SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported) - October 20, 1995
HUBCO, INC.
(Exact Name of Registrant as Specified in Charter)
NEW JERSEY
(State or Other Jurisdiction of Incorporation)
1-10699 22-2405746
(Commission File Number) (IRS Employer Identification No.)
1000 MacArthur Boulevard, Mahwah, New Jersey 07430
(Address of Principal Executive Offices)
(201) 236-2200
(Registrant's Telephone Number)
<PAGE>
Item 5 - Other Events
On October 20, 1995 HUBCO, Inc. ("HUBCO") restated its financial statements
in order to reflect the effect of recent acquisitions accounted for as poolings
of interest. HUBCO's restated balance sheets at December 31, 1994 and 1993 and
restated statements of income, changes in stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1994 are included
as an exhibit to this Current Report on Form 8-K.
Item 7 - Financial Statements, Pro Forma Financial Information and Exhibits
27 Restated Financial Data Schedule, Annual Report for 12/31/94
99 Consolidated Financial Statements of HUBCO, Inc.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, HUBCO,
Inc. has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
HUBCO, INC.
Dated: October 20, 1995 By: KENNETH T. NEILSON
---------------------------
Kenneth T. Neilson
President and
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 71,498
<INT-BEARING-DEPOSITS> 1,212,807
<FED-FUNDS-SOLD> 33,530
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 111,604
<INVESTMENTS-CARRYING> 562,567
<INVESTMENTS-MARKET> 537,090
<LOANS> 866,570
<ALLOWANCE> 16,559
<TOTAL-ASSETS> 1,709,284
<DEPOSITS> 1,491,584
<SHORT-TERM> 50,658
<LIABILITIES-OTHER> 26,631
<LONG-TERM> 25,000
<COMMON> 23,372
0
19,147
<OTHER-SE> 73,032
<TOTAL-LIABILITIES-AND-EQUITY> 1,709,384
<INTEREST-LOAN> 62,031
<INTEREST-INVEST> 39,958
<INTEREST-OTHER> 1,364
<INTEREST-TOTAL> 103,353
<INTEREST-DEPOSIT> 29,268
<INTEREST-EXPENSE> 32,257
<INTEREST-INCOME-NET> 71,096
<LOAN-LOSSES> 5,550
<SECURITIES-GAINS> (420)
<EXPENSE-OTHER> 51,050
<INCOME-PRETAX> 28,324
<INCOME-PRE-EXTRAORDINARY> 28,324
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,432
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.33
<YIELD-ACTUAL> 4.95
<LOANS-NON> 19,456
<LOANS-PAST> 3,368
<LOANS-TROUBLED> 669
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 14,109
<CHARGE-OFFS> 6,810
<RECOVERIES> 993
<ALLOWANCE-CLOSE> 16,559
<ALLOWANCE-DOMESTIC> 9,202
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 7,357
</TABLE>
Hubco, Inc. And Subsidiaries
Consolidated Financial Statements
As Of December 31, 1994, 1993 And 1992
Together With
Report Of Independent Public Accountants
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
HUBCO, Inc.:
We have audited the accompanying consolidated balance sheets of HUBCO, Inc. (a
New Jersey corporation) and subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of income, changes in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of HUBCO, Inc. and subsidiaries as
of December 31, 1994 and 1993, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1992 the
Company changed its method of accounting for income taxes and in 1993 its method
of accounting for investments in debt and equity securities.
Roseland, New Jersey
June 30, 1995
<PAGE>
HUBCO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- DECEMBER 31, 1994 AND 1993
(in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS 1994 1993
---------- ----------
<S> <C> <C>
ASSETS:
Cash and due from banks (Notes 3 and 20) $ 71,498 $ 63,579
Federal funds sold 33,530 39,302
---------- ----------
Total cash and cash equivalents 105,028 102,881
---------- ----------
Securities (Notes 1, 4 and 20)-
Available for sale, at market value (amortized cost of
$114,793 and $180,564 for 1994 and 1993, respectively) 111,604 187,204
Held to maturity, at cost (market value of $537,090
and $374,055 for 1994 and 1993, respectively) 562,567 368,824
---------- ----------
Total securities 674,171 556,028
---------- ----------
Loans (Notes 1, 5, 7 and 20)-
Real estate -- mortgage 458,079 380,845
Commercial and financial 208,026 178,827
Consumer credit 132,888 109,291
Credit card 67,577 0
---------- ----------
866,570 668,963
---------- ----------
Less-
Allowance for possible loan losses (Notes 1 and 6) 16,559 14,109
Deferred loan fees 1,149 676
Unearned income 3,037 4,699
---------- ----------
Net loans 845,825 649,479
---------- ----------
Premises and equipment, net (Notes 1 and 9) 35,330 20,696
Accrued interest receivable 16,072 11,139
Other real estate (Note 1) 8,528 9,766
Other assets (Notes 2 and 10) 24,430 13,685
---------- ----------
Total assets $1,709,384 $1,363,674
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits-
Noninterest bearing $ 278,737 $ 258,063
Interest bearing 1,212,807 955,273
---------- ----------
Total deposits 1,491,544 1,213,336
---------- ----------
Federal funds purchased and securities sold under agreements to repurchase 50,658 42,774
Accrued taxes and other liabilities 26,631 9,910
---------- ----------
Total liabilities 1,568,833 1,266,020
---------- ---------
SUBORDINATED DEBT (Note 12) 25,000 0
---------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 16 and 17)
STOCKHOLDERS' EQUITY (Notes 13, 14 and 15):
Preferred stock -- Series A, no par value; authorized 3,300,000 shares,
issued 797,811 and outstanding 788,811 shares in 1994 19,147 0
Common stock, no par value; authorized 19,800,000 shares;
13,145,059 shares outstanding 23,372 23,372
Additional paid-in capital 49,289 49,289
Retained earnings 39,699 26,220
Treasury stock, at cost, 1,184,502 and 313,050 common shares in
1994 and 1993, respectively, and 9,000 preferred shares in 1994 (11,723) (4,571)
Restricted stock award (1,266) (946)
Unrealized holding (loss) gain on securities
available for sale, net of income taxes (2,967) 4,290
---------- ---------
Total stockholders' equity 115,551 97,654
---------- ----------
Total liabilities and stockholders' equity $1,709,384 $1,363,674
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
<PAGE>
HUBCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(in thousands, except per share data)
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans-
Taxable $ 61,660 $ 55,834 $ 60,541
Tax-exempt 371 306 402
--------- --------- ---------
62,031 56,140 60,943
--------- --------- ---------
Interest and dividends on securities-
Taxable 38,310 27,474 23,818
Tax-exempt 1,648 1,260 1,338
--------- --------- ---------
39,958 28,734 25,156
--------- --------- ---------
Interest on Federal funds sold 1,364 1,676 2,197
--------- --------- ---------
Total interest income 103,353 86,550 88,296
--------- --------- ---------
INTEREST EXPENSE:
Savings deposits 18,785 15,424 16,806
Time deposits and certificates of deposits 10,483 11,180 17,810
Interest on short-term and other borrowings 2,989 907 745
--------- --------- ---------
Total interest expense 32,257 27,511 35,361
--------- --------- ---------
Net interest income 71,096 59,039 52,935
--------- --------- ---------
PROVISION FOR POSSIBLE LOAN LOSSES 3,550 4,874 7,432
--------- --------- ---------
Net interest income after provision for
possible loan losses 67,546 54,165 45,503
--------- --------- ---------
NONINTEREST INCOME:
Trust department income 630 525 591
Service charges on deposit accounts 9,082 7,428 6,245
Securities gains (losses ) (420) 83 1,283
Other 2,536 2,543 2,598
--------- --------- ---------
11,828 10,579 10,717
--------- --------- ---------
OPERATING EXPENSES:
Salaries $ 18,541 $ 16,156 $ 14,476
Pension and other employee benefits (Note 11) 7,132 5,512 4,486
Occupancy expense 5,313 4,150 4,245
Equipment expense 3,002 2,618 2,431
Net cost to operate other real estate 1,227 1,691 2,386
Deposit and other insurance 3,835 3,279 2,873
Outside services 4,188 3,891 3,861
Amortization of intangible assets 1,299 40 2,456
Charitable contributions 78 36 4,036
Other 6,435 4,940 5,362
--------- --------- ---------
51,050 42,313 46,612
--------- --------- ---------
Income before provision for income taxes 28,324 22,431 9,608
--------- --------- ---------
PROVISION FOR INCOME TAXES (Note 10):
Federal 9,065 7,518 135
State 1,827 1,042 502
--------- --------- ---------
10,892 8,560 637
--------- --------- ---------
Net income $ 17,432 $ 13,871 $ 8,971
========= ========= =========
INCOME PER COMMON SHARE:
Primary $ 1.36 $ 1.06 $ 0.76
Fully diluted $ 1.33 $ 1.06 $ 0.76
WEIGHTED AVERAGE SHARES OUTSTANDING (Note 1):
Common 13,098 13,109 11,881
Preferred 602 0 0
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE>
HUBCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(in thousands, except share data)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
----------------- -------------------- Paid-In Retained
Shares Amount Shares Amount Capital Earnings
------- ------- ---------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991 0 $ 0 9,542,255 $16,966 $18,885 $ 25,480
Net income -- 1992 0 0 0 0 0 8,971
Cash dividends 0 0 0 0 0 (2,527)
Issuance of common stock, net of related expenses 0 0 2,587,500 4,600 15,115 0
Return of 770 shares of restricted stock to treasury stock 0 0 0 0 0 0
Issuance of restricted stock 0 0 44,775 80 318 0
Amortization of restricted stock 0 0 0 0 0 0
------- ------- ---------- ------- ------- --------
BALANCE AT DECEMBER 31, 1992 0 0 12,174,530 21,646 34,318 31,924
Net income -- 1993 0 0 0 0 0 13,871
Cash dividends 0 0 0 0 0 (3,267)
10% stock dividend -- Note 12 0 0 942,017 1,675 14,653 (16,328)
Return of 1,122 shares of restricted stock to treasury stock 0 0 0 0 0 0
Issuance of restricted stock 0 0 28,512 51 318 1
Amortization of restricted stock 0 0 0 0 0 19
Purchase of 221,000 shares of treasury stock 0 0 0 0 0 0
Unrealized holding gain on securities available for sale 0 0 0 0 0 0
------- ------- ---------- ------- ------- --------
BALANCE AT DECEMBER 31, 1993 0 0 13,145,059 23,372 49,289 26,220
Net income -- 1994 0 0 0 0 0 17,432
Cash dividends 0 0 0 0 0 (3,512)
Cash dividends - $.36 per share, preferred 0 0 0 0 0 (447)
Issuance of preferred stock, net of related expenses 797,811 19,147 0 0 0 6
Return of 4,446 shares of restricted stock to treasury stock 0 0 0 0 0 0
Issuance of restricted stock 0 0 0 0 0 0
Amortization of restricted stock 0 0 0 0 0 0
Purchase of 9,000 shares of treasury stock-preferred 0 0 0 0 0 0
Purchase of 526,621 shares of treasury stock-common 0 0 0 0 0 0
Change in net unrealized holding gain (loss) on securities
available for sale 0 0 0 0 0 0
------- ------- ---------- ------- ------- --------
BALANCE AT DECEMBER 31, 1994 797,811 $19,147 13,145,059 $23,372 $49,289 $ 39,699
======= ======= ========== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Holding
Gain (Loss)
On
Securities
Treasury Restricted Available
Stock Stock Award for Sale
-------- ----------- ----------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991 $ 0 ($ 446) $ 0
Net income -- 1992 0 0 0
Cash dividends 0 0 0
Issuance of common stock, net of related expenses 0 0 0
Return of 770 shares of restricted stock to treasury stock (6) 6 0
Issuance of restricted stock 0 (398) 0
Amortization of restricted stock 0 272 0
-------- ------- -------
BALANCE AT DECEMBER 31, 1992 (6) (566) 0
Net income -- 1993 0 0 0
Cash dividends 0 0 0
10% stock dividend -- Note 12 0 0 0
Return of 1,122 shares of restricted stock to treasury stock (11) 10 0
Issuance of restricted stock 280 (668) 0
Amortization of restricted stock 0 278 0
Purchase of 221,000 shares of treasury stock (4,834) 0 0
Unrealized holding gain on securities available for sale 0 0 4,290
-------- ------- -------
BALANCE AT DECEMBER 31, 1993 (4,571) (946) 4,290
Net income -- 1994 0 0 0
Cash dividends 0 0 0
Cash dividends - $.36 per share, preferred 0 0 0
Issuance of preferred stock, net of related expenses 0 0 0
Return of 4,446 shares of restricted stock to treasury stock (43) 37 0
Issuance of restricted stock 746 (746) 0
Amortization of restricted stock 0 389 0
Purchase of 9,000 shares of treasury stock-preferred (190) 0 0
Purchase of 526,621 shares of treasury stock-common (7,665) 0 0
Change in net unrealized holding gain (loss) on securities
available for sale 0 0 (7,257)
-------- ------- -------
BALANCE AT DECEMBER 31, 1994 ($11,723) ($1,266) ($2,967)
======== ======= =======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE>
HUBCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,432 $ 13,871 $ 8,971
Adjustments to reconcile net income to net cash
provided by (used in) operating activities-
Provision for possible loan losses 3,550 4,874 7,432
Provision for depreciation and amortization 4,189 2,446 5,083
Amortization of securities premiums, net 2,482 1,132 346
Securities (gains) losses 420 (83) (1,283)
Noncash charitable contribution 0 0 4,000
Deferred income taxes (benefit) 2,114 (536) (4,460)
(Increase) decrease in accrued interest receivable (4,933) 352 (1,890)
Increase (decrease) in interest payable 2,114 (600) (4,000)
(Decrease) increase in accrued taxes and
other liabilities (49,205) 1,826 (4,924)
(Increase) decrease in other assets (6,122) 7,258 (2,755)
--------- --------- ---------
Net cash provided by (used in) operating
activities (27,959) 30,540 6,520
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities 85,758 52,595 57,624
Proceeds from maturities of securities 127,708 121,439 114,088
Purchases of securities (250,516) (282,371) (359,461)
Net cash acquired through acquisitions 117,773 43,134 425,698
Net cash paid for acquisitions (26,660) (227) (3,411)
Net decrease in loans 30,609 47,599 28,390
Purchases of premises and equipment (10,128) (4,157) (3,547)
Decrease (increase) in other real estate 2,671 2,328 (1,790)
--------- --------- ---------
Net cash provided by (used in) investing activities 77,215 (19,660) 257,591
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand deposits, NOW accounts and
savings accounts ($ 20,326) ($ 6,369) ($ 84,757)
Net decrease in certificates of deposit (47,853) (14,862) (197,767)
Net increase in Federal funds purchased and
securities sold under agreements to repurchase 7,884 15,615 7,108
Proceeds from the issuance of subordinated debt 25,000 0 0
Net proceeds from issuance of common stock 0 0 19,715
Cash dividends (3,959) (3,267) (2,527)
Acquisition of treasury stock (7,855) (4,834) (6)
--------- --------- ---------
Net cash used in financing activities (47,109) (13,717) (258,234)
--------- --------- ---------
Increase (decrease) in cash and
cash equivalents 2,147 (2,837) 5,877
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 102,881 105,718 99,841
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 105,028 $ 102,881 $ 105,718
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for-
Interest $ 30,858 $ 27,954 $ 39,544
Income taxes 8,545 9,762 4,274
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE>
HUBCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
(in thousands, except share data)
(1) SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
HUBCO, Inc. (the Company) provides a full range of banking services to
individual and corporate customers through its subsidiary and branch
locations in New Jersey. The Company is subject to the regulations of
certain Federal and state banking agencies and undergoes periodic
examinations by those regulatory authorities.
Basis Of Presentation
And Consolidation-
The consolidated financial statements include the accounts of HUBCO,
Inc. and its subsidiaries, all of which are wholly owned.
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 balance sheet
and revenues and expenses for the period. Actual results could differ
significantly from those estimates.
All significant intercompany accounts and transactions are eliminated
in consolidation.
Securities-
The Company adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115), effective December 31, 1993. In accordance
with the pronouncement, the Company classified its securities as held
to maturity, available for sale and held for trading purposes.
Securities for which the Company has the ability and intent to hold
until maturity are classified as held to maturity. These securities
are carried at cost adjusted for amortization of premiums and
accretion of discounts on a straight-line basis which is not
materially different from the interest method. Management reviews its
intent to hold securities to maturity as a result of changes in
circumstances including major business combinations. Such a sale or
transfer of held to maturity securities may be necessary to maintain
the Company's existing interest rate risk position or credit risk
policy.
Securities which are held for indefinite periods of time which
management intends to use as part of its asset/liability strategy, or
that may be sold in response to changes in interest rates, changes in
prepayment risk, increases in capital requirements or other similar
factors, are classified as available for sale and are carried at fair
value. Differences between available for sale securities' amortized
cost and fair value are charged/credited directly to stockholders'
equity, net of income taxes. The cost of securities sold is determined
on a specific identification basis.
<PAGE>
-2-
The Company has no securities held for trading purposes at December
31, 1994 and 1993.
Loans-
Loans are recorded at their principal amounts outstanding. Interest
income on loans not made on a discounted basis is credited to income
based on principal amounts outstanding at applicable interest rates.
Interest income on consumer credit loans is recorded primarily using
the simple interest method.
Recognition of interest on the accrual method is discontinued when, in
the opinion of management, collateral is insufficient to cover
principal and interest, or when other factors indicate that collection
of such amounts is doubtful. A nonaccrual loan is not returned to an
accrual status until interest is received on a current basis and other
factors indicating collection ability is no longer doubtful.
The net amount of all loan origination fees, direct loan origination
costs and loan commitment fees are deferred and recognized over the
estimated life of the related loans as an adjustment of yield.
Allowance For Possible Loan Losses-
The allowance is maintained at a level believed adequate by management
to absorb potential losses in the loan portfolio. Management's
determination of the adequacy of the allowance is based on an
evaluation of the portfolio, past loan loss experience, current
economic conditions, volume, growth and composition of the loan
portfolio and other relevant factors. The allowance is increased by
provisions charged to expense and reduced by net charge-offs.
While management uses available information to recognize potential
losses on loans, future additions to the allowance may be necessary
based on changes in economic conditions, particularly in New Jersey.
In addition, various regulatory agencies, as an integral part of their
examination processes, periodically review the Company's allowance for
possible loan losses. Such agencies may require the Company to
recognize additions to the allowance based on their judgments of
information available to them at the time of their examination.
Premises And Equipment-
Land, buildings and furniture, fixtures and equipment are carried at
cost. Depreciation on substantially all buildings and furniture,
fixtures and equipment is provided using the straight-line method
based on estimated useful lives. Maintenance and repairs are expensed
as incurred and additions and improvements are capitalized.
Other Real Estate-
Other real estate (ORE) includes loan collateral that has been
formally repossessed. These assets are transferred to ORE and recorded
at the lower of carrying cost or fair value of the properties.
Subsequent provisions that result from ongoing periodic evaluations of
these ORE properties are charged to expense in the period in which
they are identified. ORE is carried at the lower of cost or fair
value, less estimated costs to sell. Carrying costs, such as
maintenance and property taxes, are charged to expense as incurred.
<PAGE>
-3-
In December 1992, the Company contributed certain real estate
previously acquired through foreclosure to a charity. The carrying
amount of the other real estate contributed was $4,000.
Intangibles-
Intangible assets resulting from acquisitions under the purchase
method of accounting consist of goodwill and core deposit intangibles.
Goodwill is being amortized on a straight-line basis over five years.
Core deposit intangibles are being amortized, on a straight-line
basis, over the estimated average remaining lives of such intangible
assets (primarily one to five years).
Federal Income Taxes-
In 1992, the Company adopted SFAS No. 109, "Accounting for Income
Taxes," which changed the method of accounting for income taxes from
the deferred method to the liability method. Certain income and
expense items are recorded differently for financial reporting
purposes than for Federal income tax purposes and provisions for
deferred taxes are made in recognition of these temporary differences.
The Company and its subsidiaries file a consolidated Federal income
tax return. Under tax sharing agreements, each subsidiary provides for
and settles income taxes with the Company as if they would have filed
on a separate return basis.
Per Share Amounts-
Primary income per common share is computed by dividing net income,
less dividends on the convertible preferred stock, by the weighted
average number of common shares outstanding during the year. Fully
diluted income per share is computed by dividing net income by the
weighted average number of common shares plus the number of shares
issuable on conversion of the preferred stock. Shares issuable upon
the exercise of options are not included in the calculation of income
per share since their effect is not material. All per share amounts
have been retroactively adjusted for the three-for-two common stock
split on January 14, 1995.
Cash Equivalents-
Cash equivalents include amounts due from banks and Federal funds
sold.
Reclassifications-
Certain reclassifications have been made to the 1993 and 1992 amounts
in order to conform with the 1994 presentation.
(2) ACQUISITIONS:
On April 5, 1995, the Company acquired all of the outstanding shares of
Jefferson National Bank (Jefferson), based in Passaic, New Jersey. Each
share of Jefferson common stock outstanding was converted into 2.697
shares of the Company's common stock, for a total of 609,842 shares. At
the time of the acquisition, Jefferson had approximately $90,000 in
assets.
<PAGE>
-4-
On June 30, 1995, the Company acquired all of the outstanding shares of
Urban National Bank (Urban), based in Franklin Lakes, New Jersey. Each
share of Urban common stock outstanding was converted into 2.17 shares of
the Company's common stock, for a total of 2,135,175 shares. At the time
of the acquisition, Urban had approximately $230,000 in assets.
The Jefferson and Urban acquisitions have been accounted for by the
pooling of interests method of accounting. Accordingly, the accompanying
consolidated financial statements include the accounts of Jefferson and
Urban for all periods presented.
Separate results of the combining entities are as follows-
1994 1993 1992
-------- -------- --------
Net interest income-
The Company $ 58,021 $ 47,018 $ 41,013
Jefferson 3,775 3,808 3,977
Urban 9,300 8,213 7,945
-------- -------- --------
$ 71,096 $ 59,039 $ 52,935
======== ======== ========
Net income (loss)-
The Company $ 16,931 $ 14,202 $ 9,641
Jefferson (983) (1,356) (1,118)
Urban 1,484 1,025 448
-------- -------- --------
$ 17,432 $ 13,871 $ 8,971
======== ======== ========
On June 30, 1993, the Company, through Hudson United Bank, acquired
deposits and certain assets of Pilgrim State Bank from Ramapo Bank. On May
6, 1994, the Company, through Hudson United Bank, acquired deposits and
certain assets of Polifly Federal Savings & Loan Association from the
Resolution Trust Corporation.
A summary of these transactions is as follows-
Pilgrim Polifly
June 30, 1993 May 6, 1994
------------- -----------
Cash paid at acquisition $ 227 $ 6,180
Balances at acquisition date-
Cash and cash equivalents 42,907 104,077
Loans 46,670 456
Total assets 123,113 98,353
Deposits 122,876 104,446
Total liabilities 123,340 104,533
On July 1, 1994, the Company acquired Washington Bancorp, Inc.
(Washington) for a combination of cash and convertible preferred stock
with an aggregate consideration of approximately $40.5 million. In the
transaction, 51% of the Washington shares were converted into preferred
stock at .6708 per share and 49% of the Washington shares were converted
to cash at $16.10 per share. The Bank assumed deposits of approximately
$237.8 million, received $7.1 million in cash and cash equivalents and
acquired $91.4 million in securities and $168.5 million in loans. The
transaction has been accounted for as a purchase and, accordingly, the
results of operations have been included in the accompanying consolidated
financial statements since the date of acquisition. The excess of book
value of net assets acquired over their fair value was approximately $5.1
million, which is being amortized over a five-year period.
<PAGE>
-5-
On December 7, 1994, the Bank acquired Shoppers Charge Accounts Co.
("Shoppers") for approximately $16.3 million in cash, which approximated
the fair value of the assets acquired. The Bank recorded approximately
$63.4 million in assets and $46.9 million in liabilities.
A summary of unaudited pro forma combined financial information for the
Company, Washington and Shoppers as if the acquisitions occurred on
January 1 of the period presented is as follows-
For The Years Ended
December 31
----------------------
1994 1993
--------- ----------
Total interest income $117,524 $109,708
Net interest income after provision for possible
loan losses 64,955 68,090
Income before income taxes 26,333 23,205
Net income 16,111 15,934
======== ========
Income per share:
Primary $ 1.23 $ 1.22
Fully diluted 1.18 1.22
======== ========
(3) CASH AND DUE FROM BANKS:
Banks are required to maintain an average reserve balance with the Federal
Reserve Bank. The average 1994 amount of this reserve for the Company's
subsidiary was approximately $21,000.
(4) SECURITIES:
The amortized cost and estimated market value of securities as of December
31 are summarized as follows-
1994
--------------------------------------------
Gross Unrealized Estimated
Amortized --------------------- Market
Cost Gains Losses Value
-------- -------- --------- --------
Available for Sale
U. S. Government $ 51,455 $ 11 ($ 935) $ 50,531
U. S. Government agencies 53,480 0 (3,411) 50,069
States and political subdivisions 580 0 (2) 578
Other debt securities 1,000 0 0 1,000
Equity securities 8,278 1,271 (123) 9,426
-------- -------- --------- --------
$114,793 $ 1,282 ($ 4,471) $111,604
======== ======== ========= ========
Held to Maturity
U. S. Government $248,926 $ 4 ($ 7,022) $241,908
U. S. Government agencies 273,529 35 (17,739) 255,825
States and political subdivisions 33,986 58 (631) 33,413
Other debt securities 6,126 20 (202) 5,944
-------- -------- --------- --------
$562,567 $ 117 ($ 25,594) $537,090
======== ======== ========= ========
<PAGE>
-6-
1993
--------------------------------------------
Gross Unrealized Estimated
Amortized --------------------- Market
Cost Gains Losses Value
-------- -------- --------- --------
Available for Sale
U. S. Government $130,093 $ 5,704 ($ 208) $135,589
U. S. Government agencies 40,116 639 (117) 40,639
States and political subdivisions 1,600 237 0 1,837
Other debt securities 3,999 226 (21) 4,204
Equity securities 4,756 377 (195) 4,935
-------- ------- --------- --------
$180,564 $ 7,183 ($ 541) $187,204
======== ======= ========= ========
Held to Maturity
U. S. Government $138,124 $ 2,692 ($ 517) $140,299
U. S. Government agencies 193,539 3,167 (715) 195,991
States and political subdivisions 33,324 557 (63) 33,818
Other debt securities 3,837 110 0 3,947
-------- ------- --------- --------
$368,824 $ 6,526 ($ 1,295) $374,055
======== ======= ========= ========
The amortized cost and estimated market value of debt securities at
December 31, 1994, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
Estimated
Amortized Market
Cost Value
-------- --------
Available for Sale
Due in one year or less $ 20,690 $ 20,634
Due after one year through five years 59,741 57,527
Due after five years through ten years 8,706 8,151
-------- --------
89,137 86,312
Mortgage-backed securities 17,378 15,866
Equity securities 8,278 9,426
-------- --------
$114,793 $111,604
======== ========
Held to Maturity
Due in one year or less $ 60,971 $ 60,833
Due after one year through five years 338,469 326,072
Due after five years through ten years 33,309 31,238
Due after ten years 20,110 18,173
-------- --------
452,859 436,316
Mortgage-backed securities 109,708 100,774
-------- --------
$562,567 $537,090
======== ========
<PAGE>
-7-
In July, 1994, the Bank transferred securities with an amortized cost
basis of $117,393 and an estimated market value of $116,696 from available
for sale to held to maturity. The transfer resulted from the Bank's review
of its interest rate risk position in connection with the Washington
business combination (see Note 2). As of December 31, 1994 these
securities are included in held to maturity at the estimated fair value at
the transfer date, and the unrealized loss is being accreted over the
remaining life of the securities.
In December 1994, the Bank transferred securities with an amortized cost
basis of $98,505 and an estimated market value of $97,482 from held to
maturity to available for sale. Securities with an amortized cost of
$50,295 and an estimated market value of $49,996 were immediately sold
resulting in a realized loss of $299. The purpose of the transfer and sale
was to fund the purchase price and repay assumed debt related to the
Shoppers business combination (see Note 2). As a result of the Shoppers
business combination, the Company transferred securities with an amortized
cost basis of $48,210 and an estimated fair value of $47,486 from held to
maturity to available for sale. The purpose of the transfer was to
maintain the Company's interest rate risk position and to adjust for the
credit risk associated with the purchase of credit card receivables.
Sales of securities available for sale are summarized as follows-
1994 1993 1992
---------- ---------- ----------
Proceeds from sales $ 85,758 $ 52,595 $ 57,624
Gross gains from sales 22 275 1,372
Gross losses from sales (442) (96) (89)
Securities with a book value of $62,420 and $61,043 at December 31, 1994
and 1993, respectively, are pledged to secure public funds, securities
sold under agreements to repurchase and for other purposes as required or
permitted by law.
(5) LOANS:
The Company's loan portfolio is diversified with no industry comprising
greater than 10% of the total outstanding. Real estate loans are primarily
made in the local lending area. The Company requires collateral on all
real estate loans and generally requires loan to value ratios of not
greater than 67% for commercial mortgages and 75% for residential
mortgages.
(6) ALLOWANCE FOR POSSIBLE LOAN LOSSES:
The allowance for possible loan losses is based on estimates, and ultimate
losses may vary from the current estimates. These estimates are reviewed
periodically and, as adjustments become necessary, they are reflected in
operations in the periods in which they become known.
<PAGE>
-8-
A summary of the activity in the allowance for possible loan losses is as
follows-
1994 1993 1992
-------- -------- --------
Balance at January 1 $ 14,109 $ 11,354 $ 9,181
Additions (deductions)-
Provision charged to expense 3,550 4,874 7,432
Allowance acquired through
mergers or acquisitions 4,717 400 1,500
Recoveries on loans
previously charged off 993 554 962
Loans charged off (6,810) (3,073) (7,721)
-------- -------- --------
Balance at December 31 $ 16,559 $ 14,109 $ 11,354
======== ======== ========
(7) NONPERFORMING LOANS:
The following table presents information related to loans which are on
nonaccrual, contractually past due ninety days or more as to interest or
principal payments and loans which have been restructured to provide a
reduction or deferral of interest or principal for reasons related to the
debtors' financial difficulties.
1994 1993
------- -------
Nonaccrual loans $19,456 $15,244
Renegotiated loans 732 2,177
------- -------
Total nonperforming loans $20,188 $17,421
======= =======
90 days or more past due $ 3,187 $ 3,560
======= =======
Gross interest income which would have
been recorded under original terms $ 1,491 $ 1,728
Gross interest income recorded during the year 181 263
Commitments for additional funds 0 0
======= =======
In May 1993 and October 1994, the Financial Accounting Standards Board
issued SFAS 114, "Accounting by Creditors for Impairment of a Loan" and
SFAS 118," Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosure." As defined in SFAS 114 and SFAS 118, a loan
is impaired when, based on current information and events, it is probable
that a creditor will be unable to collect all amounts due according to the
contractual terms of the loan agreement. SFAS 114 and SFAS 118 require
that the measurement of impairment of a loan be based on the present value
of expected future cash flows, net of estimated costs to sell discounted
at the loan's effective interest rate. Impairment can also be measured
based on a loan's observable market price or the fair value of collateral,
if the loan is collateral dependent. If the measure of the impaired loan
is less than the recorded investment in the loan, the Bank will be
required to establish a valuation allowance, or adjust existing valuation
allowances, with a corresponding charge or credit to the provision for
possible loan losses.
<PAGE>
-9-
The Company adopted SFAS 114 as of January 1, 1994. The effect of
adopting this new accounting standard was not material based on the net
carrying value and other real estate portfolios at the date of adoption.
At December 31, 1994 and 1993 impaired loans, comprised principally of
nonaccruing loans totaled $15,050 and $14,473, respectively. The
allowance for possible loan losses related to such impaired loans was
$2,899 and $2,660 at December 31, 1994 and 1993, respectively.
(8) LOANS TO RELATED PARTIES:
In the ordinary course of business, the Company and its subsidiaries
have extended credit to various directors, officers and their
associates.
The aggregate extension of this credit is summarized below-
1994 1993
-------- --------
Balance at January 1 $ 6,026 $ 7,419
New loans issued 2,744 1,186
Repayment of loans (2,312) (2,579)
-------- --------
Balance at December 31 $ 6,458 $ 6,026
======== ========
(9) PREMISES AND EQUIPMENT:
The following is a summary of premises and equipment-
1994 1993
-------- --------
Land $ 8,666 $ 4,626
Premises 26,766 18,393
Furniture, fixtures and equipment 14,195 9,539
-------- --------
49,627 32,558
Less- Accumulated depreciation 14,297 11,862
-------- --------
$ 35,330 $ 20,696
======== ========
Depreciation and amortization expense for premises and equipment for
1994, 1993 and 1992 amounted to $2,541, $2,148 and $2,028, respectively.
(10) INCOME TAXES:
The components of the provision for income taxes are as follows-
1994 1993 1992
------- ------- -------
Federal-
Current $ 5,873 $ 8,054 $ 4,595
Deferred 3,192 (536) (4,460)
State 1,827 1,042 502
------- ------- -------
Total provision for income taxes $10,892 $ 8,560 $ 637
======= ======= =======
<PAGE>
-10-
A reconciliation of the provision for income taxes, as reported, with
the Federal income tax at the statutory rate of 35 percent for the years
ended 1994 and 1993, and 34 percent for 1992, is as follows-
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Tax at statutory rate $ 9,917 $ 7,850 $ 3,267
Increase (decrease) in taxes resulting from-
Tax-exempt income (707) (548) (592)
State income taxes, net of
Federal income tax benefit 1,187 677 331
Reversal of reserves no longer deemed necessary 0 0 (1,475)
Noncash charitable contribution basis
for tax in excess of book 0 0 (680)
Other, net 495 581 (214)
-------- ------- -------
Provision for income taxes $ 10,892 $ 8,560 $ 637
======== ======= =======
</TABLE>
Significant components of deferred tax assets and liabilities as of
December 31, 1994 and 1993 were as follows-
1994 1993
------- -------
Deferred Tax Assets (Liabilities)-
Available for sale securities $ 1,483 ($2,434)
Allowance for possible loan losses 2,140 2,781
Charitable contribution 0 1,500
Other (652) 14
------- -------
$ 2,971 $ 1,861
======= =======
Included in the table above is $2,755 of deferred tax assets acquired
from Washington. In order to fully realize its deferred tax assets, the
Company will need to generate future taxable income during periods in
which existing deductible temporary differences reverse. Based upon the
Company's historical and current pretax earnings, management believes it
is more likely than not that the Company will generate future net
taxable income in sufficient amounts to realize its net deferred tax
asset at December 31, 1994, however, there can be no assurance that the
Company will generate earnings or a specific level of continuing
earnings. The Company did not record any valuation allowances against
its deferred tax assets at December 31, 1994 and 1993.
(11) PENSION PLANS AND
POSTRETIREMENT BENEFITS:
The Company has two noncontributory pension plans which cover eligible
employees (a base plan and a nonbargaining plan). The plans provide for
payments to qualified employees based on salary and years of service.
The Company's funding policy for these plans is to make the maximum
annual contributions allowed by the applicable regulations.
<PAGE>
-11-
Net pension cost (income) includes the following-
1994 1993 1992
----- ----- -----
Service cost -- benefits earned during the year $ 301 $ 169 $ 107
Interest cost on projected benefit obligation 567 492 456
Actual return on plan assets (643) (607) (581)
Net amortization and deferral 46 (8) (41)
----- ----- -----
Net periodic pension cost (income) $ 271 $ 46 ($ 59)
===== ===== =====
Assumptions used in the accounting for the plans in 1994, 1993 and 1992
were-
1994 1993 1992
----- ----- -----
Weighted average discount rate 7.0% 7.0% 8.0%
Rate of increase in compensation 4.0% 4.0% 4.0%
Expected long-term rate of return
on assets 8.0% 8.0% 8.0%
The following table sets forth the funded status and amounts recognized
in the consolidated balance sheets at December 31 for the Company's
plans-
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations-
Accumulated benefit obligation, including
vested benefits of $6,705 and $6,706 for
1994 and 1993, respectively $ 6,834 $ 6,841
------- -------
Projected benefit obligation for service rendered to date (8,653) (7,263)
Plan assets at fair value 8,279 8,178
------- -------
Projected benefit obligation (greater than) less than
plan assets (374) 915
Unrecognized portion as of December 31, of
net asset existing at date of adoption of FASB
Statement No. 87 (152) (186)
Prior service cost not yet recognized in net
periodic pension cost 805 885
Unrecognized net asset at December 31 528 (890)
------- -------
Prepaid pension costs included in other assets $ 807 $ 724
======= =======
</TABLE>
The Company also has a noncontributory pension plan covering
substantially all of Urban's employees. The plan is a defined benefit
plan which provides benefits based on a participant's years of service
and average compensation. Annual contributions are made to the plan
equal to the maximum amount deductible for federal income tax purposes.
<PAGE>
-12-
The following table sets forth the plan's funded status and components
of net periodic pension cost-
<TABLE>
<CAPTION>
1994 1993
------- -----
<S> <C> <C>
Actuarial present value of benefit obligation, including vested
benefits of $730 and $682 in 1994 and 1993, respectively ($ 777) ($709)
------- -----
Projected benefit obligation (984) (865)
Plan assets at fair value 1,080 981
------- -----
Plan assets in excess of projected benefit obligation 96 116
Unrecognized net obligation at January 1, 1990 being 184
amortized over fifteen years 167
Unrecognized net (gain) loss 88 (42)
------- -----
Prepaid pension costs included on other assets $ 351 $ 258
======= =====
Net pension cost includes the following-
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- -----
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 82 $ 62 $ 75
Interest cost on projected benefit obligation 63 58 69
Actual return on plan assets (27) (67) (113)
Net amortization and deferral (31) 20 65
---- ---- -----
Net periodic pension cost $ 87 $ 73 $ 96
==== ==== =====
Assumptions used in accounting for the plan are as follows-
Discount rate 7.5% 7.5% 7.5%
Rate of increase in compensation 4.5% 4.5% 4.5%
Expected long-term rate of return on assets 7.5% 7.5% 7.5%
</TABLE>
The Company has three 401(k) savings plans covering substantially all of
the nonbargaining employees. Under the Plan, the Company matches varying
percentages of the first 6% of the employee's contribution. The
Company's contributions under these Plans were approximately $184, $130
and $67 in 1994, 1993 and 1992, respectively.
In 1992, the Company adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (SFAS 106) which establishes standards of financial accounting
and reporting for an employer that offers postretirement benefits other
than pensions to its employees. The Company increased the annual pension
benefits for current and future retirees and eliminated medical
insurance coverage and group life insurance benefits for retirees. There
was no significant impact on the consolidated results of operations or
financial position resulting from the implementation of SFAS 106.
(12) SUBORDINATED DEBT:
In January, 1994, the Company sold $25,000 aggregate principal amount of
subordinated debentures. The debentures, which mature 2004, bear
interest at 7.75% per annum payable semi-annually.
<PAGE>
-13-
(13) PREFERRED STOCK:
The Series "A" preferred stock was issued to stockholders of Washington
in connection with the Company's acquisition of Washington (see Note 2).
The Series "A" preferred stock was issued at $24.00 per share and cash
dividends are payable at the annual rate per share of $1.44, payable in
quarterly installments. The outstanding shares of the preferred stock
may be redeemed as a whole at the option by vote of the Company's Board
of Directors at any time from the later of (i) July 1, 1995, and (ii)
the date on which the market price of the Company's common stock is
$16.00 or more for twenty consecutive business days. The holders of any
preferred stock, at any time prior to the date fixed for any redemption,
have the right to surrender certificates in conversion for 1.5 shares of
the Company's common stock. At December 31, 1994, the Company has
1,196,716 shares of authorized common stock reserved for issuance in
connection with the Series "A" preferred stock.
(14) COMMON STOCK:
On October 13, 1994, the Company announced that its Board of Directors
had approved a 3-for-2 stock split payable January 14, 1995 to record
holders of HUBCO Common Stock on January 3, 1995. As a result, all share
data has been retroactively restated.
In December, 1994 the Board of Directors adopted the 1995 Stock Option
Plan which provides for the issuance of up to 525,000 stock options to
employees of the Company. The option price cannot be less than the fair
market value of the common stock at the date of the grant and options
are granted by the Company's restricted stock committee. Under the terms
of this plan, the Board of Directors granted 450,000 shares at an
exercise price of $19.25 a share or $12.83, after the 3 for 2 stock
split effective January, 1995.
On April 20, 1993, the Board of Directors approved a 10 percent stock
dividend payable on June 1, 1993, to holders of record at May 11, 1993.
During 1989, the Company adopted a restricted stock plan in which
150,000 shares of the Company's common stock may be granted to officers
and key employees. During 1992, the Company amended the Plan to increase
the maximum number of shares of common stock which may be awarded to
495,000 shares, after giving retroactive effect to stock dividends and
the stock split. During 1994 and 1993, 54,450 and 54,780 shares of
common stock were awarded which vest between two to five years from the
date of grant. The value of shares issued that have not been earned
($1,266) and ($946) has been recorded as a reduction of stockholders'
equity for 1994 and 1993, respectively. Amortization of restricted stock
awards charged to expense amounted to $389, $278 and $272 in 1994, 1993
and 1992, respectively.
During 1993, the Company adopted a stock option plan in which 165,000
shares of the Company's common stock may be granted to nonemployee
directors. The options are granted at an exercise price equal to the
fair market value at the date of grant and will vest and become
exercisable three years after the date of grant. During 1993, 4,125
options were granted. Nonemployee directors who elect not to participate
in the plan are eligible for benefits under an alternative arrangement.
Under this arrangement, each nonemployee director with at least three
years of service upon retirement will receive a benefit equal to 10% of
the director's retainer in effect at the date of retirement for each
year of service as a director (not to exceed ten years). During 1993,
the Company incurred an expense of $2 related to this arrangement.
During 1994, this plan was terminated.
<PAGE>
-14-
On November 8, 1993, the Company's Board of Directors authorized
management to repurchase up to 10 percent of its outstanding common
stock each year. The program may be discontinued or suspended at any
time, and there is no assurance that the Company will purchase the full
amount authorized. The acquired shares are to be held in treasury to be
used for stock option and other employee benefit plans, preferred stock
conversion or in connection with the issuance of common stock in pending
or future acquisitions accounted for under the purchase method of
accounting. As of December 31, 1994, the Company had purchased 858,121
shares at an aggregate cost of $17.3 million.
(15) RESTRICTIONS ON BANK
DIVIDENDS, LOANS OR ADVANCES:
Certain restrictions exist regarding the ability of the Hudson United
Bank (the Bank) to transfer funds to the Company in the form of cash
dividends, loans or advances. State banking regulations allow for the
payment of dividends in any amount provided that capital stock will be
unimpaired and there remains an additional amount of paid-in capital of
not less than 50 percent of the capital stock amount. As of December 31,
1994, $98,183 was available for distribution to the Company.
Under Federal Reserve regulations, the Bank is also limited as to the
amount it may loan to its affiliates, including the Company. All such
loans are required to be collateralized by specific obligations. During
1994, the Company obtained a loan from the Bank for $4,000 in order to
finance the purchase of its new administrative facility. The loan has
been collateralized by the property.
(16) LEASES:
Total rental expense for all leases amounted to approximately $1,717,
$1,393 and $1,313 in 1994, 1993 and 1992, respectively. At December 31,
1994, the minimum total rental commitments under all noncancellable
leases on bank premises with initial or remaining terms of more than one
year were as follows-
1995 $1,023
1996 1,021
1997 896
1998 743
1999 501
Thereafter 1,417
It is expected that in the normal course of business, leases that expire
will be renewed or replaced by leases of other properties.
(17) COMMITMENTS AND
CONTINGENT LIABILITIES:
In 1994, the Company entered into an interest rate exchange agreement
for the purpose of hedging the interest rate related to the subordinated
debt. The agreement is a contractual agreement between the Company and
its counterparty to exchange fixed and floating rate interest
obligations without exchange of the underlying notional amount of
$25,000. Such agreement involves interest rate risk. If interest rates
increase, the benefit resulting from the
<PAGE>
-15-
agreement will be diminished. The notional principal amount is used to
express the volume of the transaction involved in this agreement;
however this amount does not represent exposure to credit loss. The
counterparty to the agreement is the fixed rate payor on the agreement
and the Company is the floating rate payor on the agreement. The
floating rate is reset every three months. The term of this agreement is
three years. Management does not anticipate any material loss as a
result of this transaction.
The Company and its subsidiaries, from time to time, may be defendants
in legal proceedings. In the opinion of management, based upon
consultation with legal counsel, the ultimate resolution of these legal
proceedings will not have a material effect on the consolidated
financial statements. In the normal course of business, the Company and
its subsidiaries have various commitments and contingent liabilities
such as commitments to extend credit, letters of credit and liability
for assets held in trust which are not reflected in the accompanying
financial statements.
Loan commitment and standby letters of credit are made to customers in
the ordinary course of business. Both arrangements have credit risk
essentially the same as that involved in extending loans to customers
and are subject to the Company's normal credit policies. The Company's
maximum exposure to credit loss for loan commitments, primarily unused
credit card lines of credit and standby letters of credit outstanding at
December 31, 1994 was $906,483 and $15,140, respectively. Loan
commitments and standby letters of credit were $77,297 and $13,760,
respectively, at December 31, 1993. Commitments under commercial letters
of credit used to facilitate customers trade transactions were $1,131
and $442 at December 31, 1994 and 1993, respectively.
(18) HUBCO, INC. (PARENT COMPANY
ONLY) FINANCIAL INFORMATION:
<TABLE>
<CAPTION>
December 31
-------------------------------
BALANCE SHEETS 1994 1993
-------- --------
<S> <C> <C>
Assets:
Cash $ 3,543 $ 1,085
Securities-
Available for sale, at market value (amortized cost
of $6,411 and $4,679 in 1994 and 1993, respectively) 7,760 4,858
Held to maturity, at cost (market value of $11,720 for 1994) 11,904 0
Investment in-
Bank subsidiary 109,571 92,002
Nonbank subsidiary -- HUB Financial Services, Inc. 98 427
Accounts receivable 1,121 477
Premises and equipment, net 8,066 1,284
Other assets 4,076 65
-------- --------
Total assets $146,139 $100,198
======== ========
</TABLE>
<PAGE>
-16-
December 31
-------------------
BALANCE SHEETS 1994 1993
-------- --------
Liabilities and Stockholders' Equity:
Payable for the purchase of treasury stock $ 378 $ 2,225
Notes payable-subsidiary 3,938 0
Accrued taxes and other liabilities 1,272 319
-------- --------
Total liabilities 5,588 2,544
Subordinated debt 25,000 0
Stockholders' equity 115,551 97,654
-------- --------
Total liabilities and stockholders' equity $146,139 $100,198
======== ========
Year Ended December 31
-------------------------------
STATEMENTS OF INCOME 1994 1993 1992
-------- -------- -------
Income:
Cash dividends from bank subsidiary $ 14,261 $ 11,381 $ 2,863
Cash dividends from nonbank subsidiary 0 0 600
Interest 1,155 124 307
Rental income 238 238 238
-------- -------- -------
15,654 11,743 4,008
Expenses:
General and administrative 1,587 581 759
Interest 1,914 0 35
-------- -------- -------
3,501 581 794
-------- -------- -------
Income before income tax benefit
and equity in undistributed
net income of subsidiaries 12,153 11,162 3,214
Income tax benefit (742) (73) (360)
-------- -------- -------
12,895 11,235 3,574
Equity in undistributed net income of-
Bank subsidiaries 4,866 2,624 5,667
Nonbank subsidiary (329) 12 (270)
-------- -------- -------
Net income $ 17,432 $ 13,871 $ 8,971
======== ======== =======
<PAGE>
-17-
Year Ended December 31
------------------------------
STATEMENTS OF CASH FLOWS 1994 1993 1992
-------- -------- --------
Operating activities:
Net income $ 17,432 $ 13,871 $ 8,971
Adjustments to reconcile net income to
net cash provided by operating activities-
Provision for depreciation 294 81 83
Amortization of restricted stock 389 278 641
Increase in investment in subsidiaries (865) (2,635) (25,997)
Increase in accounts receivable (644) (140) (146)
Decrease (increase) in other assets (4,011) (65) 7
Increase in payable for the
purchase of treasury stock (1,847) 2,225 0
Increase (decrease) in accrued taxes
and other liabilities 952 (38) 288
-------- -------- --------
Net cash provided by (used in)
operating activities 11,700 13,577 (16,153)
-------- -------- --------
Investing activities:
Purchase of securities (15,351) (4,373) (543)
Capital expenditures (7,077) 0 (3)
-------- -------- --------
Net cash used in
investing activities (22,428) (4,373) (546)
-------- -------- --------
Financing activities:
Issuance of subordinated debt 25,000 0 0
Decrease in amount due to Hudson
United Bank 0 (21) (19)
Decrease in note payable 0 0 (763)
Issuance of common stock 0 0 19,715
Dividends paid (3,959) (3,267) (2,414)
Acquisition of treasury stock (7,855) (4,834) (6)
-------- -------- --------
Net cash provided by (used
in) financing activities 13,186 (8,122) 16,513
-------- -------- --------
Increase (decrease) in cash 2,458 1,082 (186)
Cash at beginning of year 1,085 3 189
-------- -------- --------
Cash at end of year $ 3,543 $ 1,085 $ 3
======== ======== ========
<PAGE>
-18-
(19) SUMMARY OF QUARTERLY RESULTS
OF OPERATIONS (UNAUDITED):
The following quarterly financial information for the two years ended
December 31, 1994 and is unaudited. However, in the opinion of
management, all adjustments, which include only normal recurring
adjustments necessary to present fairly the results of operations for
the periods are reflected. Results of operations for the periods are not
necessarily indicative of the results of the entire year or any other
interim period.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------
March 31 June 30 September 30 December 31
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
1994-
Net interest income $ 15,434 $ 16,325 $ 19,201 $ 20,136
Provision for possible loan losses 600 515 1,135 1,300
Income before income taxes 6,653 6,771 7,711 7,189
Net income 4,130 4,332 4,755 4,215
Net income per share - primary .33 .35 .37 .31
Net income per share - fully diluted .33 .35 .35 .31
========== ========== ========== ==========
1993-
Net interest income $ 14,122 $ 14,484 $ 15,161 $ 15,272
Provision for possible loan losses 1,420 1,055 1,529 870
Income before income taxes 5,282 5,575 5,669 5,905
Net income 3,270 3,544 3,746 3,311
Net income per share .25 .27 .28 .25
========== ========== ========== ==========
</TABLE>
(20) ESTIMATED FAIR VALUE
OF FINANCIAL INSTRUMENTS
The Financial Accounting Standards Board issued Statement No. 107,
"Disclosures About Fair Value of Financial Instruments." Financial
instruments encompassing this standard's definition include cash, loan
agreements, accounts receivable and payable, debt securities, deposit
liabilities, loan commitments, standby letters of credit and financial
guarantees, among others. The fair value of a financial instrument is
the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than a forced or liquidation
sale.
Estimated fair values have been determined by the Company using the best
available data and estimation methodology suitable for each category of
financial instruments. For those loans and deposits with floating rates,
it is presumed that estimated fair values generally approximate their
recorded book balances. The estimation methodologies used, the estimated
fair values and recorded book balances of the Bank's financial
instruments at December 31, 1994 and 1993 were as follows-
Cash and cash equivalents include cash and due from bank balances,
Federal funds sold and securities purchased under agreements to resell.
For these instruments, the recorded book balance approximates their
fair value.
For securities in the Company's portfolio, fair value was determined by
reference to quoted market prices. In the few instances where quoted
market prices were not available, prices for similar securities were
used. Additional detail is contained in Note 4 to these consolidated
financial statements
<PAGE>
-19-
<TABLE>
<CAPTION>
1994 1993
------------------------------ -----------------------------
Estimated Recorded Estimated Recorded
Fair Value Book Value Fair Value Book Value
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $105,028 $105,028 $102,881 $102,881
Securities 648,694 674,439 565,137 556,028
</TABLE>
The Company aggregated loans into pools having similar characteristics
when comparing their terms, contractual rates, type of collateral, risk
profile and other pertinent loan characteristics. Since no active
market exists for these pools, fair values were estimated using the
present value of future cashflows expected to be received. Loan rates
currently offered by the Bank were used in determining the appropriate
discount rate.
<TABLE>
<CAPTION>
1994 1993
------------------------------ -----------------------------
Estimated Recorded Estimated Recorded
Fair Value Book Value Fair Value Book Value
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Loans, net $860,506 $845,557 $670,385 $649,479
</TABLE>
The fair value of demand deposits, savings deposits and certain money
market accounts approximate their recorded book balances. The fair
value of fixed maturity certificates of deposit was estimated using the
present value of discounted cash flows based on rates currently offered
for deposits of similar remaining maturities.
<TABLE>
<CAPTION>
1994 1993
------------------------------ -----------------------------
Estimated Recorded Estimated Recorded
Fair Value Book Value Fair Value Book Value
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Deposits $1,494,038 $1,491,544 $1,214,049 $1,213,336
</TABLE>
The fair value for accrued interest receivable and for the other
borrowed funds approximates their respective recorded book balance.
<TABLE>
<CAPTION>
1994 1993
------------------------------ -----------------------------
Estimated Recorded Estimated Recorded
Fair Value Book Value Fair Value Book Value
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accrued interest receivable $16,072 $16,072 $11,139 $11,139
Federal funds purchased
and securities sold under
agreements to repurchase 50,658 50,658 42,774 42,774
</TABLE>
The fair value of the subordinated debt was determined by reference to
quoted market prices.
<TABLE>
<CAPTION>
1994 1993
------------------------------ -----------------------------
Estimated Recorded Estimated Recorded
Fair Value Book Value Fair Value Book Value
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Subordinated debt $21,813 $25,000 $0 $0
</TABLE>
<PAGE>
-20-
The Company's remaining assets and liabilities which are not considered
financial instruments have not been valued differently than has been
customary with historical cost accounting. There is no material
difference between the notional amount and estimated fair value of
off-balance sheet items which are primarily comprised of unfunded loan
commitments which are generally priced at market at the time of
funding.
For certain homogeneous categories of loans, such as some residential
mortgages, fair value is estimated using the quoted market prices for
securities backed by similar loans, adjusted for differences in loan
characteristics. The fair value of other types of loans is estimated by
discounting the future cash flows using the current rates at which
similar loans would be made to borrowers with similar credit ratings
and for the same remaining maturities.
