SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 quarterly period ended September 30, 1995
OR
- --------- 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 0-010699
HUBCO, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2405746
------------------------------ ---------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1000 MacArthur Blvd
Mahwah, New Jersey 07430
-------------------------------------- ----------
(Address of principal executive office) (Zip Code)
(201)-236-2600
--------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
---------------------------------------------------
Former name, former address, and formal fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date:
13,110,482 shares, no par value, outstanding as of October 31, 1995.
<PAGE>
HUBCO, INC. AND SUBSIDIARIES
INDEX
Page
------
PART I. FINANCIAL INFORMATION
- ------ ---------------------
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994..................... 1
Consolidated Statements of Income
Nine Months Ended September 30, 1995
and September 30, 1994....................................... 2
Consolidated Statements of Income
Three Months Ended September 30, 1995
and September 30, 1994....................................... 3
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1995
and September 30, 1994....................................... 4
Asset Quality Schedule - Quarterly Recaps.................... 5
S.E.C. Guide 3 - Item IV
Summary of loan loss experience.............................. 6
Notes to Consolidated Financial Statements................... 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 9-14
PART II. OTHER INFORMATION
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K............................. 15
Signatures................................................... 16
<PAGE>
Page 1
HUBCO, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
September 30 December 31
1995 1994
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks ....................................... $ 68,608 $ 71,687
Investment Securities (Note - B)
Available for Sale, at market value
(amortized cost of $123,309 and $115,062
in 1995 and 1994, respectively) ........................... 126,665 112,006
Held to maturity, at amortized cost(market value of
$495,694 and $537,090 for 1995 and 1994, respectively) .... 496,818 562,567
---------- ----------
623,483 674,573
Federal funds sold and securities
purchased under agreements to resell ......................... 0 23,640
Loans:
Real estate--mortgage ....................................... 428,208 485,660
Commercial and financial .................................... 239,325 215,036
Consumer credit ............................................. 131,152 110,160
Credit Card ................................................. 53,983 67,577
---------- ----------
852,668 878,433
Less:
Allowance for possible loan losses .......................... 16,678 16,559
Deferred loan fees .......................................... 1,273 1,149
Unearned income ............................................. 3,631 3,037
---------- ----------
NET LOANS ........................... 831,086 857,688
---------- ----------
Property and equipment, net ................................... 33,109 35,330
Other real estate ............................................. 6,320 6,550
Accrued interest receivable ................................... 13,560 16,072
Other assets .................................................. 26,424 24,285
---------- ----------
TOTAL ASSETS ............................ $1,602,590 $1,709,825
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing ....................................... $ 282,180 $ 278,753
Interest bearing ........................................... 1,108,788 1,212,839
---------- ----------
TOTAL DEPOSITS ........................... 1,390,968 1,491,592
---------- ----------
Federal funds purchased and securities
sold under agreements to repurchase .......................... 44,224 48,964
Treasury tax and loan note .................................... 999 2,865
Accrued taxes and other liabilities ........................... 16,425 25,504
---------- ----------
TOTAL LIABILITIES ................................ 1,452,616 1,568,925
---------- ----------
Subordinated Debt ............................................. 25,000 25,000
Stockholders' equity:
Preferred Stock--Series A, no par value;
authorized 3,300,000 shares, 797,811 shares issued
and outstanding in 1994 ..................................... 0 19,147
Common stock, no par value, issued and outstanding
13,111,482 shares (1995); issued 13,145,059 shares
and outstanding 12,355,391 shares (1994) .................... 23,330 23,372
Capital in excess of par ...................................... 50,007 50,058
Retained earnings ............................................. 50,626 39,199
Treasury stock, at cost, 33,577 and 179,826 common shares
in 1995 and 1994, respectively, 0 and
9,000 Preferred shares in 1995 and 1994 respectively ........ (101) (11,723)
Unearned Compensation--Restricted stock awards ................ (829) (1,266)
Unrealized gain/loss on investment securities
available for sale, net of income taxes ..................... 1,941 (2,887)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY .......................... 124,974 115,900
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ..................... $1,602,590 $1,709,825
========== ==========
</TABLE>
See notes to consolidated financial statements
<PAGE>
Page 2
HUBCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
NINE MONTHS ENDED
-----------------
SEPTEMBER 30
-----------------
1995 1994
---- ----
(Unaudited)
INTEREST INCOME
Interest & fees on loans:
Taxable ........................................... $60,225 $43,866
Tax exempt ........................................ 217 285
------- -------
60,442 44,151
------- -------
Interest & dividends on securities:
Taxable ........................................... 28,620 27,719
Tax exempt ........................................ 814 1,269
------- -------
29,434 28,988
------- -------
Interest on federal funds sold ..................... 935 761
------- -------
TOTAL INTEREST INCOME ........................ 90,811 73,900
------- -------
INTEREST EXPENSE
Interest on deposits:
Savings deposits .................................. 13,920 14,056
Time deposits ..................................... 12,835 6,899
Interest on borrowings ............................. 3,296 2,052
------- -------
TOTAL INTEREST EXPENSE ....................... 30,051 23,007
------- -------
NET INTEREST INCOME .......................... 60,760 50,893
------- -------
Provision for possible loan losses ................. 3,150 2,250
------- -------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES ................... 57,610 48,643
NON-INTEREST INCOME
Trust department income ........................... 532 460
Service charges on deposit accounts ............... 6,903 6,795
Securities gains/(losses) ......................... 637 (85)
Other income ...................................... 5,069 1,618
------- -------
13,141 8,788
------- -------
OPERATING EXPENSES
Salaries ......................................... 16,908 12,855
Pension and other employee benefits .............. 6,963 5,992
Occupancy expense of property .................... 4,832 3,738
Equipment expense ................................ 3,232 2,072
Other operating expenses ......................... 14,187 11,575
------- -------
46,122 36,232
------- -------
INCOME BEFORE INCOME TAXES ................. 24,629 21,199
INCOME TAXES - Federal ............................. 5,905 6,486
State ............................... 1,347 1,546
------- -------
7,252 8,032
------- -------
NET INCOME ................................... $17,377 $13,167
======= =======
INCOME PER COMMON SHARE:
Primary ......................................... $ 1.34 $ 1.03
Fully Diluted ................................... $ 1.31 $ 1.02
WEIGHTED AVERAGE SHARES OUTSTANDING:
Common .......................................... 12,621 12,502
Preferred ....................................... 680 412
See notes to consolidated financial statements
<PAGE>
Page 3
HUBCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
NINE MONTHS ENDED
-----------------
SEPTEMBER 30
-----------------
1995 1994
----- ----
(Unaudited)
INTEREST INCOME
Interest & fees on loans:
Taxable ........................................... $19,996 $16,685
Tax exempt ........................................ 64 90
------- -------
20,060 16,775
------- -------
Interest & dividends on securities:
Taxable ........................................... 9,248 10,917
Tax exempt ........................................ 243 415
------- -------
9,491 11,332
------- -------
Interest on federal funds sold ..................... 361 190
------- -------
TOTAL INTEREST INCOME ........................ 29,912 28,297
------- -------
INTEREST EXPENSE Interest on deposits:
Savings deposits .................................. 4,467 6,129
Time deposits ..................................... 4,563 2,299
Interest on borrowings ............................. 835 735
------- -------
TOTAL INTEREST EXPENSE ....................... 9,865 9,163
------- -------
NET INTEREST INCOME .......................... 20,047 19,134
------- -------
Provision for possible loan losses ................. 1,050 1,135
------- -------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES .................. 18,997 17,999
NON-INTEREST INCOME
Trust department income ........................... 203 151
Service charges on deposit accounts ............... 2,246 2,633
Securities gains .................................. 73 --
Other income ...................................... 2,350 501
------- -------
4,872 3,285
------- -------
OPERATING EXPENSES
Salaries ......................................... 5,411 4,392
Pension and other employee benefits .............. 2,114 2,319
Occupancy expense of property .................... 1,627 1,198
Equipment expense ................................ 1,091 942
Other operating expenses ......................... 4,088 4,659
------- -------
14,331 13,510
------- -------
INCOME BEFORE INCOME TAXES ................... 9,538 7,774
INCOME TAXES - Federal ............................. 3,120 2,615
State ............................... 445 455
------- -------
3,565 3,070
------- -------
NET INCOME ................ $ 5,973 $ 4,704
======= =======
INCOME PER COMMON SHARE:
Primary ......................................... $ .46 $ .35
Fully Diluted ................................... $ .46 $ .34
WEIGHTED AVERAGE SHARES OUTSTANDING:
Common .......................................... 13,112 12,497
Preferred ....................................... -- 1,222
See notes to consolidated financial statements
<PAGE>
Page 4
HUBCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (NET)
(in thousands)
Nine Months Ended
September 30
-------------------
1995 1994
----- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 17,377 $ 13,167
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses ........... 3,150 2,250
Provision for depreciation and amortization .. 4,656 2,521
Amortization of security premiums ............ 2,024 1,663
Accretion of security discounts .............. (850) (430)
Realized security (gains)/losses.............. (637) 85
Gain on sale of fixed assets ................. 232 --
Deferred income taxes ........................ 960 976
Decrease (increase) in interest receivable ......... 2,512 (229)
(Decrease) increase in interest payable ............ (187) 1,011
(Decrease) in accrued taxes and other
liabilities .................................. (12,928) (4,751)
(Increase) in other assets ......................... (4,278) (4,298)
-------- -------
NET CASH PROVIDED BY OPERATING
ACTIVITIES .......................... 12,031 11,965
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities ................... 22,839 12,817
Proceeds from maturities of securities .............. 96,884 98,140
Proceeds from sale of equipment ..................... 1,533 --
Net cash acquired from acquisitions ................. -- 117,407
Net cash paid for acquisitions ...................... -- (26,660)
Net decrease in loans ............................... 23,452 35,643
Purchase of securities .............................. (66,047) (240,910)
Purchases of premises and equipment ................. (1,925) (8,758)
Decrease in other real estate ....................... 230 3,060
-------- -------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES ................ 76,966 (9,261)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) in demand deposits, NOW accounts
and savings accounts ............................. (122,407) (32,016)
Net increase (decrease) in certificates
of deposit ....................................... 21,783 (11,905)
Net (decrease) increase in federal funds
purchased and securities sold under
agreements to repurchase ......................... (4,740) 13,813
Subordinated Debt .................................. -- 25,000
Cash dividends ..................................... (5,466) (2,667)
Purchase of treasury stock ......................... (4,886) (5,298)
-------- --------
NET CASH (USED IN) FINANCING
ACTIVITIES .......................... (115,716) (13,073)
-------- --------
DECREASE IN CASH AND CASH
EQUIVALENTS ......................... (26,719) (10,369)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD ................. 95,327 102,881
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........ $ 68,608 $ 92,512
======== ========
<PAGE>
Page 5
HUBCO, INC. AND SUBSIDIARIES
ASSET QUALITY SCHEDULE - QUARTERLY RECAP
(In Thousands)
<TABLE>
<CAPTION>
9/30/95 6/30/95 3/31/95 12/31/94
------- ------- ------- --------
<S> <C> <C> <C> <C>
Non-Accruing Loans:
Commercial .................................................. $ 6,581 $ 7,442 $ 7,509 $ 8,176
Real Estate ................................................. 7,916 8,681 9,284 10,665
Consumer Loans .............................................. 621 647 439 615
Credit Cards ................................................ 250 448 398 --
------- ------- ------- -------
Total Non-Accruing Loans ............................... 15,368 17,218 17,630 19,456
------- ------- ------- -------
Renegotiated Loans ............................................ 1,288 1,359 538 669
------- ------- ------- -------
Total Non-Performing Loans ............................. 16,656 18,577 18,168 20,125
Other Real Estate ............................................. 6,321 5,828 6,222 6,550
------- ------- ------- -------
Total Non-Performing Assets ............................ $22,977 $24,405 $24,390 $26,675
======= ======= ======= =======
Non-Accruing Loans to Total Loans ............................. 1.81% 2.01% 2.06% 2.23%
Non-Performing Loans to Total Loans ........................... 1.96 2.17 2.12 2.30
Non-Performing Assets to Total Assets ......................... 1.43 1.51 1.45 1.56
Non-Performing Assets to Total Loans, Plus
Other Real Estate ........................................... 2.69 2.83 2.83 3.03
Loans Past Due 90 Days or More and Accruing:
Commercial .................................................. $ 1,152 $ 467 $ 799 $ 1,100
Real Estate ................................................. 2,829 3,121 3,153 1,573
Installment ................................................. 168 177 169 51
Credit Cards ................................................ 624 383 458 644
------- ------- ------- -------
Total .................................................. $ 4,773 $ 4,148 $ 4,579 $ 3,368
======= ======= ======= =======
</TABLE>
<PAGE>
Page 6
HUBCO, INC. AND SUBSIDIARIES
S.E.C. GUIDE 3 ITEM IV
SUMMARY OF LOAN LOSS EXPERIENCE
Summary of Activity in the Allowance,
Broken Down by Loan Category
-------------------------------------
Nine Months Ended Year Ended
9/30/95 12/31/94
----------------- ----------
(In Thousands of Dollars)
Amount of Loans Outstanding .............. $852,668 $878,433
======== ========
Daily Average Amount of Loans ............ $856,837 $744,257
======== ========
Balance of Allowance for
Possible Loan Losses at
Beginning of Period .................... $ 16,559 $ 14,109
Loans Charged Off:
Commercial, Financial,
and Agricultural ...................... (2,272) (653)
Real Estate - Mortgage ................. (808) (5,833)
Installment ............................ (460) (214)
Credit Card ............................ (211) (3)
--------- --------
Total Loans Charged Off .............. (3,751) (6,810)
--------- --------
Recoveries of Loans Previously
Charged Off:
Commercial, Financial,
and Agricultural ...................... 207 660
Real Estate - Mortgage ................. 376 129
Installment ............................ 137 204
Credit Card ............................ -- --
-------- -------
Total Recoveries ................... 720 993
-------- -------
Net Loans Charged Off .................... (3,031) (5,817)
Addition to Allowance
Charged to Operations .................. 3,150 3,550
Additions Acquired Through Acquisitions .. -- 4,717
-------- -------
Balance at End of Period ................. $ 16,678 $ 16,559
======== ========
Ratio of Net Loans Charged-Off
During Period to Average
Loans Outstanding ...................... .47% .78%
<PAGE>
Page 7
HUBCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1995
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form l0-Q and Rule l0-0l of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles to complete
financial statements. In the opinion of management, the information presented
includes all adjustments considered necessary to a fair presentation of the
interim period results.
Effective April 5, 1995, the Company acquired Jefferson National Bank and
effective June 30, 1995, the Company acquired Urban National Bank. These
acquisitions have been accounted for under the pooling-of-interests method of
accounting and, accordingly, all prior period financial statements have been
restated.
NOTE B - SECURITIES
The amortized cost and estimated market value of securities are summarized
as follows:
<TABLE>
<CAPTION>
September 30, 1995
------------------------------------------------------------------------------------
Gross Unrealized Estimated
Amortized ---------------------------- Market
Cost Gains (Losses) Value
--------- ----- -------- ---------
<S> <C> <C> <C> <C>
Available for Sale
- ------------------
U.S. Government ............... $ 74,671 $ 946 ($ 275) $ 75,342
U.S. Government
agencies .................... 37,870 378 (277) 37,971
Equity securities ............. 10,768 2,587 (3) 13,352
-------- ------ ------ --------
$123,309 $3,911 ($ 555) $126,665
======== ====== ====== ========
September 30, 1995
-----------------------------------------------------------------------------------
Gross Unrealized Estimated
Amortized ---------------------------- Market
Cost Gains (Losses) Value
--------- ----- -------- ---------
Held to Maturity
- ----------------
U.S. Government ............... $167,006 $1,553 ($ 484) $168,075
U.S. Government agencies ...... 313,201 1,457 (3,934) 310,724
State and political
subdivisions ................ 12,789 200 (18) 12,971
Other securities .............. 3,822 119 (17) 3,924
-------- ------ ------ --------
$496,818 $3,329 ($4,453) $495,694
======== ====== ====== ========
</TABLE>
<PAGE>
Page 8
<TABLE>
<CAPTION>
December 31, 1994
----------------------------------------------------------------------------------
Gross Unrealized Estimated
Amortized ------------------------------- Market
Cost Gains (Losses) Value
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Available for Sale
- ------------------
U.S. Government .................... $ 51,455 $ 11 ($ 935) $ 50,531
U.S. Government
Agencies ......................... 53,480 -- (3,412) 50,068
States and Political
Subdivisions ................... 580 -- (2) 578
Other securities ................... 1,000 -- -- 1,000
Equity securities .................. 8,547 1,405 (123) 9,829
-------- ------- ------- --------
$115,062 $ 1,416 ($4,472) $112,006
======== ======= ======= ========
December 31, 1994
----------------------------------------------------------------------------------
Gross Unrealized Estimated
Amortized ------------------------------- Market
Cost Gains (Losses) Value
--------- -------- -------- ---------
Held to Maturity
- ----------------
U.S. Government .................... $246,476 $ 4 ($ 6,764) $239,716
U.S. Government
Agencies ......................... 276,147 $ 35 (18,002) 258,180
State and Political
Subdivisions ..................... 33,986 58 (631) 33,413
Other securities ................... 5,958 20 (197) 5,781
-------- ------- ------- --------
$562,567 $ 117 $(25,594) $537,090
======== ======= ======= ========
</TABLE>
<PAGE>
Page 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This financial review presents management's discussion and analysis of financial
condition and results of operations. It should be read in conjunction with the
Company's Consolidated Financial Statements and the accompanying notes. Unless
otherwise noted, all dollar amounts, other than per share information, are
presented in thousands.
As of April 5, 1995, the Company acquired Jefferson National Bank ("Jefferson"),
which added four branches in Passaic County to Hudson United Bank. Under the
terms of the acquisition agreement, Jefferson's stockholders received
approximately 2.698 shares of HUBCO's common stock in exchange for each share of
Jefferson's common shares. The acquisition was accounted for as a
pooling-of-interests.
On June 30, 1995, the Company acquired and merged Urban National Bank ("Urban")
into Hudson United Bank. Under the terms of the merger agreement, Urban
shareholders received 2.170 shares of HUBCO common stock in exchange for each of
Urban's shares. The transaction was accounted for as a pooling-of-interests.
In 1994, the Company consummated three acquisitions. On May 6, 1994, the
Company, through Hudson United Bank, acquired four branches, deposits and
certain assets of Polifly Federal Savings and Loan Association ("Polifly") from
the Resolution Trust Corporation ("RTC"). The purchase price for the acquisition
was $6.2 million. On July 1, 1994, the Company consummated its merger with
Washington Bancorp, Inc. ("Washington") for a combination of cash and
convertible preferred stock with an aggregate value of approximately $40.5
million. On December 7, 1994, the Bank acquired Shoppers Charge Accounts Co.
("Shoppers") for approximately $16.3 million in cash.
The balance sheet and income statement comparisons are influenced by the
transactions mentioned above. On October 13, 1994, HUBCO 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 as of January 3, 1995. As a result, all
share data has been retroactively restated. In addition, prior period financial
statements have been restated for the effect of the Jefferson and Urban
acquisitions described above.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1995 and September 30, 1994
- ------------------------------------------------------------
For the three month period ended September 30, 1995, the Company earned $5,973,
or $.46 per share on a fully diluted basis, compared to $4,704, or $.34 per
share, for the same period in 1994. The increase in earnings of $1,269, or
27.0%, is the result of increases in net interest income and non-interest
income of $913 and $1,587, respectively, which were partially offset by
increases in operating expenses and income taxes of $821 and $495, respectively.
<PAGE>
Page 10
Interest income of $29,912 for the quarter ended September 30, 1995, represents
an increase of $1,615, or 5.7%, from the $28,297 reported for the same period in
1994. The increase in interest income is comprised of an increase in interest
and fee income on loans of $3,285, (19.6%), a decrease in interest and dividends
on securities of $1,841 (16.2%), and an increase in interest on federal funds
sold of $171. The loan portfolio for the third quarter of 1995 averaged
$851,605, or $41,765 higher than the third quarter of 1994. This increase in
volume generated $865 of the increased loan income and an increase in loan
yields generated the remaining $2,240 increase. The decline in interest and
dividend income on securities is primarily due to a decline in the volume of
securities for the comparative period as securities matured or were sold in 1994
and the proceeds used to finance the Shoppers Charge Co. acquisition. The
increase in average loan volume was primarily due to the acquisition of Shoppers
Charge Co. in December 1994 which added the $54,000 in outstanding credit card
loans shown as of September 30, 1995. Overall, average earning assets decreased
to $1,476,851 during the third quarter of 1995 from $1,593,413 for the same
period in 1994, a decrease of $116,562, or 7.3%. The yield on average earning
assets on a fully taxable equivalent basis increased 97 basis points from 7.11%
for the third quarter of 1994 to 8.08% for the third quarter of 1995. The higher
yields on the credit card portfolio contributed to this increase.
Interest expense for the three month period ended September 30, 1995 increased
by $913, or 4.8%, over the comparable period in 1994. Specifically, interest on
deposits increased by $602, or 7.1%, while interest on borrowings increased by
$100, or 13.6%. Deposit interest increased as a result of an increase in the
average deposit rates of 53 basis points, from 2.63% for the third quarter of
1994 to 3.16% for the third quarter of 1995. Interest on borrowings increased as
a result of the repricing of the Company's interest rate swap and interest on
the subordinated debt.
The provision for possible loan losses decreased by $85, or 7.5%, from $1,135
for the three month period ended September 30, 1994, to $1,050 for the third
quarter of 1995. The provision required, in the opinion of management, has been
approximately the same amount on a quarterly basis since the third quarter of
1994 based upon management's determination of the allowance necessary to provide
for possible loan losses. Non-performing loans resulting from
recent acquisitions have been aggressively worked down and charge-offs as a
percentage of average loans are also down from 1994.
Non-interest income increased to $4,872 for the three month period ended
September 30, 1995 from $3,285 for the same period in 1994, an increase of
$1,587, or 48.3%. Service charges on deposit accounts decreased by $387, or
14.7%, as a result of a decrease in average deposits of $130,787, or 7.9%, from
$1,535,699 for the third quarter of 1994 to $1,414,912 for the same period in
1995. The decrease is primarily attributable to the run-off of the
acquired Polifly and Washington deposits and is typical in savings bank
acquisitions. Trust income increased by $52, or 34.4%, as a result of an
increase in trust assets. Non-interest income also included securities gains of
$73 for the current period. Other income increased by $1,849, or $369.1%, due
primarily to a $1,015 insurance settlement related
<PAGE>
Page 11
to the Urban transaction. The remaining increase results primarily from the fees
generated by Shoppers ($604) and the International Department ($104) neither of
which existed during the third quarter of 1994.
Operating expenses increased by $821, or 6.1%, from $13,510 for the three month
period ended September 30, 1994, to $14,331 for the third quarter of 1995.
Salaries and other employee benefits increased by $814, or 12.1%, due primarily
to the acquisition of Shoppers. Full-time equivalent employees at Shoppers has
been reduced from 115 to 70 which will reduce salary expense in future periods.
Occupancy expense increased by $429, or 35.8%, also as a result of the Shoppers'
rental expense under an old lease agreement which expires 12/31/95 and will not
be renewed, and the costs associated with operating the Company's new corporate
headquarters while continuing to maintain the old headquarters building.
Equipment expenses increased by $149, or 15.8%, due primarily to the Shoppers
computer expenses and the Company's new imaged item processing system. Other
expenses for the third quarter of 1995 amounted to $4,088 or a decrease of $571
(12.3%) from the comparable quarter of 1994. The reduction in other expense
would have been greater but the Company recognized approximately $900 in
acquisition expenses partially offset by a FDIC insurance premium refund.
Income taxes (state and federal) for the three-month period ended September 30,
1995, increased by $495, or 16.1% over the comparable period in 1994. The
increase is due to an increase of $821, or 6.1%, in net income before taxes and
to an increase of 2% in the effective tax rate for the current period.
Nine Months Ended September 30, 1995 and September 30, 1994
- -----------------------------------------------------------
For the nine-month period ended September 30, 1995, the Company reported net
income of $17,377, or $1.31 per share on a fully-diluted basis compared to
$13,167, or $1.02 per share for the same period in 1994. The increase in
earnings of $4,210, or 32.0%, is primarily attributable to improvements in net
interest income and non-interest income and to a reduction in federal income
taxes.
Interest income for the nine-month period ended September 30, 1995, increased by
$16,911, or 22.9%, over the comparable period in 1994. The increase is due to an
increase in average earning assets of $98,514, or 7.0%, and with an increase in
the overall yield on all earning assets from 7.10% (FTE) in 1994 to 8.11% (FTE)
in 1995. The increased volume is primarily a result of the loans and securities
acquired in the Washington and Shoppers transactions. The increased yield
results from increased market rates, most notably prime based loans, and the
impact of the higher yield of the credit card portfolio.
Interest expense for the nine-month period ended September 30, 1995, increased
to $30,051 from $23,007 for the same period in 1994, an increase of $7,044, or
30.6%. Of the total increase, $5,800 represents additional deposit interest and
results from an increase of $74,065, or 6.8%, in average interest-bearing
deposits coupled with an increase of 63 basis points in the
<PAGE>
Page 12
average rate, from 2.82% in 1994 to 3.45%, in 1995. The increased volume is a
result of the deposits acquired in the Polifly and Washington transactions.
The increase of $1,244, or 60.6% in interest on borrowings is primarily
attributable to the increase in volume of federal funds purchased and reverse
repurchase agreements, which were entered into to meet short-term liquidity
needs, and to the repricing of the Company's interest rate swap.
Overall, the net interest margin increased from 4.88% for the nine-month period
ended September 30, 1994, to 5.42% for the same period in 1995 as a result of
changes in market rates and the related impact on the new mix of assets and
liabilities created by the merging of the acquired institutions.
The provision for possible loan losses was increased by $900, or 40.0%, as a
result of managements' analysis of the allowance level and its adequacy,
specifically in regard to the non-performing loans acquired.
Non-interest income increased to $13,141 for the nine month period ended
September 30, 1995 from $8,788 for the comparable period in 1994. The increase
of $4,353, or 49.5% includes a securities gain of $637 in 1995, compared to a
loss of $85 in 1994. Excluding securities transactions, the 1995 increase is
$3,631, or 40.9%, and results primarily from the third quarter insurance
settlement of $1,015, and from increases in fees on international services
and Shoppers credit cards of $263 and $2,089, respectively.
Operating expenses increased by $9,890, or 27.3%, from $36,232 for the nine
month period in 1994 to $46,122 in 1995. Salaries and benefits increased by
$5,024, or 26.7%, as a result of the additional personnel at Washington and
Shoppers, severance packages associated with the staffs of Shoppers, annual
salary increases of approximately 3.0%, additional payroll taxes and employer
401k contributions due to the higher salary base, and an increase in the
Company's performance bonus accrual due to higher earnings. Occupancy expense
increased by $1,094, or 29.3%, as a result of the twelve additional branches,
the Shoppers' lease agreement and the carrying of two headquarters buildings
until the Union City facility is sold or disposed. Equipment expense increased
by $1,160, or 56.0%, as a result of the additional equipment, Shoppers' computer
expenses and the imaged item processing system. Other operating expenses
increased by $2,612, or 22.6%, primarily as a result of acquisition related
expenses including increases in consulting fees ($336), and amortization of core
deposit ($463), and goodwill ($452). Costs associated with the Jefferson and
Urban acquisitions, including printing, legal, accounting, mailing and
conversion fees, totaled approximately $850. Other increases include outside
service fees, operating supplies and telephone and postage expense, all of which
also arose primarily from the additional costs associated with operating a
larger franchise. In addition, charges for acquisition related expenses of $900
were recorded in the third quarter.
Income taxes (state and federal) for the nine-month period ended September 30,
1995, decreased by $780, or 9.7%, over the comparable period in 1994. An
increase of approximately $1,300 based on an increase of $3,430 in income before
income taxes, was more than offset by credits totalling $2,076 which resulted
primarily from reserve reversals following an I.R.S. settlement through 1993 in
the first half of the year.
<PAGE>
Page 13
FINANCIAL CONDITION
- -------------------
Total assets at September 30, 1995 decreased by $107,235, or 6.3%, from December
31, 1994. The decrease is primarily attributable to a runoff in deposits of
$100,624, or 6.7%, and to the cash payment of $16,275, in settlement of the
Shoppers acquisition, which was a note payable at December 31, 1994.
The Company's loan portfolio decreased by $25,763, or 2.9% from $878,433 at
December 31, 1994, to $852,668 at September 30, 1995. The decrease is primarily
the result of a seasonal runoff in the credit card portfolio and
payments on residential mortgage loans. These decreases were greater than the
growth realized in the commercial and consumer loan portfolios.
Total non-performing loans, which include non-accruing and renegotiated loans,
decreased by $3,469, or 17.2%, primarily as a result of collection efforts.
Other real estate decreased by $229, or 3.5%, as the result of sales of
foreclosed properties.
Overall, asset quality ratios at September 30, 1995 improved, showing declines
in each area measured. As there was a decrease in total loans, the ratio
improvements were generated strictly by the reductions in non-performing assets
(See Asset Quality Schedule on Page 5).
The allowance for possible loan losses increased from $16,559 at December 31,
1994 to $16,678 at September 30, 1995. The increase of $119, or .07%, results
from a nine-month provision of $3,150 to replenish the allowance which was
offset by $3,031 in net charge-offs.
The securities portfolio decreased by $51,090, or 7.6%, from $674,573 at
December 31, 1994 to $623,483 at September 30, 1995. The decrease is the result
of the sale of available for sale securities of approximately $22,839 and
maturities which exceeded purchases by $30,837. At September 30, 1995 and
December 31, 1994, approximately 20.3% and 16.6%, respectively, of the
securities portfolio was categorized as "Available for Sale".
Property and equipment decreased by $2,221, or 6.3% primarily as a result of the
sale of two branch properties and the Company's former data processing facility,
and the consolidation of two branch sites into existing facilities of close
proximity.
Accrued interest receivable decreased by $2,512, or 15.6%, as a result of the
decreases in the loan and investment portfolios.
Other assets increased from $24,285 at December 31, 1994 to $26,424 at September
30, 1995, an increase of $2,139, or 8.8%. The increase is primarily attributable
to an increase in the Company's deferred tax assets, generated by the reserve
reversals arising from the I.R.S. settlement.
Total deposits at September 30, 1995 decreased by $100,624, or 6.7%, from
$1,491,592 at December 31, 1994 to $1,390,968 at September 30, 1995. The deposit
outflow was caused by the Polilfy and Washington deposit outflows discussed
previously.
<PAGE>
Page 14
The ratio of non-interest bearing deposit to total deposits increased to 20.3%
at September 30, 1995 from 18.7% at December 31, 1994.
Federal funds purchased and securities sold under agreement to repurchase
decreased by $4,740, or 9.7%, as short-term liquidity needs eased and the
Company repaid borrowings.
Other liabilities decreased $9,079, or 35.6%, from $25,504 at December 31, 1994
to $16,425 at September 30, 1995. The decrease is primarily attributable to the
repayment of a $16,275 note payable arising from the December closing of the
Shoppers acquisition, for which cash payment took place in January 1995.
Increases in accrued expenses, other reserves and temporary suspense items
partially offset this transaction.
At the end of the reporting period, the Company is not aware of any current
recommendations by the regulatory authorities which would have a material
adverse effect on the Company's capital resources or operations. The capital
ratios for HUBCO, Inc. and subsidiaries at September 30, 1995, and the minimum
regulatory requirements for such capital ratios are as follows:
Ratios at 1995 Minimum
Sept 30, 1995 Requirements*
------------- -------------
Tier I Risk-Based Capital Ratio ............. 12.98% 6.0%
Total Risk-Based Capital Ratio .............. 17.06% 10.0%
Leverage Capital Ratio ...................... 7.21% 5.0%
* For qualification as a well-capitalized institution.
<PAGE>
Page 15
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
--------
(2) Agreement and Plan of Merger dated as of August 18, 1995, among HUBCO,
Inc., Hudson United Bank, Growth Financial Corp and Growth Bank (Incorporated by
reference from the Company's Current Report on Form 8-K filed August 24, 1995).
(3)(i) The Certificate of Incorporation of HUBCO, Inc. filed May 5, 1982
and amendments to the Certificate of Incorporation, dated November 22, 1983,
January 30, 1984, January 11, 1985, July 17, 1986, March 25, 1987, April 26,
1991, November 26, 1991, March 25, 1992, May 17, 1993 and January 4, 1995
(Incorporated by reference from the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, Exhibit (3i).)
(3)(ii) The By-Laws of HUBCO, Inc. (Incorporated by reference from the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, Exhibit (3ii).)
Material Contracts Executed or Becoming Effective During the Most Recent Period
Reflected in this Report:
(10)(a) Stock Option Agreement dated August 18, 1995 between HUBCO, Inc.
and Growth Financial Corp (Incorporated by reference from the Company's Current
Report on Form 8-K filed August 24, 1995).
(10)(b) Stock Purchase and Stockholder Agreement dated as of August 11,
1995 among HUB Financial Services, Inc., HUBCO, Inc., and United National
Bancorp (Incorporated by reference from the Company's Current Report on Form 8-K
filed August 24, 1995).
(10)(c) Form of Data Processing Service and Clearing Agency Agreement
(Incorporated by reference from the Company's Current Report on Form 8-K filed
August 24, 1995).
(10)(d) Form of Administrative Services Agreement (Incorporated by
reference from the Company's Current Report on Form 8-K filed August 24, 1995).
(b) Reports on Form 8-K
-------------------
(1) On August 24, 1995, HUBCO filed a Form 8-K pursuant to Item 5 to
report: (a) the signing of an agreement on August 14, 1995 with United National
Bancorp to provide data processing and imaged item processing services and (b)
the signing of a merger agreement on August 18, 1995 with Growth Financial Corp
("GFC") pursuant to which GFC will be merged with and into HUBCO and Growth Bank
will be merged with and into Hudson United Bank.
(2) On September 27, 1995, HUBCO filed a Form 8-K/A that amended the
Form 8-K that it filed on February 14, 1995.
(3) On October 19, 1995, HUBCO filed a Form 8-K pursuant to Item 5 to
report the October 17, 1995 announcement of its regular quarterly cash dividend
of $.15 per common share, payable December 1, 1995, to shareholders of record
November 17, 1995.
(4) On October 23, 1995, HUBCO filed a Form 8-K pursuant to Item 5 to
report the restatement of its financial statements to reflect the effect of
recent acquisitions accounted for as poolings of interest.
<PAGE>
Page 16
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.
HUBCO, Inc.
November 14, 1995 /s/ KENNETH T. NEILSON
- -------------------------------- ---------------------------------------
Date Kenneth T. Neilson
President & Chief Executive Officer
November 14, 1995` /s/ RICHARD LINHART
- --------------------------------- ---------------------------------------
Date Richard Linhart
Executive Vice President &
Chief Financial Officer
November 14, 1995 /s/ CHRISTINA L. MAIER
- --------------------------------- ---------------------------------------
Date Christina L. Maier
Assistant Treasurer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 68,608
<INT-BEARING-DEPOSITS> 1,108,788
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 126,665
<INVESTMENTS-CARRYING> 496,818
<INVESTMENTS-MARKET> 495,694
<LOANS> 852,668
<ALLOWANCE> 16,678
<TOTAL-ASSETS> 1,602,590
<DEPOSITS> 1,390,968
<SHORT-TERM> 44,224
<LIABILITIES-OTHER> 17,424
<LONG-TERM> 25,000
<COMMON> 23,330
0
0
<OTHER-SE> 101,644
<TOTAL-LIABILITIES-AND-EQUITY> 1,602,590
<INTEREST-LOAN> 60,442
<INTEREST-INVEST> 29,434
<INTEREST-OTHER> 935
<INTEREST-TOTAL> 90,811
<INTEREST-DEPOSIT> 26,755
<INTEREST-EXPENSE> 30,051
<INTEREST-INCOME-NET> 60,760
<LOAN-LOSSES> 3,150
<SECURITIES-GAINS> 637
<EXPENSE-OTHER> 46,122
<INCOME-PRETAX> 24,629
<INCOME-PRE-EXTRAORDINARY> 24,629
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,377
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.31
<YIELD-ACTUAL> 5.44
<LOANS-NON> 15,368
<LOANS-PAST> 4,773
<LOANS-TROUBLED> 1,288
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 16,559
<CHARGE-OFFS> 4,353
<RECOVERIES> 1,322
<ALLOWANCE-CLOSE> 16,678
<ALLOWANCE-DOMESTIC> 11,233
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,445
</TABLE>
