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, 2002
-------------------------------------------------
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
WEST ESSEX BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
UNITED STATES 22-3597632
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
417 Bloomfield Avenue, Caldwell, New Jersey 07006
- --------------------------------------------------------------------------------
(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:
4,900,643 shares of common stock, par value $0.01 par share, were outstanding as
of April 26, 2002.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
WEST ESSEX BANCORP, INC.
FORM 10-QSB
For the Quarter Ended March 31, 2002
INDEX
Page
Number
------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 1
Consolidated Statements of Financial Condition at
March 31, 2002 and December 31, 2001 (Unaudited) 2
Consolidated Statements of Income for the
Three Months Ended March 31, 2002 and 2001 (Unaudited) 3
Consolidated Statements of Comprehensive Income for the
Three Months Ended March 31, 2002 and 2001 (Unaudited) 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2002 and 2001 (Unaudited) 5 - 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan
of Operation 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
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
WEST ESSEX BANCORP, INC.
PART I. FINANCIAL INFORMATION
March 31, 2002
-----------------------------
ITEM 1. FINANCIAL STATEMENTS
Certain information and footnote disclosures required under accounting
principles generally accepted in the United States 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, 2001.
The results of operations for the three month period ended March 31, 2002, 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,
2002 2001
---- ----
Assets (Unaudited)
Cash and amounts due from depository institutions $ 2,307,701 $ 2,008,885
Federal funds sold 3,500,000 10,500,000
Interest-bearing deposits in other banks 3,817,137 4,781,061
------------- -------------
Total cash and cash equivalents 9,624,838 17,289,946
Term deposits -- 200,000
Investment securities held to maturity 31,240,353 33,169,187
Mortgage-backed securities held to maturity 153,351,145 137,327,932
Loans receivable 161,701,350 165,935,968
Real estate owned 209,000 209,000
Premises and equipment 2,459,107 2,502,584
Federal Home Loan Bank of New York stock 3,830,000 3,842,800
Accrued interest receivable 2,030,726 1,879,537
Excess of cost over assets acquired 3,309,621 3,457,813
Other assets 5,444,103 4,949,385
------------- -------------
Total assets $ 373,200,243 $ 370,764,152
============= =============
Liabilities and Stockholders' Equity
Liabilities
Deposits $ 243,444,563 $ 240,864,308
Borrowed money 76,470,965 76,855,928
Advance payments by borrowers for taxes and insurance 925,329 927,375
Other liabilities 1,196,420 1,201,590
------------- -------------
Total liabilities 322,037,277 319,849,201
------------- -------------
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 5,246,461; shares outstanding 4,900,643 (2002)
and 4,921,615 (2001) 52,465 52,465
Additional paid-in capital 17,444,724 17,379,880
Retained earnings - substantially restricted 38,469,497 37,914,015
Common stock acquired by Employee Stock Ownership
Plan ("ESOP") (847,317) (884,158)
Unearned Incentive Plan stock (374,059) (405,730)
Treasury stock, at cost; 345,818 shares (2002) and
324,846 shares (2001) (3,582,344) (3,141,521)
------------- -------------
Total stockholders' equity 51,162,966 50,914,951
------------- -------------
Total liabilities and stockholders' equity $ 373,200,243 $ 370,764,152
============= =============
See notes to consolidated financial statements.
2.
WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
-----------------------------------------
Three Months Ended March 31,
----------------------------
2002 2001
---- ----
(Unaudited)
Interest income:
Loans $ 2,887,668 $ 3,143,337
Mortgage-backed securities 2,173,898 2,175,104
Investment securities 465,965 669,019
Other interest-earning assets 80,932 141,274
--------- ---------
Total interest income 5,608,463 6,128,734
--------- ---------
Interest expense:
Deposits 1,793,938 2,426,106
Borrowed money 967,841 926,403
--------- ---------
Total interest expense 2,761,779 3,352,509
--------- ---------
Net interest income 2,846,684 2,776,225
Provision for (recapture of) loan losses -- (3,506)
--------- ---------
Net interest income after provision for (recapture of) loan losses 2,846,684 2,779,731
--------- ---------
Non-interest income:
Fees and service charges 82,247 81,388
Gain on sale of security available for sale -- 45,000
Other 82,258 50,143
--------- ---------
Total non-interest income 164,505 176,531
--------- ---------
Non-interest expenses:
Salaries and employee benefits 1,004,773 859,396
Net occupancy expense of premises 93,833 122,245
Equipment 170,170 192,377
Loss on real estate owned 1,287 14,408
Amortization of intangibles 148,192 148,192
Miscellaneous 360,262 380,895
--------- ---------
Total non-interest expenses 1,778,517 1,717,513
--------- ---------
Income before income taxes 1,232,672 1,238,749
Income taxes 428,229 440,589
--------- ---------
Net income $ 804,443 $ 798,160
========= =========
Net income per common share:
Basic $ 0.17 $ 0.17
Diluted $ 0.17 $ 0.16
========= =========
Weighted average number of common shares outstanding:
Basic 4,749,825 4,780,569
Diluted 4,874,223 4,849,856
========= =========
See notes to consolidated financial statements.
3.
WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended March 31
---------------------------
2002 2001
---- ----
(Unaudited)
Net income $ 804,443 $ 798,160
--------- ---------
Other comprehensive income -
Unrealized holding gains on securities available for sale,
net of income taxes of $(13,318) in 2001 -- 23,696
Reconciliation adjustment for realized gain on security available
for sale, net of deferred income taxes of $16,191 in 2001 -- (28,809)
--------- ---------
Other comprehensive loss -- (5,113)
--------- ---------
Comprehensive income $ 804,443 $ 793,047
========= =========
See notes to consolidated financial statements.
4.
WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------------------------------
Three Months Ended March 31,
----------------------------
2002 2001
---- ----
(Unaudited)
Cash flows from operating activities:
Net income $ 804,443 $ 798,160
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization of premises and equipment 63,322 64,826
Net accretion of premiums, discounts and deferred loan fees (31,316) (72,276)
Amortization of intangibles 148,192 148,192
Provision for (recapture of) loan losses -- (3,506)
(Gain) on sale of security available for sale -- (45,000)
Loss on sale of real estate owned -- 3,506
(Increase) decrease in accrued interest receivable (151,189) 178,312
(Increase) in other assets (451,359) (364,258)
(Decrease) increase in interest payable (116,075) 197,807
Increase in other liabilities 5,616 629,374
Amortization of Incentive Plan costs 31,671 31,233
ESOP shares committed to be released 86,903 46,316
------------ ------------
Net cash provided by operating activities 390,208 1,612,686
------------ ------------
Cash flows from investing activities:
Proceeds from maturities of term deposits 200,000 --
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 2,000,000 9,548,188
Principal repayments on mortgage-backed securities held to maturity 10,929,406 8,721,051
Purchases of mortgage-backed securities held to maturity (26,955,294) (15,664,344)
Purchases of loans receivable (4,541) (189,792)
Net decrease (increase) in loans receivable 4,201,984 (156,910)
Proceeds from sales of real estate owned -- 131,713
Additions to premises and equipment (19,845) (56,370)
Redemption of Federal Home Loan Bank of New York stock 12,800 --
Purchase of life insurance -- (1,700,000)
------------ ------------
Net cash (used in) provided by investing activities (9,635,490) 2,378,536
------------ ------------
Cash flows from financing activities:
Net increase (decrease) in deposits 2,685,544 (212,782)
Net (decrease) in short-term borrowed money -- (5,550,000)
Proceeds of long-term borrowed money -- 10,000,000
Repayment of long-term borrowed money (384,963) (362,977)
Net (decrease) in advance payments by borrowers for taxes
and insurance (2,046) (17,327)
Purchases of treasury stock (469,400) (95,625)
Proceeds from sale of treasury stock -- 17,813
Cash dividends paid (248,961) (222,735)
------------ ------------
Net cash provided by financing activities 1,580,174 3,556,367
------------ ------------
Net (decrease) increase in cash and cash equivalents (7,665,108) 7,547,589
Cash and cash equivalents - beginning 17,289,946 8,877,917
------------ ------------
Cash and cash equivalents - ending $ 9,624,838 $ 16,425,506
============ ============
See notes to consolidated financial statements.
5.
WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
----------------------------
2002 2001
---- ----
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes $ -- $ --
=========== ===========
Interest $ 2,877,854 $ 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 $ 43,359 $ 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
accounting principles generally accepted in the United States. 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, 2002, 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.
On September 28, 2001, the Company's Board of Directors announced a
five-for-four stock split, which was distributed on October 22, 2001, to
stockholders of record on October 8, 2001. Net income per common share for the
quarter ended March 31, 2001, has been restated to give retroactive effect to
the stock split.
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, 2002 and December 31, 2001
Total assets were $373.2 million at March 31, 2002, compared to $370.8
million at December 31, 2001, an increase of $2.4 million, or 0.6%.
8.
Cash and cash equivalents, primarily federal funds sold and
interest-bearing deposits with the Federal Home loan Bank of New York ("FHLB"),
decreased $7.7 million to $9.6 million at March 31, 2002 from $17.3 million at
December 31, 2001. Cash and cash equivalents decreased as such funds were
invested in mortgage-backed securities.
In the aggregate, mortgage-backed securities and investment securities, all
of which are held to maturity, totalled $184.6 million at March 31, 2002, an
increase of $14.1 million, or 8.3%, from $170.5 million at December 31, 2001.
Mortgage-backed securities increased $16.0 million due to purchases exceeding
repayments. Investment securities decreased $1.9 million due primarily to calls
of several higher yielding securities in advance of scheduled maturities.
Loans receivable decreased by $4.2 million, or 2.5%, to $161.7 million at
March 31, 2002 from $165.9 million at December 31, 2001, due to loan repayments
exceeding originations.
Deposits totalled $243.4 million at March 31, 2002, an increase of $2.5
million, or 1.0%, from the $240.9 million balance at December 31, 2001.
Borrowed money decreased $385,000 to $76.5 million at March 31, 2002, as
compared to $76.9 million at December 31, 2001. During the quarter ended March
31, 2002, long-term debt of $385,000 was repaid.
Stockholders' equity increased $248,000, or 4.9%, to $51.2 million,
primarily due to the retention of net income.
Comparison of Operating Results for the Three Months Ended March 31, 2002 and
2001
Net Income. Net income increased $6,000, or 0.8%, to $804,000 for the three
months ended March 31, 2002, compared with $798,000 for the same 2001 period.
The increase in net income during the 2002 period resulted primarily from an
increase in net interest income partially offset by a decrease in non-interest
income and an increase in non-interest expense.
Interest Income. Total interest income decreased $520,000 or 8.5% to $5.6
million for the three months ended March 31, 2002 from $6.1 million for the same
2001 period. The decrease was the result of a decrease in the average yield on
interest earning assets to 6.28% during the three months ended March 31, 2002,
from 7.14% during the same 2001 period, partially offset by an increase of $14.2
million in average interest-earning assets between the periods.
Interest income on loans decreased by $255,000 or 8.1% to $2.9 million
during the three months ended March 31, 2002, when compared with $3.1 million
for the same 2001 period. The decrease during the 2002 period resulted from a
decrease of $941,000, or 0.6%, in the average balance of loans outstanding,
along with a 58 basis point decrease to 7.00% in the yield earned on the loan
portfolio. The decreased yield is the result of lower rates obtained on
originations since mid-2001, as well as downward interest rate adjustments on
many of the Bank's adjustable-rate mortgage loans.
Interest on mortgage-backed securities, all of which are held-to-maturity,
decreased $1,000 to $2.2 million during the three months ended March 31, 2002,
the same as for the same 2001 period. During the 2002 period, average
mortgage-backed securities increased $18.0 or 14.1%, while the average yield
thereon decreased 85 basis points to 5.98%. The increased average balance is the
result of purchases exceeding repayments of mortgage-backed securities. The
decrease in yield is the result of lower interest rates obtained on securities
purchased since March 31, 2001, and downward rate adjustments on adjustable rate
issues held.
9.
Interest earned on investment securities, all of which are
held-to-maturity, decreased by $203,000, or 30.3%, to $466,000 during the three
months ended March 31, 2002, when compared to $669,000 during the same 2001
period, primarily due to a decrease of $6.8 million, or 17.1%, in the average
balance of such assets, along with a 108 basis point decrease to 5.70% in the
yield earned. The decline in both average balance and yield is the result of
calls of higher yielding investment securities and the lower interest rates
available on purchased securities.
Interest on other interest-earning assets decreased $60,000, or 42.6%, to
$81,000 during the three months ended March 31, 2002, as compared to $141,000
for the same 2001 period. The decrease was due to a decrease of 317 basis
points, to 2.25%, in the yield on such assets, partially offset by an increase
of $3.9 million, or 37.2%, in the average balance of such assets. The increase
in average balance was the result of the proceeds on 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 decreased $632,000, or
26.1%, to $1.8 million during the three months ended March 31, 2002, when
compared to $2.4 million during the same 2001 period. Such decrease was
primarily attributable to a decrease of 119 basis points, to 3.21%, in the cost
of interest-bearing deposits, partially offset by a $2.7 million, or 1.2%,
increase in the average balance thereof. The average cost of certificates of
deposit was 4.05% for the three months ended March 31, 2002, as compared to
5.65% for the same 2001 period. The average cost of non-certificate deposits
decreased to 1.71% for the three months ended March 31, 2002, as compared to
1.81% for the same prior year period.
Interest expense on borrowed money increased by $42,000, or 4.5%, to
$968,000 during the three months ended March 31, 2002, when compared with
$926,000 during the same 2001 period. Such increase was primarily attributable
to a $11.2 million, or 17.0%, increase in the average balance of borrowings
outstanding from the FHLB, partially offset by a decrease of 61 basis points, to
5.05%, in the average cost of such borrowings. During the three months ended
March 31, 2002, the Bank repaid $385,000 in long-term borrowings having an
average interest rate of 5.97%.
Net Interest Income. Net interest income increased $71,000, or 2.6%, to
$2.85 million during the three months ended March 31, 2002, when compared with
$2.78 million for the same 2001 period. Such increase was due to a decrease in
total interest expense of $591,000, partially offset by a decrease in total
interest income of $520,000. The Bank's net interest rate spread increased to
2.60% in 2002 from 2.45% in 2001. The increase in the interest rate spread
resulted from a 101 basis point decrease in the cost of average interest-bearing
liabilities, partially offset by an 86 basis point decrease in the yield on
average interest-earning assets. In addition to the increase in the net interest
rate spread, net interest income increased due to the additional income
generated by a $14.2 million increase in average interest-earning assets, which
more than offset the additional cost incurred by a $12.8 million increase in
average interest-bearing liabilities.
Provision for Loan Losses. During the three months ended March 31, 2002,
the Bank did not record a 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. There were no loan charge-offs or 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, 2002 and 2001, loans delinquent ninety days or more totalled $1.5 million
and $270,000, respectively, representing 0.94% and 0.16%, respectively, of total
loans. At March 31, 2002, the allowance for loan losses stood at $1.36 million,
representing 0.83% of total loans and 88.3% of loans delinquent ninety days or
more. At
10.
December 31, 2001, the allowance for loan losses stood at $1.36 million,
representing 0.80% of total loans and 235.8% of loans delinquent ninety days or
more. At March 31, 2001, the allowance for loan losses stood at $1.36 million,
representing 0.81% of total loans and 503.7% 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 decreased $12,000, or 6.8%, to
$165,000 during the three months ended March 31, 2002, from $177,000 during the
same 2001 period. Included in the 2001 period results is a $45,000 gain on the
sale of a security available for sale. There were no security sales during the
current year period.
Non-Interest Expenses. Non-interest expenses increased by $61,000, or 3.6%,
to $1.8 million during the three months ended March 31, 2002, when compared with
$1.7 million during the same 2001 period. Salaries and employee benefits, the
largest component of non-interest expenses, increased $146,000, or 17.0%, to
$1.0 million during the three months ended March 31, 2002, from $860,000 during
the prior year quarter. The increase in this category is due to normal salary
increases as well as the increased cost of stock-based compensation plans, such
as the ESOP, which are based on the average price of the Company's common stock.
The average price of the Company's common stock was $18.28 for the quarter ended
March 31, 2002, as compared to $10.03 for the comparable prior year quarter.
Occupancy and equipment expenses decreased $51,000, or 16.2%, to $264,000
for the three months ended March 31, 2002, as compared to $315,000 for the
comparable prior year quarter. The decrease was the result of reduced expense
related to data processing services and the much milder current year winter,
which led to significantly lower costs for utilities and snow removal. All other
elements of non-interest expense, which includes loss on real estate owned,
amortization of intangibles, and other expenses, totalled $510,000 and $543,000
during the three months ended March 31, 2002 and 2001, respectively.
Income Taxes. Income tax expense totalled $428,000, or 34.7% of income
before income taxes, during the three months ended March 31, 2002, as compared
to $441,000, or 35.6% of income before income taxes, during the comparable 2001
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. OTS regulations require the Bank to maintain sufficient liquidity
to ensure its safe and sound operation.
The Company's most liquid assets are cash and cash equivalents. The levels
of these assets are dependent on operating, financing, lending and investing
activities during any given period. At March 31, 2002, cash and cash equivalents
totalled $9.6 million, or 2.6% of total assets.
11.
The Company, through its Bank subsidiary, has other sources of liquidity if
a need for additional funds arises, including FHLB borrowings. At March 31,
2002, the Bank had $76.5 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, 2002, the Bank had commitments to originate and purchase loans
and fund unused outstanding lines of credit and undisbursed proceeds of
construction mortgages totalling $15.7 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, 2002, totalled $123.5 million. The Bank expects that
substantially all of the maturing certificate accounts will be retained by the
Bank.
At March 31, 2002, the Company had total equity, determined in accordance
with generally accepted accounting principles, of $51.2 million, or 13.7% of
total assets. At March 31, 2002, the Bank exceeded all of its regulatory capital
requirements with a tangible capital level of $45.3 million, or 12.3% of total
adjusted assets, which is above the required level of $5.5 million, or 1.5%;
core capital of $45.3 million, or 12.3% of total adjusted assets, which is above
the required level of $14.8 million, or 4.0%; and risk-based capital of $46.7
million, or 32.7% of risk-weighted assets, which is above the required level of
$11.4 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, 2002
ITEM 1. Legal Proceedings
-----------------
Neither the Company nor the Bank is involved in any pending legal
proceedings other than routine legal proceedings occurring in the ordinary
course of business, including a recent lawsuit filed by a former employee
related to a claim filed by that employee under the Workers' Compensation
Law of the State of New Jersey. Such routine legal proceedings in the
aggregate, are believed by management to be immaterial to the financial
condition and results of 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
---------------------------------------------------
None.
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
13.
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 3, 2002 By /s/ Leopold W. Montanaro
-----------------------------------------
Leopold W. Montanaro
Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 3, 2002 By: /s/ Dennis A. Petrello
----------------------------------------
Dennis A. Petrello
Senior Executive Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
14.