UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM____ TO ____
Commission File number 1-10518
INTERCHANGE FINANCIAL SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-2553159
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Park 80 West/Plaza Two, Saddle Brook, NJ 07663
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 703-2265
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
Common Stock (no par value)
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities 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) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes |X| No |_|
The aggregate market value of registrant's voting stock held by
non-affiliates of the registrant computed June 28, 2002 based on the average bid
and asked price for such stock on that date was approximately $154,312,000.
The number of outstanding shares of the Registrant's common stock, no par
value per share, as of March 18, 2003, was as follows:
Class Number of Outstanding Shares
----- ----------------------------
Common Stock
(No par value) 9,839,831
Documents incorporated by reference:
Portions of registrant's definitive Proxy Statement for the 2003 Annual Meeting
of Shareholders forming a part of registrant's registration statement on Form
S-4 (Registration No. 333-103256) (the "2003 annual Meeting Proxy Statement")
are incorporated by reference to Part III of this Annual Report on Form 10-K.
Portions of registrant's Annual Report to Shareholders for the fiscal year ended
December 31, 2002 (the "2002 Annual Report to Shareholders") are incorporated by
reference to Parts II and IV of this Annual Report on Form 10-K.
With the exception of information specifically incorporated by reference, the
2003 Annual Meeting Proxy Statement and the 2002 Annual Report to Shareholders
are not deemed to be part of the report.
1
INTERCHANGE FINANCIAL SERVICES CORPORATION
INDEX TO ANNUAL REPORT
ON FORM 10-K
PART I PAGE
Item 1. Business.............................................................. 1
Item 2. Properties............................................................ 10
Item 3. Legal Proceedings..................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders................... 11
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters........................................................... 12
Item 6. Selected Financial Data............................................... 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 15
Item 7A. Quantitative and Qualitative Disclosures About Market Risk............ 15
Item 8. Financial Statements and Supplementary Data........................... 15
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............................ 15
PART III
Item 10. Directors and Executive Officers of the Registrant.................... 16
Item 11. Executive Compensation................................................ 17
Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters.................... 17
Item 13. Certain Relationships and Related Transactions........................ 18
Item 14. Controls and Procedures............................................... 18
PART IV
Item 15. Exhibits, Financial Statement Schedules
and Reports on Form 8-K........................................... 20
Signatures ...................................................................... 22
Certifications ......................................................................
Exhibit Index ......................................................................
PART I
Item 1. Business
General
Interchange Financial Services Corporation (the "Company"), a New Jersey
business corporation, is a bank holding company registered with the Board of
Governors of the Federal Reserve System under the Bank Holding Company Act of
1956, as amended. The Company was incorporated in the State of New Jersey on
October 15, 1984. It acquired all of the outstanding stock of Interchange Bank
(formerly known as Interchange State Bank), a New Jersey state chartered bank
(the "Bank" or "Interchange"), in 1986. The Bank is the Company's principal
operating subsidiary. In addition to the Bank, the Company owns all of the
outstanding capital stock of Clover Leaf Mortgage Company, a New Jersey
Corporation established in 1988, which is not currently engaged in any business
activity.
The Company's principal executive office is located at Park 80 West/ Plaza
Two, Saddle Brook, New Jersey 07663, and the telephone number is (201) 703-2265.
As of December 31, 2002, the Company had consolidated assets of
approximately $936,332,000, deposits of approximately $815,672,000 and
shareholders' equity of approximately $80,680,000.
As a holding company, the Company provides support services to its direct
and indirect subsidiaries. These include executive management, personnel and
benefits, risk management, data processing, strategic planning, legal, and
accounting and treasury.
Banking Subsidiary
The Bank, established in 1969, is a full-service New Jersey-chartered
commercial bank headquartered in Saddle Brook, New Jersey. The Bank is a member
of the Federal Reserve System and its deposits are insured by the Federal
Deposit Insurance Corporation (the "FDIC"). It offers banking services for
individuals and businesses through eighteen (18) banking offices and one (1)
supermarket mini-branch in Bergen County, New Jersey. The Bank maintains
twenty-two (22) automated teller machines (operating within the Star(TM),
Plus(TM), HONOR(TM), CIRRUS(TM), VISA(TM), NYCE(TM), and MasterCard(TM)
networks), which are located at seventeen of the banking offices, a supermarket,
a college and the Bank's operations center.
Subsidiaries of the Bank include: Clover Leaf Investment Corporation,
established in 1988 to engage in the business of an investment company pursuant
to New Jersey law; Clover Leaf Insurance Agency, Inc., established in 1990 to
engage in sales of tax-deferred annuities; Clover Leaf Management Realty
Corporation, established in 1998 as a Real Estate Investment Trust ("REIT")
which manages certain real estate assets of the Company; and Interchange Capital
Company, L.L.C., established in 1999 to engage in equipment lease financing. All
of the Bank's subsidiaries are organized under New Jersey law and are 100% owned
by the Bank,
1
except for the REIT which is 99% owned by the Bank.
Growth of the Company and the Bank
On November 18, 2002, the Company and Bridge View Bancorp ("Bridge View")
signed a definitive agreement under which the Company will acquire Bridge View
in a merger transaction for cash and stock. Pursuant to the terms of the
definitive agreement, the Company will pay to Bridge View shareholders and stock
option holders approximately $33,528,472 in cash and issue 2,949,719 shares of
its common stock. The proposed acquisition, which will be accounted for as a
purchase, is subject to certain closing conditions including shareholder and
regulatory approval, and is expected to be completed in the second quarter of
2003. Bridge View, with approximately $281 million in total assets at December
31, 2002, is a bank holding company headquartered in Englewood Cliffs, New
Jersey and operates eleven branches in Bergen County, New Jersey. The primary
banking subsidiary of Bridge View is Bridge View Bank.
On January 16, 2002, the Company acquired certain assets and assumed
certain liabilities of Monarch Capital Corporation ("Monarch"). In this asset
purchase transaction, the Company acquired certain loans and leases valued at
approximately $13.7 million. In addition, the Company assumed certain
liabilities (borrowings) of Monarch, valued at approximately $13.2 million,
which had been used to fund the loans and leases. The purchase price of
$2,252,000 was paid in cash and shares of Company common stock, subject to
certain adjustments.
On May 31, 1998, the Company completed its acquisition of Jersey Bank for
Savings. At that date, Jersey Bank had total assets of approximately $78.6
million and total deposits of approximately $69.8 million. The transaction was
accounted for as a pooling of interests. In the transaction, each share of stock
of Jersey Bank for Savings, including shares of common stock that had been
converted from shares of preferred stock, was converted into 1.5 shares of the
Company's common stock. The Company issued 780,198 shares of its common stock in
the transaction.
In 1994, the Bank assumed $26,468,000 in deposit liabilities of Volunteer
Federal Savings Association of Little Ferry, New Jersey.
Description of Banking and Related Operations
Through the Bank, the Company offers a wide range of consumer banking
products and services, including checking and savings accounts, money-market
accounts, certificates of deposit, individual retirement accounts, residential
mortgages, home equity lines of credit and other second mortgage loans, home
improvement loans, automobile loans, personal loans and overdraft protection.
The Bank also offers a VISA(TM) credit card and several convenience products,
including the Interchange Check Card, which permits customers to
2
access their checking accounts by using the card when making purchases. The
Interchange Check Card can also be used as an ATM card to perform basic banking
transactions.
Another service offered to customers is Interchange Bank-Line Telephone
Banking, which permits customers to perform basic banking transactions,
including, transfer money between accounts and make loan payments from any
phone, at any time of the day or night by calling a toll-free number. The Bank
also offers the Interchange Bank-Line Center, which is an inbound calling
facility providing enhanced customer service via access to a single source for
account and product information, opening accounts or even applying for a
consumer loan. The Interchange Bank-Line Center also serves as an outbound
telemarketing resource, contacting prospective and current customers for new
accounts.
The Bank also offers online banking through InterBank. InterBank, which is
accessed through the Bank's web site at www.interchangebank.com, allows
customers to access account information, process transfers between accounts,
generate an account statement, pay bills electronically and more. As discussed
herein, additional products and services may be accessed through the Bank's web
site.
The Bank also is engaged in the financing of local business and industry,
providing credit facilities and related services for smaller businesses,
typically those with $1 million to $5 million in annual sales. Commercial loan
customers of the Bank are businesses ranging from light manufacturing and local
wholesale and distribution companies to medium-sized service firms and local
retail businesses. Most types of commercial loan products are offered, including
working capital lines of credit, small business administration loans, term loans
for fixed asset acquisitions, commercial mortgages, equipment lease financing
and other forms of asset-based financing.
In addition to its origination activities, the Bank purchases packages of
loans. In 2002 and 2001, the Bank purchased $14.9 million and $18.8 million of
loans, respectively. These loans were subjected to the Bank's independent credit
analysis prior to purchase. The Bank has experienced opportunities to sell its
other products and services to the borrowers whose loans are purchased and
believes that purchasing loans will continue to be a desirable way to augment
its portfolios as opportunities arise.
The Bank also engages in mutual fund and annuities sales and brokerage
services. An Investment Services Program is offered through an alliance between
the Bank and ICBA Financial Services Corporation ("ICBA"), under which mutual
funds and annuities offered by ICBA are made available to the Bank's customers.
The Bank has also expanded its product offerings by entering into an agreement
with a third party provider to offer discount brokerage services to its
customers. The Bank offers securities trading through its web site, which is
hyperlinked to FISERV Securities, Inc., member NASD/SIFC, so that customers can
access their brokerage accounts via the Internet. There is also a direct link
from the Company's web site to the Nasdaq National Market
3
to allow investors to keep informed of the daily quotes and market activity for
the Company's common stock.
Additional information about the Bank and the Company may be found on our
web site at www.interchangebank.com. Information contained on our Internet web
site is not part of this Annual Report on Form 10-K and is not being
incorporated by reference into this report.
Market Areas
The Company's principal market for its deposit gathering and loan
origination activities covers major portions of Bergen County in the
northeastern corner of New Jersey adjacent to New York City. Bergen County has a
relatively large affluent base for the Company's services. The principal service
areas of the Company represent a diversified mix of stable residential
neighborhoods with a wide range of per household income levels; offices, service
industries and light industrial facilities; and large shopping malls and small
retail outlets.
Competition
Competition in the banking and financial services industry within the
Company's primary market area is strong. The Bank actively competes with
national and state-chartered commercial banks, operating on a local and national
scale, and other financial institutions, including savings and loan
associations, mutual savings banks, and credit unions. In addition, the Bank
faces competition from less heavily regulated entities such as brokerage
institutions, money management firms, consumer finance and credit card companies
and various other types of financial services companies. Many of these
institutions are larger than the Bank, some are better capitalized, and a number
pursue community banking strategies similar to those of the Bank.
The Bank believes that opportunities continue to exist to satisfy the
deposit and borrowing needs of small and middle market businesses. Larger banks
continued to show an appetite for only the largest loans, finding themselves
challenged to administer smaller loans profitably. Interchange has the desire
and the ability to give smaller and mid-sized businesses the service they
require. Many small businesses eventually become midsize businesses, with a
corresponding change in their financial requirements. By designing programs to
accommodate the changing needs of growing businesses, Interchange is extending
the longevity of valuable customer relationships. For example, through our
subsidiary, Interchange Capital Company, L.L.C., we are able to extend
cost-effective equipment leasing solutions for a variety of expansion and
upgrading projects. The Bank believes that it is able to maintain its
relationship with these growing businesses because of its ability to be
responsive to both small and midsize business constituencies.
Personnel
The Company had 226 full-time-equivalent employees at year-end 2002. The
Company believes its relationship with employees to be good.
4
Regulation and Supervision
Banking is a complex, highly regulated industry. The primary goals of the
bank regulatory structure are to maintain a safe and sound banking system and to
facilitate the conduct of sound monetary policy. In furtherance of those goals,
Congress has created several largely autonomous regulatory agencies and enacted
myriad legislation that governs banks, bank holding companies and the banking
industry. Descriptions and references to the statutes and regulations below are
brief summaries thereof and do not purport to be complete. The descriptions are
qualified in their entirety by reference to the specific statutes and
regulations discussed.
The Company
The Company is a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), and as such, is subject to
supervision and regulation by the Board of Governors of the Federal Reserve
System (the "Federal Reserve"). As a bank holding company, the Company is
required to file an annual report with the Federal Reserve and such additional
information as the Federal Reserve may require pursuant to the BHCA and Federal
Regulation Y. The Federal Reserve may conduct examinations of the Company or any
of its subsidiaries.
The BHCA requires every bank holding company to obtain the prior approval
of the Federal Reserve before it may acquire all or substantially all of the
assets of any bank (although the Federal Reserve may not assert jurisdiction in
certain bank mergers that are regulated under the Bank Merger Act), or ownership
or control of any voting shares of any bank if after such acquisition it would
own or control directly or indirectly more than 5% of the voting shares of such
bank.
The BHCA also provides that, with certain limited exceptions, a bank
holding company may not (i) engage in any activities other than those of banking
or managing or controlling banks and other authorized subsidiaries or (ii) own
or control more than five percent (5%) of the voting shares of any company that
is not a bank, including any foreign company. A bank holding company is
permitted, however, to acquire shares of any company the activities of which the
Federal Reserve, after due notice and opportunity for hearing, has determined to
be so closely related to banking or managing or controlling banks as to be a
proper incident thereto. The Federal Reserve has issued regulations setting
forth specific activities that are permissible under the exception. A bank
holding company and its subsidiaries are also prohibited from engaging in
certain tie-in arrangements in connection with any extension of credit, lease or
sale of property or furnishing of services.
Under certain circumstances, prior approval of the Federal Reserve is
required under the BHCA before a bank holding company may purchase or redeem any
of its equity securities.
Traditionally, the activities of bank holding companies have been limited
to the business of banking and
5
activities closely related or incidental to banking. The Gramm-Leach-Bliley
Financial Services Modernization Act of 1999 (the "Modernization Act"), enacted
on November 11, 1999, with an effective date of March 11, 2000, expanded the
types of activities in which a bank holding company may engage. Subject to
various limitations, the Modernization Act generally permits a bank holding
company to elect to become a "financial holding company." A financial holding
company may affiliate with securities firms and insurance companies and engage
in other activities that are "financial in nature." Among the activities that
are deemed "financial in nature" are, in addition to traditional lending
activities, securities underwriting, dealing in or making a market in
securities, sponsoring mutual funds and investment companies, insurance
underwriting and agency activities, certain merchant banking activities, and
activities that the Federal Reserve considers to be closely related to banking.
A bank holding company may become a financial holding company under the
Modernization Act if each of its subsidiary banks is "well capitalized" under
the Federal Reserve guidelines (See "Capital Adequacy Guidelines" below), is
well managed and has at least a satisfactory rating under the Community
Reinvestment Act. In addition, the bank holding company must file a declaration
with the Federal Reserve that the bank holding company wishes to become a
financial holding company. A bank holding company that falls out of compliance
with such requirements may be required to cease engaging in certain activities
permitted only for financial holding companies. Any bank holding company that
does not elect to become a financial holding company remains subject to the
current restrictions of the BHCA.
Under the Modernization Act, the Federal Reserve serves as the primary
"umbrella" regulator of financial holding companies, with supervisory authority
over each parent company and limited authority over its subsidiaries. Expanded
financial activities of financial holding companies will generally be regulated
according to the type of such financial activity: banking activities by banking
regulators, securities activities by securities regulators, and insurance
activities by insurance regulators. The Modernization Act also imposes
additional restrictions and heightened disclosure requirements regarding private
information collected by financial institutions.
Presently, the Company has not chosen to become a financial holding
company.
Monetary Policy
The banking industry is affected by the monetary and fiscal policies of
the Federal Reserve. An important function of the Federal Reserve is to regulate
the national supply of bank credit to moderate recessions and to curb inflation.
Among the instruments of monetary policy used by the Federal Reserve to
implement its objectives are: open-market operations in U. S. government
securities, changes in the discount
6
rate and the federal funds rate (which is the rate banks charge each other for
overnight borrowings), and changes in reserve requirements on bank deposits.
Sarbanes-Oxley Act
On July 30, 2002, the Sarbanes-Oxley Act of 2002 was signed into law. The
Act addresses many aspects of financial accounting, corporate governance and
public company disclosure. Among other things, it establishes a comprehensive
framework for the oversight of public company auditing and for strengthening the
independence of auditors and audit committees. Under the Act, audit committees
are responsible for the appointment, compensation and oversight of the work of
the auditors. The non-audit services that can be provided to a company by its
auditor are limited. Audit committee members are subject to new rules addressing
their independence. The Act also requires enhanced and accelerated financial
disclosures, and it establishes various responsibility measures (including, for
example, requiring the chief executive officer and chief financial officer to
certify to the quality of a company's financial reporting). The Act imposes new
restrictions on and accelerated reporting requirements for certain insider
trading activities. It imposes a variety of new penalties for fraud and other
violations and creates a new federal felony for securities fraud. Various
sections of the Act are applicable to the Company. Portions of the Act were
effective immediately; others became effective or are in the process of becoming
effective through rulings by the Securities and Exchange Commission, based on
timelines set forth in the law.
Capital Adequacy Guidelines
The Federal Reserve issued guidelines establishing risk-based capital
requirements for bank holding companies having more than $150 million in assets
and member banks of the Federal Reserve System. The guidelines established a
risk-based capital framework consisting of (1) a definition of capital and (2) a
system for assigning risk weights. Capital consists of Tier I capital, which
includes common shareholders' equity less certain intangibles and a
supplementary component called Tier II, which includes a portion of the
allowance for loan losses. Effective October 1, 1998, the Federal Reserve
adopted an amendment to its risk-based capital guidelines that permits insured
depository institutions to include in their Tier II capital up to 45% of the
pre-tax net unrealized gains on certain available for sale equity securities.
All assets and off-balance-sheet items are assigned to one of four weighted risk
categories ranging from 0% to 100%. Higher levels of capital are required for
the categories perceived as representing the greater risks. The Federal Reserve
established a minimum risk-based capital ratio of 8% (of which at least 4% must
be Tier I). An institution's risk-based capital ratio is determined by dividing
its qualifying capital by its risk-weighted assets. The guidelines make
regulatory capital requirements more sensitive to differences in risk profiles
among banking institutions, take off-balance sheet items
7
into account in assessing capital adequacy, and minimize disincentives to
holding liquid, low-risk assets. Banking organizations are generally expected to
operate with capital positions well above the minimum rates. Institutions with
higher levels of risk, or which experience or anticipate significant growth, are
also expected to operate well above minimum capital standards. In addition to
the risk-based guidelines discussed above, the Federal Reserve requires that a
bank holding company and bank which meet the regulator's highest performance and
operational standards and which are not contemplating or experiencing
significant growth maintain a minimum leverage ratio (Tier I capital as a
percent of quarterly average adjusted assets) of 3%. For those financial
institutions with higher levels of risk or that are experiencing or anticipating
significant growth, the minimum leverage ratio will be increased. At December
31, 2002, the Company and the Bank satisfied these ratios and have been
categorized as "well-capitalized" institutions, which in the regulatory
framework for prompt corrective action imposes the lowest level of supervisory
restraints.
Capital adequacy guidelines focus principally on broad categories of
credit risk although the framework for assigning assets and off-balance sheet
items to risk categories does incorporate elements of transfer risk. The
risk-based capital ratio does not, however, incorporate other factors that may
affect a company's financial condition, such as overall interest rate exposure,
liquidity, funding and market risks, the quality and level of earnings,
investment or loan concentrations, the quality of loans and investments, the
effectiveness of loan and investment policies and management's ability to
monitor and control financial and operating risks.
The Federal Reserve is vested with broad enforcement powers over bank
holding companies to forestall activities that represent unsafe or unsound
practices or constitute violations of law. These powers may be exercised through
the issuance of cease and desist orders or other actions. The Federal Reserve is
also empowered to assess civil money penalties against companies or individuals
that violate the BHCA, to order termination of non-banking activities of
non-banking subsidiaries of bank holding companies and to order termination of
ownership and control of non-banking subsidiaries by bank holding companies.
Neither the Company nor any of its affiliates has ever been the subject of any
such actions by the Federal Reserve.
The Bank
As a New Jersey state-chartered bank, the Bank's operations are subject to
various requirements and restrictions of state law pertaining to, among other
things, lending limits, reserves, interest rates payable on deposits, loans,
investments, mergers and acquisitions, borrowings, dividends, locations of
branch offices and capital adequacy. The Bank is subject to primary supervision,
periodic examination and regulation by the New Jersey Department of Banking and
Insurance ("NJDBI"). If, as a result of an examination of a bank, the NJDBI
determines that the financial condition, capital resources, asset quality,
earnings prospects, management, liquidity,
8
or other aspects of the bank's operations are unsatisfactory or that the bank or
its management is violating or has violated any law or regulation, various
remedies are available to the NJDBI. Such remedies include the power to enjoin
"unsafe and unsound" practices, to require affirmative action to correct any
conditions resulting from any violation or practice, to issue an administrative
order that can be judicially enforced, to, among other things, direct an
increase in capital, to restrict the growth of the Bank, to assess civil
penalties and to remove officers and directors. The Bank has never been the
subject of any administrative orders, memoranda of understanding or any other
regulatory action by the NJDBI. The Bank also is a member of the Federal Reserve
System and therefore subject to supervisory examination by and regulations of
the Federal Reserve Bank of New York.
The Bank's deposits are insured by the Bank Insurance Fund ("BIF")
administered by the FDIC up to a maximum of $100,000 per depositor. For this
protection, the Bank pays a quarterly statutory deposit insurance assessment to,
and is subject to the rules and regulations of, the FDIC.
The Bank's ability to pay dividends is subject to certain statutory and
regulatory restrictions. The New Jersey Banking Act of 1948, as amended,
provides that no state-chartered bank may pay a dividend on its capital stock
unless, following the payment of each such dividend, the capital stock of the
bank will be unimpaired, and the bank will have a surplus of not less than 50%
of its capital, or, if not, the payment of such dividend will not reduce the
surplus of the bank. In addition, the payment of dividends is limited by the
requirement to meet the risk-based capital guidelines issued by the Federal
Reserve Board and other regulations.
To the extent that the foregoing information describes statutory and
regulatory provisions, it is qualified in its entirety by reference to the full
text of those provisions. Also, as such statutes, regulations and policies are
continually under review by Congress and state legislature and federal and state
regulatory agencies. A change in statutes, regulations or regulatory policies
applicable to the Company or the Bank could have a material effect on the
business of the Company.
Available Information
The Company's annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and all amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available
free of charge through the Company's web site as soon as reasonably practicable
after such material is electronically filed or furnished to the Securities and
Exchange Commission. The Company's web site address is www.interchangebank.com.
Forward Looking Statements
In addition to discussing historical information, certain statements
included in or incorporated into this report relating to the financial
condition, results of operations and business of the Company which are not
9
historical facts may be deemed "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. When used herein, the
words "anticipate," "believe," "estimate," "expect," "will" and other similar
expressions (including when preceded or followed by the word "not") are
generally intended to identify such forward-looking statements. Such statements
are intended to be covered by the safe harbor provisions for forward-looking
statements contained in such Act, and we are including this statement for
purposes of invoking these safe harbor provisions. Such forward-looking
statements include, but are not limited to, statements about the operations of
the Company, the adequacy of the Company's allowance for losses associated with
the loan portfolio, the prospects of continued loan and deposit growth, and
improved credit quality.
The forward-looking statements in this report involve certain estimates or
assumptions, known and unknown risks and uncertainties, many of which are beyond
the control of the Company, and reflect what we currently anticipate will happen
in each case. What actually happens could differ materially from what we
currently anticipate will happen due to a variety of factors, including, among
others, (i) increased competitive pressures among financial services companies;
(ii) changes in the interest rate environment, reducing interest margins or
increasing interest rate risk; (iii) deterioration in general economic
conditions, internationally, nationally, or in the State of New Jersey; (iv) the
occurrence of acts of terrorism, such as the events of September 11, 2001, or
acts of war; (v) legislation or regulatory requirements or changes adversely
affecting the business of the Company; (vi) losses in the Company's leasing
subsidiary exceeding management's expectations; and (vii) other risks detailed
in reports filed by the Company with the Securities and Exchange Commission.
Readers should not place undue expectations on any forward-looking statements.
We are not promising to make any public announcement when we consider
forward-looking statements in this document to be no longer accurate, whether as
a result of new information, what actually happens in the future or for any
other reason.
Item 2. Properties
The Company leases twelve banking offices, one mini-branch within a
supermarket, one operations/support facility and one administrative/executive
facility. It also leases two locations for the sole purpose of operating
Automated Teller Machines. It owns four banking offices and leases land on which
it owns two bank buildings. All of the facilities are located in Bergen County,
New Jersey, which constitutes the Company's primary market area.
In the opinion of management, the physical properties of the Company and
its subsidiaries are suitable and adequate.
Item 3. Legal Proceedings
In the ordinary course of business, the Company and its subsidiaries are
involved in routine litigation involving various aspects of its business, none
of which, individually or in the aggregate, in the opinion of management and its
legal counsel, is expected to have a material adverse impact on the consolidated
financial condition, results of operations or liquidity of the Company.
10
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders
through the solicitation of proxies or otherwise during the three months ended
December 31, 2002.
11
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Company's common stock is presently listed for quotation on the Nasdaq
National Market System under the symbol "IFCJ". At March 17, 2003, there were
approximately 1,200 shareholders of record. A portion of the Company's common
stock is held in "street name" by nominees for beneficial owners, so the actual
number of shareholders is probably higher. The following table sets forth, for
the periods indicated, the reported high and low sales prices by quarter:
Quarterly Common Stock Price Range
for the years ended December 31,
- --------------------------------------------------------------------------------
High Low Cash
Sales Sales Dividends
Price Price Declared
-------- -------- --------
2001
First quarter ............. $ 12.59 $ 9.17 $ 0.090
Second quarter ............ 12.23 9.96 0.090
Third quarter ............. 12.41 11.57 0.090
Fourth quarter ............ 13.15 11.70 0.090
2002
First quarter ............. $ 16.23 $ 12.47 $ 0.100
Second quarter ............ 19.27 16.23 0.100
Third quarter ............. 18.67 15.70 0.100
Fourth quarter ............ 19.10 15.95 0.140
- --------------------------------------------------------------------------------
All per share data was restated to reflect a 3-for-2 stock split declared on May
23, 2002 and paid on July 12, 2002.
A cash dividend of $0.090 and $0.100 was declared on each common share
outstanding in each quarter during 2001 and 2002, respectively. The Company
declared a special cash dividend of $0.04 per common share in the fourth quarter
of 2002, which was paid in the first quarter of 2003.
The Company intends, subject to its financial results, contractual, legal,
and regulatory restrictions, and other factors that its Board of Directors may
deem relevant, to declare and pay a quarterly cash dividend on its common stock
in the future. The principal source of the funds to pay any dividends on the
Company's common stock is dividends received from the Bank. Certain federal and
state regulators impose restrictions on the payment of dividends by banks. See
"Business - Regulation and Supervision" for a discussion of these restrictions.
See Note 17 of Notes to Consolidated Financial Statement for additional
information.
Item 6. Selected Financial Data
The following selected financial data are derived from the Company's
audited Consolidated Financial Statements. The information set forth below
should be read in conjunction with the Consolidated Financial Statements and the
Notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The Consolidated Statements of Financial Condition
as of December 31, 2002 and 2001,
12
and the Consolidated Statements of Income, Changes in Stockholders' Equity and
Cash Flows for each of the years in the three-year period ended December 31,
2002 and the report thereon of Deloitte & Touche LLP are included on pages 30
through 51 of the Company's 2002 Annual Report to Shareholders filed as Exhibit
13 hereto, which pages are incorporated herein by reference.
CONSOLIDATED FINANCIAL HIGHLIGHTS
Years Ended December 31,
- --------------------------------------------------------------------------------
2002 2001 2000 1999 1998(1)
-------- -------- -------- -------- --------
Income Statement Data (in thousands)
Interest income $ 56,500 $ 57,402 $ 55,621 $ 49,054 $ 48,766
Interest expense 17,478 23,444 24,227 18,783 19,864
-------- -------- -------- -------- --------
Net interest income 39,022 33,958 31,394 30,271 28,902
Provision for loan losses 1,500 1,075 750 1,200 951
-------- -------- -------- -------- --------
Net interest income after provision for loan losses 37,522 32,883 30,644 29,071 27,951
Non-interest income 6,514 5,578 4,381 5,586 4,982
Non-interest expenses 25,063 22,873 21,177 20,063 19,416
-------- -------- -------- -------- --------
Income before income taxes 18,973 15,588 13,848 14,594 13,517
Income Taxes 6,096 5,048 4,592 4,959 4,908
-------- -------- -------- -------- --------
Net income $ 12,877 $ 10,540 $ 9,256 $ 9,635 $ 8,609
======== ======== ======== ======== ========
Per Share Data (2)
Basic earnings per common share $ 1.31 $ 1.08 $ 0.94 $ 0.91 $ 0.80
Diluted earnings per common share 1.30 1.07 0.94 0.91 0.79
Cash dividends declared 0.40 0.36 0.33 0.32 0.27
Special Cash Dividend 0.04 -- -- -- --
Book value 8.22 7.04 6.33 5.77 5.77
Tangible book value (3) 8.05 7.04 6.32 5.73 5.71
Weighted average shares outstanding (in thousands)
Basic 9,809 9,779 9,810 10,547 10,784
Diluted 9,933 9,822 9,838 10,593 10,856
Balance Sheet Data--end of year (in thousands)
Total assets $936,332 $830,949 $770,244 $706,125 $685,364
Securities held-to-maturity and securities available-for-sale 252,512 193,902 161,354 161,889 149,930
Loans and leases 615,641 581,323 560,879 511,976 478,717
Allowance for loan and lease losses 7,207 6,569 6,154 5,476 5,645
Total deposits 815,672 726,483 668,860 598,992 598,732
Securities sold under agreements to repurchase 17,390 6,700 18,500 16,431 8,780
Short-term borrowings -- 18,100 13,000 13,975 9,768
Long-term borrowings 10,000 -- -- 13,000 --
Total stockholders' equity $ 80,680 $ 68,233 $ 61,984 $ 58,276 $ 62,372
Selected Performance Ratios
Return on average total assets 1.43% 1.31% 1.24% 1.39% 1.31%
Return on average total stockholders' equity 17.35 16.06 16.18 15.52 14.53
Dividend Payout 33.56 33.37 35.24 35.04 32.81
Average total stockholders' equity to average total assets 8.27 8.13 7.64 8.99 9.00
Net yield on interest earning assets (taxable equivalent) (4) 4.68 4.49 4.41 4.61 4.61
Efficiency ratio (5) 55.06 57.46 58.52 56.81 53.59
Non-interest income to average total assets 0.73 0.69 0.59 0.81 0.76
Non-interest expense to average total assets 2.79 2.83 2.83 2.90 2.95
Asset Quality--end of year (in thousands)
Nonaccrual loans and leases to total loans and leases 0.97% 0.37% 0.25% 0.22% 0.25%
Nonperforming assets to total assets 0.66 0.34 0.21 0.22 0.26
Allowance for loan and lease losses to nonaccrual loans and leases 120.86 304.12 441.15 491.12 471.20
Allowance for loan and lease losses to total loans and leases 1.17 1.13 1.10 1.07 1.18
Net charge-offs to average loans and leases 0.14 0.11 0.01 0.28 0.12
13
Liquidity and Capital
Average loans and leases to average deposits 78.21% 81.77% 82.81% 81.79% 81.06%
Total stockholders' equity to total assets 8.62 8.21 8.05 8.25 9.10
Tier 1 capital to risk weighted assets 12.16 11.74 11.75 12.72 13.80
Total capital to risk weighted assets 13.33 12.89 12.92 13.91 15.12
Tier 1 capital to average assets 8.12 8.09 8.02 8.32 9.08
- --------------------------------------------------------------------------------
(1) Information for this period has been restated to reflect the Company's
acquisition of The Jersey Bank for Savings, which was completed on May 31,
1998 and was accounted for as a pooling of interests.
(2) All per share data and average shares have been restated to reflect a 3
for 2 stock split declared on May 23, 2002 and paid on July 12, 2002.
(3) Tangible book value is calculated by tangible capital (total stockholders'
equity less goodwill and other intangible assets) by total shares issued.
2002 2001 2000 1999 1998(1)
-------- -------- -------- -------- --------
Total stockholders' equity $ 80,680 $ 68,233 $ 61,984 $ 58,276 $ 62,372
Less: goodwill and other intangible assets 1,678 -- 81 394 707
-------- -------- -------- -------- --------
Total tangible capital $ 79,002 $ 68,233 $ 61,903 $ 57,882 $ 61,665
======== ======== ======== ======== ========
Total shares issued (2) 9,815 9,691 9,796 10,092 10,800
Tangible book value per share (2) $ 8.05 $ 7.04 $ 6.32 $ 5.73 $ 5.71
(4) Net yield on interest earning assets (taxable equivalent) is calculated by
dividing net interest income (on a fully taxable equivalent basis) by
average interest earning assets.
2002 2001 2000 1999 1998(1)
-------- -------- -------- -------- --------
Net interest income $ 39,022 $ 33,958 $ 31,394 $ 30,271 $ 28,902
Tax-equivalent basis adjustment 376 324 158 158 53
-------- -------- -------- -------- --------
Net interest income (on a fully taxable equivalent
basis)* $ 39,398 $ 34,282 $ 31,552 $ 30,429 $ 28,955
======== ======== ======== ======== ========
Average interest earning assets $842,191 $764,218 $715,113 $660,528 $627,499
Net yield on interest earning assets (taxable
equivalent)* 4.68% 4.49% 4.41% 4.61% 4.61%
(5) The efficiency ratio is calculated by dividing non-interest expenses,
excluding merger-related charges, amortization of intangibles and net
expense of foreclosed real estate by net interest income (on a fully
taxable equivalent basis) and non-interest income, excluding gains on
sales of loans, securities and loan servicing.
2002 2001 2000 1999 1998(1)
-------- -------- -------- -------- --------
Non-interest expense $ 25,063 $ 22,873 $ 21,177 $ 20,063 $ 19,416
Less:
Merger related charges -- -- -- -- 1,392
Amortization of intangibles 69 81 313 313 383
Net expense of foreclosed real estate 24 37 17 13 1
-------- -------- -------- -------- --------
Non-interest expense adjusted $ 24,970 $ 22,755 $ 20,847 $ 19,737 $ 17,640
======== ======== ======== ======== ========
Net interest income (on a fully taxable equivalent
basis)* 39,398 $ 34,282 $ 31,552 $ 30,429 $ 28,955
Non-interest income 6,514 5,578 4,381 5,586 4,982
Less:
Security gains 564 252 312 859 1,021
Sale of loans** -- 8 -- 86 --
Net gain on sale of merchant credit card portfolio -- -- -- 329 --
-------- -------- -------- -------- --------
Net interest income and non-interest income
adjusted $ 45,348 $ 39,600 $ 35,621 $ 34,741 $ 32,916
======== ======== ======== ======== ========
Efficiency ratio 55.06% 57.46% 58.52% 56.81% 53.59%
* Computed on a fully taxable equivalent basis using the
corporate federal tax rate of 34%.
** Does not include leases which were syndicated.
14
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information contained in the section entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on pages 13
through 29 of the Company's 2002 Annual Report to Shareholders filed as Exhibit
13 hereto is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
The information regarding the market risk of the Company's financial
instruments, contained in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on page 23 of the Company's 2002 Annual
Report to Shareholders filed as Exhibit 13 hereto is incorporated herein by
reference.
Item 8. Financial Statements and Supplemental Data
The financial statements required by this Item are included in the
Company's 2002 Annual Report to Shareholders on pages 30 through 51, filed as
Exhibit 13 hereto and incorporated herein by reference.
Page of Annual
Report to
Shareholders
--------------
Report of Independent Public Auditors 30
Interchange Financial Services Corporation and Subsidiaries
Consolidated Balance Sheets 31
Consolidated Statements of Income 32
Consolidated Statements of Changes in Stockholders' Equity 33
Consolidated Statements of Cash Flows 34
Notes to Consolidated Financial Statements (Notes 1 - 21) 35 - 51
No supplementary data is included in this report as it is inapplicable,
not required, or the information is included elsewhere in the financial
statements or notes thereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no changes in or disagreements with accountants on accounting
and financial disclosure as defined by item 304 of Regulation S-K.
15
PART III
Item 10. Directors and Executive Officers
a. Directors
The information contained in the section entitled "INTERCHANGE
PROPOSAL NO. 2 - ELECTION OF DIRECTORS - Nominees and Directors" in the
Company's 2003 Annual Meeting Proxy Statement is incorporated herein by
reference in response to this item.
b. Executive Officers
The following table sets forth the names, ages, and present
positions of the Company's and the Bank's principal executive officers:
Name Age Positions Held with the Company and the Bank
---- --- --------------------------------------------
ANTHONY S. ABBATE ................... 63 President and Chief Executive Officer
ANTHONY J. LABOZZETTA ............... 39 Executive Vice President and Chief Operating Officer
PATRICIA D. ARNOLD ................. 44 Senior Vice President--Chief Credit Officer
CHARLES T. FIELD .................... 38 Senior Vice President - Chief Financial Officer
FRANK R. GIANCOLA ................... 49 Senior Vice President--Operations
Business Experience
ANTHONY S. ABBATE, President and Chief Executive Officer of the Bank
since 1981; Senior Vice President and Controller from October 1980 to
1981. Engaged in the banking industry since 1959.
ANTHONY J. LABOZZETTA, Executive Vice President and Chief Operating
Officer since February 2003; Executive Vice President and Chief Financial
Officer from September 1997 to February 2003; Senior Vice President and
Treasurer from 1995 to 1997. Engaged in the banking industry since 1989.
Formerly a senior manager with an international accounting firm,
specializing in the financial services industry.
PATRICIA D. ARNOLD, Senior Vice President - Commercial Lending since
August 1997; First Vice President from 1995 to 1997; Department Head Vice
President from 1986 to 1995; Assistant Vice President from 1985 to 1986;
Commercial Loan Officer-Assistant Treasurer from 1983 to 1985. Engaged in
the banking industry since 1981.
CHARLES T. FIELD, Senior Vice President and Chief Financial Officer
since February 2003. Formerly Vice President Finance and Treasurer of
Viatel, Inc. from 1999 to 2002 and Treasurer from 1998 to 1999, Corporate
Controller of Horsehead Industries, Inc. from 1995 to 1998 and a manager
specializing in financial institutions at an international accounting firm
from 1987 to 1995.
16
FRANK R. GIANCOLA, Senior Vice President - Operations since
September 1997; Senior Vice President-Retail Banking from 1993 to 1997;
Senior Vice President-Operations of the Bank from 1984 to 1993; Senior
Operations Officer from 1982 to 1984; Vice President/Branch Administrator
from 1981 to 1982. Engaged in the banking industry since 1971.
Officers are elected annually by the Board of Directors and serve at
the discretion of the Board of Directors. Management is not aware of any
family relationship between any director or executive officer. No
executive officer was selected to his or her position pursuant to any
arrangement or understanding with any other person.
c. Compliance with Section 16(a)
Information contained in the section entitled "PRINCIPAL
SHAREHOLDERS AND HOLDINGS OF MANAGEMENT OF INTERCHANGE - Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's 2003 Annual
Meeting Proxy Statement is incorporated herein by reference in response to
this item.
Item 11. Executive Compensation
Information contained in the section entitled "INTERCHANGE EXECUTIVE
COMPENSATION AND OTHER INTERCHANGE INFORMATION - Executive Compensation" in the
Company's 2003 Annual Meeting Proxy Statement is incorporated herein by
reference in response to this item.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
The information contained in the section entitled "Principal Shareholders
and Holdings of Management of Interchange" in the Company's 2003 Annual Meeting
Proxy Statement is incorporated herein by reference in response to this item.
Equity Compensation Plan Information
The table below summarizes information about our common stock that may be issued
upon the exercise of options, warrants and rights under all of our existing
equity compensation plans as of December 31, 2002.
- ------------------------------------------------------------------------------------------------------------------------------------
Number of securities to be Weighted-average Number of securities remaining
issued upon exercise of exercise price of available for future issuance under
outstanding options, outstanding options, equity compensation plans (excluding
warrants and rights warrants and rights securities reflected in column (a))
- ------------------------------------------------------------------------------------------------------------------------------------
Plan category (a) (b) (c)
- ------------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans approved
by security holders 494,016 $11.91 672,268
Equity compensation plans not
approved by security holders -- -- --
------- ------ -------
Total 494,016 $11.91 672,268
======= ====== =======
17
The Outside Director Incentive Compensation Plan
The Outside Director Incentive Compensation Plan is designed to attract
qualified personnel to accept positions of responsibility as outside directors
with Interchange and to provide incentives for persons to remain on the board,
as outside directors. The Compensation/Stock Option Committee administers the
Outside Director Incentive Compensation Plan, reviews the awards and submits
recommendations to the full board of directors for action. Options to acquire
1,000 shares of Interchange common stock are granted to each outside director of
Interchange each year on the anniversary date of the initial grant. Each option
represents the right to purchase, upon exercise, one share of Interchange common
stock at an exercise price equal to the price of a share of stock at the close
of business on the date of the grant as reported by the Nasdaq National Market.
Stock options may be exercisable between one and ten years from the date
granted. All options granted under the Outside Director Incentive Compensation
Plan are non-qualified stock options and are not entitled to special tax
treatment under the Internal Revenue Code of 1986, as amended.
Stock Option and Incentive Plan
The Stock Option and Incentive Plan of 1997, as amended, is designed to align
shareholders' and executive officers' interests. The Compensation/Stock Option
Committee administers the plan, reviews the awards and submits recommendations
to the full board of directors for action. Stock options are granted on a
discretionary basis with an exercise price equal to the price of a share of
stock at the close of business on the date of the grant as reported by the
Nasdaq National Market. Stock options may be exercisable between one and ten
years from the date granted. Such stock options provide a retention and
motivational program for executives and an incentive for the creation of
shareholder value over the long-term since their full benefit cannot be realized
unless an appreciation in the price of the common stock occurs over a specified
number of years.
The Stock Option and Incentive Plan also provides for the issuance of
incentive stock awards as determined by the board of directors of Interchange.
Certain key executives may be awarded incentive compensation in the form of
3-year restricted stock, which is forfeitable upon termination of employment
during that time period. Key employees may also use their cash bonus to purchase
two-year restricted stock at a twenty-five percent discount. All amounts in
excess of the purchase price of this stock are forfeitable should they terminate
their employment during that time period. Incentive stock awards are an
important factor in attracting and motivating key executives who will dedicate
their maximum efforts toward the advancement of the Company.
Item 13. Certain Relationships and Related Transactions
The information contained in the section entitled "Certain Relationships
and Related Party Transactions of Interchange" in the Company's 2003 Annual
Meeting Proxy Statement is incorporated herein by reference in response to this
item.
Item 14. Controls and Procedures
Within the 90 days prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive
18
Officer and current and former Chief Financial Officers, of the effectiveness of
the design and operation of the Company's disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief
Executive Officer and current and former Chief Financial Officers concluded that
the Company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company (including its
consolidated subsidiaries) required to be included in the Company's periodic
filings with the Securities and Exchange Commission. There were no significant
changes in our internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation.
19
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this Report:
1. Financial Statements: The Financial Statements listed under
Item 8 to this Report are set forth at pages 31 through 34,
and the Notes to Consolidated Financial Statements are set
forth at pages 35 through 51, of the 2002 Annual Report to
Shareholders (See Exhibit 13 under paragraph (a)3 of this Item
14).
2. Financial Statement Schedules: All required schedules for the
Company and its subsidiaries have been included in the
Consolidated Financial Statements or related Notes thereto.
3. Exhibits: Exhibits followed by a parenthetical reference are
incorporated by reference herein from the document described
in such parenthetical reference.
Exhibit 2.1 Agreement and Plan of Merger, dated as of
November 18, 2002, by and between Registrant
and Bridge View Bancorp (Incorporated by
reference to Exhibit 2.1 to Registrant's Form
S-4, filed February 14, 2003, Registration
Statement No. 333-103256)
Exhibit 3(a) Restated Certificate of Incorporation of
Registrant (Incorporated by reference to
Exhibit 3.1 to Registrant's Form S-4, filed
February 14, 2003, Registration Statement No.
333-103256)
Exhibit 3(b) Amended and Restated Bylaws of Registrant,
dated October 24, 2002(Incorporated by
reference to Exhibit 4(b) to the Registrant's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 2002)
* Exhibit 10(a) Agreement for legal services between Andora
and Romano and Registrant, dated April 25,
2002.
(1) Exhibit 10(b) Outside Director Incentive Compensation Plan
(Incorporated by reference to Exhibit 4(a) to
Registrant's Form S-8, filed June 26, 2000,
Registration Statement No. 33-40098)
(1) Exhibit 10(c) Stock Option and Incentive Plan of 1997, as
Amended (Incorporated by reference to Exhibit
4(a) to Registrant's Form S-8, filed August
26, 2002, Registration Statement No. 33-98705)
(1) Exhibit 10(d) Directors' Retirement Plan, as Amended 2002
(Incorporated by reference to Exhibit 10(d) to
Annual Report on Form 10-K for fiscal year
ended December 31, 2001)
(1) Exhibit 10(e) Executives' Supplemental Pension Plan
(Incorporated by reference to Exhibit 10(i)(4)
to Annual Report on Form 10-K for fiscal year
ended December 31, 1994)
(1) Exhibit 10(f) Change-in-Control Agreements for the
Registrant's principal executive officers, and
Amendment dated June 14, 2001 (Incorporated by
reference to Exhibit 10(f) to Annual Report on
Form 10-K for fiscal year ended December 31,
2001)
* Exhibit 11 Statement regarding computation of per share
earnings
* Exhibit 13 Portion of the Annual Report to Shareholders
for the year ended December 31, 2002
* Exhibit 21 Subsidiaries of Registrant
* Exhibit 23 Independent Auditors' Consent of Deloitte &
Touche LLP
20
(b) Reports on Form 8-K during the quarter ended December 31, 2002:
The Company filed a Current Report on Form 8-K
on November 26, 2002. Item 5 of the referenced
Current Report contained the press release
announcing that it has entered into an
Agreement and Plan of Merger with Bridge View
Bancorp, Englewood Cliffs, New Jersey.
----------
(1) Pursuant to Item 14(a) - 3 of Form 10-K, this exhibit represents a
management contract or compensatory plan or arrangement required to
be filed as an exhibit to this Form 10-K pursuant to Item 14(c) of
this item.
* Filed herewith
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Interchange Financial Services
Corporation
By: /s/ Anthony S. Abbate By: /s/ Charles T. Field
----------------------------- --------------------------------
Anthony S. Abbate Charles T. Field
President and Chief Executive Senior Vice President and
Officer Chief Financial Officer
(principal executive officer) (principal financial and
accounting officer)
March 21, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated:
/s/ Anthony S. Abbate /s/ Charles T. Field
- ----------------------------------------------- ---------------------------------------------------
Anthony S. Abbate March 21, 2003 Charles T. Field March 21, 2003
Director Senior Vice President and
President and Chief Executive Officer Chief Financial Officer
/s/ Anthony D. Andora /s/ Nicholas R. Marcalus
- ----------------------------------------------- ---------------------------------------------------
Anthony D. Andora March 21, 2003 Nicholas R. Marcalus March 21, 2003
Director Director
Chairman of the Board
/s/ Donald L. Correll /s/ Eleanore S. Nissley
- ----------------------------------------------- ---------------------------------------------------
Donald L. Correll March 21, 2003 Eleanore S. Nissley March 21, 2003
Director Director
/s/ Anthony R. Coscia /s/ Jeremiah F. O'Connor
- ----------------------------------------------- ---------------------------------------------------
Anthony R. Coscia March 21, 2003 Jeremiah F. O'Connor March 21, 2003
Director Director
/s/ John J. Eccleston /s/ Robert P. Rittereiser
- ----------------------------------------------- ---------------------------------------------------
John J. Eccleston March 21, 2003 Robert P. Rittereiser March 21, 2003
Director Director
/s/ David R. Ficca /s/ Benjamin Rosenzweig
- ----------------------------------------------- ---------------------------------------------------
David R. Ficca March 21, 2003 Benjamin Rosenzweig March 21, 2003
Director Director
/s/ James E. Healey /s/ William Schuber
- ----------------------------------------------- ---------------------------------------------------
James E. Healey March 21, 2003 William Schuber March 21, 2003
Director Director
22
CERTIFICATION OF DISCLOSURE CONTROLS
I, Anthony S. Abbate, certify that:
1. I have reviewed this annual report on Form 10-K of Interchange Financial
Services Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: March 21, 2003 /s/ Anthony S. Abbate
-------------- --------------------------------------
President and Chief Executive Officer
CERTIFICATION OF DISCLOSURE CONTROLS
I, Anthony Labozzetta, certify that:
1. I have reviewed this annual report on Form 10-K of Interchange Financial
Services Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: March 21, 2003 /s/ Anthony Labozzetta
-------------- ----------------------------------------------------
Executive Vice President and Chief Operating Officer
Formerly Chief Financial Officer thru February 2003
CERTIFICATION OF DISCLOSURE CONTROLS
I, Charles T. Field, certify that:
1. I have reviewed this annual report on Form 10-K of Interchange Financial
Services Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: March 21, 2003 /s/ Charles T. Field
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Senior Vice President and Chief Financial Officer