Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2001, for Bridge Bancorp, Inc. (the Company), a one-bank holding company for The Bridgehampton National Bank. The Company operates primarily in the five East End towns of Suffolk County, New York, focusing on commercial real estate, residential mortgages, and consumer lending.
Key Financial Metrics
| Metric | Three Months Ended 9/30/01 | Nine Months Ended 9/30/01 | As of 9/30/01 |
|---|---|---|---|
| Net Income | $1,795,000 | $4,928,000 | - |
| Earnings Per Share (Diluted) | $0.42 | $1.16 | - |
| Net Interest Income | $4,879,000 | $13,923,000 | - |
| Total Assets | - | - | $402,507,000 |
| Total Loans (Net) | - | - | $214,913,000 |
| Total Deposits | - | - | $365,321,000 |
| Stockholders' Equity | - | - | $33,287,000 |
| Cash & Equivalents | - | - | $22,829,000 |
| Net Interest Margin | 5.5% | 5.5% | - |
| Return on Average Equity | - | 22.93% (Annualized) | - |
Material Changes vs. Prior Period
- Profitability: Net income increased 15.6% for the three months ended September 30, 2001, compared to the same period in 2000. For the nine-month period, net income rose 22.8% to $4.93 million.
- Asset Growth: Total assets increased 13.5% ($47.9 million) from year-end 2000, driven by a 19.8% increase in investment securities and an 8.0% increase in net loans.
- Deposit Growth: Total deposits grew 16.6% ($51.9 million) year-over-year, with demand deposits up 21.3% and savings/money market deposits up 18.5%.
- Interest Rates: The yield on average interest-earning assets decreased to 7.5% (Q3) and 8.0% (9-month) from 8.1% in the prior year. However, the cost of interest-bearing liabilities also decreased significantly to 3.0% (Q3) and 3.6% (9-month), expanding the net interest margin to 5.5%.
- Asset Quality: Non-performing loans decreased 49.0% to $392,000 (0.18% of net loans) from $769,000 at year-end 2000. The allowance for loan losses increased to $2.30 million (1.06% of loans).
Outlook, Risks, and Management Commentary
- Strategic Shifts: Management shifted strategy to hold originated residential mortgages in portfolio rather than selling them on the secondary market, contributing to loan growth. A new branch in Sag Harbor opened in Q1 2001, increasing occupancy and compensation expenses.
- September 11 Impact: Management noted that the events of September 11 accelerated a weakening economic environment. While the short and long-term impact on earnings and asset quality cannot be clearly assessed, there is a risk of negative effects due to reduced consumer confidence and job reductions.
- Capital Adequacy: The Bank is considered "well capitalized," exceeding all regulatory requirements for Total Capital (12.8%) and Tier 1 Capital (11.9%) to risk-weighted assets.
- Liquidity: The Company maintains $37 million in aggregate lines of credit with correspondent banks and has access to Federal Home Loan Bank borrowing capacity. Management believes liquidity is sufficient to meet operating requirements.
- Accounting Changes: The Company adopted SFAS No. 140 and SFAS No. 138/133 with no material impact. SFAS No. 141 and 142 (Business Combinations/Goodwill) are expected to have no material effect.
Investor Verification Checklist
- Asset Quality Trends: Verify the stability of the 49% reduction in non-performing loans and the adequacy of the 1.06% allowance for loan losses given the post-9/11 economic uncertainty.
- Deposit Composition: Confirm the sustainability of the 18.5% growth in public fund deposits, which drove a significant portion of the deposit increase.
- Expense Management: Monitor the impact of the new Sag Harbor branch on future occupancy and compensation expenses, which rose 19-21% year-over-year.
- Interest Rate Sensitivity: Assess the impact of the declining yield curve on future net interest income, as the Company relies heavily on net interest margin (5.5%) for profitability.
- Capital Ratios: Review the "well capitalized" status to ensure compliance with Prompt Corrective Action provisions remains intact.