10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2009
Commission file number 001-34096
BRIDGE BANCORP, INC.
(Exact name of registrant as specified in its charter)
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NEW YORK
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11-2934195 |
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification Number) |
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2200 MONTAUK HIGHWAY, BRIDGEHAMPTON, NEW YORK
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11932 |
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(Address of principal executive offices)
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(Zip Code) |
Registrants 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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
There were 6,231,960 shares of common stock outstanding as of November 3, 2009.
Item 1. Financial Statements
BRIDGE BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets (unaudited)
(In thousands, except share and per share amounts)
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September 30, |
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December 31, |
|
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2009 |
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2008 |
|
ASSETS |
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|
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|
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|
Cash and due from banks |
|
$ |
10,929 |
|
|
$ |
24,744 |
|
Interest earning deposits with banks |
|
|
25,803 |
|
|
|
4,141 |
|
|
|
|
|
|
|
|
Total cash and cash equivalents |
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|
36,732 |
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|
|
28,885 |
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|
|
|
|
|
|
|
|
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Securities available for sale, at fair value |
|
|
291,308 |
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|
310,695 |
|
Securities held to maturity (fair value of $63,602 and $43,890, respectively) |
|
|
62,534 |
|
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|
43,444 |
|
|
|
|
|
|
|
|
Total securities, net |
|
|
353,842 |
|
|
|
354,139 |
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|
|
|
|
|
|
|
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|
Securities, restricted |
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|
1,205 |
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|
|
3,800 |
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|
|
|
|
|
|
|
|
|
Loans |
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|
439,317 |
|
|
|
429,683 |
|
Allowance for loan losses |
|
|
(5,485 |
) |
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|
(3,953 |
) |
|
|
|
|
|
|
|
Loans, net |
|
|
433,832 |
|
|
|
425,730 |
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net |
|
|
20,568 |
|
|
|
18,377 |
|
Accrued interest receivable |
|
|
3,744 |
|
|
|
3,626 |
|
Other assets |
|
|
4,623 |
|
|
|
4,502 |
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
854,546 |
|
|
$ |
839,059 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Demand deposits |
|
$ |
213,121 |
|
|
$ |
181,213 |
|
Savings, NOW and money market deposits |
|
|
391,853 |
|
|
|
344,860 |
|
Certificates of deposit of $100,000 or more |
|
|
85,101 |
|
|
|
78,165 |
|
Other time deposits |
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|
75,359 |
|
|
|
54,847 |
|
|
|
|
|
|
|
|
Total deposits |
|
|
765,434 |
|
|
|
659,085 |
|
|
|
|
|
|
|
|
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Federal funds purchased and Federal Home Loan Bank overnight borrowings |
|
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70,900 |
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Federal Home Loan Bank term advances |
|
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|
|
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|
30,000 |
|
Repurchase agreements |
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|
15,000 |
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|
15,000 |
|
Accrued interest payable |
|
|
673 |
|
|
|
672 |
|
Other liabilities and accrued expenses |
|
|
11,816 |
|
|
|
7,263 |
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
792,923 |
|
|
|
782,920 |
|
|
|
|
|
|
|
|
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Stockholders equity: |
|
|
|
|
|
|
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Preferred stock, par value $.01 per share (2,000,000 shares authorized; none issued) |
|
|
|
|
|
|
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Common stock, par value $.01 per share: |
|
|
|
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|
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Authorized: 20,000,000 shares; 6,390,629 and 6,386,306 shares issued, respectively; 6,225,501 and 6,184,080
shares outstanding, respectively |
|
|
64 |
|
|
|
64 |
|
Surplus |
|
|
20,265 |
|
|
|
20,452 |
|
Retained earnings |
|
|
42,340 |
|
|
|
40,081 |
|
Less: Treasury Stock at cost, 165,128 and 202,226 shares, respectively |
|
|
(5,522 |
) |
|
|
(6,309 |
) |
|
|
|
|
|
|
|
|
|
|
57,147 |
|
|
|
54,288 |
|
Accumulated other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Net unrealized gain on securities, net of deferred taxes of ($3,936) and ($2,250), respectively |
|
|
5,980 |
|
|
|
3,417 |
|
Change in pension liabilities, net of deferred taxes of $1,019 and $1,060, respectively |
|
|
(1,504 |
) |
|
|
(1,566 |
) |
|
|
|
|
|
|
|
Total Stockholders Equity |
|
|
61,623 |
|
|
|
56,139 |
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity |
|
$ |
854,546 |
|
|
$ |
839,059 |
|
|
|
|
|
|
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|
See accompanying condensed notes to the Unaudited Consolidated Financial Statements.
Page 1
BRIDGE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income (unaudited)
(In thousands, except per share amounts)
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For the |
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For the |
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Three Months Ended |
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Nine Months Ended |
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|
September 30, |
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September 30, |
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2009 |
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|
2008 |
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2009 |
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|
2008 |
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (including fee income) |
|
$ |
7,386 |
|
|
$ |
7,087 |
|
|
$ |
21,929 |
|
|
$ |
20,850 |
|
Mortgage-backed securities |
|
|
2,585 |
|
|
|
2,174 |
|
|
|
8,439 |
|
|
|
5,649 |
|
State and municipal obligations |
|
|
528 |
|
|
|
455 |
|
|
|
1,635 |
|
|
|
1,353 |
|
U.S. GSE securities |
|
|
211 |
|
|
|
285 |
|
|
|
584 |
|
|
|
797 |
|
Federal funds sold |
|
|
13 |
|
|
|
73 |
|
|
|
22 |
|
|
|
173 |
|
Deposits with banks |
|
|
4 |
|
|
|
1 |
|
|
|
5 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
Total interest income |
|
|
10,727 |
|
|
|
10,075 |
|
|
|
32,614 |
|
|
|
28,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and money market deposits |
|
|
887 |
|
|
|
1,384 |
|
|
|
2,767 |
|
|
|
4,286 |
|
Certificates of deposit of $100,000 or more |
|
|
519 |
|
|
|
527 |
|
|
|
1,537 |
|
|
|
1,581 |
|
Other time deposits |
|
|
420 |
|
|
|
247 |
|
|
|
1,175 |
|
|
|
825 |
|
Federal funds purchased and repurchase agreements |
|
|
90 |
|
|
|
108 |
|
|
|
311 |
|
|
|
338 |
|
Federal Home Loan Bank Advances |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
1,916 |
|
|
|
2,266 |
|
|
|
5,791 |
|
|
|
7,060 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
8,811 |
|
|
|
7,809 |
|
|
|
26,823 |
|
|
|
21,767 |
|
Provision for loan losses |
|
|
900 |
|
|
|
550 |
|
|
|
3,200 |
|
|
|
1,075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses |
|
|
7,911 |
|
|
|
7,259 |
|
|
|
23,623 |
|
|
|
20,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
|
781 |
|
|
|
798 |
|
|
|
2,216 |
|
|
|
2,302 |
|
Fees for other customer services |
|
|
538 |
|
|
|
602 |
|
|
|
1,279 |
|
|
|
1,377 |
|
Title fee income |
|
|
226 |
|
|
|
250 |
|
|
|
586 |
|
|
|
945 |
|
Net securities gains |
|
|
|
|
|
|
|
|
|
|
529 |
|
|
|
|
|
Other operating income |
|
|
20 |
|
|
|
27 |
|
|
|
59 |
|
|
|
108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non interest income |
|
|
1,565 |
|
|
|
1,677 |
|
|
|
4,669 |
|
|
|
4,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
|
3,614 |
|
|
|
3,265 |
|
|
|
10,714 |
|
|
|
9,404 |
|
Net occupancy expense |
|
|
602 |
|
|
|
481 |
|
|
|
1,750 |
|
|
|
1,388 |
|
Furniture and fixture expense |
|
|
262 |
|
|
|
212 |
|
|
|
741 |
|
|
|
621 |
|
FDIC assessments |
|
|
310 |
|
|
|
89 |
|
|
|
1,265 |
|
|
|
172 |
|
Other operating expenses |
|
|
1,276 |
|
|
|
1,354 |
|
|
|
4,133 |
|
|
|
4,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non interest expense |
|
|
6,064 |
|
|
|
5,401 |
|
|
|
18,603 |
|
|
|
15,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
3,412 |
|
|
|
3,535 |
|
|
|
9,689 |
|
|
|
9,751 |
|
Income tax expense |
|
|
1,092 |
|
|
|
1,179 |
|
|
|
3,137 |
|
|
|
3,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,320 |
|
|
$ |
2,356 |
|
|
$ |
6,552 |
|
|
$ |
6,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
0.38 |
|
|
$ |
0.39 |
|
|
$ |
1.08 |
|
|
$ |
1.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
0.38 |
|
|
$ |
0.39 |
|
|
$ |
1.07 |
|
|
$ |
1.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income |
|
$ |
3,803 |
|
|
$ |
2,495 |
|
|
$ |
9,177 |
|
|
$ |
6,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying condensed notes to the Unaudited Consolidated Financial Statements.
Page 2
BRIDGE BANCORP, INC. AND SUBSIDIARY
Consolidated Statement of Stockholders Equity (unaudited)
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Common |
|
|
|
|
|
|
Comprehensive |
|
|
Retained |
|
|
Treasury |
|
|
Comprehensive |
|
|
|
|
|
|
Stock |
|
|
Surplus |
|
|
Income |
|
|
Earnings |
|
|
Stock |
|
|
Income |
|
|
Total |
|
Balance at December 31, 2008 |
|
$ |
64 |
|
|
$ |
20,452 |
|
|
|
|
|
|
$ |
40,081 |
|
|
$ |
(6,309 |
) |
|
$ |
1,851 |
|
|
$ |
56,139 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
6,552 |
|
|
|
6,552 |
|
|
|
|
|
|
|
|
|
|
|
6,552 |
|
Proceeds from issuance of common stock |
|
|
|
|
|
|
113 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
115 |
|
Stock awards granted |
|
|
|
|
|
|
(932 |
) |
|
|
|
|
|
|
|
|
|
|
932 |
|
|
|
|
|
|
|
|
|
Vesting of stock awards |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
(21 |
) |
|
|
|
|
|
|
(22 |
) |
Exercise of stock options, including tax benefit |
|
|
|
|
|
|
163 |
|
|
|
|
|
|
|
|
|
|
|
(126 |
) |
|
|
|
|
|
|
37 |
|
Share based compensation expense |
|
|
|
|
|
|
470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
470 |
|
Cash dividend declared, $0.69 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,293 |
) |
|
|
|
|
|
|
|
|
|
|
(4,293 |
) |
Other comprehensive income, net of deferred taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized net gains in securities
available for sale,
net of deferred tax effects |
|
|
|
|
|
|
|
|
|
|
2,563 |
|
|
|
|
|
|
|
|
|
|
|
2,563 |
|
|
|
2,563 |
|
Adjustment to pension liability, net of deferred taxes |
|
|
|
|
|
|
|
|
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
62 |
|
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
9,177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2009 |
|
$ |
64 |
|
|
$ |
20,265 |
|
|
|
|
|
|
$ |
42,340 |
|
|
$ |
(5,522 |
) |
|
$ |
4,476 |
|
|
$ |
61,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying condensed notes to the Unaudited Consolidated Financial Statements.
Page 3
BRIDGE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows (unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
2009 |
|
|
2008 |
|
Operating activities: |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
6,552 |
|
|
$ |
6,561 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
3,200 |
|
|
|
1,075 |
|
Depreciation and amortization |
|
|
1,068 |
|
|
|
900 |
|
Amortization and (accretion), net |
|
|
140 |
|
|
|
(66 |
) |
Share based compensation expense |
|
|
470 |
|
|
|
313 |
|
Tax benefit from exercise of stock options issued pursuant to equity incentive plans |
|
|
(3 |
) |
|
|
|
|
SERP expense |
|
|
211 |
|
|
|
124 |
|
Net securities gains |
|
|
(529 |
) |
|
|
|
|
Increase in accrued interest receivable |
|
|
(118 |
) |
|
|
(730 |
) |
(Increase) decrease in other assets |
|
|
(118 |
) |
|
|
84 |
|
Decrease in accrued and other liabilities |
|
|
2,709 |
|
|
|
10,396 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
13,582 |
|
|
|
18,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
|
|
Purchases of securities available for sale |
|
|
(66,346 |
) |
|
|
(162,812 |
) |
Purchases of FHLB stock |
|
|
(19,514 |
) |
|
|
(23,817 |
) |
Purchases of securities held to maturity |
|
|
(48,518 |
) |
|
|
(38,321 |
) |
Proceeds from sales of securities available for sale |
|
|
13,087 |
|
|
|
|
|
Redemption of FHLB stock |
|
|
22,109 |
|
|
|
25,324 |
|
Maturities and calls of securities available for sale |
|
|
28,420 |
|
|
|
68,505 |
|
Maturities of securities held to maturity |
|
|
24,563 |
|
|
|
5,234 |
|
Principal payments on mortgage-backed securities |
|
|
53,729 |
|
|
|
20,417 |
|
Net increase in loans |
|
|
(11,302 |
) |
|
|
(38,352 |
) |
Purchase of premises and equipment |
|
|
(3,259 |
) |
|
|
(753 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(7,031 |
) |
|
|
(144,575 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
|
|
Net increase in deposits |
|
|
106,349 |
|
|
|
162,641 |
|
Net (decrease) increase in federal funds purchased and FHLB overnight borrowings |
|
|
(70,900 |
) |
|
|
8,000 |
|
Net decrease in FHLB term advances |
|
|
(30,000 |
) |
|
|
(35,000 |
) |
Proceeds from issuance of common stock |
|
|
115 |
|
|
|
|
|
Net proceeds from exercise of stock options |
|
|
20 |
|
|
|
|
|
Repurchase of surrendered stock from exercise of stock options and vesting
of restricted stock awards |
|
|
(5 |
) |
|
|
|
|
Cash dividends paid |
|
|
(4,283 |
) |
|
|
(4,234 |
) |
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
1,296 |
|
|
|
131,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
7,847 |
|
|
|
5,489 |
|
Cash and cash equivalents at beginning of period |
|
|
28,885 |
|
|
|
14,348 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
36,732 |
|
|
$ |
19,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Information-Cash Flows: |
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
5,790 |
|
|
$ |
7,056 |
|
Income tax |
|
$ |
2,111 |
|
|
$ |
3,130 |
|
|
|
|
|
|
|
|
|
|
Noncash investing and financing activities: |
|
|
|
|
|
|
|
|
Securities which settled in the subsequent period |
|
$ |
1,500 |
|
|
$ |
10,000 |
|
Dividends declared and unpaid at end of period |
|
$ |
1,433 |
|
|
$ |
1,413 |
|
See accompanying condensed notes to the Unaudited Consolidated Financial Statements.
Page 4
BRIDGE BANCORP, INC. AND SUBSIDIARY
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
Bridge Bancorp, Inc. (the Company) is incorporated under the laws of the State of New York as a
bank holding company. The Companys business currently consists of the operations of its
wholly-owned subsidiary, The Bridgehampton National Bank (the Bank). The Banks operations
include its real estate investment trust subsidiary, Bridgehampton Community, Inc. (BCI) and a
financial title insurance subsidiary, Bridge Abstract LLC (Bridge Abstract).
The accompanying Unaudited Consolidated Financial Statements, which include the accounts of the
Company and its wholly-owned subsidiary, the Bank, have been prepared in accordance with U.S.
generally accepted accounting principles (GAAP) for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. The Unaudited Consolidated Financial
Statements included herein reflect all normal recurring adjustments that 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 annualized results of operations for
the nine months ended September 30, 2009 are not necessarily indicative of the results of
operations that may be expected for the entire fiscal year. Certain information and note
disclosures normally included in the financial statements prepared in accordance with GAAP have
been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange
Commission (the SEC). Certain reclassifications have been made to prior year amounts, and the
related discussion and analysis, to conform to the current year presentation. The Unaudited
Consolidated Financial Statements should be read in conjunction with the Audited Consolidated
Financial Statements and notes thereto included in the Companys Annual Report on Form 10-K for the
year ended December 31, 2008.
2. EARNINGS PER SHARE
Basic earnings per common share is computed by dividing net income by the weighted-average number
of common shares outstanding for the period. Diluted earnings per share, which reflect the
potential dilution that could occur if outstanding stock options were exercised and dilutive stock
awards were fully vested 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 common stock equivalents.
Computation of Per Share Income
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
2,320 |
|
|
$ |
2,356 |
|
|
$ |
6,552 |
|
|
$ |
6,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Equivalent Shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding |
|
|
6,100 |
|
|
|
6,076 |
|
|
|
6,093 |
|
|
|
6,076 |
|
Weighted Average Common Equivalent Shares Outstanding |
|
|
47 |
|
|
|
21 |
|
|
|
33 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common and Equivalent Shares Outstanding |
|
|
6,147 |
|
|
|
6,097 |
|
|
|
6,126 |
|
|
|
6,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per Share |
|
$ |
0.38 |
|
|
$ |
0.39 |
|
|
$ |
1.08 |
|
|
$ |
1.08 |
|
Diluted Earnings per Share |
|
$ |
0.38 |
|
|
$ |
0.39 |
|
|
$ |
1.07 |
|
|
$ |
1.08 |
|
There were approximately 55,505 and 61,705 options outstanding at September 30, 2009 and
September 30, 2008, respectively, that were not included in the computation of diluted earnings per
share because the options exercise prices were greater than the average market price of common
stock and were, therefore, antidilutive. There were approximately 500 and 58,070 shares of unvested
restricted stock at September 30, 2009 and September 30, 2008, respectively, that were not included
in the computation of diluted earnings per share because they were antidilutive.
Page 5
3. REPURCHASE STOCK
The Companys Board of Directors approved a stock repurchase program on March 27, 2006 that
authorized the repurchase of up to 309,000 shares or approximately 5% of its total issued and
outstanding common shares. These shares can be purchased from time to time in the open market or
through private purchases, depending on market conditions, availability of stock, the trading price
of the stock, alternative uses for capital, and the Companys financial performance. Repurchased
shares are held in the Companys treasury account and may be utilized for general corporate
purposes.
For the nine months ended September 30, 2009 and September 30, 2008, the Company did not repurchase
any of its common shares. At September 30, 2009, 167,041 shares were available for repurchase
under the Board approved program.
4. STOCK BASED COMPENSATION PLANS
The Compensation Committee of the Board of Directors determines stock options and restricted stock
awarded under the Bridge Bancorp, Inc. Equity Incentive Plan (Plan) and the Company accounts for
this plan under the Financial Accounting Standards Board Accounting Standards Codification (FASB
ASC) No. 718 and 505.
No new grants of stock options were awarded during the nine months ended September 30, 2009 and
September 30, 2008. Compensation expense attributable to stock options was $11,000 and $32,000 for
the three months and nine months ended September 30, 2009, respectively, and $10,000 and $28,000
for the three months and nine months ended September 30, 2008, respectively.
The intrinsic value for stock options is calculated based on the exercise price of the underlying
awards and the market price of our common stock as of the reporting date. The intrinsic value of
options exercised during the third quarter of 2009 was $12,000. No stock options were exercised
during the third quarter of 2008. The intrinsic value of options outstanding and exercisable at
September 30, 2009 and September 30, 2008 was $51,000 and $178,000, respectively.
A summary of the status of the Companys stock options as of and for the nine months ended
September 30, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
|
Number |
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
of |
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
|
|
Options |
|
|
Price |
|
|
Life |
|
|
Value |
|
Outstanding, December 31, 2008 |
|
|
81,205 |
|
|
$ |
22.67 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(20,600 |
) |
|
$ |
17.20 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, September 30, 2009 |
|
|
60,605 |
|
|
$ |
24.53 |
|
|
6.16 years |
|
$ |
50,590 |
|
Vested or expected to vest |
|
|
57,050 |
|
|
$ |
24.48 |
|
|
6.10 years |
|
$ |
50,590 |
|
Exercisable, September 30, 2009 |
|
|
40,795 |
|
|
$ |
24.15 |
|
|
5.79 years |
|
$ |
50,590 |
|
|
|
|
Number of |
|
|
Exercise |
|
Range of Exercise Prices |
|
Options |
|
|
Price |
|
|
|
|
1,200 |
|
|
$ |
12.53 |
|
|
|
|
3,900 |
|
|
$ |
15.47 |
|
|
|
|
5,659 |
|
|
$ |
24.00 |
|
|
|
|
44,443 |
|
|
$ |
25.25 |
|
|
|
|
3,000 |
|
|
$ |
26.55 |
|
|
|
|
2,403 |
|
|
$ |
30.60 |
|
|
|
|
|
|
|
|
|
|
|
|
60,605 |
|
|
|
|
|
During the nine months ended September 30, 2009 and September 30, 2008, restricted stock
awards of 29,392 shares and 42,470 shares were granted, respectively. These awards vest over five
years with a third vesting after three years, four years and five years from the date of grant.
Compensation expense attributable to restricted stock awards was $134,000 and $406,000 for the
three months and nine months ended September 30, 2009, respectively, and $108,000 and $285,000 for
the three months and nine months ended September 30, 2008, respectively.
Page 6
A summary of the status of the Companys unvested restricted stock as of and for the nine months
ended September 30, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average Grant-Date |
|
|
|
Shares |
|
|
Fair Value |
|
Unvested, December 31, 2008 |
|
|
95,570 |
|
|
$ |
21.55 |
|
Granted |
|
|
29,392 |
|
|
$ |
18.99 |
|
Vested |
|
|
(500 |
) |
|
$ |
26.55 |
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested, September 30, 2009 |
|
|
124,462 |
|
|
$ |
20.93 |
|
|
|
|
|
|
|
|
In April 2009, the Company adopted a Directors Deferred Compensation Plan. Under the Plan,
independent directors may elect to defer all or a portion of their annual retainer fee in the form
of restricted stock units. These restricted stock units vest ratably over one year and have
dividend rights but no voting rights. In connection with this Plan, the Company recorded expenses
of approximately $21,000 and $32,000 for the three and nine months ended September 30, 2009,
respectively.
5. SECURITIES
The following table summarizes the amortized cost and fair value of the available for sale and held
to maturity investment securities portfolio at September 30, 2009 and December 31, 2008 and the
corresponding amounts of unrealized gains and losses therein:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
(In thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
Available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
$ |
10,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
10,000 |
|
U.S. GSE securities |
|
|
32,102 |
|
|
|
305 |
|
|
|
|
|
|
|
32,407 |
|
State and municipal obligations |
|
|
40,592 |
|
|
|
1,733 |
|
|
|
|
|
|
|
42,325 |
|
Mortgage-backed securities and
collateralized mortgage obligations |
|
|
198,698 |
|
|
|
7,898 |
|
|
|
(20 |
) |
|
|
206,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale |
|
|
281,392 |
|
|
|
9,936 |
|
|
|
(20 |
) |
|
|
291,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal obligation |
|
|
48,051 |
|
|
|
425 |
|
|
|
(5 |
) |
|
|
48,471 |
|
Mortgage-backed securities and
collateralized mortgage obligations |
|
|
14,483 |
|
|
|
648 |
|
|
|
|
|
|
|
15,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity |
|
|
62,534 |
|
|
|
1,073 |
|
|
|
(5 |
) |
|
|
63,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities |
|
$ |
343,926 |
|
|
$ |
11,009 |
|
|
$ |
(25 |
) |
|
$ |
354,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
(In thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
Available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
U.S. GSE securities |
|
|
29,855 |
|
|
|
306 |
|
|
|
(27 |
) |
|
|
30,134 |
|
State and municipal obligations |
|
|
47,848 |
|
|
|
840 |
|
|
|
(100 |
) |
|
|
48,588 |
|
Mortgage-backed securities and
collateralized mortgage obligations |
|
|
227,325 |
|
|
|
4,731 |
|
|
|
(83 |
) |
|
|
231,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale |
|
|
305,028 |
|
|
|
5,877 |
|
|
|
(210 |
) |
|
|
310,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal obligation |
|
|
24,153 |
|
|
|
68 |
|
|
|
(4 |
) |
|
|
24,217 |
|
Mortgage-backed securities and
collateralized mortgage obligations |
|
|
19,291 |
|
|
|
382 |
|
|
|
|
|
|
|
19,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity |
|
|
43,444 |
|
|
|
450 |
|
|
|
(4 |
) |
|
|
43,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities |
|
$ |
348,472 |
|
|
$ |
6,327 |
|
|
$ |
(214 |
) |
|
$ |
354,585 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 7
The following table summarizes the amortized cost, fair value and maturities of the available
for sale and held to maturity investment securities portfolio at September 30, 2009. Expected
maturities will differ from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
Amortized |
|
|
Fair |
|
(In thousands) |
|
Cost |
|
|
Value |
|
Maturity |
|
|
|
|
|
|
|
|
Available for sale: |
|
|
|
|
|
|
|
|
Within one year |
|
$ |
21,035 |
|
|
$ |
21,137 |
|
One to five years |
|
|
53,706 |
|
|
|
55,025 |
|
Five to ten years |
|
|
48,934 |
|
|
|
51,015 |
|
Beyond ten years |
|
|
157,717 |
|
|
|
164,131 |
|
|
|
|
|
|
|
|
Total |
|
$ |
281,392 |
|
|
$ |
291,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity: |
|
|
|
|
|
|
|
|
Within one year |
|
$ |
29,470 |
|
|
$ |
29,525 |
|
One to five years |
|
|
18,054 |
|
|
|
18,410 |
|
Five to ten years |
|
|
527 |
|
|
|
536 |
|
Beyond ten years |
|
|
14,483 |
|
|
|
15,131 |
|
|
|
|
|
|
|
|
Total |
|
$ |
62,534 |
|
|
$ |
63,602 |
|
|
|
|
|
|
|
|
Securities with unrealized losses at September 30, 2009 and December 31, 2008, aggregated by
category and length of time that individual securities have been in a continuous unrealized loss
position, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months |
|
|
Greater than 12 months |
|
|
Total |
|
September 30, 2009 |
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
Unrealized |
|
(In thousands) |
|
Fair Value |
|
|
losses |
|
|
Fair Value |
|
|
losses |
|
|
Fair Value |
|
|
losses |
|
Available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
U.S. GSE securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities and
collateralized mortgage obligations |
|
|
3,580 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
3,580 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale |
|
$ |
3,580 |
|
|
$ |
20 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,580 |
|
|
$ |
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal obligations |
|
$ |
8,745 |
|
|
$ |
5 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
8,745 |
|
|
$ |
5 |
|
Mortgage-backed securities and
collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity |
|
$ |
8,745 |
|
|
$ |
5 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
8,745 |
|
|
$ |
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months |
|
|
Greater than 12 months |
|
|
Total |
|
December 31, 2008 |
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
Unrealized |
|
(In thousands) |
|
Fair Value |
|
|
losses |
|
|
Fair Value |
|
|
losses |
|
|
Fair Value |
|
|
losses |
|
Available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
U.S. GSE securities |
|
|
4,319 |
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
4,319 |
|
|
|
27 |
|
State and municipal obligations |
|
|
2,160 |
|
|
|
51 |
|
|
|
701 |
|
|
|
49 |
|
|
|
2,861 |
|
|
|
100 |
|
Mortgage-backed securities and
collateralized mortgage obligations |
|
|
17,224 |
|
|
|
64 |
|
|
|
1,529 |
|
|
|
19 |
|
|
|
18,753 |
|
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale |
|
$ |
23,703 |
|
|
$ |
142 |
|
|
$ |
2,230 |
|
|
$ |
68 |
|
|
$ |
25,933 |
|
|
$ |
210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal obligations |
|
$ |
3,996 |
|
|
$ |
4 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,996 |
|
|
$ |
4 |
|
Mortgage-backed securities and
collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity |
|
$ |
3,996 |
|
|
$ |
4 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,996 |
|
|
$ |
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 8
Other-Than-Temporary-Impairment
Management evaluates securities for other-than-temporary impairment (OTTI) at least on a
quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.
The investment securities portfolio is evaluated for OTTI by segregating the portfolio into two
general segments and applying the appropriate OTTI model. Investment securities classified as
available for sale or held-to-maturity are generally evaluated for OTTI under FASB ASC 320,
Accounting for Certain Investments in Debt and Equity Securities. In determining OTTI under the
FASB ASC 320 model, management considers many factors, including: (1) the length of time and the
extent to which the fair value has been less than cost, (2) the financial condition and near-term
prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions,
and (4) whether the Company has the intent to sell the debt security or more likely than not will
be required to sell the debt security before its anticipated recovery. The assessment of whether an
other-than-temporary decline exists involves a high degree of subjectivity and judgment and is
based on the information available to management at a point in time.
At September 30, 2009, the majority of unrealized losses are related to the Companys mortgage
backed securities and collateralized mortgage obligations. The decline in fair value is
attributable to changes in interest rates and not credit quality, and the Company does not have the
intent to sell these securities and it is more likely than not that it will not be required to sell
the securities before their anticipated recovery, therefore the Company does not consider these
securities to be other-than-temporarily impaired at September 30, 2009.
There were no proceeds from sales and calls of securities available for sale for the three months
ended September 30, 2009 and 2008. Proceeds from sales and calls of securities available for sale
were $32.6 million and $2.4 million for the nine months ended September 30, 2009 and 2008,
respectively. Gross gains of $0.5 million were realized on these sales during the nine months ended
September 30, 2009. There were no securities gains or losses during the three and nine months
ended September 30, 2008.
Securities having a fair value of approximately $169.1 million and $276.0 million at September 30,
2009 and December 31, 2008, respectively, were pledged to secure public deposits and Federal Home
Loan Bank and Federal Reserve Bank overnight borrowings. The Bank did not hold any trading
securities during the nine months ended September 30, 2009 or the year ended December 31, 2008.
The Bank is a member of the Federal Home Loan Bank (FHLB) of New York. Members are required to
own a particular amount of stock based on the level of borrowings and other factors, and may invest
in additional amounts. The Bank is also a member of the Federal Reserve Bank (FRB) system and
required to own FRB stock. FHLB and FRB stock is carried at cost and periodically evaluated for
impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as
income. The Bank owned approximately $1.2 million in FHLB and FRB stock at September 30, 2009 and
$3.8 million at December 31, 2008, respectively and reported these amounts as restricted securities
in the consolidated balance sheets.
6. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
FASB ASC No. 820-10 defines fair value as the exchange price that would be received for an asset or
paid to transfer a liability (exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the measurement date.
FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the
use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The
standard describes three levels of inputs that may be used to measure fair values:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the
entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for
similar assets or liabilities; quoted prices in markets that are not active; or other inputs that
are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a reporting entitys own assumptions about
the assumptions that market participants would use in pricing an asset or liability.
The fair value of securities available for sale is determined by obtaining quoted prices on
nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a
mathematical technique widely used in the industry to value debt securities without relying
exclusively on quoted prices for the specific securities but rather by relying on the securities
relationship to other benchmark quoted securities (Level 2 inputs).
Page 9
Assets and Liabilities Measured on a Recurring Basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at |
|
|
|
|
|
|
|
September 30, 2009 Using: |
|
|
|
|
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Quoted Prices In |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
Active Markets for |
|
|
Observable |
|
|
Unobservable |
|
|
|
Carrying |
|
|
Identical Assets |
|
|
Inputs |
|
|
Inputs |
|
(In thousands) |
|
Value |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
$ |
10,000 |
|
|
$ |
10,000 |
|
|
$ |
|
|
|
|
|
|
U.S. GSE securities |
|
|
32,407 |
|
|
|
|
|
|
|
32,407 |
|
|
|
|
|
State and municipal obligations |
|
|
42,325 |
|
|
|
|
|
|
|
42,325 |
|
|
|
|
|
Mortgage-backed securities and
collateralized mortgage obligations |
|
|
206,576 |
|
|
|
|
|
|
|
206,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale |
|
$ |
291,308 |
|
|
$ |
10,000 |
|
|
$ |
281,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at |
|
|
|
|
|
|
|
December 31, 2008 Using: |
|
|
|
|
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Quoted Prices In |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
Active Markets for |
|
|
Observable |
|
|
Unobservable |
|
|
|
Carrying |
|
|
Identical Assets |
|
|
Inputs |
|
|
Inputs |
|
(In thousands) |
|
Value |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
U.S. GSE securities |
|
|
30,134 |
|
|
|
|
|
|
|
30,134 |
|
|
|
|
|
State and municipal obligations |
|
|
48,588 |
|
|
|
|
|
|
|
48,588 |
|
|
|
|
|
Mortgage-backed securities and
collateralized mortgage obligations |
|
|
231,973 |
|
|
|
|
|
|
|
231,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale |
|
$ |
310,695 |
|
|
|
|
|
|
$ |
310,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value estimates are made at specific points in time and are based on existing on-and
off-balance sheet financial instruments. Such estimates are generally subjective in nature and
dependent upon a number of significant assumptions associated with each financial instrument or
group of financial instruments, including estimates of discount rates, risks associated with
specific financial instruments, estimates of future cash flows, and relevant available market
information. Changes in assumptions could significantly affect the estimates. In addition, fair
value estimates do not reflect the value of anticipated future business, premiums or discounts that
could result from offering for sale at one time the Banks entire holdings of a particular
financial instrument, or the tax consequences of realizing gains or losses on the sale of financial
instruments.
The Company used the following method and assumptions in estimating the fair value of its financial
instruments:
Cash and Due from Banks and Federal Funds Sold: Carrying amounts approximate fair value, since
these instruments are either payable on demand or have short-term maturities.
Securities Available for Sale and Held to Maturity: The estimated fair values are based on
independent dealer quotations on nationally recognized securities exchanges or matrix pricing,
which is a mathematical technique widely used in the industry to value debt securities without
relying exclusively on quoted prices for the specific securities but rather by relying on the
securities relationship to other benchmark quoted securities.
Page 10
Restricted Stock: It is not practicable to determine the fair value of FHLB and FRB stock due to
restrictions placed on its transferability.
Loans: The estimated fair values of real estate mortgage loans and other loans receivable are based
on discounted cash flow calculations that use available market benchmarks when establishing
discount factors for the types of loans. All nonaccrual loans are carried at their current fair
value. Exceptions may be made for adjustable rate loans (with resets of one year or less), which
would be discounted straight to their rate index plus or minus an appropriate spread.
Deposits: The estimated fair value of certificates of deposits are based on discounted cash flow
calculations that use a replacement cost of funds approach to establishing discount rates for
certificates of deposits maturities. Stated value is fair value for all other deposits.
Borrowed Funds and Brokered Deposits: The estimated fair value of borrowed funds and wholesale
certificates of deposit are based on discounted cash flow calculations that use a replacement cost
of funds approach to establishing discount rates for funding maturities.
Accrued Interest Receivable and Payable: For these short-term instruments, the carrying amount is a
reasonable estimate of the fair value.
Off-Balance-Sheet Liabilities: The fair value of off-balance-sheet commitments to extend credit is
estimated using fees currently charged to enter into similar agreements. The fair value is
immaterial as of September 30, 2009 and December 31, 2008.
The estimated fair values and recorded carrying values of the Banks financial instruments are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
(In thousands) |
|
Amount |
|
|
Value |
|
|
Amount |
|
|
Value |
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
10,929 |
|
|
$ |
10,929 |
|
|
$ |
24,744 |
|
|
$ |
24,744 |
|
Interest bearing deposits with banks |
|
|
25,803 |
|
|
|
25,803 |
|
|
|
4,141 |
|
|
|
4,141 |
|
Securities available for sale |
|
|
291,308 |
|
|
|
291,308 |
|
|
|
310,695 |
|
|
|
310,695 |
|
Securities restricted |
|
|
1,205 |
|
|
|
|
|
|
|
3,800 |
|
|
|
|
|
Securities held to maturity |
|
|
62,534 |
|
|
|
63,602 |
|
|
|
43,444 |
|
|
|
43,890 |
|
Loans, net |
|
|
433,832 |
|
|
|
444,467 |
|
|
|
425,730 |
|
|
|
437,265 |
|
Accrued interest receivable |
|
|
3,744 |
|
|
|
3,744 |
|
|
|
3,626 |
|
|
|
3,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand and other deposits |
|
|
765,434 |
|
|
|
766,810 |
|
|
|
659,085 |
|
|
|
660,176 |
|
Federal funds purchased and Federal Home Loan Bank
overnight borrowings |
|
|
|
|
|
|
|
|
|
|
70,900 |
|
|
|
70,882 |
|
Federal Home Loan Bank term advances |
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
29,998 |
|
Repurchase agreements |
|
|
15,000 |
|
|
|
15,960 |
|
|
|
15,000 |
|
|
|
15,368 |
|
Accrued interest payable |
|
|
673 |
|
|
|
673 |
|
|
|
672 |
|
|
|
672 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 11
7. LOANS
The following table sets forth the major classifications of loans:
|
|
|
|
|
|
|
|
|
(In thousands) |
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
Commercial real estate mortgage loans |
|
$ |
219,084 |
|
|
$ |
199,156 |
|
Residential real estate mortgage loans |
|
|
137,411 |
|
|
|
139,342 |
|
Commercial, financial, and agricultural loans |
|
|
62,301 |
|
|
|
63,468 |
|
Installment/consumer loans |
|
|
10,826 |
|
|
|
11,081 |
|
Real estate-construction loans |
|
|
9,354 |
|
|
|
16,370 |
|
|
|
|
|
|
|
|
Total loans |
|
|
438,976 |
|
|
|
429,417 |
|
Net deferred loan costs and fees |
|
|
341 |
|
|
|
266 |
|
|
|
|
|
|
|
|
|
|
|
439,317 |
|
|
|
429,683 |
|
Allowance for loan losses |
|
|
(5,485 |
) |
|
|
(3,953 |
) |
|
|
|
|
|
|
|
Net loans |
|
$ |
433,832 |
|
|
$ |
425,730 |
|
|
|
|
|
|
|
|
The principal business of the Bank is lending, primarily in commercial real estate loans,
residential mortgage loans, construction loans, home equity loans, commercial and industrial loans,
land loans and consumer loans. The Bank considers its lending area to be Suffolk County on Long
Island, New York, and a substantial portion of the Banks loans are secured by real estate in this
area. Accordingly, the ultimate collectibility of such a loan portfolio is susceptible to changes
in market and economic conditions in this region.
Nonaccrual loans at September 30, 2009 and December 31, 2008 were $6.0 million and $3.1 million,
respectively. There were no loans 90 days or more past due that were still accruing at September
30, 2009 and December 31, 2008.
As of September 30, 2009 and December 31, 2008, the Company had impaired loans as defined by FASB
ASC No. 310, Receivables of $9.2 million and $5.7 million, respectively. Impaired loans include
individually classified nonaccrual loans and troubled debt restructured (TDR) loans. Recognition
of interest income on impaired loans is discontinued when reasonable doubt exists as to the
ultimate collectability of the interest and principal of the loan.
The TDR loans of $3.2 million at September 30, 2009 and December 31, 2008 are current and are
secured with collateral that has a fair value of approximately $5.4 million as well as personal
guarantors. Management believes that the ultimate collection of principal and interest is
reasonably assured and therefore continues to recognize interest income on an accrual basis. In
addition, the Bank has no commitment to lend additional funds to this debtor. The loan was
determined to be impaired during the third quarter of 2008 and since that determination $96,000 of
interest income has been recognized.
The average recorded investment in the impaired loans during the nine months ended September 30,
2009 was $4.1 million and was $0.8 million for the year ended December 31, 2008. There were no
impaired loans as of September 30, 2008. At September 30, 2009, each impaired loan was analyzed
and written down to its net realizable value if the loan balance was higher than the net realizable
value of its associated collateral. Since all impaired loans are stated at the loans net
realizable value or less, there was no specifically allocated allowance for loan losses related to
impaired loans as of September 30, 2009 and December 31, 2008.
On October 1, 2009, impaired loans of $3.4 million were restructured as TDR loans. The loans have
been brought current and are secured with collateral that has a fair value of approximately $5.3
million except for $0.1 million of the loans that is unsecured but have personal guarantors. In
addition, the Bank has no commitment to lend additional funds to this debtor. These TDR loans are
not accruing interest.
The Bank had no foreclosed real estate at September 30, 2009, December 31, 2008 and September 30,
2008, respectively.
8. ALLOWANCE FOR LOAN LOSSES
The Company monitors its entire loan portfolio on a regular basis, with consideration given to
detailed analyses of classified loans, repayment patterns, probable incurred losses, past loss
experience, current economic conditions, and various types of concentrations of credit. Additions
to the allowance are charged to expense and realized losses, net of recoveries, are charged to the
allowance. Based on the determination of management and the Classification Committee, the overall
level of reserves is periodically adjusted to account
for the inherent and specific risks within the entire portfolio. Based on the Classification
Committees review of the classified loans and the overall reserve levels as they relate to the
entire loan portfolio at September 30, 2009 and December 31, 2008, the Company determined the
allowance for loan losses to be adequate.
Page 12
The following table sets forth changes in the allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended |
|
|
For the Year Ended |
|
(In thousands) |
|
September 30, 2009 |
|
|
September 30, 2008 |
|
|
December 31, 2008 |
|
Beginning balance |
|
$ |
3,953 |
|
|
$ |
2,954 |
|
|
$ |
2,954 |
|
Provision for loan
loss |
|
|
3,200 |
|
|
|
1,075 |
|
|
|
2,000 |
|
Net charge-offs |
|
|
(1,668 |
) |
|
|
(395 |
) |
|
|
(1,001 |
) |
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
5,485 |
|
|
$ |
3,634 |
|
|
$ |
3,953 |
|
|
|
|
|
|
|
|
|
|
|
9. EMPLOYEE BENEFITS
The Bank maintains a noncontributory pension plan through the New York State Bankers Association
Retirement System covering all eligible employees.
The Bridgehampton National Bank Supplemental Executive Retirement Plan (SERP) provides benefits
to certain employees, as recommended by the Compensation Committee of the Board of Directors and
approved by the full Board of Directors, whose benefits under the Pension Plan are limited by the
applicable provisions of the Internal Revenue Code. The benefit under the SERP is equal to the
additional amount the employee would be entitled to under the Pension Plan and the 401(k) Plan in
the absence of such Internal Revenue Code limitations. The assets of the SERP are held in a rabbi
trust to maintain the tax-deferred status of the plan and are subject to the general, unsecured
creditors of the Company. As a result, the assets of the trust are reflected on the Consolidated
Balance Sheets of the Company. The effective date of the SERP was January 1, 2001.
The Company made a $400,000 contribution to the pension plan during the nine months ended September
30, 2009. There were no contributions made to the SERP during the nine months ended September 30,
2009.
The Companys funding policy with respect to its benefit plans is to contribute at least the
minimum amounts required by applicable laws and regulations.
The following table sets forth the components of net periodic benefit cost and other amounts
recognized in Other Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
Pension Benefits |
|
|
SERP Benefits |
|
|
Pension Benefits |
|
|
SERP Benefits |
|
(In thousands) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Service Cost |
|
$ |
121 |
|
|
$ |
111 |
|
|
$ |
41 |
|
|
$ |
18 |
|
|
$ |
360 |
|
|
$ |
331 |
|
|
$ |
121 |
|
|
$ |
53 |
|
Interest Cost |
|
|
80 |
|
|
|
70 |
|
|
|
15 |
|
|
|
12 |
|
|
|
238 |
|
|
|
209 |
|
|
|
44 |
|
|
|
36 |
|
Expected return on plan assets |
|
|
(130 |
) |
|
|
(124 |
) |
|
|
|
|
|
|
|
|
|
|
(386 |
) |
|
|
(371 |
) |
|
|
|
|
|
|
|
|
Amortization of net loss |
|
|
22 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
66 |
|
|
|
|
|
|
|
10 |
|
|
|
|
|
Amortization of unrecognized prior service cost |
|
|
3 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
7 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
Amortization of unrecognized transition
(asset) obligation |
|
|
|
|
|
|
|
|
|
|
7 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
96 |
|
|
$ |
59 |
|
|
$ |
66 |
|
|
$ |
37 |
|
|
$ |
285 |
|
|
$ |
175 |
|
|
$ |
196 |
|
|
$ |
109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
At September 30, 2009, December 31, 2008 and September 30, 2008 securities sold under agreements to
repurchase totaled $15.0 million and were secured by mortgage-backed securities with a carrying
amount of $22.0 million, $23.4 million and $23.8 million, respectively.
Securities sold under agreements to repurchase are financing arrangements with $5.0 million
maturing during the first quarter of 2013 and $10.0 million maturing during the first quarter of
2015. At maturity, the securities underlying the agreements are returned to the Company.
Page 13
Information concerning the securities sold under agreements to repurchase is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended |
|
|
For the year ended |
|
(Dollars in thousands) |
|
September 30, 2009 |
|
|
September 30, 2008 |
|
|
December 31, 2008 |
|
Average daily balance |
|
$ |
15,000 |
|
|
$ |
12,573 |
|
|
$ |
13,183 |
|
Average interest rate |
|
|
2.35 |
% |
|
|
2.30 |
% |
|
|
2.39 |
% |
Maximum month-end
balance |
|
$ |
15,000 |
|
|
$ |
15,000 |
|
|
$ |
15,000 |
|
Weighted average
interest rate |
|
|
2.35 |
% |
|
|
2.30 |
% |
|
|
2.39 |
% |
11. FEDERAL HOME LOAN BANK ADVANCES AND OVERNIGHT BORROWINGS
As of September 30, 2009, there were no term advances or overnight borrowings outstanding from the
Federal Home Loan Bank. As of December 31, 2008, there was one term advance from the Federal Home
Loan Bank for $30.0 million with a fixed interest rate of 0.49% that matured in January 2009. The
term advance was payable at its maturity date and was subject to a prepayment penalty. The term
advance was collateralized by $35.3 million of mortgage-backed securities as of December 31, 2008.
In addition to the term advance, there was $34.9 million of overnight borrowings from the Federal
Home Loan Bank outstanding as of December 31, 2008. The overnight borrowings were collateralized
by $15.8 million of securities and a blanket lien on residential mortgages as of December 31, 2008.
As of September 30, 2008 there were no term advances or overnight borrowings outstanding from the
Federal Home Loan Bank.
12. SUBSEQUENT EVENTS
As defined in FASB ASC 855-10, Subsequent Events, subsequent events are events or transactions
that occur after the balance sheet date but before financial statements are issued or available to
be issued. Financial statements are considered issued when they are widely distributed to
shareholders and other financial statement users for general use and reliance in a form and format
that complies with GAAP. The Company has evaluated subsequent events through November 5, 2009,
which is the date that the Companys financial statements are being issued.
Based on the evaluation, the Company did not identify any recognized subsequent events that would
have required an adjustment to the financial statements. The following were nonrecognized
subsequent events identified by the Company:
On October 23, 2009, the Company issued $9 million of Convertible Trust Preferred Securities
(TPS) which mature in 30 years. The TPS have a liquidation value of $1,000 per share, and are
entitled to receive an 8.50% distribution payable quarterly. Each $1,000 in liquidation amount of
the TPS is convertible into 32.2581 shares of the Companys common stock. The net proceeds will be
used for general corporate purposes, primarily to provide additional capital to our primary
operating subsidiary, The Bridgehampton National Bank.
|
|
|
Item 2. |
|
Managements Discussion and Analysis of Financial Condition and Results of Operations |
Private Securities Litigation Reform Act Safe Harbor Statement
This report 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, could, intend, may,
outlook, predict, project, would, estimates, assumes, likely, 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 earnings growth; revenue growth in retail banking, lending and
other areas; origination volume in the Companys consumer, commercial and other lending businesses;
current and future capital management programs; non-interest income levels, including fees from the
abstract subsidiary and banking services as well as product sales; tangible capital generation;
market share; expense levels; and other business operations and strategies. For this presentation,
the Company claims the protection of the safe harbor for forward-looking statements contained in
the PSLRA.
Page 14
Factors that could cause future results to vary from current management expectations include, but
are not limited to: changes in economic conditions including an economic recession that could
affect the value of real estate collateral and the ability for borrowers to repay their loans;
legislative and regulatory changes, including increases in FDIC insurance rates; 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 and other financial services; competition; changes in the quality
and composition of the Banks loan and investment portfolios; changes in managements business
strategies; changes in accounting principles, policies or guidelines; changes in real estate values
and other factors discussed elsewhere in this report, factors set forth under Item 1A., Risk
Factors, in our Annual Report on Form 10-K for the year ended December 31, 2008 and in quarterly
and other reports filed by the Company with the Securities and Exchange Commission. 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.
Overview
Who We Are and How We Generate Income
Bridge Bancorp, Inc. (the Company), a New York corporation, is a bank holding company formed in
1989. On a parent-only basis, the Company has had minimal results of operations. The Company is
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 in this report reflects principally the financial condition and results of operations
of the Bank. The Banks results of operations are primarily dependent on its net interest income,
which is mainly the difference between interest income on loans and investments and interest
expense on deposits and borrowings. The Bank also generates non interest income, such as fee
income on deposit accounts and merchant credit and debit card processing programs, income from its
title abstract subsidiary, and net gains on sales of securities and loans. The level of its non
interest expenses, such as salaries and benefits, occupancy and equipment costs, other general and
administrative expenses, expenses from its title insurance subsidiary, and income tax expense,
further affects the Banks net income. Certain reclassifications have been made to prior year
amounts and the related discussion and analysis to conform to the current year presentation.
Quarterly Highlights
|
|
Net income of $2.3 million or $.38 per diluted share as compared to net income of $2.4
million or $.39 per diluted share for the third quarter in 2008. |
|
|
Returns on average assets and equity of 1.12% and 16.07%, respectively. |
|
|
Net interest income increased to $8.8 million for the third quarter of 2009 compared to
$7.8 million in 2008. |
|
|
A net interest margin of 4.63% for the third quarter of 2009 compared to 4.71% for 2008. |
|
|
Total loans at September 30, 2009 of $439.3 million, an increase of $9.6 million or 2.2%
over December 31, 2008 and an increase of $26.1 million or 6.3% over September 30, 2008. |
|
|
Total assets of
$854.5 million at September 30, 2009, an increase of $15.5 million or 1.8%
compared to December 31, 2008 and an increase of $99.1 million or 13.1% compared to September
30, 2008. |
|
|
Deposits of $765.4 million, an increase of $106.3 million or 16.1% over December 31, 2008
and an increase of $93.9 million or 14.0% compared to September 30, 2008 levels. |
|
|
The launch of a Dividend Reinvestment Plan and declared quarterly dividend of $.23 per
share. |
|
|
Named one of thirty All Star banks in the country by Sandler ONeill & Partners. |
|
|
Private placement of $9 million in Convertible Trust Preferred Securities on October 23,
2009. |
Page 15
Principal Products and Services and Locations of Operations
The Bank operates fifteen branches on eastern Long Island. Federally chartered in 1910, the Bank
was founded by local farmers and merchants. For nearly a century, the Bank has maintained its
focus on building customer relationships in this market area. The mission of the Company is to
grow through the provision of exceptional service to its customers, its employees, and the
community. The Company strives to achieve excellence in financial performance and build long term
shareholder value. The Bank engages in full service commercial and consumer banking business,
including accepting time, savings and demand deposits from the consumers, businesses and local
municipalities surrounding its branch offices. These deposits, together with funds generated from
operations and borrowings, are invested primarily in: (1) commercial real estate loans; (2) home
equity loans; (3) construction loans; (4) residential mortgage loans; (5) secured and unsecured
commercial and consumer loans; (6) FHLB, FNMA, GNMA and FHLMC mortgage-backed securities and
collateralized mortgage obligations; (7) New York State and local municipal obligations; and (8)
U.S. government sponsored entity (U.S. GSE) securities. The Bank also offers the CDARS program,
providing up to $50,000,000 of FDIC insurance to its customers. In addition, the Bank offers
merchant credit and debit card processing, automated teller machines, cash management services,
lockbox processing, online banking services, safe deposit boxes, individual retirement accounts and
investment services through Bridge Investment Services, offering a full range of investment
products and services through a third party broker dealer. Through its title insurance abstract
subsidiary, the Bank acts as a broker for title insurance services. The Banks customer base is
comprised principally of small businesses, municipal relationships and consumer relationships.
Significant Events
On February 27, 2009, the FDIC issued a final rule, effective April 1, 2009, to change the way that
the FDICs assessment system differentiates for risk and to set new assessment rates beginning with
the second quarter of 2009. In May 2009, the FDIC issued a final rule to impose an emergency
special assessment of 5 basis points on all banks based on their total assets less tier one capital
as of June 30, 2009. The special assessment is payable on September 30, 2009. During the second
quarter of 2009, the Company recorded an expense of $375,000 related to the FDIC special
assessment. In September 2009, the FDIC issued a Notice of Proposed Rulemaking that would require
insured institutions to prepay their estimated quarterly risk-based assessments for the fourth
quarter of 2009 and for all of 2010, 2011 and 2012. The FDIC also adopted a uniform three-basis
point increase in assessment rates effective on January 1, 2011. The Companys estimated prepayment
of FDIC assessments is approximately $3.8 million which would be amortized to expense over three
years.
Opportunities and Challenges
The economic and competitive landscape has changed dramatically over the past two
years. Recognizing that our market areas are generally affluent, large money center banks
increasingly meet their funding needs by aggressively pricing deposits in the Banks
markets. Competition for deposits and loans is intense as various banks in the marketplace, large
and small, promise excellent service yet often price their products aggressively. Deposit growth
is essential to the Banks ability to increase earnings; therefore branch expansion and building
share in our existing markets remain key strategic goals. Controlling funding costs yet protecting
the deposit base along with focusing on profitable growth, presents a unique set of challenges in
this operating environment.
Since the second half of 2007 and continuing through 2009, the financial markets experienced
significant volatility resulting from the continued fallout of sub-prime lending and the global
liquidity crises. A multitude of government initiatives along with eight rate cuts by the Federal
Reserve totaling 500 basis points have been designed to improve liquidity for the distressed
financial markets. The ultimate objective of these efforts has been to help the beleaguered
consumer, and reduce the potential surge of residential mortgage loan foreclosures and stabilize
the banking system. Despite these actions, many of our competitors, due to liquidity concerns, have
not yet fully adjusted their deposit pricing. This contrasts with the impact on assets where yields
on loans and securities have declined. The squeeze between declining asset yields and more slowly
declining liability pricing has impacted margins.
Growth and service strategies have the potential to offset the tighter net interest margin with
volume as the customer base grows through expanding the Banks footprint, while maintaining and
developing existing relationships. Since 2007, the Bank has opened four new branches. In January
2007, the Bank opened in the Village of Southampton; in February 2007, in Cutchogue; and in
September 2007, the Bank opened a new branch in Wading River. In April 2009, the Bank opened a new
branch in Shirley, New York. The opening of the branch facilities in Wading River and Shirley, move
the Bank geographically westward and demonstrate our commitment to traditional growth through
branch expansion.
In April 2008, the Bank received approval from the Office of the Comptroller of the Currency
(OCC) and expects that the opening of the new full service branch facility in the Village of East
Hampton will be a fourth quarter 2009 event. In addition, in November 2008, the Bank received OCC
approval to open a branch in Deer Park, New York, and the Bank anticipates opening the location
during the first half of 2010. In July 2009, the Company received OCC approval to open a new
branch in Center Moriches, New York, and the Bank anticipates opening the location during the first
quarter of 2010.
Page 16
The Bank routinely adds to its menu of products and services, continually meeting the needs of
consumers and businesses. We believe positive outcomes in the future will result from the expansion
of our geographic footprint, investments in infrastructure and technology, such as BridgeNEXUS, our
remote deposit capture product as well as the introduction of lockbox processing in the fourth
quarter of 2008, and continued focus on placing our customers first. In January 2009, the Bank
launched Bridge Investment Services, offering a full range of investment products and services
through a third party broker dealer.
Corporate objectives for 2009 include: leveraging our expanding branch network to build customer
relationships and grow loans and deposits; focusing on opportunities and processes that continue to
enhance the customer experience at the Bank; improving operational efficiencies and prudent
management of non-interest expense; and maximizing non-interest income through Bridge Abstract as
well as other lines of business. The ability to attract, retain, train and cultivate employees at
all levels of the Company remains significant to meeting these objectives. The Company has made
great progress toward the achievement of these objectives, and avoided many of the problems facing
other financial institutions as a result of maintaining discipline in its underwriting, expansion
strategies, investing and general business practices. The Company has capitalized on opportunities
presented by the market in 2008 and continues during 2009 to diligently seek opportunities for
growth and to strengthen the franchise. The causes of the current economic crisis are many and have
occurred over a prolonged period and therefore cannot be expected to be resolved in days, weeks or
months. The Company recognizes the potential risks of the current economic environment and will
monitor the impact of market events as we consider growth initiatives and evaluate loans and
investments.
Critical Accounting Policies
Allowance for Loan Losses
We consider the accounting policy on the allowance for loan losses to be the most critical and
requires complex management judgment as discussed below. The judgments made regarding the allowance
for loan losses can have a material effect on the results of operations of the Company.
The allowance for loan losses is established and maintained through a provision for loan losses
based on probable incurred losses inherent in the Banks loan portfolio. We evaluate the adequacy
of the allowance on a quarterly basis. The allowance is comprised of both individual valuation
allowances and loan pool valuation allowances. If the allowance for loan losses is not sufficient
to cover actual loan losses, the Companys earnings could decrease.
The Bank monitors its entire loan portfolio on a regular basis, with consideration given to
detailed analysis of classified loans, repayment patterns, probable incurred losses, past loss
experience, current economic conditions, and various types of concentrations of credit. Additions
to the allowance are charged to expense and realized losses, net of recoveries, are charged to the
allowance.
Individual valuation allowances are established in connection with specific loan reviews and the
asset classification process including the procedures for impairment testing under FASB Accounting
Standard Codification (ASC) No. 310, Receivables, Such valuation, which includes a review of
loans for which full collectibility in accordance with contractual terms is not reasonably assured,
considers the estimated fair value of the underlying collateral less the costs to sell, if any, or
the present value of expected future cash flows, or the loans observable market value. Any
shortfall that exists from this analysis results in a specific allowance for the loan. Pursuant to
our policy, loan losses must be charged-off in the period the loans, or portions thereof, are
deemed uncollectible. Assumptions and judgments by management, in conjunction with outside sources,
are used to determine whether full collectibility of a loan is not reasonably assured. These
assumptions and judgments also are used to determine the estimates of the fair value of the
underlying collateral or the present value of expected future cash flows or the loans observable
market value. Individual valuation allowances could differ materially as a result of changes in
these assumptions and judgments. Individual loan analyses are periodically performed on specific
loans considered impaired. The results of the individual valuation allowances are aggregated and
included in the overall allowance for loan losses.
Loan pool valuation allowances represent loss allowances that have been established to recognize
the inherent risks associated with our lending activities, but which, unlike individual allowances,
have not been allocated to particular problem assets. Pool evaluations are broken down as follows:
first, loans with homogenous characteristics are pooled by loan type and include home equity loans,
residential mortgages, land loans and consumer loans. Then all remaining loans are segregated into
pools based upon the risk rating of each credit. Key factors in determining a credits risk rating
include managements evaluation of: cash flow, collateral, guarantor support, financial
disclosures, industry trends and strength of borrowers management. The determination of the
adequacy of the valuation allowance is a process that takes into consideration a variety of
factors. The Bank has developed a range of valuation allowances necessary to adequately provide for
probable incurred losses inherent in each pool of loans. We consider our own charge-off history
along with the growth in the portfolio as well as the Banks credit administration and asset
management philosophies and procedures when determining the allowances for each pool. In addition,
we evaluate and consider the impact that economic and market conditions may have on the portfolio
as well as known and inherent risks in the portfolio. Finally, we evaluate and consider the
allowance ratios and coverage percentages of both peer group and regulatory agency data. These
evaluations are inherently subjective
because, even though they are based on objective data, it is managements interpretation of that
data that determines the amount of the appropriate allowance. If the evaluations prove to be
incorrect, the allowance for loan losses may not be sufficient to cover losses inherent in the loan
portfolio, resulting in additions to the allowance for loan losses.
Page 17
The Classification Committee is comprised of members of both management and the Board of Directors.
The adequacy of the allowance is analyzed quarterly, with any adjustment to a level deemed
appropriate by the Classification Committee, based on its risk assessment of the entire portfolio.
Based on the Classification Committees review of the classified loans and the overall allowance
levels as they relate to the entire loan portfolio at September 30, 2009, management believes the
allowance for loan losses has been established at levels sufficient to cover the probable incurred
losses in the Banks loan portfolio. Future additions or reductions to the allowance may be
necessary based on changes in economic, market or other conditions. Changes in estimates could
result in a material change in the allowance. In addition, various regulatory agencies, as an
integral part of the examination process, periodically review the allowance for loan losses. Such
agencies may require the Bank to recognize adjustments to the allowance based on their judgments of
the information available to them at the time of their examination.
Comparison of Operating Results
Net Income
Net income for the three months ended September 30, 2009 was $2.3 million or $0.38 per diluted
share as compared to $2.4 million or $0.39 per diluted share for the same period in 2008. Changes
for the three months ended September 30, 2009 compared to September 30, 2008 include: (i) $1.0
million or 12.8% increase in net interest income; (ii) $0.1 million or 6.7% decrease in total non
interest income as a result of lower fee income for customer services and lower title insurance
revenues; (iii) $0.7 million or 12.3% increase in total non interest expenses, primarily due to a
$0.4 million increase in salaries and employee benefits related to increased staffing and greater
incentive based compensation, a $0.3 million increase in other operating expenses primarily related
to higher FDIC insurance premiums and higher occupancy costs associated with new branches. In
addition, a provision for loan losses of $0.9 million was recorded this quarter due to the
continued growth of our loan portfolio as well as our assessment of risk factors considering the
weakening economic environment and overall industry trends. The effective income tax rate was
32.0% for the quarter ended September 30, 2009 compared to 33.4% for the same period last year.
Net income was unchanged at $6.6 million for the nine months ended September 30, 2009 and 2008,
however the following fluctuations did occur: (i) $5.1 million or 23.2% increase in net interest
income; (ii) a provision for loan losses of $3.2 million was recorded in 2009 compared to $1.1
million in 2008 due to the continued growth of our loan portfolio and changes in economic
conditions, (iii) $63,000 or 1.3% decrease in total non interest income as a result of lower
service charges on deposit accounts and fees on customer services and lower title insurance income
and merchant income, partially offset by net securities gains of $0.5 million and (iv) $2.9 million
or 18.7% increase in total non interest expenses, primarily due to a $1.3 million increase in
salaries and employee benefits related to higher staff levels associated with expanding the
Companys infrastructure and the opening of new branch offices and higher incentive based
compensation, and a $1.6 million increase in other operating expenses primarily related to higher
FDIC insurance premiums related to growth in deposits, higher rates and the special assessment.
The effective income tax rate decreased to 32.4% from 32.7% for the same period last year. For the
nine months ended September 30, 2009 diluted earnings per share was $1.07 as compared to $1.08 for
the same period in 2008.
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. Net interest income
depends upon the volume of interest earning assets and interest bearing liabilities and the
interest rates earned or paid on them.
The following tables set forth certain information relating to the Companys average consolidated
balance sheets and its consolidated statements of income for the periods indicated and reflect the
average yield on assets and average cost of liabilities for the periods indicated. 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 and
include nonaccrual loans. The yields and costs include fees, which are considered adjustments to
yields. Interest on nonaccrual loans has been included only to the extent reflected in the
consolidated statements of income. For purposes of this table, the average balances for
investments in debt and equity securities exclude unrealized appreciation/depreciation due to the
application of FASB ASC 320, Investments Debt and Equity Securities.
Page 18
|
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|
|
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|
|
|
|
|
|
Three months ended September 30, |
|
2009 |
|
|
2008 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
Average |
|
|
|
|
|
|
Yield/ |
|
|
Average |
|
|
|
|
|
|
Yield/ |
|
|
|
Balance |
|
|
Interest |
|
|
Cost |
|
|
Balance |
|
|
Interest |
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net (including loan fee income) |
|
$ |
438,006 |
|
|
$ |
7,386 |
|
|
|
6.69 |
% |
|
$ |
400,276 |
|
|
$ |
7,087 |
|
|
|
7.04 |
% |
Mortgage-backed securities |
|
|
214,313 |
|
|
|
2,585 |
|
|
|
4.79 |
|
|
|
176,716 |
|
|
|
2,174 |
|
|
|
4.89 |
|
Tax exempt securities (1) |
|
|
74,870 |
|
|
|
811 |
|
|
|
4.30 |
|
|
|
56,597 |
|
|
|
698 |
|
|
|
4.91 |
|
Taxable securities |
|
|
27,958 |
|
|
|
211 |
|
|
|
2.99 |
|
|
|
31,945 |
|
|
|
285 |
|
|
|
3.55 |
|
Federal funds sold |
|
|
20,303 |
|
|
|
13 |
|
|
|
0.25 |
|
|
|
14,339 |
|
|
|
73 |
|
|
|
2.03 |
|
Deposits with banks |
|
|
3,977 |
|
|
|
4 |
|
|
|
0.40 |
|
|
|
233 |
|
|
|
1 |
|
|
|
1.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets |
|
|
779,427 |
|
|
|
11,010 |
|
|
|
5.60 |
|
|
|
680,106 |
|
|
|
10,318 |
|
|
|
6.04 |
|
Non interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
|
12,630 |
|
|
|
|
|
|
|
|
|
|
|
16,944 |
|
|
|
|
|
|
|
|
|
Other assets |
|
|
29,555 |
|
|
|
|
|
|
|
|
|
|
|
25,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
821,612 |
|
|
|
|
|
|
|
|
|
|
$ |
722,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and
money market deposits |
|
$ |
362,947 |
|
|
$ |
887 |
|
|
|
0.97 |
% |
|
$ |
319,673 |
|
|
$ |
1,384 |
|
|
|
1.72 |
% |
Certificates of deposit of $100,000
or more |
|
|
85,082 |
|
|
|
519 |
|
|
|
2.42 |
|
|
|
70,718 |
|
|
|
527 |
|
|
|
2.96 |
|
Other time deposits |
|
|
73,144 |
|
|
|
420 |
|
|
|
2.28 |
|
|
|
35,131 |
|
|
|
247 |
|
|
|
2.80 |
|
Federal funds purchased and
repurchase agreements |
|
|
16,370 |
|
|
|
90 |
|
|
|
2.18 |
|
|
|
18,163 |
|
|
|
108 |
|
|
|
2.37 |
|
Federal Home Loan Bank term advances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities |
|
|
537,543 |
|
|
|
1,916 |
|
|
|
1.41 |
|
|
|
443,685 |
|
|
|
2,266 |
|
|
|
2.03 |
|
Non interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
|
220,143 |
|
|
|
|
|
|
|
|
|
|
|
218,238 |
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
6,641 |
|
|
|
|
|
|
|
|
|
|
|
6,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
764,327 |
|
|
|
|
|
|
|
|
|
|
|
668,909 |
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
57,285 |
|
|
|
|
|
|
|
|
|
|
|
53,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
821,612 |
|
|
|
|
|
|
|
|
|
|
$ |
722,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/interest rate spread (2) |
|
|
|
|
|
|
9,094 |
|
|
|
4.19 |
% |
|
|
|
|
|
|
8,052 |
|
|
|
4.01 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest earning assets/net interest margin (3) |
|
$ |
241,884 |
|
|
|
|
|
|
|
4.63 |
% |
|
$ |
236,421 |
|
|
|
|
|
|
|
4.71 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of interest earning assets to
interest bearing liabilities |
|
|
|
|
|
|
|
|
|
|
145.00 |
% |
|
|
|
|
|
|
|
|
|
|
153.29 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Tax equivalent adjustment |
|
|
|
|
|
|
(283 |
) |
|
|
|
|
|
|
|
|
|
|
(243 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
$ |
8,811 |
|
|
|
|
|
|
|
|
|
|
$ |
7,809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The above table is presented on a tax equivalent basis. |
|
(2) |
|
Net interest rate spread represents the difference between the yield on average interest
earning assets and the cost of average interest bearing liabilities. |
|
(3) |
|
Net interest margin represents net interest income divided by average interest earning
assets. |
Page 19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
2009 |
|
|
2008 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
Average |
|
|
|
|
|
|
Yield/ |
|
|
Average |
|
|
|
|
|
|
Yield/ |
|
|
|
Balance |
|
|
Interest |
|
|
Cost |
|
|
Balance |
|
|
Interest |
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net (including loan fee income) |
|
$ |
436,168 |
|
|
$ |
21,929 |
|
|
|
6.72 |
% |
|
$ |
390,884 |
|
|
$ |
20,850 |
|
|
|
7.13 |
% |
Mortgage-backed securities |
|
|
227,913 |
|
|
|
8,439 |
|
|
|
4.95 |
|
|
|
153,939 |
|
|
|
5,649 |
|
|
|
4.90 |
|
Tax exempt securities (1) |
|
|
71,692 |
|
|
|
2,511 |
|
|
|
4.68 |
|
|
|
54,216 |
|
|
|
2,078 |
|
|
|
5.12 |
|
Taxable securities |
|
|
21,699 |
|
|
|
584 |
|
|
|
3.60 |
|
|
|
25,846 |
|
|
|
797 |
|
|
|
4.12 |
|
Federal funds sold |
|
|
10,859 |
|
|
|
22 |
|
|
|
0.27 |
|
|
|
10,622 |
|
|
|
173 |
|
|
|
2.18 |
|
Deposits with banks |
|
|
3,341 |
|
|
|
5 |
|
|
|
0.20 |
|
|
|
180 |
|
|
|
5 |
|
|
|
3.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets |
|
|
771,672 |
|
|
|
33,490 |
|
|
|
5.80 |
|
|
|
635,687 |
|
|
|
29,552 |
|
|
|
6.21 |
|
Non interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
|
13,526 |
|
|
|
|
|
|
|
|
|
|
|
16,631 |
|
|
|
|
|
|
|
|
|
Other assets |
|
|
29,048 |
|
|
|
|
|
|
|
|
|
|
|
26,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
814,246 |
|
|
|
|
|
|
|
|
|
|
$ |
678,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and
money market deposits |
|
$ |
368,169 |
|
|
$ |
2,767 |
|
|
|
1.00 |
% |
|
$ |
306,023 |
|
|
$ |
4,286 |
|
|
|
1.87 |
% |
Certificates of deposit of $100,000
or more |
|
|
82,879 |
|
|
|
1,537 |
|
|
|
2.48 |
|
|
|
62,853 |
|
|
|
1,581 |
|
|
|
3.36 |
|
Other time deposits |
|
|
67,462 |
|
|
|
1,175 |
|
|
|
2.33 |
|
|
|
34,406 |
|
|
|
825 |
|
|
|
3.20 |
|
Federal funds purchased and
repurchase agreements |
|
|
33,767 |
|
|
|
311 |
|
|
|
1.23 |
|
|
|
17,879 |
|
|
|
338 |
|
|
|
2.53 |
|
Federal Home Loan Bank term advances |
|
|
110 |
|
|
|
1 |
|
|
|
1.22 |
|
|
|
1,642 |
|
|
|
30 |
|
|
|
2.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities |
|
|
552,387 |
|
|
|
5,791 |
|
|
|
1.40 |
|
|
|
422,803 |
|
|
|
7,060 |
|
|
|
2.23 |
|
Non interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
|
200,091 |
|
|
|
|
|
|
|
|
|
|
|
197,230 |
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
5,749 |
|
|
|
|
|
|
|
|
|
|
|
5,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
758,227 |
|
|
|
|
|
|
|
|
|
|
|
625,327 |
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
56,019 |
|
|
|
|
|
|
|
|
|
|
|
53,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
814,246 |
|
|
|
|
|
|
|
|
|
|
$ |
678,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/interest rate spread (2) |
|
|
|
|
|
|
27,699 |
|
|
|
4.40 |
% |
|
|
|
|
|
|
22,492 |
|
|
|
3.98 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest earning assets/net interest margin (3) |
|
$ |
219,285 |
|
|
|
|
|
|
|
4.80 |
% |
|
$ |
212,884 |
|
|
|
|
|
|
|
4.73 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of interest earning assets to
interest bearing liabilities |
|
|
|
|
|
|
|
|
|
|
139.70 |
% |
|
|
|
|
|
|
|
|
|
|
150.35 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Tax equivalent adjustment |
|
|
|
|
|
|
(876 |
) |
|
|
|
|
|
|
|
|
|
|
(725 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
$ |
26,823 |
|
|
|
|
|
|
|
|
|
|
$ |
21,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The above table is presented on a tax equivalent basis. |
|
(2) |
|
Net interest rate spread represents the difference between the yield on average interest
earning assets and the cost of average interest bearing liabilities. |
|
(3) |
|
Net interest margin represents net interest income divided by average interest earning
assets. |
Page 20
Rate/Volume Analysis
Net interest income can be analyzed in terms of the impact of changes in rates and volumes. The
following table illustrates the extent to which changes in interest rates and in the volume of
average interest earning assets and interest bearing liabilities have affected the Banks 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 or rate changes have been allocated to these categories based on the respective
percentage changes in average volume and rate. Due to the numerous simultaneous volume and rate
changes during the periods analyzed, it is not possible to precisely allocate changes between
volume and rates. In addition, average earning assets include nonaccrual loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2009 Over 2008 |
|
|
2009 Over 2008 |
|
|
|
Changes Due To |
|
|
Changes Due To |
|
(In thousands) |
|
Volume |
|
|
Rate |
|
|
Net Change |
|
|
Volume |
|
|
Rate |
|
|
Net Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income on interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net (including loan fee income) |
|
$ |
2,042 |
|
|
$ |
(1,743 |
) |
|
$ |
299 |
|
|
$ |
2,848 |
|
|
$ |
(1,769 |
) |
|
$ |
1,079 |
|
Mortgage-backed securities |
|
|
720 |
|
|
|
(309 |
) |
|
|
411 |
|
|
|
2,734 |
|
|
|
56 |
|
|
|
2,790 |
|
Tax exempt securities (1) |
|
|
579 |
|
|
|
(466 |
) |
|
|
113 |
|
|
|
718 |
|
|
|
(285 |
) |
|
|
433 |
|
Taxable securities |
|
|
(33 |
) |
|
|
(41 |
) |
|
|
(74 |
) |
|
|
(119 |
) |
|
|
(94 |
) |
|
|
(213 |
) |
Federal funds sold |
|
|
144 |
|
|
|
(204 |
) |
|
|
(60 |
) |
|
|
6 |
|
|
|
(157 |
) |
|
|
(151 |
) |
Deposits with banks |
|
|
9 |
|
|
|
(6 |
) |
|
|
3 |
|
|
|
12 |
|
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets |
|
|
3,461 |
|
|
|
(2,769 |
) |
|
|
692 |
|
|
|
6,199 |
|
|
|
(2,261 |
) |
|
|
3,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense on interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and money market deposits |
|
|
1,021 |
|
|
|
(1,518 |
) |
|
|
(497 |
) |
|
|
1,158 |
|
|
|
(2,677 |
) |
|
|
(1,519 |
) |
Certificates of deposit of $100,000 or more |
|
|
450 |
|
|
|
(458 |
) |
|
|
(8 |
) |
|
|
583 |
|
|
|
(627 |
) |
|
|
(44 |
) |
Other time deposits |
|
|
503 |
|
|
|
(330 |
) |
|
|
173 |
|
|
|
741 |
|
|
|
(391 |
) |
|
|
350 |
|
Federal funds purchased and repurchase agreements |
|
|
(10 |
) |
|
|
(8 |
) |
|
|
(18 |
) |
|
|
277 |
|
|
|
(304 |
) |
|
|
(27 |
) |
Federal Home Loan Bank Advances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19 |
) |
|
|
(10 |
) |
|
|
(29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities |
|
|
1,964 |
|
|
|
(2,314 |
) |
|
|
(350 |
) |
|
|
2,740 |
|
|
|
(4,009 |
) |
|
|
(1,269 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ |
1,497 |
|
|
$ |
(455 |
) |
|
$ |
1,042 |
|
|
$ |
3,459 |
|
|
$ |
1,748 |
|
|
$ |
5,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The above table is presented on a tax equivalent basis. |
Analysis of Net Interest Income for the Three Months ended September 30, 2009 and September
30, 2008
Net interest income was $8.8 million for the three months ended September 30, 2009 compared to $7.8
million for the same period in 2008, an increase of $1.0 million or 12.8%. Net interest margin
declined to 4.63% for the quarter ended September 30, 2009 as compared to 4.71% for the quarter
ended September 30, 2008. This decrease was primarily the result of an increase in average interest
earnings assets of $99.3 million and decrease in the yield on average total interest earning assets
being greater than the decrease in the cost of the average total interest bearing liabilities. The
cost of interest bearing liabilities decreased approximately 62 basis points during the third
quarter of 2009 compared to 2008, which was partly offset by a decrease in yields of approximately
44 basis points on interest earning assets.
For the three months ended September 30, 2009, average loans grew by $37.7 million or 9.4% to
$438.0 million as compared to $400.3 million for the same period in 2008. Real estate mortgage
loans and commercial loans primarily contributed to the growth. The Bank remains committed to
growing loans with prudent underwriting, sensible pricing and limited credit and extension risk.
Page 21
For the three months ended September 30, 2009, average total investments increased by $51.9 million
or 19.6% to $317.1 million as compared to $265.3 million for the three months ended September 30,
2008. Average federal funds sold increased to $20.3 million or 41.6% for the three months ended
September 30, 2009 from $14.3 million in 2008. The increase in the average federal funds sold for
the three months ended September 30, 2009 was primarily due to growth in the average deposits.
Average total interest bearing liabilities totaled $537.5 million for the three months ended
September 30, 2009 compared to $443.7 million for the same period in 2008. During the three months
ended September 30, 2009, the Bank reduced interest rates on deposit products through the prudent
management of deposit pricing. The reduction in deposit rates along with lower borrowing costs
resulted in a decrease in the cost of interest bearing liabilities from 2.03% for the three months
ended September 30, 2008 to 1.41% for the same period in 2009. Since the Companys interest
bearing liabilities generally reprice or mature more quickly than its interest earning assets, a
decrease in short term interest rates initially result in an increase in net interest
income. Additionally, the large percentages of deposits in money market accounts reprice at short
term market rates making the balance sheet more liability sensitive.
For the three months ended September 30, 2009, average total deposits increased by $97.6 million or
15.2% to $741.3 million as compared to average total deposits of $643.8 million for the same period
in 2008. Components of this increase include an increase in average balances in savings, NOW and
money market accounts of $43.3 million or 13.5% to $362.9 million for the three months ended
September 30, 2009 compared to $319.7 million for the same period last year. Average balances in
certificates of deposit of $100,000 or more and other time deposits increased $52.4 million or
49.5% to $158.2 million for 2009 as compared to 2008. Average public fund deposits comprised 13.9%
of total average deposits during the three months ended September 30, 2009 and 19.1% of total
average deposits for the same period in 2008. Average federal funds purchased and repurchase
agreements and average Federal Home Loan Bank advances decreased $1.8 million to $16.4 million for
the three months ended September 30, 2009 as compared to $18.2 million for the same period in the
prior year.
Total interest income increased $0.7 million or 6.5% to $10.7 million for the three months ended
September 30, 2009 from $10.1 million for the same period in 2008. Interest income on loans
increased $0.3 million or 4.2% to $7.4 million in 2009 compared to $7.1 million in 2008 primarily
due to growth in the loan portfolio partially offset by a decrease in yield on average loans. The
yield on average loans was 6.7% for 2009 as compared to 7.0% in 2008.
Interest income on investment in mortgage-backed, taxable and tax exempt securities increased $0.5
million to $3.6 million for the three months ended September 30, 2009 compared to $3.1 million for
the same period in 2008. Interest income on securities included net amortization of premium of
$103,000 in the 2009 period compared to accretion of discounts of $43,000 for the same period in
2008. The tax adjusted average yield on total securities decreased to 4.5% in 2009 from 4.7% in
2008.
Interest expense decreased $0.3 million or 15.4% to $1.9 million for the three months ended
September 30, 2009 compared to $2.3 million for the same period in 2008. The decrease in interest
expense in 2009 resulted from the Federal Reserve reducing the targeted federal funds rate and
discount rate to 0.25% and 0.50%, respectively and the prudent management of deposit pricing which
was partially offset by the growth in average balances for deposits.
Analysis of Net Interest Income for the Nine Months ended September 30, 2009 and September 30, 2008
Net interest income was $26.8 million for the nine months ended September 30, 2009 compared to
$21.8 million for the same period in 2008, an increase of $5.1 million or 23.2%. Net interest
margin improved to 4.80% for the nine months ended September 30, 2009 as compared to 4.73% for the
same period in 2008. This increase was primarily the result of an increase in average interest
earnings assets of $136.0 million and the decrease in the cost of the average total interest
bearing liabilities being greater than the decrease in the yield on average total interest earning
assets. The cost of interest bearing liabilities decreased approximately 83 basis points during
the nine months ended September 30, 2009 compared to 2008, which was partly offset by a decrease in
yields of approximately 41 basis points on interest earning assets.
For the nine months ended September 30, 2009, average loans grew by $45.3 million or 11.6% to
$436.2 million as compared to $390.9 million for the same period in 2008. Real estate mortgage
loans and commercial loans primarily contributed to the growth. The Bank remains committed to
growing loans with prudent underwriting, sensible pricing and limited credit and extension risk.
For the nine months ended September 30, 2009, average total investments increased by $87.3 million
or 37.3% to $321.3 million as compared to $234.0 million for the same period in 2008. Average
federal funds sold increased to $10.9 million or 2.2% for the nine months ended September 30, 2009
from $10.6 million in 2008. The increase in the average federal funds sold for the nine months
ended September 30, 2009 was primarily due to growth in the average deposits.
Page 22
Average total interest bearing liabilities totaled $552.4 million for the nine months ended
September 30, 2009 compared to $422.8 million for the same period in 2008. During the nine months
ended September 30, 2009, the Bank reduced interest rates on deposit products in response to the
reductions in the federal funds and discount rate by the Federal Reserve and the prudent management
of deposit pricing. The reduction in deposit rates along with lower borrowing costs resulted in a
decrease in the cost of interest bearing liabilities from 2.23% for the nine months ended September
30, 2008 to 1.40% for the same period in 2009. Since the Companys interest bearing liabilities
generally reprice or mature more quickly than its interest earning assets, a decrease in short term
interest rates initially result in an increase in net interest income. Additionally, the large
percentages of deposits in money market accounts reprice at short term market rates making the
balance sheet more liability sensitive.
For the nine months ended September 30, 2009, average total deposits increased by $118.1 million or
19.7% to $718.6 million as compared to average total deposits of $600.5 million for the same period
in 2008. Components of this increase include an increase in average balances in savings, NOW and
money market accounts of $62.2 million or 20.3% to $368.2 million for the nine months ended
September 30, 2009 compared to $306.0 million for the same period last year. Average balances in
certificates of deposit of $100,000 or more and other time deposits increased $53.1 million or
54.6% to $150.3 million for 2009 as compared to $97.2 million in 2008. Average public fund
deposits comprised 18.3% of total average deposits during the nine months ended September 30, 2009
and 21.7% of total average deposits for the same period in 2008. Average federal funds purchased
and repurchase agreements and average Federal Home Loan Bank advances increased $14.4 million to
$33.9 million for the nine months ended September 30, 2009 as compared to $19.5 million for the
same period in the prior year.
Total interest income increased $3.8 million or 13.1% to $32.6 million for the nine months ended
September 30, 2009 from $28.8 million for the same period in 2008. Interest income on loans
increased $1.0 million or 5.2% to $21.9 million in 2009 compared to $20.9 million in 2008 primarily
due to growth in the loan portfolio partially offset by a decrease in yield on average loans. The
yield on average loans was 6.7% for 2009 as compared to 7.1% in 2008.
Interest income on investment in mortgage-backed, taxable and tax exempt securities increased $3.0
million to $11.5 million for the nine months ended September 30, 2009 compared to $8.5 million for
the same period in 2008. Interest income on securities included net amortization of premium of
$140,000 in the 2009 period compared to accretion of discounts of $66,000 for the same period in
2008. The tax adjusted average yield on total securities declined to 4.8% for the nine months
ended September 30, 2009 from 4.9% in 2008.
Interest expense decreased $1.3 million or 18.0% to $5.8 million for the nine months ended
September 30, 2009 compared to $7.1 million for the same period in 2008. The decrease in interest
expense in 2009 resulted from the Federal Reserve reducing the targeted federal funds rate and
discount rate to 0.25% and 0.50%, respectively and the prudent management of deposit pricing which
was partially offset by the growth in average balances for deposits and borrowings.
Provision and Allowance for Loan Losses
The Banks loan portfolio consists primarily of real estate loans secured by commercial and
residential real estate properties located in the Banks principal lending area on eastern Long
Island. The interest rates charged by the Bank on loans are affected primarily by the demand for
such loans, the supply of money available for lending purposes, the rates offered by its
competitors, the Banks relationship with the customer and the related credit risks of the
transaction. These factors are affected by general and economic conditions including, but not
limited to, monetary policies of the federal government, including the Federal Reserve Board,
legislative policies and governmental budgetary matters.
Non performing assets were $6.0 million at September 30, 2009 compared to $3.1 million at December
31, 2008 and $0.7 million at September 30, 2008 representing 1.36% of total loans at September 30,
2009 compared to 0.71% at December 31, 2008 and 0.16% at September 30, 2008. As of September 30,
2009 and December 31, 2008, the Company had impaired loans as defined by FASB ASC No. 310,
Receivables of $9.2 million and $5.7 million, respectively. Impaired loans include individually
classified nonaccrual loans and troubled debt restructured (TDR) loans. Recognition of interest
income on impaired loans is discontinued when reasonable doubt exists as to the ultimate
collectability of the interest and principal of the loan.
The TDR loans of $3.2 million at September 30, 2009 and December 31, 2008 are current and are
secured with collateral that has a fair value of approximately $5.4 million as well as personal
guarantors. Management believes that the ultimate collection of principal and interest is
reasonably assured and therefore continues to recognize interest income on an accrual basis. In
addition, the Bank has no commitment to lend additional funds to this debtor. The loan was
determined to be impaired during the third quarter of 2008 and since that determination $96,000 of
interest income has been recognized.
Page 23
The average recorded investment in the impaired loans during the nine months ended September 30,
2009 was $4.1 million and was $0.8 million for the year ended December 31, 2008. There were no
impaired loans as of September 30, 2008. At September 30, 2009,
each impaired loan was analyzed and written down to its net realizable value if the loan balance
was higher than the net realizable value of its associated collateral. Since all impaired loans are
stated at the loans net realizable value or less, there was no specifically allocated allowance
for loan losses related to impaired loans as of September 30, 2009 and December 31, 2008.
On October 1, 2009, impaired loans of $3.4 million were restructured as TDR loans. The loans have
been brought current and are secured with collateral that has a fair value of approximately $5.3
million except for $0.1 million of the loans that is unsecured but have personal guarantors. In
addition, the Bank has no commitment to lend additional funds to this debtor. These TDR loans are
not accruing interest.
The Bank had no foreclosed real estate at September 30, 2009, December 31, 2008 and September 30,
2008, respectively.
Loans of approximately $28.5 million or 6.5% of total loans at September 30, 2009 were classified
as potential problem loans compared to $15.3 million or 3.4% at June 30, 2009, $3.5 million or 0.8%
at December 31, 2008 and $11.1 million or 2.7% at September 30, 2008. These are loans for which
management has information that indicates the borrower may not be able to comply with the present
repayment terms. These loans are subject to increased management attention and their classification
is reviewed on at least a quarterly basis. Due to the structure and nature of the credits, we do
not expect to sustain a loss on these relationships.
Based on our continuing review of the overall loan portfolio, the current asset quality of the
portfolio, the growth in our loan portfolio, and the net charge-offs, a provision for loan losses
of $0.9 million and $3.2 million was recorded during the three and nine months ended September 30,
2009 compared to a provision for loan loss of $0.6 million and $1.1 million that was recorded
during the same periods in 2008. The Bank recognized net charge-offs in the amount of $1.7 million
for the nine months ended September 30, 2009 as compared to $0.4 million for the same period in
2008. The allowance for loan losses increased to $5.5 million at September 30, 2009, as compared to
$4.0 million at December 31, 2008 and $3.6 million at September 30, 2008. As a percentage of total
loans, the allowance increased to 1.25% at September 30, 2009 compared to 0.92% at December 31,
2008 and 0.88% at September 30, 2008. Management continues to carefully monitor the loan portfolio
as well as real estate trends on eastern Long Island. The Banks consistent and rigorous
underwriting standards preclude sub prime lending, and management remains cautious about the
potential for an indirect impact on the local economy and real estate values in the future.
Non Interest Income
Total non interest income decreased $0.1 million or 6.7% to $1.6 million for the three months ended
September 30, 2009 compared to $1.7 million for the same period in 2008. Service charges on
deposit accounts remained at $0.8 million for the three months ended September 30, 2009 and
2008. Fees for other customer services were $0.5 million for the three months ended September 30,
2009 and $0.6 million in 2008. Title fee income related to Bridge Abstract decreased $24,000 or
9.6% to $226,000 for the three months ended September 30, 2009 compared to $250,000 for the same
period in 2008.
Total non interest income decreased during the nine months ended September 30, 2009 by $63,000 or
1.3% from the same period last year. Net securities gains were $0.5 million for the nine months
ended September 30, 2009. There were no net securities gains or losses for the nine months ended
September 30, 2008. Fees for other customer services totaled $1.3 million and service charges on
deposit accounts totaled $2.2 million for the nine months ended September 30, 2009, compared to
$1.4 million and $2.3 million, respectively, from the same period in 2008. The decrease in fees
for other customer services represents lower merchant fee income. The decline in service charges on
deposit accounts represents lower overdraft fees. Bridge Abstract, the Banks title insurance
abstract subsidiary, generated title fee income of $0.6 million during the nine months ended
September 30, 2009 compared to $0.9 million for the same period in 2008. The decrease was
attributable to a decline in the number and value of transactions processed by the subsidiary.
Other operating income for the nine months ended September 30, 2009 totaled $59,000, a decrease of
$49,000 from $108,000 for the nine months ended September 30, 2008. The decline represents lower
check book fees and bank rental income.
Non Interest Expense
Total non interest expense increased $0.7 million or 12.3% to $6.1 million during the three months
ended September 30, 2009 over the same period in 2008. The primary components of these increases
were higher salaries and employee benefits, net occupancy expense, furniture and fixture expense
and FDIC assessments. Salary and benefit expense increased $0.3 million or 10.7% to $3.6 million
for the three months ended September 30, 2009 from $3.3 million for the same period in 2008. The
increase reflects filling vacant positions, hiring new employees to support the Companys expanding
infrastructure and new branch offices, and related employee benefit costs. Net occupancy expense
increased $121,000 or 25.1% to $602,000 for the three months ended September 30, 2009 from $481,000
for the same period in 2008. Higher net occupancy expenses were due to increases in maintenance
and supplies, and rent expense related to the new branch offices in 2009 as well as annual rent
increases in other branch locations. Furniture and fixture expense increased $50,000 or 23.6% to
$262,000 for the three months ended September 30, 2009 from $212,000 for the same period in 2008.
The increase in furniture and fixture expense in 2009 relates primarily to the new branches. FDIC
assessments increased $0.2
million to $0.3 million for the three months ended September 30, 2009 from $0.1 million for the
same period in 2008. The increase during 2009 was due to growth in deposits and higher rates.
Page 24
Total non interest expense increased $2.9 million or 18.7% to $18.6 million during the nine months
ended September 30, 2009 from $15.7 million for the same period in 2008. The primary components of
these increases were higher salaries and employee benefits, net occupancy expense, furniture and
fixture expense and FDIC assessments. Salary and benefit expense increased $1.3 million or 13.9% to
$10.7 million for the nine months ended September 30, 2009 from $9.4 million for the same period in
2008. The increases in salary and benefits reflect base salary increases for staff, filling vacant
positions, hiring new employees to support the Companys expanding infrastructure and new branch
offices, increases in incentive based compensation and an increase in employee benefit costs,
particularly related to pension and SERP expense. Net occupancy expense increased $0.4 million or
26.1% to $1.8 million for the nine months ended September 30, 2009 from $1.4 million for the same
period in 2008. Higher net occupancy expenses were due to increases in maintenance and supplies,
and rent expense related to the new branch offices in 2009 as well as annual rent increases in
other branch locations. Furniture and fixture expense increased $0.1 million or 19.3% to $0.7
million for the nine months ended September 30, 2009 from $0.6 million for the same period in 2008.
The increase in furniture and fixture expense in 2009 relates primarily to the new branches. FDIC
assessments increased $1.1 million to $1.3 million for the nine months ended September 30, 2009
from $0.2 million for the same period in 2008. The increase during 2009 was due growth in deposits,
higher rates, and a special assessment of $0.4 million.
Income Taxes
The provision for income taxes decreased $0.1 million to $1.1 million during the three months ended
September 30, 2009 from $1.2 million for the same period in 2008 due to lower income before income
taxes and a lower effective tax rate. The effective tax rate for the three months ended September
30, 2009 decreased to 32.0% from 33.4% for the same period last year. For the nine months ended
September 30, 2009 the provision for income taxes decreased $0.1 million to $3.1 million from $3.2
million for the same period in 2008. The effective tax rate for the nine months ended September 30,
2009 decreased to 32.4% from 32.7% for the same period in 2008.
Financial Condition
Assets totaled $854.5 million at September 30, 2009, an increase of $15.5 million or 1.8% from
$839.1 million at December 31, 2008. This change is primarily a result of an increase in net loans
of $8.1 million or 1.9% as well as an increase in cash and cash equivalents of $7.8 million or
27.2%. The increase in cash and cash equivalents is due to the seasonal inflows of deposits. Cash
and due from banks decreased $13.8 million and interest earnings deposits with banks increased
$21.7 million. The increase in interest bearing deposits with banks represents deposits with the
Federal Reserve Bank. The Federal Reserve Bank was paying a competitive interest rate compared to
the unaffiliated correspondent banks. Total deposits grew $106.3 million to $765.4 million at
September 30, 2009, compared to $659.1 million at December 31, 2008. Demand deposits increased
$31.9 million to $213.1 million compared to $181.2 million at December 31, 2008. Savings, NOW and
money market deposits increased $47.0 million to $392.0 million at September 30, 2009 from $344.9
million at December 31, 2008. Certificates of deposit of $100,000 or more and other time deposits
increased $27.4 million or 20.6%. The increase in deposits and the decline in the investment
portfolio resulted in a decrease in borrowings at September 30, 2009. There were no Federal funds
purchased and Federal Home Loan Bank overnight borrowings at September 30, 2009 compared to $70.9
million at December 31, 2008. There were no Federal Home Loan Bank term advances outstanding at
September 30, 2009 compared to $30.0 million at December 31, 2008. Accrued interest payable and
other liabilities increased $4.6 million to $12.5 million at September 30, 2009 from $7.9 million
at December 31, 2008. The increase in other liabilities at September 30, 2009 relates to an
increase in accrued taxes payable and an increase in deferred tax liabilities as a result of higher
unrealized gains on the security portfolio, and the purchase of a security that settled in October
2009.
Total stockholders equity was $61.6 million at September 30, 2009, an increase of $5.5 million
or 9.8% from December 31, 2008, primarily due to net income of $6.6 million and an increase in
net unrealized gains on securities of $2.6 million, partially offset by the declaration of
dividends totaling $4.3 million.
In April 2009, the Company announced a dividend reinvestment plan effective with the second
quarter 2009 dividend. In September 2009, the Company declared a quarterly dividend of $0.23 per
share. The Company continues its long term trend of uninterrupted dividends.
Liquidity
The objective of liquidity management is to ensure the sufficiency of funds available to respond to
the needs of depositors and borrowers, and to take advantage of unanticipated earnings enhancement
opportunities for Company growth. Liquidity management addresses the ability of the Company to
meet financial obligations that arise in the normal course of business. Liquidity is primarily
needed to meet customer borrowing commitments, deposit withdrawals either on demand or contractual
maturity, to repay other borrowings as they mature, to fund current and planned expenditures and to
make new loans and investments as opportunities arise.
Page 25
The Holding Companys principal sources of liquidity included cash and cash equivalents of $3.1
million as of September 30, 2009, and dividends from the Bank. Cash available for distribution of
dividends to shareholders of the Company is primarily derived from dividends paid by the Bank to
the Company. During 2009, the Bank declared and paid $4.5 million in cash dividends to the Company.
At September 30, 2009, the Bank had $7.9 million of retained net income available for dividends to
the Company. Prior regulatory approval is required if the total of all dividends declared by the
Bank in any calendar year exceeds the total of the Banks net income of that year combined with its
retained net income of the preceding two years. In the event that the Company subsequently expands
its current operations, in addition to dividends from the Bank, it will need to rely on its own
earnings, additional capital raised and other borrowings to meet liquidity needs. On October 23,
2009, the Company completed a private placement of $9.0 million aggregate liquidation amount of
8.50% cumulative convertible trust preferred securities (the TPS) through a newly-formed
subsidiary, Bridge Statutory Capital Trust II, a wholly-owned Delaware statutory trust (the
Trust). The net proceeds will be used for general corporate purposes, primarily to provide
additional capital to the Bank.
The Banks 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
Banks operating, financing, lending and investing activities during any given period. Other
sources of liquidity include principal repayments and maturities of loan and investment securities,
lines of credit with other financial institutions including the Federal Home Loan Bank and the
Federal Reserve Bank, growth in core deposits and sources of wholesale funding such as brokered
certificates of deposits. While scheduled loan amortization, maturing securities and short term
investments are a relatively predictable source of funds, deposit flows and loan and
mortgage-backed securities 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 seasonal deposit outflows, loans, and asset and liability management objectives.
Historically, the Bank has relied on its deposit base, drawn through its full-service branches that
serve its market area and local municipal deposits, as its principal source of funding. The Bank
seeks to retain existing deposits and loans and maintain customer relationships by offering quality
service and competitive interest rates to its customers, while managing the overall cost of funds
needed to finance its strategies.
The Banks Asset/Liability and Funds Management Policy allows for wholesale borrowings of up to 25%
of total assets. At September 30, 2009, the Bank had aggregate lines of credit of $217.5 million
with unaffiliated correspondent banks to provide short term credit for liquidity requirements. Of
these aggregate lines of credit, $197.5 million is available on an unsecured basis. The Bank also
has the ability, as a member of the Federal Home Loan Bank (FHLB) system, to borrow against
unencumbered residential and commercial mortgages owned by the Bank. The Bank also has a master
repurchase agreement with the FHLB, which increases its borrowing capacity. In addition, the Bank
has an approved broker relationship for the purpose of issuing brokered certificates of deposit.
As of September 30, 2009, the Bank had no brokered certificates of deposit compared to $5.0 million
at December 31, 2008. As of December 31, 2008, the Bank had $70.9 million in overnight borrowings.
There were no overnight borrowings as of September 30, 2009. The Bank had $15.0 million of
securities sold under agreements to repurchase outstanding as of September 30, 2009 and December
31, 2008. The Bank had a $30.0 million advance that was collateralized by securities outstanding as
of December 31, 2008 with the FHLB. There were no advances outstanding as of September 30, 2009.
Management continually monitors the liquidity position and believes that sufficient liquidity
exists to meet all of our operating requirements. Based on the objectives determined by the Asset
and Liability Committee, the Banks liquidity levels may be affected by the use of short term and
wholesale borrowings, and the amount of public funds in the deposit mix. The Asset and Liability
Committee is comprised of members of senior management and the Board. Excess short term liquidity
is invested in overnight federal funds sold. The Bank did not have overnight federal funds sold as
of September 30, 2009 or December 31, 2008. However, the Bank did leave $24.9 million as of
September 30, 2009 at the Federal Reserve Bank since the interest rate paid on deposits with the
Federal Reserve Bank were competitive compared to the unaffiliated correspondent banks.
Capital Resources
The Company and the Bank are subject to various regulatory capital requirements administered by the
federal banking agencies. Failure to meet minimum capital requirements can result in certain
mandatory and possibly additional discretionary actions by regulators that, if undertaken, could
have a direct material effect on the Companys and the Banks financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the
Bank must meet specific capital guidelines that involve quantitative measures of the Companys and
Banks assets, liabilities, and certain off-balance sheet items calculated under regulatory
accounting practices. The Companys and the Banks capital amounts and classification also are
subject to qualitative judgments by the regulators about components, risk weightings, and other
factors.
Page 26
Quantitative measures established by regulation to ensure capital adequacy require the Company and
the Bank to maintain minimum amounts and ratios (set forth in the following table) 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). As of September 30,
2009, the Company and the Bank met all capital adequacy requirements. In April 2009, the Company
announced that its Board of Directors approved and adopted a Dividend Reinvestment Plan (DRP
Plan) and filed a registration statement on Form S-3 to register 600,000 shares of common stock
with the Securities and Exchange Commission (SEC) pursuant to the DRP Plan. In June 2009, the
Company filed a shelf registration statement on Form S-3 to register up to $50 million of
securities with the SEC. On October 23, 2009, the Company completed a private placement of $9.0
million aggregate liquidation amount of 8.50% cumulative convertible trust preferred securities
(the TPS) through a newly-formed subsidiary, Bridge Statutory Capital Trust II, a wholly-owned
Delaware statutory trust (the Trust). The TPS mature in 30 years, and carry a fixed distribution
rate of 8.50%. The TPS have a liquidation amount of $1,000 per security. The Company has the
right to redeem the TPS at par (plus any accrued but unpaid distributions) at any time after
September 30, 2014. Holders of the TPS may convert the TPS into shares of the Companys common
stock at a conversion price equal to $31.00 per share, which represents 125% of the of
the average closing price of the Companys common stock over the 20 trading days ended on October
14, 2009. Each $1,000 in liquidation amount of the TPS is convertible into 32.2581 shares of the
Companys common stock. As provided in the regulations, TPS are included in holding company Tier 1
capital (up to a limit of 25% of Tier 1 capital) which will be reflected in the calculations for
Tier 1 capital as of December 31, 2009.
At September 30, 2009 and December 31, 2008, actual capital levels and minimum required levels for
the Company and the Bank were as follows:
Bridge Bancorp, Inc. (Consolidated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, |
|
2009 |
|
(Dollars 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) |
|
$ |
62,632 |
|
|
|
11.8 |
% |
|
$ |
42,581 |
|
|
|
8.0 |
% |
|
|
n/a |
|
|
|
n/a |
|
Tier 1 Capital (to risk weighted assets) |
|
|
57,147 |
|
|
|
10.7 |
% |
|
|
21,290 |
|
|
|
4.0 |
% |
|
|
n/a |
|
|
|
n/a |
|
Tier 1 Capital (to average assets) |
|
|
57,147 |
|
|
|
7.0 |
% |
|
|
32,793 |
|
|
|
4.0 |
% |
|
|
n/a |
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
2008 |
|
(Dollars 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) |
|
$ |
58,360 |
|
|
|
11.1 |
% |
|
$ |
42,137 |
|
|
|
8.0 |
% |
|
|
n/a |
|
|
|
n/a |
|
Tier 1 Capital (to risk weighted assets) |
|
|
54,288 |
|
|
|
10.3 |
% |
|
|
21,068 |
|
|
|
4.0 |
% |
|
|
n/a |
|
|
|
n/a |
|
Tier 1 Capital (to average assets) |
|
|
54,288 |
|
|
|
6.9 |
% |
|
|
31,304 |
|
|
|
4.0 |
% |
|
|
n/a |
|
|
|
n/a |
|
Page 27
Bridgehampton National Bank
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, |
|
2009 |
|
(Dollars 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) |
|
$ |
61,002 |
|
|
|
11.5 |
% |
|
$ |
42,574 |
|
|
|
8.0 |
% |
|
$ |
53,217 |
|
|
|
10.0 |
% |
Tier 1 Capital (to risk weighted assets) |
|
|
55,517 |
|
|
|
10.4 |
% |
|
|
21,287 |
|
|
|
4.0 |
% |
|
|
31,930 |
|
|
|
6.0 |
% |
Tier 1 Capital (to average assets) |
|
|
55,517 |
|
|
|
6.8 |
% |
|
|
32,789 |
|
|
|
4.0 |
% |
|
|
40,986 |
|
|
|
5.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
2008 |
|
(Dollars 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) |
|
$ |
55,431 |
|
|
|
10.5 |
% |
|
$ |
42,130 |
|
|
|
8.0 |
% |
|
$ |
52,662 |
|
|
|
10.0 |
% |
Tier 1 Capital (to risk weighted assets) |
|
|
51,359 |
|
|
|
9.8 |
% |
|
|
21,065 |
|
|
|
4.0 |
% |
|
|
31,597 |
|
|
|
6.0 |
% |
Tier 1 Capital (to average assets) |
|
|
51,359 |
|
|
|
6.6 |
% |
|
|
31,279 |
|
|
|
4.0 |
% |
|
|
39,099 |
|
|
|
5.0 |
% |
Impact of Inflation and Changing Prices
The Unaudited Consolidated Financial Statements and notes thereto presented herein have been
prepared in accordance with U.S. generally accepted accounting principles, which require the
measurement of financial position and operating results in terms of historical dollars without
considering changes in the relative purchasing power of money over time due to inflation. The
primary effect of inflation on the operations of the Company is reflected in increased operating
costs. Unlike most industrial companies, virtually all of the assets and liabilities of a
financial institution are monetary in nature. As a result, changes in interest rates have a more
significant effect on the performance of a financial institution than do the effects of changes in
the general rate of inflation and changes in prices. Changes in interest rates could aversely
affect our results of operations and financial condition. Interest rates do not necessarily move
in the same direction, or in the same magnitude, as the prices of goods and services. Interest
rates are highly sensitive to many factors, which are beyond the control of the Company, including
the influence of domestic and foreign economic conditions and the monetary and fiscal policies of
the United States government and federal agencies, particularly the Federal Reserve Bank.
Recent Regulatory and Accounting Developments
In June 2008, the FASB issued FASB ASC 260-10, Determining Whether Instruments Granted in
Shared-Based Payment Transactions Are Participating Securities". This ASC addresses whether
instruments granted in share-based payment transactions are participating securities prior to
vesting and, therefore, need to be included in the earnings allocation in computing earnings per
share (EPS). This ASC is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and interim periods within those years. All prior-period EPS data
presented shall be adjusted retrospectively. The Company adopted this ASC for the quarter ending
March 31, 2009 and determined that there was no material impact to earnings per share.
In April 2009, the FASB issued FASB ASC 820-10-65-4, Determining Fair Value When the Volume and
Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That
Are Not Orderly". This ASC emphasizes that even if there has been a significant decrease in the
volume and level of activity for the asset or liability and regardless of the valuation
technique(s) used, the objective of a fair value measurement remains the same. It also provides
guidance to determine whether transactions are orderly. FASB ASC 820-10-65-4 is effective for
interim and annual periods ending after June 15, 2009, with early adoption permitted for periods
ending after March 15, 2009, if FASB ASC 320-10-65-1, Recognition and Presentation of
Other-Than-Temporary Impairment and FASB ASC 825-10-65-1, Interim Disclosures about Fair Value of
Financial Instruments", are adopted simultaneously. The adoption of this FSP did not have a
significant impact on the Companys financial statements.
In April 2009, the FASB issued FASB ASC 825-10-65-1, Interim Disclosures about Fair Value of
Financial Information. This ASC amends FASB ASC 825-10-50, Disclosures about the Fair Value of
Financial Instruments to require disclosures about fair value of financial instruments for interim
reporting periods of publicly traded companies as well as in annual financial statements.
Page 28
This ASC also amends FASB ASC 270-10, Interim Financial Reporting to require those disclosures in
summarized financial information at interim reporting periods. This ASC shall be effective for
interim reporting periods ending after June 15, 2009, with early adoption permitted for periods
ending after March 15, 2009. An entity may early adopt this ASC only if it also elects to early
adopt FASB ASC 820-10-65-4, Determining Fair Value When the Volume and Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly", and FASB
ASC 320-10-65-1, Recognition and Presentation of Other-Than-Temporary Impairments". The adoption
of this ASC at June 30, 2009 did not have a material impact on the results of operations or
financial position as it only required disclosures which are included in Note 6.
In April 2009, the FASB issued FASB ASC 320-10-65-1, Recognition and Presentation of
Other-Than-Temporary Impairments". This ASC amends the other-than-temporary impairment guidance in
U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation
and disclosure of other-than-temporary impairments on debt and equity securities in the financial
statements. The ASC shall be effective for interim and annual reporting periods ending after June
15, 2009, with early adoption permitted for periods ending after March 15, 2009. Earlier adoption
for periods ending before March 15, 2009, is not permitted. If an entity elects to adopt early
either FASB ASC 820-10-65-4, Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly",
or FASB ASC 825-10-65-1, Interim Disclosures about Fair Value of Financial Instruments", the
entity also is required to adopt early this ASC. Additionally, if an entity elects to adopt early
this ASC, it is required to adopt FASB ASC 820-10-65-4. The adoption of this ASC did not have a
significant impact on the Companys financial statements.
In April 2009, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin
(SAB) No. 111 which amends Topic 5.M. in the SAB Series entitled Other than Temporary Impairment
of Certain Investments in Debt and Equity Securities. This SAB maintains the staffs previous
views related to equity securities and it amends Topic 5.M. to exclude debt securities from its
scope.
In April 2009, the FASB issued FASB ASC 805-20, Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies". This ASC shall be effective for
assets or liabilities arising from contingencies in business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The adoption of this ASC had no impact on the Companys financial statements.
In May 2009, the FASB ASC 855-10, Subsequent Events", which addresses accounting and disclosure
requirements related to subsequent events. ASC 855-10 requires management to evaluate subsequent
events through the date the financial statements are either issued or available to be issued,
depending on the companys expectation of whether it will widely distribute its financial
statements to its shareholders and other financial statement users. Companies are required to
disclose the date through which subsequent events have been evaluated. ASC 855-10 is effective for
interim or annual financial periods ending after June 15, 2009 and should be applied prospectively.
The Company adopted this ASC for the quarter ending June 3, 2009 and reporting the required
disclosures in Note 12.
In June 2009, the FASB issued Statement of Financial Accounting Standards No. 166, Accounting for
Transfers of Financial Assets, an Amendment of FASB Statement No. 140". This standard has not yet
been codified in the FASB Accounting Standards Codification. FAS 166 improves the relevance,
representational faithfulness, and comparability of the information that a reporting entity
provides in its financial statements about a transfer of financial assets; the effects of a
transfer on its financial position, financial performance and cash flows; and a transferors
continuing involvement. This Statement must be applied as of the beginning of each reporting
entitys first annual reporting period that begins after November 15, 2009, for interim periods
within that first annual reporting period and for interim and annual reporting periods thereafter.
This Statement must be applied to transfers occurring on or after the effective date.
Additionally, on and after the effective date, the concept of a qualifying special-purpose entity
is no longer relevant for accounting purposes. Therefore, formerly qualifying special-purpose
entities should be evaluated for consolidation by reporting entities on and after the effective
date in accordance with the applicable consolidation guidance. Additionally, the disclosure
provisions of this Statement should be applied to transfers that occurred both before and after the
effective date of this Statement. The Company does not expect the adoption of this Statement to
have a significant impact to the Companys financial statements.
In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, Amendments to
FASB Interpretation No. 46(R), which improves financial reporting by enterprises involved with
variable interest entities. This standard has not yet been codified in the FASB Accounting
Standards Codification. FAS 167 amends Interpretation No. 46(R), Consolidation of Variable
Interest Entities", to replace the quantitative-based risks and rewards calculation for determining
which enterprise, if any, has a controlling financial interest in a variable interest entity with
an approach focused on identifying which enterprise has the power to direct the activities of a
variable interest entity that most significantly impact the entitys economic performance and (1)
the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity.
This Statement also requires additional disclosures about an enterprises involvement in variable
interest entities. FAS 167 will be effective as of the beginning of each reporting entitys first
annual reporting period that begins after November 15, 2009, for interim periods within that first
annual reporting period, and for
interim and annual reporting periods thereafter. Early adoption is prohibited. The Company does
not expect the adoption of this Statement to have a significant impact to the Companys financial
statements.
Page 29
In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168, The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles",
which is codified as ASC 105, Generally Accepted Accounting Principles". The objective of this
Statement is to replace Statement 162, The Hierarchy of Generally Accepted Accounting Principles",
and to establish the FASB Accounting Standards Codification TM as the source of
authoritative accounting principles recognized by the FASB to be applied by nongovernmental
entities in the preparation of financial statements in conformity with GAAP. Rules and
interpretive releases of the Securities and Exchange Commission under authority of federal
securities laws are also sources of authoritative GAAP for SEC registrants. This Statement is
effective for financial statements issued for interim and annual periods ending after September 15,
2009. The adoption of this Statement will not impact the results of operations or financial
position as it only required disclosures. Beginning with this Quarterly Report on Form 10-Q for
September 30, 2009, and in all filings thereafter, references to Financial Accounting Standards
that have been codified in the FASB Accounting Standards Codification have been replaced with
references to the appropriate guidance in the Codification.
In August 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-05, Measuring
Liabilities at Fair Value", which is codified as ASC 820, Fair Value Measurements and
Disclosures". This Update provides amendments to Topic 820-10, Fair Value Measurements and
Disclosures Overall, for the fair value measurement of liabilities. This Update provides
clarification that in circumstances in which a quoted price in an active market for the identical
liability is not available, a reporting entity is required to measure fair value using a valuation
technique that uses the quoted price of the identical liability when traded as an asset, quoted
prices for similar liabilities or similar liabilities when traded as assets, or that is consistent
with the principles of Topic 820. The amendments in this Update also clarify that when estimating
the fair value of a liability, a reporting entity is not required to include a separate input or
adjustment to other inputs relating to the existence of a restriction that prevents transfer of the
liability. The amendments in this Update also clarify that both a quoted price in an active market
for the identical liability at the measurement date and the quoted price for the identical
liability when traded as an asset in an active market when no adjustments to the quoted price of
the asset are required are Level 1 fair value measurements. The guidance provided in this Update
is effective for the first reporting period (including interim periods) beginning after issuance.
The adoption of this Update did not have a significant impact to the Companys financial
statements.
|
|
|
Item 3. |
|
Quantitative and Qualitative Disclosures about Market Risk |
Asset/Liability Management
Management considers interest rate risk to be the most significant market risk for the Company.
Market risk is the risk of loss from adverse changes in market prices and rates. Interest rate
risk is the exposure to adverse changes in the net income of the Company as a result of changes in
interest rates.
The Companys 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 liabilities, and the credit quality
of earning assets. The Companys objectives in its asset and liability management are to maintain
a strong, stable net interest margin, to utilize its capital effectively without taking undue
risks, to maintain adequate liquidity, and to reduce vulnerability of its operations to changes in
interest rates.
The Companys Asset and Liability Committee evaluates periodically, but at least four times a year,
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 at least annually. The
economic environment continually presents uncertainties as to future interest rate trends. The
Asset and Liability Committee regularly utilizes a model that projects net interest income based on
increasing or decreasing interest rates, in order to be better able to respond to changes in
interest rates.
At September 30, 2009, $313.7 million or 88.3% of the Companys securities had fixed interest
rates. Changes in interest rates affect the value of the Companys interest earning assets and in
particular its securities portfolio. Generally, the value of securities fluctuates inversely with
changes in interest rates. Increases in interest rates could result in decreases in the market
value of interest earning assets, which could adversely affect the Companys results of operations
if sold. The Company is also subject to reinvestment risk associated with changes in interest
rates. Changes in interest rates may affect the average life of loans and mortgage related
securities. In periods of decreasing interest rates, the average life of loans and securities held
by the Company may be shortened to the extent increased prepayment activity occurs during such
periods which, in turn, may result in the investment of funds from such prepayments in lower
yielding assets. Under these circumstances the Company is subject to reinvestment risk to the
extent that it is unable to reinvest the cash received from such prepayments at rates that are
comparable to the rates on existing loans and securities.
Page 30
Additionally, increases in interest rates may result in decreasing loan prepayments with respect to
fixed rate loans, (and therefore an increase in the average life of such loans), may result in a
decrease in loan demand, and make it more difficult for borrowers to repay adjustable rate loans.
The Company utilizes the results of a detailed and dynamic simulation model to quantify the
estimated exposure to net interest income to sustained interest rate changes. Management routinely
monitors simulated net interest income sensitivity over a rolling two-year horizon. The simulation
model captures the seasonality of the Companys deposit flows and the impact of changing interest
rates on the interest income received and the interest expense paid on all assets and liabilities
reflected on the Companys consolidated balance sheet. This sensitivity analysis is compared to
the asset and liability policy limits that specify a maximum tolerance level for net interest
income exposure over a one-year horizon given a 100 and 200 basis point upward shift in interest
rates and a 100 basis point downward shift in interest rates. A parallel and pro rata shift in
rates over a twelve-month period is assumed.
The following reflects the Companys net interest income sensitivity analysis at September 30,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
Potential Change |
|
|
Potential Change |
|
Change in Interest |
|
in Net |
|
|
in Net |
|
Rates in Basis Points |
|
Interest Income |
|
|
Interest Income |
|
(Dollars in thousands) |
|
$ Change |
|
|
% Change |
|
|
$ Change |
|
|
% Change |
|
200 |
|
$ |
(630 |
) |
|
|
(1.84 |
%) |
|
$ |
(2,617 |
) |
|
|
(7.27 |
%) |
100 |
|
$ |
(262 |
) |
|
|
(0.77 |
%) |
|
$ |
(1,250 |
) |
|
|
(3.47 |
%) |
Static |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(100) |
|
$ |
40 |
|
|
|
0.12 |
% |
|
$ |
249 |
|
|
|
0.69 |
% |
The preceding sensitivity analysis does not represent a Company forecast and should not be
relied upon as being indicative of expected operating results. These hypothetical estimates are
based upon numerous assumptions including, but not limited to, the nature and timing of interest
rate levels and yield curve shapes, prepayments on loans and securities, deposit decay rates,
pricing decisions on loans and deposits, and reinvestment and replacement of asset and liability
cash flows. While assumptions are developed based upon perceived current economic and local market
conditions, the Company cannot make any assurances as to the predictive nature of these assumptions
including how customer preferences or competitor influences may change.
Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will
also differ due to prepayment and refinancing levels likely deviating from those assumed, the
varying impact of interest rate change caps or floors on adjustable rate assets, the potential
effect of changing debt service levels on customers with adjustable rate loans, depositor early
withdrawals, prepayment penalties and product preference changes and other internal and external
variables. Furthermore, the sensitivity analysis does not reflect actions that management might
take in responding to, or anticipating changes in interest rates and market conditions.
|
|
|
Item 4. |
|
Controls and Procedures |
An evaluation was performed under the supervision and with the participation of the Companys
management, including the Principal Executive Officer and Principal Financial Officer, of the
effectiveness of the design and operation of the Companys disclosure controls and procedures (as
defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as
of September 30, 2009. Based on that evaluation, the Companys Principal Executive Officer and
Principal Financial Officer concluded that the Companys disclosure controls and procedures were
effective as of the end of the period covered by this quarterly report. There has been no change
in the Companys internal control over financial reporting during the quarter that has materially
affected, or is reasonably likely to materially affect, the Companys internal control over
financial reporting.
Page 31
PART II. OTHER INFORMATION
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|
|
Item 1. |
|
Legal Proceedings |
None.
There have been no material changes to the factors disclosed in Item 1A., Risk Factors, in our
Annual Report on Form 10-K for the year ended December 31, 2008.
|
|
|
Item 2. |
|
Unregistered Sales of Equity Securities and Use of Proceeds |
(a) Not applicable.
(b) Not applicable.
(c) 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 |
|
|
|
|
|
|
31.1 |
|
|
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) |
|
31.2 |
|
|
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) |
|
32.1 |
|
|
Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350 |
Page 32
SIGNATURES
In accordance with the requirement of the Securities Exchange Act of 1934, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
BRIDGE BANCORP, INC.
Registrant
|
|
November 5, 2009 |
/s/ Kevin M. OConnor
|
|
|
Kevin M. OConnor |
|
|
President and Chief Executive Officer |
|
|
|
|
November 5, 2009 |
/s/ Howard H. Nolan
|
|
|
Howard H. Nolan |
|
|
Senior Executive Vice President, Chief Financial Officer |
|
Page 33
EXHIBIT INDEX
|
|
|
|
|
|
31.1 |
|
|
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) |
|
31.2 |
|
|
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) |
|
32.1 |
|
|
Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350 |
Page 34