Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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 Identification No.
Incorporation or Organization
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 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 June 30, 1996
- ----------------------------- -------------------------------------
Common Stock 3,174,000 shares
1st Bergen Bancorp and Subsidiaries
Consolidated Statements of Financial Condition
(dollars in thousands)
June 30, September 30,
1996 1995
(UNAUDITED)
----------- ------------
Assets:
Cash and due from banks $ 5,197 $ 3,215
Interest-bearing deposits in other banks 12,000 6,000
-------- --------
Total Cash and cash equivalents 17,197 9,215
Investment securities held to maturity 36,546 22,666
MBS securities held to maturity 56,688 44,154
Securities available for sale 22,430 25,009
Loans receivable 109,968 113,556
Premises and equipment 2,597 2,698
Real estate owned 1,436 1,071
FHLB stock 1,487 1,446
Accrued interest and dividends receivable 1,431 1,163
Deferred income taxes 2,053 1,989
Other assets 262 200
-------- --------
Total Assets $252,095 $223,167
======== ========
Liabilities and Stockholders' Equity
Liabilities:
Deposits $207,318 $207,838
Escrow 836 911
Accrued income taxes 744 79
Other liabilities 211 165
-------- --------
Total Liabilities 209,109 208,993
Total Stockholders' Equity 42,986 14,174
-------- --------
Total Liabilities and Stockholders' Equity $252,095 $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 Nine Months Ended
June 30, June 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
INTEREST INCOME
Interest on loans $ 2,378 $ 2,551 $ 7,269 $ 7,809
Interest on mortgage-backed securities 834 587 2,382 1,714
Interest on investment securities held to maturity 895 271 2,163 796
Interest on securities available for sale 249 315 517 954
-------- -------- -------- --------
Total interest income 4,356 3,724 12,331 11,273
INTEREST EXPENSE
Deposits 2,346 2,025 7,063 5,527
Advances from FHLB NY 0 36 0 147
-------- -------- -------- --------
Total interest expense 2,346 2,061 7,063 5,674
NET INTEREST INCOME 2,010 1,663 5,268 5,599
Provision for loan losses 150 276 335 1,077
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,860 1,387 4,933 4,522
NON-INTEREST INCOME:
Loan fees and service charges 38 27 124 90
Net loss on sale of securities 0 0 (412) 0
Other income 18 19 51 24
-------- -------- -------- --------
Total other income 56 46 (237) 114
NON-INTEREST EXPENSE:
Compensation and employee benefits 630 577 1,797 1,751
Occupancy expense 64 59 204 184
Equipment 91 93 286 279
Advertising 42 45 142 147
Federal deposit insurance premiums 119 113 353 343
Net loss (gain) from real estate owned (32) 81 204 164
Insurance and bond premiums 21 14 76 80
Other 210 193 582 634
-------- -------- -------- --------
Total non-interest expense 1,145 1,175 3,644 3,582
Income before income taxes 771 258 1,052 1,054
Federal and state tax expense 277 93 380 415
-------- -------- -------- --------
Net Income $ 494 $ 165 $ 672 $ 639
======== ======== ======== ========
See accompanying notes to consolidated financial statements
1st Bergen Bancorp and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
for the Nine Months Ended June 30, 1996 and 1995
(In thousands)
June 30
--------------------
1996 1995
---- ----
Cash Flows from operating activities:
Net Income $ 672 $ 639
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for loan loss 335 1077
Net gain on sales of real estate owned (67) (22)
Depreciation of premises and equipment 123 119
Net accretion of premiums and amortization of discounts (26) (68)
Net loss on sales of securities available for sale 412 --
Net (decrease) increase in deferred loan fees (24) 115
Decrease (increase) in interest and dividends receivable (269) 158
Increase in other assets (63) (63)
Increase in other liabilities 46 2
Increase in deferred income taxes (64) (14)
Increase (decrease) in income taxes payable 665 (585)
-------- --------
Net cash provided by operating activities $ 1,740 $ 1,358
-------- --------
Cash Flows from investing activities:
Net decrease (increase) in loans receivable $ 1,742 $ (4,229)
Proceeds from sales of real estate owned 1,236 240
Purchases of mortgage-backed securities (22,824) --
Investment securities called 13,670 --
Purchases of investment securities held to maturity (27,582) --
Purchases of securities available for sale (16,362) --
Proceeds from sales of securities available for sale 18,589 --
Principle payments on mortgage-backed securities 10,348 4,100
Purchases of premises and equipment (23) (61)
Purchases of FHLB-NY stock (41) (97)
Net cash used in investing activities $(21,247) $ (47)
-------- --------
Cash Flows from financing activities:
Net increase (decrease) in deposits $ (519) $ 596
Proceeds from issuance of common stock, net of ESOP loan 28,082 --
Net decrease in advances by borrowers (taxes&insurance) (74) (46)
-------- --------
Net cash provided by financing activities 27,489 550
-------- --------
Net increase in cash and cash equivalents 7,982 1,861
Cash and cash equivalents at the beginning of the period 9,215 5,883
-------- --------
Cash and cash equivalents at the end of the period $ 17,197 $ 7,744
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest 7,063 5,435
Income taxes -- 538
Non-cash investing and financing activities:
Transfer of loans to real estate owned $ 1,534 $ 781
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 owned subsidiary South Bergen
Savings Bank, (the Bank), and the Bank's 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 nine month periods ended June 30, 1996. The
results of operations for the nine month period ended June 30, 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 chartered 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 which was 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 Company earned 16 cents per share for the quarter ended June 30, 1996.
The Company completed its initial public offering on March 29, 1996 and
accordingly, per share data is not available for prior periods.
5. Stockholders' Equity
The components of stockholders' equity were as follows:
(dollars in thousands)
June 30, 1996 September 30, 1995
------------- ------------------
Preferred Stock, no par value,
2,000,000 shares authorized:
No shares issued -- --
Common Stock, no par value, 6,000,000 shares
authorized: 3,174,000 shares issued $ 30,621 --
Retained earnings, substantially restricted 16,092 $ 15,421
Unearned ESOP Shares (2,539) --
Net unrealized loss on securities available
for sale, net of tax (1,188) (1,247)
-------- --------
Total stockholders' equity $ 42,986 $ 14,174
======== ========
6. Non Performing Loans and the Allowance for Loan Loss.
Non-performing loans were as follows:
(dollars in thousands)
June 30, 1996 September 30, 1995
------------- ------------------
Loans delinquent 90 days or more
and other non-performing loans. $ 4,017 $ 7,363
Loans delinquent 90 days or more and
other non-performing loans as a
percentage of gross loans 3.52% 6.19%
An analysis of the allowance for loan losses for the nine month periods
ended June 30, 1996 and 1995 follows:
(dollars in thousands)
June 30, 1996 September 30, 1995
------------- ------------------
Balance at the beginning of the period $ 5,061 $ 5,045
Provision charged to operations 335 1,077
Charge-offs, net 1,721 1,066
-------- --------
Balance at end of period $ 3,675 $ 5,056
======== ========
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 June 30, 1996, the Company had net income of $494,000 as
compared to net income of $165,000 for the comparable period a year ago. Net
income increased to $672,000 for the nine month period ended June 30, 1996 as
compared with net income of $639,000 for the same period in the prior year. The
increase in both periods as compared with the prior year periods is primarily
attributable to an increase in net interest income attributable to an increase
in interest earning assets funded through the Company's initial public offering
and a decrease in the provision for loan losses.
The Company earned 16 cents per share for the quarter ended June 30, 1996. The
Company completed its initial public offering on March 29, 1996 and accordingly,
per share data is not available for prior periods.
Assets and Liabilities
Total assets increased $28.9 million, or 13.0%, to $252.1 million at June 30,
1996 from $223.2 million at September 30, 1995. Cash and cash equivalents
increased $8.0 million, or 86.6%, to $17.2 million as of June 30, 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. Loans receivable decreased $3.6 million, or 3.2%, to
$110.0 million at June 30, 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 $13.9 million, or 61.2%, to
$36.5 million at June 30, 1996 from $22.7 million at September 30, 1995.
Mortgage-backed securities held to maturity increased $12.5 million, or 28.4%,
to $56.7 million at June 30, 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 $28.0 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 $ 8.0 million in
maturities of U.S. Government Agencies and approximately $12.6 million in normal
amortization and prepayments within the mortgage-backed securities portfolio.
Securities available for sale decreased $2.6 million, or 10.3%, to $22.4 million
at June 30, 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 $13.0 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 remained relatively stable at $207.3 million at June 30, 1996 compared
to $207.8 million at September 30, 1995.
In June, 1996, the Company received regulatory approval to open a new branch
office in Wanaque New Jersey. The office is to be located in a FoodTown
Supermarket and is expected to open in September, 1996.
Stockholders Equity
Stockholders equity increased $28.8 million, or 203.3%, to $43.0 million at June
30, 1996 from $14.2 million at September 30, 1995. The increase in stockholders
equity is due to 30.6 million in net proceeds of the initial public offering
which was completed on March 29, 1996 offset by a loan to the employee stock
ownership plan of $2.5 million. In addition to the net proceeds, net income for
the nine month period totalling $672,000 combined with the decrease in the net
unrealized loss on securities available for sale of $59,000 resulted in the
$28.8 million increase in stockholders equity during the period.
Liquidity and Capital Resource
Liquidity is a measure of a bank's ability to fund loans and withdrawals of
deposits in a cost effective manner. The Company's 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 June 30, 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 $ 73.3 million or 29.1% of
total assets. This amount includes $45.8 million scheduled to mature within one
year, which represented 18.2% of total assets and 22.1% of total deposits at
June 30, 1996.
At June 30, 1996, the Company had commitments to originate loans totalling $14.1
million and outstanding unused lines of credit of $5.0 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 June 30, 1996, the Bank exceeded all regulatory
capital requirements. The Bank's required, actual and excess capital levels as
of June 30, 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 $3,781 1.50 $42,986 17.05 $39,205
Core Capital 7,563 3.00 42,986 17.05 35,423
Risk-Based Capital 7,964 8.00 44,250 44.45 36,286
Comparison of Operating Results for the three months ended June 30, 1996 and
1995
Net Income
For the three months ended June 30, 1996, net income increased by $329,000, or
199.4%, to $494,000 from $165,000 for the same period last year. The increase as
compared with prior year period is primarily attributable to an increase in net
interest income and a decrease in the provision for loan losses.
Interest Income
Interest income increased $632,000, or 17.0%, to $4.4 million for the three
months ended June 30, 1996 from $3.7 million for the comparable period last
year.
Interest on loans decreased $173,000, or 6.8%, to $2.4 million for the three
months ended June 30, 1996 from $2.6 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 $107.5 million for the three
months ended June 30, 1996 from $121.3 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 $247,000, or 42.1%, to
$834,000 for the three months ended June 30, 1996 from $587,000 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 $54.3
million for the three months ended June 30, 1996 from $39.1 million for the same
period in 1995, combined with an increase in the average yield to 6.14% from
6.00% 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 $624,000, or 230.3%, to $895,000 for the three months
ended June 30, 1996 compared to $271,000 for the same period in 1995. The
increase was primarily due to an increase of $17.5 million in the average
balance of investment securities outstanding to $37.5 million for the three
months ended June 30, 1996 from $20.0 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 $66,000, or 21.0%, to
$249,000 for the three months ended June 30, 1996 compared to $315,000 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 November, 1995, partially
offset by the purchase of $13.0 million of US Government Agency Securities and
$3.0 million of GNMA mortgage-backed securities. 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 $321,000, or 15.9%, to $2.4 million for the three
month period ended June 30, 1996 compared to $2.0 million for the same period in
1995. This increase was primarily attributed to an increase of $12.3 million in
the average balance of deposits outstanding to $208.3 million during the three
months ended June 30, 1996 from $196.0 million for the same period in 1995
combined with an increase in the average rate paid on deposits to 4.5% from
4.13% for the comparison periods reflecting increasing market rates of interest.
The increase in average rates paid reflects increased market rates in the
Company's market area.
Interest expense on borrowed funds was $36,000 for the three month period ended
June 30, 1995. The Bank did not have any borrowings during the three month
period ended June 30, 1996.
Provision for Loan Losses
The provision for loan losses decreased $126,000, or 45.7%, to $150,000 for the
three months ended June 30, 1996 from $276,000 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 Company's overall loan portfolio. Non-performing loans, defined as
non-accrual loans and accruing loans delinquent 90 days or more, decreased by
$4.7 million, or 53.8% to $4.0 million , or 3.52% of gross loans at June 30,
1996 from $8.7 million, or 6.19% of gross loans at June 30, 1995. This decline
reflects $3.9 million of loans being transferred to 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. Real estate owned totaled $1.4 million at
June 30, 1996 compared to $2.0 million at March 31, 1996. At June 30, 1996 and
1995, the allowance for loan losses was $3.7 million and $5.1 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 assets increased to 67.39% at June 30, 1996
as compared to 54.62% at June 30, 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 income and non-interest expense for the three months ended June 30,
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 and the Company's new
branch location.
Income Tax Expense
Income tax expense increased $184,000, or 197.8%, to $277,000 for the three
months ended June 30, 1996 from $93,000 for the same period in 1995. The
increase in income tax expense is attributable to the $513,000 or 198.8%
increase in income before taxes to $771,000 for the three months ended June 30,
1996 from $258,000 for the same period in 1995. The effective tax rate for both
periods was 36.0%.
Comparison of Operating Results For The Nine Months Ended
June 30, 1996 and 1995
Net Income
For the nine months ended June 30, 1996, net income increased by $33,000, or
5.2% to $672,000 from $639,000 for the comparable period last year. The increase
was due to a decrease in the provision for loan losses partially offset by a
loss on the sale of securities and a decrease in net interest income.
Interest Income
Interest income increased $1.1 million, or 9.4%, to $12.3 million for the nine
months ended June 30, 1996 from $11.3 million for the comparable period last
year.
Interest on loans decreased $540,000, or 6.9%, to $7.3 million for the nine
months ended June 30, 1996 from $7.8 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 $110.4 million during the nine months
ended June 30, 1996 from $119.1 million for the same period in 1995. The average
yield on loans increased to 8.78% for the nine months ended June 30, 1996
compared to 8.74% for the nine months ended June 30, 1995, reflecting increasing
market rates of interest.
Interest income on mortgage-backed securities increased $668,000, or 39.0%, to
$2.4 million for the nine months ended June 30, 1996 from $1.7 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 $52.0 million for the nine months ended June 30, 1996 from $42.9 million for
the same period in 1995 combined with an increase in the average yield to 6.11%
from 5.33% 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 $1.4 million, or 171.7%, to $2.2 million for the nine
months ended June 30, 1996 compared to $796,000 for the same period in 1995. The
decrease was primarily attributable to an increase of $17.3 million in the
average balance of investment securities outstanding to $37.2 million for the
nine months ended June 30, 1996 from $19.9 million for the same period in 1995
combined with an increase in the average yield to 5.37% from 4.95% for the
comparison period.
Interest income on securities available for sale decreased $437,000, or 45.8%,
to $517,000 for the nine months ended June 30, 1996 compared to $954,000 for the
same period in 1995. The decrease was primarily attributable to a decrease of
$15.7 million in the average balance of securities available for sale
outstanding to $10.8 million for the nine months ended June 30, 1996 from $26.5
million for the same period in 1995. In November of 1995, the Bank sold $19.0
million of lower yielding US Government Agency 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.
Interest Expense
Interest expense increased $1.5 million, or 27.8%, to $7.1 million for the nine
month period ended June 30, 1996 compared to $5.5 million for the same period in
1995. The increase was primarily attributed to an increase of $6.9 million in
the average balance of deposits outstanding to $205.9 million during the nine
months ended June 30, 1996 from $199.0 million for the same period in 1995
combined with an increase in the average rate paid on deposits to 4.57% from
3.7% for the comparison periods, reflecting increasing market rates of interest.
Interest expense on borrowed funds was $147,000 for the nine months ended June
30, 1995. The Company did not have any borrowings during the nine months ended
June 30, 1996.
Provision for Loan Losses
The provision for loan losses decreased $742,000, or 68.9%, to $335,000 for the
nine months ended June 30, 1996 from $1.1 million 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 Company's overall loan portfolio. Non-performing loans, defined
as non-accrual loans and accruing loans delinquent 90 days or more, decreased by
$4.7 million, or 53.8%, to $4.0 million at June 30, 1996 from $8.7 million at
June 30, 1995. This decline reflects $3.9 million of loans being transferred to
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 June 30,
1996 and 1995, the allowance for loan losses was $3.7 million and $5.1 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 to 67.39% at June 30, 1996 as
compared to 54.62% at June 30, 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 income for the nine months ended June 30, 1996 reflects a loss of
$237,000 compared to income of $114,000 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 November,
1995. The Company sold the securities and purchased securities held to maturity
to take advantage of higher yields available on the securities purchased. No
such transactions occurred during the nine month period ended June 30, 1995.
Non-interest expense for the nine months ended June 30, 1996 and 1995 did not
show any material increases or decreases.
Income Tax Expense
Income tax expense decreased $35,000 or 8.4% to $380,000 for the nine months
period ended June 30, 1996 from $415,000 for the same period in 1995. The
effective tax rate for the periods ended June 30, 1996 and June 30, 1995 were
36.0% and 39.0% respectively. The higher effective tax rate in 1995 was due to a
higher level of non-deductible expenses in that period.
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 of Form 8-K
The Registrant filed a current report on Form 8-K on May 1, 1996
announcing the Registrant's second quarter results.
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
President and Chief Executive Officer
Date: By: Albert E. Gossweiler
Executive Vice President and Chief
Financial Officer