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Previous: PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT, 10-Q, EX-27.2, 2000-11-14 |
Next: BRIDGE BANCORP INC, 10-Q, EX-11, 2000-11-14 |
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-Q[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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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 4,217,597 shares of common stock outstanding as of November 14, 2000.
Item 1. Financial Statements Unaudited Consolidated Statements of Condition as of September 30, 2000 and December 31, 1999 Unaudited Consolidated Statements of Income for the Three Months and Nine Months Ended September 30, 2000 and 1999 Unaudited Consolidated Statements of Stockholders' Equity for the Nine Months Ended September 30, 2000 Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2000 and 1999 Notes to Unaudited Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsPART II – OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8K
11.0 Statement re: Computation of Per Share Earning
27.0 Financial Data Schedule
Signatures
Item 1. Financial Statements
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BRIDGE BANCORP, INC. AND SUBSIDIARY
September 30, December 31,
2000 1999
--------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 16,586 $ 11,604
Interest earning deposits with banks 68 417
Federal funds sold 29,500 8,000
--------- ---------
Total cash and cash equivalents 46,154 20,021
Investment in debt and equity securities, net:
Securities available for sale, at fair value 125,433 84,596
Securities held to maturity (fair value of $9,208
and $13,361 respectively) 9,205 13,373
--------- ---------
Total investment in debt and equity securities, net 134,638 97,969
Loans 190,018 170,870
Less:
Allowance for loan losses (2,091) (1,971)
--------- ---------
Loans, net 187,927 168,899
Banking premises and equipment, net 9,278 8,466
Accrued interest receivable 2,410 1,857
Other assets 1,751 2,832
--------- ---------
Total Assets $ 382,158 $ 300,044
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits $ 107,079 $ 84,392
Savings, N.O.W. and money market deposits 187,037 128,917
Certificates of deposit of $100,000 or more 25,816 26,204
Other time deposits 33,067 34,809
--------- ---------
Total deposits 352,999 274,322
Accrued interest on depositors' accounts 785 761
Other liabilities and accrued expenses 1,745 1,289
--------- ---------
Total Liabilities 355,529 276,372
--------- ---------
Stockholders' equity:
Common stock, par value $.01 per share: Authorized:
20,000,000 shares; issued andoutstanding 4,237,597
at 9/30/00 and 4,257,597 shares at 12/31/99 43 43
Surplus 21,261 21,261
Undivided profits 5,719 3,233
Less: Treasury Stock at cost, 20,000 shares (320) --
--------- ---------
26,703 24,537
Accumulated other comprehensive (loss)income, net of taxes (74) (865)
--------- ---------
Total Stockholders' Equity 26,629 23,672
Commitments and contingencies --------- ---------
Total Liabilities and Stockholders' Equity $ 382,158 $ 300,044
========= =========
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See accompanying notes to the Unaudited Consolidated Financial Statements.
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BRIDGE BANCORP, INC. AND SUBSIDIARY
Three months ended September 30, Nine months ended September 30,
2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------
Interest income:
Loans (including fee income) $ 4,410 $ 3,704 $12,525 $11,191
Mortgage-backed securities 1,146 867 2,940 1,971
State and municipal obligations 454 333 1,336 926
U.S. Treasury and government agency securities 275 220 791 627
Federal funds sold 428 198 782 539
Other securities 18 18 54 54
Deposits with banks 115 46 148 91
------- ------- ------- -------
Total interest income 6,846 5,386 18,576 15,399
Interest expense:
Savings, N.O.W. and money market deposits 1,698 800 3,697 2,119
Certificates of deposit of $100,000 or more 404 341 1,336 1,032
Other time deposits 407 388 1,172 1,370
Federal funds purchased -- -- 16 --
------- ------- ------- -------
Total interest expense 2,509 1,529 6,221 4,521
------- ------- ------- -------
Net interest income 4,337 3,857 12,355 10,878
Provision for loan losses -- 105 105 315
------- ------- ------- -------
Net interest income after provision for loan losses 4,337 3,752 12,250 10,563
------- ------- ------- -------
Other income:
Service charges on deposit accounts 267 240 783 741
Net securities gains -- -- -- 116
Fees for other customer services 325 362 758 774
Other operating income 83 74 292 455
------- ------- ------- -------
Total other income 675 676 1,833 2,086
------- ------- ------- -------
Other expenses:
Salaries and employee benefits 1,480 1,167 4,078 3,546
Net occupancy expense 225 190649 569
Furniture and fixture expense 207 204 585 596
Net securities losses -- -- 266 --
Other operating expenses 838 926 2,766 2,742
------- ------- ------- -------
Total other expenses 2,750 2,487 8,344 7,453
------- ------- ------- -------
Income before provision for income taxes 2,262 1,941 5,739 5,196
Provision for income taxes 709 637 1,726 1,772
------- ------- ------- -------
Net income $ 1,553 $ 1,304 $ 4,013 $ 3,424
======= ======= ======= =======
Basic earnings per share $ 0.37 $ 0.31 $ 0.95 $ 0.81
======= ======= ======= =======
Diluted earnings per share $ 0.37 $ 0.31 $ 0.94 $ 0.80
======= ======= ======= =======
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See accompanying notes to the Unaudited Consolidated Financial Statements.
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BRIDGE BANCORP, INC. AND SUBSIDIARY
Accumulated
Other
Common Stock Comprehensive Undivided Treasury Comprehensive
Shares Amount Surplus Income Profits Stock Income Total
-----------------------------------------------------------------------------------------
=========================== ================================================
Balance at December 31, 1999 4,257,597 $43 $21,261 $3,233 $ 0 ($865) $23,672
Net income -- -- -- $4,013 4,013 -- -- 4,013
Purchase of Treasury Stock (20,000) -- -- (320) (320)
Cash dividends declared, $.36 per share (1,527) (1,527)
Net change in unrealized (depreciation)/
appreciation in securities available for -- -- -- 791 -- -- 791 791
sale, net of tax
--------------
Comprehensive Income -- -- -- $4,804 -- -- -- --
---------------------------==============------------------------------------------------
Balance at September 30, 2000 4,237,597 $43 $21,261 $5,719 ($320) ($74) $26,629
=========================================================================================
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See accompanying notes to the Unaudited Consolidated Financial Statements.
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BRIDGE BANCORP, INC. AND SUBSIDIARY
Nine months ended September 30, 2000 1999
---------------------------------------------------------------------------------------------------------
Operating activities:
Net Income $ 4,013 $ 3,424
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 105 315
Depreciation and amortization 589 570
Accretion of discounts (94) (78)
Amortization of premiums 112 129
Net securities losses (gains) 266 (116)
(Increase) in accrued interest receivable (553) (444)
Decrease in deferred income taxes 69 --
Decrease (increase) in other assets 463 (233)
Increase (decrease) in accrued and other liabilities 439 (623)
-------- --------
Net cash provided by operating activities 5,409 2,944
-------- --------
Investing activities:
Purchases of securities available for sale (49,602) (52,039)
Purchases of securities held to maturity (7,880) (6,848)
Proceeds from sales of securities available for sale 4,386 6,836
Proceeds from maturing securities available for sale 1,085 125
Proceeds from maturing securities held to maturity 12,048 3,494
Proceeds from principal payments on mortgage-backed securities 4,350 8,690
Net (increase) decrease in loans (19,133) 2,210
Purchases of banking premises and equipment, net of deletions (1,401) (376)
-------- --------
Net cash used by investing activities (56,147) (37,908)
-------- --------
Financing activities:
Net increase in deposits 78,677 59,416
Purchase of treasury stock (320) --
Net proceeds from exercise of stock options
issued pursuant to equity incentive plan -- 203
Cash dividends paid (1,486) (1,909)
-------- --------
Net cash provided by financing activities 76,871 57,710
-------- --------
Increase in cash and cash equivalents 26,133 22,746
Cash and cash equivalents beginning of period 20,021 14,282
-------- --------
Cash and cash equivalents end of period $ 46,154 $ 37,028
======== ========
Supplemental information-Cash Flows:
Cash paid for:
Interest $ 6,196 $ 5,187
Income taxes $ 1,395 $ 1,802
Noncash investing and financing activities:
Dividends declared and unpaid $ 509 $ 468
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See accompanying 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 Bank has one subsidiary that was formed on May 14, 1999, Bridgehampton Community Inc., a passive Real Estate Investment Trust (REIT). 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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reported periods. Such estimates are subject to change in the future as additional information becomes available or previously existing circumstances are modified. Actual future results could differ significantly from those estimates. The results of operations for the nine months ended September 30, 2000 are not necessarily indicative of the results of operations that may be expected for the entire fiscal year. Certain reclassifications have been made to prior year amounts to conform to current year presentations. 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 1999 Annual Report on Form 10-K.
2. Earnings Per Share
For the nine months ended September 30, 2000 and 1999, diluted weighted average common stock and common stock equivalent shares outstanding for the diluted earnings per share were 4,263,959 and 4,275,902, respectively. For the nine months ended September 30, 2000 and 1999, the total weighted average number of shares of common stock outstanding for the basic earnings per share calculation were 4,241,904 and 4,248,896, respectively. For the three months ended September 30, 2000 and 1999, diluted weighted average common stock and common stock equivalent shares outstanding for the diluted earnings per share were 4,259,710 and 4,275,911, respectively. For the three months ended September 30, 2000 and 1999, the total weighted average number of shares of common stock outstanding for the basic earnings per share calculation were 4,237,597 and 4,252,715, respectively. Diluted earnings per share, which reflects the potential dilution that could occur if outstanding stock options were exercised and resulted in the issuance of common stock that then shared in the earnings of the Company, is computed by dividing net income by the weighted average number of common shares and dilutive stock options.
3. Repurchased Stock
On February 16, 2000 the Company announced that its Board of Directors approved a stock repurchase. The Company purchased 20,000 shares in an open market transaction. The repurchased shares are being held as Treasury Stock.
4. Investment in Debt and Equity Securities
A summary of the amortized cost and estimated fair value of investment securities is as follows:
09/30/00 12/31/99
------------------------------------------------------------------------------------------------
(In thousands) Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
======================================================
Available for sale:
U.S. Treasury securities $ 7,046 $ 7,059 $ 8,078 $ 8,111
Oblig. of U.S. Government agencies 11,924 11,891 4,984 4,912
Oblig. of NY State & pol.subs 34,338 34,297 28,489 28,114
Mortgage-backed securities 72,252 72,186 44,511 43,459
======== ======== ======== ========
Total available for sale $125,560 $125,433 $ 86,062 $ 84,596
======== ======== ======== ========
Held to maturity:
Oblig. of NY State & pol.subs $ 8,122 $ 8,125 $ 12,290 $ 12,278
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 $ 9,205 $ 9,208 $ 13,373 $ 13,361
======== ======== ======== ========
Total debt and equity securities $134,765 $134,641 $ 99,435 $ 97,957
======== ======== ======== ========
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5. Loans
Loans are summarized as follows:
09/30/00 12/31/99
-------------------------------------------------------------------------------
(In thousands)
Real Estate Loans $ 157,931 $ 141,479
Unsecured business and personal loans 30,327 27,869
Secured business and personal loans 1,102 1,086
Installment/consumer loans 805 675
-------------------------
Total loans $ 190,165 $ 171,109
Unearned income (147) (239)
-------------------------
$ 190,018 $ 170,870
Allowance for loan losses (2,091) (1,971)
-------------------------
Net loans $ 187,927 $ 168,899
=========================
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The principal business of the Bank is lending, primarily in commercial real estate loans, construction 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 two forks of the eastern end of Long Island, the loan portfolio as a whole is dependent on the economic conditions of the geographic market served by the Bank.
6. Allowance for Loan Losses
The Bank monitors its portfolio on a regular basis, with consideration given to detailed analysis of classified loans, delinquency trends, probable losses, past loss experience, current economic conditions, concentrations of credit and other pertinent factors. Weight is also given to input from the Bank’s outside loan review consultants. Additions to the allowance are charged to expense and realized losses, net of recoveries, are charged to the allowance. Based on management’s and the loan classification committee’s determination of the condition of the portfolio, the overall level of reserves is periodically adjusted to account for the inherent and specific risks within the entire portfolio. At a minimum, the adequacy of these reserves are adjusted quarterly, to a level deemed appropriate by management based on their risk assessment of the entire portfolio. 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 at the quarter ended September 30, 2000, management believes 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 loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgments based on information available to them at the time of their examination.
Changes in the allowance for possible loan losses are summarized
as follows:
Period ended, 09/30/00 12/31/99 09/30/99
-----------------------------------------------------------------------------------------
(In thousands)
Allowance for loan losses
balance at beginning of period $ 1,971 $ 1,713 $ 1,713
Charge-offs:
Real estate loans 9 170 --
Unsecured business & personal loans 62 39 37
Secured business & personal loans -- -- --
Installment/consumer loans 33 62 51
---------------------------------------
Total 104 271 88
Recoveries:
Real estate loans 56 -- --
Unsecured business & personal loans 1 4 4
Secured business & personal loans -- -- --
Installment/consumer loans 62 105 95
---------------------------------------
Total 119 109 99
---------------------------------------
Net recoveries (charge-offs) 15 (162) 11
Provision for loan losses
charged to operations 105 420 315
---------------------------------------
Balance at end of period $ 2,091 $ 1,971 $ 2,039
=======================================
Ratio of net recoveries (charge-offs) during
period to average loans outstanding 0.01% -0.10% 0.01%
=======================================
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7. Asset Quality
The following table summarizes non-performing loans:
09/30/00 12/31/99
-----------------------------------------------------------------------
(In thousands)
Loans 90 days or more past due
and still accruing:
Other $ 10 $ 1
Nonaccrual loans:
Mortgage loans:
Single-family residential 311 --
Commercial real estate -- 300
Construction and Land -- --
Other 130 189
-------------------
Total nonaccrual loans 741 189
Restructured loans -- 776
Other real estate owned, net -- --
-------------------
Total $751 $966
===================
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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 service charges on deposit accounts and income from fees for other customer services and merchant credit card processing programs. The level of its other expenses, such as employees’ salaries and benefits and occupancy costs, further affects the Bank’s net income. This discussion and analysis should be read in conjunction with the Audited Consolidated Financial Statements and notes thereto included in the Company’s 1999 Form 10-K.
Financial Condition
The assets of the Registrant totaled $382,158,000 at September 30, 2000, an increase of $82,114,000 or 27.4% from the year-end. This increase mainly results from an increase in cash and cash equivalents of $26,133,000 or 130.5%, an increase in available-for-sale securities of $40,837,000 or 48.3%, and an increase in net loans of $19,028,000 or 11.3%. These increases were slightly offset by a decrease in held-to-maturity securities of $4,168,000 or 31.2%. The primary source of funds for the increase in assets was derived from increased deposits of $78,677,000 or 28.7%. Demand deposits increased $22,687,000 or 26.9% over December 31, 1999. Savings, N.O.W. and money market deposits increased $58,120,000 or 45.1%. The increase in deposits is primarily attributed to continued business development efforts targeting high balance relationships.
Total stockholders’ equity was $26,629,000 at September 30, 2000, an increase of 12.5% over December 31, 1999. The increase of $2,957,000 was the result of net income for the nine month period ended September 30, 2000, of $4,013,000; less $320,000 utilized for the purchase of 20,000 shares of treasury stock; less cash dividends declared of $1,527,000; and plus the net decrease in unrealized depreciation in securities available for sale, net of tax, of $791,000. Total capital before unrealized losses on available-for-sale securities increased by $2,166,000 or 8.8%. Securities held as available-for-sale may be sold in response to , or in anticipation of, changes in interest rates and resulting prepayment risk, or other factors. During the second quarter of 2000, management sold a portion of the lowest yielding securities in the available for sale investment portfolio and reinvested these funds in securities earning current market rates of return. This partial repositioning of the available for sale securities portfolio and changes in market conditions were the primary reason for the net decrease in unrealized depreciation in securities available for sale.
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 nine month periods ended September 30, 2000 and 1999, 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 September 30, 2000 and 1999 totaled $22,000 and $30,000, respectively. For the nine months ended September 30, 2000 and 1999 loan fee income totaled $103,000 and $121,000, 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.
Nine months ended September 30, 2000 1999
=====================================================================================================================================
(In thousands) Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
=====================================================================================================================================
Interest earning assets:
Loans (including fee income) $182,017 $12,525 9.2% $168,599 $11,191 8.9%
Mortgage backed securities 54,697 2,940 7.2% 39,356 1,971 6.7%
Tax exempt investment securities 40,682 1,910 6.3% 28,256 1,390 6.6%
Taxable investment securities 16,268 791 6.5% 13,011 627 6.4%
Federal funds sold 17,315 782 6.0% 14,761 539 4.9%
Other securities 1,083 54 6.7% 1,083 54 6.7%
Deposits with banks 3,165 148 6.2% 2,481 91 4.9%
=========================================================================
Total interest earning assets $315,227 $19,150 8.1% $267,547 $15,863 7.9%
Interest bearing liabilities:
Savings, N.O.W. and
money market deposits $149,274 $3,697 3.3% $119,086 $2,119 2.4%
Certificates of deposit of $100,000
or more 32,084 1,336 5.6% 28,452 1,032 4.8%
Other time deposits 34,062 1,172 4.6% 39,779 1,370 4.6%
Federal funds purchased 286 16 7.5% - - -
=========================================================================
Total interest bearing liabilities $215,706 $6,221 3.8% $187,317 $4,521 3.2%
=========================================================================
Net interest income/interest
rate spread (1) $12,929 4.3% $11,342 4.7%
======= ====== ======= ======
Net interest earning assets/net interest margin $ 99,521 5.5% $ 80,230 5.7%
======== ======= ======== ======
Ratio of interest earning assets to
interest bearing liabilities 146.1% 142.8%
====== ======
Less: Tax equivalent adjustment $ (574) $ (464)
======= =======
Net interest income $12,355 $10,878
======= =======
Three months ended September 30, 2000 1999
=====================================================================================================================================
(In thousands) Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
=====================================================================================================================================
Interest earning assets:
Loans (including fee income) $188,378 $4,410 9.3% $167,887 $3,704 8.8%
Mortgage backed securities 62,560 1,146 7.3% 51,058 867 6.7%
Tax exempt investment securities 40,028 649 6.5% 30,563 500 6.5%
Taxable investment securities 16,787 275 6.5% 13,800 220 6.3%
Federal funds sold 28,501 428 6.0% 15,505 198 5.1%
Other securities 1,083 18 6.6% 1,083 18 6.6%
Deposits with banks 7,283 115 6.3% 3,652 46 5.0%
=========================================================================
Total interest earning assets $344,620 $7,041 8.1% $283,548 $5,553 7.8%
Interest bearing liabilities:
Savings, N.O.W. and
money market deposits $170,619 $1,698 4.0% $128,239 $ 800 2.5%
Certificates of deposit of $100,000
or more 27,733 404 5.8% 27,458 341 4.9%
Other time deposits 33,557 407 4.8% 36,674 388 4.2%
=========================================================================
Total interest bearing liabilities $231,909 $2,509 4.3% $192,371 $1,529 3.2%
=========================================================================
Net interest income/interest
rate spread (1) $4,532 3.8% $4,024 4.6%
====== ====== ====== ======
Net interest earning assets/net interest margin $112,711 5.2% $ 91,177 5.6%
======== ======= ======== ======
Ratio of interest earning assets to
interest bearing liabilities 148.6% 147.4%
====== ======
Less: Tax equivalent adjustment $(195) $(167)
====== ======
Net interest income $4,337 $3,857
====== ======
(1) The above table is presented on a tax equivalent basis.
|
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.
For the Periods Ended September 30, Nine months ended Three months ended
2000 Over 1999 2000 Over 1999
(In thousands) Changes Due To Changes Due To
=================================================================================================================
Net Net
Volume Rate Change Volume Rate Change
Interest income on interest
earning assets:
Loans (including loan fee income) 920 414 1,334 $ 463 $ 243 $ 706
Mortgage-backed securities 818 151 969 205 74 279
Tax exempt investment securities 625 (105) 520 167 (18) 149
Taxable investment securities 159 5 164 48 7 55
Federal funds sold 103 140 243 189 41 230
Other securities -- -- -- -- -- --
Deposits with banks 19 38 57 41 28 69
------------------------------------------------------------------
Total interest earning assets $2,644 $643 $ 3,287 $ 1,113 $ 375 $ 1,488
------------------------------------------------------------------
Interest expense on interest
bearing liabilities
Savings, N.O.W. and money market deposits 621 957 1,578 319 579 898
Certificates of deposit of $100,000 or more 141 163 304 4 59 63
Other time deposits (196) (2) (198) (160) 179 19
Federal funds purchased 16 -- 16 -- -- --
-------------------------------------------------------------------
Total interest bearing liabilities $ 582 $ 1,118 $ 1,700 $ 163 $ 817 $ 980
-------------------------------------------------------------------
Net interest income $ 2,062 $ (475) $ 1,587 $ 950 $ (442) $ 508
===================================================================
(1) The above table is presented on a tax equivalent basis.
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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.
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 September 30, 2000, that the Bank meets all capital adequacy requirements to which it is subject and is considered well capitalized.
The Bank's actual capital amounts and ratios are presented
in the following table:
As of September 30, 2000
==========================================================================================================================
(In thousands) To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
==========================================================================================================================
Amount Ratio Amount Ratio Amount Ratio
==============================================================================
Total Capital (to risk weighted assets) 28,794 12.4% 18,507 >8.0% 23,134 > 10.0%
Tier 1 Capital (to risk weighted assets) 26,703 11.5% 9,254 >4.0% 13,881 > 6.0%
Tier 1 Capital (to average assets) 26,703 7.8% 13,612 >4.0% 17,014 > 5.0%
As of December 31, 1999
==========================================================================================================================
(In thousands) To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
==========================================================================================================================
Amount Ratio Amount Ratio Amount Ratio
==============================================================================
Total Capital (to risk weighted assets) 26,508 13.2% 16,090 >8.0% 20,113 >10.0%
Tier 1 Capital (to risk weighted assets) 24,537 12.2% 8,045 >4.0% 12,068 > 6.0%
Tier 1 Capital (to average assets) 24,537 8.2% 12,024 >4.0% 15,030 > 5.0%
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Recent Accounting Developments
In June 1998, the Financial Accounting Standards Board 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. Management is in the process of determining the impact, if any, the implementation of SFAS No. 133 and 137 will have on their statements of income and condition.
Comparison of Operating Results for the Three Months and Nine Months Ended September 30, 2000 and 1999
During the nine month period ended September 30, 2000, the Registrant earned net income of $4,013,000 or $ .94 per share as compared with $3,424,000 or $.80 per share for the same period in 1999. During the three month period ended September 30, 2000, the Registrant earned net income of $1,553,000 or $.37 per share as compared with $1,304,000 or $.31 per share for the same period in 1999. Highlights for the nine months ended September 30, 2000 include: (i) a $1,477,000 or 13.6% increase in net interest income; (ii) a $253,000 or 12.1% decrease in total other income; and (iii) a $891,000 or 12.0% increase in total other expenses over the same period in 1999. The effective income tax rate decreased to 30.07% from 34.10% for the same period last year. Highlights for the three months ended September 30, 2000 include: (i) a $480,000 or 12.4% increase in net interest income; (ii) a $1,000 or .2% decrease in total other income; and (iii) a $263,000 or 10.6% increase in total other expenses over the same period in 1999. The effective income tax rate decreased to 31.35% from 32.83% for the same period last year.
Net income for the first nine months of 2000 reflects annualized returns of 21.11% on average total stockholders’ equity and 1.57% on average total assets as compared to the corresponding figures for the preceding calendar year of 21.00% on average total stockholders’ equity and 1.59% 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 $1,477,000 or 13.6% for the current nine month period over the same period last year. The increase primarily resulted from an increase in average total interest earning assets from $267,547,000 in 1999 to $315,277,000 for the comparable period in 2000, a 17.8% increase. Average interest bearing liabilities increased 15.2% to $215,706,000 in 2000 from $187,317,000 for the same period last year. The yield on average interest earning assets at September 30, 2000 increased to 8.1% from 7.9% during the same period in 1999. The cost of average interest bearing liabilities increased to 3.9% from 3.2% during the same period in 1999. The net yield on average earning assets decreased to 5.5% from 5.7% during the same period last year.
Net interest income increased by $480,000 or 12.4% 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 $283,548,000 in 1999 to $344,620,000 for the comparable period in 2000, a 21.5% increase. Average interest bearing liabilities increased 20.6% to $231,909,000 in 2000 from $192,371,000 for the same period last year. The yield on average interest earning assets for the current three month period increased to 8.1% from 7.8% over the same period last year. The cost of average interest bearing liabilities increased to 4.3% from 3.2% during the same period in 1999. The net yield on average earning assets decreased to 5.2% from 5.6% during the same period last year.
Average loans grew by $13,418,000 or 8.0% when compared to the same nine month period in 1999. Each component of the loan portfolio contributed to the growth; however, real estate loans increased $16,452,000 or 11.6% and unsecured business and personal loans increased $2,458,000 or 8.8%. Growth in real estate loans is partially attributed to a change in holding strategy whereby a portion of originated residential mortgages are held in portfolio instead of being sold on the secondary market. Unsecured business and personal loans increased as a result of business development efforts.
The performance of the loan portfolio continued to be strong through September 30, 2000 with net recoveries of $15,000. Since December 31, 1999 non-performing loans decreased 22.3% from $966,000 to $751,000, representing 0.40% of loans, net, at September 30, 2000. The Company had no foreclosed real estate at quarter’s end. Total non-performing assets represented 0.20% of total assets at the corresponding date.
Based on management’s continuing review of the overall loan portfolio and the current asset quality on the portfolio, no provision for loan losses was recorded in the third quarter of 2000. A $105,000 provision for loan losses was made during the same period in 1999. The provision for loan losses made during the nine month period ended September 30, 2000 totaled $105,000 compared to a $315,000 provision for the same period in 1999. The allowance for loan losses increased to $2,091,000 at September 30, 2000, as compared to $1,971,000 at December 31, 1999. As a percentage of loans, the allowance was 1.10% at September 30, 2000 and 1.15% at December 31, 1999.
Total investment securities increased from $97,969,000 at December 31, 1999 to $134,638,000 at September 30, 2000. The available for sale investment portfolio increased 48.3% to $125,433,000 primarily as a result of increased holdings of mortgage backed securities. Investing in mortgage backed securities generally provides stable cash flows, which may be reinvested at current market rates. The weighted average life of the mortgage backed securities portfolio was 6.63 years at September 30, 2000.
The Bank monitors its portfolio on a regular basis, with consideration given to detailed analysis of classified loans, delinquency trends, probable losses, past loss experience, current economic conditions, concentrations of credit and other pertinent factors. Weight is also given to input from the Bank’s outside loan review consultants. Additions to the allowance are charged to expense and realized losses, net of recoveries, are charged to the allowance. Based on management’s and the loan classification committee’s determination of the condition of the portfolio, the overall level of reserves is periodically adjusted to account for the inherent and specific risks within the entire portfolio. At a minimum, the adequacy of these reserves are adjusted quarterly, to a level deemed appropriate by management based on their risk assessment of the entire portfolio. 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 at the quarter ended September 30, 2000, management believes 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 loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgments based on the information available to them at the time of their examination.
Total other income remained relatively constant during the three month period ended September 30, 2000 with a decrease of only $1,000 or .2% over the same period last year. For the nine month period ended September 30, 2000 total other income decreased $253,000 or 12.1% over the same period last year. Service charges on deposit accounts for the three month period ended September 30, 2000 totaled $267,000, an increase of $27,000 or 11.3% over the same period last year. Service charges on deposit accounts for the nine month period ended September 30, 2000 totaled $783,000, an increase of $42,000 or 5.7% over the same period last year. Fees for other customer services for the three month period ended September 30, 2000 totaled $325,000, a decrease of $37,000 or 10.2% over the same period last year. This decrease is mainly attributed to a decrease in fees collected on residential mortgage loans due to a reduction in the number of residential mortgages originated during this period. Fees for other customer services for the nine month period ended September 30, 2000 totaled $758,000, a decrease of $16,000 or 2.1% over the same period last year. Merchant processing income increased during the current year due to an increase in fees resulting from a change in the pricing structure made in the second quarter of 1999 and an increase in the volume of merchant sales during 2000. This increase was partially offset by a decrease in fees collected on residential mortgage loans due to a reduction in the number of residential mortgages originated over the same period. Decreases in other income were partially offset by fees received through the new debit card product introduced during the third quarter of 1999, and fee income recognized as a result of a referral relationship with another institution to provide wealth management services to the Bank’s customers.
Other operating income for the three month period ended September 30, 2000 totaled $83,000, an increase of $9,000 or 12.2% over the same period last year. Other operating income for the nine month period ended September 30, 2000 totaled $292,000, a decrease of $163,000 or 35.8% over the same period last year. The decrease primarily resulted from a decrease in income from the gain on the sale of mortgages for the nine month period ended September 30, 2000, resulting from a change in strategy whereby a portion of originated residential mortgages are held in portfolio instead of being sold on the secondary market. While revenue from mortgage banking operations was down, corresponding expense reductions partially offset such decline.
Total other expenses increased during the three month period ended September 30, 2000 by $263,000 or 10.6% over the same period last year. For the nine month period ended September 30, 2000 total other expenses increased $891,000 or 12.0% over the same period last year. Salary and benefit expense increased $313,000 or 26.8% for the three month period ended September 30, 2000 over the same period last year. For the nine month period ended September 30, 2000 salary and benefit expense increased $532,000 or 15.0% over the same period last year. The increase in salary expense is attributed to increased staffing, primarily in the item processing department that the Bank moved in house in the first quarter of 2000, and salary increases. These salary increases were partially offset by a decrease in expenses paid to a third party provider for item processing services. Net occupancy expenses increased $35,000 or 18.4% during the three month period ended September 30, 2000, and these expenses increased $80,000 or 14.1% for the nine month period ended September 30, 2000, over the same period last year. These increases result from the leasing of space for the new branch offices in Greenport, opened during the second quarter, and Sag Harbor which is scheduled to open in the fourth quarter. Furniture and fixture expense for the three month period ended September 30, 2000 increased $3,000 or 1.5% over the same period last year. For the nine month period ended September 30, 2000 furniture and fixture expense decreased $11,000 or 1.9% over the same period last year. This decrease for the nine month period is partially attributed to the reduction in depreciation expense due to a prior year computer conversion being fully depreciated by the fourth quarter of 1999.
During the second quarter of 2000, management sold a portion of the lowest yielding securities in the available for sale investment portfolio and reinvested these funds in securities earning current market rates of return. The net loss recognized on this sale was $266,000.
Total other operating expenses for the three month period ended September 30, 2000 totaled $838,000, a decrease of $88,000 or 9.5% over the same period last year. For the nine month period ended September 30, 2000 total other operating expenses totaled $2,766,000 an increase of $24,000 or .9% over the same period last year. The increase in both periods is partially due to large one time expenses related to the implementation of in house item processing, statement rendering and check imaging. Decreased item processing expenses paid to the former vendor of these services partially offset these increased costs. Also contributing to this increase is a change in the processing of the merchant credit card program during the first quarter of 2000, as well as increased marketing and business development costs attributed to the opening of two new branches. A new branch office was opened in Greenport in April 2000, and a branch is scheduled to open in Sag Harbor during the fourth quarter. Additionally, during the first half of 1999, the Bank incurred non recurring expenses relative to the development of training programs and other one time expenses due to the formation of a subsidiary. These nonrecurring expenses were not repeated in the current year thereby partially offsetting the current nine month period’s increases in other categories of operating expenses.
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 September 30, 2000, the Company had aggregate lines of credit of $20,000,000 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 against unencumbered residential mortgages owned by the Bank. At September 30, 2000, 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.
Private Securities Litigation Reform Act Safe Harbor Statement
In addition to historical information, this Management’s discussion and analysis includes certain forward-looking statements, which involve risk and uncertainties, based on the beliefs, assumptions and expectations of management of the Company. Words such as “expects”, “believes”, “should”, “plans”, “will”, “estimates”, and variations of such similar expressions are intended to identify such forward-looking statements. 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.
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
11.0 Statement re: Computation of Per Share Earnings
27.0 Financial Data Schedule
b. Reports on Form 8-K
On October 17, 2000 the registrant filed a form 8K relative to the purchase of 20,000 shares or .5% of its outstanding common stock to be held as treasury stock.
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: November 14, 2000 /s/Thomas J. Tobin
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Thomas J. Tobin
President and Chief Executive Officer
Date: November 14, 2000 /s/Christopher Becker
__________________________________
Christopher Becker
Executive Vice President and Treasurer
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