================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM l0-Q
--------
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
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 0-0l0699
HUBCO, INC.
------------------------------------------------------
(Exact name of registrant as specified in its Charter)
NEW JERSEY 22-2405746
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
1000 MACARTHUR BLVD.
MAHWAH, NEW JERSEY 07430
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(201)-236-2600
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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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: 40,344,816 shares, no par value,
outstanding as of November 12, 1998.
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<PAGE>
HUBCO, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets
At September 30, 1998 and December 31, 1997..................... 1
Consolidated Statements of Income
For the three-months and nine-months ended
September 30, 1998 and 1997..................................... 2-3
Consolidated Statements of Comprehensive Income
For the three-months and nine-months ended
September 30, 1998 and 1997..................................... 4
Consolidated Statements of Changes in Stockholders' Equity
For the nine-months ended
September 30, 1998 and for the Year ended December 31, 1997..... 5
Consolidated Statements of Cash Flows
For the nine-months ended
September 30, 1998 and 1997..................................... 6
Notes to Consolidated Financial Statements...................... 7-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................... 13-19
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8K................................. 20
Signatures...................................................... 21
PART III. FINANCIAL DATA SCHEDULE........................................ 22
<PAGE>
<TABLE>
<CAPTION>
HUBCO, Inc. and Subsidiaries
- -------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS (Unaudited)
SEPTEMBER 30, December 31,
(in thousands, except share data) 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 219,818 $ 240,229
Federal funds sold 64,345 277,930
----------- -----------
TOTAL CASH AND CASH EQUIVALENTS 284,163 518,159
Securities available for sale, at market value 2,141,855 1,499,306
Securities held to maturity, at cost (market value of $550,092
and $772,740 for 1998 and 1997, respectively) 544,342 764,831
Assets held for sale 31,036 --
Loans:
Real estate mortgage 2,340,998 2,519,529
Commercial and financial 636,868 640,930
Consumer credit 379,962 348,555
Credit card 79,355 91,047
----------- -----------
TOTAL LOANS 3,437,183 3,600,061
Less: Allowance for possible loan losses (53,527) (65,858)
----------- -----------
NET LOANS 3,383,656 3,534,203
Premises and equipment, net 85,819 82,511
Other real estate owned -- 11,483
Intangibles, net of amortization 81,868 55,573
Other assets 124,272 140,074
----------- -----------
TOTAL ASSETS $ 6,677,011 $ 6,606,140
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 863,760 $ 831,579
Interest bearing 4,344,571 4,421,377
----------- -----------
TOTAL DEPOSITS 5,208,331 5,252,956
Borrowed funds 765,968 626,405
Other liabilities 51,027 69,678
----------- -----------
TOTAL LIABILITIES 6,025,326 5,949,039
Subordinated debt 100,000 100,000
Company-obligated mandatorily redeemable preferred series B
capital securities of two subsidiary trusts holding solely
junior subordinated debentures of the Company 100,000 50,000
Stockholders' Equity:
Convertible preferred stock - Series B, no par value; authorized
10,300,000 shares; 500 shares issued and outstanding
in 1998; 1,250 shares issued and outstanding in 1997 50 125
Common stock, no par value; authorized 53,045,000 shares;
40,633,204 shares issued and 40,498,892 shares outstanding
in 1998; and 42,607,964 shares issued and 41,602,118 shares
outstanding in 1997 72,246 73,269
Additional paid-in capital 270,981 292,198
Retained earnings 100,121 164,612
Treasury stock, at cost, 134,312 shares in 1998
and 1,005,844 shares in 1997 (4,885) (19,133)
Employee stock awards and unallocated shares
held by ESOP, at cost (2,685) (9,609)
Unrealized gain on securities available
for sale, net of income taxes 15,857 5,639
----------- ------------
TOTAL STOCKHOLDERS' EQUITY 451,685 507,101
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,677,011 $ 6,606,140
=========== ===========
See notes to consolidated financial statements.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
HUBCO, Inc. and Subsidiaries
- ----------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the Three-Months Ended September 30,
(in thousands, except share data) 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C>
INTEREST AND FEE INCOME:
Loans $ 75,034 $ 77,326
Securities 42,552 39,796
Other 3,189 1,506
---------- -----------
TOTAL INTEREST AND FEE INCOME 120,775 118,628
---------- -----------
INTEREST EXPENSE:
Deposits 40,874 44,023
Borrowed funds 11,298 6,556
Subordinated and other debt 4,162 3,028
---------- -----------
TOTAL INTEREST EXPENSE 56,334 53,607
---------- -----------
NET INTEREST INCOME 64,441 65,021
PROVISION FOR POSSIBLE LOAN LOSSES 2,791 3,000
---------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 61,650 62,021
---------- -----------
NONINTEREST INCOME:
Trust department income 769 766
Service charges on deposit accounts 5,445 5,849
Securities gains 16 2,538
Loss on assets held for sale (23,303) --
Shoppers Charge fee income 2,959 2,658
Other income 4,328 2,528
---------- -----------
TOTAL NONINTEREST INCOME (9,786) 14,339
---------- -----------
NONINTEREST EXPENSE:
Salaries 14,567 15,407
Pension and other employee benefits 3,712 5,154
Occupancy expense 4,153 3,933
Equipment expense 2,419 2,795
Deposit and other insurance 706 678
Outside services 6,295 6,178
Other real estate owned expense 472 1,072
Amortization of intangibles 3,094 2,195
Other expense 4,439 6,621
Merger related and restructuring costs 38,529 58
---------- -----------
TOTAL NONINTEREST EXPENSE 78,386 44,091
---------- -----------
(LOSS)/INCOME BEFORE INCOME TAXES (26,522) 32,269
(BENEFIT)/PROVISION FOR INCOME TAXES (6,389) 12,860
---------- -----------
NET(LOSS)/ INCOME $ (20,133) $ 19,409
========== ===========
NET (LOSS)/INCOME PER SHARE:
Basic $ (0.50) $ 0.47
Diluted $ (0.50) $ 0.44
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 40,358 41,210
Diluted 40,358 43,673
See notes to consolidated financial statements.
</TABLE>
2
<PAGE>
HUBCO, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the Nine-Months Ended September 30,
(in thousands, except share data) 1998 1997
- -------------------------------------------------------------------------------
INTEREST AND FEE INCOME:
Loans $226,599 $229,778
Securities 120,347 120,516
Other 7,206 3,637
-------- --------
TOTAL INTEREST AND FEE INCOME 354,152 353,931
-------- --------
INTEREST EXPENSE:
Deposits 125,344 131,267
Borrowed funds 27,275 21,248
Subordinated and other debt 10,689 9,049
-------- --------
TOTAL INTEREST EXPENSE 163,308 161,564
-------- --------
NET INTEREST INCOME 190,844 192,367
PROVISION FOR POSSIBLE LOAN LOSSES 11,890 7,964
-------- --------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 178,954 184,403
-------- --------
NONINTEREST INCOME:
Trust department income 2,498 2,313
Service charges on deposit accounts 15,981 17,106
Securities gains 3,187 5,704
Loss on assets held for sale (23,303) -
Shoppers Charge fee income 8,521 6,019
Other income 12,291 7,393
-------- --------
TOTAL NONINTEREST INCOME 19,175 38,535
-------- --------
NONINTEREST EXPENSE:
Salaries 44,437 46,663
Pension and other employee benefits 15,129 15,981
Occupancy expense 12,499 11,957
Equipment expense 7,873 8,057
Deposit and other insurance 1,920 2,390
Outside services 19,597 19,027
Other real estate owned expense 1,696 2,692
Amortization of intangibles 7,928 6,745
Other expense 14,935 18,087
Merger related and restructuring costs 66,376 179
-------- --------
TOTAL NONINTEREST EXPENSE 192,390 131,778
-------- --------
(LOSS)/INCOME BEFORE INCOME TAXES 5,739 91,160
PROVISION FOR INCOME TAXES 6,388 36,188
-------- --------
NET (LOSS)/INCOME $ (649) $ 54,972
======== ========
NET (LOSS)/INCOME PER SHARE:
Basic $ (0.02) $ 1.31
Diluted $ (0.02) $ 1.25
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 40,725 41,431
Diluted 40,725 43,905
See notes to consolidated financial statements.
3
<PAGE>
HUBCO, Inc. and Subsidiaries
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
THREE MONTHS ENDED
----------------------------
September 30,
----------------------------
(In thousands) 1998 1997
- --------------------------------------------------------------------------------
NET (LOSS)/INCOME $ (20,133) $ 19,409
========== ========
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Unrealized holding gains arising during period $ 11,168 $ 11,565
Less: reclassification adjustment for gains
included in net income (10) (1,527)
---------- --------
Other comprehensive income 11,158 10,038
---------- --------
COMPREHENSIVE (LOSS)/INCOME $ (8,975) $ 29,447
========== ========
NINE MONTHS ENDED
----------------------------
September 30,
----------------------------
(In thousands) 1998 1997
- --------------------------------------------------------------------------------
NET (LOSS)/INCOME $ (649) $ 54,972
---------- ---------
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Unrealized holding gains arising during period $ 12,242 $ 13,480
Less: reclassification adjustment for gains
included in net income (2,024 (3,440)
---------- ---------
Other comprehensive income 10,218 10,040
========== =========
COMPREHENSIVE INCOME $ 9,569 $ 65,012
========== =========
See notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
HUBCO, INC. and Subsidiaries
- ------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
(in thousands)
Employee
Stock
Awards
and
Unallocate Unrealized
Convertible Shares Gain(loss)
Preferred Stock Common Stock Additional Held on Securities
-------------------------------- Paid-in- Retained Treasury in ESOP, Available for
Shares Amount Shares Amount Capital Earnings Stock at Cost Sale Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 39,600 $3,960 40,837,159 $72,609 $324,322 $168,003 $(21,195) $(11,980) $(2,356) $533,363
- ------------------------------------------------------------------------------------------------------------------------------------
Net income -- -- -- -- -- 69,827 -- -- -- 69,827
Cash dividends paid:
Common -- -- -- (27,508) -- -- -- (27,508)
Preferred -- -- -- -- -- (650) -- -- -- (650)
3% stock dividend -- -- 321,046 570 9,859 (45,066) 34,723 -- -- 86
Issuance of common stock
for:
Stock options exercised -- -- 47,325 84 (6,296) -- 10,074 -- -- 3,862
Warrants exercised -- -- -- -- (48) -- 65 -- -- 17
Dividend reinvestment
and stock purchase plan -- -- 3,444 6 77 -- -- -- -- 83
Preferred stock
conversion (38,350) (3,835) -- -- (36,513) -- 40,348 -- -- --
Cash in lieu of
fractional shares -- -- -- -- (97) -- -- -- -- (97)
Purchase of treasury stock -- -- -- -- -- -- (83,448) -- -- (83,448)
Effect of compensation
plans -- -- -- -- 894 6 300 2,371 3,571
Change in unrealized
gain(loss) on
securities available
for sale -- -- -- -- -- -- -- -- 7,995 7,995
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 1,250 $ 125 41,208,974 $73,269 $292,198 $164,612 $(19,133) $ (9,609) $5,639 $507,101
- ------------------------------------------------------------------------------------------------------------------------------------
Net income -- -- -- -- -- (649) -- -- -- (649)
IBSF fiscal year
adjustment -- -- -- -- -- 1,539 -- -- -- 1,539
Cash dividends
paid-common -- -- -- -- -- (24,547) -- -- -- (24,547)
3% Stock Dividend -- -- 40,213 72 (709) (40,797) 41,434 -- -- --
Issuance of common stock
for:
Stock options exercised -- -- 330,684 588 (1,521) -- 6,526 -- -- 5,593
Warrants exercised -- -- 7,158 13 (25) -- 77 -- -- 65
Preferred stock
conversion (750) (75) 16,608 30 (130) -- 175 -- -- --
Cash in lieu of
fractional shares -- -- -- -- (175) -- -- -- -- (175)
Other transactions -- -- 3,750 7 (9) (37) -- -- -- (39)
Purchase of treasury stock -- -- -- -- -- -- (56,938) -- -- (56,938)
Issue & Retirement of
Treasury Stock -- -- (989,058) (1,759) (18,930) -- 20,689 -- -- --
Effect of compensation
plans -- -- 14,875 26 282 -- 2,285 6,924 -- 9,517
Change in unrealized
gain/(loss) on
securities available
for sale -- -- -- -- -- -- -- -- 10,218 10,218
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September30, 1998 500 $ 50 40,633,204 $72,246 $270,981 $100,121 $(4,885) $(2,685) $15,857 $451,685
- ------------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
HUBCO, INC. and Subsidiaries
- -------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands) NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1998 1997
---- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ (649) $ 54,972
Adjustments to reconcile net income to net
cash provided by operating activities:
IBSF Fiscal Year Adjustment 1,539 --
Provision for possible loan losses 11,890 8,229
Provision for depreciation and amortization 14,477 13,340
Amortization of security premiums, net 1,130 1,206
Securities gains (3,187) (5,704)
Loss/(Gain) on sale of premises and equipment 540 (154)
Gain on sale of loans (2,115) (94)
Loss on assets held for sale 23,303 --
Market adjustment on ESOP 728 604
MRP earned 2,809 907
Deferred income tax provision -- 7,106
Net change in loans originated for sale (31,036) (1,150)
Decrease in other assets 13,691 15,460
(Decrease) in other liabilities (21,571) (8,095)
-------------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 11,549 86,627
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities:
Available for sale 269,616 235,579
Proceeds from repayments and maturities of securities:
Available for sale 676,114 211,314
Held to maturity 421,233 156,927
Purchase of securities:
Available for sale (1,441,504) (591,785)
Held to maturity (305,435) (66,930)
Net cash acquired through acquisitions 231,661 --
Loan originations net of repayments 79,456 (4,840)
Proceeds from sales of premises and equipment 25 107
Proceeds from sales of loans 89,147 41,590
Purchases of premises and equipment (5,127) (8,417)
Decrease in other real estate 8,347 7,308
-------------- ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 23,533 (19,147)
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease)/increase in demand deposits, NOW accounts,
and savings accounts (198,448) 52,597
Net decrease in certificates of deposits (188,554) (176,694)
Net increase in borrowed funds 139,220 159,497
Net proceeds from issuance of debt securities 48,737 49,250
Repayment of ESOP loan 853 622
Proceeds from issuance of common stock 5,658 3,348
Termination of ESOP plan 4,941 --
Cash dividends (24,547) (21,248)
Acquisition of treasury stock (56,938) (44,406)
-------------- ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (269,078) 22,966
-------------- ------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (233,996) 90,446
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 518,159 278,027
============== ============
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 284,163 $ 368,473
============== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest $ 168,741 $ 142,632
Income Taxes 26,081 21,642
============== ============
See notes to consolidated financial statements.
6
</TABLE>
<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"), Lafayette
American Bank ("Lafayette"), Bank of the Hudson ("BOTH"), HUBCO Capital Trust I
and HUBCO Capital Trust II. 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-KA filed with the Commission on August 14, 1998,
for the year ended December 31, 1997 and the current report on Form 8-K filed
with the Commission on November 6, 1998 which restated HUBCO's consolidated
financial statements for the year ended December 31, 1997 to take into account
the completion of the mergers of Bank of Southington, Pougkeepsie Financial
Corp., MSB Bancorp, IBS Financial, Community Financial Holding Corporation,
and Dime Financial Corporation (see Note C).
NOTE B -- EARNINGS PER SHARE
In the fourth quarter of 1997, the Company adopted SFAS No. 128, "Earnings per
Share." This statement establishes standards for computing and presenting
earnings per share and requires dual presentation of basic and diluted earnings
per share. Basic earnings per 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 period. Diluted earnings 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 incremental number of shares issuable from the exercise of stock options,
stock warrants, and includes the impact of the Management Recognition Plan
("MRP"), calculated using the treasury stock method. All per share amounts have
been retroactively restated to reflect all stock splits and stock dividends. All
prior periods presented have been restated in this new format.
7
<PAGE>
A reconciliation of net income to net income available to common stockholders
and of weighted average common shares outstanding to weighted average shares
outstanding assuming dilution follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended September 30,
- -------------------------------------------------------------------------------------
1998(1) 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
BASIC EARNINGS PER SHARE
Net (Loss)/Income $ (20,133) $ 19,409
Less Preferred Stock Dividends -- 215
---------------------------------
Net (Loss)/Income Available To Common Stockholders (20,133) 19,194
Weighted Average Common Shares Outstanding 40,358 41,210
Basic (Loss)/Earnings Per Share $ (0.50) $ 0.47
=================================
DILUTED EARNINGS PER SHARE
Net (Loss)/Income $ (20,133) $ 19,409
Weighted Average Common Shares Outstanding 40,358 41,210
Effect Of Dilutive Securities:
Convertible Preferred Stock -- 1,192
Warrants -- 27
Unearned MRP -- 152
Stock Options -- 1,092
---------------------------------
Total Weighted Average Common Shares Outstanding
Assuming Dilution 40,358 43,673
Diluted (Loss)/Earnings Per Share $ (0.50) $ 0.44
=================================
Nine Months Ended September 30,
- -------------------------------------------------------------------------------------
1998(1) 1997
- -------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE
Net (Loss)/Income $ (649) $ 54,972
Less Preferred Stock Dividends - 650
---------------------------------
Net (Loss)/Income Available To Common Stockholders (649) 54,322
Weighted Average Common Shares Outstanding 40,725 41,431
Basic (Loss)/Earnings Per Share $ (0.02) $ 1.31
=================================
DILUTED EARNINGS PER SHARE
Net(Loss)/Income $ (649) $ 54,972
Weighted Average Common Shares Outstanding 40,725 41,431
Effect Of Dilutive Securities:
Convertible Preferred Stock -- 1,266
Warrants -- 26
Unearned MRP -- 182
Stock Options -- 1,000
---------------------------------
Total Weighted Average Common Shares Outstanding
Assuming Dilution 40,725 43,905
Diluted (Loss)/Earnings Per Share $ (0.02) $ 1.25
=================================
- ----------
(1) As a result of the net loss in the three and nine-month periods of 1998,
there is no effect of dilutive securities on earnings per share.
</TABLE>
8
<PAGE>
NOTE C -- ACQUISITIONS
On January 8, 1998, the Company acquired The Bank of Southington ("BOS"), and
merged it into Lafayette. BOS was a $135 million asset state bank and trust
company with 3 branch locations, headquartered in Southington, Connecticut. In
the merger, each share of BOS common stock was converted into .637 shares of
HUBCO common stock for a total of 778,027 shares. The acquisition was treated as
a pooling of interests for accounting purposes. The financial statements have
been restated to include BOS for all periods presented.
On February 5, 1998, the Company acquired Security National Bank & Trust Company
of New Jersey ("SNB"), and merged it into Hudson United. Security was a $86
million asset bank and trust company with 4 branch locations, headquartered in
Newark, New Jersey. In the merger, shareholders of SNB received $34.00 in cash
for each share of SNB common stock. The merger was accounted for under the
purchase method of accounting and therefore, SNB's results of operations have
been included in the accompanying financial statements subsequent to February 5,
1998.
On April 24, 1998, the Company completed its acquisition of Poughkeepsie
Financial Corp. ("PFC"). PFC's wholly-owned subsidiary, Bank of the Hudson
became HUBCO's New York-based bank subsidiary. In the merger, each share of PFC
common stock was converted into .309 shares of HUBCO common stock for a total of
3,957,160 shares. PFC had $875 million in assets and was treated as a pooling of
interests for accounting purposes. The financial statements have been restated
to include PFC for all periods presented.
On May 29, 1998, the Company completed its acquisition of MSB Bancorp ("MSB"),
and merged MSB Bank, MSB's wholly-owned subsidiary into Bank of the Hudson. In
the merger, each share of MSB common stock was converted into 1.052 shares of
HUBCO common stock for a total of 2,933,818 shares. MSB had $765 million in
assets and was treated as a pooling of interests for accounting purposes. The
financial statements have been restated to include MSB for all periods
presented.
On June 25, 1998, the Company completed its acquisition of 21 branches of First
Union National Bank located in New Jersey and Connecticut with deposits of
approximately $243 million, in the aggregate. On July 24, 1998, the Company
completed its acquisition of 2 branches of First Union National Bank located in
New York with deposits of approximately $25 million, in the aggregate. These
acquisitions were accounted for under the purchase method of accounting.
On August 14, 1998, the Company completed its acquisition of IBS Financial
("IBS"). IBS was merged into HUBCO and IBS's wholly-owned subsidiary was merged
into Hudson United. In the merger each share of IBS common stock was converted
into .550 shares of HUBCO common stock for a total of 5,946,880 shares. IBS had
$734 million in assets and was treated as a pooling of interests for accounting
purposes. The financial statements have been restated to include IBS for all
periods presented. The fiscal year for IBS Financial ended on September 30,
1997. The net income for IBS Financial's calendar fourth quarter of 1997 is
included as an adjustment to HUBCO's retained earnings.
On August 14, 1998, the Company completed its acquisition of Community Financial
Holding Corporation ("CFHC"). CFHC was merged into HUBCO and CFHC's wholly-owned
subsidiary was merged into Hudson United. In the merger each share of CFHC
common stock was converted into .716 shares of HUBCO common stock for a total of
766,144 shares. CFHC had $150 million in assets and was treated as a pooling of
interests for accounting purposes. The financial statements have been restated
to include CFHC for all periods presented.
On August 21, 1998, the Company completed its acquisition of Dime Financial
Corporation ("DFC"). DFC was merged into HUBCO and DFC's wholly-owned subsidiary
into Lafayette. In the merger each share of DFC common stock was converted into
1.0815 shares of HUBCO common stock for a total of 5,221,614 shares. DFC had
$961 million in assets and was treated as a pooling interests for accounting
purposes. The financial statements have been restated to include DFC for all
periods presented.
9
<PAGE>
NOTE D -- 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:
September 30, 1998
--------------------------------------------------
Gross Unrealized Estimated
Amortized ----------------------- Market
Cost Gains (Losses) Value
------------ ------------------------ -----------
AVAILABLE FOR SALE
U.S. Government $89,000 $ 1,578 $ (12) $ 90,566
U.S. Government
agencies 398,455 4,258 (766) 401,947
Mortgage-backed
securities 1,302,777 18,412 (3,380) 1,317,809
States and political
subdivisions 13,266 104 (39) 13,331
Other debt securities 240,437 2,503 (23) 242,917
Equity securities 74,104 1,453 (272) 75,285
------------ ----------- ----------- -----------
$2,118,039 $28,308 $(4,492) $2,141,855
============ =========== =========== ===========
September 30, 1998
--------------------------------------------------
Gross Unrealized Estimated
Amortized ----------------------- Market
Cost Gains (Losses) Value
------------ ------------------------ -----------
HELD TO MATURITY
U.S. Government $ 45,295 $ 590 $ (1) $ 45,884
U.S. Government
agencies 78,734 2,243 (411) 80,566
Mortgage-backed
securities 391,203 3,508 (442) 394,269
States and political
subdivisions 18,550 147 (33) 18,664
Other debt securities 10,560 149 - 10,709
============ =========== =========== ===========
$544,342 $6,637 $(887) $550,092
============ =========== =========== ===========
10
<PAGE>
NOTE D -- SECURITIES (CONTINUED)
December 31, 1997
--------------------------------------------------
Gross Unrealized Estimated
Amortized ----------------------- Market
Cost Gains (Losses) Value
------------ ------------------------ -----------
AVAILABLE FOR SALE
U.S. Government $ 110,485 $ 890 $ (340) $ 111,035
U.S. Government
agencies 274,555 1,745 (301) 275,999
Mortgage-backed
securities 1,016,627 5,292 (3,028) 1,018,891
States and political
subdivisions 10,619 59 (26) 10,652
Other debt securities 41,850 306 (8) 42,148
Equity securities 35,718 4,925 (62) 40,581
-----------
============ =========== =========== ===========
$1,489,854 $13,217 $(3,765) $1,499,306
============ =========== =========== ===========
December 31, 1997
--------------------------------------------------
Gross Unrealized Estimated
Amortized ----------------------- Market
Cost Gains (Losses) Value
------------ ------------------------ -----------
HELD TO MATURITY
U.S. Government $ 45,585 $ 611 $ -- $ 46,196
U.S. Government
agencies 266,066 1,799 (480) 267,385
State and political
subdivisions 10,981 89 -- 11,070
Mortgage-backed
securities 442,199 7,827 (1,937) 448,089
============ =========== =========== ===========
$ 764,831 $10,326 $ (2,417) $ 772,740
============ =========== =========== ===========
NOTE E -- COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SERIES B CAPITAL
SECURITIES OF TWO SUBSIDIARY TRUSTS HOLDING SOLELY JUNIOR SUBORDINATED
DEBENTURES OF THE COMPANY
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 sole asset of the trust, that is the obligor on the Series B Capital
Securities, is $51.5 million principal amount of 8.98% Junior Subordinated
Debentures due 2027 of HUBCO. The net proceeds of the offering 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.
On June 19, 1998, the Company placed $50.0 million in aggregate liquidation
amount of 7.65% Capital Securities due June 2028, using HUBCO Capital Trust II,
a statutory business trust formed under the laws of the State of Delaware. The
sole asset of the trust, that is the obligor on the Series B Capital Securities,
is $51.5 million principal amount of 7.65% Junior Subordinated Debentures due
2028 of HUBCO. The net proceeds of the offering 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.
11
<PAGE>
NOTE F -- RECENT ACCOUNTING STANDARDS
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income", which establishes standards for the reporting of
comprehensive income and its components in a full set of general-purpose
financial statements. The Company has elected to display Consolidated Statements
of Income and Consolidated Statements of Comprehensive Income separately for the
disclosed periods. Comprehensive income is displayed on the Consolidated Balance
Sheets and Consolidated Statements of Changes in Stockholders' Equity as a
separate item entitled unrealized gains(losses) on securities available for sale
since this is the only component of comprehensive income. The following is a
reconciliation of the tax effect allocated to each component of comprehensive
income for the periods presented (in thousands):
<TABLE>
<CAPTION>
For the three-months ended For the nine-months ended
September 30, 1998 September 30, 1998
----------------------------------- ----------------------------------
Before Tax Net of Before Tax Net of
tax (Expense) Tax tax (Expense) Tax
amount Benefit Amount amount Benefit Amount
----------- ------------ ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Unrealized holding gains
arising during the period $ 16,019 $ (4,851) $11,168 $ 17,551 $ (5,309) $12,242
Less: reclassification
adjustment for gains
realized in net income 16 (6) 10 3,187 (1,163) 2,024
----------- ------------ ---------- ----------- ----------- ----------
Net change during period $ 16,003 $ (4,845) $11,158 $ 14,364 $ (4,146) $10,218
----------- ------------ ---------- ----------- ----------- ----------
</TABLE>
<TABLE>
<CAPTION>
For the three-months ended For the nine-months ended
September 30, 1997 September 30, 1997
----------------------------------- ----------------------------------
Before Tax Net of Before Tax Net of
tax (Expense) Tax tax (Expense) Tax
amount Benefit Amount amount Benefit Amount
----------- ------------ ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Unrealized holding gains
arising during the period $ 18,990 $ (7,425) $ 11,565 $ 22,246 $ (8,766) $13,480
Less: reclassification
adjustment for gains
realized in net income 2,538 (1,011) 1,527 5,704 (2,264) 3,440
----------- ------------ ---------- ----------- ----------- ----------
Net change during period $ 16,452 $ (6,414) $10,038 $ 16,542 $ (6,502) $10,040
----------- ------------ ---------- ----------- ----------- ----------
</TABLE>
Effective January 1, 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", which requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. The Company's three banking subsidiaries, Hudson
United Bank, Lafayette, and BOTH, which meet the criteria of SFAS No. 131 to be
considered in the aggregate, have been aggregated for purposes of segment
reporting. HUBCO, Inc., the banks' holding company, is not a reportable segment
because it does not exceed any of the quantitative thresholds.
12
<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. The
Bank of Southington was acquired on January 8, 1998, Poughkeepsie Financial
Corporation was acquired on April 24, 1998, MSB Bancorp was acquired on May 29,
1998, IBS Financial Corporation was acquired on August 14, 1998, Community
Financial Holding Corporation was acquired on August 14, 1998, and Dime
Financial Corporation was acquired on August 21, 1998. These acquisitions were
accounted for on a pooling-of-interests method, and accordingly, the
consolidated financial statements have been restated to include 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
Security National Bank on February 5, 1998, 21 branches of First Union National
Bank on June 26, 1998 and 2 branches of First Union National Bank on July 24,
1998, all of which were accounted for on the purchase method and thus operations
and earnings are reflected in the Company's results subsequent to the date of
acquisition. The balance sheet and income statement comparisons are influenced
by these purchase transactions.
Applications have been filed with the Federal Deposit Insurance Corporation, the
New Jersey Department of Banking and the Connecticut Department of Banking for
permission to merge HUBCO's three banking subsidiaries. Simultaneously, notice
was provided to the Office of Thrift Supervision. The resulting bank will be
operated under the New Jersey charter of Hudson United Bank.
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements within the meaning of The
Private Securities Litigation Reform Act of 1995. Forward-looking statements can
be identified by asterisks ("*") or the use of words such as "believes",
"expects" and similiar words or variations. Such statements are not historical
facts and involve certain risks and uncertainties. Actual results may differ
materially from the results discussed in these forward-looking statements.
Factors that might cause a difference include, but are not limited to, changes
in interest rates, economic conditions, deposit and loan growth, loan loss
provisions, and customer retention. The Company assumes no obligation for
updating any such forward-looking statements at any time.
YEAR 2000
HUBCO has been planning since 1996 to prepare its computer systems and
applications to meet the challenge of the new millennium. The Company, in
conjunction with its data processing subsidiary, has established a "Year 2000
Team" which is responsible for ensuring implementation of the required changes
and that business disruption is minimal. This process involves analyzing and
replacing existing computer hardware and software as needed. HUBCO is currently
communicating with customers and external providers to determine their status
regarding Year 2000 issues. Additionally, the company is assessing how problems
with third party computer systems may impact its business operations. To date,
the company has not identified any material third party problems, but will
continue to assess the situation through 1999.
Considering the company's technology infrastructure and the progress made to
date, we estimate that the modification and review of computer and
non-information technology systems will be substantially completed by December
31, 1998*. This will allow 1999 for testing and making adjustments, as
necessary, to fine tune our systems and deal with any customer or third party
developments*.
The estimated total cost to become year 2000 compliant is $5 million*. Through
September 30, 1998, the company has incurred approximately $3 million. The
Company anticipates most of the remaining costs will be incurred by mid-year
1999*.
13
<PAGE>
A failure by HUBCO, by third parties or by whom HUBCO relies for support to
correct Year 2000 issues may cause a disruption in HUBCO's business operations
that could result in reduced revenue, increased operating costs and other
adverse effects. Additionally, to the extent borrowers' financial positions are
weakened as a result of Year 2000 issues, credit quality could be impacted. It
is not possible to forecast with a reasonable degree of certainty all the
negative impacts that may result from a failure of the company or third parties
to become fully year 2000 compliant or whether such effects could have a
material impact on HUBCO. The company has developed contingency plans to
mitigate the disruption to business operations that may occur if Year 2000
compliance is not fully achieved by all parties.
RESULTS OF OPERATIONS
OVERVIEW
The net loss for the three-month period ended September 30, 1998 was $20.1
million compared to net income of $19.4 million for the three-month period ended
September 30, 1997. The third quarter included $27.8 million after-tax of merger
related and restructuring charges and a $14.9 million after-tax charge related
to a planned bulk sale of non-performing loans and other real estate owned
("OREO") ("one time charges"). Excluding one time charges, third quarter 1998
net income was $22.5 million. The loss for the three-month period ended
September 30, 1998 amounted to $0.50 per basic and diluted share compared to
earnings of $0.47 per basic share and $0.44 per diluted share for the same
period in 1997. Excluding one time charges, 1998 third quarter basic and diluted
earnings per share were $0.56 and $0.55, respectively. Return on average equity
and return on average assets were (16.52)% and (1.17)%, respectively, as
reported for the three-month period ended September 30, 1998, 14.59% and 1.20%,
respectively, for the same period in 1997 and 18.49% and 1.31%, respectively,
excluding one time charges, for the three-month period ended September 30, 1998.
The net loss for the nine-month period ended September 30, 1998 was $0.6 million
compared to net income of $55.0 million for the nine-month period ended
September 30, 1997. The nine-month period of 1998 included after-tax merger
related and restructuring charges of $46.6 million and the aforementioned charge
for the planned bulk sale ("one time charges"). Excluding one time charges, net
income for the nine-months ended September 30, 1998 amounted to $60.8 million.
The loss for the nine-month period ended September 30, 1998 amounted to $0.02
per basic and diluted share compared to earnings of $1.31 per basic share and
$1.25 per diluted share for the same period in 1997. Excluding one time charges,
1998 nine-month basic and diluted earnings per share were $1.49 and $1.46,
respectively. Return on average equity and return on average assets were (0.17)%
and (0.01)%, respectively, as reported for the nine-month period ended September
30, 1998, 14.03% and 1.14%, respectively, for the same period in 1997 and 16.28%
and 1.23%, respectively, excluding one time charges, for the nine-month period
ended September 30, 1998.
Despite the charges taken during 1998, the company's book value increased $2.66
per share during the nine-month period from year end 1997, as originally
reported, due to the accretive effects of the acquisitions completed in 1998.
Included in HUBCO's third quarter results is a $14.9 million after-tax charge,
which is recorded as a loss on assets held for sale on the consolidated income
statement, and a $10.3 million write-down against the allowance for possible
loan losses and OREO reserve. These charges relate to the planned disposal of
$64 million of non-performing loans and OREO in a bulk sale. Despite progress in
the resolution of these non-performing assets, HUBCO believes that disposal is
appropriate at this time rather than its standard work-out process given the
potential of a slowing economy and a weakening real estate market. This sale is
anticipated to be completed in the fourth quarter.
NET INTEREST INCOME
Net interest income for the three-month and nine-month periods ended September
30, 1998 was $64.4 million and $190.8 million compared to $65.0 million and
$192.4 million for the same periods in 1997. This represents a decrease of $0.6
million or 1% for the three-month period and a decrease of $1.6 million or 1%
for the nine-month period. The net interest margin for the three-month and
nine-month periods ended September 30, 1998 was 4.06% and 4.15%, respectively,
compared to 4.30% and 4.28%, respectively for the same periods in 1997.
Interest income for the three-month period ended September 30, 1998 increased
$2.1 million or 2%, while interest expense increased $2.7 million, or 5%. The
increase in interest income was due primarily to a higher average volume of
investment securities. The higher level of interest expense resulted mainly from
a higher average volume of borrowings.
14
<PAGE>
Interest income for the nine-month period ended September 30, 1998 increased
$0.2 million and interest expense increased $1.8 million. On a percentage basis
both increases were less than 1%. The higher levels of interest income and
expense were due primarily to the same factors that impacted the third quarter
results.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses for the three-month and nine-month
periods ended September 30, 1998 was $2.8 million and $11.9 million,
respectively, compared to $3.0 million and $8.0 million, respectively, for the
same periods in 1997. The Company performs an evaluation of the adequacy of the
allowance for possible loan losses each quarter. The results of this analysis
and the projection of potential credit losses and economic conditions are some
of the factors which determine the required quarterly provision. Management
believes that the allowance for possible loan losses at September 30, 1998 of
$53.5 million, or 1.56% of total loans and 164% of non-performing assets ,
including those held for sale, is adequate. Comparative ratios for September 30,
1997 and December 31, 1997 are 1.81% and 75% and 1.83% and 84%, respectively.
15
<PAGE>
At September 30, 1998, $24.4 million of non-accrual loans and $6.6 million of
other real estate owned were classified on the balance sheet as "Assets held for
sale." 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)
9/30/98 12/31/97
------ --------
Non-Accrual Loans:
Commercial 3,180 $12,361
Real Estate 9,267 36,961
Consumer 1,986 1,616
------- -------
Total Non-Accrual Loans 24,433 50,938
------- -------
Renegotiated Loans 1,637 16,162
------- -------
Total Nonperforming Loans 26,070 67,100
Other Real Estate Owned 6,603 11,483
------- -------
Total Nonperforming Assets $32,673 $78,583
======= =======
Non-Accrual Loans to Total Loans 0.71% 1.41%
Non-Performing Assets to Total Assets 0.49% 1.19%
Allowance for Loan Losses to Non-Accrual Loans 219% 129%
Allowance for Loan Losses to Non-Performing Loans 205% 98%
Loans Past Due 90 Days or More and Accruing
Commercial $ 3,083 $ 2,996
Real estate 10,255 8,802
Consumer 2,249 1,895
Credit card 3,460 2,749
------- -------
Total Past Due Loans $19,407 $16,442
======= =======
16
<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
------------------------------------
Nine Months Ended Year Ended
9/30/98 12/31/97
-----------------------------------
(Dollars in thousands)
Amount of Loans Outstanding at Period End $ 3,437,183 $ 3,600,061
=========== ===========
Daily Average Amount of Loans Outstanding $ 3,559,241 $ 3,579,797
=========== ===========
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of year $ 65,858 $ 61,995
Loans charged off:
Real estate mortgages (8,013) (6,542)
Commercial (1,995) (4,508)
Consumer (11,330) (6,120)
Other loans -- (384)
----------- -----------
Total loans charged off (21,338) (17,554)
----------- -----------
Recoveries:
Real estate mortgages 566 1,407
Commercial 630 2,896
Consumer 3,492 1,498
Other recoveries -- 41
----------- -----------
Total recoveries 4,688 5,842
----------- -----------
Net loans charged off (16,650) (11,712)
Allowance of acquired companies 1,950 2,800
Provision for loan losses 11,890 12,775
Write-down of assets held for sale (9,521) --
----------- -----------
Balance at end of period $ 53,527 $ 65,858
=========== ===========
Ratio of Annualized Net Loans Charged Off
During Period to Average Loans Outstanding 0.62% 0.33%
=========== ===========
Non-interest income, excluding the charge related to the bulk sale and security
gains, increased 15% or $1.7 million from $11.8 million for the third quarter of
1997 to $13.5 million for the same period in 1998, and increased 20% or $6.5
million from $32.8 million for the nine months ended September 30, 1997 to $39.3
million for the same period in 1998. The positive variance for the nine-month
period resulted from higher Shoppers Charge income, non deposit account fees,
and gains on the sale of loans.
17
<PAGE>
Non-interest expense for the third quarter of 1998 was $78.4 million, $39.9
million excluding merger related and restructuring charges, compared to $44.1
million for the same period in 1997. For the nine months ended September 30,
1998, non-interest expense was $192.4 million, $126.0 million excluding merger
related and restructuring charges, compared to $131.8 million for the same
period in 1997. The merger related and restructuring charges included printing,
legal, accounting, mailing, conversion costs, consulting fees and other similar
expenses. Efficiencies were realized for the three and nine-month periods ended
September 30, 1998 compared to the same periods in 1997 in salaries, benefits,
and servicing fees, due to the consolidation of operational support functions of
the acquired institutions. Increases for the 1998 periods ended September 30,
1998 compared to the same periods in 1997 occurred in occupancy expense and for
the amortization of intangibles resulting from the acquisition of Security
National Bank and the First Union branches. The third quarter decrease is
especially meaningful considering there are 28 new branches that were acquired
under the purchase method of accounting this year.
The Company's effective tax rate for the three-month and nine- month periods
ended September 30, 1998 was a 24% credit and 111%, respectively, due to
non-deductible charges and goodwill amortization, and 36% and 37% ,
respectively, excluding the effect of the charges . This compares with an
effective tax rate for the comparable periods in 1997 of 40%.
FINANCIAL CONDITION
Total assets at September 30, 1998, were $6.7 billion, an increase of $71
million or 1% from $6.6 billion of assets at December 31, 1997, as restated for
all poolings through September 30, 1998. The investment securities portfolio
increased to $2.7 billion from $2.3 billion at December 31, 1997 ( a 19%
increase) due primarily to leveraging employed to utilize the high capital level
acquired through the acquisition of IBS Financial. Total loans decreased $163
million, or 5%, to $3.4 billion at September 30, 1998 due to the sale of all new
originations of residential mortgage loans as the loan mix is being changed.
Other real estate owned decreased $4.9 million or 43% from $11.5 million at
December 31, 1997 to $6.6 million at September 30, 1998, as management continues
to focus on asset quality. The September balance was transferred to assets held
for sale. Intangibles, net of amortization, increased from $55.6 million at
December 31, 1997 to $81.9 million at September 30, 1998 due to the addition of
the goodwill created from the Security National Bank and First Union branch
acquisitions.
Deposits held steady during the nine-month period and were $5.2 billion at
September 30, 1998. Borrowings increased $140 million from $626 million at
December 31, 1997 to $766 million at September 30, 1998 to fund growth in the
investment portfolio. Total stockholders' equity at September 30, 1998 was $452
million compared to $507 million at December 31, 1997. The change in
stockholders' equity is primarily attributable to the purchase of $57 million of
treasury shares.
On June 19, 1998, the Company placed $50.0 million in aggregate liquidation
amount of 7.65% Capital Securities due June 2028, using HUBCO Capital Trust II,
a statutory business trust formed under the laws of the State of Delaware. The
net proceeds of the offering 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.
18
<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 September 30,
1998, and the minimum regulatory guidelines for such capital ratios for
qualification as a well-capitalized institution are as follows:
Ratios at Regulatory
September 30, 1998 Guidelines
------------------ ----------
Tier I Risk-Based Capital 12.35% 6.0%
Total Risk-Based Capital 16.32% 10.0%
Tier 1 Leverage Ratio 6.76% 4.0%
19
<PAGE>
PART II. OTHER INFORMATION
Items 1 through 3 are not applicable or the responses are negative
Item 4(a)-(d) See Part II. Other Information in HUBCO's Form 10-Q filed May
15,1998
Item 5: not applicable
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
(3) (a) The revised Certificate of Incorporation of HUBCO, Inc. filed
January 31, 1997. (Incorporated by reference from the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996,
Exhibit (3))..
(3) (b)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) Reports on Form 8-K
(1) On August 27, HUBCO filed a Form 8K Item 5 (date of earliest event
August 14, 1998) announcing the completion of its peviously announced
acquisitions of IBS Financial, Community Financial Holding
Corporation, and Dime Financial Corporation.
(2) On September 30, HUBCO filed a Form 8K Item 5 (date of earliest event
- August 14, 1998), containing supplemental consolidated financial
statements of HUBCO as of and for the three years ended December 31,
1997 to reflect the mergers and the acquisition of IBS Financial,
Community Financial Holding Corporation, and Dime Financial
Corporation.
(3) On October 22, HUBCO filed a Form 8K Item 5 (date of earliest event
October 15, 1998) containing HUBCO's press release reporting financial
results for the third quarter of 1998.
(4) On November 6, HUBCO filed a Form 8K Item 5 (date of earliest event
August 14, 1998) containing consolidated financial statements of HUBCO
restating HUBCO's historical consolidated financial statements as of
and for the three years ended December 31, 1997 to reflect the mergers
and the acquisition of IBS Financial, Community Financial Holding
Corporation, and Dime Financial Corporation.
20
<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.
November 16, 1998 /s/ - KENNETH T. NEILSON
- ---------------------------- -----------------------------------------------
Date Kenneth T. Neilson
Chairman, President & Chief Executive Officer
November 16, 1998 /s/ - JOSEPH F. HURLEY
- ---------------------------- -----------------------------------------------
Date Joseph F. Hurley
Executive Vice President &
Chief Financial Officer
21
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 219,818
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 64,345
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,141,855
<INVESTMENTS-CARRYING> 544,342
<INVESTMENTS-MARKET> 550,092
<LOANS> 3,437,183
<ALLOWANCE> 53,527
<TOTAL-ASSETS> 6,677,011
<DEPOSITS> 5,208,331
<SHORT-TERM> 765,968
<LIABILITIES-OTHER> 51,027
<LONG-TERM> 200,000
<COMMON> 72,246
0
50
<OTHER-SE> 379,389
<TOTAL-LIABILITIES-AND-EQUITY> 6,677,011
<INTEREST-LOAN> 226,599
<INTEREST-INVEST> 120,347
<INTEREST-OTHER> 7,206
<INTEREST-TOTAL> 354,152
<INTEREST-DEPOSIT> 125,344
<INTEREST-EXPENSE> 37,964
<INTEREST-INCOME-NET> 190,844
<LOAN-LOSSES> 11,890
<SECURITIES-GAINS> 3,187
<EXPENSE-OTHER> 192,390
<INCOME-PRETAX> 5,739
<INCOME-PRE-EXTRAORDINARY> 5,739
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (649)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
<YIELD-ACTUAL> 4.15
<LOANS-NON> 24,433
<LOANS-PAST> 19,407
<LOANS-TROUBLED> 1,637
<LOANS-PROBLEM> 26,070
<ALLOWANCE-OPEN> 65,858
<CHARGE-OFFS> 30,859
<RECOVERIES> 4,688
<ALLOWANCE-CLOSE> 53,527
<ALLOWANCE-DOMESTIC> 53,527
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 25,601
</TABLE>
