U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 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 4,237,597 shares of common stock outstanding as of May 15, 2000.
Item 1. Financial Statements
Unaudited Consolidated Statements of Condition as of March 31, 2000
and December 31, 1999
Unaudited Consolidated Statements of Income for the Three Months
Ended March 31, 2000 and 1999
Unaudited Consolidated Statements of Stockholders' Equity for the Three Months
Ended March 31, 2000
Unaudited Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2000 and 1999
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
27.0 Financial Data Schedule
Signatures
Item 1. Financial Statements
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BRIDGE BANCORP, INC. AND SUBSIDIARY March 31, December 31,
2000 1999
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ASSETS
Cash and due from banks $ 11,875 $ 11,604
Interest earning deposits with banks 439 417
Federal funds sold 4,600 8,000
--------- ---------
Total cash and cash equivalents 16,914 20,021
Investment in debt and equity securities, net:
Securities available for sale, at fair value 93,167 84,596
Securities held to maturity (fair value of $13,484
and $13,361 respectively) 13,499 13,373
--------- ---------
Total investment in debt and equity securities, net 106,666 97,969
Loans 176,498 170,870
Less:
Allowance for loan losses (2,115) (1,971)
--------- ---------
Loans, net 174,383 168,899
Banking premises and equipment, net 9,131 8,466
Accrued interest receivable 2,173 1,857
Other assets 2,994 2,832
--------- ---------
Total Assets $312,261 $300,044
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits $ 87,330 $ 84,392
Savings, N.O.W. and money market deposits 130,390 128,917
Certificates of deposit of $100,000 or more 34,866 26,204
Other time deposits 33,737 34,809
--------- ---------
Total deposits 286,323 274,322
Accrued interest on depositors' accounts 736 761
Other liabilities and accrued expenses 1,270 1,289
--------- ---------
Total Liabilities 288,329 276,372
--------- ---------
Stockholders' equity:
Common stock, par value $.01 per share: Authorized: 20,000,000 shares;
issued and outstanding 4,237,597 at 3/31/00 and 4,257,597 shares at 12/31/99 43 43
Surplus 21,261 21,261
Undivided profits 3,934 3,233
Less: Treasury Stock at cost, 20,000 shares (320) -
--------- ---------
24,918 24,537
Accumulated other comprehensive (loss)income, net of taxes (986) (865)
--------- ---------
Total Stockholders' Equity 23,932 23,672
Commitments and contingencies
--------- ---------
Total Liabilities and Stockholders' Equity $312,261 $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 March 31, 2000 1999
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Interest income:
Loans (including fee income) $3,912 $3,642
Mortgage-backed securities 812 556
State and municipal obligations 438 296
U.S. Treasury and government agency securities 250 194
Federal funds sold 186 147
Other securities 18 17
Deposits with banks 5 4
------- -------
Total interest income 5,621 4,856
Interest expense:
Savings, N.O.W. and money market deposits 895 644
Certificates of deposit of $100,000 or more 461 325
Other time deposits 379 520
------- -------
Total interest expense 1,735 1,489
------- -------
Net interest income 3,886 3,367
Provision for loan losses 105 105
------- -------
Net interest income after provision for loan losses 3,781 3,262
------- -------
Other income:
Service charges on deposit accounts 245 220
Fees for other customer services 182 181
Other operating income 103 200
------- -------
Total other income 530 601
------- -------
Other expenses:
Salaries and employee benefits 1,306 1,218
Net occupancy expense 202 194
Furniture and fixture expense 175 192
Other operating expenses 922 799
------- -------
Total other expenses 2,605 2,403
------- -------
Income before provision for income taxes 1,706 1,460
Provision for income taxes 496 507
------- -------
Net income $1,210 $ 953
======= =======
Basic earnings per share $ 0.29 $ 0.22
======= =======
Diluted earnings per share $ 0.28 $ 0.22
======= =======
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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 - - - $1,210 1,210 - - 1,210
Purchase of Treasury Stock (20,000) - - (320) (320)
Cash dividends declared, $.12 per share (509) (509)
Net change in unrealized (depreciation)/
appreciation in securities available for - - - (121) - - (121) (121)
sale, net of tax
---------------
Comprehensive Income - - - $1,089 - - - -
-----------------------------===============--------------------------------------------
Balance at March 31, 2000 4,237,597 $43 $21,261 $3,934 ($320) ($986) $23,932
========================================================================================
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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 March 31, 2000 1999
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Operating activities:
Net Income $ 1,210 $ 953
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 105 105
Depreciation and amortization 173 188
Accretion of discounts (23) (26)
Amortization of premiums 38 40
Gain on the sale of assets - -
Net securities gains - -
(Increase) in accrued interest receivable (316) (275)
(Increase) in other assets (78) (458)
(Decrease) in accrued and other liabilities (85) (7)
-------- --------
Net cash provided by operating activites 1,024 520
-------- --------
Investing activities:
Purchases of securities available for sale (9,933) (3,978)
Purchases of securities held to maturity (2,127) (2,000)
Proceeds from sales of securities available for sale - -
Proceeds from maturing securities available for sale - -
Proceeds from maturing securities held to maturity 2,000 73
Proceeds from principal payments on mortgage-backed securities 1,144 2,975
Net (increase) in loans (5,590) (2,810)
Proceeds from sale of other real estate owned - -
Purchases of banking premises and equipment, net of deletions (838) (104)
-------- --------
Net cash used by investing activities (15,344) (5,844)
-------- --------
Financing activities:
Net increase in deposits 12,001 16,530
Payment for the purchase of treasury stock (320) -
Net proceeds from excercise of Stock options
issued pursuant to equity incentive plan - 156
Cash dividends paid (468) (1,059)
-------- --------
Net cash provided by financing activities 11,213 15,627
-------- --------
(Decrease) increase in cash and cash equivalents (3,107) 10,303
Cash and cash equivalents beginning of period 20,021 14,282
-------- --------
Cash and cash equivalents end of period $16,914 $24,585
======== ========
Supplemental information-Cash Flows:
Cash paid for:
Interest $ 1,760 $ 1,504
Income taxes $ 715 $ 303
Noncash investing and financing activities:
Dividends declared and unpaid $ 509 $ 425
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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 three months ended March 31, 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 three months ended March 31, 2000 and 1999, diluted weighted average common stock and common stock equivalent shares outstanding for the diluted earnings per share were 4,268,497 and 4,274,978 respectively. For the three months ended March 31, 2000 and 1999, the total weighted average number of shares of common stock outstanding for the basic earnings per share calculation were 4,250,564 and 4,244,791, 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, which represents approximately .5% of the Company's 4,257,597 outstanding 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:
03/31/00 12/31/99
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(In thousands) Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
==========================================================
Available for sale:
U.S. Treasury securities $ 8,067 $ 8,065 $ 8,078 $ 8,111
Oblig. of U.S. Government agencies 8,907 8,816 4,984 4,912
Oblig. of NY State & pol.subs. 28,470 28,040 28,489 28,114
Mortgage-backed securities 49,392 48,246 44,511 43,459
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Total available for sale $ 94,836 $ 93,167 $ 86,062 $ 84,596
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Held to maturity:
Oblig. of NY State & pol.subs. $ 12,416 $ 12,401 $ 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
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Total held to maturity $ 13,499 $ 13,484 $ 13,373 $ 13,361
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Total debt and equity securities $ 108,335 $ 106,651 $ 99,435 $ 97,957
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5. Loans
Loans are summarized as follows:
03/31/00 12/31/99
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(In thousands)
Real Estate Loans $143,858 $141,479
Unsecured business and personal loans 30,720 27,869
Secured business and personal loans 1,094 1,086
Installment/consumer loans 1,037 675
------------------------
Total loans $176,709 $171,109
Unearned income (211) (239)
------------------------
$176,498 $170,870
Allowance for loan losses (2,115) (1,971)
------------------------
Net loans $174,383 $168,899
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6. Allowance for Loan Losses
The adequacy of the allowance for loan losses is determined based on management's detailed analysis of classified loans, input from the Bank's outside loan review consultants, past loss experience, current economic conditions, delinquency trends and other pertinent factors. The reserves are reviewed on a quarterly basis to determine if any adjustments are necessary. The information reviewed also includes past due trends, charge-off trends, and concentrations of credit. Based on the loan classification committee's review of the classified loans and the overall reserve levels as they relate to the entire loan portfolio, management believes the allowance for possible loan losses is adequate.
While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in conditions. In addition, various regulatory agencies, as an integral part of the examination process, periodically review the Bank's allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.
Changes in the allowance for possible loan losses are summarized as follows:
Period ended, 03/31/00 12/31/99 03/31/99
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(In thousands)
Allowance for loan losses
balance at beginning of period $1,971 $1,713 $1,713
Charge-offs:
Real estate loans - 170 -
Unsecured business & personal loans 1 39 -
Secured business & personal loans - - -
Installment/consumer loans 21 62 14
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Total 22 271 14
Recoveries:
Real estate loans 32 - -
Unsecured business & personal loans 1 4 -
Secured business & personal loans - - -
Installment/consumer loans 28 105 24
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Total 61 109 24
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Net recoveries (charge-offs) 39 (162) 10
Provision for loan losses
charged to operations 105 420 105
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Balance at end of period $2,115 $1,971 $1,828
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Ratio of net recoveries (charge-offs) during
period to average loans outstanding 0.02% -0.10% 0.01%
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7. Asset Quality
The following table summarizes non-performing loans:
Period ended, 03/31/00 12/31/99 03/31/99
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(In thousands)
Loans 90 days or more past due
and still accruing:
Other $ 7 $ 1 $ 4
Nonaccrual loans:
Mortgage loans:
Single-family residential 320 - 135
Commercial real estate - - 156
Construction and Land - - 600
Other 74 189 482
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Total nonaccrual loans 394 189 1,373
Restructured loans - 776 -
Other real estate owned, net - - -
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Total $401 $966 $1,377
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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 Bank's net income is further affected by the level of its other expenses, such as employees' salaries and benefits and occupancy costs. This discussion and analysis should be read in conjunction with the Audited Consolidated Financial Statements and notes thereto included in the Company's 1999 Form 10-K.
Financial Condition
The assets of the Registrant totaled $312,261,000 at March 31, 2000, an increase of $12,217,000 or 4.1% from the year end. This increase mainly results from an increase in available-for-sale securities of $8,571,000 or 10.1% and an increase in net loans of $5,484,000 or 3.3%. These increases were slightly offset by a decrease in cash and cash equivalents of $3,107,000 or 15.5%. The primary source of funds for the increase in assets was derived from increased deposits of $12,001,000 or 4.4%. Demand deposits increased $2,938,000 or 3.5% over December 31, 1999, savings, N.O.W. and money market deposits increased $1,473,000 or 1.1% and certificates of deposit of $100,000 or more increased $8,662,000 or 33.1% over December 31, 1999. Other time deposits decreased $1,072,000 or 3.1% over year end. The increase in deposits is mainly attributed to increased public fund deposits.
Total stockholders' equity was $23,932,000 at March 31, 2000, an increase of 1.1% over December 31, 1999. The increase of $260,000 was the result of net income for the three month period ended March 31, 2000, of $1,210,000; less $320,000 for the purchase of 20,000 shares of treasury stock; less cash dividends declared of $509,000; and less the net increase in unrealized depreciation in securities available for sale, net of tax, of $121,000. Total capital before unrealized losses on available-for-sale securities increased by $381,000 or 1.6%. The net increase in unrealized depreciation in securities available for sale is attributable to changes in market conditions. 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.
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
periods ended March 31, 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 quarter totaled $34,000 in 2000 and $42,000 in 1999. 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 March 31, 2000 1999
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(In thousands) Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
============================================================================================================================
Interest earning assets:
Loans (including fee income) $174,177 $3,912 9.0% $168,735 $3,642 8.8%
Mortgage backed securities 46,569 812 7.0% 33,454 556 6.7%
Tax exempt investment securities 40,847 619 6.1% 26,884 442 6.7%
Taxable investment securities 15,556 250 6.5% 12,175 194 6.5%
Federal funds sold 12,863 186 5.8% 12,975 147 4.6%
Other securities 1,083 18 6.7% 1,083 17 6.4%
Deposits with banks 420 5 4.8% 343 4 4.7%
============================================================================
Total interest earning assets $291,515 $5,802 8.0% $255,649 $5,002 7.9%
Interest bearing liabilities:
Savings, N.O.W. and
money market deposits $133,483 $895 2.7% $112,476 $ 644 2.3%
Certificates of deposit of $100,000
or more 35,085 461 5.3% 27,263 325 4.8%
Other time deposits 34,480 379 4.4% 42,895 520 4.9%
============================================================================
Total interest bearing liabilities $203,048 $1,735 3.4% $182,634 $1,489 3.3%
============================================================================
Net interest income/interest
rate spread (1) $4,067 4.6% $3,513 4.6%
================= =================
Net interest earning assets/net interest margin $ 88,467 5.6% $ 73,015 5.6%
========= ====== ========= ======
Ratio of interest earning assets to
interest bearing liabilities 143.6% 140.0%
====== ======
Less: Tax equivalent adjustment $ (181) $ (146)
====== ======
Net interest income $3,886 $3,367
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(1) The above table is presented on a tax equivalent basis.
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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 March 31, Three months ended
2000 Over 1999
(In thousands) Changes Due To
===============================================================================
Volume Rate Net Change
Interest income on interest
earning assets:
Loans (including loan fee income) $136 $ 134 $270
Mortgage-backed securities 233 23 256
Tax exempt investment securities 400 (223) 177
Taxable investment securities 71 (15) 56
Federal funds sold (9) 48 39
Other securities 0 1 1
Deposits with banks 5 (4) 1
---------------------------------
Total interest earning assets $836 $ (36) $800
---------------------------------
Interest expense on interest
bearing liabilities
Savings, N.O.W. and money market deposits 134 117 251
Certificates of deposit of $100,000 or more 102 34 136
Other time deposits (93) (48) (141)
---------------------------------
Total interest bearing liabilities $143 $ 103 $246
---------------------------------
Net interest income $693 $ (139) $554
=================================
(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 March 31, 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 March 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) 27,033 12.9% 16,814 >8.0% 21,018 >10.0%
Tier 1 Capital (to risk weighted assets) 24,918 11.9% 8,407 >4.0% 12,611 > 6.0%
Tier 1 Capital (to average assets) 24,918 7.9% 12,665 >4.0% 15,831 > 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 an 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 Ended March 31, 2000 and 1999
During the three month period ended March 31, 2000, the Registrant earned net income of $1,210,000 or $ .28 per share as compared with $953,000 or $.22 per share for the same period in 1999. Highlights for the three months ended March 31, 2000 include: (i) a $519,000 or 15.4% increase in net interest income; (ii) a $71,000 or 11.8% decrease in total other income; and (iii) a $202,000 or 8.4% increase in total other expenses over the same period in 1999. The provision for income taxes decreased $11,000 or 2.2%.
Net income for the first three months of 2000 reflects annualized returns of 19.71% on average total stockholders' equity and 1.54% 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 $519,000 or 15.4% 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 $255,649,000 in the first three months of 1999 to $291,515,000 for the comparable period in 2000, a 14.0% increase. Average interest bearing liabilities increased 11.2% to $203,048,000 in 2000 from $182,634,000 for the same period last year. The yield on average interest earning assets for the current three month period increased to 8.0% from 7.9% for the same period last year. The cost of average interest bearing liabilities increased to 3.4% from 3.3% during the same period in 1999. The net yield on average earning assets remained constant at 5.6% during the first three months of 1999 and 2000.
Average loans grew by $5,422,000 or 3.2% when compared to the same period in 1999. Each component of the loan portfolio contributed to the growth; however, real estate loans increased $2,379,000 or 1.7% and unsecured business and personal loans increased $2,851,000 or 10.2%. 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 them on the secondary market. Unsecured business and personal loans increased as a result of business development efforts.
A $105,000 provision for loan losses was made during the three month period ended March 31, 2000 and 1999. The allowance for loan losses increased to $2,115,000 at March 31, 2000, as compared to $1,971,000 at December 31, 1999. As a percentage of loans, the allowance was 1.20% at March 31, 2000 and 1.15% at December 31, 1999.
The adequacy of the allowance for loan losses is determined based on management's detailed analysis of classified loans, input from the Bank's outside loan review consultants, past loss experience, current economic conditions, delinquency trends and other pertinent factors. Additions to the allowance are charged to expense and realized losses, net of recoveries, are charged to the allowance.
Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in conditions. In addition, various regulatory agencies, as an integral part of the examination process, periodically review the Bank's allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgments from the information available to them at the time of their examination.
Total other income decreased during the three month period ended March 31, 2000 by $71,000 or 11.8% over the same period last year. Service charges on deposit accounts for the three month period ended March 31, 2000 totaled $245,000, an increase of $25,000 or 11.4% over the same period last year. This increase primarily resulted from the Bank increasing fees charged on certain deposit accounts during the second quarter of 1999. Fees for other customer services for the three month period ended March 31, 2000 totaled $182,000, an increase of $1,000 or .6% over the same period last year. Merchant processing income increased 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.
Other operating income for the three month period ended March 31, 2000 totaled $103,000, a decrease of $97,000 or 48.5% over the same period last year. The decrease primarily resulted from a decrease in income from the gain on the sale of mortgages of $100,000 or 70.2% to $43,000 at March 31, 2000 compared to $143,000 for the same period in 1999. 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 March 31, 2000 by $202,000 or 8.4% over the same period last year. The increase in salary expense of $88,000 or 7.2% is attributed to increased staffing, primarily in the item processing department which the Bank moved in house in the first quarter of 2000, and salary increases. Furniture and fixture expense decreased $17,000 or 8.9% for the three month period ended March 31, 2000 over the same period last year. This decrease is partially attributed to the reduction in depreciation expense relative to a prior year computer conversion that was fully depreciated in the fourth quarter of 1999.
Total other operating expenses for the three month period ended March 31, 2000 totaled $922,000, an increase of $123,000 or 15.4% over the same period last year. The increase is partially due to large one time expenses related to the implementation of in house item processing, statement rendering and check imaging. The increased consulting and legal fees, components of other operating expenses, are primarily attributed to the formation of a subsidiary in the second quarter of 1999. During the first quarter of 1999, the Bank incurred non recurring expenses relative to the development of training programs. Decreased personal education costs partially offset other operating expenses in the first quarter of 2000. Loan processing costs also declined from the prior year with the reduction in the number of residential mortgage loans originated over the same period.
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 March 31, 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 its unencumbered residential mortgages owned by the Bank. At March 31, 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.
Year 2000
To date no significant issues have arisen regarding the Bank's transition into the new millennium. Upgrades of its branch and back office systems to better serve its customers and improve the efficiency of its operations were accelerated in 1999 as a result of the Year 2000 issue. The total cost of these upgrades approximated $350,000.
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 February 18, 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 has 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: May 15, 2000 /s/Thomas J. Tobin
_________________________________
Thomas J. Tobin
President and Chief Executive Officer
Date: May 15, 2000 /s/Christopher Becker
__________________________________
Christopher Becker
Executive Vice President and Treasurer