<TABLE>
<CAPTION>
FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended June 30, 1999
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the transition period from to
-------------------------
COMMISSION FILE NUMBER: 000-18546
-------------------------
<S> <C>
BRIDGE BANCORP, INC. 11-2934195
(Exact name of registrant as specified in its charter) (IRS Employer Identification Number)
NEW YORK
(State or other jurisdiction of
incorporation or organization)
2200 MONTAUK HIGHWAY
BRIDGEHAMPTON, NEW YORK 11932
(Address of principal executive offices) (Zip Code)
(516) 537-1000
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. There were 4,249,047 shares of
common stock outstanding as of August 5, 1999.
</TABLE>
<PAGE>
BRIDGE BANCORP, INC.
INDEX
Part 1. FINANCIAL INFORMATION
- -----------------------------
Item 1. Financial Statements
Unaudited Consolidated Statements of Condition as of June 30, 1999 and
December 31, 1998
Unaudited Consolidated Statements of Income for the three months and six
months ended June 30, 1999 and 1998
Unaudited Consolidated Statements of Stockholders' Equity for the six
months Ended June 30, 1999
Unaudited Consolidated Statements of Cash Flows for the six months ended
June 30, 1999 and 1998
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION
- --------------------------
Part II Other Information
Item 6. Exhibits and Reports on Form 8K
Exhibit Index
- -------------
3.(i)The Certificate of Amendment of the Certificate of Incorporation of Bridge
Bancorp, Inc. filed June 24, 1999
11.0 Statement re: Computation of Per Share Earnings
27.0 Financial Data Schedule
SIGNATURES
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
BRIDGE BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CONDITION
(In thousands, except share and per share amounts)
June 30, December 31,
1999 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks ................................................... $ 28,009 $ 10,881
Interest earning deposits with banks ...................................... 330 251
Federal funds sold ........................................................ 7,000 3,150
-------- --------
Total cash and cash equivalents .................................... 35,339 14,282
Investment in debt and equity securities, net:
Securities available for sale, at fair value ........................... 76,340 69,443
Securities held to maturity (fair value of $4,299
and $5,067 respectively) ............................................... 4,296 5,052
-------- --------
Total investment in debt and equity securities, net ................ 80,636 74,495
Loans ..................................................................... 170,716 168,696
Less:
Allowance for loan losses ............................................... (1,950) (1,713)
-------- --------
Loans, net ......................................................... 168,766 166,983
Banking premises and equipment, net ....................................... 8,352 8,583
Accrued interest receivable ............................................... 1,646 1,525
Other assets .............................................................. 2,248 1,083
-------- --------
TOTAL ASSETS .............................................................. $296,987 $266,951
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits ........................................................... $ 81,774 $ 74,457
Savings, NOW, and money market deposits ................................... 130,831 103,016
Certificates of deposit of $100,000 or more ............................... 23,906 21,177
Other time deposits ....................................................... 36,317 42,881
-------- --------
Total deposits .................................................... 272,828 241,531
Accrued interest on depositors' accounts .................................. 775 1,439
Other liabilities and accrued expenses .................................... 762 1,749
-------- --------
Total Liabilities ................................................. 274,365 244,719
======== ========
Stockholders' equity:
Common stock, par value $.01 per share and $5.00 per share, respectfully:
Authorized: 20,000,000 shares; issued and outstanding
4,249,047 at 06/30/99 and 4,234,797 shares at 12/31/98 ................... 42 21,660
Surplus ................................................................. 21,204 51
Undivided profits ....................................................... 1,450 180
Less: Treasury Stock at cost, 97,200 shares ............................. -- (621)
-------- --------
22,696 21,270
Accumulated other comprehensive income, net of taxes .................... (74) 962
-------- --------
Total Stockholders' Equity ........................................ 22,622 22,232
-------- --------
Commitments and contingencies
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................ $296,987 $266,951
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BRIDGE BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Loans (including fee income) ..................................... $ 3,845 $ 3,651 $ 7,487 $ 7,015
Mortgage-backed securities ....................................... 548 435 1,104 884
State and municipal obligations .................................. 297 314 593 644
U.S. Treasury and government agency securities ................... 213 230 407 458
Other securities ................................................. 19 21 36 40
Federal funds sold ............................................... 194 77 341 84
Deposits with banks .............................................. 41 -- 45 2
------- ------- ------- -------
Total interest income .......................................... 5,157 4,728 10,013 9,127
Interest expense:
Savings, N.O.W. and money market deposits ........................ 675 496 1,319 928
Certificates of deposit of $100,000 or more ...................... 366 405 691 799
Other time deposits .............................................. 462 562 982 1,106
Other borrowed money ............................................. -- 20 -- 64
------- ------- ------- -------
Total interest expense ......................................... 1,503 1,483 2,992 2,897
------- ------- ------- -------
Net interest income ................................................ 3,654 3,245 7,021 6,230
Provision for possible loan losses ................................. 105 100 210 190
------- ------- ------- -------
Net interest income after provision for
possible loan losses ............................................. 3,549 3,145 6,811 6,040
------- ------- ------- -------
Other income:
Mortgage banking activities ...................................... 175 418 396 744
Service charges on deposit accounts .............................. 281 226 501 424
Net securities gains ............................................. 116 -- 116 --
Other operating income ........................................... 237 150 397 338
------- ------- ------- -------
Total other income ............................................. 809 794 1,410 1,506
------- ------- ------- -------
Other expenses:
Salaries and employee benefits ................................... 1,161 1,274 2,379 2,507
Net occupancy expense ............................................ 185 180 379 377
Furniture and fixture expense .................................... 200 174 392 337
Other operating expenses ......................................... 1,017 874 1,816 1,673
------- ------- ------- -------
Total other expenses ........................................... 2,563 2,502 4,966 4,894
------- ------- ------- -------
Income before provision for income taxes ........................... 1,795 1,437 3,255 2,652
Provision for income taxes ......................................... 628 492 1,135 887
------- ------- ------- -------
Net income ......................................................... $ 1,167 $ 945 $ 2,120 $ 1,765
======= ======= ======= =======
Basic earnings per share ........................................... $ 0.28 $ 0.22 $ 0.50 $ 0.42
======= ======= ======= =======
Diluted earnings per share ......................................... $ 0.27 $ 0.22 $ 0.49 $ 0.41
======= ======= ======= =======
</TABLE>
See accompanying notes to the unaudited consolidated financial statements. All
per share amounts have been adjusted to reflect the effects of the stock split.
<PAGE>
<TABLE>
<CAPTION>
Bridge Bancorp, Inc. and Subsidiary
Unaudited Consolidated Statements of Stockholders' Equity
(In thousands, except per share amounts)
Accumulated
Other
Common Stock Comprehensive Undivided Treasury Comprehensive
Shares Amount Surplus Income Profits Stock Income Total
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
================================ ===========================================
Balance at December 31, 1998 ............. 4,234,797 $ 21,660 $ 51 $ 180 ($ 621) $ 962 $ 22,232
Net income ............................... -- -- -- 2,120 2,120 -- -- 2,120
Exercise of stock options ................ 14,250 71 85 156
Retirement of Treasury Stock ............. -- (486) (135) 621 --
Reduction in Par Value from $5.00 to $.01 -- (21,203) 21,203 --
Cash dividends declared, $.20 per share .. (850) (850)
Net change in unrealized appreciation
in securities available
for sale, net of tax .................... -- -- -- (1,036) -- -- (1,036) (1,036)
--------
Comprehensive Income ..................... -- -- -- $ 1,084 -- -- -- --
---------------------------------========-----------------------------------------------
Balance at June 30, 1999 ................. 4,249,047 $ 42 $ 21,204 $ 1,450 $ -- ($ 74) $ 22,622
================================= ===============================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRIDGE BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six months ended June 30,
1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities:
Net Income ................................................... $ 2,120 $ 1,765
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses ....................... 210 190
Depreciation and amortization ............................ 375 337
Accretion of discounts ................................... (184) (33)
Amortization of premiums ................................. 288 65
Gain on the sale of assets ............................... -- (1)
Net securities gains ..................................... (116) --
Increase in accrued interest receivable .................. (121) (99)
Increase in other assets ................................. (537) (2,531)
(Decrease) increase in accrued and other liabilities ..... (926) 119
-------- --------
Net cash provided by operating activites ....................... 1,109 (188)
-------- --------
Investing activities:
Purchases of securities available for sale ................... (21,601) (8,778)
Purchases of securities held to maturity ..................... (2,363) (645)
Proceeds from sales of securities available for sale ......... 6,836 --
Proceeds from maturing securities available for sale ......... 125 2,165
Proceeds from maturing securities held to maturity ........... 3,119 9,157
Proceeds from principal payments on mortgage-backed securities 6,001 3,060
Net increase in loans ........................................ (1,994) (20,848)
Purchases of banking premises and equipment, net of deletions (144) (403)
-------- --------
Net cash used by investing activities .......................... (10,021) (16,292)
-------- --------
Financing activities:
Net increase in deposits ..................................... 31,297 36,557
Decrease in other borrowings ................................. -- (6,500)
Payment for the purchase of treasury stock ................... -- --
Net proceeds from issuance of restricted common stock
issued pursuant to equity incentive plan .............. -- --
Net proceeds from excercise of Stock options
issued pursuant to equity incentive plan .............. 156 57
Cash dividends paid .......................................... (1,484) (1,620)
-------- --------
Net cash provided by financing activities ...................... 29,969 28,494
-------- --------
Increase in cash and cash equivalents .......................... 21,057 12,014
Cash and cash equivalents beginning of period .................. 14,282 12,829
-------- --------
Cash and cash equivalents end of period ........................ $ 35,339 $ 24,843
======== ========
Supplemental information-Cash Flows:
Cash paid for:
Interest ................................................... $ 3,655 $ 2,813
Income taxes ............................................... $ 1,224 $ 730
Noncash investing and financing activities:
Dividends declared and unpaid ............................... $ 425 $ 423
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
<PAGE>
=====================
BRIDGE BANCORP, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
1. Basis of Financial Statement Presentation
The accompanying unaudited consolidated financial statements include the
accounts of Bridge Bancorp, Inc. (the Registrant or Company) and its
wholly-owned subsidiary, The Bridgehampton National Bank (the Bank). The
unaudited consolidated financial statements included herein reflect all normal
recurring adjustments which are, in the opinion of management, necessary for a
fair presentation of the results for the interim periods presented. In preparing
the interim financial statements, management has made estimates and assumptions
that affect the reported amounts of assets and liabilities and the revenue and
expense for the reported periods. Actual future results could differ
significantly from these estimates. The results of operations for the six months
ended June 30, 1999 are not necessarily indicative of the results of operations
that may be expected for the entire fiscal year. Certain information and note
disclosures normally included in the financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
The unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto included in
the Company's 1998 Annual Report on Form 10-K.
2. 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 three months ended June 30, 1999 and 1998, diluted weighted
average common stock and common stock equivalent shares outstanding for the
diluted earnings per share were 4,276,683 and 4,268,691, respectively. For the
three months ended June 30, 1999 and 1998, the total weighted average number of
shares of common stock outstanding for the basic earnings per share calculation
were 4,249,047 and 4,223,997, respectively. For the six months ended June 30,
1999 and 1998, diluted weighted average common stock and common stock equivalent
shares outstanding for the diluted earnings per share were 4,275,873 and
4,268,691, respectively. For the six months ended June 30, 1999 and 1998, the
total weighted average number of shares of common stock outstanding for the
basic earnings per share calculation were 4,246,931 and 4,223,997, respectively.
3. Stock Split
On July 20, 1998, the Board of Directors declared a three-for-one stock split in
the form of a stock dividend payable August 31, 1998 to stockholders of record
as of August 19, 1998. The stock split increased outstanding common shares from
1,411,599 to 4,234,797. Stockholders' equity has been restated to give
retroactive recognition to the stock split for all periods presented by
reclassifying from undivided profits and capital surplus 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, and market prices of the common stock have been
restated giving retroactive recognition to the stock split.
4. Change in Par Value
At June 30, 1999, the equity section of the balance sheet also reflects the
decrease in the par value of the Company's Common Stock from a par value of Five
Dollars ($5.00) per share to a par value of One Cent ($0.01) per share. This
change was authorized by the Board of Directors and adopted by the Shareholders
at the Company's April 19, 1999 annual meeting, the change was effectuated
during the second quarter by filing of an amendment to the Company's certificate
of incorporation. Such reduction in par value permitted the Company to decrease
its stated capital by approximately $21,203,000. Capital surplus increased by
approximately $21,203,000, thereby providing the Company with the added
flexibility of allowing payments of dividends from surplus if deemed advisable
or necessary by the Board of Directors. Capital surplus has not been restated
for prior periods. It should be realized, however, that as a practical matter
the Company would only have the ability to pay out a moderate proportion of the
aggregate increase in capital surplus as dividends since there are important
regulatory restrictions on the payment of dividends.
<PAGE>
5. Comprehensive Income
The Company adopted Statement of Accounting Standards No. 130 "Reporting
Comprehensive Income" in the first quarter of 1998.
Comprehensive income includes net income and all other changes in equity during
a period except those resulting from investments by owners and distributions to
owners. Other comprehensive income includes revenues, expenses, gains and losses
that under generally accepted accounting principles are included in
comprehensive income but excluded from net income.
Comprehensive income and accumulated other comprehensive income are reported net
of related income taxes. Accumulated other comprehensive income for the Company
consists solely of unrealized holding gains or losses on available for sale
securities. Such gains or losses are net of reclassification adjustments for
realized gains (losses) on sales of available for sale securities.
6. Investment in Debt and Equity Securities
A summary of the amortized cost and estimated fair value of investment
securities is as follows:
<TABLE>
<CAPTION>
06/30/99 12/31/98
- ----------------------------------------------------------------------------------------
(In thousands)
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
---------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
U.S. Treasury securities ............. $10,075 $10,221 $12,065 $12,549
Oblig. of U.S. Government agencies ... 1,000 974 -- --
Oblig. of NY State & pol.subs ........ 23,958 24,123 21,395 22,022
Mortgage-backed securities ........... 41,431 41,022 34,354 34,872
---------------------------------------------
Total available for sale ........... $76,464 $76,340 $67,814 $69,443
---------------------------------------------
Held to maturity:
Oblig. of NY State & pol.subs ........ $ 3,213 $ 3,216 $ 3,969 $ 3,984
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 ............. $ 4,296 $ 4,299 $ 5,052 $ 5,067
---------------------------------------------
Total debt and equity securities ....... $80,760 $80,639 $72,866 $74,510
=============================================
</TABLE>
7. Loans
Loans are summarized as follows:
Types of Loans
<TABLE>
<CAPTION>
The following table shows the Registrant's loan distribution in each of the
periods ended,
6/30/99 12/31/98
- --------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Real Estate Loans .............................. $ 139,225 $ 141,625
Unsecured business and personal loans .......... 28,984 23,639
Secured business and personal loans ............ 1,641 2,534
Installment/consumer loans ..................... 1,134 1,182
-------------------------
Total loans .................................... $ 170,984 $ 168,980
Unearned income ................................ ($ 268) ($ 284)
-------------------------
$ 170,716 $ 168,696
Allowance for loan losses ...................... (1,950) (1,713)
-------------------------
Net loans ...................................... $ 168,766 $ 166,983
=========================
</TABLE>
<PAGE>
8. Allowance for Possible Loan Loss
The adequacy of the allowance for loan losses is determined based on
management's detailed analysis of classified loans, input from the Bank's
outside loan review consultants, past loss experience, current economic
conditions, delinquency trends and other pertinent factors. The reserves 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 overall reserve levels as
they relate 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.
Changes in the allowance for possible loan losses are summarized as follows:
<TABLE>
<CAPTION>
Period ended, 06/30/99 12/31/98 06/30/98
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Allowance for loan losses
balance at beginning of period ............. $ 1,713 $ 1,393 $ 1,393
Charge-offs:
Real estate loans ............................ -- -- --
Unsecured business & personal loans .......... (16) (31) (2)
Secured business & personal loans ............ -- -- --
Installment/consumer loans ................... (31) (165) (76)
-------------------------------
Total ..................................... (47) (196) (78)
Recoveries:
Real estate loans ............................ -- -- --
Unsecured business & personal loans .......... 1 32 3
Secured business & personal loans ............ -- -- --
Installment/consumer loans ................... 73 59 28
-------------------------------
Total ..................................... 74 91 31
-------------------------------
Net recoveries (charge-offs) ................. 27 (105) (47)
Provision for loan losses
charged to operations ....................... 210 425 190
-------------------------------
Balance at end of period ..................... $ 1,950 $ 1,713 $ 1,536
==============================
Ratio of net recoveries (charge-offs) during
period to average loans outstanding ........ 0.02% -0.07% -0.03%
==============================
</TABLE>
9. Asset Quality
The following table summarizes non-performing loans:
NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
- -------------------------------------------
<TABLE>
<CAPTION>
06/30/99 12/31/98
- --------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Loans 90 days or more past due
and still accruing:
Other ........................................ $ 2 $ 4
Nonaccrual loans:
Mortgage loans:
Single-family residential .................. 10 4
Commercial real estate ..................... 156 156
Construction and Land ...................... -- 600
Other .......................................... 451 448
----------------------
Total nonaccrual loans ......................... 617 1,208
Restructured loans ............................. -- --
Other real estate owned, net ................... -- --
----------------------
Total .......................................... $ 619 $1,212
======================
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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, has
minimal results of operations. 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 represents the difference between income on interest
earning assets and expenses on interest bearing liabilities. 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 audited consolidated financial statements and notes thereto
included in the Company's 1998 Annual Report on Form 10-K.
Financial Condition
- -------------------
The assets of the Registrant totaled $296,987,000 at June 30, 1999, an increase
of $30,036,000 or 11.3% from the year end. This increase mainly results from an
increase in cash and cash equivalents of $21,057,000 or 147.4%. Net loans
increased $1,783,000 or 1.1%, and debt and equity securities increased
$6,141,000 or 8.2%. The primary source of funds for the increase in assets was
derived from increased deposits of $31,297,000 or 13.0%. Demand deposits
increased $7,317,000 or 9.8%, savings, NOW and money market accounts increased
$27,815,000 or 27.0% and certificates of deposits of $100,000 or more increased
$2,729,000 or 12.9% over December 31, 1998; however, other time deposits
decreased 6,564,000 or 15.3% over December 3, 1998. The increase in deposits is
attributed to increased public fund deposits and the introduction of a new money
market product targeted to high balance accounts. The decrease in other time
deposits is primarily due to the roll off of two year certificates of deposits
under $100,000 that were issued during a promotion in 1997.
Total stockholders' equity was $22,622,000 at June 30, 1999, an increase of 1.8%
over December 31, 1998. The increase of $390,000 was the result of net income
for the six month period ended June 30, 1999, of $2,120,000; plus the proceeds
of $156,000 from the exercise of stock options pursuant to the equity incentive
plan; less cash dividends declared of $850,000; and less the net decrease in
unrealized appreciation in securities available for sale, net of tax, of
$1,036,000. The net decrease in unrealized appreciation in securities available
for sale is attributable to changes in market conditions.
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 Company's
average consolidated statements of financial condition and reflects the average
yields on assets and average costs of liabilities for the three month and six
month periods ended June 30, 1999 and 1998, respectively. 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 the average amounts outstanding. Loan fee
income for the three months ended June 30, 1999 and 1998 totaled $49,000 and
$122,000, respectively. For the six months ended June 30, 1999 and 1998 loan fee
income total $91,000 and $191,000, respectively. 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.
<PAGE>
I.A. & I. B. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY:
INTEREST RATES AND INTEREST DIFFERENTIAL
<TABLE>
<CAPTION>
Six months ended June 30, 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans (including fee income) .... ........... $168,961 $ 7,487 8.94% $150,176 $ 7,015 9.42%
Deposits with banks ......................... 1,885 45 4.81% 96 2 4.20%
Federal funds sold .......................... 14,383 341 4.78% 3,096 84 5.47%
Taxable investment securities ............... 12,610 407 6.51% 14,081 458 6.56%
Tax exempt investment securities ............ 27,084 593 4.42% 28,520 644 4.55%
Other securities ............................ 1,083 36 6.70% 1,083 40 7.45%
Mortgage backed securities .................. 33,407 1,104 6.66% 25,310 884 7.04%
----------------------------------------------------------------------------------
Total interest earning assets ................. $259,413 $ 10,013 7.78% $222,362 $ 9,127 8.28%
Interest bearing liabilities:
Savings, N.O.W. and
money market deposits ..................... $114,433 $ 1,319 2.32% $ 83,807 $ 928 2.23%
Certificates of deposit of $100,000
or more .................................. 28,957 691 4.81% 29,796 799 5.41%
Other time deposits ......................... 41,358 982 4.79% 42,933 1,106 5.19%
Federal funds purchased ..................... -- -- -- -- -- --
Other borrowings ............................ -- -- -- 2,376 64 5.43%
----------------------------------------------------------------------------------
Total interest bearing liabilities ............ $184,748 $ 2,992 3.27% $158,912 $ 2,897 3.68%
----------------------------------------------------------------------------------
Net interest income/interest
rate spread ................................. $ 7,021 4.52% $ 6,230 4.60%
-------- ----- -------- -----
Net earning assets/net yield on
average interest earnings assets ............ $ 74,665 5.46% $ 63,450 5.65%
-------- ----- -------- -----
Ratio of interest earning assets to
interest bearing liabilities ................ 140.41% 139.93%
------- -------
Three months ended June 30, 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans (including fee income) ................ $169,184 $ 3,845 9.12% $155,034 $ 3,651 9.45%
Deposits with banks ......................... 3,410 41 4.82% 57 -- 0.00%
Federal funds sold .......................... 15,774 194 4.93% 5,721 77 5.40%
Taxable investment securities ............... 13,040 213 6.55% 14,079 230 6.55%
Tax exempt investment securities ............ 27,282 297 4.37% 27,823 314 4.53%
Other securities ............................ 1,083 19 7.04% 1,083 21 7.78%
Mortgage backed securities .................. 33,362 548 6.59% 24,995 435 6.98%
----------------------------------------------------------------------------------
Total interest earning assets ................. $263,135 $ 5,157 7.86% $228,792 $ 4,728 8.29%
Interest bearing liabilities:
Savings, N.O.W. and
money market deposits ..................... $116,432 $ 675 2.33% $ 86,244 $ 496 2.31%
Certificates of deposit of $100,000
or more .................................. 30,641 366 4.79% 30,158 405 5.39%
Other time deposits ......................... 39,830 462 4.65% 43,436 562 5.19%
Federal funds purchased ..................... -- -- -- -- -- --
Other borrowings ............................ -- -- -- 1,464 20 5.48%
----------------------------------------------------------------------------------
Total interest bearing liabilities ............ $186,903 $ 1,503 3.23% $161,302 $ 1,483 3.69%
----------------------------------------------------------------------------------
Net interest income/interest
rate spread ................................. $ 3,654 4.64% $ 3,245 4.60%
-------- ----- -------- -----
Net earning assets/net yield on
average interest earnings assets ............ $ 76,232 5.57% $ 67,490 5.69%
-------- ----- -------- -----
Ratio of interest earning assets to
interest bearing liabilities ................ 140.79% 141.84%
------- -------
</TABLE>
<PAGE>
Rate/Volume Analysis
- --------------------
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 Bank'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. Due to the numerous simultaneous volume and rate changes during the
period analyzed, it is not possible to precisely allocate changes between volume
and rates. In addition, average earning assets include nonaccrual loans.
VOLUME AND YIELD/RATE VARIANCES
<TABLE>
<CAPTION>
For the Periods Ended June 30, Three months ended Six months ended
1999 Over 1998 1999 Over 1998
(In thousands) Changes Due To Changes Due To
- ------------------------------------------------------------------------------------------------------------------------------------
Volume Rate Net Change Volume Rate Net Change
---------------------------------------------------------------------------
INTEREST INCOME ON INTEREST
EARNING ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold ................................... $ 163 ($ 46) $ 117 $ 289 ($ 32) $ 257
Deposits with banks .................................. 40 1 41 42 1 43
Taxable investment securities ........................ (17) -- (17) (48) (3) (51)
Tax exempt investment securities ..................... (6) (11) (17) (32) (19) (51)
Other securities ..................................... -- (2) (2) -- (4) (4)
Mortgage-backed securities ........................... 265 (152) 113 353 (133) 220
Loans (including loan fee income) .................... 881 (687) 194 1,365 (893) 472
---------------------------------------------------------------------------
Total interest earning assets ..................... 1,325 (896) 429 1,970 (1,084) 886
---------------------------------------------------------------------------
INTEREST EXPENSE ON INTEREST
BEARING LIABILITIES:
Savings, NOW and money market deposits ............... 175 4 179 351 40 391
Certificates of deposits of $100,000 or more ......... 41 (80) (39) (22) (86) (108)
Other time deposits .................................. (45) (55) (100) (40) (84) (124)
Federal funds purchased .............................. -- -- -- -- -- --
Other borrowings ..................................... (20) -- (20) (64) -- (64)
---------------------------------------------------------------------------
Total interest bearing liabilities ................ 151 (131) 20 225 (130) 95
---------------------------------------------------------------------------
Net interest income .................................. 1,174 (765) 409 1,745 (954) 791
---------------------------------------------------------------------------
</TABLE>
Capital
- -------
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.
<PAGE>
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 June 30, 1999, that the Bank
meets all capital adequacy requirements to which it is subject.
The Bank's actual capital amounts and ratios are presented in the following
table:
<TABLE>
<CAPTION>
As of June 30, 1999
- -------------------------------------------------------------------------------------------------------------------------------
(In thousands) To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
- -------------------------------------------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to risk weighted assets) ................ 24,646 12.6% 15,704 >8.0% 19,630 >10.0%
Tier 1 Capital (to risk weighted assets) ............... 22,696 11.6% 7,852 >4.0 11,778 >6.0
Tier 1 Capital (to average assets) ..................... 22,696 7.9% 11,423 >4.0 14,278 >5.0
As of December 31, 1998
- -------------------------------------------------------------------------------------------------------------------------------
(In thousands) To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
- -------------------------------------------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to risk weighted assets) ................ 22,983 12.0% 15,372 >8.0% 19,215 >10.0%
Tier 1 Capital (to risk weighted assets) ............... 21,270 11.1% 7,686 >4.0 11,529 >6.0
Tier 1 Capital (to average assets) ..................... 21,270 8.2% 10,319 >4.0 12,899 >5.0
</TABLE>
The equity section of the balance sheet, at June 30, 1999, shows the effect of
the retirement of treasury stock acquired by management's past repurchases of
the Company's Common Stock.
Change in Par Value
- --------------------
At June 30, 1999, the equity section of the balance sheet also reflects the
decrease in the par value of the Company's Common Stock from a par value of Five
Dollars ($5.00) per share to a par value of One Cent ($0.01) per share.
This change was authorized by the Board of Directors and adopted by the
Shareholders at the Company's April 19, 1999 annual meeting, the change was
effectuated during the second quarter by filing of an amendment to the Company's
certificate of incorporation. Such reduction in par value permitted the Company
to decrease its stated capital by approximately $21,203,000. Capital surplus
increased by approximately $21,203,000, thereby providing the Company with the
added flexibility of allowing payments of dividends from surplus if deemed
advisable or necessary by the Board of Directors. Capital surplus has not been
restated for prior periods. It should be realized, however, that as a practical
matter the Company would only have the ability to pay out a moderate proportion
of the aggregate increase in capital surplus as dividends since there are
important regulatory restrictions on the payment of dividends.
<PAGE>
Recent Accounting Developments
- ------------------------------
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards NO. 133 "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133). This Statement established accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measures those instruments at fair value.
The accounting for changes in the fair value of a derivative depends on the
intended use of a derivative and the resulting designation.
In June 1999, the FASB issued SFAS No. 137 "Accounting for Derivative
Instruments and Hedging Activities Deferral of the Effective Date of FASB
Statement No. 133". This pronouncement delayed the effective date of the
provisions of SFAS No. 133 to all fiscal quarters of fiscal years beginning
after June 15, 2000. In management's opinion, SFAS No. 133, when adopted, will
not have a material impact on the Company's financial statements.
Comparison of Operating Results for the Three Months and Six Months Ended June
- --------------------------------------------------------------------------------
30, 1999 and 1998
- -----------------
During the six month period ended June 30, 1999, the Registrant earned net
income of $2,120,000 or $ .49 per share as compared with $1,765,000 or $.41 per
share for the same period in 1998. During the three month period ended June 30,
1999, the Registrant earned net income of $1,167,000 or $.27 per share as
compared with $945,000 or $ .22 per share for the same period in 1998.
Highlights for the three months ended June 30, 1999 include: (i) a $409,000 or
12.6% increase in net interest income; (ii) a $15,000 or 1.9% increase in total
other income; and (iii) a $61,000 or 2.4% increase in total other expenses over
the same period in 1998. Highlights for the six months ended June 30, 1999
include: (i) a $791,000 or 12.7% increase in net interest income; (ii) a $96,000
or 6.4% decrease in total other income; and (iii) a $72,000 or 1.5% increase in
total other expenses over the same period in 1998.
Net income for the first six months of 1999 reflects annualized returns of
19.33% on average total stockholders' equity and 1.50% on average total assets
as compared to the corresponding figures for the preceding calendar year of
19.19% on average total stockholders' equity and 1.51% on average total assets.
For purposes of these calculations, average stockholders' equity excludes the
effects of changes in the unrealized appreciation (depreciation) on securities
available for sale, net of taxes.
Net interest income, the primary source of income, increased by $409,000 or
12.6% for the current three month period over the same period last year. The
increase primarily resulted from an increase in average total interest earning
assets from $228,792,000 in 1998 to $263,135,000 for the comparable period in
1999, a 15.0% increase. Average interest bearing liabilities increased 15.9% to
$186,903,000 in 1999 from $161,302,000 for the same period last year. The yield
on average interest earning assets for the current three month period decreased
to 7.86% from 8.29% for the same period last year. The cost of average interest
bearing liabilities decreased to 3.23% from 3.69% during the same period in
1998. The net yield on average earning assets decreased to 5.57% from 5.69%
during the same period in 1998.
Net interest income increased by $791,000 or 12.7% for the current six month
period over the same period last year. The increase primarily resulted from an
increase in average total interest earning assets from $222,362,000 in 1998 to
$259,413,000 for the comparable period in 1999, a 16.7% increase. Average
interest bearing liabilities increased by 16.3% to $184,748,000 in 1999 from
$158,912,000 for the same period last year. The yield on average interest
earning assets at June 30, 1999 decreased to 7.8% from 8.3% during the same
period in 1998. The cost of average interest bearing liabilities decreased to
3.27% from 3.68% during the same period in 1998. The net yield on average
earning assets decreased to 5.46% from 5.65% during the same period in 1998.
A $105,000 provision for possible loan losses was made during the three month
period ended June 30, 1999, compared to a $100,000 provision for the same period
in 1998. The provision for possible loan losses made during the six month period
ended June 30, 1999 totaled $210,000 compared to a $190,000 provision for the
same period in 1998. The allowance for possible loan losses increased to
$1,950,000 at June 30, 1999, as compared to $1,713,000 at December 31, 1998. As
a percentage of loans, the allowance was 1.14% at June 30, 1999 and 1.02% at
December 31, 1998. The allowance as a percentage of nonperforming loans
(including loans past due 90 days or more and still accruing) was 315.0% at June
30, 1999 compared to 141.3% at December 31, 1998.
The adequacy of the allowance for loan losses is determined based on
management's detailed analysis of classified loans, input from the Bank's
outside loan review consultants, 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.
<PAGE>
Management believes that the allowance for 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 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.
Total other income increased during the three month period ended June 30, 1999
by $15,000 or 1.9% over the same period last year. For the six month period
ended June 30, 1999 total other income decreased $96,000 or 6.4% over the same
period last year. Income from mortgage banking activities for the three month
period ended June 30, 1999 totaled $175,000, a decrease of $243,000 or 58.1%
over the same period last year. Income from mortgage banking activities for the
six month period ended June 30, 1999 totaled $396,000, a decrease of $348,000 or
46.8% over the same period last year. The Bank's practice is to originate and
sell these mortgages in the secondary market. Increased competition within the
Bank's market has decreased the return on residential mortgages. Additionally,
the department has been streamlined to become more efficient. While revenue is
down, corresponding expense reductions partially offset such decline. Service
charges on deposit accounts for the three month period ended June 30, 1999
increased $55,000 or 24.3%. For the six month period ended June 30, 1999 service
charges on deposit accounts increased $77,000 or 18.2% over the same period last
year. These increases primarily result from the Bank increasing fees charged on
deposit accounts during the second quarter of 1999. Securities gains increased
$116,000 or 100% for the three and six month periods ended June 30, 1999 over
the same periods last year. These gains resulted primarily from sales of
securities in accordance with the Bank's investment strategies.
Other operating income for the three month period ended June 30, 1999 totaled
$237,000, an increase of $87,000 or 58.0% over the same period last year. This
increase primarily results from an increase in merchant processing fees
resulting from a change in the pricing structure made in the second quarter.
Other operating income for the six month period ended June 30, 1999 totaled
$397,000, an increase of $59,000 or 17.5% over the same period last year. This
increase primarily results from an increase in merchant processing fees, ATM
fees and checkbook fees.
Total other expenses increased during the three month period ended June 30, 1999
by $61,000 or 2.4% over the same period last year. For the six month period
ended June 30, 1999 total other expenses increased $72,000 or 1.5% over the same
period last year. Salary and benefit expense decreased $113,000 or 8.9% for the
three month period ended June 30, 1999 over the same period last year. For the
six month period ended June 30, 1999 salary and benefit expense decreased
$128,000 or 5.1% over the same period last year. These decreases are attributed
to a decrease in staffing in the mortgage department which has been streamlined
to become more efficient. Furniture and fixture expense increased $26,000 or
14.9% for the three month period ended June 30, 1999 over the same period last
year. For the six month period ended June 30, 1999 furniture and fixture expense
increased $55,000 or 16.3% over the same period last year. This increase
primarily results from increased depreciation expenses relative to equipment
upgrades in preparation for year 2000 readiness.
Total other operating expenses increased during the three month period ended
June 30, 1999 by $143,000 or 16.4% over the same period last year. For the six
month period ended June 30, 1999 total other operating expenses increased
$143,000 or 8.6% over the same period last year. These increases are primarily
attributed to increased consulting and legal fees relative to the formation of a
subsidiary in the second quarter of 1999. It is the Bank's intention to operate
this subsidiary as a Real Estate Investment Trust, allowing the Bank to better
manage its real estate assets.
<PAGE>
Asset/Liability Management
- --------------------------
The Company's primary earnings source is net interest income, which is affected
by changes in the level of interest rates, the relationship between rates, the
impact of interest rate fluctuations on asset prepayments, the level and
composition of deposits, and the credit quality of the portfolio. Management's
asset/liability objectives are to maintain a strong, stable net interest margin,
to utilize its capital effectively without taking undue risks and to maintain
adequate liquidity.
The Company's Asset/ Liability Committee, comprised of members of senior
management and the Board, meets periodically to evaluate the impact of changes
in market interest rates on assets and liabilities, net interest margin, capital
and liquidity. Risk assessments are governed by policies and limits established
by senior management which are reviewed and approved by the full Board of
Directors.
Liquidity
- ---------
The objective of liquidity management is to ensure the availability of
sufficient resources to meet all financial commitments. Liquidity management
addresses the ability to meet deposit withdrawals either on demand or
contractual maturity, to repay other borrowings as they mature and to make new
loans and investments as opportunities arise.
The Company's most liquid assets are cash and cash equivalents, securities
available for sale and securities held to maturity due within one year. The
levels of these assets are dependent upon the Company's operating, financing,
lending and investing activities during any given period. Other sources of
liquidity include loan and security principal repayments and maturities, lines
of credit with other financial institutions, the sale of securities from the
available for sale portfolio, and growth in the core deposit base. 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. At June 30, 1999,
the Company had aggregate lines of credit of $8,000,000 with correspondent banks
to provide short term credit for liquidity requirements. The Company also has
the ability, as a member of the Federal Home Loan Bank ("FHLB") system, to
borrow approximately $12,171,800 in the form of an overnight line of credit, and
an additional $12,171,800 in the form of a one month line of credit. At June 30,
1999, the Company had no such borrowings outstanding.
The Company's liquidity positions are monitored daily to ensure the maintenance
of an optimum level and efficient use of available funds. Management believes
the Company has sufficient liquidity to meet its operating requirements.
Year 2000
- ---------
The Bank is working diligently to assure a smooth transition into the new
millennium. To accomplish Year 2000 compliance, the Bank has implemented a
project plan as established by the banking regulatory authorities. The
established timetable breaks the plan into seven phases; the awareness phase,
inventory phase, assessment phase, renovation phase, validation phase,
implementation phase, and post implementation phase. Completion of the plan
through the implementation phase is targeted for the late spring of 1999.
The Bank uses software purchased from third party vendors for all processing
applications; therefore, no significant internal program renovation by Bank
staff is necessary to prepare these systems to handle transactions in the Year
2000. The majority of the Bank's efforts in preparation for Year 2000 processing
relate to replacing or upgrading noncompliant software and hardware as well as
testing purchased and outsourced processing systems.
<PAGE>
The Bank has established formal processes for identifying, assessing, and
managing the Year 2000 risks posed by internal bank activities, vendors, and
customers. The Bank has assessed the risks posed by its customers. The Bank is
evaluating Year 2000 readiness of commercial loan applicants as part of the
underwriting process, has called and continues calling upon significant existing
borrowers to assess their readiness for Year 2000. Seminars have been offered to
the Bank's commercial and municipal customers, and the Bank has presented these
seminars to different community groups to educate the local public about the
Year 2000 matter and the Bank's preparedness to address the issue.
Testing of internal systems was substantially completed by December 31, 1998.
Testing with significant third party vendors has been substantially completed.
During 1999 the Bank will continue to monitor its own internal activities and
the plans of its vendors and customers to address the Year 2000 issue.
The Bank utilizes Fiserv, Inc., one of the largest data processing providers for
banks and savings institutions to perform its core systems data processing.
Fiserv runs software from Information Technology Inc. (ITI), a subsidiary of
Fiserv, to perform the vast majority of its data processing activities. This
system, which handles processing of loans, deposits, general ledger, accounts
payable, fixed assets, and other ancillary applications, is believed to be Year
2000 ready according to the vendor. However, the Bank has embarked on a project
to thoroughly test the system for Year 2000 compliance. If Year 2000 processing
problems are uncovered during the testing phase, ITI is committed to correct
those problems. To date, no problems have been encountered in testing. In
addition, the Bank is currently in the process of finalizing contingency plans
with respect to all critical services and operations regardless if performed
internally or by external sources including outside vendors. This plan is a
coordinated effort with a three fold goal of ensuring that the century date
change occurs with minimal, if any, disruptions of service to both the
institution and its customers, minimizing any possibility of financial losses,
and ensuring a timely resumption of normal banking operations.
Monitoring and managing the Year 2000 project will result in additional direct
and indirect costs to the Bank. Direct costs include potential charges by third
party software vendors for product enhancements, costs involved in testing
software products for Year 2000 compliance, and any resulting costs for
developing and implementing contingency plans for critical software products.
Indirect costs will principally consist of time devoted by existing employees in
monitoring software vendor progress, testing renovated software products and
implementing any necessary contingency plans. These costs will be charged to
earnings as incurred.
The Bank has upgraded equipment in its branch and back office systems to better
serve its customers and improve the efficiency of its operations. The timing of
the upgrades was accelerated as a result of the Year 2000 issue. The total cost
of the upgrades is expected to be approximately $350,000 all of which has been
placed in service. Based on current information, management does not expect
these costs when taken together with other Year 2000 compliance costs to
materially impact the Company's future results of operations, financial
condition, or liquidity.
<PAGE>
Private Securities Litigation Reform Act Safe Harbor Statement
- ---------------------------------------------------------------
In addition to historical information, this Management's discussion and analysis
includes certain forward-looking statements based on current management
expectations. The Bank's annual results could differ materially from those
management expectations contemplated by the forward-looking statements. Factors
that could cause future results to vary from current management expectations
include, but are not limited to, general economic conditions, legislative and
regulatory changes, monetary and fiscal policies of the federal government,
changes in tax policies, rates and regulations of federal, state and local tax
authorities, changes in interest rates, deposit flows, the cost of funds, demand
for loan products, demand for financial services, competition, changes in the
quality and composition of the Bank's loan and investment portfolios, changes in
accounting principles, policies or guidelines, and other economic, competitive,
governmental and technological factors affecting the Bank's operations, markets,
products, services and prices. In addition, the Bank assumes no duty to update
forward-looking statements.
<PAGE>
Part II Other Information
- -------------------------
Item 1. Legal Proceedings
- -------------------------
There have been no material developments with respect to the lawsuit against the
Bank, two present executive officers and one former executive officer, filed on
February 18, 1999 by two former employees in Suffolk County Supreme Court which
was previously reported in the Registrant's first quarter Form 10-Q under this
Item.
Item 2. Changes in Securities
- -----------------------------
Not applicable
Item 3. Defaults upon Senior Securities
- ---------------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
At the Registrant's annual meeting on April 19, 1999, an amendment to the
Certificate of Incorporation to increase the authorized number of shares of
Common Stock, from 6,500,000 with a par value of $5.00 per share to 20,000,000
with a par value of $0.01 per share was approved by the stockholders. Shares
voted for the proposal totaled 3,136,991; shares voted against the proposal
totaled 438,105; abstentions totaled 107,511; and broker non votes totaled
46,298.
Item 5. Other Information
- -------------------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(A) Exhibit Index
-----------------
3.(i)The Certificate of Amendment of the Certificate of Incorporation
of Bridge Bancorp, Inc. filed June 24, 1999.
11.0 Statement re: Computation of Per Share Earnings
27.0 Financial Data Schedule
(B) Reports on Form 8-K
-----------------------
None
Submitted only with filing in electronic format.
<PAGE>
In accordance with the requirement of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BRIDGE BANCORP, INC.
Date: August 13, 1999 /s/ Thomas J. Tobin
-------------------
Thomas J. Tobin
President and Chief Executive Officer
Date: August 13, 1999 /s/ Christopher Becker
----------------------
Christopher Becker
Executive Vice President and Treasurer
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
BRIDGE BANCORP, INC.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned, being the president and the secretary of Bridge Bancorp,
Inc., do hereby certify and set forth:
(1) The name of the corporation is Bridge Bancorp, Inc.
(2) The certificate of incorporation of Bridge Bancorp, Inc. was filed by
the Department of State on the 13th day of September, 1988.
(3) Paragraph 4. of the certificate of incorporation of Bridge Bancorp,
Inc., which sets forth the aggregate number of shares of one class only of the
common stock of the par value of Five Dollars ($5.00) which this corporation
shall have authority to issue is hereby amended to increase the number of shares
this corporation shall have the authority to issue simultaneously with reducing
the par value of all shares, both issued and unissued, and to thereby read as
follows:
4. The aggregate number of shares which this corporation shall have
authority to issue is 20,000,000 shares, which shall be common shares
having a par value of One ($.01) Cent per share.
This amendment to the certificate of incorporation of Bridge Bancorp., Inc.
provides for a change of shares as follows:
Issued Shares: The amendment provides for a change of the 4,249,047
issued common shares of the par value of $5.00 per share. Resulting
from the change are 4,249,047 issued common shares of the par value of
One ($.01) Cent per share. The terms of the change are as follows:
4,249,047 issued shares of the common stock of the par value of $5.00
per share are changed into 4,249,047 issued shares of the common stock
of the par value of One ($.01) Cent per share at a rate of 1 for 1.
<PAGE>
Page 2
Unissued Shares: The amendment provides for a change of 2,250,953
unissued common shares of the par value of Five ($5.00) Dollars per
share. Resulting from the change are 15,750,953 unissued common shares
of the par value of One ($.01) Cent per share. The terms of the change
are as follows: 2,250,953 unissued shares of the common stock of the
par value of Five ($5.00) Dollars per share are changed into
15,750,953 unissued shares of the common stock of the par value of One
($.01) Cent per share at a rate of 1 for 6.9974597426.
This amendment to the certificate of incorporation of Bridge Bancorp.,
Inc. reduces the stated capital of the corporation by reducing the par
value of 4,249,047 issued common shares of the corporation from Five
($5.00) Dollars per share to One ($.01) Cent per share. The stated
capital is thereby reduced from Twenty One Million Two Hundred Forty
Five Thousand Two Hundred Thirty Five ($21,245,235.00) Dollars to
Forty Two Thousand Four Hundred Ninety and 47/100 ($42,490.47)
Dollars, a reduction of Twenty One Million Two Hundred Two Thousand
Seven Hundred Forty Four and 53/100 ($21,202,744.53) Dollars, which
amount represents the aggregate reduction in par value of the
4,249,047 issued common shares affected by this amendment, and which
amount is transferred from stated capital to capital surplus.
(4) This amendment to the certificate of incorporation of Bridge Bancorp,
Inc. was authorized, pursuant to section 803(a) of the Business Corporation Law,
by vote of the board of directors followed by the affirmative vote of the
holders of a majority of all outstanding shares entitled to vote thereon at a
meeting of the shareholders of said corporation duly called and held on the 19th
day of April, 1999, a quorum being present.
IN WITNESS WHEREOF, the undersigned has executed and signed this
certificate this 14th day of June, 1999.
/s/ Thomas J. Tobin
--------------------------
Thomas J. Tobin, President
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF SUFFOLK)
On the 14th day of June, 1999, before me personally came Thomas J. Tobin,
to me known, who, being by me duly sworn, did depose and say that he resides at
2488 Montauk Highway, Bridgehampton, New York 11932; that he is the President of
Bridge Bancorp, Inc., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the board
of directors of said corporation.
/s/ Mary Hyer
-------------
Notary Public
Mary A. Hyer
Notary Public, State of New York
No. 4811162, Suffolk County
Commission Expires June 30, 2000
<TABLE>
<CAPTION>
Bridge Bancorp Inc. and Subsidiary
Computation of Per Share Income
June 30, 1999
(UNAUDITED)
------------------------------------------------------
Three months ended Six months ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
------------------------------------------------------
<S> <C> <C> <C> <C>
Net Income ......................................... $1,167,000 $ 945,000 $2,120,000 $1,765,000
Common Equivalent Shares:
Weighted Average Common Shares Outstanding ......... 4,249,047 4,223,997 4,246,931 4,223,997
Weighted Average Common Equivalent Shares .......... 27,636 44,694 28,912 44,694
------------------------------------------------------
Weighted Average Common and Common Equivalent Shares 4,276,683 4,268,691 4,275,843 4,268,691
------------------------------------------------------
Net Income per Common Equivalent Share ............. $ 0.27 $ 0.22 $ 0.49 $ 0.41
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000846617
<NAME> Bridge Bancorp, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Jun-30-1999
<CASH> 28,009
<INT-BEARING-DEPOSITS> 330
<FED-FUNDS-SOLD> 7,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 76,340
<INVESTMENTS-CARRYING> 4,296
<INVESTMENTS-MARKET> 4,299
<LOANS> 170,716
<ALLOWANCE> 1,950
<TOTAL-ASSETS> 296,987
<DEPOSITS> 272,828
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,537
<LONG-TERM> 0
0
0
<COMMON> 42
<OTHER-SE> 22,654
<TOTAL-LIABILITIES-AND-EQUITY> 296,987
<INTEREST-LOAN> 7,487
<INTEREST-INVEST> 2,140
<INTEREST-OTHER> 386
<INTEREST-TOTAL> 10,013
<INTEREST-DEPOSIT> 2,992
<INTEREST-EXPENSE> 2,992
<INTEREST-INCOME-NET> 7,021
<LOAN-LOSSES> 210
<SECURITIES-GAINS> 116
<EXPENSE-OTHER> 4,966
<INCOME-PRETAX> 3,255
<INCOME-PRE-EXTRAORDINARY> 3,255
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,120
<EPS-BASIC> .50
<EPS-DILUTED> .49
<YIELD-ACTUAL> 5.46
<LOANS-NON> 617
<LOANS-PAST> 2
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,713
<CHARGE-OFFS> 47
<RECOVERIES> 74
<ALLOWANCE-CLOSE> 1,950
<ALLOWANCE-DOMESTIC> 1,950
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
