Form 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2009
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Commission File No. 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 |
(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 |
(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (631) 537-1000
Securities registered under Section 12 (b) of the Exchange Act:
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Title of each class
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Name of each exchange on which registered |
Common Stock, Par Value of $0.01 Per Share
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The Nasdaq Stock Market, LLC |
Securities registered under Section 12 (g) of the Exchange Act:
(Title of Class)
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes o No þ
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(§229.405) of this chapter is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or non-accelerated filer. See definition of accelerated filer and large accelerated filer 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
Act). Yes o No þ
The approximate aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing price of the Common Stock on June 30, 2009, was $155,793,371.
The number of shares of the Registrants common stock outstanding on March 8, 2010 was 6,284,070.
Portions of the following documents are incorporated into the Parts of this Report on Form 10-K
indicated below:
The Registrants definitive Proxy Statement for the 2010 Annual Meeting to be filed pursuant to
Regulation 14A on or before April 30, 2010 (Part III).
PART I
Item 1. Business
Bridge Bancorp, Inc. (the Registrant or Company) is a registered bank holding company for The
Bridgehampton National Bank (the Bank). The Bank was established in 1910 as a national banking
association and is headquartered in Bridgehampton, New York. The Registrant was incorporated under
the laws of the State of New York in 1988, at the direction of the Board of Directors of the Bank
for the purpose of becoming a bank holding company pursuant to a plan of reorganization; under
which the former shareholders of the Bank became the shareholders of the Company. Since commencing
business in March 1989, after the reorganization, the Registrant has functioned primarily as the
holder of all of the Banks common stock. In May 1999, the Bank established a real estate
investment trust subsidiary, Bridgehampton Community, Inc. (BCI) as an operating subsidiary. The
assets transferred to BCI are viewed by the bank regulators as part of the Banks assets in
consolidation. The operations of the Bank also include Bridge Abstract LLC (Bridge Abstract), a
wholly owned subsidiary of the Bank which is a broker of title insurance services. In October 2009,
the Company formed Bridge Statutory Capital Trust II (the Trust) a wholly owned subsidiary, which
sold $16.0 million of 8.5% cumulative convertible Trust Preferred Securities (the Trust Preferred
Securities) in a private placement to accredited investors.
The Bank operates sixteen 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
$50.0 million 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, remote deposit capture, safe deposit boxes and individual retirement
accounts. 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.
The Bank employs 195 people on a full-time and part-time basis. The Bank provides a variety of
employment benefits and considers its relationship with its employees to be positive. In addition,
the Company has an equity incentive plan under which it may issue shares of the common stock of the
Company.
All phases of the Banks business are highly competitive. The Bank faces direct competition from a
significant number of financial institutions operating in its market area, many with a statewide or
regional presence, and in some cases, a national presence. There is also competition for banking
business from competitors outside of its market areas. Most of these competitors are significantly
larger than the Bank, and therefore have greater financial and marketing resources and lending
limits than those of the Bank. The fixed cost of regulatory compliance remains high for community
banks as compared to their larger competitors that are able to achieve economies of scale. The Bank
considers its major competition to be local commercial banks as well as other commercial banks with
branches in the Banks market area. Other competitors include mortgage brokers and financial
services firms other than financial institutions such as investment and insurance companies.
Increased competition within the Banks market areas may limit growth and profitability.
Additionally, as the Banks market area expands westward, competitive pressure in new markets is
expected to be strong. The title insurance abstract subsidiary also faces competition from other
title insurance brokers as well as directly from the companies that underwrite title insurance. In
New York State, title insurance is obtained on most transfers of real estate and mortgage
transactions.
The Banks principal market area is located in Suffolk County, New York. Suffolk County is located
on the eastern portion of Long Island and has a population of approximately 1.5 million. Eastern
Long Island is semi-rural. Surrounded by water and including the Hamptons and North Fork, the
region is a recreational destination for the New York metropolitan area, and a highly regarded
resort locale world-wide. While the local economy flourishes in the summer months as a result of
the influx of tourists and second homeowners, the year-round population has grown considerably in
recent years, resulting in a reduction of the seasonal fluctuations in the economy. Industries
represented in the marketplace include retail establishments; construction and trades; restaurants
and bars; lodging and recreation; professional entities; real estate; health services; passenger
transportation and agricultural and related businesses. During the last decade, the Long Island
wine industry has grown with an increasing number of new wineries and vineyards locating in the
region each year. The vast majority of businesses are considered small businesses employing fewer
than ten full-time employees. In recent years, more national chains have opened retail stores
within the villages on the north and south forks of the island. Major employers in the region
include the municipalities, school districts, hospitals, and financial institutions.
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Since 2007, the Bank has opened five new branches. In January 2007, the Bank opened a branch in the
Village of Southampton; in February 2007, in Cutchogue; and in September 2007, the Bank opened its
first branch in the Town of Riverhead, located in Wading River. During 2009, the Bank opened two
new branches. In April 2009, the Bank opened a new branch in Shirley and in December 2009, the Bank
opened a new full service branch facility in the Village of East Hampton. 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 November 2008, the Bank received
approval from the Office of the Comptroller of the Currency (OCC) to open a new branch facility
in Deer Park, New York. In addition, in July 2009, the Bank received approval from the OCC to open
a new branch in Center Moriches, New York, and in March 2010, the Bank received approval from the
OCC to open a new branch in Patchogue, New York. The Bank anticipates opening the Center Moriches
branch in the first half of 2010. The Deer Park and Patchogue branch locations are expected to
open during the second half of 2010.
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, lockbox processing, 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. The Bank plans to roll out
its new commercial online bill paying service, as well as a new mobile banking product during the
first half of 2010.
The Company, the Bank and its subsidiaries with the exception of the real estate investment trust,
which files its own federal and state tax return, report their income on a consolidated basis using
the accrual method of accounting and are subject to federal and state income taxation. In general,
banks are subject to federal income tax in the same manner as other corporations. However, gains
and losses realized by banks from the sale of available for sale securities are generally treated
as ordinary income, rather than capital gains or losses. The Bank is subject to the New York State
Franchise Tax on Banking Corporations based on certain criteria. The taxation of net income is
similar to federal taxable income subject to certain modifications.
REGULATION AND SUPERVISION
The Bridgehampton National Bank
The Bank is a national bank organized under the laws of the United States of America. The lending,
investment, and other business operations of the Bank are governed by federal law and regulations
and the Bank is prohibited from engaging in any operations not specifically authorized by such laws
and regulations. The Bank is subject to extensive regulation by the Office of the Comptroller of
the Currency (OCC) and to a lesser extent by the Federal Deposit Insurance Corporation (FDIC),
as its deposit insurer as well as by the Board of Governors of the Federal Reserve System. The
Banks deposit accounts are insured up to applicable limits by the FDIC under its Deposit Insurance
Fund (DIF). A summary of the primary laws and regulations that govern the operations of the Bank
are set forth below.
Loans and Investments
There are no restrictions on the type of loans a national bank can originate and/or purchase.
However, OCC regulations govern the Banks investment authority. Generally, a national bank is
prohibited from investing in corporate equity securities for its own account. Under OCC
regulations, a national bank may invest in investment securities, which is generally defined as
securities in the form of a note, bond or debenture. The OCC classifies investment securities into
five different types and, depending on its type, a national bank may have the authority to deal in
and underwrite the security. The OCC has also permitted national banks to purchase certain
noninvestment grade securities that can be reclassified and underwritten as loans.
Lending Standards
The federal banking agencies adopted uniform regulations prescribing standards for extensions of
credit that are secured by liens on interests in real estate or made for the purpose of financing
the construction of a building or other improvements to real estate. Under these regulations, all
insured depository institutions, such as the Bank, must adopt and maintain written policies that
establish appropriate limits and standards for extensions of credit that are secured by liens or
interests in real estate or are made for the purpose of financing permanent improvements to real
estate. These policies must establish loan portfolio diversification standards, prudent
underwriting standards (including loan-to-value limits) that are clear and measurable, loan
administration procedures, and documentation, approval and reporting requirements. The real estate
lending policies must reflect consideration of the Interagency Guidelines for Real Estate Lending
Policies that have been adopted by the federal bank regulators.
Federal Deposit Insurance
The Bank is a member of the DIF, which is administered by the FDIC. Deposit accounts at the Bank
are insured by the FDIC, generally up to a maximum of $100,000 for each separately insured
depositor and up to a maximum of $250,000 for self-directed retirement accounts. However, the FDIC
increased the deposit insurance available on all deposit accounts to $250,000, effective until June
30, 2010. In addition, certain non interest-bearing transaction accounts maintained with financial
institutions participating in the FDICs Temporary Liquidity Guarantee Program are fully insured
regardless of the dollar amount until June 30, 2010. The Bank has opted to participate in the
FDICs Temporary Liquidity Guarantee Program. See Temporary Liquidity Guarantee Program below.
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The FDIC imposes an assessment against all depository institutions for deposit insurance. This
assessment is based on the risk category of the institution and, prior to 2009, ranged from 5 to 43
basis points of the institutions deposits. In 2008, as a result of a decrease in the reserve ratio
of the DIF, the FDIC issued a proposed rule establishing a Restoration Plan for the DIF. On
December 22, 2008, the FDIC published a final rule raising the current deposit insurance assessment
rates uniformly for all institutions by 7 basis points (to a range from 12 to 50 basis points) for
the first quarter of 2009. However, the FDIC approved an extension of the comment period on the
parts of the proposed rulemaking that would become effective on April 1, 2009. On February 27,
2009, the FDIC issued a second final rule, to be 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 was 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. On November 12, 2009, the FDIC issued a final rule that required 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 3 basis point increase in
assessment rates effective on January 1, 2011. The Companys prepayment of FDIC assessments for
2010, 2011 and 2012 was $3.8 million which will be amortized to expense over three years.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged
in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has
violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not
know of any practice, condition or violation that might lead to termination of deposit insurance.
In addition to the FDIC assessments, the Financing Corporation (FICO) is authorized to impose and
collect, with the approval of the FDIC, assessments for
anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to
recapitalize the former Federal Savings and Loan Insurance Corporation. The bonds issued by the
FICO are due to mature in 2017 through 2019. For the quarter ended December 31, 2009, the
annualized FICO assessment was equal to 1.10 basis points for each $100 in domestic deposits
maintained at an institution.
Temporary Liquidity Guarantee Program
On October 14, 2008, the FDIC announced a new program the Temporary Liquidity Guarantee Program.
This program has two components. One, the Debt Guarantee Program (DGP), guarantees newly issued
senior unsecured debt of the participating organizations, up to certain limits established for each
institution, issued between October 14, 2008 and October 31, 2009. The FDIC will pay the unpaid
principal and interest on an FDIC-guaranteed debt instrument upon the uncured failure of the
participating entity to make a timely payment of principal or interest in accordance with the terms
of the instrument. The guarantee will remain in effect until December 31, 2012. In return for the
FDICs guarantee, participating institutions will pay the FDIC a fee based on the amount and
maturity of the debt. The Bank has opted to participate in the DGP component of the Temporary
Liquidity Guarantee Program however, there is no guaranteed debt issued to date. In order to ensure
a smooth phase out of the DGP, the FDIC established a limited emergency guarantee facility. If an
institution is unable to issue non-guaranteed debt to replace the maturing senior unsecured debt as
of October 31, 2009, the institution can apply for an emergency guarantee facility. If the
application is approved, the FDIC will guarantee the senior unsecured debt issued on or before
April 30, 2010. Participating institutions will pay the FDIC a fee equal to an annualized
assessment rate of a minimum of 300 basis points.
The other component of the program provides full federal deposit insurance coverage for
non-interest bearing transaction deposit accounts, regardless of dollar amount, until June 30,
2010. An annualized 10 basis point assessment on balances in non interest-bearing transaction
accounts that exceed the existing deposit insurance limit of $250,000 will be assessed on a
quarterly basis to insured depository institutions that have not opted out of this component of the
Temporary Liquidity Guarantee Program. The Bank has opted to participate in this component of the
Temporary Liquidity Guarantee Program.
Capitalization
Under OCC regulations, all national banks are required to comply with minimum capital requirements.
For an institution determined by the OCC to not be anticipating or experiencing significant growth
and to be, in general, a strong banking organization, rated composite 1 under the Uniform Financial
Institutions Ranking System established by the Federal Financial Institutions Examination Council,
the minimum capital leverage requirement is a ratio of Tier I capital to total assets of 3%. For
all other institutions, the minimum leverage capital ratio is not less than 4%. Tier I capital is
the sum of common shareholders equity, non-cumulative
perpetual preferred stock (including any related surplus) and minority investments in certain
subsidiaries, less intangible assets (except for certain servicing rights and credit card
relationships) and certain other specified items.
The OCC regulations require national banks to maintain certain levels of regulatory capital in
relation to regulatory risk-weighted assets. The ratio of regulatory capital to regulatory
risk-weighted assets is referred to as a banks risk-based capital ratio. Risk-based capital
ratios are determined by allocating assets and specified off-balance sheet items (including
recourse obligations, direct credit substitutes and residual interests) to four risk-weighted
categories ranging from 0% to 100%, with higher levels of capital being required for the categories
perceived as representing greater risk. For example, under the OCCs risk-weighting system, cash
and securities backed by the full faith and credit of the U.S. government are given a 0% risk
weight, loans secured by one-to-four family residential properties generally have a 50% risk
weight, and commercial loans have a risk weighting of 100%.
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National banks, such as the Bank, must maintain a minimum ratio of total capital to risk-weighted
assets of at least 8%, of which at least one-half must be Tier I capital. Total capital consists of
Tier I capital plus Tier 2 or supplementary capital items, which include allowances for loan losses
in an amount of up to 1.25% of risk-weighted assets, cumulative preferred stock and certain other
capital instruments, and a portion of the net unrealized gain on equity securities. The includable
amount of Tier 2 capital cannot exceed the amount of the institutions Tier I capital. Banks that
engage in specified levels of trading activities are subject to adjustments in their risk based
capital calculation to ensure the maintenance of sufficient capital to support market risk.
The OCC, along with the other federal banking agencies, has adopted a regulation providing that the
agencies will take into account the exposure of a banks capital and economic value to changes in
interest rate risk in assessing a banks capital adequacy. The OCC also has authority to establish
individual minimum capital requirements in appropriate cases upon a determination that an
institutions capital level is, or is likely to become, inadequate in light of the particular
circumstances.
Safety and Soundness Standards
Each federal banking agency, including the OCC, has adopted guidelines establishing general
standards relating to internal controls, information and internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings
and compensation, fees and benefits. In general, the guidelines require, among other things,
appropriate systems and practices to identify and manage the risks and exposures specified in the
guidelines. The guidelines prohibit excessive compensation as an unsafe and unsound practice and
describe compensation as excessive when the amounts paid are unreasonable or disproportionate to
the services performed by an executive officer, employee, director, or principal shareholder.
Prompt Corrective Regulatory Action
Federal law requires, among other things, that federal bank regulatory authorities take prompt
corrective action with respect to institutions that do not meet minimum capital requirements. For
these purposes, the statute establishes five capital tiers: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.
The OCC may order national banks which have insufficient capital to take corrective actions. For
example, a bank which is categorized as undercapitalized would be subject to growth limitations
and would be required to submit a capital restoration plan, and a holding company that controls
such a bank would be required to guarantee that the bank complies with the restoration plan. A
significantly undercapitalized bank would be subject to additional restrictions. National banks
deemed by the OCC to be critically undercapitalized would be subject to the appointment of a
receiver or conservator.
Dividends
Under federal law and applicable regulations, a national bank may generally declare a dividend,
without approval from the OCC, in an amount equal to its year-to-date net income plus the prior two
years net income that is still available for dividend.
Transactions with Affiliates and Insiders
Sections 23A and 23B of the Federal Reserve Act govern transactions between a national bank and its
affiliates, which includes the Company. The Federal Reserve Board has adopted Regulation W, which
comprehensively implements and interprets Sections 23A and 23B, in part by codifying prior Federal
Reserve Board interpretations under Sections 23A and 23B.
An affiliate of a bank is any company or entity that controls, is controlled by or is under common
control with the bank. A subsidiary of a bank that is not also a depository institution or a
financial subsidiary under federal law is not treated as an affiliate of the bank for the
purposes of Sections 23A and 23B; however, the OCC has the discretion to treat subsidiaries of a
bank as affiliates on a case-by-case basis. Sections 23A and 23B limit the extent to which a bank
or its subsidiaries may engage in covered transactions with
any one affiliate to an amount equal to 10% of such banks capital stock and surplus, and limit all
such transactions with all affiliates to an amount equal to 20% of such capital stock and surplus.
The statutory sections also require that all such transactions be on terms that are consistent with
safe and sound banking practices. The term covered transaction includes the making of loans,
purchase of assets, issuance of guarantees and other similar types of transactions. Further, most
loans by a bank to any of its affiliates must be secured by collateral in amounts ranging from 100
to 130 percent of the loan amounts. In addition, any covered transaction by an association with an
affiliate and any purchase of assets or services by an association from an affiliate must be on
terms that are substantially the same, or at least as favorable, to the bank as those that would be
provided to a non-affiliate.
A banks loans to its executive officers, directors, any owner of more than 10% of its stock (each,
an insider) and any of certain entities affiliated with any such person (an insiders related
interest) are subject to the conditions and limitations imposed by Section 22(h) of the Federal
Reserve Act and the FRBs Regulation O thereunder. Under these restrictions, the aggregate amount
of the loans to any insider and the insiders related interests may not exceed the
loans-to-one-borrower limit applicable to national banks. All loans by a bank to all insiders and
insiders related interests in the aggregate may not exceed the banks unimpaired capital and
unimpaired surplus. With certain exceptions, loans to an executive officer, other than loans for
the education of the officers children and certain loans secured by the officers residence, may
not exceed the greater of $25,000 or 2.5% of the banks unimpaired capital and unimpaired surplus,
but in no event more than $100,000. Regulation O also requires that any proposed loan to an insider
or a related interest of that insider be approved in advance by a majority of the board of
directors of the bank, with any interested director not participating in the voting, if such loan,
when aggregated with any existing loans to that insider and the insiders related interests, would
exceed either $500,000 or the greater of $25,000 or 5% of the banks unimpaired capital and
surplus. Generally, such loans must be made on substantially the same terms as, and follow credit
underwriting procedures that are no less stringent than, those that are prevailing at the time for
comparable transactions with other persons and must not present more than a normal risk of
collectibility.
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An exception is made for extensions of credit made pursuant to a benefit or compensation plan of a
bank that is widely available to employees of the bank and that does not give any preference to
insiders of the bank over other employees of the bank.
Examinations and Assessments
The Bank is required to file periodic reports with and is subject to periodic examination by the
OCC. Federal regulations generally require annual on-site examinations for all depository
institutions and annual audits by independent public accountants for all insured institutions. The
Bank is required to pay an annual assessment to the OCC to fund its supervision.
Community Reinvestment Act
Under the Community Reinvestment Act (CRA), the Bank has a continuing and affirmative obligation
consistent with its safe and sound operation to help meet the credit needs of its entire community,
including low and moderate income neighborhoods. The CRA does not establish specific lending
requirements or programs for financial institutions nor does it limit an institutions discretion
to develop the types of products and services that it believes are best suited to its particular
community, consistent with the CRA. The CRA requires the OCC in connection with its examination of
the Bank, to assess its record of meeting the credit needs of its community and to take that record
into account in its evaluation of certain applications by the Bank. For example, the regulations
specify that a banks CRA performance will be considered in its expansion (e.g., branching)
proposals and may be the basis for approving, denying or conditioning the approval of an
application. As of the date of its most recent regulatory examination, the Bank was rated
satisfactory with respect to its CRA compliance.
USA PATRIOT Act
The USA PATRIOT Act of 2001 gave the federal government new powers to address terrorist threats
through enhanced domestic security measures, expanded surveillance powers, increased information
sharing and broadened anti-money laundering requirements. The USA PATRIOT Act also required the
federal banking agencies to take into consideration the effectiveness of controls designed to
combat money laundering activities in determining whether to approve a merger or other acquisition
application of a member institution. Accordingly, if the Bank engages in a merger or other
acquisition, our controls designed to combat money laundering would be considered as part of the
application process. The Bank has established policies, procedures and systems designed to comply
with these regulations.
Bridge Bancorp, Inc.
The Company, as a bank holding company controlling the Bank, is subject to the Bank Holding Company
Act of 1956, as amended (BHCA), and the rules and regulations of the Federal Reserve Board under
the BHCA applicable to bank holding companies. The Company is required to file reports with, and
otherwise comply with the rules and regulations of the Federal Reserve Board.
These regulatory authorities have extensive enforcement authority over the institutions that they
regulate to prohibit or correct activities that violate law, regulation or a regulatory agreement
or which are deemed to be unsafe or unsound banking practices.
Enforcement actions may include the appointment of a conservator or receiver, the issuance of a
cease and desist order, the termination of deposit insurance, the imposition of civil money
penalties on the institution, its directors, officers, employees and institution-affiliated
parties, the issuance of directives to increase capital, the issuance of formal and informal
agreements, the removal of or restrictions on directors, officers, employees and
institution-affiliated parties, and the enforcement of any such mechanisms through restraining
orders or other court actions. Any change in laws and regulations, whether by the OCC, the FDIC,
the Federal Reserve Board or through legislation, could have a material adverse impact on the Bank
and the Company and their operations and stockholders. Additional information on regulatory
requirements is set forth in Note 14 to the Consolidated Financial Statements.
The Company had nominal results of operations for 2009, 2008 and 2007 on a parent-only basis. In
2009, the Company completed the private placement of $16.0 million in aggregate liquidation amount of
8.50% cumulative convertible trust preferred securities (the TPS), through its subsidiary, Bridge
Statutory Capital Trust II. The TPS have a liquidation amount of $1,000 per security and the TPS
shares are convertible into our common stock, at an effective conversion price of $31 per share.
The TPS mature in 30 years but are callable by the company at par any time after September 30,
2014. During 2008, the Company received approval and began trading on the NASDAQ Global Select
Market under the symbol BDGE. Equity incentive plan grants of stock options and stock awards are
recorded directly to the holding company. The Companys sources of funds are dependent on dividends
from the Bank, its own earnings, additional capital raised and borrowings. 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. 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 insurance 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 abstract subsidiary, and income tax expense, further affects the Banks net
income.
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The Company files certain reports with the Securities and Exchange Commission (SEC) under the
federal securities laws. The Companys operations are also subject to extensive regulation by other
federal, state and local governmental authorities and it is subject to various laws and judicial
and administrative decisions imposing requirements and restrictions on part or all of its
operations. Management believes that the Company is in substantial compliance, in all material
respects, with applicable federal, state and local laws, rules and regulations. Because the
Companys business is highly regulated, the laws, rules and regulations applicable to it are
subject to regular modification and change. There can be no assurance that these proposed laws,
rules and regulations, or any other laws, rules or regulations, will not be adopted in the future,
which could make compliance more difficult or expensive or otherwise adversely affect the Companys
business, financial condition or prospects.
OTHER INFORMATION
Through a link on the Investor Relations section of the Banks website of www.bridgenb.com, copies
of the Companys Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) for 15(d) of
the Exchange Act, are made available, free of charge, as soon as reasonably practicable after
electronically filing such material with, or furnishing it to, the SEC. Copies of such reports and
other information also are available at no charge to any person who requests them or at
www.sec.gov. Such requests may be directed to Bridge Bancorp, Inc., Investor Relations, 2200
Montauk Highway, PO Box 3005, Bridgehampton, NY 11932, (631) 537-1000.
Item 1A. Risk Factors
Concentration of Loan Portfolio
The Bank generally invests a significant portion of its assets in loans secured by commercial and
residential real estate properties located in eastern Long Island. A downturn in real estate values
and economic conditions on eastern Long Island could have a significant impact on the value of
collateral securing the loans as well as the ability for the repayment of loans. See a further
discussion in Item 7, Managements Discussion and Analysis of Financial Condition and Results of
Operations Financial Condition Loans.
Changes in Interest Rates Could Affect Profitability
The ability to earn a profit, like most financial institutions, depends on the net interest income,
which is the difference between the interest income that the Bank earns on its interest-bearing
assets, such as loans and investments, and the interest expense that the Bank pays on its
interest-bearing liabilities, such as deposits. The Banks profitability depends on its ability to
manage its assets and liabilities during periods of changing market interest rates.
A sustained decrease in market interest rates could adversely affect the Banks earnings. When
interest rates decline, borrowers tend to refinance higher-rate, fixed-rate loans at lower rates.
Under those circumstances, the Bank would not be able to reinvest those
prepayments in assets earning interest rates as high as the rates on those prepaid loans or in
investment securities. In addition, the majority of the Banks loans are at variable interest
rates, which would adjust to lower rates.
In a period of rising interest rates, the interest income earned on the Banks assets may not
increase as rapidly as the interest paid on its liabilities. In an increasing interest rate
environment, the Banks cost of funds is expected to increase more rapidly than interest earned on
its loan and investment portfolio as the primary source of funds is deposits with generally shorter
maturities than those on its loans and investments. This makes the balance sheet more liability
sensitive in the short term.
Geographic Location and Competition
The Banks market area is located in Suffolk County on eastern Long Island and its customer base is
mainly located in the towns of East Hampton, Southampton, Southold and Riverhead. In 2009, the Bank
expanded its market areas to include a branch in Shirley, New York located in the town of
Brookhaven. During 2010 the Bank plans to continue to expand westward to Center Moriches and
Patchogue, New York located in the Town of Brookhaven and Deer Park, New York located within the
town of Babylon. Competition in the banking and financial services industry remains intense. The
profitability of the Bank depends on the continued ability to successfully compete. The Bank
competes with commercial banks, savings banks, insurance companies, and brokerage and investment
banking firms. Many of our competitors have substantially greater resources and lending limits than
the Bank and may offer certain services that the Bank does not provide. In addition, competitors
recently have been offering deposits at higher rates and loans with lower fixed rates, more
attractive terms and less stringent credit structures than the Bank has been willing to offer.
Furthermore, the high cost of living on the twin forks of eastern Long Island creates staff
recruitment and retention challenges.
The Companys Future Depends on Successful Growth of its Subsidiary
The Companys primary business activity for the foreseeable future will be to act as the holding
company of the Bank. Therefore, the Companys future profitability will depend on the success and
growth of this subsidiary.
The Loss of Key Personnel Could Impair our Future Success
Our future success depends in part on the continued service of our executive officers, other key
management, as well as our staff, and on our ability to continue to attract, motivate, and retain
additional highly qualified employees. The loss of services of one or more of our key personnel or
our inability to timely recruit replacements for such personnel, or to otherwise attract, motivate,
or retain qualified personnel could have an adverse effect on our business, operating results, and
financial condition. In February 2008, the Companys Chief Retail Banking Officer (CRBO) resigned
and in March 2008, the Company hired James Manseau as the Companys CRBO.
Page -7-
In addition, Kevin M. OConnor was appointed to the Board of Directors in October 2007 and became
President and Chief Executive Officer effective January 1, 2008 succeeding Thomas J. Tobin. Mr.
Tobin assumed his new role as President Emeritus and Advisor to the Board effective January 1, 2008
through March 2, 2010, his retirement date. Effective as of March 3, 2010, Mr. Tobin was retained
on a part time basis as the co-chair of the Enterprise Risk Management Committee. Mr. Tobin
remains a member of the Board of Directors.
Highly Regulated Environment
The Bank and Company are subject to extensive regulation, supervision and examination by the OCC,
FDIC, the Federal Reserve Board and the SEC. Such regulation and supervision govern the activities
in which a financial institution and its holding company may engage and are intended primarily for
the protection of the consumer. Recently regulators have intensified their focus on the USA PATRIOT
Acts anti-money laundering and Bank Secrecy Act compliance requirements. In order to comply with
regulations, guidelines and examination procedures in this area as well as other areas of the Bank,
we have been required to adopt new policies and procedures and to install new systems. We cannot be
certain that the policies, procedures, and systems we have in place are flawless and there is no
assurance that in every instance we are in full compliance with these requirements. Regulatory
authorities have extensive discretion in connection with their supervisory and enforcement
activities, including the imposition of restrictions on the operation of an institution. Any change
in such regulation and oversight, whether in the form of regulatory policy, regulations, or
legislation, may have a material impact on our operations.
We May Be Adversely Affected By Current Economic and Market Conditions
The national and global economic downturn that began in 2007 has resulted in unprecedented levels
of financial market volatility which may depress the market value of financial institutions, limit
access to capital or have a material adverse effect on the financial condition or results of
operations of banking companies. Since 2008 significant declines in the values of mortgage-backed
securities and derivative securities by financial institutions, government sponsored entities, and major
commercial and investment banks has led to decreased confidence in financial markets among
borrowers, lenders, and depositors, as well as disruption and extreme volatility in the capital and
credit markets and the failure of some entities in the financial sector. As a result, many lenders
and institutional investors have reduced or ceased to provide funding to borrowers. While financial
markets appear to be stabilizing and there are a few positive signs of economic recovery including
increased local real estate activity, economic uncertainty remains. Unemployment rates are high and
consumer confidence is low. While the timing of an economic recovery remains unknown this may have an
adverse affect on the Company. Turbulence in the capital and credit markets may adversely affect
our liquidity and financial condition and the willingness of certain counterparties and customers
to do business with us.
Increases to the Allowance for Credit Losses May Cause Our Earnings to Decrease
Our customers may not repay their loans according to the original terms, and the collateral
securing the payment of those loans may be insufficient to pay any remaining loan balance. Hence,
we may experience significant loan losses, which could have a material adverse effect on our
operating results. We make various assumptions and judgments about the collectibility of our loan
portfolio, including the creditworthiness of our borrowers and the value of the real estate and
other assets serving as collateral for the repayment of loans. In determining the amount of the
allowance for credit losses, we rely on loan quality reviews, past loss experience, and an
evaluation of economic conditions, among other factors. If our assumptions prove to be incorrect,
our allowance for credit losses may not be sufficient to cover losses inherent in our loan
portfolio, resulting in additions to the allowance. Material additions to the allowance would
materially decrease our net income.
Bank regulators periodically review our allowance for credit losses and may require us to increase
our provision for credit losses or loan charge-offs. Any increase in our allowance for credit
losses or loan charge-offs as required by these regulatory authorities could have a material
adverse effect on our results of operations and/or financial condition.
Increases in FDIC Insurance Premiums May Cause Our Earnings to Decrease
The Emergency Economic Stabilization Act (EESA) temporarily increased the limit on FDIC coverage
to $250,000 through June 30, 2010. In addition, we have enrolled in the Temporary Liquidity
Guarantee Program for non interest bearing transaction deposit accounts. 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 was 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 November 2009,
the FDIC issued a final rule that required 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 3 basis point increase in assessment rates effective on January 1, 2011.
The Companys prepayment of FDIC assessments on December 31, 2009 was $3.8 million which will be
amortized to expense over three years. This, along with the full utilization or our assessment
credit in early 2008 and the increase in FDIC insurance rates, caused the premiums assessed by the
FDIC to increase. These actions have significantly increased our expense in 2009 and will continue
to affect our earnings in future years as long as the increased premiums are in place.
Page -8-
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
At present, the Registrant does not own or lease any property. The Registrant uses the Banks space
and employees without separate payment. Headquarters are located at 2200 Montauk Highway,
Bridgehampton, New York 11932. The Banks internet address is www.bridgenb.com.
All of the Banks properties are located in Suffolk County, New York. The Banks Main Office in
Bridgehampton is owned. The Bank also owns buildings that house its Montauk Branch located at 1 The
Plaza, Montauk; its Southold Branch located at 54790 Main Road, Southold; its Westhampton Beach
Office at 194 Mill Road, Westhampton Beach; its Southampton Village Branch located at 150 Hampton
Road, Southampton; and its East Hampton Village Branch located at 8 Gingerbread Lane, East Hampton.
The Bank currently leases out a portion of the Montauk building and the Westhampton Beach building.
The Bank leases nine additional properties on eastern Long Island as branch locations at 32845 Main
Road, Cutchogue; 26 Park Place, East Hampton; 218 Front Street, Greenport; 48 East Montauk Highway,
Hampton Bays; Mattituck Plaza, Main Road, Mattituck; 2 Bay Street, Sag Harbor; 425 County Road 39A,
Southampton; 6324 Route 25A, Wading River and 630 Montauk Highway, Shirley. Additionally, the Bank
utilizes space for a branch in the retirement community, Peconic Landing at 1500 Brecknock Road, Greenport.
In 2008, the Bank entered into a lease agreement for a branch in Deer Park, New York. In 2009, the
Bank entered into a lease agreement for a branch in Center Moriches, New York and in January 2010
the Bank entered into a lease agreement for a branch in Patchogue, New York. The Bank has
contractual rights to purchase real estate in the Town of Southold which will also be considered as
a site for a future branch facility.
Item 3. Legal Proceedings
The Registrant and its subsidiary are subject to certain pending and threatened legal actions that
arise out of the normal course of business. In the opinion of management at the present time, the
resolution of any pending or threatened litigation will not have a material adverse effect on its
consolidated financial statements.
Item 4. Reserve
Page -9-
PART II
Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
COMMON STOCK INFORMATION
The Companys common stock was traded on the NASDAQ® over the counter bulletin board market under
the symbol, BDGE until June 2008 when it began trading on the NASDAQ Global Select Market. The
following table details the quarterly high and low sale prices of the Companys common stock since
it began trading on the NASDAQ Global Select Market and the high and low bid prices for the
previous periods, and the dividends declared for such periods.
At December 31, 2009 the Company had approximately 654 shareholders of record, not including the
number of persons or entities holding stock in nominee or the street name through various banks and
brokers.
COMMON STOCK INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Prices |
|
|
Dividends |
|
|
|
High |
|
|
Low |
|
|
Declared |
|
By Quarter 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
First |
|
$ |
20.97 |
|
|
$ |
17.50 |
|
|
$ |
0.23 |
|
Second |
|
$ |
27.48 |
|
|
$ |
19.25 |
|
|
$ |
0.23 |
|
Third |
|
$ |
29.25 |
|
|
$ |
24.33 |
|
|
$ |
0.23 |
|
Fourth |
|
$ |
25.59 |
|
|
$ |
20.05 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Prices |
|
|
Dividends |
|
|
|
High |
|
|
Low |
|
|
Declared |
|
By Quarter 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
First |
|
$ |
24.00 |
|
|
$ |
20.24 |
|
|
$ |
0.23 |
|
Second |
|
$ |
22.75 |
|
|
$ |
17.75 |
|
|
$ |
0.23 |
|
Third |
|
$ |
22.50 |
|
|
$ |
19.00 |
|
|
$ |
0.23 |
|
Fourth |
|
$ |
21.75 |
|
|
$ |
17.78 |
|
|
$ |
0.23 |
|
Stockholders received cash dividends totaling $5.7 million in 2009 and $5.6 million in 2008. The
ratio of dividends per share to net income per share was 65.43% in 2009 compared to 64.74% in 2008.
Page -10-
PERFORMANCE GRAPH
Pursuant to the regulations of the SEC, the graph below compares the performance of the Company
with that of the total return for the NASDAQ® stock market and for certain bank stocks of financial
institutions with an asset size $500 million to $1 billion, as reported by SNL Financial L.C. from
December 31, 2004 through December 31, 2009. The graph assumes the reinvestment of dividends in
additional shares of the same class of equity securities as those listed below.
Bridge Bancorp, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ending |
|
Index |
|
12/31/04 |
|
|
12/31/05 |
|
|
12/31/06 |
|
|
12/31/07 |
|
|
12/31/08 |
|
|
12/31/09 |
|
Bridge Bancorp, Inc. |
|
|
100.00 |
|
|
|
83.47 |
|
|
|
84.13 |
|
|
|
88.46 |
|
|
|
70.50 |
|
|
|
95.27 |
|
NASDAQ Composite |
|
|
100.00 |
|
|
|
101.37 |
|
|
|
111.03 |
|
|
|
121.92 |
|
|
|
72.49 |
|
|
|
104.31 |
|
SNL Bank $500M-$1B |
|
|
100.00 |
|
|
|
104.29 |
|
|
|
118.61 |
|
|
|
95.04 |
|
|
|
60.90 |
|
|
|
58.00 |
|
ISSUER PURCHASES OF EQUITY SECURITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Number (or |
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
Approximate Dollar |
|
|
|
Total Number |
|
|
Average |
|
|
Shares Purchased as |
|
|
Value) of Shares that |
|
|
|
of Shares |
|
|
Price |
|
|
Part of Publicly |
|
|
May Yet Be Purchased |
|
|
|
Purchased in |
|
|
Paid per |
|
|
Announced Plans or |
|
|
Under the Plans or |
|
Period |
|
Month |
|
|
Share |
|
|
Programs-2006 (1) |
|
|
Programs |
|
October 2009 |
|
|
|
|
|
|
|
|
|
|
141,959 |
|
|
|
167,041 |
|
November 2009 |
|
|
|
|
|
|
|
|
|
|
141,959 |
|
|
|
167,041 |
|
December 2009 |
|
|
|
|
|
|
|
|
|
|
141,959 |
|
|
|
167,041 |
|
|
|
|
(1) |
|
The Board of Directors approved a stock repurchase program on March 27, 2006. |
|
|
|
The Board of Directors approved repurchase of shares up to 309,000 shares. |
|
|
|
There is no expiration date for the stock repurchase plan. |
|
|
|
There is no stock repurchase plan that has expired or that has been terminated during the period ended December 31, 2009. |
Page -11-
Item 6. Selected Financial Data
Five-Year Summary of Operations
(In thousands, except per share data and financial ratios)
Set forth below are selected consolidated financial and other data of the Company. The Companys
business is primarily the business of the Bank. This financial data is derived in part from, and
should be read in conjunction with, the Consolidated Financial Statements of the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Selected Financial Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale |
|
$ |
306,112 |
|
|
$ |
310,695 |
|
|
$ |
187,384 |
|
|
$ |
202,590 |
|
|
$ |
182,801 |
|
Securities, restricted |
|
|
1,205 |
|
|
|
3,800 |
|
|
|
2,387 |
|
|
|
878 |
|
|
|
1,377 |
|
Securities held to maturity |
|
|
77,424 |
|
|
|
43,444 |
|
|
|
5,836 |
|
|
|
9,444 |
|
|
|
10,012 |
|
Total loans |
|
|
448,038 |
|
|
|
429,683 |
|
|
|
375,236 |
|
|
|
325,997 |
|
|
|
302,264 |
|
Total assets |
|
|
897,257 |
|
|
|
839,059 |
|
|
|
607,424 |
|
|
|
573,644 |
|
|
|
533,444 |
|
Total deposits |
|
|
793,538 |
|
|
|
659,085 |
|
|
|
508,909 |
|
|
|
504,412 |
|
|
|
468,025 |
|
Total stockholders equity |
|
|
61,855 |
|
|
|
56,139 |
|
|
|
51,109 |
|
|
|
45,539 |
|
|
|
46,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
$ |
43,368 |
|
|
$ |
39,620 |
|
|
$ |
35,864 |
|
|
$ |
32,030 |
|
|
$ |
28,713 |
|
Total interest expense |
|
|
7,815 |
|
|
|
9,489 |
|
|
|
10,437 |
|
|
|
8,337 |
|
|
|
4,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
35,553 |
|
|
|
30,131 |
|
|
|
25,427 |
|
|
|
23,693 |
|
|
|
24,394 |
|
Provision for loan losses |
|
|
4,150 |
|
|
|
2,000 |
|
|
|
600 |
|
|
|
85 |
|
|
|
300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses |
|
|
31,403 |
|
|
|
28,131 |
|
|
|
24,827 |
|
|
|
23,608 |
|
|
|
24,094 |
|
Total non interest income |
|
|
6,174 |
|
|
|
6,064 |
|
|
|
5,678 |
|
|
|
4,413 |
|
|
|
5,105 |
|
Total non interest expense |
|
|
24,765 |
|
|
|
21,157 |
|
|
|
18,168 |
|
|
|
16,002 |
|
|
|
14,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
12,812 |
|
|
|
13,038 |
|
|
|
12,337 |
|
|
|
12,019 |
|
|
|
14,552 |
|
Income tax expense |
|
|
4,049 |
|
|
|
4,288 |
|
|
|
4,043 |
|
|
|
3,851 |
|
|
|
4,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
8,763 |
|
|
$ |
8,750 |
|
|
$ |
8,294 |
|
|
$ |
8,168 |
|
|
$ |
9,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Financial Ratios and Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average equity |
|
|
15.58 |
% |
|
|
16.29 |
% |
|
|
17.47 |
% |
|
|
17.68 |
% |
|
|
20.15 |
% |
Return on average assets |
|
|
1.06 |
% |
|
|
1.24 |
% |
|
|
1.38 |
% |
|
|
1.49 |
% |
|
|
1.76 |
% |
Average equity to average assets |
|
|
6.80 |
% |
|
|
7.62 |
% |
|
|
7.91 |
% |
|
|
8.41 |
% |
|
|
8.71 |
% |
Dividend payout ratio |
|
|
65.43 |
% |
|
|
64.74 |
% |
|
|
67.67 |
% |
|
|
68.98 |
% |
|
|
58.88 |
% |
Diluted earnings per share |
|
$ |
1.43 |
|
|
$ |
1.43 |
|
|
$ |
1.36 |
|
|
$ |
1.33 |
|
|
$ |
1.53 |
|
Basic earnings per share |
|
$ |
1.44 |
|
|
$ |
1.44 |
|
|
$ |
1.37 |
|
|
$ |
1.33 |
|
|
$ |
1.54 |
|
Cash dividends declared per common share |
|
$ |
0.92 |
|
|
$ |
0.92 |
|
|
$ |
0.92 |
|
|
$ |
0.92 |
|
|
$ |
0.91 |
|
Page -12-
Item 7. 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.
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, and in 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., a New York corporation, is a single 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.
Year and Quarterly Highlights
|
|
|
Returns on average equity and average assets of 15.58% and 1.06%, respectively for
2009; |
|
|
|
Net income of $2.2 million or $0.36 per diluted share for the fourth quarter 2009
and $8.8 million or $1.43 per diluted share for 2009, unchanged from prior year levels; |
|
|
|
Net interest income increased $5.4 million from 2008 to 2009 with a net interest
margin of 4.69% for 2009, and 4.70% for 2008; |
|
|
|
Total assets of $897.3 million at December 31, 2009, an increase of 6.9% over the
same date last year; |
|
|
|
Total loans of $448.0 million at December 31, 2009, an increase of 4.3% from
December 31, 2008; |
|
|
|
Total investments of $384.7 million at December 31, 2009, an increase of 7.5%
over December 31, 2008; |
|
|
|
Total deposits of $793.5 million at December 31, 2009, an increase of $134.5
million or 20.4% over the same date last year; |
Page -13-
|
|
|
Enhanced capital with the private placement of $16.0 million in Convertible Trust
Preferred Securities. |
|
|
|
The Companys capital levels remain strong with a Tier 1 Capital to Quarterly
Average Assets ratio of 8.6%. The Company is positioned well for future growth.
Stockholders equity totaled $61.9 million at December 31, 2009 as compared $56.1
million at December 31, 2008; |
|
|
|
Declaration of cash dividends totaling $0.92 for 2009; |
|
|
|
Launched a Dividend Reinvestment Plan during 2009; |
|
|
|
Named for the second straight year as an All Star bank by Sandler ONeill &
Partners and recognized as a top community bank by the ICBA; |
|
|
|
The addition of the Companys common stock to the Russell 3000 stock market
index. |
Significant Events
The economic events of the past two years have been unprecedented. During 2008, the failure of
several large financial institutions along with the conservatorship of Fannie Mae and Freddie Mac
driven by the diminution in housing values and sub-prime mortgage lending has resulted in multiple
actions by the United States government. On October 3, 2008, the Congress passed the Emergency
Economic Stabilization Act of 2008 (EESA) which provides up to $700 billion and grants new
authorities to the United States Treasury Department (Treasury), the Federal Reserve Board
(FRB) and the Federal Deposit Insurance Corporation (FDIC) for initiatives to restore stability
and liquidity to U.S. markets. Many European nations have also taken actions to inject liquidity
and capital into critical financial institutions in order to stabilize world markets.
On October 14, 2008, the Treasury, FRB and FDIC jointly announced a sweeping plan to invest in
banks and thrifts to help restore confidence in the U.S. banking system. Some of the actions taken
by these governmental agencies included: (i) temporarily increasing FDIC insurance coverage to
$250,000 from $100,000 ; (ii) reducing the targeted federal funds rate to between 0 and 0.25% from
2.00% and the discount rate to 0.25% from 2.25%, respectively; (iii) temporarily guaranteeing Money
Market mutual funds (iv) introducing a capital purchase program whereby the Treasury will purchase
up to $250 billion in senior preferred shares from healthy qualifying financial institutions; and
(v) introducing a Temporary Liquidity Guarantee Program (TLGP) whereby the FDIC will guarantee
newly issued senior unsecured debt on or before June 30, 2009 and provide unlimited FDIC insurance
coverage for non-interest bearing transaction accounts for thirty days without charge followed by
an annualized 10 basis point assessment for the insurance coverage above $250,000 on such accounts
effective until December 31, 2009. In November 2008, the Bank opted to participate in the TLGP. In
2009, the FDICs guarantee of unsecured debt was extended to October 31, 2009 and the FDIC
insurance coverage for non-interest bearing transaction accounts to $250,000 was extended to June
30, 2010. In order to ensure a smooth phase out of the debt guaranteed program on October 31, 2009,
the FDIC established a limited emergency guarantee facility. If an institution is unable to issue
non-guaranteed debt to replace the maturing senior unsecured debt as of October 31, 2009, the
institution can apply for an emergency guarantee facility. If the application is approved, the FDIC
will guarantee the senior unsecured debt issued on or before April 30, 2010. Participating
institutions will pay the FDIC a fee equal to an annualized assessment rate of a minimum of 300
basis points.
One of the provisions resulting from the EESA was the Treasurys Capital Purchase Program (CPP),
which provided direct equity investment of perpetual preferred stock by the Treasury in qualified
financial institutions. The program is voluntary and requires an institution to comply with a
number of restrictions and provisions, including limits on executive compensation, stock
redemptions and declaration of dividends. Applications were due by November 14, 2008 and were
subject to approval by the Treasury. In November 2008, the Company filed an application to
participate in this program. In order to be eligible to participate in this program, the Company
also filed a proxy statement in November 2008 requesting shareholder approval to amend its
certificate of incorporation and authorize the issuance of preferred stock. On December 12, 2008,
the shareholders approved the proposal and on January 7, 2009 the Companys application to
participate in this program was approved by the Treasury Department. On January 27, 2009,
management and the Board, after careful deliberation and thoughtful review of the relevant issues,
determined it was not in our shareholders best interest to participate, and declined the
Treasury investment.
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 was 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
November 2009, the FDIC issued a final rule that required 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 3 basis point increase in assessment rates effective
on January 1, 2011. The Companys prepayment of FDIC assessments for 2010, 2011 and 2012 was made
on December 31, 2009 totaling $3.8 million which will be amortized to expense over three years. On
January 12, 2010, the FDIC approved an advance notice of proposed rulemaking that requested
feedback from the public on whether employee compensation plans pose risks that should be reflected
in the deposit insurance assessment program. The FDIC is concerned that certain compensation
structures may encourage risk taking that can result in losses in the financial system.
Page -14-
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. Effective as of February 19, 2010, the Federal
Reserve increased the discount rate 50 basis points to 0.75%. The Federal Reserve stated that this
rate change was intended to normalize their lending facility and to step away from emergency
lending to banks.
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 five new branches. In January
2007, the Bank opened a new branch in the Village of Southampton; in February 2007, in Cutchogue; and in
September 2007, in Wading River. In April 2009, the Bank opened a new
branch in Shirley, New York, and in December 2009, the Bank opened a state-of-the-art branch
facility in the Village of East Hampton. 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 November 2008, the Bank received approval from the Office of the Comptroller of the Currency
(OCC) to open a new branch facility in Deer Park, New York. In addition, in July 2009, the Bank
received approval from the OCC to open a new branch in Center Moriches, New York, and in March
2010, the Bank received approval from the OCC to open a new branch in Patchogue, New York. The Bank
anticipates opening the Center Moriches branch in the first half of 2010. The Deer Park and
Patchogue branch locations are expected to open during the second half of 2010.
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, lockbox processing, 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. The Bank plans to roll out
its new commercial online bill paying service, as well as a new mobile banking product during the
first half of 2010.
As 2010 begins there is still significant economic uncertainty. Unemployment remains high,
confidence is low and consumers and businesses face a myriad of challenges from higher taxes to
increased regulations. While there have been some recent positive signs and real estate activity
has increased, management remains cautious about the timeline for a true economic recovery.
Corporate objectives for 2010 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 2009 and continues during 2010 to diligently seek opportunities for growth and to strengthen the franchise. 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. Management and the
Board have built a solid foundation for growth and the Company is positioned to adapt to
anticipated changes in the industry resulting from new regulations and legislative initiatives.
Page -15-
CRITICAL ACCOUNTING POLICIES
Note 1 to our Consolidated Financial Statements for the year ended December 31, 2009 contains a
summary of our significant accounting policies. Various elements of our accounting policies, by
their nature, are inherently subject to estimation techniques, valuation assumptions and other
subjective assessments. Our policy with respect to the methodologies used to determine the
allowance for loan losses is our most critical accounting policy. This policy is important to the
presentation of our financial condition and results of operations, and it involves a higher degree
of complexity and requires management to make difficult and subjective judgments, which often
require assumptions or estimates about highly uncertain matters. The use of different judgments,
assumptions and estimates could result in material differences in our results of operations or
financial condition.
The following is a description of our critical accounting policy and an explanation of the methods
and assumptions underlying its application.
ALLOWANCE FOR LOAN LOSSES
Management considers 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. Management evaluates 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 are also 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 -16-
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
December 31, 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.
For additional information regarding our allowance for loan losses, see Note 3 to the Consolidated
Financial Statements.
NET INCOME
Net income for 2009 totaled $8.8 million or $1.43 per diluted share while net income for 2008
totaled $8.8 million or $1.43 per diluted share, as compared to net income of $8.3 million, or
$1.36 per diluted share for the year ended December 31, 2007. Net income increased $13,000 or 0.15%
compared to 2008 and net income for 2008 increased $0.5 million or 5.5% as compared to 2007.
Significant trends for 2009 include: (i) a $5.4 million or 18.0% increase in net interest income;
(ii) a $2.2 million increase in the provision for loan losses; (iii) a $0.1 million or 1.8%
increase in total non interest income; (iv) a $3.6 million or 17.1% increase in total non interest
expenses; and (v) a $0.2 million or 5.6% decrease in income tax expense.
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 table sets forth certain information relating to the Companys average consolidated
balance sheets and its consolidated statements of income for the years indicated and reflect the
average yield on assets and average cost of liabilities for the years indicated. Such yields and
costs are derived by dividing income or expense by the average balance of assets or liabilities,
respectively, for the years 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 -17-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
Average |
|
|
|
|
|
|
Yield/ |
|
|
Average |
|
|
|
|
|
|
Yield/ |
|
|
Average |
|
|
|
|
|
|
Yield/ |
|
|
|
Balance |
|
|
Interest |
|
|
Cost |
|
|
Balance |
|
|
Interest |
|
|
Cost |
|
|
Balance |
|
|
Interest |
|
|
Cost |
|
Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net (including loan fee
income) |
|
$ |
435,694 |
|
|
$ |
29,167 |
|
|
|
6.69 |
% |
|
$ |
397,560 |
|
|
$ |
28,040 |
|
|
|
7.05 |
% |
|
$ |
347,029 |
|
|
$ |
26,347 |
|
|
|
7.59 |
% |
Mortgage-backed securities |
|
|
227,471 |
|
|
|
11,074 |
|
|
|
4.87 |
|
|
|
170,592 |
|
|
|
8,404 |
|
|
|
4.93 |
|
|
|
120,314 |
|
|
|
5,764 |
|
|
|
4.73 |
|
Tax exempt securities (1) |
|
|
76,746 |
|
|
|
3,381 |
|
|
|
4.41 |
|
|
|
58,065 |
|
|
|
2,930 |
|
|
|
5.05 |
|
|
|
53,599 |
|
|
|
2,823 |
|
|
|
5.19 |
|
Taxable securities |
|
|
27,298 |
|
|
|
880 |
|
|
|
3.22 |
|
|
|
27,298 |
|
|
|
1,081 |
|
|
|
3.96 |
|
|
|
28,529 |
|
|
|
1,213 |
|
|
|
4.19 |
|
Federal funds sold |
|
|
11,466 |
|
|
|
33 |
|
|
|
0.29 |
|
|
|
8,575 |
|
|
|
183 |
|
|
|
2.13 |
|
|
|
12,375 |
|
|
|
638 |
|
|
|
5.08 |
|
Deposits with banks |
|
|
5,171 |
|
|
|
13 |
|
|
|
0.25 |
|
|
|
1,235 |
|
|
|
5 |
|
|
|
0.40 |
|
|
|
173 |
|
|
|
4 |
|
|
|
2.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets |
|
|
783,846 |
|
|
|
44,548 |
|
|
|
5.68 |
|
|
|
663,325 |
|
|
|
40,643 |
|
|
|
6.13 |
|
|
|
562,019 |
|
|
|
36,789 |
|
|
|
6.52 |
|
Non interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
|
13,574 |
|
|
|
|
|
|
|
|
|
|
|
15,408 |
|
|
|
|
|
|
|
|
|
|
|
16,081 |
|
|
|
|
|
|
|
|
|
Other assets |
|
|
29,397 |
|
|
|
|
|
|
|
|
|
|
|
26,206 |
|
|
|
|
|
|
|
|
|
|
|
22,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
826,817 |
|
|
|
|
|
|
|
|
|
|
$ |
704,939 |
|
|
|
|
|
|
|
|
|
|
$ |
600,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and money market
deposits |
|
$ |
376,429 |
|
|
$ |
3,698 |
|
|
|
0.98 |
% |
|
$ |
315,481 |
|
|
$ |
5,681 |
|
|
|
1.80 |
% |
|
$ |
287,450 |
|
|
$ |
7,634 |
|
|
|
2.66 |
% |
Certificates of deposit of $100,000
or more |
|
|
81,838 |
|
|
|
1,974 |
|
|
|
2.41 |
|
|
|
66,578 |
|
|
|
2,125 |
|
|
|
3.19 |
|
|
|
35,965 |
|
|
|
1,452 |
|
|
|
4.04 |
|
Other time deposits |
|
|
68,289 |
|
|
|
1,551 |
|
|
|
2.27 |
|
|
|
37,413 |
|
|
|
1,148 |
|
|
|
3.07 |
|
|
|
28,044 |
|
|
|
1,058 |
|
|
|
3.77 |
|
Federal funds purchased and
repurchase agreements |
|
|
29,607 |
|
|
|
401 |
|
|
|
1.35 |
|
|
|
24,595 |
|
|
|
478 |
|
|
|
1.94 |
|
|
|
6,035 |
|
|
|
288 |
|
|
|
4.71 |
|
Federal Home Loan Bank term advances |
|
|
82 |
|
|
|
1 |
|
|
|
1.22 |
|
|
|
4,552 |
|
|
|
57 |
|
|
|
1.25 |
|
|
|
110 |
|
|
|
5 |
|
|
|
4.55 |
|
Junior subordinated debentures |
|
|
2,263 |
|
|
|
190 |
|
|
|
8.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities |
|
|
558,508 |
|
|
|
7,815 |
|
|
|
1.40 |
|
|
|
448,619 |
|
|
|
9,489 |
|
|
|
2.12 |
|
|
|
357,604 |
|
|
|
10,437 |
|
|
|
2.92 |
|
Non interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
|
205,984 |
|
|
|
|
|
|
|
|
|
|
|
197,179 |
|
|
|
|
|
|
|
|
|
|
|
191,022 |
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
6,086 |
|
|
|
|
|
|
|
|
|
|
|
5,428 |
|
|
|
|
|
|
|
|
|
|
|
4,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
770,578 |
|
|
|
|
|
|
|
|
|
|
|
651,226 |
|
|
|
|
|
|
|
|
|
|
|
552,855 |
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
56,239 |
|
|
|
|
|
|
|
|
|
|
|
53,713 |
|
|
|
|
|
|
|
|
|
|
|
47,487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders
equity |
|
$ |
826,817 |
|
|
|
|
|
|
|
|
|
|
$ |
704,939 |
|
|
|
|
|
|
|
|
|
|
$ |
600,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/interest rate
spread (2) |
|
|
|
|
|
|
36,733 |
|
|
|
4.28 |
% |
|
|
|
|
|
|
31,154 |
|
|
|
4.01 |
% |
|
|
|
|
|
|
26,352 |
|
|
|
3.60 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest earning assets/net
interest margin (3) |
|
$ |
225,338 |
|
|
|
4.69 |
% |
|
|
|
|
|
$ |
214,706 |
|
|
|
4.70 |
% |
|
|
|
|
|
$ |
204,415 |
|
|
|
4.69 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of interest earning assets to
interest bearing liabilities |
|
|
140.35 |
% |
|
|
|
|
|
|
|
|
|
|
147.86 |
% |
|
|
|
|
|
|
|
|
|
|
157.16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Tax equivalent adjustment |
|
|
|
|
|
|
(1,180 |
) |
|
|
|
|
|
|
|
|
|
|
(1,023 |
) |
|
|
|
|
|
|
|
|
|
|
(925 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
$ |
35,553 |
|
|
|
|
|
|
|
|
|
|
$ |
30,131 |
|
|
|
|
|
|
|
|
|
|
$ |
25,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 -18-
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 that 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Over 2008 |
|
|
2008 Over 2007 |
|
Years Ended December 31, |
|
Changes Due To |
|
|
Changes Due To |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Net |
|
|
|
|
|
|
|
|
|
|
Net |
|
|
|
Volume |
|
|
Rate |
|
|
Change |
|
|
Volume |
|
|
Rate |
|
|
Change |
|
Interest income on interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (including loan fee income) |
|
$ |
2,603 |
|
|
$ |
(1,476 |
) |
|
$ |
1,127 |
|
|
$ |
3,653 |
|
|
$ |
(1,960 |
) |
|
$ |
1,693 |
|
Mortgage-backed securities |
|
|
2,773 |
|
|
|
(103 |
) |
|
|
2,670 |
|
|
|
2,473 |
|
|
|
167 |
|
|
|
2,640 |
|
Tax exempt securities (1) |
|
|
857 |
|
|
|
(406 |
) |
|
|
451 |
|
|
|
229 |
|
|
|
(122 |
) |
|
|
107 |
|
Taxable securities |
|
|
|
|
|
|
(201 |
) |
|
|
(201 |
) |
|
|
(51 |
) |
|
|
(81 |
) |
|
|
(132 |
) |
Federal funds sold |
|
|
46 |
|
|
|
(196 |
) |
|
|
(150 |
) |
|
|
(156 |
) |
|
|
(299 |
) |
|
|
(455 |
) |
Deposits with banks |
|
|
10 |
|
|
|
(2 |
) |
|
|
8 |
|
|
|
7 |
|
|
|
(6 |
) |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets |
|
|
6,289 |
|
|
|
(2,384 |
) |
|
|
3,905 |
|
|
|
6,155 |
|
|
|
(2,301 |
) |
|
|
3,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense on interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and money market deposits |
|
|
950 |
|
|
|
(2,933 |
) |
|
|
(1,983 |
) |
|
|
689 |
|
|
|
(2,642 |
) |
|
|
(1,953 |
) |
Certificates of deposit of $100,000 or more |
|
|
432 |
|
|
|
(583 |
) |
|
|
(151 |
) |
|
|
1,028 |
|
|
|
(355 |
) |
|
|
673 |
|
Other time deposits |
|
|
761 |
|
|
|
(358 |
) |
|
|
403 |
|
|
|
311 |
|
|
|
(221 |
) |
|
|
90 |
|
Federal funds purchased and repurchase agreements |
|
|
86 |
|
|
|
(163 |
) |
|
|
(77 |
) |
|
|
446 |
|
|
|
(256 |
) |
|
|
190 |
|
Federal Home Loan Bank Advances |
|
|
(55 |
) |
|
|
(1 |
) |
|
|
(56 |
) |
|
|
58 |
|
|
|
(6 |
) |
|
|
52 |
|
Junior subordinated debentures |
|
|
190 |
|
|
|
|
|
|
|
190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities |
|
|
2,364 |
|
|
|
(4,038 |
) |
|
|
(1,674 |
) |
|
|
2,532 |
|
|
|
(3,480 |
) |
|
|
(948 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ |
3,925 |
|
|
$ |
1,654 |
|
|
$ |
5,579 |
|
|
$ |
3,623 |
|
|
$ |
1,179 |
|
|
$ |
4,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The above table is presented on a tax equivalent basis. |
The net interest margin remained stable at 4.69% in 2009 compared to 4.70% for the year ended
December 31, 2008 and 4.69% in 2007. The yield on average total interest earning assets decreased
approximately 45 basis points during 2009 compared to the prior year and the cost of interest
bearing liabilities decreased approximately 72 basis points. The net interest margin during 2009
was also impacted by the issuance of $16.0 million in junior subordinated debentures.
Net interest income was $35.6 million in 2009 compared to $30.1 million in 2008 and $25.4 million
in 2007. The increase in net interest income of $5.5 million or 18.0% as compared to 2008 primarily
resulted from the effect of the increase in the volume of average total interest earning assets and
the decrease in the cost of average total interest bearing liabilities being greater than the
effect of the increase in volume of average total interest bearing liabilities and the decrease in
yield on average total interest earning assets. The increase in net interest income of $4.7 million
or 18.5% in 2008 as compared to 2007 primarily resulted from the effect of the increase in the
volume of average total interest earning assets and the decrease in the cost of average total
interest bearing liabilities being greater than the effect of the increase in volume of average
total interest bearing liabilities and the decrease in yield on average total interest earning
assets.
Average total interest earning assets grew by $120.5 million or 18.2% to $783.8 million in 2009
compared to $663.3 million in 2008. During this period, the yield on average total interest earning
assets decreased to 5.68% from 6.13%. Average interest earning assets grew $101.3 million or 18.0%
in 2008 from $562.0 million in 2007. During this period, the yield on average total interest
earning assets decreased to 6.13% from 6.52%.
For the year ended December 31, 2009, average loans grew by $38.1 million or 9.6% to $435.7 million
as compared to $397.6 million in 2008 and increased $50.6 million or 14.6% in 2008 as compared to
$347.0 million in 2007. 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 -19-
For the year ended December 31, 2009, average total investments increased by $75.6 million or 29.5%
to $331.5 million as compared to $256.0 million in 2008 and increased $53.5 million or 26.4% in
2008 as compared to $202.4 million in 2007. To position the balance sheet for the future and better
manage liquidity and interest rate risk, a portion of the available for sale investment securities
portfolio was sold during 2009 resulting in a net gain of $529,000 compared to a net loss of
$101,000 in 2007. There were no sales of securities in 2008. Average federal funds sold increased
to $11.5 million or 33.7% in 2009 from $8.6 million in 2008 and decreased $3.8 million or 30.7% in
2008 as compared to $12.4 million in 2007. The decrease in the average federal funds sold in 2008
was primarily due to growth in the average loans and investments.
Average total interest bearing liabilities were $558.5 million in 2009 compared to $448.6 million
in 2008 and $357.6 million in 2007. The Bank grew deposits during 2009 as a result of the maturing
of three new branches opened during 2007, two new branches opening during 2009 and the building of
new relationships in existing markets. The Bank offered deposit promotions during 2008 and 2007 in
connection with increased competition in the market to reduce potential core deposits outflows. In
2009, the Company completed the private placement of $16.0 million in aggregate liquidation amount
of 8.50% cumulative convertible trust preferred securities (the TPS), through its subsidiary,
Bridge Statutory Capital Trust II. The Company issued $16.0 million of junior subordinated
debentures (the Debentures) to the trust in exchange for ownership of all of the common security
of the trust and the proceeds of the preferred securities sold by the trust. The junior
subordinated debentures bear interest at a fixed rate equal to 8.50% and mature on December 31,
2039. The cost of interest bearing liabilities decreased to 1.40% for 2009 as compared to a cost of
2.12% during 2008 and 2.92% in 2007. Since the Companys interest bearing liabilities generally
reprice or mature more quickly than its interest earning assets, an increase in short term interest
rates would initially result in a decrease 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. Funding costs continued to decline in 2009 through prudent
management of deposit pricing in response to the Federal Reserve lowering the targeted federal
funds rate and discount rate in December 2008 and maintaining those levels throughout 2009.
For the year ended December 31, 2009, average total deposits increased by $115.9 million or 18.8%
to $732.5 million as compared to average total deposits of $616.7 million for the year ended
December 31, 2008. Components of this increase include an increase in average demand deposits for
2009 of $8.8 million or 4.5% to $206.0 million as compared to average demand deposits for 2008. The
average balances in savings, NOW and money market accounts increased $60.9 million or 19.3% to
$376.4 million for the year ended December 31, 2009 compared to the same period last year. Average
balances in certificates of deposit of $100,000 or more and other time deposits increased $46.1
million or 44.4% to $150.1 million for 2009 as compared to 2008. Average public fund deposits
comprised 17.3% of total average deposits during 2009 and 20.6% of total average deposits during
2008. Average federal funds purchased and repurchase agreements together with average other
borrowed money and average Federal Home Loan Bank term advances increased $0.5 million or 1.9% for
the year ended December 31, 2009 as compared to average balances for the same period in the prior
year.
Total interest income increased to $43.4 million in 2009 from $39.6 million in 2008 and $35.9
million in 2007, an increase of 9.5% between 2009 and 2008 and a 10.5% increase between 2008 and
2007. The ratio of interest earning assets to interest bearing liabilities decreased to 140.35% in
2009 as compared to 147.86% in 2008 and 157.16% in 2007. Interest income on loans increased $1.1
million in 2009 over 2008 and increased $1.7 million in 2008 over 2007 primarily due to growth in
the loan portfolio. The yield on average loans was 6.69% for 2009, 7.05% for 2008 and 7.59% for
2007.
Interest income on investments in residential mortgage-backed, taxable and tax exempt securities
increased $2.8 million or 24.3% in 2009 to $14.2 million from $11.4 million in 2008 and increased
$2.5 million or 28.4% in 2008 from $8.9 million in 2007. Interest income on securities included net
amortization of premiums on securities of $305,000 in 2009 compared to net accretion of discounts
of $55,000 in 2008 and $22,000 in 2007 as the rate environment changed and prepayments
substantially increased on the mortgage-backed security portfolio. The tax adjusted average yield
on total securities decreased to 4.63% in 2009 from 4.85% in 2008 and 4.84% in 2007.
Total interest expense decreased $1.7 million or 17.6% to $7.8 million in 2009 and decreased $0.9
million or 9.1% to $9.5 million in 2008 from $10.4 million in 2007. The decrease in interest
expense in 2009 resulted from the Federal Reserve lowering the targeted federal funds rate and
discount rate and the prudent management of deposit pricing. The decrease in interest expense in
2008 resulted from the lower cost of average interest bearing liabilities. The cost of average
interest bearing liabilities was 1.40% in 2009, 2.12% in 2008, and 2.92% in 2007.
Provision 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.
Page -20-
Loans of approximately $31.7 million or 7.1% of total loans at December 31, 2009 were classified as
potential problem loans compared to $9.8 million or 2.3% at December 31, 2008 and $12.9 million or
3.4% at December 31, 2007. These loans are classified as potential problem loans as 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. The increase in the 2009 level of potential problem loans reflects the
current economic environment as well as managements decision to enhance the asset and credit
quality review process of the loan portfolio. This process includes the early identification of
potential problem loans, a more stringent assessment of potential credit weaknesses and expanding
the scope and depth of individual credit reviews.
At December 31, 2009, approximately $30 million of these loans are commercial real estate (CRE)
loans which are current and well secured with real estate as collateral. In addition, all but $2.1
million of the CRE loans have personal guarantees. The remaining $1.7 million in classified loans
are unsecured and current, have personal guarantees and demonstrate sufficient cash flow to pay the
loans. Due to the structure and nature of the credits, we do not expect to sustain a material loss
on these relationships.
CRE loans represented $211.6 million or 47.2% of the total loan portfolio at December 31, 2009
compared to $190.7 million or 44.4% at December 31, 2008 and $167.8 million or 44.7% at December
31, 2007. The Banks underwriting standards for CRE loans requires an evaluation of the cash flow
of the property, the overall cash flow of the borrower and related guarantors as well as the value
of the real estate securing the loan. In addition, the Banks underwriting standards for CRE loans
are consistent with regulatory requirements with original loan to value ratios less than or equal
to 75%. The Bank considers delinquency trends, cash flow analysis, and the impact of the local
economy on commercial real estate values when evaluating the appropriate level of the allowance for
loan losses. Real estate values in our geographic markets increased significantly from 2000
through 2007. Commencing in 2008, following the financial crisis and significant downturn in the
economy, real estate values began to decline. This decline continued into 2009 and appears to have
stabilized in the fourth quarter of 2009. The estimated decline in residential and commercial real
estate values range from 15-20% from the 2007 levels, depending on the nature and location of the
real estate.
As of December 31, 2009 and December 31, 2008, the Company had impaired loans as defined by FASB
ASC No. 310, Receivables of $9.1 million and $6.3 million, respectively. For a loan to be
considered impaired, management determines after review whether it is probable that the Bank will
not be able to collect all amounts due according to the contractual terms of the loan agreement.
Additionally management applies its normal loan review procedures in making these judgments.
Impaired loans include individually classified nonaccrual loans and troubled debt restructured
(TDR) loans. For impaired and TDR loans, the Bank evaluates the fair value of the loan in
accordance with FASB ASC 310-10-35-22. For loans that are collateral dependent, the fair value of
the collateral is used to determine the fair value of the loan. The fair value of the collateral is
determined based upon recent appraised values. For unsecured loans, the fair value is determined
based on the present value of expected future cash flows discounted at the loans effective
interest rate. The fair value of the loan is compared to the carrying value to determine if any
write-down or specific reserve is required. These methods of fair value measurement for impaired
and TDR loans are considered level 3 within the fair value hierarchy described in FASB ASC
820-10-50-5.
Nonaccrual loans increased $2.8 million to $5.9 million or 1.32% of total loans at December 31,
2009 from $3.1 million or 0.71% of total loans at December 31, 2008. Approximately $4.9 million of
the nonaccrual loans at December 31, 2009 represent troubled debt restructured loans where the
borrowers are complying with the modified terms of the loans and are currently making payments. In
2008, nonaccrual loans increased $2.9 million to $3.1 million from $0.2 million in 2007. The
increase in non accrual loans at December 31, 2008 was due to a single loan of approximately $2.5
million.
In addition, the Company has one borrower with TDR loans of $3.2 million at December 31, 2009 that
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
$187,000 of interest income has been recognized. There were no loans considered to be trouble debt
restructurings at December 31, 2007.
The Bank had no foreclosed real estate at December 31, 2009, 2008 and 2007, respectively.
Net charge-offs were $2,058,000 for the year ended December 31, 2009 compared to $1,001,000 for the
year ended December 31, 2008 and $158,000 for the year ended December 31, 2007. The ratio of
allowance for loan losses to nonaccrual loans was 103%, 129% and 1290%, at December 31, 2009, 2008,
and 2007, respectively.
Based on our continuing review of the overall loan portfolio, the current asset quality of the
portfolio, the growth in the loan portfolio and the net charge-offs or recoveries, a provision for
loan losses of $4.2 million was recorded in 2009 as compared to $2.0 million in 2008 and $0.6 million in
2007. The allowance for loan losses increased to $6.0 million at December 31, 2009 as compared to
$4.0 million at December 31, 2008 and $3.0 million at December 31, 2007. As a percentage of total
loans, the allowance was 1.35%, 0.92% and 0.79% at December 31, 2009, 2008 and 2007, respectively.
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.
Page -21-
The following table sets forth changes in the allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
(Dollars in thousands) |
|
Allowance for loan losses balance at beginning of period |
|
$ |
3,953 |
|
|
$ |
2,954 |
|
|
$ |
2,512 |
|
|
$ |
2,383 |
|
|
$ |
2,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate mortgage loans |
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate mortgage loans |
|
|
707 |
|
|
|
480 |
|
|
|
|
|
|
|
|
|
|
|
7 |
|
Commercial, financial and agricultural loans |
|
|
796 |
|
|
|
534 |
|
|
|
203 |
|
|
|
33 |
|
|
|
153 |
|
Installment/consumer loans |
|
|
228 |
|
|
|
56 |
|
|
|
23 |
|
|
|
50 |
|
|
|
129 |
|
Real estate construction loans |
|
|
262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,093 |
|
|
|
1,070 |
|
|
|
226 |
|
|
|
83 |
|
|
|
289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate mortgage loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate mortgage loans |
|
|
6 |
|
|
|
|
|
|
|
1 |
|
|
|
6 |
|
|
|
17 |
|
Commercial, financial and agricultural loans |
|
|
28 |
|
|
|
53 |
|
|
|
13 |
|
|
|
59 |
|
|
|
37 |
|
Installment/consumer loans |
|
|
1 |
|
|
|
16 |
|
|
|
54 |
|
|
|
62 |
|
|
|
30 |
|
Real estate construction loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
35 |
|
|
|
69 |
|
|
|
68 |
|
|
|
127 |
|
|
|
184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (charge-offs) recoveries |
|
|
(2,058 |
) |
|
|
(1,001 |
) |
|
|
(158 |
) |
|
|
44 |
|
|
|
(105 |
) |
Provision for loan losses charged to operations |
|
|
4,150 |
|
|
|
2,000 |
|
|
|
600 |
|
|
|
85 |
|
|
|
300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
6,045 |
|
|
$ |
3,953 |
|
|
$ |
2,954 |
|
|
$ |
2,512 |
|
|
$ |
2,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of net (charge-offs) recoveries during period to
average loans outstanding |
|
|
(0.47% |
) |
|
|
(0.25% |
) |
|
|
(0.05% |
) |
|
|
0.01 |
% |
|
|
(0.04% |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of Allowance for Loan Losses
The following table sets forth the allocation of the total allowance for loan losses by loan type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
(Dollars in thousands) |
|
|
|
|
|
Percentage |
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
of Loans |
|
|
|
|
|
|
of Loans |
|
|
|
|
|
|
of Loans |
|
|
|
|
|
|
of Loans |
|
|
|
|
|
|
of Loans |
|
|
|
|
|
|
|
to Total |
|
|
|
|
|
|
to Total |
|
|
|
|
|
|
to Total |
|
|
|
|
|
|
to Total |
|
|
|
|
|
|
to Total |
|
|
|
Amount |
|
|
Loans |
|
|
Amount |
|
|
Loans |
|
|
Amount |
|
|
Loans |
|
|
Amount |
|
|
Loans |
|
|
Amount |
|
|
Loans |
|
Commercial real estate
mortgage loans |
|
$ |
2,452 |
|
|
|
47.3 |
% |
|
$ |
1,778 |
|
|
|
44.4 |
% |
|
$ |
1,820 |
|
|
|
44.7 |
% |
|
$ |
1,715 |
|
|
|
51.2 |
% |
|
$ |
1,527 |
|
|
|
44.9 |
% |
Residential real estate
mortgage loans |
|
|
2,384 |
|
|
|
32.0 |
|
|
|
1,152 |
|
|
|
32.4 |
|
|
|
310 |
|
|
|
33.4 |
|
|
|
239 |
|
|
|
32.6 |
|
|
|
236 |
|
|
|
33.2 |
|
Commercial, financial and
agricultural loans |
|
|
891 |
|
|
|
17.2 |
|
|
|
696 |
|
|
|
16.8 |
|
|
|
484 |
|
|
|
15.6 |
|
|
|
358 |
|
|
|
9.0 |
|
|
|
327 |
|
|
|
12.8 |
|
Installment/consumer loans |
|
|
279 |
|
|
|
2.2 |
|
|
|
61 |
|
|
|
2.6 |
|
|
|
87 |
|
|
|
2.3 |
|
|
|
79 |
|
|
|
2.7 |
|
|
|
110 |
|
|
|
3.2 |
|
Real estate construction loans |
|
|
39 |
|
|
|
1.3 |
|
|
|
266 |
|
|
|
3.8 |
|
|
|
253 |
|
|
|
4.0 |
|
|
|
121 |
|
|
|
4.5 |
|
|
|
183 |
|
|
|
5.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
6,045 |
|
|
|
100.0 |
% |
|
$ |
3,953 |
|
|
|
100.0 |
% |
|
$ |
2,954 |
|
|
|
100.0 |
% |
|
$ |
2,512 |
|
|
|
100.0 |
% |
|
$ |
2,383 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non Interest Income
Total non interest income increased by $0.1 million or 1.8% in 2009 to $6.2 million and increased
$0.4 million or 6.8% to $6.1 million in 2008 as compared to $5.7 million in 2007. The increase in
total non interest income in 2009 compared to 2008 was due to $0.5 million in net securities gains
partially offset by a $0.2 million decrease in revenues from the title insurance abstract
subsidiary, Bridge Abstract, a $0.07 million decrease in service charges on deposit accounts, a
decrease of $0.08 million in fees for other customer services and a decline of $0.05 million in
other operating income. The increase in total non interest income during 2008 compared to 2007 was
due to a $0.5 million increase in service charges on deposit accounts, and an increase of $0.025
million in fees for other customer services partly offset by a $0.2 million decrease in revenues
from the title insurance abstract subsidiary, Bridge Abstract, and a decrease in other operating
income of $0.05 million. Excluding net securities gains and losses, total non interest income
decreased $0.4 million or 6.9% in 2009 and increased $0.3 million or 4.9% for the year ended
December 31, 2008.
Net security gains of $529,000 were recognized in 2009 compared to no security gains or losses
recognized in 2008 and net security losses of $101,000 recognized in 2007. The sales of securities
were due to repositioning of the available for sale investment portfolio.
Page -22-
Bridge Abstract, the Banks title insurance abstract subsidiary, generated title fee income of $0.9
million, $1.1 million, and $1.3 million in 2009, 2008 and 2007, respectively. The decrease of
$0.2 million or 19.4% in 2009 and the decrease of $0.2 million or 16.4% in 2008, was due to a
decrease in the number and average value of transactions processed by the subsidiary.
Fees from other customer services decreased $0.08 million or 4.6% to $1.7 million in 2009 as
compared to $1.8 million in 2008. The decrease was due primarily to lower sales volume in our
merchant and debit card cash management services. Fees from other customer services increased
$0.025 million or 1.4% in 2008 as compared to 2007. Service charges on deposit accounts for the
year ended December 31, 2009 totaled $3.0 million, a decrease of $0.07 million as compared to 2008.
This decrease predominately represents lower overdraft fees. For the year ended December 31, 2008,
service charges were $3.1 million, an increase of $0.5 million from 2007.
Other operating income for the year ended December 31, 2009 totaled $67,000, a decrease of $51,000
or 43.2% from $118,000 for the year ended December 31, 2008, and decreased $48,000 or 28.9% in 2008
from the prior year.
Non Interest Expense
Non interest expenses increased $3.6 million or 17.1% in 2009 to $24.8 million from $21.2 million
in 2008, and increased $3.0 million or 16.5% in 2008 from $18.2 million in
2007. The primary components of these changes were higher salaries and employee benefits, net
occupancy expense, furniture and fixture expense, FDIC assessments and other operating expenses.
Salaries and benefits increased $1.4 million or 10.8% in 2009 as compared to 2008 and increased
$2.0 million or 18.2% in 2008 as compared to 2007. The increases in salary and benefits reflect
filling vacant positions, hiring new employees to support the Companys expanding infrastructure
and new branch offices, and the related employee benefit costs associated with the new employees,
including higher medical, and pension expenses.
Net occupancy expense increased $0.4 million or 25.0% to $2.3 million in 2009 from $1.9 million in
2008 and increased $0.2 million or 7.8% in 2008 from $1.7 million in 2007. 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. Higher net
occupancy expenses in 2008 were due to increases in depreciation expense and rent expense related
to the new branch offices as well as annual rent increases in other branch locations. Furniture and
fixture expense increased $0.2 million or 18.5% to $1.0 million in 2009 from $0.85 million in 2008
and increased $0.02 million or 2.0% in 2008 from $0.83 million in 2007. The increase in furniture
and fixture expense relates primarily to the opening of new branches. FDIC assessments increased
$1.3 million or 489.5% to $1.6 million in 2009 from $0.3 million in 2008 and increased $0.2 million
or 304.5% in 2008 from $0.07 million in 2007. The increases during 2009 and 2008 relate to growth
in deposits and higher assessment rates. Additionally during 2009, the Bank incurred a special
assessment fee from the FDIC of $0.4 million. Other operating expenses increased $0.3 million or
6.2% to $4.8 million in 2009 from $4.5 million in 2008 and increased $0.6 million or 15.6% in 2008
from $3.9 million in 2007. The increase during 2009 included higher professional fees associated
with legal and consulting fees. The increase during 2008 included higher professional fees
associated with the listing and trading of the Companys common stock on the NASDAQ Global Select
Market, the special shareholders meeting legal work and outsourced internal audits.
Income Tax Expense
Income tax expense for December 31, 2009, 2008, and 2007 was $4.0 million, $4.3 million and $4.0
million, respectively. The decrease in 2009 was due to a decrease in income before income taxes of
$0.2 million to $12.8 million from $13.0 million in 2008 and a lower effective tax rate. The
increase in income tax expense in 2008 was due to an increase in income before income before taxes
of $0.7 million to $13.0 million from $12.3 million in 2007. The effective tax rate was 31.6%,
32.9% and 32.8% for the years ended December 31, 2009, 2008, and 2007, respectively.
FINANCIAL CONDITION
The assets of the Company totaled $897.3 million at December 31, 2009, an increase of $58.2 million
or 6.9% from the previous year-end. This increase was primarily driven by growth in total
securities, net, of $26.8 million, total loans of $18.4 million, other assets of $6.9 million, and an
increase of $5.3 million in cash and cash equivalents.
This growth in assets was funded principally by growth in deposits fueled by increased sales
initiatives and maturation of newer branches, and borrowings. The deposit growth occurred in all
markets and included both new commercial and consumer relationships. Core retail and commercial
deposits increased $111.1 million or 21.3% over the prior year to $632.0 million at December 31,
2009. Demand deposits increased $30.9 million or 17.1% to $212.1 million at December 31, 2009 compared to
$181.2 million at December 31, 2008. Savings, NOW and money market deposits increased $95.5 million
or 27.7% to $440.4 million at December 31, 2009 from $344.9 million at December 31, 2008.
Certificates of deposit of $100,000 or more decreased $4.8 million or 6.1% and other time deposits
increased $12.7 million or 23.2%.
Page -23-
Due to the significant growth in deposits, there were no Federal funds purchased and FHLB overnight
borrowings at December 31, 2009 compared to $70.9 million at December 31, 2008. In addition, there
were no Federal Home Loan Bank term advances as of December 31, 2009 compared to $30.0 million
outstanding at December 31, 2008. Repurchase agreements were flat at $15.0 million outstanding at
December 31, 2009 and December 31, 2008, respectively. During 2008, market opportunities
contributed to the fourth quarter strategy to utilize wholesale funding to increase securities
holdings and manage seasonal deposit flows. This strategy enhanced earnings and assisted in
managing the Banks liquidity.
Other liabilities increased $3.0 million to $10.3 million at December 31, 2009 from $7.3 million at
December 31, 2008 due primarily to an increase in deferred tax liabilities related to the increase
in unrealized gains on securities as of December 31, 2009 compared to December 31, 2008.
Total stockholders equity was $61.9 million at December 31, 2009, an increase of $5.8 million or
10.2% from December 31, 2008 primarily due to net income of $8.8 million, an increase in net
unrealized gains on securities of $1.8 million partially offset by the declaration of dividends
totaling $5.7 million and the issuance of shares of common stock pursuant to the equity incentive
plan. In December 2009, the Company declared a quarterly dividend of $0.23 per share. The Company
continues its long term trend of uninterrupted dividends.
Loans
During 2009, the Company continued to experience growth trends in commercial and residential real
estate lending. The concentration of loans in our primary market areas may increase risk. Unlike
larger banks that are more geographically diversified, 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 markets in which the Company operates
have experienced substantial growth in construction and land development activity over the past
several years, which has been a factor in overall loan growth. The local economic conditions on
eastern Long Island have a significant impact on the volume of loan originations and the quality of
our loans, the ability of borrowers to repay these loans, and the value of collateral securing
these loans. A considerable decline in the general economic conditions caused by inflation,
recession, unemployment or other factors beyond the Companys control would impact these local
economic conditions and could negatively affect the financial results of the Companys operations.
Additionally, while the Company has a significant amount of commercial real estate loans, the
majority of which are owner-occupied, decreases in tenant occupancy may also have a negative effect
on the ability of borrowers to make timely repayments of their loans, which would have an adverse
impact on the Companys earnings.
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.
The Bank targets its business lending and marketing initiatives towards promotion of loans that
primarily meet the needs of small to medium-sized businesses. These small to medium-sized
businesses generally have fewer financial resources in terms of capital or borrowing capacity than
larger entities. If general economic conditions negatively impact these businesses, the results of
operations and financial condition may be adversely affected.
With respect to the underwriting of loans, there are certain risks, including the risk of
non-payment that is associated with each type of loan that the Bank markets. Approximately 80.6% of
the Banks loan portfolio at December 31, 2009 is secured by real estate and approximately 47.3% is
comprised of commercial real estate loans. Residential real estate mortgage loans represent 32.0%
of the Banks loan portfolio and include home equity lines of credit of approximately 14.7%,
residential mortgages of approximately 14.1%, and residential land loans of approximately 3.2%.
Real estate construction loans comprise approximately 1.3% of the Banks loan portfolio. Risks
associated with a concentration in real estate loans include potential losses from fluctuating
values of land and improved properties. Home equity loans represent loans originated in the Banks
geographic markets with original loan to value ratios generally of 75% or less. The Banks
residential mortgage portfolio includes approximately $4.3 million in interest only mortgages. The
underwriting standards for interest only mortgages are consistent with the remainder of the loan
portfolio and do not include any features that result in negative amortization. Largest loan
concentrations by industry are loans granted to lessors of commercial property both owner occupied
and nonowner occupied. The Bank uses conservative underwriting criteria to better insulate itself
from a downturn in real estate values and economic conditions on eastern Long Island that could
have a significant impact on the value of collateral securing the loans as well as the ability of
customers to repay loans.
The remainder of the loan portfolio is comprised of commercial and consumer loans, which represent
approximately 19.4% of the Banks loan portfolio. The primary risks associated with commercial
loans are the cash flow of the business, the experience and quality of the borrowers management,
the business climate, and the impact of economic factors. The primary risks associated with
consumer loans relate to the borrower, such as the risk of a borrowers unemployment as a result of
deteriorating economic conditions or the amount and nature of a borrowers other existing
indebtedness, and the value of the collateral securing the loan if the Bank must take possession of
the collateral. Consumer loans also have risks associated with concentrations of loans in a single
type of loan.
Page -24-
The Banks policy for charging off loans is a multi-step process. A loan is considered a potential
charge-off when it is in default of either principal or interest for a period of 90, 120 or 180
days, depending upon the loan type, as of the end of the prior month. In addition to date criteria,
other triggering events may include, but are not limited to, notice of bankruptcy by the borrower
or guarantor, death of the borrower, and deficiency balance from the sale of collateral. These
loans identified are presented for evaluation at the regular meeting of the Classification
Committee. The recovery of charged-off balances is actively pursued until the potential for
recovery has been exhausted, or until the expense of collection does not justify the recovery
efforts.
Total loans grew $18.4 million or 4.3%, during 2009 and $54.4 million or 14.5% during 2008. Average
net loans grew $38.1 million or 9.6% during 2009 over 2008 and $50.5 million or 14.6% during 2008
when compared to 2007. Real estate mortgage loans were the largest contributor of the growth for
both 2009 and 2008 and increased $16.3 million or 4.8% and $37.5 million or 12.4%, respectively.
Commercial real estate mortgage loans grew $20.9 million or 11.0% during 2009 and residential real
estate mortgage loans grew $4.0 million or 2.8% during 2009. Commercial, financial and agricultural
loans increased $4.8 million or 6.6% in 2009 from 2008 and increased $13.5 million or 27.9% in 2008
from 2007. Real estate construction loans decreased $10.3 million or 63.5% in 2009 and increased
$1.3 million or 8.8% in 2008. Installment/consumer loans decreased $1.3 million or 11.4% in 2009
and increased $2.5 million or 29.6% during 2008. Fixed rate loans represented 25.2%, 23.3% and
19.2% of total loans at December 31, 2009, 2008, and 2007, respectively.
The following table sets forth the major classifications of loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate mortgage loans |
|
$ |
211,647 |
|
|
$ |
190,727 |
|
|
$ |
167,770 |
|
|
$ |
166,950 |
|
|
$ |
135,570 |
|
Residential real estate mortgage loans |
|
|
143,312 |
|
|
|
139,342 |
|
|
|
125,317 |
|
|
|
106,189 |
|
|
|
100,219 |
|
Commercial, financial, and agricultural loans |
|
|
76,867 |
|
|
|
72,093 |
|
|
|
58,637 |
|
|
|
29,183 |
|
|
|
38,783 |
|
Installment/consumer loans |
|
|
9,821 |
|
|
|
11,081 |
|
|
|
8,553 |
|
|
|
8,848 |
|
|
|
9,827 |
|
Real estate construction loans |
|
|
5,906 |
|
|
|
16,174 |
|
|
|
14,867 |
|
|
|
14,767 |
|
|
|
17,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
|
447,553 |
|
|
|
429,417 |
|
|
|
375,144 |
|
|
|
325,937 |
|
|
|
302,359 |
|
Net deferred loan costs and fees |
|
|
485 |
|
|
|
266 |
|
|
|
92 |
|
|
|
60 |
|
|
|
(95 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
448,038 |
|
|
|
429,683 |
|
|
|
375,236 |
|
|
|
325,997 |
|
|
|
302,264 |
|
Allowance for loan losses |
|
|
(6,045 |
) |
|
|
(3,953 |
) |
|
|
(2,954 |
) |
|
|
(2,512 |
) |
|
|
(2,383 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans |
|
$ |
441,993 |
|
|
$ |
425,730 |
|
|
$ |
372,282 |
|
|
$ |
323,485 |
|
|
$ |
299,881 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Loan Maturity Information
The following table sets forth the approximate maturities and sensitivity to changes in interest
rates of certain loans, exclusive of real estate mortgage loans and installment/consumer loans to
individuals as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After One |
|
|
|
|
|
|
|
|
|
Within One |
|
|
But Within |
|
|
After |
|
|
|
|
|
|
Year |
|
|
Five Years |
|
|
Five Years |
|
|
Total |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans |
|
$ |
12,565 |
|
|
$ |
22,199 |
|
|
$ |
42,103 |
|
|
$ |
76,867 |
|
Construction loans (1) |
|
|
2,470 |
|
|
|
444 |
|
|
|
2,992 |
|
|
|
5,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
15,035 |
|
|
$ |
22,643 |
|
|
$ |
45,095 |
|
|
$ |
82,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate provisions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts with fixed interest rates |
|
$ |
12,508 |
|
|
$ |
21,715 |
|
|
$ |
33,972 |
|
|
$ |
68,195 |
|
Amounts with variable interest rates |
|
|
2,527 |
|
|
|
928 |
|
|
|
11,123 |
|
|
|
14,578 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
15,035 |
|
|
$ |
22,643 |
|
|
$ |
45,095 |
|
|
$ |
82,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Included in the After Five Years column, are one-step construction loans that contain a
preliminary construction period (interest only) that automatically converts to amortization at
the end of the construction phase. |
Page -25-
Past Due, Nonaccrual and Restructured Loans
The following table sets forth selected information about past due, nonaccrual and restructured
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans 90 days or more past due and still accruing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Nonaccrual loans |
|
|
1,001 |
|
|
|
3,068 |
|
|
|
229 |
|
|
|
305 |
|
|
|
658 |
|
Restructured loans Nonaccrual |
|
|
4,890 |
|
|
|
|
|
|
|
|
|
|
|
118 |
|
|
|
|
|
Restructured loans Performing |
|
|
3,229 |
|
|
|
3,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
9,120 |
|
|
$ |
6,297 |
|
|
$ |
229 |
|
|
$ |
423 |
|
|
$ |
658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross interest income that has not been paid
or recorded during the year under original
terms: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans |
|
$ |
52 |
|
|
$ |
127 |
|
|
$ |
12 |
|
|
$ |
9 |
|
|
$ |
38 |
|
Restructured loans |
|
|
189 |
|
|
|
12 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross interest income recorded during the year: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans |
|
$ |
37 |
|
|
$ |
189 |
|
|
$ |
5 |
|
|
$ |
12 |
|
|
$ |
17 |
|
Restructured loans |
|
|
288 |
|
|
|
238 |
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
Commitments for additional funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth impaired loans by loan type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate mortgage loans |
|
$ |
324 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
460 |
|
Residential real estate mortgage loans |
|
|
511 |
|
|
|
426 |
|
|
|
223 |
|
|
|
182 |
|
|
|
198 |
|
Commercial, financial & agricultural loans |
|
|
61 |
|
|
|
96 |
|
|
|
6 |
|
|
|
108 |
|
|
|
|
|
Installment/consumer loans |
|
|
105 |
|
|
|
6 |
|
|
|
|
|
|
|
15 |
|
|
|
|
|
Real estate construction loans |
|
|
|
|
|
|
2,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,001 |
|
|
|
3,068 |
|
|
|
229 |
|
|
|
305 |
|
|
|
658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructured Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate mortgage loans |
|
|
3,229 |
|
|
|
3,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate mortgage loans |
|
|
4,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial & agricultural loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118 |
|
|
|
|
|
Installment/consumer loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate construction loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
8,119 |
|
|
|
3,229 |
|
|
|
|
|
|
|
118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impaired Loans |
|
$ |
9,120 |
|
|
$ |
6,297 |
|
|
$ |
229 |
|
|
$ |
423 |
|
|
$ |
658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructured loans totaled $8.1 million at December 31, 2009, of which $4.9 million of the
restructured loans were nonaccrual as of December 31, 2009.
Securities
Total securities increased to $383.5 million at December 31, 2009 from $354.1 million at December
31, 2008. The available for sale portfolio decreased 1.5% to $306.1 million from $310.7 million at
December 31, 2008. Securities held as available for sale may be sold in response to, or in
anticipation of, changes in interest rates and resulting prepayment risk, or other factors. U.S.
government sponsored entity (U.S. GSE) securities increased to $45.9 million at December 31, 2009
from $30.1 million at December 31, 2008, while state and municipal obligations decreased by $6.8
million, residential mortgage-backed securities decreased by $40.6 million and residential
collateralized mortgage obligations increased by $27.0 million. Securities held to maturity
increased 78.2% to $77.4 million at December 31, 2009 compared to $43.4 million at December 31,
2008. Residential collateralized mortgage obligations held to maturity decreased to $18.3 million at December 31, 2009 from $19.3 at December 31, 2008, while
U.S. GSE securities increased by $5.0 million and state and municipal obligations increased by
$30.0 million. Fixed rate securities represented 87.4% of total securities at December 31, 2009
compared to 84.7% at December 31, 2008. Residential collateralized mortgage obligations represented
approximately 36.6% of the available for sale balance at December 31, 2009 as compared to 27.4% at
the prior year-end. A change in market rates was the primary reason for the net increase in
unrealized gains in securities available for sale, which increased other comprehensive income.
Page -26-
Total securities include restricted securities which represent FHLB and FRB stock, of $1.2 million
and $3.8 million at December 31, 2009 and 2008, respectively.
A summary of the amortized cost, gross unrealized gains, gross unrealized losses and estimated fair
value of securities is as follows:
The following table sets forth the fair value, amortized cost, maturities and approximated weighted
average yield at December 31, 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. Yields on tax-exempt obligations have been computed on a tax-equivalent
basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within |
|
|
After One But |
|
|
After Five But |
|
|
After |
|
|
|
|
December 31, 2009 |
|
One Year |
|
|
Within Five Years |
|
|
Within Ten Years |
|
|
Ten Years |
|
|
Total |
|
(Dollars in thousands) |
|
Fair |
|
|
Amortized |
|
|
|
|
|
|
Fair |
|
|
Amortized |
|
|
|
|
|
|
Fair |
|
|
Amortized |
|
|
|
|
|
|
Fair |
|
|
Amortized |
|
|
|
|
|
|
Fair |
|
|
Amortized |
|
|
|
Value |
|
|
Cost |
|
|
|
|
|
|
Value |
|
|
Cost |
|
|
|
|
|
|
Value |
|
|
Cost |
|
|
|
|
|
|
Value |
|
|
Cost |
|
|
|
|
|
|
Value |
|
|
Cost |
|
|
|
Amount |
|
|
Amount |
|
|
Yield |
|
|
Amount |
|
|
Amount |
|
|
Yield |
|
|
Amount |
|
|
Amount |
|
|
Yield |
|
|
Amount |
|
|
Amount |
|
|
Yield |
|
|
Amount |
|
|
Amount |
|
Available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GSE securities |
|
$ |
2,892 |
|
|
$ |
2,791 |
|
|
|
4.60 |
% |
|
$ |
34,662 |
|
|
$ |
34,747 |
|
|
|
2.14 |
% |
|
$ |
8,385 |
|
|
$ |
8,249 |
|
|
|
3.07 |
% |
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
|
$ |
45,939 |
|
|
$ |
45,787 |
|
State and municipal obligations |
|
|
5,972 |
|
|
|
5,898 |
|
|
|
4.51 |
|
|
|
19,712 |
|
|
|
18,896 |
|
|
|
4.93 |
|
|
|
16,121 |
|
|
|
15,546 |
|
|
|
6.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,805 |
|
|
|
40,340 |
|
Residential mortgage-backed securities |
|
|
3,990 |
|
|
|
4,009 |
|
|
|
3.83 |
|
|
|
6,016 |
|
|
|
5,828 |
|
|
|
4.32 |
|
|
|
24,432 |
|
|
|
23,582 |
|
|
|
4.33 |
|
|
|
71,899 |
|
|
|
68,418 |
|
|
|
5.12 |
|
|
|
106,337 |
|
|
|
101,837 |
|
Residential collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,444 |
|
|
|
9,378 |
|
|
|
2.86 |
|
|
|
102,587 |
|
|
|
100,064 |
|
|
|
4.44 |
|
|
|
112,031 |
|
|
|
109,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale |
|
|
12,854 |
|
|
|
12,698 |
|
|
|
4.32 |
|
|
|
60,390 |
|
|
|
59,471 |
|
|
|
3.24 |
|
|
|
58,382 |
|
|
|
56,755 |
|
|
|
4.39 |
|
|
|
174,486 |
|
|
|
168,482 |
|
|
|
4.72 |
|
|
|
306,112 |
|
|
|
297,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GSE securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,927 |
|
|
|
5,000 |
|
|
|
4.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,927 |
|
|
|
5,000 |
|
State and municipal obligations |
|
|
29,724 |
|
|
|
29,685 |
|
|
|
1.97 |
|
|
|
24,241 |
|
|
|
23,894 |
|
|
|
3.16 |
|
|
|
531 |
|
|
|
525 |
|
|
|
4.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,496 |
|
|
|
54,104 |
|
Residential mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,907 |
|
|
|
18,320 |
|
|
|
4.63 |
|
|
|
18,907 |
|
|
|
18,320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity |
|
|
29,724 |
|
|
|
29,685 |
|
|
|
1.97 |
|
|
|
24,241 |
|
|
|
23,894 |
|
|
|
3.16 |
|
|
|
5,458 |
|
|
|
5,525 |
|
|
|
4.05 |
|
|
|
18,907 |
|
|
|
18,320 |
|
|
|
4.63 |
|
|
|
78,330 |
|
|
|
77,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities |
|
$ |
42,578 |
|
|
$ |
42,383 |
|
|
|
2.67 |
% |
|
$ |
84,631 |
|
|
$ |
83,365 |
|
|
|
3.22 |
% |
|
$ |
63,840 |
|
|
$ |
62,280 |
|
|
|
4.36 |
% |
|
$ |
193,393 |
|
|
$ |
186,802 |
|
|
|
4.71 |
% |
|
$ |
384,442 |
|
|
$ |
374,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits and Borrowings
Borrowings including Fed Funds purchased, repurchase agreements and FHLB term advances, decreased
$100.9 million to $15.0 million at December 31, 2009 from the prior year-end. Total deposits
increased $134.5 million or 20.4% in 2009 as compared to 2008. The growth in deposits is
attributable to an increase in core deposits of $111.1 million, driven by the opening of three new
branches during 2007, two new branches opening during 2009 and the building of new relationships in
current markets, as well as an increase of $23.3 million in public funds deposits. Demand deposits
increased $30.9 million or 17.1% and Savings, NOW and money market deposits increased $95.6 million
or 27.7% primarily related to core deposits growth. Certificates of deposit of $100,000 or more
decreased $4.8 million or 6.1% from December 31, 2008 and other time deposits increased $12.7
million or 23.2% as compared to the prior year.
Page -27-
The following table sets forth the remaining maturities of the Banks time deposits at December 31,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than |
|
|
$100,000 or |
|
|
|
|
|
|
$100,000 |
|
|
Greater |
|
|
Total |
|
(In thousands) |
|
3 Months or less |
|
$ |
24,847 |
|
|
$ |
23,377 |
|
|
$ |
48,224 |
|
Over 3 through 6 months |
|
|
17,898 |
|
|
|
18,277 |
|
|
|
36,175 |
|
Over 6 through 12 months |
|
|
17,956 |
|
|
|
25,276 |
|
|
|
43,232 |
|
Over 12 months through 24 months |
|
|
5,445 |
|
|
|
3,951 |
|
|
|
9,396 |
|
Over 24 months through 36 months |
|
|
658 |
|
|
|
701 |
|
|
|
1,359 |
|
Over 36 months through 48 months |
|
|
559 |
|
|
|
1,003 |
|
|
|
1,562 |
|
Over 48 months through 60 months |
|
|
122 |
|
|
|
816 |
|
|
|
938 |
|
Over 60 months |
|
|
68 |
|
|
|
|
|
|
|
68 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
67,553 |
|
|
$ |
73,401 |
|
|
$ |
140,954 |
|
|
|
|
|
|
|
|
|
|
|
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. The Companys principal sources of liquidity included cash and cash equivalents of $7.5 million as
of December 31, 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 December
31, 2009, the Bank had $10.3 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.
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 loan and investment securities principal repayments and maturities,
lines of credit with other financial institutions including the Federal Home Loan Bank, growth in
core deposits and sources of wholesale funding such as brokered certificates of deposit. 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.
During 2009 and 2008, the Bank grew its individual, partnership and corporate account balances
(core deposits) as well as its level of public funds. During 2007, the Bank grew its core deposits and reduced its level of public funds.
The Banks Asset/Liability and Funds Management Policy allows for wholesale borrowings of up to 25%
of total assets. At December 31, 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. As of December 31,
2009, there were no overnight borrowings under these lines. The Bank had $15.0 million of
securities sold under agreements to repurchase outstanding as of December 31, 2009 with brokers.
In addition, the Bank has an approved broker relationship for the purpose of issuing brokered
certificates of deposit. As of December 31, 2009 the Bank had no brokered certificates of deposits.
As of December 31, 2008, the Bank had issued $5.0 million of brokered certificates of deposit.
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.
Page -28-
CONTRACTUAL OBLIGATIONS
In the ordinary course of operations, the Company enters into certain contractual obligations.
The following represents contractual obligations outstanding at December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts |
|
|
Less than |
|
|
One to |
|
|
Four to Five |
|
|
Over Five |
|
|
|
Committed |
|
|
One Year |
|
|
Three Years |
|
|
Years |
|
|
Years |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
$ |
4,793 |
|
|
$ |
827 |
|
|
$ |
976 |
|
|
$ |
925 |
|
|
$ |
2,065 |
|
Purchase obligation |
|
|
250 |
|
|
|
250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB term advances and repurchase
agreements |
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
10,000 |
|
Junior subordinated debentures |
|
|
16,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,002 |
|
Time deposits |
|
|
140,954 |
|
|
|
127,631 |
|
|
|
10,755 |
|
|
|
2,500 |
|
|
|
68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations outstanding |
|
$ |
176,999 |
|
|
$ |
128,708 |
|
|
$ |
11,731 |
|
|
$ |
8,425 |
|
|
$ |
28,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS, CONTINGENT LIABILITIES, AND OFF-BALANCE SHEET ARRANGEMENTS
Some financial instruments, such as loan commitments, credit lines, letters of credit, and
overdraft protection, are issued to meet customer financing needs. These are agreements to provide
credit or to support the credit of others, as long as conditions established in the contract are
met, and usually have expiration dates. Commitments may expire without being used.
Off-balance-sheet risk to credit loss exists up to the face amount of these instruments, although
material losses are not anticipated. The same credit policies are used to make such commitments as
are used for loans, often including obtaining collateral at exercise of the commitment. At December
31, 2009, the Company had $25.4 million in outstanding loan commitments and $103.4 million in
outstanding commitments for various lines of credit including unused overdraft lines. The Company
also has $1.2 million of standby letters of credit as of December 31, 2009. See Note 12 of the
Notes to the Consolidated Financial Statements for additional information on loan commitments and
standby letters of credit.
CAPITAL RESOURCES
Stockholders equity increased to $61.9 million at December 31, 2009 from $56.1 million at December
31, 2008 as a result of undistributed net income; plus the change in net unrealized appreciation in
securities available for sale, net of deferred taxes; the change in pension liability under FASB
ASC 715-30, net of deferred taxes; and the issuance of shares of common stock pursuant to the
equity incentive plan; less the declaration of dividends. The ratio of average stockholders equity
to average total assets decreased to 6.80% at year end 2009 from 7.62% at year end 2008.
The Companys capital strength is paralleled by the solid capital position of the Bank, as
reflected in the excess of its regulatory capital ratios over the risk-based capital adequacy ratio
levels required for classification as a well capitalized institution by the FDIC (see Note 14 to
the Consolidated Financial Statements). During 2009, the Company completed the private placement of
$16.0 million in aggregate liquidation amount of 8.50% cumulative convertible trust preferred
securities (the TPS), through its subsidiary, Bridge Statutory Capital Trust II. The TPS have a
liquidation amount of $1,000 per security and the TPS shares are convertible into our common stock,
at an effective conversion price of $31 per share. The TPS mature in 30 years but are callable by
the Company at par any time after September 30, 2014. The Company issued $16.0 million of Junior
Subordinated Debentures (the Debentures) to the trust in exchange for ownership of all of the
common security of the trust and the proceeds of the preferred securities sold by the trust. In
accordance with current accounting guidance, the trust is not consolidated in the Companys
financial statements, but rather the Debentures are shown as a liability. The Debentures bear
interest at a fixed rate equal to 8.50% and mature on December 31, 2039. Consistent with regulatory
requirements, the interest payments may be deferred for up to 5 years, and are cumulative. The
Debentures have the same prepayment provisions as the TPS. The Debentures may be included in Tier I
capital (with certain limitations applicable) under current regulatory guidelines and
interpretations. Management believes that the current capital levels along with future retained
earnings will allow the Bank to maintain a position exceeding required capital levels and which is
sufficient to support Company growth. Additionally, the Company has the ability to issue additional
common stock, preferred stock and/or trust preferred securities should the need arise.
The Company had returns on average equity of 15.58%, 16.29%, and 17.47% and returns on average
assets of 1.06%, 1.24%, and 1.38%, for the years ended December 31, 2009, 2008, and 2007,
respectively. The Company utilizes cash dividends and stock
repurchases to manage capital levels. Cash dividends totaled $5.7 million in 2009 and 2008. The
dividend payout ratios for 2009 and 2008 were 65.43% and 64.74%, respectively. The Company
continues its trend of uninterrupted dividends. On March 27, 2006, the Company approved its stock repurchase plan allowing the repurchase of up to
5% of its then current outstanding shares, 309,000 shares. There is no expiration date for the
share repurchase plan. The Company considers opportunities for stock repurchases carefully. The
Company did not repurchase any shares in 2009, 2008 or 2007.
Page -29-
IMPACT OF INFLATION AND CHANGING PRICES
The 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 adversely 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.
IMPACT OF PROSPECTIVE ACCOUNTING STANDARDS
For discussion regarding the impact of new accounting standards, refer to Note 1 r) of the notes to
Consolidated Financial Statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
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
December 31, 2009, $336.4 million or 87.4% 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 stockholders equity
and its results of operations if sold. The Company is also subject to reinvestment risk associated
with changes in interest rates. Changes in market interest rates also could affect the type
(fixed-rate or adjustable-rate) and amount of loans originated by the Company and the average life
of loans and securities, which can impact the yields earned on the Companys loans and securities.
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. 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.
Page -30-
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 December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
Potential Change |
|
|
|
in Net |
|
Change in Interest |
|
Interest Income |
|
Rates in Basis Points |
|
$ Change |
|
|
% Change |
|
(Dollars in thousands) |
|
200 |
|
$ |
(1,243 |
) |
|
|
(3.54 |
)% |
100 |
|
$ |
(545 |
) |
|
|
(1.55 |
)% |
Static |
|
|
|
|
|
|
|
|
(100) |
|
$ |
42 |
|
|
|
0.12 |
% |
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.
Page -31-
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
ASSETS |
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
27,108 |
|
|
$ |
24,744 |
|
Interest earning deposits with banks |
|
|
7,039 |
|
|
|
4,141 |
|
|
|
|
|
|
|
|
Total cash and cash equivalents |
|
|
34,147 |
|
|
|
28,885 |
|
|
|
|
|
|
|
|
|
|
Securities available for sale, at fair value |
|
|
306,112 |
|
|
|
310,695 |
|
Securities held to maturity (fair value of $78,330 and $43,890, respectively) |
|
|
77,424 |
|
|
|
43,444 |
|
|
|
|
|
|
|
|
Total securities |
|
|
383,536 |
|
|
|
354,139 |
|
|
|
|
|
|
|
|
|
|
Securities, restricted |
|
|
1,205 |
|
|
|
3,800 |
|
|
|
|
|
|
|
|
|
|
Loans |
|
|
448,038 |
|
|
|
429,683 |
|
Allowance for loan losses |
|
|
(6,045 |
) |
|
|
(3,953 |
) |
|
|
|
|
|
|
|
Loans, net |
|
|
441,993 |
|
|
|
425,730 |
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net |
|
|
21,306 |
|
|
|
18,377 |
|
Accrued interest receivable |
|
|
3,679 |
|
|
|
3,626 |
|
Other assets |
|
|
11,391 |
|
|
|
4,502 |
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
897,257 |
|
|
$ |
839,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Demand deposits |
|
$ |
212,137 |
|
|
$ |
181,213 |
|
Savings, NOW and money market deposits |
|
|
440,447 |
|
|
|
344,860 |
|
Certificates of deposit of $100,000 or more |
|
|
73,401 |
|
|
|
78,165 |
|
Other time deposits |
|
|
67,553 |
|
|
|
54,847 |
|
|
|
|
|
|
|
|
Total deposits |
|
|
793,538 |
|
|
|
659,085 |
|
|
|
|
|
|
|
|
|
|
Federal funds purchased and Federal Home Loan Bank overnight borrowings |
|
|
|
|
|
|
70,900 |
|
Federal Home Loan Bank term advances |
|
|
|
|
|
|
30,000 |
|
Repurchase agreements |
|
|
15,000 |
|
|
|
15,000 |
|
Junior subordinated debentures |
|
|
16,002 |
|
|
|
|
|
Accrued interest payable |
|
|
531 |
|
|
|
672 |
|
Other liabilities and accrued expenses |
|
|
10,331 |
|
|
|
7,263 |
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
835,402 |
|
|
|
782,920 |
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
Preferred stock, par value $.01 per share (2,000,000 shares authorized; none issued) |
|
|
|
|
|
|
|
|
Common stock, par value $.01 per share: |
|
|
|
|
|
|
|
|
Authorized: 20,000,000 shares; 6,397,088 and 6,386,306 shares issued, respectively;
6,261,216 and 6,184,080 shares outstanding, respectively |
|
|
64 |
|
|
|
64 |
|
Surplus |
|
|
19,950 |
|
|
|
20,452 |
|
Retained earnings |
|
|
43,110 |
|
|
|
40,081 |
|
Less: Treasury stock at cost, 135,872 and 202,226 shares, respectively |
|
|
(4,791 |
) |
|
|
(6,309 |
) |
|
|
|
|
|
|
|
|
|
|
58,333 |
|
|
|
54,288 |
|
Accumulated other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Net unrealized gain on securities, net of deferred income taxes of ($3,457) and
($2,250), respectively |
|
|
5,249 |
|
|
|
3,417 |
|
Pension liability, net of deferred income taxes of $1,166 and $1,060, respectively |
|
|
(1,727 |
) |
|
|
(1,566 |
) |
|
|
|
|
|
|
|
Total Stockholders Equity |
|
|
61,855 |
|
|
|
56,139 |
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity |
|
$ |
897,257 |
|
|
$ |
839,059 |
|
|
|
|
|
|
|
|
See accompanying notes to Consolidated Financial Statements.
Page -32-
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans (including fee income) |
|
$ |
29,167 |
|
|
$ |
28,040 |
|
|
$ |
26,347 |
|
Mortgage-backed securities |
|
|
11,074 |
|
|
|
8,404 |
|
|
|
5,764 |
|
State and municipal obligations |
|
|
2,201 |
|
|
|
1,907 |
|
|
|
1,898 |
|
U.S. GSE securities |
|
|
880 |
|
|
|
1,081 |
|
|
|
1,213 |
|
Federal funds sold |
|
|
33 |
|
|
|
183 |
|
|
|
638 |
|
Deposits with banks |
|
|
13 |
|
|
|
5 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
|
43,368 |
|
|
|
39,620 |
|
|
|
35,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and money market deposits |
|
|
3,698 |
|
|
|
5,681 |
|
|
|
7,634 |
|
Certificates of deposit of $100,000 or more |
|
|
1,974 |
|
|
|
2,125 |
|
|
|
1,452 |
|
Other time deposits |
|
|
1,551 |
|
|
|
1,148 |
|
|
|
1,058 |
|
Federal funds purchased and repurchase agreements |
|
|
401 |
|
|
|
478 |
|
|
|
288 |
|
Federal Home Loan Bank Advances |
|
|
1 |
|
|
|
57 |
|
|
|
5 |
|
Junior subordinated debentures |
|
|
190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
7,815 |
|
|
|
9,489 |
|
|
|
10,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
35,553 |
|
|
|
30,131 |
|
|
|
25,427 |
|
Provision for loan losses |
|
|
4,150 |
|
|
|
2,000 |
|
|
|
600 |
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses |
|
|
31,403 |
|
|
|
28,131 |
|
|
|
24,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
|
2,997 |
|
|
|
3,067 |
|
|
|
2,540 |
|
Fees for other customer services |
|
|
1,678 |
|
|
|
1,759 |
|
|
|
1,734 |
|
Title fee income |
|
|
903 |
|
|
|
1,120 |
|
|
|
1,339 |
|
Net securities gains (losses) |
|
|
529 |
|
|
|
|
|
|
|
(101 |
) |
Other operating income |
|
|
67 |
|
|
|
118 |
|
|
|
166 |
|
|
|
|
|
|
|
|
|
|
|
Total non interest income |
|
|
6,174 |
|
|
|
6,064 |
|
|
|
5,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
|
14,084 |
|
|
|
12,710 |
|
|
|
10,755 |
|
Net occupancy expense |
|
|
2,337 |
|
|
|
1,870 |
|
|
|
1,734 |
|
Furniture and fixture expense |
|
|
1,007 |
|
|
|
850 |
|
|
|
833 |
|
Data/Item processing |
|
|
486 |
|
|
|
481 |
|
|
|
423 |
|
Advertising |
|
|
457 |
|
|
|
440 |
|
|
|
429 |
|
FDIC assessments |
|
|
1,574 |
|
|
|
267 |
|
|
|
66 |
|
Other operating expenses |
|
|
4,820 |
|
|
|
4,539 |
|
|
|
3,928 |
|
|
|
|
|
|
|
|
|
|
|
Total non interest expense |
|
|
24,765 |
|
|
|
21,157 |
|
|
|
18,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
12,812 |
|
|
|
13,038 |
|
|
|
12,337 |
|
Income tax expense |
|
|
4,049 |
|
|
|
4,288 |
|
|
|
4,043 |
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
8,763 |
|
|
$ |
8,750 |
|
|
$ |
8,294 |
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
1.44 |
|
|
$ |
1.44 |
|
|
$ |
1.37 |
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
1.43 |
|
|
$ |
1.43 |
|
|
$ |
1.36 |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income |
|
$ |
10,434 |
|
|
$ |
10,369 |
|
|
$ |
10,787 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to Consolidated Financial Statements.
Page -33-
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Common |
|
|
|
|
|
|
Comprehensive |
|
|
Retained |
|
|
Treasury |
|
|
Comprehensive |
|
|
|
|
|
|
Stock |
|
|
Surplus |
|
|
Income |
|
|
Earnings |
|
|
Stock |
|
|
Income (Loss) |
|
|
Total |
|
Balance at January 1, 2007 |
|
$ |
64 |
|
|
$ |
21,565 |
|
|
|
|
|
|
$ |
34,347 |
|
|
$ |
(8,176 |
) |
|
$ |
(2,261 |
) |
|
$ |
45,539 |
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
8,294 |
|
|
|
8,294 |
|
|
|
|
|
|
|
|
|
|
|
8,294 |
|
Stock awards granted |
|
|
|
|
|
|
(271 |
) |
|
|
|
|
|
|
|
|
|
|
271 |
|
|
|
|
|
|
|
|
|
Stock awards forfeited |
|
|
|
|
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
(39 |
) |
|
|
|
|
|
|
|
|
Exercise of stock options, including tax benefit |
|
|
|
|
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
55 |
|
|
|
|
|
|
|
149 |
|
Shared based compensation expense |
|
|
|
|
|
|
244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
244 |
|
Cash dividend declared, $0.92 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,610 |
) |
|
|
|
|
|
|
|
|
|
|
(5,610 |
) |
Other comprehensive income, net of deferred taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized net gains in securities
available for sale, net of reclassification and
deferred tax effects |
|
|
|
|
|
|
|
|
|
|
1,738 |
|
|
|
|
|
|
|
|
|
|
|
1,738 |
|
|
|
1,738 |
|
Adjustment to pension liability, net of deferred tax |
|
|
|
|
|
|
|
|
|
|
755 |
|
|
|
|
|
|
|
|
|
|
|
755 |
|
|
|
755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income |
|
|
|
|
|
|
|
|
|
$ |
10,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007 |
|
$ |
64 |
|
|
$ |
21,671 |
|
|
|
|
|
|
$ |
37,031 |
|
|
$ |
(7,889 |
) |
|
$ |
232 |
|
|
$ |
51,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
8,750 |
|
|
|
8,750 |
|
|
|
|
|
|
|
|
|
|
|
8,750 |
|
Stock awards granted |
|
|
|
|
|
|
(1,848 |
) |
|
|
|
|
|
|
|
|
|
|
1,848 |
|
|
|
|
|
|
|
|
|
Stock awards forfeited |
|
|
|
|
|
|
91 |
|
|
|
|
|
|
|
|
|
|
|
(91 |
) |
|
|
|
|
|
|
|
|
Vesting of stock awards |
|
|
|
|
|
|
(34 |
) |
|
|
|
|
|
|
|
|
|
|
(40 |
) |
|
|
|
|
|
|
(74 |
) |
Exercise of stock options, including tax benefit |
|
|
|
|
|
|
140 |
|
|
|
|
|
|
|
|
|
|
|
(137 |
) |
|
|
|
|
|
|
3 |
|
Shared based compensation expense |
|
|
|
|
|
|
432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
432 |
|
Cash dividend declared, $0.92 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,665 |
) |
|
|
|
|
|
|
|
|
|
|
(5,665 |
) |
Other comprehensive income, net of deferred taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized net gains in securities
available for sale, net of reclassification and
deferred tax effects |
|
|
|
|
|
|
|
|
|
|
3,204 |
|
|
|
|
|
|
|
|
|
|
|
3,204 |
|
|
|
3,204 |
|
Adjustment to pension liability, net of deferred taxes |
|
|
|
|
|
|
|
|
|
|
(1,585 |
) |
|
|
(35 |
) |
|
|
|
|
|
|
(1,585 |
) |
|
|
(1,620 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income |
|
|
|
|
|
|
|
|
|
$ |
10,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 |
|
$ |
64 |
|
|
$ |
20,452 |
|
|
|
|
|
|
$ |
40,081 |
|
|
$ |
(6,309 |
) |
|
$ |
1,851 |
|
|
$ |
56,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
$ |
8,763 |
|
|
|
8,763 |
|
|
|
|
|
|
|
|
|
|
|
8,763 |
|
Proceeds from issuance of common stock, net of
offering costs |
|
|
|
|
|
|
252 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
255 |
|
Stock awards granted |
|
|
|
|
|
|
(1,664 |
) |
|
|
|
|
|
|
|
|
|
|
1,664 |
|
|
|
|
|
|
|
|
|
Vesting of stock awards |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
(52 |
) |
|
|
|
|
|
|
(53 |
) |
Exercise of stock options, including tax benefit |
|
|
|
|
|
|
161 |
|
|
|
|
|
|
|
|
|
|
|
(97 |
) |
|
|
|
|
|
|
64 |
|
Shared based compensation expense |
|
|
|
|
|
|
750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
750 |
|
Cash dividend declared, $0.92 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,734 |
) |
|
|
|
|
|
|
|
|
|
|
(5,734 |
) |
Other comprehensive income, net of deferred taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized net gains in securities
available for sale, net of reclassification and
deferred tax effects |
|
|
|
|
|
|
|
|
|
|
1,832 |
|
|
|
|
|
|
|
|
|
|
|
1,832 |
|
|
|
1,832 |
|
Adjustment to pension liability, net of deferred taxes |
|
|
|
|
|
|
|
|
|
|
(161 |
) |
|
|
|
|
|
|
|
|
|
|
(161 |
) |
|
|
(161 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income |
|
|
|
|
|
|
|
|
|
$ |
10,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
$ |
64 |
|
|
$ |
19,950 |
|
|
|
|
|
|
$ |
43,110 |
|
|
$ |
(4,791 |
) |
|
$ |
3,522 |
|
|
$ |
61,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to Consolidated Financial Statements.
Page -34-
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
8,763 |
|
|
$ |
8,750 |
|
|
$ |
8,294 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
4,150 |
|
|
|
2,000 |
|
|
|
600 |
|
Depreciation and amortization |
|
|
1,453 |
|
|
|
1,214 |
|
|
|
1,223 |
|
Amortization and (accretion), net |
|
|
305 |
|
|
|
(55 |
) |
|
|
(22 |
) |
Share based compensation expense |
|
|
750 |
|
|
|
432 |
|
|
|
244 |
|
Tax expense from the vesting of restricted stock awards |
|
|
1 |
|
|
|
34 |
|
|
|
|
|
Tax benefit from exercise of stock options |
|
|
(13 |
) |
|
|
(19 |
) |
|
|
(25 |
) |
SERP expense |
|
|
281 |
|
|
|
166 |
|
|
|
214 |
|
Net securities (gains) losses |
|
|
(529 |
) |
|
|
|
|
|
|
101 |
|
Increase in accrued interest receivable |
|
|
(53 |
) |
|
|
(919 |
) |
|
|
(15 |
) |
Deferred income tax (benefit) expense |
|
|
(948 |
) |
|
|
441 |
|
|
|
(257 |
) |
Increase in other assets |
|
|
(5,928 |
) |
|
|
(863 |
) |
|
|
(1,346 |
) |
Increase (decrease) in accrued expenses and other liabilities |
|
|
1,261 |
|
|
|
(1,468 |
) |
|
|
595 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
9,493 |
|
|
|
9,713 |
|
|
|
9,606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of securities available for sale |
|
|
(113,975 |
) |
|
|
(213,851 |
) |
|
|
(37,935 |
) |
Purchases of FHLB stock |
|
|
(19,514 |
) |
|
|
(65,496 |
) |
|
|
(16,595 |
) |
Purchases of securities held to maturity |
|
|
(65,838 |
) |
|
|
(46,571 |
) |
|
|
(5,836 |
) |
Proceeds from sales of securities available for sale |
|
|
13,087 |
|
|
|
|
|
|
|
8,484 |
|
Redemption of FHLB stock |
|
|
22,109 |
|
|
|
64,083 |
|
|
|
15,086 |
|
Maturities and calls of securities available for sale |
|
|
46,150 |
|
|
|
69,496 |
|
|
|
28,978 |
|
Maturities of securities held to maturity |
|
|
25,713 |
|
|
|
7,945 |
|
|
|
9,444 |
|
Principal payments on securities |
|
|
68,727 |
|
|
|
27,431 |
|
|
|
18,503 |
|
Net increase in loans |
|
|
(20,413 |
) |
|
|
(55,448 |
) |
|
|
(49,397 |
) |
Purchase of premises and equipment |
|
|
(4,382 |
) |
|
|
(1,122 |
) |
|
|
(1,687 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(48,336 |
) |
|
|
(213,533 |
) |
|
|
(30,955 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in deposits |
|
|
134,453 |
|
|
|
150,176 |
|
|
|
4,497 |
|
Net (decrease) increase in federal funds purchased and FHLB overnight borrowings |
|
|
(70,900 |
) |
|
|
63,900 |
|
|
|
(11,600 |
) |
Net (decrease) increase in FHLB term advances |
|
|
(30,000 |
) |
|
|
20,000 |
|
|
|
10,000 |
|
Net (decrease) increase in repurchase agreements |
|
|
|
|
|
|
(10,000 |
) |
|
|
25,000 |
|
Proceeds from issuance of junior subordinated debentures |
|
|
16,002 |
|
|
|
|
|
|
|
|
|
Net proceeds from exercise of stock options |
|
|
47 |
|
|
|
|
|
|
|
149 |
|
Net proceeds from issuance of common stock |
|
|
255 |
|
|
|
|
|
|
|
|
|
Repurchase of surrendered stock from exercise of stock options and vesting
of restricted stock awards |
|
|
(36 |
) |
|
|
(71 |
) |
|
|
|
|
Cash dividends paid |
|
|
(5,716 |
) |
|
|
(5,648 |
) |
|
|
(5,612 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
44,105 |
|
|
|
218,357 |
|
|
|
22,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
5,262 |
|
|
|
14,537 |
|
|
|
1,085 |
|
Cash and cash equivalents at beginning of period |
|
|
28,885 |
|
|
|
14,348 |
|
|
|
13,263 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
34,147 |
|
|
$ |
28,885 |
|
|
$ |
14,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Information-Cash Flows: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
7,956 |
|
|
$ |
9,457 |
|
|
$ |
10,651 |
|
Income tax |
|
$ |
3,264 |
|
|
$ |
4,419 |
|
|
$ |
4,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared and unpaid at end of period |
|
$ |
1,441 |
|
|
$ |
1,423 |
|
|
$ |
1,406 |
|
See accompanying notes to Consolidated Financial Statements.
Page -35-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Bridge Bancorp, Inc. (the Company) is incorporated under the laws of the State of New York as a
single 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).
In addition to the Bank, the Company has another subsidiary, Bridge Statutory Capital Trust II
which was formed in 2009. In accordance with current accounting guidance, the trust is not
consolidated in the Companys financial statements. See Note 8 for a further discussion of Bridge
Statutory Capital Trust II.
The financial statements have been prepared in accordance with U.S. generally accepted accounting
principles (GAAP) and general practices within the financial institution industry. The following
is a description of the significant accounting policies that the Company follows in preparing its
Consolidated Financial Statements.
a) Subsequent Events
As defined in Financial Accounting Standards Board (FASB) Accounting Standards Codification
(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. Based on the evaluation, the Company did not identify any subsequent events that would
have required an adjustment to the financial statements.
b) Basis of Financial Statement Presentation
The accompanying Consolidated Financial Statements are prepared on the accrual basis of accounting
and include the accounts of the Company and its wholly-owned subsidiary, the Bank. All material
intercompany transactions and balances have been eliminated.
The preparation of financial statements, in conformity with U.S. generally accepted accounting
principles, requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities as of the date of
each consolidated balance sheet and the related consolidated statement of income for the years then
ended. 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 allowance for loan losses, fair values of financial
instruments, deferred taxes, prepayment speeds on mortgage-backed securities, and pension
assumptions are particularly subject to change.
c) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due
from banks and federal funds sold, which mature overnight. Cash flows are reported net for customer
loan and deposit transactions, overnight borrowings and federal funds purchased, Federal Home Loan
Bank advances, and repurchase agreements.
d) Securities
Debt and equity securities are classified in one of the following categories: (i) held to
maturity (management has a positive intent and ability to hold to maturity), which are reported at
amortized cost, (ii) available for sale (all other debt and marketable equity securities), which
are reported at fair value, with unrealized gains and losses reported net of tax, as accumulated
other comprehensive income, a separate component of stockholders equity, and (iii) restricted
which represents FHLB and FRB stock which are reported at cost.
Premiums and discounts on securities are amortized to expense and accreted to income over the
estimated life of the respective securities using the interest method. Gains and losses on the
sales of securities are recognized upon realization based on the specific identification method.
Declines in the fair value of securities below their cost that are other than temporary are
reflected as realized losses. In estimating other-than-temporary losses, management considers many
factors including: (1) the length of time and extent that 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) the whether the Company has the intent to sell the
security or more than likely than not will be required to sell the security before its anticipated
recovery. The assessment of whether an other than temporary decline exists may involve a high
degree of subjectivity and judgment and is based on the information available to management at a
point in time.
Page -36-
e) Loans and Loan Interest Income Recognition
Loans are stated at the principal amount outstanding, net deferred origination costs and fees. Loan
origination and commitment fees and certain direct and indirect costs incurred in connection with
loan originations are deferred and amortized to income over the life of the related loans as an
adjustment to yield. When a loan prepays, the remaining unamortized net deferred origination fees
or costs are recognized in the current year. Interest on loans is credited to income based on the
principal outstanding during the period. Loans that are 90 days past due are automatically placed
on nonaccrual and previously accrued interest is reversed and charged against interest income.
However, if the loan is in the process of collection and the Bank has reasonable assurance that the
loan will be fully collectible based upon individual loan evaluation assessing such factors as
collateral and collectibility, accrued interest will be recognized as earned. Loans are returned to
accrual status when all the principal and interest amounts contractually due are brought current
and future payments are reasonably assured.
A loan is considered impaired when, based on current information and events, it is probable that
the Bank will be unable to collect the scheduled payments of principal or interest when due
according to the contractual terms of the loan agreement. Factors considered by management in
determining impairment include payment status and the probability of collecting scheduled principal
and interest payments when due. Loans for which the terms have been modified due to the borrower
experiencing financial difficulties are considered troubled debt restructurings and are classified
as impaired. The impairment of a loan is measured at the value of expected future cash flows using
the loans effective interest rate, or at the loans observable market price or the fair value of
the collateral less costs to sell if the loan is collateral dependent. Generally, the Bank measures
impairment of such loans by reference to the fair value of the collateral less costs to sell. Loans
that experience minor payment delays and payment shortfall generally are not classified as
impaired.
f) Allowance for Loan Losses
The Bank monitors its entire loan portfolio on a regular basis, with consideration given to loan
growth, detailed analyses of classified loans, repayment patterns, current delinquencies, 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 allowance 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 allowance levels as they relate to the
entire loan portfolio at December 31, 2009, management believes the allowance for loan losses is
adequate.
A loan is considered a potential charge-off when it is in default of either principal or interest
for a period of 90, 120 or 180 days, depending upon the loan type, as of the end of the prior
month. In addition to delinquency criteria, other triggering events may include, but are not
limited to, notice of bankruptcy by the borrower or guarantor, death of the borrower, and
deficiency balance from the sale of collateral.
While management uses available information to recognize losses on loans, future additions to the
allowance may be necessary based on changes in conditions. In addition, various regulatory
agencies, as an integral part of the examination process, periodically review the Banks allowance
for loan losses. Such agencies may require the Bank to recognize additions to, or charge-offs
against, the allowance based on their judgment about information available to them at the time of
their examination.
g) Premises and Equipment
Buildings, furniture and fixtures and equipment are stated at cost less accumulated depreciation.
Buildings and related components are depreciated using the straight-line method using a useful life
of fifty years for buildings and a range of two to ten years for equipment, computer hardware and
software, and furniture and fixtures. Leasehold improvements are amortized over the lives of the
respective leases or the service lives of the improvements, whichever is shorter. Land is recorded
at cost.
Improvements and major repairs are capitalized, while the cost of ordinary maintenance, repairs and
minor improvements is charged to expense.
h) Other Real Estate Owned
Other real estate owned consists of real estate acquired by foreclosure or deed in lieu of
foreclosure and is recorded at the lower of the net loan balance at the foreclosure date plus
acquisition costs or fair value, less estimated costs to sell. Subsequent valuation adjustments are
made if fair value less estimated costs to sell the property falls below the carrying amount. At
December 31, 2009 and 2008, the Company carried no other real estate owned.
Page -37-
i) Loan Commitments and Related Financial Instruments
Financial instruments include off-balance sheet credit instruments, such as unused lines of credit,
commitments to make loans and commercial letters of credit, issued to meet customer-financing
needs. The face amount for these items represents the exposure to loss, before considering customer
collateral or ability to repay. Such financial instruments are recorded on the balance sheet when
they are funded.
j) Income Taxes
The Company follows the asset and liability approach, which requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities, computed using enacted
tax rates. Deferred tax assets are recognized if it is more likely than not that a future benefit
will be realized. It is managements position, as currently supported by the facts and
circumstances, that no valuation allowance is necessary against any of the Companys deferred tax
assets.
The Company adopted FASB ASC 740, Accounting for Uncertainty in Income Taxes (FIN 48), as of
January 1, 2007. A tax position is recognized as a benefit only if it is more likely than not
that the tax position would be sustained in a tax examination, with a tax examination being
presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than
50% likely of being realized on examination. For tax positions not meeting the more likely than
not test, no tax benefit is recorded. The adoption had no affect on the Companys financial
statements.
The Company recognizes interest and/or penalties related to income tax matters in income tax
expense. The Company did not have any amounts accrued for interest and penalties at December 31,
2009 or 2008.
k) Treasury Stock
Repurchases of common stock are recorded as treasury stock at cost. Treasury stock is reissued
using the first in, first out method.
l) Earnings Per Share
Basic earnings per common share is net income attributable to common shareholders divided by the
weighted average number of common shares outstanding during the period. Diluted earnings per share,
which reflects the potential dilution that could occur if outstanding stock options were exercised
and if junior subordinated debentures were converted into common shares, is computed by dividing
net income by the weighted average number of common shares and common stock equivalents.
m) Dividends
Cash available for distribution of dividends to shareholders of the Company is primarily derived
from dividends paid by the Bank to the Company. Due to regulatory restrictions, dividends from the
Bank to the Company at December 31, 2009, were limited to $10.3 million which represents the Banks
2009 retained net income and net retained earnings from the previous two years. During 2009, $4.5
million was declared and paid from the Bank 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.
n) Segment Reporting
While management monitors the revenue streams of the various products and services, the
identifiable segments are not material and operations are managed and financial performance is
evaluated on a Company-wide basis. Accordingly, all of the financial service operations are
considered by management to be aggregated in one reportable operating segment.
o) Stock Based Compensation Plans
FASB ASC No. 718 and 505, Accounting for Stock-Based Compensation requires companies to record
compensation cost for stock options and stock awards granted to employees in return for employee
service. The cost is measured at the fair value of the options and awards when granted, and this
cost is expensed over the employee service period, which is normally the vesting period of the
options and awards. The Company adopted FASB ASC No. 718 and 505 beginning January 1, 2006 applying
the modified prospective transition method. Under the modified prospective transition method, the
financial statements will not reflect restated amounts.
p) Comprehensive Income
Comprehensive income includes net income and all other changes in equity during a period, except
those resulting from investments by owners and distributions to owners. Other comprehensive income
includes revenues, expenses, gains and losses that under generally accepted accounting principles
are included in comprehensive income but excluded from net income. Comprehensive income and
accumulated other comprehensive income are reported net of deferred income taxes. Accumulated other
comprehensive income for the Company includes unrealized holding gains or losses on available for sale
securities, and the pension liability. FASB ASC 715-30 Compensation Retirement Benefits
Defined Benefit Plans Pension requires employers to recognize the overfunded or underfunded
status of a defined benefit postretirement plan as an asset or liability in its statement of
financial position and to recognize changes in that funded status in the year the changes occur
through comprehensive income. Other comprehensive income is net of reclassification adjustments for
realized gains (losses) on sales of available for sale securities.
Page -38-
q) Fair Value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other
assumptions, as more fully disclosed in Note 13. Fair value estimates involve uncertainties and
matters of significant judgment regarding interest rates, credit risk, prepayments, and other
factors, especially in the absence of broad markets for particular items. Changes in assumptions or
in market conditions could significantly affect the estimates.
r) New Accounting Standards
In June 2008, the FASB issued FASB ASC 260-10, Determining Whether Instruments Granted in
Share-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 and the impact is
disclosed in Note 11.
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
material 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. 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 13.
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
material 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. The adoption of this SAB did not have a material impact on the Companys financial
statements.
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.
Page -39-
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 (ASC 860). The new
accounting requirement amends previous guidance relating to the transfers of financial assets and
eliminates the concept of a qualifying special purpose entity. 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 material 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) (ASC 810), which improves financial reporting by enterprises
involved with variable interest entities. This Statement amends guidance for consolidation of
variable interest entities by replacing 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. This guidance 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 material impact to the Companys financial statements.
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 the 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 material impact to the Companys financial statements.
s) Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the FHLB system. 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. FHLB
stock is carried at cost and classified as a restricted security, and periodically evaluated for
impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as
income.
t) Reclassifications
Certain reclassifications have been made to prior year amounts, and the related discussion and
analysis, to conform to the current year presentation.
Page -40-
2. SECURITIES
A summary of the amortized cost, gross unrealized gains and losses and estimated fair value of
securities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
2009 |
|
|
2008 |
|
(In thousands) |
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
Available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GSE securities |
|
$ |
45,787 |
|
|
$ |
309 |
|
|
$ |
(157 |
) |
|
$ |
45,939 |
|
|
$ |
29,855 |
|
|
$ |
306 |
|
|
$ |
(27 |
) |
|
$ |
30,134 |
|
State and municipal obligations |
|
|
40,340 |
|
|
|
1,473 |
|
|
|
(8 |
) |
|
|
41,805 |
|
|
|
47,848 |
|
|
|
840 |
|
|
|
(100 |
) |
|
|
48,588 |
|
Residential mortgage-backed securities |
|
|
101,837 |
|
|
|
4,561 |
|
|
|
(61 |
) |
|
|
106,337 |
|
|
|
143,372 |
|
|
|
3,637 |
|
|
|
(54 |
) |
|
|
146,955 |
|
Residential collateralized mortgage
obligations |
|
|
109,442 |
|
|
|
2,722 |
|
|
|
(133 |
) |
|
|
112,031 |
|
|
|
83,953 |
|
|
|
1,094 |
|
|
|
(29 |
) |
|
|
85,018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale |
|
|
297,406 |
|
|
|
9,065 |
|
|
|
(359 |
) |
|
|
306,112 |
|
|
|
305,028 |
|
|
|
5,877 |
|
|
|
(210 |
) |
|
|
310,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GSE securities |
|
|
5,000 |
|
|
|
|
|
|
|
(73 |
) |
|
|
4,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal obligations |
|
|
54,104 |
|
|
|
400 |
|
|
|
(8 |
) |
|
|
54,496 |
|
|
|
24,153 |
|
|
|
68 |
|
|
|
(4 |
) |
|
|
24,217 |
|
Residential mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential collateralized mortgage
obligations |
|
|
18,320 |
|
|
|
589 |
|
|
|
(2 |
) |
|
|
18,907 |
|
|
|
19,291 |
|
|
|
382 |
|
|
|
|
|
|
|
19,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity |
|
|
77,424 |
|
|
|
989 |
|
|
|
(83 |
) |
|
|
78,330 |
|
|
|
43,444 |
|
|
|
450 |
|
|
|
(4 |
) |
|
|
43,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities |
|
$ |
374,830 |
|
|
$ |
10,054 |
|
|
$ |
(442 |
) |
|
$ |
384,442 |
|
|
$ |
348,472 |
|
|
$ |
6,327 |
|
|
$ |
(214 |
) |
|
$ |
354,585 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All of the residential mortgage-backed securities and residential collateralized mortgage
obligations were backed by U.S. Government Sponsored Entities as of December 31, 2009 and 2008.
Securities with unrealized losses at year-end 2009 and 2008, aggregated by category and length of
time that individual securities have been in a continuous unrealized loss position, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
2009 |
|
|
2008 |
|
(In thousands) |
|
Less than 12 months |
|
|
Greater than 12 months |
|
|
Less than 12 months |
|
|
Greater than 12 months |
|
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
Unrealized |
|
|
|
Value |
|
|
losses |
|
|
Value |
|
|
losses |
|
|
Fair Value |
|
|
losses |
|
|
Fair Value |
|
|
losses |
|
Available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GSE securities |
|
$ |
15,637 |
|
|
$ |
157 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
4,319 |
|
|
$ |
27 |
|
|
$ |
|
|
|
$ |
|
|
State and municipal obligations |
|
|
742 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
2,160 |
|
|
|
51 |
|
|
|
701 |
|
|
|
49 |
|
Residential mortgage-backed
securities |
|
|
9,879 |
|
|
|
61 |
|
|
|
|
|
|
|
|
|
|
|
6,924 |
|
|
|
35 |
|
|
|
1,529 |
|
|
|
19 |
|
Residential collateralized
mortgage obligations |
|
|
5,845 |
|
|
|
133 |
|
|
|
|
|
|
|
|
|
|
|
10,300 |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale |
|
$ |
32,103 |
|
|
$ |
359 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
23,703 |
|
|
$ |
142 |
|
|
$ |
2,230 |
|
|
$ |
68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GSE securities |
|
$ |
4,927 |
|
|
$ |
73 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
State and municipal obligations |
|
|
10,818 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
3,996 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
Residential mortgage-backed
securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential collateralized
mortgage obligations |
|
|
4,952 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity |
|
$ |
20,697 |
|
|
$ |
83 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,996 |
|
|
$ |
4 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on securities have not been recognized into income, as the losses on these
securities would be expected to dissipate as they approach their maturity dates. The Company
evaluates securities for other-than-temporary impairment periodically and with increased frequency
when economic or market concerns warrant such evaluation. Consideration is given to the length of
time and the extent to which the fair value has been less than cost, the financial condition and
near-term prospects of the issuer, whether the market decline was affected by macroeconomic
conditions, and whether the Company has the intent to sell the security or more than likely than
not will be required to sell the security before its anticipated recovery. In analyzing an issuers
financial condition, the Company may consider whether the securities are issued by the federal
government or its entities, whether downgrades by bond rating agencies have occurred, and the
issuers financial condition.
Page -41-
The following table sets forth the fair value, amortized cost and maturities of the securities at
December 31, 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within |
|
|
After One But |
|
|
After Five But |
|
|
After |
|
|
|
|
December 31, 2009 |
|
One Year |
|
|
Within Five Years |
|
|
Within Ten Years |
|
|
Ten Years |
|
|
Total |
|
(In thousands) |
|
|
|
|
|
Amortized |
|
|
|
|
|
|
Amortized |
|
|
|
|
|
|
Amortized |
|
|
|
|
|
|
Amortized |
|
|
|
|
|
|
Amortized |
|
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
|
Amount |
|
|
Amount |
|
|
Amount |
|
|
Amount |
|
|
Amount |
|
|
Amount |
|
|
Amount |
|
|
Amount |
|
|
Amount |
|
|
Amount |
|
Available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GSE securities |
|
$ |
2,892 |
|
|
$ |
2,791 |
|
|
$ |
34,662 |
|
|
$ |
34,747 |
|
|
$ |
8,385 |
|
|
$ |
8,249 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
45,939 |
|
|
$ |
45,787 |
|
State and municipal obligations |
|
|
5,972 |
|
|
|
5,898 |
|
|
|
19,712 |
|
|
|
18,896 |
|
|
|
16,121 |
|
|
|
15,546 |
|
|
|
|
|
|
|
|
|
|
|
41,805 |
|
|
|
40,340 |
|
Residential mortgage-backed
securities |
|
|
3,990 |
|
|
|
4,009 |
|
|
|
6,016 |
|
|
|
5,828 |
|
|
|
24,432 |
|
|
|
23,582 |
|
|
|
71,899 |
|
|
|
68,418 |
|
|
|
106,337 |
|
|
|
101,837 |
|
Residential collateralized
mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,444 |
|
|
|
9,378 |
|
|
|
102,587 |
|
|
|
100,064 |
|
|
|
112,031 |
|
|
|
109,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale |
|
|
12,854 |
|
|
|
12,698 |
|
|
|
60,390 |
|
|
|
59,471 |
|
|
|
58,382 |
|
|
|
56,755 |
|
|
|
174,486 |
|
|
|
168,482 |
|
|
|
306,112 |
|
|
|
297,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GSE securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,927 |
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
4,927 |
|
|
|
5,000 |
|
State and municipal obligations |
|
|
29,724 |
|
|
|
29,685 |
|
|
|
24,241 |
|
|
|
23,894 |
|
|
|
531 |
|
|
|
525 |
|
|
|
|
|
|
|
|
|
|
|
54,496 |
|
|
|
54,104 |
|
Residential mortgage-backed
securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential collateralized
mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,907 |
|
|
|
18,320 |
|
|
|
18,907 |
|
|
|
18,320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity |
|
|
29,724 |
|
|
|
29,685 |
|
|
|
24,241 |
|
|
|
23,894 |
|
|
|
5,458 |
|
|
|
5,525 |
|
|
|
18,907 |
|
|
|
18,320 |
|
|
|
78,330 |
|
|
|
77,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities |
|
$ |
42,578 |
|
|
$ |
42,383 |
|
|
$ |
84,631 |
|
|
$ |
83,365 |
|
|
$ |
63,840 |
|
|
$ |
62,280 |
|
|
$ |
193,393 |
|
|
$ |
186,802 |
|
|
$ |
384,442 |
|
|
$ |
374,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were $13.1 million of proceeds on sales of available for sale securities and gross gains
of approximately $529,000 realized, in 2009. No securities were sold at a loss in 2009. There were
no sales of available for securities in 2008. There were $8.5 million of proceeds on sales of
available for sale securities and gross losses of approximately $101,000 realized, in 2007. There
were no sales of held to maturity securities during 2009, 2008, and 2007.
Securities having a fair value of approximately $247.3 million and $276.0 million at December 31,
2009 and 2008, respectively, were pledged to secure public deposits and Federal Home Loan Bank and
Federal Reserve Bank overnight borrowings. The Company did not hold any trading securities during
the years ended December 31, 2009, 2008 and 2007.
There were no investment holdings of any one issuer that exceeded 10% of stockholders equity at
December 31, 2009 and 2008, other than U.S. Government and its Sponsored Entities.
3. LOANS
The following table sets forth the major classifications of loans:
|
|
|
|
|
|
|
|
|
December 31, |
|
2009 |
|
|
2008 |
|
(In thousands) |
|
|
|
|
|
|
|
|
Commercial real estate mortgage loans |
|
$ |
211,647 |
|
|
$ |
190,727 |
|
Residential real estate mortgage loans |
|
|
143,312 |
|
|
|
139,342 |
|
Commercial, financial, and agricultural loans |
|
|
76,867 |
|
|
|
72,093 |
|
Installment/consumer loans |
|
|
9,821 |
|
|
|
11,081 |
|
Real estate-construction loans |
|
|
5,906 |
|
|
|
16,174 |
|
|
|
|
|
|
|
|
Total loans |
|
|
447,553 |
|
|
|
429,417 |
|
Net deferred loan costs and fees |
|
|
485 |
|
|
|
266 |
|
|
|
|
|
|
|
|
|
|
|
448,038 |
|
|
|
429,683 |
|
Allowance for loan losses |
|
|
(6,045 |
) |
|
|
(3,953 |
) |
|
|
|
|
|
|
|
Net loans |
|
$ |
441,993 |
|
|
$ |
425,730 |
|
|
|
|
|
|
|
|
Page -42-
Lending Risk
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 primary lending area to be eastern Long
Island in Suffolk County, New York, and a substantial portion of the Banks loans are secured by
real estate in this area. Accordingly, the ultimate collectability of such a loan portfolio is
susceptible to changes in market and economic conditions in this region.
Allowance for Loan Losses
The following table sets forth changes in the allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses balance at beginning of period |
|
$ |
3,953 |
|
|
$ |
2,954 |
|
|
$ |
2,512 |
|
Charge-offs |
|
|
(2,093 |
) |
|
|
(1,070 |
) |
|
|
(226 |
) |
Recoveries |
|
|
35 |
|
|
|
69 |
|
|
|
68 |
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
|
(2,058 |
) |
|
|
(1,001 |
) |
|
|
(158 |
) |
Provision for loan losses charged to operations |
|
|
4,150 |
|
|
|
2,000 |
|
|
|
600 |
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
6,045 |
|
|
$ |
3,953 |
|
|
$ |
2,954 |
|
|
|
|
|
|
|
|
|
|
|
Past Due, Nonaccrual and Restructured Loans
As of December 31, 2009 and December 31, 2008, the Company had impaired loans as defined by FASB
ASC No. 310, Receivables of $9.1 million and $6.3 million, respectively. For a loan to be
considered impaired, management determines after review whether it is probable that the Bank will
not be able to collect all amounts due according to the contractual terms of the loan agreement.
Additionally management applies its normal loan review procedures in making these judgments.
Impaired loans include individually classified nonaccrual loans and troubled debt restructured
(TDR) loans. For impaired and TDR loans, the Bank evaluates the fair value of the loan in
accordance with FASB ASC 310-10-35-22. For loans that are collateral dependent, the fair value of
the collateral is used to determine the fair value of the loan. The fair value of the collateral is
determined based upon recent appraised values. For unsecured loans, the fair value is determined
based on the present value of expected future cash flows discounted at the loans effective
interest rate. The fair value of the loan is compared to the carrying value to determine if any
write-down or specific reserve is required. These methods of fair value measurement for impaired
and TDR loans are considered level 3 within the fair value hierarchy described in FASB ASC
820-10-50-5.
Nonaccrual loans increased $2.8 million to $5.9 million or 1.31% of total loans at December 31,
2009 from $3.1 million or 0.71% of total loans at December 31, 2008. Approximately $4.9 million of
the nonaccrual loans at December 31, 2009 represent troubled debt restructured loans where the
borrowers are complying with the modified terms of the loans and are currently making payments.
Additionally, the Bank has no commitment to lend additional funds to these debtors. In 2008,
nonaccrual loans increased $2.9 million to $3.1 million from $0.2 million in 2007. The increase in
non accrual loans at December 31, 2008 was due to a single loan of approximately $2.5 million.
In addition, the Company has one borrower with TDR loans of $3.2 million at December 31, 2009 that
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
$187,000 of interest income has been recognized. There were no loans considered to be trouble debt
restructurings at December 31, 2007.
There were no loans 90 days or more past due that were still accruing interest at December 31, 2009
and 2008.
Individually impaired loans were as follows:
|
|
|
|
|
|
|
|
|
December 31, |
|
2009 |
|
|
2008 |
|
(In thousands) |
|
|
|
|
|
|
|
|
Loans with no allocated allowance for loan loss |
|
$ |
9,022 |
|
|
$ |
6,297 |
|
Loans with allocated allowance for loan loss |
|
|
98 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
9,120 |
|
|
$ |
6,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of the allowance for loan losses allocated |
|
$ |
50 |
|
|
$ |
|
|
Page -43-
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Average of individually impaired loans during the year |
|
$ |
7,406 |
|
|
$ |
1,725 |
|
|
$ |
|
|
Interest income recognized during impairment |
|
|
135 |
|
|
|
52 |
|
|
|
|
|
Cash basis interest income recognized |
|
|
|
|
|
|
|
|
|
|
|
|
Related Party Loans
Certain directors, executive officers, and their related parties, including their immediate
families and companies in which they are principal owners, were loan customers of the Bank during
2009 and 2008.
The following table sets forth selected information about related party loans at December 31, 2009:
|
|
|
|
|
|
|
Balance |
|
|
|
Outstanding |
|
(In thousands) |
|
|
|
Balance at December 31, 2008 |
|
$ |
3,267 |
|
New loans |
|
|
|
|
Effective change in related parties |
|
|
|
|
Advances |
|
|
34 |
|
Repayments |
|
|
(827 |
) |
|
|
|
|
Balance at December 31, 2009 |
|
$ |
2,474 |
|
|
|
|
|
4. PREMISES AND EQUIPMENT
Premises and equipment consist of:
|
|
|
|
|
|
|
|
|
December 31, |
|
2009 |
|
|
2008 |
|
(In thousands) |
|
|
|
|
|
|
|
|
Land |
|
$ |
6,142 |
|
|
$ |
6,142 |
|
Construction in progress |
|
|
565 |
|
|
|
769 |
|
Building and improvements |
|
|
13,905 |
|
|
|
11,515 |
|
Furniture and fixtures |
|
|
9,602 |
|
|
|
8,372 |
|
Leasehold improvements |
|
|
3,319 |
|
|
|
2,410 |
|
|
|
|
|
|
|
|
|
|
$ |
33,533 |
|
|
$ |
29,208 |
|
|
|
|
|
|
|
|
|
|
Less: accumulated depreciation and amortization |
|
|
(12,227 |
) |
|
|
(10,831 |
) |
|
|
|
|
|
|
|
|
|
$ |
21,306 |
|
|
$ |
18,377 |
|
|
|
|
|
|
|
|
Additionally the Bank is in the process of building new branch locations and is committed to spend
$0.9 million related to the construction which is not reflected in the above figures.
5. DEPOSITS
Time Deposits
The following table sets forth the remaining maturities of the Banks time deposits at December 31,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than |
|
|
$100,000 or |
|
|
|
|
|
|
$100,000 |
|
|
Greater |
|
|
Total |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
$ |
60,701 |
|
|
$ |
66,930 |
|
|
$ |
127,631 |
|
2011 |
|
|
5,445 |
|
|
|
3,951 |
|
|
|
9,396 |
|
2012 |
|
|
658 |
|
|
|
701 |
|
|
|
1,359 |
|
2013 |
|
|
559 |
|
|
|
1,003 |
|
|
|
1,562 |
|
2014 |
|
|
122 |
|
|
|
816 |
|
|
|
938 |
|
2015 |
|
|
68 |
|
|
|
|
|
|
|
68 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
67,553 |
|
|
$ |
73,401 |
|
|
$ |
140,954 |
|
|
|
|
|
|
|
|
|
|
|
Page -44-
Deposits from principal officers, directors and their affiliates at December 31, 2009 and 2008
were approximately $6.0 million and $8.7 million, respectively. Public fund deposits at December
31, 2009 and 2008 were $161.6 million and $138.2 million, respectively.
6. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
At December 31, 2009 and 2008, securities sold under agreements to repurchase totaled $15.0 million
respectively and were secured by U.S. GSE, residential mortgage-backed securities and residential
collateralized mortgage obligations with a carrying amount of $22.2 million and $23.4 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.
Information concerning the securities sold under agreements to repurchase is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Average daily balance during the year |
|
$ |
15,000 |
|
|
$ |
13,183 |
|
|
$ |
753 |
|
Average interest rate during the year |
|
|
2.35 |
% |
|
|
2.39 |
% |
|
|
4.50 |
% |
Maximum month-end balance during the year |
|
$ |
15,000 |
|
|
$ |
15,000 |
|
|
$ |
25,000 |
|
Weighted average interest rate at year-end |
|
|
2.35 |
% |
|
|
2.39 |
% |
|
|
4.50 |
% |
7. FEDERAL HOME LOAN BANK ADVANCES
As of December 31, 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 residential 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.
8. JUNIOR SUBORDINATED DEBENTURES
In December 2009, the Company completed the private placement of $16.0 million in aggregate
liquidation amount of 8.50% cumulative convertible trust preferred securities (the TPS), through
its wholly-owned subsidiary, Bridge Statutory Capital Trust II. The TPS have a liquidation amount
of $1,000 per security and are convertible into our common stock, at an effective conversion price
of $31 per share. The TPS mature in 30 years but are callable by the Company at par any time after
September 30, 2014.
The Company issued $16.0 million of junior subordinated debentures (the Debentures) to the trust
in exchange for ownership of all of the common security of the trust and the proceeds of the
preferred securities sold by the trust. In accordance with current accounting guidance, the trust
is not consolidated in the Companys financial statements, but rather the Debentures are shown as a
liability. The Debentures bear interest at a fixed rate equal to 8.50% and mature on December 31,
2039. Consistent with regulatory requirements, the interest payments may be deferred for up to 5
years, and are cumulative. The Debentures have the same prepayment provisions as the TPS.
The Debentures may be included in Tier I capital (with certain limitations applicable) under
current regulatory guidelines and interpretations.
9. INCOME TAXES
The components of income tax expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
4,467 |
|
|
$ |
3,263 |
|
|
$ |
3,609 |
|
State |
|
|
530 |
|
|
|
584 |
|
|
|
691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,997 |
|
|
|
3,847 |
|
|
|
4,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
(788 |
) |
|
|
399 |
|
|
|
(194 |
) |
State |
|
|
(160 |
) |
|
|
42 |
|
|
|
(63 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(948 |
) |
|
|
441 |
|
|
|
(257 |
) |
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
$ |
4,049 |
|
|
$ |
4,288 |
|
|
$ |
4,043 |
|
|
|
|
|
|
|
|
|
|
|
Page -45-
The reconciliation of the expected Federal income tax expense at the statutory tax rate to the
actual provision follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
(Dollars in thousands) |
|
|
|
|
|
Percentage |
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
of Pre-tax |
|
|
|
|
|
|
of Pre-tax |
|
|
|
|
|
|
of Pre-tax |
|
|
|
Amount |
|
|
Earnings |
|
|
Amount |
|
|
Earnings |
|
|
Amount |
|
|
Earnings |
|
Federal income tax
expense computed by
applying the statutory
rate to income before
income taxes |
|
$ |
4,362 |
|
|
|
34 |
% |
|
$ |
4,442 |
|
|
|
34 |
% |
|
$ |
4,195 |
|
|
|
34 |
% |
Tax exempt interest |
|
|
(682 |
) |
|
|
(6 |
) |
|
|
(588 |
) |
|
|
(4 |
) |
|
|
(575 |
) |
|
|
(4 |
) |
State taxes, net of
federal income tax
benefit |
|
|
302 |
|
|
|
3 |
|
|
|
413 |
|
|
|
3 |
|
|
|
415 |
|
|
|
3 |
|
Other |
|
|
67 |
|
|
|
1 |
|
|
|
21 |
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
$ |
4,049 |
|
|
|
32 |
% |
|
$ |
4,288 |
|
|
|
33 |
% |
|
$ |
4,043 |
|
|
|
33 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax assets and liabilities are comprised of the following:
|
|
|
|
|
|
|
|
|
December 31, |
|
2009 |
|
|
2008 |
|
(In thousands) |
|
|
|
|
|
|
|
|
Deferred income tax assets: |
|
|
|
|
|
|
|
|
Allowance for loan losses |
|
$ |
2,567 |
|
|
$ |
1,726 |
|
Other |
|
|
749 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3,316 |
|
|
|
1,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities: |
|
|
|
|
|
|
|
|
Pension and SERP expense |
|
|
(1,167 |
) |
|
|
(853 |
) |
Other |
|
|
(518 |
) |
|
|
(507 |
) |
Depreciation |
|
|
(580 |
) |
|
|
(263 |
) |
|
|
|
|
|
|
|
Total |
|
|
(2,265 |
) |
|
|
(1,623 |
) |
|
|
|
|
|
|
|
|
|
Total before other comprehensive income |
|
|
1,051 |
|
|
|
103 |
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities: |
|
|
|
|
|
|
|
|
Net unrealized gains on securities |
|
|
(3,457 |
) |
|
|
(2,250 |
) |
Deferred income tax assets: |
|
|
|
|
|
|
|
|
Net change in pension liability |
|
|
1,166 |
|
|
|
1,060 |
|
|
|
|
|
|
|
|
Net deferred income tax liability |
|
$ |
(1,240 |
) |
|
$ |
(1,087 |
) |
|
|
|
|
|
|
|
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax
of the State of New York. The Company is no longer subject to examination by taxing authorities for
years before 2005. The Company does not expect the total amount of unrecognized income tax benefits
to significantly increase in the next twelve months.
10. EMPLOYEE BENEFITS
a) Pension Plan and Supplemental Executive Retirement Plan
The Bank maintains a noncontributory pension plan through the New York State Bankers Association
Retirement System covering all eligible employees. Beginning in 2008, the Bank uses a December
31st measurement date for this plan in accordance with FASB ASC 715-30 Compensation
Retirement Benefits Defined Benefit Plans Pension. Prior to 2008, the Bank used a September
30th measurement date. In order to properly reflect the change in measurement dates the
Bank recorded a net transition adjustment of $35,000 in 2008.
During 2001, the Bank adopted the Bridgehampton National Bank Supplemental Executive Retirement
Plan (SERP). The 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.
During 2008, the assets of the SERP were 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.
Page -46-
Information about changes in obligations and plan assets of the defined benefit pension plan and
the defined benefit plan component of the SERP are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
SERP Benefits |
|
At December 31, |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in benefit obligation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year |
|
$ |
5,357 |
|
|
$ |
4,716 |
|
|
$ |
1,481 |
|
|
$ |
1,054 |
|
Service cost |
|
|
481 |
|
|
|
553 |
|
|
|
162 |
|
|
|
71 |
|
Interest cost |
|
|
318 |
|
|
|
348 |
|
|
|
59 |
|
|
|
48 |
|
Benefits paid and expected expenses |
|
|
(225 |
) |
|
|
(270 |
) |
|
|
|
|
|
|
|
|
Assumption changes and other |
|
|
1,536 |
|
|
|
10 |
|
|
|
(211 |
) |
|
|
308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year |
|
$ |
7,467 |
|
|
$ |
5,357 |
|
|
$ |
1,491 |
|
|
$ |
1,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets at beginning of year |
|
$ |
6,572 |
|
|
$ |
6,574 |
|
|
$ |
|
|
|
$ |
|
|
Actual return on plan assets |
|
|
1,428 |
|
|
|
(1,736 |
) |
|
|
|
|
|
|
|
|
Employer contribution |
|
|
1,400 |
|
|
|
2,000 |
|
|
|
|
|
|
|
|
|
Benefits paid and actual expenses |
|
|
(217 |
) |
|
|
(266 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets at end of year |
|
$ |
9,183 |
|
|
$ |
6,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status (plan assets less benefit
obligations) |
|
$ |
1,716 |
|
|
$ |
1,215 |
|
|
$ |
(1,491 |
) |
|
$ |
(1,481 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive income at December 31, consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
SERP Benefits |
|
At December 31, |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss |
|
$ |
2,458 |
|
|
$ |
1,930 |
|
|
$ |
87 |
|
|
$ |
312 |
|
Prior service cost |
|
|
99 |
|
|
|
108 |
|
|
|
|
|
|
|
|
|
Transition obligation |
|
|
|
|
|
|
|
|
|
|
225 |
|
|
|
252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized |
|
$ |
2,557 |
|
|
$ |
2,038 |
|
|
$ |
312 |
|
|
$ |
564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accumulated benefit obligation was $5.8 million and $1.3 million for the pension plan and the
SERP, respectively, as of December 31, 2009. As of December 31, 2008, the accumulated benefit
obligation was $4.6 million and $1.2 million for the pension plan and the SERP, respectively.
Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
SERP Benefits |
|
|
|
|
|
|
|
|
|
|
|
Transition |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2007 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of net periodic benefit cost and
other amounts recognized in Other Comprehensive
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
481 |
|
|
$ |
442 |
|
|
$ |
111 |
|
|
$ |
451 |
|
|
$ |
162 |
|
|
$ |
71 |
|
|
$ |
61 |
|
Interest cost |
|
|
318 |
|
|
|
279 |
|
|
|
70 |
|
|
|
280 |
|
|
|
59 |
|
|
|
47 |
|
|
|
52 |
|
Expected return on plan assets |
|
|
(516 |
) |
|
|
(495 |
) |
|
|
(124 |
) |
|
|
(395 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net loss |
|
|
88 |
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
Amortization of unrecognized prior service cost |
|
|
9 |
|
|
|
9 |
|
|
|
2 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of unrecognized transition (asset)
obligation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28 |
|
|
|
28 |
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
380 |
|
|
$ |
235 |
|
|
$ |
59 |
|
|
$ |
359 |
|
|
$ |
262 |
|
|
$ |
146 |
|
|
$ |
141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss (gain) |
|
$ |
616 |
|
|
|
2,361 |
|
|
|
|
|
|
$ |
(1,141 |
) |
|
$ |
(211 |
) |
|
$ |
308 |
|
|
|
4 |
|
Prior service cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transition obligation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(64 |
) |
Amortization of net gain |
|
|
(88 |
) |
|
|
|
|
|
|
|
|
|
|
(14 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
(9 |
) |
|
|
(11 |
) |
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of transition obligation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28 |
) |
|
|
(28 |
) |
|
|
(28 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
519 |
|
|
|
2,350 |
|
|
|
|
|
|
|
(1,164 |
) |
|
|
(252 |
) |
|
|
280 |
|
|
|
(88 |
) |
Deferred taxes |
|
|
(206 |
) |
|
|
(933 |
) |
|
|
(24 |
) |
|
|
462 |
|
|
|
100 |
|
|
|
(111 |
) |
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in other comprehensive income |
|
|
313 |
|
|
|
1,417 |
|
|
|
|
|
|
|
(702 |
) |
|
|
(152 |
) |
|
|
169 |
|
|
|
(53 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in net periodic benefit cost
and other comprehensive income |
|
$ |
693 |
|
|
$ |
1,711 |
|
|
$ |
35 |
|
|
$ |
(343 |
) |
|
$ |
110 |
|
|
$ |
315 |
|
|
$ |
88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page -47-
The estimated net loss, transition obligation and prior service costs for the defined benefit
pension plan that will be amortized from accumulated other comprehensive income into net periodic
benefit cost over the next fiscal year are $104,000, $0 and $9,000, respectively. The estimated net
gain and unrecognized net transition obligation for the SERP that will be amortized from
accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is
$0 and $28,000, respectively.
Expected Long-Term Rate-of-Return
The expected long-term rate-of-return on plan assets reflects long-term earnings expectations on
existing plan assets and those contributions expected to be received during the current plan year.
In estimating that rate, appropriate consideration was given to historical returns earned by plan
assets in the fund and the rates of return expected to be available for reinvestment. Average rates
of return over the past 1, 3, 5 and 10-year periods were determined and subsequently adjusted to
reflect current capital market assumptions and changes in investment allocations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
SERP Benefits |
|
At December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Weighted Average Assumptions Used
to Determine Benefit Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
5.89 |
% |
|
|
6.00 |
% |
|
|
6.00 |
% |
|
|
4.31 |
% |
|
|
4.00 |
% |
|
|
4.52 |
% |
Rate of compensation increase |
|
|
4.00 |
|
|
|
3.50 |
|
|
|
4.00 |
|
|
|
5.00 |
|
|
|
5.00 |
|
|
|
5.00 |
|
Weighted Average Assumptions Used
to Determine Net Periodic Benefit
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
6.00 |
% |
|
|
6.00 |
% |
|
|
5.75 |
% |
|
|
4.00 |
% |
|
|
4.52 |
% |
|
|
4.69 |
% |
Rate of compensation increase |
|
|
4.00 |
|
|
|
4.00 |
|
|
|
4.50 |
|
|
|
5.00 |
|
|
|
5.00 |
|
|
|
5.00 |
|
Expected long-term rate of return |
|
|
7.50 |
|
|
|
7.75 |
|
|
|
8.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Assets
The New York State Bankers Retirement System (the System) was established in 1938 to provide for
the payment of benefits to employees of participating banks. The System is overseen by a Board of
Trustees (Trustees), who meet quarterly, and set the investment policy guidelines.
The Systems overall investment strategy is to achieve a mix of approximately 97% of investments
for long-term growth and 3% for near-term benefit payments with a wide diversification of asset
types, fund strategies, and fund managers.
Cash equivalents consist primarily of short term investment funds.
Equity securities primarily include investments in common stock and depository receipts.
Fixed
income securities include corporate bonds, government issues and mortgage-backed securities.
Other financial instruments primarily include rights and warrants.
The weighted average expected long-term rate-of-return is estimated based on current trends in
Systems assets as well as projected future rates of return on those assets and reasonable
actuarial assumptions based on the guidance provided by ASOP No. 27 for long term inflation, and
the real and nominal rate of investment return for a specific mix of asset classes. The following
assumptions were used in determining the long-term rate-of-return:
|
|
|
Equity securities
|
|
Dividend discount model, the smoothed earnings yield model
and the equity risk premium model. |
|
|
|
Fixed income securities
|
|
Current yield-to-maturity and forecasts of future yields |
|
|
|
Other financial instruments
|
|
Comparison of the specific investments risk to that of fixed
income and equity instruments and using judgment |
The long term rate of return considers historical returns. Adjustments were made to historical
returns in order to reflect expectations of future returns. These adjustments were due to factor
forecasts by economists and long-term U.S. Treasury yields to forecast long-term inflation. In
addition forecasts by economists and others for long-term GDP growth were factored into the
development of assumptions for earnings growth and per capital income.
Page -48-
Effective March 2009, the System revised its investment guidelines. The System currently prohibits
its investment managers from purchasing the following investments:
|
|
|
Equity securities
|
|
Securities in emerging market countries as defined by the
Morgan Stanley Emerging Markets Index, Short sales,
Unregistered securities and
Margin purchases |
|
|
|
Fixed income securities
|
|
Securities of BBB quality or less,
CMOs that have an inverse floating rate and whose payments
dont include principal or which arent certified and
guaranteed by the U.S. Government,
ABSs that arent issued or guaranteed by the U.S., or its
agencies or its instrumentalities,
Non-agency residential subprime or ALT-A MBSs and
Structured Notes |
|
|
|
Other financial instruments
|
|
Unhedged currency exposure in countries not defined as high income economies by the World Bank |
All other investments not prohibited by the System are permitted. At December 31, 2009 the System
holds certain investments which are no longer deemed acceptable to acquire. These positions will be
liquidated when the investment managers deem that such liquidation is in the best interest of the
System.
The target allocations for System assets are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected |
|
|
|
Target |
|
|
Percentage of Plan Assets |
|
|
Long-term |
|
|
|
Allocation |
|
|
at December 31, |
|
|
Rate of |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
Return |
|
Asset Category |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
|
0-20 |
% |
|
|
13.6 |
% |
|
|
10.0 |
% |
|
|
|
|
Equity securities |
|
|
40 - 60 |
% |
|
|
45.9 |
% |
|
|
48.0 |
% |
|
|
4.6 |
% |
Fixed income securities |
|
|
40 - 60 |
% |
|
|
40.5 |
% |
|
|
41.4 |
% |
|
|
2.1 |
% |
Other financial
instruments |
|
|
0-5 |
% |
|
|
|
|
|
|
0.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
Fair value is defined under ASC 820 as the exchange price that would be received for an asset
or paid to transfer a liability (an 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. Valuation techniques used to measure fair value under ASC 820 must maximize the use of
observable inputs and minimize the use of unobservable inputs. The standard describes a fair value
hierarchy based on three levels of inputs, of which the first two are considered observable and the
last unobservable, that may be used to measure fair value which are the following:
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.
In instances in which the inputs used to measure fair value fall into different levels of the fair
value hierarchy, the fair value measurement has been determined based on the lowest level input
that is significant to the fair value measurement in its entirety. The Systems assessment of the
significance of a particular item to the fair value measurement in its entirety requires judgment,
including the consideration of inputs specific to the asset.
Page -49-
In accordance with FASB ASC 715-20, the following table represents the Plans fair value hierarchy
for its financial assets measured at fair value on a recurring basis as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at |
|
|
|
|
|
|
|
December 31, 2009 Using: |
|
|
|
|
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Quoted Prices In |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
Active Markets for |
|
|
Observable |
|
|
Unobservable |
|
|
|
Carrying |
|
|
Identical Assets |
|
|
Inputs |
|
|
Inputs |
|
|
|
Value |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term investment funds |
|
$ |
27,239 |
|
|
|
|
|
|
$ |
27,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
89,928 |
|
|
$ |
89,928 |
|
|
|
|
|
|
|
|
|
Depository receipts |
|
|
1,258 |
|
|
|
1,258 |
|
|
|
|
|
|
|
|
|
Other equities |
|
|
997 |
|
|
|
997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equities |
|
|
92,183 |
|
|
|
92,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
|
19,163 |
|
|
|
|
|
|
|
19,163 |
|
|
|
|
|
Government issues |
|
|
33,475 |
|
|
|
|
|
|
|
33,475 |
|
|
|
|
|
Collateralized mortgage obligations |
|
|
4,869 |
|
|
|
|
|
|
|
4,869 |
|
|
|
|
|
Mortgage-backed securities |
|
|
22,888 |
|
|
|
|
|
|
|
22,888 |
|
|
|
|
|
Other fixed income securities |
|
|
1,133 |
|
|
|
|
|
|
|
1,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed income securities |
|
|
81,528 |
|
|
|
|
|
|
|
81,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total System Plan Assets |
|
$ |
200,950 |
|
|
$ |
92,183 |
|
|
$ |
108,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below presents a reconciliation of all plan assets measured at fair value using
significant unobservable inputs (Level 3) for period ended December 31, 2009:
|
|
|
|
|
|
|
Plan |
|
|
|
Assets |
|
(In thousands) |
|
|
|
Balance of recurring Level 3 assets at January 1, 2009 |
|
$ |
790 |
|
Change in unrealized appreciation |
|
|
321 |
|
Realized losses |
|
|
(348 |
) |
Sale proceeds |
|
|
(763 |
) |
|
|
|
|
Balance of recurring Level 3 assets at December 31, 2009 |
|
$ |
|
|
|
|
|
|
Contributions
The Company expects to contribute $1.1 million to the pension plan during 2010.
Estimated Future Payments
The following benefit payments, which reflect expected future service, are expected to be paid as
follows:
|
|
|
|
|
Year |
|
Pension and SERP Payments |
|
(In thousands) |
|
|
|
|
2010 |
|
$ |
323 |
|
2011 |
|
|
337 |
|
2012 |
|
|
362 |
|
2013 |
|
|
378 |
|
2014 |
|
|
395 |
|
Following 5 years |
|
|
2,603 |
|
Page -50-
b) 401(k) Plan
A savings plan is maintained under Section 401(k) of the Internal Revenue Code and covers
substantially all current employees. Newly hired employees can elect to participate in the savings
plan after completing six months of service. Under the provisions of the savings plan, employee
contributions are partially matched by the Bank with cash contributions. Participants can invest
their account balances into several investment alternatives. The savings plan does not allow for
investment in the Companys common stock. During the years ended December 31, 2009, 2008 and 2007
the Bank made cash contributions of $181,000, $189,000, and $140,000, respectively.
c) Equity Incentive Plan
During 2006, the Bridge Bancorp, Inc. Equity Incentive Plan (the Plan) was approved by the
shareholders to provide for the grant of options to purchase shares of common stock of the Company
and for the award of shares of common stock. The plan supersedes the Bridge Bancorp, Inc. Equity
Incentive Plan that was approved in 1996 and amended in 2001. Of the total 620,000 shares of common
stock approved for issuance under the Plan, 418,995 shares remain available for issuance at
December 31, 2009.
The Compensation Committee of the Board of Directors determines options awarded under the Plan. The
Company accounts for this Plan under FASB ASC No. 718 and 505.
The fair value of each option granted is estimated on the date of the grant using the Black-Scholes
option-pricing model. No new grants of stock options were awarded during the years ended December
31, 2009, 2008, and 2007.
A summary of the status of the Companys stock options as of December 31, 2009 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 |
|
|
(21,800 |
) |
|
$ |
17.03 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2009 |
|
|
59,405 |
|
|
$ |
24.74 |
|
|
5.98 years |
|
$ |
35,422 |
|
Vested or expected to vest |
|
|
55,850 |
|
|
$ |
24.71 |
|
|
5.92 years |
|
$ |
35,422 |
|
Exercisable, December 31, 2009 |
|
|
49,121 |
|
|
$ |
24.61 |
|
|
5.88 years |
|
$ |
35,422 |
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
|
|
|
|
of |
|
|
Exercise |
|
Range of Exercise Prices |
|
Options |
|
|
Price |
|
|
|
|
600 |
|
|
$ |
12.53 |
|
|
|
|
3,300 |
|
|
$ |
15.47 |
|
|
|
|
5,659 |
|
|
$ |
24.00 |
|
|
|
|
44,443 |
|
|
$ |
25.25 |
|
|
|
|
3,000 |
|
|
$ |
26.55 |
|
|
|
|
2,403 |
|
|
$ |
30.60 |
|
|
|
|
|
|
|
|
|
|
|
|
59,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value for options outstanding and exercisable as of December 31, 2009 is
the same because the options that are unvested have no intrinsic value.
Page -51-
A summary of activity related to the stock options follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
(In thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
Intrinsic value of options exercised |
|
$ |
29 |
|
|
$ |
75 |
|
|
$ |
130 |
|
Cash received from options exercised |
|
|
34 |
|
|
|
|
|
|
|
124 |
|
Tax benefit realized from option exercises |
|
|
13 |
|
|
|
19 |
|
|
|
25 |
|
Weighted average fair value of options granted |
|
|
|
|
|
|
|
|
|
|
|
|
The Company did not grant any stock options in 2009, 2008 and 2007. Compensation expense
attributable to options was $42,000, $39,000 and $44,000 for the years ended December 31, 2009,
2008, and 2007, respectively. As of December 31, 2009, there was $42,000 of total unrecognized
compensation costs related to nonvested stock options granted under the Plan. The cost is expected
to be recognized during 2010.
A summary of the status of the Companys shares of unvested restricted stock for the year ended
December 31, 2009 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average Grant- |
|
|
|
|
|
|
|
Date |
|
|
|
Shares |
|
|
Fair Value |
|
Unvested, December 31, 2008 |
|
|
95,570 |
|
|
$ |
21.55 |
|
Granted |
|
|
58,792 |
|
|
$ |
21.13 |
|
Vested |
|
|
(5,480 |
) |
|
$ |
23.58 |
|
Forfeited |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
Unvested, December 31, 2009 |
|
|
148,882 |
|
|
$ |
21.31 |
|
|
|
|
|
|
|
|
The Companys Equity Incentive Plan also provides for issuance of restricted stock awards. During
the year ended December 31, 2009, the Company granted restricted stock awards of 58,792 shares. Of
the 58,792 shares granted, 33,892 shares vest over five years with a third vesting after years
three, four and five. The remaining 24,900 vest ratably over five years beginning in December 2009.
During the year ended December 31, 2008, the Company granted restricted stock awards of 78,970
shares. These awards vest over five years with a third vesting after years three, four and five.
During the year ended December 31, 2007, the Company granted restricted stock awards of 22,000
shares. These awards vest over five years with a third vesting after years three, four and five.
Such shares are subject to restrictions based on continued service as employees of the Company or
employees of subsidiaries of the Company. Compensation expense attributable to these awards was
approximately $656,000, $393,000 and $200,000 for the years ended December 31, 2009, 2008, and
2007, respectively. The total fair value of shares vested during the years ended December 31, 2009,
2008 and 2007 was $125,000, $286,000 and $50,000, respectively. As of December 31, 2009, there was
$2,388,000 of total unrecognized compensation costs related to nonvested restricted stock awards
granted under the Plan. The cost is expected to be recognized over a weighted-average period of 3.7
years.
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 $52,000 for the year ended December 31, 2009.
11. EARNINGS PER SHARE
FASB ASC 260-10-45 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). The restricted stock awards granted by the
Company contain nonforfeitable rights to dividends and therefore are considered participating
securities. The two-class method for calculating basic EPS excludes dividends paid to
participating securities and any undistributed earnings attributable to participating securities.
Prior period EPS figures have been presented in accordance with this accounting guidance.
Page -52-
The following is a reconciliation of earnings per share for December 31, 2009, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
(In thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
8,763 |
|
|
$ |
8,750 |
|
|
$ |
8,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Equivalent Shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding |
|
|
6,097 |
|
|
|
6,076 |
|
|
|
6,072 |
|
Weighted Average Common Equivalent Shares Outstanding |
|
|
35 |
|
|
|
23 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common and Equivalent Shares Outstanding |
|
|
6,132 |
|
|
|
6,099 |
|
|
|
6,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per Share |
|
$ |
1.44 |
|
|
$ |
1.44 |
|
|
$ |
1.37 |
|
Diluted Earnings per Share |
|
$ |
1.43 |
|
|
$ |
1.43 |
|
|
$ |
1.36 |
|
There were 55,505 options outstanding at December 31, 2009 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. The $16.0
million in convertible trust preferred securities outstanding at December 31, 2009, were not
included in the computation of diluted earnings per share because the securities conversion price
was greater than the average market price of common stock and were, therefore, antidilutive.
12. COMMITMENTS AND CONTINGENCIES AND OTHER MATTERS
In the normal course of business, there are various outstanding commitments and contingent
liabilities, such as claims and legal actions, minimum annual rental payments under non-cancelable
operating leases, guarantees and commitments to extend credit, which are not reflected in the
accompanying consolidated financial statements. No material losses are anticipated as a result of
these commitments and contingencies.
a) Leases
At December 31, 2009, the Company was obligated to make minimum annual rental payments under
non-cancelable operating leases for its premises. Projected minimum rentals under existing leases
are as follows:
|
|
|
|
|
December 31, 2009 |
|
|
|
|
(In thousands) |
|
|
|
|
2010 |
|
$ |
827 |
|
2011 |
|
|
533 |
|
2012 |
|
|
443 |
|
2013 |
|
|
458 |
|
2014 |
|
|
467 |
|
Thereafter |
|
|
2,065 |
|
|
|
|
|
Total minimum rentals |
|
$ |
4,793 |
|
|
|
|
|
Certain leases contain rent escalation clauses which are reflected in the figures listed above. In
addition, certain leases provide for additional payments based upon real estate taxes, interest and
other charges. Certain leases contain renewal options which are not reflected. Rental expenses
under these leases for the years ended December 31, 2009, 2008 and 2007 approximated $883,000,
$659,000 and $584,000, respectively.
b) Loan commitments
Some financial instruments, such as loan commitments, credit lines, letters of credit, and
overdraft protection, are issued to meet customer financing needs. These are agreements to provide
credit or to support the credit of others, as long as conditions established in the contract are
met, and usually have expiration dates. Commitments may expire without being used.
Off-balance-sheet risk of credit loss exists up to the face amount of these instruments, although
material losses are not anticipated. The same credit policies are used to make such commitments as
are used for loans, often including obtaining collateral at exercise of the commitment.
Page -53-
The following represents commitments outstanding:
|
|
|
|
|
|
|
|
|
December 31, |
|
2009 |
|
|
2008 |
|
(In thousands) |
|
|
|
|
|
|
|
|
Standby letters of credit |
|
$ |
1,150 |
|
|
$ |
1,781 |
|
Loan commitments outstanding (1) |
|
|
25,380 |
|
|
|
27,752 |
|
Unused lines of credit |
|
|
103,417 |
|
|
|
103,237 |
|
|
|
|
|
|
|
|
Total commitments outstanding |
|
$ |
129,947 |
|
|
$ |
132,770 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Of the $25.4 million of loan commitments outstanding at December 31, 2009, $7.2 million
are fixed rate commitments and $18.2 million are variable rate commitments |
c) Other
During 2009, the Bank was required to maintain certain cash balances with the Federal Reserve Bank
of New York for reserve and clearing requirements. The required cash balance at December 31, 2009
was $1.0 million. During 2009, the Federal Reserve Bank of New York offered higher interest rates
on overnight deposits compared to our correspondent banks. Therefore the Bank invested overnight
with the Federal Reserve Bank of New York and the average balance maintained during 2009 was $4.4
million.
During 2009, 2008 and 2007, the Bank maintained an overnight line of credit with the Federal Home
Loan Bank of New York (FHLB). The Bank has the ability to borrow against its unencumbered
residential and commercial mortgages and investment securities owned by the Bank. At December 31,
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. As of December 31, 2009, the Bank did not have
any such borrowings outstanding.
In March 2001, the Bank entered into a Master Repurchase Agreement with the FHLB whereby the FHLB
agrees to purchase securities from the Bank, upon the Banks request, with the simultaneous
agreement to sell the same or similar securities back to the Bank at a future date. Securities are
limited, under the agreement, to government securities, securities issued, guaranteed or
collateralized by any agency or instrumentality of the U.S. Government or any government sponsored
enterprise, and non-agency AA and AAA rated mortgage-backed securities. At December 31, 2009, there
was $81.2 million available for transactions under this agreement.
The Bank had $15.0 million of securities sold under agreements to repurchase outstanding as of
December 31, 2009 (See Note 6).
13. 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 -54-
Assets and Liabilities Measured on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at |
|
|
|
|
|
|
|
December 31, 2009 Using: |
|
|
|
|
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Quoted Prices In |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
Active Markets for |
|
|
Observable |
|
|
Unobservable |
|
|
|
Carrying |
|
|
Identical Assets |
|
|
Inputs |
|
|
Inputs |
|
|
|
Value |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GSE securities |
|
$ |
45,939 |
|
|
|
|
|
|
$ |
45,939 |
|
|
|
|
|
State and municipal obligations |
|
|
41,805 |
|
|
|
|
|
|
|
41,805 |
|
|
|
|
|
Residential mortgage-backed securities |
|
|
106,337 |
|
|
|
|
|
|
|
106,337 |
|
|
|
|
|
Residential collateralized mortgage
obligations |
|
|
112,031 |
|
|
|
|
|
|
|
112,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale |
|
$ |
306,112 |
|
|
|
|
|
|
$ |
306,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at |
|
|
|
|
|
|
|
December 31, 2008 Using: |
|
|
|
|
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Quoted Prices In |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
Active Markets for |
|
|
Observable |
|
|
Unobservable |
|
|
|
Carrying |
|
|
Identical Assets |
|
|
Inputs |
|
|
Inputs |
|
|
|
Value |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GSE securities |
|
$ |
30,134 |
|
|
|
|
|
|
$ |
30,134 |
|
|
|
|
|
State and municipal obligations |
|
|
48,588 |
|
|
|
|
|
|
|
48,588 |
|
|
|
|
|
Residential mortgage-backed securities |
|
|
146,955 |
|
|
|
|
|
|
|
146,955 |
|
|
|
|
|
Residential collateralized mortgage
obligations |
|
|
85,018 |
|
|
|
|
|
|
|
85,018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
Page -55-
Assets measured at fair value on a non-recurring basis are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at |
|
|
|
|
|
|
|
December 31, 2009 Using: |
|
|
|
|
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Quoted Prices In |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
Active Markets for |
|
|
Observable |
|
|
Unobservable |
|
|
|
Carrying |
|
|
Identical Assets |
|
|
Inputs |
|
|
Inputs |
|
|
|
Value |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans |
|
$ |
48 |
|
|
|
|
|
|
|
|
|
|
$ |
48 |
|
For impaired and TDR loans, the Company evaluates the fair value of the loan in accordance
with FASB ASC 310-10-35-22. For loans that are collateral dependent, the fair value of the
collateral is used to determine the fair value of the loan. The fair value of the collateral is
determined based upon recent appraised values. For unsecured loans, the fair value is determined
based on the present value of expected future cash flows discounted at the loans effective
interest rate. The fair value of the loan is compared to the carrying value to determine if any
write-down or specific reserve is required. These methods of fair value measurement for impaired
and TDR loans are considered level 3 within the fair value hierarchy described in FASB ASC
820-10-50-5. Impaired loans with allocated allowance for loan losses at December 31, 2009, had a
carrying amount of $48,000, which is made up of the outstanding balance of $98,000, net of a
valuation allowance of $50,000. This resulted in an additional provision for loan losses of $50,000
that is included in the amount reported on the income statement. There were no impaired loans with
allocated allowance for loan losses at December 31, 2008.
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.
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: The estimated fair value of borrowed funds are based on
discounted cash flow calculations that use a replacement cost
of funds approach to establishing discount rates for funding maturities.
Junior Subordinated Debentures: The estimated fair value is based on estimates using market data
for similarly risk weighted items taking into consideration the convertible features of the
debentures into common stock of the Company.
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 December 31, 2009 and 2008.
Page -56-
The estimated fair values and recorded carrying values of the Companys financial instruments are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
2009 |
|
|
2008 |
|
(In thousands) |
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
|
|
Amount |
|
|
Value |
|
|
Amount |
|
|
Value |
|
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
27,108 |
|
|
$ |
27,108 |
|
|
$ |
24,744 |
|
|
$ |
24,744 |
|
Interest bearing deposits with banks |
|
|
7,039 |
|
|
|
7,039 |
|
|
|
4,141 |
|
|
|
4,141 |
|
Securities available for sale |
|
|
306,112 |
|
|
|
306,112 |
|
|
|
310,695 |
|
|
|
310,695 |
|
Securities restricted |
|
|
1,205 |
|
|
|
n/a |
|
|
|
3,800 |
|
|
|
n/a |
|
Securities held to maturity |
|
|
77,424 |
|
|
|
78,330 |
|
|
|
43,444 |
|
|
|
43,890 |
|
Loans, net |
|
|
441,993 |
|
|
|
449,496 |
|
|
|
425,730 |
|
|
|
437,265 |
|
Accrued interest receivable |
|
|
3,679 |
|
|
|
3,679 |
|
|
|
3,626 |
|
|
|
3,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand and other deposits |
|
|
793,538 |
|
|
|
794,512 |
|
|
|
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 |
|
|
|
15,210 |
|
|
|
15,000 |
|
|
|
15,368 |
|
Junior subordinated debentures |
|
|
16,002 |
|
|
|
15,500 |
|
|
|
|
|
|
|
|
|
Accrued interest payable |
|
|
531 |
|
|
|
531 |
|
|
|
672 |
|
|
|
672 |
|
14. REGULATORY CAPITAL REQUIREMENTS
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 requirements 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 Banks capital amounts and classifications also are subject
to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the 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). Management believes, as of December 31, 2009,
that the Company and the Bank met all capital adequacy requirements with which it must comply. 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. In December 2009, the Company completed a private placement
of $16.0 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. As provided in applicable regulations, TPS are included in holding
company Tier 1 capital (up to a limit of 25% of Tier 1 capital).
As of December 31, 2009, the most recent notification from the Federal Deposit Insurance
Corporation categorized the Bank as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Bank must maintain minimum total
risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table. Since that
notification, there are no conditions or events that management believes have changed the
institutions category.
Page -57-
The Companys and the Banks actual capital amounts and ratios are presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bridge Bancorp, Inc. (Consolidated) As of December 31, |
|
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) |
|
$ |
80,378 |
|
|
|
14.5 |
% |
|
$ |
44,361 |
|
|
|
8.0 |
% |
|
|
n/a |
|
|
|
n/a |
|
Tier 1 Capital (to risk weighted assets) |
|
|
74,333 |
|
|
|
13.4 |
% |
|
|
22,180 |
|
|
|
4.0 |
% |
|
|
n/a |
|
|
|
n/a |
|
Tier 1 Capital (to average assets) |
|
|
74,333 |
|
|
|
8.6 |
% |
|
|
34,499 |
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bridgehampton National Bank As of December 31, |
|
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) |
|
$ |
74,191 |
|
|
|
13.4 |
% |
|
$ |
44,337 |
|
|
|
8.0 |
% |
|
$ |
55,421 |
|
|
|
10.0 |
% |
Tier 1 Capital (to risk weighted assets) |
|
|
68,146 |
|
|
|
12.3 |
% |
|
|
22,168 |
|
|
|
4.0 |
% |
|
|
33,253 |
|
|
|
6.0 |
% |
Tier 1 Capital (to average assets) |
|
|
68,146 |
|
|
|
7.9 |
% |
|
|
34,494 |
|
|
|
4.0 |
% |
|
|
43,117 |
|
|
|
5.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
2008 |
|
(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 |
% |
Page -58-
15. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
Condensed financial information of Bridge Bancorp, Inc. (Parent Company only) follows:
Condensed Balance Sheets
|
|
|
|
|
|
|
|
|
December 31, |
|
2009 |
|
|
2008 |
|
(In thousands) |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
7,490 |
|
|
$ |
4,309 |
|
Other assets |
|
|
300 |
|
|
|
83 |
|
Investment in the Bank |
|
|
71,549 |
|
|
|
53,210 |
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
79,339 |
|
|
$ |
57,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Junior subordinated debentures |
|
$ |
16,002 |
|
|
$ |
|
|
Dividends payable |
|
|
1,441 |
|
|
|
1,423 |
|
Other liabilities |
|
|
41 |
|
|
|
40 |
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
17,484 |
|
|
|
1,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity |
|
|
61,855 |
|
|
|
56,139 |
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity |
|
$ |
79,339 |
|
|
$ |
57,602 |
|
|
|
|
|
|
|
|
Condensed Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from the Bank |
|
$ |
4,500 |
|
|
$ |
3,000 |
|
|
$ |
11,029 |
|
Interest expense |
|
|
190 |
|
|
|
|
|
|
|
|
|
Non interest expense |
|
|
34 |
|
|
|
149 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and equity in undistributed
earnings of the Bank |
|
|
4,276 |
|
|
|
2,851 |
|
|
|
11,028 |
|
Income tax benefit |
|
|
(69 |
) |
|
|
(50 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before equity in undistributed earnings of the Bank |
|
|
4,345 |
|
|
|
2,901 |
|
|
|
11,028 |
|
Equity in undistributed (overdistributed) earnings of the Bank |
|
|
4,418 |
|
|
|
5,849 |
|
|
|
(2,734 |
) |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
8,763 |
|
|
$ |
8,750 |
|
|
$ |
8,294 |
|
|
|
|
|
|
|
|
|
|
|
Page -59-
Condensed Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
8,763 |
|
|
$ |
8,750 |
|
|
$ |
8,294 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Equity in (undistributed) overdistributed earnings of the Bank |
|
|
(4,418 |
) |
|
|
(5,849 |
) |
|
|
2,734 |
|
(Increase) decrease in other assets |
|
|
(217 |
) |
|
|
1,319 |
|
|
|
197 |
|
Increase (decrease) in other liabilities |
|
|
1 |
|
|
|
57 |
|
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
4,129 |
|
|
|
4,277 |
|
|
|
11,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Investment in the Bank |
|
|
(11,500 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(11,500 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of junior subordinated debentures |
|
|
16,002 |
|
|
|
|
|
|
|
|
|
Net proceeds from issuance of common stock |
|
|
255 |
|
|
|
|
|
|
|
|
|
Net proceeds from exercise of stock options |
|
|
47 |
|
|
|
|
|
|
|
149 |
|
Repurchase of surrendered stock from exercise of stock options and vesting
of restricted stock awards |
|
|
(36 |
) |
|
|
(71 |
) |
|
|
|
|
Dividends paid |
|
|
(5,716 |
) |
|
|
(5,648 |
) |
|
|
(5,612 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
10,552 |
|
|
|
(5,719 |
) |
|
|
(5,463 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
3,181 |
|
|
|
(1,442 |
) |
|
|
5,749 |
|
Cash and cash equivalents at beginning of year |
|
|
4,309 |
|
|
|
5,751 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
$ |
7,490 |
|
|
$ |
4,309 |
|
|
$ |
5,751 |
|
|
|
|
|
|
|
|
|
|
|
16. OTHER COMPREHENSIVE INCOME (LOSS)
Other comprehensive income (loss) components and related income tax effects were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) on available for sale securities |
|
$ |
4,085 |
|
|
$ |
5,314 |
|
|
$ |
2,802 |
|
Reclassification adjustment for (gains) losses realized in income |
|
|
(529 |
) |
|
|
|
|
|
|
101 |
|
Income tax effect |
|
|
(1,724 |
) |
|
|
(2,110 |
) |
|
|
(1,165 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized gain (loss) on available for sale securities |
|
|
1,832 |
|
|
|
3,204 |
|
|
|
1,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in post-retirement obligation |
|
|
(267 |
) |
|
|
(2,629 |
) |
|
|
1,252 |
|
Income tax effect |
|
|
106 |
|
|
|
1,044 |
|
|
|
(497 |
) |
|
|
|
|
|
|
|
|
|
|
Net change in post-retirement obligation |
|
|
(161 |
) |
|
|
(1,585 |
) |
|
|
755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,671 |
|
|
$ |
1,619 |
|
|
$ |
2,493 |
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of the accumulated other comprehensive income balances, net of
income tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of |
|
|
|
|
|
|
Balance as of |
|
|
|
December 31, |
|
|
Current Period |
|
|
December 31, |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on available for sale securities |
|
$ |
3,417 |
|
|
$ |
1,832 |
|
|
$ |
5,249 |
|
Unrealized gains (loss) on pension benefits |
|
|
(1,566 |
) |
|
|
(161 |
) |
|
|
(1,727 |
) |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,851 |
|
|
$ |
1,671 |
|
|
$ |
3,522 |
|
|
|
|
|
|
|
|
|
|
|
Page -60-
17. QUARTERLY FINANCIAL DATA (Unaudited)
Selected Consolidated Quarterly Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Quarters Ended, |
|
March 31, |
|
|
June 30, |
|
|
September 30, |
|
|
December 31, |
|
(In thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
11,023 |
|
|
$ |
10,864 |
|
|
$ |
10,727 |
|
|
$ |
10,754 |
|
Interest expense |
|
|
1,940 |
|
|
|
1,935 |
|
|
|
1,916 |
|
|
|
2,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
9,083 |
|
|
|
8,929 |
|
|
|
8,811 |
|
|
|
8,730 |
|
Provision for loan losses |
|
|
900 |
|
|
|
1,400 |
|
|
|
900 |
|
|
|
950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses |
|
|
8,183 |
|
|
|
7,529 |
|
|
|
7,911 |
|
|
|
7,780 |
|
Non interest income |
|
|
1,179 |
|
|
|
1,925 |
|
|
|
1,565 |
|
|
|
1,505 |
|
Non interest expenses |
|
|
6,089 |
|
|
|
6,450 |
|
|
|
6,064 |
|
|
|
6,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
3,273 |
|
|
|
3,004 |
|
|
|
3,412 |
|
|
|
3,123 |
|
Income tax expense |
|
|
1,064 |
|
|
|
981 |
|
|
|
1,092 |
|
|
|
912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,209 |
|
|
$ |
2,023 |
|
|
$ |
2,320 |
|
|
$ |
2,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
0.36 |
|
|
$ |
0.33 |
|
|
$ |
0.38 |
|
|
$ |
0.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
0.36 |
|
|
$ |
0.33 |
|
|
$ |
0.38 |
|
|
$ |
0.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Quarters Ended, |
|
March 31, |
|
|
June 30, |
|
|
September 30, |
|
|
December 31, |
|
(In thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
9,194 |
|
|
$ |
9,558 |
|
|
$ |
10,075 |
|
|
$ |
10,793 |
|
Interest expense |
|
|
2,546 |
|
|
|
2,248 |
|
|
|
2,266 |
|
|
|
2,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
6,648 |
|
|
|
7,310 |
|
|
|
7,809 |
|
|
|
8,364 |
|
Provision for loan losses |
|
|
200 |
|
|
|
325 |
|
|
|
550 |
|
|
|
925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses |
|
|
6,448 |
|
|
|
6,985 |
|
|
|
7,259 |
|
|
|
7,439 |
|
Non interest income |
|
|
1,446 |
|
|
|
1,609 |
|
|
|
1,677 |
|
|
|
1,332 |
|
Non interest expenses |
|
|
4,989 |
|
|
|
5,283 |
|
|
|
5,401 |
|
|
|
5,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
2,905 |
|
|
|
3,311 |
|
|
|
3,535 |
|
|
|
3,287 |
|
Income tax expense |
|
|
935 |
|
|
|
1,076 |
|
|
|
1,179 |
|
|
|
1,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,970 |
|
|
$ |
2,235 |
|
|
$ |
2,356 |
|
|
$ |
2,189 |
|
Basic earnings per share |
|
$ |
0.32 |
|
|
$ |
0.37 |
|
|
$ |
0.39 |
|
|
$ |
0.36 |
|
Diluted earnings per share |
|
$ |
0.32 |
|
|
$ |
0.37 |
|
|
$ |
0.39 |
|
|
$ |
0.36 |
|
Page -61-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Audit Committee
Board of Directors
Bridge Bancorp, Inc.
Bridgehampton, New York
We have audited the accompanying consolidated balance sheets of Bridge Bancorp, Inc. as of December
31, 2009 and 2008, and the related consolidated statements of income, stockholders equity and cash
flows for each of the years in the three-year period ended December 31, 2009. We also have audited
Bridge Bancorp, Incs. internal control over financial reporting as of December 31, 2009, based on
criteria established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Bridge Bancorp, Inc.s management is
responsible for these consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over
financial reporting, included in the Report By Management on Internal Control Over Financial
Reporting located in Item 9A. Our responsibility is to express an opinion on these consolidated financial statements
and an opinion on Bridge Bancorp, Incs internal control over financial reporting based on our
audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material
respects. Our audits of the financial statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. Our audit of internal control over financial reporting included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal
control, based on the assessed risk. Our audits also included performing such other procedures as
we considered necessary in the circumstances. We believe that our audits provide a reasonable basis
for our opinions.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Bridge Bancorp, Inc. as of December 31, 2009 and 2008,
and the results of its operations and its cash flows for each of the years in the three-year period
ended December 31, 2009 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, Bridge Bancorp, Inc. maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2009, based on criteria
established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
|
|
|
|
|
|
|
|
|
|
|
|
Crowe Horwath LLP
|
|
|
Livingston, New Jersey
March 11, 2010
Page -62-
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure 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 December 31, 2009. Based on that evaluation, the Companys Principal Executive Officer and
Principal Chief Financial Officer concluded that the Companys disclosure controls and procedures
were effective as of the end of the period covered by the annual report.
Report By Management On Internal Control Over Financial Reporting
Management of Bridge Bancorp, Inc. (the Company) is responsible for establishing and maintaining
an effective system of internal control over financial reporting. The Companys system of internal
control over financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. There are inherent
limitations in the effectiveness of any system of internal control over financial reporting,
including the possibility of human error and circumvention or overriding of controls. Accordingly,
even an effective system of internal control over financial reporting can provide only reasonable
assurance with respect to financial statement preparation. Projections of any evaluation of
effectiveness to future periods are subject to the risks that controls may become inadequate
because of changes in conditions or that the degree of compliance with the policies or procedures
may deteriorate.
Management assessed the Companys internal control over financial reporting as of December 31,
2009. This assessment was based on criteria for effective internal control over financial reporting
described in Internal Control Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, management believes that, as of
December 31, 2009, the Company maintained effective internal control over financial reporting based
on those criteria.
The Companys independent registered public accounting firm that audited the financial statements
that are included in this annual report on Form 10-K, has issued an audit report on the Companys
internal control over financial reporting. The audit report of Crowe Horwath LLP appears on the
previous page.
Changes in Internal Control Over Financial Reporting
There has been no change in the Companys internal control over financial reporting during the
quarter ended December 31, 2009, that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 1 Election of Directors, Compliance with Section 16 (a) of the Exchange Act, and Code
of Ethics set forth in the Registrants Proxy Statement for the Annual Meeting of Shareholders to
be held on May 7, 2010, are incorporated herein by reference.
Item 11. Executive Compensation
Compensation of Directors, Compensation of Executive Officers, Report of the Compensation
Committee on Executive Compensation, Compensation Committee Interlocks and Insider
Participation, and Employment Contracts and Severance Agreements set forth in the Registrants
Proxy Statement for the Annual Meeting of Shareholders to be held on May 7, 2010, are incorporated
herein by reference.
Page -63-
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Beneficial Ownership and Item 1 Election of Directors, set forth in the Registrants Proxy
Statement for the Annual Meeting of Shareholders to be held on May 7, 2010, are incorporated herein
by reference.
Set forth below is certain information as of December 31, 2009, regarding the Companys equity
compensation plan that has been approved by stockholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities to |
|
|
Weighted Average |
|
|
|
|
|
|
be Issued upon |
|
|
Exercise Price with |
|
|
Number of Securities |
|
Equity Compensation |
|
Exercise |
|
|
respect to |
|
|
Remaining Available |
|
Plan approved by |
|
of outstanding options |
|
|
Outstanding |
|
|
for |
|
Stockholders |
|
and awards |
|
|
Stock Options |
|
|
Issuance under the Plan |
|
1996 Equity Incentive Plan |
|
|
15,462 |
|
|
$ |
23.23 |
|
|
|
|
|
2006 Equity Incentive Plan |
|
|
192,825 |
|
|
$ |
25.25 |
|
|
|
418,995 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
208,287 |
|
|
$ |
24.74 |
|
|
|
418,995 |
|
|
|
|
|
|
|
|
|
|
|
Item 13. Certain Relationships and Related Transactions, and Director Independence
Certain Relationships and Related Transactions, and Director Nominations set forth in the
Registrants Proxy Statement for the Annual Meeting of Shareholders to be held on May 7, 2010, is
incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
Item 2 Ratification of the Appointment of the Independent Registered Public Accounting Firm
Fees Paid to Crowe Horwath, and Policy on Audit Committee Pre-approval of Audit and Non-audit
Services of Independent Registered Public Accounting Firm set forth in the Registrants Proxy
Statement for the Annual Meeting of Shareholders to be held on May 7, 2010, is incorporated herein
by reference.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) The following Consolidated Financial Statements, including notes thereto, and financial
schedules of the Company, required in response to this item are included in Part II, Item 8.
1. Financial Statements
|
|
|
|
|
|
|
Page No. |
|
|
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
34 |
|
|
|
|
|
|
|
|
|
35 |
|
|
|
|
|
|
|
|
|
36 |
|
|
|
|
|
|
|
|
|
62 |
|
2. Financial Statement Schedules
Financial Statement Schedules have been omitted because they are not applicable or the required
information is shown in the Consolidated Financial Statements or Notes thereto under Item 8,
Financial Statements and Supplementary Data.
3. Exhibits.
See Index of Exhibits on page 66.
Page -64-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
|
|
|
BRIDGE BANCORP, INC. |
|
|
|
|
Registrant |
|
|
|
|
|
|
|
March 11, 2010
|
|
/s/ Kevin M. OConnor |
|
|
|
|
Kevin M. OConnor
|
|
|
|
|
President and Chief Executive Officer |
|
|
|
|
|
|
|
March 11, 2010
|
|
/s/ Howard H. Nolan |
|
|
|
|
Howard H. Nolan
|
|
|
|
|
Senior Executive Vice President, Chief Financial |
|
|
|
|
Officer and Treasurer |
|
|
|
|
|
|
|
March 11, 2010
|
|
/s/ Sarah K. Quinn |
|
|
|
|
Sarah K. Quinn
|
|
|
|
|
Vice President, Controller and Principal |
|
|
|
|
Accounting Officer |
|
|
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
March 11, 2010
|
|
/s/ Marcia Z. Hefter
Marcia Z. Hefter
|
|
,Director |
|
|
|
|
|
March 11, 2010
|
|
/s/ Dennis A. Suskind
Dennis A. Suskind
|
|
,Director |
|
|
|
|
|
March 11, 2010
|
|
/s/ Kevin M. OConnor
Kevin M. OConnor
|
|
,Director |
|
|
|
|
|
March 11, 2010
|
|
/s/ Emanuel Arturi
Emanuel Arturi
|
|
,Director |
|
|
|
|
|
March 11, 2010
|
|
/s/ Thomas E. Halsey
Thomas E. Halsey
|
|
,Director |
|
|
|
|
|
March 11, 2010
|
|
/s/ R. Timothy Maran
R. Timothy Maran
|
|
,Director |
|
|
|
|
|
March 11, 2010
|
|
/s/ Charles I. Massoud
|
|
,Director |
|
|
|
|
|
|
|
Charles I. Massoud |
|
|
|
|
|
|
|
March 11, 2010
|
|
/s/ Albert E. McCoy Jr.
Albert E. McCoy Jr.
|
|
,Director |
|
|
|
|
|
March 11, 2010
|
|
/s/ Howard H. Nolan
Howard H. Nolan
|
|
,Director |
|
|
|
|
|
March 11, 2010
|
|
/s/ Rudolph J. Santoro
Rudolph J. Santoro
|
|
,Director |
|
|
|
|
|
March 11, 2010
|
|
/s/ Thomas J. Tobin
Thomas J. Tobin
|
|
,Director |
Page -65-
EXHIBIT INDEX
|
|
|
|
|
|
|
Exhibit Number |
|
Description of Exhibit |
|
Exhibit |
|
|
|
|
|
|
|
|
3.1 |
|
|
Certificate of Incorporation of the registrant (incorporated by
reference to Registrants amended Form 10, File No. 0-18546, filed
October 15, 1990)
|
|
* |
|
|
|
|
|
|
|
|
3.1(i) |
|
|
Certificate of Amendment of the Certificate of Incorporation of the
Registrant (incorporated by reference to Registrants Form 10, File
No. 0-18546, filed August 13, 1999)
|
|
* |
|
|
|
|
|
|
|
3.1(ii)
|
|
|
Certificate of Amendment of the Certificate of Incorporation of the
Registrant (incorporated by reference to Registrants Definitive Proxy
Statement, File No. 0-18546, filed November 18, 2008)
|
|
* |
|
|
|
|
|
|
|
|
3.2 |
|
|
Revised By-laws of the Registrant (incorporated by reference to
Registrants Form 8-K, File No. 0-18546, filed December 17, 2007)
|
|
* |
|
|
|
|
|
|
|
|
10.1 |
|
|
Amended and Restated Employment Contract Thomas J. Tobin
(incorporated by reference to Registrants Form 8-K, File No. 0-18546,
filed October 9, 2007)
|
|
* |
|
|
|
|
|
|
|
|
10.2 |
|
|
Amended and Restated Employment Contract Howard H. Nolan
(incorporated by reference to Registrants Form 10-K, File No.
0-18546, filed March 12, 2009)
|
|
* |
|
|
|
|
|
|
|
|
10.3 |
|
|
Employment Contract Kevin M. OConnor (incorporated by reference to
Registrants Form 8-K, File No. 0-18546, filed October 9, 2007)
|
|
* |
|
|
|
|
|
|
|
|
10.5 |
|
|
Equity Incentive Plan (incorporated by reference to Registrants Form
S-8, File No. 0-18546, filed August 14, 2006)
|
|
* |
|
|
|
|
|
|
|
|
10.6 |
|
|
Supplemental Executive Retirement Plan (Revised for 409A)
(incorporated by reference to Registrants Form 10-K, File No.
0-18546, filed March 14, 2008)
|
|
* |
|
|
|
|
|
|
|
|
23 |
|
|
Consent of Independent Registered Public Accounting Firm |
|
|
|
|
|
|
|
|
|
|
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 U.S.C. Section 1350 |
|
|
|
|
|
* |
|
Denotes incorporated by reference. |
Page -66-