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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 SEPTEMBER 30, 1997
COMMISSION FILE NUMBER 0-27686
1ST BERGEN BANCORP
----------------------------------------------------
(Exact name of registrant as specific in its charter)
NEW JERSEY 22-3409845
- -------------------------------- -----------------
State or other jurisdiction 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 ( )
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at September 30, 1997
------------ ---------------------------------
Common Stock 2,864,535 shares
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1ST BERGEN BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(DOLLARS IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------ ------------
ASSETS:
Cash and due from banks ..................... $ 2,690 $ 5,231
Interest-bearing deposits in other banks .... 14,300 2,500
-------- --------
Total cash and cash equivalents ................ 16,990 7,731
Investment securities held to maturity ...... 55,081 33,136
Investment securities available for sale .... 19,728 19,597
Mortgage-backed securities held to maturity . 52,469 51,769
Mortgage-backed Securities available for sale 10,682 2,824
Loans receivable, net ....................... 120,971 123,825
Premises and equipment ...................... 3,006 2,699
Real estate owned ........................... 209 537
FHLB stock .................................. 1,627 1,487
Accrued interest and dividends receivable ... 1,808 1,466
Deferred income taxes ....................... 1,804 1,817
Other assets ................................ 363 185
-------- --------
TOTAL ASSETS ...................................... $284,738 $247,073
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits .................................... $215,516 $204,154
FHLB Borrowings ............................. 27,334 --
Escrow ...................................... 983 932
Accrued income taxes ........................ 1,069 592
Other liabilities ........................... 955 160
-------- --------
TOTAL LIABILITIES ................................. 245,857 205,838
TOTAL STOCKHOLDERS' EQUITY ........................ 38,881 41,235
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........ $284,738 $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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
INTEREST INCOME
Interest on loans ....................................... $ 2,440 $ 2,470 $ 7,531 $ 7,218
Interest on investment securities held to maturity ...... 950 641 2,388 1,637
Interest on securities available for sale ............... 485 279 1,222 618
Interest on mortgage-backed securities held to maturity . 912 857 2,618 2,518
Interest on mortgage-backed securities available for sale 126 45 252 124
Interest on FHLB deposits ............................... 161 72 319 557
FHLB stock dividends .................................... 28 24 77 71
-------- -------- -------- --------
Total interest income ................................... 5,102 4,388 14,407 12,743
INTEREST EXPENSE
Deposits ................................................ 2,399 2,247 6,937 6,953
FHLB Borrowings ......................................... 413 0 637 0
-------- -------- -------- --------
Total interest expense .................................. 2,812 2,247 7,574 6,953
NET INTEREST INCOME ........................................... 2,290 2,141 6,833 5,790
Provision for loan losses ............................... 100 261 400 600
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES ............................................... 2,190 1,880 6,433 5,190
NON-INTEREST INCOME:
Loan fees and service charges ........................... 47 37 134 30
Other income ............................................ 33 17 70 103
-------- -------- -------- --------
Total other income ...................................... 80 54 204 133
NON-INTEREST EXPENSE:
Compensation and employee benefits ...................... 861 558 2,389 1,723
Occupancy expense ....................................... 77 70 228 211
Equipment ............................................... 113 97 334 292
Advertising ............................................. 45 47 152 136
Federal deposit insurance premiums ...................... 34 1,382 104 1,555
Net (gain) loss from real estate owned .................. 24 143 (33) 211
Insurance and bond premiums ............................. 32 25 97 75
Other ................................................... 303 229 919 658
-------- -------- -------- --------
Total non-interest expense .............................. 1,489 2,551 4,190 4,861
Income (loss) before income taxes ....................... 781 (617) 2,447 462
Federal and state tax expense (benefit) ................. 291 (218) 883 168
-------- -------- -------- --------
Net Income (loss) ................................. $ 490 ($ 399) $ 1,564 $ 294
======== ======== ======== ========
Earnings (loss) per share ............................... .18 (.13) .57 --
-------- -------- -------- --------
See accompanying notes to (unaudited) consolidated financial statements
1ST BERGEN BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997, AND 1996
(IN THOUSANDS)
SEPTEMBER 30
--------------------
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ................................................................... $ 1,564 $ 294
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for loan loss ................................................ 400 600
Net gain on sales of real estate owned ................................. (45) (89)
Depreciation of premises and equipment ................................. 163 124
Amortization of MRP shares ............................................. 121 --
Amortization of ESOP shares ............................................ 177 --
Net accretion of premiums and amortization of discounts ................ 77 44
Net decrease (increase) in deferred loan fees .......................... 27 (7)
Increase in interest and dividends receivable .......................... (342) (358)
Decrease in other assets ............................................... (178) (100)
Increase in other liabilities .......................................... 795 1,373
Increase in deferred income taxes ...................................... 1 288
Increase (decrease) in income taxes payable ............................ 477 (121)
-------- --------
Net cash provided by operating activities ............................ $ 3,237 $ 2,048
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in loans receivable ............................ $ 2,259 $(10,911)
Purchases of investment securities held to maturity .................... (29,986) (29,949)
Purchases of investment securities available for sale .................. (24,550) (13,000)
Proceeds from sales of real estate owned ............................... 541 2,166
Purchases of mortgage-backed securities held to maturity ............... (10,169) (9,715)
Purchases of mortgage-backed securities available for sale ............. (9,621) (3,128)
Investment securities held to maturity called .......................... 7,000 16,670
Investment securities available for sale called ........................ 24,550 --
Principle payments on investment securities held to maturity ........... 1,045 410
Principle payments on mortgage-backed securities held to maturity ...... 9,389 10,707
Principle payments on mortgage-backed securities - available for sale .. 1,913 237
Purchases of premises and equipment .................................... (470) (156)
Purchases of FHLB-NY stock ............................................. (140) (41)
-------- --------
Net cash used in investing activities ................................ $(28,239) $(36,710)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits .................................... $ 11,362 $ (4,714)
Proceeds from issuance of common stock, net of ESOP loan ............... -- 28,082
Purchase of shares by MRP .............................................. (1,745) --
Purchase of treasury stock ............................................. (2,414) --
Net increase in advances by borrowers (taxes & insurance) .............. 51 216
Net increase in borrowings ............................................. 27,334 --
Dividends paid ......................................................... (327) (95)
-------- --------
Net cash provided by financing activities ........................ 34,261 23,489
Net increase (decrease) in cash and cash equivalents ............. 9,259 (11,173)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD ..................... 7,731 15,127
-------- --------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD ........................... $ 16,990 $ 3,954
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ........................................................ 6,907 6,999
Income taxes .................................................... 190 --
Non-cash investing and financing activities:
Transfer of loans to real estate owned ............................... $ 168 $ 864
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 nine-month period ended September 30, 1997. The results of
operations for the three and nine-month periods ended September 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, the 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 without par value of the
Company ("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
nine-month period ending September 30, 1996.
4. STOCKHOLDERS' EQUITY
The components of stockholders' equity were as follows:
September 30, December 31,
1997 1996
------------ ------------
(dollars in thousands)
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 ................................... $ 30,692 30,621
(2,864,535 shares outstanding)
Retained earnings, substantially restricted .............................. 17,194 $ 15,957
Unallocated ESOP Shares .................................................. (2,433) (2,539)
Allocated MRP Shares ..................................................... (1,332) --
Unallocated MRP Shares ................................................... (292) --
Net unrealized loss on securities available for sale,
net of tax ............................................................. (640) (910)
Treasury stock at cost (309,465 shares) .................................. (4,308) (1,894)
-------- --------
Total stockholders' equity ............................................... $ 38,881 $ 41,235
======== ========
5. NON PERFORMING LOANS AND THE ALLOWANCE FOR LOAN LOSSES
Non-performing loans at September 30, 1997, and December 31, 1996, were as follows:
September 30, December 31,
1997 1996
------------ ------------
(dollars in thousands)
Loans delinquent 90 days or more
and other non-performing loans ......................................... $ 2,192 $ 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 September 30, 1997, and 1996 follows:
September 30, September 30,
1997 1996
------------ ------------
(dollars in thousands)
Balance at the beginning of the period ................................... $ 3,126 $ 4,747
Provision charged to operations .......................................... 400 536
Charge-offs, net ......................................................... 461 1,614
-------- --------
Balance at end of period ................................................. $ 3,065 $ 3,669
======== ========
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 expects that basic EPS will increase as compared to primary EPS
and that diluted EPS will decrease as compared to fully diluted EPS.
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130") 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 requires 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 third quarter ended September 30, 1997, of $490,000, compared
to $416,000 for the same period last year before reflecting the one-time FDIC
special assessment on thrift institutions to recapitalize the Savings
Association Insurance Fund ("SAIF") which resulted in a net loss for the third
quarter 1996 of ($399,000). The third quarter 1997 income of $490,000 was a
decrease of 14.0% from the $570,000 earned for the prior quarter. The $74,000
increase in earnings over the prior year period is primarily attributable to a
$149,000 increase in net interest income, a decrease in the provision for loan
losses of $161,000, partially offset by increases in non-interest expense and
tax expense of $414,000 and $60,000, respectively, exclusive of the one-time
SAIF assessment of $1.3 million.
ASSETS AND LIABILITIES
Total assets increased $37.7 million, or 15.2%, to $284.7 million at September
30, 1997, from $247.1 million at December 31, 1996. This increase is primarily
attributable to management's decision to begin a leverage program in April 1997,
using low cost Federal Home Loan Bank ("FHLB") borrowings to fund the purchase
of higher yielding mortgage-backed securities and investment securities. Cash
and cash equivalents increased $9.3 million, or 120.8%, to $17.0 million as of
September 30, 1997, from $7.7 million at December 31, 1996, primarily due to the
early maturity of investment securities. The Company had outstanding commitments
totalling $10.0 million for the purchase of mortgage-backed and investment
securities for October 1997 settlement. Loans receivable, net, decreased $2.8
million, or 2.26%, to $121.0 million at September 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 $700,000, or 13.5%, to
$52.5 million at September 30, 1997, from $51.8 million at December 31, 1996.
Investment securities held to maturity increased $22.0 million, or 66.5%, to
$55.1 million at September 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 the reinvestment of available funds in excess of mortgage
loan closing requirements.
Investment securities available for sale increased slightly to $19.7 million at
September 30, 1997, from $19.6 million as of December 31, 1996, due to an
increase in the market price of the portfolio. Mortgage-backed securities
available for sale, net, increased $7.9 million, or 282.1%, to $10.7 million at
September 30, 1997, from $2.8 million at December 31, 1996, due in part to an
increase in the market price of the available for sale portfolio and through the
reinvestment of available funds in excess of loan closing requirements.
STOCKHOLDERS' EQUITY
Stockholders' equity decreased $2.3 million, or 5.6%, to $38.9 million at
September 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
Common Stock in the amount of $4.4 million. Of the shares of Common Stock
repurchased, $1.7 million were used to fund grants under the Company's
Management Recognition Program ("MRP"). The additional $2.7 million of Common
Stock was repurchased in connection with the Company's second 5% buyback
program. This decrease was primarily offset by year-to-date income of $1.6
million. Additionally, the payment of cash dividends in the amount of $327,000
also reduced stockholders' equity.
LIQUIDITY AND CAPITAL RESOURCES
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
FHLB 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 September 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 $ 49.4 million, or 17.4% of total assets. This amount
includes $31.9 million scheduled to mature within one year, which represented
11.2% of total assets and 14.8% of total deposits at September 30, 1997.
At September 30, 1997, the Company had commitments to originate and purchase
loans totalling $1.4 million and $970,000, respectively, 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 Office of Thrift Supervision (OTS), which regulates activities of the bank,
requires that the Bank meet minimum tangible, core and risk-based capital
requirements. As of September 30, 1997, and December 31, 1996, the Bank exceeded
all regulatory capital requirements. The Bank's required and actual capital
levels as of September 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 SEPTEMBER 30, 1997:
Tangible capital ................ $30,115 10.6% $ 4,282 1.5% $ 4,282 1.5%
Core capital .................... $30,115 10.6% $ 8,564 3.0% $14,273 5.0%
Tier 1 risk-based capital $30,115 10.6% $ 4,303 4.0% $ 6,455 6.0%
Risk-based capital .............. $31,472 29.3% $ 8,606 8.0% $10,758 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 SEPTEMBER 30,
1997 AND 1996
NET INCOME
For the three months ended September 30, 1997, net income increased $74,000 to
$490,000 from $416,000 for the same period last year before reflecting the
one-time FDIC special assessment on thrift institutions to recapitalize The
SAIF, which resulted in a net loss for the third quarter 1996 of ($399,000). The
increase in earnings is primarily attributable to a $149,000 increase in net
interest income, a decrease in the provision for loan losses of $161,000,
partially offset by increases in non-interest expense and tax expense of
$414,000 and $60,000, respectively, exclusive of the one-time SAIF assessment of
$1.3 million.
INTEREST INCOME
Interest on loans decreased slightly to $2.4 million for the three months ended
September 30, 1997, from $2.5 million for the same period in 1996. The decrease
in the interest on loans was primarily due to a decrease in the average yield
from 8.64% to 7.92% reflecting current market rates of interest, offset by an
increase in the average balance of loans outstanding during the period to $120.0
million for the three months ended September 30, 1997, from $114.3 million for
the same period in 1996.
Interest on mortgage-backed securities held to maturity increased $55,000, or
6.4%, to $912,000 for the three months ended September 30, 1997, from $857,000
for the same period in 1996. The increase was due to an increase in the average
yield from 6.19% to 6.73% while the average balance decreased $1.2 million to
$54.2 million for the three months ended September 30, 1997, from $55.4 million
for the same period last year.
Interest on investments held to maturity increased $309,000, or 48.2%, to
$950,000 for the three months ended September 30, 1997, from $641,000 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 $50.5
million for the three months ended September 30, 1997, from $42.6 million for
the same period in 1996. This was coupled with an increase in the average yield
to 7.52% for the three months ended September 30, 1997, from 6.03% for the same
period in 1996.
Interest income on mortgage-backed securities available for sale increased
$81,000, or 180.0%, to $126,000 for the three months ended September 30, 1997,
compared to $45,000 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 $8.8 million for the three months ended September 30, 1997,
from $2.9 million for the same period in the prior year. This was offset
partially by a decrease in the average yield to 5.72% for the three months ended
September 30, 1997, from 6.29% for the same period in 1996.
Interest income on investment securities available for sale increased $206,000,
or 73.8%, to $485,000 for the three months ended September 30, 1997, compared to
$279,000 for the same period in 1996. The increase was due to an increase in the
average balance outstanding to $27.0 million for the three months ended
September 30, 1997, from $19.4 million for the same period last year coupled
with an increase in the yield to 7.17% from 5.75%.
INTEREST EXPENSE
Interest expense increased $600,000, or 27.3%, to $2.8 million for the three
month period ended September 30, 1997, compared to $2.2 million for the same
period last year. 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 $27.3 million for the three months ended September 30, 1997,
with an average cost of 6.04%. The Company had no borrowed funds outstanding for
the same period last year. The average balance of savings deposits was $214.6
million with a cost of 4.47% for the three months ended September 30, 1997
compared to average deposits of $205.5 million and a cost of 4.37% for the same
period last year. The increase in the average deposits of $9.1 million to $214.6
million at September 30, 1997, from $205.5 million at September 30, 1996, was
due primarily to new deposit growth at the Company's Wanaque and Montville, New
Jersey, offices which were opened within the last 12 months.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $100,000 for the three months ended September
30, 1997, compared to $261,000 for the same period last year. The decrease in
the provision reflects a leveling off of the non-performing loans, reduced loan
balance and the amount of the existing reserve balance. 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 September 30, 1997, a decrease of
$100,000, or 4.30%, from $2.3 million at September 30, 1996. Real estate owned
decreased by $328,000, or 61.1%, to $209,300 at September 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
September 30, 1997 and December 31, 1996, the allowance for loan losses was $3.1
million. The Company's ratio of non-performing assets to total assets was .84%
at September 30, 1997, compared to .83% at December 31, 1996, and June 30, 1997.
NON-INTEREST INCOME AND NON-INTEREST EXPENSE
Non-interest income increased $26,000, or 48.2%, to $80,000 for the three months
ended September 30,1997, compared to $54,000 for the same period last year. The
increase was primarily due to an increase in NOW account service charges and an
increase in safe deposit box rental fees. Non-interest expense increased
$300,000, or 25.0%, to $1.5 million for the three months ended September 30,
1997, from $1.2 million for the same period last year, exclusive of the one-time
SAIF assessment of $1.3 million. The increase was primarily due to an increase
in compensation and employee benefit expense of $303,000. The increase in
compensation and employee benefit expense is due to the addition of staff at the
Company's two new retail offices in Passaic and Morris counties, New Jersey, and
the amortization of stock based benefit plans. Coupled with an increase in other
expenses, these increases were partially offset by a reduction in real estate
owned expenses.
INCOME TAX EXPENSE
Income tax expense increased $24,000, or 9.0%, to $291,000 for the three months
ended September 30, 1997, from $267,000 for the same period in 1996, exclusive
of the one-time SAIF assessment of $1.3 million. The increase was due to the
Company's increased net income for the quarter ended September 30, 1997,
compared to the same period last year.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997,
AND 1996
NET INCOME
For the nine months ended September 30, 1997, net income increased $455,000, or
41.0%, to $1.6 million from $1.1 million for the comparable period last year
before the one-time SAIF assessment of $1.3 million. The $455,000 increase in
earnings over the prior year is primarily attributable to a $1.2 million
increase in net interest income after the provision for loan losses, partially
offset by increases in non-interest expense and tax expense of $629,000 and
$230,000, respectively, exclusive of the one-time SAIF assessment of $1.3
million.
INTEREST INCOME
Interest income increased $1.7 million, or 12.6%, to $14.4 million for the nine
months ended September 30, 1997, from $12.7 million for the comparable period
last year.
Interest on loans increased $313,000, or 4.3%, to $7.5 million for the nine
months ended September 30, 1997, from $7.2 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 $121.3 million for
the nine months ended September 30, 1997, from $109.7 million for the same
period in 1996. This was partially offset by a decrease in the average yield to
8.28% for the nine months ended September 30, 1997, from 8.77% for the same
period in 1996, reflecting current market rates of interest.
Interest income on mortgage-backed securities held to maturity increased
$100,000, or 3.9%, to $2.6 million for the nine months ended September 30, 1997,
from $2.5 million for the same period in 1996. This increase was due to an
increase in the average yield to 6.59% for the nine months ended September 30,
1997, from 6.09% 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 $53.0 million for the nine months ended September 30, 1997,
from $55.1 million for the same period in 1996. This decrease was due to normal
amortization.
Interest income on investments held to maturity increased $751,000, or 45.9%, to
$2.4 million for the nine-month period ending September 30, 1997, from $1.6
million for the same period in 1996. This increase was primarily due to an
increase in the average yield to 7.36% for the nine months ended September 30,
1997, from 5.76% 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 $43.3 million for the nine months ended September 30, 1997, from $37.9
million for the same period in 1996.
Interest income on securities available for sale increased $593,000, or 94.3%,
to $1.2 million for the nine months ended September 30, 1997, compared to
$629,000 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 $25.5 million for the nine months ended September 30, 1997, from $14.8
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
6.39% from 5.67% for the same period in 1996.
Interest income on mortgage-backed securities available for sale increased
$140,000, or 125.0%, to $252,000 for the nine-month period ended September 30,
1997, compared to $112,000 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 $5.6 million for
the nine months ended September 30, 1997, from $2.7 million for the same period
in 1996. This was coupled with an increase in the average yield to 5.97% from
5.62% for the same period in 1996.
INTEREST EXPENSE
Interest expense increased $621,000, or 8.9%, to $7.6 million for the nine-month
period ended September 30, 1997, compared to $7.0 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
$14.2 million for the nine months ended September 30, 1997, with an average cost
of 5.96%. 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 4.37% for the nine months ended September 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 decreased $200,000, or 33.3%, to $400,000 for the
nine months ended September 30, 1997, from $600,000 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 September 30,
1997, a decrease of $100,000, or 4.3%, from $2.3 million of gross loans at
September 30, 1996.
Real estate owned decreased by $328,000, or $61.1%, to $209,300 at September 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 September 30, 1997, and December 31, 1996, the allowance for loan losses was
$3.1 million. The Company's ratio of non-performing assets to total assets was
.84% at September 30, 1997, compared to .83% at December 31, 1996, and June 30,
1997.
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 September 30, 1997, increased
$71,000, or 53.4% to $204,000 from $133,000 for the same period last year. This
increase was due primarily to an increase in NOW account service charges as well
as income generated by an increase in safe deposit box rental fees.
Non-interest expense increased $629,000, or 17.7%, to $4.2 million for the
nine-month period ended September 30, 1997, from $3.6 million for the same
period in 1996 exclusive of the one-time SAIF assessment of $1.3 million. This
increase was primarily due to an increase in compensation and employee benefits
of $666,000. 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, New Jersey, 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 $151,000 for the nine months ended September 30,
1997, and a net gain from real estate owned of $33,000 for the nine months ended
September 30, 1997, as compared to a loss of ($211,000) for the same period in
1996.
INCOME TAX EXPENSE
Income tax expense increased $230,000, or 35.2%, to $883,000 for the nine months
ended September 30, 1997, from $653,000 for the same period in 1996, exclusive
of the one-time SAIF assessment of $1.3 million. The increase was due to the
Company's increased net income for the nine months ended September 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. OTHER INFORMATION.
None
ITEM 5. 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 July 29, 1997, announcing the
Registrant's earnings for the period ending June 30, 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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President and Chief Executive Officer
Date: By: /s/ ALBERT E. GOSSWEILER
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Executive Vice President and Chief
Financial Officer