NEW YORK 11-2934195(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
2200 Montauk Highway, Bridgehampton, New York 11932 (Address of principal executive office) (Zip Code)
Issuer's telephone number, including area code (631) 537-1000
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 4,194,879 shares of common stock outstanding as of August 14, 2001.
Item 1. Financial Statements Unaudited Consolidated Statements of Condition as of June 30, 2001 and December 31, 2000 Unaudited Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2001 and 2000 Unaudited Consolidated Statements of Stockholders' Equity for the Six Months Ended June 30, 2001 Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000 Notes to Unaudited Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
PART 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 Signatures
PART I - FINANCIAL INFORMATION Item 1. Financial Statements BRIDGE BANCORP, INC. AND SUBSIDIARY Unaudited Consolidated Statements of Condition(In thousands, except share and per share amounts) June 30, December 31, 2001 2000 ================================================================================================ ASSETS Cash and due from banks $ 14,169 $ 16,005 Interest earning deposits with banks 70 39 Federal funds sold 8,000 - ----------------------- Total cash and cash equivalents 22,239 16,044 Investment in debt and equity securities, net: Securities available for sale, at fair value (securities pledged of $91,003 and $73,977 at June 30, 2001 and December 31, 2000 respectively) 121,322 114,454 Securities held to maturity (fair value of $8,892 and $12,414 respectively) 8,870 12,397 ======================= Total investment in debt and equity securities, net 130,192 126,851 Loans 219,599 201,092 Less: Allowance for loan losses (2,273) (2,100) ======================= Loans, net 217,326 198,992 Banking premises and equipment, net 9,012 9,210 Accrued interest receivable 2,055 2,165 Other assets 1,619 1,380 ======================= Total Assets $382,443 $354,642 ======================= LIABILITIES AND STOCKHOLDERS' EQUITY Demand deposits $108,473 $ 99,979 Savings, N.O.W. and money market deposits 174,333 158,904 Certificates of deposit of $100,000 or more 32,732 21,892 Other time deposits 32,950 32,604 ======================= Total deposits 348,488 313,379 Overnight borrowings - 9,700 Accrued interest on depositors' accounts 707 786 Other liabilities and accrued expenses 2,006 1,989 ======================= Total Liabilities 351,201 325,854 ======================= Stockholders' equity: Common stock, par value $.01 per share: Authorized: 20,000,000 shares; 4,257,597 issued; 4,194,879 and 4,217,597 shares outstanding at 6/30/01 and 12/31/00 respectively 43 43 Surplus 21,261 21,261 Undivided profits 8,831 6,793 Less: Treasury Stock at cost, 62,718 and 40,000 shares at 6/30/01 and 12/31/00 respectively (1,045) (653) ======================= 29,090 27,444 Accumulated other comprehensive income, net of taxes 2,152 1,344 ======================= Total Stockholders' Equity 31,242 28,788 Commitments and contingencies ======================= Total Liabilities and Stockholders' Equity $382,443 $354,642 =======================
BRIDGE BANCORP, INC. AND SUBSIDIARY Unaudited Consolidated Statements of Income(In thousands, except per share amounts) Three months ended June 30, Six months ended June 30, 2001 2000 2001 2000 ============================================================================================================ Interest income: Loans (including fee income) $4,701 $4,203 $9,341 $8,115 Mortgage-backed securities 1,430 982 2,782 1,794 State and municipal obligations 434 444 887 882 U.S. Treasury and government agency securities 155 266 308 516 Federal funds sold 104 175 212 361 Other securities 19 18 38 36 Deposits with banks 29 21 30 26 -------------------------------------------------------- Total interest income 6,872 6,109 13,598 11,730 Interest expense: Savings, N.O.W. and money market deposits 1,392 1,104 3,031 1,999 Certificates of deposit of $100,000 or more 382 471 711 932 Other time deposits 387 386 790 765 Federal funds purchased 9 16 19 16 Other borrowed money 3 - 3 - -------------------------------------------------------- Total interest expense 2,173 1,977 4,554 3,712 -------------------------------------------------------- Net interest income 4,699 4,132 9,044 8,018 Provision for loan losses 85 0 170 105 -------------------------------------------------------- Net interest income after provision for loan losses 4,614 4,132 8,874 7,913 -------------------------------------------------------- Other income: Service charges on deposit accounts 361 271 710 516 Fees for other customer services 188 108 339 248 Net securities (losses) gains - (266) 78 (266) Other operating income 77 46 83 99 -------------------------------------------------------- Total other income 626 159 1,210 597 -------------------------------------------------------- Other expenses: Compensation and employee benefits 1,524 1,292 3,063 2,598 Net occupancy expense 244 222 500 424 Furniture and fixture expense 213 203 422 378 Other operating expenses 775 803 1,506 1,633 -------------------------------------------------------- Total other expenses 2,756 2,520 5,491 5,033 -------------------------------------------------------- Income before provision for income taxes 2,484 1,771 4,593 3,477 Provision for income taxes 808 521 1,460 1,017 -------------------------------------------------------- Net income $1,676 $1,250 3,133 2,460 ======================================================== Basic earnings per share $ 0.40 $ 0.29 $ 0.75 $ 0.58 ======================================================== Diluted earnings per share $ 0.40 $ 0.29 $ 0.74 $ 0.57 ======================================================== See accompanying notes to the Unaudited Consolidated Financial Statements.
BRIDGE BANCORP, INC. AND SUBSIDIARY Unaudited Consolidated Statements of Stockholders' Equity(In thousands, except share and per share amounts) Accumulated Other Common Stock Comprehensive Undivided Treasury Comprehensive Shares Amount Surplus Income Profits Stock Income Total ============================================================================================================================== ========================= ============================================ Balance at December 31, 2000 4,257,597 $43 $21,261 $6,793 ($653) $1,344 $28,788 Net income - - - $3,133 3,133 - - 3,133 Purchase of Treasury Stock - - - (445) (445) Issuance of vested stock awards from treasury 29 29 Exercise of stock options - - - 24 24 Cash dividends declared, $.26 per share (1,095) (1,095) Net change in unrealized (depreciation)/ appreciation in securities available for sale, net of tax - - - 808 - - 808 808 ------------- Comprehensive Income - - - $3,941 - - - - -------------------------=============--------------------------------------------- Balance at June 30, 2001 4,257,597 $43 $21,261 $8,831 ($1,045) $2,152 $31,242 =================================================================================== See accompanying notes to the Unaudited Consolidated Financial Statements.
BRIDGE BANCORP, INC. AND SUBSIDIARY Unaudited Consolidated Statements of Cash Flows(In thousands) Six months ended June 30, 2001 2000 =============================================================================================== Operating activities: Net Income $ 3,133 $ 2,460 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 170 105 Depreciation and amortization 450 382 Accretion of discounts (116) (53) Amortization of premiums 69 73 Earned or allocated expense of restricted stock awards 29 18 Loss on the sale of assets 4 - Net securities losses (gains) (78) 266 (Increase) in accrued interest receivable 110 (156) Decrease in deferred income taxes - 43 Decrease (increase) in other assets (239) (958) Increase (decrease) in accrued and other liabilities (587) (552) ===================== Net cash provided by operating activities 2,945 1,628 ===================== Investing activities: Purchases of securities available for sale (24,014) (29,355) Purchases of securities held to maturity (6,504) (3,181) Proceeds from sales of securities available for sale 9,747 4,386 Proceeds from maturing securities available for sale 820 785 Proceeds from maturing securities held to maturity 10,032 11,183 Proceeds from principal payments on mortgage-backed securities 8,038 2,584 Net (increase) decrease in loans (18,504) (17,587) Purchases of banking premises and equipment, net of deletions (256) (1,237) ===================== Net cash used by investing activities (20,641) (32,422) ===================== Financing activities: Net increase in deposits 35,109 50,312 Decrease in other borrowings (9,700) (320) Payment for the purchase of treasury stock (445) - Net proceeds from exercise of stock options issued pursuant to the equity incentive plan 24 - Cash dividends paid (1,097) (977) ===================== Net cash provided by financing activities 23,891 49,015 ===================== (Decrease) increase in cash and cash equivalents 6,195 18,221 Cash and cash equivalents beginning of period 16,044 20,021 ===================== Cash and cash equivalents end of period $22,239 $38,242 ===================== Supplemental information-Cash Flows: Cash paid for: Interest $4,634 $ 3,790 Income taxes $1,623 $1,225 Noncash investing and financing activities: Dividends declared and unpaid $ 546 $ 509 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 six months ended June 30, 2001 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 2000 Annual Report on Form 10-K.
For the three months ended June 30, 2001 and 2000, diluted weighted average common stock and common stock equivalent shares outstanding for the diluted earnings per share were 4,237,397 and 4,258,370, respectively. For the three months ended June 30, 2001 and 2000, the total weighted average number of shares of common stock outstanding for the basic earnings per share calculation were 4,208,659 and 4,237,597, respectively. For the six months ended June 30, 2001 and 2000, diluted weighted average common stock and common stock equivalent shares outstanding for the diluted earnings per share were 4,238,210 and 4,266,107, respectively. For the six months ended June 30, 2001 and 2000, the total weighted average number of shares of common stock outstanding for the basic earnings per share calculation were 4,211,448 and 4,244,081, 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.
On January 3, 2001 the Company announced that its Board of Directors approved a stock repurchase of 5,000 shares in an open market transaction at a cost of $79,000. The repurchased shares are being held as Treasury Stock.
On February 22, 2001 the Company announced that its Board of Directors authorized a stock repurchase program for the repurchase of up to 210,630 of the Company’s shares, or approximately 5% of its common shares outstanding, from time to time in the open market or through private purchases, depending on market conditions and subject to compliance with applicable securities laws. As of June 30, 2001, 21,000 shares had been repurchased by the Company pursuant to the stock repurchase program at an aggregate cost of $366,000.
A summary of the amortized cost and estimated fair value of investment securities is as follows:
06/30/01 12/31/00 =========================================================================================================== (In thousands) Estimated Estimated Amortized Fair Amortized Fair Cost Value Cost Value ================================================================= Available for sale: U.S. Treasury securities $ 2,007 $ 2,031 $ 2,017 $ 2,032 Oblig. of U.S. Government agencies 6,959 7,174 6,944 7,050 Oblig. of NY State & pol.subs. 26,097 27,081 34,318 34,781 Mortgage-backed securities 82,674 85,036 68,923 70,591 ================================================================= Total available for sale $117,737 $121,322 $112,202 $114,454 ================================================================= Held to maturity: Oblig. of NY State & pol.subs. $ 7,477 $ 7,499 $ 11,314 $ 11,331 Non marketable Equity securities: Federal Reserve Bank Stock $ 36 $ 36 $ 36 $ 36 Federal Home Loan Bank Stock 1,357 1,357 1,047 1,047 ================================================================= Total held to maturity $ 8,870 $ 8,892 $ 12,397 $ 12,414 ================================================================= Total debt and equity securities $126,607 $130,214 $124,599 $126,868 =================================================================
06/30/01 12/31/00 ================================================================================ (In thousands) Real Estate Loans $183,012 $165,889 Unsecured business and personal loans 34,811 33,291 Secured business and personal loans 693 1,059 Installment/consumer loans 1,189 963 ========================== Total loans $219,705 $201,202 Unearned income (106) (110) ========================== $219,599 $201,092 Allowance for loan losses (2,273) (2,100) ========================== Net loans $217,326 $198,992 ==========================
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.
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 June 30, 2001, 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 after consideration of the information available to them at the time of their examination.
Period ended, 06/30/01 12/31/00 06/30/00 ======================================================================================== (In thousands) Allowance for loan losses Balance at beginning of period $2,100 $1,971 $1,971 Charge-offs: Real estate loans - 9 Unsecured business & personal loans 38 62 62 Secured business & personal loans - - - Installment/consumer loans 9 36 21 ====================================== Total 47 107 92 Recoveries: Real estate loans 29 58 55 Unsecured business & personal loans 5 1 1 Secured business & personal loans - - - Installment/consumer loans 16 72 47 ====================================== Total 50 131 103 ====================================== Net recoveries (charge-offs) 3 24 11 Provision for loan losses charged to operations 170 105 105 ====================================== Balance at end of period $2,273 $2,100 $2,087 ====================================== Ratio of net recoveries (charge-offs) during period to average loans outstanding 0.00% 0.01% 0.02% ======================================
06/30/01 12/31/00 ====================================================================== (In thousands) Loans 90 days or more past due and still accruing: Other $ - $ - Nonaccrual loans: Mortgage loans: Single-family residential 316 463 Commercial real estate 300 - Construction and Land - - Other 122 6 ==================== Total nonaccrual loans 438 769 Restructured loans - - Other real estate owned, net - - ==================== Total $438 $769 ====================
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsBridge 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 2000 Form 10-K.
Financial ConditionThe assets of the Registrant totaled $382,443,000 at June 30, 2001, an increase of $27,801,000 or 7.8% from the year-end. This increase mainly results from an increase in cash and cash equivalents of $6,195,000 or 38.6%, an increase in debt and equity securities of $3,341,000 or 2.6% , and an increase in net loans of $18,334,000 or 9.2%. The primary source of funds for the increase in assets was derived from increased deposits of $35,109,000 or 11.2% over December 31, 2000. The increase in deposits is offset by a decrease in overnight borrowings of $9,700,000 or 100% from the year-end. Demand deposits increased $8,494,000 or 8.5% over December 31, 2000. This increase is attributed to growth in deposits associated with business development efforts in new and existing markets. Savings, N.O.W. and money market deposits increased $15,429,000 or 9.7%, certificates of deposit over $100,000 increased $10,840,000 or 49.5% and other time deposits increased $346,000 or 1.1% over year end. These increases are primarily attributed to increased public fund deposits.
Total stockholders' equity was $31,242,000 at June 30, 2001, an increase of 8.5% over December 31, 2000. The increase of $2,454,000 was the result of net income for the six month period ended June 30, 2001, of $3,133,000; less $445,000 utilized for the purchase of 26,000 shares of treasury stock; plus $29,000 obtained from the issuance of vested stock awards from treasury; plus the proceeds of $24,000 from the exercise of incentive stock options pursuant to the equity incentive plan; less cash dividends declared of $1,095,000; and plus the net increase in unrealized appreciation in securities available for sale, net of tax, of $808,000. 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 first quarter of 2001, management sold municipal securities in the available for sale investment portfolio and reinvested these funds in mortgage backed securities earning higher market rates of return. Changes in market conditions were the primary reason for the net increase in unrealized appreciation in securities available for sale.
Analysis of Net Interest IncomeNet 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, 2001 and 2000, 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. 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.
Three months ended June 30, 2001 2000 - --------------------------------------------------------------------------------------------------------------------- Average Average Average Average (In thousands) Balance Interest Yield/Cost Balance InterestYield/Cost - --------------------------------------------------------------------------------------------------------------------- Assets: Interest earning assets: Loans, net (including fee income) $213,281 $4,701 8.8% $183,426 $4,203 9.2% Mortgage backed securities (1) 78,284 1,430 7.3% 54,876 982 7.2% Tax exempt investment securities (1) 38,005 643 6.8% 41,179 627 6.1% Taxable investment securities (1) 8,965 155 6.9% 16,458 266 6.5% Federal funds sold 10,646 104 3.9% 10,458 175 6.7% Other securities 1,393 19 5.5% 1,083 18 6.7% Deposits with banks 3,014 29 3.9% 1,894 21 4.5% ----------------------------------------------------------------- Total interest earning assets 353,588 7,081 8.0% 309,374 6,292 8.2% Non-interest earning assets: Cash and due from banks 13,751 13,944 Other assets 14,749 13,827 -------- -------- Total assets $382,088 $337,145 ======== ======== Liabilities and Stockholders' Equity: Interest bearing liabilities: Savings, N.O.W. and money market deposits $181,135 $1,392 3.1% $143,486 $1,104 3.1% Certificates of deposit of $100,000 or more 31,718 382 4.8% 33,483 471 5.7% Other time deposits 33,938 387 4.6% 34,155 386 4.5% Federal funds purchased 921 9 3.9% 862 16 7.5% Other Borrowings 275 3 4.4% - - - ----------------------------------------------------------------- Total interest bearing liabilities 247,987 2,173 3.5% 211,986 1,977 3.8% Non-interest bearing liabilities: Other assets 14,749 13,827 Demand deposits 105,543 99,903 Other liabilities 1,254 1,575 -------- -------- Total liabilities 354,784 313,464 Stockholders' equity (1) 27,304 23,681 -------- -------- Total liabilities and stockholders' equity $382,088 $337,145 ======== ======== Net interest income/interest rate spread (2) $4,908 4.5% $4,315 4.4% ------ ------ ------ ------ Net interest earning assets/net interest margin(3) $105,601 5.6% $ 97,388 5.6% -------- ------ -------- ------ Ratio of interest earning assets to interest bearing liabilities 142.6% 145.9% ------ ------ Less: Tax equivalent adjustment $ (209) $ (183) ------- ------- Net interest income $ 4,699 $ 4,132 ------- -------
Six months ended June 30, 2001 2000 - --------------------------------------------------------------------------------------------------------------------- Average Average Average Average (In thousands) Balance Interest Yield/Cost Balance InterestYield/Cost - --------------------------------------------------------------------------------------------------------------------- Assets: Interest earning assets: Loans, net (including fee income) $208,492 $9,341 9.0% $176,733 $8,115 9.2% Mortgage backed securities (1) 75,995 2,782 7.4% 50,723 1,794 7.1% Tax exempt investment securities (1) 38,691 1,300 6.8% 41,013 1,246 6.1% Taxable investment securities (1) 8,963 308 6.9% 16,007 516 6.5% Federal funds sold 9,273 212 4.6% 11,661 361 6.2% Other securities 1,249 38 6.1% 1,083 36 6.7% Deposits with banks 1,539 30 3.9% 1,156 26 4.5% ----------------------------------------------------------------- Total interest earning assets 344,202 14,011 8.2% 298,376 12,094 8.2% Non-interest earning assets: Cash and due from banks 13,986 14,017 Other assets 13,064 12,810 -------- -------- Total assets $371,252 $325,203 ======== ======== Liabilities and Stockholders' Equity: Interest bearing liabilities: Savings, N.O.W. and money market deposits $176,897 $3,031 3.5% $138,484 $1,999 2.9% Certificates of deposit of $100,000 or more 27,899 711 5.1% 34,284 932 5.5% Other time deposits 33,431 790 4.8% 34,318 765 4.5% Federal funds purchased 911 19 4.2% 431 16 7.5% Other Borrowings 138 3 4.4% - - - ----------------------------------------------------------------- Total interest bearing liabilities 239,276 4,554 3.8% 207,517 3,712 3.6% Non-interest bearing liabilities: Demand deposits 101,270 91,017 Other liabilities 2,436 1,634 -------- -------- Total liabilities 342,982 300,168 Stockholders' equity (1) 28,270 25,035 -------- -------- Total liabilities and stockholders' equity $371,252 $325,203 ======== ======== Net interest income/interest rate spread (2) $9,457 4.4% $8,382 4.6% ------ ------ ------ ------ Net interest earning assets/net interest margin(3) $104,926 5.5% $ 90,859 5.6% -------- ------ -------- ------ Ratio of interest earning assets to interest bearing liabilities 143.9% 143.8% ------ ------ Less: Tax equivalent adjustment $ (413) $ (364) ------- ------- Net interest income $ 9,044 $ 8,018 ------- -------
(1) Excludes unrealized depreciation\appreciation in available-for-sale securities.
(2) The above table is presented on a tax equivalent basis. Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average interest-earning assets.
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 June 30, Three months ended Six months ended 2001 Over 2000 2001 Over 2000 (In thousands) Changes Due To Changes Due To ============================================================================================================ Volume Rate Net Change Volume Rate Net Change Interest income on interest earning assets: Loans (including loan fee income) $1,499 $ (1,001) $498 $1,723 $(497) $1,226 Mortgage-backed securities 430 18 448 918 70 988 Tax exempt investment securities (222) 238 16 (169) 223 54 Taxable investment securities (221) 110 (111) (304) 96 (208) Federal funds sold 21 (92) (71) (66) (83) (149) Other securities 17 (16) 1 9 (7) 2 Deposits with banks 25 (17) 8 13 (9) 4 Total interest earning assets $1,549 $ (760) $789 $2,124 $(207) $1,917 =============================================================== Interest expense on interest bearing liabilities Savings, N.O.W. and money market deposits 318 (30) 288 612 420 1,032 Certificates of deposit of $100,000 or more (24) (65) (89) (167) (54) (221) Other time deposits (9) 10 1 (49) 74 25 Federal funds purchased 7 (14) (7) 22 (19) 3 =============================================================== Other Borrowings 3 - 3 3 - 3 =============================================================== Total interest bearing liabilities $ 295 $ (99) $196 $ 421 $ 421 $842 =============================================================== Net interest income $1,254 $(661) $593 $1,703 $(628) $1,075 ===============================================================
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 June 30, 2001, 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 June 30, 2001 ===================================================================================================================== (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) 31,363 12.5% 20,044 >8.0% 25,055 >10.0% Tier 1 Capital (to risk weighted assets) 29,090 11.6% 10,022 >4.0% 15,033 > 6.0% Tier 1 Capital (to average assets) 29,090 7.8% 14,850 >4.0% 18,563 > 5.0% As of December 31, 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) 29,544 12.6% 18,799 >8.0% 23,498 >10.0% Tier 1 Capital (to risk weighted assets) 27,444 11.7% 9,399 >4.0% 14,099 > 6.0% Tier 1 Capital (to average assets) 27,444 7.9% 13,911 >4.0% 17,389 > 5.0%
Recent Accounting Developments
In July 2001, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." These Statements will change the accounting for business combinations and goodwill in two ways. First, SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Second, SFAS No. 142 changes the accounting for goodwill, including goodwill recorded in past business combinations. The previous accounting principles governing goodwill generated from a business combination will cease upon adoption of SFAS No. 142. The adoption of SFAS Nos. 141 and 142 will not materially effect the Company's statements of financial condition and results of operations. SFAS Nos. 141 and 142 will become effective on July 1, 2001 and January 1, 2002, respectively, for the Company.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." This Statement replaces SFAS No. 125. SFAS No. 140 is effective for transfers occurring after March 31, 2001 and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000, which disclosures have been incorporated into our consolidated financial statements. There was no material impact on the Company's financial condition or results of operations upon adoption of SFAS No. 140.
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 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities"- an amendment of FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement amends and supersedes certain paragraphs of SFAS No. 133. The effective date for SFAS No. 138 is for fiscal years beginning after June 15, 2000. SFAS Nos. 138 and 133 apply to quarterly and annual financial statements. There was no material impact on the Company's financial condition or results of operations upon adoption of SFAS Nos. 138 and 133.
Comparison of Operating Results for the Three Months and Six Months Ended June 30, 2001 and 2000
During the three month period ended June 30, 2001, the Registrant earned net income of $1,676,000 or $ .38 per share as compared with $1,250,000 or $.29 per share for the same period in 2000. During the six month period ended June 30, 2001, the Registrant earned net income of $3,133,000 or $ .74 per share as compared with $2,460,000 or $ .57 per share for the same period in 2000. Highlights for the three months ended June 30, 2001 include: (i) a $567,000 or 13.7% increase in net interest income; (ii) a $467,000 or 293.7% increase in total other income; and (iii) a $236,000 or 9.4% increase in total other expenses over the same period in 2000. The effective income tax rate increased to 32.52% from 29.19% for the same period last year. Highlights for the six months ended June 30, 2001 include: (i) a $1,026,000 or 12.8% increase in net interest income; (ii) a $613,000 or 102.7% increase in total other income; and (iii) a $458,000 or 9.1% increase in total other expenses over the same period in 2000. The effective income tax rate increased to 31.78% from 29.21% for the same period last year.
Net income for the first six months of 2001 reflects annualized returns of 22.36% on average total stockholders’ equity and 1.70% on average total assets as compared to the corresponding figures for the preceding calendar year of 21.86% on average total stockholders’ equity and 1.62% 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 $567,000 or 13.7% 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 $309,374,000 in 2000 to $353,588,000 for the comparable period in 2001, a 14.3% increase. Average interest bearing liabilities increased 17.0% to $247,987,000 in 2001 from $211,986,000 for the same period last year. The yield on average interest earning assets at for the three month period ended June 30, 2001 decreased to 8.0% from 8.2% during the same period in 2000. The cost of average interest bearing liabilities decreased to 3.5% from 3.8% during the same period in 2000. The net yield on average earning assets remained constant at 5.6% for the three month periods ended June 30, 2000 and 2001.
Net interest income increased by $1,026,000 or 12.8% 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 $298,376,000 in 2000 to $344,202,000 for the comparable period in 2001, a 15.4% increase. Average interest bearing liabilities increased 15.3% to $239,276,000 in 2001 from $207,517,000 for the same period last year. The yield on average interest earning assets remained constant at 8.2% for the six month periods ended June 30, 2000 and 2001. The cost of average interest bearing liabilities increased to 3.8% from 3.6% during the same period in 2000. The net yield on average earning assets decreased to 5.5% from 5.6% during the same period last year.
Average mortgage backed securities grew by $25,272,000 or 49.8% when compared to the same six month period in 2000. This increase is partially due to deposit growth outpacing loan growth and a repositioning of the investment portfolio.
Average loans grew by $31,759,000 or 18.0% when compared to the same six month period in 2000. Each component of the loan portfolio contributed to the growth; however, real estate loans increased $17,123,000 or 10.3% since December 31, 2000. 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.
The performance of the loan portfolio continued to be strong for the six months ended June 30, 2001. Since December 31, 2000 non-performing loans decreased 43.0% from $769,000 to $438,000, representing 0.20% of loans, net, at June 30, 2001. The Company had no foreclosed real estate at quarter’s end. Total non-performing assets represented 0.11% of total assets at the corresponding date.
The provision for loan losses made during the second quarter of 2001 was $85,000. No provision for loan losses was made for the same period in 2000. A $170,000 provision for loan losses was recorded during the six month period ended June 30, 2001 compared to a $105,000 provision for the same period in 2000. The allowance for loan losses increased to $2,273,000 at June 30, 2001, as compared to $2,100,000 at December 31, 2000. As a percentage of loans, the allowance was 1.04% at June 30, 2001 and December 31, 2000.
Total other income increased during the three month period ended June 30, 2001 by $467,000 or 293.7% over the same period last year. For the six month period ended June 30, 2001 total other income increased $613,000 or 102.7% over the same period last year. Service charges on deposit accounts for the three month period ended June 30, 2001 totaled $361,000, an increase of $90,000 or 33.2% over the same period last year. Service charges on deposit accounts for the six month period ended June 30, 2001 totaled $710,000, an increase of $194,000 or 37.6% over the same period last year. This increase is attributed to a change, in January of 2001, in the process of charging fees for checks drawn on non-sufficient funds and returned checks. There were no net losses on securities for the three month period ended June 30, 2001 as compared to a $266,000 net loss for the same period last year. For the six month period ended June 30, 2001 net gains on securities totaled $78,000 compared to net losses of $266,000, an increase of $344,000 or 129.3% over the same period last year. These fluctuations in the net gains and losses in securities sales result from management selling a portion of the lowest yielding securities in the available for sale investment portfolio during the second quarter of 2000 and the first quarter of 2001 and reinvesting the funds in securities earning current market rates of return. Fees for other customer services for the three month period ended June 30, 2001 totaled $188,000, an increase of $80,000 or 74.1% over the same period last year. Fees for other customer services for the six month period ended June 30, 2001 totaled $339,000, and increase of $91,000 or 36.7% over the same period in 2000. This increase is partially attributed to an increase in merchant processing income due to an increase in fees resulting from an increase in the number of merchants processing credit card sales. 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 a new debit card product introduced during the third quarter of 1999.
Other operating income for the three month period ended June 30, 2001 totaled $77,000, an increase of $31,000 or 67.4% over the same period last year. The increase primarily resulted from an insurance recovery resulting from a prior year loss totaling approximately $51,000 that was recognized during the second quarter 2001. For the six month period ended June 30, 2001 other operating income totaled $83,000, a decrease of $16,000 or 16.2% over the same period last year. This decrease is primarily due to a decrease in income from the gain on the sale of mortgages of $64,000 or 84.1% partially offset by the prior mentioned insurance recovery. During the prior year, the Bank continued to sell mortgages into the secondary market as they converted from the construction phase to a permanent mortgage. As these loans run off, the Bank instituted a change in strategy whereby a portion of originated residential mortgages are held in portfolio instead of being sold on the secondary market.
Total other expenses increased during the three month period ended June 30, 2001 by $236,000 or 9.4% over the same period last year. For the six month period ended June 30, 2001 total other expenses increased by $458,000 or 9.1% over the same period last year. Compensation and benefit expense increased $232,000 or 18.0% for the three month period ended June 30, 2001 over the same period last year. For the six month period ended June 30, 2001 compensation and benefit expense increased $465,000 or 17.9% over the same period last year. The increase in compensation expense is attributed to increased staffing, primarily for the new branch office in Sag Harbor that the Bank opened in the first quarter of 2001, and salary increases. Net occupancy expenses increased $22,000 or 9.9% during the three month period ended June 30, 2001. For the six month period ended June 30, 2001 net occupancy expenses increased $76,000 or 17.9% over the same period last year. These increases primarily result from the leasing of space for the new branch office in Sag Harbor, opened during the first quarter. Furniture and fixture expense for the three month period ended June 30, 2001 increased $10,000 or 4.9% over the same period last year. For the six month period ended June 30, 2001 furniture and fixture expense increased $44,000 or 11.6% over the same period last year. The increase in furniture and fixture expense is attributed to the depreciation of item processing assets and fixed assets for the new branch offices in Greenport, opened during the second quarter of 2000, and Sag Harbor opened in the first quarter of this year.
Total other operating expenses for the three month period ended June 30, 2001 totaled $775,000, a decrease of $28,000 or 3.5% over the same period last year. Total other operating expenses for the six month period ended June 30, 2001 totaled $1,506,000, a decrease of $127,000 or 7.8% over the same period last year. During the first quarter of 2000, the Company incurred nonrecurring set up costs to bring the item processing function in house. Expenses paid to a former vendor of these services remained high during the transition period. With more item processing transactions now being conducted in house, the fees paid to this vendor are steadily declining. A decrease in marketing expenses resulted from a reduction in expenditures made for promotional sponsorships.
The provision for income taxes increased during the three month period ended June 30, 2001 by $287,000 or 55.1% over the same period last year. The effective tax rate for the three month period ended June 30, 2001 was 32.52% as compared to the prior year rate of 29.41%. The provision for income taxes increased during the six month period ended June 30, 2001 by $443,000 or 43.6% over the same period last year. The effective tax rate for the six month period ended June 30, 2001 was 31.78% as compared to a rate of 29.24% for the same period last year. These increases are primarily due to the Bank holding less tax exempt securities.
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, 2001, the Company had aggregate lines of credit of $30,000,000 with unaffiliated correspondent banks to provide short term credit for liquidity requirements. Of these aggregate lines of credit, $10,000,000 is availble on an unsecured basis. The Company also has the ability, as a member of the Federal Home Loan Bank (“FHLB”) system, to borrow against investment securities and unencumbered residential mortgages owned by the Bank. At June 30, 2001, the Company had no such borrowings outstanding. During the first quarter of 2001, the Bank also executed a master repurchase agreement with the Federal Home Loan Bank which increased it’s borrowing capacity. The Bank does not anticipate the need to borrow under this agreement in the near future.
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 this report, as well as other written communications made from time to time by the Company or the Bank (including, without limitation, the Company’s 2000 Annual Report to Stockholders) and oral communications made from time to time by authorized officers of the Company or the Bank, may contain statements relating to the future results of the Company (including certain projections and business trends) that are considered “forward looking statements” as defined in the Private Securities Litigation Reform act of 1995 (the PSLRA). Such forward looking statements , in addition to historical information, which involve risk and uncertainties, are based on the beliefs, assumptions and expectations of management of the Company. Words such as “expects”, “believes”, “should”, “plans”, “anticipates”, “will”, “potential”, “estimates”, and variations of such similar expressions are intended to identify such forward-looking statements. Examples of forward-looking statements include, but are not limited to, possible or assumed estimates with respect to the financial condition, expected or anticipated revenue, and results of operations and business of the Company, including with respect to earnings growth (on both a generally accepted accounting principles (GAAP) and cash basis); revenue growth in retail banking, lending and other areas; origination volume in the Company’s consumer, commercial and other lending businesses; current and future capital management programs; non-interest income levels, including fees from services and product sales; tangible capital generation; market share; expense levels; and other business operations and strategies. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the PSLRA.
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, prevailing 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, regulatory and technological factors affecting the Bank’s operations, markets, products, services and prices. The forward-looking statements are made as of the date of this report, and the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.
Item 1. Legal ProceedingsNot applicableItem 2. Changes in SecuritiesNot applicableItem 3. Defaults upon Senior SecuritiesNot applicableItem 4. Submission of Matters to a Vote of Security HoldersNot applicableItem 5. Other InformationNot applicableItem 6. Exhibits and Reports on Form 8-K
a. Exhibits
b. Reports on Form 8-K
NoneSIGNATURESIn 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 14,2001 /s/ Thomas J. Tobin ----------------------------------- Thomas J. Tobin President and Chief Executive Officer Date: August 14, 2001 /s/ Christopher Becker ----------------------------------- Christopher Becker Executive Vice President and Treasurer
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.
Date: August 14,2001 /s/ Thomas J. Tobin ----------------------------------- Thomas J. Tobin President and Chief Executive Officer Date: August 14, 2001 /s/ Christopher Becker ----------------------------------- Christopher Becker Executive Vice President and Treasurer