<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 June 30, 1998
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to _______.
Commission file number : 1-12165
Bridge View Bancorp
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-3461336
---------- ----------------
(State or 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)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class: Name of each exchange on which registered:
Common Stock, No Par Value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Indicate by check mark whether the Issuer: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days. YES (X) NO___
APPLICABLE TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of the Registrant's classes of common
stock, as of the last practicable date.
2,647,900 shares of Common Stock as of July 31, 1998
1
<PAGE>
INDEX
BRIDGE VIEW BANCORP
Part I - Financial Information
- --------------------------------
Item 1. Financial Statement
Consolidated Statements of Financial Condition
as of June 30, 1998(unaudited) and December 31, 1997
Consolidated Statements of Income
for the three months ended June 30, 1998 and 1997 (unaudited) and the
six months ended June 30, 1998 and 1997 (unaudited)
Consolidated Statements of Cash Flows
for the six months ended June 30, 1998 and 1997 (unaudited)
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
2
<PAGE>
BRIDGE VIEW BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks............................. $ 13,187 $ 9,629
Federal funds sold.................................. 15,750 12,000
-------- --------
TOTAL CASH AND CASH EQUIVALENTS 28,937 21,629
-------- --------
Securities:
FHLBNY Stock, at cost............................... 476 476
Available for sale.................................. 11,434 12,543
Held to maturity.................................... 29,716 24,781
-------- --------
TOTAL SECURITIES 41,626 37,800
-------- --------
Loans, net of allowance for losses of $1,126 and $1,009,
and deferred loan fees of $137 and $129, respectively... 85,831 82,186
Premises and equipment, net.............................. 1,592 1,652
Accrued interest receivable and other assets............. 1,533 1,353
-------- --------
TOTAL ASSETS $159,519 $144,620
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing demand deposits................ $ 35,699 $ 38,790
Interest bearing deposits:
Savings and time deposits...................... 84,785 71,260
Certificates of deposit $100,000 +............. 22,224 18,695
-------- --------
TOTAL DEPOSITS 142,708 128,745
Accrued interest payable and other liabilities........... 786 718
-------- --------
TOTAL LIABILITIES 143,494 129,463
Commitments and Contingencies
Stockholders' equity:
Common stock, no par value,
authorized 10,000,000 shares issued
and outstanding 2,647,900 in 1998
and 2,521,010 in 1997.............................. 16,379 13,347
(Accumulated deficit)retained earnings............. (375) 1,788
Accumulated other comprehensive income............. 21 22
-------- --------
TOTAL STOCKHOLDERS' EQUITY 16,025 15,157
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $159,519 $144,620
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE>
BRIDGE VIEW BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest Income:
Loans, including fees.................... $1,923 $1,812 $3,779 $3,477
Federal funds sold....................... 250 56 434 215
Investment Securities
Taxable............................... 462 572 908 1,091
Tax - exempt.......................... 74 56 138 115
------ ------ ------ ------
TOTAL INTEREST INCOME 2,709 2,496 5,259 4,898
Interest Expense:
Savings deposits......................... 231 203 443 379
Other time deposits...................... 260 358 523 752
Time deposits $100,000 +................. 271 234 525 564
Borrowed funds........................... 0 1 0 1
------ ------ ------ ------
TOTAL INTEREST EXPENSE 762 796 1,491 1,696
Net Interest Income 1,947 1,700 3,768 3,202
Provision for loan losses................... 40 60 120 120
Net interest income after provision for loan
losses 1,907 1,640 3,648 3,082
Non-interest income:
Service charge income.................... 288 289 588 527
------ ------ ------ ------
TOTAL NON-INTEREST INCOME 288 289 588 527
Non-interest expense:
Salaries and related expenses............ 535 488 1,088 998
Premises and fixed assets................ 279 234 551 468
Other..................................... 364 361 761 700
------ ------ ------ ------
TOTAL NON-INTEREST EXPENSE 1,178 1,083 2,400 2,166
Income before income taxes 1,017 846 1,836 1,443
Income tax expense 391 331 714 564
------ ------ ------ ------
NET INCOME $ 626 $ 515 $1,122 $ 879
====== ======= ====== ======
Earnings per share:
Basic $ 0.24 $ 0.20 $ 0.42 $ 0.37
Diluted $ 0.23 $ 0.19 $ 0.41 $ 0.36
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE>
BRIDGE VIEW BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net Income........................................................ $ 1,122 $ 879
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................................. 92 81
Provision for loan losses...................................... 120 120
Proceeds from sales of loans held for sale..................... 1,676 0
Loans originated for sale...................................... (1,660) 0
Increase (decrease) in accrued interest receivable
and other assets.............................................. 180 (180)
Increase in accrued interest payable and other
liabilities................................................... (68) (34)
------- -------
Net Cash Provided by Operating Activities 1,462 866
Cash flows from investing activities:
Proceeds from maturities of investment securities................ 9,107 8,406
Purchases of investment securities............................... (13,386) (15,263)
Net increase in loans............................................ (3,645) (5,487)
Decrease(increase) to premises and equipment..................... 59 (50)
------- -------
Net Used in Investing Activities (7,865) (12,394)
Cash flows from financing activities:
Net increase(decrease) in deposits............................... 13,963 (422)
Proceeds from issuance of common stock........................... 6 385
Cash paid for dividends.......................................... (258) (224)
------- -------
Net Cash Provided by(Used in) Financing Activities 13,711 (261)
Net change in cash and cash equivalents 7,308 (11,789)
Cash and cash equivalents at beginning of period 21,629 23,558
------- -------
Cash and cash equivalents at end of period $28,937 $11,769
Cash paid during the period for:
Interest......................................................... 1,449 1,151
Income taxes..................................................... 753 521
</TABLE>
See notes to unaudited consolidated financial statements.
5
<PAGE>
BRIDGE VIEW BANCORP AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
The accompanying consolidated financial statements include the accounts
of Bridge View Bancorp (the Company) and its direct and indirect
wholly-owned subsidiaries, Bridge View Bank and Bridge View Investment
Company (the Bank). All significant inter-company accounts and
transactions have been eliminated in consolidation. Certain accounts in
prior periods have been restated to conform to the current presentation.
The consolidated 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, 1997. The results for the six
months ended June 30, 1998 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1998.
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.
Use of Estimates
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.
6
<PAGE>
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. Securities available for sale are reported at fair value with
changes in the carrying value from period to period included as a
separate component of stockholders' equity.
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. 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.
(2) Formation of Bank Holding Company and Exchange of Common Stock
The Company is a New Jersey corporation organized in May 1996 at the
direction of the Board of Directors of the Bank for the purpose of
acquiring all of the capital stock of the Bank. As part of the
acquisition in December 1996, shareholders of the Bank received 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 acquisition was
accounted for in a manner similar to a pooling of interest resulting in
no changes in the underlying assets and liabilities.
7
<PAGE>
(3) Earnings Per Share Reconciliation
In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 "Earnings per Share"
(SFAS 128). SFAS 128 establishes standards for the presentation and
disclosure for earnings per share (EPS). It also simplifies the standards
for computing EPS and makes them comparable to international EPS
standards. SFAS 128 replaces the presentation of primary and fully
diluted EPS with basic and diluted EPS, respectively, and requires the
reconciliation of the numerator and the denominator of basic EPS with
that of diluted EPS. Basic EPS is computed by dividing net income by the
weighted-average number of common shares outstanding for the period. The
diluted EPS computation includes the potential impact of dilutive
securities including stock options and restricted stock grants. The
dilutive effect of stock options is computed using the treasury stock
method which assumes the repurchase of common shares of the Company at
the average market price for the period.
The reconciliation of the numerator and the denominator of basic EPS with
that of diluted EPS is presented for the three month and the six month
periods ended June 30, 1998, and 1997. (in thousands, except per share
data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic earnings per share
- ------------------------
Net Income $ 626 $ 515 $1,122 $ 880
====== ====== ====== ======
Average number of shares outstanding 2,648 2,539 2,648 2,357
====== ====== ====== ======
Basic earnings per share $ 0.24 $ 0.20 $ 0.42 $ 0.37
====== ====== ====== ======
Diluted earnings per share
- --------------------------
Net Income $ 626 $ 515 $1,122 $ 880
====== ====== ====== ======
Average number of shares of common stock
and equivalents outstanding:
Average common shares outstanding 2,648 2,539 2,648 2,357
Additional shares considered in
diluted computation assuming:
Exercise of options and warrants 83 135 86 93
------ ------ ------ ------
Average number of shares outstanding
on a diluted basis 2,731 2,674 2,734 2,450
====== ====== ====== ======
Diluted earnings per share $ 0.23 $ 0.19 $ 0.41 $ 0.36
====== ====== ====== ======
</TABLE>
8
<PAGE>
(4) Comprehensive Income
Financial Accounting Standards Board Statement No. 130, "Reporting
Comprehensive Income", (SFAS 130) establishes standards for reporting and
displaying of comprehensive income and its components (revenues,
expenses, gains, and losses) in a full set of general purpose financial
statements. SFAS 130 requires all items that are required to be
recognized under accounting standards as components of comprehensive
income to be reported in a financial statement that is displayed with the
same prominence as other financial statements. SFAS 130 does not require
a specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive income for
the period in that financial statement.
SFAS 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. SFAS 130 is effective for
fiscal years beginning after December 15, 1997. Reclassification of
financial statements for earlier periods provided for comparative
purposes is required. The Company adopted Statement 130 on January 1,
1998. Total comprehensive income includes net income and other
comprehensive income which is comprised of unrealized holding gains and
losses on securities available for sale, net of taxes.
Total comprehensive income is as follows:
<TABLE>
<CAPTION>
Three months ended June 30,
(in thousands) 1998 1997
---- ----
<S> <C> <C>
Comprehensive Income
Net income $ 626 $ 515
Other comprehensive income, net of taxes (3) (57)
------ ------
Total comprehensive income $ 623 $ 458
Six months ended June 30,
(in thousands) 1998 1997
---- ----
Comprehensive Income
Net income $1,122 $ 879
Other comprehensive income, net of taxes (1) 0
------ ------
Total comprehensive income $1,121 $ 879
</TABLE>
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the Company's consolidated
financial statements and the notes thereto included herein. When necessary,
reclassifications have been made to prior years' data throughout the following
discussion and analysis for purposes of comparability.
RESULTS OF OPERATIONS - Three Months Ended June 30, 1998 and 1997 and
Six Months Ended June 30, 1998 and 1997
The Company'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,
primarily deposits. Net interest margin is the difference between the weighted
average rate received on interest-earning assets and the weighted average rate
paid on interest-bearing liabilities, as well as the average level of
interest-earning assets as compared with that of interest-bearing liabilities.
Net income is also affected by the amount of non-interest income and other
operating expenses.
NET INCOME
For the three months ended June 30, 1998, net income increased by $111,000 or
21.6% to $626,000 from $515,000 for the three months ended June 30, 1997. For
the six months ended June 30, 1998, net income reached $1,122,000, an increase
of $243,000 or 27.6%, when compared to net income of $879,000 for the six months
ended June 30, 1997. The increase in net income for the first half of 1998
compared to 1997 is a result of a 17.7% increase in net interest income to
$3,768,000 from $3,202,000 in the prior year which was driven by a $205,000 or
12.1% decrease in interest expense from $1,696,000 in 1997 to $1,491,000 for the
same time period in 1998. The Company also experienced an 11.6% increase in fee
income, reaching $588,000 for the six months ended June 30, 1998 from $527,000
for the same time period in 1997.
Interest expense fell $34,000 or 4.3% for the three month period ended June 30,
1998 compared to the three month period ended June 30, 1997. As previously
mentioned, interest expense also decreased $205,000 or 12.1% to $1,491,000 for
the six month period ended June 30, 1998 compared to $1,696,000 for the six
month period ended June 30, 1997. This decrease reflects the termination of a
promotional rate on certificates of deposit in April, 1997, and a shift in the
deposit portfolio during late 1997 resulting in more cost efficient deposits.
Operating expenses increased by $95,000 or 8.8% and $234,000 or 10.8% for the
three month periods and the six month periods ended June 30, 1998 compared to
1997. These increases reflect the Company's continued growth which also affected
staff additions, occupancy expenses, salary and employee benefits, data
processing, as well as other administrative expenses attributable to the
Company's expected opening of two new branches during the second half, 1998.
10
<PAGE>
On a per share basis, basic and diluted earnings per share were $0.24 and $0.23
for the quarter ended June 30, 1998 as compared to $0.20 and $0.19 for the
quarter ended June 30, 1997. For the six month period ended June 30, 1998, basic
and diluted earnings per share were $0.42 and $0.41 for the first half of 1998
as compared to $0.37 and $0.36 for the first half of 1997. Per share data has
been restated to include the effect of the 5% stock dividend in April, 1998.
PROVISION FOR LOAN LOSSES
For the quarter ended June 30, 1998, the Company's provision for loan losses was
$40,000, a decrease of $20,000 from the provision of $60,000 for the quarter
ended June 30, 1997. The provision for the six months ended June 30, 1998 and
the six months ended June 30, 1997 remained stable at $120,000. The relative
stability of the provision reflects management's view of the economy of its
service area and its effect upon the Company's loan portfolio.
NON-INTEREST INCOME
Non-interest income, which was primarily attributable to service fees received
from deposit accounts, amounted, for the three months ended June 30, 1998, to
$288,000, a decrease of $1,000 from $289,000 for the three months ended June 30,
1997. For the six months ended June 30, 1998, non-interest income reflected
$588,000, an increase of $61,000 or 11.6% above the non-interest income level of
$527,000 for the six months ended June 30, 1997. The increase in service fees is
attributable to the higher level of average deposits.
NON-INTEREST EXPENSE
Non-interest expenses for the quarter ended June 30,1998 amounted to $1,178,000,
an increase of $95,000 or 8.8% from $1,083,000 for the quarter ended June 30,
1997. For the six months ended June 30, 1998, non-interest expense aggregated
$2,400,000, an increase of $234,000 or 10.8%, from $2,166,000 for the six months
ended June 30, 1997. As mentioned, these increases are related primarily to the
Company's growth and that effect upon administrative expenses.
INCOME TAX EXPENSE
The income tax provision, which includes both federal and state taxes, for the
quarters ended June 30, 1998 and 1997 was $391,000 and $331,000, respectively.
For the first half of 1998 and 1997, the income tax provision totaled $714,000
and $564,000, respectively. The increase in income taxes is a direct result of
the increase in income before taxes for both periods.
FINANCIAL CONDITION : June 30, 1998 and December 31, 1997
At June 30, 1998, the Company's total assets were $159,519,000 compared to
$144,620,000 at December 31, 1997, an increase of 10.3%. Total loans increased
to $87,094,000 at June 30, 1998 from $83,324,000 at December 31, 1997. Total
deposits at June 30,1998 were $142,708,000, 10.8% higher than the $128,745,000
at December 31, 1997.
11
<PAGE>
LOAN PORTFOLIO
At June 30, 1998, the Company's total loans were $87,094,000, an increase of
$3,770,000 or 4.5% over total loans of $83,324,000 at December 31, 1997. The
increase in the loan portfolio represents increased penetration of the Company's
local small business market. Management believes that the Company will remain
successful in penetrating this market 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 maintains 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 loan portfolio consists of commercial loans, real estate loans,
and consumer loans. Commercial loans are made for the purpose of providing
working capital, financing the purchase of equipment or inventory, as well as
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 Company's loans are primarily to businesses and individuals located in
eastern 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 structures, and selective
marketing have enabled the Company to gain market entry to local loans. Bank
mergers and lending restrictions at larger banks competing with the Company have
also contributed to the Company's efforts to attract borrowers.
The following table sets forth the classification of the Company's loans by
major category as of June 30, 1998 and December 31, 1997, respectively :
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- ------------------
(Dollars in thousands)
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C>
Commercial and Industrial $16,208 18.6% $15,568 18.7%
Real Estate :
Non-residential properties 28,459 32.7% 25,929 31.1%
Residential properties 35,254 40.5% 36,988 44.4%
Construction 5,151 5.9% 2,783 3.3%
Consumer 2,022 2.3% 2,056 2.5%
------- ---- ------- ----
Total Loans $87,094 100% $83,324 100%
======= ==== ======= ====
</TABLE>
12
<PAGE>
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 elements include 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. 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 of
interest.
The Company attempts to minimize overall credit risk through loan
diversification and its loan approval procedures. Due diligence begins at the
time a borrower and the Company 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 audit
and review.
The following table sets forth information concerning the Company's
non-performing assets as of the dates indicated:
Non-Performing Assets
(dollars in thousands)
June 30, December 31,
1998 1997
---- ----
Non-accrual loans $ 235 $ 439
Non-accrual loans to total loans 0.27% 0.53%
Non-performing assets to total assets 0.15% 0.30%
Allowance for possible loan losses as
a percentage of non-performing loans 479.15% 229.84%
As of June 30, 1998, the Company has one non-accrual loan which represents a
construction loan totaling $234,676. The Company has no other non-performing
loans and has real estate owned (REO) as a result of a foreclosure which is
carried at $203,975.
Other than as disclosed above, there were no loans where information about
possible credit problems of borrowers causes management to have serious doubts
as to the ultimate collectibility of such loans.
As of June 30, 1998 and December 31, 1997, there were no concentrations of loans
exceeding 10% of the Company's total loans and the Company had no foreign loans.
The Company's loans are primarily to businesses and individuals located in
eastern Bergen County, New Jersey.
13
<PAGE>
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is a reserve established through charges to
earnings in the form of a provision 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 continuous basis by the Company's
officers, by external 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. In
addition to 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 the expense and the allowance is reduced by net-chargeoffs
(i.e. loans judged to be uncollectible are charged against the reserve, less any
recoveries on the loans.) Although management attempts to maintain the allowance
at an adequate level, future addition to the allowance may be required based
upon changes in market conditions. Additionally, various regulatory agencies
periodically review the allowance for loan losses. These agencies may require
additional provisions based upon their judgment about information available to
them at the time of their examination.
The Company's allowance for loan losses totaled $1,126,000 and $981,000 at June
30, 1998 and 1997, respectively. This increase in the allowance is due to the
continued growth of the loan portfolio. The following is a summary of the
reconciliation of the allowance for loan losses for the six month periods ended
June 30, 1998 and 1997, respectively :
Six months ended
June 30,
1998 1997
---- ----
(dollars in thousands)
Balance, beginning of period $1,009 $ 861
Charge-offs (3) 0
Recoveries 0 0
Provision charged to expense 120 120
------ ------
Balance, end of period $1,126 $ 981
====== ======
Balance of allowance at end of period as
a percentage of loans at end of period 1.29% 1.18%
14
<PAGE>
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, obligation of U.S. Government Agencies and selected municipal and
state obligations.
At June 30, 1998, $29,716,000 of the Company's investment securities were
classified as held to maturity and $11,434,000 were classified as available for
sale. At June 30, 1998, the Company held no securities which it classified as
trading securities.
At June 30, 1998, total securities were $41,626,000, an increase of $3,826,000,
from total securities of $37,800,000 at December 31, 1997. This increase in
securities from year end 1997 to quarter end 1998 reflects increases in total
deposits in excess of funds needed for new loan originations.
The following table sets forth the carrying value of the Company's security
portfolio as of the dates indicated.
A comparative summary of securities available for sale at June 30, 1998 and
December 31, 1997 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>
1998 - U.S. Government and
agency obligations $11,400 39 (5) $11,434
======= == ==== =======
1997 - U.S. Government and
agency obligations $12,507 46 (10) $12,543
======== == ==== =======
</TABLE>
15
<PAGE>
A comparative summary of investment securities held to maturity at June 30, 1998
and December 31, 1997 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>
1998:
U.S. Government and agency
securities $19,436 42 (1) $19,477
State and municipal obligations 10,280 18 - 10,298
------- -- ---- -------
$29,716 60 (1) $29,775
======= == ==== =======
1997:
U.S. Government and agency
obligations $19,442 37 (9) $19,470
State and municipal obligations 5,339 25 - 5,364
------- -- ---- -------
$24,781 62 (9) $24,834
======= == ==== =======
</TABLE>
The following table sets forth as of June 30, 1998, the maturity distribution of
the Company's investment portfolio :
Maturity of Investment Securities
June 30, 1998
(in thousands)
<TABLE>
<CAPTION>
Securities
Investment Securities Available 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 $17,646 $17,661 6.10% $11,400 $11,434 6.00%
1 to 5 Years 12,070 12,114 5.73% 0 0 0.00%
------- ------- ---- ------- ------- ----
$29,716 $29,775 $11,400 $11,434
======= ======= ======= =======
</TABLE>
The Company sold no securities from its portfolio during the
first half of 1998 or 1997.
16
<PAGE>
DEPOSITS
Deposits are the Company's primary source of funds. The Company experienced a
growth in deposit balances of $13,963,000 or 10.9% to $142,708,000 at June 30,
1998 as compared to $128,745,000 at December 31, 1997. This growth was
accomplished as a result of effective selective marketing and growth within the
local Bergen County community based upon the Company's continued emphasis upon
customer service through extended hours of operation and a competitive rate
structure. Within the increase in total deposits, interest bearing deposits grew
$10,996,000 or 33.4% from December 31, 1997 to June 30, 1998 while time deposits
grew $2,543,000 or 6.2% during the same period. 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 (in thousands) :
<TABLE>
<CAPTION>
June 30, December 31 ,
1998 1997
---- ----
Amount % Amount %
------ -- ------ --
<S> <C> <C> <C> <C>
Non-interest Bearing Demand $ 38,175 26.8% $ 38,790 30.1%
Interest Bearing Demand 43,889 30.8% 32,893 25.5%
Savings 17,331 12.1% 16,292 12.7%
Time Deposits 43,313 30.3% 40,770 31.7%
-------- ---- -------- ----
$142,708 100% $128,745 100%
======== ==== ======== ====
</TABLE>
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 June 30, 1998 (in thousands).
<TABLE>
<CAPTION>
<S> <C>
Three months or less $ 14,632
Over three months through twelve months 7,201
Over one year through three years 229
Over three years 162
--------
TOTAL $ 22,224
========
</TABLE>
17
<PAGE>
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, maturities of investment securities, and
funds provided by operations. While scheduled loan payments and maturing
investments are relatively predictable sources of funds, deposit flow and loan
prepayments are greatly influenced by general interest rates, economic
conditions, and competition.
The Company's total deposits equaled $142,708,000 at June 30, 1998 as compared
to $128,745,000 at December 31, 1997. The increase in funds provided by deposit
inflows during this period has been more than sufficient to provide 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 investments 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 been 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.
Management believes that the Company's current sources of funds provide adequate
liquidity for the current cash flow needs of the Company.
18
<PAGE>
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 the amount of 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 resulting in a decrease in net
interest income. 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 historical repayment rates.
19
<PAGE>
Cumulative Rate Sensitive Balance Sheet
June 30, 1998
(in thousands)
<TABLE>
<CAPTION>
0 - 3 0 - 6 0 - 1 0 - 5 All
Months Months Year Year 5 + Years Others TOTAL
------ ------ ----- ----- --------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Securities $ 7,568 $13,090 $29,067 $ 41,150 $ 0 $ 0 $ 41,150
Loans:
Commercial 22,641 23,936 26,423 51,610 1,439 0 53,049
Participations 475 475 475 4,242 178 0 4,420
Mortgages 181 181 1,196 10,247 2,670 0 12,917
Consumer 14,413 14,433 14,488 16,627 81 0 16,708
Federal Funds Sold 15,750 15,750 15,750 15,750 0 0 15,750
Other Assets 0 0 0 0 0 15,525 15,525
------- ------- ------- -------- -------- -------- --------
TOTAL ASSETS $61,028 $67,865 $87,399 $139,626 $143,994 $159,519 $159,519
======= ======= ======= ======== ======== ======== ========
Transaction /
NOW Accounts $29,339 $29,339 $29,339 $29,339 $ 0 $ 0 $ 29,339
Money Market 14,550 14,550 14,550 14,550 0 0 14,550
Savings 17,330 17,330 17,330 17,330 0 0 17,330
Time less than $100,000 9,511 16,278 18,500 20,562 30 0 20,592
Time greater than $100,000 15,049 17,550 22,106 22,721 0 0 22,721
Other Liabilities 0 0 0 0 0 38,962 38,962
Equity 0 0 0 0 0 16,025 16,025
------- ------- ------- -------- -------- -------- --------
TOTAL LIABILITIES AND
EQUITY $85,779 $95,047 $101,825 $104,502 $104,532 $159,519 $159,519
======= ======= ======= ======== ======== ======== ========
Dollar Gap (24,751) (27,182) (14,426) 35,124 39,462
Gap / Total Assets -15.52% -17.04% -9.04% 22.02% 24.74%
Target Gap Range +/-35.0% +/- 30.0% +/- 25.0% +/-25.0%
RSA / RSL 71.15% 71.40% 85.83% 133.61% 137.75%
(Rate Sensitive Assets to
Rate Sensitive Liabilities)
</TABLE>
20
<PAGE>
CAPITAL
A significant measure of 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 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 3.0%. 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 ongoing regulatory examination process.
The following table summarizes the risk-based and leverage capital ratios for
the Bank at June 30, 1998, as well as the required minimum regulatory capital
ratios :
Capital Adequacy
<TABLE>
<CAPTION>
Minimum
June 30, Regulatory
1998 Requirements
-------- ----------------
<S> <C> <C>
Risk-Based Capital:
Tier I Capital Ratio 15.50% 4.0%
Total Capital Ratio 16.59% 8.0%
Leverage Ratio 10.69% 3.0%
</TABLE>
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements of the Company 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 Company's operations. Unlike most industrial companies, nearly all of the
assets and liabilities of the Company are monetary. As a result, interest rates
have a greater impact on the Company'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.
21
<PAGE>
CURRENT OPERATIONAL AND ACCOUNTING ISSUES
YEAR 2000
Due to the technological issues surrounding the Year 2000, the Company has
adopted a Year 2000 Compliance Plan. The Company has also established a Year
2000 Compliance Committee, which includes members of senior management from all
operating areas. The objectives of the plan and the committee are to ensure that
the Bank will be prepared for the new millenium. As recommended by the Federal
Financial Institutions Examination Council, the Year 2000 Plan includes the
following phases: Awareness, Assessment, Renovation, Validation, and
Implementation.
The Company is currently in the Renovation stage, having identified any Year
2000 critical systems during the Assessment stage, and has begun to upgrade and
replace non-compliant systems and equipment. Management continues to believe
that it is currently on target to be appropriately prepared for the Year 2000.
No material expenses have been identified.
SFAS 133
In June, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments and for hedging activities. SFAS
No. 133 supersedes the disclosure requirements in SFAS No. 80, 105, and 119.
This statement is effective for periods after June 15, 1999. The Company is
currently evaluating early adoption of this statement. The adoption of SFAS No.
133 is not expected to have a material impact on the financial position or
results of operations of the Company.
22
<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
The Company's Annual Meeting was held on May 21, 1998. At the Annual
Meeting, the following matters were voted on:
1. ELECTION OF DIRECTORS - The following directors received the
following votes :
________________________________________________________________________________
DIRECTORS FOR AGAINST WITHHELD
________________________________________________________________________________
Albert F. Buzzetti 2,071,002 -- 5,777
________________________________________________________________________________
Jeremiah F. O'Connor, Jr. 2,071,975 -- 4,798
________________________________________________________________________________
All nominees were reelected.
2. Proposal that the stockholders approve the 1998 Stock Option
Plan for Non-Employee Directors
1,823,787 For 47,861 Against 3,242 Abstain
Item 5. Other information
Pursuant to recent amendments to the proxy rules under the Securities
Exchange Act of 1934, as amended, the Company's stockholders are notified that
the deadline for providing the Company timely notice of any stockholder proposal
to be submitted outside of the Rule 14a-8 process for consideration at the
Company's 1999 Annual Meeting of Stockholders (the "Annual Meeting") will be
Tuesday, March 9, 1999. As to all such matters which the Company does not have
notice on or prior to March 9, 1999, discretionary authority shall be granted to
the designated persons in the Company's proxy statement for the Annual Meeting.
Item 6. Exhibits and reports on Form 8-K - NONE
23
<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.
/s/ Michael Lesler
By: ____________________________________
(Registrant - Bridge View Bancorp)
Michael Lesler
Manager - Financial Reporting
(Principal Financial Officer)
Date: August 12, 1998
24
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibits
- ------- -----------------------
27 Financial Data Schedule
25
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's unaudited June 30, 1997 financial statements and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,187,000
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 15,750,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,434,000
<INVESTMENTS-CARRYING> 29,716,000
<INVESTMENTS-MARKET> 29,775,000
<LOANS> 87,094,000
<ALLOWANCE> 1,126,000
<TOTAL-ASSETS> 159,519,000
<DEPOSITS> 142,708,000
<SHORT-TERM> 0
<LIABILITIES-OTHER> 786,000
<LONG-TERM> 0
0
0
<COMMON> 16,379,000
<OTHER-SE> (354,000)
<TOTAL-LIABILITIES-AND-EQUITY> 159,519,000
<INTEREST-LOAN> 3,779,000
<INTEREST-INVEST> 1,480,000
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 5,259,000
<INTEREST-DEPOSIT> 1,491,000
<INTEREST-EXPENSE> 1,491,000
<INTEREST-INCOME-NET> 3,768,000
<LOAN-LOSSES> 120,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,812,000
<INCOME-PRETAX> 1,836,000
<INCOME-PRE-EXTRAORDINARY> 1,836,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,122,000
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.41
<YIELD-ACTUAL> 0
<LOANS-NON> 235,000
<LOANS-PAST> 239,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,009,000
<CHARGE-OFFS> 3,000
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,126,000
<ALLOWANCE-DOMESTIC> 1,126,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 146,000
</TABLE>
