<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
---------------------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________________________ to ___________________
Commission file number 0-21264
------------------------------------------------------
VISTA BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
New Jersey 22-2870972
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
305 Roseberry Street, P.O. Box 5360, Phillipsburg, New Jersey 08865
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(Address of principal executive offices) (Zip Code)
(908) 859-9500
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(Issuer's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report.)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such report), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes 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 latest practicable date.
As of April 30, 1997, there were 4,097,265 shares of $.50 par value
Common Stock outstanding.
<PAGE>
VISTA BANCORP, INC.
Form 10-Q
For the period ended March 31, 1997
Index
PAGE
Part I Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets - March 31, 1997
and December 31, 1996 3
Consolidated Statements of Income - Three Months
Ended March 31, 1997 and 1996 4
Consolidated Statements of Changes in Shareholders' Equity -
Three Months Ended March 31, 1997 and
The Year Ended December 31, 1996 5
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Part II Other Information
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
<PAGE>
VISTA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Amounts in Thousands (Except Per Share and Share Data)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------------------------
<S> <C> <C>
Assets
Cash and cash equivalents:
Cash and due from banks $18,497 $18,370
Federal funds sold 4,820 13,395
Short-term investments 596 3,817
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Total Cash and Cash Equivalents 23,913 35,582
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Securities available for sale (Amortized cost: $172,736 and $151,303 in 1997 and 1996, 171,343 152,368
- ----------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income:
Mortgage 140,273 140,612
Commercial 84,438 78,250
Consumer 80,576 80,702
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Total Loans 305,287 299,564
Allowance for loan losses (3,807) (3,903)
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Total Net Loans 301,480 295,661
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Premises and equipment 7,695 7,542
Accrued interest receivable 3,183 2,826
Other assets 5,314 4,222
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Total Assets $512,928 $498,201
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Liabilities and Shareholders' Equity
Deposits:
Demand:
Noninterest-bearing $43,955 $42,462
Interest-bearing 70,534 69,908
Savings 115,941 111,671
Time 227,815 211,070
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Total Deposits 458,245 435,111
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Borrowed funds 8,689 16,643
Long-term debt 4,435 4,498
Accrued interest payable 1,230 1,102
Other liabilities 2,298 2,032
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Total Liabilities 474,897 459,386
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Shareholders' Equity:
Common stock: $.50 par value; shares authorized 10,000,000; shares issued,
4,107,045 and 4,085,498 at March 31, 1997 and December 31, 1996, respectively 2,054 2,043
Paid-in capital 13,372 13,092
Retained earnings 23,601 22,984
Treasury stock (5,780 shares) (77) (7)
Net unrealized (loss) gain on securities available for sale (919) 703
- ----------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 38,031 38,815
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Total Liabilities and Shareholders' Equity $512,928 $498,201
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</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
3
<PAGE>
VISTA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Amounts in Thousands (Except Per Share and Share Data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
----------------------------
<S> <C> <C>
Interest Income:
Interest and fees on loans $6,054 $5,454
Interest on federal funds sold 204 144
Interest on short-term investments 28 74
Interest on securities:
Taxable 2,403 2,300
Nontaxable 198 138
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Total Interest Income 8,887 8,110
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Interest Expense:
Interest on deposits 4,265 3,867
Interest on borrowed funds 151 131
Interest on long-term debt 78 86
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Total Interest Expense 4,494 4,084
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Net Interest Income 4,393 4,026
Provision for Loan Losses 195 45
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Net Interest Income After Provision for Loan Losses 4,198 3,981
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Noninterest Income:
Service charges on deposit accounts 407 392
Other service charges 116 128
Net security gains 96 58
Other income 78 132
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Total Noninterest Income 697 710
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Noninterest Expense:
Salaries and benefits 1,914 1,609
Occupancy expense 340 284
Furniture and equipment expense 342 287
Other expense 780 711
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Total Noninterest Expense 3,376 2,891
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Income Before Provision for Income Taxes 1,519 1,800
Provision for Income Taxes 493 628
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Net Income $1,026 $1,172
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Earnings per Share $0.25 $0.29
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Weighted Average Number of Common Shares Outstanding 4,089,236 4,003,962
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</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
4
<PAGE>
VISTA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Amounts in Thousands (Except Per Share and Share Data)
<TABLE>
<CAPTION>
For The Year Ended December 31, 1996 and
For The Three Months Ended March 31, 1997
Net Unrealized
(Loss) Gain on
Securities Total
Shares Common Paid-in Retained Treasury Available Shareholders'
Outstanding Stock Capital Earnings Stock for Sale Equity
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 3,998,564 $2,000 $12,064 $20,268 $(7) $1,520 $35,845
Net income - 1996 - - - 4,248 - - 4,248
Cash dividends - $.38 per share - - - (1,532) - - (1,532)
Net proceeds from
issuance of common stock 86,154 43 998 - - - 1,041
Deferred compensation - - 30 - - - 30
Net unrealized depreciation in the
market value of securities available
for sale, net of income taxes - - - - - (817) (817)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 4,084,718 2,043 13,092 22,984 (7) 703 38,815
Net income - 1997 - - - 1,026 - - 1,026
Cash dividends - $.10 per share - - - (409) - - (409)
Net proceeds from
issuance of common stock 21,547 11 269 - - - 280
Purchase of Treasury Stock (5,000) - - - (70) - (70)
Deferred compensation - - 11 - - - 11
Net unrealized depreciation in the
market value of securities available
for sale, net of income taxes - - - - - (1,622) (1,622)
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Balance, March 31, 1997 4,101,265 $2,054 $13,372 $23,601 ($77) ($919) $38,031
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
5
<PAGE>
VISTA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts in Thousands
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
----------------------------
<S> <C> <C>
Cash Flows From Operating Activites:
Net Income $1,026 $1,172
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 249 223
Provision for loan losses 195 45
Increase (decrease) in deferred income 15 (147)
Increase in accrued interest receivable (357) (99)
Increase (decrease) in accrued interest payable 128 (53)
Increase in other assets (287) (949)
Increase in other liabilities 277 569
Net amortization of premium on securities 73 160
Net security gains (96) (58)
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Net Cash Provided By Operating Activities 1,223 863
- ----------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Proceeds from maturities of securities available for sale 4,690 8,941
Proceeds from sales of securities available for sale 4,590 16,012
Purchases of securities available for sale (30,690) (44,463)
Proceeds from maturities of securities held to maturity - -
Purchases of securities held to maturity - -
Net (increase) decrease in loans (6,038) 61
Net capital expenditures (362) (95)
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Net Cash Used For Investing Activities (27,810) (19,544)
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Cash Flows From Financing Activities:
Net increase in demand and savings deposits 6,389 2,394
Net increase (decrease) in time deposits 16,745 (997)
Net (decrease) increase in borrowed funds (7,954) 1,543
Net decrease in long-term debt (63) (55)
Net proceeds from issuance of common stock 280 241
Purchases of treasury stock (70) -
Cash dividends paid (409) (360)
- ----------------------------------------------------------------------------------------------------------------------
Net Cash Provided By Financing Activities 14,918 2,766
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Net Decrease in Cash and Cash Equivalents (11,669) (15,915)
Cash and Cash Equivalents, Beginning of Period 35,582 36,148
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Cash and Cash Equivalents, End of Period $23,913 $20,233
- ----------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information:
Interest paid $4,366 $4,137
Income taxes paid - -
Supplemental Disclosures of Investing and Financing Activities:
Transfers from loans to other real estate owned 9 -
Net unrealized (loss) gain in the fair value of securities available for sale (2,458) (2,543)
Increase (decrease) in deferred tax asset related to net unrealized
(loss) gain in the fair value of securities available for sale 836 865
Net unrealized (loss) gain in the fair value of securities available for sale,
net of income taxes (1,622) (1,678)
Deferred compensation 11 7
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
6
<PAGE>
Vista Bancorp, Inc. and Subsidiaries
- -----------------------------------------------
Notes to Consolidated Financial Statements
Note 1. Basis of Presentation
The accompanying consolidated financial statements of Vista Bancorp,
Inc. and its subsidiaries (Vista) reflect all adjustments and disclosures which
are, in the opinion of management, necessary for a fair presentation of interim
results. The financial information has been prepared in accordance with Vista's
customary accounting practices and has not been audited.
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted pursuant to the
Securities and Exchange Commission (SEC) rules and regulations. The preparation
of financial statements in conformity with general accepted accounting
principals requires management to make certain estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates. These interim financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in Vista's Annual Report for the year
ended December 31, 1996.
Results of operations for the three month period ended March 31, 1997,
are not necessarily indicative of the results to be expected for the full year.
Note 2. Securities
Gains or losses are recognized and shown separately in the statements
of income on realization or when values are deemed to have been other than
temporarily impaired. Recognition of these gains or losses is based on the
specific identification method. Proceeds from the sales of securities available
for sale (AFS) during the first quarter of 1997 and 1996 were $4.6 million and
$16.0 million, respectively. Gross realized gains of $96 thousand were
recognized on the sales of securities AFS during the first quarter of 1997. For
the first quarter of 1996 gross realized gains of $67 thousand and gross
realized losses of $9 thousand were recognized on the sales of securities AFS.
The amortized cost, estimated market value and contractual maturity
information for securities AFS at March 31, 1997 and December 31, 1996, are
disclosed on the following page. Securities not due at a single maturity date,
such as mortgage-backed securities, are disclosed separately rather than
allocated over several maturity categories.
7
<PAGE>
Vista Bancorp, Inc. and Subsidiaries
- -----------------------------------------------
Notes to Consolidated Financial Statements - (Continued)
Note 2. Securities (Continued)
<TABLE>
<CAPTION>
Securities Available for Sale March 31, 1997
- ---------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Amounts in Thousands Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $25,553 $11 ($270) $25,294
U.S. Government agencies and corporations 15,815 3 (219) 15,599
State and political subdivisions 19,248 23 (229) 19,042
Corporate debt securities 10,183 67 (51) 10,199
Mortgage-backed securities 99,320 730 (1,458) 98,592
Equity securities 2,617 - - 2,617
- ---------------------------------------------------------------------------------------------------------
Total securities available for sale $172,736 $834 ($2,227) $171,343
- ---------------------------------------------------------------------------------------------------------
Securities Available for Sale December 31, 1996
- ---------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Amounts in Thousands Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury securities $19,552 $100 ($76) $19,576
U.S. Government agencies and corporations 12,324 46 (52) 12,318
State and political subdivisions 14,369 69 (38) 14,400
Corporate debt securities 10,691 159 (16) 10,834
Mortgage-backed securities 91,750 1,339 (466) 92,623
Equity securities 2,617 - - 2,617
- ---------------------------------------------------------------------------------------------------------
Total securities available for sale $151,303 $1,713 ($648) $152,368
- ---------------------------------------------------------------------------------------------------------
Securities Securities
Available for Sale Available for Sale
March 31, 1997 December 31, 1996
- ---------------------------------------------------------------------------------------------------------
Estimated Estimated
Amortized Market Amortized Market
Amounts in Thousands Cost Value Cost Value
- ---------------------------------------------------------------------------------------------------------
Maturing within one year $11,430 $11,426 $9,658 $9,676
Maturing after one year but within five years 44,717 44,319 36,580 36,751
Maturing after five years but within ten years 9,740 9,545 9,375 9,379
Maturing after ten years 4,912 4,844 1,323 1,322
No Maturity 2,617 2,617 2,617 2,617
Mortgage-backed securities 99,320 98,592 91,750 92,623
- ---------------------------------------------------------------------------------------------------------
Total securities available for sale $172,736 $171,343 $151,303 $152,368
- ---------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
Vista Bancorp, Inc. and Subsidiaries
- -----------------------------------------------
Notes to Consolidated Financial Statements - (Continued)
Note 3. Loans
At March 31, 1997, the total impaired loans recognized in accordance
with Statement of Financial Accounting Standards (SFAS) No. 114 and SFAS No. 118
were $2.7 million, of which $499 thousand were valued based upon discounted cash
flows and $2.2 million using the fair value of collateral. Based on these
methods, $542 thousand of the $3.8 million allowance for loan losses was
allocated against the $2.7 million of impaired loans. The remaining allowance
for loan losses, totalling $3.3 million at March 31, 1997, is available to
absorb losses in Vista's entire credit portfolio. Vista's total average impaired
loans during the quarter ended March 31, 1997 was approximately the same as the
balance at March 31, 1997. Interest income recorded on total impaired loans
during the first quarter of 1997 was immaterial.
Note 4. Recently Issued Accounting Standards
In June 1996, the Financial Accounting Standards Board (FASB) issued
SFAS No. 125, "Accounting for Transfers of Securities and Extinguishment of
Liabilities." SFAS No. 125 provides standards based on consistent application of
a financial-components approach that focuses on control. Under this approach,
after a transfer of financial assets, an entity would recognize the financial
and servicing assets it controls and the liabilities it has incurred, remove
financial assets from the balance sheet when control has been surrendered, and
remove liabilities from the balance sheet when they have been extinguished. This
statement supersedes SFAS No. 122 which was originally effective for transfers
of financial assets and extinguishment of liabilities occurring after December
31, 1996. SFAS No. 127 issued in December 1996 delayed the effective date of
certain provisions of SFAS No. 125 as they affect transfers of financial assets
until after December 31, 1997. Earlier or retroactive application of either
standard is not permitted. Management has not yet determined the effect of these
statements on Vista's financial position or results of operations.
9
<PAGE>
Vista Bancorp, Inc. and Subsidiaries
- -----------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Certain statements in this Form 10-Q are forward-looking statements
that involve a number of risks and uncertainties. A discussion of these factors,
among others, which may cause actual results to differ materially from projected
results appears under "Factors That May Affect Future Results."
Factors That May Affect Future Results
General. Banking is affected, directly and indirectly, by local,
domestic and international economic and political conditions, and by government
monetary and fiscal policies. Conditions such as inflation, recession,
unemployment, volatile interest rates, tight money supply, real estate values,
international conflicts and other factors beyond the control of Vista may
adversely affect the future results of operations of Vista. Management does not
expect any particular factor to affect Vista's results of operations. A downward
trend in several areas, however, including real estate, construction and
consumer spending, could have an adverse impact on Vista's ability to maintain
or increase profitability. Therefore, there is no assurance that Vista will be
able to continue its current rates of income and growth.
Interest Rates. Vista's earnings depend, to a large extent, upon net
interest income, which is primarily influenced by the relationship between its
cost of funds (deposits and borrowings) and the yield on its interest-earning
assets (loans and investments). This relationship, known as the net interest
spread, is subject to fluctuation and is affected by regulatory, economic and
competitive factors which influence interest rates, the volume, rate and mix of
interest-earning assets and interest-bearing liabilities, and the level of
nonperforming assets. As part of its interest rate risk management strategy,
management seeks to control its exposure to interest rate changes by managing
the maturity and repricing characteristics of interest-earning assets and
interest-bearing liabilities.
Adequacy of Allowance for Loan Losses. In originating loans, there is a
likelihood that some credit losses will occur. This risk of loss varies with,
among other things, general economic conditions, the type of loan being made,
the credit worthiness and debt servicing capacity of the borrower over the term
of the loan and, in the case of a collateralized loan, the value and
marketability of the collateral securing the loan. Management maintains an
allowance for loan losses based on, among other things, historical loan loss
experience, known inherent risks in the loan portfolio, adverse situations that
may affect the borrower's ability to repay, the estimated value of any
underlying collateral and the evaluation of current economic conditions.
Management currently believes that the allowance for loan losses is adequate,
but there can be no assurance that nonperforming loans will not increase in the
future.
Local Economic Conditions. The success of Vista is dependent, to a
certain extent, upon the general economic conditions in the geographic market
served by Vista. Although Vista expects that economic conditions will continue
to be favorable in this market, no assurance can be given that these economic
conditions will continue. Adverse changes in economic conditions in the
geographic market that Vista serves would likely impair Vista's ability to
collect loans and could otherwise have a material adverse effect on Vista's
results of operations and financial condition.
10
<PAGE>
Vista Bancorp, Inc. and Subsidiaries
- -----------------------------------------------
Competition. The banking industry is highly competitive, with rapid
changes in product delivery systems and in the consolidation of service
providers. Many of Vista's competitors are bigger than Vista in terms of assets
and have substantially greater technical, marketing and financial resources.
Because of their size, any of these competitors can (and do) offer products and
services that Vista does not offer. Vista is constantly striving to meet the
convenience and needs of its customers and to enlarge its customer base. No
assurance can be given that these efforts will be successful in maintaining and
expanding Vista's customer base.
Growth by Internal Expansion and Acquisition. Vista's strategy to
expand internally by establishing new branch offices is dependent on its ability
to identify advantageous branch office locations and generate new deposits and
loans from those locations that will create an acceptable level of net income
for Vista. At the same time, Vista's strategy to grow externally through
selective acquisitions of other financial institutions or branches of such
institutions is dependent on successfully identifying, acquiring and integrating
such institutions or branches. There can be no assurance Vista will be
successful in implementing its internal growth strategy or in identifying
attractive acquisition candidates, acquiring such candidates on favorable terms
or successfully integrating any acquired institutions or branches into Vista.
Federal and State Government Regulation. The operations of Vista are
heavily regulated and will be affected by present and future legislation and by
the policies established from time to time by various federal and state
regulatory authorities. In particular, the monetary policies of the Federal
Reserve Board have had a significant effect on the operating results of banks in
the past and are expected to continue to do so in the future.
Results of Operations for the periods ended March 31, 1997 and March 31, 1996
For the first quarter of 1997, Vista reported a 12% decrease in net
income to $1.026 million, or $.25 per common share compared to net income of
$1.172 million or $.29 per common share reported for the first quarter of 1996.
The decrease in net income for the first quarter of 1997 was primarily due to
higher operating expenses in connection with Vista's announced major branch
expansion, added staff and a higher provision for loan losses, which in turn
were offset in part by a higher level of net interest income. The three branches
were acquired in late 1996 without deposits and consequently the start-up costs
of expansion are expected to impact earnings for a period of twelve to eighteen
months until the acquired branches can grow deposits and deploy the funds into
loans and investments in order to reach a break-even point for profitability.
These estimates are based on historical experience and management's judgement.
There can be no guarantee that these branches will reach a break-even level of
profitability according to this time frame.
Return on average shareholders' equity equaled 10.57%, and return on
average assets equaled .82% for the first quarter of 1997 compared to 12.94% and
1.03%, respectively, for the first quarter of 1996.
11
<PAGE>
Vista Bancorp, Inc. and Subsidiaries
- -----------------------------------------------
Tax-equivalent net interest income amounted to $4.5 million for the
first quarter of 1997, an increase of approximately $400 thousand, or 10%,
compared to $4.1 million earned in the first quarter of 1996. The tax-equivalent
net interest rate spread increased 2 basis points to 3.27% for the quarter
compared to the prior year quarter of 3.25%. The net interest margin, which is
tax-equivalent net interest income expressed as a percentage of average
interest-earning assets, remained unchanged at 3.77% for the first quarter of
1997 compared to the first quarter of 1996.
Interest income on a tax-equivalent basis amounted to $9.0 million for
the first quarter of 1997, an increase of approximately $800 thousand, or 10%,
compared to $8.2 million in interest income earned in the first quarter of 1996.
The increase in interest income was largely due to a higher volume of average
interest-earning assets which increased interest income by $939 thousand. Lower
yields on the loan portfolio accounted for the majority of the $132 thousand
decline in interest income. The average yield on interest-earning assets
increased 1 basis point to 7.55% for the first quarter of 1997 compared to 7.54%
for the first quarter in 1996.
Interest expense amounted to $4.5 million for the first quarter of
1997, an increase of approximately $400 thousand, or 10%, compared to $4.1
million in the first quarter of 1996. The increase is due primarily to a higher
volume of average interest-bearing liabilities which increased interest expense
by $500 thousand. Lower rates paid for the majority of deposits, except savings,
reduced interest expense by $89 thousand. The average cost of funds on
interest-bearing liabilities was largely unchanged at 4.28% in the first quarter
of 1997, compared to 4.29% in the comparable quarter of 1996.
The table, "Consolidated Average Balances, Net Interest Income and
Average Rates," presents Vista's average assets, liabilities and shareholders'
equity. Vista's net interest income, net interest spreads and net interest
income as a percentage of interest-earning assets for the periods ended March
31, 1997 and 1996, are also reflected.
The table, "Volume/Rate Analysis of Changes in Net Interest Income,"
analyzes net interest income by segregating the volume and rate components of
the changes in net interest income resulting from changes in the volume of
various interest-earning assets and interest-bearing liabilities and the changes
in the rates earned and paid by Vista.
For the first quarter of 1997, total noninterest income equaled $697
thousand substantially unchanged from $710 thousand noninterest income earned in
the first quarter of 1996.
Income from service charges on deposit accounts increased 4% to $407
thousand in the first quarter of 1997 from $392 thousand in the comparable
quarter of 1996. The majority of the increase resulted from a higher level of
fees earned from nonsufficient funds (NSF) on personal checking accounts and
fees earned on commercial accounts attributable to a greater volume of item
processing activity.
Other service charges declined 9% to $116 thousand in the first
quarter of 1997 compared to $128 thousand in the similar quarter of 1996 due
primarily to lower levels of fees from loan origination activities and fees
earned from the sale of life insurance protection on certain consumer loans.
12
<PAGE>
Vista Bancorp, Inc. and Subsidiaries
- --------------------------------------------
<TABLE>
<CAPTION>
Consolidated Average Balances, Net Interest Income and Average Rates Three Months Ended March 31,
(Tax-equivalent Basis)
1997 1996
----------------------------- -----------------------------
Average Average Average Average
Amounts in Thousands (Except Percentages) Balances Interest Rates Balances Interest Rates
(1) (2) (3) (1) (2) (3)
----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Federal funds sold $15,581 $204 5.31% $10,721 $144 5.40%
Short-term investments 2,242 28 5.06% 5,483 74 5.43%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Short-term Investments 17,823 232 5.28% 16,204 218 5.41%
- ------------------------------------------------------------------------------------------------------------------------------------
Securities:
U.S. Treasury 21,521 320 6.03% 28,032 414 5.94%
U.S. Government agencies and corporations 109,523 1,868 6.92% 96,992 1,601 6.64%
States and other political subdivisions 17,369 270 6.30% 12,577 186 5.95%
Other 13,107 215 6.65% 17,202 284 6.64%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Securities 161,520 2,673 6.71% 154,803 2,485 6.46%
- ------------------------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income: (4)
Mortgage 139,971 2,634 7.63% 134,670 2,549 7.61%
Commercial 81,367 1,818 9.06% 65,704 1,536 9.40%
Consumer 80,897 1,611 8.08% 64,012 1,373 8.63%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Loans 302,235 6,063 8.14% 264,386 5,458 8.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest-earning Assets 481,578 8,968 7.55% 435,393 8,161 7.54%
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and due from banks 16,372 15,663
Allowance for loan losses (3,924) (3,984)
Other assets 14,969 12,522
- ------------------------------------------------------------------------------------------------------------------------------------
Total Noninterest-earning Assets 27,417 24,201
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets $508,995 $459,594
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Demand $72,189 $387 2.17% $67,172 $410 2.45%
Savings 112,966 894 3.21% 106,658 827 3.12%
Time 192,299 2,577 5.43% 167,300 2,286 5.50%
Time deposits $100,000 and over 30,165 407 5.47% 24,742 344 5.59%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest-bearing Deposits 407,619 4,265 4.24% 365,872 3,867 4.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Borrowed funds 13,330 151 4.59% 11,900 131 4.43%
Long-term debt 4,497 78 7.03% 4,723 86 7.32%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Borrowed Funds and Long-term Debt 17,827 229 5.21% 16,623 217 5.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest-bearing Liabilities 425,446 4,494 4.28% 382,495 4,084 4.29%
- ------------------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing demand deposits 40,502 37,136
Other liabilities 3,698 3,526
- ------------------------------------------------------------------------------------------------------------------------------------
Total Noninterest-bearing Liabilities 44,200 40,662
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity 39,349 36,437
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $508,995 $459,594
- ------------------------------------------------------------------------------------------------------------------------------------
Net Interest Income/Spread (tax-equivalent basis) $4,474 3.27% $4,077 3.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Tax-equivalent Basis Adjustment (81) (51)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Interest Income $4,393 $4,026
- ------------------------------------------------------------------------------------------------------------------------------------
Net Interest Margin (5) 3.77% 3.77%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Average volume information was computed using approximate daily averages.
(2) Interest on loans includes fee income.
(3) Rates have been annualized and computed on a tax-equivalent basis using the
federal income tax statutory rate of 34%.
(4) Includes nonaccrual loans.
(5) Net interest income as a percent of average interest-earning assets on a
tax-equivalent basis.
</TABLE>
13
<PAGE>
Vista Bancorp, Inc. and Subsidiaries
- --------------------------------------------
Volume/Rate Analysis of Changes in Net Interest Income
(Tax-equivalent Basis)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 vs. 1996
-------------------------------
Increase (Decrease)
Due to Changes in
--------------------
Amounts in Thousands Total Average Average
Change(1) Volume Rate
-------------------------------
<S> <C> <C> <C>
Interest Income
Federal funds sold $60 $64 ($4)
Short-term investments (46) (40) (6)
- -----------------------------------------------------------------------------------------
Total Short-term Investments 14 24 (10)
- -----------------------------------------------------------------------------------------
Securities:
U.S. Treasury (94) (96) 2
U.S. Government agencies and corporations 267 212 55
States and other political subdivisions 84 73 11
Other (69) (67) (2)
- -----------------------------------------------------------------------------------------
Total Securities 188 122 66
- -----------------------------------------------------------------------------------------
Loans, net of unearned income: (2)
Mortgage 85 100 (15)
Commercial 282 352 (70)
Consumer 238 341 (103)
- -----------------------------------------------------------------------------------------
Total Loans 605 793 (188)
- -----------------------------------------------------------------------------------------
Total Interest Income 807 939 (132)
- -----------------------------------------------------------------------------------------
Interest Expense
Interest-bearing deposits:
Demand (23) 29 (52)
Savings 67 50 17
Time 291 335 (44)
Time deposits $100,000 and over 63 73 (10)
- -----------------------------------------------------------------------------------------
Total Interest-bearing Deposits 398 487 (89)
- -----------------------------------------------------------------------------------------
Borrowed funds 20 17 3
Long-term debt (8) (4) (4)
- -----------------------------------------------------------------------------------------
Total Borrowed Funds and Long-term Debt 12 13 (1)
- -----------------------------------------------------------------------------------------
Total Interest Expense 410 500 (90)
- -----------------------------------------------------------------------------------------
Net Interest Income (tax-equivalent basis) $397 $439 ($42)
- -----------------------------------------------------------------------------------------
</TABLE>
(1) The volume/rate variance is allocated based on the percentage
relationship of changes in volume and changes in rate to the "Total
Change".
(2) Includes nonaccrual loans.
14
<PAGE>
In the first quarter of 1996, other income included a one-time gain of
$62 thousand on the sale of the student loan portfolio by Phillipsburg National
Bank. Excluding the effect of this gain, other income for the first quarter of
1997 increased 11% to $78 thousand from $70 thousand earned in the first quarter
of 1996. The increase was due to higher revenues from the Trust Department at
Phillipsburg National Bank.
In the first quarter of 1997, Vista sold $4.6 million of securities
compared to $16.0 million of securities sold in the first quarter of 1996
resulting in net gains of $96 thousand and $58 thousand, respectively. The sales
are not expected to have a material effect on the yield on the securities
portfolio.
For the first quarter of 1997 total noninterest expense increased 17%
to $3.4 million from $2.9 million in the first quarter of 1996. When annualized,
noninterest expense expressed as a percentage of total average assets increased
to 2.69% for the first quarter of 1997 from 2.53% in the first quarter one year
ago. The increase is due largely to Vista's announced 30% expansion of its
branch network, as well as staffing enhancements made in retail banking,
commercial lending, operations and technology. The first quarter of 1997 is the
first full quarter of operations for the three new branch sites.
The largest component of Vista's cost structure is salary and benefits
expense which increased 19% to $1.9 million for the first quarter of 1997
compared to $1.6 million for the similar quarter of 1996. Full-time equivalent
employees increased to 213 in the first quarter of 1997 from 181 full-time
equivalent employees in the comparable quarter of 1996.
Separately, salary expense increased $237 thousand or 19% due to the
need to staff three new branches, added professional staff in key areas and
normal merit increases. Benefits expense increased $69 thousand or 19% in the
first quarter of 1997 over the same period last year due to increases in company
subsidized medical insurance premiums, payroll taxes and other staff benefits.
Occupancy expense increased 20% to $340 thousand in the first quarter
of 1997 from $284 thousand in 1996 due to increased costs to operate and
maintain 14 branch facilities in the first quarter of 1997 compared to 11
facilities in the first quarter of 1996. The majority of the increase in
expenses resulted from higher building depreciation, rental expense, utilities,
property insurance and real estate property tax expense.
Furniture and equipment expense increased 19% to $342 thousand in the
first quarter of 1997 from $287 thousand in the first quarter of 1996 due
primarily to upgrades in technology and automation, furniture and equipment
depreciation and increased telephone and data line communication charges.
Other expense, consisting mainly of marketing, real estate owned
expenses, professional fees, printing, stationery and supplies, and postage
expenses, increased 10% to $780 thousand in the first quarter of 1997 from $711
thousand for the same quarter of in 1996. Such increases are commensurate with
Vista's growth and the need to compete aggressively in its markets for loans and
deposits.
15
<PAGE>
Vista Bancorp, Inc. and Subsidiaries
- --------------------------------------------
Vista's provision for income taxes decreased $135 thousand, or 21%, to
$493 thousand for the first quarter of 1997 from $628 thousand in the first
quarter of 1996 due largely to a lower level of pretax income. The effective tax
rate declined to 32.4% in the first quarter 1997 from 34.9% in the first quarter
of 1996 due to a higher level of tax exempt interest income.
Financial Condition - March 31, 1997 versus December 31, 1996
At March 31, 1997, consolidated total assets equaled $513 million which
represented an increase of approximately $15 million from $498 million in
consolidated total assets at December 31, 1996. The increase was largely due to
strong deposit growth from the three new branch facilities located in
Flemington, New Jersey and Butztown and Bethlehem in Pennsylvania which all
became operational in late 1996.
Securities available for sale equaled $171 million at March 31, 1997
with 58% of the portfolio comprised of fixed and variable rate mortgage-backed
securities with pass-through, balloon and adjustable-rate structures, 24% in
U.S. Government and Federal agency debt instruments, 11% in tax-exempt
securities and the balance in other securities. Securities available for sale
increased $19 million or 13% from year-end 1996. The portfolio activity during
the first quarter of 1997 included $31 million in purchases, $5 million in sales
and $5 million of maturities. Vista had maintained higher than average
short-term cash equivalents at December 31, 1996 and utilized these available
funds during the first quarter of 1997 as bond market interest rates increased
and provided an opportunity to improve interest income.
Total loans equaled $305 million at March 31, 1997, reflecting an
increase of $5 million from $300 million in total outstanding loans at year-end
1996. This increase occurred in commercial loans and was consistent with Vista's
objective to lessen its concentration in mortgage loans and diversify the
portfolio mix while improving yields and profitability by increasing its
concentration in consumer and small business lending. At March 31, 1997, Vista's
loan to deposit ratio was 66.6% compared to 68.9% at December 31, 1996.
Total deposits amounted to $458 million at March 31, 1997, reflecting
an increase of $23 million in total deposits since year-end 1996. Deposit growth
was experienced in all categories with the largest increases seen in retail time
deposits, time deposits over $100 thousand and savings accounts. The opening of
the three new branch facilities was complimented by special promotional
campaigns designed to attract deposits which in turn would be reinvested into
securities and loans in order to offset the significant growth in operating
expense which accompanies the expansion efforts. Variable-rate tiered savings
products with money market rates are offered to customers who maintain high
balances. Strategies deployed during the first quarter of 1997 proved successful
in attracting deposits to these savings accounts.
At March 31, 1997, time deposits, including those $100 thousand and
over, remained the largest component of Vista's total deposit base, equaling 50%
compared to 49% at year-end 1996. Demand accounts equaled 17% of total
interest-bearing deposits at March 31, 1997 compared to 18% at year-end 1996.
Savings accounts equaled 28% of total interest-bearing deposits at March 31,
1997 and at year-end 1996.
16
<PAGE>
Vista Bancorp, Inc. and Subsidiaries
- --------------------------------------------
Total borrowed funds and long-term debt equaled $13 million at March 31,
1997, a decrease of approximately $8 million from the $21 million outstanding at
December 31, 1996. Certain short-term borrowings were repaid as bond market
rates increased during the first quarter of 1997.
Nonperforming assets, consisting of loans on nonaccrual status plus
other real estate acquired through foreclosure (ORE), totaled $4.6 million at
March 31, 1997 and $4.5 million at December 31, 1996, or 1.51% and 1.48% of
total outstanding loans and ORE, respectively. The percentage increase was due
to an increase in nonaccrual mortgage and consumer loans, offset in part, by a
reduction in nonaccrual commercial loans. ORE remained unchanged from year-end
1996 at $1.3 million.
The allowance for loan losses equaled $3.8 million at March 31, 1997 a
narrow decline from $3.9 million at year-end 1996. The allowance equaled 1.25%
of total loans at March 31, 1997, compared to 1.30% at December 31, 1996. Net
charge-offs to the allowance during the first quarter of 1997 totaled $291
thousand and consisted primarily of charged off loans in the indirect auto loan
portfolio totaling $163 thousand and $128 thousand of commercial loan
charge-offs on one unsecured line of credit.
The provision for loan losses equaled $195 thousand for the first
quarter of 1997 compared to $45 thousand in the first quarter of 1996. At March
31, 1997, the allowance for loan losses represented 114% of total nonaccrual
loans as compared to 123% at December 31, 1996.
At March 31, 1997, cash and cash equivalents equaled $23.9 million
which represented a decrease of $11.7 million from the $35.6 million in cash and
cash equivalents at December 31, 1996. Changes in cash are measured by changes
in operating, investing and financing activities. The $11.7 million decrease in
cash and cash equivalents was attributable to combined net cash flows provided
by operating and financing activities totaling $16.1 million, which were then
used for investing activities of $27.8 million.
At March 31, 1997, net cash provided by operating activities equaled
$1.2 million which consisted mainly of net income adjusted for noncash charges.
Net cash provided by financing activities totaled approximately $14.9 million
and consisted of a $23 million increase in deposits which offset an $8.0 million
reduction in borrowed funds.
At March 31, 1997 total shareholders' equity equaled $38.0 million
representing a decrease of $800 thousand from the $38.8 million in shareholders'
equity at December 31, 1996. This decrease was due to a $1.6 million reversal in
the market value adjustment recorded for the available for sale portfolio, cash
dividends paid of $409 thousand and $70 thousand of treasury stock purchases
which will be used to fund stock plan awards. The decrease was offset in part by
an increase resulting from $1.026 million in net income and $280 thousand in
added capital raised through the various stock plans.
Vista's dividend payout ratio equaled 39.9% for the quarter ended March
31, 1997, its highest level in several years. This trend is expected to continue
for the balance of 1997 until such time as earnings increase. The increase in
the dividend payout ratio was expected and is considered acceptable by
management.
17
<PAGE>
Vista Bancorp, Inc. and Subsidiaries
- --------------------------------------------
Vista maintained a Tier I risk-based capital ratio of 13.28% and a total
risk-based capital ratio of 14.83% at March 31, 1997, compared to 13.33% and
14.90%, respectively, at December 31, 1996. Vista maintained a leverage capital
ratio of 7.58% at March 31, 1997 and 7.57% at December 31, 1996.
18
<PAGE>
Vista Bancorp, Inc. and Subsidiaries
- --------------------------------------------
Part II Other Information
Item 1. Legal Proceedings Not Applicable
Item 2. Changes in Securities Not Applicable
Item 3. Defaults Upon Senior Securities Not Applicable
Item 4. Submission of Matters to a Vote of
Security Holders Not Applicable
Item 5. Other Information Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K:
Exhibit Number Description of Exhibit
-------------- -------------------------
2 Not Applicable
4 Not Applicable
10 Not Applicable
11 Not Applicable
15 Not Applicable
18 Not Applicable
19 Not Applicable
22 Not Applicable
23 Not Applicable
24 Not Applicable
27 Financial Data Schedules
99 Not Applicable
(b) Reports on Form 8-K
The registrant has filed no reports on Form 8-K for the
quarterly period ended March 31, 1997.
19
<PAGE>
Vista Bancorp, Inc. and Subsidiaries
- --------------------------------------------
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Vista Bancorp, Inc.
- ----------------------------------
(Registrant)
Dated: May 15, 1997
---------------------------
By /s/ William F. Keefe
------------------------------------
William F. Keefe
Executive Vice President and
and Chief Financial Officer
(Mr. Keefe is the Principal
Accounting Officer and has
been duly authorized to sign
on behalf of the registrant.)
20
<PAGE>
Vista Bancorp, Inc. and Subsidiaries
- --------------------------------------------
INDEX TO EXHIBITS
Item Number Description Page
- ----------- ----------- ----
27 Financial Data Schedules . . . . . . . . . 22
21
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000831979
<NAME> VISTA BANCORP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 18,497
<INT-BEARING-DEPOSITS> 598
<FED-FUNDS-SOLD> 4,820
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 171,343
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 305,287
<ALLOWANCE> 3,807
<TOTAL-ASSETS> 512,828
<DEPOSITS> 458,245
<SHORT-TERM> 8,689
<LIABILITIES-OTHER> 3,528
<LONG-TERM> 4,435
0
0
<COMMON> 2,054
<OTHER-SE> 35,977
<TOTAL-LIABILITIES-AND-EQUITY> 612,928
<INTEREST-LOAN> 6,054
<INTEREST-INVEST> 2,601
<INTEREST-OTHER> 232
<INTEREST-TOTAL> 8,887
<INTEREST-DEPOSIT> 4,265
<INTEREST-EXPENSE> 4,494
<INTEREST-INCOME-NET> 4,393
<LOAN-LOSSES> 195
<SECURITIES-GAINS> 98
<EXPENSE-OTHER> 3,376
<INCOME-PRETAX> 1,519
<INCOME-PRE-EXTRAORDINARY> 1,519
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,026
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
<YIELD-ACTUAL> 0.00
<LOANS-NON> 3,424
<LOANS-PAST> 274
<LOANS-TROUBLED> 205
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,903
<CHARGE-OFFS> 315
<RECOVERIES> 24
<ALLOWANCE-CLOSE> 3,807
<ALLOWANCE-DOMESTIC> 3,807
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 723
</TABLE>
