. The
increases in the allowance are due to the continued increase in the Bank's total
loan portfolio.
The following is a summary of the reconciliation of the allowance for loan
losses for the six month periods ended June 30, 1996 and 1995 and for the years
ended December 31, 1995 and 1994.
17
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
---------------- ------------------
(Unaudited)
1996 1995 1995 1994
---- ---- ---- ----
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Balance at Beginning of Year ..................... $692 $626 $626 $567
Net Charge Offs .................................. 12 (4) (26) (16)
Provision Charged to Expense .................... 113 92 92 75
---- ---- ---- ----
Balance of Allowance at End of Period ............ $817 $714 $692 $626
==== ==== ==== ====
Ratio of Net Charge-Offs to Average Loans
Outstanding ..................................... (0.02%) 0.01% 0.05% 0.04%
Balance of Allowance at End of Period as
a % of Loans at End of Period ................... 1.21% 1.42% 1.23% 1.42%
</TABLE>
The following table sets forth, for each of the Bank's major lending areas,
the amount and percentage of the Bank's allowance for loan losses attributable
to such category, and the percentage of total loans represented by such
category, as of the periods indicated:
18
<PAGE>
Allocation of the Allowance for Loan Losses by Category
<TABLE>
<CAPTION>
December 31,
June 30, 1996 -----------------------------------------------------------------
-------------------------------- 1995 1994
(Unaudited) -------------------------------- ------------------------------
% of % of Total % of % of Total % of % of Total
Amount ALL loans Amount ALL loans Amount ALL loans
------ ---- ---------- ------ ---- ---------- ------ ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Applicable to:
Commercial and Industrial .... $229 28.03% 27.49% $147 21.24% 23.34% $123 19.65% 24.84%
Real Estate --
Non-Residential ............. 199 24.36% 29.47% 157 22.69% 27.74% 101 16.13% 22.89%
Properties
Residential Properties ...... 199 24.36% 37.44% 196 28.32% 43.98% 173 27.64% 48.52%
Construction ................ 22 2.69% 3.21% 13 1.88% 2.35% 5 .80% 1.24%
Consumer ..................... 20 2.45% 2.39% 18 2.60% 2.59% 14 2.24% 2.51%
---- ------- ------- ---- ------- ------- ---- ------- -------
Subtotal .................... 669 81.89% 100% 531 76.73% 100.00% 416 66.46% 100.00%
Unallocated Reserves ......... 148 18.11% --- 161 23.27% -- 210 33.54% --
---- ------- ------- ---- ------- ------- ---- ------- -------
Total ....................... $817 100.00% 100.00% $692 100.00% 100.00% $626 100.00% 100.00%
==== ======= ======= ==== ======= ======= ==== ======= =======
</TABLE>
19
<PAGE>
INVESTMENT SECURITIES
The Bank maintains an investment portfolio to fund increased loans or
decreased deposits and other liquidity needs and to provide an additional source
of interest income. The portfolio is composed of U.S. Treasury Securities,
obligations of U.S. Government agencies and selected municipal and state
obligations.
The Bank adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," (SFAS 115),
effective January 1, 1994. Under SFAS 115, securities are classified as
securities held to maturity based on management's intent and the Bank's ability
to hold them to maturity. Such securities are stated at cost, adjusted for
unamortized purchase premiums and discounts. Securities that are bought and held
principally for the purpose of selling them in the near term are classified as
trading securities, which are carried at market value. Realized gains and losses
and gains and losses from marking the portfolio to market value are included in
trading revenue. Securities not classified as securities held to maturity or
trading securities are classified as securities available for sale, and are
stated at fair value. Unrealized gains and losses on securities available for
sale are excluded from results of operations, and are reported as a separate
component of stockholders' equity, net of taxes. Securities classified as
available for sale include securities that may be sold in response to changes in
interest rates, changes in prepayment risks, the need to increase regulatory
capital or other similar requirement.
Management determines the appropriate classification of securities at the
time of purchase. At June 30, 1996, $22,839,000 of the Bank's investment
securities were classified as held to maturity and the remainder were classified
as available for sale. At June 30, 1996, no investment securities were
classified as trading securities.
At June 30, 1996, total investment securities were $28,531,000 an increase
from total investment securities of $24,410,000 at December 31, 1995, which was
a decrease from total securities of $32,821,000 at December 31, 1994. The
increase in investment securities from December 31, 1995 to June 30, 1996
reflects increases in the Bank's total deposits in excess of funds needed for
new loan originations. The decline in investment securities from December 31,
1994 to December 31, 1995 is attributable to the Bank using the proceeds of
maturing investment securities to fund new loan demand during 1995.
The following table sets forth the carrying value of the Bank's security
portfolio as of the dates indicated.
20
<PAGE>
A comparative summary of securities available for sale at June 30, 1996,
December 31, 1995 and 1994 is as follows (in thousands):
<TABLE>
<CAPTION>
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Market Value
-------------- ---------------------- ----------------------- ------------
<S> <C> <C> <C> <C>
(Unaudited) June 30, 1996:
U.S. Government and Agency Obligations ...... $5,710 $-- $ (18) $5,692
December 31, 1995:
U.S. Government and Agency Obligations ...... 6,762 38 (20) 6,780
December 31, 1994:
U.S. Government and Agency Obligations ...... 7,836 -- (323) 7,513
</TABLE>
21
<PAGE>
A comparative summary of investment securities held to maturity at June 30,
1996, December 31, 1995 and 1994 is as follows (in thousands):
<TABLE>
<CAPTION>
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Market Value
-------------- ---------------------- ----------------------- ------------
<S> <C> <C> <C> <C>
(Unaudited) June 30, 1996:
U.S. Government and Agency Obligations ...... $15,695 $ -- $ (66) $15,629
Municipal Obligations ....................... 7,144 11 -- 7,156
------- ---- ----- -------
$22,839 11 (66) $22,785
December 31, 1995:
U.S. Government and Agency Obligations ...... $12,668 120 (11) 12,777
Municipal Obligations ....................... 4,962 28 -- 4,990
------- ---- ----- -------
$17,630 148 (11) 17,767
December 31, 1994:
U.S. Government and Agency Obligations ...... $21,889 4 (319) 21,574
Municipal Obligations ....................... 3,419 1 (5) 3,415
------- ---- ----- -------
$25,308 $ 5 $(324) $24,989
======= ==== ===== =======
</TABLE>
22
<PAGE>
The following table sets forth as of June 30, 1996 and December 31, 1995 the
maturity distribution of the Bank's investment portfolio.
<TABLE>
<CAPTION>
MATURITY SCHEDULE OF INVESTMENT SECURITIES
June 30, 1996
---------------------------------------------------------------------------------
(Unaudited)
Investment Securities Securities Available
for Sale
--------------------------------------- -----------------------------------
(In Thousands)
Weighted Weighted
Amortized Market Average Amortized Market Average
Cost Value Yield Cost Value Yield
--------- ------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Within One Year ..... $12,486 $12,514 6.23% $ 4,998 $ 5,002 5.84%
One to Five Years ... 9,962 9,871 5.68% 712 682 5.16%
Six to Ten Years .... 391 400 9.12% -- -- --
------- ------- ------- -------
$22,839 $22,785 $ 5,710 $ 5,684
======= ======= ======= =======
<CAPTION>
December 31, 1995
--------------------------------------------------------------------------------
Investment Securities Securities Available
for Sale
-------------------------------------- -----------------------------------
(In Thousands)
Weighted Weighted
Amortized Market Average Amortized Market Average
Cost Value Yield Cost Value Yield
--------- ------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Within One Year ..... $ 9,800 $ 9,816 5.55% $ 4,011 $ 4,020 5.72%
One to Five Years ... 7,439 7,539 6.22% 2,751 2,760 5.86%
Six to Ten Years .... 391 412 9.12% -- -- --
------- ------- ------- -------
$17,630 $17,767 $ 6,762 $ 6,780
======= ======= ======= =======
</TABLE>
The Bank sold no securities from its portfolio during the first six months of
1996. Proceeds from the sales of securities available for sale during the year
ended December 31, 1995 were $2.9 million. Gross gains of $31,000 and gross
losses of $36,000 were realized on those sales in 1995.
DEPOSITS
Deposits are the Bank's primary source of funds. The Bank experienced a
growth in average deposit balances of $8,960,000, or 11.5% to $86,989,000 for
the six months ended June 30, 1996, and $4,313,000, or 5.9% during the year
ended December 31, 1995 as compared to the year ended December 31, 1994 when
total average deposits were $73,716,000. This growth was accomplished through
the Bank's emphasis on customer service, extended hours of operations,
competitive rate structures and selective marketing. Among the increase in
deposits, average time deposits grew 31.4% or $5,363,000, from 1994 to 1995,
while average demand deposits,
23
<PAGE>
which are non-interest bearing, grew 14.8% or $2,334,000 during 1995 as compared
to 1994. The aggregate amount of average non-interest-bearing deposits has been
24.4%, 23.2% and 21.4% of average total deposits during the first six months of
1996 and the years ended December 31, 1995 and 1994, respectively. The Bank has
no foreign deposits, nor are there any material concentrations of deposits.
The following table sets forth the average amounts of various types of
deposits for each of the periods indicated:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------
June 30, 1996 1995 1994
---------------------- ----------------------- -----------------------
(Unaudited)
Amount % Amount % Amount %
------ ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Non-interest-bearing demand ........... $21,245 24.4% $18,108 23.2% $15,774 21.4%
Interest-bearing demand ............... 25,762 29.6% 23,151 29.7% 25,489 34.6%
Savings deposit ....................... 12,964 14.9% 14,345 18.4% 15,391 20.9%
Time deposits ......................... 27,018 31.1% 22,425 28.7% 17,062 23.1%
------- ---- ------- ---- ------- ----
Total ................................. $86,989 100% $78,029 100% $73,716 100%
======= ==== ======= ==== ======= ====
</TABLE>
The Bank does not actively solicit short-term deposits of $100,000 or more
because of the liquidity risks posed by such deposits. The following table
summarizes the maturity distribution of certificates of deposits of
denominations of $100,000 or more as of June 30, 1996.
Time Deposits ($100,000 and over)
(In Thousands)
Three months or less ........................................... $ 6,568
Over three months through six months ........................... $ 3,711
Over six months through twelve months .......................... $ 2,465
Over twelve months ............................................. $ 492
Total ................................................. $13,236
24
<PAGE>
LIQUIDITY
The Bank's liquidity is a measure of its ability to fund loans, withdrawals
or maturities of deposits and other cash outflows in a cost-effective manner.
The Bank's principal sources of funds are deposits, scheduled amortization and
prepayments of loan principal, sales and maturities of investment securities and
funds provided by operations. While scheduled loan payments and maturing
investments are relatively predictable sources of funds, deposit flows and loan
prepayments are greatly influenced by general interest rates, economic
conditions and competition.
The Bank's total deposits equaled $90,105,000, $85,225,000 and $76,637,000
as of June 30, 1996, December 31, 1995, and December 31, 1994, respectively. The
increase in funds provided by deposit inflows during these years has been more
than sufficient to provide for the Bank's lending demand.
Through the Bank's investment portfolio the Bank has generally sought to
obtain a safe yet slightly higher yield than would have been available to the
Bank as a net seller of overnight Federal Funds while still maintaining
liquidity. Through its investment portfolio, the Bank also attempts to manage
its maturity gap by seeking maturities of investments which coincide as closely
as possible with maturities of deposits. The Bank's investment portfolio also
includes securities held for sale to provide liquidity for anticipated loan
demand and other liquidity needs.
Although the Bank has traditionally been a net "seller" of Federal Funds
(or overnight loans to large banks), the Bank does maintain lines of credit with
the Federal Home Loan Bank of New York, Summit Bank and Bank of New York for
"purchase" of Federal Funds in the event that temporary liquidity needs arise.
Management believes that the Bank's current sources of funds provide
adequate liquidity for the current cash flow needs of the Bank.
INTEREST RATE SENSITIVITY ANALYSIS
The principal objective of the Bank's asset and liability management
function is to evaluate the interest-rate risk included in certain balance sheet
accounts; determine the level of risk appropriate given the Bank's business
focus, operating environment, capital, and liquidity requirements; establish
prudent asset concentration guidelines; and manage the risk consistent with
Board approved guidelines. The Bank seeks to reduce the vulnerability of its
operations to changes in interest rates and to manage the ratio of interest-rate
sensitive assets to interest-rate sensitive liabilities within specified
maturities or repricing dates. The Bank's actions in this regard are taken under
the guidance of the Asset/Liability Committee (ALCO) of the Board of Directors.
The ALCO generally reviews the Bank's liquidity, cash flow needs, maturities of
investments, deposits and borrowings and current market conditions and interest
rates.
One of the monitoring tools used by the ALCO is an analysis of the extent
to which assets and liabilities are interest rate sensitive and measures the
Bank's interest rate sensitivity "gap". An asset or liability is said to be
interest rate sensitive within a specific time period if it will mature or
reprice within that time period. A gap is considered positive when the amount of
interest rate sensitive assets exceeds the amount of interest rate sensitive
liabilities. A gap is considered negative when the amount of interest rate
sensitive liabilities exceeds interest rate sensitive assets. Accordingly,
during a period of rising rates, a negative gap may result in the yield on the
institution's assets increasing at a slower rate than the increase in its cost
of interest-bearing liabilities. Conversely, during a period of falling interest
rates, an institution with a negative gap would experience a repricing of its
assets at a slower rate than its interest-bearing liabilities which,
consequently, may result in its net interest income growing.
25
<PAGE>
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at the periods indicated which are
anticipated by the Bank, based upon certain assumptions, to reprice or mature in
each of the future time periods presented. Except as noted, the amount of assets
and liabilities which reprice or mature during a particular period were
determined in accordance with the earlier of the term to repricing or the
contractual terms of the asset or liability. Because the Bank has no
interest-bearing liabilities with a maturity greater than five years, management
believes that a static gap for the over five year time period reflects a more
accurate assessment of interest rate risk. The Bank's loan prepayment
assumptions are based upon actual historic prepayment rates.
<TABLE>
BRIDGE VIEW BANK
CUMULATIVE RATE SENSITIVE BALANCE SHEET (as of June 30, 1996)
<CAPTION>
0-3 0-6 0-1 0-5 5- All
Months Months Year Years Years Others TOTALS
------ ------ ---- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENTS
FIXED RATE 3,864 9,085 17,491 28,134 390 0 28,524
-------
28,524
-------
LOANS:
COMMERCIAL 17,585 18,135 17,945 37,583 720 0 38,303
PARTICIPATIONS 0 190 371 2,379 0 0 2,379
MORTGAGES 185 646 646 8,166 2,436 0 10,602
CONSUMER 14,582 14,610 14,650 15,609 727 0 16,336
-------
67,620
-------
FED FUNDS SOLD 0 0 0 0 0 0 0
NON-INT BEARING/
OTHER ASSETS 0 0 0 0 0 8,530 8,530
------- ------- ------- ------ ------ ------- -------
TOTAL ASSETS 36,216 42,666 51,103 91,873 96,144 104,674 104,674
======= ======= ======= ====== ====== ======= =======
TRANSACTION/NOW 13,621 13,621 13,621 13,621 0 0 13,621
MONEY MARKET 12,782 12,782 12,782 12,782 0 0 12,782
OTHER SAVINGS 14,338 14,338 14,338 14,338 0 0 14,338
C/D'S LESS THAN $100,000 4,663 9,647 12,869 13,865 0 0 13,865
C/D'S GREATER THAN $100,000 4,444 9,193 12,265 13,213 0 0 13,213
NON-INT BEARING/
OTHER LIAB. 0 0 0 0 0 25,290 25,290
NON-INT BEARING/
EQUITY 0 0 0 0 0 11,565 11,565
------- ------- ------- ------ ------ ------- -------
TOTAL LIAB. & EQUITY 49,848 59,681 65,875 67,819 67,819 104,674 104,674
======= ======= ======= ====== ====== ======= =======
DOLLAR GAP (13,632) (16,915) (14,772) 24,052 28,325 0
CUM.GAP/TOTAL ASSETS -13.02% -16.16% -14.11% 22.98% 27.06% 0
R.S.A./R.S.L.* 72.65% 71.61% 77.58% 135.46% 141.77%
</TABLE>
* R.S.A./R.S.L. IS THE PERCENTAGE OF RE-PRICING RATE SENSITIVE ASSETS TO RATE
SENSITIVE LIABILITIES
CAPITAL
A significant measure of the strength of a financial institution is its
capital base. The Bank's federal regulators have classified and defined bank
capital into the following components: (1) Tier I capital, which includes
tangible shareholders' equity for common stock and qualifying perpetual
preferred stock, and (2) Tier II capital, which includes a portion of the
allowance for possible loan losses, certain qualifying long-term debt and
preferred stock which does not qualify for Tier I capital. Minimum capital
levels for banks are regulated by risk-based capital adequacy guidelines which
require a bank to maintain certain capital as a percent of the bank's assets and
certain off-balance sheet items adjusted for predefined credit risk factors
(risk-adjusted assets).
26
<PAGE>
A bank is required to maintain, at a minimum, Tier I capital as a percentage of
risk-adjusted assets of 4.0% and combined Tier I and Tier II capital as a
percentage of risk-adjusted assets of 8.0%.
In addition to the risk-based guidelines, the Bank's regulators require
that a bank which meets the regulator's highest performance and operation
standards maintain a minimum leverage ratio (Tier I capital as a percentage of
tangible assets) of 3%. For those banks with higher levels of risk or that are
experiencing or anticipating significant growth, the minimum leverage ratio will
be proportionately increased. Minimum leverage ratios for each bank are
evaluated through the ongoing regulatory examination process.
The following table summarizes the risk-based and leverage capital ratios
for the Bank at June 30, 1996, as well as the required minimum regulatory
capital ratios:
CAPITAL ADEQUACY
June 30, 1996 Minimum
(Unaudited) Regulatory Requirements
------------- ----------------------
Risk-based Capital:
Tier I capital ratio .......... 15.95% 4.00%
Total capital ratio ........... 17.08 8.00
Leverage ratio ..................... 11.95 3.00-5.00
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements of the Bank and notes thereto, presented elsewhere
herein, have been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and operating
results in terms of historical dollars without considering the change in the
relative purchasing power of money over time and due to inflation. The impact of
inflation is reflected in the increased cost of the Bank's operations. Unlike
most industrial companies, nearly all the assets and liabilities of the Bank are
monetary. As a result, interest rates have a greater impact on the Bank's
performance than do the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the
prices of goods and services.
27
<PAGE>
RECENTLY ISSUED ACCOUNTING STANDARDS
In October 1995 the Financial Accounts Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). This statement establishes financial accounting and
reporting standards for stock-based employee compensation plans. SFAS 123
encourages all entities to adopt the "fair value based method" of accounting for
employee stock compensation plans. However, SFAS 123 also allows an entity to
continue to measure compensation cost under such plans using the "intrinsic
value based method." The accounting requirements of this statement are effective
for transactions entered into in fiscal years that begin after December 15,
1995. The Company intends to continue accounting for compensation cost under the
intrinsic value based method and will provide pro forma disclosures for all
awards granted after December 31, 1994. Such disclosures include net income and
earnings per share as if the fair value based method had been applied.
On June 28, 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities". This
Statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses on
control. It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings.
Under the financial-components approach, after a transfer of financial
assets, an entity recognizes all financial and servicing assets it controls and
liabilities it has incurred and derecognizes financial assets it no longer
controls and liabilities that have been extinguished. The financial-components
approach focuses on the assets and liabilities that exist after the transfer.
Many of these assets and liabilities are components of financial assets that
existed prior to the transfer. If a transfer does not meet the criteria for a
sale, the transfer is accounted for as a secured borrowing with pledge of
collateral.
It is important to note that this Statement extends the
"available-for-sale" or "trading" approach in SFAS 115, Accounting for Certain
Investments in Debt and Equity Securities, to non-security financial assets that
can contractually be prepaid or otherwise settled in such a way that the holder
of the asset would not recover substantially all of its recorded investment.
Thus, non-security financial assets (no matter how acquired) such as loans,
other receivables, interest-only strips or residual interests in securitization
trusts (for example, tranches subordinate to other tranches, cash reserve
accounts or rights to future interest from serviced assets that exceed
contractually specified servicing fees) that are subject to prepayment risk that
could prevent recovery of substantially all of the recorded amount are to be
reported at fair value with the change in fair value accounted for depending on
the asset's classification as "available-for-sale" or "trading." The Statement
also amends SFAS 115 to prevent a security from being classified as
28
<PAGE>
held-to-maturity if the security can be prepaid or otherwise settled in such a
way that the holder of the security would not recover substantially all of its
recorded investment.
This Statement requires that a liability be derecognized if and only if
either (a) the debtor pays the creditor and is relieved of its obligation for
the liability or (b) the debtor is legally released from being the primary
obligor under the liability either judicially or by the creditor. Therefore, a
liability is not considered extinguished by an in-substance defeasance.
This Statement provides implementation guidance for accounting for (1)
securitizations, (2) transfers of partial interests, (3) servicing of financial
assets, (4) securities lending transactions, (5) repurchase agreements including
"dollar rolls", (5) "wash salos," (6) loan syndications and participations, (7)
risk participations in banker's acceptances, (8) factoring arrangements, (9)
transfers of receivables with recourse, (10) transfers of sales-type and direct
financing lease receivables and (11) extinguishments of liabilities.
A number of existing FASB Statements are superseded or amended by SFAS 125.
SFAS 125 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996, and is to be
applied prospectively. Earlier or retroactive application is not permitted.
Also, the extension of the SFAS 115 approach to certain non-security financial
assets and the amendment to SFAS 115 is effective for financial assets held on
or acquired after January 1, 1997. Reclassifications that are necessary because
of the amendment do not call into question an entity's intent to hold other debt
securities to maturity in the future. The Company, at this time, does not
believe that SFAS 125 will have a significant impact on the consolidated
financial position or results of operations in 1997.
ITEM 3 -- PROPERTIES
The Bank's main office is located at 457 Sylvan Avenue, Englewood Cliffs,
New Jersey. The Bank owns the 10,000 square foot building at this location and
leases the land under a lease which expires on March 31, 1999. The lease
provides the Bank options to renew at various intervals for an additional
twenty-five years. The Bank has an option to purchase the land during the
six-month period prior to the tenth anniversary of the lease and again six
months prior to the sixteenth anniversary. The purchase price is to be fixed
according to an appraisal of vacant land only. A Director of the Bank is a
general partner in the partnership which leases the land to the Bank. The terms
of the Bank's lease were negotiated by the Bank Board and are considered to be
as favorable to the Bank as the terms of a comparable lease with an unaffiliated
party would be. See "INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS."
The Bank has a branch office at 1605 Lemoine Avenue, Fort Lee, New Jersey
in the Whiteman Park Plaza Shopping Center and a branch office at 115 River
Road, Edgewater, New Jersey, both of which it leases. The office at 1605 Lemoine
Avenue, Fort Lee, New Jersey is
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<PAGE>
leased at $11,113 monthly under a lease which expires in November 1997. The Bank
has the option to renew for three further periods of five years each. The Bank
also pays a proportionate share of common charges, taxes and insurance equipment
to 21% of those charges for the Whiteman Park Plaza Shopping Center.
The office at 115 River Road, Edgewater, New Jersey is leased at $2,000
monthly until April 1997, $2,350 monthly until April 1998, $2,600 monthly until
April 1999, $3,000 monthly until April 2000 and $4,198 monthly until April 2006.
The Bank has the option to renew for four additional five year terms after the
2006 expiration and pays no common charges, taxes or insurance but has agreed to
pay a proportionate share of any increase in taxes.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 2, 1996, certain information
concerning the ownership of shares of the Bank's Common Stock by (i) each person
who is known by the Company to own beneficially more than five percent (5%) of
the issued and outstanding Bank Common Stock, (ii) each director of the Company,
(iii) each named executive officer described in the section of this Registration
Statement captioned "Executive Compensation," and (iv) all directors and
executive officers as a group. Except as otherwise indicated, each individual
named has sole investment and voting power with respect to the securities shown.
Name and Address of Amount and Nature of Percent of
Beneficial Owner(1) Beneficial Owner Class
------------------- -------------------- ----------
Albert F. Buzzetti(2) ................... 6,860 1.31%
Gerald A. Calabrese, Jr.(3) ............. 16,295 3.11%
Glenn L. Creamer(4) ..................... 4,791 0.92%
Bernard Mann(5) ......................... 20,272 3.8%
Mark Metzger(6) ......................... 28,299 5.41%
Jeremiah F. O'Connor, Jr.(7) ............ 16,503 3.15%
Joseph C. Parisi(8) ..................... 18,232 3.46%
John A. Schepisi(9) ..................... 23,168 4.43%
------- -----
Directors and Executive
Officers as a Group ................... 134,420 25.67%
======= =====
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<PAGE>
- ---------------
(1) Beneficially owned shares include shares over which the named person
exercised either sole or shared voting power or sole or shared investment
power. It also includes shares owned (i) by a spouse, minor children or by
relatives sharing the same home, (ii) by entities owned or controlled by
the named person, or (iii) by other persons if the named person has the
right to acquire such shares within 60 days by the exercise of any right or
option. Unless otherwise noted, all shares are owned of record and
beneficially by the named person, either directly or through the dividend
reinvestment plan.
(2) Includes 1,014 shares owned by Mr. Buzzetti's wife and does not include
shares owned by Mr. Buzzetti's emancipated children. Mr. Buzzetti disclaims
beneficial ownership of the shares owned by his wife and of shares owned by
other family members.
(3) Includes 869 shares owned by Mr. Calabrese's minor children. Mr. Calabrese
disclaims any beneficial ownership of shares owned by other family members
who are not dependents.
(4) Mr. Creamer disclaims any beneficial ownership of shares owned by family
members who are not dependents.
(5) Includes 7,019 shares owned by Mr. Mann's wife. Mr. Mann disclaims any
beneficial ownership of shares owned by his wife as well as shares by other
family members.
(6) Includes 289 shares owned by Mr. Metzger's wife and 175 shares owned by the
Metzger Family Partnership of which he is trustee. Mr. Metzger disclaims
beneficial ownership of shares owned by his wife and of any other shares
held by emancipated members of his family.
(7) Includes 173 shares owned by Mr. O'Connor's wife; 1,353 shares owned by Mr.
O'Connor's dependent children; and 3,229 shares held by the AtHome Medical
Pension Plan. Mr. O'Connor disclaims beneficial ownership of shares owned
by his wife and of any shares held by emancipated family members.
(8) Includes 13,346 shares owned jointly by Mr. Parisi and his wife. Mr. Parisi
disclaims beneficial ownership of any shares owned by emancipated family
members.
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<PAGE>
(9) Includes 1,158 shares owned by Mr. Schepisi's wife; and 2,990 shares owned
by Homaro Co., a partnership, which Mr. Schepisi manages but disclaims
beneficial interest. Mr. Schepisi disclaims beneficial ownership of any
shares owned by his wife or by any emancipated family members.
32
<PAGE>
ITEM 5 - DIRECTORS AND EXECUTIVE OFFICERS
Direction of the Bank is vested in the Board of Directors which must
consist of not less than five nor more than twenty five persons who are elected
under the Bank's Certificate of Incorporation. The term of each Director is one
year. The board presently consists of eight Directors, each of whom has served
as a Director of the Bank since its inception.
The Board of Directors of the Company will initially consist of the members
of the Board of Directors of the Bank. Each Director of the Company is to serve
a one-year term and until his successor is duly elected by the shareholders of
the Company and qualified to serve on the Board of Directors.
Set forth below are the names and certain biographical information
regarding the Directors of the Bank:
Name, Age and Position Principal Occupation Director
with the Bank for Past Five Years Since
- ----------------------- -------------------- --------
Albert F. Buzzetti, 56, President and Chief Executive
President and Chief Officer of the Bank 1988
Executive Officer
Gerald A. Calabrese, Jr., 45 President, Century 21 Calabrese
Realty and Chairman and Chief
Executive Officer, Metropolitan
Mortgage Company 1988
Glenn L. Creamer, 43 Treasurer and Safety Director, J.
Fletcher Creamer & Son, Inc.
(Construction) 1988
Bernard Mann, 66 President and Chief Executive
Officer, Carolace Industries
(textiles) 1988
Mark Metzger, 54 Managing Director, BEM Management,
Inc. (equity investment fund) 1988
Jeremiah F. O'Connor, Jr., 39 President, AtHome Medical, Inc.,
(supplier of medical equipment) 1988
Joseph C. Parisi, 70, President and Chief Executive
Chairman of the Board Officer, Otterstedt Insurance Agency 1988
John A. Schepisi, 51, Senior Partner, Schepisi &
Vice Chairman McLaughlin (attorneys) 1988
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<PAGE>
No director of the Bank is also a director of a company having a class of
securities registered under Section 12 of the Securities Exchange Act of 1934 or
subject to the requirements of Section 15(d) of such Act or any company
registered as an investment company under the Investment Company Act of 1940.
PRINCIPAL OFFICERS
Set forth below is the name of and certain biographical information
regarding the additional principal officer of the Bank who does not also serve
as a Director. The term of office for each officer is one year.
THOMAS W. THOMASMA
Mr. Thomasma, 42, has been Senior Vice President and Senior Lending Officer
of the bank since 1994. He previously serviced in Senior Lending capacities at
Independence Bank and at First Fidelity Bank for more than five years.
ITEM 6 -- EXECUTIVE COMPENSATION
The following table sets forth a summary for the last three (3) fiscal
years of the cash and non-cash compensation awarded to, earned by, or paid to,
the Chief Executive Officer of the Bank and each of the four (4) most highly
compensated executive officers whose individual remuneration exceeded $100,000
for the last fiscal year.
34
<PAGE>
SUMMARY COMPENSATION TABLE
Cash and Cash Equivalent Forms
of Remuneration
<TABLE>
<CAPTION>
Long Term
Compensation
Name and Principal Annual Annual Other Annual Securities
Position Year Salary Bonus Compensation(1) Underlying Options
----------------- ---- ------ ----- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Albert F. Buzzetti,
President and Chief
Executive Officer 1995 $160,000 $15,000 $2,700 5,000
1994 $140,000 $15,000 $2,700 2,500
1993 $125,000 $15,000 $2,700 --
- -----------------
</TABLE>
(1) Other annual compensation includes the estimated personal benefit of usage
of bank-leased automobiles.
STOCK OPTION PLANS
During 1994, the Bank's stockholders approved the 1994 Employee Stock
Option Plan (the "Employees' Plan"). The Employees' Plan provides for the
granting of options to purchase up to 26,103 shares of the Bank Common Stock to
employees of the Bank adjusted to reflect stock dividends declared subsequent to
the adoption of the Employee's Plan. Under the Employee Plan, the exercise price
of the options is to be the fair market value of the Bank Common Stock on the
date of grant. Upon consummation of the Acquisition, the Company will assume the
Employee's Plan.
35
<PAGE>
The following table sets forth information concerning individual grants of
stock options made during 1995 to each of the named executive officers:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options/
Underlying SARs Granted Exercise or
Options/SAR's to Employees Base Price Expir.
Name Granted (#) in Fiscal Year ($/Sh) Date
---- ------------ -------------- ----------- ------
<S> <C> <C> <C> <C>
Albert F. Buzzetti. ........ 5,000 78.1 % $21.00 2005
</TABLE>
The following table sets forth information concerning the fiscal year-end
value of unexercised options held by the executive officers of the Bank named in
the table above. No stock options were exercised by such executive officers
during 1995.
AGGREGATED OPTIONS/SARS EXERCISED IN LAST FISCAL
YEAR AND FISCAL YEAR END OPTION VALUES
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
Value of Unexercised
Number of Securities In-the-Money Options at
Underlying Unexercised FY-End ($) (based on
Options at FY-End (#) $23.00 per share)
Shares Acquired Value Exercise/ Exercisable/
Name On Exercise (#) Realized $ Unexercisable Unexercisable
- ---- --------------- ---------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Albert F. Buzzetti ...... N/A $ N/A 7,500/0 $18,800/$0
</TABLE>
36
<PAGE>
COMPENSATION OF DIRECTORS
Directors of the Bank, other than full-time employees of the Bank, receive
fees of $500 per Board meeting attended and $250 per committee meeting attended.
The Bank maintains a Stock Option Plan for Non-employee Directors (the
"Outside Directors' Plan"). Under the Outside Directors' Plan, 26,103 shares of
Bank Common Stock have been reserved for issuance, adjusted to reflect stock
dividends declared subsequent to the adoption of the Outside Directors' Plan.
Non-employee Directors of the Bank and any other subsidiaries which the Bank may
acquire or incorporate participate in the Outside Directors' Plan. Under the
Outside Directors' Plan, each current non-employee member of the Board of
Directors has received options to purchase 3,728 shares of Common Stock at
exercise prices ranging from $18.50 to $19.95, 100% of the fair market value on
the date the options were granted.
ITEM 7 -- INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
By Board policy, the Bank does not extend credit to any director of officer
or their affiliates or immediate family members.
RELATED-PARTY TRANSACTIONS
Director Bernard Mann is a 30% partner in Three R Realty Associates, a
partnership which owns the land at 457 Sylvan Avenue, Englewood Cliffs, New
Jersey which is leased by the Bank. See "PROPERTIES." In approving this lease,
the Board conducted an independent appraisal to determine that the terms of the
lease were fair to the Bank. The Bank intends to exercise its option to purchase
the land in October, 1998. Lease payments to Three R Realty Associates were
$299,680 in 1994 and $306,804 in 1995.
The firm of Breslin & Trovini, Attorneys at Law, acted as the Bank's
general counsel during 1994. Michael J. Breslin, Jr., the firm's Senior Partner,
was a Director of the Bank during 1994 and part of 1995. During 1994 the Bank
paid legal fees totaling $4,059 to Breslin & Trovini while in 1995 those fees
totaled $124.
The firm of Schepisi & McLaughlin, Attorneys at Law, have acted as the
Bank's general counsel since April 1995. John A. Schepisi, the firm's Senior
Partner, is a Director and Vice Chairman of the Bank's Board. During 1994 the
Bank paid legal fees totaling $910 to Schepisi & McLaughlin while in 1995 these
fees totaled $7,642.
37
<PAGE>
The Bank's Blanket Bond as well as other policies have been placed with
various insurance carriers by the Otterstedt Agency of which the Bank Board
Chairman, Joseph C. Parisi, is Chief Executive Officer. 1994 gross insurance
premiums totaled $49,781 while 1995 premiums were $35,247.
Residential appraisals on the Bank's home equity lines of credit are
conducted at the expense of the Bank. Certain of those appraisals were conducted
by Gerald A. Calabrese, Jr., a state-licensed appraiser and a Bank Director.
Cost of 1994 appraisals was $11,225 while 1995 totaled $15,500.
ITEM 8 -- DESCRIPTION OF SECURITIES
COMMON STOCK
The authorized capital stock of the Company consists of one class of
5,000,000 shares of common stock, no par value. The Bank currently has 523,644
shares issued and outstanding. In addition, the Bank has issued options for an
aggregate of 40,524 shares of common stock and has reserved 79,244 shares for
issuance upon the exercise of outstanding common stock purchase warrants. Upon
consummation of the Acquisition, the Company will issue two shares of Common
Stock for each share of Bank Common Stock, and so will have approximately
1,047,288 shares outstanding. In addition, the Company will assume both the
Employee's Plan and the Outside Directors Plan, reserving 81,048 shares for
issuance thereunder after the terms of such Plans are adjusted to reflect the
terms of the Acquisition. The Company will also assume the Bank's obligations
under its common stock purchase warrants, reserving 158,720 shares for issuance
upon their exercise, after such warrants are adjusted to reflect the terms of
the Acquisition.
Dividends. The Company may pay dividends as declared from time to time by
the Company's Board of Directors out of funds legally available therefor,
subject to certain restrictions. Since dividends from the Bank will be the
Company's sole source of income, any restriction on the Bank's ability to pay
dividends will act as a restriction on the Company's ability to pay dividends.
Under the New Jersey Banking Act of 1948 (the "Banking Act"), no cash dividend
may be paid by the Bank unless, following the payment of such dividend, the
capital stock of the Bank will be unimpaired and the Bank will have a surplus of
no less than 50% of its capital stock or, if not, the payment of such dividend
will not reduce the surplus of the Bank. In addition, the Bank cannot pay
dividends in such amounts as would reduce its capital below the regulatorily
imposed minimums.
Voting Rights. Each holder of the Common Stock is entitled to one vote for
each share held on all matters voted upon by the shareholders, including the
election of directors. There is no cumulative voting in the election of
directors.
38
<PAGE>
Rights in Liquidation. In the event of a liquidation, dissolution or
winding up of the Company, each holder of the Common Stock would be entitled to
receive a pro rata portion of all assets of the Company available for
distribution to holders of the Common Stock after payment of all debts and
liabilities of the Company.
No Preemptive Rights; Redemption. Holders of shares of the Common Stock are
not entitled to preemptive rights with respect to any shares of the Common Stock
that may be issued. The Common Stock is not subject to call or redemption and is
fully paid and nonassessable.
SHAREHOLDERS PROTECTION ACT
A provision of New Jersey law, the New Jersey Shareholders Protection Act
(the "Shareholders Act") prohibits certain transactions involving an "interested
shareholder" and a corporation. An "interested shareholder" is generally defined
as one who is the beneficial owner, directly or indirectly, of ten percent or
more of the voting power of the outstanding stock of the corporation. The
Shareholders Act prohibits certain business combinations between an interested
shareholder and a New Jersey corporation subject to the Shareholders Act for a
period of five years after the date the interested shareholder acquired his
stock, unless the transaction was approved by the corporation's board of
directors prior to the time the interested shareholder acquired their shares.
After the five year period expires, the prohibition on business combinations
with an interested shareholder continues unless certain conditions are met. The
conditions include (i) that the business combination is approved by the Board of
Directors of the target corporation; (ii) that the business combination is
approved by a vote of two-thirds of the voting stock not owned by the interested
shareholder; and (iii) that the shareholders of the corporation receive a price
in accordance with a fair price formula set forth in the statute. Because the
Company will become a reporting company under Section 12 of the Exchange Act in
connection with the listing of its shares on the American Stock Exchange, the
Shareholders Act will be applicable to Company. The Shareholders Act as
applicable to the Company could inhibit unsolicited offers to acquire the
Company.
The Shareholders Act is not applicable to the Bank. Although a party
seeking control of the Bank is required to file applications with the Federal
Deposit Insurance Corporation pursuant to the Bank Merger Act and with the
Commissioner pursuant to the Banking Act, neither the Bank Merger Act nor the
Banking Act have prohibitions and standards similar to those contained in the
Shareholders Act.
After consummation of the Acquisition and the transactions contemplated by
the Plan, a party seeking to gain control of the Company would be required to
file applications with the Federal Reserve Board, FDIC and the Commissioner,
since such a party would be indirectly acquiring control of the Bank.
WARRANTS
Each warrant will entitle the holder to purchase one share of the Common
Stock at a purchase price equal to $17.28, subject to adjustment as hereinafter
described. The Warrants are non-transferable and will expire on September 30,
1997. Any warrant not exercised on or before the expiration date shall expire
and will not thereafter be exercisable.
The number of shares purchasable upon exercise and the exercise price of
each warrant will be proportionately adjusted upon the occurrence of certain
events, including stock dividends, stock splits, reclassifications and
reorganizations.
TRANSFER AGENT
The Company's transfer agent for the Common Stock will be American Stock
Transfer & Trust Co., with offices at 40 Wall Street, New York, New York 10005.
Part II
ITEM 1 -- MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The Bank's Common Stock is not traded on any established market nor do any
brokerage firms of which the Bank is aware make a market in the Bank Common
Stock. As of June 30, 1996, there were 455 holders of the Bank Common Stock and
the Company anticipates there will be the same number of holders of the Common
Stock upon consummation of the Acquisition. In connection with the Acquisition,
the Company intends to apply to have the Common Stock listed for trading on the
American Stock Exchange. The Company has made application for such listing.
Although the Company intends to have the Common Stock included on the American
Stock Exchange, there can be no assurance that an active or liquid trading
market for the Common Stock will develop, or, if it is developed, that it will
be maintained.
39
<PAGE>
Commencing in January 1996, the Bank began paying a quarterly cash dividend
of $.18 per share. Although the amount of dividends to be paid by the Company
will be determined by the Board of Directors of the Company based upon the
Company's earnings, capital needs, financial condition and other relevant
factors, the Board of Directors of the Company currently intends to adhere to
the dividend policy previously established by the Bank.
As of June 30, 1996, options to purchase 40,524 shares of Bank Common Stock
were outstanding. These options will be assumed by the Company and, after giving
effect to the terms of the Acquisition, the Company will have outstanding
options to purchase 63,890 shares of Common Stock. All of these options are
immediately exercisable.
ITEM 2 -- LEGAL PROCEEDINGS
The Bank is not a party to any legal proceedings other than routine
litigation incidental to the Bank's business. The Bank believes that none of
these proceedings would, if adversely determined, have a material effect on the
bank's consolidated financial condition or results of operations.
ITEM 3 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
ITEM 4 -- RECENT SALES OF UNREGISTERED SECURITIES
The Company has not sold any securities over the past three years. Other
than for purposes of stock dividends, the Bank has not issued any securities
over the past three years. Issuance of the Common Stock in the Acquisition will
be exempt from registration pursuant to Section 3(a)(12) of the Securities Act
of 1933, as amended.
ITEM 5 -- INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VII of the Certificate of Incorporation of the Company provides
that the Company shall indemnify its present and former officers, directors,
employees and agents and persons serving at its request against expenses,
including attorneys' fees, judgments, fines or amounts paid in settlement
incurred in connection with any pending or threatened civil or criminal
proceeding to the fullest extent permitted by the New Jersey Business
Corporation Act. Article VII also provides that such indemnification shall not
exclude any other rights to indemnification to which a person may otherwise be
entitled, and authorizes the Company to purchase insurance on behalf
40
<PAGE>
of any of the persons enumerated against any liability whether or not the
Company would have the power to indemnify him under the provisions of Article
VII.
The New Jersey Business Corporation Act empowers a corporation to indemnify
a corporate agent against his expenses and liabilities incurred in connection
with any proceeding (other than a derivative lawsuit) involving the corporate
agent by reason of his being or having been a corporate agent if (a) the agent
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and (b) with respect to any
criminal proceeding, the corporate agent had not reasonable cause to believe his
conduct was unlawful. For purposes of the Act, the term "corporate agent"
includes any present or former director, officer, employee or agent of the
corporation, and a person serving as a "corporate agent" for any other
enterprise at the request of the corporation.
With respect to any derivative action, the corporation is empowered to
indemnify a corporate agent against his expenses (but not his liabilities)
incurred in connection with any proceeding involving the corporate agent by
reason of his being or having been a corporate agent if the agent acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation. However, only the court in which the proceeding
was brought can empower a corporation to indemnify a corporate agent against
expenses with respect to any claim, issue or matter as to which the agent was
adjudged liable for negligence or misconduct.
The corporation may indemnify a corporate agent in a specific case if a
determination is made by any of the following that the applicable standard of
conduct was met: (i) the Board of Directors, or a committee thereof, acting by a
majority vote of a quorum consisting of disinterested directors; (ii) by
independent legal counsel if there is not a quorum of disinterested directors or
if the disinterested quorum empowers counsel to make the determination; or (iii)
by the stockholders.
A corporate agent is entitled to mandatory indemnification to the extent
that the agent is successful on the merits or otherwise in any proceeding, or in
defense of any claim, issue or matter in the proceeding. If a corporation fails
or refuses to indemnify a corporate agent, whether the indemnification is
permissive or mandatory, the agent may apply to a court to grant him the
requested indemnification. In advance of the final disposition of a proceeding,
the corporation may pay an agent's expenses if the agent agrees to repay the
expenses unless it is ultimately determined that he is entitled to
indemnification.
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<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF BRIDGE VIEW BANK
Consolidated Balance Sheet as of June 30, 1996............................ F-1
Consolidated Statements of Income for the six months ended
June 30, 1996 and 1995.................................................. F-2
Consolidated Statements of Cash Flows for the six months ended
June 30, 1996 and 1995.................................................. F-3
Notes to Unaudited Consolidated Financial Statement....................... F-4
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF BRIDGE VIEW BANK
Report of Independent Accountants......................................... F-5
Consolidated Statement of Financial Condition as of December 31, 1995
and 1994................................................................ F-6
Consolidated Statements of Income for the years ended December 31, 1995
and 1994................................................................ F-7
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1995 and 1994.............................................. F-8
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1994.............................................. F-9
Notes to Consolidated Financial Statements................................ F-11
The Financial Statements of Bridge View Bancorp (the "Company") are not
available. The Company has not yet been capitalized as it is awaiting final
regulatory approval.
<PAGE>
BRIDGE VIEW BANK
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
June 30, June 30,
1996 1995
-------- -------
Assets
Cash and Due from Banks ........................... $ 6,372 $ 5,203
Federal Funds Sold ................................ 0 4,800
Investment Securities:
Held to Maturity Securities
(Market Value $22.785 6/30/96 and
$18.502 on 6/30/95) ........................... 22,839 18,453
Available for Sale Securities
(Net of unrealized holding losses of
$26 on 6/30/96 and $6 on 6/30/95) ............. 5,692 7,824
Federal Home Loan Bank Stock ...................... 283 0
Loans, Less Allowance for Loan Losses of
$817 on 6/30/96 and $720 on 6/30/95 ............. 66,803 50,292
Net Deferred Loan Fees ............................ (120) (51)
Premises and Equipment, Net ....................... 1,539 1,620
Other Real Estate Owned ........................... 0 0
Accrued Interest Receivable and Other Assets ...... 1,608 1,114
-------- -------
Total Assets ................................ $105,016 $89,255
======== =======
Liabilities and Stockholders' Equity
Deposits
Non-Interest Bearing Demand Deposits ............ $ 22,286 $18,734
Interest Bearing
Savings, NOW and Money Market Deposits ........ 40,741 37,997
Other Time Deposits ........................... 14,360 13,298
Certificates of Deposit $100,000 and over ..... 12,718 8,485
-------- -------
Total Deposits .............................. 90,105 78,514
Federal Funds Borrowed ............................ 2,500 0
Accrued Interest Payable and Other Liabilities .... 846 450
-------- -------
Total Liabilities ........................... 93,451 78,964
Stockholders' Equity
Common Stock, authorized 2,500,000 shares,
issued and outstanding 523,544 shares
on 6/30/96 and 497,253 shares on 6/30/95 ...... 4,986 4,973
Capital Surplus ................................... 5,076 5,066
Undivided Profits ................................. 1,519 154
Reserve for Unrealized Losses on Available
For Sale Securities ............................. 16 (27)
Total Stockholders' Equity .................. 11,565 10,291
-------- -------
Total Liabilities and Stockholders' Equity .. $105,016 $89,255
======== =======
F-1
<PAGE>
BRIDGE VIEW BANK
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE DATA)
Six Months Ended
---------------------
June 30, June 30,
1996 1995
-------- --------
Interest Income:
Interest and Fees on Loans ......................... $2,774 $2,195
Interest on Federal Funds Sold ..................... 125 115
Interest on Investment Securities:
Taxable Interest Income .......................... 625 597
Tax-Exempt Interest Income ....................... 100 71
------ ------
Total Interest Income .......................... 3,624 2,978
Interest Income:
Savings, NOW and Money Market Deposits ............. 345 407
Other Time Deposits ................................ 346 304
Certificates of Deposit $100,000 and over .......... 285 191
Borrowed Funds ..................................... 6 0
------ ------
Total Interest Expense ......................... 982 902
Net Interest Income ............................ 2,642 2,076
Provision for Loan Losses .......................... 113 92
------ ------
Net Interest Income After Provision
for Loan Losses .............................. 2,529 1,984
Non-Interest Income:
Service Fees on Deposits ........................... 220 124
Other Fees and Commissions ......................... 143 141
Investment Securities Gains (Losses) ............... 0 (6)
------ ------
Total Non-Interest Income ...................... 363 259
------ ------
Non-Interest Expense:
Salaries and Wages ................................. 640 547
Employee Benefits .................................. 128 99
Occupancy Expense .................................. 382 369
Furniture and Equipment ............................ 73 67
Other .............................................. 479 463
------ ------
Total Non-Interest Expense ..................... 1,702 1,545
------ ------
Income Before Income Taxes ..................... 1,190 698
Income Tax Expense ................................... 464 266
------ ------
Net Income ..................................... $ 726 $ 432
====== ======
Net Income Per Share ................................. $ 1.39 $ 0.82
Weighted Average Shares Outstanding .................. 523,544 523,544
F-2
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Six Months Ended
---------------------
June 30, June 30,
1996 1995
-------- --------
Cash Flows from Operating Activities:
Net Income ....................................... $ 726 $ 432
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Losses .................... 113 92
Depreciation ................................. 73 81
Net Amortization and Accretion of Premiums
and Discounts on Investment Securities ..... 1 24
Proceeds from Sale of Loans Held for Sale .... 0 87
Gain on Sale of Loans Held for Sale .......... 0 (1)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accrued Interest
Receivable ............................... (117) 20
Increase in Other Assets ................... (581) (355)
Increase in Accounts Payable and Accrued
Liabilities .............................. 312 82
Other ...................................... (185) 55
-------- -------
Net Cash Provided by Operating Activities .... 342 517
-------- -------
Cash Flows from Investing Activities:
Purchases of Investment Securities ............... (10,093) (7,366)
Maturities of Investment Securities .............. 4,881 14,250
Proceeds from Repayments of Securities
Available for Sale ............................. 46 58
Proceeds from Sale of Securities Available
for Sale ....................................... 0 2,896
Maturities of Securities Available for Sale ...... 1,000 0
Purchase of Securities Available for Sale ........ 0 (2,982)
Net Increase in Loans ............................ (11,388) (6,895)
Purchase of Federal Home Loan Bank Stock ......... (283) 0
Purchase of Premises and Equipment ............... (59) (14)
-------- -------
Net Cash Used in Investing Activities .......... (15,896) (53)
-------- -------
Cash Flows from Financing Activities:
Net Increase in Deposits ......................... 4,880 1,877
Issuance of Common Stock and Options
and Warrants Exercised ......................... 15 1
Purchase of Federal Funds ........................ 2,500 0
-------- -------
Net Cash Provided by Financing Activities ...... 7,395 1,878
-------- -------
Increase in Cash and Cash Equivalents .......... (8,159) 2,342
Cash and Cash Equivalents at Beginning of Year ... 14,531 7,661
-------- -------
Cash and Cash Equivalents at End of Year ......... $ 6,372 $10,003
======== =======
Supplemental Information:
Cash Paid During the Year for:
Interest on Deposits ........................... $ 955 $ 874
Income Taxes ................................... $ 767 $ 377
F-3
<PAGE>
BRIDGE VIEW BANK AND SUBSIDARY
Notes to Unaudited Consolidated Financial Statements
(1) Basis of Unaudited Financial Statement Presentation
In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments of a normal recurring
nature necessary to present fairly the bank's financial position as of
June 30, 1996, the results of its operations for the six months ended,
and the cash flows for the six months of 1996. The results of operations
for such interim periods are not necessarily indicative of the results
to be expected for the full year.
F-4
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Bridge View Bank:
We have audited the accompanying consolidated statements of financial
condition of Bridge View Bank and subsidiary as of December 31, 1995 and 1994,
and the related consolidated statements of income, stockholders' equity, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Bank's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bridge View
Bank and subsidiary at December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, the Bank
adopted Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," in 1994.
KPMG Peat Marwick LLP
Short Hills, New Jersey
February 16, 1996
F-5
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1995 and 1994
(Dollars in Thousands)
1995 1994
-------- --------
ASSETS
Cash and cash equivalents:
Cash and due from banks ............................ $ 8,331 $ 4,011
Federal funds sold ................................. 6,200 3,650
-------- --------
Total cash and cash equivalents ................ 14,531 7,661
-------- --------
Securities available for sale (note 2) ............... 6,780 7,513
Investment securities, estimated market value of
$17,767 in 1995 and $24,989 in 1994 (note 2) ....... 17,630 25,308
Loans held for sale .................................. -- 86
Loans (note 3):
Commercial ......................................... 30,013 21,597
Mortgage ........................................... 9,818 7,879
Consumer and other ................................. 16,310 14,600
-------- --------
Total loans .................................... 56,141 44,076
Deferred loan fees ................................. (41) (13)
Allowance for loan losses .......................... (692) (626)
-------- --------
Net loans ...................................... 55,408 43,437
-------- --------
Premises and equipment, net (note 4) ................. 1,553 1,687
Accrued interest receivable .......................... 738 608
Other assets (note 5) ................................ 154 292
-------- --------
Total assets ................................... $ 96,794 $ 86,592
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits ................ 23,244 19,502
Interest-bearing deposits:
Savings and time deposits ........................ 53,300 49,416
Certificates of deposit of $100,000 or more ...... 8,681 7,719
-------- --------
Total deposits ................................. 85,225 76,637
Accounts payable and accrued liabilities ............. 534 368
-------- --------
Total liabilities .............................. 85,759 77,005
-------- --------
Stockholders' equity (note 8):
Capital stock, par value $10 per share .............
Authorized 2,500,00 shares in
1995 and 600,000 shares in 1994;
issued and outstanding 497,752
shares in 1995 and 473,750 shares in 1994 ........ 4,978 4,738
Surplus ............................................ 5,069 4,783
Net unrealized gain (loss) on securities
available for sale ............................... 11 (194)
Retained earnings .................................. 977 260
-------- --------
Total stockholders' equity ..................... 11,035 9,587
-------- --------
Commitments and contingencies (notes 6 and 9)
Total liabilities and stockholders' equity ..... $ 96,794 $ 86,592
======== ========
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Consolidated Statements of Income
Years ended December 31, 1995 and 1994
(Dollars in Thousands, Except Share Data)
1995 1994
------ ------
Interest income:
Interest and fees on loans .......................... $4,712 $3,383
Interest on investments available for sale .......... 384 382
Interest on municipals--nontaxable .................. 165 67
Interest on investments ............................. 823 1,080
Interest on Federal funds sold ...................... 294 132
------ ------
Total interest income .......................... 6,378 5,044
------ ------
Interest expense:
Savings and time deposits ........................... 1,431 1,132
Certificates of deposit of $100,000 or more ......... 413 229
------ ------
1,844 1,361
Net interest income ............................ 4,534 3,683
Provision for loan losses (note 3) .................... 92 75
------ ------
Net interest income after pro-
vision for loan losses ...................... 4,442 3,608
------ ------
Other income--fees and service charges ................ 578 378
------ ------
Other expenses:
Salaries and employee benefits ...................... 1,361 1,155
Occupancy (note 6) .................................. 534 511
Furniture and equipment expense (note 6) ............ 239 254
Advertising and business promotion .................. 63 64
Data processing ..................................... 173 147
FDIC insurance ...................................... 87 161
Other insurance ..................................... 32 42
Other operating expenses ............................ 515 563
------ ------
Total other expenses ........................... 3,004 2,897
------ ------
Income before income tax expense ............... 2,016 1,089
Income tax expense (note 5) ........................... 781 349
------ ------
Net income ..................................... $1,235 $ 740
====== ======
Earnings per share:
Primary ............................................. $ 2.40 $ 1.50
Fully diluted ....................................... 2.40 1.50
====== ======
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1995 and 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
Net unrealized
gain (loss)
on securities
Capital Sur- Retained available
stock plus earnings for sale Total
------ ----- ----- -------------- ------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 ..................................... $4,507 $ 508 $ 15 $ -- $ 9,030
Cumulative effect of accounting change--
investments ................................................. -- -- -- 8 8
Net income ....................................................... -- -- 740 -- 740
5% stock dividend ................................................ 225 270 (495) -- --
Common stock issued upon exercise of stock warrants .............. 6 5 -- -- 11
Net change in unrealized loss on securities
available for sale, net of tax .............................. -- -- -- (202) (202)
------ ------ ----- --- -------
Balance at December 31, 1994 ..................................... 4,738 4,783 260 (194) 9,587
Net income ....................................................... -- -- 1,235 -- 1,235
5% stock dividend ................................................ 236 282 (518) -- --
Common stock issued upon exercise of stock warrants .............. 4 4 -- -- 8
Net change in unrealized loss on securities
available for sale, net of tax .............................. -- -- -- 205 205
------ ------ ----- --- -------
Balance at December 31, 1995 ..................................... $4,978 $5,069 $ 977 $ 11 $11,035
====== ====== ===== ==== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended December 31, 1995 and 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................................................ $ 1,235 $ 740
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses ................................................... 92 75
Depreciation ................................................................ 155 180
Net amortization and accretion of premiums and discounts on
investment securities ................................................... (21) 7
Net loss on sale of securities available for sale ........................... 5 --
Loans originated for sale ................................................... (1,188) (1,693)
Proceeds from sales of loans held for sale .................................. 1,285 1,701
Gain on sale of loans held for sale ......................................... (11) (14)
Changes in operating assets and liabilities:
Increase in accrued interest receivable ................................. (130) (107)
Decrease in other assets ................................................ 2 8
Increase in accounts payable and accrued liabilities .................... 166 145
------- ------
Net cash provided by operating activities ............................ 1,590 1,042
------- ------
Cash flows from investing activities:
Purchases of investment securities ................................................ (14,310) (10,602)
Maturities of investment securities ............................................... 22,012 10,500
Proceeds from repayments of investment securities ................................. -- 50
Proceeds from repayments of securities available for sale ......................... 133 89
Proceeds from sale of securities available for sale ............................... 2,915 --
Maturities of securities available for sale ....................................... 1,000 5,000
Purchase of securities available for sale ......................................... (2,982) (2,952)
Net increase in loans ............................................................. (12,063) (8,282)
Purchases of premises and equipment ............................................... (21) (23)
------- ------
Net cash used in investing activities ................................ (3,316) (6,220)
------- ------
Cash flows from financing activities:
Net increase in deposits .......................................................... 8,588 4,010
Issuance of common stock and options and warrants exercised ....................... 8 11
------- ------
Net cash provided by financing activities ............................ 8,596 4,021
------- ------
Increase (decrease) in cash and cash equivalents ..................... 6,870 (1,157)
Cash and cash equivalents at beginning of year ...................................... 7,661 8,818
------- ------
Cash and cash equivalents at end of year ............................................ $14,531 $7,661
======= ======
</TABLE>
F-9
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued
(Dollars in Thousands)
1995 1994
------ ------
Supplemental information:
Cash paid during the year for:
Interest on deposits ................................ $1,801 $1,326
====== ======
Income taxes ........................................ $ 408 $ 249
====== ======
Transfer of investment securities to
securities available for sale ...................... $ -- $9,982
====== ======
See accompanying notes to consolidated financial statements.
F-10
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1995 and 1994
(1) Summary of Significant Accounting Policies
The accompanying consolidated financial statements include the accounts
of Bridge View Bank and its wholly-owned subsidiary, Bridge View
Investment Company (the Bank). All intercompany accounts and
transactions have been eliminated in consolidation.
Organization
The Bank is a commercial bank which provides a full range of banking
services to individuals and corporate customers in New Jersey. The Bank
is subject to competition from other financial institutions. The Bank
is regulated by state and Federal agencies and is subject to periodic
examinations by those regulatory authorities.
Basis of Financial Statement Presentation
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the
consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the consolidated statement of
financial condition and revenues and expenses for the year. Actual
results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant
change in the near term relate to the determination of the allowance
for loan losses. In connection with the determination of the allowance
for loan losses, management generally obtains independent appraisals
for significant properties.
Securities Available for Sale
Management determines the appropriate classification of securities at
the time of purchase. If management has the intent and the Bank has the
ability at the time of purchase to hold securities until maturity, they
are classified as investment securities. Securities to be held for
indefinite periods of time and not intended to be held to maturity are
classified as securities available for sale. Gains or losses on sales
of securities available for sale are based upon the specific
identification method.
As of January 1, 1994, the Bank has adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS 115). SFAS 115 requires that
securities available for sale be reported at fair value with changes in
the carrying value from period to period included as a separate
component of stockholders' equity.
F-11
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, cont.
Investment Securities
Investment securities are carried at the principal amount outstanding,
adjusted for amortization of premiums and accretion of discounts using
a method that approximates the level-yield method over the terms of the
securities. Gains or losses on sales of investment securities are based
upon the specific identification method. Investment securities are
carried at the principal amount outstanding because the Bank has the
ability and it is management's intention to hold these securities to
maturity.
Premises and Equipment
Premises and equipment are stated at historical cost, less accumulated
depreciation and amortization. Depreciation of fixed assets is
accumulated on a straight-line basis over the estimated useful lives of
the related asset. Leasehold improvements are amortized on a
straight-line basis over the shorter of their estimated useful lives or
the term of the lease. Maintenance and repairs are charged to expense
in the year incurred.
Loans
Loans are stated at their principal amount outstanding, net of deferred
loan origination fees and costs. Interest income on loans is accrued
and credited to interest income when earned. The accrual of income on
loans is discontinued when certain factors indicate reasonable doubt as
to the collectibility of such income, and the interest income on such
loans is recognized only when subsequently collected. Loan origination
fees and certain direct loan origination costs are deferred and
recognized over the life of the loan as an adjustment to yield using a
method which approximates the interest method.
Loans Held for Sale
Mortgage loans intended for sale are carried at the lower of unpaid
principal balance, net, or market value on an aggregate basis.
Allowance for Loan Losses
Losses on loans are charged to the allowance for loan losses. Additions
to this allowance are made by recoveries of loans previously charged
off and by a provision charged to expense. The determination of the
balance of the allowance for loan losses is based on an analysis of the
loan portfolio, economic conditions and other factors warranting
recognition. Management believes that the allowance for loan losses is
adequate. While management uses available information to recognize
losses on loans, future additions may be necessary based on changes in
economic conditions, particularly in
F-12
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, cont.
Allowance for Loan Losses, cont.
New Jersey. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the Bank's
allowance for loan losses. Such agencies may require the Bank to
recognize additions to the allowance based on their judgments about
information available to them at the time of their examination.
Income Taxes
The Bank uses the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates in effect for the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Earnings Per Share
For the year ended December 31, 1995, earnings per share is based on
the weighted average number of shares outstanding, including common
stock equivalents (514,007), utilizing the modified treasury stock
method.
For the year ended December 31, 1994, earnings per share was computed
by dividing net income by the weighted average number of shares
outstanding (493,373), retroactively adjusted for stock dividends.
Common stock equivalents were not included in the calculation as they
were not material.
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks and Federal
funds sold, which are generally sold for one-day periods.
Reclassifications
Certain reclassifications have been made to amounts reported in 1994 to
conform to the 1995 presentation.
F-13
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(2) Securities Available for Sale and Investment Securities
A comparative summary of securities available for sale at December 31,
1995 and 1994 is as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amor- unreal- unreal-
tized ized ized Market
cost gains losses value
------- ------ ------ -------
<S> <C> <C> <C> <C>
1995--U.S. Government and agency
obligations ............................... $6,762 $38 $(20) $6,780
====== === ==== ======
1994--U.S. Government and agency
obligations ............................... $7,836 -- (323) 7,513
====== === ==== ======
</TABLE>
A comparative summary of investment securities at December 31, 1995 and
1994 is as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amor- unreal- unreal-
tized ized ized Market
cost gains losses value
------- ------ ------ ------
<S> <C> <C> <C> <C>
1995:
U.S. Government and agency obligations ............ $12,668 $120 $ (11) $12,777
Municipal obligations ............................. 4,962 28 -- 4,990
------- ---- ----- -------
$17,630 $148 $ (11) $17,767
======= ==== ===== =======
1994:
U.S. Government and agency obligations ............ 21,889 4 (319) 21,574
Municipal obligations ............................. 3,419 1 (5) 3,415
------- ---- ----- -------
$25,308 $ 5 $(324) $24,989
======= ==== ===== =======
</TABLE>
F-14
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(2) SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES, CONT.
The investments held at December 31, 1995 mature as follows (in thousands):
Investment Securities available
securities for sale
--------------------- ---------------------
Amortized Market Amortized Market
cost value cost value
-------- ------ --------- -------
Within one year ........... $ 9,800 $9,816 $4,011 $4,020
One to five years ......... 7,439 7,539 2,751 2,760
Six to ten years .......... 391 412 -- --
------- ------ ------ ------
$17,630 $7,767 $6,762 $6,780
======= ====== ====== ======
Proceeds from the sales of securities available for sale during 1995 were
$2.9 million. Gross gains of $31,000 and gross losses of $36,000 were realized
on those sales in 1995. For the year ended December 31, 1994, there were no
sales of securities. Securities with a carrying value of $1.5 million at
December 31, 1995 and 1994 were pledged to secure public funds on deposit.
(3) LOANS AND ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses for the years ended December
31, 1995 and 1994 are as follows (in thousands):
1995 1994
---- ----
Balance at beginning of year ..................... $626 $567
Provision charged to expense ..................... 92 75
Loans charged off, net of recoveries ............. (26) (16)
---- ----
Balance at end of year ........................... $692 $626
==== ====
Nonaccrual loans that are contractually past due 90 days or more amount to
$163,000 and $0 as of December 31, 1995 and 1994, respectively. Interest on
nonaccrual loans excluded from interest income was insignificant for 1995; there
was no interest on nonaccrual loans excluded from income in 1994.
The Bank grants commercial, mortgage and installment loans to those New
Jersey residents and businesses within its local trading area. Its borrowers'
abilities to repay their obligations are dependent upon various factors,
including the borrowers' income and net worth, cash flows generated by the
underlying collateral, value of the underlying collateral and priority of the
Bank's lien on the property. Such factors are dependent upon various economic
conditions and individual circumstances beyond the Bank's control; the Bank is
therefore subject to risk of loss. The Bank believes its lending policies and
procedures adequately minimize the potential exposure to such risks and that
adequate provisions for loan losses are provided for all known and inherent
risks.
F-15
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(4) PREMISES AND EQUIPMENT
At December 31, 1995 and 1994, premises and equipment consists of the
following (in thousands):
1995 1994
------ -----
Building ........................................ $1,677 $1,677
Furniture, fixtures and equipment ............... 492 472
Leasehold improvements .......................... -- 15
------ ------
Total fixed assets .............. 2,169 2,164
Less accumulated depreciation and amortization .. 616 477
Net carrying value .............. $1,553 $1,687
====== ======
(5) INCOME TAXES
Income tax expense from operations for the years ended December 31, 1995
and 1994 aggregated $781,000 and $349,000, respectively. The current and
deferred amounts of such provisions are as follows (in thousands):
1995 1994
---- ----
Federal:
Current ............... $585 $272
Deferred .............. 35 18
---- ----
620 290
State:
Current ............... 156 40
Deferred .............. 5 19
---- ----
161 59
$781 $349
==== ====
Total income tax expense for the years ended December 31, 1995 and 1994 was
allocated as follows (in thousands):
1995 1994
----- ----
Income tax expense from operations ............................ $ 781 $349
Stockholders' equity--unrealized (gain) loss on securities
available for sale ......................................... (136) 129
----- ----
$ 645 $478
===== ====
F-16
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(5) INCOME TAXES, CONT.
Income tax expense from operations differed from the amounts computed by
applying the U.S. Federal income tax rate (34% in 1995 and 1994) to income taxes
as a result of the following (in thousands):
1995 1994
---- ----
Computed "expected" tax expense ......................... $685 $370
Increase (decrease) in taxes resulting from:
State taxes, net of Federal income tax benefit ..... 106 39
Tax-exempt income .................................. (29) (15)
Other .............................................. 19 (45)
---- ----
$781 $349
==== ====
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of December
31, 1995 and 1994 are as follows (in thousands):
1995 1994
---- ----
Deferred tax assets:
Start-up costs .............................................. $ 1 $ 5
Bank premises, furniture and equipment, principally due to
differences in depreciation .............................. 50 40
Unrealized loss on securities available for sale ............ -- 129
Loans, principally due to allowance for loan losses and
deferred fee income ...................................... 273 247
--- ----
Total gross deferred tax assets .................. 324 421
--- ----
Deferred tax liabilities:
Deferred fee income ......................................... 31 --
Unrealized gain on securities available for sale 7 --
Investment securities, principally due to accretion of
discounts ................................................ 22 11
Accrual to cash adjustment .................................. 200 181
--- ----
Total gross deferred tax liabilities ............. 260 192
---- ----
Net deferred tax asset ........................... $ 64 $229
==== ====
F-17
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(5) INCOME TAXES, CONT.
At December 31, 1995, management believes that no valuation allowance for
the deferred tax asset is necessary due to sufficient taxes paid in the
statutory carryback period.
(6) LEASES
The Bank leases its land in Englewood Cliffs, New Jersey from a general
partnership owned partly by a director under a ten-year operating lease with
five five-year renewal options. The Bank has the option to purchase the land six
months prior to expiration of the original ten-year term or six months prior to
the end of the 16th year of the lease. The purchase price shall be the market
value of the land only as determined by an appraisal. The Bank also leases a
branch facility in Fort Lee, New Jersey.
The following is a schedule of future minimum lease payments (exclusive of
payments for maintenance, insurance, taxes and additional rental payments based
on increases in certain indexes) for operating leases (which include both
branches) with initial or remaining terms in excess of one year from December
31, 1995 (in thousands):
Year ending December 31:
1996 ................................... $443
1997 ................................... 423
1998 ................................... 292
1999 ................................... 76
====
Rental expense amounted to $432,000 and $411,000 for the years ended
December 31, 1995 and 1994, respectively.
(7) RELATED-PARTY TRANSACTIONS
Certain directors of the Bank are associated with professional firms that
rendered various professional services for the Bank. The Bank paid the firms,
excluding rental payments, approximately $58,000 and $19,000 during the years
ended December 31, 1995 and 1994, respectively. It is the Bank's policy not to
originate loans to directors, executive officers or their affiliates.
(8) STOCKHOLDERS' EQUITY AND DIVIDEND RESTRICTIONS
Warrants to purchase common stock were distributed to stockholders of
record as of October 1, 1992. One warrant was issued for each five shares of
common stock owned on that date. Each warrant entitles the holder to purchase
one share of common stock at a price of $18.14 per share. The warrants are
exercisable on or before September 30, 1997. During 1995 and 1994, 442 and 629
warrants, respectively, were exercised, and 76,012 and 76,454 warrants were
outstanding at December 31, 1995 and 1994, respectively.
F-18
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(8) STOCKHOLDERS' EQUITY AND DIVIDEND RESTRICTIONS, CONT.
During 1994, the Bank's stockholders approved the 1994 Stock Option Plan
for Non Employee Directors (Directors' Plan) and the 1994 Employee Stock Option
Plan (Employees' Plan). The Directors' Plan provides for options to purchase up
to 24,860 shares of the Bank's common stock to be issued to directors who are
not employees of the Bank. The Employees' Plan provides for the option to
purchase up to 24,860 shares of the Bank's common stock to be issued to
employees of the Bank. Previously issued options to an employee of the Bank were
terminated upon adoption of these plans. The option price per share approximates
the market value of the Bank's stock on the date of grant.
A summary of the stock option plans for the years ended December 31, 1995
and 1994 is as follows:
Number
of Option price
shares per share($)
------ ---------------
Outstanding at December 31, 1993 -- --
Granted 23,625 19.52
Exercised -- --
------
Outstanding at December 31, 1994 23,625 19.52
Granted 12,882 21.00
Exercised -- --
------
Outstanding at December 31, 1995 36,507 21.00 -- 19.52
====== ==============
The Bank declared a 5% stock dividend effective March 17, 1995 and February
28, 1994.
New Jersey law provides that no dividend may be paid unless, after the
payment of such dividend, the capital of the Bank will not be impaired and
either the Bank will have statutory surplus of not less than 50% of its capital
stock or the payment of such dividend will not reduce the statutory surplus of
the Bank.
(9) COMMITMENTS AND CONTINGENCIES
The Bank is a party to transactions with off-balance-sheet risk in the
normal course of business in order to meet the financing needs of its customers.
These transactions consist of commitments to extend credit and involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the accompanying consolidated statements of financial
condition.
F-19
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(9) COMMITMENTS AND CONTINGENCIES, CONT.
The Bank uses the same credit policies and collateral requirements in
making commitments and conditional obligations as it does for on-balance-sheet
loans. Commitments to extend credit are agreements to lend to customers as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since the commitments may expire without being
drawn upon, the total commitment amounts do not necessarily represent future
cash requirements. The Bank evaluates each 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 management's credit evaluation of
the borrower. Outstanding available loan commitments, primarily variable rate
home equity loans, at December 31, 1995 and 1994 totaled $21.1 million and $17.1
million, respectively. Additionally, unused credit card commitments totaled
$394,000 at December 31, 1995.
Most of the Bank's lending activity is with customers located in Bergen
County, New Jersey. The Bank has issued letters of credit to customers totaling
$382,000 and $668,000 at December 31, 1995 and 1994, respectively, whereby the
Bank guarantees performance to a third party. These letters of credit generally
have fixed expiration dates of less than one year.
(10) REGULATORY MATTERS
On December 19, 1991, the Federal Deposit Insurance Corporation Improvement
Act of 1991 (FDICIA) became law. Regulations implementing the prompt corrective
action provisions of FDICIA became effective on December 19, 1992. In addition
to the prompt corrective action requirements, FDICIA includes significant
changes to the legal and regulatory environment for insured depository
institutions, including reductions in insurance coverage for certain kinds of
deposits, increased supervision by the Federal regulatory agencies, increased
reporting requirements for insured institutions, and new regulations concerning
internal controls, accounting and operations.
The prompt corrective action regulations define specific capital categories
based on an institution's capital ratios. The capital categories, in declining
order, are "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," and "critically undercapitalized." To be
considered "well capitalized," an institution must generally have a leverage
ratio of at least 5%, a Tier 1 risk-based capital ratio of at least 10%, and a
total risk-based capital ratio of at least 6%. An institution is deemed to be
"critically undercapitalized" if it has a tangible equity ratio of 2% or less.
At December 31, 1995, the Bank's (unaudited) leverage ratio, Tier 1 risk-based
capital ratio and total risk-based capital ratio were 12.4%, 17% and 18%,
respectively. The Bank currently meets the criteria of a "well capitalized"
institution.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments" (SFAS 107), requires that the Bank disclose
F-20
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONT.
the estimated fair value of its financial instruments whether or not
recognized in the consolidated balance sheet. Fair value estimates and
assumptions are set forth below for the Bank's financial instruments at December
31, 1995 (in thousands):
Estimated
Carrying fair
amount value
-------- ---------
Financial assets:
Cash and cash equivalents ............ $14,531 $14,531
Securities available for sale ........ 6,780 6,780
Investment securities ................ 17,630 17,767
Net loans ............................ 55,408 55,659
Accrued interest receivable .......... 738 738
Financial liabilities--deposits ........... 85,225 85,313
====== =======
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
CASH AND CASH EQUIVALENTS
The carrying amount approximates fair value.
SECURITIES AVAILABLE FOR SALE
All securities available for sale are valued using quoted market prices.
INVESTMENT SECURITIES
All investment securities are valued using quoted market prices.
NET LOANS
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type, such as residential and
commercial real estate, commercial and other consumer. The fair value of loans
is estimated by discounting contractual cash flows using estimated market
discount rates which reflect the credit and interest rate risk inherent in the
loans.
ACCRUED INTEREST RECEIVABLE
The carrying amount approximates fair value.
F-21
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONT.
DEPOSITS
The fair value of deposits with no stated maturity, such as
non-interest-bearing demand deposits is equal to the amount payable on demand as
of December 31, 1995. The fair value of certificates of deposit is based on the
discounted value of contractual cash flows. The discount rate is estimated using
the rates currently offered for deposits of similar remaining maturities.
COMMITMENTS TO EXTEND CREDIT
The fair value of commitments is estimated using the fees currently charged
to enter into similar agreements, taking into account the remaining terms of the
agreements; at December 31, 1995 such amounts were not material.
LIMITATION
The preceding fair value estimates were made at December 31, 1995, based on
pertinent market data and relevant information on the financial instrument.
These estimates do not include any premium or discount that could result from an
offer to sell at one time the Bank's entire holdings of a particular financial
instrument or category thereof. Since no market exists for a substantial portion
of the Bank's financial instruments, fair value estimates were necessarily based
on judgments regarding future expected loss experience, current economic
conditions, risk assessment of various financial instruments, and other factors.
Given the innately subjective nature of these estimates, the uncertainties
surrounding them and the matter of significant judgment that must be applied,
these fair value estimates cannot be calculated with precision. Modifications in
such assumptions could meaningfully alter these estimates.
Since these fair value approximations were made solely for on- and
off-balance-sheet financial instruments at December 31, 1995, no attempt was
made to estimate the value of anticipated future business. Furthermore, certain
tax implications related to the realization of the unrealized gains and losses
could have a substantial impact on these fair value estimates and have not been
incorporated into the estimates.
(12) RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
(SFAS 121). This statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever
F-22
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(12) RECENT ACCOUNTING PRONOUNCEMENTS, CONT.
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Goodwill is included in the scope of SFAS 121,
while core deposit intangibles and mortgage servicing rights are specifically
excluded. SFAS 121 is effective for fiscal years beginning after December 15,
1995 and was adopted by the Bank in 1996. The effect of adopting SFAS 121 is
expected to be immaterial.
In May 1995 the FASB issued Statement of Financial Accounting Standards No.
122, "Accounting for Mortgage Servicing Rights" (SFAS 122). This statement
requires recognition of the rights to service mortgage loans for others, whether
those rights were acquired through purchase or origination. SFAS 122 also
requires that capitalized mortgage servicing rights be evaluated for impairment
based on the fair value of those rights with impairment recognized through a
valuation allowance. The accounting requirements of this statement are effective
for fiscal years beginning after December 15, 1995. The impact of adopting SFAS
122 on the consolidated financial statements of the Bank is expected to be
immaterial.
In October 1995, FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation (SFAS 123). This statement
establishes financial accounting and reporting standards for stock-based
employee compensation plans. SFAS 123 encourages all entities to adopt the "fair
value based method" of accounting for employee stock compensation plans.
However, SFAS 123 also allows an entity to continue to measure compensation cost
under such plans using the "intrinsic value based method." The accounting
requirements of this statement are effective for transactions entered into in
fiscal years that begin after December 15, 1995.
F-23
<PAGE>
PART III
ITEM 1 - INDEX TO EXHIBITS
(a) The following exhibits are filed as part of this Registration
Statement:
Exhibit Number Description
- -------------- -----------
2(a)* Certificate of Incorporation of Bridge View Bancorp
2(b)* By Laws of Bridge View Bancorp
3* Form of Non-Transferable Warrant Certificate
5* Not Applicable
6(a)* Bridgeview Bank 1994 Stock Option Plan
6(b)* Bridgeview Bank Stock Option Plan for Non-Employee Directors
- -----------
*Previously Filed
42
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant has duly caused Amendment No. 1 to this registration statement to be
signed on its behalf by the undersigned thereunto duly authorized.
BRIDGE VIEW BANCORP
By: /s/ ALBERT F. BUZZETTI
-----------------------------------
Albert F. Buzzetti, President
Dated: October 30, 1996
43
