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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, 1997
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 IRS Employer
of 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 ( )
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practible date.
CLASS OUTSTANDING AT JUNE 30, 1997
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Common Stock 3,000,300 shares
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1ST BERGEN BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
ASSETS:
Cash and due from banks .......................... $ 3,830 $ 5,231
Interest-bearing deposits in other banks ......... 500 2,500
-------- --------
Total cash and cash equivalents .................. 4,330 7,731
Investment securities held to maturity ......... 50,541 33,136
Investment securities available for sale ....... 36,145 19,604
Mortgage-backed securities held to maturity .... 55,409 51,769
Mortgage-backed Securities available for sale .. 9,313 2,817
Loans receivable, net .......................... 120,143 123,825
Premises and equipment ......................... 3,047 2,699
Real estate owned .............................. 201 537
FHLB stock ..................................... 1,627 1,487
Accrued interest and dividends receivable ...... 2,072 1,466
Deferred income taxes .......................... 1,782 1,817
Other assets ................................... 155 185
-------- --------
TOTAL ASSETS ....................................... $284,765 $247,073
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits ......................................... $214,282 $204,154
FHLB Borrowings .................................. 27,334 --
Escrow ........................................... 1,062 932
Accrued income taxes ............................. 1,207 592
Other liabilities ................................ 476 160
-------- --------
TOTAL LIABILITIES .................................. 244,361 205,838
TOTAL STOCKHOLDERS' EQUITY ......................... 40,404 41,235
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......... $284,765 $247,073
======== ========
See accompanying notes to (unaudited) consolidated financial statements
1ST BERGEN BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
INTEREST INCOME
Interest on loans ................................................... $2,530 $2,379 $5,091 $4,748
Interest on investment securities held to maturity .................. 857 535 1,438 996
Interest on securities available for sale ........................... 438 201 737 339
Interest on mortgage-backed securities held to maturity ............. 896 834 1,706 1,661
Interest on mortgage-backed securities available for sale ........... 83 47 126 79
Interest on FHLB deposits ........................................... 54 337 158 485
FHLB stock dividends ................................................ 25 23 49 47
------ ------ ------ ------
Total interest income ............................................... 4,883 4,356 9,305 8,355
INTEREST EXPENSE
Deposits ........................................................... 2,325 2,346 4,538 4,706
FHLB Borrowings .................................................... 224 0 224 0
------ ------ ------ ------
Total interest expense ............................................. 2,549 2,346 4,762 4,706
NET INTEREST INCOME .................................................. 2,334 2,010 4,543 3,649
Provision for loan losses .......................................... 125 150 300 275
------ ------ ------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES .................................................... 2,209 1,860 4,243 3,374
NON-INTEREST INCOME:
Loan fees and service charges ...................................... 44 38 87 74
Other income ....................................................... 13 18 37 20
------ ------ ------ ------
Total other income ................................................. 57 56 124 94
NON-INTEREST EXPENSE:
Compensation and employee benefits ................................. 816 630 1,528 1,206
Occupancy expense .................................................. 78 64 151 142
Equipment .......................................................... 109 91 221 185
Advertising ........................................................ 55 42 107 89
Federal deposit insurance premiums ................................. 35 119 70 237
Net (gain) loss from real estate owned ............................. (48) (32) (57) 68
Insurance and bond premiums ........................................ 31 21 65 50
Other .............................................................. 317 210 616 397
------ ------ ------ ------
Total non-interest expense ......................................... 1,393 1,145 2,701 2,374
Income before income taxes ......................................... 873 771 1,666 1,094
Federal and state tax expense ...................................... 303 277 592 393
------ ------ ------ ------
Net Income .................................................. $ 570 $ 494 $1,074 $ 701
====== ====== ====== ======
Earnings per share ................................................. .21 .16 .39 --
------ ------ ------ ------
See accompanying notes to (unaudited) consolidated financial statements
1ST BERGEN BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(IN THOUSANDS)
JUNE 30
----------------------
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ........................................................ $ 1,074 $ 701
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for loan loss ....................................... 325 275
Net gain on sales of real estate owned ........................ (45) (58)
Depreciation of premises and equipment ........................ 108 83
Amortization of MRP shares .................................... 48 --
Amortization of ESOP shares ................................... 79 --
Net accretion of premiums and amortization of discounts ....... 40 31
Net increase in deferred loan fees ............................ 20 6
Increase in interest and dividends receivable ................. (606) (390)
Decrease in other assets ...................................... 30 313
Increase in other liabilities ................................. 316 77
Increase in deferred income taxes ............................. 266 --
Increase in income taxes payable .............................. 615 394
-------- --------
Net cash provided by operating activities ................... $ 2,270 $ 1,432
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in loans receivable ..................... $ 3,237 $ (1,808)
Purchases of investment securities held to maturity ............. (19,986) (17,949)
Purchases of investment securities available for sale ........... (16,550) (13,000)
Proceeds from sales of real estate owned ........................ 481 1,158
Purchases of mortgage-backed securities held to maturity ........ (10,169) (9,715)
Purchases of mortgage-backed securities available for sale ...... (6,689) (3,128)
Investment securities held to maturity called ................... 2,000 10,670
Principle payments on investment securities held to maturity .... 584 248
Principle payments on mortgage-backed securities held to maturity 6,458 7,860
Principle payments on mortgage-backed securities securities - AFS 104 13
Purchases of premises and equipment ............................. (456) (10)
Purchases of FHLB-NY stock ...................................... (140) (41)
-------- --------
Net cash used in investing activities ....................... $(41,126) $(25,702)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits ............................. $ 10,128 $ (1,896)
Proceeds from issuance of common stock, net of ESOP loan ........ -- 28,082
Purchase of shares by MRP ....................................... (1,745) --
Purchase of treasury stock ...................................... (207) --
Net increase in advances by borrowers (taxes & insurance) ....... 130 154
Net increase in borrowings ...................................... 27,334 --
Dividends paid .................................................. (185) --
-------- --------
Net cash provided by financing activities ............... 35,455 26,340
Net increase (decrease) in cash and cash equivalents .... (3,401) 2,070
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD .......... 7,731 15,127
-------- --------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD ................ $ 4,330 $ 17,197
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ...................................................... 4,514 4,710
Income taxes .................................................. -- --
Non-cash investing and financing activities:
Transfer of loans to real estate owned ...................... $ 100 $ 610
See accompanying notes to (unaudited) 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 branch system consisting of offices in Bergen, Morris and
Passaic Counties. 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 10-Q and Article 10 of Regulation 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 six month period ended June 30, 1997. The results of operations for the
three and six month periods ended June 30, 1997 are not necessarily
indicative of results that may be expected for the entire year ending
December 31, 1997.
During 1996, the Company changed its fiscal year end from September 30th to
December 31st. This change enables the Company to conform to the financial
reporting system of most publicly held companies.
2. 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.
3. NET INCOME PER SHARE
The Company completed its initial public offering on March 29, 1996, and
accordingly, earnings per share data would not be meaningful for the six
month period ending June 30, 1996.
4. STOCKHOLDERS' EQUITY
The components of stockholders' equity were as follows:
(dollars in thousands)
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
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 ......................................... $30,647 30,621
(3,000,300 shares outstanding)
Retained earnings, substantially restricted .................................... 16,846 $15,957
Unallocated ESOP Shares ........................................................ (2,486) (2,539)
Allocated MRP Shares ........................................................... (1,404) --
Unallocated MRP Shares ......................................................... (292) --
Net unrealized loss on securities available for sale,
net of tax ................................................................... (806) (910)
Treasury stock at cost (173,700 shares) ........................................ (2,101) (1,894)
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Total stockholders' equity ..................................................... $40,404 $ 41,235
======= ========
5. NON PERFORMING LOANS AND THE ALLOWANCE FOR LOAN LOSSES
Non-performing loans at June 30, 1997 and December 31, 1996 were as
follows:
(dollars in thousands)
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
Loans delinquent 90 days or more
and other non-performing loans ............................................. $2,170 $1,522
Loans delinquent 90 days or more and other
non-performing loans as a percentage of gross loans ........................ 1.76% 1.20%
An analysis of the allowance for loan losses for the three month periods
ended June 30, 1997 and 1996 follows:
(dollars in thousands)
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
Balance at the beginning of the period ....................................... $3,126 $4,747
Provision charged to operations .............................................. 300 275
Charge-offs, net ............................................................. 348 1,347
------ ------
Balance at end of period ..................................................... $3,078 $3,675
====== ======
6. RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
(SFAS 128) establishes standards for computing and presenting earnings per
share (EPS) and applies to entities with publicly held common stock or
potential common stock. SFAS 128 replaces the presentation of primary EPS
with a presentation of basic EPS and requires dual presentation of basic
and diluted EPS on the face of the income statement for all entities with
complex capital structures. SFAS 128 requires a reconciliation of the
numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. SFAS 128 is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods, and earlier application is not permitted. SFAS
128 also requires restatement of all prior period EPS data presented.
Management does not expect the adoption of SFAS 128 to have a significant
effect on the Company's EPS calculation.
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general-purpose financial statements. SFAS 130
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS 130 does not require a specific format for that financial
statement but requires that an enterprise display an amount representing
total comprehensive income for the period in that financial statement. SFAS
130 requiries that an enterprise (a) classify items of other comprehensive
income by their nature in a financial statement and (b) display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a
statement of financial position. SFAS 130 is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements
for earlier periods provided for comparative purposes is required.
1ST BERGEN BANCORP SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
OVERVIEW
1st Bergen Bancorp, the holding company for South Bergen Savings Bank, earned
net income for the quarter ended June 30, 1997 of $570,000, compared to $494,000
for the same period last year and an increase of 13.1% over the $504,000 earned
for the prior quarter. The $76,000 increase in earnings over the prior year is
primarily attributable to a $324,000 increase in net interest income partially
offset by increases in non-interest expense and tax expense of $248,000 and
$26,000, respectively.
ASSETS AND LIABILITIES
Total assets increased $37.7 million, or 15.3%, to $284.8 million at June 30,
1997 from $247.1 million at December 31, 1996. This increase is primarily
attributable to management's decision to use low cost Federal Home Loan Bank
borrowings to fund the purchase of higher yielding mortgage-backed securities
and investment securities. This program was developed to offset the start up
costs of the Company's new Montville and Wanaque offices and the additional
expenses associated with the ESOP and Management Recognition (MRP) programs. The
average cost of the Federal Home Loan Bank borrowings is 6.01% versus an average
yield of 7.70% on the mortgage-backed securities and investment securities
purchased. Management will continually monitor the performance of this leverage
program and may expand it if appropriate. Cash and Cash equivalents decreased
$3.4 million, or 44.2%, to $4.3 million as of June 30, 1997 from $7.7 million at
December 31, 1996, primarily due to the use of funds to purchase mortgage-backed
securities and investment security purchases. Loans receivable, net, decreased
$3.7 million, or 3.0%, to $120.1 million at June 30, 1997 from $123.8 million at
December 31, 1996. The decrease in loans receivable, net, resulted from loan
payoffs and amortizations in excess of new loan closings. Mortgage-backed
securities held to maturity increased $3.6 million, or 7.0%, to $55.4 million at
June 30, 1997 from $51.8 million at December 31, 1996.
Investment securities held to maturity increased $17.4 million, or 52.6%, to
$50.5 million at June 30, 1997 from $33.1 million at December 31, 1996. The
increase in mortgage-backed securities and investment securities held to
maturity was due to purchases made in connection with the Company's planned
leverage program.
Securities and mortgage-backed securities available for sale, net, increased
$23.0 million, or 102.7%, to $45.4 million at June 30, 1997 from $22.4 million
at December 31, 1996 due in part to an increase in the market price of the
available for sale portfolio and to purchases made in connection with the
Company's leverage program.
STOCKHOLDERS EQUITY
Stockholders equity decreased $800,000, or 2.0%, to $40.4 million at June 30,
1997 from $41.2 million at December 31, 1996. The decrease in stockholders
equity was due primarily to the repurchase by the Company of 1st Bergen Bancorp
shares in the amount of $1.7 million. These shares were used to fund grants
under the Company's Management Recognition Programs. This decrease was primarily
offset by year-to-date income of $1.1 million. Additionally, the repurchase of
treasury stock and the payment of cash dividends in the amount of $207,000 and
$185,000, respectively, also reduced stockholders equity.
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, 1997, 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 $67.8 million, or 23.8%
of total assets. This amount includes $17.4 million scheduled to mature within
one year, which represented 6.11% of total assets and 8.12% of total deposits at
June 30, 1997.
At June 30, 1997, the Company had commitments to originate loans totalling $1.0
million and outstanding unused lines of credit of $5.2 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, 1997 and December 31, 1996, the Bank
exceeded all regulatory capital requirements. The Bank's required and actual
capital levels as of June 30, 1997 and December 31, 1996 are as follows:
TO BE WELL
CAPITALIZED
FOR CAPITAL UNDER PROMPT
ACTUAL ADEQUACY PURPOSE CORRECTION ACTION
-------------- ---------------- -------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
----- ----- ------- ------- ------- -------
AS OF JUNE 30, 1997:
Tangible capital ............. $29,408 10.3% $4,281 1.5% $ 4,281 1.5%
Core capital ................. $29,408 10.3% $8,562 3.0% $14,270 5.0%
Tier 1 risk-based
capital .................... $29,408 10.3% $4,182 4.0% $ 6,274 6.0%
Risk-based capital ........... $30,730 29.4% $8,365 8.0% $10,456 10.0%
AS OF DECEMBER 31, 1996:
Tangible capital ............. $28,151 11.4% $3,712 1.5% $ 3,712 1.5%
Core capital ................. $28,151 11.4% $7,425 3.0% $12,374 5.0%
Tier 1 risk-based
capital .................... $28,151 26.9% $4,194 4.0% $ 6,051 6.0%
Risk-based capital ........... $29,477 28.1% $8,387 8.0% $10,484 10.0%
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND
1996
NET INCOME
For the three months ended June 30, 1997, net income increased $76,000 to
$570,000 from $494,000 for the same period last year. The $76,000 increase in
earnings over the prior year is primarily attributable to a $324,000 increase in
net interest income partially offset by increases in non-interest expense and
tax expense of $248,000 and $26,000, respectively.
INTEREST INCOME
Interest on loans increased $151,000, or 6.3%, to $2.5 million for the three
months ended June 30, 1997 from $2.4 million for the same period in 1996. The
increase in the interest on loans was primarily due to an increase in the
average balance of loans outstanding during the period to $120.8 million for the
three months ended June 30, 1997 from $107.4 million for the same period in
1996. This was offset by a decrease in the average yield from 8.86% to 8.38%,
reflecting current market rates of interest.
Interest on mortgage-backed securities held to maturity increased $62,000, or
7.4%, to $896,000 for the three months ended June 30, 1997 from $834,000 for the
same period in 1996. The increase was primarily due to an increase in the
average yield from 6.14% to 6.61%.
Interest on investments held to maturity increased $322,000, or 60.2%, to
$857,000 for the three months ended June 30, 1997 from $535,000 for the same
period in 1996. The increase was primarily due to an increase in the average
balance of securities held to maturity during the period to $46.0 million for
the three months ended June 30, 1997 from $37.4 million for the same period in
1996, reflecting the implementation of the Company's leverage program. This was
coupled with an increase in the average yield to 7.45% for the three months
ended June 30, 1997 from 5.71% for the same period in 1996.
Interest income on securities available for sale increased $237,000, or 117.9%,
to $438,000 for the three months ended June 30, 1997, compared to $201,000 for
the same period in 1996. The increase was primarily due to an increase in the
average balance of securities available for sale during the period to $27.1
million for the three months ended June 30, 1997 from $15.7 million for the same
period in 1996, also reflecting the implementation of the Company's leverage
program. This was coupled with an increase in the average yield to 6.47% from
5.13% for the same period in 1996.
Interest income on mortgage-backed securities available for sale increased
$36,000, or 76.6%, to $83,000 for the three months ended June 30, 1997, compared
to $47,000 for the same period in 1996. The increase was primarily due to an
increase in the average balance of mortgage-backed securities outstanding during
the period to $5.3 million for the three months ended June 30, 1997 from $3.1
million for the same period in the prior year. This was in addition to an
increase in the average yield to 6.32% for the three months ended June 30, 1997
from 6.03% for the same period in 1996.
INTEREST EXPENSE
Interest expense increased $203,000, or 8.7%, to $2.5 million for the three
month period ended June 30, 1997, compared to $2.3 million for the same period
in 1996. The increase was primarily due to the cost of borrowed funds in
connection with the Company's leverage program. The average balance of borrowed
funds was $15.1 million for the three months ended June 30, 1997 with an average
cost of 5.94%. The Company had no borrowed funds outstanding for the same period
last year. This was partially offset by a decrease in the average cost of
savings deposits to 4.40% for the three months ended June 30, 1997 from 4.51%
for the same period last year, reflecting current market rates of interest.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $125,000 for the three month period ended June
30, 1997 and 1996, respectively. Non-performing loans, defined as non-accrual
loans and accruing loans delinquent 90 days or more were $2.2 million, or 1.76%
of gross loans at June 30, 1997, a decrease of $1.8 million, or 45.0%, from $4.0
million, or 3.51% of gross loans at June 30, 1996, and an increase of $700,000,
or 46.67% from $1.5 million, or 1.20% of gross loans at December 31, 1996. Real
estate owned decreased by $336,000, or 62.6%, to $201,000 at June 30, 1997 from
$537,000 at December 31, 1996. Management is continuing its efforts to sell
these properties and reinvest the proceeds in interest bearing assets. At June
30, 1997 and December 31, 1996, the allowance for loan losses was $3.1 million
and $3.1 million, respectively. The Company's ratio of non-performing assets to
total assets was .83% at June 30, 1997, compared to .83% at December 31, 1996.
NON-INTEREST INCOME AND NON-INTEREST EXPENSE
Non-interest income for the three months ended June 30, 1997 was virtually
unchanged from the same period in 1996 at $57,000. Non-interest expense
increased $248,000, or 21.6%, to $1.4 million for the three months ended June
30, 1997 from $1.1 million for the same period in 1996. The increase was
primarily due to an increase in compensation and employee benefits expense of
$186,000. The increase in compensation and employee benefit expense was due to
the addition of staff at the Company's two new retail offices in Passaic and
Morris Counties and the amortization of stock based benefit plans. Coupled with
an increase in other expenses, these increases were partially offset by a
reduction in FDIC insurance premiums of $84,000, compared to the same period in
1996, as the FDIC insurance premium for SAIF insured institutions was reduced in
connection with the recapitalization of the SAIF.
INCOME TAX EXPENSE
Income tax expense increased $26,000, or 9.4%, to $303,000 for the three months
ended June 30, 1997 from $277,000 for the same period in 1996. The increase was
due to the Company's increased net income for the quarter ended June 30, 1997,
compared to the same period in the prior year.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
NET INCOME
For the six months ended June 30, 1997, net income increased $373,000, or 53.2%,
to $1.1 million from $701,000 for the comparable period last year. The $373,000
increase in earnings over the prior year is primarily attributable to a $869,000
increase in net interest income after provision for loan losses partially offset
by increases in non-interest expense and tax expense of $327,000 and $199,000,
respectively.
INTEREST INCOME
Interest income increased $950,000, or 11.4%, to $9.3 million for the six months
ended June 30, 1997 from $8.4 million for the comparable period last year.
Interest income on loans increased $343,000, or 7.2%, to $5.1 million for the
six months ended June 30, 1997 from $4.7 million for the same period in 1996.
The increase in interest on loans was primarily attributable to an increase in
the average balance of loans outstanding during the period to $122.0 million for
the six months ended June 30, 1997 from $107.4 million for the same period in
1996. This was partially offset by a decrease in the average yield to 8.35% for
the six months ended June 30, 1997 from 8.84% for the same period in 1996,
reflecting current market rates of interest.
Interest income on mortgage-backed securities held to maturity increased
$45,000, or 2.7%, to $1,706,000 for the six months ended June 30, 1997 from
$1,661,000 for the same period in 1996. This increase was due to an increase in
the average yield to 6.51% for the six months ended June 30, 1997 from 6.04% for
the comparable period in 1996, partially offset by a decrease in the average
balance of mortgage-backed securities held to maturity during the period to
$52.4 million for the six months ended June 30, 1997 from $55.0 million for the
same period in 1996. This decrease was due to normal amortization.
Interest income on investments held to maturity increased $442,000, or 44.4%, to
$1.4 million for the six month period ending June 30, 1997 from $996,000 for the
same period in 1996. This increase was primarily due to an increase in the
average yield to 7.26% for the six months ended June 30, 1997 from 5.60% for the
comparable period in 1996. This was coupled with an increase in the average
balance of investments held to maturity during the period to $40.0 million for
the six months ended June 30, 1997 from $35.6 million for the same period in
1996.
Interest income on securities available for sale increased $398,000, or 117.4%
to $737,000 for the six months ended June 30, 1997, compared to $339,000 for the
same period in 1996. The increase was due primarily to an increase in the
average balance of securities available for sale during the period to $23.4
million for the six months ended June 30, 1997 from $12.5 million for the
comparable period in 1996 as the Company implemented its leverage program. This
was in addition to an increase in the average yield to 6.30% from 5.44% for the
same period in 1996.
Interest income on mortgage-backed securities available for sale increased
$47,000, or 59.5%, to $126,000 for the six month period ended June 30, 1997,
compared to $79,000 for the same period in 1996. The increase was primarily due
to an increase in the average balance of mortgage-backed securities available
for sale outstanding during the period to $4.0 million for the six months ended
June 30, 1997 from $2.5 million for the same period in 1996. This was coupled
with an increase in the average yield to 6.30% from 6.23% for the same period in
1996.
INTEREST EXPENSE
Interest expense increased $56,000, or 1.2%, to $4.8 million for the six month
period ended June 30, 1997, compared to $4.7 million for the same period in
1996. The increase was primarily due to the cost of borrowed funds in connection
with the Company's leverage program. The average balance of borrowed funds was
$7.6 million for the six months ended June 30, 1997 with an average cost of
5.90%. The Company had no borrowed funds outstanding for the same period last
year. This was partially offset by a decrease in the average cost of savings
deposits to 4.35% for the six months ended June 30, 1997 from 4.50% for the same
period last year, reflecting current market rates of interest.
PROVISION FOR LOAN LOSSES
The provision for loan losses increased $25,000, or 9.1%, to $300,000 for the
six months ended June 30, 1997 from $275,000 for the same period in 1996.
Non-performing loans, defined as non-accrual loans and accruing loans delinquent
90 days or more were $2.2 million, or 1.76% of gross loans at June 30, 1997, a
decrease of $1.8 million, or 45.0%, from $4.0 million, or 3.51% of gross loans
at June 30, 1996, and an increase of $700,000, or 46.67% from $1.5 million, or
1.20% of gross loans at December 31, 1996. Real estate owned decreased by
$336,000, or $62.6%, to $201,000 at June 30, 1997 from $537,000 at December 31,
1996. Management is continuing its efforts to sell these properties and reinvest
the proceeds in interest bearing assets. At June 30, 1997 and December 31, 1996,
the allowance for loan losses was $3.1 million and $3.1 million, respectively.
The Company's ratio of non-performing assets to total assets was .83% at June
30, 1997, compared to 2.50% at June 30, 1996 and .83% at December 31, 1996.
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 six months ended June 30, 1997 increased $30,000, or
31.9% to $124,000 from $94,000 for the same period last year. This increase was
due primarily to an increase in NOW service charges as well as income generated
by an increase in safe deposit box rental fees.
Non-interest expense increased $327,000, or 13.8%, to $2.7 million for the six
month period ended June 30, 1997 from $2.4 million for the same period in 1996.
This increase was primarily due to an increase in compensation and employee
benefits of $322,000. The increase in compensation and employee benefit expense
was due to the addition of staff at the Company's two new retail offices in
Passaic and Morris Counties and the amortization of stock based benefit plans.
This was coupled with an increase in other expenses such as legal stationary and
supplies, telephone, postage and other operating expenses which are related to
the establishment and start up of the Company's two new offices. Partially
offsetting these expenses are reductions in the FDIC Insurance Premium of
$167,000 for the six months ended June 30, 1997 and a net gain from real estate
owned of $57,000 for the six months ended June 30, 1997 as compared to a loss of
$68,000 for the same period in 1996.
INCOME TAX EXPENSE
Income tax expense increased $199,000, or 50.6%, to $592,000 for the six months
ended June 30, 1997 from $393,000 for the same period in 1996. The increase was
due to the Company's increased net income for the six months ended June 30,
1997, compared to the same period in the prior year.
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.
On April 29, 1997, the Registrant held its Annual Meeting of Shareholders
to elect members of its Board of Directors. The following Directors
received the votes indicated:
Kathleen Fisher:
For: 2,642,143 Withhold: 5,825 Broker Non-Votes: 0
--------- ----- -
Robert O'Neill:
For: 2,644,643 Withhold: 3,325 Broker Non-Votes: 0
--------- ----- -
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 April 2, 1997 announcing a 4%
stock buyback.
The Registrant filed a current report on April 21, 1997 announcing a 5%
stock buyback.
The Registrant filed a current report on April 28, 1997 announcing the
Registrant's earnings for the period ending March 31, 1997.
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: /s/ WILLIAM M. BRICKMAN
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William H. Brickman
President and Chief Executive Officer
Date: By: /s/ ALBERT E. GOSSWEILER
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Albert K. Gossweiler
Executive Vice President and Chief
Financial Officer