<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal quarter ended March 31, 1999
( ) 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.
2,781,452 shares of Common Stock as of April 30, 1999
1
<PAGE>
INDEX
BRIDGE VIEW BANCORP
Part I - Financial Information
Item 1. Financial Statement
Consolidated Statements of Financial Condition
as of March 31, 1999 and December 31, 1998 (unaudited)
Consolidated Statements of Income
for the three months ended March 31, 1999 and 1998 (unaudited)
Consolidated Statements of Cash Flows
for the three months ended March 31, 1999 and 1998 (unaudited)
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
2
<PAGE>
BRIDGE VIEW BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
( in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------------- ------------
ASSETS (unaudited)
<S> <C> <C>
Cash and cash equivalents :
Cash and due from banks..................................... $ 14,224 $ 11,534
Federal funds sold.......................................... 25,000 22,600
-------- --------
TOTAL CASH AND CASH EQUIVALENTS 39,224 34,134
-------- --------
Securities:
Available for sale.......................................... 4,991 6,979
Held to maturity............................................ 32,534 28,474
-------- --------
TOTAL SECURITIES ................................................ 37,525 35,453
-------- --------
Loans, net of allowance for losses of $1,165 and $1,127,
and deferred loan fees of $173 and $151, respectively............ 96,180 96,955
Premises and equipment, net...................................... 3,614 2,243
Accrued interest receivable and other
assets........................................................... 1,555 1,983
-------- --------
TOTAL ASSETS .................................................... $178,098 $170,768
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing demand
deposits.................................................... $ 45,255 $ 43,253
Interest bearing deposits:
Savings and time deposits.............................. 94,404 89,449
Certificates of deposit $100,000 +..................... 20,001 19,998
-------- --------
TOTAL DEPOSITS 159,660 152,700
Accrued interest payable and other liabilities................... 727 831
-------- --------
TOTAL LIABILITIES ............................................... 160,387 153,531
Commitments and Contingencies
Stockholders' equity:
Common stock, no par value,
authorized 10,000,000 shares issued
and outstanding 2,781,452 in 1999
and 2,780,295 in 1998....................................... 19,028 16,379
(Accumulated deficit)retained earnings...................... (1,322) 841
Accumulated other comprehensive income...................... 5 17
-------- --------
TOTAL STOCKHOLDERS' EQUITY ...................................... 17,711 17,237
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...................... $178,098 $170,768
========= ========
</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 March 31,
1999 1998
---- ----
<S> <C> <C>
Interest Income :
Loans, including fees................................... $ 2,049 $ 1,856
Federal funds sold...................................... 256 184
Investment Securities
Taxable.............................................. 365 446
Tax - exempt......................................... 100 64
------- -------
TOTAL INTEREST INCOME 2,770 2,550
Interest Expense :
Savings deposits........................................ 184 213
Other time deposits..................................... 274 262
Time deposits $100,000 +................................ 247 254
------- -------
TOTAL INTEREST EXPENSE .................................... 705 729
Net Interest Income ........................ 2,065 1,821
Provision for loan losses.................................. 40 80
Net interest income after provision for loan
losses .................................................... 2,025 1,741
Non-interest income :
Service charge income................................... 322 300
------- -------
TOTAL NON-INTEREST INCOME ................................. 322 300
Non-interest expense :
Salaries and employee benefits.......................... 657 553
Occupancy and equipment expense......................... 341 272
Other................................................... 377 397
------- -------
TOTAL NON-INTEREST EXPENSE ................................ 1,375 1,222
Income before income taxes ................................ 972 819
Income tax expense ........................................ 355 323
------- -------
NET INCOME ................................................ $ 617 $ 496
======= =======
Earnings per share :
Basic ................................................ $0.22 $0.18
Diluted .............................................. $0.22 $0.17
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE>
BRIDGE VIEW BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
------------------ -----------------
<S> <C> <C>
Cash flows from operating activities :
Net Income.................................................. $ 617 $ 496
Adjustments to reconcile net income to net cash
provided by operating activities :
Depreciation and amortization............................ 68 45
Provision for loan losses................................ 40 80
Gains from sales of loans held for sale.................. 17 8
Decrease(increase) in accrued interest receivable
and other assets......................................... 428 (63)
(Decrease)increase in accrued interest payable and
other Liabilities....................................... (104) 271
------- -------
Net cash provided by operating activities 1,066 837
Cash flows from investing activities :
Proceeds from maturities of investment securities........... 12,447 5,107
Purchases of investment securities.......................... (14,587) (5,751)
Net decrease in loans....................................... 775 718
Additions to premises and equipment......................... (1,439) (27)
------- -------
Net cash (used in)provided by investing activities (2,804) 47
Cash flows from financing activities :
Net increase in deposits.................................... 6,960 5,952
Proceeds from issuance of common stock...................... 0 6
Cash paid for dividends..................................... (132) (126)
------- -------
Net cash provided by financing activities 6,828 5,832
Net change in cash and cash equivalents ......................... 5,090 6,716
Cash and cash equivalents at beginning of period ................ 34,134 21,629
------- -------
Cash and cash equivalents at end of period ...................... $39,224 $28,345
Cash paid during the period for :
Interest.................................................... 701 688
Income taxes................................................ 222 -
</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 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, 1998. The results for the three months ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 1999.
Organization
The Bank is a commercial bank which provides a full range of banking
services to individuals and corporate customers in New Jersey. The Bank
is subject to competition from other financial institutions. The Bank is
regulated by state and federal agencies and is subject to periodic
examinations by those regulatory authorities.
Basis of Financial Presentation
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the
consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the consolidated statement of financial
condition and revenues and expenses for the year. Actual results could
differ significantly from those estimates. Certain prior period amounts
have been reclassified to conform to the financial statements
presentation of 1999. The reclassifications have no effect upon
stockholders' equity or net income as previously reported.
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.
Securities Held to Maturity
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) Retained Earnings - Stock Dividend
The Company declared a 5% Stock Dividend (the "1999 Stock Dividend) on
March 1, 1999 and paid the dividend on April 1, 1999. Retained earnings
decreased by the market value of shares issued in connection with the
1999 Stock Dividend. Earnings per share for 1998 has been restated to
reflect the effect of the stock dividend.
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). AS required under SFAS 128, the
reconciliation of the numerator and the denominator of basic EPS with
that of diluted EPS is presented for the three month periods ended March
31, 1999, and 1998.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
---- ----
(in thousands,
except per share data)
<S> <C> <C>
Basic earnings per share:
-------------------------
Net Income $ 617 496
====== ======
Average number of shares outstanding 2,781 2,780
====== ======
Basic earnings per share $ 0.22 0.18
====== ======
Diluted earnings per share :
----------------------------
Net Income $ 617 496
====== ======
Average number of shares of common
stock and equivalents outstanding :
Average common shares outstanding 2,781 2,780
Additional shares considered in
diluted computation assuming :
Exercise of options and warrants 82 87
------ ------
Average number of shares outstanding
on a diluted basis 2,863 2,867
====== ======
Diluted earnings per share $ 0.22 0.17
====== ======
</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 March 31,
(in thousands) 1999 1998
---- ----
<S> <C> <C>
Comprehensive Income
--------------------
Net income $ 617 $ 496
Other comprehensive (loss)income,
net of taxes (12) 1
------ ------
Total comprehensive income $ 605 $ 497
</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.
In addition to historical information, this discussion and analysis contains
forward-looking statements. The forward-looking statements contained herein are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected in the forward-looking statements.
Important factors that might cause such a difference include, but are not
limited to, those discussed in this section. Readers are cautioned not to place
undue reliance on these forward-looking statements, which reflect management's
analysis only as of the date of the report. The Company undertakes no obligation
to publicly revise or update these forward-looking statements to reflect events
and circumstances that arise after such date.
RESULTS OF OPERATIONS - Three Months Ended March 31, 1999 and 1998
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 March 31, 1999, net income increased by $121,000 or
24.4% to $617,000 from $496,000 for the three months ended March 31, 1998. The
increase in net income is the result of a 13.4%, increase in net interest income
to $2,065,000 from $1,821,000 in the prior year combined with a 7.3% increase in
fee income to $322,000 from $300,000 in 1998 producing an 18.7% increase in
pre-tax income to $972,000 for first quarter, 1999 compared to $819,000 for
first quarter, 1998.
Interest expense fell $24,000 or 3.3% for the three months ended March 31, 1999
to $705,000 as compared to $729,000 for the three months ended March 31, 1998.
This decrease reflects the continued effect of a shift in the deposit mix to
more cost efficient deposits.
Non-interest expense increased by $153,000 or 12.5% for the three month period
ended March 31, 1999 compared to 1998. This increase reflects 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 new branch office which opened in the fourth
quarter of 1998.
On a per share basis, basic earnings per share were $0.22 for the quarter ended
March 31, 1999 as compared to $0.18 for the quarter ended March 31, 1998 Diluted
earnings per share were $0.22 for the first quarter of 1999 as compared to $0.17
for the first quarter of 1998. Per share data has been restated to reflect the
1999 5% stock dividend.
10
<PAGE>
PROVISION FOR LOAN LOSSES
For the quarter ended March 31, 1999, the Company's provision for loan losses
was $40,000, a decrease of $40,000 from the provision of $80,000 for the quarter
ended March 31, 1998. The decreased provision reflects the continued overall
stability of the 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 March 31,1999, to
$322,000, an increase of $22,000 above the $300,000 from the three months ended
March 31, 1998. The increase in service fees is attributable to the higher level
of average deposits.
NON-INTEREST EXPENSE
Non-interest expenses for the quarter ended March 31,1999 amounted to
$1,375,000, an increase of $153,000 over the $1,222,000 for the quarter ended
March 31, 1998. These increases continue to be related primarily to staff
additions, occupancy expense, data processing fees, customary increases for
salary and employee benefits, as well as other administrative expenses resulting
from the bank's growth and its newest branch which was opened during the fourth
quarter of 1998.
INCOME TAX EXPENSE
The income tax provision, which includes both federal and state taxes, for the
quarters ended March 31, 1999 and 1998 was $355,000 and $323,000, respectively.
The increase in income taxes is a direct result of the increase in income before
taxes in 1998.
FINANCIAL CONDITION : March 31, 1999 and December 31, 1998
At March 31, 1999, the Company's total assets were $178,098,000 compared to
$170,768,000 at December 31, 1998. Total loans decreased to $97,518,000 at March
31, 1999 from $98,233,000 at December 31, 1998. Total deposits at first quarter
end 1999 were $159,660,000 compared to $152,700,000 at December 31, 1998.
LOAN PORTFOLIO
At March 31, 1999, the Company's total loans were $97,518,000, a decrease of
$715,000 or 0.7% over total loans of $98,233,000 at December 31, 1998. The
decrease in the loan portfolio is due to loan prepayments and sale of
residential properties on which the Company had extended construction loans.
Management maintains that the Company will remain successful in loan acquisition
in 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 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 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.
11
<PAGE>
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 March 31, 1999 and December 31, 1998, respectively :
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- ------------------
(Dollars in thousands)
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Commercial and Industrial $16,892 17.3% $18,906 19.3%
Real Estate :
Non-residential properties 35,410 36.3% 33,487 34.1%
Residential properties 37,804 38.8% 37,703 38.4%
Construction 4,519 4.6% 5,443 5.5%
Consumer 2,893 3.0% 2,694 2.7%
------- ----- ------- -----
Total Loans $97,518 100% $98,233 100%
======= ===== ======= =====
</TABLE>
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.
12
<PAGE>
The following table sets forth information concerning the Company's
non-performing assets as of the dates indicated :
Non-Performing Assets
(dollars in thousands)
March 31, December 31,
1999 1998
--------- ------------
Non-performing loans $ 125 $ 0
Other real estate 152 163
----- -----
Total non-performing assets $ 277 $ 163
Non-performing loans to total gross loans 0.13% 0.00%
Non-performing assets to total assets 0.16% 0.10%
As of March 31, 1999, the Company had two non-accrual loans. Both loans were
commercial lines of credit, which had matured, but were not repaid due to the
customers financial condition. At December 31, 1998, the Company had no
non-accrual loans.
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 March 31, 1999 and December 31, 1998, 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.
OTHER REAL ESTATE
As of March 31, 1999, other real estate reflected one foreclosed property and
totaled $152,000 compared to $163,000 at December 31, 1998. This decrease is due
to a periodic valuation of the asset. The Company carries other real estate at
the lower of the carrying value or fair market value less estimated cost to
sell. Sale of this property to a third party is expected during the second
quarter of 1999.
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 maintains 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
13
<PAGE>
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 $1,165,000 and $1,086,000 at
March 31, 1999 and 1998, 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 three month periods
ended March 31, 1999 and 1998, respectively :
Three months ended
March 31,
1999 1998
---- ----
(dollars in thousands)
Balance, beginning of period $1,127 $1,009
Charge-offs (2) (3)
Recoveries 0 0
Provision charged to expense 40 80
------ ------
Balance, end of period $1,165 $1,086
====== ======
Ratio of net charge-offs to
average loans outstanding 0.00% 0.00%
Balance of allowance at end of period as
a percentage of loans at end of period 1.20% 1.31%
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, selected municipal and state
obligations, stock in the Federal Home Loan Bank ("FHLB"), and equity securities
of another financial institution.
Management determines the appropriate classification of securities at the time
of purchase. At March 31, 1999, $32,534,000 of the Company's investment
securities were classified as held to maturity and $4,991,000 were classified as
available for sale. At March 31, 1999, the Company held no securities which it
classified as trading securities.
14
<PAGE>
At March 31, 1999, total investment securities were $37,525,000, an increase of
$2,072,000, from total investment securities of $35,453,000 at December 31,
1998. This increase in investment securities from year end 1998 to quarter end
1999 reflects increases in total deposits in excess of funds needed for new loan
originations. At March 31, 1999 and December 31, 1998, respectively, the Company
held 4.9%, or $469,000, of the initial stock offering of Red Oak Bank, which is
in formation and is expected to open in Hanover Township, New Jersey, during
early second quarter, 1999.
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 March 31, 1999 and
December 31, 1998 is as follows (in thousands) :
<TABLE>
<CAPTION>
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
March 31, 1999
- --------------
U.S. Government and agency
Obligations $4,002 8 - $4,010
FHLBNY stock 512 - - 512
Other equity securities 469 - - 469
------- ------- ------- -------
Total available for sale $4,983 8 - $4,991
December 31, 1998
- -----------------
U.S. Government and agency
Obligations $6,006 28 - $6,034
FHLBNY stock 476 - - 476
Other equity securities 469 - - 469
------- ------- ------- -------
Total available for sale $6,951 28 - $6,979
</TABLE>
A comparative summary of securities held to maturity at March 31, 1999 and
December 31, 1998 is as follows (in thousands) :
<TABLE>
<CAPTION>
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
March 31, 1999
- --------------
U.S. Government and agency
Obligations $23,039 83 (26) $23,096
Municipal and state obligations 9,495 16 -
9,511
------- ------- ------- -------
Total held to maturity $32,534 99 (26) $32,607
December 31, 1998
- -----------------
U.S. Government and agency
Obligations $16,278 124 - $16,402
Municipal and state obligations 12,196 16 - 12,212
------- ------- ------- -------
Total held to maturity $28,474 140 - $28,614
</TABLE>
15
<PAGE>
The following table sets forth as of March 31, 1999, the maturity distribution
of the Company's debt investment portfolio :
Maturity of Debt Investment Securities
March 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Securities Securities
Held to Maturity 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 $21,636 $21,693 5.67% $4,002 $ 4,010 6.07%
1 to 5 Years 10,898 10,914 5.36% - - -
------- ------- ------ -------
$32,534 $32,607 $4,002 $ 4,010
======= ======= ====== =======
</TABLE>
The Company sold no securities from its portfolio during the first quarter of
1999 or 1998.
16
<PAGE>
DEPOSITS
Deposits are the Company's primary source of funds. The Company experienced a
growth in deposit balances of $6,960,000 or 4.6% to $159,660,000 at March 31,
1999 as compared to $152,700,000 at December 31, 1998. This growth was
accomplished as a result of continued market penetration as well as continued
customer referrals. Within the increase in total deposits, savings deposits grew
$2,185,000 or 11.7% from December 31, 1998 to March 31, 1999, while non-interest
bearing deposits grew $2,002,000 or 4.6% 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>
March 31, December 31,
1999 1998
---- ----
Amount % Amount %
------ - ------ -
<S> <C> <C> <C> <C>
Non-interest Bearing Demand $45,255 28.4% $43,253 28.3%
Interest Bearing Demand 49,324 30.9% 47,560 31.2%
Savings 20,945 13.1% 18,760 12.3%
Time Deposits 44,136 27.6% 43,127 28.2%
-------- ----- -------- -----
$159,660 100% $152,700 100%
======== ===== ======== =====
</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 March 31, 1999 (in thousands).
Three months or less $ 12,134
Over three months through twelve months 7,291
Over one year through three years 410
Over three years 166
--------
TOTAL $ 20,001
========
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 $159,660,000 at March 31, 1999 as compared
to $152,700,000 at December 31, 1998. 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 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.
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
Company is subject to substantially similar regulations by its federal
regulations.
18
<PAGE>
The following table summarizes the risk-based and leverage capital ratios for
the Bank at March 31, 1999, as well as the required minimum regulatory capital
ratios :
Capital Adequacy
Minimum
March 31, Regulatory
1999 Requirements
---------- ------------
Risk-Based Capital :
Tier I Capital Ratio 16.20% 4.0%
Total Capital Ratio 17.27% 8.0%
Leverage Ratio 10.65% 3.0%
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.
CURRENT OPERATIONAL AND ACCOUNTING ISSUES
SFAS No. 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 adoption of
SFAS No. 133 is not expected to have a material impact on the financial position
or results of operations of the Company.
YEAR 2000
Due to the technological issues surrounding the Year 2000, the Company formally
initiated an ongoing project during 1997 to ensure that its financial condition,
results of operations or liquidity will not be adversely affected by any Year
2000 computer software failures. The Company adopted a Year 2000 Compliance Plan
and established a Year 2000 Compliance Committee, which includes members of
senior management from all areas of company and from the Company's Board of
Directors. The objectives of the plan and the committee are to ensure that the
Bank will be prepared for the new millennium. As recommended by the Federal
Financial Institutions Examination Council, the Year 2000 Plan includes the
following phases: Awareness, Assessment, Renovation, Validation, and
Implementation.
19
<PAGE>
The Company is currently completing the Validation stage and has initiated
testing of certain functions which have been upgraded. While the Company
believes it is taking all appropriate steps to assure Year 2000 compliance, it
is dependent on vendor compliance to some extent. The Company is requiring its
systems and software vendors to represent that the services and products
provided are, or will be, Year 2000 compliant and that the vendors have planned,
or have begun to perform, a program of testing compliance. The Company's plan
also addresses compliance of its non-EDP systems as well as evaluation of its
major loan customers for Year 2000 state of readiness. Management believes that
it is currently on target to be appropriately prepared for the Year 2000. To
date, the Company has not incurred any material costs related to the Y2K
conversion and no material expenses have been identified or are expected.
Management continues to believe that the costs to bring the Company's systems
into Year 2000 compliance will not have a materially adverse effect upon the
Company's financial condition, results of operations, or liquidity.
The primary risks affecting the Company's Year 2000 conversion relate to the
proper functioning of its on-line banking system after December 31, 1999. This
risk is mitigated by the use of a major on-line banking system provider which
has performed and verified Y2K readiness with its own "testing and
implementation phases" to ensure proper operation. The Bank will continue to
perform its own independent validation testing of the on-line system to ensure
reliance. Additionally, the Company has developed a contingency plan for all
"mission critical" applications which are not compliant by the "trigger date".
If any application is not Y2K compliant or is incapable of providing banking
support in the Year 2000, the Bank will convert to an alternative software. The
Bank continues to evaluate its software options.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
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
20
<PAGE>
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.
21
<PAGE>
Cumulative Rate Sensitive Balance Sheet
March 31, 1999
(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 $10,510 $14,928 $31,085 $ 37,525 $ 0 $ 0 $ 37,525
Loans :
Commercial 21,555 23,063 24,843 53,995 3,513 0 57,508
Participations 0 0 175 6,699 176 0 6,875
Mortgages 762 762 843 12,483 4,205 0 16,688
Consumer 14,247 14,286 14,324 16,209 238 0 16,447
Federal Funds Sold 25,000 25,000 25,000 25,000 0 0 25,000
Other Assets 0 0 0 0 0 18,055 18,055
------- ------- ------- -------- -------- -------- --------
TOTAL ASSETS $72,074 $78,039 $96,270 $151,911 $160,043 $178,098 $178,098
======= ======= ======= ======== ======== ======== ========
Transaction /
NOW Accounts $34,204 $34,204 $34,204 $34,204 $ 0 $ 0 $34,204
Money Market 15,120 15,120 15,120 15,120 0 0 15,120
Savings 20,945 20,945 20,945 20,945 0 0 20,945
CD's < $100,000 11,653 17,315 21,412 24,135 0 0 24,135
CD's > $100,000 12,134 15,474 19,425 20,001 0 0 20,001
Other Liabilities 0 0 0 0 0 45,982 45,982
Equity 0 0 0 0 0 17,711 17,711
------- ------- ------- -------- -------- -------- --------
TOTAL LIABILITIES AND EQUITY $94,056 $103,058 $111,106 $114,405 $114,405 $178,098 $178,098
======= ======== ======== ======== ======== ======== ========
Dollar Gap (21,982) (25,019) (14,837) 37,506 45,638
Gap / Total Assets -12.34% -14.05% -8.33% 21.06% 25.07%
Target Gap Range +/-35.0% +/- 30.0% +/- 25.0% +/-25.0%
RSA / RSL 76.62% 75.72% 86.65% 132.78% 139.89%
(Rate Sensitive Assets to
Rate Sensitive Liabilities)
</TABLE>
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 - NONE
Item 5. Other information - NONE
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.
By: /s/ Albert F. Buzzetti
--------------------------------------
(Registrant - Bridge View Bancorp)
Albert F. Buzzetti
President and Chief Executive Officer
Date: May 13, 1999
24
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibits
- ------ -----------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's unaudited March 31, 1999 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-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 14,224,000
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 25,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,991,000
<INVESTMENTS-CARRYING> 32,534,000
<INVESTMENTS-MARKET> 32,607,000
<LOANS> 97,518,000
<ALLOWANCE> 1,165,000
<TOTAL-ASSETS> 178,098,000
<DEPOSITS> 159,660,000
<SHORT-TERM> 0
<LIABILITIES-OTHER> 727,000
<LONG-TERM> 0
0
0
<COMMON> 19,028,000
<OTHER-SE> (1,317,000)
<TOTAL-LIABILITIES-AND-EQUITY> 178,098,000
<INTEREST-LOAN> 2,049,000
<INTEREST-INVEST> 721,000
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,770,000
<INTEREST-DEPOSIT> 705,000
<INTEREST-EXPENSE> 705,000
<INTEREST-INCOME-NET> 2,065,000
<LOAN-LOSSES> 40,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,375,000
<INCOME-PRETAX> 972,000
<INCOME-PRE-EXTRAORDINARY> 972,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 617,000
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,127,000
<CHARGE-OFFS> 2,000
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,165,000
<ALLOWANCE-DOMESTIC> 1,165,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 294,000
</TABLE>
