[PHOTOGRAPH-Brigdehampton National Bank's Headquarters building]
1998 Annual Report
Bridge Bancorp, Inc.
SM
[TRADEMARK - The Bank you can talk to.]
COMPANY PROFILE
Bridge Bancorp, Inc., a New York corporation, is a one-bank holding company
engaged in commercial banking through its wholly owned subsidiary, The
Bridgehampton National Bank.
Federally chartered in 1910, the Bank was founded by local farmers and merchants
to serve the needs of the agricultural based villages comprising the area. While
growing and expanding over the past eighty-nine years, The Bridgehampton
National Bank has continued to maintain its community orientation. The Bank
offers a full range of deposit and loan products and services, geared to the
businesses and consumers within its primary market area, the East End of Long
Island.
Bridgehampton National Bank serves both the North and South Forks on the East
End through its branch network, operating seven full service banking offices
located in Bridgehampton, East Hampton, Mattituck, Montauk, Southampton,
Southampton Village and Southold, New York. Residential mortgage services are
available at all branch locations. In addition, twenty-four hour Automated
Teller Machines with access to the MAC and NYCE networks are maintained in
Bridgehampton, Mattituck, Southampton Hospital and Southampton Town Hall. The
Bank is an Equal Housing Lender and a member of the Federal Deposit Insurance
Corporation.
MISSION
The mission of the employees of The Bridgehampton National Bank is to provide
the Company's shareholders with an above average return on investment and
increased shareholder value. We will accomplish our mission by profitably
providing financial services to all customers, being particularly cognizant of
providing fair and evenhanded distribution of credit to all segments of our
marketplace while utilizing safe and sound banking practices. Critically
important to the success of our mission are superior levels of commitment and
service to our customers by all of our employees. Equally important to the
success of our mission is the selection and retention of the highest quality
employees. The Bank is dedicated to providing its employees with the direction
and training necessary to achieve their mission.
BRIDGE BANCORP, INC.
- --------------------
Serving the East End through Four Market Areas
TEAMWORK
In 1998, The Bridgehampton National Bank refined its management structure in an
effort to provide unique levels of service, value and responsiveness to our
customers. Each market area within the East End region is ready to provide a
full range of business and consumer banking services, and is led by a Senior
Banking Officer. We would like to take this opportunity to introduce you to our
Market Area Team Leaders.
[PHOTOGRAPH]
Bridgehampton
Ann Sweeney, Vice President, Senior Banking Officer began her career with The
Bridgehampton National Bank in 1988 as a Cooperative Education student from Long
Island University-Southampton College. She started off in our loan department
and upon graduation began working for Bridgehampton National full-time,
mastering all aspects of consumer and commercial loan processing before her
promotion to a Loan Officer position. Ms. Sweeney was promoted to Assistant Vice
President, Senior Lending Officer in 1995 and served as the Loan and Business
Development Officer for the Main Office branch. Ms. Sweeney now directs and
manages the Bridgehampton Market Area, which includes business development in
Bridgehampton, Wainscott, Water Mill, Sagaponack and Sag Harbor. Ann is
currently completing her thesis, the culmination of the American Bankers
Association (ABA) Stonier Graduate School of Banking. Ms. Sweeney has earned
several ABA banking certificates, including Consumer Lending, Commercial Lending
and Advanced Commercial Lending. Working with businesses and consumers in our
market area for more than ten years, Ann really knows her business.
[PHOTOGRAPH]
North Fork
Peter Coleman, Vice President, Senior Banking Officer has more than twenty years
in the banking business and provides important leadership in our North Fork
region. Mr. Coleman is a graduate of the State University of New York at Delhi
after which he served in the U.S. Army. He has completed numerous credit and
banking programs, including Dun & Bradstreet's Credit Administration
Certificate, the ABA National Mortgage School, and the ABA Stonier Graduate
School of Banking. Pete began his career at BNB in 1993, working as Vice
President, Commercial Lending Officer. In November of 1997, Mr. Coleman moved to
the North Fork Market Area with the objective of coordinating and solidifying
the business development efforts of BNB's North Fork branches. A lifelong
resident of Mattituck, Pete is well-known in the North Fork business community,
and his knowledge and commitment to the North Fork have been a key asset to the
Bank's growth and reputation in the region. Peter has been involved in several
community activities on the North Fork, including serving as Chief and
Commissioner of the Mattituck Fire Department, where he was also voted Fireman
of the Year. In addition, Pete served as Director of the Mattituck Community
Fund, Inc., and is a member of the Mattituck Lions Club. Currently, Mr. Coleman
is an active member of the Eastern Long Island Executive Roundtable.
[PHOTOGRAPH]
East Hampton / Montauk
Kevin Santacroce, Assistant Vice President, Senior Banking Officer heads up the
team in the East Hampton/Montauk Market Area. A graduate of Bryant College, Mr.
Santacroce has been in banking since 1991. He has completed several credit and
accounting programs, graduating with top honors in Credit Analyst and Senior
Credit Analyst course work. Kevin began the ABA Stonier Graduate School of
Banking program in 1998, and will be working on his thesis in 1999. Mr.
Santacroce joined The Bridgehampton National Bank in 1997 as Assistant Cashier,
Loan Officer, East Hampton/Montauk. Kevin came to our Company with several years
of financial and credit management experience, including development of
statistical financial projections, asset and relationship pricing, risk rating,
budget development and analysis, capital procurement and investment strategies,
financial reporting and accounting supervision. Kevin was promoted to the
position of Assistant Vice President, Loan Officer, East Hampton/Montauk in
December 1997. As Senior Banking Officer, Kevin directs and manages all aspects
of banking business in our East Hampton and Montauk Branch Offices, and points
in between. Kevin participates in many community programs, including serving on
the Volunteer Fire Department in his hometown of Southold.
[PHOTOGRAPH]
Southampton
Although Seamus Doyle, Assistant Vice President, Senior Banking Officer hails
from Dublin, Ireland, he is very much at home here on the East End. Mr. Doyle
began his career at The Bridgehampton National Bank as a Credit Analyst in 1992,
after which he graduated with honors from the Bucknell School of Commercial
Credit and was promoted to the position of Loan Officer. Until 1997, Seamus
served as BNB's Loan Officer in Montauk, and then East Hampton. During this
period, Mr. Doyle was promoted to Assistant Vice President, completed his
studies in accounting, and passed the Certified Public Accountant examinations.
Still working to gain the experience required for the CPA designation, Mr. Doyle
left the Bank temporarily, for a position at a prestigious local accounting
firm. Seamus returned to BNB in 1998, coming back on board as AVP, Senior
Banking Officer for the Southampton Market Area. The Bridgehampton National Bank
maintains two branch offices in the Southampton marketplace, including the
County Road 39 Branch Office, as well as the newly established Southampton
Village Commercial Branch Office. Business development in the Village Branch
Office represented a significant challenge in 1998. Seamus has been recommended
to begin the ABA Stonier Graduate School of Banking program in Spring 1999.
Seamus serves as a Director of the East Hampton Chamber of Commerce.
Consolidated Financial Highlights
(IN THOUSANDS, EXCEPT PER SHARE DATA AND FINANCIAL RATIOS)
At December 31, 1998 1997
- -----------------------------------------------------------------------------------------------
FOR THE YEAR ENDED
Net income $ 3,895 $ 4,195
Net income, excluding gain on sale of building<F1> -- 3,366
Cash dividends declared 1,482 1,972
--------------------------
AT YEAR END
Total assets $ 266,984 $ 233,112
Total deposits 241,531 203,697
Total loans 168,696 138,636
Total stockholders' equity 22,232 19,451
--------------------------
SIGNIFICANT RATIOS FOR THE YEAR ENDED
Return on average equity 19.19% 23.08%
Return on average assets 1.51 1.86
--------------------------
SELECTED FINANCIAL RATIOS, EXCLUDING GAIN ON SALE OF BUILDING<F1>
Return on average equity -- 18.52%
Return on average assets -- 1.49
--------------------------
PER SHARE DATA<F2>
Diluted earnings per share $ 0.91 $ 0.99
Basic earnings per share 0.92 0.99
Cash dividends declared 0.35 0.47
Book value 5.25 4.60
--------------------------
PER SHARE DATA, EXCLUDING GAIN ON SALE OF BUILDING IN 1997<F1><F2>
Diluted earnings per share $ 0.91 $ 0.79
Basic earnings per share 0.92 0.79
--------------------------
<FN>
<F1>
On June 17, 1997, the Bank sold its former headquarters building resulting in a
gain, net of taxes, of approximately $829,000. On December 15, 1997 the bank
declared a one time special dividend of approximately $845,000, or $.20 per
share, paying out this gain to the shareholders.
<F2>
On July 20, 1998, the Board of Directors declared a three-for-one stock split in
the form of a stock dividend payable August 31, 1998 to stockholders of record
as of August 19, 1998 . The stock split increased outstanding shares from
1,411,599 to 4,234,797. On April 15, 1997, the Board of Directors declared a
three-for-one stock split in the form of a stock dividend payable May 30, 1997
to stockholders of record as of May 1, 1997. The stock split increased
outstanding shares from 469,333 to 1,407,999. All per share amounts have been
adjusted to reflect these splits.
</FN>
[BAR GRAPHS]
(In Thousands) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------
TOTAL ASSETS $266,951 $233,112 $204,614 $184,070 $171,953
(In Thousands) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------
NET INCOME $ 3,895 $ 4,195 $ 3,006 $ 2,383 $ 1,933
3,366*
(Percent) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------
RETURN ON AVERAGE ASSETS 1.51% 1.86% 1.51% 1.27% 1.81%
1.49%<F1>
(Percent) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------
RETURN ON AVERAGE EQUITY 19.19% 23.08% 1.51% 1.27% 1.81%
18.52%<F1>
<FN>
<F1>
1997, excluding gain on sale of building
</FN>
p.1 BRIDGE BANCORP, INC. AND SUBSIDIARY
Dear Shareholders
It is with considerable pride that I report our Company's results of operations
for fiscal year 1998.
We have set high financial performance goals for The Bridgehampton National Bank
and have met them in 1998 with return on average equity of 19.2% and return on
average assets of 1.5%. The Company continued its seven year trend of record
earnings posting net income of $3,895,000, an increase of 15.7% over earnings
last year, excluding the gain on the sale of the Bank's former headquarters
building. Our Company continues to be recognized among top performing U.S. banks
of our asset size. Last year The Bridgehampton National Bank was ranked among
the Sheshunoff Highest Rated Banks and S&Ls in America, as well as one of The
Ryan, Beck Report's small-cap financial elite peer group.
Financial highlights include a 21.7% increase in net loans, an 18.6% increase in
total deposits, 14.5% growth in total assets, and an increase in total
shareholder equity of 14.3%. Total dividends declared represented a 31.5%
increase over the total dividends declared in 1997, excluding the one-time
special dividend resulting from the gain on the sale of the headquarters
building.
We have been gratified by the positive recognition that ownership of shares of
Bridge Bancorp, Inc. has received. Over the past four years, our efforts toward
our performance goals have translated into significant growth in our stock
price. As we continue our efforts to provide shareholder value, we look forward
to the Company's new policy of considering quarterly rather than semi-annual
dividends.
While banking industry mergers and increased competition not only from financial
institutions but also from nonbank entities have made headlines throughout the
year, our Company has continued to stay on course. Last year we began a sea
change, put in place to enhance our strengths in the East End marketplace. We
recognized that in order to maintain our competitive advantage, our focus on
customer service and uncommon levels of responsiveness were key. As such,
throughout 1998 we have continued to refine our management structure and our
focus in an effort to improve our level of responsiveness to our customers and
the marketplace. We have developed an innovative team approach so that each
market area within the East End is served by a complete management team led by a
Senior Banking Officer. Each team is able to provide the full breadth of credit
and deposit services to both businesses and consumers with a unique level of
responsiveness. Market area teams are experts regarding their specific region
and our officers understand the nuances of the communities that they serve.
A glance at our cover and the highlights pages gives a glimpse of our Company,
both inside and out. The five year financial summary that follows tells our
Company's story of steady incremental growth in our core business.
We have positioned our Company well to leverage the recent positive economic
environment. However, equally important, we have structured our Company to face
the challenges of the future. While we have set our course through our knowledge
of our strengths and our marketplace, we are also ready and able to tack as
necessary as economic winds shift. We look toward our opportunities with
confidence in the abilities of our dynamic management team, all our employees
and the essential leadership of our Board of Directors.
Thank you, our valued shareholders, for your confidence and for your support of
Bridge Bancorp, Inc.
Sincerely,
/s/ Thomas J. Tobin
Thomas J. Tobin
President and Chief Executive Officer
1998 ANNUAL REPORT p.2
[PHOTOGRAPH]
Wendy Engel, Retired, East Hampton.
Wendy Engel, longtime BNB customer, participated in our advertising launch of
select advantage banking.
The Bridgehampton National Bank is committed to growth through the expansion of
existing customer relationships while also developing new business
opportunities. Our Bank is differentiated in our marketplace by its clearly
defined focus on the East End of Long Island, our development of products that
specifically meet the needs of businesses and consumers in our market areas, our
community orientation, and the accessibility of our management.
SEVERAL HIGHLIGHTS OF EVENTS IN 1998 SHOWCASE THESE DISTINGUISHING
CHARACTERISTICS.
Select Advantage Banking: At The Bridgehampton National Bank, maturity does have
its rewards. In 1998, BNB developed a new package of banking products for
consumers fifty years of age and older. The Senior market on the East End is an
important consumer segment. However, equally important are the Baby Boomers, who
are beginning to reach their early fifties. Select Advantage Banking offers a
highly competitive "advantage" package that includes checking, certificates of
deposit, savings, and a variety of related benefits. At the same time, the
package effectively serves as an introduction to our Bank within this
increasingly affluent market sector.
Electronic Delivery Systems: Our customers like to do their banking business
through various delivery channels. In 1997, Teller*Fone, BNB's telephone banking
system, was introduced. Teller*Fone put account information as well as the
opportunity to conduct transactions, at our customers' fingertips. This was a
start; however, it was determined that the provision of alternative delivery
channels was becoming an increasingly important aspect of customer service. In
1998, the Bank devoted a member of its senior management team, Michael
Kochanasz, to the development of electronic delivery systems that make banking
easier, and add value to banking with BNB. PC banking for businesses is
currently being tested through selected customer sites. This service will be
available to our business customers during the second quarter of 1999. Other
projects that are underway include the introduction of a Debit Card program; the
exploration of opportunity for a Call Center; improvements to the Bank's ATM
program; and enhancement and active marketing of the Bank's cash management
services for businesses, which include ACH origination, check reconciliation,
and direct deposit of payroll systems. We look toward expanded importance of
alternative delivery channels in facilitating our customers' daily banking.
Year 2000: Are we ready? The Bridgehampton National Bank has been working
diligently for the past two years to provide as seamless a transition into the
next millennium as possible. The Federal Financial Institutions Examination
Council has identified six phases for readiness: awareness, inventory and
assessment, renovation, validation, implementation, and post-implementation. The
Bridgehampton National Bank has met or exceeded all governmental requirements
for readiness. In addition, the Bank has served as a test site for community
banks in the Northeast U.S.
As the East End's community bank, The Bridgehampton National Bank has taken a
leadership position with regard to education pertaining to Y2K issues. On June
9, 1998, the Bank sponsored a Year 2000 Breakfast Seminar for our customers and
others among the local business community. The program consisted of an
educational segment which was presented by our Chief Information Officer and
business technology specialists, followed by a question and answer period. The
program was attended by approximately sixty participants. Additionally, our
Chief Information Officer and Chief Financial Officer have made similar
presentations at business meetings throughout the East End community. Our
efforts to educate and provide appropriate information will be stepped up in
1999. Further, a communication program for our customer base regarding BNB's Y2K
readiness and tips on readiness for businesses and consumers is underway.
p.3 BRIDGE BANCORP, INC. AND SUBSIDIARY
Bridging the Gap
[PHOTOGRAPH]
Southern Cross, Christening.
Over on Shelter Island, BNB helps bridge the gap with financing for South
Ferry's Southern Cross.
[PHOTOGRAPH]
Stuart Lowrie, Director of Conservation Programs and Government Relations, The
Nature Conservancy.
The Bridgehampton National Bank helped to galvanize the East End business
community in support of the Community Preservation Fund. Stuart Lowrie joined
our celebration on November 10, 1998
Residential Mortgage Operations: In June of 1998, the Bank made an important
step toward the level of customer service to which our Company is committed. We
moved our residential mortgage processing department from the Riverhead location
into our headquarters facility in Bridgehampton, and relocated our residential
mortgage originators to our branch offices. Now, our customers in each of our
market areas have access to all of our Bank's products. Each market area team is
comprised of professional staff members who are experts in their areas of
specialization.
At the same time all of our loan operations processes, commercial and consumer,
were streamlined. Management and support staff were placed with the objectives
of increasing processing efficiencies, reducing turnaround time, and providing a
greater level of support to our customers, as well as our loan originators. We
made several key steps towards our customer service goals in 1998, and our
efforts to improve loan operations processes will be ongoing.
Stock Split: On July 20, 1998, the Board of Directors declared a three-for-one
stock split in the form of a stock dividend payable August 31, 1998 to
stockholders of record as of August 19, 1998. The stock split was the second in
two years.
U.S. Trust: Wealth management is a financial service required by a growing
number of consumers in our marketplace. Key to the Bank's strategic plan has
been the provision of the highest level of banking services backed by state of
the art technology. The Board of Directors unanimously approved an alliance
between BNB and United States Trust Company of New York, which puts the ultimate
in consultative wealth management services at the fingertips of BNB customers.
Through this agreement, Bridgehampton National customers now have access to
investment management and consulting, trust services, financial and estate
planning, and private banking through U.S. Trust, which has been serving
affluent individuals and their families since 1853.
South Ferry's Southern Cross: Anyone who has traveled between the North and
South Forks of Long Island on the East End via ferry understands how this mode
of transportation, while serving to connect the Forks and Shelter Island, also
reminds us of the uniqueness of our region, and our connection to our maritime
history.
On October 24, 1998 a new ferry boat, South Ferry's Southern Cross, was
christened. The addition of a new boat to the fleet was a momentous occasion,
and represented a considerable undertaking for the owners, the Clark family of
Shelter Island. The Bridgehampton National Bank was recognized at the official
christening ceremony as an essential partner in bringing the Southern Cross
project to fruition, through the Bank's funding of the construction of the new
vessel. Just as the ferry takes residents and travelers from the South Fork to
Shelter Island and beyond to the North Fork, Bridgehampton National has been
noted as the community bank which also bridges the gap, serving businesses and
consumers on the South Fork, North Fork and Shelter Island.
Community Preservation Fund: On November 10, 1998, approximately 150 local
residents joined a celebration at The Bridgehampton National Bank headquarters
facility. Voters on the East End had clearly rallied behind Proposal 4 on
election day, establishing the Community Preservation Fund in all five East End
towns. The Fund is a land bank established to finance the purchase of properties
for open space and farmland preservation. The Bridgehampton National Bank was
recognized as the only bank on the East End which consistently supports
environmental and preservation programs. The Bank remains committed to the
support of programs throughout the region that protect and preserve the
environment, quality of life, rural character and the unique beauty of the East
End.
1998 ANNUAL REPORT p.4
Dedicated to the East End Community
Our dedication to the East End community is reflected by our reinvestment of
deposits into all of our market areas, in the form of commercial and consumer
loans, and community programs. We welcome you to review some of the
"investments" made by The Bridgehampton National Bank in 1998.
BANK-WIDE * Peconic Community Council * North Fork Housing Alliance * Y2K
Information Seminars * Ellen's Run * Central Suffolk Hospital's Polo Panache *
March of Dimes * Family Service League * East End Hospice * Salvation Army *
Muscular Dystrophy Foundation * East End Alternatives Counseling Center * The
Retreat * Have a Heart Charities * Eastern Long Island Hospital * American
Cancer Society * Make a Wish Foundation * Habitat for Humanity * Choral Society
of the Hamptons * Group for the South Fork * American Red Cross * Cancer Care *
South Fork Breast Coalition * Fish Unlimited * Suffolk County Girl Scout
Council, Inc. * Suffolk County Boy Scouts of America * Sloan Kettering * East
End Arts Council * Charity in Action Family Health Services, Inc. * Dominican
Sisters Family Health Promotion * Coat off Your Back * Local Food Pantries *
Ducks Unlimited * Spanish Community Project * American Heart Association * Small
Business Development Center Research Foundation * South Fork Community Health
Initiative * The Hampton Classic * Americas' Sail Greenport Rendezvous '98 *
Juvenile Diabetes Foundation * U.S. Equestrian Team Bridgehampton/Sag Harbor *
Bridgehampton Child Care Center * Bay Street Theatre * Bridgehampton Historical
Society * Bridgehampton Road Rallye * Bridgehampton School * Madoo Conservatory
* Sag Harbor Elementary School * Stella Maris School * Hayground School *
Bridgehampton Lions Club * Bridgehampton Community House * Bridgehampton Village
Improvement Society * Bridgehampton Fire Department and Ambulance Company
Southampton * Southampton Senior Services * Southampton Hospital
[PHOTOGRAPH]
Sag Pond Vineyard, Sagaponack. With the wine industry firmly rooted on the East
End, The Bridgehampton National Bank cultivates business opportunities.
[PHOTOGRAPH]
Ruby Beets, Bridgehampton. When it's time to move or expand, Bridgehampton
National Bank is prepared to help East End businesses grow.
[PHOTOGRAPH]
Eastland Farms, Water Mill. From agriculture to technology, BNB has developed
products and services that meet the needs of local business customers.
[PHOTOGRAPH]
Peter's Back Street, Southampton. Over in Southampton Village, Bridgehampton
National has established a commercial branch to meet the banking requirements of
merchants and professional entities in the Village.
[PHOTOGRAPH]
Southampton Home. Bridgehampton National Bank makes home ownership a reality for
East Enders every day. When it comes to financing a home sweet home, folks here
know that BNB has more than 50 residential mortgage programs available.
p.5 BRIDGE BANCORP, INC. AND SUBSIDIARY
[PHOTOGRAPH]
Newly completed residential construction, East Hampton. Builders and consumers
throughout our market areas know that Bridgehampton National Bank stands ready
with financing for land and new construction.
[PHOTOGRAPH]
Gansett Green Manor, Amagansett. Improvements and expansions help local
businesses flourish.
[PHOTOGRAPH]
Montauk Lighthouse, Montauk Point, a beacon to the East End. The Bridgehampton
National Bank supports the region's historical treasures.
[PHOTOGRAPH]
Simon Bolivar. In 1998, The Bridgehampton National Bank signed on as Title
Sponsor of The Bridgehampton National Bank Americas' Sail Greenport Rendezvous,
bringing national and international attention to the East End's rich maritime
history. Simon Bolivar. In 1998, The Bridgehampton National Bank signed on as
Title Sponsor of The Bridgehampton National Bank Americas' Sail Greenport
Rendezvous, bringing national and international attention to the East End's rich
maritime history.
[PHOTOGRAPH]
Shelley Scoggin, owner, The Market, Greenport. Shelley Scoggin told her story in
BNB's testimonial advertising campaign. The Bridgehampton National Bank helped
her make her business dreams come true in 1998
Community Health Services * Southampton AARP * Shinnecock Nation Cultural
Center & Museum * Southampton Hospital Lyme Disease Research * Southampton
Hospital Quarterbackers Club * Hampton Bays Beautification Association, Inc.
* Sacred Heart CYO Basketball * Southampton Day Care * Southampton Chamber
of Commerce * Southampton College Career Development Center * Parrish Art
Museum * Cultural Center of Southampton * PBA of Southampton * Southampton
Elks Ladies of the 1574 Club * Southampton Lions Club * Southampton Business
Alliance * North Sea Fire Department East Hampton/Montauk * The ReCenter *
East Hampton Seniors Center * Town of East Hampton 350th Anniversary
Celebration Lecture Series * Guild Hall * Kidfest * East Hampton Youth
Alliance * Montauk Historical Society * Montauk Friends of Erin * Montauk
Chamber of Commerce * East Hampton Christmas Tree Lighting * East Hampton
Youth Football * Youth Hoops of East Hampton * East Hampton Presbyterian
Church * Community Council of East Hampton * Montauk Downtown Association
Street Lighting Fund * East Hampton Day Care Center * St. Luke's Church
Beach Walk * East Hampton Lions Club North Fork * First Night Greenport *
Mattituck Senior Nutrition Center * Mattituck Lionesses * Shelter Island
Senior Center * East End Seaport Museum * North Fork Lions Club
* Town of Southold Haunted House * North Fork Women's Resource Center *
Southold Rotary * Greenport-Southold Chamber of Commerce * North Fork Reform
Synagogue * Mattituck Chamber of Commerce * Our Lady of Mercy School
* San Simeon by the Sound * Peconic Landing * Southold Fire Department *
Southold Schools * Southold Summer Showcase Concert Series * Arts in
Southold Town * Greenport Music Festival
We invite you to learn more about our Company through the financial pages
that follow.
1998 ANNUAL REPORT p.6
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 Company's business is primarily the business of the Bank. The
financial data is derived in part from, and should be read in conjunction with,
the consolidated financial statements of the Company.
December 31, 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL DATA:
Securities available for sale<F1> $ 69,443 $ 60,190 $ 57,779 $ 52,689 $ 26,413
Securities held to maturity/for investment<F1> 5,052 11,812 6,262 6,425 37,166
Loans, net 166,983 137,243 117,643 110,442 93,817
Total assets 26,651 233,112 204,614 184,070 171,953
Total deposits 241,531 203,697 184,847 166,144 155,891
Total stockholders' equity 22,232 19,451 16,926 15,420 12,807
Year Ended December 31,
- -------------------------------------------------------------------------------------------------------
SELECTED OPERATING DATA:
Total interest income (including fee income) $ 19,019 $ 17,224 $ 15,501 $ 14,384 $ 11,187
Total interest expense 5,978 5,543 5,072 5,258 3,270
-------------------------------------------------------
Net interest income 13,041 11,681 10,429 9,126 7,917
Provision for loan losses 425 410 330 268 333
-------------------------------------------------------
Net interest income after provision
for possible loan losses 12,616 11,271 10,099 8,858 7,584
Total other income 3,005 4,323(3) 2,422 1,697 1,512
Total other expenses 9,637 9,067 7,960 7,024 6,318
-------------------------------------------------------
Income before income taxes 5,984 6,527(3) 4,561 3,531 2,778
Provision for income taxes 2,089 2,332 1,555 1,148 845
-------------------------------------------------------
Net income $ 3,895 $ 4,195(3) $ 3,006 $ 2,383 $ 1,933
=======================================================
December 31,
- -------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Return on average equity<F2> 19.19% 23.08%<F3> 18.84% 16.29% 15.36%
Return on average assets<F2> 1.51% 1.86%<F3> 1.51% 1.27% 1.18%
Equity to assets 8.00% 8.00% 8.07% 8.20% 7.79%
Dividend payout ratio 38.05% 47.00%<F3> 32.87% 32.23% 32.28%
Diluted earnings per share<F4> $ 0.91 $ .99<F3> -- -- --
Basic earnings per share<F4> $ 0.92 $ .99<F3> $ 0.70 $ 0.55 $ 0.45
Cash dividends declared per common share<F4> $ 0.35 $ .47<F3> $ 0.23 $ 0.18 $ 0.14
<FN>
<F1>
On November 15,1995, the FASB issued "A Guide to Implementation of Statement No.
115 on Accounting for Certain Investments in Debt and Equity Securities,
Questions and Answers" which resulted in a reclassification of a portion of the
held to maturity portfolio to available for sale stated at fair value.
<F2>
For purposes of these calculations, average stockholders' equity excludes the
effect of changes in the unrealized appreciation (depreciation) on securities
available for sale, net of taxes.
<F3>
On June 17, 1997, the Bank sold its former headquarters building resulting in a
gain, net of taxes, of approximately $829,000. Return on average equity
excluding this gain, net of taxes, was 18.52%. Return on average assets
excluding this gain, net of taxes, was 1.49%. On December 15, 1997 the Bank
declared a one time special dividend of approximately $845,000, or $.20 per
share, paying out this gain to the shareholders.
<F4>
On July 20, 1998, the Board of Directors declared a three-for-one stock split in
the form of a stock dividend payable August 31, 1998, to stockholders of record
as of August 19, 1998. The par value of the Company's common stock remains
unchanged. As a result, $14,439,990 was transferred from Undivided Profits and
Capital Surplus at August 19, 1998 to reflect the issuance. On April 15, 1997,
the Board of Directors declared a three-for-one stock split in the form of a
stock dividend payable on May 30, 1997 to stockholders of record as of May 1,
1997. The par value per share of the Company's common stock again remained
unchanged. As a result, $4,801,000 was transferred from Undivided Profits at May
1, 1997 to reflect the issuance. All per share amounts have been adjusted to
reflect the effects of these splits.
</FN>
p.7 BRIDGE BANCORP, INC. AND SUBSIDIARY
Managements's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL. Bridge Bancorp, Inc. (the Company), a New York corporation, is a
one-bank holding company formed effective March 31, 1989, and on a parent only
basis, had minimal results of operations for 1998, 1997 and 1996. In the event
the Company subsequently expands its current operations, it will be dependent on
dividends from its wholly owned subsidiary, The Bridgehampton National Bank (the
Bank), its own earnings, additional capital raised and borrowings as sources of
funds. The information below reflects principally the financial condition and
results of operations of the Bank. The Bank's results of operations are
primarily dependent on its net interest income, which is mainly the difference
between interest income on loans and investments and interest expense on
deposits. Interest income on loans and investments is a function of the average
balances outstanding and the average rates earned during a period. Interest
expense is a function of the average amount of interest-bearing deposits and the
average rates paid on such deposits during a period. The Bank also generates
other income, such as fee income on deposit accounts and income from mortgage
banking operations and merchant credit card processing programs. The Bank's net
income is further affected by the level of its other expenses, such as
employees' salaries and benefits and occupancy costs. This discussion and
analysis should be read in conjunction with the consolidated financial
statements, the notes thereto and the other financial information included
elsewhere in this annual report.
FINANCIAL CONDITION. The assets of the Company totaled $266,951,000 at December
31, 1998, an increase of $33,839,000 or 14.5% from the previous year end. This
increase mainly results from the increase in gross loans of $30,060,000 or 21.7%
and an increase in investments in debt and equity securities of $2,493,000 or
3.46%. The source of funds for the increase in assets was derived from increased
deposits of $37,834,000 or 18.6%, offset primarily by a decrease in other
borrowings of $6,500,000. Demand deposits increased $10,828,000 or 17.0%, and
all other deposits increased $27,006,000 or 19.3% over December 31, 1997. This
increase is mainly attributed to efforts to increase market share and the
introduction of a new money market deposit product which targets high balance
accounts.
Total stockholders' equity was $22,232,000 at December 31, 1998, an increase of
14.3% over December 31, 1997. The increase of $2,781,000 was the result of
undistributed net income for the year ended December 31, 1998, of $3,895,000;
plus the proceeds of $109,000 from the exercise of incentive stock options
pursuant to the equity incentive plan; plus the tax benefit of $51,000 from the
exercise of nonqualified stock options pursuant to the equity incentive plan;
less cash dividends declared of $1,482,000; and plus the net increase in
unrealized appreciation in securities available for sale, net of tax, of
$208,000. The net increase in unrealized appreciation in securities available
for sale is attributable to appreciation due to changes in market conditions.
Management has determined such appreciation to be temporary, and does not expect
future sales of such securities to result in material gains and thus a material
impact on results of operations.
STOCK SPLITS. On July 20, 1998, the Board of Directors declared a three-for-one
stock split in the form of a stock dividend payable August 31, 1998 to
stockholders of record as of August 19, 1998. The stock split increased
outstanding common shares from 1,411,599 to 4,234,797. On April 15, 1997, the
Board of Directors declared a three-for-one stock split in the form of a stock
dividend payable May 30, 1997 to stockholders of record as of May 1, 1997. The
stock split increased outstanding common shares from 469,333 to 1,407,999.
Stockholders' equity has been restated to give retroactive recognition to the
stock splits for all periods presented by reclassifying from undivided profits
and capital surplus to common stock the par value of additional shares resulting
from the stock splits. In addition, all references in the Consolidated Financial
Statements and Notes thereto to number of shares, per share amounts, stock
option data and market prices of the common stock have been restated giving
retroactive recognition to the stock splits.
ASSET/LIABILITY MANAGEMENT. The Company's primary earnings source is net
interest income, which is affected by changes in the level of interest rates,
the relationship between rates, the impact of interest rate fluctuations on
asset prepayments, the level and composition of deposits, and the credit quality
of the portfolio. Management's asset/liability objectives are to maintain a
strong, stable net interest margin, to utilize its capital effectively without
taking undue risks and to maintain adequate liquidity.
The Company's Asset/ Liability Committee, comprised of members of senior
management and the Board, meets periodically to evaluate the impact of changes
in market interest rates on assets and liabilities, net interest margin, capital
and liquidity. Risk assessments are governed by policies and limits established
by senior management which are reviewed and approved by the full Board of
Directors.
As measured by the Interest Sensitivity Gap Table, the Company's estimated one
year cumulative interest sensitivity gap (the difference between assets and
liabilities that reprice or mature within such period) was a negative
$14,894,000, or (5.58)% of total assets. A gap is considered negative when
interest rate sensitive liabilities maturing or repricing within a specified
time period exceed the amount of interest rate sensitive assets repricing or
maturing within that same time period. A gap is considered positive when the
amount of interest rate sensitive assets maturing or repricing within a
specified time frame exceeds the amount of interest rate sensitive liabilities
repricing or maturing within that same time period. In a rising rate
environment, an institution with a negative gap would generally be expected,
absent the effects of other factors, to experience a greater increase in the
costs of its liabilities relative to the yields of its assets and thus a
decrease in the institution's net interest income, whereas an institution with a
positive gap would generally be expected to experience the opposite results.
Conversely, during a period of falling rates, a negative gap would tend to
result in an increase in net interest income while a positive gap would tend to
adversely affect net interest income.
1998 ANNUAL REPORT P.8
The economic environment continually presents uncertainties as to future
interest rate trends. The Asset/Liability Committee regularly monitors the
cumulative gap position, in addition to utilizing a model that projects net
interest income based on increasing or decreasing interest rates, in order to be
able to respond to changes in interest rates by adjusting the gap position.
INTEREST RATE SENSITIVITY ANALYSIS. The following table sets forth the amounts
of interest earning assets and interest-bearing liabilities outstanding at
December 31, 1998, which are anticipated by the Bank, using certain assumptions
based on historical experience and other data available to management, to
reprice or mature in each of the future time periods shown. This table does not
necessarily indicate the impact of general interest rate movements on the Bank's
net interest income because actual repricing of various assets and liabilities
is subject to customer discretion and competitive and other pressures and,
therefore, actual experience may vary from that indicated.
Over Three Over Six Over One
Three Months Months Year Over
Year ended December 31, 1998 Months Through Through Through Five
(Dollars in thousands, except financial ratios) or Less Six Months One Year Five Years Years Total
- -------------------------------------------------------------------------------------------------------------------------------
Interest Earning Assets:
Investment in debt and equity securities<F1> $ 2,732 $ 3,089 $ 7,518 $ 40,329 $ 19,449 $ 73,117
Total loans<F2> 63,199 6,340 11,196 58,702 29,259 168,696
Federal funds sold 3,150 -- -- -- -- 3,150
------------------------------------------------------------------------------
Total Interest Earning Assets $ 69,081 $ 9,429 $ 18,714 $ 99,031 $ 48,708 $244,963
Interest Bearing Liabilities:
Savings, N.O.W., and money
market accounts<F3> $ 56,245 $ -- $ -- $ -- $ 46,771 $103,016
Certificates of deposit 29,507 17,763 8,603 8,185 -- 64,058
------------------------------------------------------------------------------
Total Interest Bearing Liabilities $ 85,752 $ 17,763 $ 8,603 $ 8,185 $ 46,771 $167,074
------------------------------------------------------------------------------
Interest Sensitivity Gap Per Period $(16,671) $( 8,334) $ 10,111 $ 90,846 $ 1,937 $ 77,889
------------------------------------------------------------------------------
Cumulative Interest Sensitivity Gap $ 96,671) $(25,005) $(14,894) $ 75,952 $ 77,889
------------------------------------------------------------------------------
Gap to Total Assets -6.24% -9.37% -5.58% 28.45% 29.18%
------------------------------------------------------------------------------
<FN>
<F1>
Investment in debt and equity securities is shown excluding the fair value
appreciation of $1,629,000, before tax, due to the application of SFAS No. 115.
Investment in debt and equity securities includes interest earning deposits with
banks of $251,000.
<F2>
For the purpose of this table, nonaccrual loans of approximately $1,208,000 have
been included.
<F3>
Statement savings, N.O.W. and money market accounts have been included in the
"Three Months or Less" category. Passbook savings have been included in the
"Over Five Years" category.
</FN>
Certain shortcomings are inherent in the method of analysis presented. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market interest rates.
The table reflects the estimates of management as to periods to repricing at
particular points in time. Among the factors considered, management monitors
both current trends and its historical repricing experience with respect to
particular or similar products. For example, the Bank has a number of deposit
accounts, including passbook savings, NOW accounts and money market accounts
which may be withdrawn at any time. The Bank, based on historical experience,
assumes that while all customers in these account categories could withdraw
their funds on any given day, they will not do so, even if the market interest
rates were to change. As a result, different assumptions may be used at
different points in time.
MARKET RISK. Significant increases in the level of market interest rates also
may adversely affect the fair value of securities and other interest earning
assets. At December 31, 1998, $74,495,000 or 100% of the Company's securities
had fixed interest rates. Generally, the value of fixed rate instruments
fluctuates inversely with the changes in interest rates. As a result, increases
in interest rates could result in decreases in the market value of interest
earning assets which could adversely affect the Company's results of operations
if sold or, in the case of interest earning assets classified as available for
sale, the Company's stockholders' equity if retained. Increases 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 adversely impact the yields earned on the Company's loans
and securities. In periods of decreasing interest rates, the average life of
loans held by the Company may be shortened to the extent increased prepayment
activity occurs during such period which, in turn, may result in the investing
of funds from such prepayments in lower yielding assets.
The Company's interest rate sensitivity is monitored by management through the
use of a quarterly interest rate risk analysis model which evaluates (i) the
potential change in the net interest income over the succeeding four quarter
period and (ii) the potential change in the fair market value of the Company,
the "Net Economic Value of Equity of the Company", which would result from an
instantaneous and sustained interest rate change of plus or minus 200 basis
points, in 100 basis point increments.
p.9 BRIDGE BANCORP, INC. AND SUBSIDIARY
Managements's Discussion and Analysis of Financial Condition and
Results of Operations
(CONTINUED)
At December 31, 1998, net interest income over the succeeding four quarter
periods would be effected as follows given an instantaneous and sustained
interest rate change of:
Change Potential Change in
in Interest Net Economic Value
Rates in Potential of Equity as a
Basis Points Change in Net Percentage of
(RATE SHOCK) Interest Income of Total Assets
- ----------------------------------------------------------------------------
$ Change % Change $ Change % Change
----------------------------------------------------------
200 $ 481,000 3.43% $(313,000 ) (0.12)%
100 $ 244,000 1.74% * *
Static -- -- -- --
(100) ($347,000) (2.48)% * *
(200) ($751,000) (5.36)% $(295,000) (0.11)%
* The information on the potential effect of a 100 basis point change in market
interest rates on the net economic value of equity is not available. The 200
basis point rate shock estimates the potential effect of a change in market
interest rates, and the Company does not view the lack of information for a 100
basis point rate shock as meaningful.
As in the case of the gap table, certain shortcomings are inherent in the
methodology used in the above interest rate risk measurements. Modeling
potential changes in the net interest income and net economic value of equity
requires the making of certain assumptions which may or may not reflect the
manner in which actual yields and costs respond to changes in market interest
rates. In this regard, the model presented assumes that the composition of the
Company's interest sensitive assets and liabilities existing at the beginning of
a period remains constant over the period being measured and also assumes that a
particular change in interest rates is reflected uniformly across the yield
curve regardless of the duration to maturity or repricing of specific assets and
liabilities. Accordingly, although the net interest income models and net
economic value of equity measurements provide an indication of the Company's
interest rate exposure at a particular point in time, such measurements are not
intended to and do not provide a precise forecast of the effect of changes in
market interest rates on the Company's net interest income and will differ from
actual results.
ANALYSIS OF NET INTEREST INCOME. Net interest income, the primary contributor to
earnings, represents the difference between income on interest earning assets
and expenses on interest bearing liabilities.
The following table sets forth certain information relating to the Bank's
average consolidated statements of condition and reflects the average yield on
assets and average cost of liabilities for the periods indicated. Such yields
and costs are derived by dividing income or expense by the average balance of
assets or liabilities, respectively, for the periods shown. Average balances are
derived from daily average balances. Interest on nonaccruing loans has been
included only to the extent reflected in the consolidated statements of income.
However, the loan balances are included in the average amounts outstanding. Loan
fee income totaled $322,000 in 1998, $649,000 in 1997 and $598,000 in 1996. For
purpose of this table the average balances for investment in debt and equity
securities exclude unrealized appreciation/depreciation due to the application
of SFAS No.115.
Year Ended December 31, 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Average Average Average
Average Yield/ Average Yield/ Average Yield/
(Dollars in thousands) Balance Interest Cost Balance Interest Cost Balance Interest Cost
- ------------------------------------------------------------------------------------------------------------------------------------
Interest earning assets:
Loans (including fee income) $156,268 $ 14,461 9.3% $125,780 $ 12,400 9.9% $114,220 $ 11,261 9.9%
Deposits with banks 2,963 155 5.2% 1,320 73 5.5% 1,941 99 5.1%
Federal funds sold 3,721 202 5.4% 4,787 267 5.6% 4,422 243 5.5%
Taxable investment securities 14,034 916 6.5% 19,736 1,295 6.6% 19,703 1,286 6.5%
Tax exempt investment securities 26,055 1,177 4.5% 23,790 1,115 4.7% 17,474 907 5.2%
Other securities 1,083 78 7.2% 1,083 71 6.6% 736 48 6.5%
Mortgage backed securities 29,822 2,030 6.8% 28,395 2,003 7.1% 24,670 1,657 6.7%
--------------------------------------------------------------------------------------------
Total interest earning assets $233,946 $ 19,019 8.1% $204,891 $ 17,224 8.4% $183,166 $ 15,501 8.5%
Interest bearing liabilities:
Savings, N.O.W. and
money market deposits $ 90,522 $ 2,095 2.3% $ 71,703 $ 1,632 2.3% $ 68,342 $ 1,598 2.3%
Certificates of deposit of $100,000
or more 29,412 1,574 5.4% 28,601 1,560 5.5% 18,718 1,000 5.3%
Other time deposits 43,428 2,242 5.2% 42,456 2,230 5.3% 44,848 2,410 5.4%
Federal funds purchased -- -- -- 20 1 5.0% 22 1 4.5%
Other borrowings 1,230 67 5.4% 2,127 120 5.6% 1,143 63 5.5%
--------------------------------------------------------------------------------------------
Total interest bearing liabilities $164,592 $ 5,978 3.6% $144,907 $ 5,543 3.8% $133,073 $ 5,072 3.8%
--------------------------------------------------------------------------------------------
Net interest income/interest
rate spread $ 13,041 4.5% $ 11,681 4.6% $ 10,429 4.7%
-------- --- --------- --- -------- ---
Net earning assets/net yield on
average interest earning assets $ 69,354 5.6% $ 59,984 5.7% $ 50,093 5.7%
-------- --- --------- --- -------- ---
Ratio of interest earning assets to
interest bearing liabilities 142.1% 141.4% 137.6%
----- ----- -----
1998 ANNUAL REPORT p.10
RATE/VOLUME ANALYSIS. Net interest income can also be analyzed in terms of the
impact of changing rates and changing volumes. The following table describes the
extent to which changes in interest rates and changes in the volume of interest
earning assets and interest bearing liabilities have affected the Bank's
interest income and interest expense during the periods indicated. Information
is provided in each category with respect to (i) changes attributable to changes
in volume (changes in volume multiplied by prior rate), (ii) changes
attributable to changes in rates (changes in rates multiplied by prior volume),
and (iii) the net changes. For purposes of this table, changes which are not due
solely to volume changes or rate changes have been allocated to these categories
based on the respective percentage changes in average volume and average rate as
they compare to each other.
Year Ended December 31, 1998 Over 1997 1997 Over 1996
(In thousands) Changes Due To Changes Due To
- ------------------------------------------------------------------------------------------------------------------
Volume Rate Net Change Volume Rate Net Change
Interest Income on Interest Earning Assets:
Federal funds sold $ (58) $ (7) $ (65) $ 20 $ 4 $ 24
Deposits with banks 98 (16) 82 (34) 8 (26)
Taxable investment securities (372) (7) (379) 2 7 9
Tax exempt investment securities 103 (41) 62 303 (95) 208
Other securities -- 7 7 23 -- 23
Mortgage-backed securities 99 (72) 27 260 86 346
Loans (including loan fee income*) 2,858 (797) 2,061 1,140 (1) 1,139
---------------------------------------------------------------
Total interest earning assets 2,728 (933) 1,795 1,714 9 1,723
---------------------------------------------------------------
Interest expense on interest bearing liabilities:
Savings, NOW and money market deposits 435 28 463 77 (43) 34
Certificates of deposits of $100,000 or more 43 (29) 14 539 21 560
Other time deposits 50 (38) 12 (126) (54) (180)
Federal funds purchased (1) -- (1) -- -- --
Other borrowings (49) (4) (53) 56 1 57
---------------------------------------------------------------
Total interest bearing liabilities 478 (43) 435 546 (75) 471
---------------------------------------------------------------
Net interest income 2,250 (890) 1,360 1,168 84 1,252
===============================================================
* The net change in interest income relating to loan fee income was an decrease
of $327,000 in 1998 over 1997 and an increase of $51,000 in 1997 over 1996.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
GENERAL. Net income for 1998 totaled $3,895,000, or $.91 per share, as compared
to net income of $4,195,000 or $.99 per share for the year ended December 31,
1997. Net income increased 15.7%, compared to $3,366,000 or $.79 per share in
1997, excluding the gain on the sale of the Bank's former headquarters building
totaling $829,000 net of applicable taxes of $575,000. Highlights include: (i) a
$1,360,000 or 11.6% increase in net interest income; (ii) a $1,318,000 or 30.5%
decrease in total other income; and (iii) a $570,000 or 6.3% increase in total
other expenses over the same period in 1997. The provision for income taxes
decreased $243,000 or 10.4%.
NET INTEREST INCOME. Net interest income increased from $11,681,000 in 1997 to
$13,041,000 in 1998. The increase of 11.6% reflects an increase in average
earning assets from $204,891,000 in 1997 to $233,946,000 or 14.2% in 1998. The
net yield on average earning assets for 1998 decreased to 5.6% from 5.7% for
1997.
INTEREST INCOME. Total interest income (including loan fee income of $322,000 in
1998 and $649,000 in 1997) increased from $17,224,000 in 1997 to $19,019,000 in
1998, an increase of 10.4%. The yield on average interest earning assets for
1998 decreased to 8.1% from 8.4% for 1997.
Interest income on loans (including fee income) increased $2,061,000 during 1998
the result of an increase in average loans of 24.2% from $125,780,000 in 1997 to
$156,268,000 in 1998. The yield on average loans for 1998 decreased to 9.3% from
9.9% for 1997.
Interest on investment in debt and equity securities decreased $283,000 or 6.7%.
The decrease resulted from a decrease in average investment in debt and equity
securities from $73,004,000 in 1997 to $70,994,000 in 1998. In addition, the
average yield on debt and equity securities decreased from 6.1% in 1997 to 5.9%
in 1998.
INTEREST EXPENSE. Interest expense increased $435,000 to $5,978,000 in 1998 from
$5,543,000 in 1997. The increase in interest expense was caused by an increase
in average interest-bearing liabilities of 13.6% from $144,907,000 in 1997 to
$164,592,000 in 1998. The cost of average interest bearing liabilities decreased
to 3.6% from 3.8% during 1998.
PROVISION FOR LOAN LOSSES. The provision for loan losses increased $15,000 in
1998 to $425,000. The allowance for loan losses increased to $1,713,000 at
December 31, 1998 as compared with $ 1,393,000 at December 31, 1997. As a
percentage of loans, the allowance was 1.02% at December 31, 1998 in comparison
to 1.01% at December 31, 1997. A specific reserve was established in the third
quarter of the year primarily as a result of one loan
p.11 BRIDGE BANCORP, INC. AND SUBSIDIARY
Managements's Discussion and Analysis of Financial Condition and
Results of Operations
(CONTINUED)
relationship becoming nonperforming. Management is negotiating with the borrower
to minimize any losses and does not expect such losses to materially effect the
results of operations going forward.
The allowance as a percentage of nonperforming loans (including loans past due
90 days or more and still accruing) was 141.3% at December 31, 1998 compared to
142.6% at December 31, 1997. The allowance reflects management's evaluation of
classified loans, charge-off trends, concentrations of credit and other
pertinent factors. It also reflects input from the Bank's outside loan review
consultants. While management uses available information in estimating possible
loan losses, future additions to the allowance may be necessary based on future
changes in economic conditions.
OTHER INCOME. Other income decreased by $1,318,000 or 30.5% to $3,005,000 in
1998 compared to $4,323,000 in 1997. Other income increased $87,000 or 29.8% in
1998, excluding the gain on the sale of the Bank's former headquarters building
totaling $1,405,000. Income from mortgage banking activities for 1998 totaled
$1,306,000, an increase of $81,000 or 6.6% over 1997. The Bank's practice is to
originate and sell these mortgages in the secondary market. During 1998 the Bank
reorganized mortgage banking operations into their headquarter building. The
Bank expects to continue to penetrate the mortgage market, taking advantage of
the low interest rate environment fueling the refinance and construction loan
market. Net gains on securities were $47,000 in 1998 compared to $106,000 in
1997. Other operating income for the year ended December 31, 1998 totaled
$813,000, an increase of $31,000 or 4.0% over the last year. This change
primarily results from a decrease in merchant processing fees resulting from
increased interchange costs that took effect in Spring 1998 partially offset by
increased fee income including new surcharges imposed on non-bank customers'
transactions at automatic teller machines.
OTHER EXPENSES. Other expenses increased by $570,000 or 6.3% to $9,637,000 in
1998 from $9,067,000 in 1997. The components of this change included an increase
in salaries and employee benefits of $175,000 or 3.8%; an increase in furniture
and fixture expense of $122,000 or 21.2%; and an increase in other operating
expenses of $243,000 or 7.7%. Increases in salaries and benefits in the current
year, partially attributed to increased staffing primarily at the new
Southampton Village branch opened in the fall of 1997, were partially offset by
reduction of staff in mortgage banking operations. Increased furniture and
fixture expense primarily results from increased depreciation expenses relative
to equipment upgrades in preparation for Year 2000 readiness. The increase in
other operating expenses primarily results from increased personnel education
costs from the development of training programs; increased advertising and
promotion expenses; increased data and item processing expenses to an outsource
provider; and increased telephone costs attributable to improved data
communication lines between the Bank headquarters and the remote branches. These
expenses were partially offset by savings relative to servicing certain consumer
loans in house thereby eliminating an outside servicer.
PROVISION FOR INCOME TAXES. The provision for income taxes decreased to
$2,089,000 for 1998 from $2,332,000 for 1997. This decrease was due to income
before income taxes decreasing from $6,527,000 in 1997 to $5,984,000 in 1998.
The decrease also reflects the decrease in the effective tax rate to 35% in 1998
from 36% in 1997. The decrease in the effective tax rate resulted from a slight
decline in the effective state tax rate, net of the federal income tax benefit.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
GENERAL. Net income for 1997 was $4,195,000, an increase of $1,189,000 or 39.6%
from 1996 net income of $3,006,000. Net income includes a gain on the sale of
the Bank's former headquarters building totaling $829,000 net of applicable
taxes of $575,000. Highlights include: (i) a $1,252,000 or 12.0% increase in net
interest income; (ii) a $1,901,000 or 78.5% increase in total other income; and
(iii) a $1,107,000 or 13.9% increase in other expenses. The provision for income
taxes increased $777,000 or 50.0%.
NET INTEREST INCOME. Net interest income increased from $10,429,000 in 1996 to
$11,681,000 in 1997. The increase of 12.0% reflects an increase in average net
interest earning assets from $50,093,000 in 1996 to $59,984,000, or 19.7%, in
1997.
INTEREST INCOME. Total interest income (including loan fee income of $649,000 in
1997 and $598,000 in 1996) increased from $15,501,000 in 1996 to $17,224,000 in
1997, an increase of 11.1%. The increase from 1996 to 1997 was the result of an
increase in the average interest earning assets from $183,166,000 in 1996 to
$204,891,000 in 1997. The average yield on interest earning assets decreased
from 8.5% in 1996 to 8.4% in 1997.
Interest income on loans (including fee income) increased $1,139,000 during 1997
the result of an increase in average loans of 10.1% from $114,220,000 in 1996 to
$125,780,000 in 1997. The yield on average loans remained constant at 9.9%.
Interest on investment in debt and equity securities increased $586,000 or
15.0%. The increase resulted from an increase in average investment in debt and
equity securities from $62,583,000 in 1996 to $73,004,000 in 1997 offset by a
decrease in the average yield from 6.2% in 1996 to 6.1% in 1997.
INTEREST EXPENSE. Interest expense increased $471,000 to $5,543,000 in 1997 from
$5,072,000 in 1996. The increase in interest expense was caused by an increase
in average interest-bearing liabilities from $133,073,000 in 1996 to
$144,907,000 in 1997. The cost of average interest-bearing liabilities remained
the same at 3.8%.
1998 ANNUAL REPORT P.12
PROVISION FOR LOAN LOSSES. The provision for loan losses increased $80,000 in
1997 to $410,000. The allowance for loan losses increased to $1,393,000 at
December 31, 1997 as compared with $1,238,000 at December 31, 1996. The increase
in the allowance for loan losses was the result of an increase in average loans
from 1996 to 1997 of 10.1%. The allowance as a percentage of loans decreased
slightly, being 1.01% at year end 1997 in comparison to 1.04% at year end 1996.
The allowance as a percentage of nonperforming loans (including loans past due
90 days or more and still accruing) was 142.6% at year end 1997 compared to
460.2% at year end 1996. This decrease primarily results from one loan
relationship becoming nonperforming although management believes the borrowing
relationship in question is adequately collateralized. The allowance reflects
management's evaluation of classified loans, charge-off trends, economic
conditions, past due trends, concentrations of credit and other pertinent
factors. It also reflects input from the Bank's 1997 examination from the Office
of the Comptroller of the Currency (O.C.C.) and outside loan review consultants.
OTHER INCOME. Other income increased by $1,901,000 or 78.5% to $4,323,000 in
1997 compared to $2,422,000 in 1996. The increase resulted from a gain on the
sale of assets, principally the sale of the Bank's former headquarter's
building, of $1,405,000; and mortgage banking activities totaling $1,225,000, an
increase of $413,000 or 50.9% over the previous year resulting from the Bank's
efforts to further penetrate the mortgage market. The Bank's practice is to
originate and sell these mortgages in the secondary market. Service charges on
deposit accounts increased $107,000 or 15.3% to $805,000 from $698,000 in 1996
as a result of increased demand deposit accounts. Net gains on securities were
$106,000 in 1997 compared to $68,000 in 1996.
OTHER EXPENSES. Other expenses increased by $1,107,000 or 13.9% to $9,067,000 in
1997 from $7,960,000 in 1996. The components of this change included an increase
in salaries and employee benefits of $609,000 or 15.1% reflecting salary and
benefit increases and increased staffing; an increase in net occupancy expense
of $161,000 or 29.5%; and an increase in other operating expenses of $287,000 or
10.0%. Increased occupancy costs reflect the costs of the new headquarters
occupied in May of 1997, increased rental space in the Bank's residential
mortgage center and costs of opening an additional branch office in the Village
of Southampton in November 1997. Increased other operating costs primarily
result from increased loan processing expenses incurred by the Bank as part of a
product promotion, and from increased advertising and promotion expenses of
approximately $56,000 or 16.5% relative to the opening of the new headquarters
building.
PROVISION FOR INCOME TAXES. The provision for income taxes increased to
$2,332,000 for 1997 from $1,555,000 for 1996. This increase was due to income
before income taxes increasing from $4,561,000 in 1996 to $6,527,000 in 1997.
The increase reflects the growth in income before income taxes and the increase
in the effective tax rate to 36% in 1997 from 34% in 1996. The increase in the
effective tax rate resulted from decreased benefits of tax exempt income in
1997.
LIQUIDITY. The objective of liquidity management is to ensure the availability
of sufficient resources to meet all financial commitments. Liquidity management
addresses the ability to meet deposit withdrawals either on demand or
contractual maturity, to repay other borrowings as they mature and to make new
loans and investments as opportunities arise.
The Company's principal source of liquidity is dividends from the Bank. Due to
regulatory restrictions (see note 1k to the consolidated financial statements),
dividends from the Bank to the Company at December 31, 1998 were limited to
$6,034,000 which represents the Bank's 1998 retained net income and the net
undivided profits from the previous two years. The dividends received from the
Bank are used primarily for dividends to the shareholders. In the event 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 Company's most liquid assets are cash and cash equivalents, securities
available for sale and securities held to maturity due within one year. The
levels of these assets are dependent upon the Company's operating, financing,
lending and investing activities during any given period. Other sources of
liquidity include loan and security principal repayments and maturities, lines
of credit with other financial institutions, the sale of securities from the
available for sale portfolio, and growth in the core deposit base. While
scheduled loan amortization, maturing securities and short term investments are
a relatively predictable source of funds, deposit flows and loan prepayments are
greatly influenced by general interest rates, economic conditions and
competition. The Bank adjusts its liquidity levels as appropriate to meet
funding needs such as deposit outflows, loans, asset/liability objectives and
suggested O.C.C. measurements such as loans to capital ratios. At December 31,
1998, the Company had aggregate lines of credit of $8,000,000 with correspondent
banks to provide short term credit for liquidity requirements. The Company also
has the ability, as a member of the Federal Home Loan Bank ("FHLB") system, to
borrow approximately $12,171,800 in the form of an overnight line of credit, and
an additional $12,171,800 in the form of a one month line of credit. At December
31, 1998, the Company had no such borrowings outstanding.
p.13 BRIDGE BANCORP, INC. AND SUBSIDIARY
Managements's Discussion and Analysis of Financial Condition and
Results of Operations
(CONTINUED)
The Company's liquidity positions are monitored daily to ensure the maintenance
of an optimum level and efficient use of available funds. Management believes
the Company has sufficient liquidity to meet its operating requirements.
CAPITAL RESOURCES. As a result of undistributed net income, plus the change in
net unrealized appreciation in securities available for sale, net of tax, and
the issuance of common stock pursuant to the equity incentive plan, the
Company's stockholders' equity increased to $22,232,000 at December 31, 1998
from $19,451,000 at December 31, 1997. The ratio of stockholders' equity to
total assets decreased to 8.33% at year end 1998 from 8.34% at year end 1997.
The loan commitments outstanding as of December 31, 1998 totaled approximately
$39,719,000. The funding of such commitments is derived from the primary sources
of liquidity stated previously. See note 9B to the consolidated financial
statements for a discussion of loan commitments.
The Company exceeds the risk-based capital adequacy ratio levels required by the
regulatory agencies. Management believes that the current capital levels along
with future retained earnings will allow the Bank to maintain a position
exceeding required levels which will be more than adequate to meet the growth of
the Bank or any higher ratios required by the discretionary authority of the
regulators. The Company is prepared to issue additional common stock should the
need arise.
The Company had return on average equity of 19.19%, 23.08% and 18.84% and return
on average assets of 1.51%, 1.86%, and 1.51% for the years ended December 31,
1998, 1997 and 1996, respectively. Return on average equity and return on
average assets before the gain on the sale of assets, chiefly the former
headquarters, were 18.52% and 1.49%, respectively, for the year ended 1997.
IMPACT OF INFLATION AND CHANGING PRICES. The consolidated financial statements
and notes thereto presented herein have been prepared in accordance with
generally accepted accounting principles ("GAAP"), which requires the
measurements of financial position and operating results in historical dollars
without considering the changes in the relative purchasing power of money over
time due to inflation. The impact of inflation is reflected in the increased
costs of the Company's operations. Unlike industrial companies, nearly all the
assets and liabilities of the Company are monetary in nature. As a result,
interest rates have a greater impact on the Company's performance than do the
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or, to the same extent, as the price of goods or services.
IMPACT OF PROSPECTIVE ACCOUNTING STANDARDS. In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133"). This Statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The accounting
for changes in the fair value of a derivative depends on the intended use of a
derivative and the resulting designation. SFAS No. 133, which is effective for
all fiscal quarters of fiscal years beginning after June 15, 1999, will not
impact the Company's accounting or disclosures.
IMPACT OF THE YEAR 2000 ISSUE. The Bank is working diligently to assure a smooth
transition into the new millennium. To accomplish Year 2000 compliance, the Bank
has implemented a project plan as established by the banking regulatory
authorities. The established timetable breaks the plan into seven phases; the
awareness phase, inventory phase, assessment phase, renovation phase, validation
phase, implementation phase, and post implementation phase. Completion of the
plan through the implementation phase is targeted for the spring of 1999.
The Bank uses software purchased from third party vendors for all processing
applications; therefore, no significant internal program renovation by Bank
staff is necessary to prepare these systems to handle transactions in the Year
2000. The majority of the Bank's efforts in preparation for Year 2000 processing
relate to replacing or upgrading noncompliant software and hardware as well as
testing purchased and outsourced processing systems.
1998 ANNUAL REPORT p. 14
The Bank has established formal processes for identifying, assessing, and
managing the Year 2000 risks posed by internal bank activities, vendors, and
customers. By the end of the first quarter 1999, the Bank expects to complete an
initial assessment of the risks posed by its customers. The Bank has begun
evaluating Year 2000 readiness of commercial loan applicants as part of the
underwriting process, and is calling upon significant existing borrowers to
assess their readiness for Year 2000. Seminars have been offered to the Bank's
commercial and municipal customers, and the Bank has presented these seminars to
different community groups to educate the local public about the Year 2000
matter and the Bank's preparedness to address the issue.
Testing of internal systems was substantially completed by December 31, 1998.
Testing with significant third party vendors is expected to be substantially
completed by June 30, 1999. During 1999 the Bank will continue to monitor its
own internal activities and the plans of its vendors and customers to address
the Year 2000 issue.
The Bank utilizes Fiserv, Inc., one of the largest data processing providers for
banks and savings institutions to perform its core systems data processing.
Fiserv runs software from Information Technology Inc. (ITI) to perform a
significant portion of its data processing activities. This application, which
handles processing of loans, deposits, general ledger, accounts payable,
stockholder ledger, fixed assets, and other ancillary applications, is believed
to be Year 2000 ready according to the vendor. However, the Bank has embarked on
a project to thoroughly test the system for Year 2000 compliance. If Year 2000
processing problems are uncovered during the testing phase, ITI is committed to
correct those problems. In addition, the Bank is currently in the process of
developing contingency plans with respect to all critical services and
operations regardless if performed internally or by external sources including
outside vendors. This plan is a coordinated effort with a three fold goal of
ensuring that the century date change occurs with minimal, if any, disruptions
of service to both the institution and its customers, minimizing any possibility
of financial losses, and ensuring a timely resumption of normal banking
operations.
Monitoring and managing the Year 2000 project will result in additional direct
and indirect costs to the Bank. Direct costs include potential charges by third
party software vendors for product enhancements, costs involved in testing
software products for Year 2000 compliance, and any resulting costs for
developing and implementing contingency plans for critical software products
that are not enhanced. Indirect costs will principally consist of time devoted
by existing employees in monitoring software vendor progress, testing enhanced
software products and implementing any necessary contingency plans. These costs
will be charged to earnings as incurred.
The Bank is also currently upgrading equipment in its branch and back office
systems to better serve its customers and improve the efficiency of its
operations. The timing of the upgrades was accelerated as a result of the Year
2000 issue. The total cost of the upgrades is expected to be approximately
$332,000 of which approximately $132,000 remains to be placed in service by the
early part of 1999. Based on current information, management does not expect
these costs when taken together with other Year 2000 compliance costs to
materially impact the Company's future results of operations, financial
condition, or liquidity.
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT. In addition to
historical information, this Annual Report includes certain forward-looking
statements based on current management expectations. The Bank's annual results
could differ materially from those management expectations contemplated by the
forward-looking statements. Factors that could cause future results to vary from
current management expectations include, but are not limited to, general
economic conditions, legislative and regulatory changes, monetary and fiscal
policies of the federal government, changes in tax policies, rates and
regulations of federal, state and local tax authorities, changes in interest
rates, deposit flows, the cost of funds, demand for loan products, demand for
financial services, competition, changes in the quality and composition of the
Bank's loan and investment portfolios, changes in accounting principles,
policies or guidelines, and other economic, competitive, governmental and
technological factors affecting the Bank's operations, markets, products,
services and prices. In addition, the Bank assumes no duty to update
forward-looking statements.
p. 15 BRIDGE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
(In thousands, except share and per share amounts)
December 31, 1998 1997
- ---------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 10,881 $ 12,740
Interest earning deposits with banks 251 89
Federal funds sold 3,150 --
-------------------------
Total cash and cash equivalents 14,282 12,829
Investment in debt and equity securities, net:
Securities available for sale, at fair value 69,443 60,190
Securities held to maturity (fair value of $5,067
and $11,823 respectively) 5,052 11,812
-------------------------
Total investment in debt and equity securities, net 74,495 72,002
Loans 168,696 138,636
Less:
Allowance for loan losses (1,713) (1,393)
-------------------------
Loans, net 166,983 137,243
Banking premises and equipment, net 8,583 8,728
Accrued interest receivable 1,525 1,460
Other assets 1,083 850
-------------------------
TOTAL ASSETS $266,951 $233,112
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits $ 74,457 $ 63,629
Savings, NOW, and money market deposits 103,016 76,740
Certificates of deposit of $100,000 or more 21,177 20,872
Other time deposits 42,881 42,456
-------------------------
Total deposits 241,531 203,697
Overnight borrowings -- 6,500
Accrued interest on depositors' accounts 1,439 1,244
Deferred income taxes 91 94
Other liabilities and accrued expenses 1,658 2,126
-------------------------
Total Liabilities 244,719 213,661
-------------------------
Stockholders' equity:
Common stock, par value $5.00 per share:
Authorized: 6,500,000 shares; issued and outstanding
4,234,797 shares at 12/31/98 and 4,223,997 at 12/31/97 21,660 7,202
Surplus 51 607
Undivided profits 180 11,509
Less: Treasury Stock at cost, 97,200 shares (621) (621)
-------------------------
21,270 18,697
Accumulated other comprehensive income, net of taxes 962 754
-------------------------
Total Stockholders' Equity 22,232 19,451
Commitments and contingencies (Note 9)
-------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $266,951 $233,112
=========================
See accompanying notes to the consolidated financial statements.
1998 ANNUAL REPORT p.16
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
Year ended December 31, 1998 1997 1996
- ------------------------------------------------------------------------------------
Interest income:
Loans (including fee income) $14,461 $12,400 $11,261
Mortgage-backed securities 2,030 2,003 1,657
Obligations of NY State & political subdivisions 1,177 1,115 907
U.S. Treasury and government agency securities 916 1,295 1,286
Federal funds sold 202 267 243
Other 233 144 147
-------------------------------
Total interest income 19,019 17,224 15,501
-------------------------------
Interest expense:
Savings, N.O.W. and money market deposits 2,095 1,632 1,598
Certificates of deposit of $100,000 or more 1,574 1,560 1,000
Other time deposits 2,242 2,230 2,410
Other borrowings 67 121 64
-------------------------------
Total interest expense 5,978 5,543 5,072
-------------------------------
Net interest income 13,041 11,681 10,429
Provision for loan losses 425 410 330
-------------------------------
Net interest income after provision for
loan losses 12,616 11,271 10,099
-------------------------------
Other income:
Mortgage banking activities 1,306 1,225 812
Service charges on deposit accounts 839 805 698
Gain on sale of building -- 1,405 --
Net securities gains 47 106 68
Other operating income 813 782 844
-------------------------------
Total other income 3,005 4,323 2,422
-------------------------------
Other expenses:
Salaries and employee benefits 4,801 4,626 4,017
Net occupancy expense 737 707 546
Furniture and fixture expense 698 576 526
Other operating expenses 3,401 3,158 2,871
-------------------------------
Total other expenses 9,637 9,067 7,960
-------------------------------
Income before provision for income taxes 5,984 6,527 4,561
Provision for income taxes 2,089 2,332 1,555
-------------------------------
Net income $ 3,895 $ 4,195 $ 3,006
===============================
Basic earnings per share $ 0.92 $ 0.99 $ 0.70
===============================
Diluted earnings per share $ 0.91 $ 0.99 $ --
===============================
See accompanying notes to the consolidated financial statements. All per share
amounts have been adjusted to reflect the effects of the split.
p.17 BRIDGE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
(In thousands, except per share amounts)
Accumulated
Other
Common Stock Comprehensive Undivided Treasury Comprehensive
Shares Amount Surplus Income profits Stock Income Total
--------------------------------------------------------------------------------
Balance at December 31, 1995 480,000 $ 2,400 $600 $ -- $12,068 $ -- $352 $15,420
Net income -- -- -- 3,006 3,006 -- -- 3,006
Cash dividends declared, $.23 per share (987) (987)
Net change in unrealized appreciation in
securities available for sale, net of tax<F1> -- -- -- 108 -- -- 108 108
------
Purchase of 10,800 shares to be held
in treasury, at cost (10,800) -- -- (621) (621)
Comprehensive Income -- -- -- $3,114 -- -- --
---------------------------------======------------------------------------------
Balance at December 31, 1996 469,200 2,400 600 14,087 (621) 460 16,926
--------------------------------- -----------------------------------------
Net income -- -- -- $4,195 4,195 -- 4,195
Issuance of restricted common stock 133 1 7 8
Effect of stock split (in the form of a
stock dividend) 938,666 4,801 -- (4,801) --
Cash dividends declared, $.47 per share (1,972) (1,972)
Net change in unrealized appreciation in
securities available for sale, net of tax<F1> -- -- -- 294 -- -- 294 294
------
Comprehensive Income -- -- -- $4,489 -- -- --
---------------------------------======------------------------------------------
Balance at December 31, 1997 1,407,999 7,202 607 11,509 (621) 754 19,451
================================= ==========================================
Net income -- -- -- $3,895 3,895 -- -- 3,895
Exercise of stock options 3,600 18 142 160
Effect of stock split (in the form of a
stock dividend) 2,823,198 14,440 (698) (13,742) --
Cash dividends declared, $.35 per share (1,482) (1,482)
Net change in unrealized appreciation in
securities available for sale, net of tax<F1> -- -- -- 208 -- -- 208 208
------
Comprehensive Income -- -- -- $4,103 -- -- --
---------------------------------======------------------------------------------
Balance at December 31, 1998 4,234,797 $21,660 $ 51 $ 180 $(621) $962 $22,232
================================= ==========================================
<FN>
<F1>
Disclosure of reclassification amount:
December 31, 1998 1997 1996
- --------------------------------------------------------------------------
Comprehensive Income Items
Unrealized gain arising during the period $236 $356 $148
Less: reclassification adjustments for
gains included in income (28) (62) (40)
-----------------------
Net unrealized appreciation $208 $294 $108
</FN>
See accompanying notes to the consolidated financial statements.
1998 ANNUAL REPORT p. 18
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Twelve months ended December 31, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------
Operating activities:
Net Income $ 3,895 $ 4,195 $ 3,006
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 425 410 330
Depreciation and amortization 698 564 415
Accretion of discounts (85) (64) (96)
Amortization of premiums 143 126 329
Gain on sale of assets (1) (1,405) --
Gain on sale of other real estate owned -- -- (4)
Net securities gains (47) (106) (68)
(Increase) Decrease in accrued interest receivable (65) (117) 181
Benefit for deferred income taxes (144) (60) (56)
(Increase) Decrease in other assets (233) 348 235
Increase (Decrease) in accrued and other liabilities 289 (411) 183
--------------------------------
Net cash provided by operating activities 4,875 3,480 4,455
--------------------------------
Investing activities:
Purchases of securities available for sale (21,955) (32,464) (58,901)
Purchases of securities held to maturity (3,969) (10,729) (5,599)
Proceeds from sales of securities available for sale 2,052 24,239 38,473
Proceeds from maturing securities available for sale 2,870 2,060 8,810
Proceeds from maturing securities held to maturity 10,729 5,179 5,761
Proceeds from principal payments on mortgage-backed securities 8,118 4,297 6,544
Proceeds from sale of building -- 1,554 --
Net increase in loans (30,165) (20,010) (7,531)
Proceeds from sale of other real estate owned -- -- 239
Purchases of banking premises and equipment, net of retirements (553) (2,668) (3,413)
--------------------------------
Net cash used by investing activities (32,873) (28,542) (15,617)
--------------------------------
Financing activities:
Net increase in deposits 37,834 18,850 18,703
(Decrease) Increase in other borrowings (6,500) 6,500 --
Payment for purchase of treasury stock -- -- (621)
Net proceeds from issuance of restricted common stock
issued pursuant to equity incentive plan -- 8 --
Net proceeds from exercise of stock options
issued pursuant to equity incentive plan 160 -- --
Cash dividends paid (2,043) (1,032) (835)
--------------------------------
Net cash provided by financing activities 29,451 24,326 17,247
--------------------------------
Increase (Decrease) in cash and cash equivalents 1,453 (736) 6,085
Cash and cash equivalents beginning of period 12,829 13,565 7,480
--------------------------------
Cash and cash equivalents end of period $ 14,282 $ 12,829 $ 13,565
================================
Supplemental information-Cash Flows:
Cash paid for:
Interest $ 5,782 $ 5,835 $ 5,016
Income taxes $ 2,149 $ 2,493 $ 1,474
Noncash investing and financing activities:
Dividends declared and unpaid $ 1,059 $ 1,620 $ 680
See accompanying notes to the consolidated financial statements.
p. 19 BRIDGE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
1. Summary of Significant Accounting Policies
Bridge Bancorp, Inc. (the Company) is chartered by the State of New York as a
one bank holding company. The Company's business currently consists of the
operations of its wholly-owned subsidiary, The Bridgehampton National Bank (the
Bank). The accounting and reporting policies of the Bank conform to generally
accepted accounting principles and to general practices within the financial
institution industry. The following is a description of the more significant
accounting policies that the Company follows in preparing its consolidated
financial statements.
a) 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.
In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of each consolidated statement of condition and the
related consolidated statement of income for the year then ended. Actual results
could differ from those estimates.
Certain reclassifications have been made to prior year amounts to conform to the
current year presentation.
b) 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.
c) Investment in Debt and Equity Securities
The Company has adopted Statement of Financial Accounting Standard (SFAS) No.
115 "Accounting for Certain investments in Debt and Equity Securities". Under
SFAS No. 115, the Company is required to report readily-marketable equity and
debt securities in one of the following categories: (i) "held-to-maturity"
(management has a positive intent and ability to hold to maturity) which are to
be reported at amortized cost; (ii) "trading" (held for current resale) which
are to be reported at fair value, with unrealized gains and losses included in
earnings; and (iii) "available for sale" (all other debt and marketable equity
securities) which are to be reported at fair value, with unrealized gains and
losses excluded from earnings and reported, net of tax, as a separate component
of stockholder's equity.
Included in investment securities are mortgage-backed securities that represent
participating interests in pools of long term mortgage loans originated and
serviced by the issuers of the securities and real estate mortgage investment
conduit (REMIC) certificates which represent beneficial interests in a pool of
mortgage-backed securities held in a trust. These securities are carried at fair
value.
Premiums and discounts on investment in debt and equity securities are amortized
to expense and accreted to income over the estimated life of the respective
securities using a method which approximates the level yield method. Gains and
losses on the sales of securities are recognized upon realization based on the
specific identification method.
d) Loans and Loan Interest Income Recognition
Loans are stated at the principal amount outstanding, interest on loans is
credited to income based on the principal outstanding during the period. Loans
that are 90 days past due are placed on a nonaccrual basis. Exceptions to this
policy are loans that are fully and adequately secured and are in the process of
collection.
Mortgage loans held for sale are carried at the lower of cost or estimated
market value, determined on an aggregate basis. Mortgage loans are primarily
sold with the servicing released. Any retained servicing rights are packaged and
sold periodically. Retained servicing rights at year end were immaterial and
therefore are not reflected in the Bank's financial statements.
All of the Bank's nonaccruing loans are considered impaired under SFAS No. 114
"Accounting by Creditors for Impairmenet of a Loan." In accordance with SFAS No.
114, a valuation allowance is established on impaired loans to reflect the
difference, if any, between face amount of the loan and the present value of
expected future cash flow discounted at the loan's effective interest rate, or
as a practical expedient, at the loan's observable market price or the fair
value of the collateral.
During 1998, the Bank began deferring non refundable loan origination fees and
amortizing these fees as yield adjustments over the life of the related loans.
In prior years loan origination costs and commitment fees were recorded as
income when received. The effect of this change in accounting treatment reduced
income before provision for income taxes, by approximately $284,000 and is not
considered material. Direct loan origination costs are expensed as incurred.
e) Allowance for Loan Losses
The adequacy of the allowance for loan losses is determined based on
management's detailed analysis of classified loans, past loss experience,
current economic conditions, delinquency trends and other pertinent factors.
Additions to the allowance are charged to expense and realized losses, net of
recoveries, are charged to the allowance.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in conditions. In
addition, various regulatory agencies, as an integral part of the examination
process, periodically review the Bank's allowance for loan losses. Such agencies
may require the Bank to recognize additions to the allowance based on their
judgments about information available to them at the time of their examination.
f) Banking Premises and Equipment
Banking premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation on banking premises and equipment is computed on
the straight-line method over the estimated useful lives of the assets (50 years
for buildings and 2 to 10 years for furniture and fixtures). Leasehold
improvements are amortized on a straight-line method over the terms of the
related leases.
g) 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 unpaid principal
balance at the foreclosure date plus acquisition costs or fair value. Subsequent
valuation adjustments are made if fair value less estimated costs to sell the
property falls below the carrying amount.
1998 ANNUAL REPORT p.20
h) Income Taxes
The Company follows SFAS No. 109 which requires an asset and liability approach
for accounting for income taxes. The asset and liability approach 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. Under SFAS No. 109 deferred tax assets are
recognized if it is more likely than not that a future benefit will be realized.
It is management's position, as currently supported by the facts and
circumstances, that no valuation allowance is necessary against any of the
Company's deferred tax assets.
i) Treasury Stock
Repurchases of common stock are recorded as treasury stock at cost.
j) Earnings Per Share
Earnings per share is computed by dividing net income by the weighted average
number of shares of common stock and dilutive common stock equivalents
outstanding. For the year ended December 31, 1998, 1997 and 1996, diluted
weighted average common stock and common stock equivalent shares outstanding for
the diluted earnings per share were 4,270,991, 4,234,866 and 4,264,497,
respectively. For the year ended December 31, 1998, 1997 and 1996, the total
weighted average number of shares of common stock outstanding for the basic
earnings per share calculation were 4,229,307, 4,223,703 and 4,264,497,
respectively.
k) Dividends
Cash available for dividend distribution to shareholders of the Company must
initially come from dividends paid by the Bank to the Company. The approval of
the Regional Administrator of National Banks is required if the total of all
dividends declared by the Bank in any calendar year exceeds the total of the
Bank's net income of that year combined with its retained net income of the
preceding two years. The Bank had approximately $6,034,000 available as of
December 31, 1998 which may be paid to the Company as a dividend.
l) Stock Splits
On July 20, 1998, the Board of Directors declared a three-for-one stock split in
the form of a stock dividend payable August 31, 1998 to stockholders of record
as of August 19, 1998. The stock split increased outstanding common shares from
1,411,599 to 4,234,797. On April 15, 1997, the Board of Directors declared a
three-for-one stock split in the form of a stock dividend payable May 30, 1997
to stockholders of record as of May 1, 1997. The stock split increased
outstanding common shares from 469,333 to 1,407,999. Stockholders' equity has
been reclassified to give retroactive recognition to the stock splits for all
periods presented by reclassifying from undivided profits and capital surplus to
common stock the par value of additional shares resulting from the stock splits.
In addition, all references in the Consolidated Financial Statements and Notes
thereto to number of shares, per share amounts, stock option data and market
prices of the common stock have been restated giving retroactive recognition to
the stock splits.
m) Stock Based Compensation Plans
SFAS No. 123 "Accounting for Stock-Based Compensation," encourages, but does not
require companies to record compensation cost for stock-based compensation plans
at fair value. The Company continues to account for stock based compensation
using the intrinsic value method prescribed in Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees" .
n) Report of Independent Public Accountants
The notes to the consolidated financial statements include selected information
as of December 31, 1996, 1995, and 1994 and for the years ended December 31,
1996 and 1995. Such information is not covered by the Report of Independent
Public Accountants.
IMPACT OF NEW ACCOUNTING STANDARDS. In June 1996, the Financial Accounting
Standards Board (FASB) issued SFAS No. 125 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities". This statement
is effective for transfers and servicing of financial assets and extinguishment
of liabilities occurring after December 31, 1996.
In March 1997, the FASB issued SFAS No. 128 "Earnings per Share," superseding
APB Opinion No. 15. The main goal of the Statement is to harmonize the
earnings per share calculation in the United States with those common in other
countries and with International Accounting Standard No. 33.
In March 1997, the FASB issued SFAS No. 129, "Disclosures of Information about
Capital Structure." SFAS No. 129 continues the existing requirements to disclose
the pertinent rights and privileges of all securities other than the ordinary
common stock but expands the number of companies subject to portions of its
requirements.
SFAS Nos. 125, 128 and 129 were adopted in 1997 without any material effect on
the Company's financial statements.
The Company adopted Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" in 1998. All comparative financial statements
provided for earlier periods have been reclassified to reflect application of
the provisions of this Statement.
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 related income taxes. Accumulated other comprehensive income for the Company
consists solely of unrealized holding gains or losses on available for sale
securities. Such gains or losses are net of reclassification adjustments for
realized gains (losses) on sales of available for sale securities.
In July 1997, the FASB issued SFAS No. 131 "Disclosures About Segments of an
Enterprise and Related Information." Statement No. 131 requires disclosures for
each segment that are similar to those required under standards with the
addition of quarterly disclosure requirements and a finer partitioning of
geographic disclosures. The Statement is effective for fiscal years beginning
after December 15, 1997 with earlier application permitted.
In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures about
Pensions and Other Post-Retirement Benefits." This statement revises the
previously required disclosures related to employers' pensions and other
post-retirement benefits, but does
p. 21 BRIDGE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(CONTINUED)
not change the measurement or recognition of those plans. The prior year
disclosures related to employee benefit plans have been revised to conform to
the new format required by SFAS No. 132.
In management's opinion, the adoption of SFAS No. 131 and 132 did not have a
material effect on the Company's financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards NO. 133 "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133). This Statement established accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measures those instruments at fair value.
The accounting for changes in the fair value of a derivative depends on the
intended use of a derivative an the resulting designation. SFAS No. 133, which
is effective for all fiscal quarters of fiscal years beginning after June 15,
1999, will not effect the company's accounting or disclosures.
2. Investment in Debt and Equity Securities
A summary of the amortized cost, gross unrealized gains, gross unrealized losses
and estimated fair value of investment securities is as follows:
December 31, 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Gross Gross Esti- Gross Gross Esti- Gross Gross Esti-
Amor- Unreal- Unreal- mated Amor- Unreal- Unreal- mated Amor- Unreal- Unreal- mated
tized ized ized Fair tized ized ized Fair tized ized ized Fair
(In thousands) Cost Gains Losses Value Cost Gains Losses Value Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------------
Available for sale:
U.S. Treasury securities $12,065 $ 484 -- $12,549 $14,084 $ 325 - $14,409 $16,102 $ 244 -- $16,346
Oblig. of U.S. Government
agencies -- -- -- -- -- -- - -- 1,985 24 -- $ 2,009
Oblig. of NY State & pol.subs 21,395 627 -- 22,022 18,636 427 - 19,063 15,567 303 -- 15,870
Mortgage-backed securities 34,354 533 (15) 34,902 26,190 528 - 26,718 23,344 218 (8) 23,570
-------------------------------------------------------------------------------------------------
Total available for sale $67,814 $ 1,644 (15) $69,473 $58,910 $ 1,280 - $60,190 $56,998 $ 789 (8) $57,795
-------------------------------------------------------------------------------------------------
Held to maturity:
Oblig. of NY State & pol.subs $ 3,969 $ 15 -- $ 3,984 $10,729 $ 11 - $10,740 $ 5,179 $ 11 -- $ 5,190
Non marketable Equity securities:
Federal Reserve Bank Stock $ 36 -- -- $ 36 $ 36 -- - $ 36 $ 36 -- -- $ 36
Federal Home Loan Bank Stock 1,047 -- -- 1,047 1,047 -- - 1,047 1,047 -- -- 1,047
-------------------------------------------------------------------------------------------------
Total held to maturity $ 5,052 $ 15 -- $ 5,067 $11,812 $ 11 - $11,823 $ 6,262 $ 11 -- $ 6,273
-------------------------------------------------------------------------------------------------
Total debt and equity securities $72,866 $ 1,659 $(15) $74,540 $70,722 $ 1,291 - $72,013 $63,260 $ 800 $(8) $64,068
=================================================================================================
The following table sets forth the book value, maturities and approximated
weighted average yield (based on the estimated annual income divided by the
average book value) at December 31,1998. 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 not been computed on a tax-equivalent basis.
Principal Maturing
-----------------------------------------------------------------------------------------------
Within After One But After Five But After No Stated
One Year Within Five Years Within Ten Years Ten Years Maturity
-----------------------------------------------------------------------------------------------
(In thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Total
- ------------------------------------------------------------------------------------------------------------------------------------
Available for sale:
U.S.Treasury securities -- -- $12,066 6.50% -- -- -- -- -- -- $12,066
Mortgage-backed securities -- -- -- -- $ 5,813 7.13% $28,540 6.57% -- -- 34,353
Oblig.of state and pol.subs $ 126 5.17% 10,914 4.68% 10,355 4.32% -- -- -- -- 21,395
-----------------------------------------------------------------------------------------------
Total available for sale 126 5.17% 22,980 5.64% 16,168 5.33% 28,540 6.57% -- -- 67,814
-----------------------------------------------------------------------------------------------
Held to maturity:
Oblig.of state and pol.subs 3,969 3.63% -- -- -- -- -- -- -- -- 3,969
-----------------------------------------------------------------------------------------------
3,969 3.63% -- -- -- -- -- -- -- -- 3,969
Non marketable equity securities:
Federal Reserve Bank Stock -- -- -- -- -- -- -- -- 36 6.00% 36
Federal Home Loan Bank Stock -- -- -- -- -- -- -- -- 1,047 7.25% 1,047
-----------------------------------------------------------------------------------------------
Total non marketable equity
securities -- -- -- -- -- -- -- -- 1,083 7.21% 1,083
-----------------------------------------------------------------------------------------------
Total held to maturity 3,969 3.63% -- -- -- -- -- -- 1,083 7.21% 5,052
-----------------------------------------------------------------------------------------------
Total debt and equity
securities $4,095 3.68% $22,980 5.64% $16,168 5.33% $28,540 6.57%$ 1,083 7.21% $72,866
===============================================================================================
1998 ANNUAL REPORT p. 22
Proceeds from sales of available for sale securities were approximately
$2,052,000, $24,239,000 and $38,473,000 in 1998, 1997 and 1996, respectively.
Gross gains of approximately $47,000, $114,000 and $257,000 were realized on
sales of available for sale securities during 1998, 1997 and 1996, respectively.
During 1998 there were no gross losses recognized on sales of available for sale
securities. Gross losses of approximately $8,000 and $189,000 were realized on
sales of available for sale securities during 1997 and 1996, respectively. There
were no sales of held to maturity securities during 1998, 1997 and 1996.
Investment securities having an amortized cost of approximately $50,125,000 and
$62,429,000 at December 31, 1998 and 1997, respectively, were pledged to secure
public deposits.
Investments in debt and equity securities which exceed 10% of stockholders'
equity for any one issuer (other than U.S. Government securities) are as
follows:
December 31, 1998
- -----------------------------------------------------------------
Amortized Estimated
(In thousands) Cost Fair Value
- -----------------------------------------------------------------
Springs Union Free School District $2,400 $2,409
- -----------------------------------------------------------------
3. LOANS
The following table sets forth the major classifications of loans:
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
(In thousands)
Real estate loans $ 141,625 $ 114,357 $ 93,639 $ 81,394 $ 67,291
Unsecured business and personal loans 23,639 17,638 13,211 11,798 10,094
Secured business and personal loans 2,534 725 317 654 973
Installment/consumer loans 1,182 5,916 11,714 17,634 15,773
-------------------------------------------------------------
Total Loans $ 168,980 $ 138,636 $ 118,881 $ 111,480 $ 94,131
Unearned Income (284) -- -- -- --
-------------------------------------------------------------
$ 168,696 $ 138,636 $ 118,881 $ 111,480 $ 94,131
Allowance For Loan Losses (1,713) (1,393) (1,238) (1,038) (944)
-------------------------------------------------------------
Net Loans $ 166,983 $ 137,243 $ 117,643 $ 110,442 $ 93,187
=============================================================
LENDING RISK. The principal business of the Bank is lending, primarily in
commercial real estate loans, construction loan mortgages, home equity loans,
land loans, consumer loans, home advantage loans, residential mortgages and
commercial loans. The Bank considers its primary lending area as the five East
End towns of Suffolk County, New York. Since the primary lending area of the
Bank is the two forks of the eastern end of Long Island, the loan portfolio as a
whole is dependant on the economic conditions of the geographic market served by
the Bank.
ALLOWANCE FOR LOAN LOSSES. Management uses criteria set forth by the OCC in its
classification and review of the loan portfolio which includes a general
allocation reserve for each loan type. Reserves are reviewed on a quarterly
basis to determine if any adjustments are necessary. The information reviewed
includes past due trends, charge-off trends, economic conditions and
concentrations of credit. The provisions for loan losses in 1998 was used to
bring the allowance for loan losses to an adequate reserve level to support the
Bank's asset quality as well as to reflect the increase in loan growth during
the year. Based on the loan classification committee's review of the classified
loans and the overall reserve levels as they relates to the entire loan
portfolio, management believes the allowance for loan losses is adequate.
However, future additions to the allowance may be necessary based on changes in
conditions.
p.23 BRIDGE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(CONTINUED)
The following table sets forth changes in the allowance for possible loan
losses.
December 31, 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------
(In thousands)
Allowance for loan losses
balance at beginning of period $1,393 $1,238 $1,038 $ 944 $ 747
Charge-offs:
Real estate loans -- -- -- 2 26
Unsecured business & personal loans 31 87 11 64 27
Installment/consumer loans 165 229 264 164 123
----------------------------------------------
Total 196 316 275 230 176
Recoveries:
Real estate loans -- -- -- 1 --
Unsecured business & personal loans 32 6 79 23 12
Installment/consumer loans 59 55 66 32 28
----------------------------------------------
Total 91 61 145 56 40
----------------------------------------------
Net charge-offs 105 255 130 174 136
Provision for loan losses
charged to operations 425 410 330 268 333
----------------------------------------------
Balance at end of period $1,713 $1,393 $1,238 $1,038 $ 944
==============================================
Ratio of net charge-offs during period
to average loans outstanding 0.07% 0.20% 0.11% 0.16% 0.17%
==============================================
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES. The following table sets forth the
allocation of the total allowance for loan losses by loan type.
Year Ended December 31, 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
(In thousands, except for percentages) 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
----------------------------------------------------------------------------------------
Real estate loans $1,122 83.8% $ 868 82.5% $ 685 78.8% $ 576 73.0% $ 517 71.5%
Unsecured business and personal loans 38 14.0% 336 12.7% 301 11.1% 179 10.6% 165 10.7%
Secured business and personal loans 507 1.5% 1 0.5% 1 0.3% 1 0.6% 5 1.0%
Installment/consumer loans 46 0.7% 188 4.3% 251 9.8% 282 15.8% 257 16.8%
----------------------------------------------------------------------------------------
Total $1,713 100.0% $1,393 100.0% $1,238 100.0% $1,038 100.0% $ 944 100.0%
========================================================================================
SELECTED LOAN MATURITY INFORMATION. The following table sets forth the
approximate maturities and sensitivity to changes in interest rates of certain
loans, exclusive of non-commercial real estate mortgages and consumer loans to
individuals as of December 31, 1998.
After One
Within One But Within After
Year Five Years Five Years Total
- --------------------------------------------------------------------------------
(In thousands)
Commercial loans $ 1,456 $ 2,064 $69,346 $72,866
Construction loans 17,058 4,353 4,877 26,288
-----------------------------------------
Total loans $18,514 $ 6,417 $74,223 $99,154
=========================================
Rate provisions:
Amounts with fixed interest rates $ 229 $ 290 $ 6,546 $ 7,065
Amounts with variable interest rates 18,285 6,127 67,677 92,089
-----------------------------------------
Total $18,514 $ 6,417 $74,223 $99,154
=========================================
1998 ANNUAL REPORT p.24
PAST DUE, NONACCRUAL AND RESTRUCTURED LOANS. The following table sets forth
selected information about past due, nonaccrual and restructured loans.
December 31, 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------
(In thousands)
Loans 90 days or more past due
and still accruing $ 4 $ 1 $ 1 -- --
Nonaccrual loans 1,208 975 269 $ 507 $ 422
Restructured loans -- -- -- -- --
Other real estate owned, net -- -- -- 235 782
------------------------------------------
Total $1,212 $ 976 $ 270 $ 742 $1,204
==========================================
Year Ended December 31,
Gross interest income that would have been
recorded during the year under
original terms:
Nonaccrual loans $ 128 $ 163 $ 50 $ 58 $ 19
Restructured loans -- -- -- -- --
Gross interest income recorded during the year:
Nonaccrual loans $ 37 $ 151 $ 42 $ 12 $ 22
Restructured loans -- -- -- -- --
Commitments for additional funds -- -- -- -- --
As of December 31, 1998, the Bank did not have any impaired loans as defined in
SFAS No. 114 except for the restructured and nonaccrual loans noted above. No
valuation allowance has been recorded. The average recorded investment in
impaired loans for the years ended December 31, 1998 and 1997 was approximately
$1,101,000 in each year.
RELATED PARTY LOANS. Certain directors and related parties, including their
immediate families and companies in which they are principal owners, were loan
customers of the Bank during 1998, 1997 and 1996. Such loans were made in the
ordinary course of business on substantially the same terms, including interest
rate and security, as those prevailing at the time for comparable transactions
with other persons, and do not represent more than normal risk of collection or
present other unfavorable features. The aggregate amount of these loans was
approximately $201,000, $256,000, and $192,000 at December 31, 1998, 1997 and
1996, respectively. During 1998, $70,000 of new loans to such persons were made
and repayments totaled $125,000. There were no loans to directors which were
nonaccruing at December 31, 1998, 1997 or 1996.
4. DEPOSITS
The following table sets forth major classifications of average deposits and
average rates paid on these deposits for the periods indicated.
Year Ended December 31, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
Average Average Average Average Average Average
(In thousands, except for percentages) Deposits Rates Paid Deposits Rates Paid Deposits Rates Paid
- ----------------------------------------------------------------------------------------------------------------------
Demand deposits $ 70,352 -- $ 58,571 -- $ 47,829 --
Savings, NOW and money market deposits 90,522 2.3% 71,703 2.3% 68,342 2.3%
Certificates of deposit of $100,000 or more 29,412 5.4% 28,601 5.5% 18,718 5.3%
Other time deposits 43,428 5.2% 42,456 5.3% 44,848 5.4%
------------------------------------------------------------------------
Total $233,714 2.7% $201,331 2.7% $179,737 2.8%
========================================================================
TIME DEPOSITS OF $100,000 OR MORE. The following table sets forth the remaining
maturities of the Bank's time certificates of deposit in amounts of $100,000 or
more.
(In thousands)
- --------------------------------------
3 months or less $16,076
Over 3 thru 6 months 2,831
Over 6 thru 12 months 1,269
Over 12 months 1,001
-------
Total $21,177
=======
p.25 BRIDGE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(CONTINUED)
5.Banking Premises and Equipment
Banking premises and equipment consist of:
December 31, 1998 1997
- --------------------------------------------------
(In thousands)
Land $ 1,496 $ 1,496
Building and improvements 5,545 5,530
Furniture and fixtures 3,350 2,889
Leasehold improvements 376 371
-----------------
10,767 10,286
Less accumulated
depreciation and amortization 2,184 1,558
-----------------
$ 8,583 $ 8,728
=================
6. Income Taxes
The components of the provision for income taxes are as follows:
Year ended December 31, 1998 1997 1996
- -----------------------------------------------------
(In thousands)
Current:
Federal $ 1,606 $ 1,732 $ 1,152
State 627 660 459
-----------------------------
2,233 2,392 1,611
-----------------------------
Deferred:
Federal (106) (45) (43)
State (38) (15) (13)
-----------------------------
(144) (60) (56)
-----------------------------
Total $ 2,089 $ 2,332 $ 1,555
=============================
The reconciliation of the expected Federal income tax expense at the statutory
tax rate to the actual provision follows:
- -----------------------------------------------------------------------------------------------
Year ended December 31, 1998 1997 1996
Percentage Percentage Percentage
of Pre-tax of Pre-tax of Pre-tax
(In thousands) Amount Earnings Amount Earnings Amount Earnings
- -----------------------------------------------------------------------------------------------
Federal income tax expense
computed by applying the
statutory rate to income
before income taxes $ 2,034 34% $ 2,219 34% $ 1,551 34%
Tax exempt interest (381) (6) (361) (6) (330) (7)
State taxes, net of Federal
income tax benefit 388 6 425 7 294 6
Interest disallowed 40 1 40 1 32 1
Other 8 -- 9 -- 8 --
----------------------------------------------------------------
Provision for income taxes $ 2,089 35% $ 2,332 36% $ 1,555 34%
================================================================
1998 ANNUAL REPORT p.26
Deferred tax assets and liabilities are comprised of the following:
December 31, 1998 1997 1996
- ----------------------------------------------------------------
(In thousands) Deferred tax assets:
Allowance for loan losses $ 603 $ 479 $ 414
Depreciation -- 7 --
Deferred loan fees 116 -- --
Other 1 1 1
---------------------------
Total $ 720 $ 487 $ 415
---------------------------
Deferred tax liabilities:
Pension expense $ (32) $ (55) $ (1)
Depreciation (112) -- (42)
Securities available for sale (667) (526) (321)
---------------------------
Total $(811) $(581) $(364)
---------------------------
Net deferred tax liability assets $ (91) $ (94) $ 51
===========================
7. Employee Benefits
a. Pension Plan
The Bank maintains a non-contributory pension plan through the New York State
Bankers Association Retirement System covering all eligible employees. The
following table sets forth the plan's funded status projected to September 30,
1998 and 1997 (measurement dates).
Pension Benefits 1998 1997
- ----------------------------------------------------------------------
(In thousands)
Change in projected benefit obligation
Projected benefit obligation at beginning of year $ 1,249 $ 1,049
Service cost 160 133
Expenses (27) (24)
Interest cost 98 82
Benefits paid (38) (45)
Assumption changes and other 15 54
- ----------------------------------------------------------------------
Projected benefit obligation at end of year $ 1,457 $ 1,249
- ----------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at beginning of year $ 1,668 $ 1,239
Actual return on plan assets 75 298
Employer contribution 68 200
Benefit paid (38) (45)
Expenses (27) (24)
- ----------------------------------------------------------------------
Fair value of plan assets at end of year $ 1,746 $ 1,668
- ----------------------------------------------------------------------
Funded Status $ 289 $ 420
Unrecognized net actuarial loss (gain) (136) (220)
Unrecognized prior service cost (19) (21)
Unrecognized transition asset (65) (74)
- ----------------------------------------------------------------------
Prepaid benefit cost $ 69 $ 105
======================================================================
1998 1997 1996
- --------------------------------------------------------------------------------
Components of net periodic benefit cost
Service cost $ 160 $ 133 $ 114
Interest cost 98 82 74
Expected return on plan assets (141) (108) (96)
Amortization of net(gain)/loss (3) -- --
Amortization of unrecognized prior service cost (1) (1) (1)
Amortization of unrecognized transition asset (9) (9) (9)
-----------------------------
Net periodic benefit cost $ 104 $ 97 $ 82
=============================
At December 31, 1998, 1997, and 1996 a weighted average discount rate of 7.0%
and 8.0%, and 7.75%, respectively, and a rate of increase in future compensation
levels of 4.0%, 5.0%, and 5.0% respectively, were used in determining the
actuarial present value of the projected benefit obligation. The expected
long-term rate of return on assets was 8.5% at September 30, 1998, 1997 and
1996.
b. Equity Incentive Plan
During 1996, an equity incentive plan was approved by the stockholders to
provide for the grant of options to purchase up to a total of 432,000 shares of
common stock of the Company and for the award of shares of common stock as a
bonus. Such shares may be subject to restrictions based on continued service or
performance as employees of the Company or subsidiaries of the Company. Options
awarded under the plan are determined by the Incentive Compensation Committee of
the Board of Directors. The Company accounts for this plan under APB Opinion No.
25, under which no compensation cost has been recognized for stock options
granted. Had compensation cost for these stock options been determined
consistent with SFAS No. 123, the Company's net income and earnings per share
would have been reduced to the following pro forma amounts:
1998
- -------------------------------------------------------------
Net Income: As Reported: $3,895
Pro Forma: 3,702
Basic EPS: As Reported: $ 0.92
Pro Forma: 0.88
Diluted EPS: As Reported: $ 0.91
Pro Forma: 0.87
1997
- -------------------------------------------------------------
Net Income: As Reported: $4,195
Pro Forma: 4,128
Basic EPS: As Reported: $ 0.99
Pro Forma: 0.98
Diluted EPS: As Reported: $ 0.99
Pro Forma: 0.98
SFAS No. 123 was not applicable in 1996 since there were no stock
options outstanding.
p.27 BRIDGE BANCORP, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(CONTINUED)
The fair value of each option granted is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1998: a risk-free interest rate of 5.11%; an
expected dividend yield of 2.4%; expected lives of five years; and expected
volatility of 32.0%.
For the Year Ended, 1998 1997
- -----------------------------------------------------------------------------------------
Weighted Weighted
Average Average
Exercise Exercise
(In thousands) Shares Price Shares Price
- -----------------------------------------------------------------------------------------
Outstanding, beginning of the year 43,200 $ 6.78 -- --
Granted 45,000 $ 14.67 43,200 $ 6.78
Exercised (10,800) $ 10.06 -- --
Forfeited -- -- -- --
Outstanding and exercisable, end of the year 77,400 $ 10.91 43,200 $ 6.78
Weighted average fair value of options granted $ 4.29 $ 1.56
8. Other Income and Expenses
a) Components of other operating income which exceed one percent of the
aggregate of total interest income and other income are as follows:
December 31, 1998 1997 1996
- ------------------------------------------------------
(In thousands)
Checkbook charges $210 $194 $187
Credit card processing $438 $445 $369
b) Components of other operating expenses which exceed one percent of the
aggregate of total interest income and other income are as follows:
December 31, 1998 1997 1996
- ------------------------------------------------------
(In thousands)
Data\Item processing $413 $363 $336
Check printing $183 $167 $160
Credit card processing $151 $140 $122
Loan Servicing $62 $133 $222
Advertising $294 $227 $225
9. Commitments and Contingencies and Other Matters
a. Leases
The Company is obligated to make minimum annual rental payments under
non-cancellable operating leases on its premises. The projected minimum rentals
under existing leases at December 31, 1998 are as follows (in thousands):
1999 $268
2000 $215
2001 $205
2002 $167
2003 $149
Thereafter $98
Certain leases contain renewal options and rent escalation clauses. In addition,
certain leases provide for additional payments based upon real estate taxes,
interest and other charges. Rental expenses under these leases for the years
ended December 31, 1998, 1997 and 1996 approximated $286,000 $263,000 and
$243,000, respectively.
b. Loans
In the normal course of business, there are various outstanding commitments and
contingent liabilities, such as guarantees and commitments to extend credit,
which are not reflected in the accompanying financial statements. No material
losses are anticipated as a result of these transactions.
The following represents commitments outstanding:
December 31, 1998 1997
- -------------------------------------------------------------
(In thousands)
Standby letters of credit $ 209 $ 2,205
Loan commitments outstanding 9,905 15,663
Unused equity lines 10,735 8,551
Unused construction lines 6,992 12,457
Unused lines of credit 8,462 7,184
Unused overdraft lines 3,416 2,868
----------------------
Total commitments outstanding $39,719 $48,928
======================
c. Other
During 1998, the Bank was required to maintain certain cash balances with the
Federal Reserve Bank of New York for reserve and clearing requirements. These
balances averaged $3,893,000 in 1998.
During 1998, 1997 and 1996, the Bank maintained an overnight line of credit with
the Federal Home Loan Bank of New York. At year end 1998 and 1997, the line of
credit available was $12,171,800 and $10,785,850, respectively. There was no
amount outstanding at year end 1998. The amount outstanding at year end 1997 was
$6,500,000.
10. Estimated Fair Value of Financial Instruments
Fair value estimates are made at a specific point 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
1998 ANNUAL REPORT p.28
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 Bank's entire holdings of a particular
financial instrument, or the tax consequences of realizing gains or losses on
the sale of financial instruments.
The significant assumptions utilized by the Company in estimating the fair value
of its financial instruments are as follows:
CASH AND CASH EQUIVALENTS. For these short term instruments, the carrying amount
is a reasonable estimate of fair value.
INVESTMENT SECURITIES. For investment securities, fair value is based on quoted
market prices.
LOANS. Fair values are estimated for portfolios of loans with similar financial
characteristics. The total loan portfolio is first divided into adjustable and
fixed rate terms. Adjustable rate loans are then divided into those that can
reprice immediately with changes in interest rates and those that are subject to
repricing over time. Adjustable rate loans that reprice over time and fixed rate
loans are further segmented by type such as residential mortgages, home equity
loans, consumer loans, commercial mortgages, commercial loans and land loans.
Fair value is calculated by discounting anticipated future repricing amounts or
cash flows using discount rates equivalent to the rates at which the Company
would currently make loans which are similar with regard to collateral, maturity
and type of borrower. The discounted value of the repricing amounts and cash
flows is reduced by a credit risk adjustment based on internal loan
classifications.
DEPOSIT LIABILITIES. The fair value of deposits with no stated maturity, such as
noninterest- bearing demand deposits, money market accounts and savings accounts
is equal to the amount payable on demand at the reporting date. Time deposits
are segregated by type, size and remaining maturity. The fair value of time
deposits is based on the discounted value of contractual cash flows. The
discount rate is equivalent to the rate currently offered for deposits of
similar size, type and maturity.
ACCRUED INTEREST RECEIVABLE AND PAYABLE. For these short term instruments, the
carrying amount is a reasonable estimate of the fair value.
OFF BALANCE SHEET ASSETS AND LIABILITIES. The fair value of off-balance sheet
commitments to extend credit and letters of credit listed in the preceding Note
11 "Commitments and Contingencies and Other Matters" were estimated to be
insignificant as of December 31, 1998 and 1997.
The estimated fair values and recorded carrying values of the Bank's financial
instruments are as follows:
December 31, 1998 1997
- ----------------------------------------------------------------------------------
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
- ----------------------------------------------------------------------------------
Financial Assets:
Cash and due from banks $ 10,881 $ 10,881 $ 12,740 $ 12,740
Interest bearing deposits with banks 251 251 89 89
Securities available-for-sale 69,443 69,443 60,190 60,190
Securities held-to-maturity 5,052 5,067 11,812 11,823
Loans 166,983 167,115 137,243 136,567
Accrued interest receivable 1,525 1,525 1,460 1,460
Financial Liabilities:
Demand and other deposits 241,531 241,534 203,697 203,693
Accrued interest payable 1,439 1,439 1,244 1,244
Overnight borrowings -- -- 6,500 6,500
11. Regulatory Matters
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance sheet items calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier 1 capital (as defined in the regulations) to risk
weighted assets (as defined), and of Tier 1 capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1998, that the Bank
meets all capital adequacy requirements to which it is subject.
As of December 31, 1998, 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,
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
institution's category.
p.29 BRIDGE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(CONTINUED)
The Bank's actual capital amounts and ratios are also presented in the following
table:
As of December 31, 1998
- -------------------------------------------------------------------------------------------------
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
(In thousands) Actual Purposes Action Provisions
- -------------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
------------------------------------------------------
Total Capital (to risk weighted assets) 22,983 12.0% 15,372 >8.0% 19,215 >10.0%
Tier 1 Capital (to risk weighted assets) 21,270 11.1% 7,686 >4.0 11,529 >6.0
Tier 1 Capital (to average assets) 21,270 8.2% 10,319 >4.0 12,899 >5.0
As of December 31, 1997
- -------------------------------------------------------------------------------------------------
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
(In thousands) Actual Purposes Action Provisions
- -------------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
------------------------------------------------------
Total Capital (to risk weighted assets) 20,090 12.3% 13,104 >8.0% 16,381 >10.0%
Tier 1 Capital (to risk weighted assets) 18,697 11.4% 6,552 >4.0 9,828 >6.0
Tier 1 Capital (to average assets) 18,697 8.3% 9,037 >4.0 11,296 >5.0
12. Bridge Bancorp Inc. (Parent Company Only)
Condensed Statements of Financial Condition
December 31, 1998 1997 1996
- --------------------------------------------------------------------------------
(In thousands)
Assets
Cash and cash equivalents $ 116 $ 11 $ 3
Dividend receivable 1,059 1,620 680
Other assets 58 5 --
Investment in the Bank 22,058 19,435 16,923
--------------------------------
Total Assets $ 23,291 $ 21,071 $ 17,606
================================
Liabilities
Dividends payable 1,059 1,620 680
--------------------------------
Total Liabilities $ 1,059 $ 1,620 $ 680
================================
Stockholders' Equity
Stockholders' Equity 22,853 20,072 $ 17,547
Treasury stock at cost, 10,800 shares (621) (621) ($ 621)
--------------------------------
Total Stockholders' Equity $ 22,232 $ 19,451 $ 16,926
================================
Total Liabilities and Stockholders' Equity $ 23,291 $ 21,071 $ 17,606
================================
Condensed Statements of Income
Year ended December 31, 1998 1997 1996
- -------------------------------------------------------------------------------
(In Thousands)
Dividend income from the Bank $ 1,482 $ 1,984 $ 1,608
Other operating expenses 4 13 $ 1
-------------------------------
Income before income taxes and equity in
undistributed earnings of the Bank 1,478 1,971 1,607
Income tax provision (2) (5) --
-------------------------------
Income before equity in undistributed
earnings of the Bank 1,480 1,976 1,607
Equity in undistributed earnings of the Bank 2,415 2,219 1,399
-------------------------------
Net income $ 3,895 $ 4,195 $ 3,006
===============================
1998 ANNUAL REPORT p.30
Condensed Statements of Cash Flows
Year ended December 31, 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------
(In thousands)
Cash flows used by operations:
Other operating expenses $ (4) $ (13) $ (1)
Net cash used by operating activities (4) (13) (1)
Cash flows from investing activities:
Dividends received 2,043 1,045 1,456
-----------------------------
Net cash provided by investing activities 2,043 1,045 1,456
Cash flows used by financing activities:
Net proceeds from issuance of restricted common stock
issued pursuant to equity incentive plan -- 8 --
Net proceeds from issuance of common stock
upon exercise of stock options 109 -- --
Payment for the purchase of treasury stock -- -- (621)
Dividends paid (2,043) (1,032) (835)
-----------------------------
Net cash used by financing activities (1,934) (1,024) (1,456)
Net increase (decrease) in cash and cash
equivalents 105 8 (1)
Cash and cash equivalents at beginning of
year 11 3 4
-----------------------------
Cash and cash equivalents at end of year $ 116 $ 11 $ 3
=============================
Reconciliation of net income to net cash used by operating activities:
Net income $ 3,895 $ 4,195 $ 3,006
Adjustments to reconcile net income to net cash used by operating activities:
Equity in undistributed earnings
of the Bank (2,415) (2,219) (1,399)
Dividend income (1,482) (1,984) (1,608)
Income tax benefit from exercise of employee stock options 51 -- --
Increase in other assets (53) (5) --
-----------------------------
Net cash used by operating activities $ (4) $ (13) $ (1)
=============================
13. Quarterly Financial Data (Unaudited)
Selected Consolidated Quarterly Financial Data
1998 Quarter ended,
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts) March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31,
- ------------------------------------------------------------------------------------------------------------------------------------
Interest income $4,399 $4,728 $5,033 $4,859 $4,012 $4,166 $4,353 $4,693
Interest expense 1,414 1,483 1,633 1,448 1,338 1,370 1,419 1,416
-------------------------------------------------------------------------------
Net interest income 2,985 3,245 3,400 3,411 2,674 2,796 2,934 3,277
Provision for loan losses 90 100 160 75 60 60 60 230
-------------------------------------------------------------------------------
Net interest income after provision for loan losses 2,895 3,145 3,240 3,336 2,614 2,736 2,874 3,047
Other income 712 794 810 689 538 2,054 883 848
Other expenses 2,392 2,502 2,347 2,396 2,021 2,220 2,399 2,427
-------------------------------------------------------------------------------
Income before income taxes 1,215 1,437 1,703 1,629 1,131 2,570 1,358 1,468
Provision for income taxes 395 492 620 582 374 960 498 500
-------------------------------------------------------------------------------
Net income $ 820 $ 945 $1,083 $1,047 $ 757 $1,610 $ 860 $ 968
===============================================================================
Basic earnings per share $ 0.19 $ 0.22 $ 0.26 $ 0.25 $ 0.18 $ 0.38 $ 0.20 $ 0.23
Diluted earnings per share $ 0.19 $ 0.22 $ 0.26 $ 0.24 $ 0.18 $ 0.38 $ 0.20 $ 0.23
===============================================================================
p.31 BRIDGE BANCORP, INC. AND SUBSIDIARY
Report of Independent Public Accountants
The Board of Directors and Stockholders
Bridge Bancorp, Inc.:
We have audited the accompanying consolidated statements of condition of
Bridge Bancorp, Inc. and subsidiary as of December 31, 1998 and 1997, 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, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bridge Bancorp, Inc. and
subsidiary as of December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the years in the three year period ended
December 31, 1998, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
New York, New York
January 22, 1999
Common Stock Information
The Company's common stock is traded on the NASDAQ over the counter bulletin
board market under the symbol "BDGE". The following table details the quarterly
high and low prices of the Company's common stock and the dividends declared for
such periods.
At December 31, 1998 the Company had approximately 721 holders of its common
stock. The number of stockholders of record includes banks and brokers who act
as nominees, each of whom may represent more than one stockholder. All prices
have been adjusted to reflect the 3-for-1 stock splits declared in April 1997
and August 1998 and rounded to the nearest dollar.
Stock Price Dividends
High Low Declared
- ----------------------------------------------------------------------
By Quarter 1998
- ----------------------------------------------------------------------
First $24 $14 --
Second $23 $21 $0.10
Third $24 $20 --
Fourth $25 $21 $0.25
- ----------------------------------------------------------------------
By Quarter 1997
- ----------------------------------------------------------------------
First $ 7 $ 7 --
Second $ 9 $ 7 $0.08
Third $12 $ 9 --
Fourth $17 $12 $0.38*
* On June 17, 1997, the Bank sold its former headquarters building resulting in
a gain, net of taxes, of approximately $829,000. On December 15, 1997, the Bank
declared a one time special dividend of approximately $845,000, or $.20 per
share, paying out this gain to the shareholders.
1998 ANNUAL REPORT p.32
Bridge Bancorp, Inc.
- --------------------
BOARD OF DIRECTORS BANK OFFICERS NOTICE OF ANNUAL MEETING
AND AFFILIATIONS Thomas J. Tobin The Annual Meeting of Shareholders
President and Chief Executive Officer is scheduled for 3:30 p.m.,Monday,
Raymond Wesnofske April 19, 1999 in the Community
Chairman Christopher Becker Room, Bridgehampton National Bank,
Bridge Bancorp, Inc. and Executive Vice President and 2200 Montauk Highway,
The Bridgehampton National Bank Chief Financial Officer Bridgehampton, NY 11932.
Thomas J. Tobin VICE PRESIDENTS BANKING OFFICES
President and Chief Executive Officer
Bridge Bancorp, Inc. and Peter M. Coleman MAIN OFFICE
The Bridgehampton National Bank Senior Banking Officer 2200 Montauk Highway,
North Fork Market Area Bridgehampton, NY 11932
Thomas E. Halsey Carol Kennedy (516) 537-1000 Fax (516) 537-1835
Holly Hill Nursery Credit Administration
Water Mill, NY SOUTHAMPTON
Michael P. Kochanasz 425 County Road 39
Marcia Z. Hefter Electronic Delivery Systems Southampton, NY 11968
Esseks, Hefter & Angel (516) 283-1286 Fax (516) 287-3309
Counselor of Law Diane Reutershan
Riverhead, NY Community Development Officer SOUTHAMPTON VILLAGE
COMMERCIAL BRANCH
R. Timothy Maran Thomas H. Simson 94 Main Street
Maran, DeBaun, Cruise & Simonson Chief Information Officer Southampton, NY 11968
Southampton, Westhampton, NY (516) 287-5880 Fax (516) 287-5882
Ann K. Sweeney
Albert E. McCoy Senior Banking Officer EAST HAMPTON
W.F. McCoy Petroleum Products, Inc. Bridgehampton Market Area 26 Park Place
McCoy Bus Co., Inc. East Hampton, NY 11937
Bridgehampton, NY Janet T. Verneuille, C.P.A. (516) 324-8480 Fax (516) 329-1485
Comptroller
Walter A. Preische, Jr. SOUTHOLD
Certified Public Accountant ASSISTANT VICE PRESIDENTS 54970 Main Road
East Hampton, NY Southold, NY 11971
Michelle Dosch (516) 765-1500 Fax (516) 765-1605
Lawrence H. Strickland Financial Operations
Vice Chairman MATTITUCK
Peter Lyle, Inc. Financial Services Seamus Doyle Mattituck Shopping Center, Main Road
Bridgehampton, NY Senior Banking Officer Mattituck, NY 11952
Southampton Market Area (516) 298-0190 Fax (516) 298-0194
COMPANY OFFICERS
Maureen P. Mougios MONTAUK
Thomas J. Tobin Director of Internal Audit 1 The Plaza
President and Chief Executive Officer Montauk, NY 11954
Christopher Becker Sandra Novick (516) 668-6400 Fax (516) 668-6412
Executive Vice President and Treasurer Director of Marketing and Advertising
RESIDENTIAL MORTGAGE SERVICES
Kevin L. Santacroce All branch locations
Senior Banking Officer
East Hampton/Montauk Market Area 10-K REPORT
A copy of the Annual Report
Aidan Wood on Form 10-K, filed with the
Senior Mortgage Officer Securities and Exchange Commission,
is available upon request by any share-
ASSISTANT CASHIERS holder of the Company at no charge.
Write to Christopher Becker,
Patricia L. Brennan Executive Vice President and Treasurer,
Loan Processing Bridge Bancorp, Inc., P.O. Box 3005,
Bridgehampton, NY 11932.
Caroline Kalish
Systems Analyst INTERNET WEBSITE ADDRESS
http://www.bridgenb.com
Lorraine LaRosa
Branch Manager Designed by
Mattituck and Southold Curran & Connors, Inc.
John J. McDonald
Branch Manager
Montauk
Kimberly Romano
Deputy Comptroller
Amy Turza
Branch Manager
Main Office