Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
COMMISSION FILE NUMBER 0-27686
1st Bergen Bancorp
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(Exact name of registrant as specific in its charter)
New Jersey 22-3409845
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State or other juridiction of IRS Employer
Incorporation or Organization Identification No.
250 Valley Boulevard, Wood-Ridge, NJ 07075
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Address of Principal Executive Offices
(201) 939-3400
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Registrant's Telephone No.
Not Applicable
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Former Name, Address, and Fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) had been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Indicate the number of share outstanding of each of the issuer's classes of
common stock, as of the latest practible date.
Class Outstanding at March 31, 1996
----- -----------------------------
Common Stock 3,174,000 shares
1ST BERGEN BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollar in thousands)
March 31, September 30,
1996 1995
-------- --------------
(UNAUDITED)
Assets:
Cash and due from banks $ 35,223 $ 3,215
Interest-bearing deposits in other banks 1,000 6,000
-------- --------
Total Cash and cash equivalents 36,223 9,215
Investment securities held to maturity 36,726 22,666
MBS securities held to maturity 54,556 44,154
Securities available for sale 14,588 25,009
Loans receivable 106,916 113,556
Premises and Equipment 2,636 2,698
Real estate owned 2,000 1,071
FHLB Stock 1,487 1,446
Accrued interest and dividends receivable 1,116 1,163
Deferred income taxes 2,053 1,989
Other Assets 266 200
-------- --------
TOTAL ASSETS $258,567 $223,167
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $210,360 $207,838
Escrow 765 911
Accrued income taxes 467 79
Other liabilities 166 165
Stock Subscriptions Funds Deposited 4,097 0
-------- --------
TOTAL LIABILITIES 215,855 208,993
TOTAL STOCKHOLDERS' EQUITY 42,712 14,174
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $258,567 $223,167
======== ========
See accompanying notes to consolidated financial statements
1ST BERGEN BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands)
Three Months Ended Six Months Ended
March 31, March 31,
------------------- --------------------
1996 1995 1996 1995
------- ------- ------- -------
INTEREST INCOME
Interest on loans $ 2,369 $ 2,652 $ 4,891 $ 5,258
Interest on mortgage-backed securities 828 553 1,548 1,127
Interest on investment securities held to maturity 633 261 1,268 525
Interest on securities available for sale 169 320 268 639
------- ------- ------- -------
Total interest income 3,999 3,786 7,975 7,549
INTEREST EXPENSE
Deposits 2,359 1,799 4,717 3,502
Advances from FHLBNY 0 71 0 111
------- ------- ------- -------
Total interest expense 2,359 1,870 4,717 3,613
NET INTEREST INCOME 1,640 1,916 3,258 3,936
Provision for loan losses 125 301 185 801
------- ------- ------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,515 1,615 3,073 3,135
NON-INTEREST INCOME:
Loan fees and service charges 36 31 86 63
Net loss on sale of securities 0 0 (412) 0
Other income 10 2 33 5
------- ------- ------- -------
Total other income 46 33 (293) 68
NON-INTEREST EXPENSE:
Compensation and employee benefits 576 556 1,167 1,174
Occupancy expense 77 65 140 125
Equipment 97 94 195 186
Advertising 47 50 100 102
Federal deposit insurance premiums 119 113 234 230
Net loss from real estate owned 108 60 236 83
Insurance and bond premiums 29 30 55 66
Other 184 253 372 441
------- ------- ------- -------
Total non-interest expense 1,237 1,221 2,499 2,407
Income before income taxes 324 427 281 796
Federal and state tax expense 117 154 103 322
------- ------- ------- -------
Net Income $ 207 $ 273 $ 178 $ 474
======= ======= ======= =======
See accompanying notes to consolidated financial statements
1ST BERGEN BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND 1995
(In thousands)
March 31
----------------------
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 178 $ 474
Adjustments to reconcile net income to net cash provided
by (used in) operating activities
Provision for loan loss 185 801
Net gain on sales of real estate owned (32) (17)
Depreciation of premises and equipment 83 78
Net accretion of premiums and amortization of discounts (10) (46)
Net loss on sales of securities available for sale 411 --
Net (decrease) increase in deferred loan fees (33) 128
Decrease in interest and dividends receivable 47 79
Increase in other assets (66) (72)
Increase (decrease) in other liabilities 2 (70)
Decrease in deferred income taxes (64) (143)
Increase (decrease) in income taxes payable 388 (173)
-------- --------
Net cash provided by operating activities $ 1,089 $ 1,039
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in loans receivable $ 5,121 $ (5,439)
Proceeds from sales of real estate owned 470 179
Purchases of mortgage-backed securities (16,051) --
Investment securities called 5,670 --
Purchases of investment securities held to maturity (19,761) --
Purchases of securities available for sale (8,308) --
Proceeds from sales of securities available for sale 18,589 --
Principle payments on mortgage-backed securities 5,690 3,094
Purchases of premises and equipment (21) (41)
Purchases of FHLB-NY stock (41) (97)
-------- --------
Net cash used in investing activities $ (8,642) $ (2,304)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits $ 2,522 $ (7,699)
Proceeds from issuance of common stock, net of ESOP loan 28,088 --
Stock subscriptions received 4,097 --
Net increase of advances from FHLB-NY -- 4,350
Net (decrease) increase in advances by borrowers (taxes&insurance) (146) 50
-------- --------
Net cash provided by (used in) financing activities 34,561 (3,299)
-------- --------
Net increase (decrease)in cash and cash equivalents 27,008 (4,564)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 9,215 5,883
-------- --------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 36,223 $ 1,319
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for: 8,890 6,829
Interest
Income taxes 463 677
Non-cash investing and financing activities:
Transfer of loans to real estate owned $ 1,366 $ 435
Transfer of investments held to maturity to securities
available for sale $ 19,000
See accompanying notes to consolidated financial statements
1ST BERGEN BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
The Consolidated financial statements include the accounts of 1st Bergen
Bancorp, (the Company) and its wholly subsidiary South Bergen Savings Bank,
(the Bank), and its wholly owned subsidiary South Bergen Financial
Services, Inc. All significant intercompany balances and transactions have
been eliminated in consolidation. The Bank provides a full range of banking
services to individuals and corporate customers through its two branches in
Bergen County, New Jersey. The Bank is subject to competition from other
financial institutions and to the regulations of certain regulatory
agencies and undergoes periodic examinations by those regulatory
authorities.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
("GAAP") for interim financial information and in conformity with the
instructions to form 10Q and Article 10 of Regulations S-X for the Company
and its subsidiary.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial condition,
results of operations, and changes in cash flows have been made at and for
the three and six month periods ended March 31, 1996. The results of
operations for the six month period ended March 31, 1996 are not
necessarily indicative of results that may be expected for the entire
fiscal year ending September 30, 1996.
These consolidated financial statements should be read in conjunction with
the consolidated financial statements for the year ended September 30,
1995, and the notes thereto, that are included in the Company's Prospectus
filed with the Securities and Exchange Commission as part of its
registration statement on Form S-1 Registration No. 33-80399.
2. CHARTER CONVERSION
On November 14, 1995, the Bank converted from a state mutual savings and
loan association (South Bergen Savings and Loan Association) to a federally
charted mutual savings bank called South Bergen Savings Bank.
3. ORGANIZATION OF THE HOLDING COMPANY AND CONVERSION TO STOCK FORM OF
OWNERSHIP
On November 28, 1995, 1st Bergen Bancorp (the Holding Company) was
organized for the purpose of acquiring all of the capital stock of the Bank
to be issued in the Bank's conversion from the mutual to stock form of
ownership. On March 29, 1996, the Company completed an initial public
offering. The offering resulted in the sale of 3,174,000 shares of common
stock including the sale of 253,920 shares to the Bank's tax qualified
Employee Stock Ownership Plan (the ESOP).
In connection with the conversion from a mutual to a capital stock form,
the Company established the ESOP for the benefit of the employees of the
Company and the Bank. The ESOP purchased 253,920 shares or 8% of the total
stock sold in the subscription, for $2,539,200 financed by a loan from the
Company.
The ESOP was effective upon completion of the conversion. Full time
employees of the Company or the Bank who have been credited with at least
1000 hours of service during a twelve month period and who have attained
the age of 21 are eligible to participate in the ESOP. The loan to the ESOP
will be repaid principally from the Bank's discretionary contributions to
the ESOP over a period of ten years, and the collateral for the loan will
be the Common Stock purchased by the ESOP that has not been committed to be
released.
4. NET INCOME PER SHARE
The initial public offering was completed on March 29, 1996. Accordingly,
net income per share calculations for the three and six month periods ended
March 31, 1996 are not meaningful and are therefore not presented.
5. STOCKHOLDERS' EQUITY
The components of stockholders' equity were as follows:
(dollars in thousands)
March 31, 1996 September 30, 1995
-------------- ------------------
Common Stock, no par value, 6,000,000 shares
authorized: 3,174,000 shares issued $ 30,627 --
Retained earnings, substantially restricted 15,599 $ 15,421
Unearned ESOP Shares (2,539) --
Net unrealized loss on securities available for sale,
net of tax (975) (1,247)
-------- --------
Total stockholders' equity $ 42,712 $ 14,174
======== ========
6. NON PERFORMING LOANS AND THE ALLOWANCE FOR LOAN LOSS.
Non-performing loans were as follows:
(dollars in thousands)
March 31, 1996 September 30, 1995
-------------- ------------------
Loans delinquent 90 days or more
and other non-performing loans. $4,438 $7,363
Loans delinquent 90 days or more and other
non-performing loans as a percentage of gross loans 4.15% 6.19%
An analysis of the allowance for loan losses for the six month periods
ended March 31, 1996 and 1995 follows:
(dollars in thousands)
March 31, 1996 March 31, 1995
-------------- --------------
Balance at the beginning of the period $5,061 $5,045
Provision charged to operations 185 801
Charge-offs, net 1,385 629
------ ------
Balance at end of period $3,861 $5,217
====== ======
7. RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Account Standards No. 114 "Accounting for Creditors
for Impairment of a Loan" (SFAS No. 114) and SFAS No. 118 "Accounting for
Creditors for Impairment of a Loan-Income Recognition and Disclosures"
(SFAS No. 118) were adopted prospectively by the Company on October 1,
1995. These statements address the accounting for impaired loans and
specify how allowances for loan losses related to these impaired loans
should be determined. The adoption of the statements did not affect the
level of the overall allowance or the operating results of the Company.
Income recognition and charge-off policies were not changed as a result of
SFAS No. 114 and SFAS No. 118. The Company has defined the population of
impaired loans to be those loans for which it is probable that future
events make it unlikely that all of the principal or interest will be
collected. Impaired loans are individually assessed to determine that the
loan's carrying value is not in excess of the fair value of the collateral
or the present value of the loan's expected future cash flows. Smaller
balance homogeneous loans that are collectively evaluated for impairment,
such as residential mortgage loans and installment loans, are specifically
excluded from the impaired loan portfolio.
1ST BERGEN BANCORP SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
OVERVIEW
For the quarter ended March 31, 1996, the Company had net income of $207,000 as
compared to net income of $273,000 a year ago. Net income decreased to $178,000
for the six month period ended March 31, 1996 as compared with net income of
$474,000 for the same period in the prior year. The decreases in both periods as
compared with the prior year periods reflect the adverse effect of higher
interest rates over those experienced during similar periods last year and the
efforts of the Company to position itself for future growth.
The Company completed its initial public offering of its common stock on March
29, 1996. Accordingly, per share data is not presented because it is not
considered meaningful.
ASSETS AND LIABILITIES
Total assets increased $35.4 million, or 15.9%, to $258.6 million at March 31,
1996 from $223.2 million at September 30, 1995. Cash and cash equivalents
increased $27.0 million, or 293.5%, to $36.2 million as of March 31, 1996 from
$9.2 million at September 30, 1995, primarily as a result of the completion of
the Bank's initial public offering on March 29, 1996, in which net proceeds of
$30.6 million were realized. At March 31, 1996, the vast majority of these
proceeds were invested in cash and cash equivalents. Loans receivable decreased
$6.6 million, or 5.9%, to $106.9 million at March 31, 1996 from $113.6 million
at September 30, 1995. The decrease in loans receivable, net, resulted from
prepayments of loans and scheduled amortization in excess of new loan
originations and purchases. Investment securities held to maturity increased
$14.1 million, or 62.0%, to $36.7 million at March 31, 1996 from $22.7 million
at September 30, 1995. Mortgage-backed securities held to maturity increased
$10.4 million, or 23.6%, to $54.6 million at March 31, 1996 from $44.2 million
at September 30, 1995. The increase in investment securities held to maturity
and mortgage-backed securities held to maturity was due primarily to the
purchase of $13.0 million of U.S. Government Agency securities, $6.8 million of
SBA securities and $15.7 million of GNMA 30 year adjustable rate mortgages
offset by $3.0 million in maturities of U.S. Government Agencies and
approximately $8.0 million in normal amortization and prepayments within the
mortgage-backed securities portfolio.
Securities available for sale decreased $10.4 million, or 41.2%, to $14.6
million at March 31, 1996 from $25.0 million at September 30, 1995. The decrease
was due to the sale of $19.0 million of U.S. Government Agency securities in
November, 1995 offset by the purchase of $5.0 million of U.S. Government Agency
securities and $3.0 million of GNMA mortgage-backed securities. The Bank sold
the lower yielding securities to enhance the average yield on interest earning
assets by reinvesting the proceeds from the sale in higher yielding investment
securities to be held to maturity.
Deposits increased $2.5 million, or 1.2%, to $210.4 million at March 31, 1996
from $207.8 million at September 30, 1995.
STOCKHOLDERS EQUITY
Stockholders equity increased $28.5 million, or 201.3%, to $42.7 million at
March 31, 1996 from $14.1 million at September 30, 1995. The increase in
stockholders equity is due to net proceeds of the initial public offering which
was completed on March 29, 1996 totaling $30.6 million, offset by a loan to the
employee stock option plan of $2.5 million. In addition to the net proceeds, net
income for the six month period totalling $178,000 combined with the decrease in
the net unrealized loss on securities available for sale of $271,000 resulted in
the $28.5 million increase in stockholders equity during the period.
LIQUIDITY AND CAPITAL RESOURCE
Liquidity is a measure of its ability to fund loans and withdrawals of deposits
in a cost effective manner. The principal sources of funds are deposits,
scheduled amortization and prepayments of loan principal and mortgage-backed
securities, maturities of investment securities and funds provided by
operations. Liquidity is also available through borrowings from the Federal Home
Loan Bank of New York.
While loan repayments and maturing investment securities are a relatively
predictable source of funds, deposit flows, prepayments and calls of investment
securities and prepayment of mortgage-backed securities are influenced by
interest rates, general economic conditions and competition in the marketplace.
At March 31, 1996, total liquid assets, consisting of cash, interest bearing
deposits in other banks, investment securities and mortgage-backed securities,
all with final maturities of five years or less, were $90.0 million or 34.8% of
total assets. This amount includes $23.3 million scheduled to mature within one
year, which represented 9.0% of total assets and 11.1% of total deposits at
March 31, 1996. Included in this amount is $30.6 million in net proceeds from
the Company's initial public offering. Management anticipates that these
proceeds will be invested in loans, mortgage-backed and investment securities as
opportunities arise.
At March 31, 1996, the Company had commitments to originate loans totalling
$10.4 million, outstanding unused lines of credit of $5.0 million and
commitments to purchase investment securities totalling $8.0 million. The
Company is committed to maintaining a strong liquidity position and anticipates
that it will have sufficient funds to meet its current funding commitments. The
Company does not have any balloon or other payments due on any long-term
obligations or any off-balance sheet items other than the loan commitments and
unused lines of credit noted above.
The OTS requires that the Bank meet minimum tangible, core and risk-based
capital requirements. As of March 31, 1996, the Bank exceeded all regulatory
capital requirements. The Bank's required, actual and excess capital levels as
of March 31, 1996 are as follows:
EXCESS OF ACTUAL
OVER
REQUIRED CAPITAL ACTUAL CAPITAL REGULATORY
REQUIREMENT
(dollars in thousands) AMOUNT % OF ASSETS AMOUNT % OF ASSETS $ AMOUNT
------ ----------- ------ ----------- ----------------
Tangible Capital $3,882 1.50 $42,712 16.52 $38,830
Core Capital 7,765 3.00 42,712 16.52 34,947
Risk-Based Capital 8,135 8.00 44,003 43.28 35,868
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
1995
NET INCOME
For the three months ended March 31, 1996, net income decreased by $66,000, or
24.2%, to $207,000 from $273,000 for the same period last year. For the six
months ended March 31, 1996, net income decreased by $296,000, or 62.5%, to
$178,000 from $474,000 for the same period last year. The decline in net income
for both periods was primarily a result of a decrease in net interest income
partially offset by a decrease in the provision for loan loss.
INTEREST INCOME
Interest income increased $213,000, or 5.6%, to $4.0 million for the three
months ended March 31, 1996 from $3.8 million for the same period last year.
Interest on loans decreased $283,000, or 10.7%, to $2.4 million for the three
months ended March 31, 1996 from $2.7 million for the same period in 1995. The
decrease in interest on loans was primarily due to a decrease in the average
balance of loans outstanding during the period to $107.3 million for the three
months ended March 31, 1996 from $122.6 million for the same period in 1995. The
decrease is due to loan repayments exceeding originations as the Company
continued to experience weak loan demand in its primary market area.
Interest income on mortgage backed securities increased $275,000, or 49.7%, to
$828,000 for the three months ended March 31, 1996 from $553,000 for the same
period in 1995. The increase was primarily due to the increase in the average
balance of mortgage backed securities outstanding during the period to $55.7
million for the three months ended March 31, 1996 from $40.6 million for the
same period in 1995, combined with an increase in the average yield to 5.94%
from 5.44% for the comparison period reflecting increasing market rates of
interest. The increase in the average balance was a result of available funds
exceeding new loan demand.
Interest on investment securities held to maturity, which includes interest
income on Federal Home Loan Bank stock and other Federal Home Loan Bank
deposits, increased by $372,000, or 142.5%, to $633,000 for the three months
ended March 31, 1996 compared to $261,000 for the same period in 1995. The
increase was primarily due to an increase of $27.3 million in the average
balance of investment securities outstanding to $48.7 million for the three
months ended March 31, 1996 from $21.4 million for the same period in 1995. The
increase in the average balance of the investments held to maturity portfolio
was primarily due to the available funds from sales within the securities
available for sale portfolio discussed below.
Interest income on securities available for sale decreased $151,000, or 47.2%,
to $169,000 for the three months ended March 31, 1996 compared to $320,000 for
the same period in 1995. The decrease was primarily due to the sale of
approximately $19.0 million of securities available for sale during the quarter
ended December 31, 1995. The Company sold the securities and purchased
investment securities held to maturity to take advantage of higher yields
available on the securities purchased.
INTEREST EXPENSE
Interest expense increased $489,000, or 26.1%, to $2.4 million for the three
month period ended March 31, 1996 compared to $1.9 million for the same period
in 1995. This increase was primarily attributed to an increase of $22.5 million
in the average balance of deposits outstanding to $215.9 million during the
three months ended March 31, 1996 from $193.4 million for the same period in
1995 combined with an increase in the average rate paid on deposits to 4.37%
from 3.72% for the comparison periods reflecting increasing market rates of
interest. The increase in the average balance of deposits was primarily
attributed to the stock subscriptions received during the three months ended
March 31, 1996 for the initial public offering which was completed on March 29,
1996.
Interest expense on borrowed funds was $71,000 for the three month period ended
March 31, 1995. The Bank did not have any borrowings during the three month
period ended March 31, 1996.
PROVISION FOR LOAN LOSSES
The provision for loan losses decreased $176,000, or 58.5%, to $125,000 for the
three months ended March 31, 1996 from $301,000 for the same period in 1995. The
decreased provision reflects a decline in the amount of newly classified loans,
the continuing resolution of existing non-performing assets and a decrease in
the Bank's overall loan portfolio. Non-performing loans, defined as non-accrual
loans and accruing loans delinquent 90 days or more, decreased by $2.9 million,
or 39.7% to $4.4 million at March 31, 1996 from $7.3 million at March 31, 1995.
This decline reflects $4.3 million of these loans being reclassified as real
estate owned as the Company acquired title to these properties through the
foreclosure process. Management is continuing its efforts to sell these
properties and reinvest the proceeds in interest earning assets. At March 31,
1996 and 1995, the allowance for loan losses was $3.9 million and $5.2 million.
The decrease in the allowance for loan losses is due to charge-offs within the
allowance of previously established reserves on loans transferred to real estate
owned at fair market value. The Company's allowance for loan losses as a
percentage of total non-performing loans increased slightly to 68.74% at March
31, 1996 as compared to 66.64% at March 31, 1995.
Future provisions for loan losses will continue to be based on management's
assessment of the loan portfolio and its underlying collateral, trends in
non-performing loans, then current economic conditions and other factors which
warrant recognition in order to maintain the allowance for loan losses at levels
sufficent to provide for estimated future losses. Although management uses the
best information available, adjustments may be necessary due to economic,
operating, regulatory and other conditions that may be beyond the Bank's
control.
NON-INTEREST INCOME AND NON-INTEREST EXPENSE
Non-interest income and non-interest expense for the three months ended March
31, 1996 and 1995 did not show any material increases or decreases. The Company
expects to experience increased costs in future periods due to expenses
associated with the ESOP and other stock benefit plans, if adopted, as well as
increased costs associated with being a public company.
INCOME TAX EXPENSE
Income tax expense decreased $37,000, or 24.0%, to $117,000 for the three months
ended March 31, 1996 from $154,000 for the same period in 1995. The decrease in
income tax expense is attributable to the $103,000 or 24.1% decrease in income
before taxes to $324,000 for the three months ended March 31, 1996 from $427,000
for the same period in 1995.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED
MARCH 31, 1996 AND 1995
INTEREST INCOME
Interest income increased $426,000, or 5.6%, to $8.0 million for the six months
ended March 31, 1996 from $7.5 million for the same period last year.
Interest on loans decreased $367,000, or 7.0%, to $4.9 million for the six
months ended March 31, 1996 from $5.3 million for the same period in 1995. The
decrease in interest on loans was primarily attributable to a decrease in the
average balance of loans outstanding to $109.3 million during the six months
ended March 31, 1996 from $120.4 million for the same period in 1995. The
average yield on loans increased to 8.95% for the six months ended March 31,
1996 compared to 8.73% for the six months ended March 31, 1995, reflecting
increasing market rates of interest.
Interest income on mortgage-backed securities increased $421,000, or 37.4%, to
$1.5 million for the six months ended March 31, 1996 from $1.1 million for the
same period in 1995. The increase was primarily attributable to the increase in
the average balance of mortgage-backed securities outstanding during the period
to $52.6 million for the six months ended March 31, 1996 from $41.3 million for
the same period in 1995 combined with an increase in the average yield to 5.88%
from 5.45% for the comparison period, reflecting increasing market rates of
interest.
Interest on investment securities held to maturity, which includes interest
income on Federal Home Loan Bank stock and other Federal Home Loan Bank
deposits, increased by $743,000, or 141.5%, to $1.3 million for the six months
ended March 31, 1996 compared to $525,000 for the same period in 1995. The
increase was primarily attributable to an increase of $13.6 million in the
average balance of investment securities outstanding to $34.4 million for the
six months ended March 31, 1996 from $20.8 million for the same period in 1995
combined with an increase in the average yield to 5.45% from 4.69% for the
comparison period.
Interest income on securities available for sale decreased $371,000, or 58.1%,
to $268,000 for the six months ended March 31, 1996 compared to $639,000 for the
same period in 1995.
INTEREST EXPENSE
Interest expense increased $1.2 million, or 34.7%, to $4.7 million for the six
month period ended March 31, 1996 compared to $3.5 million for the same period
in 1995. The increase was primarily attributed to an increase of $16.5 million
in the average balance of deposits outstanding to $212.2 million during the six
months ended March 31, 1996 from $195.7 million for the same period in 1995
combined with an increase in the average rate paid on deposits to 4.45% from
3.58 % for the comparison periods, reflecting increasing market rates of
interest.
Interest expense on borrowed funds was $111,000 for the six months ended March
31, 1995. The Bank did not have any borrowings during the six months ended March
31, 1996.
PROVISION FOR LOAN LOSSES
The provision for loan losses decreased $615,000, or 76.8%, to $185,000 for the
six months ended March 31, 1996 from $801,000 for the same period in 1995. The
decreased provision reflects a decline in the amount of newly classified loans,
the continuing resolution of existing non-performing assets and a decrease in
the Bank's overall loan portfolio. Non-performing loans, defined as non-accrual
loans and accruing loans delinquent 90 days or more, decreased by $2.9 million,
or 39.7%, to $4.4 million at March 31, 1996 from $7.3 million at March 31, 1995.
This decline reflects $4.3 million of loans being reclassified as real estate
owned as the Company acquired title to these properties through the foreclosure
process. Management is continuing its efforts to sell these properties and
reinvest the proceeds in interest earning assets. At March 31, 1996 and 1995,
the allowance for loan losses was $3.9 million and $5.2 million. The decrease in
the allowance for loan losses is due to charge-offs within the
allowance of previously established reserves on loans transferred to real estate
owned at fair market value. The Bank's allowance for loan losses as a percentage
of total non-performing loans increased slightly to 68.74% at March 31, 1996 as
compared to 66.64% at March 31, 1995.
Future provisions for loan losses will continue to be based on management's
assessment of the loan portfolio and its underlying collateral, trends in
non-performing loans, then current economic conditions and other factors which
warrant recognition in order to maintain the allowance for loan losses at levels
sufficient to provide for estimated future losses. Although management uses the
best information available, adjustments may be necessary due to economic,
operating, regulatory and other conditions that may be beyond the Bank's
control.
NON-INTEREST INCOME AND NON-INTEREST EXPENSE
Non-interest loss for the six months ended March 31, 1996 was $293,000 compared
to income of $68,000 for the same period last year. The decrease in non-interest
income was due to the loss of $412,000 on the sale of approximately $19.0
million of securities available for sale during the quarter ended December 31,
1995. The Bank sold the securities and purchased securities held to maturity to
take advantage of higher yields available on the securities purchased.
Non-interest expense increased $92,000 or 3.6% for the six months ended March
31, 1996 to $2.5 million from $2.4 million for the same period in 1995. This
increase was primarily due to an increase in the net loss from real estate owned
to $236,000 for the six months period ended March 31, 1996 from $83,000 for the
comparison period. The increase is real estate owned expense is primarily
attributable to the costs required in maintaining the properties' condition.
INCOME TAX EXPENSE
Income tax expense decreased $219,000 or 68.0% to $103,000 for the six months
period ended March 31, 1996 from $322,000 for the same period in 1995. The
decrease in income tax expense is attributable to the $515,000 or 64.7%
decreased in income before taxes to $281,000 for the six months ended March 31,
1996 from $796,000 for the same period in 1995.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are various claims and lawsuits in which the Registrant is
periodically involved incidental to the Registrant's business. In the
opinion of management, no material loss is expected from any of such
pending claims and lawsuits.
ITEM 2. CHANGES IN SECURITIES.
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
1st BERGEN BANCORP
Date: By: WILLIAM M. BRICKMAN
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President and Chief Executive Officer
Date: By: ALBERT E. GOSSWEILER
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Executive Vice President and
Chief Financial Officer