-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FyJW6BSf8FW/IwG0T6ol5F2Z8zrFb5srHQBDFJts2OmM3ElSu8MnAGBVIQl49zLt SDp3V60v46lAf0/dKX8Mtg== 0000846617-99-000027.txt : 19990402 0000846617-99-000027.hdr.sgml : 19990402 ACCESSION NUMBER: 0000846617-99-000027 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRIDGE BANCORP INC CENTRAL INDEX KEY: 0000846617 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 112934195 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-18546 FILM NUMBER: 99581557 BUSINESS ADDRESS: STREET 1: 2200 MONTAUK HIGHWAY CITY: BRIDGEHAMPTON STATE: NY ZIP: 11932 BUSINESS PHONE: 5165371000 MAIL ADDRESS: STREET 1: P O BOX 3005 CITY: BRIDGEHAMPTON STATE: NY ZIP: 11932 10-K 1 ANNUAL REPORT U.S. Securities and Exchange Commission Washington, DC 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark one) [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the fiscal year ended December 31, 1998 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the Transition period from ____________________ to _____________________ Commission file Number 0-18546 BRIDGE BANCORP, INC (Exact name of registrant as specified in its charter) NEW YORK 11-2934195 - ----------------------------------- --------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 2200 Montauk Highway, Bridgehampton, New York 11932 - ------------------------------------------------- --------------------------- (Address of principal executive office) (Zip Code) Issuer's telephone number, including area code (516) 537-1000 Securities registered under Section 12 (b) of the Exchange Act: Name of each exchange on Title of each class which registered ----------------------------------- ------------------------------- ----------------------------------- ------------------------------- Securities registered under Section 12 (g) of the Exchange Act: Common Stock, Par Value of $5.00 Per Share, (Title of Class) ----------------------------------------------------------------------------- (Title of Class) 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 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 (section 229.405) of this chapter 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. [X] The aggregate market value of the voting stock owned by non affiliates of the Registrant as of March 16, 1999 was $72,040,199. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the year ended December 31, 1998 are incorporated by reference into Part II and Part III. Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held April 19, 1999, dated March 16, 1999, are incorporated by reference into Part III. PART I Item 1. Business - ---------------- Bridge Bancorp, Inc. (the "Registrant") is a registered bank holding company, the sole subsidiary of which is The Bridgehampton National Bank (the "Bank"). The Registrant was organized as a New York business corporation and incorporated under the laws of the State of New York in 1988, at the direction of the Board of Directors of the Bank for the purpose of becoming a bank holding company pursuant to a plan of reorganization; under the plan the former stockholders of the Bank became the stockholders of the Company. Since commencing business in March 1989 after the reorganization, the Registrant has functioned primarily as the holder of all of the Bank's common stock. At present, the Registrant does not own or lease any property and has no paid employees. The Registrant uses the Bank's space and employees without separate payment. The Bank was established in 1910 as a national banking association and is under the supervision of the Office of the Comptroller of the Currency (the "OCC"). Its headquarters are located at 2200 Montauk Highway, Bridgehampton, New York 11932. The Bank engages in full service commercial and consumer banking and limited trust business, including accepting time and demand deposits, as well as making secured and unsecured commercial and consumer loans, including auto, personal, home equity, home improvement, residential and commercial mortgages, commercial construction and S.B.A. guaranteed loans. In addition the Bank offers merchant credit and debit card processing, automated teller machines, safe deposit boxes and individual retirement accounts. The Bank employees 91 people on a full-time and part-time basis. The Bank provides a variety of employment benefits and considers its relationship with its employees to be good. All phases of the Bank's business are highly competitive. The Bank's market is primarily the trade areas of the North and South Forks of Eastern Suffolk County, with concentrations in the Bridgehampton, East Hampton, Mattituck, Montauk, Southampton, and Southold, New York areas. The Bank considers its major competition to be local commercial banks as well as other commercial banks with branches in the Bank's market area. Regulation - ---------- References in this section to applicable statutes and regulations are brief summaries only, and do not purport to be complete. The reader should consult such statutes and regulations themselves for a full understanding of the details of their operation. The Registrant is subject to the provisions of the Bank Holding Company Act of 1956, as amended (the "Act") and to supervision by the Federal Reserve Board. The Act requires the Registrant to secure the prior approval of the Federal Reserve Board before it can acquire all or substantially all of the assets of any bank, or acquire ownership or control of any voting shares of any bank other than the Bank, if after such acquisition, it would own or control more than 5 percent of the voting shares of such bank. Federal law also prohibits acquisitions of control of a bank holding company without prior notice to certain federal bank regulators. As a bank holding company, the Registrant is required to file an annual report with the Federal Reserve Board and any additional information as the Federal Reserve Board may require pursuant to the Act. The Federal Reserve Board may also make examinations of the Registrant and any or all of its subsidiaries. Subsidiary banks of a bank holding company are subject to certain restrictions imposed by the Act on any extension of credit to the bank holding company or any of its subsidiaries, on investments in the stock or other securities of the bank holding company or its subsidiaries, and on the taking of such stock or securities as collateral for loans to any borrower. The Federal Reserve Board permits bank holding companies to engage in non-banking activities so closely related to banking or managing or controlling banks so as to be a proper incident thereto including, for example, consumer finance companies, mortgage companies, leasing companies, data processing companies, financial advisor and securities brokerage. Federal Reserve Board approval is required before the Registrant or a non-bank subsidiary of the Registrant may begin to engage in any of the above activities and before any such business may be acquired. At the present time, the Registrant does not contemplate conduct of any non-banking activities permitted by the Act. The operations of the Bank are subject to federal and state statutes applicable to banks chartered under the banking laws of the United States, to members of the Federal Reserve System and to banks whose deposits are insured by the Federal Deposit Insurance Corporation (the "FDIC"). Bank operations are also subject to regulations of the OCC, the Federal Reserve Board, the FDIC, and the New York State Banking Department. The primary supervisory authority of the Bank is the OCC, who regularly examines the Bank. Federal and state banking laws and regulations govern, among other things the scope of a bank's business, the investments a bank may make, the reserves against deposits a bank must maintain, the loans a bank makes and collateral it takes, the maximum interest rates a bank must pay on deposits, the activities of a bank with respect to mergers and consolidations and the establishment of branches. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") expanded the Federal Reserve Board's authority to prohibit activities of bank holding companies and their non-banking subsidiaries which represent unsafe and unsound banking practices or which constitute violations of laws or regulations. FIRREA increased the amount of civil money penalties that the Federal Reserve Board can assess for such practices or violations. The penalties can be as high as $1 million per day. FIRREA also expanded the scope of individuals and entities against which such penalties may be assessed. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") required each federal banking agency to revise its risk-based capital standards to ensure that those standards take adequate account of interest rate risk, concentrations of credit risk and the risks of non-traditional activities, as well as reflect the actual performances and expected risk of loss on multi-family mortgages. This law also required each federal banking agency to specify, by regulation the levels at which an insured institution would be considered "well capitalized," "adequately capitalized," "under-capitalized," "significantly under-capitalized" and "critically under-capitalized." Under the regulations adopted by the banking agencies, the Bank is considered "well capitalized." FDICIA requires bank regulators to take "prompt corrective action" to resolve problems associated with insured depository institutions. In the event an institution becomes "under-capitalized," it must submit a capital restoration plan. If an institution becomes "significantly under-capitalized" or "critically under-Capitalized," additional and significant limitations are placed on the institution. The capital restoration plan of an under-capitalized institution will not be accepted by the regulators unless each company "having control of" the under-capitalized institution "guarantees" the subsidiary's compliance with the capital restoration plan until it becomes "adequately capitalized." Under FDICIA, the aggregate liability of all companies controlling a particular institution is limited to the lesser of 5% of the institution's assets at the time it became under-capitalized or the amount necessary to bring the institution into compliance with applicable capital standards. FDICIA grants powers to the bank regulators in situations where an institution becomes "significantly" or "critically under-capitalized" or fails to submit a capital restoration plan. For example, a bank holding company controlling such an institution can be required to obtain prior Federal Reserve Board approval of proposed dividends, or might be required to consent to a merger or to divest the troubled institution or other affiliates. Additionally, Federal Reserve Board policy discourages the payment of dividends by a bank holding company from borrowed funds as well as payments that would adversely affect capital adequacy. Failure to meet the capital guidelines may result in institution by the Federal Reserve Board of appropriate supervisory or enforcement actions. The prompt corrective action provisions of FDICIA reflect the same concerns which gave rise to a position adopted by the Federal Reserve Board known as the "source of strength doctrine," which is based on the Federal Reserve Board's Regulation Y. Regulation Y directs bank holding companies to "serve as a source of financial and managerial strength" to their subsidiary banks, and bars them from engaging in unsafe and unsound practices. STATISTICAL INFORMATION ----------------------- The following tables set forth statistical information relating to the Registrant and the Bank. The tables should be read in conjunction with the consolidated financial statements and related notes and the discussion included in Management's Discussion and Analysis of Financial Condition and Results of Operations. I.A. & I.B. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY: - ------------------------------------------------------------------------------- INTEREST RATES AND INTEREST DIFFERENTIAL - ---------------------------------------- The information required by Items I.A. & I.B. is included in the "Analysis of Net Interest Income" which appears on page 10 of the Registrant's 1998 Annual Report to Shareholders which is incorporated herein by reference. I.C. VOLUME AND YIELD/RATE VARIANCES - ------------------------------------- The information required by Item I.C. is included in the "Rate/Volume Analysis" which appears on page 11 of the Registrant's 1998 Annual Report to Shareholders which is incorporated herein by reference. II.A. & II.B. INVESTMENT PORTFOLIO - ---------------------------------- The information required by Items II.A. & II.B. is included in Footnote 2 of the Notes to Consolidated Financial Statements which appears on pages 22 and 23 of the Registrant's 1998 Annual Report to Shareholders which is incorporated herein by reference. III.A., III.B., III.C.1 & III.C.3 LOANS - --------------------------------------- The information required by Items III.A., III.B., III.C.1 & III.C.3 is included in Footnote 3 of the Notes to Consolidated Financial Statements which appears on pages 23 through 25 of the Registrant's 1998 Annual Report to Shareholders which is incorporated herein by reference. III.C.2. POTENTIAL PROBLEM LOANS - -------------------------------- In addition to the total non-performing loans set forth above, loans of approximately $4,439,000 at December 31, 1998, were classified as potential problem loans. These are loans for which management has information which indicated that the borrower may not be able to comply with the present payment terms. These loans are subject to constant management attention and their classification is reviewed on at least a quarterly basis. III.C.4. LOAN CONCENTRATIONS - ---------------------------- At December 31, 1998, there were no loan concentrations. IV.A. & IV.B. SUMMARY OF LOAN LOSS EXPERIENCE - ---------------------------------------------- The information required by Items IV.A. & IV.B. is included in Footnote 3 of the Notes to Consolidated Financial Statements which appears on pages 23 through 25 of the Registrant's 1998 Annual Report to Shareholders which is incorporated herein by reference. V. DEPOSITS - ----------- The information required by Item V. is included in Footnote 4 of the Notes to Consolidated Financial Statements which appears on page 25 of the Registrant's 1998 Annual Report to Shareholders which is incorporated herein by reference. VI. RETURN ON EQUITY AND ASSETS - --------------------------------- The information required by Item VI. is included in the "Five Year Summary of Operations" which appears on page 7 of the Registrant's 1998 Annual Report to Shareholders which is incorporated herein by reference. VII. SHORT-TERM BORROWINGS - ---------------------------- The Registrant's average balance outstanding during the period for all categories of short term borrowings was less than thirty percent of stockholders' equity at the end of the period. Item 2. Properties - ------------------ Facilities of the Registrant are located at 2200 Montauk Highway, Bridgehampton, New York in the Bank's Main Office facility. As such, the Registrant itself has no physical properties. The Bank's Main Office is owned in fee. The Bank also owns the building which houses its Southold Branch located at 54790 Main Road, Southold, New York. The Bank leases five additional properties as branch locations at 425 County Road 39, Southampton, New York; 26 Park Place, East Hampton, New York; Main Road Mattituck, New York; 94 Main Street, Southampton, NY 11968; and 1 The Plaza, Montauk, New York. The Bank leases additional space at 184 Old Country Road, Riverhead, New York formerly used as a residential mortgage center. The Bank is currently in the process of subletting this space. It is the opinion of management of the Company that the current facilities are suitable and adequate at the present time. Item 3. Legal Proceedings - ------------------------- The Bank, and two present executive officers and one former executive officer, have been named as defendants in a lawsuit that was filed on February 18, 1999 by two former employees in Suffolk County Supreme Court. The plaintiffs assert causes of action in connection with their employment, conduct of loan and banking transactions, and subsequent termination or resignation. The plaintiffs seek compensatory and punitive damages. In the opinion of management at the present time, after consultation with legal counsel, the lawsuit is without merit and the ultimate outcome of this matter is not expected to have a material adverse effect on the Company's results of operations, business operations or consolidated financial condition. Item 4. Submission of Matters to a Vote of Security Holders - ----------------------------------------------------------- None PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters - ----------------------------------------------------------------------------- "Common Stock Information" set forth on page 32 of the Annual Report to Shareholders for the year ended December 31, 1998 is incorporated herein by reference. Item 6. Selected Financial Data - ------------------------------- "Five Year Summary of Operations" set forth on page 7 of the Annual Report to Shareholders for the year ended December 31, 1998 is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- of Operations - ------------- "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth on pages 8 through 15 of the Annual Report to Shareholders for the year ended December 31, 1998 is incorporated herein by reference. Item 7A. Quantitative and Qualitative Disclosures About Market Risk - -------------------------------------------------------------------- "Market Risk" under Item 7. Management's Discussion and Analysis or Plan of Operation set forth on pages 9 through 10 of the Annual Report to Shareholders for the year ended December 31, 1998 is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data - --------------------------------------------------- The Consolidated Financial Statements and notes, together with the Report of Independent Public Accountants included on pages 16 through 32 of the Annual Report to Shareholders for the year ended December 31, 1998 is incorporated herein by reference. Item 9. Changes in and disagreements with Accountants on Accounting and - -------------------------------------------------------------------------------- Financial Disclosure -------------------- None PART III Item 10. Directors and Executive Officers of the Registrant - ----------------------------------------------------------- "Nominees for Director and Directors Continuing in Office", "Shares Beneficially Owned by other Executive Officers and All Directors" and "Compliance with Section 16 (a) of the Exchange Act" set forth on pages 3 through 5 and 15 of the Registrant's Proxy Statement dated March 16, 1999 are incorporated herein by reference. Item 11. Executive Compensation - ------------------------------- "Compensation of Directors", "Compensation of Executive Officers", and "Employment Contracts and Severance Agreements" set forth on pages 7 through 15 of the Registrant's Proxy Statement dated March 16, 1999 are incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management - ----------------------------------------------------------------------- "Beneficial Ownership" and "Nominees for Director and Directors Continuing in Office" set forth on pages 2 through 5 of the Registrant's Proxy Statement dated March 16, 1999 are incorporated herein by reference. Item 13. Certain Relationships and Related Transactions - ------------------------------------------------------- "Certain Relationships and Related Transactions" set forth on page 15 of the Registrant's Proxy Statement dated March 16, 1999 is incorporated herein by reference. "Related party loans" set forth as part of Footnote 3 of the Notes to Consolidated Financial Statements which appears on page 25 of the Annual Report to Shareholders for the year ended December 31, 1998 is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K Exhibits The Following Exhibits are incorporated herein by reference: 3.1 Certificate of Incorporation of the Registrant 3.2 By-laws of the Registrant 10.1 Employment Contract - Thomas J. Tobin, Dated January 27, 1997 10.2 Severance Agreement - Anthony Leone, Dated January 13, 1998 10.3 Annual Incentive Plan 10.4 Service Agreement - Fiserv Boston, Inc. 10.5 Equity Incentive Plan The following Exhibits are filed with this Form 10-K: 10.6 Change in Control Agreement - Christopher Becker 13.1 Registrant's Annual Report to Shareholders for the year ended December 31, 1998 (parts not incorporated by reference are furnished for information purposes only and are not to be deemed filed herewith.) 23.1 Consent of Independent Public Accountants - Arthur Andersen, LLP Reports on Form 8-K There were no reports on Form 8K filed during the fourth quarter of 1998. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BRIDGE BANCORP, INC. -------------------- Registrant Date: March 31, 1999 By /s/ Thomas J. Tobin -------------------- --------------------- Thomas J. Tobin, President/CEO Date: March 31, 1999 By /s/ Christopher Becker ------------------- ------------------------ Christopher Becker, Senior Vice President/Treasurer Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Raymond Wesnofske Director March 31, 1999 - --------------------------------- --------------------- Raymond Wesnofske /s/ Thomas J. Tobin Director March 31, 1999 - --------------------------------- --------------------- Thomas J. Tobin /s/ Thomas E. Halsey Director March 31, 1999 - --------------------------------- --------------------- Thomas E. Halsey /s/ Marcia Z. Hefter Director March 31, 1999 - --------------------------------- --------------------- Marcia Z. Hefter /s/ R. Timothy Maran Director March 31, 1999 - --------------------------------- --------------------- R. Timothy Maran /s/ Albert E. McCoy Director March 31, 1999 - --------------------------------- --------------------- Albert E. McCoy /s/ Walter A. Preische, Jr. Director March 31, 1999 - --------------------------------- --------------------- Walter A. Preische, Jr. /s/ L.H. Strickland Director March 31, 1999 - --------------------------------- --------------------- L.H. Strickland EXHIBIT INDEX ------------- Exhibit Number Description of Exhibit Exhibit - -------------- ---------------------- ------- 3.1 Certificate of Incorporation of the * Registrant (incorporated by reference to Registrant's amended Form 10, File No. 0-18546, filed October 15, 1990) 3.2 By-laws of the Registrant (incorporated * by reference to Registrant's amended Form 10, File No. 0-18546, filed October 15, 1990) 10.1 Employment Contract - Thomas J. Tobin (incorporated by reference to Registrant's * Form 10-KSB, File No. 0-18546, filed March 31, 1997) 10.2 Severance Agreement - Anthony Leone * (incorporated by reference to Registrant's Form 10-KSB, File No. 0-18546, filed March 31, 1998) 10.3 Annual Incentive Plan (incorporated by * reference to Registrant's Form 10-KSB, File No. 0-18546, filed March 31, 1994) 10.4 Service Agreement - Fiserv Boston, Inc. * (incorporated by reference to Registrant's Form 10-KSB, File No 0-18546, filed March 31, 1994) 10.5 Equity Incentive Plan (incorporated by * reference to Registrant's Form 14A, File No. 0-18546, filed April 1, 1996) 10.6 Change in Control Agreement - Christopher 2 Becker, Dated January 19, 1999 13.1 Registrant's Annual Report to Shareholders 1 for the year ended December 31, 1998 23.1 Consent of Independent Public Accountants - 3 Arthur Andersen, LLP * Denotes incorporated by reference EX-13 2 BRIDGE BANCORP'S ANNUAL REPORT [PHOTOGRAPH-Brigdehampton National Bank's Headquarters building] 1998 Annual Report Bridge Bancorp, Inc. SM [TRADEMARK - The Bank you can talk to.] COMPANY PROFILE Bridge Bancorp, Inc., a New York corporation, is a one-bank holding company engaged in commercial banking through its wholly owned subsidiary, The Bridgehampton National Bank. Federally chartered in 1910, the Bank was founded by local farmers and merchants to serve the needs of the agricultural based villages comprising the area. While growing and expanding over the past eighty-nine years, The Bridgehampton National Bank has continued to maintain its community orientation. The Bank offers a full range of deposit and loan products and services, geared to the businesses and consumers within its primary market area, the East End of Long Island. Bridgehampton National Bank serves both the North and South Forks on the East End through its branch network, operating seven full service banking offices located in Bridgehampton, East Hampton, Mattituck, Montauk, Southampton, Southampton Village and Southold, New York. Residential mortgage services are available at all branch locations. In addition, twenty-four hour Automated Teller Machines with access to the MAC and NYCE networks are maintained in Bridgehampton, Mattituck, Southampton Hospital and Southampton Town Hall. The Bank is an Equal Housing Lender and a member of the Federal Deposit Insurance Corporation. MISSION The mission of the employees of The Bridgehampton National Bank is to provide the Company's shareholders with an above average return on investment and increased shareholder value. We will accomplish our mission by profitably providing financial services to all customers, being particularly cognizant of providing fair and evenhanded distribution of credit to all segments of our marketplace while utilizing safe and sound banking practices. Critically important to the success of our mission are superior levels of commitment and service to our customers by all of our employees. Equally important to the success of our mission is the selection and retention of the highest quality employees. The Bank is dedicated to providing its employees with the direction and training necessary to achieve their mission. BRIDGE BANCORP, INC. - -------------------- Serving the East End through Four Market Areas TEAMWORK In 1998, The Bridgehampton National Bank refined its management structure in an effort to provide unique levels of service, value and responsiveness to our customers. Each market area within the East End region is ready to provide a full range of business and consumer banking services, and is led by a Senior Banking Officer. We would like to take this opportunity to introduce you to our Market Area Team Leaders. [PHOTOGRAPH] Bridgehampton Ann Sweeney, Vice President, Senior Banking Officer began her career with The Bridgehampton National Bank in 1988 as a Cooperative Education student from Long Island University-Southampton College. She started off in our loan department and upon graduation began working for Bridgehampton National full-time, mastering all aspects of consumer and commercial loan processing before her promotion to a Loan Officer position. Ms. Sweeney was promoted to Assistant Vice President, Senior Lending Officer in 1995 and served as the Loan and Business Development Officer for the Main Office branch. Ms. Sweeney now directs and manages the Bridgehampton Market Area, which includes business development in Bridgehampton, Wainscott, Water Mill, Sagaponack and Sag Harbor. Ann is currently completing her thesis, the culmination of the American Bankers Association (ABA) Stonier Graduate School of Banking. Ms. Sweeney has earned several ABA banking certificates, including Consumer Lending, Commercial Lending and Advanced Commercial Lending. Working with businesses and consumers in our market area for more than ten years, Ann really knows her business. [PHOTOGRAPH] North Fork Peter Coleman, Vice President, Senior Banking Officer has more than twenty years in the banking business and provides important leadership in our North Fork region. Mr. Coleman is a graduate of the State University of New York at Delhi after which he served in the U.S. Army. He has completed numerous credit and banking programs, including Dun & Bradstreet's Credit Administration Certificate, the ABA National Mortgage School, and the ABA Stonier Graduate School of Banking. Pete began his career at BNB in 1993, working as Vice President, Commercial Lending Officer. In November of 1997, Mr. Coleman moved to the North Fork Market Area with the objective of coordinating and solidifying the business development efforts of BNB's North Fork branches. A lifelong resident of Mattituck, Pete is well-known in the North Fork business community, and his knowledge and commitment to the North Fork have been a key asset to the Bank's growth and reputation in the region. Peter has been involved in several community activities on the North Fork, including serving as Chief and Commissioner of the Mattituck Fire Department, where he was also voted Fireman of the Year. In addition, Pete served as Director of the Mattituck Community Fund, Inc., and is a member of the Mattituck Lions Club. Currently, Mr. Coleman is an active member of the Eastern Long Island Executive Roundtable. [PHOTOGRAPH] East Hampton / Montauk Kevin Santacroce, Assistant Vice President, Senior Banking Officer heads up the team in the East Hampton/Montauk Market Area. A graduate of Bryant College, Mr. Santacroce has been in banking since 1991. He has completed several credit and accounting programs, graduating with top honors in Credit Analyst and Senior Credit Analyst course work. Kevin began the ABA Stonier Graduate School of Banking program in 1998, and will be working on his thesis in 1999. Mr. Santacroce joined The Bridgehampton National Bank in 1997 as Assistant Cashier, Loan Officer, East Hampton/Montauk. Kevin came to our Company with several years of financial and credit management experience, including development of statistical financial projections, asset and relationship pricing, risk rating, budget development and analysis, capital procurement and investment strategies, financial reporting and accounting supervision. Kevin was promoted to the position of Assistant Vice President, Loan Officer, East Hampton/Montauk in December 1997. As Senior Banking Officer, Kevin directs and manages all aspects of banking business in our East Hampton and Montauk Branch Offices, and points in between. Kevin participates in many community programs, including serving on the Volunteer Fire Department in his hometown of Southold. [PHOTOGRAPH] Southampton Although Seamus Doyle, Assistant Vice President, Senior Banking Officer hails from Dublin, Ireland, he is very much at home here on the East End. Mr. Doyle began his career at The Bridgehampton National Bank as a Credit Analyst in 1992, after which he graduated with honors from the Bucknell School of Commercial Credit and was promoted to the position of Loan Officer. Until 1997, Seamus served as BNB's Loan Officer in Montauk, and then East Hampton. During this period, Mr. Doyle was promoted to Assistant Vice President, completed his studies in accounting, and passed the Certified Public Accountant examinations. Still working to gain the experience required for the CPA designation, Mr. Doyle left the Bank temporarily, for a position at a prestigious local accounting firm. Seamus returned to BNB in 1998, coming back on board as AVP, Senior Banking Officer for the Southampton Market Area. The Bridgehampton National Bank maintains two branch offices in the Southampton marketplace, including the County Road 39 Branch Office, as well as the newly established Southampton Village Commercial Branch Office. Business development in the Village Branch Office represented a significant challenge in 1998. Seamus has been recommended to begin the ABA Stonier Graduate School of Banking program in Spring 1999. Seamus serves as a Director of the East Hampton Chamber of Commerce. Consolidated Financial Highlights (IN THOUSANDS, EXCEPT PER SHARE DATA AND FINANCIAL RATIOS)
At December 31, 1998 1997 - ----------------------------------------------------------------------------------------------- FOR THE YEAR ENDED Net income $ 3,895 $ 4,195 Net income, excluding gain on sale of building -- 3,366 Cash dividends declared 1,482 1,972 -------------------------- AT YEAR END Total assets $ 266,984 $ 233,112 Total deposits 241,531 203,697 Total loans 168,696 138,636 Total stockholders' equity 22,232 19,451 -------------------------- SIGNIFICANT RATIOS FOR THE YEAR ENDED Return on average equity 19.19% 23.08% Return on average assets 1.51 1.86 -------------------------- SELECTED FINANCIAL RATIOS, EXCLUDING GAIN ON SALE OF BUILDING Return on average equity -- 18.52% Return on average assets -- 1.49 -------------------------- PER SHARE DATA Diluted earnings per share $ 0.91 $ 0.99 Basic earnings per share 0.92 0.99 Cash dividends declared 0.35 0.47 Book value 5.25 4.60 -------------------------- PER SHARE DATA, EXCLUDING GAIN ON SALE OF BUILDING IN 1997 Diluted earnings per share $ 0.91 $ 0.79 Basic earnings per share 0.92 0.79 -------------------------- On June 17, 1997, the Bank sold its former headquarters building resulting in a gain, net of taxes, of approximately $829,000. On December 15, 1997 the bank declared a one time special dividend of approximately $845,000, or $.20 per share, paying out this gain to the shareholders. On July 20, 1998, the Board of Directors declared a three-for-one stock split in the form of a stock dividend payable August 31, 1998 to stockholders of record as of August 19, 1998 . The stock split increased outstanding shares from 1,411,599 to 4,234,797. On April 15, 1997, the Board of Directors declared a three-for-one stock split in the form of a stock dividend payable May 30, 1997 to stockholders of record as of May 1, 1997. The stock split increased outstanding shares from 469,333 to 1,407,999. All per share amounts have been adjusted to reflect these splits.
[BAR GRAPHS] (In Thousands) 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------ TOTAL ASSETS $266,951 $233,112 $204,614 $184,070 $171,953 (In Thousands) 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------ NET INCOME $ 3,895 $ 4,195 $ 3,006 $ 2,383 $ 1,933 3,366* (Percent) 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------ RETURN ON AVERAGE ASSETS 1.51% 1.86% 1.51% 1.27% 1.81% 1.49% (Percent) 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------ RETURN ON AVERAGE EQUITY 19.19% 23.08% 1.51% 1.27% 1.81% 18.52% 1997, excluding gain on sale of building
p.1 BRIDGE BANCORP, INC. AND SUBSIDIARY Dear Shareholders It is with considerable pride that I report our Company's results of operations for fiscal year 1998. We have set high financial performance goals for The Bridgehampton National Bank and have met them in 1998 with return on average equity of 19.2% and return on average assets of 1.5%. The Company continued its seven year trend of record earnings posting net income of $3,895,000, an increase of 15.7% over earnings last year, excluding the gain on the sale of the Bank's former headquarters building. Our Company continues to be recognized among top performing U.S. banks of our asset size. Last year The Bridgehampton National Bank was ranked among the Sheshunoff Highest Rated Banks and S&Ls in America, as well as one of The Ryan, Beck Report's small-cap financial elite peer group. Financial highlights include a 21.7% increase in net loans, an 18.6% increase in total deposits, 14.5% growth in total assets, and an increase in total shareholder equity of 14.3%. Total dividends declared represented a 31.5% increase over the total dividends declared in 1997, excluding the one-time special dividend resulting from the gain on the sale of the headquarters building. We have been gratified by the positive recognition that ownership of shares of Bridge Bancorp, Inc. has received. Over the past four years, our efforts toward our performance goals have translated into significant growth in our stock price. As we continue our efforts to provide shareholder value, we look forward to the Company's new policy of considering quarterly rather than semi-annual dividends. While banking industry mergers and increased competition not only from financial institutions but also from nonbank entities have made headlines throughout the year, our Company has continued to stay on course. Last year we began a sea change, put in place to enhance our strengths in the East End marketplace. We recognized that in order to maintain our competitive advantage, our focus on customer service and uncommon levels of responsiveness were key. As such, throughout 1998 we have continued to refine our management structure and our focus in an effort to improve our level of responsiveness to our customers and the marketplace. We have developed an innovative team approach so that each market area within the East End is served by a complete management team led by a Senior Banking Officer. Each team is able to provide the full breadth of credit and deposit services to both businesses and consumers with a unique level of responsiveness. Market area teams are experts regarding their specific region and our officers understand the nuances of the communities that they serve. A glance at our cover and the highlights pages gives a glimpse of our Company, both inside and out. The five year financial summary that follows tells our Company's story of steady incremental growth in our core business. We have positioned our Company well to leverage the recent positive economic environment. However, equally important, we have structured our Company to face the challenges of the future. While we have set our course through our knowledge of our strengths and our marketplace, we are also ready and able to tack as necessary as economic winds shift. We look toward our opportunities with confidence in the abilities of our dynamic management team, all our employees and the essential leadership of our Board of Directors. Thank you, our valued shareholders, for your confidence and for your support of Bridge Bancorp, Inc. Sincerely, /s/ Thomas J. Tobin Thomas J. Tobin President and Chief Executive Officer 1998 ANNUAL REPORT p.2 [PHOTOGRAPH] Wendy Engel, Retired, East Hampton. Wendy Engel, longtime BNB customer, participated in our advertising launch of select advantage banking. The Bridgehampton National Bank is committed to growth through the expansion of existing customer relationships while also developing new business opportunities. Our Bank is differentiated in our marketplace by its clearly defined focus on the East End of Long Island, our development of products that specifically meet the needs of businesses and consumers in our market areas, our community orientation, and the accessibility of our management. SEVERAL HIGHLIGHTS OF EVENTS IN 1998 SHOWCASE THESE DISTINGUISHING CHARACTERISTICS. Select Advantage Banking: At The Bridgehampton National Bank, maturity does have its rewards. In 1998, BNB developed a new package of banking products for consumers fifty years of age and older. The Senior market on the East End is an important consumer segment. However, equally important are the Baby Boomers, who are beginning to reach their early fifties. Select Advantage Banking offers a highly competitive "advantage" package that includes checking, certificates of deposit, savings, and a variety of related benefits. At the same time, the package effectively serves as an introduction to our Bank within this increasingly affluent market sector. Electronic Delivery Systems: Our customers like to do their banking business through various delivery channels. In 1997, Teller*Fone, BNB's telephone banking system, was introduced. Teller*Fone put account information as well as the opportunity to conduct transactions, at our customers' fingertips. This was a start; however, it was determined that the provision of alternative delivery channels was becoming an increasingly important aspect of customer service. In 1998, the Bank devoted a member of its senior management team, Michael Kochanasz, to the development of electronic delivery systems that make banking easier, and add value to banking with BNB. PC banking for businesses is currently being tested through selected customer sites. This service will be available to our business customers during the second quarter of 1999. Other projects that are underway include the introduction of a Debit Card program; the exploration of opportunity for a Call Center; improvements to the Bank's ATM program; and enhancement and active marketing of the Bank's cash management services for businesses, which include ACH origination, check reconciliation, and direct deposit of payroll systems. We look toward expanded importance of alternative delivery channels in facilitating our customers' daily banking. Year 2000: Are we ready? The Bridgehampton National Bank has been working diligently for the past two years to provide as seamless a transition into the next millennium as possible. The Federal Financial Institutions Examination Council has identified six phases for readiness: awareness, inventory and assessment, renovation, validation, implementation, and post-implementation. The Bridgehampton National Bank has met or exceeded all governmental requirements for readiness. In addition, the Bank has served as a test site for community banks in the Northeast U.S. As the East End's community bank, The Bridgehampton National Bank has taken a leadership position with regard to education pertaining to Y2K issues. On June 9, 1998, the Bank sponsored a Year 2000 Breakfast Seminar for our customers and others among the local business community. The program consisted of an educational segment which was presented by our Chief Information Officer and business technology specialists, followed by a question and answer period. The program was attended by approximately sixty participants. Additionally, our Chief Information Officer and Chief Financial Officer have made similar presentations at business meetings throughout the East End community. Our efforts to educate and provide appropriate information will be stepped up in 1999. Further, a communication program for our customer base regarding BNB's Y2K readiness and tips on readiness for businesses and consumers is underway. p.3 BRIDGE BANCORP, INC. AND SUBSIDIARY Bridging the Gap [PHOTOGRAPH] Southern Cross, Christening. Over on Shelter Island, BNB helps bridge the gap with financing for South Ferry's Southern Cross. [PHOTOGRAPH] Stuart Lowrie, Director of Conservation Programs and Government Relations, The Nature Conservancy. The Bridgehampton National Bank helped to galvanize the East End business community in support of the Community Preservation Fund. Stuart Lowrie joined our celebration on November 10, 1998 Residential Mortgage Operations: In June of 1998, the Bank made an important step toward the level of customer service to which our Company is committed. We moved our residential mortgage processing department from the Riverhead location into our headquarters facility in Bridgehampton, and relocated our residential mortgage originators to our branch offices. Now, our customers in each of our market areas have access to all of our Bank's products. Each market area team is comprised of professional staff members who are experts in their areas of specialization. At the same time all of our loan operations processes, commercial and consumer, were streamlined. Management and support staff were placed with the objectives of increasing processing efficiencies, reducing turnaround time, and providing a greater level of support to our customers, as well as our loan originators. We made several key steps towards our customer service goals in 1998, and our efforts to improve loan operations processes will be ongoing. Stock Split: On July 20, 1998, the Board of Directors declared a three-for-one stock split in the form of a stock dividend payable August 31, 1998 to stockholders of record as of August 19, 1998. The stock split was the second in two years. U.S. Trust: Wealth management is a financial service required by a growing number of consumers in our marketplace. Key to the Bank's strategic plan has been the provision of the highest level of banking services backed by state of the art technology. The Board of Directors unanimously approved an alliance between BNB and United States Trust Company of New York, which puts the ultimate in consultative wealth management services at the fingertips of BNB customers. Through this agreement, Bridgehampton National customers now have access to investment management and consulting, trust services, financial and estate planning, and private banking through U.S. Trust, which has been serving affluent individuals and their families since 1853. South Ferry's Southern Cross: Anyone who has traveled between the North and South Forks of Long Island on the East End via ferry understands how this mode of transportation, while serving to connect the Forks and Shelter Island, also reminds us of the uniqueness of our region, and our connection to our maritime history. On October 24, 1998 a new ferry boat, South Ferry's Southern Cross, was christened. The addition of a new boat to the fleet was a momentous occasion, and represented a considerable undertaking for the owners, the Clark family of Shelter Island. The Bridgehampton National Bank was recognized at the official christening ceremony as an essential partner in bringing the Southern Cross project to fruition, through the Bank's funding of the construction of the new vessel. Just as the ferry takes residents and travelers from the South Fork to Shelter Island and beyond to the North Fork, Bridgehampton National has been noted as the community bank which also bridges the gap, serving businesses and consumers on the South Fork, North Fork and Shelter Island. Community Preservation Fund: On November 10, 1998, approximately 150 local residents joined a celebration at The Bridgehampton National Bank headquarters facility. Voters on the East End had clearly rallied behind Proposal 4 on election day, establishing the Community Preservation Fund in all five East End towns. The Fund is a land bank established to finance the purchase of properties for open space and farmland preservation. The Bridgehampton National Bank was recognized as the only bank on the East End which consistently supports environmental and preservation programs. The Bank remains committed to the support of programs throughout the region that protect and preserve the environment, quality of life, rural character and the unique beauty of the East End. 1998 ANNUAL REPORT p.4 Dedicated to the East End Community Our dedication to the East End community is reflected by our reinvestment of deposits into all of our market areas, in the form of commercial and consumer loans, and community programs. We welcome you to review some of the "investments" made by The Bridgehampton National Bank in 1998. BANK-WIDE * Peconic Community Council * North Fork Housing Alliance * Y2K Information Seminars * Ellen's Run * Central Suffolk Hospital's Polo Panache * March of Dimes * Family Service League * East End Hospice * Salvation Army * Muscular Dystrophy Foundation * East End Alternatives Counseling Center * The Retreat * Have a Heart Charities * Eastern Long Island Hospital * American Cancer Society * Make a Wish Foundation * Habitat for Humanity * Choral Society of the Hamptons * Group for the South Fork * American Red Cross * Cancer Care * South Fork Breast Coalition * Fish Unlimited * Suffolk County Girl Scout Council, Inc. * Suffolk County Boy Scouts of America * Sloan Kettering * East End Arts Council * Charity in Action Family Health Services, Inc. * Dominican Sisters Family Health Promotion * Coat off Your Back * Local Food Pantries * Ducks Unlimited * Spanish Community Project * American Heart Association * Small Business Development Center Research Foundation * South Fork Community Health Initiative * The Hampton Classic * Americas' Sail Greenport Rendezvous '98 * Juvenile Diabetes Foundation * U.S. Equestrian Team Bridgehampton/Sag Harbor * Bridgehampton Child Care Center * Bay Street Theatre * Bridgehampton Historical Society * Bridgehampton Road Rallye * Bridgehampton School * Madoo Conservatory * Sag Harbor Elementary School * Stella Maris School * Hayground School * Bridgehampton Lions Club * Bridgehampton Community House * Bridgehampton Village Improvement Society * Bridgehampton Fire Department and Ambulance Company Southampton * Southampton Senior Services * Southampton Hospital [PHOTOGRAPH] Sag Pond Vineyard, Sagaponack. With the wine industry firmly rooted on the East End, The Bridgehampton National Bank cultivates business opportunities. [PHOTOGRAPH] Ruby Beets, Bridgehampton. When it's time to move or expand, Bridgehampton National Bank is prepared to help East End businesses grow. [PHOTOGRAPH] Eastland Farms, Water Mill. From agriculture to technology, BNB has developed products and services that meet the needs of local business customers. [PHOTOGRAPH] Peter's Back Street, Southampton. Over in Southampton Village, Bridgehampton National has established a commercial branch to meet the banking requirements of merchants and professional entities in the Village. [PHOTOGRAPH] Southampton Home. Bridgehampton National Bank makes home ownership a reality for East Enders every day. When it comes to financing a home sweet home, folks here know that BNB has more than 50 residential mortgage programs available. p.5 BRIDGE BANCORP, INC. AND SUBSIDIARY [PHOTOGRAPH] Newly completed residential construction, East Hampton. Builders and consumers throughout our market areas know that Bridgehampton National Bank stands ready with financing for land and new construction. [PHOTOGRAPH] Gansett Green Manor, Amagansett. Improvements and expansions help local businesses flourish. [PHOTOGRAPH] Montauk Lighthouse, Montauk Point, a beacon to the East End. The Bridgehampton National Bank supports the region's historical treasures. [PHOTOGRAPH] Simon Bolivar. In 1998, The Bridgehampton National Bank signed on as Title Sponsor of The Bridgehampton National Bank Americas' Sail Greenport Rendezvous, bringing national and international attention to the East End's rich maritime history. Simon Bolivar. In 1998, The Bridgehampton National Bank signed on as Title Sponsor of The Bridgehampton National Bank Americas' Sail Greenport Rendezvous, bringing national and international attention to the East End's rich maritime history. [PHOTOGRAPH] Shelley Scoggin, owner, The Market, Greenport. Shelley Scoggin told her story in BNB's testimonial advertising campaign. The Bridgehampton National Bank helped her make her business dreams come true in 1998 Community Health Services * Southampton AARP * Shinnecock Nation Cultural Center & Museum * Southampton Hospital Lyme Disease Research * Southampton Hospital Quarterbackers Club * Hampton Bays Beautification Association, Inc. * Sacred Heart CYO Basketball * Southampton Day Care * Southampton Chamber of Commerce * Southampton College Career Development Center * Parrish Art Museum * Cultural Center of Southampton * PBA of Southampton * Southampton Elks Ladies of the 1574 Club * Southampton Lions Club * Southampton Business Alliance * North Sea Fire Department East Hampton/Montauk * The ReCenter * East Hampton Seniors Center * Town of East Hampton 350th Anniversary Celebration Lecture Series * Guild Hall * Kidfest * East Hampton Youth Alliance * Montauk Historical Society * Montauk Friends of Erin * Montauk Chamber of Commerce * East Hampton Christmas Tree Lighting * East Hampton Youth Football * Youth Hoops of East Hampton * East Hampton Presbyterian Church * Community Council of East Hampton * Montauk Downtown Association Street Lighting Fund * East Hampton Day Care Center * St. Luke's Church Beach Walk * East Hampton Lions Club North Fork * First Night Greenport * Mattituck Senior Nutrition Center * Mattituck Lionesses * Shelter Island Senior Center * East End Seaport Museum * North Fork Lions Club * Town of Southold Haunted House * North Fork Women's Resource Center * Southold Rotary * Greenport-Southold Chamber of Commerce * North Fork Reform Synagogue * Mattituck Chamber of Commerce * Our Lady of Mercy School * San Simeon by the Sound * Peconic Landing * Southold Fire Department * Southold Schools * Southold Summer Showcase Concert Series * Arts in Southold Town * Greenport Music Festival We invite you to learn more about our Company through the financial pages that follow. 1998 ANNUAL REPORT p.6 Five Year Summary of Operations (IN THOUSANDS, EXCEPT PER SHARE DATA AND FINANCIAL RATIOS) Set forth below are selected consolidated financial and other data of the Company. The Company's business is primarily the business of the Bank. The financial data is derived in part from, and should be read in conjunction with, the consolidated financial statements of the Company.
December 31, 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------- SELECTED FINANCIAL DATA: Securities available for sale $ 69,443 $ 60,190 $ 57,779 $ 52,689 $ 26,413 Securities held to maturity/for investment 5,052 11,812 6,262 6,425 37,166 Loans, net 166,983 137,243 117,643 110,442 93,817 Total assets 26,651 233,112 204,614 184,070 171,953 Total deposits 241,531 203,697 184,847 166,144 155,891 Total stockholders' equity 22,232 19,451 16,926 15,420 12,807 Year Ended December 31, - ------------------------------------------------------------------------------------------------------- SELECTED OPERATING DATA: Total interest income (including fee income) $ 19,019 $ 17,224 $ 15,501 $ 14,384 $ 11,187 Total interest expense 5,978 5,543 5,072 5,258 3,270 ------------------------------------------------------- Net interest income 13,041 11,681 10,429 9,126 7,917 Provision for loan losses 425 410 330 268 333 ------------------------------------------------------- Net interest income after provision for possible loan losses 12,616 11,271 10,099 8,858 7,584 Total other income 3,005 4,323(3) 2,422 1,697 1,512 Total other expenses 9,637 9,067 7,960 7,024 6,318 ------------------------------------------------------- Income before income taxes 5,984 6,527(3) 4,561 3,531 2,778 Provision for income taxes 2,089 2,332 1,555 1,148 845 ------------------------------------------------------- Net income $ 3,895 $ 4,195(3) $ 3,006 $ 2,383 $ 1,933 ======================================================= December 31, - ------------------------------------------------------------------------------------------------------- SELECTED FINANCIAL RATIOS AND OTHER DATA: Return on average equity 19.19% 23.08% 18.84% 16.29% 15.36% Return on average assets 1.51% 1.86% 1.51% 1.27% 1.18% Equity to assets 8.00% 8.00% 8.07% 8.20% 7.79% Dividend payout ratio 38.05% 47.00% 32.87% 32.23% 32.28% Diluted earnings per share $ 0.91 $ .99 -- -- -- Basic earnings per share $ 0.92 $ .99 $ 0.70 $ 0.55 $ 0.45 Cash dividends declared per common share $ 0.35 $ .47 $ 0.23 $ 0.18 $ 0.14 On November 15,1995, the FASB issued "A Guide to Implementation of Statement No. 115 on Accounting for Certain Investments in Debt and Equity Securities, Questions and Answers" which resulted in a reclassification of a portion of the held to maturity portfolio to available for sale stated at fair value. For purposes of these calculations, average stockholders' equity excludes the effect of changes in the unrealized appreciation (depreciation) on securities available for sale, net of taxes. On June 17, 1997, the Bank sold its former headquarters building resulting in a gain, net of taxes, of approximately $829,000. Return on average equity excluding this gain, net of taxes, was 18.52%. Return on average assets excluding this gain, net of taxes, was 1.49%. On December 15, 1997 the Bank declared a one time special dividend of approximately $845,000, or $.20 per share, paying out this gain to the shareholders. On July 20, 1998, the Board of Directors declared a three-for-one stock split in the form of a stock dividend payable August 31, 1998, to stockholders of record as of August 19, 1998. The par value of the Company's common stock remains unchanged. As a result, $14,439,990 was transferred from Undivided Profits and Capital Surplus at August 19, 1998 to reflect the issuance. On April 15, 1997, the Board of Directors declared a three-for-one stock split in the form of a stock dividend payable on May 30, 1997 to stockholders of record as of May 1, 1997. The par value per share of the Company's common stock again remained unchanged. As a result, $4,801,000 was transferred from Undivided Profits at May 1, 1997 to reflect the issuance. All per share amounts have been adjusted to reflect the effects of these splits.
p.7 BRIDGE BANCORP, INC. AND SUBSIDIARY Managements's Discussion and Analysis of Financial Condition and Results of Operations GENERAL. Bridge Bancorp, Inc. (the Company), a New York corporation, is a one-bank holding company formed effective March 31, 1989, and on a parent only basis, had minimal results of operations for 1998, 1997 and 1996. In the event the Company subsequently expands its current operations, it will be dependent on dividends from its wholly owned subsidiary, The Bridgehampton National Bank (the Bank), its own earnings, additional capital raised and borrowings as sources of funds. The information below reflects principally the financial condition and results of operations of the Bank. The Bank's results of operations are primarily dependent on its net interest income, which is mainly the difference between interest income on loans and investments and interest expense on deposits. Interest income on loans and investments is a function of the average balances outstanding and the average rates earned during a period. Interest expense is a function of the average amount of interest-bearing deposits and the average rates paid on such deposits during a period. The Bank also generates other income, such as fee income on deposit accounts and income from mortgage banking operations and merchant credit card processing programs. The Bank's net income is further affected by the level of its other expenses, such as employees' salaries and benefits and occupancy costs. This discussion and analysis should be read in conjunction with the consolidated financial statements, the notes thereto and the other financial information included elsewhere in this annual report. FINANCIAL CONDITION. The assets of the Company totaled $266,951,000 at December 31, 1998, an increase of $33,839,000 or 14.5% from the previous year end. This increase mainly results from the increase in gross loans of $30,060,000 or 21.7% and an increase in investments in debt and equity securities of $2,493,000 or 3.46%. The source of funds for the increase in assets was derived from increased deposits of $37,834,000 or 18.6%, offset primarily by a decrease in other borrowings of $6,500,000. Demand deposits increased $10,828,000 or 17.0%, and all other deposits increased $27,006,000 or 19.3% over December 31, 1997. This increase is mainly attributed to efforts to increase market share and the introduction of a new money market deposit product which targets high balance accounts. Total stockholders' equity was $22,232,000 at December 31, 1998, an increase of 14.3% over December 31, 1997. The increase of $2,781,000 was the result of undistributed net income for the year ended December 31, 1998, of $3,895,000; plus the proceeds of $109,000 from the exercise of incentive stock options pursuant to the equity incentive plan; plus the tax benefit of $51,000 from the exercise of nonqualified stock options pursuant to the equity incentive plan; less cash dividends declared of $1,482,000; and plus the net increase in unrealized appreciation in securities available for sale, net of tax, of $208,000. The net increase in unrealized appreciation in securities available for sale is attributable to appreciation due to changes in market conditions. Management has determined such appreciation to be temporary, and does not expect future sales of such securities to result in material gains and thus a material impact on results of operations. STOCK SPLITS. On July 20, 1998, the Board of Directors declared a three-for-one stock split in the form of a stock dividend payable August 31, 1998 to stockholders of record as of August 19, 1998. The stock split increased outstanding common shares from 1,411,599 to 4,234,797. On April 15, 1997, the Board of Directors declared a three-for-one stock split in the form of a stock dividend payable May 30, 1997 to stockholders of record as of May 1, 1997. The stock split increased outstanding common shares from 469,333 to 1,407,999. Stockholders' equity has been restated to give retroactive recognition to the stock splits for all periods presented by reclassifying from undivided profits and capital surplus to common stock the par value of additional shares resulting from the stock splits. In addition, all references in the Consolidated Financial Statements and Notes thereto to number of shares, per share amounts, stock option data and market prices of the common stock have been restated giving retroactive recognition to the stock splits. ASSET/LIABILITY MANAGEMENT. The Company's primary earnings source is net interest income, which is affected by changes in the level of interest rates, the relationship between rates, the impact of interest rate fluctuations on asset prepayments, the level and composition of deposits, and the credit quality of the portfolio. Management's asset/liability objectives are to maintain a strong, stable net interest margin, to utilize its capital effectively without taking undue risks and to maintain adequate liquidity. The Company's Asset/ Liability Committee, comprised of members of senior management and the Board, meets periodically to evaluate the impact of changes in market interest rates on assets and liabilities, net interest margin, capital and liquidity. Risk assessments are governed by policies and limits established by senior management which are reviewed and approved by the full Board of Directors. As measured by the Interest Sensitivity Gap Table, the Company's estimated one year cumulative interest sensitivity gap (the difference between assets and liabilities that reprice or mature within such period) was a negative $14,894,000, or (5.58)% of total assets. A gap is considered negative when interest rate sensitive liabilities maturing or repricing within a specified time period exceed the amount of interest rate sensitive assets repricing or maturing within that same time period. A gap is considered positive when the amount of interest rate sensitive assets maturing or repricing within a specified time frame exceeds the amount of interest rate sensitive liabilities repricing or maturing within that same time period. In a rising rate environment, an institution with a negative gap would generally be expected, absent the effects of other factors, to experience a greater increase in the costs of its liabilities relative to the yields of its assets and thus a decrease in the institution's net interest income, whereas an institution with a positive gap would generally be expected to experience the opposite results. Conversely, during a period of falling rates, a negative gap would tend to result in an increase in net interest income while a positive gap would tend to adversely affect net interest income. 1998 ANNUAL REPORT P.8 The economic environment continually presents uncertainties as to future interest rate trends. The Asset/Liability Committee regularly monitors the cumulative gap position, in addition to utilizing a model that projects net interest income based on increasing or decreasing interest rates, in order to be able to respond to changes in interest rates by adjusting the gap position. INTEREST RATE SENSITIVITY ANALYSIS. The following table sets forth the amounts of interest earning assets and interest-bearing liabilities outstanding at December 31, 1998, which are anticipated by the Bank, using certain assumptions based on historical experience and other data available to management, to reprice or mature in each of the future time periods shown. This table does not necessarily indicate the impact of general interest rate movements on the Bank's net interest income because actual repricing of various assets and liabilities is subject to customer discretion and competitive and other pressures and, therefore, actual experience may vary from that indicated.
Over Three Over Six Over One Three Months Months Year Over Year ended December 31, 1998 Months Through Through Through Five (Dollars in thousands, except financial ratios) or Less Six Months One Year Five Years Years Total - ------------------------------------------------------------------------------------------------------------------------------- Interest Earning Assets: Investment in debt and equity securities $ 2,732 $ 3,089 $ 7,518 $ 40,329 $ 19,449 $ 73,117 Total loans 63,199 6,340 11,196 58,702 29,259 168,696 Federal funds sold 3,150 -- -- -- -- 3,150 ------------------------------------------------------------------------------ Total Interest Earning Assets $ 69,081 $ 9,429 $ 18,714 $ 99,031 $ 48,708 $244,963 Interest Bearing Liabilities: Savings, N.O.W., and money market accounts $ 56,245 $ -- $ -- $ -- $ 46,771 $103,016 Certificates of deposit 29,507 17,763 8,603 8,185 -- 64,058 ------------------------------------------------------------------------------ Total Interest Bearing Liabilities $ 85,752 $ 17,763 $ 8,603 $ 8,185 $ 46,771 $167,074 ------------------------------------------------------------------------------ Interest Sensitivity Gap Per Period $(16,671) $( 8,334) $ 10,111 $ 90,846 $ 1,937 $ 77,889 ------------------------------------------------------------------------------ Cumulative Interest Sensitivity Gap $ 96,671) $(25,005) $(14,894) $ 75,952 $ 77,889 ------------------------------------------------------------------------------ Gap to Total Assets -6.24% -9.37% -5.58% 28.45% 29.18% ------------------------------------------------------------------------------ Investment in debt and equity securities is shown excluding the fair value appreciation of $1,629,000, before tax, due to the application of SFAS No. 115. Investment in debt and equity securities includes interest earning deposits with banks of $251,000. For the purpose of this table, nonaccrual loans of approximately $1,208,000 have been included. Statement savings, N.O.W. and money market accounts have been included in the "Three Months or Less" category. Passbook savings have been included in the "Over Five Years" category.
Certain shortcomings are inherent in the method of analysis presented. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market interest rates. The table reflects the estimates of management as to periods to repricing at particular points in time. Among the factors considered, management monitors both current trends and its historical repricing experience with respect to particular or similar products. For example, the Bank has a number of deposit accounts, including passbook savings, NOW accounts and money market accounts which may be withdrawn at any time. The Bank, based on historical experience, assumes that while all customers in these account categories could withdraw their funds on any given day, they will not do so, even if the market interest rates were to change. As a result, different assumptions may be used at different points in time. MARKET RISK. Significant increases in the level of market interest rates also may adversely affect the fair value of securities and other interest earning assets. At December 31, 1998, $74,495,000 or 100% of the Company's securities had fixed interest rates. Generally, the value of fixed rate instruments fluctuates inversely with the changes in interest rates. As a result, increases in interest rates could result in decreases in the market value of interest earning assets which could adversely affect the Company's results of operations if sold or, in the case of interest earning assets classified as available for sale, the Company's stockholders' equity if retained. Increases in market interest rates also could affect the type (fixed-rate or adjustable-rate) and amount of loans originated by the Company and the average life of loans and securities, which can adversely impact the yields earned on the Company's loans and securities. In periods of decreasing interest rates, the average life of loans held by the Company may be shortened to the extent increased prepayment activity occurs during such period which, in turn, may result in the investing of funds from such prepayments in lower yielding assets. The Company's interest rate sensitivity is monitored by management through the use of a quarterly interest rate risk analysis model which evaluates (i) the potential change in the net interest income over the succeeding four quarter period and (ii) the potential change in the fair market value of the Company, the "Net Economic Value of Equity of the Company", which would result from an instantaneous and sustained interest rate change of plus or minus 200 basis points, in 100 basis point increments. p.9 BRIDGE BANCORP, INC. AND SUBSIDIARY Managements's Discussion and Analysis of Financial Condition and Results of Operations (CONTINUED) At December 31, 1998, net interest income over the succeeding four quarter periods would be effected as follows given an instantaneous and sustained interest rate change of:
Change Potential Change in in Interest Net Economic Value Rates in Potential of Equity as a Basis Points Change in Net Percentage of (RATE SHOCK) Interest Income of Total Assets - ---------------------------------------------------------------------------- $ Change % Change $ Change % Change ---------------------------------------------------------- 200 $ 481,000 3.43% $(313,000 ) (0.12)% 100 $ 244,000 1.74% * * Static -- -- -- -- (100) ($347,000) (2.48)% * * (200) ($751,000) (5.36)% $(295,000) (0.11)% * The information on the potential effect of a 100 basis point change in market interest rates on the net economic value of equity is not available. The 200 basis point rate shock estimates the potential effect of a change in market interest rates, and the Company does not view the lack of information for a 100 basis point rate shock as meaningful.
As in the case of the gap table, certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling potential changes in the net interest income and net economic value of equity requires the making of certain assumptions which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the model presented assumes that the composition of the Company's interest sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the net interest income models and net economic value of equity measurements provide an indication of the Company's interest rate exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on the Company's net interest income and will differ from actual results. ANALYSIS OF NET INTEREST INCOME. Net interest income, the primary contributor to earnings, represents the difference between income on interest earning assets and expenses on interest bearing liabilities. The following table sets forth certain information relating to the Bank's average consolidated statements of condition and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods shown. Average balances are derived from daily average balances. Interest on nonaccruing loans has been included only to the extent reflected in the consolidated statements of income. However, the loan balances are included in the average amounts outstanding. Loan fee income totaled $322,000 in 1998, $649,000 in 1997 and $598,000 in 1996. For purpose of this table the average balances for investment in debt and equity securities exclude unrealized appreciation/depreciation due to the application of SFAS No.115.
Year Ended December 31, 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Average Average Average Average Yield/ Average Yield/ Average Yield/ (Dollars in thousands) Balance Interest Cost Balance Interest Cost Balance Interest Cost - ------------------------------------------------------------------------------------------------------------------------------------ Interest earning assets: Loans (including fee income) $156,268 $ 14,461 9.3% $125,780 $ 12,400 9.9% $114,220 $ 11,261 9.9% Deposits with banks 2,963 155 5.2% 1,320 73 5.5% 1,941 99 5.1% Federal funds sold 3,721 202 5.4% 4,787 267 5.6% 4,422 243 5.5% Taxable investment securities 14,034 916 6.5% 19,736 1,295 6.6% 19,703 1,286 6.5% Tax exempt investment securities 26,055 1,177 4.5% 23,790 1,115 4.7% 17,474 907 5.2% Other securities 1,083 78 7.2% 1,083 71 6.6% 736 48 6.5% Mortgage backed securities 29,822 2,030 6.8% 28,395 2,003 7.1% 24,670 1,657 6.7% -------------------------------------------------------------------------------------------- Total interest earning assets $233,946 $ 19,019 8.1% $204,891 $ 17,224 8.4% $183,166 $ 15,501 8.5% Interest bearing liabilities: Savings, N.O.W. and money market deposits $ 90,522 $ 2,095 2.3% $ 71,703 $ 1,632 2.3% $ 68,342 $ 1,598 2.3% Certificates of deposit of $100,000 or more 29,412 1,574 5.4% 28,601 1,560 5.5% 18,718 1,000 5.3% Other time deposits 43,428 2,242 5.2% 42,456 2,230 5.3% 44,848 2,410 5.4% Federal funds purchased -- -- -- 20 1 5.0% 22 1 4.5% Other borrowings 1,230 67 5.4% 2,127 120 5.6% 1,143 63 5.5% -------------------------------------------------------------------------------------------- Total interest bearing liabilities $164,592 $ 5,978 3.6% $144,907 $ 5,543 3.8% $133,073 $ 5,072 3.8% -------------------------------------------------------------------------------------------- Net interest income/interest rate spread $ 13,041 4.5% $ 11,681 4.6% $ 10,429 4.7% -------- --- --------- --- -------- --- Net earning assets/net yield on average interest earning assets $ 69,354 5.6% $ 59,984 5.7% $ 50,093 5.7% -------- --- --------- --- -------- --- Ratio of interest earning assets to interest bearing liabilities 142.1% 141.4% 137.6% ----- ----- -----
1998 ANNUAL REPORT p.10 RATE/VOLUME ANALYSIS. Net interest income can also be analyzed in terms of the impact of changing rates and changing volumes. The following table describes the extent to which changes in interest rates and changes in the volume of interest earning assets and interest bearing liabilities have affected the Bank's interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rates (changes in rates multiplied by prior volume), and (iii) the net changes. For purposes of this table, changes which are not due solely to volume changes or rate changes have been allocated to these categories based on the respective percentage changes in average volume and average rate as they compare to each other.
Year Ended December 31, 1998 Over 1997 1997 Over 1996 (In thousands) Changes Due To Changes Due To - ------------------------------------------------------------------------------------------------------------------ Volume Rate Net Change Volume Rate Net Change Interest Income on Interest Earning Assets: Federal funds sold $ (58) $ (7) $ (65) $ 20 $ 4 $ 24 Deposits with banks 98 (16) 82 (34) 8 (26) Taxable investment securities (372) (7) (379) 2 7 9 Tax exempt investment securities 103 (41) 62 303 (95) 208 Other securities -- 7 7 23 -- 23 Mortgage-backed securities 99 (72) 27 260 86 346 Loans (including loan fee income*) 2,858 (797) 2,061 1,140 (1) 1,139 --------------------------------------------------------------- Total interest earning assets 2,728 (933) 1,795 1,714 9 1,723 --------------------------------------------------------------- Interest expense on interest bearing liabilities: Savings, NOW and money market deposits 435 28 463 77 (43) 34 Certificates of deposits of $100,000 or more 43 (29) 14 539 21 560 Other time deposits 50 (38) 12 (126) (54) (180) Federal funds purchased (1) -- (1) -- -- -- Other borrowings (49) (4) (53) 56 1 57 --------------------------------------------------------------- Total interest bearing liabilities 478 (43) 435 546 (75) 471 --------------------------------------------------------------- Net interest income 2,250 (890) 1,360 1,168 84 1,252 =============================================================== * The net change in interest income relating to loan fee income was an decrease of $327,000 in 1998 over 1997 and an increase of $51,000 in 1997 over 1996.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 GENERAL. Net income for 1998 totaled $3,895,000, or $.91 per share, as compared to net income of $4,195,000 or $.99 per share for the year ended December 31, 1997. Net income increased 15.7%, compared to $3,366,000 or $.79 per share in 1997, excluding the gain on the sale of the Bank's former headquarters building totaling $829,000 net of applicable taxes of $575,000. Highlights include: (i) a $1,360,000 or 11.6% increase in net interest income; (ii) a $1,318,000 or 30.5% decrease in total other income; and (iii) a $570,000 or 6.3% increase in total other expenses over the same period in 1997. The provision for income taxes decreased $243,000 or 10.4%. NET INTEREST INCOME. Net interest income increased from $11,681,000 in 1997 to $13,041,000 in 1998. The increase of 11.6% reflects an increase in average earning assets from $204,891,000 in 1997 to $233,946,000 or 14.2% in 1998. The net yield on average earning assets for 1998 decreased to 5.6% from 5.7% for 1997. INTEREST INCOME. Total interest income (including loan fee income of $322,000 in 1998 and $649,000 in 1997) increased from $17,224,000 in 1997 to $19,019,000 in 1998, an increase of 10.4%. The yield on average interest earning assets for 1998 decreased to 8.1% from 8.4% for 1997. Interest income on loans (including fee income) increased $2,061,000 during 1998 the result of an increase in average loans of 24.2% from $125,780,000 in 1997 to $156,268,000 in 1998. The yield on average loans for 1998 decreased to 9.3% from 9.9% for 1997. Interest on investment in debt and equity securities decreased $283,000 or 6.7%. The decrease resulted from a decrease in average investment in debt and equity securities from $73,004,000 in 1997 to $70,994,000 in 1998. In addition, the average yield on debt and equity securities decreased from 6.1% in 1997 to 5.9% in 1998. INTEREST EXPENSE. Interest expense increased $435,000 to $5,978,000 in 1998 from $5,543,000 in 1997. The increase in interest expense was caused by an increase in average interest-bearing liabilities of 13.6% from $144,907,000 in 1997 to $164,592,000 in 1998. The cost of average interest bearing liabilities decreased to 3.6% from 3.8% during 1998. PROVISION FOR LOAN LOSSES. The provision for loan losses increased $15,000 in 1998 to $425,000. The allowance for loan losses increased to $1,713,000 at December 31, 1998 as compared with $ 1,393,000 at December 31, 1997. As a percentage of loans, the allowance was 1.02% at December 31, 1998 in comparison to 1.01% at December 31, 1997. A specific reserve was established in the third quarter of the year primarily as a result of one loan p.11 BRIDGE BANCORP, INC. AND SUBSIDIARY Managements's Discussion and Analysis of Financial Condition and Results of Operations (CONTINUED) relationship becoming nonperforming. Management is negotiating with the borrower to minimize any losses and does not expect such losses to materially effect the results of operations going forward. The allowance as a percentage of nonperforming loans (including loans past due 90 days or more and still accruing) was 141.3% at December 31, 1998 compared to 142.6% at December 31, 1997. The allowance reflects management's evaluation of classified loans, charge-off trends, concentrations of credit and other pertinent factors. It also reflects input from the Bank's outside loan review consultants. While management uses available information in estimating possible loan losses, future additions to the allowance may be necessary based on future changes in economic conditions. OTHER INCOME. Other income decreased by $1,318,000 or 30.5% to $3,005,000 in 1998 compared to $4,323,000 in 1997. Other income increased $87,000 or 29.8% in 1998, excluding the gain on the sale of the Bank's former headquarters building totaling $1,405,000. Income from mortgage banking activities for 1998 totaled $1,306,000, an increase of $81,000 or 6.6% over 1997. The Bank's practice is to originate and sell these mortgages in the secondary market. During 1998 the Bank reorganized mortgage banking operations into their headquarter building. The Bank expects to continue to penetrate the mortgage market, taking advantage of the low interest rate environment fueling the refinance and construction loan market. Net gains on securities were $47,000 in 1998 compared to $106,000 in 1997. Other operating income for the year ended December 31, 1998 totaled $813,000, an increase of $31,000 or 4.0% over the last year. This change primarily results from a decrease in merchant processing fees resulting from increased interchange costs that took effect in Spring 1998 partially offset by increased fee income including new surcharges imposed on non-bank customers' transactions at automatic teller machines. OTHER EXPENSES. Other expenses increased by $570,000 or 6.3% to $9,637,000 in 1998 from $9,067,000 in 1997. The components of this change included an increase in salaries and employee benefits of $175,000 or 3.8%; an increase in furniture and fixture expense of $122,000 or 21.2%; and an increase in other operating expenses of $243,000 or 7.7%. Increases in salaries and benefits in the current year, partially attributed to increased staffing primarily at the new Southampton Village branch opened in the fall of 1997, were partially offset by reduction of staff in mortgage banking operations. Increased furniture and fixture expense primarily results from increased depreciation expenses relative to equipment upgrades in preparation for Year 2000 readiness. The increase in other operating expenses primarily results from increased personnel education costs from the development of training programs; increased advertising and promotion expenses; increased data and item processing expenses to an outsource provider; and increased telephone costs attributable to improved data communication lines between the Bank headquarters and the remote branches. These expenses were partially offset by savings relative to servicing certain consumer loans in house thereby eliminating an outside servicer. PROVISION FOR INCOME TAXES. The provision for income taxes decreased to $2,089,000 for 1998 from $2,332,000 for 1997. This decrease was due to income before income taxes decreasing from $6,527,000 in 1997 to $5,984,000 in 1998. The decrease also reflects the decrease in the effective tax rate to 35% in 1998 from 36% in 1997. The decrease in the effective tax rate resulted from a slight decline in the effective state tax rate, net of the federal income tax benefit. COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 GENERAL. Net income for 1997 was $4,195,000, an increase of $1,189,000 or 39.6% from 1996 net income of $3,006,000. Net income includes a gain on the sale of the Bank's former headquarters building totaling $829,000 net of applicable taxes of $575,000. Highlights include: (i) a $1,252,000 or 12.0% increase in net interest income; (ii) a $1,901,000 or 78.5% increase in total other income; and (iii) a $1,107,000 or 13.9% increase in other expenses. The provision for income taxes increased $777,000 or 50.0%. NET INTEREST INCOME. Net interest income increased from $10,429,000 in 1996 to $11,681,000 in 1997. The increase of 12.0% reflects an increase in average net interest earning assets from $50,093,000 in 1996 to $59,984,000, or 19.7%, in 1997. INTEREST INCOME. Total interest income (including loan fee income of $649,000 in 1997 and $598,000 in 1996) increased from $15,501,000 in 1996 to $17,224,000 in 1997, an increase of 11.1%. The increase from 1996 to 1997 was the result of an increase in the average interest earning assets from $183,166,000 in 1996 to $204,891,000 in 1997. The average yield on interest earning assets decreased from 8.5% in 1996 to 8.4% in 1997. Interest income on loans (including fee income) increased $1,139,000 during 1997 the result of an increase in average loans of 10.1% from $114,220,000 in 1996 to $125,780,000 in 1997. The yield on average loans remained constant at 9.9%. Interest on investment in debt and equity securities increased $586,000 or 15.0%. The increase resulted from an increase in average investment in debt and equity securities from $62,583,000 in 1996 to $73,004,000 in 1997 offset by a decrease in the average yield from 6.2% in 1996 to 6.1% in 1997. INTEREST EXPENSE. Interest expense increased $471,000 to $5,543,000 in 1997 from $5,072,000 in 1996. The increase in interest expense was caused by an increase in average interest-bearing liabilities from $133,073,000 in 1996 to $144,907,000 in 1997. The cost of average interest-bearing liabilities remained the same at 3.8%. 1998 ANNUAL REPORT P.12 PROVISION FOR LOAN LOSSES. The provision for loan losses increased $80,000 in 1997 to $410,000. The allowance for loan losses increased to $1,393,000 at December 31, 1997 as compared with $1,238,000 at December 31, 1996. The increase in the allowance for loan losses was the result of an increase in average loans from 1996 to 1997 of 10.1%. The allowance as a percentage of loans decreased slightly, being 1.01% at year end 1997 in comparison to 1.04% at year end 1996. The allowance as a percentage of nonperforming loans (including loans past due 90 days or more and still accruing) was 142.6% at year end 1997 compared to 460.2% at year end 1996. This decrease primarily results from one loan relationship becoming nonperforming although management believes the borrowing relationship in question is adequately collateralized. The allowance reflects management's evaluation of classified loans, charge-off trends, economic conditions, past due trends, concentrations of credit and other pertinent factors. It also reflects input from the Bank's 1997 examination from the Office of the Comptroller of the Currency (O.C.C.) and outside loan review consultants. OTHER INCOME. Other income increased by $1,901,000 or 78.5% to $4,323,000 in 1997 compared to $2,422,000 in 1996. The increase resulted from a gain on the sale of assets, principally the sale of the Bank's former headquarter's building, of $1,405,000; and mortgage banking activities totaling $1,225,000, an increase of $413,000 or 50.9% over the previous year resulting from the Bank's efforts to further penetrate the mortgage market. The Bank's practice is to originate and sell these mortgages in the secondary market. Service charges on deposit accounts increased $107,000 or 15.3% to $805,000 from $698,000 in 1996 as a result of increased demand deposit accounts. Net gains on securities were $106,000 in 1997 compared to $68,000 in 1996. OTHER EXPENSES. Other expenses increased by $1,107,000 or 13.9% to $9,067,000 in 1997 from $7,960,000 in 1996. The components of this change included an increase in salaries and employee benefits of $609,000 or 15.1% reflecting salary and benefit increases and increased staffing; an increase in net occupancy expense of $161,000 or 29.5%; and an increase in other operating expenses of $287,000 or 10.0%. Increased occupancy costs reflect the costs of the new headquarters occupied in May of 1997, increased rental space in the Bank's residential mortgage center and costs of opening an additional branch office in the Village of Southampton in November 1997. Increased other operating costs primarily result from increased loan processing expenses incurred by the Bank as part of a product promotion, and from increased advertising and promotion expenses of approximately $56,000 or 16.5% relative to the opening of the new headquarters building. PROVISION FOR INCOME TAXES. The provision for income taxes increased to $2,332,000 for 1997 from $1,555,000 for 1996. This increase was due to income before income taxes increasing from $4,561,000 in 1996 to $6,527,000 in 1997. The increase reflects the growth in income before income taxes and the increase in the effective tax rate to 36% in 1997 from 34% in 1996. The increase in the effective tax rate resulted from decreased benefits of tax exempt income in 1997. LIQUIDITY. The objective of liquidity management is to ensure the availability of sufficient resources to meet all financial commitments. Liquidity management addresses the ability to meet deposit withdrawals either on demand or contractual maturity, to repay other borrowings as they mature and to make new loans and investments as opportunities arise. The Company's principal source of liquidity is dividends from the Bank. Due to regulatory restrictions (see note 1k to the consolidated financial statements), dividends from the Bank to the Company at December 31, 1998 were limited to $6,034,000 which represents the Bank's 1998 retained net income and the net undivided profits from the previous two years. The dividends received from the Bank are used primarily for dividends to the shareholders. In the event the Company subsequently expands its current operations, in addition to dividends from the Bank, it will need to rely on its own earnings, additional capital raised and other borrowings to meet liquidity needs. The Company's most liquid assets are cash and cash equivalents, securities available for sale and securities held to maturity due within one year. The levels of these assets are dependent upon the Company's operating, financing, lending and investing activities during any given period. Other sources of liquidity include loan and security principal repayments and maturities, lines of credit with other financial institutions, the sale of securities from the available for sale portfolio, and growth in the core deposit base. While scheduled loan amortization, maturing securities and short term investments are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. The Bank adjusts its liquidity levels as appropriate to meet funding needs such as deposit outflows, loans, asset/liability objectives and suggested O.C.C. measurements such as loans to capital ratios. At December 31, 1998, the Company had aggregate lines of credit of $8,000,000 with correspondent banks to provide short term credit for liquidity requirements. The Company also has the ability, as a member of the Federal Home Loan Bank ("FHLB") system, to borrow approximately $12,171,800 in the form of an overnight line of credit, and an additional $12,171,800 in the form of a one month line of credit. At December 31, 1998, the Company had no such borrowings outstanding. p.13 BRIDGE BANCORP, INC. AND SUBSIDIARY Managements's Discussion and Analysis of Financial Condition and Results of Operations (CONTINUED) The Company's liquidity positions are monitored daily to ensure the maintenance of an optimum level and efficient use of available funds. Management believes the Company has sufficient liquidity to meet its operating requirements. CAPITAL RESOURCES. As a result of undistributed net income, plus the change in net unrealized appreciation in securities available for sale, net of tax, and the issuance of common stock pursuant to the equity incentive plan, the Company's stockholders' equity increased to $22,232,000 at December 31, 1998 from $19,451,000 at December 31, 1997. The ratio of stockholders' equity to total assets decreased to 8.33% at year end 1998 from 8.34% at year end 1997. The loan commitments outstanding as of December 31, 1998 totaled approximately $39,719,000. The funding of such commitments is derived from the primary sources of liquidity stated previously. See note 9B to the consolidated financial statements for a discussion of loan commitments. The Company exceeds the risk-based capital adequacy ratio levels required by the regulatory agencies. Management believes that the current capital levels along with future retained earnings will allow the Bank to maintain a position exceeding required levels which will be more than adequate to meet the growth of the Bank or any higher ratios required by the discretionary authority of the regulators. The Company is prepared to issue additional common stock should the need arise. The Company had return on average equity of 19.19%, 23.08% and 18.84% and return on average assets of 1.51%, 1.86%, and 1.51% for the years ended December 31, 1998, 1997 and 1996, respectively. Return on average equity and return on average assets before the gain on the sale of assets, chiefly the former headquarters, were 18.52% and 1.49%, respectively, for the year ended 1997. IMPACT OF INFLATION AND CHANGING PRICES. The consolidated financial statements and notes thereto presented herein have been prepared in accordance with generally accepted accounting principles ("GAAP"), which requires the measurements of financial position and operating results in historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased costs of the Company's operations. Unlike industrial companies, nearly all the assets and liabilities of the Company are monetary in nature. As a result, interest rates have a greater impact on the Company's performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or, to the same extent, as the price of goods or services. IMPACT OF PROSPECTIVE ACCOUNTING STANDARDS. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). This Statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of a derivative and the resulting designation. SFAS No. 133, which is effective for all fiscal quarters of fiscal years beginning after June 15, 1999, will not impact the Company's accounting or disclosures. IMPACT OF THE YEAR 2000 ISSUE. The Bank is working diligently to assure a smooth transition into the new millennium. To accomplish Year 2000 compliance, the Bank has implemented a project plan as established by the banking regulatory authorities. The established timetable breaks the plan into seven phases; the awareness phase, inventory phase, assessment phase, renovation phase, validation phase, implementation phase, and post implementation phase. Completion of the plan through the implementation phase is targeted for the spring of 1999. The Bank uses software purchased from third party vendors for all processing applications; therefore, no significant internal program renovation by Bank staff is necessary to prepare these systems to handle transactions in the Year 2000. The majority of the Bank's efforts in preparation for Year 2000 processing relate to replacing or upgrading noncompliant software and hardware as well as testing purchased and outsourced processing systems. 1998 ANNUAL REPORT p. 14 The Bank has established formal processes for identifying, assessing, and managing the Year 2000 risks posed by internal bank activities, vendors, and customers. By the end of the first quarter 1999, the Bank expects to complete an initial assessment of the risks posed by its customers. The Bank has begun evaluating Year 2000 readiness of commercial loan applicants as part of the underwriting process, and is calling upon significant existing borrowers to assess their readiness for Year 2000. Seminars have been offered to the Bank's commercial and municipal customers, and the Bank has presented these seminars to different community groups to educate the local public about the Year 2000 matter and the Bank's preparedness to address the issue. Testing of internal systems was substantially completed by December 31, 1998. Testing with significant third party vendors is expected to be substantially completed by June 30, 1999. During 1999 the Bank will continue to monitor its own internal activities and the plans of its vendors and customers to address the Year 2000 issue. The Bank utilizes Fiserv, Inc., one of the largest data processing providers for banks and savings institutions to perform its core systems data processing. Fiserv runs software from Information Technology Inc. (ITI) to perform a significant portion of its data processing activities. This application, which handles processing of loans, deposits, general ledger, accounts payable, stockholder ledger, fixed assets, and other ancillary applications, is believed to be Year 2000 ready according to the vendor. However, the Bank has embarked on a project to thoroughly test the system for Year 2000 compliance. If Year 2000 processing problems are uncovered during the testing phase, ITI is committed to correct those problems. In addition, the Bank is currently in the process of developing contingency plans with respect to all critical services and operations regardless if performed internally or by external sources including outside vendors. This plan is a coordinated effort with a three fold goal of ensuring that the century date change occurs with minimal, if any, disruptions of service to both the institution and its customers, minimizing any possibility of financial losses, and ensuring a timely resumption of normal banking operations. Monitoring and managing the Year 2000 project will result in additional direct and indirect costs to the Bank. Direct costs include potential charges by third party software vendors for product enhancements, costs involved in testing software products for Year 2000 compliance, and any resulting costs for developing and implementing contingency plans for critical software products that are not enhanced. Indirect costs will principally consist of time devoted by existing employees in monitoring software vendor progress, testing enhanced software products and implementing any necessary contingency plans. These costs will be charged to earnings as incurred. The Bank is also currently upgrading equipment in its branch and back office systems to better serve its customers and improve the efficiency of its operations. The timing of the upgrades was accelerated as a result of the Year 2000 issue. The total cost of the upgrades is expected to be approximately $332,000 of which approximately $132,000 remains to be placed in service by the early part of 1999. Based on current information, management does not expect these costs when taken together with other Year 2000 compliance costs to materially impact the Company's future results of operations, financial condition, or liquidity. PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT. In addition to historical information, this Annual Report includes certain forward-looking statements based on current management expectations. The Bank's annual results could differ materially from those management expectations contemplated by the forward-looking statements. Factors that could cause future results to vary from current management expectations include, but are not limited to, general economic conditions, legislative and regulatory changes, monetary and fiscal policies of the federal government, changes in tax policies, rates and regulations of federal, state and local tax authorities, changes in interest rates, deposit flows, the cost of funds, demand for loan products, demand for financial services, competition, changes in the quality and composition of the Bank's loan and investment portfolios, changes in accounting principles, policies or guidelines, and other economic, competitive, governmental and technological factors affecting the Bank's operations, markets, products, services and prices. In addition, the Bank assumes no duty to update forward-looking statements. p. 15 BRIDGE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION (In thousands, except share and per share amounts) December 31, 1998 1997 - --------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 10,881 $ 12,740 Interest earning deposits with banks 251 89 Federal funds sold 3,150 -- ------------------------- Total cash and cash equivalents 14,282 12,829 Investment in debt and equity securities, net: Securities available for sale, at fair value 69,443 60,190 Securities held to maturity (fair value of $5,067 and $11,823 respectively) 5,052 11,812 ------------------------- Total investment in debt and equity securities, net 74,495 72,002 Loans 168,696 138,636 Less: Allowance for loan losses (1,713) (1,393) ------------------------- Loans, net 166,983 137,243 Banking premises and equipment, net 8,583 8,728 Accrued interest receivable 1,525 1,460 Other assets 1,083 850 ------------------------- TOTAL ASSETS $266,951 $233,112 ========================= LIABILITIES AND STOCKHOLDERS' EQUITY Demand deposits $ 74,457 $ 63,629 Savings, NOW, and money market deposits 103,016 76,740 Certificates of deposit of $100,000 or more 21,177 20,872 Other time deposits 42,881 42,456 ------------------------- Total deposits 241,531 203,697 Overnight borrowings -- 6,500 Accrued interest on depositors' accounts 1,439 1,244 Deferred income taxes 91 94 Other liabilities and accrued expenses 1,658 2,126 ------------------------- Total Liabilities 244,719 213,661 ------------------------- Stockholders' equity: Common stock, par value $5.00 per share: Authorized: 6,500,000 shares; issued and outstanding 4,234,797 shares at 12/31/98 and 4,223,997 at 12/31/97 21,660 7,202 Surplus 51 607 Undivided profits 180 11,509 Less: Treasury Stock at cost, 97,200 shares (621) (621) ------------------------- 21,270 18,697 Accumulated other comprehensive income, net of taxes 962 754 ------------------------- Total Stockholders' Equity 22,232 19,451 Commitments and contingencies (Note 9) ------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $266,951 $233,112 ========================= See accompanying notes to the consolidated financial statements.
1998 ANNUAL REPORT p.16
CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share and per share amounts) Year ended December 31, 1998 1997 1996 - ------------------------------------------------------------------------------------ Interest income: Loans (including fee income) $14,461 $12,400 $11,261 Mortgage-backed securities 2,030 2,003 1,657 Obligations of NY State & political subdivisions 1,177 1,115 907 U.S. Treasury and government agency securities 916 1,295 1,286 Federal funds sold 202 267 243 Other 233 144 147 ------------------------------- Total interest income 19,019 17,224 15,501 ------------------------------- Interest expense: Savings, N.O.W. and money market deposits 2,095 1,632 1,598 Certificates of deposit of $100,000 or more 1,574 1,560 1,000 Other time deposits 2,242 2,230 2,410 Other borrowings 67 121 64 ------------------------------- Total interest expense 5,978 5,543 5,072 ------------------------------- Net interest income 13,041 11,681 10,429 Provision for loan losses 425 410 330 ------------------------------- Net interest income after provision for loan losses 12,616 11,271 10,099 ------------------------------- Other income: Mortgage banking activities 1,306 1,225 812 Service charges on deposit accounts 839 805 698 Gain on sale of building -- 1,405 -- Net securities gains 47 106 68 Other operating income 813 782 844 ------------------------------- Total other income 3,005 4,323 2,422 ------------------------------- Other expenses: Salaries and employee benefits 4,801 4,626 4,017 Net occupancy expense 737 707 546 Furniture and fixture expense 698 576 526 Other operating expenses 3,401 3,158 2,871 ------------------------------- Total other expenses 9,637 9,067 7,960 ------------------------------- Income before provision for income taxes 5,984 6,527 4,561 Provision for income taxes 2,089 2,332 1,555 ------------------------------- Net income $ 3,895 $ 4,195 $ 3,006 =============================== Basic earnings per share $ 0.92 $ 0.99 $ 0.70 =============================== Diluted earnings per share $ 0.91 $ 0.99 $ -- =============================== See accompanying notes to the consolidated financial statements. All per share amounts have been adjusted to reflect the effects of the split.
p.17 BRIDGE BANCORP, INC. AND SUBSIDIARY Consolidated Statements of Stockholders' Equity (In thousands, except per share amounts)
Accumulated Other Common Stock Comprehensive Undivided Treasury Comprehensive Shares Amount Surplus Income profits Stock Income Total -------------------------------------------------------------------------------- Balance at December 31, 1995 480,000 $ 2,400 $600 $ -- $12,068 $ -- $352 $15,420 Net income -- -- -- 3,006 3,006 -- -- 3,006 Cash dividends declared, $.23 per share (987) (987) Net change in unrealized appreciation in securities available for sale, net of tax -- -- -- 108 -- -- 108 108 ------ Purchase of 10,800 shares to be held in treasury, at cost (10,800) -- -- (621) (621) Comprehensive Income -- -- -- $3,114 -- -- -- ---------------------------------======------------------------------------------ Balance at December 31, 1996 469,200 2,400 600 14,087 (621) 460 16,926 --------------------------------- ----------------------------------------- Net income -- -- -- $4,195 4,195 -- 4,195 Issuance of restricted common stock 133 1 7 8 Effect of stock split (in the form of a stock dividend) 938,666 4,801 -- (4,801) -- Cash dividends declared, $.47 per share (1,972) (1,972) Net change in unrealized appreciation in securities available for sale, net of tax -- -- -- 294 -- -- 294 294 ------ Comprehensive Income -- -- -- $4,489 -- -- -- ---------------------------------======------------------------------------------ Balance at December 31, 1997 1,407,999 7,202 607 11,509 (621) 754 19,451 ================================= ========================================== Net income -- -- -- $3,895 3,895 -- -- 3,895 Exercise of stock options 3,600 18 142 160 Effect of stock split (in the form of a stock dividend) 2,823,198 14,440 (698) (13,742) -- Cash dividends declared, $.35 per share (1,482) (1,482) Net change in unrealized appreciation in securities available for sale, net of tax -- -- -- 208 -- -- 208 208 ------ Comprehensive Income -- -- -- $4,103 -- -- -- ---------------------------------======------------------------------------------ Balance at December 31, 1998 4,234,797 $21,660 $ 51 $ 180 $(621) $962 $22,232 ================================= ========================================== Disclosure of reclassification amount: December 31, 1998 1997 1996 - -------------------------------------------------------------------------- Comprehensive Income Items Unrealized gain arising during the period $236 $356 $148 Less: reclassification adjustments for gains included in income (28) (62) (40) ----------------------- Net unrealized appreciation $208 $294 $108 See accompanying notes to the consolidated financial statements.
1998 ANNUAL REPORT p. 18 CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Twelve months ended December 31, 1998 1997 1996 - ---------------------------------------------------------------------------------------------------- Operating activities: Net Income $ 3,895 $ 4,195 $ 3,006 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 425 410 330 Depreciation and amortization 698 564 415 Accretion of discounts (85) (64) (96) Amortization of premiums 143 126 329 Gain on sale of assets (1) (1,405) -- Gain on sale of other real estate owned -- -- (4) Net securities gains (47) (106) (68) (Increase) Decrease in accrued interest receivable (65) (117) 181 Benefit for deferred income taxes (144) (60) (56) (Increase) Decrease in other assets (233) 348 235 Increase (Decrease) in accrued and other liabilities 289 (411) 183 -------------------------------- Net cash provided by operating activities 4,875 3,480 4,455 -------------------------------- Investing activities: Purchases of securities available for sale (21,955) (32,464) (58,901) Purchases of securities held to maturity (3,969) (10,729) (5,599) Proceeds from sales of securities available for sale 2,052 24,239 38,473 Proceeds from maturing securities available for sale 2,870 2,060 8,810 Proceeds from maturing securities held to maturity 10,729 5,179 5,761 Proceeds from principal payments on mortgage-backed securities 8,118 4,297 6,544 Proceeds from sale of building -- 1,554 -- Net increase in loans (30,165) (20,010) (7,531) Proceeds from sale of other real estate owned -- -- 239 Purchases of banking premises and equipment, net of retirements (553) (2,668) (3,413) -------------------------------- Net cash used by investing activities (32,873) (28,542) (15,617) -------------------------------- Financing activities: Net increase in deposits 37,834 18,850 18,703 (Decrease) Increase in other borrowings (6,500) 6,500 -- Payment for purchase of treasury stock -- -- (621) Net proceeds from issuance of restricted common stock issued pursuant to equity incentive plan -- 8 -- Net proceeds from exercise of stock options issued pursuant to equity incentive plan 160 -- -- Cash dividends paid (2,043) (1,032) (835) -------------------------------- Net cash provided by financing activities 29,451 24,326 17,247 -------------------------------- Increase (Decrease) in cash and cash equivalents 1,453 (736) 6,085 Cash and cash equivalents beginning of period 12,829 13,565 7,480 -------------------------------- Cash and cash equivalents end of period $ 14,282 $ 12,829 $ 13,565 ================================ Supplemental information-Cash Flows: Cash paid for: Interest $ 5,782 $ 5,835 $ 5,016 Income taxes $ 2,149 $ 2,493 $ 1,474 Noncash investing and financing activities: Dividends declared and unpaid $ 1,059 $ 1,620 $ 680 See accompanying notes to the consolidated financial statements.
p. 19 BRIDGE BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997 and 1996 1. Summary of Significant Accounting Policies Bridge Bancorp, Inc. (the Company) is chartered by the State of New York as a one bank holding company. The Company's business currently consists of the operations of its wholly-owned subsidiary, The Bridgehampton National Bank (the Bank). The accounting and reporting policies of the Bank conform to generally accepted accounting principles and to general practices within the financial institution industry. The following is a description of the more significant accounting policies that the Company follows in preparing its consolidated financial statements. a) Basis of Financial Statement Presentation The accompanying consolidated financial statements are prepared on the accrual basis of accounting and include the accounts of the Company and its wholly-owned subsidiary, the Bank. All material intercompany transactions and balances have been eliminated. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of each consolidated statement of condition and the related consolidated statement of income for the year then ended. Actual results could differ from those estimates. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. b) Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks and federal funds sold which mature overnight. c) Investment in Debt and Equity Securities The Company has adopted Statement of Financial Accounting Standard (SFAS) No. 115 "Accounting for Certain investments in Debt and Equity Securities". Under SFAS No. 115, the Company is required to report readily-marketable equity and debt securities in one of the following categories: (i) "held-to-maturity" (management has a positive intent and ability to hold to maturity) which are to be reported at amortized cost; (ii) "trading" (held for current resale) which are to be reported at fair value, with unrealized gains and losses included in earnings; and (iii) "available for sale" (all other debt and marketable equity securities) which are to be reported at fair value, with unrealized gains and losses excluded from earnings and reported, net of tax, as a separate component of stockholder's equity. Included in investment securities are mortgage-backed securities that represent participating interests in pools of long term mortgage loans originated and serviced by the issuers of the securities and real estate mortgage investment conduit (REMIC) certificates which represent beneficial interests in a pool of mortgage-backed securities held in a trust. These securities are carried at fair value. Premiums and discounts on investment in debt and equity securities are amortized to expense and accreted to income over the estimated life of the respective securities using a method which approximates the level yield method. Gains and losses on the sales of securities are recognized upon realization based on the specific identification method. d) Loans and Loan Interest Income Recognition Loans are stated at the principal amount outstanding, interest on loans is credited to income based on the principal outstanding during the period. Loans that are 90 days past due are placed on a nonaccrual basis. Exceptions to this policy are loans that are fully and adequately secured and are in the process of collection. Mortgage loans held for sale are carried at the lower of cost or estimated market value, determined on an aggregate basis. Mortgage loans are primarily sold with the servicing released. Any retained servicing rights are packaged and sold periodically. Retained servicing rights at year end were immaterial and therefore are not reflected in the Bank's financial statements. All of the Bank's nonaccruing loans are considered impaired under SFAS No. 114 "Accounting by Creditors for Impairmenet of a Loan." In accordance with SFAS No. 114, a valuation allowance is established on impaired loans to reflect the difference, if any, between face amount of the loan and the present value of expected future cash flow discounted at the loan's effective interest rate, or as a practical expedient, at the loan's observable market price or the fair value of the collateral. During 1998, the Bank began deferring non refundable loan origination fees and amortizing these fees as yield adjustments over the life of the related loans. In prior years loan origination costs and commitment fees were recorded as income when received. The effect of this change in accounting treatment reduced income before provision for income taxes, by approximately $284,000 and is not considered material. Direct loan origination costs are expensed as incurred. e) Allowance for Loan Losses The adequacy of the allowance for loan losses is determined based on management's detailed analysis of classified loans, past loss experience, current economic conditions, delinquency trends and other pertinent factors. Additions to the allowance are charged to expense and realized losses, net of recoveries, are charged to the allowance. Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in conditions. In addition, various regulatory agencies, as an integral part of the examination process, periodically review the Bank's allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. f) Banking Premises and Equipment Banking premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation on banking premises and equipment is computed on the straight-line method over the estimated useful lives of the assets (50 years for buildings and 2 to 10 years for furniture and fixtures). Leasehold improvements are amortized on a straight-line method over the terms of the related leases. g) Other Real Estate Owned Other real estate owned consists of real estate acquired by foreclosure or deed in lieu of foreclosure and is recorded at the lower of the net unpaid principal balance at the foreclosure date plus acquisition costs or fair value. Subsequent valuation adjustments are made if fair value less estimated costs to sell the property falls below the carrying amount. 1998 ANNUAL REPORT p.20 h) Income Taxes The Company follows SFAS No. 109 which requires an asset and liability approach for accounting for income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Under SFAS No. 109 deferred tax assets are recognized if it is more likely than not that a future benefit will be realized. It is management's position, as currently supported by the facts and circumstances, that no valuation allowance is necessary against any of the Company's deferred tax assets. i) Treasury Stock Repurchases of common stock are recorded as treasury stock at cost. j) Earnings Per Share Earnings per share is computed by dividing net income by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding. For the year ended December 31, 1998, 1997 and 1996, diluted weighted average common stock and common stock equivalent shares outstanding for the diluted earnings per share were 4,270,991, 4,234,866 and 4,264,497, respectively. For the year ended December 31, 1998, 1997 and 1996, the total weighted average number of shares of common stock outstanding for the basic earnings per share calculation were 4,229,307, 4,223,703 and 4,264,497, respectively. k) Dividends Cash available for dividend distribution to shareholders of the Company must initially come from dividends paid by the Bank to the Company. The approval of the Regional Administrator of National Banks is required if the total of all dividends declared by the Bank in any calendar year exceeds the total of the Bank's net income of that year combined with its retained net income of the preceding two years. The Bank had approximately $6,034,000 available as of December 31, 1998 which may be paid to the Company as a dividend. l) Stock Splits On July 20, 1998, the Board of Directors declared a three-for-one stock split in the form of a stock dividend payable August 31, 1998 to stockholders of record as of August 19, 1998. The stock split increased outstanding common shares from 1,411,599 to 4,234,797. On April 15, 1997, the Board of Directors declared a three-for-one stock split in the form of a stock dividend payable May 30, 1997 to stockholders of record as of May 1, 1997. The stock split increased outstanding common shares from 469,333 to 1,407,999. Stockholders' equity has been reclassified to give retroactive recognition to the stock splits for all periods presented by reclassifying from undivided profits and capital surplus to common stock the par value of additional shares resulting from the stock splits. In addition, all references in the Consolidated Financial Statements and Notes thereto to number of shares, per share amounts, stock option data and market prices of the common stock have been restated giving retroactive recognition to the stock splits. m) Stock Based Compensation Plans SFAS No. 123 "Accounting for Stock-Based Compensation," encourages, but does not require companies to record compensation cost for stock-based compensation plans at fair value. The Company continues to account for stock based compensation using the intrinsic value method prescribed in Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees" . n) Report of Independent Public Accountants The notes to the consolidated financial statements include selected information as of December 31, 1996, 1995, and 1994 and for the years ended December 31, 1996 and 1995. Such information is not covered by the Report of Independent Public Accountants. IMPACT OF NEW ACCOUNTING STANDARDS. In June 1996, the Financial Accounting Standards Board (FASB) issued SFAS No. 125 "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities". This statement is effective for transfers and servicing of financial assets and extinguishment of liabilities occurring after December 31, 1996. In March 1997, the FASB issued SFAS No. 128 "Earnings per Share," superseding APB Opinion No. 15. The main goal of the Statement is to harmonize the earnings per share calculation in the United States with those common in other countries and with International Accounting Standard No. 33. In March 1997, the FASB issued SFAS No. 129, "Disclosures of Information about Capital Structure." SFAS No. 129 continues the existing requirements to disclose the pertinent rights and privileges of all securities other than the ordinary common stock but expands the number of companies subject to portions of its requirements. SFAS Nos. 125, 128 and 129 were adopted in 1997 without any material effect on the Company's financial statements. The Company adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" in 1998. All comparative financial statements provided for earlier periods have been reclassified to reflect application of the provisions of this Statement. Comprehensive income includes net income and all other changes in equity during a period except those resulting from investments by owners and distributions to owners. Other comprehensive income includes revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income but excluded from net income. Comprehensive income and accumulated other comprehensive income are reported net of related income taxes. Accumulated other comprehensive income for the Company consists solely of unrealized holding gains or losses on available for sale securities. Such gains or losses are net of reclassification adjustments for realized gains (losses) on sales of available for sale securities. In July 1997, the FASB issued SFAS No. 131 "Disclosures About Segments of an Enterprise and Related Information." Statement No. 131 requires disclosures for each segment that are similar to those required under standards with the addition of quarterly disclosure requirements and a finer partitioning of geographic disclosures. The Statement is effective for fiscal years beginning after December 15, 1997 with earlier application permitted. In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures about Pensions and Other Post-Retirement Benefits." This statement revises the previously required disclosures related to employers' pensions and other post-retirement benefits, but does p. 21 BRIDGE BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997 and 1996 (CONTINUED) not change the measurement or recognition of those plans. The prior year disclosures related to employee benefit plans have been revised to conform to the new format required by SFAS No. 132. In management's opinion, the adoption of SFAS No. 131 and 132 did not have a material effect on the Company's financial statements. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards NO. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133). This Statement established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measures those instruments at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of a derivative an the resulting designation. SFAS No. 133, which is effective for all fiscal quarters of fiscal years beginning after June 15, 1999, will not effect the company's accounting or disclosures. 2. Investment in Debt and Equity Securities A summary of the amortized cost, gross unrealized gains, gross unrealized losses and estimated fair value of investment securities is as follows:
December 31, 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Gross Gross Esti- Gross Gross Esti- Gross Gross Esti- Amor- Unreal- Unreal- mated Amor- Unreal- Unreal- mated Amor- Unreal- Unreal- mated tized ized ized Fair tized ized ized Fair tized ized ized Fair (In thousands) Cost Gains Losses Value Cost Gains Losses Value Cost Gains Losses Value - ------------------------------------------------------------------------------------------------------------------------------------ Available for sale: U.S. Treasury securities $12,065 $ 484 -- $12,549 $14,084 $ 325 - $14,409 $16,102 $ 244 -- $16,346 Oblig. of U.S. Government agencies -- -- -- -- -- -- - -- 1,985 24 -- $ 2,009 Oblig. of NY State & pol.subs 21,395 627 -- 22,022 18,636 427 - 19,063 15,567 303 -- 15,870 Mortgage-backed securities 34,354 533 (15) 34,902 26,190 528 - 26,718 23,344 218 (8) 23,570 ------------------------------------------------------------------------------------------------- Total available for sale $67,814 $ 1,644 (15) $69,473 $58,910 $ 1,280 - $60,190 $56,998 $ 789 (8) $57,795 ------------------------------------------------------------------------------------------------- Held to maturity: Oblig. of NY State & pol.subs $ 3,969 $ 15 -- $ 3,984 $10,729 $ 11 - $10,740 $ 5,179 $ 11 -- $ 5,190 Non marketable Equity securities: Federal Reserve Bank Stock $ 36 -- -- $ 36 $ 36 -- - $ 36 $ 36 -- -- $ 36 Federal Home Loan Bank Stock 1,047 -- -- 1,047 1,047 -- - 1,047 1,047 -- -- 1,047 ------------------------------------------------------------------------------------------------- Total held to maturity $ 5,052 $ 15 -- $ 5,067 $11,812 $ 11 - $11,823 $ 6,262 $ 11 -- $ 6,273 ------------------------------------------------------------------------------------------------- Total debt and equity securities $72,866 $ 1,659 $(15) $74,540 $70,722 $ 1,291 - $72,013 $63,260 $ 800 $(8) $64,068 =================================================================================================
The following table sets forth the book value, maturities and approximated weighted average yield (based on the estimated annual income divided by the average book value) at December 31,1998. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Yields on tax-exempt obligations have not been computed on a tax-equivalent basis.
Principal Maturing ----------------------------------------------------------------------------------------------- Within After One But After Five But After No Stated One Year Within Five Years Within Ten Years Ten Years Maturity ----------------------------------------------------------------------------------------------- (In thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Total - ------------------------------------------------------------------------------------------------------------------------------------ Available for sale: U.S.Treasury securities -- -- $12,066 6.50% -- -- -- -- -- -- $12,066 Mortgage-backed securities -- -- -- -- $ 5,813 7.13% $28,540 6.57% -- -- 34,353 Oblig.of state and pol.subs $ 126 5.17% 10,914 4.68% 10,355 4.32% -- -- -- -- 21,395 ----------------------------------------------------------------------------------------------- Total available for sale 126 5.17% 22,980 5.64% 16,168 5.33% 28,540 6.57% -- -- 67,814 ----------------------------------------------------------------------------------------------- Held to maturity: Oblig.of state and pol.subs 3,969 3.63% -- -- -- -- -- -- -- -- 3,969 ----------------------------------------------------------------------------------------------- 3,969 3.63% -- -- -- -- -- -- -- -- 3,969 Non marketable equity securities: Federal Reserve Bank Stock -- -- -- -- -- -- -- -- 36 6.00% 36 Federal Home Loan Bank Stock -- -- -- -- -- -- -- -- 1,047 7.25% 1,047 ----------------------------------------------------------------------------------------------- Total non marketable equity securities -- -- -- -- -- -- -- -- 1,083 7.21% 1,083 ----------------------------------------------------------------------------------------------- Total held to maturity 3,969 3.63% -- -- -- -- -- -- 1,083 7.21% 5,052 ----------------------------------------------------------------------------------------------- Total debt and equity securities $4,095 3.68% $22,980 5.64% $16,168 5.33% $28,540 6.57%$ 1,083 7.21% $72,866 ===============================================================================================
1998 ANNUAL REPORT p. 22 Proceeds from sales of available for sale securities were approximately $2,052,000, $24,239,000 and $38,473,000 in 1998, 1997 and 1996, respectively. Gross gains of approximately $47,000, $114,000 and $257,000 were realized on sales of available for sale securities during 1998, 1997 and 1996, respectively. During 1998 there were no gross losses recognized on sales of available for sale securities. Gross losses of approximately $8,000 and $189,000 were realized on sales of available for sale securities during 1997 and 1996, respectively. There were no sales of held to maturity securities during 1998, 1997 and 1996. Investment securities having an amortized cost of approximately $50,125,000 and $62,429,000 at December 31, 1998 and 1997, respectively, were pledged to secure public deposits. Investments in debt and equity securities which exceed 10% of stockholders' equity for any one issuer (other than U.S. Government securities) are as follows:
December 31, 1998 - ----------------------------------------------------------------- Amortized Estimated (In thousands) Cost Fair Value - ----------------------------------------------------------------- Springs Union Free School District $2,400 $2,409 - -----------------------------------------------------------------
3. LOANS The following table sets forth the major classifications of loans: 1998 1997 1996 1995 1994 - ----------------------------------------------------------------------------------------------------- (In thousands) Real estate loans $ 141,625 $ 114,357 $ 93,639 $ 81,394 $ 67,291 Unsecured business and personal loans 23,639 17,638 13,211 11,798 10,094 Secured business and personal loans 2,534 725 317 654 973 Installment/consumer loans 1,182 5,916 11,714 17,634 15,773 ------------------------------------------------------------- Total Loans $ 168,980 $ 138,636 $ 118,881 $ 111,480 $ 94,131 Unearned Income (284) -- -- -- -- ------------------------------------------------------------- $ 168,696 $ 138,636 $ 118,881 $ 111,480 $ 94,131 Allowance For Loan Losses (1,713) (1,393) (1,238) (1,038) (944) ------------------------------------------------------------- Net Loans $ 166,983 $ 137,243 $ 117,643 $ 110,442 $ 93,187 =============================================================
LENDING RISK. The principal business of the Bank is lending, primarily in commercial real estate loans, construction loan mortgages, home equity loans, land loans, consumer loans, home advantage loans, residential mortgages and commercial loans. The Bank considers its primary lending area as the five East End towns of Suffolk County, New York. Since the primary lending area of the Bank is the two forks of the eastern end of Long Island, the loan portfolio as a whole is dependant on the economic conditions of the geographic market served by the Bank. ALLOWANCE FOR LOAN LOSSES. Management uses criteria set forth by the OCC in its classification and review of the loan portfolio which includes a general allocation reserve for each loan type. Reserves are reviewed on a quarterly basis to determine if any adjustments are necessary. The information reviewed includes past due trends, charge-off trends, economic conditions and concentrations of credit. The provisions for loan losses in 1998 was used to bring the allowance for loan losses to an adequate reserve level to support the Bank's asset quality as well as to reflect the increase in loan growth during the year. Based on the loan classification committee's review of the classified loans and the overall reserve levels as they relates to the entire loan portfolio, management believes the allowance for loan losses is adequate. However, future additions to the allowance may be necessary based on changes in conditions. p.23 BRIDGE BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997 and 1996 (CONTINUED) The following table sets forth changes in the allowance for possible loan losses.
December 31, 1998 1997 1996 1995 1994 - --------------------------------------------------------------------------------------- (In thousands) Allowance for loan losses balance at beginning of period $1,393 $1,238 $1,038 $ 944 $ 747 Charge-offs: Real estate loans -- -- -- 2 26 Unsecured business & personal loans 31 87 11 64 27 Installment/consumer loans 165 229 264 164 123 ---------------------------------------------- Total 196 316 275 230 176 Recoveries: Real estate loans -- -- -- 1 -- Unsecured business & personal loans 32 6 79 23 12 Installment/consumer loans 59 55 66 32 28 ---------------------------------------------- Total 91 61 145 56 40 ---------------------------------------------- Net charge-offs 105 255 130 174 136 Provision for loan losses charged to operations 425 410 330 268 333 ---------------------------------------------- Balance at end of period $1,713 $1,393 $1,238 $1,038 $ 944 ============================================== Ratio of net charge-offs during period to average loans outstanding 0.07% 0.20% 0.11% 0.16% 0.17% ==============================================
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES. The following table sets forth the allocation of the total allowance for loan losses by loan type.
Year Ended December 31, 1998 1997 1996 1995 1994 - -------------------------------------------------------------------------------------------------------------------------------- (In thousands, except for percentages) Percentage Percentage Percentage Percentage Percentage of Loans of Loans of Loans of Loans of Loans to Total to Total to Total to Total to Total Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans ---------------------------------------------------------------------------------------- Real estate loans $1,122 83.8% $ 868 82.5% $ 685 78.8% $ 576 73.0% $ 517 71.5% Unsecured business and personal loans 38 14.0% 336 12.7% 301 11.1% 179 10.6% 165 10.7% Secured business and personal loans 507 1.5% 1 0.5% 1 0.3% 1 0.6% 5 1.0% Installment/consumer loans 46 0.7% 188 4.3% 251 9.8% 282 15.8% 257 16.8% ---------------------------------------------------------------------------------------- Total $1,713 100.0% $1,393 100.0% $1,238 100.0% $1,038 100.0% $ 944 100.0% ========================================================================================
SELECTED LOAN MATURITY INFORMATION. The following table sets forth the approximate maturities and sensitivity to changes in interest rates of certain loans, exclusive of non-commercial real estate mortgages and consumer loans to individuals as of December 31, 1998.
After One Within One But Within After Year Five Years Five Years Total - -------------------------------------------------------------------------------- (In thousands) Commercial loans $ 1,456 $ 2,064 $69,346 $72,866 Construction loans 17,058 4,353 4,877 26,288 ----------------------------------------- Total loans $18,514 $ 6,417 $74,223 $99,154 ========================================= Rate provisions: Amounts with fixed interest rates $ 229 $ 290 $ 6,546 $ 7,065 Amounts with variable interest rates 18,285 6,127 67,677 92,089 ----------------------------------------- Total $18,514 $ 6,417 $74,223 $99,154 =========================================
1998 ANNUAL REPORT p.24 PAST DUE, NONACCRUAL AND RESTRUCTURED LOANS. The following table sets forth selected information about past due, nonaccrual and restructured loans.
December 31, 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------ (In thousands) Loans 90 days or more past due and still accruing $ 4 $ 1 $ 1 -- -- Nonaccrual loans 1,208 975 269 $ 507 $ 422 Restructured loans -- -- -- -- -- Other real estate owned, net -- -- -- 235 782 ------------------------------------------ Total $1,212 $ 976 $ 270 $ 742 $1,204 ========================================== Year Ended December 31, Gross interest income that would have been recorded during the year under original terms: Nonaccrual loans $ 128 $ 163 $ 50 $ 58 $ 19 Restructured loans -- -- -- -- -- Gross interest income recorded during the year: Nonaccrual loans $ 37 $ 151 $ 42 $ 12 $ 22 Restructured loans -- -- -- -- -- Commitments for additional funds -- -- -- -- --
As of December 31, 1998, the Bank did not have any impaired loans as defined in SFAS No. 114 except for the restructured and nonaccrual loans noted above. No valuation allowance has been recorded. The average recorded investment in impaired loans for the years ended December 31, 1998 and 1997 was approximately $1,101,000 in each year. RELATED PARTY LOANS. Certain directors and related parties, including their immediate families and companies in which they are principal owners, were loan customers of the Bank during 1998, 1997 and 1996. Such loans were made in the ordinary course of business on substantially the same terms, including interest rate and security, as those prevailing at the time for comparable transactions with other persons, and do not represent more than normal risk of collection or present other unfavorable features. The aggregate amount of these loans was approximately $201,000, $256,000, and $192,000 at December 31, 1998, 1997 and 1996, respectively. During 1998, $70,000 of new loans to such persons were made and repayments totaled $125,000. There were no loans to directors which were nonaccruing at December 31, 1998, 1997 or 1996. 4. DEPOSITS The following table sets forth major classifications of average deposits and average rates paid on these deposits for the periods indicated.
Year Ended December 31, 1998 1997 1996 - ---------------------------------------------------------------------------------------------------------------------- Average Average Average Average Average Average (In thousands, except for percentages) Deposits Rates Paid Deposits Rates Paid Deposits Rates Paid - ---------------------------------------------------------------------------------------------------------------------- Demand deposits $ 70,352 -- $ 58,571 -- $ 47,829 -- Savings, NOW and money market deposits 90,522 2.3% 71,703 2.3% 68,342 2.3% Certificates of deposit of $100,000 or more 29,412 5.4% 28,601 5.5% 18,718 5.3% Other time deposits 43,428 5.2% 42,456 5.3% 44,848 5.4% ------------------------------------------------------------------------ Total $233,714 2.7% $201,331 2.7% $179,737 2.8% ======================================================================== TIME DEPOSITS OF $100,000 OR MORE. The following table sets forth the remaining maturities of the Bank's time certificates of deposit in amounts of $100,000 or more. (In thousands) - -------------------------------------- 3 months or less $16,076 Over 3 thru 6 months 2,831 Over 6 thru 12 months 1,269 Over 12 months 1,001 ------- Total $21,177 =======
p.25 BRIDGE BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997 and 1996 (CONTINUED) 5.Banking Premises and Equipment
Banking premises and equipment consist of: December 31, 1998 1997 - -------------------------------------------------- (In thousands) Land $ 1,496 $ 1,496 Building and improvements 5,545 5,530 Furniture and fixtures 3,350 2,889 Leasehold improvements 376 371 ----------------- 10,767 10,286 Less accumulated depreciation and amortization 2,184 1,558 ----------------- $ 8,583 $ 8,728 =================
6. Income Taxes The components of the provision for income taxes are as follows:
Year ended December 31, 1998 1997 1996 - ----------------------------------------------------- (In thousands) Current: Federal $ 1,606 $ 1,732 $ 1,152 State 627 660 459 ----------------------------- 2,233 2,392 1,611 ----------------------------- Deferred: Federal (106) (45) (43) State (38) (15) (13) ----------------------------- (144) (60) (56) ----------------------------- Total $ 2,089 $ 2,332 $ 1,555 =============================
The reconciliation of the expected Federal income tax expense at the statutory tax rate to the actual provision follows:
- ----------------------------------------------------------------------------------------------- Year ended December 31, 1998 1997 1996 Percentage Percentage Percentage of Pre-tax of Pre-tax of Pre-tax (In thousands) Amount Earnings Amount Earnings Amount Earnings - ----------------------------------------------------------------------------------------------- Federal income tax expense computed by applying the statutory rate to income before income taxes $ 2,034 34% $ 2,219 34% $ 1,551 34% Tax exempt interest (381) (6) (361) (6) (330) (7) State taxes, net of Federal income tax benefit 388 6 425 7 294 6 Interest disallowed 40 1 40 1 32 1 Other 8 -- 9 -- 8 -- ---------------------------------------------------------------- Provision for income taxes $ 2,089 35% $ 2,332 36% $ 1,555 34% ================================================================
1998 ANNUAL REPORT p.26 Deferred tax assets and liabilities are comprised of the following:
December 31, 1998 1997 1996 - ---------------------------------------------------------------- (In thousands) Deferred tax assets: Allowance for loan losses $ 603 $ 479 $ 414 Depreciation -- 7 -- Deferred loan fees 116 -- -- Other 1 1 1 --------------------------- Total $ 720 $ 487 $ 415 --------------------------- Deferred tax liabilities: Pension expense $ (32) $ (55) $ (1) Depreciation (112) -- (42) Securities available for sale (667) (526) (321) --------------------------- Total $(811) $(581) $(364) --------------------------- Net deferred tax liability assets $ (91) $ (94) $ 51 ===========================
7. Employee Benefits a. Pension Plan The Bank maintains a non-contributory pension plan through the New York State Bankers Association Retirement System covering all eligible employees. The following table sets forth the plan's funded status projected to September 30, 1998 and 1997 (measurement dates).
Pension Benefits 1998 1997 - ---------------------------------------------------------------------- (In thousands) Change in projected benefit obligation Projected benefit obligation at beginning of year $ 1,249 $ 1,049 Service cost 160 133 Expenses (27) (24) Interest cost 98 82 Benefits paid (38) (45) Assumption changes and other 15 54 - ---------------------------------------------------------------------- Projected benefit obligation at end of year $ 1,457 $ 1,249 - ---------------------------------------------------------------------- Change in plan assets Fair value of plan assets at beginning of year $ 1,668 $ 1,239 Actual return on plan assets 75 298 Employer contribution 68 200 Benefit paid (38) (45) Expenses (27) (24) - ---------------------------------------------------------------------- Fair value of plan assets at end of year $ 1,746 $ 1,668 - ---------------------------------------------------------------------- Funded Status $ 289 $ 420 Unrecognized net actuarial loss (gain) (136) (220) Unrecognized prior service cost (19) (21) Unrecognized transition asset (65) (74) - ---------------------------------------------------------------------- Prepaid benefit cost $ 69 $ 105 ====================================================================== 1998 1997 1996 - -------------------------------------------------------------------------------- Components of net periodic benefit cost Service cost $ 160 $ 133 $ 114 Interest cost 98 82 74 Expected return on plan assets (141) (108) (96) Amortization of net(gain)/loss (3) -- -- Amortization of unrecognized prior service cost (1) (1) (1) Amortization of unrecognized transition asset (9) (9) (9) ----------------------------- Net periodic benefit cost $ 104 $ 97 $ 82 =============================
At December 31, 1998, 1997, and 1996 a weighted average discount rate of 7.0% and 8.0%, and 7.75%, respectively, and a rate of increase in future compensation levels of 4.0%, 5.0%, and 5.0% respectively, were used in determining the actuarial present value of the projected benefit obligation. The expected long-term rate of return on assets was 8.5% at September 30, 1998, 1997 and 1996. b. Equity Incentive Plan During 1996, an equity incentive plan was approved by the stockholders to provide for the grant of options to purchase up to a total of 432,000 shares of common stock of the Company and for the award of shares of common stock as a bonus. Such shares may be subject to restrictions based on continued service or performance as employees of the Company or subsidiaries of the Company. Options awarded under the plan are determined by the Incentive Compensation Committee of the Board of Directors. The Company accounts for this plan under APB Opinion No. 25, under which no compensation cost has been recognized for stock options granted. Had compensation cost for these stock options been determined consistent with SFAS No. 123, the Company's net income and earnings per share would have been reduced to the following pro forma amounts:
1998 - ------------------------------------------------------------- Net Income: As Reported: $3,895 Pro Forma: 3,702 Basic EPS: As Reported: $ 0.92 Pro Forma: 0.88 Diluted EPS: As Reported: $ 0.91 Pro Forma: 0.87 1997 - ------------------------------------------------------------- Net Income: As Reported: $4,195 Pro Forma: 4,128 Basic EPS: As Reported: $ 0.99 Pro Forma: 0.98 Diluted EPS: As Reported: $ 0.99 Pro Forma: 0.98
SFAS No. 123 was not applicable in 1996 since there were no stock options outstanding. p.27 BRIDGE BANCORP, INC AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997 and 1996 (CONTINUED) The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 1998: a risk-free interest rate of 5.11%; an expected dividend yield of 2.4%; expected lives of five years; and expected volatility of 32.0%.
For the Year Ended, 1998 1997 - ----------------------------------------------------------------------------------------- Weighted Weighted Average Average Exercise Exercise (In thousands) Shares Price Shares Price - ----------------------------------------------------------------------------------------- Outstanding, beginning of the year 43,200 $ 6.78 -- -- Granted 45,000 $ 14.67 43,200 $ 6.78 Exercised (10,800) $ 10.06 -- -- Forfeited -- -- -- -- Outstanding and exercisable, end of the year 77,400 $ 10.91 43,200 $ 6.78 Weighted average fair value of options granted $ 4.29 $ 1.56
8. Other Income and Expenses a) Components of other operating income which exceed one percent of the aggregate of total interest income and other income are as follows:
December 31, 1998 1997 1996 - ------------------------------------------------------ (In thousands) Checkbook charges $210 $194 $187 Credit card processing $438 $445 $369
b) Components of other operating expenses which exceed one percent of the aggregate of total interest income and other income are as follows:
December 31, 1998 1997 1996 - ------------------------------------------------------ (In thousands) Data\Item processing $413 $363 $336 Check printing $183 $167 $160 Credit card processing $151 $140 $122 Loan Servicing $62 $133 $222 Advertising $294 $227 $225
9. Commitments and Contingencies and Other Matters a. Leases The Company is obligated to make minimum annual rental payments under non-cancellable operating leases on its premises. The projected minimum rentals under existing leases at December 31, 1998 are as follows (in thousands): 1999 $268 2000 $215 2001 $205 2002 $167 2003 $149 Thereafter $98
Certain leases contain renewal options and rent escalation clauses. In addition, certain leases provide for additional payments based upon real estate taxes, interest and other charges. Rental expenses under these leases for the years ended December 31, 1998, 1997 and 1996 approximated $286,000 $263,000 and $243,000, respectively. b. Loans In the normal course of business, there are various outstanding commitments and contingent liabilities, such as guarantees and commitments to extend credit, which are not reflected in the accompanying financial statements. No material losses are anticipated as a result of these transactions. The following represents commitments outstanding:
December 31, 1998 1997 - ------------------------------------------------------------- (In thousands) Standby letters of credit $ 209 $ 2,205 Loan commitments outstanding 9,905 15,663 Unused equity lines 10,735 8,551 Unused construction lines 6,992 12,457 Unused lines of credit 8,462 7,184 Unused overdraft lines 3,416 2,868 ---------------------- Total commitments outstanding $39,719 $48,928 ======================
c. Other During 1998, the Bank was required to maintain certain cash balances with the Federal Reserve Bank of New York for reserve and clearing requirements. These balances averaged $3,893,000 in 1998. During 1998, 1997 and 1996, the Bank maintained an overnight line of credit with the Federal Home Loan Bank of New York. At year end 1998 and 1997, the line of credit available was $12,171,800 and $10,785,850, respectively. There was no amount outstanding at year end 1998. The amount outstanding at year end 1997 was $6,500,000. 10. Estimated Fair Value of Financial Instruments Fair value estimates are made at a specific point in time and are based on existing on and off balance sheet financial instruments. Such estimates are generally subjective in nature and dependent upon a number of significant assumptions associated with each financial instrument or group of financial instruments, including estimates of discount rates, risks associated with specific financial instruments, estimates of future cash flows, and relevant available 1998 ANNUAL REPORT p.28 market information. Changes in assumptions could significantly affect the estimates. In addition, fair value estimates do not reflect the value of anticipated future business, premiums or discounts that could result from offering for sale at one time the Bank's entire holdings of a particular financial instrument, or the tax consequences of realizing gains or losses on the sale of financial instruments. The significant assumptions utilized by the Company in estimating the fair value of its financial instruments are as follows: CASH AND CASH EQUIVALENTS. For these short term instruments, the carrying amount is a reasonable estimate of fair value. INVESTMENT SECURITIES. For investment securities, fair value is based on quoted market prices. LOANS. Fair values are estimated for portfolios of loans with similar financial characteristics. The total loan portfolio is first divided into adjustable and fixed rate terms. Adjustable rate loans are then divided into those that can reprice immediately with changes in interest rates and those that are subject to repricing over time. Adjustable rate loans that reprice over time and fixed rate loans are further segmented by type such as residential mortgages, home equity loans, consumer loans, commercial mortgages, commercial loans and land loans. Fair value is calculated by discounting anticipated future repricing amounts or cash flows using discount rates equivalent to the rates at which the Company would currently make loans which are similar with regard to collateral, maturity and type of borrower. The discounted value of the repricing amounts and cash flows is reduced by a credit risk adjustment based on internal loan classifications. DEPOSIT LIABILITIES. The fair value of deposits with no stated maturity, such as noninterest- bearing demand deposits, money market accounts and savings accounts is equal to the amount payable on demand at the reporting date. Time deposits are segregated by type, size and remaining maturity. The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is equivalent to the rate currently offered for deposits of similar size, type and maturity. ACCRUED INTEREST RECEIVABLE AND PAYABLE. For these short term instruments, the carrying amount is a reasonable estimate of the fair value. OFF BALANCE SHEET ASSETS AND LIABILITIES. The fair value of off-balance sheet commitments to extend credit and letters of credit listed in the preceding Note 11 "Commitments and Contingencies and Other Matters" were estimated to be insignificant as of December 31, 1998 and 1997. The estimated fair values and recorded carrying values of the Bank's financial instruments are as follows:
December 31, 1998 1997 - ---------------------------------------------------------------------------------- Carrying Fair Carrying Fair (In thousands) Amount Value Amount Value - ---------------------------------------------------------------------------------- Financial Assets: Cash and due from banks $ 10,881 $ 10,881 $ 12,740 $ 12,740 Interest bearing deposits with banks 251 251 89 89 Securities available-for-sale 69,443 69,443 60,190 60,190 Securities held-to-maturity 5,052 5,067 11,812 11,823 Loans 166,983 167,115 137,243 136,567 Accrued interest receivable 1,525 1,525 1,460 1,460 Financial Liabilities: Demand and other deposits 241,531 241,534 203,697 203,693 Accrued interest payable 1,439 1,439 1,244 1,244 Overnight borrowings -- -- 6,500 6,500
11. Regulatory Matters The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 1998, that the Bank meets all capital adequacy requirements to which it is subject. As of December 31, 1998, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage ratios as set forth in the table. Since that notification, there are no conditions or events that management believes have changed the institution's category. p.29 BRIDGE BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997 and 1996 (CONTINUED) The Bank's actual capital amounts and ratios are also presented in the following table:
As of December 31, 1998 - ------------------------------------------------------------------------------------------------- To Be Well For Capital Capitalized Under Adequacy Prompt Corrective (In thousands) Actual Purposes Action Provisions - ------------------------------------------------------------------------------------------------- Amount Ratio Amount Ratio Amount Ratio ------------------------------------------------------ Total Capital (to risk weighted assets) 22,983 12.0% 15,372 >8.0% 19,215 >10.0% Tier 1 Capital (to risk weighted assets) 21,270 11.1% 7,686 >4.0 11,529 >6.0 Tier 1 Capital (to average assets) 21,270 8.2% 10,319 >4.0 12,899 >5.0 As of December 31, 1997 - ------------------------------------------------------------------------------------------------- To Be Well For Capital Capitalized Under Adequacy Prompt Corrective (In thousands) Actual Purposes Action Provisions - ------------------------------------------------------------------------------------------------- Amount Ratio Amount Ratio Amount Ratio ------------------------------------------------------ Total Capital (to risk weighted assets) 20,090 12.3% 13,104 >8.0% 16,381 >10.0% Tier 1 Capital (to risk weighted assets) 18,697 11.4% 6,552 >4.0 9,828 >6.0 Tier 1 Capital (to average assets) 18,697 8.3% 9,037 >4.0 11,296 >5.0
12. Bridge Bancorp Inc. (Parent Company Only)
Condensed Statements of Financial Condition December 31, 1998 1997 1996 - -------------------------------------------------------------------------------- (In thousands) Assets Cash and cash equivalents $ 116 $ 11 $ 3 Dividend receivable 1,059 1,620 680 Other assets 58 5 -- Investment in the Bank 22,058 19,435 16,923 -------------------------------- Total Assets $ 23,291 $ 21,071 $ 17,606 ================================ Liabilities Dividends payable 1,059 1,620 680 -------------------------------- Total Liabilities $ 1,059 $ 1,620 $ 680 ================================ Stockholders' Equity Stockholders' Equity 22,853 20,072 $ 17,547 Treasury stock at cost, 10,800 shares (621) (621) ($ 621) -------------------------------- Total Stockholders' Equity $ 22,232 $ 19,451 $ 16,926 ================================ Total Liabilities and Stockholders' Equity $ 23,291 $ 21,071 $ 17,606 ================================
Condensed Statements of Income Year ended December 31, 1998 1997 1996 - ------------------------------------------------------------------------------- (In Thousands) Dividend income from the Bank $ 1,482 $ 1,984 $ 1,608 Other operating expenses 4 13 $ 1 ------------------------------- Income before income taxes and equity in undistributed earnings of the Bank 1,478 1,971 1,607 Income tax provision (2) (5) -- ------------------------------- Income before equity in undistributed earnings of the Bank 1,480 1,976 1,607 Equity in undistributed earnings of the Bank 2,415 2,219 1,399 ------------------------------- Net income $ 3,895 $ 4,195 $ 3,006 ===============================
1998 ANNUAL REPORT p.30
Condensed Statements of Cash Flows Year ended December 31, 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------ (In thousands) Cash flows used by operations: Other operating expenses $ (4) $ (13) $ (1) Net cash used by operating activities (4) (13) (1) Cash flows from investing activities: Dividends received 2,043 1,045 1,456 ----------------------------- Net cash provided by investing activities 2,043 1,045 1,456 Cash flows used by financing activities: Net proceeds from issuance of restricted common stock issued pursuant to equity incentive plan -- 8 -- Net proceeds from issuance of common stock upon exercise of stock options 109 -- -- Payment for the purchase of treasury stock -- -- (621) Dividends paid (2,043) (1,032) (835) ----------------------------- Net cash used by financing activities (1,934) (1,024) (1,456) Net increase (decrease) in cash and cash equivalents 105 8 (1) Cash and cash equivalents at beginning of year 11 3 4 ----------------------------- Cash and cash equivalents at end of year $ 116 $ 11 $ 3 ============================= Reconciliation of net income to net cash used by operating activities: Net income $ 3,895 $ 4,195 $ 3,006 Adjustments to reconcile net income to net cash used by operating activities: Equity in undistributed earnings of the Bank (2,415) (2,219) (1,399) Dividend income (1,482) (1,984) (1,608) Income tax benefit from exercise of employee stock options 51 -- -- Increase in other assets (53) (5) -- ----------------------------- Net cash used by operating activities $ (4) $ (13) $ (1) =============================
13. Quarterly Financial Data (Unaudited)
Selected Consolidated Quarterly Financial Data 1998 Quarter ended, - ------------------------------------------------------------------------------------------------------------------------------------ (In thousands, except per share amounts) March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31, - ------------------------------------------------------------------------------------------------------------------------------------ Interest income $4,399 $4,728 $5,033 $4,859 $4,012 $4,166 $4,353 $4,693 Interest expense 1,414 1,483 1,633 1,448 1,338 1,370 1,419 1,416 ------------------------------------------------------------------------------- Net interest income 2,985 3,245 3,400 3,411 2,674 2,796 2,934 3,277 Provision for loan losses 90 100 160 75 60 60 60 230 ------------------------------------------------------------------------------- Net interest income after provision for loan losses 2,895 3,145 3,240 3,336 2,614 2,736 2,874 3,047 Other income 712 794 810 689 538 2,054 883 848 Other expenses 2,392 2,502 2,347 2,396 2,021 2,220 2,399 2,427 ------------------------------------------------------------------------------- Income before income taxes 1,215 1,437 1,703 1,629 1,131 2,570 1,358 1,468 Provision for income taxes 395 492 620 582 374 960 498 500 ------------------------------------------------------------------------------- Net income $ 820 $ 945 $1,083 $1,047 $ 757 $1,610 $ 860 $ 968 =============================================================================== Basic earnings per share $ 0.19 $ 0.22 $ 0.26 $ 0.25 $ 0.18 $ 0.38 $ 0.20 $ 0.23 Diluted earnings per share $ 0.19 $ 0.22 $ 0.26 $ 0.24 $ 0.18 $ 0.38 $ 0.20 $ 0.23 ===============================================================================
p.31 BRIDGE BANCORP, INC. AND SUBSIDIARY Report of Independent Public Accountants The Board of Directors and Stockholders Bridge Bancorp, Inc.: We have audited the accompanying consolidated statements of condition of Bridge Bancorp, Inc. and subsidiary as of December 31, 1998 and 1997, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years in the three year period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bridge Bancorp, Inc. and subsidiary as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 1998, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP New York, New York January 22, 1999 Common Stock Information The Company's common stock is traded on the NASDAQ over the counter bulletin board market under the symbol "BDGE". The following table details the quarterly high and low prices of the Company's common stock and the dividends declared for such periods. At December 31, 1998 the Company had approximately 721 holders of its common stock. The number of stockholders of record includes banks and brokers who act as nominees, each of whom may represent more than one stockholder. All prices have been adjusted to reflect the 3-for-1 stock splits declared in April 1997 and August 1998 and rounded to the nearest dollar. Stock Price Dividends High Low Declared - ---------------------------------------------------------------------- By Quarter 1998 - ---------------------------------------------------------------------- First $24 $14 -- Second $23 $21 $0.10 Third $24 $20 -- Fourth $25 $21 $0.25 - ---------------------------------------------------------------------- By Quarter 1997 - ---------------------------------------------------------------------- First $ 7 $ 7 -- Second $ 9 $ 7 $0.08 Third $12 $ 9 -- Fourth $17 $12 $0.38* * On June 17, 1997, the Bank sold its former headquarters building resulting in a gain, net of taxes, of approximately $829,000. On December 15, 1997, the Bank declared a one time special dividend of approximately $845,000, or $.20 per share, paying out this gain to the shareholders. 1998 ANNUAL REPORT p.32 Bridge Bancorp, Inc. - --------------------
BOARD OF DIRECTORS BANK OFFICERS NOTICE OF ANNUAL MEETING AND AFFILIATIONS Thomas J. Tobin The Annual Meeting of Shareholders President and Chief Executive Officer is scheduled for 3:30 p.m.,Monday, Raymond Wesnofske April 19, 1999 in the Community Chairman Christopher Becker Room, Bridgehampton National Bank, Bridge Bancorp, Inc. and Executive Vice President and 2200 Montauk Highway, The Bridgehampton National Bank Chief Financial Officer Bridgehampton, NY 11932. Thomas J. Tobin VICE PRESIDENTS BANKING OFFICES President and Chief Executive Officer Bridge Bancorp, Inc. and Peter M. Coleman MAIN OFFICE The Bridgehampton National Bank Senior Banking Officer 2200 Montauk Highway, North Fork Market Area Bridgehampton, NY 11932 Thomas E. Halsey Carol Kennedy (516) 537-1000 Fax (516) 537-1835 Holly Hill Nursery Credit Administration Water Mill, NY SOUTHAMPTON Michael P. Kochanasz 425 County Road 39 Marcia Z. Hefter Electronic Delivery Systems Southampton, NY 11968 Esseks, Hefter & Angel (516) 283-1286 Fax (516) 287-3309 Counselor of Law Diane Reutershan Riverhead, NY Community Development Officer SOUTHAMPTON VILLAGE COMMERCIAL BRANCH R. Timothy Maran Thomas H. Simson 94 Main Street Maran, DeBaun, Cruise & Simonson Chief Information Officer Southampton, NY 11968 Southampton, Westhampton, NY (516) 287-5880 Fax (516) 287-5882 Ann K. Sweeney Albert E. McCoy Senior Banking Officer EAST HAMPTON W.F. McCoy Petroleum Products, Inc. Bridgehampton Market Area 26 Park Place McCoy Bus Co., Inc. East Hampton, NY 11937 Bridgehampton, NY Janet T. Verneuille, C.P.A. (516) 324-8480 Fax (516) 329-1485 Comptroller Walter A. Preische, Jr. SOUTHOLD Certified Public Accountant ASSISTANT VICE PRESIDENTS 54970 Main Road East Hampton, NY Southold, NY 11971 Michelle Dosch (516) 765-1500 Fax (516) 765-1605 Lawrence H. Strickland Financial Operations Vice Chairman MATTITUCK Peter Lyle, Inc. Financial Services Seamus Doyle Mattituck Shopping Center, Main Road Bridgehampton, NY Senior Banking Officer Mattituck, NY 11952 Southampton Market Area (516) 298-0190 Fax (516) 298-0194 COMPANY OFFICERS Maureen P. Mougios MONTAUK Thomas J. Tobin Director of Internal Audit 1 The Plaza President and Chief Executive Officer Montauk, NY 11954 Christopher Becker Sandra Novick (516) 668-6400 Fax (516) 668-6412 Executive Vice President and Treasurer Director of Marketing and Advertising RESIDENTIAL MORTGAGE SERVICES Kevin L. Santacroce All branch locations Senior Banking Officer East Hampton/Montauk Market Area 10-K REPORT A copy of the Annual Report Aidan Wood on Form 10-K, filed with the Senior Mortgage Officer Securities and Exchange Commission, is available upon request by any share- ASSISTANT CASHIERS holder of the Company at no charge. Write to Christopher Becker, Patricia L. Brennan Executive Vice President and Treasurer, Loan Processing Bridge Bancorp, Inc., P.O. Box 3005, Bridgehampton, NY 11932. Caroline Kalish Systems Analyst INTERNET WEBSITE ADDRESS http://www.bridgenb.com Lorraine LaRosa Branch Manager Designed by Mattituck and Southold Curran & Connors, Inc. John J. McDonald Branch Manager Montauk Kimberly Romano Deputy Comptroller Amy Turza Branch Manager Main Office
EX-10.6 3 CHANGE IN CONTROL AGREEMENT - CHRISTOPHER BECKER CHANGE IN CONTROL AGREEMENT (two years) This CHANGE IN CONTROL AGREEMENT (this "Agreement") is dated as of January 19, 1999, by and among BRIDGEHAMPTON NATIONAL BANK (the "Bank"), BRIDGE BANCORP, INC. (the "Company") (the Bank and the Company, collectively, the "Employers") and Christopher Becker (the "Employee"). WHEREAS, the Employee is currently serving as the Executive Vice President/Chief Financial Officer; WHEREAS, the Company and the Employee have entered into a Change in Control Agreement dated as of January 13, 1998 (the "Prior Agreement"); WHEREAS, the respective Board of Directors of the Employers (the "Boards") have approved and authorized the entry into this Agreement with the Employee; WHEREAS, the Boards believe that it is in the best interests of the Employers to encourage the Employee's continued employment with and dedication to the Bank in the face of potentially distracting circumstances arising from the possibility of a change in control of the Company or the Bank; and WHEREAS, the parties desire to enter into this Agreement setting forth the terms and conditions for the payment of special compensation to the Employee in the event of a termination of the Employee's employment in connection with or as the result of a change in control of the Company or of the Bank and to replace and supersede the Prior Agreement; NOW, THEREFORE, it is AGREED as follows: 1. Term. The initial term of this Agreement shall be for a period commencing on the date hereof and ending on December 31, 2003. The Employers may renew this Agreement by written notice to the Employee for one additional year on January 1, 2000 and each subsequent January 1 during the term of this Agreement unless the Employee gives contrary written notice to the Employers before any such renewal date. If at any time during the term of this Agreement, there is a "Change in Control" as defined in Section 2(b) hereof, the provisions of this Agreement shall continue to apply for two years from the date of such Change in Control regardless of whether the term of this Agreement is subsequently renewed under this Section 1. References herein to the "Term of this Agreement" shall include the initial term and any additional years for which this Agreement is renewed. 2. Change in Control. (a)(i) If during the term of this Agreement there is a Change in Control (as defined below) and the Employee's employment by the Employers is terminated in accordance with Section 2(a)(iv), the Employee shall be entitled to receive as a severance payment for services -1- previously rendered to the Employers a lump sum cash payment equal to 2.99 times the sum of the Employee's base salary in effect as of date of the Change in Control or the date of termination, whichever is greater, plus the amount of bonuses paid to the Employee during the 12 months preceding the Change in Control. (Subject to Section 2(c) and 2(d) below). Payment under this Section 2(a) shall not be reduced by any compensation that the Employee may receive from other employment with another employer after termination of the Employee's employment. Payment to the Employee of severance under this Section 2(a) shall be made on or before the Employee's last day of employment with the Employers. (ii) In addition to the liquidated damages that are payable to the Employee, the following shall apply in the event of any termination without Cause or in the event of any termination subject to Section 2(a)(i) hereof: (1) the Employee shall continue to participate in, and accrue benefits under, all retirement, pension, profit-sharing, employee stock ownership, and other deferred compensation plans of the Company or the Bank for the remaining term of this Agreement (or following a "Change in Control" as defined below, if longer, three years) as if the termination of employment of the Employee had not occurred (with the Employee being deemed to receive annually for the purposes of such plans the Employee's base salary as of the date of termination or, if applicable, Change in Control, whichever is greater), except to the extent that such continued participation and accrual is expressly prohibited by law, or to the extend such plan constitutes a "qualified plan" under Section 401 of the Internal Revenue Code of 1986, as amended (the "Code"), in which case the Employers shall provide substantially equivalent benefits to the Employee under a non-qualified plan; (2) the Employee shall be entitled to continue to receive all other employee benefits for the remaining term of this Agreement (or following a "Change in Control," if longer, three years) as if the termination of employment had not occurred; and (3) all insurance or other provisions for indemnification, defense or hold-harmless of officers or directors of the Company or the Bank that are in effect on the date the notice of termination is sent to the Employee shall continue for the benefit of the Employee with respect to all of his acts and omissions while an officer as fully and completely as if such termination had not occurred, and until the final expiration or running of all periods of limitation against action that may be applicable to such acts or omissions; provided, however, that the Employers shall not be required to provide the benefits described in clause (1) or (2) of this Section 2(a)(ii) to the extent that the Employee has the right to receive substantially identical benefits by reason of his employment by another employer following the termination of his employment hereunder. (iii) In the event the employment of the Employee is terminated by the Employers in accordance with Section 2(a)(ii) hereof and the Bank fails to make timely payment of any amount then payable to or for the benefit of the Employee under this Agreement and such failure continues for more than 30 days, the Employee shall be entitled to reimbursement for all reasonable costs, including attorneys' fees, incurred by the Employee in taking action to collect such amounts or otherwise to enforce this Agreement, plus interest on such amounts at the prime rate (defined as the base rate on corporate loans at large U.S. money center commercial banks as published by The Wall Street Journal), compounded monthly, for the period from the date the payment is due until the payment is made. Such reimbursement and interest shall be in addition to all rights that the Employee is otherwise entitled to under this Agreement. -2- (iv) For purposes of this Agreement, the Employee's employment by the Employers shall be considered terminated "in accordance with Section 2(a)(iv)" if a Change in Control shall occur, and in connection with such Change in Control or within two years thereafter either (x) the Employee's employment with the Employers shall be terminated as a result of an Actual Termination (as defined below), or (y) the Employee's employment with the Employers shall terminate after an event that would constitute Good Reason (as defined below); and the following terms shall have the meanings set out below: (A) "Actual Termination" means involuntary termination of the Employee's employment with the Employers for any reason other than Willful Misconduct, Disability, death or Retirement. (B) "Willful Misconduct" means (I) the continued willful failure by the Employee to substantially perform his duties with the Employers or either of them (other than any such failure resulting from the Employee's incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Employee by the Boards (or either of the Boards) that specifically identifies the manner in which the Employee has not substantially performed his duties and after a reasonable time period has run to allow the Employee to perform, (II) willful conduct that is a material violation of the Bank's written ethics policy or applicable law and that is materially injurious to the Employers or either of them, (III) other willful and wrongful conduct by the Employee that causes substantial and material injury to the business and operations of the Employers or either of them, the continuation of which, in the reasonable judgment of the Boards (or either of the Boards), will continue to substantially and materially injure the business and operations of the Employers (or either of them) in the future, or (IV) conviction of the Employee of a felony involving moral turpitude; provided, that an act or failure to act shall not be considered "willful" unless done, or omitted to be done, in bad faith and without reasonable belief that the Employee's action or omission was in the best interests of the Employers; (C) "Good Reason" For purposes of this Agreement, a termination of employment by the Employee for "Good Reason" shall be treated as an involuntary termination of the Employee's employment by the Employers without Cause. "Good Reason" shall mean: (A) a material breach by the Employers or either of them of this Agreement or (B) a reduction, without the prior written consent of the Employee, in his base salary under Section 2 hereof or benefits provided to him under Section 3 hereof (or both). (D) "Retirement" means termination of the Employee based on the Employee's having reached the earlier of age 65 or the normal retirement age as defined under Bank's employee's pension plan, if permissible under applicable law. (E) "Date of Termination" means the date specified in the notice of termination. (b) For purposes of this Agreement, a "Change in Control" shall be deemed to have taken place if: (i) any person becomes the beneficial owner of more that 50 percent of the total number of voting shares of the Company; (ii) any person (other than the persons named as proxies solicited on behalf of the Board of Directors of the Company) holds revocable or irrevocable proxies as to the election or removal of members of the board of directors of the Company, for more than 50 percent of the total number of voting shares of the Company; (iii) any person -3- (other than a person controlled directly or indirectly by the Company) becomes the beneficial owner of more than 50 percent of the total number of voting shares of the Bank; (iv) any person has received all required approvals of applicable regulatory authorities to acquire control of the Company or the Bank; or (v) as the result of, or in connection with, any cash tender or exchange offer, merger, or other business combination, sale of assets or contested election, or any combination of the foregoing transactions, the persons who were directors of the Company immediately before such transaction shall cease to constitute at least one-half of the members of the Board of Directors of the Company or any successor corporation. For purposes of this Section 2(b), a "person" includes an individual, corporation, partnership, trust, association, joint venture, pool, syndicate, unincorporated organization, joint-stock company or similar organization or group acting in concert. A person for these purposes shall be deemed to be a beneficial owner as that term is used in Rule 13d-3 under the Securities Exchange Act of 1934. (c) Notwithstanding any other provisions of this Agreement or of any other agreement, contract, or understanding heretofore or hereafter entered into by the Employee with the Company, the Bank or any other entity controlled by the Company, except an agreement, contract, or understanding hereafter entered into that expressly modifies or excludes application of this Section 2(c) (the "Other Agreements"), and notwithstanding any formal or informal plan or other arrangement heretofore or hereafter adopted by the Company or the Bank for the direct or indirect provision of compensation to the Employee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for the Employee (a "Benefit Plan"), the Employee shall not have any right to receive any payment or other benefit under this Agreement, any Other Agreement, or any Benefit Plan if such payment or benefit, taking into account all other payments or benefits to or for the Employee under this Agreement, all Other Agreement, and all Benefit Plans, would cause any payment to the Employee under this Agreement to be considered a "parachute payment" within the meaning of Section 280G(b)(2) of the Code (a "Parachute Payment"). In the event that the receipt of any such payment or benefit under this Agreement, any Other Agreement, or any Benefit Plan would cause the Employee to be considered to have received a Parachute Payment under this Agreement, then the Employee shall have the right, in the Employee's sole discretion, to designate those payments or benefits under this Agreement, any Other Agreements, and/or any Benefit Plans, that should be reduced or eliminated so as to avoid having the payment to the employee under this Agreement be deemed to be a Parachute Payment. (d) Notwithstanding any other provision in this Agreement, (i) the Employers may terminate or suspend this Agreement and the employment of the Employee hereunder, as if such termination were for Cause under Section 7(a)(i) hereof and for Willful Misconduct under Section 8(a)(ii) hereof, to the extent required by the laws of the State of New York related to banking, by applicable federal law relating to deposit insurance or bank holding companies or by regulations or orders issued by the Banking Commissioner of the State of New York, the Federal Deposit Insurance Corporation or the Board of Governors of the Federal Reserve System and (ii) no payment shall be required to be made to the Employee under this Agreement to the extent such payment is prohibited by applicable law, regulation or order issued by a banking agency or a court of competent jurisdiction; provided, that it shall be the Employers' burden to prove that any such action was so required. -4- 3. Confidentially and Noninterference with Customers and Employees. (a) Except as authorized or directed by the Employers, the Employee shall not at any time during or subsequent to employment with the Employers, directly or indirectly, publish or disclose to any person or entity any confidential information of the Employers or confidential information of others that has come into the Employers' possession or the Employee's possession in the course of employment with Employers, and the Employee will not use such information for the Employee's personal gain or make it available for others to use. All information, whether written or not, regarding the business and finances of the Employers, or their customers and contractors, including, without limitation, information relating to existing and contemplated products, services, software, systems, methods, business procedures, construction, operational and marketing plans and programs, prices, costs and revenues, prospective and existing contracts, prospective and existing customers or other business arrangements and any additional information acquired only because of employment with the Employers, shall be presumed to be confidential, except to the extent the same shall have been lawfully and without breach of obligation made available to the general public without restriction. All papers and records of every kind, including all memoranda, notes, lists, plans, reports, data (written or recorded) and documents, whether originals or copies and whether prepared by the Employee or by others, relating to the business and finances of the Employers or their customers or contractors, shall be the sole and exclusive property of the Employers. The Employee will return to the Employers all of the above materials upon termination of employment and will not at any time give or disclose such materials to any unauthorized person or entity. (b) The Employee acknowledges and agrees that, because relationships with customers and prospective customers are expected to constitute a large portion of the goodwill of the Bank's business, it is of great importance to the Employers that the Employee not solicit the Bank's customers and prospective customers (other than on behalf of the Bank) during the period of employment, and that the Employee not solicit such customers and prospective customers after termination of the Employee's employment while the Employee is receiving salary continuation payments under Section 2(a) hereof, with respect to business or contracts for any products or service of the type provided, developed or under development by the Bank during the Employee's employment by the Bank, so that another employee of the Bank will have an opportunity to develop relationships with such clients and prospective clients. The Employee agrees that, while the Employee is employed by the Bank and while the Employee is receiving salary continuation payments under Section 2(a) hereof, the Employee shall not, within the area comprised of the Towns of Southampton, East Hampton, Shelter Island, Southold and Riverhead, New York, and any other town in which the Employee performed material services for the Bank, directly or indirectly solicit (other than on behalf of the Bank) business or contracts for any products or services of the type provided, developed or under development by the Bank during the Employee's employment by the Bank, from or with (i) any person or entity that was a customer of the Bank for such products or services as of, or within one year before, the date of termination of the Employee's employment with the Bank (the "Termination Date"), or (ii) any prospective customer that the Bank was actively soliciting as of, or within one year before, the Termination Date. (c) While the Employee is employed by the Employers and thereafter while the Employee is -5- receiving salary continuation payments under Section 2(a) hereof, the Employee shall not solicit any person who is then employed by the Company, the Bank or any subsidiary of either of them or who within 90 days before the Termination Date had been so employed, to leave such employment or to become employed by any person or entity other than the company, the Bank or any such subsidiary. (d) The Employee acknowledges that the restrictions contained in this Section 3 are reasonable and necessary to protect the business and interest of the Employers and that any violation of these restrictions would cause substantial irreparable injury. Accordingly, the Employee agrees that a remedy at law for any breach of the foregoing covenants would be inadequate and that the Employers, in addition to any other remedies available, shall be entitled to obtain preliminary and permanent injunctive relief to secure specific performance of such covenants and to prevent a breach or contemplated breach of this Section without the necessity of proving actual damage. The Employee will provide the Employers a full accounting of all proceeds and profits received by the Employee as a result of or in connection with a breach of this Section. Unless prohibited by law, the Employers shall have the right to retain any amounts otherwise payable to the Employee to satisfy any obligations of the Employee as a result of any breach of this Section. The Employee hereby agrees to indemnify and hold harmless the Employers from and against any costs and expenses incurred by the Employers as a result of any breach of this Section by the Employee and in enforcing and preserving the Employers' rights under this Section. 4. No Assignments. This Agreement is personal to each of the parties hereto. No party may assign or delegate any rights or obligations hereunder without first obtaining the written consent of the other party hereto. However, in the event of the death of the Employee, all rights to receive payments hereunder shall become rights of the Employee's estate. 5. Prior Agreement Superseded; Entire Agreement; Amendments. The Prior Agreement is hereby replaced and superseded and the Prior Agreement shall be of no further force or effect after the date of this Agreement. This Agreement constitutes the entire agreement among the parties hereto with respect to the matters contemplated herein, and it supersedes all prior oral or written agreements, commitments or understandings with respect to the matters provided for herein. No amendment, modification or discharge of this Agreement shall be valid or binding unless set forth in writing and duly executed and delivered by the party against whom enforcement of the amendment, modification, or discharge is sought. 6. Section Headings. The section headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement. 7. Governing Law. This Agreement shall be governed by the laws of the United States to the extent applicable and otherwise by the laws of the State of New York, excluding the choice of law rules thereof. -6- Attest: BRIDGE BANCORP, INC. /s/ Raymond Wesnofske By /s/ Thomas J. Tobin - ------------------------------------ ------------------------------------- Chairman of the Board President and Chief Executive Officer Attest: BRIDGEHAMPTON NATIONAL BANK /s/ Raymond Wesnofske By /s/ Thomas J. Tobin - ------------------------------------ ------------------------------------- Chairman of the Board President and Chief Executive Officer EMPLOYEE /s/ Christopher Becker ------------------------------------- Christopher Becker -7- EX-23 4 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ARTHUR ANDERSEN LLP CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent the incorporation of our report dated January 22, 1999, incorporated by reference in this form 10-K, into the Company's previously filed Registration Statement No. 333-50933. /s/ Arthur Andersen LLP New York, New York March 30, 1999 EX-27 5 FDS - 12/31/98
9 0000846617 Bridge Bancorp, Inc. 1000 12-MOS Dec-31-1998 Dec-31-1998 10,881 251 3,150 0 69,443 5,052 5,067 168,696 1,713 266,951 241,531 1,439 1,749 0 0 0 21,660 621 266,951 14,461 4,123 435 19,019 5,911 5,978 13,041 425 47 9,637 5,984 5,984 0 0 3,895 0.92 0.91 5.60 1,208 4 0 4,439 1,393 196 91 1,713 1,713 0 0
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