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, 1997
[ ] 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)
2200 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 $21,547,000.
The aggregate market value of the voting stock of the Registrant as of March 19,
1998 was $97,151,931.
As of March 19, 1998, the Registrant had outstanding $1,407,999 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,
1997 are incorporated by reference into Part II and Part III. Portions of the
Proxy Statement for the Annual Meeting of Shareholders to be held April 14,
1998, dated March 13, 1998, are incorporated by reference into Part III.
<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 2200 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 99 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 OCC, the Federal Reserve Board, the FDIC, and the
New York State Banking Department. The primary supervisory authority of the Bank
is the OCC, 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 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>
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.
<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 $649,000 in 1997, $598,000 in 1996 and $425,000 in 1995.
Year ended December 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(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> . $125,780 $ 12,400 9.9% $114,220 $ 11,261 9.9% $105,983 $ 10,299 9.7%
Deposits with banks ............... 1,320 73 5.5% 1,941 99 5.1% 445 29 6.5%
Federal funds sold ................ 4,787 267 5.6% 4,422 243 5.5% 4,524 262 5.8%
Taxable investment securities ..... 19,736 1,295 6.6% 19,703 1,286 6.5% 17,797 1,134 6.4%
Tax exempt investment securities .. 23,790 1,115 4.7% 17,474 907 5.2% 19,961 965 4.8%
Other securities .................. 1,083 71 6.6% 736 48 6.5% 637 48 7.5%
Mortgage backed securities ........ 28,395 2,003 7.1% 24,670 1,657 6.7% 24,996 1,647 6.6%
-------- -------- ------ -------- -------- ------ -------- -------- ------
Total interest earning assets ....... $204,891 $ 17,224 8.4% $183,166 $ 15,501 8.5% $174,343 $ 14,384 8.3%
Interest bearing liabilities:
Savings, N.O.W. and
money market deposits ........... $ 71,703 $ 1,632 2.3% $ 68,342 $ 1,598 2.3% $ 65,740 $ 1,581 2.4%
Certificates of deposit of $100,000
or more ........................ 28,601 1,560 5.5% 18,718 1,000 5.3% 22,733 1,321 5.8%
Other time deposits ............... 42,456 2,230 5.3% 44,848 2,410 5.4% 43,176 2,334 5.4%
Federal funds purchased ........... 20 1 5.0% 22 1 4.5% -- -- --
Other borrowings .................. 2,127 120 5.6% 1,143 63 5.5% 342 22 6.4%
-------- -------- ------ -------- -------- ------ -------- -------- ------
Total interest bearing liabilities .. $144,907 $ 5,543 3.8% $133,073 $ 5,072 3.8% $131,991 $ 5,258 4.0%
-------- -------- ------ -------- -------- ------ -------- -------- ------
Net interest income/interest
rate spread ....................... $ 11,681 4.6% $ 10,429 4.7% $ 9,126 4.3%
-------- ------ --------- ------ -------- ------
Net earning assets/net yield on
average interest earnings assets .. $ 59,984 5.7% $ 50,093 5.7% $ 42,352 5.2%
-------- ------ --------- ------ -------- ------
Ratio of interest earning assets to
interest bearing liabilities ...... 141.4% 137.6% 132.1%
------ ------ ------
<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>
<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,
1997 Over 1996 1996 Over 1995
(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 ......................... $ 20 $ 4 $ 24 ($ 6) ($ 13) ($ 19)
Deposits with banks ........................ (34) 8 (26) 77 (7) 70
Taxable investment securities .............. 2 7 9 123 29 152
Tax exempt investment securities ........... 303 (95) 208 (126) 68 (58)
Other securities ........................... 23 0 23 6 (6) 0
Mortgage-backed securities ................. 260 86 346 (21) 31 10
Loans (including loan fee income)<F1>....... 1,140 (1) 1,139 811 151 962
-------------------------------------------------------------
Total interest earning assets ........... 1,714 9 1,723 864 253 1,117
-------------------------------------------------------------
INTEREST EXPENSE ON INTEREST
BEARING LIABILITIES:
Savings, NOW and money market deposits ..... 77 (43) 34 62 (45) 17
Certificates of deposits of $100,000 or more 539 21 560 (220) (101) (321)
Other time deposits ........................ (126) (54) (180) 90 (14) 76
Federal funds purchased .................... -- -- 0 1 -- --
Other borrowings ........................... 56 1 57 44 (3) 41
-------------------------------------------------------------
Total interest bearing liabilities ...... 546 (74) 471 (23) (163) (187)
-------------------------------------------------------------
Net interest income ........................ 1,169 83 1,252 887 416 1,304
=============================================================
<FN>
<F1>
The net change in interest income relating to loan fee income was an increase
of $51,000 in 1997 over 1996 and an increase of $173,000 in 1996 over 1995.
</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) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Mortgage-Backed Securities ....................... $26,718 $23,554 $22,517
Obligations of State and Political Subdivisions .. 29,792 21,049 18,734
U.S. Treasury and Government Agencies ............ 14,409 18,355 17,200
Other Securities ................................. 1,083 1,083 663
------- ------- -------
Total ............................................ $72,002 $64,041 $59,114
======= ======= =======
</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, 1997 are as
follows:
After one but After five but No stated
Within 1 year within five years within ten years After ten years 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 ......... -- -- $14,409 6.52% -- -- -- -- -- -- $14,409
U.S. Government Agency Securities -- -- -- -- -- -- -- -- -- -- --
Mortgage-backed securities ...... -- -- -- -- $ 4,741 7.12% $21,977 6.99% -- -- 26,718
Oblig.of state and pol.subs ..... $ 2,905 5.64% 6,320 4.89% 9,838 4.66% -- -- -- -- 19,063
--------------------------------------------------------------------------------------------------
Total available for sale ........ 2,905 5.64% 20,729 6.02% 14,579 5.46% 21,977 6.99% -- -- 60,190
Held to maturity:
Oblig.of state and pol.subs ..... 10,729 3.87% -- -- -- -- -- -- -- -- 10,729
--------------------------------------------------------------------------------------------------
10,729 3.87% -- -- -- -- -- -- -- -- 10,729
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 .......... 10,729 3.87% -- -- -- -- -- -- 1,083 6.97% 11,812
--------------------------------------------------------------------------------------------------
Total debt and equity
securities .................... $13,634 4.25% $20,729 6.02% $14,579 5.46% $21,977 6.99%$ 1,083 6.97% $72,002
==================================================================================================
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 pages 24 and 25 of the
Registrant's 1997 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
five years at December 31,
December 31,
------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(in thousands)
Real estate loans ................... $114,357 $ 93,639 $ 81,394 $ 67,291 $ 55,510
Unsecured business and personal loans 17,638 13,211 11,798 10,094 6,263
Secured business and personal loans . 725 317 654 973 741
Installment/consumer loans .......... 5,916 11,714 17,634 15,773 9,065
----------------------------------------------------
Total loans ......................... $138,636 $118,881 $111,480 $ 94,131 $ 71,579
====================================================
</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, 1997:
After One
Within One But Within After
Year Five Years Five Years Total
- --------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Commercial loans ..................... $ 1,059 $ 5,624 $52,453 $59,136
Construction loans ................... 12,280 5,611 -- $17,891
----------------------------------------------
Total loans .................... $13,339 $11,235 $52,453 $77,027
==============================================
Rate provisions:
Amounts with fixed interest rates .... -- $ 2,070 $ 3,044 $ 5,114
Amounts with variable interest rates.. 13,339 9,165 49,409 71,913
----------------------------------------------
Total ................................ $13,339 $11,235 $52,453 $77,027
==============================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
III.C. NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
- --------------------------------------------------------------------------------
The following table shows the Registrant's non-performing assets:
December 31, 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Loans 90 days or more past due
and still accruing .............. $ 1 $ 1 -- -- $ 150
Nonaccrual loans .................. 975 269 507 422 259
Restructured loans ................ -- -- -- -- --
Other real estate owned, net ...... -- -- 235 782 585
------------------------------------------
Total ........................ $ 976 $ 270 $ 742 $1,204 $ 994
==========================================
III.C.2.
The information required by Item III.C.2. is included in Footnote 4 of the Notes
to Consolidated Financial Statements which appears on pages 25 and 26 of the
Registrant's 1997 Annual Report to Shareholders which is incorporated herein by
reference.
III.C.3.
The information required by Item III.C.3. is included in Footnote 1 of the Notes
to Consolidated Financial Statements which appears on pages 21 through 23 of the
Registrant's 1997 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 $3,440,607 at December 31, 1997, 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.
III.C.4.
Loan Concentrations
At December 31, 1997, 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 $410,000 provision for possible loan losses for 1997 was used to
increase the general allocation as a result of average loans increasing 10.1%.
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, 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Allowance for possible loan losses
balance at beginning of period ..... $1,238 $1,038 $ 944 $ 747 $ 846
Charge-offs:
Real estate loans .................... -- -- 2 26 --
Unsecured business & personal loans .. 87 11 64 27 118
Secured business & personal loans .... -- -- -- -- --
Installment/consumer loans ........... 229 264 164 123 77
----------------------------------------------
Total ............................. 316 275 230 176 195
Recoveries:
Real estate loans .................... -- -- 1 -- --
Unsecured business & personal loans .. 6 79 23 12 15
Secured business & personal loans .... -- -- -- -- --
Installment/consumer loans ........... 55 66 32 28 37
----------------------------------------------
Total ............................. 61 145 56 40 52
----------------------------------------------
Net charge-offs ...................... 255 130 174 136 143
Provision for possible loan losses
charged to operations ............... 410 330 268 333 44
----------------------------------------------
Balance at end of period ............. $1,393 $1,238 $1,038 $ 944 $ 747
==============================================
Ratio of net charge-offs during period
to average loans outstanding ....... 0.20% 0.11% 0.16% 0.17% 0.22%
==============================================
IV.B.
The allocation of the allowance for possible loan losses is as follows:
Year Ended December 31, 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
(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 ................... 868 82.5% 685 78.8% 576 73.0% 517 71.7% 462 77.5%
Unsecured business and personal loans 336 12.7% 301 11.1% 179 10.6% 165 10.7% 172 8.8%
Secured business and personal loans . 1 0.5% 1 0.3% 1 0.6% 5 1.0% 63 1.0%
Installment/consumer loans .......... 188 4.3% 251 9.8% 282 15.8% 257 16.6% 50 12.7%
----------------------------------------------------------------------------------------------
Total .......................... 1,393 100.0% 1,238 100.0% 1,038 100.0% 944 100.0% 747 100.0%
==============================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
V. 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, 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
(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 ........................... $ 58,571 -- $ 47,829 -- $ 39,496 --
Savings, NOW and money market deposits .... $ 71,703 2.3% $ 68,342 2.3% $ 65,740 2.4%
Certificates of deposit of $100,000 or more $ 28,601 5.5% $ 18,718 5.3% $ 22,733 5.8%
Other time deposits ....................... $ 42,456 5.3% $ 44,848 5.4% $ 43,176 5.4%
--------------------------------------------------------------------------
Total ................................ $201,331 2.7% $179,737 2.8% $171,145 3.1%
==========================================================================
At December 31, 1997, the remaining maturities of the Registrant's time
certificates of $100,000 or more were as follows:
(In thousands)
-----------------------------------------------
3 months or less ..................... $16,157
Over 3 thru 6 months ................. $ 4,075
Over 6 thru 12 months ................ $ 337
Over 12 months ....................... $ 303
-------
Total ....................... $20,872
=======
</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 9 of the Registrant's 1997 Annual Report to
Shareholders which is incorporated herein by reference.
<PAGE>
VII. SHORT-TERM BORROWINGS
- ----------------------------
The Registrant's average balance outstanding during the period for all
categories of short term borrowings was less than thirty percent of
stockholders' equity at the end of the period.
<PAGE>
Item 2. Description of Property
- -------------------------------
Facilities of the Registrant are located at 2200 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 1997 the Bank sold its previous
headquarters building and moved into its new Main Office and Administrative
facility located at 2200 Montauk Highway, Bridgehampton, New York.
The Bank also owns the building which houses its Southold Branch located at
54790 Main Road, Southold, New York. The Bank leases five 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; 94 Main Street,
Southampton, NY 11968; and 1 The Plaza, Montauk, New York. The Bank leases
additional space at 184 Old Country Road, Riverhead, New York for a residential
mortgage center.
It is the opinion of management of the Company that the current facilities 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 32 of the Annual Report to
Shareholders for the year ended December 31, 1997 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 10 through 16 of the Annual Report to
Shareholders for the year ended December 31, 1997 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 17 through 31 of the Annual
Report to Shareholders for the year ended December 31, 1997 is incorporated
herein by reference.
Item 8. Changes in and Disagreements with Accountants on Accounting and
- --------------------------------------------------------------------------------
Financial Disclosure
--------------------
None
<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 5 of the Registrant's Proxy Statement dated March 13, 1998 is
incorporated herein by reference.
Executives Officers Of The Registrant And The Bank
- --------------------------------------------------
Position with the Held Executive
Registrant and the Officer Position
Name and Age Bank Since
- ------------ ------------------ ----------------
Thomas J. Tobin President and Chief Executive 1984
53 Officer of the Registrant and Bank
Christopher Becker Senior Vice President of the 1991
32 Registrant and the Bank, Treasurer
of the Registrant, Chief Financial
Officer of the Bank
Anthony Leone Senior Vice President of the 1987
50 Registrant and the Bank, Secretary of
the Registrant, Chief Banking Officer
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.
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.
Mr. Leone has been Senior Vice President and Credit Administrator of the Bank
since 3/89.
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.
"Compliance with Section 16 (a) of the Exchange Act" set forth on page 10 of the
Registrant's Proxy Statement dated March 13, 1998 is incorporated herein by
reference.
Item 10. Executive Compensation
- -------------------------------
"Compensation of Directors", "Compensation of Executive Officers", and
"Employment Contracts and Severance Agreements" set forth on pages 7 through 10
of the Registrant's Proxy Statement dated March 13, 1998 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 5 of the Registrant's Proxy Statement dated
March 13, 1998 incorporated herein by reference.
Item 12. Certain Relationships and Related Transactions
- -------------------------------------------------------
"Certain Relationships and Related Transactions" set forth on page 10 of the
Registrant's Proxy Statement dated March 13, 1998 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 25 of the Annual Report
to Shareholders for the year ended December 31, 1997 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
10.1 Employment Contract - Thomas J. Tobin, Dated January 27, 1997
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:
10.2 Severance Agreement - Anthony Leone
10.6 Severance Agreement - Christopher Becker
13.1 Registrant's Annual Report to Shareholders for the year ended
December 31, 1997 (parts not incorporated by reference are
furnished for information purposes only and are not to be
deemed filed herewith.)
Reports on Form 8-K
There were no reports on Form 8K filed during the fourth quarter of 1997.
<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 27, 1998 By /s/ Thomas J. Tobin
-------------------- ---------------------------------
Thomas J. Tobin, President/CEO
Date: March 27, 1998 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 27, 1998
- --------------------------------- ---------------------
Raymond Wesnofske
/s/ Thomas J. Tobin Director March 27, 1998
- --------------------------------- ---------------------
Thomas J. Tobin
/s/ Thomas E. Halsey Director March 27, 1998
- --------------------------------- ---------------------
Thomas E. Halsey
/s/ Marcia Z. Hefter Director March 27, 1998
- --------------------------------- ---------------------
Marcia Z. Hefter
/s/ R. Timothy Maran Director March 27, 1998
- --------------------------------- ---------------------
R. Timothy Maran
/s/ Albert E. McCoy Director March 27, 1998
- --------------------------------- ---------------------
Albert E. McCoy
/s/ Walter A. Preische, Jr. Director March 27, 1998
- --------------------------------- ---------------------
Walter A. Preische, Jr.
/s/ L.H. Strickland Director March 27, 1998
- --------------------------------- ---------------------
L.H. Strickland
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Number Description of Exhibit Exhibit
- -------------- ---------------------- -------
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
(incorporated by reference to Registrant's *
Form 10-KSB, File No. 0-18546, filed
March 31, 1997)
10.2 Severance Agreement - Anthony Leone 2
Dated January 13, 1998
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)
10.6 Severance Agreement - Christopher Becker 3
Dated January 13, 1998
13.1 Registrant's Annual Report to Shareholders 1
for the year ended December 31, 1997
* Denotes incorporated by reference
[GRAPIC LOGO - The Bridgehampton National Bank]
Bridge Bancorp, Inc.
SM
[TRADEMARK - The Bank you can talk to. ]
ANNUAL REPORT
1997
<PAGE>
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 chartered 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-eight years, The Bridgehampton
National Bank has continued to maintain its community orientation. The Bank
offers a full range of deposit and loan products and services, geared to the
businesses and consumers within its primary market area, the East End of Long
Island.
Bridgehampton National Bank serves both the North and South Forks on the East
End through its branch network, operating seven full service banking offices
located in Bridgehampton, East Hampton, Mattituck, Montauk, Southampton,
Southampton Village, 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
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.
<PAGE>
<TABLE>
<CAPTION>
Bridge Bancorp, Inc. and Subsidiary
Consolidated Financial Highlights
(In thousands, except per share data and financial ratios)
At December 31,
For the Year Ended 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Net income .................................................. $ 4,195 $ 3,006
Net income, excluding gain on sale of building (2)........... 3,366
Cash dividends declared ..................................... 1,972 987
At Year End
Total assets ................................................ $233,112 $204,614
Total deposits .............................................. 203,697 184,847
Total loans ................................................. 138,636 118,881
Total stockholders' equity .................................. 19,451 16,926
Significant Ratios for the Year End
Return on average equity .................................... 23.08% 18.84%
Return on average assets .................................... 1.86 1.51
Selected Financial Ratios, Excluding Gain on Sale of Building(2)
Return on average equity .................................... 18.52% 18.84%
Return on average assets .................................... 1.49 1.51
Per Share Data<F1>
Basic earnings per share .................................... $ 2.98 $ 2.11
Diluted earnings per share .................................. 2.97 --
Cash dividends declared ..................................... 1.40 .70
Book value .................................................. 13.81 12.02
Per Share Data, Excluding Gain on Sale of Building<F1><F2>
Basic earnings per share .................................... $ 2.39 $ 2.11
Diluted earnings per share .................................. 2.38 --
<FN>
<F1>
On April 15, 1997, the Board of Directors declared a three-for-one stock split
in the form of a stock dividend payable May 30, 1997 to stockholders of record
as of May 1, 1997. The par value per share of the Company's common stock remains
unchanged, as a result, $4,801,000 was transferred from Undivided Profits at May
1, 1997 to reflect the issuance. All per share amounts have been adjusted to
reflect the effects of the split.
<F2>
On June 17, 1997, the Bank sold its former headquarter's building resulting in a
gain, net of taxes, of approximately $829,000. On December 15, 1997 the Bank
declared a one time special dividend of approximately $845,000, or $.60 per
share, paying out this gain to the shareholders. </FN> </TABLE>
<TABLE>
<CAPTION>
[BAR GRAPHS]
(in thousands) 1997 1996 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Assets............ $233,112 $204,614 $184,070 $171,953
(in thousands) 1997 1996 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Income.............. $ 4,195 $ 3,006 $ 2,383 $ 1,933
3,366*
(percent) 1997 1996 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Return on Average Assets 1.86% 1.51% 1.27% 1.18%
1.49%*
(percent) 1997 1996 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Return on Average Equity 23.08% 18.84% 16.29% 15.36%
18.52%*
*1997, excluding gain on sale of building
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
[BAR GRAPH]
(in dollars) 1997 1996 1995 1994
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
Stock Performance........ $50.00 $20.33 $16.00 $11.00
</TABLE>
Dear Shareholders
It is rewarding to be able to report results of operations for fiscal year 1997
that reflect our Company's commitment to returning value to our shareholders
through our attention to the East End marketplace. Return on average equity,
excluding the gain on the sale of our former headquarters location, of 18.52%
and return on average assets of 1.49% place The Bridgehampton National Bank
among top performing banks of our asset size nationwide. Ranking as a top
performing bank is a constant goal for Bridgehampton National. Many of the
financial highlights of the past year clearly demonstrate this commitment,
including a 16.7% increase in net loans, 10.2% growth in total deposits, a 13.9%
increase in total assets, and growth in total shareholder equity of 14.9%,
compared to year-end 1996. Net income grew 12%, excluding the gain on the sale
of our headquarters building. The five year summary of financial highlights
reflects steady growth in deposits, net loans, total assets and net income.
The $1.65 million sale of our former headquarters building resulted in a gain,
net of taxes, of $829,000. On December 15th, the Board of Directors declared a
one time special dividend of $0.60 per share, distributing these proceeds to our
shareholders. This special dividend was paid in addition to the semi-annual
dividend of $0.55 per share. Combined with the semi-annual dividend paid in June
1997, the total dividend for 1997, excluding the special dividend, increased
14.1% over the dividends declared in 1996.
The Company's high level of performance has translated into a one hundred per
cent increase in the per share market value since its three-for-one stock split
last May. I am extremely pleased with the growth in our stock price through the
market's recognition of the consistency of Bridge Bancorp's earnings and
performance. Our stock is now trading at a price to earnings ratio comparable to
the industry standard, and I anticipate that our strong performance will produce
further appreciation in the stock based on a more consistent price to earnings
ratio.
Several events helped drive the performance numbers. Key among them was the
Bank's move to its new headquarters location, and the associated promotional
products and activities, which created expanded opportunities with existing and
new customers. The new facility, including the positive image that the building
presents to the community, has resulted in immeasurable and ongoing benefits to
our bottom line.
Our residential mortgage department was positioned well to capitalize on the
favorable interest rate environment coupled with a strong regional economy. We
will look toward increasing strength in residential mortgage lending, as the
Bank's reputation as a leading mortgage lender on the East End continues to
grow. Small business products and services comprise a key market niche for
Bridgehampton National. The establishment of our new Southampton Village
Commercial Branch clearly portrays our dedication to this important market
segment. Serving the East End consumer through competitively priced products and
services, along with excellence in customer service, remains a top priority of
our Company.
While we look back over the results of our efforts last year with pride, it is
crucial to our survival as an independent financial institution that as we look
forward, we are not complacent, and strive to improve upon what we were able to
do yesterday. Our position in our marketplace is augmented by our ability to
remain flexible and innovative. To this end, you will note several changes in
our corporate structure. These changes enhance our focus on the customer, with
one sector of our Company devoted solely to customer sales and service and the
other to operations that support the customer service function. Our ability to
make the changes necessary to grow our Company's market share and to better
leverage the opportunities within our core market niches represents one of
Bridgehampton National Bank's key strengths. The accessibility of our senior
management, their ability to make informed decisions, and their overwhelming
willingness to respond quickly to the needs of our customers, truly sets us
apart.
It was a good year. Our success is the outcome of the efforts of all of our
employees, guided by the essential leadership of our Board of Directors. My
thanks to them as well as to you, our valued shareholders, for your continued
support of Bridge Bancorp, Inc.
Sincerely,
/s/ Thomas J. Tobin
- -------------------
Thomas J. Tobin
President and Chief Executive Officer
2
<PAGE>
Over the past year, The Bridgehampton National Bank has successfully met several
key challenges. Here are some of the highlights of events that helped drive our
performance numbers.
BRIDGEHAMPTON NATIONAL BANK HOSTS LAND FORUM
On February 7th , 120 participants, including public officials, accountants,
lawyers, estate planners, and land owners attended the open space and farmland
preservation seminar co-sponsored by The Bridgehampton National Bank and the
Group for the South Fork. The topic was compelling, as legislation had recently
been signed into law that provided a new means for municipalities to buy
conservation easements and farmland. The keynote speaker was Daniel "Pat"
O'Connell, who had developed an innovative preservation financing plan for
Howard County, Maryland during the 1980s. The Bank took a leadership role in
providing an educational program that encourages preservation of open space on
the East End. At the same time, the sponsorship of this program created business
development opportunities for The Bridgehampton National Bank.
BRIDGEHAMPTON NATIONAL BANK BUILDING SOLD
The marketing and sale of our former headquarters building on Main Street in
Bridgehampton presented a unique challenge and an exciting opportunity. The
Board of Directors determined that a sale at public auction would provide the
greatest exposure for the property, affording all interested and qualified
parties equal opportunity to bid. The public auction, held on April 15th
resulted in the sale of the building for $1.65 million, and a gain, net of
taxes, in the amount of $829,000. This gain was the basis for the special
dividend declared by the Board at year end. The special dividend of $0.60 per
share was paid in addition to the $0.55 per share semi-annual dividend also
announced. The Bridgehampton National Bank has had uninterrupted semi-annual
dividend payments for more than 30 years, and has increased each semi-annual
dividend paid since 1992.
BRIDGE BANCORP, INC. SPLITS STOCK THREE-FOR-ONE
Also on April 15th, following approval by our shareholders, the Board of
Directors declared a three-for-one stock split in the form of a stock dividend
payable May 30, 1997 to stockholders of record as of May 1, 1997. The stock
split increased outstanding common shares from 469,333 to 1,407,999.
[CAPTION]
1997:
[PHOTOGRAPH]
Pat O'Connell fields questions regarding open space and farmland preservation
financing alternatives.
[CAPTION]
FOCUS
[PHOTOGRAPH]
Our traditional cupola reflects our commitment to the community bank tradition
here on the East End. Bridgehampton National Bank is the only local bank that
focuses solely on the East End marketplace.
3
<PAGE>
JUNE 7TH MARKS THE GRAND OPENING OF THE BRIDGEHAMPTON NATIONAL BANK'S MAIN
OFFICE HEADQUARTERS FACILITY On May 14th, we closed our doors at 2488 Main
Street for the last time, and opened the following morning at our new main
office facility at 2200 Montauk Highway. Thanks to an outstanding team effort of
all of our main office and administrative staff, the move went off without a
hitch! Gwendolyn Baldwin, long-time customer and widow of former Bridge Bancorp,
Inc. Chairman Sayre Baldwin, was our very first customer in our new facility. It
was an exciting day for our Bank.
The new main office branch and headquarters building provides a functional and
comfortable environment for our customers and staff alike. State-of-the-art
equipment, technology and processes are devoted to enhancing the quality of
banking products and services for our customers.
The transition to our new headquarters was a community event during which the
Bank developed new and expanded business opportunities. More than 700 guests
attended the official ribbon cutting ceremony and reception commemorating the
grand opening. Official ribbon cutters included several honored guests and
dignitaries.
A common theme was apparent in the remarks made by our speakers Thomas J. Tobin,
President and Chief Executive Officer, The Bridgehampton National Bank, U.S.
Representative Michael Forbes, and State Assemblyman Fred Thiele. Tom Tobin
reflected on the parallel which could be drawn between the Bank's commitment to
the East End during its early years, when Bridgehampton National committed
$8,000 to purchase its previous location in 1920, and the current commitment to
the community represented by the Bank's new building. Both investments reflect
Bridgehampton National Bank's dedication to the East End in no uncertain terms.
Representative Forbes spoke of the Bank's service to the community, not only
through the provision of banking products and services, but also in its
participation and sponsorship of key community events and programs. Assemblyman
Thiele talked about Bridgehampton National's participation in the dreams of East
End residents, in the form of financing for their homes and support of their
businesses. He added that the large turnout for the Bank's grand opening was the
community's way of supporting the Bank's dream. A champagne reception followed
the ribbon cutting. Our guests toured the facility and enjoyed our hospitality,
while adding to the warmth and good feeling of the Bank's new home.
The grand opening ribbon cutting and reception on June 7th marked the beginning
of a six week bank-wide promotional period. Considerable enthusiasm was
generated for the daily and grand prize drawings, and the promotion brought
existing and new customers into all of our branch locations, providing business
development opportunities bank-wide. Promotional products, including a special
rate Certificate of Deposit, and a low introductory rate Home Equity Line of
Credit were offered as part of the grand opening promotion, and were designed to
expand existing customer relationships and attract new customers. Our staff rose
to the occasion, opening 37% more accounts than were opened during the same
period the previous year, and our special rate home equity line of credit was a
home run!
[CAPTION]
STABILITY
excitement
[PHOTOGRAPH]
Board members and local officials join Tom Tobin, President & CEO, in cutting
the ribbon to officially open our new headquarters facility.
[PHOTOGRAPH]
BNB depended on East End Contractors to build our new building. Our Bank works
as a partner with the local business community - our success depends on one
another.
4
<PAGE>
BRIDGEHAMPTON NATIONAL BANK ESTABLISHES A COMMUNITY ROOM FOR USE BY LOCAL GROUPS
The Bank's Building Committee felt that something was missing from the original
plans for the new headquarters facility. Consistent with the Bank's strong
community orientation, the Committee felt that our new building should offer the
community a room which would be available for local groups to use for meetings
and educational programs. A community room was added to the plan. Located on the
west side of the building, the community room seats approximately 75, and has
its own separate entrance which is wheelchair accessible. The Bridgehampton
National Bank has become the second home of the Hampton and North Fork Realtors
Association, and has been the location chosen for a multitude of community
meetings and programs for various groups including: the East End Chapter of the
Suffolk County Bar Association, the Education Committee of the NAACP, the Long
Island Community Foundation, the Bridgehampton Service Unit of the Salvation
Army, the Southampton Town Building Department, and the South Fork Community
Health Initiative, to name a few. The Bank also co-sponsored with SONYMA, a
first time home buyers workshop and presented a panel of experts that took first
time home buyers through the process, from choosing the right house to arranging
for mortgage financing. The Community Room has proven to be an effective way for
the Bank to give back to the communities it serves, while also establishing a
vehicle for new and existing customers to learn more about our Bank.
Additionally, in January 1998, the Bank appointed a Community Development
Officer whose responsibilities include identification of community programs that
are appropriate for Bank participation.
LOCAL BANK STEPS UP TO THE PLATE FOR OPEN SPACE AND LAND CONSERVATION Last June,
The Bridgehampton National Bank once again took a leadership position in favor
of open space and land conservation on the East End. The Bank provided a $1.0
million letter of credit for its customer, the Peconic Land Trust, permitting
the joint public private purchase of Fort Corchaug, located in the Town of
Southold. Without the letter of credit, the transaction would not have been
possible, and instead of preservation of the 105 acre parcel that includes one
of the oldest archeological sites in our region, sub-division was planned by its
owners. This initiative, consistent with other programs that the Bank has
supported, clearly reflects the Bank's commitment to the integrity of the
environment and quality of life on the East End of Long Island. This was the
first effort of this kind taken by Bridgehampton National on the North Fork, and
the Bank was able to use this leadership position to its advantage. It was
reported that the innovative funding arranged for this purchase was the direct
result of information presented at the open space seminar co-sponsored by the
Bank earlier in the year.
[CAPTION]
STRENGTH
dedication
community
[PHOTOGRAPH]
Bridgehampton National contributes its financial strenght and stability to
businesses, consumers, schools, local organizations and municipalities in all
five East End towns.
5
<PAGE>
IT'S OFFICIAL - HENRY HILDRETH CUTS THE RIBBON FOR BRIDGHAMPTON NATIONAL BANK IN
SOUTHAMPTON VILLAGE On November 19th, 1997, Southampton businessman Henry
Hildreth cut the ribbon, officially opening The Bridgehampton National Bank's
Southampton Village Commercial Branch. Located at 94 Main Street in the heart of
Southampton Village, this Branch was established to meet the needs of merchants
and professionals within the Village. While serving the retail customer as well,
this branch, the first of its kind on the East End, offers special banking
services geared toward the needs of the local business customer. A convenient
location, extended banking hours, same day credit on deposits made up to 4 p.m.,
night drop services, coin and payroll preparation, availability of business
experts, and unparalleled customer service let business customers know that when
it comes to business banking in Southampton Village, Bridgehampton National Bank
really means business.
BRIDGEHAMPTON NATIONAL BANK APPOINTS SENIOR BUSINESS DEVELOPMENT OFFICER FOR THE
NORTH FORK REGION Analysis of our market area confirmed that the North Fork
represented an untapped opportunity for our Bank. While our business development
activities were expanding on the North Fork, it was determined that the Bank
needed to display a serious level of commitment to doing business there. In
November, Peter Coleman, Vice President, Commercial Loan Officer was appointed
to the important position of Senior Business Development Officer, North Fork
Region. A lifelong resident of Mattituck, Peter Coleman knows and understands
the unique character of the North Fork marketplace, and will provide much needed
leadership and visibility for Bridgehampton National on the North Fork.
BRIDGEHAMPTON NATIONAL BANK COMMITS TO FOUNDING SPONSORSHIP OF FIRST NIGHT
GREENPORT 98 First Night Greenport 98 organizers approached all the banks in our
area soliciting the opportunity for Founding Sponsorship of First Night, a
nonalcoholic, family oriented, multi-cultural evening of activities aimed at
bringing in the New Year with family and friends. Bridgehampton National signed
on as Founding Sponsor, volunteering branch locations to serve as sales points
for First Night tickets. Once again, our commitment to community provided
outstanding return on investment. This event was attended by 3,500, exceeding
the expectation of 2,000 participants! The Bank was not only honored and thanked
publicly throughout the six weeks preceding the New Year's Eve celebration, but
also received top billing as the event's Founding Sponsor in all promotional
materials and media coverage. Further, our branches sold nearly 800 tickets,
providing opportunities for branch personnel to interact with existing and
potential customers. The event was an important way for our Bank to demonstrate
just how serious we are about being the North Fork's community bank.
[CAPTION]
EXPANSION
[PHOTOGRAPH]
The Southampton Village Commercial Branch is the first branch office on the East
End established to meet the needs of the local business community.
[CAPTION]
Relationships
[PHOTOGRAPH]
Familiar faces in Southampton are left, Eliza Escalera, Relationship
Manager/Branch Banking, Southampton Village, and Alissa Leone, Customer Service
Representative, Southampton, County Road 39 Branch Office.
6
<PAGE>
WHERE WE ARE AND WHERE WE'RE GOING
While the preceding highlights recount The Bridgehampton National Bank's year in
terms of events that made local headlines, several internal accomplishments were
also significant.
Teller*Fone, Bridgehampton National's telephone banking service made its public
debut last June. Now, if you're near a phone, you're near our bank. Teller*Fone
puts banking at our customers' fingertips, with access to account information,
the ability to conduct transactions, and access to product and general bank
information, 24 hours a day, 7 days a week, through a touch tone phone.
PC Banking for businesses, currently in the product testing phase, is slated to
be brought to market during the second quarter of 1998. PC Banking is a service
that provides added convenience and Bank access to our municipal, professional,
retail and hospitality business customers.
BNB's PC Banking is one component of a cash management grouping which also
includes check reconciliation, electronic payment, and payroll direct deposit
services. These services are utilized by larger employers in our market area,
such as municipalities, hospitals and schools, as well as growing business
entities.
The development of alternative delivery channels that add value to our customer
relationships, enhance the convenience and accessibility of our products and
services, and meet the needs of customers within the East End market, is the
basis for our technology goals at BNB.
Last fall, Bridgehampton National incorporated database marketing into its
overall marketing program for the first time. Through utilization of a
state-of-the-art MCIF (Marketing Customer Information Files) system, our
marketing department can analyze, evaluate and segment customers and customer
prospects within our market area, matching our Company's offer of products and
services with appropriately targeted market segments. Strategic and technical
education of marketing staff has been key to our effective use of this powerful
marketing tool.
Bridgehampton National Bank continued to utilize the recognition derived from
its testimonial advertising campaign throughout 1997, and we are pleased to
report no shortage of volunteers among our customers to participate in the
testimonial advertising campaign. Small business services, the grand opening
promotion, and residential mortgage lending campaigns, which included both print
and radio advertising, effectively brought existing and new customers into "the
bank you can talk to." Mini-campaigns throughout the year completed the overall
advertising program, and included equity rate advertising, promotion of our new
Southampton Village Commercial Branch, promotion of the Bank's corporate
sponsorship of the world renown Hampton Classic, and the promotion of our
sponsorship and support of key community programs and events.
The tradition of community involvement, specifically our unwavering commitment
to reinvestment in the communities we serve and the dreams of businesses and
consumers in our marketplace, is the essence of a community bank, and a clear
distinction between Bridgehampton National Bank and our competition.
[CAPTION]
GROWTH
[PHOTOGRAPH]
The Veccio family, Shelter Island & Bohemia, helped spread the word that
Bridgehampton National Bank is the home-town bank that makes dreams come true.
[CAPTION]
OPPORTUNITY
[PHOTOGRAPH]
Teller*Fone banking: Now, if you're near a phone, you're near our bank - 24
hours a day, 7 days a week.
7
<PAGE>
Our testimonial advertising campaign will evolve into a new and exciting program
for 1998. While our customers will still help tell our story, an innovative
graphic device will be incorporated as a means for our Bank to communicate the
full breadth of products and services Bridgehampton National offers, and our
ultimate focus on relationships that meet the needs of our customers. Throughout
our advertising we will remind our marketplace that we ARE "the bank you can
talk to." Access to decision makers at our Bank, the ability to talk one on one
with our President as well as other members of senior management, makes working
with our Bank a competitive advantage for our customers.
The Bridgehampton National Bank web site was revised this year to work in tandem
with our overall advertising program. The site is continually updated to keep
information current and fresh. You can find us at www.bridgenb.com.
Recent legislation has resulted in several changes to Traditional IRAs, and has
also created two new IRA products, the Roth and Education IRAs. In addition to
offering Traditional, Roth and Education IRA CDs, Bridgehampton National has
also introduced a Special Short Term IRA Investment Account, which can serve as
a depository for funds until IRA CD deposit minimums are attained, or as a
temporary holding account until another long term investment option is selected.
IRAs have become more than simply a vehicle for retirement savings, and
Bridgehampton National did not miss a beat regarding the new opportunity
presented.
Several other new products are currently in various stages of development and
introduction. We are pleased to be adding debit cards to our MAC card and
Mastercard/VISA menu of electronic banking products. In addition to PC Banking
discussed above, BNB is also in the process of developing a "Preferred Business
Package" which will include a group of existing as well as newly introduced
products and services.
Bridgehampton National's Jumbo Residential Mortgage and Reverse Mortgage
products are two new offerings. In 1997, Bridgehampton National Bank became an
approved provider of the Reverse Mortgage product, joining forces with Fannie
Mae and Transamerica HomeFirst, Inc. to offer reverse mortgages. The reverse
mortgage presents a marketing challenge for our Bank, as we strive to educate
and gain the trust of individuals in our marketplace who can benefit from the
product's tax and income features. The reverse mortgage, increasingly, is viewed
as an estate planning tool, and in some cases an income stream option that can
turn difficult times into golden years.
Through a strategic alliance with a leading trust entity, in 1998 BNB will begin
to offer access to an outstanding level of wealth management services geared
specifically for high net worth individuals in our market area.
We invite you to review the financial pages that follow, which complete this
snap shot in time of our Company.
Indeed, this report represents a captured moment, because our future success
depends on our strategic ability to change, to remain flexible, to grow, to
effectively analyze and evaluate our position in our marketplace, to leverage
our strengths, to find solutions to problems, to engage the best employees we
can at all levels, and to maintain our focus on serving our customers to the
best of our ability each day.
[CAPTION]
challenge
COMMITMENT
[PHOTOGRAPH]
Your home can help turn dreams into reality.
If you're 62 or older, and you own a home, you could qualify for a Reverse
Mortgage. Bridgehampton National Bank is an approved provider of reverse
mortgages. The reverse mortgage serves as and estate planning tool, and an
income stream option during the golden years.
[PHOTOGRAPH]
Access to senior management, the decision makers at our Bank, gives
Bridgehampton National Bank's customers a competitive advantage.
8
<PAGE>
<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, 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Selected Financial Data:
Securities available for sale <F1> <F2>............. $ 60,190 $ 57,779 $ 52,689 $ 26,413 $ --
Securities held to maturity/for investment <F2>..... 11,812 6,262 6,425 37,166 66,626
Loans, net ......................................... 137,243 117,643 110,442 93,817 70,832
Total assets ....................................... 233,112 204,614 184,070 171,953 153,906
Total deposits ..................................... 203,697 184,847 166,144 155,891 140,471
Total stockholders' equity ......................... 19,451 16,926 15,420 12,807 12,144
Year Ended December 31,
- -----------------------------------------------------------------------------------------------------------------
Selected Operating Data:
Total interest income
(including loan fee income) ....................... $ 17,224 $ 15,501 $ 14,384 $ 11,187 $ 10,004
Total interest expense ............................. 5,543 5,072 5,258 3,270 3,363
----------------------------------------------------------
Net interest income ................................ 11,681 10,429 9,126 7,917 6,641
Provision for possible loan losses ................. 410 330 268 333 44
----------------------------------------------------------
Net interest income after provision
for possible loan losses .......................... 11,271 10,099 8,858 7,584 6,597
Total other income ................................. 4,323 2,422 1,697 1,512 1,503
Total other expenses ............................... 9,067 7,960 7,024 6,318 5,688
----------------------------------------------------------
Income before income taxes and
cumulative effect of accounting change ........... 6,527 4,561 3,531 2,778 2,412
Provision for income taxes ......................... 2,332 1,555 1,148 845 662
----------------------------------------------------------
Income before cumulative effect of accounting change $ 4,195 $ 3,006 $ 2,383 $ 1,933 $ 1,750
Cumulative effect of accounting change ............. -- -- -- -- $ 63
Net income ......................................... $ 4,195 $ 3,006 $ 2,383 $ 1,933 $ 1,813
==========================================================
December 31,
- ------------------------------------------------------------------------------------------------------------------
Selected Financial Ratios and Other Data:
Return on average equity <F4><F5>................... 23.08% 18.84% 16.29% 15.36% 15.52%
Return on average assets ........................... 1.86% 1.51% 1.27% 1.18% 1.15%
Equity to assets <F4>............................... 8.00% 8.07% 8.20% 7.79% 7.89%
Dividend payout ratio .............................. 47.00<F5> 32.87% 32.23% 32.28% 31.77%
Basic earnings per share ........................... $ 2.98<F5> $ 2.11 $ 1.65 $ 1.34 $ 1.26<F3>
Diluted earnings per share ......................... $ 2.97<F5> -- -- -- --
Cash dividends declared per common share ........... $ 1.40<F5> $ 0.70 $ 0.53 $ 0.43 $ 0.40
<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>
For purposes of these calculations, average stockholders equity excludes the
effect of changes in the unrealized appreciation (depreciation) on securities
available for sale, net of taxes.
<F5>
On June 17, 1997, the Bank sold its former headquarter's building resulting in a
gain, net of taxes, of approximately $829,000. Return on average equity
excluding this gain, net of taxes, was 18.52%. Return on . average assets
excluding this gain, net of taxes, was 1.49%. On December 15, 1997 the Bank
declared a one time special dividend of approximately $845,000, or $.60 per
share, paying out this gain to the shareholders. </FN> </TABLE>
BRIDGE BANCORP, INC. AND SUBSIDIARY 9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 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 1997, 1996 and 1995. 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 mainly 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 $233,112,000 at December 31, 1997. This
represents a 13.9% increase over assets at December 31, 1996, primarily the
result of an increase in loans of $19,755,000, and an increase in investments in
debt and equity securities of $7,961,000. Capitalized construction costs
attributable to the Bank's new headquarters were primarily the reason for a net
increase in banking premises and equipment of $1,955,000. The growth in assets
at December 31, 1997 was primarily funded by an increase in deposits of
$18,850,000 or 10.2% and overnight borrowings of $6,500,000. Demand deposits
increased $13,165,000 or 26.1% over the prior year primarily as a result of
business development efforts.
Stockholders' equity was $19,451,000 at December 31, 1997, an increase of 14.9%
over December 31, 1996. The increase of $2,525,000 was the result of
undistributed net income for the year ended December 31, 1997 of $2,223,000,
plus the change in net unrealized appreciation in securities available for sale,
net of tax, of $294,000; and the proceeds of the issuance of shares of common
stock of $8,000 pursuant to the equity incentive plan. 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.
STOCK SPLIT
On April 15, 1997, the Board of Directors declared a three-for-one stock split
in the form of a stock dividend payable May 30, 1997 to stockholders of record
as of May 1, 1997. The stock split increased outstanding common shares from
469,333 to 1,407,999. Stockholder's equity has been restated to give retroactive
recognition to the stock split for all periods presented by reclassifying from
undivided profits to common stock the par value of additional shares resulting
from the stock split. In addition, all references in the Consolidated Financial
Statements and Notes thereto to number of shares, per share amounts, stock
option data and market prices of the common stock have been restated giving
retroactive recognition to the stock split.
ASSET/LIABILITY MANAGEMENT
The purpose of the Company's asset/liability policy is to provide liquidity and
at the same time manage risk within acceptable levels. 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 Company's estimated one
year cumulative interest sensitivity gap (the difference between assets and
liabilities that reprice or mature within such period) was a negative
$15,399,000, or (6.61)% of total assets. A gap is considered negative when
interest rate sensitive liabilities maturing or repricing within a specified
time period exceed the amount of interest rate sensitive assets repricing or
maturing within that same time period. A gap is considered positive when the
amount of interest rate sensitive assets maturing or repricing within a
specified time frame exceeds the amount of interest rate sensitive liabilities
repricing or maturing within that same time period. In a rising rate
environment, an institution with a negative gap would generally be expected,
absent the effects of other factors, to experience a greater increase in the
costs of its liabilities relative to the yields of its assets and thus a
decrease in the institution's net interest income, whereas an institution with a
positive gap would generally be expected to experience the opposite results.
Conversely, during a period of falling rates, a negative gap would tend to
result in an increase in net interest income while a positive gap would tend to
adversely affect net interest income.
10
<PAGE>
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.
INTEREST RATE SENSITIVITY ANALYSIS
The following table sets forth the amounts of interest earning assets and
interest-bearing liabilities outstanding at December 31, 1997, which are
anticipated by the Bank, using certain assumptions based on historical
experience and other data available to management, to reprice or mature in each
of the future time periods shown. This table does not necessarily indicate the
impact of general interest rate movements on the Bank's net interest income
because actual repricing of various assets and liabilities is subject to
customer discretion and competitive and other pressures and, therefore, actual
experience may vary from that indicated.
<TABLE>
<CAPTION>
Over Three Over Six Over One
Three Months Months Year
Months Through Through Through Over
Year ended December 31, 1997 or Less Six Months One Year Five Years Five Years Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(Dollars in thousands, except financial ratios)
Interest Earning Assets:
Investment in debt and equity securities<F1> $ 1,934 $ 9,911 $ 5,594 $ 31,546 $ 21,826 $ 70,811
Total loans<F2> ............................ 50,159 11,699 16,633 45,651 14,494 138,636
--------------------------------------------------------------------------------
Total Interest Earning Assets ............ $ 52,093 $ 21,610 $ 22,227 $ 77,197 $ 36,320 209,447
Interest Bearing Liabilities:
Other borrowings ........................... $ 6,500 -- -- -- -- 6,500
Savings, N.O.W., and money
market accounts<F3> ...................... 54,159 -- -- -- $ 22,581 76,740
Certificates of deposit .................... 30,886 $ 12,042 $ 7,742 $ 12,654 4 63,328
--------------------------------------------------------------------------------
Total Interest Bearing Liabilities ....... $ 91,545 $ 12,042 $ 7,742 $ 12,654 $ 22,585 146,568
--------------------------------------------------------------------------------
Interest Sensitivity Gap Per Period .......... ($39,452) $ 9,568 $ 14,484 $ 64,543 $ 13,735 62,879
--------------------------------------------------------------------------------
Cumulative Interest Sensitivity Gap .......... ($39,452) ($29,884) ($15,399) $ 49,144 $ 62,879
--------------------------------------------------------------------------------
Gap to Total Assets .......................... (16.92%) (12.82%) (6.61%) 21.08% 26.97%
--------------------------------------------------------------------------------
<FN>
<F1>
Investment in debt and equity securities is shown excluding the fair value
appreciation of $1,280,000, before tax, due to the application of SFAS no. 115.
Investment in debt and equity securities includes interest earning deposits with
banks of $89,000.
<F2>
For the purpose of this table, nonaccrual loans of approximately $977,000 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>
Certain shortcomings are inherent in the method of analysis presented. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market interest rates.
The table reflects the estimates of management as to periods to repricing at
particular points in time. Among the factors considered, management monitors
both current trends and its historical repricing experience with respect to
particular or similar products. For example, the Bank has a number of deposit
accounts, including passbook savings, NOW accounts and money market accounts
which may be withdrawn at any time. The Bank, based on historical experience,
assumes that while all customers in these account categories could withdraw
their funds on any given day, they will not do so, even if the market interest
rates were to change. As a result, different assumptions may be used at
different points in time.
BRIDGE BANCORP, INC. AND SUBSIDIARY 11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Significant increases in the level of market interest rates also may adversely
affect the fair value of securities and other interest earning assets. At
December 31, 1997, $72,002,000 or 100% of the Company's securities had fixed
interest rates. Generally, the value of fixed rate instruments fluctuates
inversely with the changes in interest rates. As a result, increases in interest
rates could result in decreases in the market value of interest earning assets
which could adversely effect the Company's results of operations if sold or, in
the case of interest earning assets classified as available for sale, the
Company's stockholder's equity if retained. Increases in market interest rates
also could affect the type (fixed-rate or adjustable-rate) and amount of loans
originated by the Company and the average life of loans and securities, which
can adversely impact the yields earned on the Company's loans and securities. In
periods of decreasing interest rates, the average life of loans held by the
Company may be shortened to the extent increased prepayment activity occurs
during such period which, in turn, may result in the investing of funds from
such prepayments in lower yielding assets.
The Company's interest rate sensitivity is monitored by management through the
use of a quarterly interest rate risk analysis model which evaluates (i) the
potential change in the net interest income over the succeeding four quarter
period and (ii) the potential change in the fair market value of the Company,
the "Net Economic Value of Equity of the Company", which would result from an
instantaneous and sustained interest rate change of zero and plus or minus 200
basis points, in 100 basis point increments.
At December 31, 1997, net interest income over the succeeding four quarter
periods would be effected as follows given an instantaneous and sustained
interest rate change of:
Potential Change in
Change in Interest Potential Change Net Economic Value of
Rates in Basis Points in Net Equity as a Percentage
(RATE SHOCK) Interest Income of Total Assets
- --------------------------------------------------------------------------------
$ Change % Change $ Change % Change
------------------------------------------------------
200 $288,000 0.12% $ 932,000 0.40%
100 $146,000 0.06% * *
Static - - - -
(100) ($218,000) (0.09%) * *
(200) ($467,000) (0.20%) ($1,627,000) (0.70%)
* The information on the potential effect of a 100 basis point change in market
interest rates on the net economic value of equity is not available. The 200
basis point rate shock estimates the potential effect of a change in market
interest rates, and the Company does not view this lack of information as
meaningful.
As in the case of the gap table, certain shortcomings are inherent in the
methodology used in the above interest rate risk measurements. Modeling
potential changes in the net interest income and net economic value of equity
requires the making of certain assumptions which may or may not reflect the
manner in which actual yields and costs respond to changes in market interest
rates. In this regard, the model presented assumes that the composition of the
Company's interest sensitive assets and liabilities existing at the beginning of
a period remains constant over the period being measured and also assumes that a
particular change in interest rates is reflected uniformly across the yield
curve regardless of the duration to maturity or repricing of specific assets and
liabilities. Accordingly, although the net interest income models and net
economic value of equity measurements provide an indication of the Company's
interest rate exposure at a particular point in time, such measurements are not
intended to and do not provide a precise forecast of the effect of changes in
market interest rates on the Company's net interest income and will differ from
actual results.
12
<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, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(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> . $125,780 $ 12,400 9.9% $114,220 $ 11,261 9.9% $105,983 $ 10,299 9.7%
Deposits with banks ............... 1,320 73 5.5% 1,941 99 5.1% 445 29 6.5%
Federal funds sold ................ 4,787 267 5.6% 4,422 243 5.5% 4,524 262 5.8%
Investment in debt and equity
securities <F2> ................. 73,004 4,484 6.1% 62,583 3,898 6.2% 63,391 3,794 6.0%
--------------------------------------------------------------------------------------------
Total interest earning assets ....... $204,891 $ 17,224 8.4% $183,166 $ 15,501 8.5% $174,343 $ 14,384 8.3%
Interest bearing liabilities:
Savings, N.O.W. and
money market deposits ........... $ 71,703 $ 1,632 2.3% $ 68,342 $ 1,598 2.3% $ 65,740 $ 1,581 2.4%
Certificates of deposit of $100,000
or more ........................ 28,601 1,560 5.5% 18,718 1,000 5.3% 22,733 1,321 5.8%
Other time deposits ............... 42,456 2,230 5.3% 44,848 2,410 5.4% 43,176 2,334 5.4%
Other borrowings .................. 2,147 121 5.6% 1,165 64 5.5% 342 22 6.4%
--------------------------------------------------------------------------------------------
Total interest bearing liabilities .. $144,907 $ 5,543 3.8% $133,073 $ 5,072 3.8% $131,991 $ 5,258 4.0%
--------------------------------------------------------------------------------------------
Net interest income/interest
rate spread ....................... $ 11,681 4.6% $ 10,429 4.7% $ 9,126 4.3%
-------- --- -------- --- -------- ---
Net earning assets/net yield on
average interest earnings assets .. $ 59,984 5.7% $ 50,093 5.7% $ 42,352 5.2%
-------- --- -------- --- -------- ---
Ratio of interest earning assets to
interest bearing liabilities ...... 141.4% 137.6% 132.1%
----- ----- -----
<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>
YEAR 2000
The Company is working diligently to insure a smooth transition into the new
millennium. To accomplish Year 2000 compliance, the Company has implemented a
project plan as established by the banking regulatory authorities. The
established timetable breaks the plan into five phases; the awareness phase,
assessment phase, renovation phase, validation phase and implementation phase.
Completion of the plan is targeted for year end 1998. Since most of the
Company's systems are outsourced or purchased from vendors, the Company is
assessing the quality of renovation by the vendor's management and taking action
accordingly. During the validation phase the renovated products will be tested
internally to insure Year 2000 functionality. The Company does not expect the
costs of Year 2000 compliance to materially effect the results of operations.
BRIDGE BANCORP, INC AND SUBSIDIARY 13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
General.
Net income for 1997 was $4,195,000, an increase of $1,189,000 or 39.6% from 1996
net income of $3,006,000. Net income includes a gain on the sale of the Bank's
former headquarters building totaling $829,000 net of applicable taxes of
$575,000. Highlights include: (i) a $1,252,000 or 12.0% increase in net interest
income; (ii) a $1,901,000 or 78.5% increase in total other income; and (iii) a
$1,107,000 or 13.9% increase in other expenses. The provision for income taxes
increased $777,000 or 50.0%.
Net Interest Income.
Net interest income increased from $10,429,000 in 1996 to $11,681,000 in 1997.
The increase of 12.0% reflects an increase in average net interest earning
assets from $50,093,000 in 1996 to $59,984,000, or 19.7%, in 1997.
Interest Income.
Total interest income (including loan fee income of $649,000 in 1997 and
$598,000 in 1996) increased from $15,501,000 in 1996 to $17,224,000 in 1997, an
increase of 11.1%. The increase from 1996 to 1997 was the result of an increase
in the average interest earning assets from $183,166,000 in 1996 to $204,891,000
in 1997. The average yield on interest earning assets decreased from 8.5% in
1996 to 8.4% in 1997.
Interest income on loans (including fee income) increased $1,139,000 during 1997
the result of an increase in average loans of 10.1% from $114,220,000 in 1996 to
$125,780,000 in 1997. The yield on average loans remained constant at 9.9%.
Interest on investment in debt and equity securities increased $586,000 or
15.0%. The increase resulted from an increase in average investment in debt and
equity securities from $62,583,000 in 1996 to $73,004,000 in 1997 offset by a
decrease in the average yield from 6.2% in 1996 to 6.1% in 1997.
Interest Expense.
Interest expense increased $471,000 to $5,543,000 in 1997 from $5,072,000 in
1996. The increase in interest expense was caused by an increase in average
interest-bearing liabilities from $133,073,000 in 1996 to $144,907,000 in 1997.
The cost of average interest-bearing liabilities remained the same at 3.8%.
Provision for Possible Loan Losses. The provision for possible loan losses
increased $80,000 in 1997 to $410,000. The allowance for possible loan losses
increased to $1,393,000 at December 31, 1997 as compared with $1,238,000 at
December 31, 1996. The increase in the allowance for possible loan losses was
the result of an increase in average loans from 1996 to 1997 of 10.1%. The
allowance as a percentage of loans decreased slightly, being 1.01% at year end
1997 in comparison to 1.04% at year end 1996. The allowance as a percentage of
nonperforming loans (including loans past due 90 days or more and still
accruing) was 142.6% at year end 1997 compared to 460.2% at year end 1996. This
decrease primarily results from one loan relationship becoming nonperforming
although management believes the borrowing relationship in question is
adequately collateralized. Theallowance 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 1997 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 $1,901,000 or 78.5% to $4,323,000 in 1997 compared to
$2,422,000 in 1996. The increase results from a gain on the sale of assets,
principally the sale of the Bank's former headquarter's building, of $1,405,000;
and mortgage banking activities totaling $1,225,000, an increase of $413,000 or
50.9% over the previous year resulting 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. Service charges on deposit accounts
increased $107,000 or 15.3% to $805,000 from $698,000 in 1996 as a result of
increased demand deposit accounts. Net gains on securities were $106,000 in 1997
compared to $68,000 in 1996.
Other Expenses.
Other expenses increased by $1,107,000 or 13.9% to $9,067,000 in 1997 from
$7,960,000 in 1996. The components of this change included an increase in
salaries and employee benefits of $609,000 or 15.1% reflecting salary and
benefit increases and increased staffing; an increase in net occupancy expense
of $161,000 or 29.5% and an increase in other operating expenses of $287,000 or
10.0%. Increased occupancy costs reflect the costs of the new headquarters
occupied in May of 1997, increased rental space in the Bank's residential
mortgage center and costs of opening an additional branch office in the Village
of Southampton in November 1997. Increased other operating costs primarily
result from increased loan processing expenses incurred by the Bank as part of a
product promotion, and from increased advertising and promotion expenses of
approximately $56,000 or 16.5% relative to the opening of the new headquarters
building.
Provision for Income Taxes.
The provision for income taxes increased to $2,332,000 for 1997 from $1,555,000
for 1996. This increase was due to income before income taxes increasing from
$4,561,000 in 1996 to $6,527,000 in 1997. The increase reflects the growth in
income before income taxes and the increase in the effective tax rate to 36% in
1997 from 34% in 1996. The increase in the effective tax rate resulted from
decreased benefits of tax exempt income in 1997.
14
<PAGE>
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 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 earinng 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 offset by a decrease 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 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 in 1996 from $1,148,000
in 1995. This increase was due to income before income taxes increasing from
$3,531,000 in 1995 to $4,561,000 in 1996 and the effective tax, 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.
BRIDGE BANCORP AND SUBSIDIARY 15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
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>
1997 1996 1995
- --------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Loans charged-off ................................... $ 316 $ 275 $ 230
Recoveries on loans ................................. (61) (145) (56)
--------------------------
Net charge-offs ..................................... $ 255 $ 130 $ 174
==========================
Ratio of net charge-offs to average total loans...... 0.22% 0.11% 0.16%
==========================
</TABLE>
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
nonperforming loans to total loans and input by the O.C.C. during their 1997
examination, management believes the allowance for possible loan losses,
following the additional $410,000 provision in 1997, 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, 1997 were limited to $5,244,000 which represents the Bank's 1997
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'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, and the issuance of
common stock pursuant to the equity incentive plan, the Company's stockholders'
equity increased to $19,451,000 at December 31, 1997 from $16,926,000 at
December 31, 1996. The ratio of stockholders' equity to total assets increased
to 8.34% at year end 1997 from 8.27% at year end 1996.
The loan commitments outstanding as of December 31, 1997 totaled approximately
$48,928,000. 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. 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 equity of 23.08%, 18.84% and 16.29% and return
on average assets of 1.86%, 1.51% and 1.27% for the years ended December 31,
1997, 1996 and 1995, respectively. Return on average equity and return on
average assets before the gain on the sale of assets, chiefly the former
headquarters, were 18.52% and 1.49% for the year ended 1997.
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.
16
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CONDITION
(in thousands, except share and per share amounts)
December 31, 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks ............................................................. $ 12,740 $ 12,247
Interest earning deposits with banks ................................................ 89 68
Federal funds sold .................................................................. -- 1,250
-----------------------
Total cash and cash equivalents .............................................. 12,829 13,565
Investment in debt and equity securities, net:
Securities available for sale, at fair value ...................................... 60,190 57,779
Securities held to maturity (fair value $11,823 at
December 31, 1997 and $6,273 at December
31, 1996) ......................................................................... 11,812 6,262
-----------------------
Total investment in debt and equity securities, net .......................... 72,002 64,041
Loans ............................................................................... 138,636 118,881
Less:
Allowance for possible loan losses ................................................ 1,393 1,238
-----------------------
Loans, net ................................................................... 137,243 117,643
Banking premises and equipment, net ................................................. 8,728 6,773
Accrued interest receivable ......................................................... 1,460 1,343
Deferred income taxes ............................................................... -- 51
Other assets ........................................................................ 850 1,198
-----------------------
Total Assets ........................................................................ $ 233,112 $ 204,614
=======================
Liabilities and Stockholders' Equity
Liabilities:
Demand deposits ..................................................................... $ 63,629 $ 50,464
Savings, N.O.W. and money market deposits ........................................... 76,740 73,791
Certificates of deposit of $100,000 or more ......................................... 20,872 18,251
Other time deposits ................................................................. 42,456 42,341
-----------------------
Total deposits .............................................................. 203,697 184,847
Overnight borrowings ................................................................ 6,500 --
Accrued interest on depositors' accounts ............................................ 1,244 1,537
Deferred income taxes ............................................................... 94 --
Other liabilities and accrued expenses .............................................. 2,126 1,304
-----------------------
Total Liabilities ........................................................... 213,661 187,688
-----------------------
Stockholders' equity:
Common stock, par value $5.00 per share:
Authorized: 6,500,000 shares (issued and outstanding 1,407,999 shares
and 1,407,600 shares at December 31, 1997 and 1996, respectively) 7,202 7,200
Surplus ........................................................................... 607 600
Undivided profits ................................................................. 11,509 9,287
Unrealized appreciation on securities available for sale,
net of tax .................................................................. 754 460
Less: Treasury stock at cost, 32,400 shares ....................................... (621) (621)
------ -----------------------
Total Stockholders' Equity .................................................. 19,451 16,926
-----------------------
Commitments and Contingencies (Note 10)
-----------------------
Total Liabilities and Stockholders' Equity .......................................... $ 233,112 $ 204,614
=======================
</TABLE>
See accompanying notes to consolidated financial statements.
BRIDGE BANCORP, INC. AND SUBSIDIARY 17
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Year ended December 31, 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Loans (including fee income) ................. $12,400 $11,261 $10,299
Mortgage-backed securities ................... 2,003 1,657 1,647
U.S. Treasury and government agency securities 1,295 1,286 1,134
Obligations of NY State & pol. subs .......... 1,115 907 965
Federal funds sold ........................... 267 243 262
Other ........................................ 144 147 77
----------------------------
Total interest income ...................... 17,224 15,501 14,384
----------------------------
Interest expense:
Savings, N.O.W. and money market deposits .... 1,632 1,598 1,581
Certificates of deposit of $100,000 or more .. 1,560 1,000 1,321
Other time deposits .......................... 2,230 2,410 2,334
Other borrowings ............................. 121 64 22
----------------------------
Total interest expense ..................... 5,543 5,072 5,258
----------------------------
Net interest income ............................ 11,681 10,429 9,126
Provision for possible loan losses ............. 410 330 268
----------------------------
Net interest income after provision for
possible loan losses ......................... 11,271 10,099 8,858
----------------------------
Other income:
Service charges on deposit accounts .......... 805 698 705
Net securities gains ......................... 106 68 31
Mortgage banking operations .................. 1,225 812 357
Gain on sale of assets ....................... 1,405 -- --
Other operating income ....................... 782 844 604
----------------------------
Total other income ......................... 4,323 2,422 1,697
----------------------------
Other expenses:
Salaries and employee benefits ............... 4,626 4,017 3,419
Net occupancy expense ........................ 707 546 547
Furniture and fixture expense ................ 576 526 426
Other operating expenses ..................... 3,158 2,871 2,632
----------------------------
Total other expenses ....................... 9,067 7,960 7,024
----------------------------
Income before provision for income taxes ....... 6,527 4,561 3,531
Provision for income taxes ..................... 2,332 1,555 1,148
----------------------------
Net income ..................................... $ 4,195 $ 3,006 $ 2,383
============================
Basic earnings per common share ................ $ 2.98 $ 2.11 $ 1.65
Diluted earnings per share ..................... $ 2.97 -- --
============================
See accompanying notes to consolidated financial statements.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOVKHOLDERS' EQUITY
(In thousands, except per share amounts)
Net unrealized
appreciation/
(depreciation)
in securities
Common Undivided Treasury available for sale,
Years ended December 31, 1997, 1996 and 1995 stock Surplus profits Stock net of tax Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 ................................ $ 2,400 $ 600 $ 10,453 $ -- ($ 646) $ 12,807
Net income .................................................. -- -- 2,383 -- -- 2,383
Cash dividends declared, $.53 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 -- -- 3,006
Cash dividends declared, $.70 per share ..................... -- -- (987) -- -- (987)
Net change in unrealized appreciation in securities available
for sale, net of tax ...................................... -- -- -- -- 108 108
Purchase of 32,400 shares to be held in treasury, at cost ... -- -- -- (621) -- (621)
--------------------------------------------------------------------
Balance at December 31, 1996 ................................ $ 2,400 $ 600 $ 14,087 ($ 621) $ 460 $ 16,926
Net income .................................................. -- -- $ 4,195 -- -- 4,195
Effect of stock split (In the form of a stock dividend) ..... $ 4,801 -- (4,801) -- -- --
Cash dividends declared, $1.40 per share .................... -- -- (1,972 -- -- (1,972)
Net change in unrealized appreciation in securities available
for sale, net of tax ...................................... -- -- -- -- 294 294
Issuance of restricted common stock ......................... 1 7 -- -- -- 8
--------------------------------------------------------------------
Balance at December 31, 1997 ................................ $ 7,202 $ 607 $ 11,509 ($ 621) $ 754 $ 19,451
====================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
BRIDGE BANCORP, INC. AND SUBSIDIARY 19
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year ended December 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net Income ..................................................... $ 4,195 $ 3,006 $ 2,383
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for possible loan losses ......................... 410 330 268
Depreciation and amortization .............................. 564 415 402
Accretion of discounts ..................................... (64) (96) (72)
Amortization of premiums ................................... 126 329 467
Gain on the sale of assets ................................. (1,405) -- --
Net securities gains ....................................... (106) (68) (31)
(Gain) loss on sale of other real estate owned ............. 0 (4) 27
(Increase) Decrease in accrued interest receivable ......... (117) 181 (220)
Benefit for deferred income taxes .......................... (60) (56) (62)
Decrease (Increase) in other assets ........................ 348 235 (40)
(Decrease) Increase in accrued and other liabilities ....... (411) 183 955
---------------------------------
Net cash provided by operating activities ........................ 3,480 4,455 4,077
---------------------------------
Investing activities:
Purchases of securities available for sale ..................... (32,464) (58,901) (5,022)
Purchases of securities held to maturity ....................... (10,729) (5,599) (8,345)
Proceeds from sales of securities available for sale ........... 24,239 38,473 3,088
Proceeds from maturing securities available for sale ........... 2,060 8,810 2
Proceeds from maturing securities held to maturity ............. 5,179 5,761 10,635
Proceeds from principal payments on mortgage-
backed securities ............................................ 4,297 6,544 5,457
Proceeds from sale of building ................................. 1,554
Net increase in loans .......................................... (20,010) (7,531) (16,893)
Purchases of banking premises and equipment, net of deletions .. (2,668) (3,413) (1,329)
Proceeds from sales of other real estate owned ................. -- 239 518
---------------------------------
Net cash used by investing activities ............................ (28,542) (15,617) (11,889)
---------------------------------
Financing activities:
Net increase in deposits ....................................... 18,850 18,703 10,253
(Decrease) Increase in other borrowings ......................... 6,500 -- (1,800)
Purchase of treasury stock ..................................... -- (621) --
Net proceeds from issuance of restricted common stock
issued pursuant to equity incentive plan ..................... 8 -- --
Cash dividends paid ............................................ (1,032) (835) (672)
---------------------------------
Net cash provided by financing activities ........................ 24,326 17,247 7,781
---------------------------------
Increase (Decrease) in cash and cash equivalents ................. (736) 6,085 (31)
Cash and cash equivalents beginning of year ...................... 13,565 7,480 7,511
---------------------------------
Cash and cash equivalents end of year ............................ $ 12,829 $ 13,565 $ 7,480
=================================
Supplemental information - Cash Flows:
Cash paid for:
Interest ..................................................... $ 5,835 $ 5,016 $ 4,214
Income taxes ................................................. $ 2,493 $ 1,474 $ 1,214
Noncash investing and financing activities:
Dividends declared and unpaid ................................ $ 1,620 $ 680 $ 528
Securities held to maturity, transferred to available for sale
due to a one time reassessment under SFAS No. 115 ........... -- -- $ 26,750
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
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 financial
institution industry. The following is a description of the more significant
accounting policies that the Company follows in preparing its consolidated
financial statements.
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
The Company has 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 stockholder's equity.
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.
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. Mortgage loans are primarily
sold with the servicing released. Any retained servicing rights are packaged and
sold periodically. Retained servicing rights at year end were immaterial and
therefore are not reflected in the Bank's financial statements.
On January 1, 1995, the Bank adopted Statement of Financial Accounting Standard
(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. The adoption of SFAS Nos. 114 and 118 did not have any effect on
the Company's financial condition or results of operations.
The Company records loan origination and commitment fees as income when received
and expenses direct loan origination costs when incurred. The effect of this
accounting treatment is not material.
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.
BRIDGE BANCORP, INC. AND SUBSIDIARY 21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
(continued)
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 is computed by dividing net income by the weighted average
number of shares of common stock and dilutive common stock equivalents
outstanding. For the year ended December 31, 1997, 1996 and 1995, diluted
weighted average common stock and common stock equivalent shares outstanding for
the diluted earnings per share were 1,411,622, 1,421,499 and 1,440,000,
respectively. For the year ended December 31, 1997, 1996 and 1995, the total
weighted average number of shares of common stock outstanding for the basic
earnings per share calculation were 1,407,901, 1,421,499 and 1,440,000,
respectively.
K) Dividends
Cash available for dividend distribution to shareholders of the Company must
initially come from dividends paid by the Bank to the Company. 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 has approximately $5,244,000 available as of
December 31, 1997 which may be paid to the Company as a dividend.
L) Stock Split
On April 15, 1997 the Board of Directors declared a three-for-one stock split in
the form of a stock dividend payable May 30, 1997 to stockholders of record as
of May 1, 1997. The stock split increased outstanding common shares from 469,333
to 1,407,999. Stockholders' equity has been restated to give retroactive
recognition to the stock split for all periods presented by reclassifying from
undivided profits to common stock the par value of additional shares resulting
from the stock split. In addition, all references in the Consolidated Financial
Statements and Notes thereto to number of shares, per share amounts, stock
option data and market prices of the common stock have been restated giving
retroactive recognition to the stock split.
M) Stock Based Compensation Plans
SFAS No. 123 "Accounting for Stock-Based Compensation," encourages, but does not
require companies to record compensation cost for stock-based compensation plans
at fair value. The Company continues to account for stock based compesation
using the intrinsic value method prescribed in Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees" .
22
<PAGE>
N)Impact Of New Accounting Standards
In June 1996, the Financial Accounting Standards Board (FASB) issued SFAS No.
125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". This statement is effective for transfers and
servicing of financial assets and extinguishment of liabilities occurring after
December 31, 1996.
In March 1997, the FASB issued SFAS No. 128 "Earnings per Share," superseding
APB Opinion No. 15. The main goal of the Statement is to harmonize the
earnings per share calculation in the United States with those common in other
countries and with International Accounting Standard No. 33.
In March 1997, the FASB issued SFAS No. 129, "Disclosures of Information about
Capital Structure." SFAS No. 129 continues the existing requirements to disclose
the pertinent rights and privileges of all securities other than the ordinary
common stock but expands the number of companies subject to portions of its
requirements.
SFAS Nos. 125, 128 and 129 were adopted in 1997 without any material effect on
the Company's financial statements.
In July 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income."
Statement 130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
The Statement is effective for fiscal years beginning after December 15, 1997
with earlier application permitted.
In July 1997, the FASB issued SFAS No. 131 "Disclosures About Segments of an
Enterprise and Related Information." Statement No. 131 requires disclosures for
each segment that are similar to those required under standards with the
addition of quarterly disclosure requirements and a finer partitioning of
geographic disclosures. The Statement is effective for fiscal years beginning
after December 15, 1997 with earlier application permitted.
In management's opinion, SFAS Nos. 130 and 131 when adopted, will not have a
material effect on the Company's financial statements.
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, 1997, that the Bank
meets all capital adequacy requirements to which it is subject.
As of December 31, 1997, 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, 1997
- --------------------------------------------------------------------------------------------
(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) 20,090 12.3% 13,104 >8.0% 16,381 >10.0%
Tier 1 Capital (to risk weighted assets) 18,697 11.4% 6,552 >4.0 9,828 >6.0
Tier 1 Capital (to average assets) ..... 18,697 8.3% 9,037 >4.0 11,296 >5.0
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
</TABLE>
BRIDGE BANCORP, INC. AND SUBSIDIARY 23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
(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, 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Available for sale:
U.S. Treasury securities ............ $14,084 $ 325 - $14,409 $16,102 $ 244 - $16,346
Oblig. of U.S. Government agencies .. 0 0 - 0 1,985 24 - 2,009
Oblig. of NY State & pol.subs ....... 18,636 427 - 19,063 15,567 303 - 15,870
Mortgage-backed securities .......... 26,190 528 - 26,718 23,344 210 - 23,554
-----------------------------------------------------------------------------------------
Total available for sale .......... $58,910 $ 1,280 - $60,190 $56,998 $ 781 - $57,779
-----------------------------------------------------------------------------------------
Held to maturity:
Oblig. of NY State & pol.subs ....... $10,729 $ 11 - $10,740 $ 5,179 $ 11 - $ 5,190
Non marketable Equity securities:
Federal Reserve Bank Stock .......... $ 36 -- - $ 36 $ 36 -- - $ 36
Federal Home Loan Bank Stock ........ 1,047 -- - 1,047 1,047 -- - 1,047
-----------------------------------------------------------------------------------------
Total held to maturity ............ $11,812 $ 11 - $11,823 $ 6,262 $ 11 - $ 6,273
-----------------------------------------------------------------------------------------
Total debt and equity securities ...... $70,722 $ 1,291 - $72,013 $63,260 $ 792 - $64,052
=========================================================================================
</TABLE>
The amortized cost and estimated fair value of investment in debt securities at
December 31, 1997, 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, 1997
- --------------------------------------------------------------------------------
(In thousands) Amortized Estimated
Cost Fair Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Available for Sale:
Due in one year or less .............................. $ 2,875 $ 2,906
Due after one year through five years ................ 20,233 20,729
Due after five years through ten years ............... 14,266 14,579
Due after ten years .................................. 21,536 21,976
---------------------
Total Available for Sale securities .................. $58,910 $60,190
=====================
Held to Maturity:
Due in one year or less .............................. $10,729 $10,740
---------------------
Total Held to Maturity securities .................... $10,729 $10,740
=====================
</TABLE>
Proceeds from sales of available for sale securities were approximately
$24,239,000, $38,473,000 and $3,088,000 in 1997, 1996 and 1995, respectively.
Gross gains of approximately $114,000, $257,000 and $38,000 were realized on
sales of available for sale securities during 1997, 1996 and 1995, respectively.
Gross losses of approximately $8,000, $189,000 and $7,000 were realized on sales
of available for sale securities during 1997, 1996 and 1995, respectively. There
were no sales of held to maturity securities during 1997, 1996 and 1995.
Investment securities having an amortized cost of approximately $62,429,000 and
$60,478,000 at December 31, 1997 and 1996, respectively, were pledged to secure
public deposits.
24
<PAGE>
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, 1997
- --------------------------------------------------------------------------------
(In thousands) Estimated
Amortized Fair
Cost Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Hampton Bays UFSD .............................. $2,682 $2,685
Greenport UFSD ................................. $2,000 $2,001
-------------------------
Total .......................................... $4,682 $4,686
=========================
</TABLE>
4. LOANS
Loans are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1997 1996
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Real estate loans ............................ $114,357 $ 93,639
Unsecured business and
personal loans ............................. 17,638 13,211
Secured business and
personal loans ............................. 725 317
Installment/consumer loans ................... 5,916 11,714
-------------------------
Loans ................................... 138,636 118,881
Less:
Allowance for possible
loan losses ............................... 1,393 1,238
-------------------------
Net loans ............................... $137,243 $117,643
=========================
</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 dependant on the economic
conditions of the geographical market served by the Bank.
At December 31, 1997 and 1996, the recorded investment in loans for which
impairment has been recognized in accordance with SFAS Nos. 114 and 118 totaled
$976,000, and $269,000, respectively. No valuation allowance has been recorded.
The average recorded investment in impaired loans for the years ended December
31, 1997 and 1996 was approximately $1,101,000 and $238,000, respectively.
Nonaccrual loans.
Nonaccrual loans at December 31, 1997, 1996 and 1995 amounted to approximately
$976,000, $269,000 and $507,000, respectively. The additional interest income
that would have been recorded had these nonaccrual loans performed in accordance
with their original terms was approximately $12,000, $8,000 and $58,000 in 1997,
1996 and 1995, respectively. The interest income that was recorded on these
nonaccrual loans was $294,000, $74,000 and $12,000 in 1997, 1996 and 1995,
respectively. At both December 31, 1997 and 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.
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 1997,1996 and 1995. 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 $256,000, $192,000, and $164,000 at December 31, 1997,
1996 and 1995, respectively. There were no letters of credit for directors at
December 31, 1997, 1996 and 1995.
The following analysis shows the activity of director loans for 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Balance at January 1, ........................ $ 192 $ 164
Loans originated ............................. 97 115
Principal payments ........................... (33) (87)
-----------------------
Balance at December 31, ...................... $ 256 $ 192
=======================
</TABLE>
BRIDGE BANCORP, INC AND SUBSIDIARY 25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
(continued)
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 $548,000 and $895,000 at December 31, 1997 and
1996, respectively.
5. ALLOWANCE FOR POSSIBLE LOAN LOSSES
Changes in the allowance for possible loan losses are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1997 1996
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Balance at January 1, ...................... $ 1,238 $ 1,038
--------------------------
Provision for possible loan losses ......... 410 330
--------------------------
Recoveries ................................. 61 145
Loans charged-off .......................... (316) (275)
--------------------------
Net loans charged- off .................. (255) (130)
--------------------------
Balance at December 31, .................... $ 1,393 $ 1,238
==========================
</TABLE>
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. 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.
6. BANKING PREMISES AND EQUIPMENT
Banking premises and equipment consist of:
<TABLE>
<CAPTION>
December 31, 1997 1996
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Land ........................................... $ 1,496 $ 1,546
Building and improvements ...................... 5,530 4,125
Furniture and fixtures ......................... 2,889 2,354
Leasehold improvements ......................... 371 246
-----------------------
10,286 8,271
Less accumulated
depreciation and amortization ................. 1,558 1,498
-----------------------
$ 8,728 $ 6,773
=======================
</TABLE>
7. INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1997 1996 1995
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Current:
Federal ................... $ 1,732 $ 1,152 $ 846
State ..................... 660 459 364
------------------------------------------
2,392 1,611 1,210
------------------------------------------
Deferred:
Federal ................... (45) (43) (51)
State ..................... (15) (13) (11)
------------------------------------------
(60) (56) (62)
------------------------------------------
Total ................... $ 2,332 $ 1,555 $ 1,148
==========================================
</TABLE>
26
<PAGE>
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, 1997 1996 1995
- -----------------------------------------------------------------------------------------------
(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 ....... $ 2,219 34% $ 1,551 34% $ 1,201 34%
Tax exempt interest ....... (361) (6) (330) (7) (328) (9)
State taxes, net of Federal
income tax benefit ...... 425 7 294 6 233 7
Interest disallowed ....... 40 1 32 1 37 1
Other ..................... 9 -- 8 -- 5 --
-----------------------------------------------------------------
Provision for income taxes $ 2,332 36% $ 1,555 34% $ 1,148 33%
=================================================================
</TABLE>
Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1997 1996 1995
- --------------------------------------------------------------------------------
(In thousands) Deferred tax assets:
<S> <C> <C> <C>
Allowance for possible
loan losses ....................... $ 479 $ 414 $ 346
Depreciation ........................ 7 -- 7
Other ............................... 1 1 --
----------------------------------------
Total ............................. $ 487 $ 415 $ 353
----------------------------------------
Deferred tax liabilities:
Pension expense ..................... ($ 55) ($ 1) ($ 28)
Depreciation ........................ 0 (42) --
Other ............................... -- -- (9)
Securities available for sale ....... (526) (321) (249)
----------------------------------------
Total ............................. ($581) ($364) ($286)
----------------------------------------
Net deferred tax (liability) assets.. ($ 94) $ 51 $ 67
========================================
</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 projected to September 30,
1997 and 1996 (measurement dates).
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Actuarial present value of benefit
obligations at September 30:
Accumulated benefit obligation, including
vested benefits of approximately
$(797) in 1997 and $(757) in 1996 ... ($ 830) ($ 786)
-----------------------
Projected benefit obligation for service
rendered to date .................... (1,200) (1,132)
Plan assets, primarily marketable
securities, at fair value ........... 1,483 1,324
-----------------------
Plan assets in excess of projected
benefit obligation .................. 283 192
Unrecognized net (gain)/loss from past
experience different than assumed ... (84) 28
Unrecognized prior service cost ........ (20) (22)
Unrecognized net asset being recognized
over 18.31 years .................... (74) (83)
-----------------------
Prepaid pension cost ................... $ 105 $ 115
=======================
Net periodic pension cost for fiscal
1997, 1996 and 1995 included the
following components:
Service cost - benefits earned during
the period .......................... $ 133 $ 115 $ 97
Interest cost on projected benefit
obligation .......................... 82 74 68
Expected return on plan assets ......... (108) (96) (78)
Amortization of transition asset ....... (9) (9) (9)
Amortization of prior service cost ..... (1) (2) (2)
-------------------------------------
Net periodic pension cost .............. $ 97 $ 82 $ 76
=====================================
</TABLE>
BRIDGE BANCORP, INC. AND SUBSIDIARY 27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
(continued)
At September 30, 1997 and 1996 a weighted-average discount rate of 8.00% and
7.75%, respectively, and a rate of increase in future compensation levels of
5.0% 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, 1997 and 1996.
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 144,000 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. The Company accounts for this plan under APB Opinion No.
25, under which no compensation cost has been recognized for stock options
granted. Had compensation cost for these stock options been determined
consistent with SFAS No. 123, the Company's net income and earnings per share
would have been reduced to the following pro forma amounts:
1997
- --------------------------------------------------------------------------------
Net Income: ....................... As Reported: ................. $ 4,195
Pro Forma: ................... 4,128
Basic EPS: ........................ As Reported: ................. $ 2.98
Pro Forma: ................... 2.93
Diluted EPS ....................... As Reported: ................. $ 2.97
Pro Forma: ................... 2.92
The fair value of each option granted is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1997: a risk-free interest rate of 5.34%; an
expected dividend yield of 3.4%; expected lives of five years; and expected
volatility of 26.6%.
1997
- ---------------------------------------------------------------------------
Weighted
Average
Exercise
Shares Price
- ---------------------------------------------------------------------------
Outstanding at Beginning of Year ............. -- --
Granted ...................................... 14400 $ 20.33
Exercised .................................... -- --
Forfeited .................................... -- --
Outstanding at end of Year ................... 14400 $ 20.33
Exercisable at end of Year ................... 14400 $ 20.33
--------------------------
Weighted average fair value of options granted $ 4.67
==========================
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, 1997 1996 1995
- ------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Checkbook charges ......... $194 $187 $174
Credit card processing ..... 445 369 321
b) Components of other operating expenses which exceed one percent of the
aggregate of total interest income and other income are as follows:
December 31, 1997 1996 1995
- ------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Data\Item processing ....... $363 $336 $345
Check printing ............. 167 160 146
Credit card processing ..... 140 122 104
Loan servicing ............. 133 222 249
Advertising ................ 227 225 93
</TABLE>
28
<PAGE>
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. The projected minimum rentals
under existing leases at December 31, 1997 are as follows (in thousands):
1998 $269
1999 217
2000 165
2001 158
2002 121
Therafter 326
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, 1997, 1996 and 1995 approximated $263,000 $243,000 and
$266,000, respectively.
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, 1997 1996
- ------------------------------------------------------------
(In thousands)
<S> <C> <C>
Standby letters of credit .......... $ 2,205 $ 1,170
Loan commitments outstanding ....... 15,663 6,720
Unused equity lines ................ 8,551 4,279
Unused construction lines .......... 12,457 6,328
Unused lines of credit ............. 7,184 5,381
Unused overdraft lines ............. 2,868 1,846
---------------------
Total commitments outstanding ...... $48,928 $25,724
=====================
</TABLE>
c. Other
During 1997, 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 $2,512,000 in 1997.
During 1997, 1996 and 1995, the Bank maintained an overnight line of credit with
the Federal Home Loan Bank of New York. At year end 1997 and 1996, the line of
credit available was $10,785,850 and $9,913,700, respectively. The amount
outstanding at year end 1997 was $6,500,000. There was no amount outstanding at
year end 1996.
11. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates are made at a specific point in time and are based on
existing on and off balance sheet financial instruments. Such estimates are
generally subjective in nature and dependent upon a number of significant
assumptions associated with each financial instrument or group of financial
instruments, including estimates of discount rates, risks associated with
specific financial instruments, estimates of future cash flows, and relevant
available market information. Changes in assumptions could significantly affect
the estimates. In addition, fair value estimates do not reflect the value of
anticipated future business, premiums or discounts that could result from
offering for sale at one time the Bank's entire holdings of a particular
financial instrument, or the tax consequences of realizing gains or losses on
the sale of financial instruments.
The significant assumptions utilized by the Company in estimating the fair value
of its financial instruments are as follows:
Cash and Cash Equivalents.
For these short term instruments, the carrying amount is a reasonable estimate
of fair value.
Investment Securities.
For investment securities, fair value is based on quoted market prices.
Loans.
Fair values are estimated for portfolios of loans with similar financial
characteristics. The total loan portfolio is first divided into adjustable and
fixed rate terms. Adjustable rate loans are then divided into those that can
reprice immediately with changes in
BRIDGE BANCORP, INC. AND SUBSIDIARY 29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
(continued)
interest rates and those that are subject to repricing over time. Adjustable
rate loans that reprice over time and fixed rate loans are further segmented by
type such as residential mortgages, home equity loans, consumer loans,
commercial mortgages, commercial loans and land loans.
Fair value is calculated by discounting anticipated future repricing amounts or
cash flows using discount rates equivalent to the rates at which the Company
would currently make loans which are similar with regard to collateral, maturity
and type of borrower. The discounted value of the repricing amounts and cash
flows is reduced by a credit risk adjustment based on internal loan
classifications.
Deposit Liabilities.
The fair value of deposits with no stated maturity, such as noninterest-bearing
demand deposits, money market accounts and savings accounts is equal to the
amount payable on demand at the reporting date. Time deposits are segregated by
type, size and remaining maturity. The fair value of time deposits is based on
the discounted value of contractual cash flows. The discount rate is equivalent
to the rate currently offered for deposits of similar size, type and maturity.
Accrued Interest Receivable and Payable.
For these short term instruments, the carrying amount is a reasonable estimate
of the fair value.
Off Balance Sheet Assets and Liabilities.
The fair value of off-balance-sheet commitments to extend credit and letters of
credit listed in the preceding Note 10 "Commitments and Contingencies and Other
Matters" were estimated to be insignificant as of December 31, 1997.
The estimated fair values and recorded carrying values of the Bank's financial
instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands) Carrying Fair Carrying Fair
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and due from banks .............................. $ 12,740 $ 12,740 $ 12,247 $ 12,247
Interest bearing deposits with banks ................. 89 89 68 68
Securities available-for-sale ........................ 60,190 60,190 57,779 57,779
Securities held-to-maturity .......................... 11,812 11,823 6,262 6,273
Loans ................................................ 137,243 136,567 117,643 117,775
Accrued interest receivable .......................... 1,460 1,460 1,343 1,343
Financial Liabilities:
Demand and other deposits ............................ $203,697 $203,693 $184,847 $184,849
Accrued interest payable ............................. 1,244 1,244 1,537 1,537
Overnight borrowings ................................. 6500 6500 -- --
</TABLE>
<TABLE>
<CAPTION>
12. Bridge Bancorp, Inc. (Parent Company Only)
Condensed Statements of Financial Condition
December 31, 1997 1996
- --------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
Assets
Cash and cash equivalents .......................... $ 11 $ 3
Dividend receivable ................................ 1,620 680
Other assets ....................................... 5
Investment in the Bank ............................. 19,435 16,923
-----------------------
Total Assets .................................. $ 21,071 $ 17,606
=======================
Liabilities
Dividends payable .................................. 1,620 680
-----------------------
Total Liabilities ............................. $ 1,620 $ 680
=======================
Stockholders' Equity
Stockholders' Equity ............................... $ 20,072 $ 17,547
Treasury stock at cost, 32,400 shares ...... ($ 621) ($ 621)
-----------------------
Total Stockholders' Equity ..................... $ 19,451 $ 16,926
=======================
Total Liabilities and Stockholders' Equity ..... $ 21,071 $ 17,606
=======================
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Condensed Statements of Income
Year ended December 31, 1997 1996 1995
- --------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Dividend income from the Bank ................... $ 1,984 $ 1,608 $ 768
Other operating expenses ........................ $ 13 $ 1 --
----------------------------
Income before income taxes and equity in
undistributed earnings of the Bank ............ 1,971 1,607 768
Income tax provision ............................ (5) -- --
----------------------------
Income before equity in undistributed
earnings of the Bank .......................... 1,976 1,607 768
Equity in undistributed earnings of the Bank .... 2,219 1,399 1,615
----------------------------
Net income ...................................... $ 4,195 $ 3,006 $ 2,383
============================
Condensed Statements of Cash Flows
Year ended December 31, 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Cash flows used by operations:
Other operating expenses .................................................... ($ 13) ($ 1) --
-----------------------------
Net cash used by operating activities ....................................... ($ 13) ($ 1) --
Cash flows from investing activities:
Dividends received .......................................................... 1,045 1,456 672
-----------------------------
Net cash provided by investing activities ................................... 1,045 1,456 672
Cash flows used by financing activities:
Net proceeds from issuance of restricted common stock
issued pursuant to equity incentive plan ................................ 8
Payment for the purchase of treasury stock .................................. -- (621)
Dividends paid .............................................................. (1,032) (835) (672
-----------------------------
Net cash used by financing activities ....................................... (1,024) (1,456) (672)
Net decrease in cash and cash
equivalents ............................................................... 8 (1) --
Cash and cash equivalents at beginning of
year ...................................................................... 3 4 4
-----------------------------
Cash and cash equivalents at end of year .................................... $ 11 $ 3 $ 4
=============================
Reconciliation of net income to net cash used by operating activities:
Net income .................................................................. $ 4,195 $ 3,006 $ 2,383
Adjustments to reconcile net income to net cash used by operating activities:
Equity in undistributed earnings
of the Bank ............................................................... (2,219) (1,399) (1,615)
Dividend income ............................................................. (1,984) (1,608) (768)
(Increase) Decrease in other assets ......................................... (5) -- --
-----------------------------
Net cash used by operating activities ....................................... ($ 13) ($ 1) $ --
=============================
</TABLE>
BRIDGE BANCORP, INC AND SUBSIDIARY 31
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Bridge Bancorp, Inc.:
We have audited the accompanying consolidated statements of condition of
Bridge Bancorp, Inc. and subsidiary as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three year period ended December 31, 1997. 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 audit.
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, 1997 and 1996, and the results of their operations
and their cash flows for each of the years in the three year period ended
December 31, 1997, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
New York, New York
January 21, 1998
COMMON STOCK INFORMATION
The Company's common stock is traded on the NASDAQ 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, 1997 the Company had approximately 626 holders of its common
stock.
<TABLE>
<CAPTION>
COMMON STOCK INFORMATION
Stock Prices Dividends
High Low Declared
- --------------------------------------------------------------------------------
By Quarter 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
First ............................. $22 $20 --
Second ............................ 26 22 $ 0.25
Third ............................. 36 26 --
Fourth ............................ 50 36 1.15*
- --------------------------------------------------------------------------------
By Quarter 1996
- --------------------------------------------------------------------------------
First ............................. $16 $16 --
Second ............................ 19 16 $ 0.22
Third ............................. 20 19 --
Fourth ............................ 20 20 $ 0.48
* On June 17, 1997, the Bank sold its former headquarter's building resulting in
a gain, net of taxes, of approximately $829,000. On December 15, 1997 the Bank
declared a one time special dividend of approximately $845,000, or $.60 per
share, paying out this gain to the shareholders.
</TABLE>
32
<PAGE>
BOARD OF DIRECTORS BANK OFFICERS
AND AFFILIATIONS
Thomas J. Tobin
Raymond Wesnofske President and Chief Executive Officer
Chairman
Bridge Bancorp, Inc. and
The Bridgehampton National Bank SENIOR VICE PRESIDENTS
Thomas J. Tobin Christopher Becker
President and Chief Executive Officer Chief Financial Officer
Bridge Bancorp, Inc. and
The Bridgehampton National Bank Anthony Leone
Chief Banking Officer
Thomas E. Halsey
Holly Hill Nursery
Water Mill, NY VICE PRESIDENTS
Marcia Z. Hefter Peter M. Coleman
Esseks, Hefter & Angel Senior Business Development Officer
Counselor of Law North Fork Region
Riverhead, NY
Donald P. Gauthier, Jr.
R. Timothy Maran Real Estate Services Division
Maran, DeBaun, Cruise & Simonson
Southampton, Hampton Bays, Jean Irvine
Westhampton, NY Human Resources
Albert E. McCoy Carol Kennedy
W.F. McCoy Petroleum Products, Inc. Credit Administration
McCoy Bus Co., Inc.
Bridgehampton, NY Michael P. Kochanasz
Consumer Services Division
Walter A. Preische, Jr.
Markowitz Preische & Stevens, P.C. Diane Reutershan
Certified Public Accountant Community Development Officer
East Hampton, NY
Thomas H. Simson
Lawrence H. Strickland Chief Information Officer
Vice Chairman
Peter Lyle, Inc. Financial Services Janet T. Verneuille, C.P.A.
Bridgehampton, NY Comptroller
ASSISTANT VICE PRESIDENTS
COMPANY OFFICERS
Donald Brancaccio
Thomas J. Tobin Residential Mortgage Department
President and Chief Executive Officer
Michelle Dosch
Christopher Becker Financial Operations
Senior Vice President and Treasurer
Maureen P. Mougios
Anthony Leone Director of Internal Audit
Senior Vice President and Secretary
Sandra Novick
Director of Marketing and Advertising
Susan Ruthinowski
Relationship Manager
Business Portfolio Specialist
Kevin L. Santacroce
Senior Relationship Manager
Commercial Lending
Ann K. Sweeney
Senior Relationship Manager
Commercial Lending
ASSISTANT CASHIERS
David E. Hawkes
Senior Relationship Manager
Branch Banking, Southampton
Caroline Kalish
Systems Analyst
Lorraine LaRosa
Senior Relationship Manager
Branch Banking, Mattituck and Southold
John J. McDonald
Senior Relationship Manager
Branch Banking, Montauk
Kimberly Romano
Deputy Comptroller
Kenneth M. Tobin
Systems Analyst
<PAGE>
NOTICE OF ANNUAL MEETING
The Annual Meeting of Shareholders is scheduled for 3:30 p.m., Tuesday, April
14, 1998 in the Community Room, Bridgehampton National Bank, 2200 Montauk
Highway, Bridgehampton, NY, 11932.
BANKING OFFICES
Main Office
2200 Montauk Highway, Bridgehampton, NY 11932
(516) 537-1000 Fax (516) 537-1835
Southampton
425 County Road 39, Southampton, NY 11968
(516) 283-1286 Fax (516) 287-3309
Southampton Village Commercial Branch
94 Main Street, Southampton, NY 11968
(516) 287-5880 Fax (516) 287-5882
East Hampton
26 Park Place, East Hampton, NY 11937
(516) 324-8480 Fax (516) 329-1485
Southold
54970 Main Road, Southold, NY 11971
(516) 765-1500 Fax (516) 765-1605
Mattituck
Mattituck Shopping Center, Main Road, Mattituck, NY 11952
(516) 298-0190 Fax (516) 298-0194
Montauk
1 The Plaza, Montauk, NY 11954
(516) 668-6400 Fax (516) 668-6412
Residential Mortgage and Loan Center
184 Old Country Road, Route 58, Riverhead, NY 11901
(516) 369-4300 Fax (516) 369-4388
10-KSB REPORT
A copy of the Annual Report on Form 10-KSB, filed with the Securities and
Exchange Commission, is available upon request by any shareholder of the Company
at no charge. Write to Christopher Becker, Senior Vice President and Treasurer
at Bridge Bancorp, Inc., P.O. Box 3005, Bridgehampton, NY 11932.
INTERNET WEBSITE ADDRESS
http://www.bridgenb.com
Photographs: Michael Pateman, Denis Carr, Stephen Kotz, Deborah Kalas
Architectural Photographs: Christopher Wesnofske
Designed By Curran & Connors, Inc.
CHANGE IN CONTROL AGREEMENT
(two years)
This CHANGE IN CONTROL AGREEMENT (this "Agreement") is dated as of January
13, 1998, by and among BRIDGEHAMPTON NATIONAL BANK (the "Bank"), BRIDGE BANCORP,
INC. (the "Company") (the Bank and the Company, collectively, the "Employers")
and Anthony Leone (the "Employee").
WHEREAS, the Employee is currently serving as the Sr. Vice President/Chief
Banking Officer of the Bank;
WHEREAS, the Company and the Employee have entered into a Severance
Agreement dated as of January 1, 1997 (the "Prior Agreement");
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 Boards believe that it is in the best interests of the
Employers to encourage the Employee's continued employment with and dedication
to the Bank in the face of potentially distracting circumstances arising from
the possibility of a change in control of the Company or the Bank; and
WHEREAS, the parties desire to enter into this Agreement setting forth the
terms and conditions for the payment of special compensation to the Employee in
the event of a termination of the Employee's employment in connection with or as
the result of a change in control of the Company or of the Bank and to replace
and supercede the Prior Agreement;
NOW, THEREFORE, it is AGREED as follows:
1. Term. The initial term of this Agreement shall be for a period
commencing on the date hereof and ending on December 31, 2000. The Employers may
renew this Agreement by written notice to the Employee for one additional year
on January 1, 1999 and each subsequent January 1 during the term of this
Agreement unless the Employee gives contrary written notice to the Employers
before any such renewal date. If at any time during the term of this Agreement,
there is a "Change in Control" as defined in Section 2(b) hereof, the provisions
of this Agreement 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 1. References herein to the "term of
this Agreement" shall include the initial term and any additional years for
which this Agreement is renewed.
<PAGE>
2. Termination of Employment in Connection with or following a Change in
Control.
(a) If during the term of this Agreement there is a Change in Control (as
defined below), in the event the Employee's employment is terminated,
voluntarily with "Good Reason" (as defined below) or involuntarily
other than for "Willful Misconduct" (as defined below), in connection
with or within two years after a Change in Control, the Employee shall
be entitled to receive, as severance for services previously rendered
to the Bank, salary continuation as provided herein (subject to
Sections 2(d) and 3 below), unless such termination occurs by virtue
of death or normal retirement under the terms of the Bank's pension or
retirement plan applicable to the Employee.
(i) Subject to Sections 2(d) and 3 below, salary continuation under
this Agreement shall mean continuation of the Employee's "current
annual compensation" (as defined below) by the Bank for the
period from the date of termination to the date that is two years
after the Change in Control. Salary continuation payments under
this Section 2(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 with the
Bank, but such payments shall be reduced by any disability
benefits received by the Employee during such period under any
disability insurance policy or plan maintained or provided by the
Bank. No payment hereunder shall affect the Employee's
entitlement to any vested retirement benefits or other
compensation payments. Payments to the Employee under this
Section 2(a) shall be made by the Bank not less frequently than
monthly.
(ii) All insurance or other provisions for indemnification, defense or
hold-harmless of officers of the Bank that were in effect before
the Change in Control shall continue for the benefit of the
Employee following termination of his employment under this
Section 2(a) with respect to all of his acts and omissions while
an officer 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
(iii)If 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.
(b) To establish that a voluntary termination was with Good Reason, the
Employee shall state in his notice of resignation the reasons why he
believes
-2-
<PAGE>
that Good Reason exists for his resignation. For purposes of this
Agreement, "Good Reason" shall mean: (A) any requirement that the
Employee relocate his place of employment outside the area comprised
of the Towns of Southampton, East Hampton, Shelter Island, Southold
and Riverhead, New York, in connection with his employment by the Bank
or any other subsidiary of the Company, (B) a reduction, without the
prior written consent of the Employee, in his base salary or the
employee benefits provided to him (or both) or (C) a material adverse
change in the duties and responsibilities of the Employee following a
Change in Control, such that such duties and responsibilities are not
reasonably appropriate for a person having the educational background
and experience of the Employee, taking into consideration the size of
the Bank (or its successor) and the nature of its business and assets
after the Change in Control. If the Employers reject the Employee's
statement that Good Reason exists, the dispute shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, and judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction
thereof, but the Employers shall have the burden of proving in such
arbitration that the rejection of the Employee's statement was proper.
(c) 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 half of the members of the Board of
Directors of the Company or any successor corporation. For purposes of
this Section 2(c), 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.
(d) Notwithstanding any other provision of this Agreement or of any other
agreement, contract, or understanding heretofore or hereafter entered
into by the Employee and the Company, the Bank or any other subsidiary
of the Company, except an agreement, contract, or understanding
hereafter entered into that expressly modifies or excludes application
of this Section 2(d) (the "Other Agreements"), and notwithstanding any
formal or informal plan or other arrangement for the direct or
-3-
<PAGE>
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 Internal Revenue 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. Any payments made to the Employee
pursuant to this Agreement, or otherwise, are subject to and
conditioned upon their compliance with applicable laws, regulations or
orders issued by a banking agency or court of competent jurisdiction.
(e) "Current annual compensation," for purposes of this Agreement, shall
be based on the Employee's base salary (excluding incentive bonus
payments) at the annual rate in effect at the time of termination of
the Employee's employment, but not less than the amount of base salary
actually paid to the Employee during the 12-month period preceding
such termination.
-4-
<PAGE>
3. Confidentiality and Noninterference with Customers and Employees.
(a) 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.
(b) 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 after termination of the
Employee's employment while the Employee is receiving salary
continuation payments under Section 2(a) hereof, with respect to
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, 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 while the Employee is receiving
salary continuation payments under Section 2(a) hereof, the Employee
shall not, within the area comprised of the Towns of Southampton, East
Hampton, Shelter Island, Southold and Riverhead, New York, and 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
-5-
<PAGE>
products or services as of, or within one year before, the date of
termination of the Employee's employment with the Bank (the
"Termination Date"), or (ii) any prospective customer that the Bank
was actively soliciting as of, or within one year before, the
Termination Date.
(c) While the Employee is employed by the Employers and thereafter while
the Employee is receiving salary continuation payments under Section
2(a) hereof, 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.
(d) The Employee acknowledges that the restrictions contained in this
Section 3 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.
4. 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.
5. 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.
-6-
<PAGE>
5. 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.
-7-
<PAGE>
6. Governing Law. This Agreement shall be governed by the laws of United
States to the extent applicable and otherwise by the laws of the State of New
York, excluding the choice of law rules thereof.
Attest: BRIDGE BANCORP, INC.
By
Secretary President and Chief Executive Officer
Attest: BRIDGEHAMPTON NATIONAL BANK
By
Secretary President and Chief Executive Officer
EMPLOYEE
------------------------------
-8-
CHANGE IN CONTROL AGREEMENT
(two years)
This CHANGE IN CONTROL AGREEMENT (this "Agreement") is dated as of January
13, 1998, by and among BRIDGEHAMPTON NATIONAL BANK (the "Bank"), BRIDGE BANCORP,
INC. (the "Company") (the Bank and the Company, collectively, the "Employers")
and Christopher Becker (the "Employee").
WHEREAS, the Employee is currently serving as the Sr. Vice President/Chief
Financial Officer of the Bank;
WHEREAS, the Company and the Employee have entered into a Severance
Agreement dated as of January 1, 1997 (the "Prior Agreement");
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 Boards believe that it is in the best interests of the
Employers to encourage the Employee's continued employment with and dedication
to the Bank in the face of potentially distracting circumstances arising from
the possibility of a change in control of the Company or the Bank; and
WHEREAS, the parties desire to enter into this Agreement setting forth the
terms and conditions for the payment of special compensation to the Employee in
the event of a termination of the Employee's employment in connection with or as
the result of a change in control of the Company or of the Bank and to replace
and supercede the Prior Agreement;
NOW, THEREFORE, it is AGREED as follows:
1. Term. The initial term of this Agreement shall be for a period
commencing on the date hereof and ending on December 31, 2000. The Employers may
renew this Agreement by written notice to the Employee for one additional year
on January 1, 1999 and each subsequent January 1 during the term of this
Agreement unless the Employee gives contrary written notice to the Employers
before any such renewal date. If at any time during the term of this Agreement,
there is a "Change in Control" as defined in Section 2(b) hereof, the provisions
of this Agreement 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 1. References herein to the "term of
this Agreement" shall include the initial term and any additional years for
which this Agreement is renewed.
<PAGE>
2. Termination of Employment in Connection with or following a Change in
Control.
(a) If during the term of this Agreement there is a Change in Control (as
defined below), in the event the Employee's employment is terminated,
voluntarily with "Good Reason" (as defined below) or involuntarily
other than for "Willful Misconduct" (as defined below), in connection
with or within two years after a Change in Control, the Employee shall
be entitled to receive, as severance for services previously rendered
to the Bank, salary continuation as provided herein (subject to
Sections 2(d) and 3 below), unless such termination occurs by virtue
of death or normal retirement under the terms of the Bank's pension or
retirement plan applicable to the Employee.
(i) Subject to Sections 2(d) and 3 below, salary continuation under
this Agreement shall mean continuation of the Employee's "current
annual compensation" (as defined below) by the Bank for the
period from the date of termination to the date that is two years
after the Change in Control. Salary continuation payments under
this Section 2(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 with the
Bank, but such payments shall be reduced by any disability
benefits received by the Employee during such period under any
disability insurance policy or plan maintained or provided by the
Bank. No payment hereunder shall affect the Employee's
entitlement to any vested retirement benefits or other
compensation payments. Payments to the Employee under this
Section 2(a) shall be made by the Bank not less frequently than
monthly.
(ii) All insurance or other provisions for indemnification, defense or
hold-harmless of officers of the Bank that were in effect before
the Change in Control shall continue for the benefit of the
Employee following termination of his employment under this
Section 2(a) with respect to all of his acts and omissions while
an officer 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
(iii)If 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.
(b) To establish that a voluntary termination was with Good Reason, the
Employee shall state in his notice of resignation the reasons why he
believes
-2-
<PAGE>
that Good Reason exists for his resignation. For purposes of this
Agreement, "Good Reason" shall mean: (A) any requirement that the
Employee relocate his place of employment outside the area comprised
of the Towns of Southampton, East Hampton, Shelter Island, Southold
and Riverhead, New York, in connection with his employment by the Bank
or any other subsidiary of the Company, (B) a reduction, without the
prior written consent of the Employee, in his base salary or the
employee benefits provided to him (or both) or (C) a material adverse
change in the duties and responsibilities of the Employee following a
Change in Control, such that such duties and responsibilities are not
reasonably appropriate for a person having the educational background
and experience of the Employee, taking into consideration the size of
the Bank (or its successor) and the nature of its business and assets
after the Change in Control. If the Employers reject the Employee's
statement that Good Reason exists, the dispute shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, and judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction
thereof, but the Employers shall have the burden of proving in such
arbitration that the rejection of the Employee's statement was proper.
(c) 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 half of the members of the Board of
Directors of the Company or any successor corporation. For purposes of
this Section 2(c), 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.
(d) Notwithstanding any other provision of this Agreement or of any other
agreement, contract, or understanding heretofore or hereafter entered
into by the Employee and the Company, the Bank or any other subsidiary
of the Company, except an agreement, contract, or understanding
hereafter entered into that expressly modifies or excludes application
of this Section 2(d) (the "Other Agreements"), and notwithstanding any
formal or informal plan or other arrangement for the direct or
-3-
<PAGE>
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 Internal Revenue 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. Any payments made to the Employee
pursuant to this Agreement, or otherwise, are subject to and
conditioned upon their compliance with applicable laws, regulations or
orders issued by a banking agency or court of competent jurisdiction.
(e) "Current annual compensation," for purposes of this Agreement, shall
be based on the Employee's base salary (excluding incentive bonus
payments) at the annual rate in effect at the time of termination of
the Employee's employment, but not less than the amount of base salary
actually paid to the Employee during the 12-month period preceding
such termination.
-4-
<PAGE>
3. Confidentiality and Noninterference with Customers and Employees.
(a) 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.
(b) 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 after termination of the
Employee's employment while the Employee is receiving salary
continuation payments under Section 2(a) hereof, with respect to
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, 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 while the Employee is receiving
salary continuation payments under Section 2(a) hereof, the Employee
shall not, within the area comprised of the Towns of Southampton, East
Hampton, Shelter Island, Southold and Riverhead, New York, and 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
-5-
<PAGE>
products or services as of, or within one year before, the date of
termination of the Employee's employment with the Bank (the
"Termination Date"), or (ii) any prospective customer that the Bank
was actively soliciting as of, or within one year before, the
Termination Date.
(c) While the Employee is employed by the Employers and thereafter while
the Employee is receiving salary continuation payments under Section
2(a) hereof, 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.
(d) The Employee acknowledges that the restrictions contained in this
Section 3 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.
4. 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.
5. 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.
-6-
<PAGE>
5. 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.
-7-
<PAGE>
6. Governing Law. This Agreement shall be governed by the laws of United
States to the extent applicable and otherwise by the laws of the State of New
York, excluding the choice of law rules thereof.
Attest: BRIDGE BANCORP, INC.
By
Secretary President and Chief Executive Officer
Attest: BRIDGEHAMPTON NATIONAL BANK
By
Secretary President and Chief Executive Officer
EMPLOYEE
------------------------------
-8-
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<NAME> Bridge Bancorp, Inc.
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<PERIOD-END> Dec-31-1997
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