================================================================================
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 June 30, 1997
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 former 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:
21,551,540 shares, no par value, outstanding as of August 11, 1997.
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<PAGE>
HUBCO, INC. AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets
At June 30, 1997 and December 31, 1996...................... 1
Consolidated Statements of Income
For the three-months and six-months ended
June 30, 1997 and 1996...................................... 2-3
Consolidated Statements of Cash Flows
For the six-months ended
June 30, 1997 and 1996...................................... 4
Notes to Consolidated Financial Statements.................... 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 7-11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................. 12
Signatures................................................... 13
PART III. FINANCIAL DATA SCHEDULE ....................................... 14
<PAGE>
<TABLE>
HUBCO, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In Thousands Except Share Data)
<CAPTION>
June 30, December 31,
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Cash and due from banks ..................................................... $ 167,539 $ 128,868
Federal funds sold .......................................................... -- 24,200
---------- ----------
TOTAL CASH AND CASH EQUIVALENTS ................................ 167,539 153,068
Securities available for sale, at market value .............................. 633,471 655,492
Securities held to maturity, at cost (market value of
$241,406 and $279,610 in 1997 and 1996, respectively) ..................... 240,923 280,914
Loans:
Real estate mortgage ...................................................... 1,045,198 1,085,720
Commercial and financial .................................................. 485,937 499,004
Consumer credit ........................................................... 219,399 237,872
Credit card ............................................................... 85,371 61,759
---------- ----------
TOTAL LOANS .................................................... 1,835,905 1,884,355
Less: Allowance for possible loan losses .................................. (37,281) (35,153)
---------- ----------
NET LOANS ...................................................... 1,798,624 1,849,202
Premises and equipment, net ................................................. 42,451 43,510
Other real estate owned ..................................................... 2,824 5,651
Intangibles, net of amortization ............................................ 26,823 29,225
Other assets ................................................................ 89,168 98,625
---------- ----------
TOTAL ASSETS ................................................... $3,001,823 $3,115,687
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing ...................................................... $ 599,782 $ 622,719
Interest bearing .......................................................... 1,768,479 1,969,373
---------- ----------
TOTAL DEPOSITS ................................................. 2,368,261 2,592,092
Borrowings .................................................................. 233,320 187,979
Other liabilities ........................................................... 38,521 29,283
---------- ----------
TOTAL LIABILITIES .............................................. 2,640,102 2,809,354
---------- ----------
Subordinated Debt ........................................................... 100,000 100,000
Capital Trust Securities .................................................... 50,000 --
---------- ----------
Commitments and contingencies
Stockholders' equity:
Convertible Preferred Stock-Series B, no par value; authorized 10,300,000
shares; 35,850 shares issued and outstanding in 1997 and 39,600 shares
issued and outstanding in 1996 ......................................... 3,585 3,960
Common stock, no par value; authorized 51,500,000
shares; 21,624,468 issued and 21,619,164 shares
outstanding in 1997 and 21,624,468 shares
issued and outstanding in 1996 ......................................... 38,448 38,448
Additional paid-in capital ................................................ 96,797 104,233
Retained earnings ......................................................... 71,861 56,968
Treasury shares, at cost, 5,304 shares in 1997 ............................ (148) --
Restricted stock awards ................................................... (546) (279)
Unrealized gain on securities
available for sale, net of income taxes ................................ 1,724 3,003
---------- ----------
TOTAL STOCKHOLDERS' EQUITY ..................................... 211,721 206,333
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ....................... $3,001,823 $3,115,687
========== ==========
See notes to consolidated financial statements
</TABLE>
1
<PAGE>
HUBCO, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In Thousands Except Per Share Data)
Three Months Ended
June 30,
-------------------
1997 1996
------- -------
INTEREST AND FEE INCOME:
Loans ................................................ $40,844 $36,700
Securities ........................................... 15,253 13,151
Other ................................................ 338 121
------- -------
TOTAL INTEREST AND FEE INCOME ............. 56,435 49,972
------- -------
INTEREST EXPENSE:
Deposits ............................................. 13,278 15,338
Borrowings ........................................... 3,759 1,446
Subordinated and other debt .......................... 3,182 495
------- -------
TOTAL INTEREST EXPENSE .................... 20,219 17,279
------- -------
NET INTEREST INCOME ....................... 36,216 32,693
PROVISION FOR POSSIBLE LOAN LOSSES ..................... 1,621 2,743
------- -------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES ................ 34,595 29,950
NON-INTEREST INCOME:
Trust department income .............................. 955 758
Service charges on deposit accounts .................. 3,456 3,534
Securities gains ..................................... 1,849 638
Other income ......................................... 3,454 2,933
------- -------
TOTAL NON-INTEREST INCOME ................. 9,714 7,863
------- -------
NON-INTEREST EXPENSE:
Salaries ............................................. 8,262 9,000
Pension and other employee benefits .................. 2,196 1,975
Occupancy expense .................................... 2,420 2,782
Equipment expense .................................... 1,559 1,265
Deposit insurance and other insurance ................ 467 326
Outside services ..................................... 4,280 3,063
Other real estate owned expense ...................... 461 1,241
Amortization of intangibles .......................... 1,267 745
Other ................................................ 3,232 4,758
------- -------
TOTAL NON-INTEREST EXPENSE ................ 24,144 25,155
------- -------
INCOME BEFORE INCOME TAXES ................ 20,165 12,658
PROVISION FOR INCOME TAXES ............................. 8,124 4,926
------- -------
NET INCOME ................................ $12,041 $ 7,732
======= =======
NET INCOME PER COMMON SHARE: ........................... $ 0.53 $ 0.33
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING: ...................... 22,829 23,321
See notes to consolidated financial statements
2
<PAGE>
HUBCO, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In Thousands Except Per Share Data)
Six Months Ended
June 30,
---------------------
1997 1996
-------- --------
INTEREST AND FEE INCOME:
Loans .............................................. $ 80,294 $ 73,415
Securities ......................................... 29,913 25,949
Other .............................................. 494 407
-------- --------
TOTAL INTEREST AND FEE INCOME ........... 110,701 99,771
-------- --------
INTEREST EXPENSE:
Deposits ........................................... 28,036 31,389
Borrowings ......................................... 6,204 2,366
Subordinated and other debt ........................ 6,021 1,005
-------- --------
TOTAL INTEREST EXPENSE .................. 40,261 34,760
-------- --------
NET INTEREST INCOME ..................... 70,440 65,011
PROVISION FOR POSSIBLE LOAN LOSSES ................... 3,102 4,996
-------- --------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES .............. 67,338 60,015
NON-INTEREST INCOME:
Trust department income ............................ 1,547 1,489
Service charges on deposit accounts ................ 6,977 6,813
Securities gains ................................... 3,121 924
Other income ....................................... 6,854 5,451
-------- --------
TOTAL NON-INTEREST INCOME ............... 18,499 14,677
-------- --------
NON-INTEREST EXPENSE:
Salaries ........................................... 16,345 18,047
Pension and other employee benefits ................ 4,855 4,212
Occupancy expense .................................. 4,896 5,597
Equipment expense .................................. 2,925 2,503
Deposit insurance and other insurance .............. 652 595
Outside services ................................... 7,900 5,911
Other real estate owned expense .................... 989 1,680
Amortization of intangibles ........................ 2,534 1,342
Other .............................................. 6,042 8,635
-------- --------
TOTAL NON-INTEREST EXPENSE .............. 47,138 48,522
-------- --------
INCOME BEFORE INCOME TAXES .............. 38,699 26,170
PROVISION FOR INCOME TAXES ........................... 15,174 10,121
-------- --------
NET INCOME .............................. $ 23,525 $ 16,049
======== ========
NET INCOME PER COMMON SHARE: ......................... $ 1.03 $ 0.68
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING: .................... 22,832 23,540
See notes to consolidated financial statements
3
<PAGE>
<TABLE>
HUBCO, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
<CAPTION>
Six Months Ended
June 30,
------------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .................................................. $ 23,525 $ 16,049
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses ...................... 3,102 4,996
Provision for depreciation and amortization ............. 5,215 4,312
Amortization of security premiums, net .................. 98 1,013
Securities gains ........................................ (3,121) (924)
Gain on sale of premises and equipment .................. (6) --
Deferred income tax provision ........................... -- 1,654
Decrease in other assets .................................. 9,325 8,881
Increase (decrease) in other liabilities .................. 11,736 (3,320)
--------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ........... 49,874 32,661
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities:
Available for sale ........................................ 34,354 43,657
Proceeds from repayments and maturities of securities:
Available for sale ........................................ 56,828 112,054
Held to maturity .......................................... 48,134 33,896
Purchases of securities:
Available for sale ........................................ (77,375) (248,026)
Held to maturity .......................................... -- (5,080)
Net cash paid for acquisitions .............................. -- 56,717
Net decrease (increase) in loans ............................ 47,476 (37,942)
Proceeds from sales of premises and equipment ............... 33 1,233
Purchases of premises and equipment ......................... (1,567) (3,750)
Decrease in other real estate ............................... 2,827 4,425
--------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ........... 110,710 (42,816)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in demand deposits,
NOW accounts and savings accounts ......................... (78,264) (72,728)
Net decrease in certificates of deposits .................... (145,567) (40,468)
Net increase in short-term borrowings ....................... 45,341 80,579
Net increase in other borrowings ............................ -- 42
Net proceeds from issuance of capital trust securities ...... 49,250 --
Proceeds from issuance of common stock ...................... 1,981 616
Cash dividends .............................................. (8,626) (7,192)
Acquisition of treasury stock ............................... (10,228) (17,254)
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ........... (146,113) (56,405)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .............. 14,471 (66,560)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .............. 153,068 221,091
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................... $ 167,539 $ 154,531
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for--
Interest ................................................... $ 38,285 $ 34,285
Income taxes ............................................... 14,135 6,799
========= =========
See notes to Consolidated Financial Statements.
</TABLE>
4
<PAGE>
HUBCO INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
HUBCO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying financial statements of HUBCO, Inc. and Subsidiaries ("HUBCO"
or "the Company") include the accounts of the parent company, HUBCO, Inc. and
its wholly-owned subsidiaries: Hudson United Bank ("Hudson United Bank"),
Lafayette American Bank & Trust Co. ("Lafayette"), HUB Capital Trust I and HUB
Financial Services Inc., formerly known as HUB Investment Services, Inc. All
material intercompany balances and transactions have been eliminated in
consolidation. These unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the information presented
includes all adjustments, consisting of normal recurring accruals, considered
necessary for a fair presentation, in all material respects, of the interim
period results. The results of operations for periods of less than one year are
not necessarily indicative of results for the full year. The consolidated
financial statements should be read in conjunction with the Annual Report on
Form 10-K for the year ended December 31, 1996.
NOTE B -- INCOME PER SHARE
Net income per share is computed by dividing net income by the weighted average
number of common shares plus the number of shares issuable upon conversion of
the preferred stock and the number of shares issuable upon the exercise of
warrants. Shares issuable upon the exercise of options are not included in the
calculation of net income per share since their effect is not material. All
share data has been retroactively restated to reflect all stock splits and stock
dividends.
The Company plans to adopt Statement of Financial Accounting Standards No. 128-
"Earnings Per Share" in the fourth quarter of 1997, the impact of which is not
expected to be material.
NOTE C -- SECURITIES
The following table presents the amortized cost and estimated market value of
securities available-for sale and held-to maturity at the dates indicated:
June 30, 1997
---------------------------------------------
Gross Unrealized Estimated
Amortized ------------------ Market
Cost Gains (Losses) Value
--------- ------ -------- --------
AVAILABLE FOR SALE
U.S. Government ................ $ 67,126 $ 474 $ (37) $ 67,563
U.S. Government
agencies ..................... 430,442 1,050 (3,328) 428,164
States and political
subdivisions ................. 9,427 111 (5) 9,533
Other debt securities .......... 62,758 229 (25) 62,962
Equity securities .............. 60,730 4,604 (85) 65,249
-------- ------ ------- --------
$630,483 $6,468 $(3,480) $633,471
======== ====== ======= ========
5
<PAGE>
NOTE C -- SECURITIES (Continued)
June 30, 1997
---------------------------------------------
Gross Unrealized Estimated
Amortized ------------------ Market
Cost Gains (Losses) Value
--------- ------ -------- --------
HELD TO MATURITY
U.S. Government ................ $ 41,974 $ 451 $ -- $ 42,425
U.S. Government
agencies ..................... 198,949 1,792 (1,760) 198,981
-------- ------ ------- --------
$240,923 $2,243 $(1,760) $241,406
======== ====== ======= ========
December 31, 1996
---------------------------------------------
Gross Unrealized Estimated
Amortized ------------------ Market
Cost Gains (Losses) Value
--------- ------ -------- --------
AVAILABLE FOR SALE
U.S. Government ................ $ 85,403 $ 535 $ (51) $ 85,887
U.S. Government
agencies ..................... 496,370 3,118 (3,376) 496,112
States and political
subdivisions ............... 11,575 6 (2) 11,579
Other debt securities .......... 4,344 53 (11) 4,386
Equity securities .............. 52,730 5,088 (290) 57,528
-------- ------ ------- --------
$650,422 $8,800 $(3,730) $655,492
======== ====== ======= ========
December 31, 1996
---------------------------------------------
Gross Unrealized Estimated
Amortized ------------------ Market
Cost Gains (Losses) Value
--------- ------ -------- --------
HELD TO MATURITY
U.S. Government ................ $ 76,837 $ 326 $ (21) $ 77,142
U.S. Government
agencies ..................... 204,077 1,508 (3,117) 202,468
-------- ------ ------- --------
$280,914 $1,834 $(3,138) $279,610
======== ====== ======= ========
6
<PAGE>
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. All
dollar amounts, other than per share information, are presented in thousands
unless otherwise noted.
The financial statements for the comparative periods presented herein have been
restated to reflect the acquisitions that have been accounted for on the
pooling-of-interests accounting method during the periods presented herein.
Growth Financial Corporation was acquired on January 12, 1996, Lafayette
American Bank and Trust Company was acquired on July 1, 1996 and Westport
Bancorp, Inc. was acquired on December 13, 1996. These acquisitions were
accounted for on a pooling-of-interests method, and accordingly, the
consolidated financial statements have been restated to include the accounts of
these institutions for all periods presented. All share data has been
retroactively restated to reflect the shares issued in the aforementioned
transactions including restatement of all prior periods. In addition, the
Company acquired Hometown Bancorporation on August 30, 1996, UST
Bank/Connecticut on November 29, 1996, three branches from CrossLand Federal
Savings Bank on February 29, 1996, and a branch from Interchange State
Bank on December 20, 1996. These acquisitions were accounted for on the purchase
method and thus operations and earnings are reflected in the Company's results
subsequent to the dates of acquisition. The balance sheet and income statement
comparisons are influenced by these purchase transactions.
RESULTS OF OPERATIONS
OVERVIEW
Net income for the three-month period ended June 30, 1997 was $12.0 million, an
increase of 56% when compared to net income of $7.7 million for the three-month
period ended June 30, 1996. Earnings per share was $.53 for the second quarter
of 1997, an increase of 61% when compared to $.33 for the same period in 1996.
Return on average equity and return on average assets were 23.65% and 1.62%,
respectively, for the three-month period ended June 30, 1997 compared to 15.05%
and 1.12%, respectively, for the same period in 1996.
Net income for the six-month period ended June 30, 1997 was $23.5 million or
$1.03 per share, an increase of 51% per share when compared to $16.0 million or
$0.68 per share for the same period in 1996. Return on average equity and return
on average assets were 22.85% and 1.56%, respectively, for the six-month period
ended June 30, 1997 compared to 15.64% and 1.16%, respectively, for the same
period in 1996.
NET INTEREST INCOME
Net interest income for the three-month and six-month periods ended June 30,
1997 was $36.2 million and $70.4 million compared to $32.7 million and $65.0
million for the same periods in 1996. This represents an increase of $3.5
million or 11% for the three-month period and an increase of $5.4 million or 8%
for the six-month period. The net interest margin for the three-month and
six-month periods ended June 30, 1997 was 5.36% and 5.14%, respectively,
compared to 5.19% and 5.21%, respectively, for the same periods in 1996.
7
<PAGE>
Interest income for the six-month period ended June 30, 1997 compared to the
same period in 1996, increased $10.9 million, or 11% while interest expense
increased $5.5 million, or 16%. The increased interest expense was primarily
attributable to the $75.0 million of 8.20% subordinated debt which was issued in
September 1996 and the $50.0 million of 8.98% capital trust securities
issued in January 1997, as well as an increase of $93.1 million in average
short-term borrowings.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses for the three-month and six-month periods
ended June 30, 1997 was $1.6 million and $3.1 million compared to $2.7 million
and $5.0 million in 1996. The reduction in the provision for possible loan
losses is a reflection of, among other factors, the improved levels of
non-performing assets. The improved levels of non-performing assets. The Company
performs an evaluation of the adequacy of the allowance for loan losses each
quarter. The results of this analysis and the expectation of potential credit
losses and economic conditions are some of the factors which determine the
required quarterly provision. In connection with a purchase of approximately
$30.0 million of credit card receivables by Shoppers Charge in May 1997, an
allowance for potential credit losses of $2.4 million was also acquired.
Management believes that the allowance at June 30, 1997 of $37.3 million, or
2.03% of total loans and 125% of non-performing loans, is adequate. Comparative
ratios for June 30, 1996 and December 31, 1996 are 1.83% and 92% and 1.87% and
111%, respectively.
Non-performing assets as a percentage of total assets at June 30, 1997 was 1.09%
compared to 1.20% at December 31, 1996. The following table presents the
composition of non-performing assets and loans past due 90 days or more and
accruing and selected asset quality ratios at the dates indicated:
ASSET QUALITY SCHEDULE
(In Thousands)
------------------------
6/30/97 12/31/96
------- --------
Non-Accrual Loans:
Commercial ................................... $10,120 $10,212
Real Estate .................................. 17,895 17,299
Consumer ..................................... 1,065 1,518
------- -------
Total Non-Accrual Loans ................. 29,080 29,029
Renegotiated Loans ............................. 863 2,779
------- -------
Total Non-Performing Loans .............. 29,943 31,808
Other Real Estate .............................. 2,824 5,651
------- -------
Total Non-Performing Assets ............. $32,767 $37,459
======= =======
Non-Accrual Loans to
Total Loans .................................. 1.58% 1.54%
Non-Performing Assets to
Total Assets ................................. 1.09 1.20
Allowance for Loan Losses
to Non-Accrual Loans ........................ 128.20 121.10
Allowance for Loan Losses
to Non-Performing Loans ..................... 124.51 110.51
Loans Past Due 90 Days or
More and Accruing:
Commercial ................................. $ 3,577 $ 2,921
Real Estate ................................ 2,957 3,292
Consumer ................................... 1,562 832
Credit Cards ............................... 1,572 1,486
------- -------
Total Past Due Loans .................... $ 9,668 $ 8,531
======= =======
8
<PAGE>
The following table presents the activity in the allowance for possible loan
losses for the periods indicated:
Summary of Activity
in the Allowance
Broken Down by Loan Category
-------------------------------
Six Months Ended Year Ended
6/30/97 12/31/96
---------------- ----------
(In Thousands of Dollars)
Amount of Loans Outstanding .................. $1,835,905 $1,884,355
Daily Average Amount of Loans ................ $1,849,079 $1,723,335
Balance of Allowance for
Possible Loan Losses at
Beginning of Period ........................ $ 35,153 $ 30,105
Loans Charged Off:
Real Estate -- Mortgage .................. (1,096) (4,580)
Commercial ............................... (2,319) (6,477)
Consumer ................................. (2,062) (3,164)
---------- ----------
Total Loans Charged Off ............... (5,477) (14,221)
---------- ----------
Recoveries of Loans Previously
Charged Off:
Real Estate - Mortgage ................... 221 776
Commercial ............................... 1,252 469
Consumer ................................. 630 1,071
---------- ----------
Total Recoveries ...................... 2,103 2,316
---------- ----------
Net Loans Charged Off ........................ (3,374) (11,905)
Reserves Acquired in Purchase Transaction .... 2,400 4,658
Provision for Possible Loan Losses ........... 3,102 12,295
---------- ----------
Balance at End of Period ..................... $ 37,281 $ 35,153
========== ==========
Ratio of Annualized Net Loans Charged-Off
During Period to Average
Loans Outstanding .......................... .36% .69%
==== ====
Non-interest income increased 23% or $1.8 million from $7.9 million for the
second quarter of 1996 to $9.7 million the same period in 1997, and increased
26% or $3.8 million from $14.7 milliom for the six-months ended June 30, 1996 to
$18.5 million for the same period in 1997. This increase in non-interest income
from 1996 to 1997 relates primarily to increased trust services revenue,
security gains, international fees, fees on shoppers charge and other
miscellaneous income.
Non-interest expense decreased $1.0 million or 4% from $25.1 million for the
second quarter of 1996 to $24.1 million for the second quarter of 1997, and
decreased $1.4 million or 3% from $48.5 million for the six-months ended June
30, 1996 to $47.1 million for the same period in 1997. Reductions were realized
for the three-months and six-months ended June 30, 1997 in salaries, occupancy
expense, other real estate owned expense and other expenses. These reductions
are primarily a result of the full effect of cost savings initiatives following
the Lafayette and Hometown acquisitions in July and August 1996,
9
<PAGE>
along with the cost reductions which have been fully realized during this second
quarter of 1997, related to the UST acquisition in November 1996 and its
computer conversion in March 1997 and the Westport acquisition in December 1996.
Increases for the three-month and six-month periods ended June 30, 1997 compared
to the same period in 1996 occurred in outside services which increased $1.2
million and $2.0 million, respectively, related to payments for computer
processing and other data processing services and amortization of intangibles
which increased $522 and $1.2 million, respectively, due to the acquisitions of
Hometown and UST/Bank Connecticut in the second half of 1996, which were
accounted for under the purchase method of accounting and are being amortized
over a 10 year period.
The Company's effective tax rate for the three-month and six-month periods ended
June 30, 1997 was 40.3% and 39.2%, respectively. This compares with an effective
tax rate for the comparable periods in 1996 of 38.9% and 38.7%. The slight
increase in the effective tax rate is primarily due to the increase in
non-deductible intangibles as a result of the recent acquisitions.
FINANCIAL CONDITION
Total assets at June 30, 1997, were $3.00 billion, a decrease of $113.9 million
or 3.6% from $3.12 billion of assets at December 31, 1996, as restated for all
poolings. The securities portfolio has decreased 7% or $62.0 million from $936.4
million at December 31, 1996 to $874.4 million at June 30, 1997 due primarily to
maturities and principal repayments. Total Loans decreased $48.4 million, or 3%
to $1.84 billion at June 30, 1997 from $1.88 billion at December 31, 1996
reflecting declines in residential mortgage loans where most new originations
are being sold and consumer credit loans where indirect lending has been phased
out. The Shoppers Charge receivables increased $23.6 million from December 31,
1996 to June 30, 1997 due to the purchase of credit card receivables in early
May 1997. Shoppers Charge purchased approximately $30 million of receivables
along with a $2.4 million allowance for possible loan losses. Other real estate
owned decreased $2.8 million or 50% from $5.6 million at December 31, 1996 to
$2.8 million at June 30, 1997 as management continues to focus on asset quality.
Intangibles, net of amortization, decreased from $29.2 million at December 31,
1996 to $26.8 million at June 30, 1997 as the intangibles related to
acquisitions are amortized over periods ranging from 5 to 10 years.
Deposits decreased 9% from $2.59 billion at December 31, 1996, to $2.37 billion
at June 30, 1997. The Company generally anticipates deposit shrinkage following
acquisitions as the rates on deposits of the acquired companies are conformed to
rates generally offered by the Company. Total borrowings increased $45.3 million
from $188.0 million at December 31, 1996 to $233.3 million at June 30, 1997.
This increase is due primarily to an increase in short-term advances from the
Federal Home Loan Bank. Total stockholders' equity at June 30, 1997 was $211.7
million compared to $206.3 million at December 31, 1996. The increase in
stockholders' equity is primarily attributable to $23.5 million in earnings for
the six-month period offset by $8.6 million of cash dividends, the change in the
unrealized gain on securities available for sale of $1.3 million, and the
purchase of $10.2 million in treasury shares to fund the exercise of stock
options and Warrants along with the conversion of some convertible preferred
stock.
On January 31, 1997, the Company placed $50.0 million in aggregate liquidation
amount of 8.98% Capital Securities due February 2027, using HUBCO Capital Trust
I, a statutory business trust formed under the laws of the State of Delaware.
The net proceeds are being used for general corporate purposes and
to increase capital levels of the Company and its subsidiaries. The securities
qualify as Tier I capital under the capital guidelines of the Federal Reserve.
10
<PAGE>
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 the Company at June 30, 1997,
and the minimum regulatory guidelines for such capital ratios are as follows:
Ratios at Regulatory
June 30, 1997 Guidelines*
------------- -----------
Tier I Risk-Based Capital .......... 11.7% 6.0%
Total Risk-Based Capital ........... 18.2% 10.0%
Tier 1 Leverage Ratio .............. 7.7% 5.0%
- ----------
* For qualification as a well-capitalized institution.
11
<PAGE>
PART II. OTHER INFORMATION
Items 1 through 3 are not applicable or the responses are negative
Item 4:
(a) The Annual Meeting of shareholders of HUBCO, Inc. was held on April 18,
1997.
(b) The names of the directors who are nominees for election for the 1997
Annual Meeting and the names of the directors whose terms extend beyond the
1997 Annual Meeting are set forth in the tables below.
Nominees for 1997 Annual Meeting:
Robert J. Burke Donald P. Calcagnini
Thomas R. Farley Robert B. Goldstein
Charles F.X. Poggi David A. Rosow
John H. Tatigian
Directors whose terms extend beyond this Annual Meeting:
Joan David Bryant D. Malcolm
W. Peter McBride Sister Grace Frances Strauber
James E. Schierloh Kenneth T. Neilson, Chairman,
President and CEO
(c) The following is a brief description as well as the tabulation of votes for
each of the matters which were voted upon at the 1997 Annual Meeting.
1. Election of the following seven persons as directors of HUBCO.
For Authority Withheld
--- -----------------
Robert J. Burke 18,936,659 91,455
Donald P. Calcagnini 18,925,794 102,230
Thomas R. Farley 18,934,268 93,757
Robert B. Goldstein 18,923,419 104,605
Charles F.X. Poggi 18,936,659 91,455
David A. Rosow 18,929,147 98,877
John H. Tatigian 18,936,659 91,455
(d) not applicable
Item 5: Not applicable
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
(3)(i) 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,
1995, Exhibit (3b).
(b) not applicable
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUBCO, Inc.
August 14, 1997 /s/ KENNETH T. NEILSON
- ----------------------------------- --------------------------------------
Date Kenneth T. Neilson
Chairman, President & Chief
Executive Officer
August 14, 1997 /s/ JOSEPH F. HURLEY
- ----------------------------------- --------------------------------------
Date Joseph F. Hurley
Executive Vice President &
Chief Financial Officer
13
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 167,539
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 633,471
<INVESTMENTS-CARRYING> 240,923
<INVESTMENTS-MARKET> 241,406
<LOANS> 1,835,905
<ALLOWANCE> 37,281
<TOTAL-ASSETS> 3,001,823
<DEPOSITS> 2,368,261
<SHORT-TERM> 233,320
<LIABILITIES-OTHER> 38,521
<LONG-TERM> 150,000
0
3,585
<COMMON> 38,448
<OTHER-SE> 169,688
<TOTAL-LIABILITIES-AND-EQUITY> 3,001,823
<INTEREST-LOAN> 80,294
<INTEREST-INVEST> 29,913
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<INTEREST-EXPENSE> 12,225
<INTEREST-INCOME-NET> 70,440
<LOAN-LOSSES> 3,102
<SECURITIES-GAINS> 3,121
<EXPENSE-OTHER> 47,138
<INCOME-PRETAX> 38,699
<INCOME-PRE-EXTRAORDINARY> 38,699
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,525
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
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<LOANS-NON> 29,080
<LOANS-PAST> 9,668
<LOANS-TROUBLED> 863
<LOANS-PROBLEM> 29,943
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