<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
(X) Quarterly report pursuant to section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 1997.
( ) Transaction report pursuant to section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from ___________ to
____________.
Commission file number: 1-12165
Bridge View Bancorp
(Exact name of registrant as specified in its charter)
New Jersey 22-3461336
------------ ------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification)
457 Sylvan Avenue, Englewood Cliffs, NJ 07632
(Address of principal executive offices) (zip code)
201-871-7800
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
____X___YES _________NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of the Registrant's classes of common
stock, as of the last practicable date.
1,135,310 shares of Common Stock as of April 30, 1997.
<PAGE>
INDEX
BRIDGE VIEW BANCORP AND SUBSIDIARY
Part I - Financial Information
- -------------------------------
Item 1. Financial Statements
Consolidated Statements of Financial Condition
March 31, 1997 and December 31, 1996 (unaudited)
Consolidated Statements of Income
Three months ended March 31, 1997 and 1996 (unaudited)
Consolidated Statements of Cash Flow Three months ended March 31, 1997
and 1996 (unaudited)
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
1
<PAGE>
BRIDGE VIEW BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
<TABLE>
<CAPTION>
March 31, 1997
(Unaudited) December 31, 1996
------------ -------------------
(000's omitted)
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks ............................. $ 7,726 $ 9,058
Federal funds sold .................................. 9,000 14,500
--------- ---------
TOTAL CASH AND CASH EQUIVALENT ............................... 16,726 23,558
--------- ---------
Securities:
FHLBNY Stock, at cost ............................... 476 476
Available for sale .................................. 15,531 8,644
Held to maturity .................................... 29,362 27,517
--------- ---------
TOTAL SECURITIES ............................................. 45,369 36,637
--------- ---------
Loans, net of allowance for loan losses
of $934 at March 31, 1997 and $861 at
December 31, 1996 ........................................ 76,692 75,752
Premises and equipment, net .................................. 1,719 1,752
Other real estate owned ...................................... 139 139
Accrued interest receivable and other assets ................. 1,433 1,222
--------- ---------
TOTAL ASSETS ................................................. 142,078 139,060
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing demand deposits ................ 31,061 29,352
Interest bearing deposits:
Savings and time deposits .................. 75,267 72,577
Certificates of deposit $100,000+ .......... 22,392 24,404
--------- ---------
TOTAL DEPOSITS ............................................... 128,720 126,333
--------- ---------
Accrued Interest Payable & Other Liabilities ................. 728 509
--------- ---------
TOTAL LIABILITIES ............................................ 129,448 126,842
--------- ---------
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, authorized
5,000,000 shares issued and outstanding
1,135,310 in 1997 and 1,048,320 in 1996 ............. 10,856 10,647
Undivided profits ................................... 1,833 1,573
Net unrealized holding (losses) on
securities available for sale ....................... (59) (2)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY ................................... 12,630 12,218
--------- ---------
Total Liabilities and Stockholders' Equity ................... $ 142,078 $ 139,060
========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
2
<PAGE>
BRIDGE VIEW BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1997 1996
---------------------
(000's omitted except per share data)
<S> <C> <C>
Interest Income:
Loans, including fees ............................... $1,665 $1,329
Federal funds sold .................................. 159 104
Investment Securities:
Taxable .................................... 519 297
Tax-exempt ................................. 59 50
------- ------
TOTAL INTEREST INCOME ........................................ 2,402 1,780
------- ------
Interest expense:
Savings deposits .................................... 176 176
Other time deposits ................................. 395 173
Certificates of deposit $100,000 + .................. 329 144
Borrowed funds ...................................... -- --
------- ------
TOTAL INTEREST EXPENSE ....................................... 900 493
------- ------
Net Interest Income ........................ 1,502 1,287
Provision for loan losses .................................... 60 53
------- ------
Net interest income after provision
for loan losses ............................ 1,442 1,234
------- ------
Non-interest income:
Service charge income ............................... 238 184
Investment securities gains (losses) ................ -- --
------- ------
TOTAL NON-INTEREST INCOME .................................... 238 184
------- ------
Non-interest expense:
Salaries and related expenses ....................... 493 375
Premises and fixed assets ........................... 200 191
Other ............................................... 390 270
------- ------
TOTAL NON-INTEREST EXPENSE ................................... 1,083 836
------- ------
Income before income taxes .......................... 597 582
Income tax expense ........................................... 233 227
------- ------
NET INCOME ................................................... $ 364 $ 355
------- ------
Per Common Share:
Net Income (Primary) ................................ $ 0.33 $ 0.32
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
1997 1996
----------------------------
(000's omitted)
<S> <C> <C>
Cash flows from operating activities:
Net income .......................................... $ 364 $ 355
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization .................. 41 38
Provision for loan losses ...................... 60 53
Proceeds from mortgages held for sale .......... 53 --
Originations of mortgages held for sale ........ (50) --
Increase in accrued interest receivable
and other assets ........................... (211) (236)
Increase in accrued interest payable
and other liabilities ...................... 219 305
Other ........................................... 1 4
-------- ---------
Net Cash Provided by Operating Activities .................... 477 519
-------- ---------
Cash flows from investing activities:
Proceeds from maturities of
investment securities ...................... 3,624 2,041
Purchase of investment securities ................... (12,416) (4,562)
Net increase in loans ............................... (1,000) (4,909)
Additions to premises and equipment ................. (8) (10)
-------- ---------
Net Cash Used in Investing Activities ........................ (9,800) (7,440)
-------- ---------
Cash flows from financing activities:
Net increase in deposits ............................ 2,387 4,928
Common stock issued upon exercise
of stock warrants .......................... 209 --
Cash paid for dividends ............................. (105) (90)
-------- ---------
Net Cash Provided by Financing Activities .................... 2,491 4,838
-------- ---------
Net change in cash and cash equivalents ...................... (6,832) (2,083)
Cash and cash equivalents as of beginning of year ............ 23,558 14,531
-------- ---------
Cash and Cash Equivalents as of End of Period ................ $ 16,726 $ 12,448
======== ========
Cash paid during the period for:
Interest ............................................ $ 874 $ 457
Income Taxes ........................................ $ -- $ 276
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE>
BRIDGE VIEW BANCORP AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of Presentation
Bridge View Bancorp ("the Company"), a bank holding company, was incorporated in
May 1996 with authorized capital of 5,000,000 shares of no par value common
stock. On December 6, 1996 the Company acquired 100 percent of the shares of
Bridge View Bank ("the Bank") in an exchange of two shares of Company common
stock for each share of Bank common stock (the "Exchange Rate.") The
consolidated condensed financial statements presented for the period ended March
31, 1996 reflect information for the Bank prior to its acquisition by the
Company and have been restated to reflect the Exchange Rate.
The consolidated condensed financial statements included herein have been
prepared without audit pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The accompanying consolidated financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented. Such adjustments are
of a normal recurring nature. These consolidated unaudited financial statements
should be read in conjunction with the audited financial statements and the
notes thereto as of and for the year ended December 31, 1996. The results for
the three months ended March 31, 1997 are not necessarily indicative of the
results that may be of the results that may be expected for the year ended
December 31, 1997.
The unaudited consolidated financial statements include the accounts of the
Company and the Bank, its wholly-owned subsidiary. All significant
inter-company accounts and transactions have been eliminated.
B. Investment Securities
The Company classifies debt and equity securities into one of two categories at
the time of purchase:
5
<PAGE>
BRIDGE VIEW BANCORP AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Securities are classified as securities held to maturity based on management's
intent and the Company's ability to hold them to maturity. Such securities are
stated at cost, adjusted for unamortized purchase premiums and discounts.
Securities not classified as securities held to maturity 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 similar requirements. At March
31, 1997 $29,362,000 of the Company's investment securities were classified as
held to maturity and the remainder were classified as available for sale.
The following table sets forth the carrying value of the Company's security
portfolio as of the dates indicated:
A comparative summary of investment securities available for sale as of the
dates indicated: (in thousands)
(Unaudited)
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
March 31, 1997:
U.S. Government and
Agency Obligations $15,628 - 97 15,531
======= == =======
December 31, 1996
U.S. Government and
Agency Obligations $ 8,647 15 (18) 8,644
======== == ===== =======
A comparative summary of investment securities held to maturity as of the dates
indicated: (in thousands)
(Unaudited)
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
March 31, 1997:
U.S. Government and
Agency Obligations $23,918 - (103) 23,815
Municipal Obligations 5,444 14 - 5,458
------- -- ----- -------
$29,362 14 (103) 29,273
======= == ===== =======
December 31, 1996:
U.S. Government
and Agency Obligations $21,183 48 (37) 21,194
Municipal Obligations 6,334 18 - 6,352
------- -- ---- -------
$27,517 66 (37) 27,546
======= == ==== =======
6
<PAGE>
BRIDGE VIEW BANCORP AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Continued
C. Loans and Allowance for Loan Losses
The following table summarizes the components of the loan portfolio as of
March 31, 1997 and as of December 31, 1996.
Loan Portfolio By Type of Loan
(Unaudited)
March 31, 1997 December 31, 1996
------------------- --------------------
Amount % Amount %
------ --- ------ ---
(Dollars in thousands)
Commercial and Industrial $12,041 15.5% $12,555 16.4%
Non-residential Properties 23,809 30.6 23,000 30.0
Residential Properties 38,545 49.6 37,706 49.1
Construction 1,459 1.9 1,752 2.3
Consumer 1,838 2.4 1,705 2.2
------- ----- ------- -----
$77,692 100.0% $76,718 100.0%
======= ===== ======= ======
The following table represents activity in the allowance for loan losses for the
three month periods ended March 31 ,1997 and as of March 31, 1996:
Allowance for Loan Losses
(Unaudited)
Three Months Ended
March 31
--------
1997 1996
---- ----
(Dollars in thousands)
Balance ................................................... $ 861 $ 695
Recoveries ................................................ 17 8
Charge-offs ............................................... (4) 0
----- -----
Net (charge-offs) recoveries .............................. 13 8
Provision for loan losses ................................. 60 53
----- -----
Balance - end of period ................................... $ 934 $ 756
===== =====
D. Earnings Per Share
Earnings per share is based upon the weighted average number of shares
outstanding, including common stock equivalents, utilizing the modified treasury
stock method. All per share data has been restated to reflect the exchange data
and the 5% stock dividend in April 1996. Average shares outstanding for purposes
of calculating primary and fully diluted earnings per share are as follows:
3/31/97 3/31/96
------- -------
Primary Earnings per Share 1,211,464 1,097,282
Fully Diluted Earnings per Share 1,211,464 1,097,282
7
<PAGE>
BRIDGE VIEW BANCORP AND SUBSIDIARY
Management Discussion and Analysis of Financial Condition and Results of
Operations
Net Income
For the three months ended March 31, 1997, net income increased by $9,000 or
2.5% to $364,000 from $355,000 for the three months ended March 31, 1996. The
increase in net income is attributable to an increase in interest income of
$622,000 or 34.9%; partially offset by a $407,000 or 82.6% increase in interest
expense. This increase in interest income was primarily attributable to an
increase of 27.3% in total loans and a 66.8% increase in investment securities.
In addition to the increase in net interest income, non-interest income,
consisting primarily of service charges on deposit accounts, increased by
$54,000 or 29.3%. The volume increases in the Company's loan and securities
portfolio were primarily funded through deposit growth.
Interest expense rose $407,000 or 82.6% for the three month period ending March
31, 1997 compared to the three months ending March 31, 1996. This increase is
attributable to an increase in interest-bearing deposits of $28,688,000 or 41.6%
compared to the March 31, 1996 interest-bearing deposits and reflects the effect
of time deposit promotions in each of the Company's new branch offices.
Non-interest expense increased by $247,000 or 29.5% for the three month period
ended March 31, 1997 compared to the same period in 1996. These increases
reflect the Company's continued growth and expenses associated with two de novo
branches opened in the second half, 1996.
On a per share basis, primary and fully-diluted earnings per share were $0.33
for the three months ended March 31, 1997 as compared to $0.32 per share for the
three months ended March 31, 1996.
The following table sets forth certain information concerning certain of the
Company's financial ratios at the periods presented for the quarter and not
annualized:
(Unaudited)
Three Month Period Three Month Period
Ended 3/31/97 Ended 3/31/96
------------- -------------
Return on Average Assets 0.30% 0.41%
Return on Average Equity 3.06% 3.56%
Equity to Average Assets 8.89% 11.04%
8
<PAGE>
Provisions for Loan Losses
For the three month period ended March 31, 1997, the Company's provision for
loan losses was $60,000; an increase of $7,000 over the provision of $53,000 for
the three month period ended March 31, 1996. The increased provisions reflects
the continued growth in the loan portfolio as well as management's view of the
economy of its service area.
Non-Interest Expense
Other expenses for the three month period ended March 31, 1997 amounted to
$1,083,000; an increase of $247,000 over the $836,000 for the first quarter,
1996. This increase is related primarily to staff additions and occupancy
attributable to the Company's two new branches and customary merit increases in
salary and employee benefits and data processing fees commensurate with the
Bank's continued growth.
Income Tax Expense
The income tax provision, which includes both Federal and State taxes for the
quarter ended March 31, 1997 and 1996 was $233,000 and $227,000 respectively.
The increase in income taxes was attributable to the increase in income between
both periods reported.
FINANCIAL CONDITION
At March 31, 1997 the Company's total assets were $142,078,000 compared to
$139,060,000 at December 31, 1996. Net loans increased to $76,692,000 at March
31, 1997 from $75,752,000 at December 31, 1996. Total deposits at March 31, 1997
were $128,720,000; increased from $126,333,000 at December 31, 1996.
Loan Portfolio
At March 31, 1997 the Company's net loans were $76,692,000, an increase of
$940,000 or 1.2% over net loans at December 31, 1996. The increase in the loan
portfolio represents increased penetration of the local small business market.
Management believes that the Company's success in penetrating this market is due
to the fact that, through mergers and acquisitions, the company's trade area is
now primarily served by large institutions, frequently headquartered out of
state. Management believes that it is not cost-efficient for these larger
institutions to provide the level of personal service to small business
borrowers that the Company provides.
The Company's loans are primarily to businesses and individuals located in
Bergen County, New Jersey. The Company has not made loans to borrowers outside
of the United States. Commercial lending activities are focused primarily on
lending to small business borrowers. The Company believes that its strategy of
customer service, competitive rate structure and selective marketing have
enabled the Company to gain market entry to local loans.
9
<PAGE>
The following table sets forth the classification of the Company's loans by
major category as of March 31, 1997 and December 31, 1996 respectively:
(Unaudited)
March 31, 1997 December 31, 1996
------------------- -------------------
Amount % Amount %
-------- ----- -------- ------
(Dollars in thousands)
Commercial and Industrial $12,041 15.5% $12,555 16.4%
Non-Residential Properties 23,809 30.6 23,000 30.0
Residential Properties 38,545 49.6 37,706 49.1
Construction 1,459 1.9 1,752 2.3
Consumer 1,838 2.4 1,705 2.2
- -------- ------- ----- ------- -----
TOTAL LOANS $76,692 100.0% $76,718 100.0%
The following table sets forth fixed and adjustable rate loans as of March 31,
1997 in terms of interest rate sensitivity:
(Unaudited) (In thousands)
Within 1 to 5 After
One Year Years 5 Years Total
-------- ----- ------- -----
Loans with Fixed Rate 4,146 35,695 4,663 43,891
Loans with Adjustable Rate 32,801 - - 32,801
Asset Quality
The Company's principal assets are its loans. Inherent in the lending function
is the risk of the borrower's inability to repay a loan under its existing
terms. Risk exposure could result in non-accrual loans, past due and
restructured loans, potential problem loans, loan concentrations and other real
estate owned.
Non-performing assets include loans that are not accruing interest (non-accrual
loans) as a result of principal or interest being in default for a period of 90
days or more. 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. 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. Due diligence begins at the time the borrower
and the Company begin discussion of a loan request. Documentation, including a
borrower's credit history, materials establishing the value and liquidity of
potential collateral, the purpose of the loan, source and timing of repayment
and other factors are analyzed before a loan is submitted for approval.
10
<PAGE>
The following table sets forth information concerning the Company's
non-performing assets as of the dates indicated:
<TABLE>
<CAPTION>
Non-Performing Loans (in thousands) (Unaudited)
March 31, 1997 December 31, 1996
-------------- -----------------
<S> <C> <C>
Non-Accrual Loans $439 $0
Non-Accrual Loans to Total Loans 0.57% 0
Non-Performing Assets to Total Assets 0.31% 0
Allowance for Possible Loan Losses
as a Percentage of Non-Performing Loans 212.8% N/A
</TABLE>
Other than as disclosed above, there were no loans where information about
possible credit problems of borrowers caused management to have serious doubts
as to the ultimate collectibility of such loans.
As of the dates indicated in the above table, there were no concentrations of
loans exceeding 10% of the Company's total loans and the Company had no foreign
loans.
Allowance for Loan Losses
The Company attempts to maintain an allowance for loan losses at a sufficient
level to provide for potential losses in the loan portfolio. Loan losses are
charged directly to the allowance when they occur and any recovery is credited
to the allowance. Risks within the loan portfolio are analyzed on a continual
basis by the Company's officers, by outside, independent loan review auditors
and by the Company'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 which management
feels deserve recognition in establishing an appropriate reserve. These
estimates are reviewed at least quarterly, and, as adjustments become necessary,
they are realized in the periods in which they become known. Additions to the
allowance are made by provisions charged to 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 allowance for loan losses.
These agencies may require additional provisions based on their judgments about
information available to them at the time of their examination.
The Company's allowance for loan losses totaled $934,000 and $861,000 at March
31, 1997 and December 31, 1996, respectively. This increase in allowance is due
to continued increase in the loan portfolio. The following is a summary of the
reconciliation of the allowance for loan losses for the quarters ended March 31,
1997 and December 31, 1996.
11
<PAGE>
(Unaudited) (In thousands)
March 31, December 31,
1997 1996
---------- ----------
Balance at beginning of period $ 861 $ 692
Recoveries (13) (24)
Provision charged to expense 60 193
----- -----
BALANCE AT END OF PERIOD $ 934 $ 861
Balance of allowance at end of period as
a percent of loans at end of period 1.22% 1.12%
The following table sets forth, for each of the Company's major lending areas,
the amount and percentage of the Company's allowance for loan losses
attributable to such category and the percentage of total loans represented by
such category, as of the periods indicated:
<TABLE>
<CAPTION>
(Unaudited)
Allocation of the Allowance for Loan Losses by Category
(Dollars in thousands)
March 31, 1997 December 31, 1996
-------------- -----------------
Amount % of ALL Amount % of ALL
------ -------- ------ --------
Balance applicable to:
<S> <C> <C> <C> <C>
Commercial & Industrial $220 23.6% $235 27.29%
Real Estate:
Non-Residential Property 245 26.2 238 27.64
Residential Property 242 25.9 234 27.18
Construction 15 1.6 18 2.10
Consumer 20 2.1 21 2.43
---- ----- ---- ------
Sub Total 742 79.4 746 86.64
Unallocated Reserves 192 20.6 115 13.36
---- ----- ---- ------
TOTAL $934 100% $861 100%
</TABLE>
Investment Securities
The Company maintains an investment portfolio to fund increased loan demand or
deposit withdrawals and other liquidity needs and to provide an additional
source of interest income. The portfolio is composed of U.S. Treasury
Securities, obligations of U.S. Government Agencies and selected municipal and
state obligations.
At March 31, 1997 total investment securities excluding FHLBNY stock, were
$44,893,000, an increase from total investment securities excluding FHLBNY stock
of $36,161,000 at December 31, 1996. This increase in investment securities
reflects increases in total deposits in excess of funds needed for new loan
originations.
12
<PAGE>
The following table sets forth, as of March 31, 1997 the maturity distribution
of the Company's investment portfolio:
Maturity Schedule of Investment Securities
<TABLE>
<CAPTION>
March 31, 1997 (Unaudited)
Investment Securities Securities for Sale
--------------------- -------------------
Weighted Weighted
Amortized Market Average Amortized Market Average
Cost Value Yield Cost Value Yield
---- ----- ----- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Within 1 Year 17,835 17,806 6.07% 5,008 4,998 5.81%
1 to 5 Years 11,136 11,065 5.69% 10,620 10,533 5.88%
5 to 10 Years 391 402 9.12% -- -- --
------ ------ ----- ------ ------ -----
29,362 29,273 15,628 15,531
</TABLE>
The Company sold no securities during 1996 or during the first quarter 1997.
Deposits
Deposits are the Company's primary source of funds. The Company experienced a
growth in deposit balances of $2,387,000 or 1.9% to $128,720,000 for the quarter
ended March 31, 1997 from $126,333,000 at December 31, 1996. This growth was
accomplished through the Company's emphasis on customer service, extended hours
of operation, competitive rate structure and selective marketing. Among the
increase in deposits, time deposits grew $29,342,000 or 88.5% to $52,560,000 at
March 31, 1997 as compared to $33,159,000 at December 31, 1996, while
non-interest bearing demand deposits grew 33.8% or $7,843,000 during the first
three months 1997 as compared to year end 1996. The aggregate amount of
non-interest bearing deposits totaled 24.1% of the Company's total deposits for
the quarter ended March 31, 1997 as compared to 24.0% at December 31, 1996. The
Company has no foreign deposits, nor are there any material concentrations of
deposits.
The following table sets forth the amount of various types of deposits for each
of the periods indicated:
(Unaudited) (In thousands)
March 31, 1997 December 31, 1996
-------------------- -----------------
Amount % Amount %
-------- ----- ------- -----
Non-Interest Bearing Demand $ 31,061 24.1% $23,218 24.0%
Interest Bearing Demand 30,781 23.9 27,113 28.0
Savings 14,318 11.1 13,212 13.7
Time Deposits 52,560 40.9 33,159 34.3
-------- ---- ------- ----
TOTAL $128,720 100% $96,602 100%
13
<PAGE>
The Company 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 deposit of denominations
of $100,000 or more as of March 31, 1997:
(Unaudited)
(Dollars in Thousands)
Time Deposits ($100,000 and over)
Three months or less $17,512
Over three months through six months 2,331
Over six months through twelve months 2,293
Over twelve months 256
-------
TOTAL $22,392
Liquidity
The Company'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 Company'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 Company's total deposits equaled $128,720,000 at March 31, 1997 as compared
to $126,333,000 at December 31, 1996. The increase in funds provided by deposit
inflows during these years has been more than sufficient to provide for the
Company's loan demand and excess funds have been invested in investment
securities and federal funds sold.
Through the Company's investment portfolio the Company has generally sought to
obtain a safe, yet slightly higher yield than would have been available to the
company as a net seller of overnight federal funds while still maintaining
liquidity. Through its investment portfolio, the Company 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, 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.
14
<PAGE>
Management believes that the Company's current sources of funds provide adequate
liquidity for the current cash flow needs of the Company.
Interest Rate Sensitivity Analysis
The principal objective of the Company'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 Company's business
focus, operating environment, capital and liquidity requirements; establish
prudent asset concentration guidelines; and manage the risk consistent with
Board approved guidelines. The Company 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 Company'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 Company'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
Company'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.
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 Company, 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 Company's loan repayment
assumptions are based upon actual historic repayment rates.
15
<PAGE>
Cumulative Rate Sensitive Balance Sheet as of March 31, 1997
(Unaudited) (In thousands)
<TABLE>
<CAPTION>
0 - 3 0 - 6 0 to 1 0 to 5 5+ All
Months Months Year Years Years Others Total
------ ------ ---- ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate Investments 4,906 11,729 22,791 44,502 391 0 44,893
------
44,893
Loans:
Commercial 16,877 17,178 18,977 41,890 866 0 42,638
Participations 180 180 180 2,348 0 0 2,348
Mortgages 0 0 330 10,163 3,169 0 13,332
Consumer 13,719 15,432 17,459 18,680 628 0 19,308
------
77,862
Federal Funds Sold 9,000 9,000 9,000 9,000 0 0 9,000
Other Assets 0 0 0 0 0 10,323 10,323
------
19,323
TOTAL ASSETS 44,682 53,519 68,737 126,583 5,054 10,323 142,078
====== ====== ====== ======= ===== ====== =======
</TABLE>
<TABLE>
<CAPTION>
0 - 3 0 - 6 0 to 1 0 to 5 5+ All
Months Months Year Years Years Others Total
------ ------ ---- ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Transaction/NOW Accounts 19,053 19,053 19,053 19,053 0 0 19,053
Money Market 11,728 11,728 11,728 11,728 0 0 11,728
Savings 14,318 14,318 14,318 14,318 0 0 14,318
CD's (less than)
$100,000 17,840 23,683 27,947 29,247 0 0 29,297
CD's (greater than)
$100,000 18,283 20,614 22,907 22,392 0 0 22,392
Other Liabilities 0 0 0 0 0 32,660 32,660
Equity 0 0 0 0 0 12,630 12,630
------ ------ ------ ------ ------ ------ -------
TOTAL LIABILITIES
AND EQUITY 81,222 89,396 95,953 96,788 0 45,290 142,078
====== ====== ====== ====== ====== ====== =======
Dollar Gap (36,540) (35,877) (27,216) 28,924 0
Gap/Total Assets -25.72% -25.25% -19.16% 20.36% 23.91%
Target Gap Range (-)+35.00% (-)+30.00% (-)+25.00% (-)+25.00% (-)+25.00%
RSA/RSL * 55.01% 59.87% 71.64% 129.62% 133.96%
</TABLE>
* RSA/RSL is the percentage of repricing rate sensitive assets to rate sensitive
liabilities
16
<PAGE>
Capital
A significant measure o the strength of a financial institution is its capital
base. The Company's federal regulators have classified and defined Company
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 are regulated by risk-based capital adequacy guidelines which require
certain capital as a percent of the Company's assets and certain off-balance
sheet items adjusted for predefined credit risk factors (risk-adjusted assets.)
A bank holding company 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 Company's regulators require that
an institution 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 institutions with higher levels of risk or
that are experiencing or anticipating significant growth, the minimum leverage
ratio will be evaluated through the on-going regulatory examination process. The
Bank is subject to substantially similar regulations by its federal regulations.
The following table summarizes the risk-based and leverage capital ratios for
the Bank at March 31, 1997 as well as the required minimum regulatory capital
ratios:
Capital Adequacy
Minimum
March 31, Regulatory
1997 Requirements
------ --------------
Risk Based Capital:
Tier I Capital Ratio 14.10% 4.0%
Total Capital Ratio 15.14% 8.0%
Leverage Ratio 10.37% 4.0%
17
<PAGE>
Recently Issued Accounting Standards
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, branches subordinate to other branches, 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 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", (6) "wash sales," (7) loan syndications and participations, (8)
risk participations in banker's acceptances, (9) factoring arrangements, (10)
transfers of receivables with recourse, (11) transfers of sales-type and direct
financing lease receivables and (12) extinguishments of liabilities.
18
<PAGE>
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 21, 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.
RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 125
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS 125.)
SFAS 125 amends portions of SFAS 115, amends and extends to all servicing assets
and liabilities the accounting standards for mortgage servicing rights now in
SFAS 65, and supersedes SFAS 122. The statement provides consistent standards
for distinguishing transfers of financial assets which are sales from transfers
that are secured borrowings. Those standards are based upon consistent
application of a financial components approach that focuses on control. The
statement also defines accounting treatment for servicing assets and other
retained interest in the assets that are transferred. 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. The
adoption of the statement did not have a material effect on the Company'
financial condition or results of operations.
SFAS No. 128
FASB Statement no. 128, Earnings Per Share (Statement 128) supersedes APB
Opinion No. 15, Earnings Per Share, and specifies the computation, presentation,
and disclosure requirements for earnings per share (EPS) for entities with
publicly held common stock or potential common stock. Statement 128 was issued
to simplify the computation of EPS and to make the U.S. standard more compatible
with the EPS standards of other countries and that of the International
Accounting Standards Committee: (IASC.) it replaces Primary EPS and Fully
Diluted EPS with Basic EPS and Diluted EPS, respectively. It also requires dual
presentation of Basic EPS and Diluted EPS on the face of the income statement
for all entities with complex capital structures and requires a reconciliation
of the numerator and denominator of the Basic EPS computation to the numerator
and denominator of the Diluted EPS computation.
Basic EPS, unlike Primary EPS, excludes all dilution while Diluted EPS, like
Fully Diluted EPS, reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. For many entitles Basic EPS will be higher than
Primary EPS and Diluted EPS will be approximately the same as Fully Diluted EPS.
19
<PAGE>
Statement 128 is applicable to all entities that have issued common stock or
potential common stock (e.g., options, warrants, convertible securities,
contingent stock agreements, etc.) if those securities trade in a public market
either on a stock exchange (domestic or foreign) or in the over-the-counter
market, including securities quoted only locally or regionally. This Statement
also applies to an entity that has made a filing or is in the process of filing
with a regulatory agency in preparation for the sale of those securities in a
public market. However, Statement 128 does not require presentation of EPS for
investment companies1 or in statements of wholly-owned subsidiaries.
Statement 128 is effective for financial statements for both interim and annual
periods ending after December 15, 1997. Earlier application is not permitted
(although pro forma EPS disclosure in the footnotes for periods prior to
required adoption is permitted.) After adoption, all prior period EPS data
presented shall be restated (including interim financial statements, summaries
of earnings and selected financial data) to conform with Statement 128.
- ------------------
(1) That is, investment companies that comply with the requirement of the AICPA
Audit and Accounting Guide, Audits of Investment Companies, to present selected
per share data.
20
<PAGE>
PART II OTHER INFORMATION
- ------- -------------------
Item 1. Legal Proceedings - NONE
Item 2. Changes in Securities - NONE
Item 3. Defaults Upon Senior Securities - NONE
Item 4. Submission of Matters to a Vote of Securities Holders - NONE
Item 5. Other Information - NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Financial Data Schedule
(b) Reports on Form 8-K - NONE
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
By: /s/ Albert F. Buzzetti
-----------------------------------
(Registrant - Bridge View Bancorp)
Albert F. Buzzetti
President and CEO
Date: May 7, 1997
