-----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, Oz0DU58wia7CkRnfIaIEN5TAje/AQjshPIy+0xfTxx9y+3V++U7EWwptY31ZC7mH lznBeoL2LhYcwMexy3NxrQ== 0000950110-96-001424.txt : 19961118 0000950110-96-001424.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950110-96-001424 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUBCO INC CENTRAL INDEX KEY: 0000703559 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 222405746 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10699 FILM NUMBER: 96666248 BUSINESS ADDRESS: STREET 1: 1000 MACARTHUR BLVD CITY: MAHWAH STATE: NJ ZIP: 07430 BUSINESS PHONE: 2012362200 MAIL ADDRESS: STREET 1: 1000 MACARTHUR BLVD CITY: MAHWAH STATE: NJ ZIP: 07430 10-Q 1 FORM 10-Q QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 -------------------------------- FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - ----ACT OF 1934 For the quarterly period ended September 30, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ----EXCHANGE ACT OF 1934 For the transition period from____________________to Commission File Number 0-010699 HUBCO, INC. (Exact name of registrant as specified in its charter) New Jersey 22-2405746 ---------- ---------- (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1000 MacArthur Blvd Mahwah, New Jersey 07430 ------------------ ----- (Address of principal executive office) (Zip Code) (201)-236-2600 (Registrant's telephone number, including area code) Not Applicable Former name, former address, and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each, of the issuer's classes of common stock, as of the last practicable date: 19,798,836 shares, no par value, outstanding as of November 13, 1996. HUBCO, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements (Unaudited): Consolidated Balance Sheets At September 30, 1996 and December 31, 1995.................. 1 Consolidated Statements of Income For the three-month and nine-month periods ended September 30, 1996 and 1995.................................. 2 - 3 Consolidated Statements of Cash Flows For the nine-month periods ended September 30, 1996 and 1995.................................. 4 Notes to Consolidated Financial Statements................... 5 - 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................ 8 - 14 PART II. OTHER INFORMATION - -------------------------- Item 6. Exhibits and Reports on Form 8-K............................. 15 Signatures................................................... 16 PART III. FINANCIAL DATA SCHEDULE .................................. 17 - ----------------------------------- PART I. FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands Except Share Data)
September 30 December 31 1996 1995 ---------- ---------- ASSETS Cash and due from banks $162,360 $132,778 Federal funds sold -- 49,700 -------- -------- TOTAL CASH EQUIVALENTS 162,360 182,478 Securities available for sale, at market value (amortized cost of $569,111 and $416,461 in 1996 and 1995, respectively) 567,393 420,162 Securities held to maturity, at cost (market value of $273,065 and $297,585 in 1996 and 1995, respectively) 274,226 294,057 Loans: Real estate-mortgage 945,866 852,872 Commercial and financial 440,618 387,989 Consumer credit 171,427 175,194 Credit card 51,499 57,915 -------- --------- TOTAL LOANS 1,609,410 1,473,970 Less: Allowance for possible loan losses (29,709) (27,251) ---------- ----------- NET LOANS 1,579,701 1,446,719 Premises and equipment, net 39,983 37,227 Other real estate owned 7,094 11,564 Intangibles, net of amortization 23,074 7,572 Other assets 70,833 68,839 -------- ---------- TOTAL ASSETS $2,724,664 $2,468,618 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Non-interest bearing $ 481,751 $ 477,507 Interest bearing 1,757,406 1,694,096 ---------- ---------- TOTAL DEPOSITS 2,239,157 2,171,603 Borrowings 180,751 55,249 Other liabilities 22,125 21,132 ---------- ---------- TOTAL LIABILITIES 2,442,033 2,247,984 ---------- ---------- Subordinated Debt 100,000 25,000 ---------- ---------- Commitments and contingencies Stockholders' equity: Convertible Preferred Stock-Series A, no par value; authorized 10,000,000 shares, no shares outstanding Common stock, no par value, authorized 50,000,000 shares; issued 19,785,424 and outstanding 19,277,511 shares in 1996 and issued 19,867,885 and outstanding 19,824,337 in 1995 35,178 35,325 Additional paid-in capital 90,450 97,439 Retained earnings 68,607 61,888 Treasury shares, at cost, 507,913 shares in 1996 and 43,548 shares in 1995 (10,408) (647) Restricted stock awards (344) (688) Unrealized gain (loss) on securities available for sale, net of income taxes (852) 2,317 ---------- --------- TOTAL STOCKHOLDERS' EQUITY 182,631 195,634 ---------- ---------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $2,724,664 $2,468,618 ========== ==========
See notes to consolidated financial statements HUBCO, Inc. and Subsidiaries - -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands Except Share Data)
THREE MONTHS ENDED ------------------ SEPTEMBER 30 ------------ 1996 1995 ---- ---- INTEREST AND FEE INCOME: Loans-taxable $32,712 $32,951 Loans-tax exempt 54 67 Securities-taxable 11,617 12,148 Securities-tax-exempt 111 253 Other 141 432 ------- ------- TOTAL INTEREST AND FEE INCOME 44,635 45,851 ------- ------- INTEREST EXPENSE: Deposits 14,201 14,596 Borrowings 1,107 1,286 Subordinated debt 822 535 ------- ------- TOTAL INTEREST EXPENSE 16,130 16,417 ------- ------- NET INTEREST INCOME 28,505 29,434 ------- ------- PROVISION FOR POSSIBLE LOAN LOSSES 1,429 1,650 ------- ------- NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN LOSSES 27,076 27,784 NON-INTEREST INCOME: Trust department income 267 393 Service charges on deposit accounts 3,448 3,194 Securities gains 85 73 Other income 2,284 2,645 ------- ------- TOTAL NON-INTEREST INCOME 6,084 6,305 ------- ------- NON-INTEREST EXPENSE: Salaries 7,812 8,248 Pension and other employee benefits 2,318 2,725 Occupancy expense 1,571 2,587 Equipment expense 1,100 1,639 Deposit insurance and other insurance 260 864 Outside services 2,120 1,885 Other real estate owned expense 563 619 Amortization of intangibles 777 546 Other 3,404 2,551 SAIF special assessment 825 -- Merger related and restructuring charges 10,931 -- ------- ------- TOTAL NON-INTEREST EXPENSE 31,681 21,664 INCOME BEFORE INCOME TAXES 1,479 12,425 PROVISION FOR INCOME TAXES 211 3,819 ------- ------- NET INCOME $ 1,268 $ 8,606 ======= ======= INCOME PER COMMON SHARE: Primary $ 0.06 $ 0.42 Fully Diluted $ 0.06 $ 0.42 WEIGHTED AVERAGE SHARES OUTSTANDING: Common 19,835 20,632
See notes to consolidated financial statements HUBCO, Inc. and Subsidiaries - -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands Except Share Data)
NINE MONTHS ENDED ------------------ SEPTEMBER 30 ------------ 1996 1995 ---- ---- INTEREST AND FEE INCOME: Loans-taxable $ 97,893 $ 97,304 Loans-tax exempt 165 227 Securities-taxable 34,659 37,351 Securities-tax-exempt 346 840 Other 445 1,050 -------- -------- TOTAL INTEREST AND FEE INCOME 133,508 136,772 -------- -------- INTEREST EXPENSE: Deposits 42,742 41,851 Borrowings 3,068 4,714 Subordinated debt 1,827 1,626 -------- -------- TOTAL INTEREST EXPENSE 47,637 48,191 -------- -------- NET INTEREST INCOME 85,871 88,581 -------- -------- PROVISION FOR POSSIBLE LOAN LOSSES 5,825 5,890 -------- -------- NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN LOSSES 80,046 82,691 NON-INTEREST INCOME: Trust department income 810 1,410 Service charges on deposit accounts 9,559 9,738 Securities gains 996 1,165 Other income 7,252 6,082 -------- -------- TOTAL NON-INTEREST INCOME 18,617 18,395 -------- -------- NON-INTEREST EXPENSE: Salaries 22,966 25,531 Pension and other employee benefits 6,447 8,936 Occupancy expense 6,407 7,181 Equipment expense 3,438 4,955 Deposit insurance and other insurance 765 3,866 Outside services 7,183 5,659 Other real estate owned expense 2,242 1,223 Amortization of intangibles 2,119 1,636 Other 9,194 10,580 SAIF special assessment 825 -- Merger related and restructuring charges 13,018 -- -------- -------- TOTAL NON-INTEREST EXPENSE 74,604 69,567 INCOME BEFORE INCOME TAXES -------- -------- PROVISION FOR INCOME TAXES 24,059 31,519 8,841 7,887 -------- -------- NET INCOME $ 15,218 $ 23,632 ======== ======== INCOME PER COMMON SHARE: Primary $ 0.76 $ 1.15 Fully Diluted $ 0.76 $ 1.14 WEIGHTED AVERAGE SHARES OUTSTANDING: Common 20,044 20,057 Preferred -- 680
See notes to consolidated financial statements HUBCO, Inc. and Subsidiaries - -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands Except Share Data)
Nine Months Ended September 30 ------------ 1996 1995 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 15,218 $ 23,632 Adjustments to reconcile net income to net cash provided by operating activities: Provision for possible loan losses 5,825 5,890 Provision for depreciation and amortization 7,544 6,021 Amortization of security premiums, net 1,333 1,196 Securities gains (996) (1,165) Loss on sale of premises and equipment -- 232 Deferred income tax provision 234 947 Decrease in other assets 26,253 500 Increase (decrease) in other liabilities 2,162 (12,284) --------- --------- NET CASH PROVIDED BY(USED IN) OPERATING ACTIVITIES 57,573 24,969 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of securities: Available for sale 37,759 23,680 Held to maturity -- -- Proceeds from repayments and maturities of securities: Available for sale 120,440 31,976 Held to maturity 54,967 98,484 Purchases of securities: Available for sale (307,125) (29,626) Held to maturity (27,417) (58,929) Net cash acquired through acquisitions 17,037 -- Loan purchased -- (3,597) Net increase in loans (39,872) (56,339) Proceeds from sales of premises and equipment 34 1,533 Purchases of premises and equipment (4,024) (3,355) Decrease in other real estate 4,763 230 --------- --------- NET CASH PROVIDED BY (USED IN)INVESTING ACTIVITIES (143,438) 4,057 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Net decrease in demand deposits, NOW accounts and savings accounts (89,036) (149,066) Net increase in certificates of deposits (5,447) 85,700 Net increase (decrease) in short-term borrowings 111,260 (233) Net increase in other borrowings 1,742 108 Net proceeds from issuance of subordinated debt 73,738 -- Proceeds from issuance of common stock 271 -- Cash dividends (9,527) (5,669) Acquisition of treasury stock (17,254) (4,886) --------- --------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 65,747 (74,046) --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (20,118) (45,020) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 182,478 149,797 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 162,360 $ 104,777 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for- Interest $ 44,113 $ 44,425 Income taxes 10,057 10,512 ========= =========
See notes to Consolidated Financial Statements. HUBCO, Inc. and Subsidiaries - -------------------------------------------------------------------------------- HUBCO Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A -- BASIS OF PRESENTATION The accompanying financial statements of HUBCO, Inc. and Subsidiaries ("HUBCO" or "the Company") include the accounts of the parent company, HUBCO, Inc. and its wholly-owned subsidiaries: Hudson United Bank ("Hudson United Bank"), Lafayette American Bank & Trust Co. ("Lafayette") and HUB Investment Co. All material intercompany balances and transactions have been eliminated in consolidation. These unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the information presented includes all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation, in all material respects, of the interim period results. The results of operations for periods of less than one year are not necessarily indicative of results for the full year. NOTE B -- ACQUISITIONS Completed On January 12, 1996, HUBCO acquired Growth Financial Corp. ("Growth"), a $128 million bank holding company with 3 branch locations in Somerset and Morris counties, New Jersey, in a stock-for-stock transaction which was accounted for on the pooling-of-interests method of accounting. Under the terms of the merger agreement, Growth Bank was immediately merged into Hudson United Bank and Growth's stockholder's received .69 of a share of HUBCO common stock, .71 of a share as adjusted for the 3% stock dividend declared on October 24, 1996, in exchange for each share of Growth common stock, resulting in the issuance of approximately 1.3 million shares of HUBCO common stock. Since the Growth acquisition was accounted for as a pooling-of-interests, the consolidated financial statements have been restated to include the accounts of Growth for all periods presented. On February 29, 1996, HUBCO acquired three branch offices located in Bergen and Middlesex counties, New Jersey, and related deposits from CrossLand Federal Savings Bank ("CrossLand"). As a result of this transaction, Hudson United Bank assumed approximately $60.6 million of deposit liabilities and cash of approximately $56.7 million, net of a deposit premium of approximately $3.0 million. On July 1, 1996, HUBCO acquired Lafayette American Bank and Trust Company ("Lafayette"), a $741 million commercial bank headquartered in Fairfield county, Connecticut, in a stock-for-stock transaction which was accounted for on the pooling-of-interests method of accounting. Under the terms of the agreement, Lafayette's stockholders received .588 of a share of HUBCO common stock, .606 of a share as adjusted for the 3% stock dividend declared on October 24, 1996, in exchange for each share of Lafayette common stock, resulting in the issuance of approximately 5.9 million shares of HUBCO common stock. Lafayette is a separate subsidiary of HUBCO. On August 30, 1996, HUBCO acquired Hometown Bancorporation ("Hometown"), a $194 million bank holding company with 2 branch locations in Fairfield county Connecticut, for $17.75 per share in cash for each share of Hometown common stock. Hometown's banking subsidiary, The Bank of Darien was merged into Lafayette. This transaction was accounted for as a purchase and therefore, Hometown's results of operations have been included in HUBCO's from August 30, 1996 forward. Pending On June 21, 1996, HUBCO entered into an Agreement and Plan of merger with Westport Bancorp, Inc. ("Westport"), by which HUBCO will acquire Westport and will merge its subsidiary, The Westport Bank & Trust Company, into Lafayette adding approximately $317 million of assets to HUBCO. The transaction calls for HUBCO to exchange .332175 of a share of HUBCO common stock, as adjusted for the 3% stock dividend declared on October 24, 1996, for each outstanding share of Westport common stock. Westport's convertible preferred stock will be converted into a new HUBCO preferred issue with identical terms including an equivalent dividend yield. The transaction will be accounted for as a pooling-of-interests and is expected to close in the fourth quarter of 1996. On August 16, 1996, Lafayette executed a Definitive Agreement to acquire UST Bank/Connecticut, a subsidiary of UST Corp, in a cash transaction. UST Bank/Connecticut is a $111 million commercial bank with 4 branch locations in Fairfield county, Connecticut. This transaction will be accounted for as a purchase and is expected to close in the fourth quarter of 1996. NOTE C -- INCOME PER SHARE Primary income per share has been computed based on the weighted average number of common shares outstanding during the periods. Fully diluted earnings per share for 1995 include the effect of shares issuable upon conversion of the preferred stock. All share data has been retroactively restated for all poolings and stock dividends, including the 3% stock dividend declared on October 24, 1996 and to be paid on November 15, 1996. NOTE D -- SECURITIES The following table presents the amortized cost and estimated market value of securities at the dates indicated: September 30, 1996 ------------------------------------------------ Gross Unrealized Estimated Amortized ------------------ Market Cost Gains (Losses) Value ---------------------------------------------- Available for Sale U.S. Government $ 128,674 $ 409 ($ 408) $ 128,675 U.S. Government agencies 379,376 201 (4,653) 374,924 States and political subdivisions 8,694 -- -- 8,694 Other debt securities 8,858 35 -- 8,893 Equity securities 43,509 3,022 (324) 46,207 --------- --------- --------- --------- $ 569,111 $ 3,667 ($ 5,385) $ 567,393 ========= ========= ========= ========= September 30, 1996 ------------------------------------------------ Gross Unrealized Estimated Amortized ------------------ Market Cost Gains (Losses) Value ---------------------------------------------- Held to Maturity U.S. Government $ 80,755 $ 612 $- $ 81,367 U.S. Government agencies 193,471 499 (2,272) 191,698 --------- --------- --------- --------- $ 274,226 $ 1,111 ($ 2,272) $ 273,065 ========= ========= ========= ========= NOTE D -- SECURITIES (Continued) December 31, 1995 ------------------------------------------------ Gross Unrealized Estimated Amortized ------------------ Market Cost Gains (Losses) Value ---------------------------------------------- Available for Sale U.S. Government $ 148,016 $ 1,662 (408) $ 149,270 U.S. Government agencies 233,089 1,333 (1,706) 232,716 States and political subdivisions 10,095 30 (10) 10,115 Other debt securities 16,476 198 (52) 16,622 Equity securities 8,785 2,935 (281) 11,439 --------- --------- --------- --------- $ 416,461 $ 6,158 ($ 2,457) $ 420,162 ========= ========= ========= ========= December 31, 1995 ------------------------------------------------ Gross Unrealized Estimated Amortized ------------------ Market Cost Gains (Losses) Value ---------------------------------------------- Held to Maturity U.S. Government $ 95,521 $ 2,438 ($ 18) $ 97,941 U.S. Government agencies 198,536 2,300 (1,192) 199,644 --------- --------- --------- --------- $ 294,057 $ 4,738 $ (1,210) $ 297,585 ========= ========= ========= ========= MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This financial review presents management's discussion and analysis of financial condition and results of operations. It should be read in conjunction with the Company's Consolidated Financial Statements and the accompanying notes. All dollar amounts, other than per share information, are presented in millions unless otherwise noted. The financial statements for the comparative periods presented herein have been restated to reflect the acquisitions that have been accounted for on the pooling-of-interests accounting method during the periods presented herein. Growth Financial Corporation was acquired on January 12, 1996 and Lafayette American Bank and Trust Company was acquired on July 1, 1996 both on a pooling-of-interests method. All periods prior to the effective dates of these acquuisitions have been restated to reflect the poolings. In addition, the Company acquired three branches from CrossLand Federal Savings Bank on February 29, 1996, and the Hometown Bancorporation was acquired on August 30, 1996. These acquisitions were accounted for on the purchase method and thus operations and earnings are reflected in the Company's results since the dates of acquisition. The Company has two pending acquisitions -- Westport Bancorp, which is expected to be acquired on December 13, 1996, and will be accounted for on the pooling-of-interests method, and UST/Connecticut which will be acquired on or about November 30, 1996, and will be accounted for on the purchase method. A summary of the companies acquired, exclusive of the $60 million in deposits acquired in the CrossLand acquisition, are as follows: Assets Deposits ------ -------- Growth Financial $128 $110 Lafayette American 741 647 Hometown 194 162 Westport 317 259 UST/Conn. 111 100 The balance sheet and income statement comparisons are influenced by the transactions mentioned above. All share data has been retroactively restated to reflect the shares issued in the aforementioned transactions including restatement of all prior periods for the pooled acquisitions. RESULTS OF OPERATIONS Earnings for the three-month comparative periods ended September 30 were as follows(in thousands, except per share amounts): 1996 1995 ---- ---- Net Income $1,268 $8,606 Per share, fully diluted $ 0.06 $ 0.42 Weighted average common shares outstanding 19,835 20,632 Excluding one-time charges: Net Income $9,334 $8,606 Per share, fully diluted $ 0.47 $ 0.42 Earnings for the nine-month comparative periods ended September 30 were as follows(in thousands, except per share amounts): 1996 1995 ---- ---- Net Income $15,218 $23,632 Per share, fully diluted $ 0.76 $ 1.14 Weighted average common shares outstanding 20,044 20,057 Excluding one-time charges: Net Income $24,746 23,632 Per share, fully diluted $ 1.23 $ 1.14 The one-time charges consists of restructuring charges and merger related expenses in connection with the Lafayette acquisition of $7.6 million on an after-tax basis ($10.9 million pre-tax) for the third quarter and $9.0 million on an after-tax basis ($13.0 million pre-tax) for the nine-month period, respectively. Also included in the third quarter and for the nine-month period, is a one-time charge to the SAIF fund for savings deposits owned as of March 31, 1995, in the amount of $.5 million on an after-tax basis ($.8 million pre-tax). These one-time charges had the effect of reducing earnings per share by $.41 per share for the quarter and $.47 for the nine-months. - ------------------------------------------ THREE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 Net interest income for the third quarter was $28.5 million compared with $29.4 million for the third quarter of 1995. This represents a decline of $.9 million or 3.2%. The net interest margin for the comparative quarters was 4.92% for 1996 compared with 5.31% in 1995. The reduction is a result of a decline in interest income on earning assets offset partially by a decrease in interest expense on interest-bearing liabilities. The decline is due to yields and rates as opposed to the volume of average earning assets which were $102.4 million higher in the third quarter of 1996 compared with third quarter of 1995. The increase in earning assets is primarily attributable to the acquisition of Hometown, which was acquired August 30, 1996, on the purchase method, and therefore, the assets are included in the 1996 results for one month. The decline in net interest income and in the net interest margin for the third quarter was impacted by Hometown which operated at less than a 4% margin, Lafayette, which had approximately a 5% margin, and modestly by the $75 million in subordinated debt issued by HUBCO on September 13, 1996. Interest income was down $1.2 million, or 2.6% while interest expense declined $.3 million, or 1.8%. The yield on earning assets declined from 8.30% in the third quarter of 1995 to 7.72% for the third quarter of 1996. The competitive deposit rates in Connecticut are currently slightly higher than the competitive deposit rates in New Jersey. The provision for possible loan losses for the comparative third quarters was $1.4 million in 1996 compared with $1.7 million for 1995. The Company performs an evaluation of the adequacy of the allowance for loan losses each quarter. The results of this analysis and the expectation of potential credit losses and the economic conditions are some of the factors that determines the required quarterly provision. Management believes that the allowance at September 30, 1996 of $29.7 million, or 1.85% of loans and 93% of non-performing loans, is adequate. Comparative ratios for September 30, 1995 are 1.88% and 105% respectively. Non-performing assets as a percentage to total assets was 1.43% at September 30, 1996 and 1.62% at September 30, 1995. The following table presents the composition of non-performing assets and loans past due 90 days or more and accruing and selected asset quality ratios at the dates indicated:
ASSET QUALITY SCHEDULE - QUARTERLY RECAP (In Thousands) 9/30/96 6/30/96 3/31/95 12/31/95 ------- ------- ------- -------- Non-Accrual Loans: Commercial $12,075 $10,762 $10,040 $10,749 Real Estate 17,513 19,002 15,437 11,805 Consumer 1,171 646 912 881 Credit Cards -- -- -- 443 ------- ------- ------- ------- Total Non-Accrual Loans 30,759 30,410 26,389 23,878 ------- ------- ------- ------- Renegotiated Loans 1,201 629 1,357 1,701 ------- ------- ------- ------- Total Non-Performing Loans 31,960 31,039 27,746 25,579 Other Real Estate 7,094 6,846 10,739 11,564 ------- ------- ------- ------- Total Non-Performing Assets $39,054 $37,885 $38,485 $37,143 ======= ======= ======= ======= Non-Accrual Loans to Total Loans 1.91% 2.02% 1.79% 1.62% Non-Performing Assets to Total Assets 1.43 1.53 1.56 1.50 Allowance for Loan Losses to Non-Accrual Loans 96.59 91.15 105.30 114.13 Allowance for Loan Losses to Non-Performing Loans 92.96 89.30 100.15 106.54 Loans Past Due 90 Days or More and Accruing: Commercial $ 49 $ 264 $ 13 $ 1,027 Real Estate 2,189 2,676 1,878 4,137 Consumer 478 1,181 582 308 Credit Cards 1,501 1,526 2,066 592 ------- ------- ------- ------- Total Past Due Loans $ 4,217 $ 5,647 $ 4,539 $ 6,064 ======= ======= ======= =======
Non-interest income (excluding securities gains) decreased 3.7% from $6.2 million in the third quarter 1995 to $6.0 in 1996. The variances between the three months ended September 30, 1996 and September 30, 1995 are as follows: Trust income declined $.1 million as a result of Lafayette selling its trust business in 1995 with no income earned in 1996 whereas Hudson United Bank had 8% growth in trust income for the period. Service charges on deposit accounts increased $.3 million or 8%. Other income declined $.4 million from 1995, when HUBCO realized a $1 million insurance claim settlement asssociated with the Urban acquisition. Excluding this one-time item in 1995, non-interest income increased $.8 million or 15%. This increase is attributed to the exporting of late charges on delinquent accounts by Shoppers Charge. Shoppers is realizing approximately $.1 million per month in late fee income. Non-interest expense increased $10 million from $21.7 million for the third quarter of 1995 to $31.7 million for the third quarter of 1996. However, the company took a one-time restructuring charge and merger related expenses of $10.9 million in connection with the Lafayette acquisition that was consummated on July 1, 1996. In addition, a special one-time assessment on SAIF-assessable deposits of 52.56 basis points on such deposits held on March 31, 1995 was recorded in the third quarter of this year and totaled $.8 million. Excluding these one-time charges, non-interest expense would have been $19.9 million, or a reduction of $1.7 million (8%) from last year's comparable quarter. Reductions were realized in nearly all categories such as salaries, pension and other employee benefits, occupancy and equipment expense. These reductions are a result of the cost reductions following the Growth Financial acquisition in January and the Lafayette acquisition in July along with the sale of a 50% interest in its data processing subsidiary to another financial institution in the fourth quarter of 1995. The full effect of the Lafayette cost saving initiatives and the Hometown cost reductions will occur in the fourth quarter of this year and in 1997. In other categories, outside services increased $.2 million and other expenses $.9 million. Payments for computer processing and other services amounted to $1.1 million for the quarter thus accounting for more than the $.9 million increase in other expenses but were more than offset in other categories. A reconciliation of the combined statutory federal and state income taxes to the effective tax provision is as follows: Three Months ------------ Ended September 30 ------------------ 1996 1995 ---- ---- Combined statutory federal and state taxes (41%) $606 $5,094 Non-deductible intangible amortization 319 224 Non-deductible merger expenses 1,105 -- Reversal of tax reserves upon finalization of examinations (1,010) -- Reversal of Lafayette valuation allowance - (2,478) Other (809) 979 ---- ------ Provision for Income Taxes $211 $3,819 ==== ====== RESULTS OF OPERATIONS Nine Months Ended September 30, 1996 and September 30, 1995 Net interest income for the nine-month period was $85.9 million compared with $88.6 million for the first nine-months of 1995. This represents a decline of $2.7 million or 3%. The net interest margin for the comparative periods were 5.07% for 1996 compared with 5.31% in 1995. The reduction is a result of a $3.2 million decline in interest income on earning assets offset partially by a decrease in interst expense on interest-bearing liabilities of $.6 million. The decline is due to lower yields on earning assets as the volume of average earning assets was $29 million higher in 1996. Interest income declined $3.2 million, and interest expense declined $.6. The yield on earning assets declined from 8.20% in 1995 to 7.88% for the first nine months of 1996 on a $97 million increase in average loans and a $68 million decline in average securities. Average borrowed funds increased during this period which also contributed to the decline in the net interest margin. The provision for possible loan losses for the comparative nine-months amounted to $5.8 million in 1996 compared with $5.9 million for 1995. The Company performs an evaluation of the adequacy of the allowance for loan losses each quarter. The results of the analysis including the expectation of potential credit losses and current economic conditions are some of the factors that determine the required quarterly provision. Management believes that the allowance at September 30 is adequate. The following table presents the composition of non-performing assets and loans past due 90 days or more and accruing and selected asset quality ratios at the dates indicated: Summary of Activity in the Allowance Broken Down by Loan Category ---------------------------- Nine Months Ended Year Ended 9/30/96 12/31/95 -------------------------- (In Thousands of Dollars) Amount of Loans Outstanding $1,609,410 $1,473,970 Daily Average Amount of Loans $1,497,106 $1,408,694 Balance of Allowance for Possible Loan Losses at Beginning of Period $ 27,251 $ 27,617 Loans Charged Off: Real Estate - Mortgage (1,448) (4,729) Commercial (4,116) (4,708) Consumer (1,991) (1,365) -------- -------- Total Loans Charged Off (7,555) (10,802) Recoveries of Loans Previously Charged Off: Real Estate - Mortgage 650 1,104 Commercial 328 808 Consumer 660 509 -------- -------- Total Recoveries 1,638 2,421 Net Loans Charged Off (5,917) (8,381) Reserves Acquired in Purchase Transaction 2,550 -- Provision for Possible Loan Losses 5,825 8,015 Balance at End of Period $ 29,709 $ 27,251 ======== ======== Ratio of Net Loans Charged-Off During Period to Average Loans Outstanding .53% .59% ======== ======== Non-interest income (excluding securities gains) increased slightly from $17.2 million in 1995 to $17.6 million in 1996. The variances between the nine months ended September 30, 1996 and September 30, 1995 are as follows: Trust income declined $.6 million as a result of Lafayette selling its trust business in 1995 and therefore no income was earned in 1996 whereas Hudson United had growth in the trust income for the periods. Service charges on deposit accounts decreased approximatily $.2 million. Other income increased $1.2 million. However, in 1995, HUBCO had realized a $1 million insurance claim settlement associated with the Urban acquisition in the third quarter. Excluding this one-time item in 1995, other income would have increased $2.2 million. This increase is almost entirely attributed to the exporting of late charges on delinquent accounts by Shoppers Charge, increased merchant discount fee income, and growth in international fee income. Non-interst expense increased $5.0 million from $69.6 million for the first nine-months of 1995 to $74.6 million for the same period in 1996. However, in connection with the Lafayette acquisition, the Company took restructuring and merger related charges in the second and third quarters resulting in a total charge of $13 million. Excluding these expenses and the one-time SAIF assessment previously discussed, non-interest expense would have been $60.8 million, or a decline of $8.8 million (12.6%). Salaries declined $2.6 million, benefits were down $2.5 million, occupancy was down $.7 million, and equipment expense was down $1.5 million. These reductions are due to the economies realized following the acquisitions of Jefferson, Urban and Growth. In addition, the reductions are also attributable to the sale of the data processing operations previously mentioned. The reduction in deposit and other insurance is due to the reduction in the deposit insurance assesssment rate to the company. The increase in outside services of $1.5 million is primarily attributable to the payments for data processing services to the jointly owned service provider. The increase in the amortization of intangibles of $.5 million is due to the amortization of core deposit intangibles in connection with the acquisition of the CrossLand Savings branch deposits ($.4 million), and the amortization of the intangibles in connection with the Hometown Bancorporation on August 30, 1996. Other expenses decreased $1.4 million. The Company's effective tax rate for book purposes for the nine-month period ended September 30, 1996, was 37%. This compares with an effective tax rate for the comparable period in 1995 of 25%. The lower tax rate in 1995 was the result of the reversal of tax reserves no longer deemed necessary and the reversal of a portion of Lafayette's valuation allowance. See Results of Operations for the Three Months Ended September 30, 1996 and September 30, 1995. FINANCIAL CONDITION Total assets at September 30, 1996, were $2.724 billion, an increase of $282 million or 11.6% over the $2.442 billion at September 30, 1995 (as restated for the Growth and Lafayette poolings). The balances at September 30, 1996 include $197 million in assets from Hometown and $60 million from CrossLand both acquired on a purchase method in 1996. From September 30, 1995 to September 30, 1996, loans increased $175 million to $1.6 billion. Of this increase, approximately $100 million is due to the acquisition of Hometown. The company has experienced internal growth in commercial and industrial loans and commercial mortgage loans with declines in consumer loans where indirect lending is being phased out and in the Shoppers Charge receivables which is seasonal. Deposits increased from $2.1 billion at September 30, 1995, to $2.2 billion at September 30, 1996. The company generally plans for and experiences deposit shrinkage following acquisitions as the rates on deposits of the acquired companies are reduced to rates generally offered by the Company. The securities portfolios increased from an aggregate $805 million at September 30, 1995, to $842 million at September 30, 1996. The increase was due to the Company's strategy of pre-investing a portion of its securities maturing in late 1996 and early 1997. This strategy also had the effect of increasing borrowings which increased from $109 million at September 30, 1995 to $181 million at September 30, 1996. Intangibles, net of amortization, increased from $8.1 million to $23.1 million attributable to the $3.0 million premium paid on the $60 million in branch deposits acquired in February, 1996, and $14.6 million in intangibles incurred in connection with the Hometown acquisition on August 30. Total stockholders' equity at September 30 amounted to $182 million compared with $189.4 million at September 30, 1995, and $195.6 million at December 31, 1995. The decline is attributable to the Company's purchase of 9.5% of the shares of Lafayette and Growth prior to acquisition and due to the change in the unrealized gain/(loss) on securities which changed from an after-tax gain of $1.2 million at September 30, 1995 to an after-tax loss of $.9 million at September 30, 1996, and the purchase of treasury shares which were reissued for the 3% stock dividend issued in November 1996. On September 30, 1996, the Company issued $75 million in 8.20%, 10-year Subordinated Debt. The all-in effective cost of the debt is 8.39%. The net proceeds of the offering will be used for general corporate purposes, as necessary, and to increase capital levels of the Company and its subsidiaries as my be required for potential acquisitions in the future. At the end of the reporting period, the Company is not aware of any current recommendations by the regulatory authorities which would have a material adverse effect on the company's capital resources or operations. The capital ratios for the Company at September 30, 1996, and the minimum regulatory guidelines for such capital ratios are as follows Ratios at Regulatory September 30, 1996 Guidelines ------------------ ---------- Tier I Risk-Based Capital 9.47% 6.0% Total Risk-Based Capital 15.46% 10.0% Tier 1 Leverage Ratio 6.40% 5.0% The regulatory guidelines are for qualification as a well-capitalized institution. PART II. OTHER INFORMATION Items 1 through 5 are not applicable or the responses are negative Item 6: Exhibits and Reports on Form 8-K (a) Exhibits - not applicable (b) Reports on Form 8-K - --- ------------------- (1) On August 15, 1996, HUBCO filed a Form 8-K Item 5 (date of earliest event - August 14, 1996), to present the consolidated results of operations for the 30 day period following the Lafayette American Bank & Trust acquisition. (2) On August 19, 1996, HUBCO filed a Form 8-KA Item 7 (date of earliest event - July 1, 1996), to make readily available, a copy of Lafayette's unaudited interim financial statements for the period ending June 30, 1996. (3) On August 22, 1996, HUBCO filed a Form 8-K Item 5 (date of earliest event - June 28, 1996), to announce the signing of a definitive agreement with UST Bank/Connecticut, a subsidiary of UST Corp. in an all cash transaction. UST Bank/Connecticut will be merged into Lafayette (4) On September 18, 1996, HUBCO filed a Form 8-K Item 5 (date of earliest event - September 13, 1996), in connection with the issuance of $75 million of subordinated debt. (5) On September 22, 1996, HUBCO filed a Form 8-KA Item 7 (date of earliest event - September 13, 1996), containing exhibits related to the subordinated debt offering. (6) On October 22, 1996, HUBCO filed a Form 8-K Item 5 (date of earliest event - October 22, 1996), containing HUBCO's press release announcing third quarter earnings results. SIGNATURES Pursuant to the requirements 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. HUBCO, Inc. November 14, 1996 /S/ Kenneth T. Neilson - ----------------- ---------------------- Date Kenneth T. Neilson Chairman, President & Chief Executive Officer November 14, 1996 /S/ Christina L. Maier - ----------------- ---------------------- Date Christina L. Maier Chief Accounting Officer EX-27 2 FDS, QUARTERLY REPORT FOR 9/30/96
9 9-MOS DEC-31-1996 SEP-30-1996 162,360 0 0 0 567,393 274,226 273,065 1,609,410 29,709 2,724,664 2,239,157 178,695 22,125 102,056 0 0 35,178 147,453 2,724,664 98,058 35,005 445 133,508 42,742 47,637 85,871 5,825 996 74,604 24,059 24,059 0 0 15,218 .76 .76 5.07 30,759 4,217 1,201 31,960 27,251 7,555 1,638 29,709 22,598 0 7,111
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