SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
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
HUDSON UNITED BANCORP
-----------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
New Jersey 22-2405746
- ------------------------------- ----------------------------------------
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
1000 MacArthur Blvd, Mahwah, NJ 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: 38,860,035 shares, no par value,
outstanding as of November 13, 1999.
<PAGE>
HUDSON UNITED BANCORP
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets
At September 30, 1999 and December 31, 1998....................... 1
Consolidated Statements of Income
For the three-months and nine-months ended
September 30, 1999 and 1998....................................... 2-3
Consolidated Statements of Comprehensive Income
For the three-months and nine-months ended
September 30, 1999 and 1998....................................... 4
Consolidated Statements of Changes in Stockholders' Equity
For the nine-months ended
September 30, 1999 and for the Year ended December 31, 1998....... 5
Consolidated Statements of Cash Flows
For the nine-months ended
September 30, 1999 and 1998....................................... 6-7
Notes to Consolidated Financial Statements........................ 8-13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................... 14-19
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................. 20
Signatures....................................................... 21
FINANCIAL DATA SCHEDULE .................................................. 22
<PAGE>
HUDSON UNITED BANCORP
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS (Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
(in thousands, except share data) 1999 1998
=============================================================================================================================
<S> <C> <C>
ASSETS
Cash and due from banks $ 231,887 $ 217,954
Federal funds sold 66,556 17,697
----------- -----------
TOTAL CASH AND CASH EQUIVALENTS 298,443 235,651
Investment securities available for sale, at market value 2,513,825 2,260,625
Investment securities held to maturity, at cost (market value of $596,539 and
$638,564 for 1999 and 1998, respectively) 614,054 634,971
Assets held for sale -- 14,147
Loans:
Residential mortgages 1,517,610 1,601,957
Commercial real estate mortgages 669,497 675,366
Commercial and financial 746,692 656,553
Consumer credit 400,541 370,353
Credit card 199,556 82,581
----------- -----------
TOTAL LOANS 3,533,896 3,386,810
Less: Allowance for possible loan losses (54,788) (53,499)
----------- -----------
NET LOANS 3,479,108 3,333,311
Premises and equipment, net 86,671 83,525
Other real estate owned 1,691 103
Intangibles, net of amortization 102,702 78,990
Other assets 143,863 137,338
----------- -----------
TOTAL ASSETS $ 7,240,357 $ 6,778,661
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 900,444 $ 941,253
Interest bearing 3,928,280 4,110,137
----------- -----------
TOTAL DEPOSITS 4,828,724 5,051,390
Borrowings 1,772,110 821,593
Other liabilities 34,510 248,863
----------- -----------
6,635,344 6,121,846
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 100,000 100,000
----------- -----------
TOTAL LIABILITIES 6,835,344 6,321,846
Stockholders' Equity:
Convertible preferred stock - Series B, no par value;
authorized 25,000,000 shares; 500 shares issued and outstanding in 1998 -- 50
Common stock, no par value; authorized 100,000,000 shares;
40,631,098 shares issued and 38,851,841 shares outstanding in
1999 and 40,633,204 shares issued and 40,411,521 shares
Outstanding in 1998 72,242 72,246
Additional paid-in capital 259,904 269,264
Retained earnings 160,389 113,787
Treasury stock, at cost, 1,779,257 shares in 1999 and 221,683 shares in (59,662) (5,980)
1998
Employee stock awards and unallocated shares held in ESOP, at cost (3,102) (2,368)
Accumulated other comprehensive income/(loss) (24,758) 9,816
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 405,013 456,815
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,240,357 $ 6,778,661
=========== ===========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
HUDSON UNITED BANCORP
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
For the Three-Months Ended September 30,
(in thousands, except share data) 1999 1998
========================================================================================================
<S> <C> <C>
INTEREST AND FEE INCOME:
Loans $ 74,740 $ 75,034
Investment securities 48,152 42,552
Other 678 3,189
--------- ---------
TOTAL INTEREST AND FEE INCOME 123,570 120,775
--------- ---------
INTEREST EXPENSE:
Deposits 31,625 40,874
Borrowings 20,632 11,298
Subordinated and other debt 4,168 4,162
--------- ---------
TOTAL INTEREST EXPENSE 56,425 56,334
--------- ---------
NET INTEREST INCOME 67,145 64,441
--------- ---------
PROVISION FOR POSSIBLE LOAN LOSSES 3,300 2,791
--------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 63,845 61,650
--------- ---------
NONINTEREST INCOME:
Trust department income 913 769
Service charges on deposit accounts 5,322 5,445
Securities gains 848 16
Loss on assets held for sale -- (23,303)
Shoppers Charge fees 5,787 2,959
Other income 6,826 4,328
--------- ---------
TOTAL NONINTEREST INCOME (LOSS) 19,696 (9,786)
--------- ---------
NONINTEREST EXPENSE:
Salaries 12,992 14,567
Pension and other employee benefits 5,163 3,712
Occupancy expense 4,888 4,153
Equipment expense 2,806 2,419
Deposit and other insurance 440 706
Outside services 9,658 6,295
Amortization of intangibles 3,462 3,094
Other expense 3,464 4,932
Merger related and restructuring costs -- 38,508
--------- ---------
TOTAL NONINTEREST EXPENSE 42,873 78,386
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 40,668 (26,522)
PROVISION (BENEFIT) FOR INCOME TAXES 14,995 (6,389)
--------- ---------
NET INCOME (LOSS) $ 25,673 $ (20,133)
========= =========
EARNINGS (LOSS) PER SHARE:
Basic $ 0.66 $ (0.50)
Diluted $ 0.65 $ (0.50)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 38,924 40,358
Diluted 39,338 40,358
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
HUDSON UNITED BANCORP
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
For the Nine-Months Ended September 30,
(in thousands, except share data) 1999 1998
====================================================================================
<S> <C> <C>
INTEREST AND FEE INCOME:
Loans $ 217,548 $ 226,599
Investment securities 137,187 120,347
Other 1,204 7,206
--------- ---------
TOTAL INTEREST AND FEE INCOME 355,939 354,152
--------- ---------
INTEREST EXPENSE:
Deposits 95,811 125,344
Borrowings 50,179 27,275
Subordinated and other debt 12,504 10,689
--------- ---------
TOTAL INTEREST EXPENSE 158,494 163,308
--------- ---------
NET INTEREST INCOME 197,445 190,844
PROVISION FOR POSSIBLE LOAN LOSSES 8,300 11,890
--------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 189,145 178,954
--------- ---------
NONINTEREST INCOME:
Trust department income 2,751 2,498
Service charges on deposit accounts 15,726 15,981
Securities gains 2,831 3,187
Loss on assets held for sale -- (23,303)
Shoppers Charge fees 14,681 8,521
Other income 18,227 12,291
--------- ---------
TOTAL NONINTEREST INCOME 54,216 19,175
--------- ---------
NONINTEREST EXPENSE:
Salaries 40,851 44,437
Pension and other employee benefits 11,501 15,129
Occupancy expense 14,059 12,499
Equipment expense 8,018 7,873
Deposit and other insurance 1,398 1,920
Outside services 27,499 19,597
Amortization of intangibles 10,078 7,928
Other expense 12,276 16,717
Merger related and restructuring costs -- 66,290
--------- ---------
TOTAL NONINTEREST EXPENSE 125,680 192,390
--------- ---------
INCOME BEFORE INCOME TAXES 117,681 5,739
PROVISION FOR INCOME TAXES 41,945 6,388
--------- ---------
NET INCOME (LOSS) $ 75,736 $ (649)
========= =========
EARNINGS (LOSS) PER SHARE:
Basic $ 1.92 $ (0.02)
Diluted $ 1.89 $ (0.02)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 39,524 40,725
Diluted 40,038 40,725
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
HUDSON UNITED BANCORP
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
THREE MONTHS ENDED
----------------------------------
SEPTEMBER 30,
----------------------------------
(In thousands) 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET INCOME (LOSS) $ 25,673 $(20,133)
========= ========
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Unrealized holding gains (losses) arising during period $ (6,197) $ 11,168
Less: reclassification adjustment for gains included in net
income (551) (10)
--------- --------
Other comprehensive income (loss) (6,748) 11,158
--------- --------
COMPREHENSIVE INCOME (LOSS) $ 18,925 $ (8,975)
========= ========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------------
SEPTEMBER 30,
----------------------------------
(In thousands) 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET INCOME (LOSS) $ 75,736 $ (649)
========= =======
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Unrealized holding gains (losses) arising during period $ (32,734) $12,242
Less: reclassification adjustment for gains included in net
income (1,840) (2,024)
--------- -------
Other comprehensive income (loss) (34,574) 10,218
--------- -------
COMPREHENSIVE INCOME $ 41,162 $ 9,569
========= =======
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
HUDSON UNITED BANCORP
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Employee
Stock
Awards and
Convertible Unallocated
Preferred Stock Common Stock Additional Shares Held
---------------- ------------------ Paid-in- Retained Treasury in ESOP, at
Shares Amount Shares Amount Capital Earnings Stock Cost
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 1,250 $ 125 41,208,974 $73,269 $ 292,198 $ 164,612 $ (19,133) $ (9,609)
==============================================================================================================================
Net income - - - - - 23,151 - -
Cash dividends - common - - - (34,718) - -
3% Stock dividend - - 40,213 72 (709) (40,797) 41,434 -
Shares issued for:
Stock options exercised - - 330,684 588 (8,410) - 18,373 -
Warrants exercised - - 7,158 13 (97) - 173 -
Preferred stock conversion (750) (75) 16,608 30 (130) - 175 -
Cash in lieu of fractional
shares - - - - (212) - - -
Other transactions - - 3,750 7 (7) - - -
IBS fiscal year adjustment - - - - - 1,539 - -
Purchase of treasury stock - - - - - - (69,880) -
Issuance and retirement of
treasury stock - - (989,058) (1,759) (18,930) - 20,689 -
Effect of compensation plans - - 14,875 26 5,561 - 2,189 7,241
Other comprehensive income - - - - - - - -
(loss)
- ------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 500 50 40,633,204 72,246 269,264 113,787 (5,980) (2,368)
- ------------------------------------------------------------------------------------------------------------------------------
Net income - - - - - 75,736 - -
Cash dividends - common - - - - - (29,134) - -
Shares issued for:
Stock options exercised - - - - (13,006) - 24,258 -
Warrants exercised - - - - (182) - 236 -
Preferred stock conversion (500) (50) - - (478) - 528 -
Acquisition of Little Falls - - - - - - 26,563 -
Bancorp
Cash in lieu of fractional - - - - (16) - - -
shares
Other Transactions - - (2,106) (4) 4 - - -
Purchase of treasury stock - - - - - - (106,531) -
Effect of compensation plans - - - - 4,318 - 1,264 (734)
Other comprehensive loss - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1999 - $ - 40,631,098 $ 72,242 $ 259,904 $ 160,389 $ (59,662) $ (3,102)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive
Income Total
- ---------------------------------------------------------------------
<S> <C> <C>
Balance at December 31, 1997 $ 5,639 $ 507,101
=====================================================================
Net income - 23,151
Cash dividends - common - (34,718)
3% Stock dividend - -
Shares issued for:
Stock options exercised - 10,551
Warrants exercised - 89
Preferred stock conversion - -
Cash in lieu of fractional
shares - (212)
Other transactions - -
IBS fiscal year adjustment - 1,539
Purchase of treasury stock - (69,880)
Issuance and retirement of
treasury stock - -
Effect of compensation plans - 15,017
Other comprehensive income 4,177 4,177
(loss)
- ---------------------------------------------------------------------
Balance at December 31, 1998 9,816 456,815
- ---------------------------------------------------------------------
Net income - 75,736
Cash dividends -- common - (29,134)
Shares issued for:
Stock options exercised - 11,252
Warrants exercised - 54
Preferred stock conversion - -
Acquisition of Little Falls - 26,563
Bancorp
Cash in lieu of fractional - (16)
shares
Other Transactions - -
Purchase of treasury stock - (106,531)
Effect of compensation plans - 4,848
Other comprehensive loss (34,574) (34,574)
- ---------------------------------------------------------------------
Balance at September 30, 1999 $ (24,758) $ 405,013
- ---------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
HUDSON UNITED BANCORP
- -------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 75,736 $ (649)
Adjustments to reconcile net income to net
Cash provided by operating activities:
Provision for possible loan losses 8,300 11,890
Provision for depreciation and amortization 16,819 14,477
Amortization of security premiums, net 709 1,130
Securities gains (2,831) (3,187)
(Gain) loss on sale of premises and equipment (891) 540
Gain on sale of loans (4,948) (2,115)
Loss on assets held for sale - 23,303
Market adjustment on ESOP - 728
MRP earned - 2,809
IBS fiscal year adjustment - 1,539
Net change in assets held for sale 14,147 (31,036)
Decrease in other assets 15,109 13,691
Decrease in other liabilities (28,012) (21,571)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 94,138 11,549
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities:
Available for sale 224,802 269,616
Proceeds from repayments and maturities of investment securities:
Available for sale 681,715 676,114
Held to maturity 95,662 421,233
Purchase of investment securities:
Available for sale (1,241,800) (1,441,504)
Held to maturity (75,061) (305,435)
Net cash acquired through acquisitions 132,210 231,661
Net decrease in loans other than purchases and sales 33,486 79,456
Proceeds from sales of loans 87,172 89,147
Purchase of loans (114,273) -
Proceeds from sales of premises and equipment 7,928 25
Purchases of premises and equipment (13,842) (5,127)
(Increase) decrease in other real estate (1,291) 8,347
----------- -----------
NET CASH PROVIDED BY (USED IN)INVESTING ACTIVITIES (183,292) 23,533
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand deposits, NOW accounts,
and savings accounts (358,240) (198,448)
Net decrease in certificates of deposit (259,239) (188,554)
Net increase in borrowed funds 891,703 139,220
Reduction of ESOP loan 2,091 853
Net proceeds from issuance of debt securities - 48,737
Proceeds from issuance of common stock 11,296 5,658
Termination of ESOP plan - 4,941
Cash dividends (29,134) (24,547)
Acquisition of treasury stock (106,531) (56,938)
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 151,946 (269,078)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 62,792 (233,996)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 235,651 518,159
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 298,443 $ 284,163
=========== ===========
</TABLE>
6
<PAGE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest $ 154,944 $ 168,741
Income Taxes 39,113 26,081
========= =========
See notes to consolidated financial statements.
7
<PAGE>
HUDSON UNITED BANCORP___________________________________________________________
HUDSON UNITED BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying financial statements of Hudson United Bancorp and Subsidiaries
("the Company") include the accounts of the parent company, Hudson United
Bancorp, and its wholly-owned subsidiaries: Hudson United Bank ("Hudson
United"), HUBCO Capital Trust I and HUBCO Capital Trust II. All material
intercompany balances and transactions have been eliminated in consolidation. In
March 1999, the former Lafayette American Bank and Bank of the Hudson, were
merged into Hudson United. In addition, the shareholders of the Company on April
21, 1999 approved an amendment to the certificate of incorporation to change the
name of the company from HUBCO, Inc. to Hudson United Bancorp. 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 Company's Annual Report on Form 10-K
filed with the Commission on March 15, 1999, for the year ended December 31,
1998.
8
<PAGE>
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 (when
outstanding) and the incremental number of shares issuable from the exercise of
stock options, and stock warrants, calculated using the treasury stock method.
All per share amounts have been retroactively restated to reflect all stock
splits and stock dividends.
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):
QUARTER ENDED SEPTEMBER 30,
---------------------------
1999 1998
-------- -------
BASIC EARNINGS (LOSS) PER SHARE
Net Income (Loss) $ 25,673 $ (20,133)
Less Preferred Stock Dividends - -
-------- ----------
Net Income (Loss) Available To Common Stockholders 25,673 (20,133)
Weighted Average Common Shares Outstanding 38,924 40,358
Basic Earnings (Loss) Per Share $ 0.66 $ (0.50)
======== ==========
DILUTED EARNINGS (LOSS) PER SHARE
Net Income (Loss) $ 25,673 $ (20,133)
Weighted Average Common Shares Outstanding 38,924 40,358
Effect Of Dilutive Securities:
Convertible Preferred Stock - -
Warrants - -
Stock Options 414 -
-------- ----------
Weighted Average Common Shares
Outstanding Assuming Dilution 39,338 40,358
Diluted Earnings (Loss) Per Share $ 0.65 $ (0.50)
======== ==========
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1999 1998
-------- ---------
BASIC EARNINGS (LOSS) PER SHARE
Net Income (Loss) $ 75,736 $ (649)
Less Preferred Stock Dividends -- --
-------- --------
Net Income (Loss) Available To Common Stockholders 75,736 (649)
Weighted Average Common Shares Outstanding 39,524 40,725
Basic Earnings (Loss) Per Share $ 1.92 $ (0.02)
======== ========
DILUTED EARNINGS (LOSS) PER SHARE
Net Income (Loss) $ 75,736 $ (649)
Weighted Average Common Shares Outstanding 39,524 40,725
Effect Of Dilutive Securities:
Convertible Preferred Stock 1 --
Warrants 2 --
Stock Options 511 --
-------- --------
Weighted Average Common Shares Outstanding
Assuming Dilution 40,038 40,725
Diluted Earnings (Loss) Per Share $ 1.89 $ (0.02)
======== ========
9
<PAGE>
NOTE C -- ACQUISITIONS
On March 20, 1999, the Company acquired Little Falls Bancorp, Inc. in a
combination stock and cash transaction. Little Falls Bancorp, Inc. had assets of
approximately $341 million and operated six offices in the New Jersey counties
of Hunterdon and Passaic. The merger was accounted for under the purchase method
of accounting.
On March 26, 1999, the Company completed its purchase of $151 million in
deposits and a retail branch office in Hartford, Connecticut from First
International Bank.
On May 11, 1999, the Company announced a purchase and sale agreement in which
Hudson United Bank will acquire the loans (approximately $159 million) and other
financial assets, as well as assume the deposit liabilities (approximately $154
million) of Advest Bank and Trust. In addition, the Company simultaneously
announced it had entered into a strategic alliance agreement in which Hudson
United Bank will become the exclusive provider of banking products and services
to the clients of Advest, Inc. The purchase and sale transaction is subject to
regulatory approval and is expected to close in the fourth quarter.
On June 29, 1999, the Company announced that it had signed a definitive
agreement to merge with JeffBanks, Inc., a $1.7 billion bank holding company
with 32 branches located throughout the greater Philadelphia area of
Pennsylvania and Southern New Jersey. The agreement is expected to be completed
by the fourth quarter of 1999 and to be accounted for as a pooling of interests.
On June 29, 1999, the Company announced that it had signed a definitive
agreement to merge with Southern Jersey Bancorp, a $470 million asset bank
holding company with 17 branches in Southern New Jersey. The agreement is
expected to be completed by the fourth quarter of 1999 and to be accounted as a
pooling of interests.
On September 10, 1999, the Company announced an agreement to acquire Lyon Credit
Corporation, a $350 million asset finance company and subsidiary of Credit
Lyonnais Americas. This acquisition closed on October 22, 1999.
10
<PAGE>
NOTE D -- SECURITIES
The following table presents the amortized cost and estimated market value of
investment securities available for sale and held to maturity at the dates
indicated:
<TABLE>
<CAPTION>
September 30, 1999
------------------------------------------------------------
Gross Unrealized
----------------------------- Estimated
Amortized Market
Cost Gains (Losses) Value
------------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Government $ 73,440 $ 367 $ (206) $ 73,601
U.S. Government agencies 248,422 163 (2,942) 245,643
Mortgage-backed securities 2,056,808 1,416 (38,159) 2,020,065
States and political subdivisions 2,551 18 (5) 2,564
Other debt securities 15,537 73 (275) 15,335
Equity securities 156,034 3,306 (2,723) 156,617
---------- ------- -------- ----------
$2,552,792 $5,343 $(44,310) $2,513,825
========== ======= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
September 30, 1999
------------------------------------------------------------
Gross Unrealized
----------------------------- Estimated
Amortized Market
Cost Gains (Losses) Value
------------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
HELD TO MATURITY
U.S. Government $ 39,190 $ 17 $ (199) $ 39,008
U.S. Government agencies 65,921 257 (616) 65,562
Mortgage-backed securities 485,901 250 (17,069) 469,082
States and political subdivisions 23,013 50 (205) 22,858
Other debt securities 29 - - 29
-------- ---- -------- --------
$614,054 $574 $(18,089) $596,539
======== ==== ======== ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
------------------------------------------------------------
Gross Unrealized
----------------------------- Estimated
Amortized Market
Cost Gains (Losses) Value
------------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Government $ 84,530 $ 1,583 $ - $ 86,113
U.S. Government agencies 369,357 3,162 - 372,519
Mortgage-backed securities 1,688,464 13,645 (4,306) 1,697,803
States and political subdivisions 11,219 100 (1) 11,318
Other debt securities 4,083 5 (40) 4,048
Equity securities 87,027 2,471 (674) 88,824
---------- ------- -------- ----------
$2,244,680 $20,966 $ (5,021) $2,260,625
========== ======= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
------------------------------------------------------------
Gross Unrealized
----------------------------- Estimated
Amortized Market
Cost Gains (Losses) Value
------------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
HELD TO MATURITY
U.S. Government $ 42,373 $ 393 $ - $ 42,766
U.S. Government agencies 37,360 1,462 - 38,822
States and political subdivisions 15,513 182 (4) 15,691
Mortgage-backed securities 539,725 2,277 (717) 541,285
-------- ------ ------ ---------
$634,971 $4,314 $ (721) $ 638,564
======== ====== ====== =========
</TABLE>
11
<PAGE>
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, which is the obligor on the Series B Capital
Securities, is $51.5 million principal amount of 8.98% Junior Subordinated
Debentures due 2027 of Hudson United Bancorp. 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, which is the obligor on the Series B Capital
Securities, is $51.5 million principal amount of 7.65% Junior Subordinated
Debentures due 2028 of Hudson United Bancorp. 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.
12
<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 accumulated other comprehensive income (loss). 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
September 30, 1999
----------------------------------------------------
Before tax Tax Benefit Net of Tax
amount (Expense) Amount
----------------- ---------------- -----------------
<S> <C> <C> <C>
Unrealized security gains (losses) arising during the period $ (9,933) $ 3,736 $ (6,197)
Less: reclassification adjustment for gains realized in net income
848 (297) 551
-------------------------------------------
Net change during period $(10,781) $ 4,033 $ (6,748)
===========================================
<CAPTION>
For the three-months ended
September 30, 1998
----------------------------------------------------
Before tax Tax Benefit Net of Tax
amount (Expense) Amount
----------------- ---------------- -----------------
<S> <C> <C> <C>
Unrealized security gains (losses) arising during the period $ 16,019 $ (4,851) $ 11,168
Less: reclassification adjustment for gains realized in net income 16 (6) 10
-------------------------------------------
Net change during period $ 16,003 $ (4,845) $ 11,158
===========================================
<CAPTION>
For the nine-months ended
September 30, 1999
----------------------------------------------------
Before tax Tax Benefit Net of Tax
amount (Expense) Amount
----------------- ---------------- -----------------
<S> <C> <C> <C>
Unrealized security gains (losses) arising during the period $ (51,781) $ 19,047 $ (32,734)
Less: reclassification adjustment for gains realized in net income 2,831 (991) 1,840
-------------------------------------------
Net change during period $ (54,612) $ 20,038 $ (34,574)
===========================================
<CAPTION>
For the nine-months ended
September 30, 1998
----------------------------------------------------
Before tax Tax Benefit Net of Tax
amount (Expense) Amount
----------------- ---------------- -----------------
<S> <C> <C> <C>
Unrealized security gains (losses) arising during the period $17,551 $ (5,309) $ 12,242
Less: reclassification adjustment for gains realized in net income 3,187 (1,163) 2,024
-------------------------------------------
Net change during period $14,364 $(4,146) $ 10,218
===========================================
</TABLE>
The Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," establishing standards for
the accounting and reporting of derivatives. The statement is effective for
fiscal years beginning after June 15, 2000; earlier application is permitted.
The Company has elected not to adopt this statement prior to its effective date.
The Company does not expect that application of this statement will have a
material effect on its financial position or results of operations.
13
<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 the 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, two
branches of First Union National Bank on July 24, 1998, one branch from First
International Bank on March 26, 1999, and Little Falls Bancorp, Inc. on May 20,
1999, all of which were accounted for under 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.
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
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 the use of words such as "believes," "expects" and similar
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, customer
retention, failure to realize expected cost savings or revenue enhancements from
acquisitions, or failure of the Company's Year 2000 compliance program to
effectively address year 2000 computer problems. The Company assumes no
obligation for updating any such forward-looking statements at any time.
YEAR 2000 COMPLIANCE
Hudson United Bancorp has been involved since 1996 in preparing its computer
systems and applications to meet the challenge of the new millennium. The
Company has established a "Year 2000 Team" which is responsible for ensuring
implementation of the required changes to avoid business disruption. The process
involves analyzing and replacing existing computer hardware and software as
needed. The Company is in compliance with Y2K readiness through phases I, II,
and III. 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 throughout 1999.
The Company's review of computer and noninformation technology systems was
completed by December 31, 1998. The Company is using 1999 for testing and
implementation of system changes. We believe that all of our mission critical
systems are compliant. However, limited precautionary testing of these systems
will continue through the end of the year.
The Company's joint venture partner has decided to terminate their interest in a
computer processing joint venture. The termination is expected to occur in the
fourth quarter of 1999. In addition, the Company has signed a contract with a
third-party provider to outsource the Company's internal processing systems.
This provider's Y2K implementation and testing continues to proceed
satisfactorily and is on schedule.
The estimated total cost to become Year 2000 compliant is $5 million.
Substantially all of the costs have been incurred. The total cost has been
within budget.
14
<PAGE>
A failure by Hudson United Bancorp or by third parties on whom the Company
relies for support to correct Year 2000 issues may cause disruption in the
Company'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 could result from a
failure of the Company or third parties to become fully Year 2000-compliant or
whether such effect could have a material impact on Hudson United Bancorp. 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
Net income for the three-month period ended September 30, 1999 was $25.7 million
compared to a net loss of $20.1 million for the same period in 1998. Fully
diluted earnings per share amounted to $0.65 for the 1999 third quarter. The
Company had a $.50 per share loss for the 1998 third quarter. The 1998 quarter
included a loss on assets held for sale and merger-related and restructuring
charges ("special charges") that amounted to $42.7 million after-tax. Excluding
the special charges, net income for the 1998 period was $22.5 million and fully
diluted earnings per share was $0.55. The increase in operating earnings was
primarily due to higher net interest and noninterest income. Partially
offsetting the net revenue increases was an unfavorable variance in noninterest
expense and a higher loan loss provision. Higher income from the Shoppers Charge
and mortgage divisions and increased sales of alternative investment products
were major factors underlying the increase in net revenue for the third quarter
of 1999 compared to the same period in 1998. For the three-months ended
September 30, 1999, return on average assets was 1.43% and return on average
equity was 24.79%. Excluding special charges in the same 1998 period, return on
average assets was 1.31% and return on average equity was 18.49%.
Net income for the nine-months ended September 30, 1999 was $75.7 million
compared to a net loss of $0.6 million for the same period in 1998. Fully
diluted earnings per share amounted to $1.89 for the first nine months of 1999.
In the corresponding 1998 period, the Company had a net loss per share of $0.02.
The 1998 period included special charges that amounted to $61.5 million
after-tax. Excluding the special charges, operating earnings for the 1998 period
were $60.8 million and fully diluted earnings per share amounted to $1.46. The
higher operating earnings resulted from improved net revenue, lower noninterest
expenses, and a decline in the provision for possible loan losses. As in the
third quarter, higher income from the Shoppers Charge and mortgage divisions and
increased sales of alternative investment products were major factors
contributing to the increase in net revenue for the nine-months ended September
30, 1999 compared to the same 1998 period. Return on average assets was 1.47%
and return on average equity was 23.71% for the first nine months of 1999.
Excluding the special charges in the corresponding 1998 period, return on
average assets was 1.23% and return on average equity was 16.28%.
NET INTEREST INCOME
Net interest income amounted to $67.1 million for three-month period ended
September 30, 1999 and $64.4 million for the three-month period ended September
30, 1998. Average interest-earning assets were $360 million higher in the third
quarter of 1999 compared to the same period in 1998. The net interest margin was
4.01% and 4.06% for the third quarter of 1999 and 1998, respectively. Interest
income increased by $2.8 million in the third quarter of 1999 compared to the
third quarter of 1998 due to higher income from investment securities, which
resulted mainly from higher average volumes. Interest expense for the
three-months ended September 30, 1999 was $0.1 million higher than the same 1998
period due to higher interest expense on borrowings, partially offset by lower
interest expense on deposits. The increase in borrowing expense was primarily
due to higher average volumes. The decline in deposit expense resulted from
lower average volumes and a decreased cost of deposits.
For the nine-month period ended September 30, 1999 and 1998, net interest income
was $197.4 million and $190.8 million, respectively. Average interest-earning
assets were $291 million higher in the 1999 period compared to the same period
in 1998. The net interest margin was 4.10% and 4.15% for the first nine months
of 1999 and 1998, respectively. Interest income increased by $1.8 million for
the first nine months of 1999 compared to the first nine months of 1998 due to
higher income from investment securities, partially offset by lower income from
loans and short term money market investments. The favorable variance in
interest income on investment securities was due mainly to higher average
volumes. The year to year decline in
15
<PAGE>
interest income on loans was primarily due to lower yields and the decrease in
interest income from short term money market investments resulted mainly from
lower average volumes. Interest expense for the nine-months ended September 30,
1999 was $4.8 million below the same 1998 period as lower expense on deposits
more than offset higher expense for borrowings. As in the third quarter, the
decrease in interest expense on deposits resulted from lower average volumes and
a lower cost of deposits. A higher average volume of borrowings was the primary
reason for the increase in borrowing interest expense.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses was $3.3 million and $2.8 million for the
three-month periods ended September 30, 1999 and 1998, respectively. For the
nine-month periods ended September 30, 1999 and 1998, the provision for possible
loan losses was $8.3 million and $11.9 million, respectively. The decline in the
provision for the nine-month period was primarily due to the inclusion in the
1998 period of a $3.5 million provision taken by the former Poughkeepsie
Financial Corporation to bring its reserve policy in line with that of Hudson
United Bancorp. The allowance for possible loan losses (the "Allowance")
amounted to $54.8 million at September 30, 1999 compared to $53.5 million at
year-end 1998. The Allowance represented 1.55% and 1.58% of total loans at
September 30, 1999 and December 31, 1998, respectively.
The determination of the adequacy of the Allowance for Loan Losses and the
periodic provisioning for estimated losses included in the consolidated
financial statements is the responsibility of management. The evaluation process
is undertaken on a monthly basis, with a fully supported written analysis
prepared on a quarterly basis.
Methodology employed for assessing the adequacy of the Allowance consists of the
following criteria:
o The establishment of reserve amounts for all specifically identified
criticized loans, including those arising from business combinations,
that have been designated as requiring attention by management's
internal loan review program.
o The establishment of reserves for pools of homogenous types of loans
not subject to specific review, including 1-4 family residential
mortgages, consumer loans, and credit card accounts, based upon
historical loss rates.
o An allocation for the non-criticized loans in each portfolio, and for
all Off-Balance Sheet exposures, based upon the historical average
loss experience of those portfolios.
Consideration is also given to the changed risk profile brought about by the
aforementioned business combinations, customer knowledge, the results of ongoing
credit quality monitoring processes, the adequacy and expertise of the Company's
lending staff, underwriting policies, loss histories, delinquency trends, and
the cyclical nature of economic and business conditions. A further consideration
is the concentration of real estate related loans located in the Northeast part
of the United States. Since many of the loans depend upon the sufficiency of
collateral as a secondary source of repayment, any adverse trend in the real
estate markets could affect underlying values available to protect the Company
from loss.
Other evidence used to support the amount of the Allowance and its components
are as follows:
o Regulatory and other examinations
o The amount and trend of criticized loans
o Actual losses
o Peer comparisons with other financial institutions
o Economic data associated with the real estate market in the Company's
area of operations
o Opportunities to dispose of marginally performing loans for cash
consideration
16
<PAGE>
Based upon the process employed and giving recognition to all attendant factors
associated with the loan portfolio, management considers the Allowance for Loan
Losses to be adequate at September 30, 1999.
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)
9/30/99 12/31/98
------- --------
Nonaccrual Loans:
Commercial $ 4,799 $ 4,852
Real Estate 17,427 10,683
Consumer 1,890 2,094
======= =======
Total Nonaccrual Loans 24,116 17,629
Renegotiated Loans 1,624 3,269
------- -------
Total Nonperforming Loans 25,740 20,898
Other Real Estate Owned 1,691 3,727
======= =======
Total Nonperforming Assets $27,431 $24,625
======= =======
Nonaccrual Loans to Total Loans 0.68% 0.52%
Nonperforming Assets to Total Assets 0.38% 0.36%
Allowance for Loan Losses to Nonaccrual Loans 227% 303%
Allowance for Loan Losses to Nonperforming Loans 213% 256%
Loans Past Due 90 Days or More and Accruing
Commercial $ 2,152 $ 2,340
Real Estate 8,734 5,547
Consumer 2,086 2,470
Credit card 3,033 3,126
======= =======
Total Past Due Loans $16,005 $13,483
======= =======
17
<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
9/30/99 12/31/98
---------------- -----------
(Dollars in thousands)
Amount of Loans Outstanding at Period End $ 3,533,896 $ 3,386,810
=========== ===========
Daily Average Amount of Loans Outstanding $ 3,461,541 $ 3,521,561
=========== ===========
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of year $ 53,499 $ 65,858
Loans charged off:
Real estate mortgages (2,804) (8,050)
Commercial (2,806) (2,498)
Consumer (6,981) (11,457)
Write down of Assets held for sale (1) -- (9,521)
----------- -----------
Total loans charged off (12,591) (31,526)
----------- -----------
Recoveries:
Real estate mortgages 952 651
Commercial 744 669
Consumer 2,534 1,523
----------- -----------
Total recoveries 4,230 2,843
----------- -----------
Net loans charged off (8,361) (28,683)
Allowance of acquired companies 1,350 1,950
Provision for loan losses 8,300 14,374
----------- -----------
Balance at end of period $ 54,788 $ 53,499
=========== ===========
Ratio of Annualized Net Loans Charged
Off During Period to Average
Loans Outstanding 0.32% 0.81%
=========== ===========
- ----------
(1) The writedown of assets held for sale pertained to the planned disposal of
$54 million of nonaccrual loans.
NONINTEREST INCOME
Noninterest income, excluding security gains and loss on assets held for sale,
increased to $18.8 million for the third quarter of 1999 compared to $13.5
million in the third quarter of 1998. For the nine-months ended September 30,
1999 and 1998, non-interest income, excluding security gains and loss on assets
held for sale, was $51.4 million and $39.3 million, respectively. These
increases reflect higher income from the Shoppers Charge and mortgage divisions
and increased sales of alternative investment products. Security gains for the
three-month period ended September 30, 1999 were $0.8 million and $16 thousand
for the corresponding 1998 period. Security gains amounted to $2.8 million for
the first nine-months of 1999 and $3.2 million for the first nine months of
1998. For the three and nine-month periods ended September 30, 1998, the Company
had a $23.3 million loss on assets held for sale which resulted from the
writedown of assets held for sale pertaining to the planned disposal of $54
million of nonaccrual loans.
NONINTEREST EXPENSE
Noninterest expense for the third quarter of 1999 was $42.9 million compared to
$78.4 million in the third quarter of 1998. The amount for 1998 includes $38.5
million of merger-related restructuring costs that were recorded in that period.
Excluding the 1998 charges, the year to year increase in expenses of $3.0
million primarily reflects the higher cost of supporting our expanding business
lines. Noninterest expense for the first nine months of 1999 and 1998 amounted
to $125.7 million and $192.4 million, respectively. The 1998 period included
$66.3 million of merger-related restructuring costs. Excluding the 1998 charges,
noninterest expenses were down slightly, $0.4 million, in 1999 compared to 1998.
The 1999 expense level reflects the higher cost of supporting our expanding
business lines, the successful integration of the 1998 acquisitions, the
consolidation of
18
<PAGE>
the Company's three banking subsidiaries into a single bank charter and the
establishment of a single brand name, and the decision to terminate the
Company's interest in a computer processing joint venture and to outsource
internal processing systems. The net effect of these initiatives was immaterial
and has been provided for within the reserves established for such programs. The
efficiency ratio in the third quarter of 1999 was 45.6%, down from 46.5% in the
third quarter of 1998. The efficiency ratio for the first nine months of 1999
was 46.4% compared to 50.5% for the same 1998 period. The 1998 ratios exclude
the aforementioned special charges.
FINANCIAL CONDITION
Total assets amounted to $7.2 billion at September 30, 1999, an increase of $462
million from $6.8 billion at December 31, 1998. At September 30, 1999, total
loans were $3.5 billion and total investment securities were $3.1 billion. Total
loans increased $147 million and total investment securities increased $232
million from year-end 1998. Credit card loans increased $117 million from
December 31, 1998 primarily due to the purchase of credit card portfolios. The
increase in the investment securities portfolio was due primarily to leveraging
employed to utilize the Company's capital position. Intangibles, net of
amortization, increased from $79.0 million at December 31, 1998 to $102.7
million at September 30, 1999, due primarily to the addition of the goodwill
created from the First International Bank branch and Little Falls Bancorp, Inc.
acquisitions.
Deposits were $4.8 billion at September 30, 1999 and $5.1 billion at December
31, 1998. At September 30, 1999, borrowings amounted to $1.8 billion compared to
$822 million at December 31, 1998. The increase in borrowings resulted from the
higher asset level and lower deposit level at the September 30, 1999 compared to
year-end 1998. Total stockholders' equity at September 30, 1999 was $405 million
compared to $457 million at December 31, 1998. The change in stockholders'
equity was primarily attributable to the net purchase (gross shares purchased
less shares reissued) of $54 million of treasury shares.
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,
1999, and the minimum regulatory guidelines for such capital ratios for
qualification as a well-capitalized institution are as follows:
Ratios at Regulatory
Sept. 30, 1999 Guidelines
-------------- -----------
Tier I Risk-Based Capital 10.19% 6.0%
Total Risk-Based Capital 13.90% 10.0%
Tier 1 Leverage Ratio 5.85% 4.0%
19
<PAGE>
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
(3)(A) The Certificate of Incorporation of the Company in effect on
May 11, 1999. (Incorporated by reference from the Company's
Amended Quarterly Report on Form 10 Q/A for the quarter
ended June 30, 1999 filed September 10, 1999, Exhibit (3a)).
(3)(B) The By-Laws of the Company. (Incorporated by reference from
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, Exhibit (3b)).
(10)(A) The Agreement and Plan of Merger between Hudson United Bancorp
and Dime Bancorp, Inc. dated September 15, 1999. (Incorporated
by reference from the Company's filing on Form 8-K dated
September 24, 1999, Exhibit (99.1)).
(10)(B) The Stock Option Agreement between Dime Bancorp, Inc. and
Hudson United Bancorp dated September 16, 1999. (Incorporated
by reference from the Company's filing on Form 8-K dated
September 24, 1999, Exhibit (99.2)).
(10)(C) The Stock Option Agreement between Hudson United Bancorp and
Dime Bancorp, Inc. dated September 16, 1999. (Incorporated by
reference from the Company's filing on Form 8-K dated
September 24, 1999, Exhibit (99.3)).
(b) Reports on From 8-K
(1) On July 26, 1999, Hudson United Bancorp filed a Form 8-K Item
5 (date of earliest event -- July 15, 1999), containing Hudson
United Bancorp's press release reporting earnings for the
second quarter of 1999.
(2) On September 16, 1999, the Company filed a Form 8-K Item 5
(date of earliest event -- September 15, 1999), to announce
the signing of a definitive agreement to enter into a merger
of equals with Dime Bancorp, Inc.
(3) On September 20, 1999, Hudson United Bancorp filed a Form 8-K
Item 5 (date of earliest event -- September 20, 1999),
containing certain investor presentation materials related to
the merger of equals between Hudson United Bancorp and Dime
Bancorp, Inc.
(4) On September 24, 1999, Hudson United Bancorp filed a Form
8-K Item 5 (date of earliest event -- September 15, 1999),
containing the merger agreement and stock option agreement in
connection to the merger of equals between Hudson United
Bancorp and Dime Bancorp, Inc.
(5) On September 24, 1999, Hudson United Bancorp filed a Form 8-K
Item 5 (date of earliest event -- July 15, 1999), announcing
adjournments of the special meetings of shareholders to vote
on the mergers between Hudson United Bancorp, JeffBanks, Inc.,
and Southern Jersey Bancorp of Delaware, Inc. The meetings
were adjourned in light of the previously announced merger of
Hudson United Bancorp with Dime Bancorp, Inc., in order to
permit the preparation and dissemination of supplemental proxy
materials.
(6) On October 5, 1999, Hudson United Bancorp filed a Form 8-K
Item 5 (date of earliest event -- September 15, 1999),
containing supplemental proxy materials for the acquisitions
of JeffBanks, Inc. and Southern Jersey Bancorp of Delaware,
Inc.
(7) On October 15, 1999, Hudson United Bancorp filed a Form 8-K
Item 5 (date of earliest event -- October 14, 1999),
containing Hudson United Bancorp's press release reporting
earnings for the third quarter of 1999.
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.
Hudson United Bancorp
November 15, 1999 /s/ KENNETH T. NEILSON
- ----------------- -----------------------------------------------
Date Kenneth T. Neilson
Chairman, President & Chief Executive Officer
November 15, 1999 /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-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 231,887
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 66,556
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,513,825
<INVESTMENTS-CARRYING> 614,054
<INVESTMENTS-MARKET> 596,539
<LOANS> 3,533,896
<ALLOWANCE> 54,788
<TOTAL-ASSETS> 7,240,357
<DEPOSITS> 4,828,724
<SHORT-TERM> 1,772,110
<LIABILITIES-OTHER> 34,510
<LONG-TERM> 200,000
<COMMON> 72,242
0
0
<OTHER-SE> 332,771
<TOTAL-LIABILITIES-AND-EQUITY> 7,240,357
<INTEREST-LOAN> 217,548
<INTEREST-INVEST> 137,187
<INTEREST-OTHER> 1,204
<INTEREST-TOTAL> 355,939
<INTEREST-DEPOSIT> 95,811
<INTEREST-EXPENSE> 158,494
<INTEREST-INCOME-NET> 197,445
<LOAN-LOSSES> 8,300
<SECURITIES-GAINS> 2,831
<EXPENSE-OTHER> 125,680
<INCOME-PRETAX> 117,681
<INCOME-PRE-EXTRAORDINARY> 117,681
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,736
<EPS-BASIC> 1.92
<EPS-DILUTED> 1.89
<YIELD-ACTUAL> 4.10
<LOANS-NON> 24,116
<LOANS-PAST> 16,005
<LOANS-TROUBLED> 1,624
<LOANS-PROBLEM> 41,745
<ALLOWANCE-OPEN> 53,499
<CHARGE-OFFS> 12,591
<RECOVERIES> 4,230
<ALLOWANCE-CLOSE> 54,788
<ALLOWANCE-DOMESTIC> 54,788
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
