Business context and reporting period
This is Bridge Bancorp, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2015. The filing does not appear to be for the company named in the request metadata, Dime Commercial Bancshares, Inc.; investors should verify the registrant identity.
Bridge Bancorp is a bank holding company operating through Bridgehampton National Bank and related subsidiaries. Its primary business is commercial and consumer banking in Long Island and the New York metropolitan area. On June 19, 2015, it acquired Community National Bank (CNB), expanding its network to 40 branches. The 2015 results include CNB only from the acquisition date.
Financial performance and condition
Amounts below are in millions of dollars unless stated otherwise.
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Net interest income | $29.1 | $17.4 | $68.2 | $49.7 |
| Provision for loan losses | $1.5 | $0.5 | $3.0 | $1.7 |
| Non-interest income | $3.9 | $2.6 | $9.3 | $5.7 |
| Non-interest expense | $19.4 | $12.1 | $54.7 | $39.2 |
| Net income | $7.9 | $4.9 | $13.1 | $9.6 |
| Diluted EPS | $0.45 | $0.42 | $0.94 | $0.83 |
| Net interest margin | 3.71% | 3.45% | 3.65% | 3.42% |
- Q3 net interest income rose 67.5% and net income rose about 62%; nine-month net interest income rose 37.2% and net income rose about 36.7%. Growth was primarily driven by larger interest-earning assets, including CNB-acquired loans.
- At September 30, total assets were $3.51 billion, up 53% from December 31, 2014. Net loans were $2.28 billion, compared with $1.32 billion; total deposits were $2.91 billion, compared with $1.83 billion.
- Cash and cash equivalents were $105.9 million; securities totaled $857.7 million. Stockholders’ equity was $340.4 million, versus $175.1 million at year-end 2014.
- Borrowings included $112.8 million of FHLB advances, $26.2 million of repurchase agreements, $78.3 million of subordinated debentures and $15.9 million of junior subordinated debentures. Federal funds purchased were zero, down from $75.0 million at year-end.
- Operating cash flow was $16.0 million for the nine months, compared with $21.6 million in 2014; investing activities used $170.5 million and financing activities provided $208.6 million. Cash and cash equivalents increased $54.1 million to $105.9 million.
- The allowance for loan losses was $20.2 million, or 0.88% of total loans, versus 1.32% at December 31, 2014. Management attributed the lower ratio in part to acquired CNB loans being recorded at fair value. Nonaccrual loans were $1.4 million; classified loans were $21.7 million, or 0.9% of loans.
- Regulatory capital ratios at September 30 included consolidated CET1 of 9.7%, total capital of 14.2%, and Tier 1 leverage of 7.8%. Management said the Company and Bank met applicable capital adequacy requirements.
Material changes and unusual items
- CNB added $899.5 million of assets, including $735.6 million of loans and $786.9 million of deposits at fair value. Bridge issued 5.647 million shares for the acquisition, recorded $86.0 million of goodwill, and reported $9.3 million of acquisition and branch restructuring expense for the nine-month period.
- Q3 acquisition-related costs were $0.9 million before tax; management stated they reduced Q3 net income by $0.8 million after tax. Nine-month acquisition costs reduced net income by $6.2 million after tax. The CNB purchase accounting remained preliminary and subject to adjustment.
- The company issued $80 million of fixed-to-floating subordinated debentures in September. The notes carry fixed rates of 5.25% and 5.75% initially, then reset to LIBOR-based rates, and qualify as Tier 2 capital subject to limitations.
- Q3 expense growth reflected acquired staff and facilities, expanded infrastructure and branches, higher intangible amortization, and acquisition costs. The nine-month comparison also benefited from the absence of $1.1 million in securities losses recorded in 2014.
- Available-for-sale securities had $4.0 million of gross unrealized losses at quarter-end. Management attributed most losses to interest rates rather than credit quality and reported no other-than-temporary impairment.
- The company declared a $0.23-per-share quarterly dividend in October 2015. The nine-month cash dividend declared was $0.69 per share.
Outlook, commentary and risks
- Management’s 2015 priorities included integrating CNB, growing loans and core deposits through the expanded branch network, improving customer experience and operational efficiency, and developing non-interest income. No quantified earnings or revenue guidance was provided.
- Management described continued pressure from a prolonged low-interest-rate environment, regulatory requirements and a fragile economic recovery. It noted that rising short-term rates could initially reduce net interest income because interest-bearing liabilities generally reprice faster than assets and money-market deposits are rate-sensitive.
- The company’s rate-sensitivity model projected that a 100-basis-point rate increase would reduce net interest income by 1.80% over the next 12 months, and a 200-basis-point increase would reduce it by 3.64%; a 100-basis-point decrease was projected to increase it by 0.38%. Management cautioned that these scenarios are hypothetical, assumption-dependent estimates, not forecasts.
- Credit risks include concentrations in commercial real estate and loans tied to the Long Island and New York area, as well as borrower, property-value, vacancy, construction and local economic risks. Management said the allowance was adequate but noted future adjustments may be needed as conditions and estimates change.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. Routine legal proceedings were not expected to have a material adverse effect; the filing reported no material change in previously disclosed risk factors.
Important facts for investors to verify
- Confirm the filing issuer: the submitted document is for Bridge Bancorp, Inc., not Dime Commercial Bancshares, Inc.
- Reconcile the liquidity discussion: the balance sheet reports $105.9 million of cash and cash equivalents, while the MD&A describes $29.2 million as the Company’s principal cash and cash-equivalent liquidity source. The filing text does not clearly explain this difference.
- Assess the underlying performance apart from CNB acquisition effects, merger costs, purchase-accounting accretion, and the 2014 securities loss; CNB contributed only part of the 2015 reporting period.
- Review the preliminary CNB fair-value marks and goodwill, acquired-loan performance, allowance methodology, and the effect of acquired loans recorded at fair value on reported reserve ratios.
- Monitor deposit composition and funding costs, including brokered balances, the maturity of repurchase agreements, FHLB advances, and the newly issued subordinated debt.
- Evaluate the stated interest-rate sensitivity assumptions and the potential effect of rate changes on net interest income, securities values, deposits, and capital.