8-K 1 secondquarter.txt SECOND QUARTER 2003 EARNINGS RELEASE UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ___________ FORM 8-K ___________ CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (date of earliest event reported): July 25, 2003 INTERCHANGE FINANCIAL SERVICES CORPORATION (Exact name of registrant as specified in its charter) New Jersey 1-10518 22-2553159 _______________________________ ________________________ ____________________ (State or other jurisdiction of) (Commission File Number) (I.R.S. Employer incorporation or organization) Identification No.) Park 80 West/Plaza Two, Saddle Brook,N.J. 07663 _________________________________________ ____________ (Address of principal executive (Zip Code) offices) (Zip Code) Registrant's telephone number, including area code: (201) 703-2265 Not Applicable ________________________________________________________________________________ (Former name or former address, if changed since last report.) Item 5. Other Events On July 23, 2003, Interchange Financial Services Corporation issued a press release reporting earnings for the second quarter period ending June 30, 2003. A copy of the company's press release is attached hereto as Exhibit 99.1 and incorporated herein by this reference. Item 7. Financial Statement and Exhibits (c) Exhibits 99.1 Press Release of Interchange Financial Services Corporation dated July 23, 2003. SIGNATURE _________ Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: July 25, 2003 Interchange Financial Services Corporation By: /s/ Charles T. Field ____________________ Charles Field Senior Vice President & CFO Exhibit 99.1 Interchange Financial Services Corporation Reports 36.6% and 12.9% Increase in 2nd Quarter 2003 Net Income and Diluted EPS 2nd Quarter Highlights: |X| Acquisition of Bridge View Bancorp Completed |X| Interchange Grows to 29 Offices Throughout Bergen County |X| Interchange Reports Record Earnings _____________________________________________________________ Saddle Brook,NJ, July 23, 2003 -- Interchange Financial Services Corporation (the "Company") (Nasdaq:IFCJ), holding company of Bergen County's fast growing community bank, Interchange Bank (the "Bank"), today reported second quarter 2003 net income of approximately $4.2 million, up 36.6% from $3.1 million in the second quarter of 2002. On April 30, 2003, the Company completed its acquisition of Bridge View Bancorp ("Bridge View"), a commercial bank operating in Bergen County. Bridge View had total assets of approximately $291 million and loans and deposits of $184 million and $259 million, respectively. The acquisition added 11 branches to the Bank bringing the total number of branches to 29. As a result of this additional branch network, the Bank's deposit market share position improved to 7th from 10th place. Commenting on the Company's second quarter performance, President and Chief Executive Officer Anthony S. Abbate stated, "Interchange Bank attributes its continued growth to its mission of providing a superior level of service to the residents and businesses of Bergen County. With the full integration of Bridge View, including the data processing function within 40 days of closing, we are well on our way towards achieving the goals we have set. Additionally, we are focused on being the preferred destination for consumer banking and the primary source of small business loans in northern New Jersey." The Company generated a 1.40% return on average assets and a 14.03% return on average stockholders' equity for the second quarter 2003 versus 1.38% and 17.23%, respectively, for the second quarter 2002. The decline in return on average stockholders' equity was a function of the acquisition of Bridge View. Diluted earnings per share for the three and six months ended June 30, 2003 were $0.35 and $0.69, representing increases of 12.9% and 15.0%, respectively, as compared to the same periods in 2002. Abbate also said, "Several factors contributed to the strength of our second quarter 2003 performance, including: |X| A strong net interest margin, measuring 4.38%; |X| A 79% year-over-year increase in non-interest income; and |X| Average interest-earning assets exceeding $1.0 billion during the quarter." For the three and six-month periods ended June 30, 2003, non-interest income was $2.6 million and $4.5 million, respectively, increases of $1.2 million or 79% and $1.5 million, or 47.7%, respectively, as compared to the same periods in 2002. Of these increases, approximately $868 thousand, or 74% for the three month and $1.2 million, or 78% for the six-month period resulted from the Company's organic growth. The improvement for the three and six month periods ended June 30, 2003, as compared to the same periods last year was largely attributable to an increase in bank owned life insurance income; gains on sales of loans, mainly through the Mortgage Partnership Finance Partnership Program with the Federal Home Loan Bank; and growth in service charges on deposits. A decline in gains on sale of securities served to partly offset some of the aforementioned increases. Non-interest expense for the quarter amounted to $7.7 million, an increase of $1.4 million or 22.3% as compared to same quarter in 2002. For the six-month period, non-interest expense amounted to $14.2 million, an increase of $1.8 million or 14.5% as compared to the same period last year. The increase for each reporting period was due largely to the additional operating costs resulting from the merger with Bridge View. Also contributing to non-interest expense growth for the six months ended June 30, 2003, as compared to the same period in 2002, were normal increases related to salaries, benefits and occupancy expenses. At June 30, 2003, total loans were approximately $805.1 million, an increase of $189.4 million, or 30.8% as compared to December 31, 2002. This increase was principally due to the Bridge View acquisition. With the completion of the Bridge View merger, the Company's non-performing assets increased to $6.8 million at June 30, 2003 as compared to $6.1 at December 31, 2002 representing 0.84% and 1.00%, respectively, of the total loans outstanding at the end of the respective periods. The Allowance for Loan and Lease Losses ("ALLL") totaled $9.5 million at June 30, 2003, of which $1.9 million was from the Bridge View acquisition, and represented 139.6% of non-performing loans and leases and 1.18% of total loans and leases. In addition, in the quarter ended June 30, 2003 the Company recorded a provision for loan and lease losses of $530 thousand as compared to $255 thousand for the second quarter of 2002. Post-Earnings Conference Call _____________________________ The Bank will hold a conference call on Thursday, July 24, 2003, at 10 a.m. (Eastern Time) to discuss the financial results for its second fiscal quarter ending June 30, 2003. This web-cast can be accessed through the Bank's website, www.interchange.com on the investor relations page, as well as the web address www.companyboardroom.com. The replay will begin shortly after the completion of the live call and will be available for approximately two weeks. About Interchange Bank _______________________ Headquartered in Saddle Brook, NJ, Interchange Bank is one of Bergen County's largest independent commercial bank and a wholly owned subsidiary of Interchange Financial Services Corporation (Nasdaq:IFCJ). A thought leader in the industry, the Bank was among the first to implement a broad range of innovative services, including 24-hour, 7-day-a-week online banking and bill paying services, online stock trading, insurance services and the ability to apply for a loan online with an instant credit decision. Mutual funds and annuities are offered through the Bank's investment services. With $1.3 billion in assets and 29 branches, the Bank focuses its efforts on the local communities from which it derives deposits and generates loans. Through Interchange Bank's subsidiary, Interchange Capital Company, L.L.C., cost effective equipment leasing solutions are available to small- and middle market companies. For additional information, please visit the company's Web site at www.interchangebank.com. -more- In addition to discussing historical information, certain statements included in or incorporated into this report relate to the financial condition, results of operations and business of the Company which are not historical facts, but which are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. When used herein, the words "anticipate," "believe," "estimate," "expect," "will" and other similar expressions are generally intended to identify such forward-looking statements. Such statements are intended to be covered by the safe harbor provisions for forward-looking statements contained in such Act, and we are including this statement for purposes of invoking these safe harbor provisions. These forward-looking statements include, but are not limited to, statements about the operations of the Company, the adequacy of the Company's allowance for losses associated with the loan portfolio, the prospects of continued loan and deposit growth, and improved credit quality. The forward-looking statements in this report involve certain estimates or assumptions, known and unknown risks and uncertainties, many of which are beyond the control of the Company, and reflect what we currently anticipate will happen in each case. What actually happens could differ materially from what we currently anticipate will happen due to a variety of factors, including, among others, (i) increased competitive pressures among financial services companies; (ii) changes in the interest rate environment, reducing interest margins or increasing interest rate risk; (iii) deterioration in general economic conditions, internationally, nationally, or in the State of New Jersey; (iv) the occurrence of acts of terrorism, such as the events of September 11, 2001, or acts of war; (v) legislation or regulatory requirements or changes adversely affecting the business of the Company, and (vi) losses in the Company's leasing subsidiary exceeding management's expectations, and (vii) other risks detailed in reports filed by the Company with the Securities and Exchange Commission. Readers should not place undue expectations on any forward-looking statements. We are not promising to make any publiv announcement when we consider forard-looking statements in this document to be no longer accurate, whether as a result of new information, what actually happens in the future or for any other reason. INTERCHANGE FINANCIAL SERVICES CORPORATION CONSOLIDATED FINANCIAL HIGHLIGHTS CONSOLIDATED BALANCE SHEETS (dollars in thousands) June 30, December 31, 2003 2002 Change ___________ ____________ ___________ (unaudited) Assets Assets Cash and due from banks $44,583 $23,266 91.6 % Federal funds sold 11,000 10,650 3.3 Securities 344,914 252,512 36.6 Loans and leases Commercial 490,500 338,530 44.9 Commercial Lease Financing 24,139 26,356 (8.4) Consumer 290,445 250,755 15.8 ___________ ____________ ___________ 805,084 615,641 30.8 Allowance for loan and lease losses -9,537 -7,207 32.3 Net loans 795,547 608,434 30.8 ___________ ____________ ___________ Premises and equipment, net 20,440 10,512 94.4 Foreclosed real estate and other repossesed assets 172 176 (2.3) Bank Owned Life Insurance 21,542 21,274 1.3 Goodwill and other intangible assets 58,372 1,678 3,378.7 Accrued interest receivable and other assets 15,423 7,830 97.0 ___________ ____________ ___________ Total assets $1,311,993 $936,332 40.1 =========== ============ =========== Liabilities Deposits $1,136,718 $815,672 39.4 Borrowings 21,420 27,390 (21.8) Accrued interest payable and other liabilities 15,852 12,590 25.9 ___________ ____________ ___________ Total liabilities 1,173,990 855,652 37.2 ___________ ____________ ___________ Total stockholders' equity 138,003 80,680 71.0 ___________ ____________ ___________ Total liabilities and stockholders' equity $1,311,993 $936,332 40.1 =========== ============ ===========
CONSOLIDATED INCOME STATEMENTS(dollars in thousands) Three Months Ended Six Months Ended June 30, June 30, _________________________________ ___________________________________ 2003 2002 Change 2003 2002 Change __________ ___________ _________ ____________ ___________ ________ (unaudited) (unaudited) (unaudited) (unaudited) Interest income: Interest and fees on loans $12,470 $11,340 10.0 % $23,326 $22,354 4.3% Interest on federal funds sold 120 67 79.1 184 120 53.3 Interest on interest earning deposits 9 - - 21 - - Interest and dividends on securities: Taxable interest income 2,330 2,598 (10.3) 4,612 5,102 (9.6) Interest income exempt from federal income taxes 221 149 48.3 400 275 45.5 Dividends 52 47 10.6 109 94 16.0 __________ _______ ___ _________ ________ _________ _______ Total interest income 15,202 14,201 7.0 28,652 27,945 2.5 __________ ___________ _________ ________ _________ _______ Interest expense: Interest on deposits 3,416 4,313 (20.8) 6,823 8,697 (21.5) Interest on borrowings 186 261 (28.7) 378 553 (31.6) __________ ___________ _________ _______ ________ ________ Total interest expense 3,602 4,574 (21.3) 7,201 9,250 (22.2) __________ ___________ _________ _______ ________ ________ Net interest income 11,600 9,627 20.5 21,451 18,695 14.7 Provision for loan and lease losses 530 255 107.8 795 480 65.6 __________ ___________ _________ _______ _______ _______ Net interest income after provision for loan & lease losses 11,070 9,372 18.1 20,656 18,215 13.4 __________ ___________ _________ _______ _______ _______ Non-interest income: Service fees on deposit accounts 908 649 39.9 1,561 1,263 23.6 Net gain on sale of securities 19 94 (79.8) 19 281 (93.2) Other 1,718 734 134.1 2,908 1,494 94.6 __________ ___________ ________ _______ _______ _______ Total non-interest income 2,645 1,477 79.1 4,488 3,038 47.7 __________ ___________ ________ _______ _______ _______ Non-interest expense: Salaries and benefits 4,192 3,303 26.9 7,820 6,562 19.2 Net occupancy 1,095 869 25.9 2,023 1,733 16.7 Furniture and equipment 353 305 15.7 606 590 2.7 Advertising and promotion 422 364 15.9 737 789 (6.6) Other 1,635 1,451 12.7 3,037 2,750 10.4 __________ ____________ ________ _______ _______ ______ Total non-interest expense 7,697 6,292 22.3 14,223 12,424 14.5 __________ ___________ _______ _______ _______ ______ Income before income taxes 6,018 4,557 32.1 10,922 8,829 23.7 Income taxes 1,831 1,492 22.7 3,379 2,824 19.7 __________ ___________ _______ _______ _______ ______ Net income $ 4,187 $ 3,065 36.6 $ 7,543 $ 6,005 25.6 ========== =========== ======= ======= ======= ====== Basic earnings per common share $ 0.35 $ 0.31 12.9 $ 0.70 $ 0.61 14.8 Diluted earnings per common share $ 0.35 $ 0.31 12.9 $ 0.69 $ 0.60 15.0
Interchange Financial Services Corporation Consolidated Financial Highlights Analysis of Net Interest Income for the quarter ended June 30, (dollars in thousands) 2003 2002 __________________________________ ________________________________ (unaudited) Average Average Average Average Balance Interest Rate Balance Interest Rate __________ _________ __________ _________ _________ _______ Assets Interest earning assets: Loans (1) $732,516 $12,498 6.82 % $608,589 $11,377 7.48 % Taxable securities (4) 265,754 2,382 3.59 199,186 2,645 5.31 Tax-exempt securities (2) (4) 26,095 304 4.66 13,775 200 5.81 Interest earning deposits 3,846 9 0.94 - - - Federal funds sold 41,180 120 1.17 15,582 67 1.72 __________ _______ ____ _________ _______ _____ Total interest-earning assets 1,069,391 15,313 5.73 837,132 14,289 6.83 _______ _______ Non-interest earning assets: Cash and due from banks 37,642 20,270 Allowance for loan and lease losses (8,606) (6,336) Other assets 97,085 38,454 __________ ________ Total assets $1,195,512 $889,520 ========== ======== Liabilities and stockholders' equity Interest-bearing liabilities Interest bearing deposits $855,189 3,416 1.60 $665,563 4,313 2.59 Borrowings 25,035 186 2.97 23,407 261 4.46 _________ _______ ____ ________ ________ ______ Total interest-bearing liabilities 880,224 3,602 1.64 688,970 4,574 2.66 _______ ________ Non-interest bearing liabilities Demand deposits 178,434 116,267 Other liabilities 17,462 13,124 __________ _________ Total liabilities (3) 1,076,120 818,361 Stockholders' equity 119,392 71,159 __________ _________ Total liabilities and stockholders' equity $1,195,512 $889,520 ========== ========= Net interest income (tax-equivalent basis) 11,711 4.09 9,715 4.17 Tax-equivalent basis adjustment (112) (88) _______ ________ Net interest income $11,599 $9,627 ======= ======== Net interest income as a percent of interest-earning assets (tax- equivalent basis) 4.38 % 4.64 % ____________________________________________________________________________________________________________________________________ (1) Nonaccrual loans and any related interest recorded have been included in computing the average rate earned on the loan portfolio. When applicable, tax exempt loans are computed on a fully taxable equivalent basis using the corporate federal tax rate of 34%. (2) Computed on a fully taxable equivalent basis using the corporate federal tax rate of 34%. (3) All deposits are in domestic bank offices. (4) The average balances are based on historical cost and do not reflect unrealized gains or losses.
Analysis of Net Interest Income for the six months ended June 30, (dollars in thousands) 2003 2002 ___________________________________________________________________________________ (unaudited) Average Average Average Average Balance Interest Rate Balance Interest Rate _________ ___________ _________ ___________ __________ ____________ Assets Interest earning assets Loans (1) $673,735 $23,395 6.94 % $600,178 $22,431 7.47 % Taxable securities (4) 240,454 4,721 3.93 191,606 5,196 5.42 Tax-exempt securities (2) (4) 26,770 551 4.12 12,577 376 5.98 Interest earning deposits 4,088 21 1.03 - - - Federal funds sold 31,436 184 1.17 14,133 120 1.70 __________ ___________ ___________ __________ Total interest-earning assets 976,483 28,872 5.91 818,494 28,123 6.87 ___________ __________ Non-interest earning assets Cash and due from banks 29,947 20,659 Allowance for loan and lease losses (7,910) (6,451) Other assets 72,658 37,666 __________ ___________ Total assets $1,071,178 $870,368 ========== =========== Liabilities and stockholders' equity Interest-bearing liabilities Interest bearing deposits $780,986 6,823 1.75 $649,221 8,697 2.68 Borrowings 25,629 377 2.94 24,637 553 4.49 __________ ___________ ___________ __________ Total interest-bearing liabilities 806,615 7,200 1.79 673,858 9,250 2.75 ___________ __________ Non-interest bearing liabilities Demand deposits 148,771 114,213 Other liabilities 15,006 12,080 __________ ___________ Total liabilities (3) 970,392 800,150 Stockholders' equity 100,786 70,218 __________ ___________ Total liabilities and stockholders' equity $1,071,178 $870,368 ========== =========== Net interest income (tax-equivalent basis) 21,672 4.12 18,873 4.12 Tax-equivalent basis adjustment (220) (178) __________ _________ Net interest income $21,452 $18,695 ========== ========= Net interest income as a percent of interest- earning assets (tax-equivalent basis) 4.44 % 4.61 % ____________________________________________________________________________________________________________________________________ (1) Nonaccrual loans and any related interest recorded have been included in computing the average rate earned on the loan portfolio. When applicable, tax exempt loans are computed on a fully taxable equivalent basis using the corporate federal tax rate of 34%. (2) Computed on a fully taxable equivalent basis using the corporate federal tax rate of 34%. (3) All deposits are in domestic bank offices. (4) The average balances are based on historical cost and do not reflect unrealized gains or losses.
STATEMENT OF CONDITION - SELECTED DATA (Period Ending) June 30, March 31, 3 month June 30, 12 month 2003 2003 Change 2002 Change ____________ ____________ __________ ___________ __________ (unaudited) (unaudited) (unaudited) Loans $805,084 $606,739 32.7 % $621,909 29.5 % Securities 344,914 249,813 38.1 234,095 47.3 Earning assets 1,160,998 888,352 30.7 856,004 35.6 Total Assets 1,311,993 962,867 36.3 905,454 44.9 Deposits 1,136,718 840,915 35.2 792,175 43.5 Borrowings 21,420 25,956 (17.5) 24,155 (11.3) Shareholders' equity 138,003 83,442 65.4 74,874 84.3 Leverage ratio 6.56 % 8.30 % 8.01 % Risk weighted ratios: Tier 1 8.97 12.64 11.59 Total 10.11 13.81 12.64 Asset quality Quarter ended ____________________________________________________________________________________ Net charge offs $149 $245 (39.2) % $124 20.2 % Loan loss allowance (9,537) (7,226) 32.0 (6,430) 48.3 Nonperforming loans $6,832 $5,013 36.3 $1,721 297.0 Foreclosed real estate & other repossessed assets 172 197 (12.7) 592 (70.9) __________ ____________ __________ ____________ ________ Total Nonperforming assets ("NPA") $7,004 $5,210 34.4 $2,313 202.8 ========== ============ ========== ============ ======== Ratio's _______ Net charge offs as % of average loans (annualized) 0.08 % 0.16 % 0.04 % Loan loss allowance as % of period-end loans 1.18 1.19 1.03 Loan loss allowance as % of nonperforming loans 139.6 144.1 373.6 NPA's as a percent of loans + foreclosed assets 0.87 0.86 0.37 Six Months Ended __________________________________________________ June 30, June 30, 12 month 2003 2002 Change ___________ __________ ___________ Net charge offs $394 $619 -$225 Net charge offs as % of average loans (annualized) 0.12 % 0.21 % (0.09) %
PROFITABILITY (dollars in thousands, except per share data) Quarter ended ____________________________________________________________________ June 30, March 31, 3 month June 30, 12 month 2003 2003 Change 2002 Change ___________ ___________ ________ ___________ __________ (unaudited) (unaudited) (unaudited) Net interest income (taxable equivalent) $11,711 $9,960 17.6 % $9,715 20.5 % Provision for loan and lease losses 530 265 100.0 255 107.8 Net gain on sale of securities 19 - - 94 (79.8) Non-interest income, excluding net gain on sale of securities 2,626 1,844 42.4 1,383 89.9 Non-interest expense 7,697 6,527 17.9 6,292 22.3 Net income $4,187 $3,356 24.8 $3,065 36.6 Basic earnings per common share $0.35 $0.34 2.9 % $0.31 12.9 % Diluted earnings per common share 0.35 0.34 2.9 0.31 12.9 Dividends declared per common share 0.11 0.11 - 0.10 10.0 Book value per common share - end of period $10.79 $8.48 27.2 $7.62 41.6 Shares outstanding - end of period 12,793,801 9,839,682 30.0 9,819,881 30.3 Weighted average shares outstanding Basic 11,818,163 9,828,556 20.2 9,817,956 20.4 Diluted 11,996,433 9,967,570 20.4 9,992,353 20.1 Return on average assets 1.40 % 1.42 % 1.38 % Return on average equity 14.03 16.38 17.23 Net interest margin 4.38 4.51 4.64
Six Months Ended _____________________________________________ June 30, June 30, 12 month 2003 2002 Change ______________ __________ ________ (unaudited) (unaudited) Net interest income (taxable equivalent) $21,672 $18,873 14.8 % Provision for loan and lease losses 795 480 65.6 Net gain on sale of securities 19 281 (93.2) Non-interest income, excluding net gain on sale of securities 4,469 2,757 62.1 Non-interest expenses 14,223 12,424 14.5 Net income $7,543 $6,005 25.6 Basic earnings per common share $0.70 $0.61 14.8 % Diluted earnings per common share & share equivalents 0.69 0.60 15.0 Dividends declared per common share 0.22 0.20 10.0 Book value per common share - end of period $10.79 $7.62 41.6 Shares outstanding - end of period 12,793,801 9,819,881 30.3 Weighted average shares outstanding Basic 10,828,856 9,796,878 10.5 Diluted 10,986,587 9,928,864 10.7 Return on average assets 1.41% 1.38 % Return on average equity 14.97 17.10 Net interest margin 4.44 4.61