U.S. Securities and Exchange Commission
Washington, DC 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 1996
[ ] FOR TRANSACTION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------- -----------------------
Commission file Number 0-18546
BRIDGE BANCORP, INC.
- --------------------------------------------------------------------------------
(Name of small business issuer in its charter)
NEW YORK 11-2934195
- ------------------------------ ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2488 Montauk Highway, Bridgehampton, New York 11932
- --------------------------------------------- ------------------------------
(Address of principal executive office) (Zip Code)
Issuer's telephone number (516) 537-1000
Securities registered under Section 12 (b) of the Exchange Act:
Name of each exchange on
Title of each class which registered
- ----------------------------------- ----------------------------
- ----------------------------------- ----------------------------
Securities registered under Section 12 (g) of the Exchange Act:
Common Stock, Par Value of $5.00 Per Share,
- --------------------------------------------------------------------------------
(Title of Class)
- --------------------------------------------------------------------------------
(Title of Class)
<PAGE>
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act during the past 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
---- ----
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosures will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year were $17,923,000.
The aggregate market value of the voting stock of the Registrant as of March 17,
1997 was $29,794,200.
As of March 17, 1997, the Registrant had oustanding 469,200 shares of Common
Stock, par value $5.00 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December 31,
1996 are incorporated by reference into Part II and III. Portions of the Proxy
Statement for the Annual Meeting of Shareholders to be held April 15, 1997,
dated March 13, 1997, are incorporated by reference into Part III.
This Report Includes a Total of 71 Pages; Exhibits are listed on Page 27.
-- --
<PAGE>
PART I
Item 1. Description of Business
- -------------------------------
Bridge Bancorp, Inc. (the "Registrant") is a registered bank holding company,
the sole subsidiary of which is The Bridgehampton National Bank (the "Bank").
The Registrant was organized as a New York business corporation and incorporated
under the laws of the State of New York in 1988, at the direction of the Board
of Directors of the Bank for the purpose of becoming a bank holding company
pursuant to a plan of reorganization; under the plan the former stockholders of
the Bank became the stockholders of the Company. Since commencing business in
March 1989 after the reorganization, the Registrant has functioned primarily as
the holder of all of the Bank's common stock.
At present, the Registrant does not own or lease any property and has no paid
employees. The Registrant uses the Bank's space and employees without separate
payment.
The Bank was established in 1910 as a national banking association and is under
the supervision of the Office of the Comptroller of the Currency (the "OCC").
Its headquarters are located at 2488 Montauk Highway, Bridgehampton, New York
11932.
The Bank engages in full service commercial and consumer banking and limited
trust business, including accepting time and demand deposits, as well as making
secured and unsecured commercial and consumer loans, including auto, personal,
home equity home improvement, residential and commercial mortgages, commercial
construction and S.B.A. guaranteed loans. In addition the Bank offers merchant
credit and debit card processing, automated teller machines, safe deposit boxes
and individual retirement accounts.
The Bank employees 86 people on a full-time and part-time basis. The Bank
provides a variety of employment benefits and considers its relationship with
its employees to be good.
All phases of the Bank's business are highly competitive. The Bank's market is
primarily the trade areas of the North and South Forks of Eastern Suffolk
County, with concentrations in the Bridgehampton, East Hampton, Mattituck,
Montauk, Southampton, and Southold, New York areas. The Bank considers its major
competition to be local commercial banks as well as other commercial banks with
branches in the Bank's market area.
<PAGE>
Regulation
- ----------
References in this section to applicable statutes and regulations are brief
summaries only, and do not purport to be complete. The reader should consult
such statutes and regulations themselves for a full understanding of the details
of their operation.
The Registrant is subject to the provisions of the Bank Holding Company Act of
1956, as amended (the "Act") and to supervision by the Federal Reserve Board.
The Act requires the Registrant to secure the prior approval of the Federal
Reserve Board before it can acquire all or substantially all of the assets of
any bank, or acquire ownership or control of any voting shares of any bank other
than the Bank, if after such acquisition, it would own or control more than 5
percent of the voting shares of such bank. Federal law also prohibits
acquisitions of control of a bank holding company without prior notice to
certain federal bank regulators. As a bank holding company, the Registrant is
required to file an annual report with the Federal Reserve Board and any
additional information as the Federal Reserve Board may require pursuant to the
Act. The Federal Reserve Board may also make examinations of the Registrant and
any or all of its subsidiaries.
Subsidiary banks of a bank holding company are subject to certain restrictions
imposed by the Act on any extension of credit to the bank holding company or any
of its subsidiaries, on investments in the stock or other securities of the bank
holding company or its subsidiaries, and on the taking of such stock or
securities as collateral for loans to any borrower.
The Federal Reserve Board permits bank holding companies to engage in
non-banking activities so closely related to banking or managing or controlling
banks so as to be a proper incident thereto including, for example, consumer
finance companies, mortgage companies, leasing companies, data processing
companies, financial advisor and securities brokerage.
Federal Reserve Board approval is required before the Registrant or a non-bank
subsidiary of the Registrant may begin to engage in any of the above activities
and before any such business may be acquired. At the present time, the
Registrant does not contemplate conduct of any non-banking activities permitted
by the Act.
The operations of the Bank are subject to federal and state statutes applicable
to banks chartered under the banking laws of the United States, to members of
the Federal Reserve System and to banks whose deposits are insured by the
Federal Deposit Insurance Corporation (the "FDIC"). Bank operations are also
subject to regulations of the Comptroller of the Currency, the Federal Reserve
Board, the FDIC, and the New York State Banking Department. The primary
supervisory authority of the Bank is the Comptroller of the Currency, who
regularly examines the Bank.
<PAGE>
Federal and state banking laws and regulations govern, among other things the
scope of a bank's business, the investments a bank may make, the reserves
against deposits a bank must maintain, the loans a bank makes and collateral it
takes, the maximum interest rates a bank must pay on deposits, the activities of
a bank with respect to mergers and consolidations and the establishment of
branches.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") expanded the Federal Reserve Board's authority to prohibit activities
of bank holding companies and their non-banking subsidiaries which represent
unsafe and unsound banking practices or which constitute violations of laws or
regulations. FIRREA increased the amount of civil money penalties that the
Federal Reserve Board can assess for such practices or violations. The penalties
can be as high as $1 million per day. FIRREA also expanded the scope of
individuals and entities against which such penalties may be assessed.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
required each federal banking agency to revise its risk-based capital standards
to ensure that those standards take adequate account of interest rate risk,
concentrations of credit risk and the risks of non-traditional activities, as
well as reflect and the actual performances and expected risk of loss on
multi-family mortgages. This law also required each federal banking agency to
specify, by regulation the levels at which an insured institution would be
considered "well capitalized," "adequately capitalized," "under-capitalized,"
"significantly under-capitalized" and "critically under-capitalized." Under the
regulations adopted by the banking agencies, the Bank is considered "well
capitalized."
FDICIA requires bank regulators to take "prompt corrective action" to resolve
problems associated with insured depository institutions. In the event an
institution becomes "under-capitalized," it must submit a capital restoration
plan. If an institution becomes "significantly under-capitalized" or "critically
under-capitalized," additional and significant limitations are placed on the
institution. The capital restoration plan of an under-capitalized institution
will not be accepted by the regulators unless each company "having control of"
the under-capitalized institution "guarantees" the subsidiary's compliance with
the capital restoration plan until it becomes "adequately capitalized."
Under FDICIA, the aggregate liability of all companies controlling a particular
institution is limited to the lesser of 5% of the institution's assets at the
time it became under-capitalized or the amount necessary to bring the
institution into compliance with applicable capital standards. FDICIA grants
powers to the bank regulators in situations where an institution becomes
"significantly" or "critically under-capitalized" or fails to submit a capital
restoration plan. For example, a bank holding company controlling such an
institution can be required to obtain prior Federal Reserve Board approval of
proposed dividends, or might be required to consent to a merger or to divest the
troubled institution or other affiliates.
<PAGE>
Additionally, Federal Reserve Board policy discourages the payment of dividends
by a bank holding company from borrowed funds as well as payments that would
adversely affect capital adequacy. Failure to meet the capital guidelines may
result in institution by the Federal Reserve Board of appropriate supervisory or
enforcement actions.
The prompt corrective action provisions of FDICIA reflect the same concerns
which gave rise to a position adopted by the Federal Reserve Board known as the
"source of strength doctrine," which is based on the Federal Reserve Board's
Regulation Y. Regulation Y directs bank holding companies to "serve as a source
of financial and managerial strength" to their subsidiary banks, and bars them
from engaging in unsafe and unsound practices.
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVES OFFICERS OF THE REGISTRANT AND THE BANK
Position with the Held Executive
Registrant and the Officer Position
Name and Age Bank Since
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas J. Tobin President and Chief Executive 1984
52 Officer of the Registrant and Bank
Christopher Becker Senior Vice President of the 1991
31 Registrant and the Bank, Treasurer
of the Registrant, Chief Financial
Officer of the Bank
Jean Irvine Senior Vice President of the 1995
52 Registrant and the Bank, Human
Resources Officer of the Bank
Michael P. Kochanasz Senior Vice President of the 1985
44 Registrant and the Bank,
Secretary of the Registrant and
Sales and Marketing Officer
of the Bank
Anthony Leone Senior Vice President of the 1987
49 Registrant and the Bank Credit
Administrator of the Bank
Diane Reutershan Senior Vice President of the 1985
50 Registrant and the Bank,
Cashier and Branch
Administrator of the Bank
Each officer holds his/her term of office for the current year for which he was
elected or appointed by the Board unless he resigns, becomes disqualified, or is
removed at the pleasure of the Board of Directors.
Mr. Tobin has been President and Chief Executive Officer of the Bank since 3/86.
</TABLE>
<PAGE>
Prior to 1/97, Mr. Becker was Vice President and Finance and Operations Officer
of the Bank. Prior to 1/96 Mr. Becker was Comptroller of the Bank. Prior to 1/93
Mr. Becker was Assistant Vice President of the Registrant and the Bank.
Prior to 1/97, Ms. Irvine was Vice President of the Bank. Prior to 1/95 Ms.
Irvine was Assistant Vice President of the Bank.
Prior to 1/97, Mr. Kochanasz was Vice President of the Bank.
Mr. Leone has been Senior Vice President and Credit Administrator of the Bank
since 3/89.
Prior to 1/97, Mrs. Reutershan was Vice President of the Bank.
None of the individuals named in the above table were elected to his or her
position pursuant to any arrangement or understanding with any other person.
Management is not aware of any family relationships between such officers.
The individuals named above do not hold a directorship with a company registered
pursuant to Section 12 of the Securities Exchange Act (except for the
Registrant), or registered as an investment company under The Investment Company
Act of 1940.
The individuals named above are not involved in any material legal proceedings.
<PAGE>
STATISTICAL INFORMATION
-----------------------
The following tables set forth statistical information relating to the
Registrant and the Bank. The tables should be read in conjunction with the
consolidated financial statements and related notes and the discussion included
in Management's Discussion and Analysis of Financial Condition and Results of
Operations.
<PAGE>
<TABLE>
<CAPTION>
I.A. & I. B. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY:
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table sets forth certain information relating to the Registrant's
average consolidated statements of financial condition and reflects the average
yields on assets and average costs of liabilities for the periods indicated.
Such yields and costs are derived by dividing income or expense by the average
balance of assets or liabilities, respectively, for the periods shown. Average
balances are derived from daily average balances. Interest on nonaccruing loans
has been included only to the extent reflected in the consolidated statements of
income. However, the loan balances are included in average amounts outstanding.
Loan fee income totaled $598,000 in 1996, $425,000 in 1995 and $354,000 in 1994.
INTEREST RATES AND INTEREST DIFFERENTIAL
Twelve months ended December 31, 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
(In thousands)
Average Average Average Average Average Average
balance Interest yield/cost balance Interest yield/cost balance Interest yield/cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Federal funds sold $4,422 $243 5.5% $4,524 $262 5.8% $3,684 $140 3.8%
Deposits with banks 1,941 99 5.1% 445 29 6.5% 121 3 2.5%
Taxable investment securities<F1> 19,703 1,286 6.5% 17,797 1,134 6.4% 14,753 913 6.2%
Tax exempt investment securities<F2> 17,474 907 5.2% 19,961 965 4.8% 20,517 944 4.6%
Other securities 736 48 6.5% 637 48 7.5% 596 44 7.4%
Mortgage-backed securities<F3> 24,670 1,657 6.7% 24,996 1,647 6.6% 30,286 1,749 5.8%
Loans(including fee income) 114,220 11,261 9.9% 105,983 10,299 9.7% 82,363 7,394 9.0%
--------- ------- --------- --------- ------- --------- --------- ------- ---------
Total interest earning assets 183,166 15,501 8.5% 174,343 14,384 8.3% 152,320 11,187 7.3%
--------- ------- --------- --------- ------- --------- --------- ------- ---------
NONINTEREST EARNING ASSETS
Cash and due from banks 8,076 7,106 7,282
Allowance for possible loan losses (1,072) (995) (786)
Premises and equipment (net) 4,904 3,647 2,529
Other noninterest earning assets 3,373 3,677 2,914
--------- --------- ---------
Total noninterest earning assets 15,281 13,435 11,939
--------- --------- ---------
Total assets 198,447 187,778 164,259
========= ========= =========
<FN>
<F1>
Excludes unrealized appreciation/depreciation due to SFAS No. 115.
<F2>
Excludes unrealized appreciation/depreciation due to SFAS No. 115.
<F3>
Excludes unrealized appreciation/depreciation due to SFAS No. 115.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Twelve months ended December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
Average Average Average Average Average Average
balance Interest yield/cost balance Interest yield/cost balance Interest yield/cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST BEARING LIABILITIES:
Savings, NOW and money market deposits $68,342 $1,598 2.3% $65,740 $1,581 2.4% $74,730 $1,795 2.4%
Certificates of deposits of $100,000 or more 18,718 1,000 5.3% 22,733 1,321 5.8% 12,544 444 3.5%
Other time deposits 44,848 2,410 5.4% 43,176 2,334 5.4% 26,918 987 3.7%
Federal funds purchased 22 1 4.5% - - - - - -
Other borrowings 1,143 63 5.5% 342 22 6.4% 818 44 5.4%
--------- ------- --------- --------- ------- --------- --------- ------- ---------
Total interest bearing liabilities 133,073 5,072 3.8% 131,991 5,258 4.0% 115,010 3,270 2.8%
--------- ------- --------- --------- ------- --------- --------- ------- ---------
NONINTEREST BEARING LIABILITIES:
Demand deposits 47,829 39,496 35,768
Other noninterest bearing liabilities 2,435 1,659 900
--------- --------- ---------
Total noninterest bearing liabilities 50,264 41,155 36,668
Stockholders' equity<F1> 15,110 14,632 12,581
--------- --------- ---------
Total liabilities and stockholders' equity 198,447 187,778 164,259
========= ========= =========
Net interest income/Interest rate spread 10,429 4.7% 9,126 4.3% 7,917 4.5%
======= ========= ======= ========= ======= =========
Net yield on average interest earning assets 5.7% 5.2% 5.2%
========= ========= =========
<FN>
<F1>
Excludes unrealized appreciation/depreciation due to SFAS No. 115.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
I.C. VOLUME AND YIELD/RATE VARIANCES
Net interest income can also be analyzed in terms of the impact of changing
rates and changing volumes. The following table describes the extent to which
changes in interest rates and changes in the volume of interest earning assets
and interest bearing liabilities have affected the Registrant's interest income
and interest expense during the periods indicated. Information is provided in
each category with respect to (i) changes attributable to changes in volume
(changes in volume multiplied by prior rate), (ii) changes attributable to
changes in rates (changes in rates multiplied by prior volume), and (iii) the
net changes. For purposes of this table, changes which are not due solely to
volume changes or rate changes have been allocated to these categories based on
the respective percentage changes in average volume and average rate as they
compare to each other.
Year Ended December 31, Year Ended December 31,
1996 Over 1995 1995 Over 1994
(In thousands) Changes Due To Changes Due To
- --------------------------------------------------------------------------------------------------------------------------------
Volume Rate Net Change Volume Rate Net Change
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME ON INTEREST
EARNING ASSETS:
Federal funds sold ($6) ($13) ($19) $37 $85 $122
Deposits with banks 77 (7) 70 16 10 26
Taxable investment securities 123 29 152 193 28 221
Tax exempt investment securities (126) 68 (58) (26) 47 21
Other securities 6 (6) - 3 1 4
Mortgage-backed securities (21) 31 10 (329) 227 (102)
Loans (including loan fee income)<F1> 811 151 962 2,256 649 2,905
---------------------------------------------------------------
Total interest earning assets 865 252 1,117 2,150 1,047 3,197
---------------------------------------------------------------
INTEREST EXPENSE ON INTEREST
BEARING LIABILITIES:
Savings, NOW and money market deposits 62 (45) 17 (216) 2 (214)
Certificates of deposits of $100,000 or more (220) (101) (321) 490 387 877
Other time deposits 90 (14) 76 755 592 1,347
Federal funds purchased 1 - 1 - - -
Other borrowings 44 (3) 41 (30) 8 (22)
---------------------------------------------------------------
Total interest bearing liabilities (23) (163) (186) 999 989 1,988
---------------------------------------------------------------
Net interest income 888 415 1,303 1,151 58 1,209
===============================================================
<FN>
<F1>
The net change in interest income relating to loan fee income was an increase of
$173,000 in 1996 over 1995 and an increase of $71,000 in 1995 over 1994.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
II.A. Investment Portfolio
The following table presents the composition of the carrying value of the
securities portfolio in each of the last three years at December 31,
(In thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Mortgage-Backed Securities $23,554 $22,517 $26,007
Obligations of State and Political Subdivisions 21,049 18,734 20,967
U.S. Treasury and Government Agencies 18,355 17,200 15,994
Other Securities 1,083 663 611
-------------------------
Total $64,041 $59,114 $63,579
=========================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
II.B. INVESTMENT PORTFOLIO
The book value, maturities and approximated weighted average yield (based on the
estimated annual income divided by book value) at December 31, 1996 are as
follows:
After one but After five but
Within 1 year within five years within ten years After ten years No stated maturity
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Available for sale:
U.S.Treasury securities - - $16,346 6.51% - - - - - - $16,346
U.S.Government Agency Sec. - - 2,009 7.01% - - - - - - 2,009
Mortgage-backed securities - - 984 6.44% $1,275 6.77% $21,295 7.08% - - 23,554
Oblig.of state and pol.subs. $3,646 5.44% 5,771 5.40% 6,453 4.79% - - - - 15,870
--------------------------------------------------------------------------------------------------------
Toal available for sale 3,646 5.44% 25,110 6.29% 7,728 5.12% 21,295 7.08% - - 57,779
Held to maturity:
Oblig.of state and pol.subs. 5,190 3.91% - - - - - - - - 5,190
--------------------------------------------------------------------------------------------------------
5,190 3.91% - - - - - - - - 5,190
Non marketable equity
securities:
Federal Reserve Bank Stock - - - - - - - - $36 6.00% 36
Federal Home Loan Bank Stock - - - - - - - - 1,047 7.00% 1,047
--------------------------------------------------------------------------------------------------------
Total non marketable equity
securities - - - - - - - - 1,083 6.97% 1,083
--------------------------------------------------------------------------------------------------------
Total held to maturity 5,190 3.91% - - - - - - 1,083 6.97% 6,273
--------------------------------------------------------------------------------------------------------
Total debt and equity
securities $8,836 4.54% $25,110 6.29% $7,728 5.12% $21,295 7.08% $1,083 6.97%$64,052
=======================================================================================================
Yields on a tax exempt obligations are not on a tax equivalent basis.
The information required by Item II.C. is included in Footnote 3 of the Notes to
Consolidated Financial Statements which appears on page 22 of the Registrant's
1996 Annual Report to Shareholders which is incorporated herein by reference.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
III.A. Types of Loans
The following table shows the Registrant's loan distribution in each of the last
at December 31,
December 31,
------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(in thousands)
Real estate loans $93,639 $81,394 $67,921 $55,510 $50,031
Unsecured business and personal loans 13,211 11,798 10,094 6,263 4,252
Secured business and personal loans 317 654 973 741 823
Installment/consumer loans 11,714 17,634 15,773 9,065 3,058
----------------------------------------------
Total loans $118,881 $111,480 $94,761 $71,579 $58,164
==============================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
III.B. LOAN PORTFOLIO
- ----------------------
The following are the approximate maturities and sensitivity to changes in
interest rates of certain loans, exclusive of non-commercial real estate
mortgages and consumer loans to individuals as of December 31, 1996:
After One
Within One But Within After
Year Five Years Five Years Total
------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Commercial loans $2,206 $2,522 $49,085 $53,813
Construction loans 8,239 623 - 8,862
------------------------------------------------
Total loans 10,445 3,145 49,085 62,675
================================================
Rate provisions:
Amounts with fixed interest rates 71 1,265 3,275 4,611
Amounts with variable interest rates 10,374 1,880 45,810 58,064
------------------------------------------------
Total $10,445 $3,145 $49,085 $62,675
================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
III.C. NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
The following table shows the Registrant's non-performing assets:
December 31, 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(In thousands)
Loans 90 days or more past due
and still accruing $1 - - $150 -
Nonaccrual loans 269 $507 $422 259 $385
Restructured loans - - - - -
Other real estate owned, net - 235 782 585 678
-------------------------------------------
Total $270 $742 $1,204 $994 $1,063
-------------------------------------------
III.C.2.
The additional interest income that would have been recorded had these
nonaccrual loans performed in accordance with their original terms was
approximately $8,000 in 1996. The interest income that was recorded on these
nonaccrual loans was $74,000 in 1996.
The information required by Item III.C.3. is included in Footnote 1 of the Notes
to Consolidated Financial Statements which appears on pages 19 and 20 of the
Registrant's 1996 Annual Report to Shareholders which is incorporated herein by
reference.
Potential Problem Loans
In addition to the total non-performing loans set forth above, loans of
approximately $3,576,000 at December 31, 1996, were classified as potential
problem loans. These are loans for which management has information which
indicated that the borrower may not be able to comply with the present payment
terms. These loans are subject to constant management attention and their
classification is reviewed on at least a quarterly basis.
Loan Concentrations
At December 31, 1996, there were no loan concentrations.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IV.A. SUMMARY OF LOAN LOSS EXPERIENCE
Management uses criteria set forth by the OCC in its classification and review
of the loan portfolio which includes a general allocation reserve with a low and
high range for each loan type. The ranges are reviewed on a quarterly basis to
determine if any adjustments are necessary. The information reviewed includes
past due trends, charge off trends, economic conditions and concentrations of
credit. The $330,000 provision for possible loan losses for 1996 was used to
increase the general allocation as a result of average loans increasing 7.8%.
Based on the loan classification committee's review of the classified loans and
the general allocation reserve as it relates to the entire loan portfolio,
management believes the allowance for possible loan losses is adequate. However,
future additions to the allowance may be necessary based on changes in
conditions.
December 31, 1996 1995 1994 1993 1992
- ---------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(In thousands)
Allowance for possible loan losses
balance at beginning of period 1038 944 747 846 841
Charge-offs:
Real estate loans - 2 26 - 89
Unsecured business & personal loans 11 64 27 118 -
Secured business & personal loans - - - - -
Installment/consumer loans 264 164 123 77 86
----------------------------------------
Total 275 230 176 195 175
Recoveries:
Real estate loans - 1 - - -
Unsecured business & personal loans 79 23 12 15 -
Secured business & personal loans - - - - -
Installment/consumer loans 66 32 28 37 44
----------------------------------------
Total 145 56 40 52 44
----------------------------------------
Net charge-offs 130 174 136 143 131
Provision for possible loan losses
charged to operations 330 268 333 44 136
----------------------------------------
Balance at end of period 1238 1038 944 747 846
========================================
Ratio of net charge-offs during period
to average loans outstanding 0.11% 0.16% 0.17% 0.22% 0.23%
</TABLE>
<TABLE>
<CAPTION>
IV.B.
The allocation of the allowance for possible loan losses is as follows:
Year Ended December 31, 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
(In thousands, except for percentages) Percentage Percentage Percentage Percentage Percentage
of Loans of Loans of Loans of Loans of Loans
to Total to Total to Total to Total to Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans 685 78.8% 576 73.0% 517 71.7% 462 77.5% 597 85.9%
Unsecured business and personal loans 301 11.1% 179 10.6% 165 10.7% 172 8.8% 178 7.4%
Secured business and personal loans 1 0.3% 1 0.6% 5 1.0% 63 1.0% 6 1.4%
Installment/consumer loans 251 9.8% 282 15.8% 257 16.6% 50 12.7% 65 5.3%
-------------------------------------------------------------------------------------------
Total 1238 100.0% 1038 100.0% 944 100.0% 747 100.0% 846 100.0%
===========================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
V.A. Deposits
- -------------
The following table sets forth the classifications of the average deposits and
the average rates paid on the Registrant's deposits for the periods indicated:
Year Ended December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except for percentages)
Average Average Average Average Average Average
Deposits Rates Paid Deposits Rates Paid Deposits Rates Paid
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $47,829 - $39,496 - $35,768 -
Savings, NOW and money market deposits $68,342 2.3% $65,740 2.4% $74,730 2.4%
Certificates of deposit of $100,000 or more $18,718 5.3% $22,733 5.8% $12,544 3.5%
Other time deposits $44,848 5.4% $43,176 5.4% $26,918 3.7%
--------------------------------------------------------------------------------
Total $179,737 2.8% $171,145 3.1% $149,960 2.2%
================================================================================
At December 31, 1996, the remaining maturities of the Registrant's time
certificates of $100,000 or more were as follows:
(In thousands)
-----------------------------------------------------
3 months or less $15,016
Over 3 thru 6 months $2,064
Over 6 thru 12 months $996
Over 12 months $175
----------
Total $18,251
==========
</TABLE>
<PAGE>
VI. RETURN ON EQUITY AND ASSETS
- ---------------------------------
The information required by Item VI. is included in the "Five Year Summary of
Operations" which appears on page 8 of the Registrant's 1996 Annual Report to
Shareholders which is incorporated herein by reference.
<PAGE>
VII. SHORT-TERM BORROWINGS
- ----------------------------
The Registrant had no short-term borrowings at the end of the reported period.
The average amounts outstanding during the reported period were less than 30
percent of stockholders' equity at the end of the period.
<PAGE>
Item 2. Description of Property
- -------------------------------
Facilities of the Registrant are located at 2488 Montauk Highway, Bridgehampton,
New York in the Bank's Main Office facility. As such, the Registrant itself has
no physical properties.
The Bank's Main Office is owned in fee. During 1996 the Bank continued
construction of a new main office and administrative facility on the
approximately 3.3 acres located at Snake Hollow Road, Bridgehampton, New York. A
Spring 1997 completion date is anticipated.
The Bank also owns the building which houses its Southold Branch located at
54790 Main Road, Southold, New York. The Bank leases four additional properties
as branch locations at 425 County Road 39, Southampton, New York; 26 Park Place,
East Hampton, New York; Main Road Mattituck, New York; and 1 The Plaza, Montauk,
New York. The Bank leases additional space at 425 County Road 39, Southampton,
New York for its financial operations department and 184 Old Country Road,
Riverhead, New York for a loan and residential mortgage center.
It is the opinion of management of the Company that the current facilities,
including the facility under construction, are suitable and adequate at the
present time.
Item 3. Legal Proceedings
- -------------------------
There are no material legal proceedings, individually or in the aggregate, to
which the Registrant or the Bank is a party or of which any of their property is
subject.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
None
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
- ----------------------------------------------------------------
"Common Stock Information" set forth on page 28 of the Annual Report to
Shareholders for the year ended December 31, 1996 is incorporated herein by
reference.
Item 6. Management's Discussion and Analysis or Plan of Operation
- -----------------------------------------------------------------
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" set forth on pages 9 through 14 of the Annual Report to Shareholders
for the year ended December 31, 1996 is incorporated herein by reference.
Item 7. Financial Statements
- ----------------------------
The Consolidated Financial Statements and notes, together with the Report of
Independent Public Accountants included on pages 15 through 28 of the Annual
Report to Shareholders for the year ended December 31, 1996 is incorporated
herein by reference.
See Exhibit 13.2 for the independent auditors' report on the consolidated
statements of income, stockholders' equity and cash flows for the year ended
December 31, 1994.
Item 8. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure
--------------------
"Independent Accountants" set forth on page 10 of the Registrant's Proxy
Statement dated March 13, 1997 is incorporated herein by reference.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
- ---------------------------------------------------------------------
Compliance With Section 16 (a) of the Exchange Act
- --------------------------------------------------
"Nominees for Directors and Directors Continuing in Office" set forth on pages 3
through 4 of the Registrant's Proxy Statement dated March 13, 1997 is
incorporated herein by reference.
Information regarding executive officers of the Registrant is included in Part
I, Item 1, Description of Business.
"Compliance with Section 16 (a) of the Exchange Act" set forth on page 8 of the
Registrant's Proxy Statement dated March 13, 1997 is incorporated herein by
reference.
Item 10. Executive Compensation
- -------------------------------
"Compensation of Directors" and "Compensation of Executive Officers" set forth
on page 6 of the Registrant's Proxy Statement dated March 13, 1997 is
incorporated herein by reference.
Item 11. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
"Beneficial Ownership" and "Nominees for Director and Directors Continuing in
Office" set forth on pages 2 through 4 of the Registrant's Proxy Statement dated
March 13, 1997 incorporated herein by reference.
Item 12. Certain Relationships and Related Transactions
- -------------------------------------------------------
"Certain Relationships and Related Transactions" set forth on page 8 of the
Registrant's Proxy Statement dated March 13, 1997 is incorporated herein by
reference.
"Related party loans" set forth as part of Footnote 4 of the Notes to
Consolidated Financial Statements which appears on page 23 of the Annual Report
to Share-holders for the year ended December 31, 1996 is incorporated herein by
reference.
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
- -----------------------------------------
Exhibits
The Following Exhibits are incorporated herein by reference:
3.1 Certificate of Incorporation of the Registrant
3.2 By-laws of the Registrant
10.2 Severance Agreement - Anthony Leone
10.3 Annual Incentive Plan
10.4 Service Agreement - Fiserv Boston, Inc.
10.5 Equity Incentive Plan
The following Exhibits are filed with this Form 10-KSB:
10.1 Employment Contract - Thomas J. Tobin
Dated January 27, 1997
13.1 Registrant's Annual Report to Shareholders for the year ended
December 31, 1996 (parts not incorporated by reference are
furnished for information purposes only and are not to be
deemed filed herewith.)
13.2 Independent Auditors' Report on the consolidated statements
of income, stockholders' equity and cash flows for the year
ended December 31, 1994.
Reports on Form 8-K
There were no reports on Form 8K filed during the fourth quarter of 1996.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BRIDGE BANCORP, INC.
--------------------
Registrant
Date: March 28, 1997 By /s/ Thomas J. Tobin
---------------------- --------------------------------
Thomas J. Tobin, President/CEO
Date: March 28, 1997 By /s/ Christopher Becker
---------------------- --------------------------------
Christopher Becker,
Senior Vice President/Treasurer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
date indicated.
/s/ Raymond Wesnofske Director March 28, 1996
- -------------------------------- ------------------------
Raymond Wesnofske
/s/ Thomas J. Tobin Director March 28, 1996
- -------------------------------- ------------------------
Thomas J. Tobin
/s/ Thomas E. Halsey Director March 28, 1996
- -------------------------------- ------------------------
Thomas E. Halsey
/s/ Marcia Z. Hefter Director March 28, 1996
- -------------------------------- ------------------------
Marcia Z. Hefter
/s/ R. Timothy Maran Director March 28, 1996
- -------------------------------- ------------------------
R. Timothy Maran
/s/ Albert E. McCoy Director March 28, 1996
- -------------------------------- ------------------------
Albert E. McCoy
/s/ Walter A. Preische, Jr. Director March 28, 1996
- -------------------------------- ------------------------
Walter A. Preische, Jr.
/s/ L.H. Strickland Director March 28, 1996
- -------------------------------- ------------------------
L.H. Strickland
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
<S> <C> <C>
Exhibit Number Description of Exhibit Page
- --------------
3.1 Certificate of Incorporation of the *
Registrant (incorporated by reference
to Registrant's amended Form 10, File
No. 0-18546, filed October 15, 1990)
3.2 By-laws of the Registrant (incorporated *
by reference to Registrant's amended
Form 10, File No. 0-18546, filed
October 15, 1990)
10.1 Employment Contract - Thomas J. Tobin 28
Dated January 27, 1997
10.2 Severance Agreement - Anthony Leone *
(incorporated by reference to Registrant's
amended Form 10, File No. 0-18546, filed
October 15, 1990)
10.3 Annual Incentive Plan (incorporated by *
reference to Registrant's Form 10-KSB,
File No. 0-18546, filed March 31, 1994)
10.4 Service Agreement - Fiserv Boston, Inc. *
(incorporated by reference to Registrant's
Form 10-KSB, File No 0-18546, filed
March 31, 1994)
10.5 Equity Incentive Plan (incorporated by *
reference to Registrant's Form 14A,
File No. 0-18546, filed April 1, 1996)
13.1 Registrant's Annual Report to Shareholders 39
for the year ended December 31, 1996
13.2 Independent Auditors' Report on the 71
Consolidated Financial Statements as of
December 31, 1994 and for the year ended
December 31, 1994.
* Denotes incorporated by reference
</TABLE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of January 27,
------------
1997 and made effective as of January 1, 1997, by and among BRIDGEHAMPTON
- ----
NATIONAL BANK (the "Bank"), BRIDGE BANCORP, INC. (the "Company") (the Bank and
the Company, collectively, the "Employers") and Thomas J. Tobin (the
"Employee").
WHEREAS, the respective Boards of Directors of the Employers (the
"Boards") have approved and authorized the entry into this Agreement with the
Employee;
WHEREAS, the Employee is currently serving as the President and Chief
Executive Officer of the Employers under an Employment Agreement dated as of
April 1, 1992 (the "Prior Agreement");
WHEREAS, the parties desire to enter into this Agreement to set forth
the terms and conditions for the employment relationships of the Employee with
the Employers and to replace and supersede the Prior Agreement.
NOW, THEREFORE, it is AGREED as follows:
1. EMPLOYMENT. The Employee is employed as the President and Chief
-----------
Executive Officer of the Employers from the date hereof through the term of this
Agreement. As an executive of the Employers, the Employee shall render
executive, policy, and other management services to the Employers of the type
customarily performed by persons serving in similar executive officer
capacities. As Chief Executive Officer, the Employee shall be responsible for
implementing the policies of the Boards and shall report to the Boards, except
as otherwise determined by the Boards. All other officers of the Employers shall
report directly to the Employee, except as the Employee or the Boards shall
otherwise determine, and except that the internal auditor shall report directly
to the Boards. The Employee shall also perform such duties as the Boards may
from time to time reasonably direct and the Boards may modify the titles and
duties of the Employer, in their discretion, provided that such titles and
duties shall be reasonably commensurate with the education and experience of the
Employee, taking into consideration any changes in the size of the Employers or
the nature of their business or assets after the date hereof. During the term of
this Agreement, the Employee shall not be required to relocate anywhere outside
the area comprised of the Towns of Southampton, East Hampton, Shelter Island,
Southold and Riverhead, New York in order to perform the services hereunder.
2. SALARY AND BONUSES.
-------------------
(a) The Employers agree to pay the Employee during the term of this
Agreement a base salary at an annual rate equal to $182,500.00, with the salary
-----------
to be reviewed no less frequently than annually during the term of this
Agreement and adjusted as determined by the Boards. In determining salary
adjustments, the Boards may consider changes in the cost of living as well as
the performance of the Employers and the Employee's individual performance and
achievements.
<PAGE>
(b) In additition to his base salary under this Section 2, the Employee
shall be eligible to receive such discretionary bonuses as may be authorized,
declared and paid by the Boards. No other compensation provided for in this
Agreement shall be deemed a substitute for such bonuses when and as declared by
the Boards.
(c) The salary under this Section 2 shall be payable by the Bank to the
Employee in accordance with the Bank's usual payroll practices for executive
employees. The Company agrees to reimburse the Bank for a portion of the
compensation paid to the Employee hereunder, which portion shall represent an
appropriate allocation for the services rendered to the Company hereunder.
(d) The Employee shall be entitled to receive fees in addition to his
compensation hereunder for serving as a director of the Company, the Bank, or
any subsidiary, or for serving as a member of any committee of the Board of
Directors of the Company, the Bank, or any subsidiary.
3. PARTICIPATION IN RETIREMENT AND EMPLOYEE BENEFIT PLANS; FRINGE BENEFITS;
------------------------------------------------------------------------
INSURANCE BENEFITS.
- -------------------
(a) The Employee shall be entitled to participate in any plan of the
Employers or either of them relating to stock options, stock purchases, pension,
thrift, profit sharing, employee stock ownership, group life insurance, medical
coverage, disability insurance, education, or other retirement or employee
benefits that the Bank or the Company has adopted or may adopt, on a basis no
less favorable to the Employee than that applicable to other executive
employees. The Employee shall also be entitled to participate in any other
fringe benefits that are now or may be or become applicable to the Company's or
the Bank's executive employees, including the payment of reasonable expenses for
attending annual and periodic meetings of trade associations, the provision of
an automobile primarily for business use and any other benefits that are
commensurate with the duties and responsibilities to be performed by the
Employee under this Agreement. Participation in these plans and fringe benefits
(other than pursuant to a salary reduction agreement executed by the Employee)
shall not reduce the salary and any bonus payable to the Employee under Section
2 hereof.
(b) In addition to the benefits enumerated above, during the term of this
Agreement the Employee shall be entitled to the benefits of a special disability
income policy (Guardian Policy No. G718042) and a supplemental retirement income
plan with a preretirement death benefit (Guardian Policy No. 3505768) purchased
by and at the expense of the Company or the Bank (collectively the "Policies").
The Employee shall be the owner of the Policies and shall be entitled to
designate the beneficiary or beneficiaries of the Policies. All costs and
expenses of the Employers in connection with the Policies in excess of those
that are excludable from the Employee's income under applicable law shall be
reported as compensation income to the Employee and the Employee shall be
responsible for the payment of any and all taxes related to such amounts.
4. TERM. The initial term of employment under this Agreement shall be for a
-----
period commencing on the date hereof and ending on December 31, 2001 The
Employers may renew this
<PAGE>
Agreement by written notice to the Employee for one additional year on January
1, 1998 and each subsequent January 1 during the term of this Agreement, unless
the Employee gives contrary written notice to the other parties hereto before
such renewal date. If at any time during the term of this Agreement, there is a
"Change in Control" (as defined in Section 8(b) hereof), the provisions of
Sections 7 and 8 hereof shall continue to apply for two years from the date of
such Change in Control regardless of whether the term of this Agreement is
subsequently renewed under this Section 4. The initial term and all such renewed
terms are collectively referred to herein as the "term of this Agreement."
5. STANDARDS. The Employee shall perform the Employee's duties and
----------
responsibilities under this Agreement in accordance with such reasonable
standards as may be established from time to time by the Boards. The
reasonableness of such standards shall be measured against standards for
executive performance generally prevailing in the commercial banking industry.
6. VOLUNTARY ABSENCES; VACATIONS. The Employee shall be entitled, without
------------------------------
without loss of pay, to be absent voluntarily for reasonable periods of time
from the performance of the duties and responsibilities under this Agreement.
All such voluntary absences shall count as paid vacation time, unless the Boards
otherwise approve. The Employee shall be entitled to an annual paid vacation of
four weeks per year or such longer period as the Boards may approve. The timing
of paid vacations shall be scheduled in a reasonable manner by the Employee. The
Employee shall not be entitled (i) to receive any additional compensation from
the Bank on account of failure to take a paid vacation or (ii) to accumulate
unused paid vacation time from one calendar year to the next.
7. TERMINATION OF EMPLOYMENT.
--------------------------
(a) (i) The Boards may terminate the Employee's employment at any time, but
any termination other than termination for "Cause" shall not prejudice the
Employee's right to compensation or other benefits under this Agreement. The
Employee shall have no right to receive compensation or other benefits for any
period after termination for Cause. "Cause" shall mean the Employee's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform material stated duties, willful
violation of any law, rule, or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order, the violation of which has a
material adverse effect on the Employers or either of them, or material breach
of any provision of this Agreement. In determining incompetence, the acts or
omissions shall be measured against standards generally prevailing in the
commercial banking industry; provided, it shall be the burden of the Employers
to prove the alleged acts and omissions and the prevailing nature of the
standards the Employers shall have alleged are violated by such acts and/or
omissions.
(ii) For purposes of this Agreement, a termination of employment by the
Employee for "Good Reason" shall be treated as an involuntary termination of the
Employee's employment by the Employers without Cause. "Good Reason" shall mean:
(A) a material breach by the Employers or either of them of this Agreement or
(B) a reduction, without the prior written consent of the Employee, in his base
salary under Section 2 hereof or benefits provided to him under Section 3 hereof
(or both).
<PAGE>
(iii) The parties acknowledge and agree that damages that will result to
Employee for termination without Cause shall be extremely difficult or
impossible to establish or prove, and agree that, subject to Section 8(c) below,
unless the termination is for Cause, the Bank shall be obligated, following such
termination, to continue to pay to the Employee as liquidated damages the
Employee's then current base salary under Section 2 of this Agreement for a
period equal to the remaining term of this Agreement, payable not less
frequently than monthly over such remaining term. The Employee agrees that,
except for such other payments and benefits to which the Employee may be
entitled as expressly provided by the terms of this Agreement or an employee
benefit plan or arrangement covering him, such liquidated damages shall be in
lieu of all other claims that the Employee may make by reason of such
termination. The liquidated damages amount shall not be reduced by any
compensation that the Employee may receive for other employment with another
employer after termination of his employment with the Employers.
(iv) In addition to the liquidated damages that are payable to the
Employee, the following shall apply in the event of any termination without
Cause or in the event of any termination subject to Section 8(a)(i) hereof: (1)
the Employee shall continue to participate in, and accrue benefits under, all
retirement, pension, profit-sharing, employee stock ownership, and other
deferred compensation plans of the Company or the Bank for the remaining term of
this Agreement (or following a "Change in Control" as defined below, if longer,
three years) as if the termination of employment of the Employee had not
occurred (with the Employee being deemed to receive annually for the purposes of
such plans the Employee's salary under Section 2 hereof as of the date of
termination or, if applicable, Change in Control, whichever is greater), except
to the extent that such continued participation and accrual is expressly
prohibited by law, or to the extent such plan constitutes a "qualified plan"
under Section 401 of the Internal Revenue Code of 1986, as amended (the "Code"),
in which case the Employers shall provide substantially equivalent benefits to
the Employee under a nonqualified plan; (2) the Employee shall be entitled to
continue to receive all other employee benefits referred to in Section 3 hereof
for the remaining term of this Agreement (or following a "Change in Control," if
longer, three years) as if the termination of employment had not occurred; and
(3) all insurance or other provisions for indemnification, defense or
hold-harmless of officers or directors of the Company or the Bank that are in
effect on the date the notice of termination is sent to the Employee shall
continue for the benefit of the Employee with respect to all of his acts and
omissions while an officer or director as fully and completely as if such
termination had not occurred, and until the final expiration or running of all
periods of limitation against action that may be applicable to such acts or
omissions; provided, however, that the Employers shall not be required to
provide the benefits described in clause (1) or (2) of this Section 7(a)(iv) to
the extent that the Employee has the right to receive substantially identical
benefits by reason of his employment by another employer following the
termination of his employment hereunder.
(b) The Employee shall have no right to terminate his employment under this
Agreement before the end of the term of this Agreement, unless (i) such
termination is approved in writing by the Boards or (ii) such termination is for
Good Reason (as defined above). It shall be the Employee's burden to prove the
alleged acts that constitute a material breach by the Employers of their
obligations under this Agreement.
<PAGE>
(c) In the event the employment of the Employee is terminated by the
Employers without Cause under Section 7(a) hereof or the Employee's employment
is terminated in accordance with Section 8(a)(ii) hereof and the Bank fails to
make timely payment of any amount then payable to or for the benefit of the
Employee under this Agreement and such failure continues for more than 30 days,
the Employee shall be entitled to reimbursement for all reasonable costs,
including attorneys' fees, incurred by the Employee in taking action to collect
such amounts or otherwise to enforce this Agreement, plus interest on such
amounts at the prime rate (defined as the base rate on corporate loans at large
U.S. money center commercial banks as published by The Wall Street Journal),
compounded monthly, for the period from the date the payment is due until the
payment is made. Such reimbursement and interest shall be in addition to all
rights that the Employee is otherwise entitled to under this Agreement.
(d) In the event of the Employee's death during the term of this Agreement,
his estate shall be entitled to receive his accrued salary and bonus through the
date of his death. This Agreement shall thereupon terminate, except that any
vested rights of the Employee shall then be exercised by his estate.
(e) In the event that during the term of this Agreement the Employee is
unable to perform his duties hereunder because he is disabled within the meaning
of any policy of disability insurance maintained or provided by the Employers
under which he is entitled to benefits or, if there is no such policy, within
the meaning of Section 22(e) of the Code (a "Disability"), the Employee shall be
entitled to continue to receive (i) his base salary then in effect under Section
2 hereof, reduced by any benefits payable to the Employee under any such policy
of disability insurance, and (ii) his benefits then in effect under Section 3
hereof, for a period of one year following the occurrence of the Disability (or
until he ceases to be disabled, if earlier), and this Agreement shall terminate
following such one-year period (unless the Employee shall have returned to
employment hereunder before that date).
(f) Notwithstanding any other provision in this Agreement, (i) the
Employers may terminate or suspend this Agreement and the employment of the
Employee hereunder, as if such termination were for Cause under Section 7(a)(i)
hereof and for Willful Misconduct under Section 8(a)(ii) hereof, to the extent
required by the laws of the State of New York related to banking, by applicable
federal law relating to deposit insurance or bank holding companies or by
regulations or orders issued by the Banking Commissioner of the State of New
York, the Federal Deposit Insurance Corporation or the Board of Governors of the
Federal Reserve System and (ii) no payment shall be required to be made to the
Employee under this Agreement to the extent such payment is prohibited by
applicable law, regulation or order issued by a banking agency or a court of
competent jurisdiction; provided, that it shall be the Employers' burden to
prove that any such action was so required.
8. CHANGE IN CONTROL.
------------------
(a) (i) If during the term of this Agreement there is a Change in Control
(as defined below) and the Employee's employment by the Employers is terminated
in accordance with Section 8(a)(ii), the Employee shall be entitled to receive
as a severance payment for services previously rendered to the Employers a lump
sum cash payment equal to 2.99 times the sum of the
<PAGE>
Employee's base salary in effect under Section 2 hereof as of date of the Change
in Control or the date of termination, whichever is greater, plus the amount of
bonuses paid to the Employee during the 12 months preceding the Change in
Control (subject to Sections 7(f) above and 8(c) below). Payment under this
Section 8(a)(i) shall be in lieu of any amount owed to the Employee as
liquidated damages for termination without Cause under Section 7 hereof.
However, payment under this Section 8(a) shall not be reduced by any
compensation that the Employee may receive from other employment with another
employer after termination of the Employee's employment. In addition, Sections
7(a)(iv) and 7(c) shall apply in the case of any termination of employment
within the scope of this Section 8(a). Payment to the Employee of severance
under this Section 8(a) shall be made on or before the Employee's last day of
employment with the Employers.
(ii) For purposes of this Agreement, the Employee's employment by the
Employers shall be considered terminated "in accordance with Section 8(a)(ii)"
if a Change in Control shall occur, and in connection with such Change in
Control or within two years thereafter either (x) the Employee's employment with
the Employers shall be terminated as a result of an Actual Termination (as
defined below), or (y) the Employee's employment with the Employers shall
terminate after an event that would constitute Good Reason (as defined above);
and the following terms shall have the meanings set out below:
(A) "Actual Termination" means involuntary termination of the
Employee's employment with the Employers for any reason other than Willful
Misconduct, Disability, death or Retirement.
(B) "Willful Misconduct" means (I) the continued willful failure by
the Employee to substantially perform his duties with the Employers or
either of them (other than any such failure resulting from the Employee's
incapacity due to physical or mental illness) after a written demand for
substantial performance is delivered to the Employee by the Boards (or
either of the Boards) that specifically identifies the manner in which the
Employee has not substantially performed his duties and after a reasonable
time period has run to allow the Employee to perform, (II) willful conduct
that is a material violation of the Bank's written ethics policy or
applicable law and that is materially injurious to the Employers or either
of them, (III) other willful and wrongful conduct by the Employee that
causes substantial and material injury to the business and operations of
the Employers or either of them, the continuation of which, in the
reasonable judgment of the Boards (or either of the Boards), will continue
to substantially and materially injure the business and operations of the
Employers (or either of them) in the future, or (IV) conviction of the
Employee of a felony involving moral turpitude; provided, that an act or
failure to act shall not be considered "willful" unless done, or omitted to
be done, in bad faith and without reasonable belief that the Employee's
action or omission was in the best interests of the Employers;
(C) "Retirement" means termination of the Employee based on the
Employee's having reached the earlier of age 65 or the normal retirement
age as defined under Bank's employee's pension plan, if permissible under
applicable law.
<PAGE>
(D) "Date of Termination" means the date specified in the notice of
termination.
(b) For purposes of this Agreement, a "Change in Control" shall be deemed
to have taken place if: (i) any person becomes the beneficial owner of more than
50 percent of the total number of voting shares of the Company; (ii) any person
(other than the persons named as proxies solicited on behalf of the Board of
Directors of the Company) holds revocable or irrevocable proxies as to the
election or removal of members of the board of directors of the Company, for
more than 50 percent of the total number of voting shares of the Company; (iii)
any person (other than a person controlled directly or indirectly by the
Company) becomes the beneficial owner of more than 50 percent of the total
number of voting shares of the Bank; (iv) any person has received all required
approvals of applicable regulatory authorities to acquire control of the Company
or the Bank; or (v) as the result of, or in connection with, any cash tender or
exchange offer, merger, or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions, the
persons who were directors of the Company immediately before such transaction
shall cease to constitute at least one-half of the members of the Board of
Directors of the Company or any successor corporation. For purposes of this
Section 8(b), a "person" includes an individual, corporation, partnership,
trust, association, joint venture, pool, syndicate, unincorporated organization,
joint-stock company or similar organization or group acting in concert. A person
for these purposes shall be deemed to be a beneficial owner as that term is used
in Rule 13d-3 under the Securities Exchange Act of 1934.
(c) Notwithstanding any other provisions of this Agreement or of any other
agreement, contract, or understanding heretofore or hereafter entered into by
the Employee with the Company, the Bank or any other entity controlled by the
Company, except an agreement, contract, or understanding hereafter entered into
that expressly modifies or excludes application of this Section 8(c) (the "Other
Agreements"), and notwithstanding any formal or informal plan or other
arrangement heretofore or hereafter adopted by the Company or the Bank for the
direct or indirect provision of compensation to the Employee (including groups
or classes of participants or beneficiaries of which the Employee is a member),
whether or not such compensation is deferred, is in cash, or is in the form of a
benefit to or for the Employee (a "Benefit Plan"), the Employee shall not have
any right to receive any payment or other benefit under this Agreement, any
Other Agreement, or any Benefit Plan if such payment or benefit, taking into
account all other payments or benefits to or for the Employee under this
Agreement, all Other Agreements, and all Benefit Plans, would cause any payment
to the Employee under this Agreement to be considered a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code (a "Parachute Payment"). In
the event that the receipt of any such payment or benefit under this Agreement,
any Other Agreement, or any Benefit Plan would cause the Employee to be
considered to have received a Parachute Payment under this Agreement, then the
Employee shall have the right, in the Employee's sole discretion, to designate
those payments or benefits under this Agreement, any Other Agreements, and/or
any Benefit Plans, that should be reduced or eliminated so as to avoid having
the payment to the Employee under this Agreement be deemed to be a Parachute
Payment.
<PAGE>
9. NONCOMPETITION, CONFIDENTIALITY AND NONINTERFERENCE WITH CUSTOMERS AND
----------------------------------------------------------------------
EMPLOYEES.
- ----------
(a) In the event that the Employee terminates his employment under this
Agreement before the end of the term of this Agreement, unless (i) such
termination is approved in writing by the Boards or (ii) such termination is for
Good Reason (as defined above), or in the event the Employers terminate the
Employee's employment for Cause (or, in the event of a Change of Control, for
Willful Misconduct), the Employee shall not become an employee of, or otherwise
provide personal services to, any "Significant Competitor" of the Employers (or
either of them) for a period of two years after such termination. "Significant
Competitor" shall mean any commercial bank, savings bank, savings and loan
association, mortgage banking company or other financial institution, or a
holding company affiliate of any of the foregoing, that at the date of its
employment of the Employee has an office in Southampton, East Hampton, Shelter
Island, Southold or Riverhead, New York. If any court or other tribunal having
jurisdiction to determine the validity or enforceability of this paragraph
determines that, strictly applied, it would be invalid or unenforceable, the
definition of Significant Competitor and the time provisions used shall be
deemed modified to the extent necessary (but only to that extent) so that the
restrictions, as modified, will be valid and enforceable.
(b) Except as authorized or directed by the Employers, the Employee shall
not at any time during or subsequent to employment with the Employers, directly
or indirectly, publish or disclose to any person or entity any confidential
information of the Employers or confidential information of others that has come
into the Employers' possession or the Employee's possession in the course of
employment with the Employers, and the Employee will not use such information
for the Employee's personal gain or make it available for others to use. All
information, whether written or not, regarding the business and finances of the
Employers, or their customers and contractors, including, without limitation,
information relating to existing and contemplated products, services, software,
systems, methods, business procedures, construction, operational and marketing
plans and programs, prices, costs and revenues, prospective and existing
contracts, prospective and existing customers or other business arrangements and
any additional information acquired only because of employment with the
Employers, shall be presumed to be confidential, except to the extent the same
shall have been lawfully and without breach of obligation made available to the
general public without restriction. All papers and records of every kind,
including all memoranda, notes, lists, plans, reports, data (written or
recorded) and documents, whether originals or copies and whether prepared by the
Employee or by others, relating to the business and finances of the Employers or
their customers or contractors, shall be the sole and exclusive property of the
Employers. The Employee will return to the Employers all of the above materials
upon termination of employment and will not at any time give or disclose such
materials to any unauthorized person or entity.
(c) The Employee acknowledges and agrees that, because relationships with
customers and prospective customers are expected to constitute a large portion
of the goodwill of the Bank's business, it is of great importance to the
Employers that the Employee not solicit the Bank's customers and prospective
customers (other than on behalf of the Bank) during the period of employment,
and that the Employee not solicit such customers and prospective customers
during a two-year period after termination of the Employee's employment, with
respect to business
<PAGE>
or contracts for any products or services of the type provided, developed or
under development by the Bank during the Employee's employment by the Bank, so
that another employee of the Bank will have an opportunity to develop
relationships with such clients and prospective clients. The Employee agrees
that, while the Employee is employed by the Bank and for a period of two years
commencing on the date of termination of the Employee's employment with the Bank
(the "Termination Date"), the Employee shall not, within the area referred to in
Section 9(a) above, and in any other town in which the Employee performed
material services for the Bank, directly or indirectly solicit (other than on
behalf of the Bank) business or contracts for any products or services of the
type provided, developed or under development by the Bank during the Employee's
employment by the Bank, from or with (i) any person or entity that was a
customer of the Bank for such products or services as of, or within one year
before, the Termination Date, or (ii) any prospective customer that the Bank was
actively soliciting as of, or within one year before, the Termination Date.
(d) While the Employee is employed by the Employers and for a period of two
years commencing on the Termination Date, the Employee shall not solicit any
person who is then employed by the Company, the Bank or any subsidiary of either
of them, or who within 90 days before the Termination Date had been so employed,
to leave such employment or to become employed by any person or entity other
than the Company, the Bank or any such subsidiary.
(e) The Employee acknowledges that the restrictions contained in this
Section 9 are reasonable and necessary to protect the business and interests of
the Employers and that any violation of these restrictions would cause
substantial irreparable injury. Accordingly, the Employee agrees that a remedy
at law for any breach of the foregoing covenants would be inadequate and that
the Employers, in addition to any other remedies available, shall be entitled to
obtain preliminary and permanent injunctive relief to secure specific
performance of such covenants and to prevent a breach or contemplated breach of
this Section without the necessity of proving actual damage. The Employee will
provide the Employers a full accounting of all proceeds and profits received by
the Employee as a result of or in connection with a breach of this Section.
Unless prohibited by law, the Employers shall have the right to retain any
amounts otherwise payable to the Employee to satisfy any obligations of the
Employee as a result of any breach of this Section. The Employee hereby agrees
to indemnify and hold harmless the Employers from and against any costs and
expenses incurred by the Employers as a result of any breach of this Section by
the Employee and in enforcing and preserving the Employers' rights under this
Section.
10. NO ASSIGNMENTS. This Agreement is personal to each of the parties
----------------
hereto. No party may assign or delegate any rights or obligations hereunder
without first obtaining the written consent of the other party hereto. However,
in the event of the death of the Employee all rights to receive payments
hereunder shall become rights of the Employee's estate.
11. OTHER CONTRACTS. Except for reasonable periods of absence as set out in
----------------
Section 6 hereof, the Employee shall devote such time and effort to the
businesses of the Employers as may reasonably be required by the nature of his
offices with the Employers and shall not engage in conduct or management of any
other business without the prior written approval of the Employers; provided,
that he shall not be deemed to be engaged in the conduct or management of such
other
<PAGE>
business merely (i) by reason of having an investment therein or (ii) with the
prior written approval of the Employers, by being a member of the board of
directors of another corporation, so long as such corporation shall not be a
commercial bank, trust company, bank holding company or other financial
institution. The Employee shall not, during the term of this Agreement, have any
other paid employment other than with a subsidiary of the Company, except with
the prior approval of the Boards.
12. PRIOR AGREEMENT SUPERSEDED; ENTIRE AGREEMENT; AMENDMENTS. The Prior
------------------------------------------------------------
Agreement is hereby replaced and superseded and the Prior Agreement shall be of
no further force or effect after the date of this Agreement. This Agreement
constitutes the entire agreement among the parties hereto with respect to the
matters contemplated herein, and it supersedes all prior oral or written
agreements, commitments or understandings with respect to the matters provided
for herein. No amendment, modification or discharge of this Agreement shall be
valid or binding unless set forth in writing and duly executed and delivered by
the party against whom enforcement of the amendment, modification, or discharge
is sought.
13. SECTION HEADINGS. The section headings used in this Agreement are
------------------
included solely for convenience and shall not affect, or be used in connection
with, the interpretation of this Agreement.
14. SEVERABILITY. The provisions of this Agreement shall be deemed
-------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
15. GOVERNING LAW. This Agreement shall be governed by the laws of the
---------------
United States to the extent applicable and otherwise by the laws of the State of
Connecticut, excluding the choice of law rules thereof.
16. COUNTERPARTS. This Agreement may be executed in two or more
-------------
counterparts, for the convenience of the parties, but all such counterparts
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
or caused this Agreement to be duly executed on their behalf, as of the date and
year first above written.
Attest: BRIDGE BANCORP, INC.
/s/ Michael P. Kochanasz By /s/ Raymond Wesnofske
- -------------------------------- -------------------------------
Michael P. Kochanasz Raymond Wesnofske
Secretary Its: Chariman
----------------------------
Attest: BRIDGEHAMPTON NATIONAL BANK
<PAGE>
/s/ Michael P. Kochanasz By /s/ Raymond Wesnofske
- -------------------------------- -------------------------------
Michael P. Kochanasz Raymond Wesnofske
Secretary Its: Chariman
----------------------------
EMPLOYEE
/s/ Thomas J. Tobin
----------------------------------
Thomas J. Tobin
[GRAPHIC LOGO - The Bridgehampton National Bank]
BRIDGE BANCORP, INC.
[PHOTO]
A white picket fence.
SM
[TRADEMARK - The Bank you can talk to. ]
GROWTH AND
INCREASED
SHAREHOLDER
VALUE
1996 ANNUAL REPORT
<PAGE>
[CAPTION]
Critically important to the success of our mission are superior levels of
commitment and service to our customers.
COMPANY PROFILE
Bridge Bancorp, Inc., a New York corporation, is a one-bank holding company
engaged in commercial banking through its wholly-owned subsidiary, The
Bridgehampton National Bank. Federally charted in 1910, the Bank was founded by
local farmers and merchants to serve the needs of the agricultural based
villages comprising the area. While growing and expanding over the past
eighty-seven years, The Bridgehampton National Bank has continued to maintain
its community orientation. Within the Bank's primary market area of Eastern Long
Island, it offers a full range of deposit and loan services geared to the needs
of businesses and consumers.
The Bank operates six full service banking offices located in Bridgehampton,
East Hampton, Mattituck, Montauk, Southampton and Southold, New York as well as
a Residential Mortgage and Loan Center in Riverhead, New York. In addition,
twenty-four hour Automated Teller Machines with access to the MAC and NYCE
networks are maintained in Bridgehampton, Mattituck and at the Southampton
Hospital. The Bank is an Equal Housing Lender and a member of the Federal
Deposit Insurance Corporation.
Mission Statement
The mission of the employees of The Bridgehampton National Bank is to provide
the Company's shareholders with an above average return on investment and
increased shareholder value. We will accomplish our mission by profitably
providing financial services to all customers, being particularly cognizant of
providing fair and evenhanded distribution of credit to all segments of our
marketplace while utilizing safe and sound banking practices.
Critically important to the success of our mission are superior levels of
commitment and service to our customers by all of our employees.
Equally important to the success of our mission is the selection and retention
of the highest quality employees. The Bank is dedicated to providing its
employees with the direction and training necessary to achieve their mission.
Bride Bancorp, Inc.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL HIGHLIGHTS
(In thousands, except per share data and financial ratios)
<S> <C> <C>
Year ended December 31, 1996 1995
....................................................................
Net income $3,006 $2,383
Cash dividends declared 987 768
Return on average assets 1.51% 1.27%
Return on average equity 18.84% 16.29%
December 31,
....................................................................
Total assets $204,614 $184,070
Total deposits 184,847 166,144
Total loans 118,881 111,480
Total stockholders' equity 16,926 15,420
Per share data
....................................................................
Net income $6.34 $4.96
Cash dividends declared 2.10 1.60
Book value 36.07 32.13
</TABLE>
<TABLE>
<CAPTION>
[BAR GRAPH]
RETURN ON AVERAGE EQUITY (Percentage)
<S> <C> <C> <C> <C>
1996 1995 1994 1993
....................................................................
Return On Average Equity 18.84% 16.29% 15.36% 15.52%
</TABLE>
<TABLE>
<CAPTION>
[BAR GRAPH]
RETURN ON AVERAGE ASSETS (Percentage)
<S> <C> <C> <C> <C>
1996 1995 1994 1993
....................................................................
Return On Average Assets 1.51% 1.27% 1.18% 1.15%
</TABLE>
<TABLE>
<CAPTION>
[BAR GRAPH]
TOTAL ASSETS (Dollars in millions)
<S> <C> <C> <C> <C>
1996 1995 1994 1993
.........................................................................
Total Assets $204,614 $184,070 $171,953 $153,906
</TABLE>
<TABLE>
<CAPTION>
[BAR GRAPH]
NET INCOME (Dollars in thousands)
<S> <C> <C> <C> <C>
1996 1995 1994 1993
.........................................................................
Net Income $3,006 $2,383 $1,933 $1,813
</TABLE>
Bridge Bancorp, Inc. 1
<PAGE>
[CAPTION]
1996, a year to take pride in record-setting financial accomplishments and
related performance ratios at Bridge Bancorp, Inc.
DEAR SHAREHOLDERS,
Fiscal year 1996 was by all accounts a year to take pride in our financial
accomplishments at Bridge Bancorp, Inc. It is with considerable satisfaction
that I am able to report to you that your company continued the trend of
record-setting earnings and related performance ratios again this year.
Return on average equity of 18.84 percent, return on average assets of 1.51
percent and net income per share of $6.34 will result in our being ranked above
average among peer group banks nationally. I invite you to review the five year
summary of financial highlights and note the significant growth in deposits, net
loans, total assets and net income over this period of time.
Key to our strong performance trend has been our ability to maintain a high
level of demand deposits, primarily the result of our continued growth in market
share among both business and consumer accounts. Our goal is to continue on
course through our competitive pricing coupled with the highest level of
service. Our ability to invest funds locally by providing capital in the form of
loans to local businesses and consumers, exclusively on the East End,
distinguishes us as one of the few remaining Community Banks within our
marketplace and solidifies our position in this market niche. We will continue
to strive toward increased market penetration through our singular geographic
focus.
Our commitment to provide quality customer service is exemplified by our drive
to develop and utilize technology that will allow us to become more efficient
and consistent in delivering products and services that enhance the value of a
relationship with The Bridgehampton National Bank. To this end, we plan the
introduction of several enhancements to our product offering, including
Teller*Fone, a telephone-based audio response system that will allow our
customers access to their accounts on a 24-hour basis. We plan to follow with
other product enhancements including P.C. based account access.
A high level of enthusiasm has been building throughout the East End concerning
our impending move to the new Main Office Headquarters in Bridgehampton later
this Spring. In addition to the obvious benefits a new facility affords our
employees and customers, we plan to capitalize on the business development and
marketing opportunities associated with the positive image of the new building.
On a related matter, as previously communicated to all shareholders, the Board
of Directors has determined that in the interest of maximizing the sale price
and allowing for the most equitable exposure to the widest range of interested
parties, the existing Main Office facility will be sold at auction on April 15,
1997. The Board has selected the firm of David R. Maltz & Co., Inc. to act as
marketing agent and auctioneer for this critical endeavor.
It saddens me to inform you that former Vice-Chairman Frederick Hagerman passed
away in January. Those of us who had the pleasure of knowing and working with
Dick are deeply saddened by this loss. Dick was a source of encouragement to me,
and on numerous occasions when I would see him conducting his personal banking
here in Bridgehampton, he always had a kind word of support for the job we were
doing and the many changes we have affected over the years. Mr. Hagerman was a
good friend and we extend our sincere condolences to his family.
It gives me added satisfaction to once again acknowledge the efforts of the
employees, officers and directors of the Company without whom our success would
not be possible. It is this dedicated group that is responsible for the
performance results that distinguish our Company from our competitors. A sincere
thank you to them as well as to you, our valued shareholders, for your continued
support of the Company.
Sincerely,
/s/ Thomas J. Tobin
- -------------------
Thomas J. Tobin
President & Chief Executive Officer
Bridge Bancorp, Inc. 2
<PAGE>
YEAR IN REVIEW
[CAPTION]
Growing and getting the word out
[PHOTOGRAPH]
Rudy DeSanti, Dreesen's Market, East Hampton
"They've been extremely responsive. My business is charge and delivery, not cash
and carry. So when you sell something, that doesn't mean you get paid for it.
You may get paid 60 days later, or 30 days later, or 10 days later. Sometimes in
the course of time when you aren't paid, you need a line of credit. BNB has
always worked with me. They give you a fair shake. Bridgehampton National works
real hard for the businesses out here."
[PHOTOGRAPH]
James Tuccillo & Dara Minkin, Residential Mortgage, Westhampton [QUOTE] "They
make `what if' come true. We were looking for a land to construction to end loan
and someone in banking out here recommended Bridgehampton National Bank. They
enabled us to really build our dream house...the one that one day we would raise
our children in."
[SUB HEADLINE]
KEY ACCOMPLISHMENTS RESULTING IN 1996 FINANCIAL HIGHLIGHTS
[SUB HEADLINE]
Bridgehampton National Bank, the bank you can talk to... Our customers tell the
story
[SIDEBAR]
* Expanded business sector market share through growing customer base and
enhanced relationships
* Steady growth in consumer banking deposits through competitive products and
excellence in customer service
* Significant growth in number and volume of residential mortgage obligations
1996 was an exciting year of growth and expansion at Bridgehampton National
Bank, and key to our marketing effort was our new testimonial-based advertising
campaign. Following an extensive search last year, Bridgehampton National
outsourced its advertising development for the first time. We retained Jean
Govoni + Partners, a local firm, which has helped us bring the Bank's message to
the public through a coordinated, cohesive campaign. Additionally, the firm was
an active contributor to many of the Bank's marketing efforts throughout the
year. Bridgehampton National also engaged outside market research services in
1996, with the objectives of better understanding the East End marketplace and
Bridgehampton National's position in relation to the competition. Through
expanded capabilities, our marketing department has been able to lend meaningful
support to the sales and business development effort throughout the Bank.
Getting the word out on the North Fork has been a slow, but steady process. To
facilitate the business development effort on the North Fork, Bridgehampton
National established the North Fork Business Development Advisory Committee. The
Committee is comprised of four Bank members and five outside participants. The
objectives of the Committee include expansion of the Bank's presence on the
North Fork and the identification and support of issues and programs that are
key to the North Fork business community. Bridgehampton National will also
continue its tradition of involvement in activities that are directed towards an
improved economy and quality of life on the North Fork.
In October of 1996, Bridge Bancorp, Inc. engaged Advest, Inc. of Boston, MA as a
market maker for the Company's common stock, serving as a resource for the
purchase of shares of Bridge Bancorp, Inc. Shares are traded on the NASDAQ
over-the-counter bulletin board market under the symbol "BDGE."
Bridge Bancorp, Inc. 3
<PAGE>
[CAPTION]
Outstanding levels of customer service, an intimate knowledge of the East End
marketplace, and competitive products and rates set Bridgehampton National
apart.
BUSINESS SERVICES
Our folks at Bridgehampton National Bank are only too happy to go the distance
for East End businesses. Why? The answer is simple. The East End is
Bridgehampton National's only business, and our people understand value of
relationships, and the nuances of the East End Marketplace.
The breadth of our business products and services, the competitiveness of our
rates, our knowledge and involvement in the marketplace, and the responsiveness
of our branch managers and loan officers consistently meet the needs of the East
End community.
Bridgehampton National Bank offers an uncommon level of responsiveness. Take our
Prime Plus Line of Credit...this product was designed specifically to address
the seasonal fluctuations in cash flow so common to businesses in our area. Many
of our business customers love it, but recently, some of our customers have
expressed a need for a revolving business credit line. So, we went back to the
drawing board, and have just added a new option: Prime Plus Select Credit, a
line that's fully available as long as monthly minimum payments of principal and
interest are maintained. Both Prime Plus credit lines are simple, accessible,
economical and convenient.
Whether it's Prime Plus, business checking, commercial mortgages or merchant
credit card processing services, our people have the experience and knowledge to
direct our customers to the products and services that will help their
businesses succeed. Bridgehampton National is the bank you can talk to about
business banking services. In fact, our objective is to grow our business one
business at a time. That's the way we approach our business customers at
Bridgehampton National Bank. We listen and take the time to learn about each of
our customer's operations; if it's a farm, we'll walk the fields, and if it's a
restaurant, we'll follow that customer into the kitchen. From tractors to
technology, Bridgehampton National is here to meet the needs of East End
businesses.
[PHOTOGRAPH]
Adrienne Noonan, Greenport Tea Co., Greenport
[QUOTE]
"They've gone out of their way. When we couldn't stop in the middle of the day,
someone came down with tape for our credit card machine and another time with
checks. Everyone's always been so accommodating."
[PHOTOGRAPH]
Chris Eggert & Kevin Boles, Santa Fe Junction & Bostwick's, East Hampton [QUOTE]
"They actually listened to us. Bridgehampton National Bank was willing to work
with us when other people just closed the door. You have a dream and instead of
saying `no,' they try to achieve that dream for you. They help you along. It's
all been very smooth. They've just been very straightforward and honest with us.
The deal had to go down quickly and it was very comforting to have the Bank say
to us, `Great! When do we get started?'"
[PHOTOGRAPH]
Ron Gilliam, Ronnie's Auto Paint Shop, Bridgehampton
[QUOTE]
"The people are always friendly. They know me by name and the president of the
Bank treats me like I'm someone, in the Bank or at the deli. Sure I'd recommend
the Bank to other people because anytime you've got good people, you've got to
stick with them."
Bridge Bancorp, Inc. 4
<PAGE>
[CAPTION]
The Bridgehampton National Bank has been providing consumer banking services to
local residents since 1910.
[PHOTOGRAPH]
Bill & Val Creutz, Southold
[QUOTE]
"They remembered us right away. We are new to the area. One day we really just
stumbled on the Bank while making a U-turn. We went in. Asked what they would do
for us. Opened a checking account on the spot! And a savings account two days
later. It's a friendly bank. People always smile and say hello."
[PHOTOGRAPH]
Wendy Engel, East Hampton
[QUOTE]
"They respect you for who you are. The Bank has always been accessible and there
to help me. If it wasn't for the Bank, I wouldn't be retiring -- it's true!"
CONSUMER BANKING SERVICES
Back on February 1, 1895, The Bridgehampton News, reported, "A bank would be a
creditable institution for the village and very handy for all residents. Now
that we are soon to be connected with East Hampton by railroad, it would also be
convenient for the people of that village and we believe many of them would keep
an account with the Bridgehampton Bank. By all means let us have a bank." During
the next 15 years, the subject of establishing a bank was discussed many times
over, and in 1910, The Bridgehampton National Bank was founded.
Times have changed since the Bank began providing consumer banking services to
local residents in 1910-- we are connected to a wider marketplace though our
branch network, not to mention telephone, modem, and fax machine. While
Bridgehampton National has broadened its scope not only in terms of marketplace,
but also in the depth of products and services offered and the channels through
which we are able to deliver them, our Company has maintained its focus on
providing banking products at extraordinary levels of customer service.
That's the story our customers tell time and again: our people really do take
the time to find out what our customers' banking needs are, who they are, and
yes, even learn their names. In this mad dash, rush about world, our customers
enjoy the "hometown" feeling at each of our Bridgehampton National Bank
branches. But, the hometown feeling is only half of the customer service story.
Our branch staff is experienced and knowledgeable about all our banking
products, and is supported by up-to-the-minute systems and technology.
In 1996, Bridgehampton National Bank consolidated its systems conversion,
streamlined its accounts payable system, developed Teller*Fone, our soon to be
introduced telephone banking system, and explored P.C. banking options.
Bridgehampton National is committed to incorporating technologies that permit
improved efficiencies for the Bank and enhanced delivery of our products to our
customers.
Bridgehampton National Bank is also exceptional in its commitment to community
service, and the Bank has a long and rich tradition of giving back to the East
End Community. In 1996, the Bank sponsored the March of Dimes WalkAmerica, which
dedicated the funds raised to birth defects research; provided the financing for
the improvements to the East Hampton Free Library; provided loans for the first
Habitat for Humanity house on the South Fork of Long Island -- Habitat builds
homes that are sold to low income families; sponsored and supported the East End
Open Space Coalition; and contributed to Mattituck High School's Wired for
Education program, which provides Internet access to New York State schools
through a State education program. The Bank contributes to worthwhile
organizations and events in all of the five East End towns, and its officers and
employees donate their time and energies to entities such as the East Hampton
RECenter, Alternatives East End Counseling Project, The Retreat, and the
Salvation Army. The Bank is proud of its heritage of reinvestment in the East
End Community.
The Bridgehampton National Bank offers a wide range of consumer banking products
and services at competitive rates including: personal checking, checking with
interest, Credit Reserve checking, savings accounts, certificates of deposit,
money market accounts, MAC ATM cards, MasterCard and Visa credit cards, and
senior citizen account services. Integral to each of our product offerings is
the outstanding level of customer service for which The Bridgehampton National
Bank is known.
Bridge Bancorp, Inc. 5
<PAGE>
[CAPTION]
Thanks to our customers, the word is out that Bridgehampton National Bank is a
leader in mortgage lending on the East End.
RESIDENTIAL MORTGAGE AND EQUITY PRODUCTS
Bridgehampton National Bank has nearly 50 different ways to finance our
customers' home sweet homes.
Our residential mortgage products include: 15, 20, and 30 year fixed rate
mortgages, adjustable rate mortgages, fixed to adjustable mortgages, jumbo
mortgages, no income verification mortgages, low down payment mortgages, first
time home buyer mortgages, construction loans, construction to permanent loans,
land loans, land to construction to permanent loans, refinances, and reverse
mortgages -- to name a few. But, the best part is that our Residential Mortgage
Consultants have the expertise to direct our customers to the mortgage products
that are best for them.
Further, our Residential Mortgage Consultants are experts at delivering service.
They make themselves available when it's convenient for our customers, and have
been known to meet at kitchen tables in the evenings and on the weekends to
accommodate our customers' busy schedules. Bridgehampton National Bank's
mortgage programs are backed up by our efficient and well-staffed Residential
Mortgage Center, centrally located on Route 58 in Riverhead. What's more, our
Residential Mortgage consultants are specialists in the East End marketplace
where our unique location incorporates both year-round residences and second
homes.
Our Company also provides a competitively priced Home Equity Line of Credit and
Home Advantage Loan. Both residential loans permit home owners to borrow against
the equity in their homes for home improvements, college tuition, or even a new
car.
Whatever the need, Bridgehampton National Bank provides residential mortgage and
loan products coupled with outstanding customer service.
[PHOTOGRAPH]
The Villacis Family, First time home buyers, East Hampton
[QUOTE]
"It's a special thing to buy a house. This is our first house and Bridgehampton
National helped me in a lot of ways. I'd heard about the Bank before. People say
it's the best bank in the Hamptons. I'd heard that the Bank was very helpful and
that's why I went directly to them and not to any of the other banks. I
recommend the Bank for everybody. Because the people are good and they try to
help as much as they can. My wife is happy, very happy. I say buy a house. It
will make you happy. For you and your family."
[PHOTOGRAPH]
Bessie Swann, Home Advantage Loan, Greenport
[QUOTE]
"I saw a presentation the Bank made to our staff where we got information on the
Home Advantage Loan. I liked it. It was easy. Didn't take long. Not a lot of
paperwork. A one page application. Quick approval. They even brought the
application to the office, then came and picked it up."
[PHOTOGRAPH]
Monte Mathews, Construction Loan and Residential Mortgage, Manhattan &
Bridgehampton
[QUOTE]
"I wanted to deal with a local bank. The Bridgehampton Bank people live here,
they know what things are worth and they knew what the value of this house is. I
wanted to refinance and make improvements at the same time. So I had a
construction loan for the improvements pending the final mortgage. It was
complicated. We had to deal with the Bank over the phone and fax, and they made
it easy. They came on the weekends. On our schedule, not theirs. They made it a
personal experience. It was people every step of the way. BNB's great to deal
with and a great place to bank."
Bridge Bancorp, Inc. 6
<PAGE>
[CAPTION]
Bridgehampton National Bank is positioned to serve both the business and
consumer market sectors as they grow and prosper.
LOOKING AHEAD
Bridgehampton National Bank looks toward the future with promise. Our team is
well-prepared to work with diligence toward high performance ratios with
emphasis on continuing growth in deposits, net loans, total assets and net
income. The Bank will continue to embrace technologies that allow the delivery
of business and consumer products and services with greater efficiency at
competitive rates. Our Company will maintain its focus on the East End
marketplace and the banking products and services that are our strengths,
fortifying our unique position as the East End's Community Bank.
OUR NEW HOME
Bridgehampton National's move to the new Main Office Headquarters location, on
the Montauk Highway at Snake Hollow Road, will afford new opportunities for
improved levels of customer service, operational efficiencies, and a
state-of-the-art environment for our customers and employees.
[PHOTOGRAPH]
New Main Office Headquarters nearing completion, 2200 Montauk Highway at Snake
Hollow Road, Bridgehampton (February 1997)
We look forward to a positive outcome of the sale of our current Main Office
Headquarters building, which has been a good home to the Bank through the
expansive growth of these past 87 years.
THE FUTURE IS BRIGHT.
The economic future of the East End of Long Island has brightened, and
Bridgehampton National Bank is positioned to serve both the business and
consumer market sectors as they grow and prosper. In turn, our Company remains
committed to reinvestment in the communities we serve through business and
consumer loans, as well as community service activities. We will strive to
maintain a leadership position within our community with regard to protecting
the economic environment on the East End through attention to quality of life
and environmental integrity issues.
Effective utilization of new technologies that affect operational efficiencies
and improved levels of customer service will continue to be a high priority in
1997. To this end, the Bank has appointed a technology officer who will be
responsible for the effective coordination of the development, implementation,
employee training and introduction of improved systems. It is anticipated that
Teller*Fone, Bridgehampton National's telephone based audio response system will
be introduced to our customer-base this spring, and P.C. banking, stream-lined
accounting and collections services, and a direct deposit/debit program designed
for business accounts are all part of the Bank's ongoing technology plans.
Our future depends on a skilled and ready employee base, led by a dedicated
management team. Our collective ability to assess and respond nimbly to
marketplace demands lends strength to our determination to achieve our ambitious
financial and performance goals.
[PHOTOGRAPH]
Jim Hagen, J& K Construction, Bridgehampton
[QUOTE]
"A lot of times you're sitting in traffic and now I can sit in traffic and get
payroll started. I think it's a great idea. I really do. Anything to save time.
With Teller*Fone I can get balances before I make payroll. Whatever you can save
in terms of time, you're well ahead of the game."
Bridge Bancorp, Inc. 7
<PAGE>
[GRAPHIC LOGO - The Bridgehampton National Bank]
<TABLE>
<CAPTION>
FIVE YEAR SUMMARY OF OPERATIONS
(In thousands, except per share data and financial ratios)
Set forth below are selected consolidated financial and other data of the
Company. The Company's business is primarily the business of the Bank. This
financial data is derived in part from, and should be read in conjunction with,
the consolidated financial statements of the Company.
December 31, 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL DATA:
<S> <C> <C> <C> <C> <C>
Securities available for sale <F1> <F2> $57,779 $52,689 $26,413 $ - $ -
Securities held to maturity/for investment <F2> 6,262 6,425 37,166 66,626 77,186
Loans, net 117,643 110,442 93,817 70,832 57,317
Total assets 204,614 184,070 171,953 153,906 145,911
Total deposits 184,847 166,144 155,891 140,471 133,499
Total stockholders' equity 16,926 15,420 12,807 12,144 10,907
Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------
SELECTED OPERATING DATA:
Total interest income
(including loan fee income) $15,501 $14,384 $11,187 $10,004 $10,146
Total interest expense 5,072 5,258 3,270 3,363 4,096
------------------------------------------------------
Net interest income 10,429 9,126 7,917 6,641 6,050
Provision for possible loan losses 330 268 333 44 136
------------------------------------------------------
Net interest income after provision
for possible loan losses 10,099 8,858 7,584 6,597 5,914
Total other income 2,422 1,697 1,512 1,503 1,321
Total other expenses 7,960 7,024 6,318 5,688 4,885
------------------------------------------------------
Income before income taxes and
cumulative effect of accounting change 4,561 3,531 2,778 2,412 2,350
Provision for income taxes 1,555 1,148 845 662 662
------------------------------------------------------
Income before cumulative effect of accounting change 3,006 2,383 1,933 1,750 1,688
Cumulative effect of accounting change - - - 63 -
------------------------------------------------------
Net Income $3,006 $2,383 $1,933 $1,813 $1,688
======================================================
December 31,
- -------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Return on average assets 1.51% 1.27% 1.18% 1.15% 1.18%
Return on average equity 18.84% 16.29% 15.36% 15.52% 16.12%
Equity to assets <F4> 8.07% 8.20% 7.79% 7.89% 7.48%
Dividend payout ratio 32.87% 32.23% 32.28% 31.77% 31.28%
Earnings per share $6.34 $4.96 $4.03 $3.78 <F3> $3.52
Cash dividends declared per common share $2.10 $1.60 $1.30 $1.20 $1.10
<FN>
<F1>
The Bank adopted SFAS No. 115 effective January 1, 1994, which resulted in a
reclassification of a portion of the investment portfolio to available for sale
stated at fair value.
<F2>
On November 15,1995, the FASB issued "A Guide to Implementation of Statement No.
115 on Accounting for Certain Investments in Debt and Equity Securities,
Questions and Answers" which resulted in a reclassification of a portion of the
held to maturity portfolio to available for sale stated at fair value.
<F3>
Includes income of $.13 per share relating to cumulative effect of accounting change.
<F4>
Does not include the SFAS No. 115 equity adjustment .
</FN>
</TABLE>
8 BRIDGE BANCORP, INC. AND SUBSIDIARY
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FIANANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
Bridge Bancorp, Inc. (the Company), a New York corporation, is a one-bank
holding company formed effective March 31, 1989, and on a parent only basis, had
minimal results of operations for 1996, 1995 and 1994. In the event the Company
subsequently expands its current operations, it will be dependent on dividends
from its wholly owned subsidiary, The Bridgehampton National Bank (the Bank),
its own earnings, additional capital raised and borrowings as sources of funds.
The information below reflects principally the financial condition and results
of operations of the Bank. The Bank's results of operations are primarily
dependent on its net interest income, which is the difference between interest
income on loans and investments and interest expense on deposits. Interest
income on loans and investments is a function of the average balances
outstanding and the average rates earned during a period. Interest expense is a
function of the average amount of interest bearing deposits and the average
rates paid on such deposits during a period. The Bank also generates other
income, such as fee income on deposit accounts and income from mortgage banking
operations and merchant credit card processing programs. The Bank's net income
is further affected by the level of its other expenses, such as employees'
salaries and benefits and occupancy costs. This discussion and analysis should
be read in conjunction with the consolidated financial statements, the notes
thereto and the other financial information included elsewhere in this annual
report.
FINANCIAL CONDITION
The Company's assets increased to $204,614,000 at December 31, 1996. This
represents an 11.2% increase over assets at December 31, 1995, primarily the
result of an increase in loans of $7,401,000, an increase in cash and cash
equivalents of $6,085,000, and an increase in investments in debt and equity
securities of $4,927,000. The growth in assets at December 31, 1996 was
primarily funded by an increase in deposits of $18,703,000 or 11.3%.
Stockholders' equity was $16,926,000 at December 31, 1996, an increase of 9.8%
over December 31, 1995. The increase of $1,506,000 was the result of net income
of $3,006,000 plus the change in net unrealized appreciation in securities
available for sale, net of tax, of $108,000; offset by cash dividends declared
of $987,000 and the purchase of 10,800 shares of common stock which is now held
as treasury stock, at a cost of $621,000. The appreciation in securities
available for sale is directly attributable to changes in interest rates.
Management has determined such appreciation to be temporary, and does not expect
future sales of such securities to result in material gains and thus a material
impact on results of operations.
ASSET/LIABILITY MANAGEMENT
The purpose of the Company's asset/liability policy is to manage risk within
acceptable levels and at the same time provide liquidity. The Asset/Liability
Committee is responsible for managing interest rate risk by maintaining a gap
position within established Bank policy. The committee is also responsible for
meeting liquidity and funds management needs.
As measured by the Interest Sensitivity Gap Table, the Bank's one year
cumulative interest sensitivity gap as a percent of total assets is a negative
16.91%. A negative gap could result in a decrease in net interest income in a
rising interest rate environment. The economic environment continually presents
uncertainties as to future interest rate trends. The Asset/Liability committee
regularly monitors the cumulative gap position, in addition to utilizing a model
that projects net interest income based on increasing or decreasing interest
rates, in order to be able to respond to changes in interest rates by adjusting
the gap position.
9 BRIDGE BANCORP, INC. AND SUBSIDIARY
<PAGE>
[GRAPHIC LOGO - The Bridgehampton National Bank]
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
INTEREST SENSITIVITY GAP TABLE
(Dollars in thousands, except financial ratios)
Over Three Over Six Over One
Three Months Months Year
Year ended Months Through Through Through Over
December 31, 1996 or Less Six Months One Year Five Years Five Years Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Investment in debt and equity securities <F1> $1,002 $7,248 $4,343 $43,310 $7,424 $63,327
Total loans <F2> 35,162 6,437 15,953 48,805 12,524 $118,881
Federal funds sold 1,250 - - - - $1,250
--------------------------------------------------------------
Total Interest Earning Assets $37,414 $13,685 $20,296 $92,115 $19,948 $183,458
Interest Bearing Liabilities:
Savings, N.O.W., and money
market accounts <F3> $51,043 $ - $ - $ - $22,748 $73,791
Certificates of deposit 30,106 15,486 9,357 5,644 - $60,592
--------------------------------------------------------------
Total Interest Bearing Liabilities $81,149 $15,486 $9,357 $5,644 $22,748 $134,383
--------------------------------------------------------------
Interest Sensitivity Gap Per Period ($43,735) ($1,801) $10,939 $86,471 ($2,800) $49,075
--------------------------------------------------------------
Cumulative Interest Sensitivity Gap ($43,735) ($45,536) ($34,597) $51,874 $49,074
--------------------------------------------------------------
Gap to Total Assets (-21.38%) (-22.26%) (-16.91%) 25.36% 23.99%
--------------------------------------------------------------
<FN>
<F1>
Investment in debt and equity securities are shown excluding the fair value
appreciation of $781,000, before tax, due to the application of SFAS No. 115.
A 10% prepayment rate has been assumed for mortgage-backed securities.
Investment in debt and equity securities include interest earning deposits with
banks of $68,000.
<F2>
For the purpose of this table, nonaccrual loans of approximately $269,000
have been included.
<F3>
Statement savings, N.O.W. and money market accounts have been included in the
Three Months or Less" category. Passbook savings have been included in the
"Over Five Years" category.
</FN>
</TABLE>
10 BRIDGE BANCORP, INC. AND SUBSIDIARY
<PAGE>
ANALYSIS OF NET INTEREST INCOME
Net interest income, the primary contributor to earnings, represents the
difference between income on interest earning assets and expenses on interest
bearing liabilities. The following table sets forth certain information relating
to the Bank's average consolidated statements of condition and reflects the
average yield on assets and average cost of liabilities for the periods
indicated.
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
AVERAGE Average Average
AVERAGE YIELD/ Average Yield/ Average Yield/
BALANCE INTEREST COST Balance Interest Cost Balance Interest Cost
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans (including fee income) <F1> $114,220 $11,261 9.9% $105,983 $10,299 9.7% $82,363 $7,394 9.0%
Deposits with banks 1,941 99 5.1% 445 29 6.5% 121 3 2.5%
Federal funds sold 4,422 243 5.5% 4,524 262 5.8% 3,684 140 3.8%
Investment in debt and equity
securities <F2> 62,583 3,898 6.2% 63,391 3,794 6.0% 66,152 3,650 5.5%
-----------------------------------------------------------------------------------
Total interest earning assets 183,166 15,501 8.5% 174,343 14,384 8.3%$152,320 $11,187 7.3%
Interest bearing liabilities:
Savings, N.O.W. and
money market deposits $68,342 $1,598 2.3% $65,740 $1,581 2.4% $74,730 $1,795 2.4%
Certificates of deposit of $100,000
or more 18,718 1,000 5.3% 22,733 1,321 5.8% 12,544 444 3.5%
Other time deposits 44,848 2,410 5.4% 43,176 2,334 5.4% 26,918 987 3.7%
Other borrowings 1,165 64 5.5% 342 22 6.4% 818 44 5.4%
-----------------------------------------------------------------------------------
Total interest bearing liabilities $133,073 $5,072 3.8% $131,991 $5,258 4.0%$115,010 $3,270 2.8%
-----------------------------------------------------------------------------------
Net interest income/interest
rate spread $10,429 4.7% $9,126 4.3% $7,917 4.5%
------- -------- --------- --------- ---------- ---------
Net earning assets/net yield on
average interest earnings assets $50,093 5.7% $42,352 5.2% $37,310 5.2%
--------- -------- --------- --------- -------- ---------
Ratio of interest earning assets to
interest bearing liabilities 137.6% 132.1% 132.4%
-------- --------- ---------
<FN>
<F1>
Interest on nonaccruing loans has been included only to the extent reflected in
the consolidated statements of income. However, the loan balances are included
in average amounts outstanding.
<F2>
For purposes of this table the average balances for investment in debt and
equity securities exclude unrealized appreciation\depreciation due to the
application of SFAS No. 115.
</FN>
</TABLE>
11 BRIDGE BANCORP, INC. AND SUBSIDIARY
<PAGE>
[GRAPHIC LOGO - The Bridgehampton National Bank]
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
GENERAL
Net income for 1996 was $3,006,000, an increase of $623,000 or 26.1% from 1995
net income of $2,383,000. Highlights include: (i) a $1,303,000 or 14.3% increase
in net interest income; (ii) a $725,000 or 42.7% increase in total other income;
and (iii) a $936,000 or 13.3% increase in total other expenses.
NET INTEREST INCOME
Net interest income increased from $9,126,000 in 1995 to $10,429,000 in 1996.
The increase of 14.3% reflects an increase in average net interest earning
assets from $42,352,000 in 1995 to $50,093,000 in 1996. In addition, the net
yield on average interest earning assets increased to 5.7% in 1996 from 5.2% in
1995.
INTEREST INCOME
Total interest income (including loan fee income of $598,000 in 1996 and
$425,000 in 1995) increased from $14,384,000 in 1995 to $15,501,000 in 1996, an
increase of 7.8%. The increase from 1995 to 1996 was the result of an increase
in the average interest earning assets from $174,343,000 in 1995 to $183,166,000
in 1996. The average yield on interest earning assets increased to 8.5% in 1996
from 8.3% in 1995.
Interest income on loans (including fee income) increased $962,000 during 1996
the result of an increase in average loans of 7.8% from $105,983,000 in 1995 to
$114,220,000 in 1996 coupled with an increase in yield from 9.7% in 1995 to 9.9%
in 1996.
Interest on investment in debt and equity securities increased $105,000 or 2.8%.
The increase was the result of an increase in the average yield from 6.0% in
1995 to 6.2% in 1996 offset by a decrease in average investment in debt and
equity securities from $63,391,000 in 1995 to $62,583,000 in 1996. The reduction
in average investment in debt and equity securities was the result of funding an
increase in average loans of 7.8%.
INTEREST EXPENSE
Interest expense decreased $186,000 to $5,072,000 in 1996 from $5,258,000 in
1995. The decrease in interest expense was caused by a combination of a decrease
in the cost of average interest bearing liabilities from 4.0% in 1995 to 3.8% in
1996, and an increase in average interest bearing liabilities from $131,991,000
in 1995 to $133,073,000 in 1996.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses increased $62,000 in 1996 to $330,000.
The allowance for possible loan losses increased to $1,238,000 at December 31,
1996 as compared with $1,038,000 at December 31, 1995. The increase in the
allowance for possible loan losses was the result of an increase in average
loans from 1995 to 1996 of 7.8%. The allowance as a percentage of loans
increased to 1.04% at year end 1996 in comparison to .93% at year end 1995. The
allowance as a percentage of nonperforming loans (including loans past due 90
days or more and still accruing) was 460.2% at year end 1996 compared to 204.7%
at year end 1995. The allowance reflects management's evaluation of classified
loans, charge-off trends, economic conditions, past due trends, concentrations
of credit and other pertinent factors. In addition to the above see "Assets
Quality: Loans."
OTHER INCOME
Other income increased by $725,000 or 42.7% to $2,422,000 in 1996 compared to
$1,697,000 in 1995. While service charges on deposit accounts remained
essentially unchanged, the increase was a result of mortgage banking activities
totaling $812,000, an increase of $455,000 or 127.5% over the previous year
which resulted from the Bank's efforts to further penetrate the mortgage market.
The Bank's practice is to originate and sell these mortgages in the secondary
market. Other operating income increased $240,000 or 39.8% over the same period
last year mainly as a result of interest and expense recoveries on the payoff of
nonperforming loans of $105,000; a nonrecurring refund from an outsource
provider of $61,000; and increased merchant charge plan income of $48,000. Net
gains on securities were $68,000 in 1996 compared to $31,000 in 1995.
OTHER EXPENSES
Other expenses increased by $936,000 or 13.3% to $7,960,000 in 1996 from
$7,024,000 in 1995. The primary components of this change are as follows: (i)
increase in salaries and employee benefits of $598,000 or 17.5% reflecting
salary increases and increased staffing of the mortgage banking area; and (ii)
increase in other operating expenses of $239,000 or 9.1% resulting mainly from
increased advertising expense of $133,000 related to a new advertising campaign
and increased loan processing expenses of $129,000 resulting mainly from
increased mortgage banking volume.
PROVISION FOR INCOME TAXES
The provision for income taxes increased to $1,555,000 for 1996 from $1,148,000
for 1995. This increase was due to income before income taxes increasing from
$3,531,000 in 1995 to $4,562,000 in 1996 and the effective tax rate increasing
from 33% in 1995 to 34% in 1996. The increase in the effective tax rate resulted
from decreased benefits of tax exempt income in 1996.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
GENERAL
Net income for 1995 was $2,383,000, an increase of $450,000 or 23.3% from 1994
net income of $1,933,000. Highlights include: (i) a $1,209,000 or 15.3% increase
in net interest income; (ii) a $185,000 or 12.2% increase in total other income;
and (iii) a $706,000 or 11.2% increase in total other expenses.
12
<PAGE>
NET INTEREST INCOME
Net interest income increased from $7,917,000 in 1994 to $9,126,000 in 1995. The
increase of 15.3% reflects an increase in average net interest earning assets
from $37,310,000 in 1994 to $42,352,000 in 1995.
INTEREST INCOME
Total interest income (including loan fee income of $425,000 in 1995 and
$354,000 in 1994) increased from $11,187,000 in 1994 to $14,384,000 in 1995, an
increase of 28.6%. The increase from 1994 to 1995 was the result of an increase
in the average yield on interest earning assets from 7.3% in 1994 to 8.3% in
1995. In addition, average interest earning assets increased from $152,320,000
in 1994 to $174,343,000 in 1995.
Interest income on loans (including fee income) increased $2,905,000 during 1995
the result of an increase in average loans of 28.6% from $82,363,000 in 1994 to
$105,983,000 in 1995 coupled with an increase in yield from 9.0% in 1994 to 9.7%
in 1995.
Interest on investment in debt and equity securities increased $144,000 or 4.0%.
The increase was the result of an increase in the average yield from 5.5% in
1994 to 6.0% in 1995 offset by a decrease in average investment in debt and
equity securities from $66,152,000 in 1994 to $63,391,000 in 1995. The reduction
in average investment in debt and equity securities was the result of an
increase in average loans of 28.6%.
INTEREST EXPENSE
Interest expense increased $1,988,000 to $5,258,000 in 1995 from $3,270,000 in
1994. The increase in interest expense was caused by a combination of an
increase in average interest bearing liabilities from $115,010,000 in 1994 to
$131,991,000 in 1995 and an increase in the cost of average interest bearing
liabilities from 2.8% in 1994 to 4.0% in 1995.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses decreased $65,000 in 1995 to $268,000.
The allowance for possible loan losses increased to $1,038,000 at December 31,
1995 as compared with $944,000 at December 31, 1994. The increase in the
allowance for possible loan losses was the result of an increase in average
loans from 1994 to 1995 of 28.6%. The allowance as a percentage of loans
decreased slightly, being .93% at year end 1995 in comparison to 1.00% at year
end 1994. The allowance as a percentage of nonperforming loans (including loans
past due 90 days or more and still accruing) was 204.7% at year end 1995
compared to 223.7% at year end 1994. The allowance reflects management's
evaluation of classified loans, charge-off trends, economic conditions, past due
trends, concentrations of credit and other pertinent factors. It also reflects
input from the Bank's 1995 examination from the Office of the Comptroller of the
Currency (O.C.C.) and outside loan review consultants. In addition to the above
see "Assets Quality: Loans".
OTHER INCOME
Other income increased by $185,000 or 12.2% to $1,697,000 in 1995 compared to
$1,512,000 in 1994. Service charges on deposit accounts increased $100,000 as a
result of an increase in demand deposit accounts. Net gains on securities were
$31,000 in 1995 compared to $77,000 in 1994. Fees from mortgage banking
operations increased by $85,000 in 1995 as the Bank has made an effort to
further penetrate the mortgage market.
OTHER EXPENSES
Other expenses increased by $706,000 or 11.2% to $7,024,000 in 1995 from
$6,318,000 in 1994. The components of these changes are as follows: (i) increase
in salaries and employee benefits of $368,000 or 12.1% reflecting a combination
of salary increases and staffing for the new Montauk Branch and mortgage banking
operations; (ii) increase in occupancy and furniture and fixture expense of
$239,000 or 32.6%, the result of relocating the Bank's loan center, relocating
the Southold Branch and opening a branch in Montauk, New York; (iii) decrease in
FDIC assessments of $199,000 or 52.8% as the Bank Insurance Fund was
recapitalized and premiums were reduced; and (iv) increase in other operating
expenses of $298,000 or 13.8%. Significant components of the increase in other
operating expenses were data processing fees, consulting fees, and check
printing fees.
PROVISION FOR INCOME TAXES
The provision for income taxes increased to $1,148,000 in 1995 from $845,000 for
1994. This increase was due to income before income taxes increasing from
$2,778,000 in 1994 to $3,531,000 in 1995 and the effective tax rate increasing
from 30% in 1994 to 33% in 1995. The increase in the effective tax rate resulted
from decreased benefits of tax exempt income in 1995.
ASSETS QUALITY: LOANS
The Bank continues to maintain low net loan losses by carefully evaluating
originations against the Bank's underwriting standards and by enhancing
operating systems of controls for existing loans. The results of these efforts
are noted below:
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Loans charged-off $275 $230 $176
Recoveries on loans (145) (56) (40)
--------------------------
Net charge-offs $130 $174 $136
==========================
Ratio of net charge-offs
to average total loans 0.11% 0.16% 0.17%
==========================
</TABLE>
13 BRIDGE BANCORP, INC. AND SUBSIDIARY
<PAGE>
[GRAPHIC LOGO - The Bridgehampton National Bank]
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Based on the review of the loan portfolio by the loan classification committee,
historically low net charge-offs, an analysis of nonaccrual loans, a ratio of
non-performing loans to total loans below those of our peers, management
believes the allowance for possible loan losses, following the additional
$330,000 provision in 1996, is adequate. While management uses available
information to recognize losses on loans, future additions to the allowance may
be necessary based on, among other things, changes in economic conditions.
In addition to the above, see notes 1e and 4 to the consolidated financial
statements for a discussion of lending risks and nonaccrual loans.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of liquidity is dividends from the Bank. Due to
regulatory restrictions (see note 1k to the consolidated financial statements),
dividends from the Bank to the Company at December 31, 1996 were limited to
$4,322,000 which represents the Bank's 1996 retained net income and the net
undivided profits from the previous two years. The dividends received from the
Bank are used primarily for dividends to the shareholders. In the event the
Company subsequently expands its current operations, in addition to dividends
from the Bank, it will need to rely on its own earnings, additional capital
raised and other borrowings to meet liquidity needs. The Bank is funding
construction of a new main office and administrative facility out of current
cash flows.
The Bank's primary sources of liquidity are funds from deposits, amortization
and repayment of loan principal, other borrowings, maturities of securities and
overnight federal funds sold, funds provided from operations and advances from
the Federal Home Loan Bank of New York (the FHLB-NY). While scheduled loan
amortization, maturing securities and short term investments are a relatively
predictable source of funds, deposit flows and loan prepayments are greatly
influenced by general interest rates, economic conditions and competition. The
Bank adjusts its liquidity levels as appropriate to meet funding needs such as
deposit outflows, loans, asset/liability objectives and suggested O.C.C.
measurements such as loans to capital ratios.
As a result of undistributed net income plus the change in net unrealized
appreciation in securities available for sale, net of tax, offset by dividends
and purchases of treasury stock, the Company's stockholders' equity increased to
$16,926,000 at December 31, 1996 from $15,420,000 at December 31, 1995. The
ratio of stockholders' equity to total assets decreased to 8.27% at year end
1996 from 8.38% at year end 1995.
The loan commitments outstanding as of December 31, 1996 totaled approximately
$25,724,000. The funding of such commitments is derived from the primary sources
of liquidity stated previously. See note 10b to the consolidated financial
statements for a discussion of loan commitments.
The Company exceeds the risk-based capital adequacy ratio levels required by the
regulatory agencies and is deemed well capitalized by these agencies. Management
believes that the current capital levels along with future retained earnings
will allow the Bank to maintain a position exceeding required levels which will
be more than adequate to meet the growth of the Bank or any higher ratios
required by the discretionary authority of the regulators. The Company is
prepared to issue additional common stock should the need arise.
The Company had return on average assets of 1.51%, 1.27% and 1.18% and return on
average equity of 18.84%, 16.29% and 15.36% for the years ended December 31,
1996, 1995 and 1994, respectively.
EFFECTS OF INFLATION
Virtually all of the assets and liabilities of a financial institution are
monetary in nature. As a result, interest rates have a more significant impact
on a financial institution's performance than the effect of general levels of
inflation. Interest rates do not necessarily move in the same direction or in
the same magnitude as the prices of goods and services. Management believes that
continuation of its efforts to manage its net interest spread and the matching
of its asset and liability maturities will better insulate the Company from the
effects of changes in interest rates. The effect of inflation was not material.
14
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CONDITION
(In thousands, except share and per share amounts)
December 31, 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $12,247 $7,404
Interest earning deposits with banks 68 76
Federal funds sold 1,250 -
----------------------
Total cash and cash equivalents 13,565 7,480
Investment in debt and equity securities, net:
Securities available for sale, at fair value 57,779 52,689
Securities held to maturity (fair value $6,273 at
December 31, 1996 and $6,425 at December
31, 1995) 6,262 6,425
----------------------
Total investment in debt and equity securities, net 64,041 59,114
Loans 118,881 111,480
Less:
Allowance for possible loan losses 1,238 1,038
----------------------
Loans, net 117,643 110,442
Banking premises and equipment, net 6,773 3,775
Other real estate owned, net - 235
Accrued interest receivable 1,343 1,524
Deferred income taxes, net 51 67
Other assets 1,198 1,433
----------------------
TOTAL ASSETS $204,614 $184,070
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits $50,464 $44,291
Savings, N.O.W., and money market deposits 73,791 61,518
Certificates of deposit of $100,000 or more 18,251 14,256
Other time deposits 42,341 46,079
----------------------
Total deposits 184,847 166,144
-
Accrued interest on depositors' accounts 1,537 1,474
Other liabilities and accrued expenses 1,304 1,032
----------------------
TOTAL LIABILITIES 187,688 168,650
----------------------
STOCKHOLDERS' EQUITY:
Common stock, par value $5.00 per share:
Authorized: 1,500,000 shares; issued and outstanding
469,200 shares and 480,000 shares at December 31, 1996 and 1995, respectively 2,400 2,400
Surplus 600 600
Undivided profits 14,087 12,068
Unrealized appreciation on securities available for sale,
net of tax 460 352
Less: Treasury stock at cost, 10,800 shares (621) -
----------------------
TOTAL STOCKHOLDERS' EQUITY 16,926 15,420
----------------------
Commitments and contingencies
----------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $204,614 $184,070
======================
See accompanying notes to consolidated financial statements.
</TABLE>
BRIDGE BANCORP, INC. AND SUBSIDIARY
15
<PAGE>
[GRAPHIC LOGO - The Bridgehampton National Bank]
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Year ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Loans (including fee income) $11,261 $10,299 $7,394
Mortgage-backed securities 1,657 1,647 1,749
U.S. Treasury and government agency securities 1,286 1,134 913
Obligations of NY State & pol. subs. 907 965 944
Federal funds sold 243 262 140
Other 147 77 47
-------------------------------
Total interest income 15,501 14,384 11,187
-------------------------------
Interest expense:
Savings, N.O.W. and money market deposits 1,598 1,581 1,795
Certificates of deposit of $100,000 or more 1,000 1,321 444
Other time deposits 2,410 2,334 987
Other borrowings 64 22 44
-------------------------------
Total interest expense 5,072 5,258 3,270
-------------------------------
NET INTEREST INCOME 10,429 9,126 7,917
Provision for possible loan losses 330 268 333
-------------------------------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 10,099 8,858 7,584
-------------------------------
Other income:
Service charges on deposit accounts 698 705 605
Net securities gains 68 31 77
Mortgage banking operations 812 357 272
Other operating income 844 604 558
-------------------------------
Total other income 2,422 1,697 1,512
-------------------------------
Other expenses:
Salaries and employee benefits 4,017 3,419 3,051
Net occupancy expense 546 547 430
Furniture and fixture expense 526 426 304
Other operating expenses 2,871 2,632 2,533
-------------------------------
Total other expenses 7,960 7,024 6,318
-------------------------------
Income before provision for income taxes 4,561 3,531 2,778
Provision for income taxes 1,555 1,148 845
-------------------------------
NET INCOME $3,006 $2,383 $1,933
===============================
EARNINGS PER COMMON SHARE $6.34 $4.96 $4.03
===============================
See accompanying notes to consolidated financial statements.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except per share amounts)
Net unrealized
appreciation/
(depreciation)
in securities
Common Undivided Treasury available for sale,
Years ended December 31, 1996, 1995 and 1994 stock Surplus profits Stock net of tax Total
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $2,400 $600 $9,144 $ - - $12,144
Net income - - 1,933 - - 1,933
Cash dividends declared, $1.30 per share - - (624) - - (624)
Cumulative effect of accounting change at January 1, 1994 - - - - (192) (192)
Net change in unrealized depreciation in securities available
for sale, net of tax - - - - (454) (454)
-----------------------------------------------------------------
Balance at December 31, 1994 $2,400 $600 $10,453 $ - ($646) $12,807
Net income - - 2,383 - - 2383
Cash dividends declared, $1.60 per share - - (768) - - (768)
Net change in unrealized appreciation in securities available
for sale, net of tax - - - - 668 668
Net change due to one time reassessment under SFAS No. 115 - - - - 330 330
-----------------------------------------------------------------
Balance at December 31, 1995 $2,400 $600 $12,068 $ - $352 $15,420
Net income - - 3,006 - - 3006
Cash dividends declared, $2.10 per share - - (987) - - (987)
Net change in unrealized appreciation in securities available
for sale, net of tax - - - - 108 108
Purchase of 10,800 shares to be held in treasury, at cost - - - (621) - (621)
-----------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 $2,400 $600 $14,087 ($621) $460 $16,926
=================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
BRIDGE BANCORP, INC. AND SUBSIDIARY
17
<PAGE>
[GRAPHIC LOGO - The Bridgehampton National Bank]
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year ended December 31, 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net Income $3,006 $2,383 $1,933
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for possible loan losses 330 268 333
Depreciation and amortization 415 402 271
Accretion of discounts (96) (72) (64)
Amortization of premiums 329 467 719
Net securities gains (68) (31) (77)
(Gain) loss on sale of other real estate owned (4) 27 (24)
Decrease (Increase) in accrued interest receivable 181 (220) (278)
Benefit for deferred income taxes (56) (62) (38)
Decrease (Increase) in other assets 235 (40) (652)
Increase in accrued and other liabilities 183 955 139
----------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,455 4,077 2,262
----------------------------
Investing activities:
Purchases of securities available for sale (58,901) (5,022) (14,762)
Purchases of securities held to maturity (5,599) (8,345) (15,991)
Proceeds from sales of securities available for sale 38,473 3,088 8,206
Proceeds from maturing securities available for sale 8,810 2 1,500
Proceeds from maturing securities held to maturity 5,761 10,635 10,396
Proceeds from principal payments on mortgage-
backed securities 6,544 5,457 12,009
Net increase in loans (7,531) (16,893) (23,914)
Purchases of banking premises and equipment, net of deletions (3,413) (1,329) (767)
Proceeds from sales of other real estate owned 239 518 423
----------------------------
NET CASH USED BY INVESTING ACTIVITIES (15,617) (11,889) (22,900)
----------------------------
Financing activities:
Net increase in deposits 18,703 10,253 15,420
(Decrease) increase in other borrowings - (1,800) 1,800
Purchase of treasury stock (621) - -
Cash dividends paid (835) (672) (600)
----------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 17,247 7,781 16,620
----------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,085 (31) (4,018)
Cash and cash equivalents beginning of year 7,480 7,511 11,529
----------------------------
CASH AND CASH EQUIVALENTS END OF YEAR $13,565 $7,480 $7,511
============================
SUPPLEMENTAL INFORMATION - CASH FLOWS:
Cash paid for:
Interest $5,016 $4,214 $3,294
Income taxes $1,474 $1,214 $871
Noncash investing and financing activities:
Additions to other real estate owned - - $596
Dividends declared and unpaid $680 $528 $432
Securities held for investment transferred to available
for sale upon adoption of SFAS No. 115 as of January 1, 1994 - - $30,961
Securities held to maturity, transferred to available for sale
due to a one time reassessment under SFAS No. 115. - $26,750 -
See accompanying notes to consolidated financial statements.
</TABLE>
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Bridge Bancorp, Inc. (the Company) is chartered by the State of New York as a
one bank holding company. The Company's business currently consists of the
operations of its wholly-owned subsidiary, The Bridgehampton National Bank (the
Bank). The accounting and reporting policies of the Bank conform to generally
accepted accounting principles and to general practices within the banking
industry. The following is a description of the more significant accounting
policies of the Company:
a) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements are prepared on the accrual
basis of accounting and include the accounts of the Company and its wholly-owned
subsidiary, the Bank. All material intercompany transactions and balances have
been eliminated. In preparing the financial statements, management is required
to make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of each consolidated statement of condition and
related consolidated statement of income for the year then ended. Actual results
could differ from those estimates. Currently, material estimates that are
particularly susceptible to change relate to the determination of the allowance
for possible loan losses (see note 1e).
b) CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, amounts due from banks and federal funds sold which mature overnight.
c) INVESTMENT IN DEBT AND EQUITY SECURITIES
Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standard (SFAS) No. 115 "Accounting for Certain Investments in Debt and Equity
Securities." Under SFAS No. 115, the Company is required to report
readily-marketable equity and debt securities in one of the following
categories: (i) "held-to-maturity" (management has a positive intent and ability
to hold to maturity) which are to be reported at amortized cost; (ii) "trading"
(held for current resale) which are to be reported at fair value, with
unrealized gains and losses included in earnings; and (iii) "available for sale"
(all other debt and marketable equity securities) which are to be reported at
fair value, with unrealized gains and losses excluded from earnings and
reported, net of tax, as a separate component of stockholders' equity.
Accordingly, in adopting SFAS No. 115 the Bank classified all of its holdings of
debt and equity securities at January 1, 1994, as either "held-to-maturity" or
"available for sale". Securities held for investment with a book value of
$30,961,000 were transferred to available for sale upon the adoption of SFAS No.
115 as of January 1, 1994. Adoption of SFAS No. 115 had no impact on net income
but resulted in a $192,000 decrease in stockholders' equity at January 1, 1994
due to net unrealized losses on securities classified as "available-for-sale"
amounting to $330,000, less estimated taxes of $138,000.
Included in investment securities are mortgage-backed securities that represent
participating interests in pools of long term mortgage loans originated and
serviced by the issuers of the securities and real estate mortgage investment
conduit (remic) certificates which represent beneficial interests in a pool of
mortgage-backed securities held in a trust. These securities are carried at fair
value.
Premiums and discounts on investment in debt and equity securities are amortized
to expense and accreted to income over the estimated life of the respective
securities using a method which approximates the level yield method. Gains and
losses on the sales of securities are recognized upon realization based on the
specific identification method.
On November 15, 1995, the Financial Accounting Standards Board (FASB) issued a
special report entitled, "A Guide to Implementation of Statement No. 115 on
Accounting for Certain Investments in Debt And Equity Securities, Questions and
Answers" (the Guide). The Guide permitted a one-time reassessment and related
reclassifications from the held to maturity category (no later than December 31,
1995) that will not call into question the intent of the enterprise to hold
other debt securities to maturity in the future. In November 1995, the Company
performed a reassessment of its investment in debt and equity securities which
resulted in the decision to reclassify "held to maturity" securities with a book
value of $26,750,000 to available for sale. The reclassification resulted in a
$330,000 increase in stockholders' equity at December 31, 1995 due to unrealized
gains on securities transferred to "available for sale" amounting to $563,000,
less estimated taxes of $233,000.
d) LOANS AND LOAN INTEREST INCOME RECOGNITION
Loans are stated at the principal amount outstanding. Interest on loans is
credited to income based on the principal outstanding during the period. Loans
that are 90 days past due are placed on a nonaccrual basis. Exceptions to this
policy are loans that are fully and adequately secured and are in the process of
collection.
Mortgage loans held for sale are carried at the lower of cost or estimated
market value, determined on an aggregate basis.
On January 1, 1995, the Bank adopted SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures." SFAS Nos. 114 and 118 address
the accounting by creditors for impairment of certain loans and the recognition
of interest income on these loans and require that impairment of certain loans
be measured based on the present value of expected future cash flows discounted
at the loan's effective interest rate or the fair value of collateral or the
loans observable market price. A loan is considered impaired, based on current
information and events, if it is probable that the Bank will be unable to
collect the scheduled payments of principal and interest when due according to
the contractual terms of the loan agreement.
BRIDGE BANCORP, INC. AND SUBSIDIARY
19
<PAGE>
[GRAPHIC LOGO - The Bridgehampton National Bank]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The adoption of SFAS Nos. 114 and 118 did not have any effect on the Company's
financial condition or results of operations.
SFAS No. 91, "Accounting for Nonrefundable Fees and Costs Associated with
Originating and Acquiring Loans," requires lenders to recognize loan origination
fees, less certain direct costs, as an adjustment of a loan's yield over the
life of the loan by the interest method. The Company records loan origination
and commitment fees as income when received and expenses direct loan origination
costs when incurred. The effect of the non-application of SFAS No.91 is
immaterial.
e) ALLOWANCE FOR POSSIBLE LOAN LOSSES
The adequacy of the allowance for possible loan losses is determined based on
management's detailed analysis of classified loans, past loss experience,
current economic conditions, delinquency trends and other pertinent factors.
Additions to the allowance are charged to expense and realized losses, net of
recoveries, are charged to the allowance.
Management believes that the allowance for possible loan losses is adequate.
While management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in conditions. In
addition, various regulatory agencies, as an integral part of the examination
process, periodically review the Bank's allowance for possible loan losses. Such
agencies may require the Bank to recognize additions to the allowance based on
their judgments about information available to them at the time of their
examination.
f) BANKING PREMISES AND EQUIPMENT
Banking premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation on banking premises and equipment is computed on
the straight-line method over the estimated useful lives of the assets (50 years
for buildings and 2 to 10 years for furniture and fixtures.) Leasehold
improvements are amortized on a straight-line method over the terms of the
related leases.
g) OTHER REAL ESTATE OWNED
Other real estate owned consists of real estate acquired by foreclosure or deed
in lieu of foreclosure and is recorded at the lower of the net unpaid principal
balance at the foreclosure date plus acquisition costs or fair value. Subsequent
valuation adjustments are made if fair value less estimated costs to sell the
property falls below the carrying amount.
h) INCOME TAXES
The Company follows SFAS No. 109 which requires an asset and liability approach
for accounting for income taxes. The asset and liability approach requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of assets and liabilities. Under SFAS No. 109 deferred tax assets are
recognized if it is more likely than not that a future benefit will be realized.
It is management's position, as currently supported by the facts and
circumstances, that no valuation allowance is necessary against any of the
Company's deferred tax assets.
i) TREASURY STOCK
Repurchases of common stock are recorded as treasury stock at cost.
j) EARNINGS PER SHARE
Earnings per share were calculated based upon average shares outstanding of
473,833 in 1996 and 480,000 in 1995 and 1994.
k) DIVIDENDS
Cash available for dividend distribution to shareholders of the Company must
initially come from dividends paid by the Bank to the Company. Therefore, the
restrictions of the National Bank Act on the Bank's dividend payments are
applicable to the Company and will affect the Company's ability to declare and
pay future cash dividends. The Bank may not declare a dividend which would
impair capital. In addition, the approval of the Regional Administrator of
National Banks is required if the total of all dividends declared by the Bank in
any calendar year exceeds the total of the Bank's net income of that year
combined with its retained net income of the preceding two years. The Bank's
capital is not impaired and under the earnings test, the Bank has approximately
$4,322,000 available as of December 31, 1996 which may be paid to the Company as
a dividend.
l) IMPACT OF NEW ACCOUNTING STANDARDS
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock Based
Compensation." This Statement establishes financial accounting and reporting
standards for stock based employee compensation plans. SFAS No. 123 was
effective for fiscal years beginning after December 15, 1995. In management's
opinion, when adopted, the aforementioned pronouncement will not have a material
effect on the Company's financial position or results of operations.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." This
Statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities . SFAS No. 125
is effective for transfers and servicing of financial assets and extinguishments
of liabilities occurring after December 31, 1996 to be applied prospectively. In
management's opinion, when adopted, the aforementioned pronouncement will not
have a material effect on the Company's financial position or results of
operations.
20
<PAGE>
2. REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance sheet items calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier 1 capital (as defined in the regulations) to risk
weighted assets (as defined), and of Tier 1 capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1996, that the Bank
meets all capital adequacy requirements to which it is subject. As of December
31, 1996, the most recent notification from the Federal Deposit Insurance
Corporation categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
the Bank must maintain minimum total risk-based, Tier 1 risk-based, Tier 1
leverage ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed the institution's
category.
The Bank's actual capital amounts and ratios are also presented in the following
table:
<TABLE>
<CAPTION>
As of December 31, 1996
- ------------------------------------------------------------------------------------------------------
(In thousands) TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
--------- --------- --------- --------- --------- ---------
Total Capital (to risk weighted assets) 17,704 11.5% 12,295 >8.0% 15,369 >10.0%
Tier 1 Capital (to risk weighted assets) 16,466 10.7% 6,147 >4.0 9,221 >6.0
Tier 1 Capital (to average assets) 16,466 8.3% 7,977 >4.0 9,971 >5.0
As of December 31, 1995
- ------------------------------------------------------------------------------------------------------
(In thousands) To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
- ------------------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
--------- --------- --------- --------- --------- ---------
Total Capital (to risk weighted assets) 16,106 11.6% 11,125 >8.0% 13,907 >10.0%
Tier 1 Capital (to risk weighted assets) 15,068 10.8% 5,563 >4.0 8,344 >6.0
Tier 1 Capital (to average assets) 15,068 8.0% 7,511 >4.0 9,389 >5.0
</TABLE>
BRIDGE BANCORP, INC. AND SUBSIDIARY
21
<PAGE>
[GRAPHIC LOGO - The Bridgehampton National Bank]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3. INVESTMENT IN DEBT AND EQUITY SECURITIES
A summary of the amortized cost, gross unrealized gains, gross unrealized losses
and estimated fair value of investment securities is as follows:
<TABLE>
<CAPTION>
December 31, 1996
- -------------------------------------------------------------------------------------
(In thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
U.S. Treasury securities $16,102 $244 - $16,346
Oblig. of U.S. Government agencies 1,985 24 - 2,009
Oblig. of NY State & pol.subs. 15,567 303 - 15,870
Mortgage-backed securities 23,344 210 - 23,554
-------------------------------------------
Total available for sale $56,998 $781 - $57,779
-------------------------------------------
Held to maturity:
Oblig. of NY State & pol.subs. $5,179 $11 - $5,190
Non marketable Equity securities:
Federal Reserve Bank Stock $36 - - $36
Federal Home Loan Bank Stock 1,047 - - 1,047
-------------------------------------------
Total held to maturity $6,262 $11 - $6,273
-------------------------------------------
Total debt and equity securities $63,260 $792 - $64,052
===========================================
December 31, 1995
- -------------------------------------------------------------------------------------
(In thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
U.S. Treasury securities $16,947 $254 $1 $17,200
Oblig. of NY State & pol.subs. 12,708 268 4 12,972
Mortgage-backed securities 22,433 261 177 22,517
-------------------------------------------
Total available for sale $52,088 $783 $182 $52,689
-------------------------------------------
Held to maturity:
Oblig. of NY State & pol.subs. $5,762 - - $5,762
Non marketable Equity securities:
Federal Reserve Bank Stock $36 - - $36
Federal Home Loan Bank Stock 627 - - 627
-------------------------------------------
Total held to maturity $6425 - - $6425
-------------------------------------------
Total debt and equity securities $58,513 $783 $182 $59,114
===========================================
</TABLE>
The amortized cost and estimated fair value of investment in debt securities at
December 31, 1996, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
December 31, 1996
- ----------------------------------------------------------------------------
(In thousands) Amortized Estimated
Cost Fair Value
--------------------
<S> <C> <C>
Available for Sale:
Due in one year or less $3,609 $3,646
Due after one year through five years 24,690 25,110
Due after five years through ten years 7,621 7,728
Due after ten years 21,078 21,295
--------------------
Total debt securities $56,998 $57,779
====================
Held to Maturity:
Due in one year or less $6,262 $6,273
--------------------
Total debt securities $6,262 $6,273
====================
</TABLE>
Proceeds from sales of available for sale securities were approximately
$38,473,000, $3,088,000 and $8,206,000 in 1996, 1995 and 1994, respectively.
Gross gains of approximately $257,000, $38,000 and $93,000 were realized on
sales of available for sale securities during 1996, 1995 and 1994, respectively.
Gross losses of approximately $189,000, $7,000 and $16,000 were realized on
sales of available for sale securities during 1996, 1995 and 1994, respectively.
There were no sales of held to maturity securities during 1996, 1995 and 1994.
Investment securities having an amortized cost of approximately $60,478,000 and
$26,487,000 at December 31, 1996 and 1995, respectively, were pledged to secure
public deposits.
Investments in debt and equity securities which exceed 10% of stockholders'
equity for any one issuer (other than U.S. Government securities) are as
follows:
<TABLE>
<CAPTION>
December 31, 1996
- -----------------------------------------------------------
(In thousands) Estimated
Amortized Fair
Cost Value
- -----------------------------------------------------------
<S> <C> <C>
Montauk UFSD $1,895 $1,899
------------------------
Total $1,895 $1,899
========================
</TABLE>
22
<PAGE>
4. LOANS
Loans are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1996 1995
- ------------------------------------------------------------
(In thousands)
<S> <C> <C>
Real estate loans $93,639 $81,394
Unsecured business and
personal loans 13,211 11,798
Secured business and
personal loans 317 654
Installment/consumer loans 11,714 17,634
--------------------
Loans 118,881 111,480
Less:
Allowance for possible
loan losses 1,238 1,038
--------------------
Net loans $117,643 $110,442
====================
</TABLE>
LENDING RISK
The principal business of the Bank is lending, primarily in commercial real
estate loans, building loan mortgages, home equity loans, land loans, consumer
loans, home advantage loans, residential mortgages and commercial loans. . The
Bank considers its primary lending area as the five east end towns of Suffolk
County, New York. Since the primary lending area of the Bank is the eastern end
of Long Island, the loan portfolio as a whole is dependent on the economic
conditions of the geographical market served by the Bank.
At December 31, 1996 and 1995, the recorded investment in loans for which
impairment has been recognized in accordance with SFAS Nos. 114 and 118 totaled
$269,000 and $507,000, respectively. all of which were nonaccrual loans. No
valuation allowance has been recorded. The average recorded investment in
impaired loans for the years ended December 31, 1996 and 1995 was approximately
$238,000 and $400,000, respectively.
NONACCRUAL LOANS
Nonaccrual loans at December 31, 1996, 1995 and 1994 amounted to approximately
$269,000, $507,000 and $422,000, respectively. The additional interest income
that would have been recorded had these nonaccrual loans performed in accordance
with their original terms was approximately $8,000, $58,000 and $19,000 in 1996,
1995 and 1994, respectively. At December 31, 1996 there was one loan totaling
$1,000 over 90 days past due and still accruing interest. There were no loans
over 90 days past due and still accruing at December 31, 1995 and 1994.
RELATED PARTY LOANS
Certain directors and related parties, including their immediate families and
companies in which they are principal owners, were loan customers of the Bank
during 1996, 1995 and 1994. Such loans were made in the ordinary course of
business at normal credit terms, including interest rate and security, and do
not represent more than normal risk of collection. The aggregate amount of these
loans was approximately $192,000, $164,000, and $309,000 at December 31, 1996,
1995 and 1994, respectively. There were no letters of credit for directors at
December 31, 1996, 1995 and 1994.
The following analysis shows the activity of director loans for 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
- ----------------------------------------------------
(In thousands)
<S> <C> <C>
Balance at January 1, $164 $309
Loans originated 115 200
Principal payments (87) (345)
----------------
Balance at December 31, $192 $164
================
</TABLE>
After one year of continuous service, employees of the Bank receive a discount
on the interest rate charged for all loan types. Employees also receive a
discount on the origination fees of real estate loans. The aggregate amount of
these loans was approximately $895,000 and $637,000 at December 31, 1996 and
1995, respectively.
5. ALLOWANCE FOR POSSIBLE LOAN LOSS
Changes in the allowance for possible loan losses are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1996 1995 1994
- ------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Balance at January 1, $1,038 $944 $747
-------------------------
Provision for possible
loan losses 330 268 333
-------------------------
Recoveries 145 56 40
Loans charged-off (275) (230) (176)
-------------------------
Net loans charged- off (130) (174) (136)
-------------------------
Balance at December 31, $1,238 $1,038 $944
=========================
</TABLE>
6. BANKING PREMISES AND EQUIPMENT
Banking premises and equipment consist of:
<TABLE>
<CAPTION>
December 31, 1996 1995
- ------------------------------------------------------------
(In thousands)
<S> <C> <C>
Land $1,546 $1,546
Building and improvements 4,125 1,150
Furniture and fixtures 2,354 1,936
Leasehold improvements 246 227
----------------
8,271 4,859
Less accumulated
depreciation and amortization 1,498 1,084
----------------
Balance at December 31, $6,773 $3,775
================
</TABLE>
BRIDGE BANCORP, INC. AND SUBSIDIARY
23
<PAGE>
[GRAPHIC LOGO - The Bridgehampton National Bank]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The Bank owns approximately 3.3 acres of property obtained at a total cost of
approximately $1,396,000 for the planned construction of a new 18,500 square
foot main office and administrative facility. During 1995, the Bank received
town planning board approval and a building permit was issued. Construction
began in October of 1995 and continued throughout 1996. The construction and
site work costs of the project are estimated at $4,000,000. To date $3,447,000
has been capitalized to construction in progress and is included in building and
improvements in the preceding table. A spring 1997 completion date is
anticipated.
7. INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
- -------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Current:
Federal $1,152 $846 $581
State 459 364 302
-------------------------
1,611 1,210 883
-------------------------
Deferred:
Federal (43) (51) (27)
State (13) (11) (11)
-------------------------
(56) (62) (38)
-------------------------
Total $1,555 $1,148 $845
=========================
</TABLE>
The reconciliation of the expected Federal income tax expense at the statutory
tax rate to the actual provision follows:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------
(In thousands) PERCENTAGE Percentage Percentage
OF PRE-TAX of Pre-tax of Pre-tax
AMOUNT EARNINGS Amount Earnings Amount Earnings
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal income tax expense
computed by applying the
statutory rate to income
before income taxes $1,551 34% $1,201 34% $945 34%
Tax exempt interest (330) (7) (328) (9) (321) (12)
State taxes, net of Federal
income tax benefit 294 6 233 7 192 7
Interest disallowed 32 1 37 1 27 1
Other 8 - 5 - 2 -
----------------------------------------------------------
Provision for income taxes $1,555 34% $1,148 33% $845 30%
==========================================================
</TABLE>
<TABLE>
<CAPTION>
Deferred tax assets and liabilities are comprised of the following:
December 31December 31December 31,
1996 1995 1994
- ------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Deferred tax assets:
Allowance for possible
loan losses $414 $346 $313
Depreciation - 7 -
Pension expense - - 19
Securities available for sale - - 465
Other 1 - -
---------------------------------
Total $415 $353 $797
---------------------------------
Deferred tax liabilities:
Pension expense ($1) ($28) $ -
Depreciation (42) - (69)
Other - (9) (9)
Securities available for sale (321) (249) -
---------------------------------
Total ($364) ($286) ($78)
---------------------------------
Net deferred tax assets $51 $67 $719
=================================
</TABLE>
8. EMPLOYEE BENEFITS
a. PENSION PLAN
The Bank maintains a non-contributory pension plan through the New York State
Bankers Association Retirement System covering all eligible employees. The
following table sets forth the plan's funded status as of September 30, 1996 and
1995 (measurement dates).
24
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Actuarial present value of benefit
obligations at September 30:
Accumulated benefit obligation, including
vested benefits of approximately
$(757) in 1996 and $(668) in 1995 ($786) ($685)
=================
Projected benefit obligation for service
rendered to date (1,132) (1,000)
Plan assets, primarily marketable
securities, at fair value 1,324 1,116
-----------------
Plan assets in excess of projected
benefit obligation 192 116
Unrecognized net (gain)/loss from past
experience different than assumed 28 83
Unrecognized prior service cost (22) (23)
Unrecognized net asset being recognized
over 18.31 years (83) (92)
-----------------
Prepaid pension cost $115 $84
=================
Net periodic pension cost for fiscal 1996, 1995
and 1994 included the following components:
Service cost - benefits earned during
the period $115 $97 $95
Interest cost on projected benefit
obligation 74 68 60
Expected return on plan assets (96) (78) (71)
Amortization of transition asset (9) (9) (9)
Amortization of prior service cost (2) (2) 2
-------------------------
Net periodic pension cost $82 $76 $77
=========================
</TABLE>
At September 30, 1996 and 1995 weighted-average discount rates of 7.75% and
8.0%, respectively, a rate of increase in future compensation levels of 5.5% and
5.0%, respectively, were used in determining the actuarial present value of the
projected benefit obligation. The expected long-term rate of return on assets
was 8.5% at September 30, 1996 and 1995.
b. EQUITY INCENTIVE PLAN
During 1996, an equity incentive plan was approved by the stockholders to
provide for the grant of options to purchase up to a total of 48,000 shares of
common stock of the Company and for the award of shares of common stock as a
bonus. Such shares may be subject to restrictions based on continued service or
performance as employees of the Company or subsidiaries of the Company. Options
awarded under the plan are determined by the Incentive Compensation Committee of
the Board of Directors. Subsequent to December 31, 1996, options to purchase
4,800 shares were awarded to ten key decision making executives at an exercise
price of $61.00 per share, which options vest immediately and are based on the
fair market value of the stock on the date of the grant of the options.
9. OTHER INCOME AND EXPENSES
a) Components of other operating income which exceed one percent of the
aggregate of total interest income and other income are as follows:
<TABLE>
<CAPTION>
December 31, 1996 1995 1994
- -----------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Checkbook charges $187 $174 $150
Credit card processing 369 321 299
</TABLE>
b) Components of other operating expenses which exceed one percent of the
aggregate of total interest income and other income are as follows:
<TABLE>
<CAPTION>
December 31, 1996 1995 1994
- -----------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Data\Item processing $336 $345 $344
Check printing $160 $146 122
Credit card processing $122 $104 140
Loan Servicing $222 $249 236
Advertising $225 $93 $78
</TABLE>
10. COMMITMENTS AND CONTINGENCIES AND OTHER MATTERS
a. LEASES
The Company is obligated to make minimum annual rental payments under
non-cancellable operating leases on its premises and automobiles. The projected
minimum rentals under existing leases at December 31, 1996 are as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 175
1998 143
1999 72
2000 42
2001 44
Thereafter 156
</TABLE>
Certain leases contain renewal options and rent escalation clauses. In addition,
certain leases provide for additional payments based upon real estate taxes,
interest and other charges. Rental expenses under these leases for the years
ended December 31, 1996, 1995 and 1994 approximated $243,000, $266,000 and
$212,000, respectively.
BRIDGE BANCORP, INC. AND SUBSIDIARY
25
<PAGE>
[GRAPHIC LOGO - The Bridgehampton National Bank]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
b. LOANS
In the normal course of business, there are various outstanding commitments and
contingent liabilities, such as guarantees and commitments to extend credit,
which are not reflected in the accompanying financial statements. No material
losses are anticipated as a result of these transactions.
The following represents commitments outstanding:
<TABLE>
<CAPTION>
December 31, 1996 1995
- ---------------------------------------------------------
(In thousands)
<S> <C> <C>
Standby letters of credit $1,170 $1,993
Loan commitments outstanding 6,720 6,508
Unused equity lines 4,279 2,934
Unused construction lines 6,328 2,854
Unused lines of credit 5,381 3,703
Unused overdraft lines 1,846 1,676
------------------
Total commitments outstanding $25,724 $19,668
==================
</TABLE>
c. OTHER
During 1996, the Bank was required to maintain certain cash balances with the
Federal Reserve Bank of New York for reserve and clearing requirements. These
balances averaged $1,232,000 in 1996.
The Bank maintains an overnight line of credit with the Federal Home Loan Bank
of New York. At year end 1996 and 1995, the line of credit available was
$9,913,700 and $9,235,400, respectively. There was no amount outstanding at
years ending December 31, 1996 and 1995.
11. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the Bank's
financial instruments at December 31, 1996 and 1995. SFAS No. 107, "Disclosures
about Fair Value of Financial Instruments," defines the fair value of a
financial instrument as the amount at which the instrument could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale:
<TABLE>
<CAPTION>
December 31, 1996 1995
- -----------------------------------------------------------------------------------------
(in thousands) CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
---------------------------------------------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and due from banks 12,247 12,247 7,404 7,404
Interest bearing deposits with banks 68 68 76 76
Securities available-for-sale 57,779 57,779 52,689 52,689
Securities held-to-maturity 6,262 6,273 6,425 6,425
Loans 117,643 117,775 110,442 111,044
Accrued interest receivable 1,343 1,343 1,524 1,524
Financial Liabilities:
Demand and other deposits 184,847 184,849 166,144 166,154
Accrued interest payable 1,537 1,537 1,474 1,474
</TABLE>
LIMITATIONS
The preceding estimates are made at a specific point in time and may be based on
judgments regarding losses expected in the future, risk, and other factors which
are subjective in nature. The methods and assumptions used to produce the fair
value estimates are listed below.
CASH AND DUE FROM BANKS, FEDERAL FUNDS SOLD AND INTEREST BEARING DEPOSITS WITH
BANKS
For these short term instruments, the carrying amount is a reasonable
estimate of fair value.
INVESTMENT SECURITIES
For securities held in the Bank's investment portfolio, fair value was
determined by reference to quoted market prices.
LOANS
The fair value of the Bank's loan portfolio is based on the credit and interest
rate characteristics of the individual loans within each sector of the
portfolio. The loan portfolio was stratified by type, maturity, interest rate,
collateral type, where applicable, and credit quality ratings. The fair
valuation of loans were estimated by discounting scheduled cash flows through
the estimated maturities using discount rates, which in the opinion of
management best reflect current market interest rates that would be charged on
loans (or groups of loans) with similar characteristics and credit quality.
Credit risk concerns were reflected either by adjusting cash flow forecasts or
by adjusting the discount rate, or by a combination of both.
ACCRUED INTEREST
As accrued interest represents short term receivables and payables, the carrying
amount is a reasonable estimate of the fair value.
DEPOSIT LIABILITIES
The estimated fair value of demand deposits, savings accounts, and money market
deposits with no stated maturities is the amount payable on demand at the
reporting date. The fair value of fixed maturity certificates of deposit is
estimated by the present value of estimated future cash flows using rates
currently offered for deposits of similar remaining maturities.
COMMITMENTS TO EXTEND CREDIT, STANDBY LETTERS OF CREDIT
The fair value of the commitments to extend credit listed in the preceding Note
10 "Commitments and Contingencies and Other Matters" were estimated to be
insignificant. The fair value of commitments to extend credit and standby
letters of credit were evaluated using fees currently charged to enter into
similar agreements, taking into account the risk characteristics of the
borrower.
26
<PAGE>
<TABLE>
<CAPTION>
12. BRIDGE BANCORP, INC. (PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF FINANCIAL CONDITION
December 31, 1996 1995
- ----------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
ASSETS
Cash and cash equivalents $3 $4
Dividend receivable 680 528
Investment in the Bank 16,923 15,416
--------------------
TOTAL ASSETS $17,606 $15,948
====================
LIABILITIES
Dividends payable 680 528
--------------------
TOTAL LIABILITIES $680 $528
====================
STOCKHOLDERS' EQUITY
Stockholders' Equity $17,547 $15,420
Treasury stock at cost, 10,800 shares ($621) -
--------------------
TOTAL STOCKHOLDERS' EQUITY $16,926 $15,420
====================
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $17,606 $15,948
====================
</TABLE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME
Year ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Dividend income from the Bank $1,608 $768 $624
Other operating expenses $1 - -
------------------------------
Income before income taxes and equity in
undistributed earnings of the Bank 1,607 768 624
Income tax provision - - (2)
------------------------------
Income before equity in undistributed
earnings of the Bank 1,607 768 622
Equity in undistributed earnings of the Bank 1,399 1,615 1,311
------------------------------
Net income $3,006 $2,383 $1,933
==============================
</TABLE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
Year ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Cash flows used by operations:
Other operating expenses ($1) - -
------------------------------
Net cash used by operating activities ($1) - -
Cash flows from investing activities:
Dividends received 1,456 672 600
------------------------------
Net cash provided by investing activities 1,456 672 600
Cash flows used by financing activities:
Payment for the purchase of treasury stock (621)
Dividends paid (835) (672) (600)
------------------------------
Net cash used by financing activities (1,456) (672) (600)
Net decrease in cash and cash
equivalents (1) - -
Cash and cash equivalents at beginning of
year 4 4 4
------------------------------
Cash and cash equivalents at end of year $3 $4 $4
==============================
Reconciliation of net income to net cash used
by operating activities:
Net income $3,006 $2,383 $1,933
Adjustments to reconcile net income to net cash
used by operating activities:
Equity in undistributed earnings
of the Bank (1,399) (1,615) (1,311)
Dividend income (1,608) (768) (624)
Decrease in other assets - - 2
------------------------------
Net cash used by operating activities ($1) $ - $ -
==============================
</TABLE>
BRIDGE BANCORP, INC. AND SUBSIDIARY
27
<PAGE>
[GRAPHIC LOGO - The Bridgehampton National Bank]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Bridge Bancorp, Inc.:
We have audited the consolidated statements of condition of Bridge Bancorp,
Inc. and subsidiary as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management . Our responsibility is to express an opinion on these
financial statements based on our audits. The consolidated financial statements
of Bridge Bancorp, Inc. and subsidiary as of December 31, 1994, and for the year
then ended were audited by other auditors whose report, dated February 3, 1995,
expressed an unqualified opinion on those statements. Such report included an
explanatory paragraph that discussed a change in accounting principles relating
to the adoption of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", effective
January 1, 1994.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bridge Bancorp, Inc. and
subsidiary as of December 31, 1996 and 1995, and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
- -----------------------
Arthur Andersen LLP
New York, New York
January 31, 1997
<TABLE>
<CAPTION>
COMMON STOCK INFORMATION
The Company's common stock is traded on the NASDQ
over the counter bulletin board market under the symbol
"BDGE". The following table details the quarterly high and
low prices of the Company's common stock and the dividends
declared for such periods.
At December 31, 1996 the Company had approximately 606
holders of its common stock. Cash
Stock Prices Dividends
High Low Declared
- ------------------------------------------------------------------------------------
BY QUARTER 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIRST $48 $48 -
SECOND 57 48 $0.65
THIRD 60 57 -
FOURTH 61 60 $1.45
- ------------------------------------------------------------------------------------
By Quarter 1995
- ------------------------------------------------------------------------------------
First $33 1/2 $33 1/2 -
Second <F1> <F2> $0.50
Third $38 $34 1/2 -
Fourth $48 $39 $1.10
<FN>
<F1>
There were no per share prices known to the Company during the period indicated.
<F2>
There were no per share prices known to the Company during the period indicated.
</FN>
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
BOARD OF DIRECTORS
AND AFFILIATIONS BANK OFFICERS NOTICE OF ANNUAL MEETING
<S> <C> <C>
The Annual Meeting of Shareholders is
Raymond Wesnofske Thomas J. Tobin scheduled for 3:30 p.m. Tuesday, April
Chairman President and Chief Executive Officer 15, 1997 at the Bridgehampton
Wesnofske Produce, Inc. Community House, Main Street,
Bridgehampton, NY SENIOR VICE PRESIDENTS Bridgehampton, NY 11932.
Thomas J. Tobin Christopher Becker BANKING OFFICES
President and Chief Executive Officer Chief Financial Officer
The Bridgehampton National Bank MAIN OFFICE
Jean Irvine Montauk Highway, Bridgehampton,
Thomas E. Halsey Human Resources and CRA NY 11932
Holly Hill Nursery 516/537-1000 Fax 516/537-1835
Water Mill, NY Michael P. Kochanasz
Sales and Marketing SOUTHAMPTON
Marcia Z. Hefter 425 County Road 39, Southampton,
Esseks, Hefter & Angel Anthony Leone NY 11968
Counselor of Law Credit Administration 516/283-1286 Fax 516/287-3309
Riverhead, NY
Diane Reutershan EAST HAMPTON
R. Timothy Maran Branch Administration and Cashier 26 Park Place, East Hampton,
Maran, DeBaun, Cruise & Simonson NY 11937
Southampton, Hampton Bays, VICE PRESIDENTS 516/324-8480 Fax 516/329-1485
Westhampton, NY
Peter M. Coleman SOUTHOLD
Albert E. McCoy Commercial Loan Officer 54970 Main Road, Southold, NY 11971
W.F. McCoy Petroleum Products, Inc. 516/765-1500 Fax 516/765-1605
McCoy Bus Co., Inc. Donald P. Gauthier, Jr.
Bridgehampton, NY Residential Loan Officer MATTITUCK
Mattituck Shopping Center, Main Road,
Walter A. Preische, Jr. Carol Kennedy Mattituck, NY 11952
Markowitz Preische & Stevens, P.C. Loan compliance and workouts 516/298-0190 Fax 516/298-0194
Certified Public Accountant
East Hampton, NY Thomas H. Simson MONTAUK
Chief Information Officer 1 The Plaza, Montauk, NY 11954
Lawrence H. Strickland 516/668-6400 Fax 516/668-6412
Vice Chairman Janet T. Verneuille
Peter Lyle, Inc., Financial Services Comptroller RESIDENTIAL MORTGAGE AND
Bridgehampton, NY LOAN CENTER
ASSISTANT VICE PRESIDENTS 184 Old Country Road, Route 58,
COMPANY OFFICERS Riverhead, NY 11901
Donald Brancaccio 516/369-4300 Fax 516/369-4388
Thomas J. Tobin Residential Mortgage Center
President and Chief Executive Officer 10-KSB REPORT
Michelle Dosch A copy of the Annual Report on Form
Christopher Becker Financial Operations 10-KSB, filed with the Securities and
Senior Vice President and Treasurer Exchange Commission, is available upon
Maureen P. Mougios request by any shareholder of the
Jean Irvine Director of Internal Audit Company at no charge. Write to
Senior Vice President Michael P. Kochanasz, Senior Vice
Susan Ruthinowski President and Secretary at Bridge
Michael P. Kochanasz Small Business Services Bancorp, Inc., P.O. Box 3005,
Senior Vice President and Secretary Bridgehampton, NY 11932.
Peter Schaefer
Anthony Leone Loan Representative INTERNET WEBSITE ADDRESS
Senior Vice President http://www.peconic.net/bnb/
Robert Staron
Diane Reutershan Loan Representative
Senior Vice President
Ann K. Sweeney
Loan Representative
ASSISTANT CASHIERS
Donna A. Cramer
Branch Manager - Main Office
David E. Hawkes
Branch Manager - Southampton
Henry B. Jacobs
Branch Manager - Mattituck
John J. McDonald
Branch Manager - Montauk
Kimberly Romano
Deputy Comptroller
Toni Somerstein
Branch Manager - East Hampton
Kenneth M. Tobin
Systems Analyst
Designed by Curran & Connors, Inc.
Testimonial Photographs: Michael Pateman
Architectural Photograph: Gil Amiaga
</TABLE>
<PAGE>
[GRAPHIC LOGO - The Bridgehampton National Bank]
BRIDGE BANCORP, INC.
MONTAUK HIGHWAY
BRIDGEHAMPTON, NEW YORK 11932
(516) 537-1000
Independent Auditors' Report
----------------------------
The Stockholders and
Board of Directors
Bridge Bancorp:
We have audited the consolidated statements of income, stockholders' equity, and
cash flows of Bridge Bancorp and subsidiary for the year ended December 31,
1994. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statement referred to above present
faily, in all material respects, the results of operations and the cash flows of
Bridge Bancorp and subsidiary for the year ended December 31, 1994, in
conformity with generally accepted accounting principles.
As described in note 1(c), the Company adopted the provisions of Statement of
Accounting Standards No. 115, "Accounting for Certain Debt and Equity
Securities" effective January 1, 1994.
KPMG PEAT MARWICK LLP
Jericho, New York
February 3, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000846617
<NAME> Bridge Bancorp, Inc.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<CASH> 12,247
<INT-BEARING-DEPOSITS> 68
<FED-FUNDS-SOLD> 1250
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 57779
<INVESTMENTS-CARRYING> 6262
<INVESTMENTS-MARKET> 6273
<LOANS> 118881
<ALLOWANCE> 1238
<TOTAL-ASSETS> 204614
<DEPOSITS> 184847
<SHORT-TERM> 1537
<LIABILITIES-OTHER> 1304
<LONG-TERM> 0
0
0
<COMMON> 2400
<OTHER-SE> 621
<TOTAL-LIABILITIES-AND-EQUITY> 204614
<INTEREST-LOAN> 11261
<INTEREST-INVEST> 3850
<INTEREST-OTHER> 390
<INTEREST-TOTAL> 15501
<INTEREST-DEPOSIT> 5008
<INTEREST-EXPENSE> 5072
<INTEREST-INCOME-NET> 10099
<LOAN-LOSSES> 330
<SECURITIES-GAINS> 68
<EXPENSE-OTHER> 7960
<INCOME-PRETAX> 4561
<INCOME-PRE-EXTRAORDINARY> 4561
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<CHANGES> 0
<NET-INCOME> 3006
<EPS-PRIMARY> 6.34
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<YIELD-ACTUAL> 5.70
<LOANS-NON> 269
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<RECOVERIES> 145
<ALLOWANCE-CLOSE> 1238
<ALLOWANCE-DOMESTIC> 1238
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
