UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to_________________
Commission File Number 0-29770
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WEST ESSEX BANCORP, INC.
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(Exact name of small business issuer as specified in its charter)
UNITED STATES 22-3597632
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
417 Bloomfield Avenue, Caldwell, New Jersey 07006
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code 973-226-7911
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
3,972,788 shares of common stock, par value $0.01 par share, were
outstanding as of April 30, 2001.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
WEST ESSEX BANCORP, INC.
FORM 10-QSB
For the Quarter Ended March 31, 2001
INDEX
Page
Number
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements 1
Consolidated Statements of Financial Condition at
March 31, 2001 and December 31, 2000 (Unaudited) 2
Consolidated Statements of Income for the
Three Months Ended March 31, 2001 and 2000 (Unaudited) 3
Consolidated Statements of Comprehensive Income for the
Three Months Ended March 31, 2001 and 2000 (Unaudited) 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2001 and 2000 (Unaudited) 5 - 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan
of Operations 8 - 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13 - 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
WEST ESSEX BANCORP, INC.
PART I. FINANCIAL INFORMATION
March 31, 2001
-------------------------------------------------------------------------
ITEM 1. FINANCIAL STATEMENTS
Certain information and footnote disclosures required under generally accepted
accounting principles have been condensed or omitted from the following
consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission. West Essex Bancorp, Inc. (the "Registrant"
or the "Company") believes that the disclosures presented are adequate to assure
that the information presented is not misleading in any material respect. It is
suggested that the following consolidated financial statements be read in
conjunction with the year-end consolidated financial statements and notes
thereto included in the Registrant's Annual Report on Form 10-KSB for the year
ended December 31, 2000.
The results of operations for the three month period ended March 31, 2001, are
not necessarily indicative of the results to be expected for the entire fiscal
year.
1
WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
------------------------------------------
March 31, December 31,
2001 2000
------------- -------------
(unaudited)
Assets
Cash and amounts due from depository institutions $ 1,871,236 $ 2,416,155
Interest-bearing deposits in other banks 14,554,270 6,461,762
------------- -------------
Total cash and cash equivalents 16,425,506 8,877,917
Term deposits 300,000 --
Securities available for sale 986,875 2,994,063
Investment securities held to maturity 32,251,026 41,727,821
Mortgage-backed securities held to maturity 124,854,474 130,627,541
Loans receivable 164,402,332 164,037,987
Real estate owned 466,376 601,595
Premises and equipment 2,586,580 2,595,036
Federal Home Loan Bank of New York stock 3,558,400 3,558,400
Accrued interest receivable 2,063,405 2,307,828
Excess of cost over assets acquired 3,902,388 4,050,580
Other assets 5,094,025 3,026,894
------------- -------------
Total assets $ 356,891,387 $ 364,405,662
============= =============
Liabilities and Stockholders' Equity
Liabilities
Deposits $ 237,827,177 $ 237,956,208
Borrowed money 66,377,436 62,290,413
Advance payments by borrowers for taxes and insurance 1,015,626 1,032,953
Due to broker -- 12,768,419
Other liabilities 1,638,825 909,657
------------- -------------
Total liabilities 306,859,064 314,957,650
------------- -------------
Stockholders' Equity
Preferred stock (par value $.01), 1,000,000 shares
authorized; no shares issued or outstanding -- --
Common stock (par value $.01), 9,000,000 shares authorized;
shares issued 4,197,233; shares outstanding 3,982,788 (2001)
and 3,986,991 (2000) 41,972 41,972
Additional paid-in capital 17,340,184 17,332,221
Retained earnings - substantially restricted 36,309,240 35,733,815
Common stock acquired by Employee Stock Ownership
Plan ("ESOP") (994,676) (1,031,516)
Unearned Incentive Plan stock (499,433) (530,666)
Treasury stock, at cost; 214,445 shares (2001) and
210,242 shares (2000) (2,156,561) (2,094,524)
Accumulated other comprehensive loss - Unrealized
loss on securities available for sale, net of income taxes (8,403) (3,230)
------------- -------------
Total stockholders' equity 50,032,323 49,448,012
------------- -------------
Total liabilities and stockholders' equity $ 356,891,387 $ 364,405,662
============= =============
See notes to consolidated financial statements.
2
WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
------------------------------------------
Three Months Ended March 31,
-------------------------------
2001 2000
----------- -----------
(unaudited)
Interest income:
Loans $ 3,143,337 $ 2,916,530
Mortgage-backed securities 2,175,104 2,047,894
Investment securities 669,019 763,780
Other interest-earning assets 141,274 123,789
----------- -----------
Total interest income 6,128,734 5,851,993
----------- -----------
Interest expense:
Deposits 2,426,106 2,139,250
Borrowed money 926,403 927,439
----------- -----------
Total interest expense 3,352,509 3,066,689
----------- -----------
Net interest income 2,776,225 2,785,304
(Recapture of) provision for loan losses (3,506) --
----------- -----------
Net interest income after (recapture of) provision for loan losses 2,779,731 2,785,304
----------- -----------
Non-interest income:
Fees and service charges 81,388 88,558
Gain on sale of security available for sale 45,000 --
Other 50,143 58,490
----------- -----------
Total non-interest income 176,531 147,048
----------- -----------
Non-interest expenses:
Salaries and employee benefits 859,396 827,525
Net occupancy expense of premises 122,245 99,534
Equipment 192,377 170,543
Loss (income) on real estate owned 14,408 (108,239)
Amortization of intangibles 148,192 148,192
Other 380,895 417,582
----------- -----------
Total non-interest expenses 1,717,513 1,555,137
----------- -----------
Income before income taxes 1,238,749 1,377,215
Income taxes 440,589 497,279
----------- -----------
Net income $ 798,160 $ 879,936
=========== ===========
Net income per common share - basic and diluted $ 0.21 $ 0.23
=========== ===========
Weighted average number of common shares outstanding:
Basic 3,824,455 3,859,029
Diluted 3,879,885 3,859,029
=========== ===========
See notes to consolidated financial statements.
3
WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-----------------------------------------------
Three Months Ended March 31,
------------------------------
2001 2000
--------- ---------
(unaudited)
Net income $ 798,160 $ 879,936
--------- ---------
Other comprehensive loss -
Unrealized holding gains (losses) on securities available for sale,
net of income taxes of $(13,318) and $503, respectively 23,696 (896)
Reconciliation adjustment for realized gain on security
available for sale, net of deferred income taxes of $16,191 (28,809) --
--------- ---------
Other comprehensive loss (5,113) (896)
--------- ---------
Comprehensive income $ 793,047 $ 879,040
========= =========
See notes to consolidated financial statements
4
WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------
Three Months Ended March 31,
---------------------------------
2001 2000
------------ ------------
(unaudited)
Cash flows from operating activities:
Net income $ 798,160 $ 879,936
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization of premises and equipment 64,826 59,659
Net accretion of premiums, discounts and deferred loan fees (72,276) (97,951)
Amortization of intangibles 148,192 148,192
(Recapture of) provision for loan losses (3,506) --
(Gain) on sale of security available for sale (45,000) --
Loss (gain) on sale of real estate owned 3,506 (130,989)
Decrease (increase) in accrued interest receivable 178,312 (23,284)
(Increase) in other assets (364,258) (246,936)
Increase in interest payable 197,807 14,015
Increase in other liabilities 629,374 489,964
Amortization of Incentive Plan cost 31,233 36,613
ESOP shares committed to be released 46,316 33,754
------------ ------------
Net cash provided by operating activities 1,612,686 1,162,973
------------ ------------
Cash flows from investing activities:
Purchases of term deposits (300,000) --
Proceeds from sale of security available for sale 2,045,000 --
Proceeds from maturities and calls of investment securities held to maturity 9,548,188 --
Principal repayments on mortgage-backed securities held to maturity 8,721,051 4,834,711
Purchases of mortgage-backed securities held to maturity (15,664,344) (12,337,689)
Purchase of loans receivable (189,792) (634,971)
Net (increase) in loans receivable (156,910) (5,016,172)
Proceeds from sales of real estate owned 131,713 198,489
Additions to premises and equipment (56,370) (30,569)
Purchase of Federal Home Loan Bank of New York stock -- (33,000)
Purchase of life insurance (1,700,000) --
------------ ------------
Net cash (used in) investing activities 2,378,536 (13,019,201)
------------ ------------
Cash flows from financing activities:
Net (decrease) increase in deposits (212,782) 1,680,345
Net (decrease) increase in short-term borrowed money (5,550,000) 5,000,000
Proceeds of long-term borrowed money 10,000,000 --
Repayment of long-term borrowed money (362,977) (3,342,246)
Net (decrease) increase in advance payments by borrowers for
taxes and insurance (17,327) 49,667
Purchases of treasury stock (95,625) (148,000)
Proceeds from sale of treasury stock 17,813 --
Cash dividends paid (222,735) (159,710)
------------ ------------
Net cash provided by financing activities 3,556,367 3,080,056
------------ ------------
Net increase (decrease) in cash and cash equivalents 7,547,589 (8,776,172)
Cash and cash equivalents - beginning 8,877,917 12,745,845
------------ ------------
Cash and cash equivalents - ending $ 16,425,506 $ 3,969,673
============ ============
See notes to consolidated financial statements.
5
WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------
Three Months Ended March 31,
--------------------------------
2001 2000
------------ ------------
(unaudited)
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes $ -- $ --
=========== ===========
Interest $ 3,154,702 $ 3,052,674
=========== ===========
Supplemental schedule of noncash investing activities:
Loans receivable transferred to real estate owned $ -- $ 165,269
=========== ===========
Security purchased in 2000, settled in 2001:
Mortgage-backed security held to maturity $12,702,308 $ --
Accrued interest receivable 66,111 --
----------- -----------
Due to broker $12,768,419 $ --
=========== ===========
Issuance of treasury stock to fund Supplemental Employee
Retirement Plan $ 14,262 $ --
=========== ===========
See notes to consolidated financial statements.
6
WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of West Essex
Bancorp, Inc. (the "Company"), the Company's wholly owned subsidiary, West Essex
Bank (the "Bank") and the Bank's wholly owned subsidiary, West Essex Insurance
Agency, Inc. The Company's business is conducted principally through the Bank.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-QSB and regulations S-X and do not
include information or footnotes necessary for a complete presentation of
financial condition, results of operations, and cash flows in conformity with
generally accepted accounting principles. However, in the opinion of management,
all adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of the consolidated financial statements have been included.
The results of operations for the three months ended March 31, 2001 are not
necessarily indicative of the results which may be expected for the entire
fiscal year.
3. NET INCOME PER COMMON SHARE
Basic net income per common share is calculated by dividing net income by the
weighted average number of shares of common stock outstanding, adjusted for the
unallocated portion of shares held by the ESOP in accordance with the American
Institute of Certified Public Accountants' Statement of Position 93-6. Diluted
net income per share is calculated by adjusting the weighted average number of
shares of common stock outstanding to include the effect of unallocated ESOP
shares, unearned Incentive Plan shares and stock options, if dilutive, using the
treasury stock method. As of and for the quarter ended March 31, 2000, none of
the potentially dilutive securities were included in the computation of diluted
net income per share as they were anti-dilutive.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
Forward-Looking Statements
This report contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21F of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Company intends such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Reform Act of 1995, and is
including this statement for purposes of these safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe
future plans, strategies and expectations of the Company, are generally
identified by use of the words "believe," "expect," "intend," "anticipate,"
"estimate," "project," or similar expressions. The Company's ability to predict
results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse effect on the operations
of the Company and its subsidiaries include, but are not limited to, changes in
interest rates, general economic conditions, legislative/regulatory changes,
monetary and fiscal polices of the U.S. Government, including policies of the
U.S. Treasury and the Federal Reserve Board, the quality or composition of the
loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Company's market area and
accounting principles and guidelines. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. Further information concerning the Company and
its business, including additional factors that could materially affect the
Company's financial results, is included in the Company's filings with the
Securities and Exchange Commission (the "SEC").
The Company does not undertake - and specifically disclaims any
obligation - to publicly release the results of any revisions which may be made
to any forward-looking statements to reflect events or circumstances after the
date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
Management's Discussion and Analysis or Plan of Operation
General
The Company is the federally chartered stock holding company for
the Bank, a federally chartered stock savings bank. The Company, the Bank and
West Essex Bancorp, M.H.C., a mutual holding company and majority owner of the
Company, are regulated by the Office of Thrift Supervision (the "OTS"). The
Company's and the Bank's results of operations are dependent primarily on net
interest income, which is the difference between the income earned on
interest-earning assets, primarily the loan and investment portfolios, and the
cost of funds, consisting of interest paid on deposits and borrowings. Results
of operations are also affected by the provision for loan losses and
non-interest expense. Non-interest expense principally consists of salaries and
employee benefits, office occupancy and equipment expense, amortization of
intangibles, advertising, federal deposit insurance premiums, expenses of real
estate owned and other expenses. Results of operations are also significantly
affected by general economic and competitive conditions, particularly changes in
interest rates, government policies and actions of regulatory authorities.
Comparison of Financial Condition at March 31, 2001 and December 31, 2000
Total assets were $356.9 million at March 31, 2001, compared to
$364.4 million at December 31, 2000, a decrease of $7.5 million, or 2.1%. The
decrease in total assets was primarily due to a $12.8 million security purchase
in December 2000 which was funded via a broker liability until paid for in
January 2001. Excluding this item, total assets increased by $5.3 million or
1.5%.
8
Cash and cash equivalents, primarily interest-bearing deposits
with the Federal Home loan Bank of New York ("FHLB"), increased $7.5 million to
$16.4 million at March 31, 2001 from $8.9 million at December 31, 2000. The
increase in cash and cash equivalents was the result of proceeds received on
several securities called in advance of final maturity which had not yet been
reinvested.
In the aggregate, mortgage-backed securities and investment
securities, including available-for-sale and held to maturity issues, totalled
$158.1 million at March 31, 2001, a decrease of $17.2 million, or 9.8%, from
$175.3 million at December 31, 2000. Mortgage-backed securities, all of which
are held to maturity, decreased $5.8 million due to repayments exceeding
purchases. Investment securities held to maturity decreased $9.5 million due
primarily to calls of several higher yielding securities in advance of scheduled
maturities. Securities available for sale decreased $2.0 million due to a
security sale.
Loans receivable increased by $364,000, or 0.2%, to $164.4
million at March 31, 2001 from $164.0 million at December 31, 2000.
Deposits totalled $237.8 million at March 31, 2001, a decrease of
$129,000, or 0.1%, from the $238.0 million balance at December 31, 2000.
Borrowed money increased $4.1 million to $66.4 million at March
31, 2001, as compared to $62.3 million at December 31, 2000. During the quarter
ended March 31, 2001, a 10-year, $10.0 million borrowing was obtained, long-term
debt of $363,000 was repaid and short-term borrowings were reduced by $5.6
million.
Stockholders' equity increased $584,000, or 1.2%, to $50.0
million, primarily due to the retention of net income.
Comparison of Operating Results for the Three Months Ended March 31, 2001 and
2000
Net Income. Net income decreased $82,000, or 9.3%, to $798,000
for the three months ended March 31, 2001, compared with $880,000 for the same
2000 period. The decrease in net income during the 2001 period resulted
primarily from a $122,000 ($79,000 after tax) decline in results related to real
estate owned, as further discussed under "Non-interest Expenses".
Interest Income. Total interest income increased $277,000 or 4.7%
to $6.1 million for the three months ended March 31, 2001 from $5.9 million for
the same 2000 period. The increase was the result of an $8.5 million, or 2.6%,
increase in average interest-earning assets between the periods, as well as an
increase in the average yield on interest earning assets to 7.14% during the
three months ended March 31, 2001, from 6.99% during the same 2000 period.
Interest income on loans increased by $227,000 or 7.8% to $3.1
million during the three months ended March 31, 2001, when compared with $2.9
million for the same 2000 period. The increase during the 2001 period resulted
from an increase of $9.0 million, or 5.8%, in the average balance of loans
outstanding, along with a 15 basis point increase to 7.58% in the yield earned
on the loan portfolio. The increased average balance was the result of continued
strength in lending volume during the last twelve months. The increased yield is
the result of higher rates obtained on originations during much of 2000, as well
as upward interest rate adjustments on many of the Bank's adjustable-rate
mortgage loans.
9
Interest on mortgage-backed securities, all of which are
held-to-maturity, increased $127,000, or 6.2%, to $2.2 million during the three
months ended March 31, 2001, when compared with $2.0 million for the same 2000
period. The increase during the 2001 period resulted from increases of $2.0
million, or 1.6%, in the average balance of mortgage-backed securities and 30
basis points, to 6.83%, in yield. The increased average balance is the result of
purchases exceeding repayments of mortgage-backed securities. The increase in
yield is the result of higher interest rates obtained on securities purchased
since March 31, 2000.
Interest earned on investment securities, including both
available-for-sale and held-to-maturity issues, decreased by $95,000, or 12.4%,
to $669,000 during the three months ended March 31, 2001, when compared to
$764,000 during the same 2000 period, primarily due to a decrease of $5.1
million, or 11.4%, in the average balance of such assets, along with an eight
basis point decrease to 6.78% in the yield earned. The decline in both average
balance and yield is the result of the aforementioned calls of higher yielding
investment securities held to maturity.
Interest on other interest-earning assets increased $17,000, or
13.7%, to $141,000 during the three months ended March 31, 2001, as compared to
$124,000 for the same 2000 period. The increase was due to an increase of $2.6
million, or 32.9%, in the average balance of such assets, which was partially
offset by a decrease of 87 basis points, to 5.42%, in the yield earned. The
increase in average balance was the result of the proceeds on the aforementioned
called investment securities. The decrease in yield is reflective of the general
decrease in short-term market interest rates.
Interest Expense. Interest expense on deposits increased
$287,000, or 13.4%, to $2.4 million during the three months ended March 31,
2001, when compared to $2.1 million during the same 2000 period. Such increase
was primarily attributable to an increase of 51 basis points, to 4.40%, in the
cost of interest-bearing deposits, along with a $1.0 million, or 0.5%, increase
in the average balance thereof. The average cost of certificates of deposit was
5.65% for the three months ended March 31, 2001, as compared to 5.03% for the
same 2000 period. The average cost of non-certificate deposits decreased to
1.81% for the three months ended March 31, 2001, as compared to 1.83% for the
same prior year period.
Interest expense on borrowed money decreased marginally by
$1,000, or 0.1%, to $926,000 during the three months ended March 31, 2001, when
compared with $927,000 during the same 2000 period, as the average balance of
borrowings outstanding from the FHLB remained steady at $65.5 million and $65.2
million, respectively, as did the average cost, at 5.66% and 5.70%,
respectively. During the three months ended March 31, 2001, the Bank obtained a
10-year $10.0 million borrowing at 5.40%, repaid $363,000 in long-term
borrowings having an average interest rate of 5.96% and reduced short-term
borrowings by $5.6 million.
Net Interest Income. Net interest income decreased $9,000, or
0.3%, during the three months ended March 31, 2001, when compared with the same
2000 period. Such decrease was due to an increase in total interest expense of
$286,000, partially offset by an increase in total interest income of $277,000.
The Bank's net interest rate spread decreased to 2.45% in 2001 from 2.68% in
2000. The decrease in the interest rate spread resulted from a 38 basis point
increase in the cost of average interest-bearing liabilities, partially offset
by a 15 basis point increase in the yield on average interest-earning assets.
Despite the decrease in the net interest rate spread, net interest income was
little changed due to the additional income generated by an $8.5 million
increase in average interest-earning assets, which more than offset the
additional cost incurred by a $1.4 million increase in average interest-bearing
liabilities.
10
Provision for Loan Losses. During the three months ended March
31, 2001, the Bank recorded a recapture of $4,000 in the provision for loan
losses and experienced no loan charge-offs. During the three months ended
March 31, 2000, the Bank did not record a provision for loan losses and
recorded loan charge-offs totalling $35,000. There were no loan recoveries in
either period. The allowance for loan losses is based on management's
evaluation of the risk inherent in its loan portfolio and gives due
consideration to the changes in general market conditions and in the nature and
volume of the Bank's loan activity. The Bank intends to continue to provide for
loan losses based on its periodic review of the loan portfolio and general
market conditions. At March 31, 2001 and 2000, loans delinquent ninety days or
more totalled $270,000 and $221,000, respectively, representing 0.16% and 0.14%,
respectively, of total loans. At March 31, 2001, the allowance for loan losses
stood at $1.36 million, representing 0.82% of total loans and 503.7% of loans
delinquent ninety days or more. At December 31, 2000, the allowance for loan
losses stood at $1.36 million, representing 0.81% of total loans and 1251.7% of
loans delinquent ninety days or more. At March 31, 2000, the allowance for loan
losses stood at $1.37 million, representing 0.85% of total loans and 618.9% of
loans delinquent ninety days or more. The Bank monitors its loan portfolio on a
continuing basis and intends to continue to provide for loan losses based on its
ongoing review of the loan portfolio and general market conditions.
Non-Interest Income. Non-interest income increased $30,000, or
20.4%, to $177,000 during the three months ended March 31, 2000, from $147,000
during the same 2000 period. Included in the current period results is a $45,000
gain on the sale of a security available for sale. There were no security sales
during the prior year period.
Non-Interest Expenses. Non-interest expenses increased by
$162,000, or 10.4%, to $1.72 million during the three months ended March 31,
2001, when compared with $1.56 million during the same 2000 period. The most
significant change in non-interest expense occurred in relation to real estate
owned, where a loss of $14,000 was recorded during the three months ended March
31, 2001, as compared to income of $108,000 in the comparable prior period. The
$122,000 decline was primarily due to a loss of $4,000 on real estate sales
during the current year quarter as compared to gains of $131,000 on real estate
sales during the same prior year quarter.
Salaries and employee benefits, the largest component of
non-interest expenses, increased $32,000, or 3.9%, to $860,000 during the three
months ended March 31, 2001, from $828,000 during the prior year quarter. All
other elements of non-interest expense, which includes occupancy and equipment
expense, amortization of intangibles, and other expenses, remained little
changed at $845,000 and $836,000 during the three months ended March 31, 2001
and 2000, respectively.
Income Taxes. Income tax expense totalled $441,000, or 35.6% of
income before income taxes, during the three months ended March 31, 2001, as
compared to $497,000, or 36.1% of income before income taxes, during the
comparable 2000 period.
Liquidity and Capital Resources
The Company's and Bank's primary sources of funds on a long-term
and short-term basis are deposits, principal and interest payments on loans,
mortgage-backed and investment securities and FHLB borrowings. The Bank uses the
funds generated to support its lending and investment activities as well as any
other demands for liquidity such as deposit outflows. While maturities and
scheduled amortization of loans are predictable sources of funds, deposit flows,
mortgage prepayments and the exercise of call features on debt securities are
greatly influenced by general interest rates, economic conditions and
competition. Recent legislation repealed the Office of Thrift Supervision's
("OTS") minimum liquidity ratio requirement. OTS regulations now require the
Bank to maintain sufficient liquidity to ensure its safe and sound operation.
11
The Company's most liquid assets are cash and cash equivalents
and securities available for sale. The levels of these assets are dependent on
operating, financing, lending and investing activities during any given period.
At March 31, 2001, cash and cash equivalents and securities available for sale
totalled $17.4 million, or 4.9% of total assets.
The Company, through its Bank subsidiary, has other sources of
liquidity if a need for additional funds arises, including FHLB borrowings. At
March 31, 2001, the Bank had $66.4 million in borrowings outstanding from the
FHLB. Depending on market conditions, the pricing of deposit products and FHLB
borrowings, the Bank may continue to rely on FHLB borrowings to fund asset
growth.
At March 31, 2001, the Bank had commitments to originate and
purchase loans and fund unused outstanding lines of credit and undisbursed
proceeds of construction mortgages totalling $12.0 million and no commitments to
purchase securities. The Bank anticipates that it will have sufficient funds
available to meet its current commitments. Certificate accounts, including
Individual Retirement Account accounts, which are scheduled to mature in less
than one year from March 31, 2001, totalled $121.6 million. The Bank expects
that substantially all of the maturing certificate accounts will be retained by
the Bank.
At March 31, 2001, the Company had total equity, determined in
accordance with generally accepted accounting principles, of $50.0 million, or
14.0% of total assets. At March 31, 2001, the Bank exceeded all of its
regulatory capital requirements with a tangible capital level of $41.3 million,
or 11.8% of total adjusted assets, which is above the required level of $5.3
million, or 1.5%; core capital of $41.3 million, or 11.8% of total adjusted
assets, which is above the required level of $14.1 million, or 4.0%; and
risk-based capital of $42.7 million, or 30.6% of risk-weighted assets, which is
above the required level of $11.2 million, or 8.0%. An institution with a ratio
of tangible capital to adjusted total assets of greater than or equal to 5.0% is
considered to be "well-capitalized" pursuant to OTS regulations.
12
WEST ESSEX BANCORP, INC.
PART II . OTHER INFORMATION
March 31, 2001
ITEM 1. Legal Proceedings
The Company and the Bank are parties to various litigation
which arises primarily in the ordinary course of business.
Included in this litigation are various claims and lawsuits
involving the Bank, such as claims to enforce liens,
condemnation proceedings on properties in which the Bank holds
security interest, claims involving the making and servicing of
real property loans and other issues incident to the Bank's
business. In the opinion of management, the ultimate
disposition of such litigation should not have a material
effect on the consolidated financial position or operations of
the Company.
ITEM 2. Changes in Securities
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The 2001 Annual Meeting of Stockholders was held on April 25, 2001.
The following matters were submitted to the stockholders:
1. Election of two directors:
A. Directors elected at the meeting for terms to expire in 2004:
Number of Shares
-----------------------
For Withheld
--------- ---------
Mr. John J. Burke 3,842,116 54,246
Mr. James P. Vreeland 3,842,014 54,348
The following directors' terms of office as a director continued after
the meeting:
(i) Mr. David F. Brandley
(ii) Mr. William J. Foody
(iii) Mr. Everett N. Leonard
(iv) Mr. Leopold W. Montanaro
13
WEST ESSEX BANCORP, INC.
PART II . OTHER INFORMATION
March 31, 2001
ITEM 4. Submission of Matters to a Vote of Security Holders (Cont'd.)
--------------------------------------------------------------
Number of Shares
--------------------------------------------------------------------------------
For Against Abstained Non-Vote
----------------- ----------------- ---------------- ------------------
2. The ratification of Radics & Co., LLC
as independent auditors of the
Company for the fiscal year
ending December 31, 2001. 3,870,055 23,000 3,307 -
ITEM 5. Other Information
-----------------
None
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
3.1 Charter of West Essex Bancorp, Inc. *
3.2 Bylaws of West Essex Bancorp, Inc. *
4.0 Form of Common Stock Certificate *
11.0 Statement regarding computation of per share earnings
* Incorporated herein by reference into this document from the
Exhibits to Form S-1 Registration Statement and any amendments
thereto, Registration No. 333-56729.
(b) Reports on Form 8-K:
None
14
SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WEST ESSEX BANCORP, INC.
Date: May 11, 2001 By: /s/ Leopold W. Montanaro
------------------- -------------------------------------------
Leopold W. Montanaro
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 11, 2001 By: /s/ Dennis A. Petrello
------------------- -------------------------------------------
Dennis A. Petrello
Executive Vice President and
and Chief Financial Officer
(Principal Financial and
Accounting Officer)