10-Q 1 a14-13999_110q.htm 10-Q

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

FORM 10-Q

______________________

 

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

 

 

SECURITIES EXCHANGE ACT OF 1934

 

 

For the quarterly period ended June 30, 2014

______________________

Commission file number 001-34096

______________________

BRIDGE BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

NEW YORK

 

11-2934195

(State or other jurisdiction of incorporation or organization)

 

(IRS Employer Identification Number)

 

 

 

2200 MONTAUK HIGHWAY, BRIDGEHAMPTON, NEW YORK

 

11932

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (631) 537-1000

 

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

Large accelerated filer [  ]

 

Accelerated filer [X]

 

 

 

Non-accelerated filer [  ] (Do not check if a smaller reporting company)

 

Smaller reporting company [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

There were 11,637,363 shares of common stock outstanding as of August 5, 2014.

 

 



Table of Contents

 

 

BRIDGE BANCORP, INC.

 

PART I -

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

3

 

 

 

 

Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013

3

 

 

 

 

Consolidated Statements of Income for the Three and Six Months Ended June 30, 2014 and 2013

4

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2014 and 2013

5

 

 

 

 

Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 30, 2014 and 2013

6

 

 

 

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013

7

 

 

 

 

Condensed Notes to Consolidated Financial Statements

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

34

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

49

 

 

 

Item 4.

Controls and Procedures

50

 

 

 

PART II -

OTHER INFORMATION

51

 

 

 

Item 1.

Legal Proceedings

51

 

 

 

Item 1A.

Risk Factors

51

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

51

 

 

 

Item 3.

Defaults Upon Senior Securities

51

 

 

 

Item 4.

Mine Safety Disclosures

51

 

 

 

Item 5.

Other Information

51

 

 

 

Item 6.

Exhibits

51

 

 

 

Signatures

 

52

 

 



Table of Contents

 

 

Item 1. Financial Statements

BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (unaudited)

(In thousands, except share and per share amounts)

 

 

 

June 30,

 

December 31,

 

 

 

2014

 

2013

 

ASSETS

 

 

 

 

 

Cash and due from banks

 

$

48,419

 

$

39,997

 

Interest earning deposits with banks

 

14,782

 

5,576

 

Total cash and cash equivalents

 

63,201

 

45,573

 

 

 

 

 

 

 

Securities available for sale, at fair value

 

629,067

 

575,179

 

Securities held to maturity (fair value of $205,341 and $197,339, respectively)

 

205,062

 

201,328

 

Total securities

 

834,129

 

776,507

 

 

 

 

 

 

 

Securities, restricted

 

10,690

 

7,034

 

 

 

 

 

 

 

Loans held for investments

 

1,200,861

 

1,013,263

 

Allowance for loan losses

 

(16,680

)

(16,001

)

Loans, net

 

1,184,181

 

997,262

 

 

 

 

 

 

 

Premises and equipment, net

 

30,846

 

27,983

 

Accrued interest receivable

 

6,425

 

5,648

 

Goodwill

 

10,673

 

2,034

 

Core deposit intangible

 

1,967

 

190

 

Bank owned life insurance

 

10,176

 

10,035

 

Prepaid pension

 

8,625

 

8,586

 

Other real estate owned

 

577

 

2,242

 

Other assets

 

27,486

 

13,652

 

Total Assets

 

$

2,188,976

 

$

1,896,746

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Demand deposits

 

$

566,503

 

$

582,938

 

Savings, NOW and money market deposits

 

1,016,887

 

855,246

 

Certificates of deposit of $100,000 or more

 

104,913

 

64,445

 

Other time deposits

 

62,768

 

36,450

 

Total deposits

 

1,751,071

 

1,539,079

 

 

 

 

 

 

 

Federal Funds Purchased

 

70,000

 

64,000

 

Federal Home Loan Bank advances

 

146,086

 

98,000

 

Repurchase agreements

 

11,392

 

11,370

 

Junior subordinated debentures

 

16,002

 

16,002

 

Other liabilities and accrued expenses

 

21,551

 

8,835

 

Total Liabilities

 

2,016,102

 

1,737,286

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock, par value $.01 per share (2,000,000 shares authorized; none issued)

 

 

 

Common stock, par value $.01 per share:

 

 

 

 

 

Authorized: 20,000,000 shares; 11,632,113 and 11,317,367 shares issued, respectively; 11,632,113 and 11,307,607 shares outstanding, respectively

 

116

 

113

 

Surplus

 

117,880

 

111,377

 

Retained earnings

 

60,878

 

61,441

 

Less: Treasury Stock at cost, 0 and 9,760 shares, respectively

 

 

(235

)

 

 

178,874

 

172,696

 

Accumulated other comprehensive loss, net of income tax

 

(6,000

)

(13,236

)

Total Stockholders’ Equity

 

172,874

 

159,460

 

Total Liabilities and Stockholders’ Equity

 

$

2,188,976

 

$

1,896,746

 

 

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

 

3



Table of Contents

 

 

BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Income (unaudited)

(In thousands, except per share amounts)

 

 

 

For the

 

For the

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Interest income:

 

 

 

 

 

 

 

 

 

Loans (including fee income)

 

$

14,068

 

$

11,182

 

$

27,382

 

$

21,850

 

Mortgage-backed securities, CMOs and other asset-backed securities

 

2,949

 

1,469

 

5,240

 

2,912

 

U.S. GSE securities

 

698

 

659

 

1,505

 

1,450

 

State and municipal obligations

 

691

 

646

 

1,392

 

1,326

 

Corporate Bonds

 

211

 

100

 

365

 

201

 

Deposits with banks

 

7

 

8

 

15

 

13

 

Other interest and dividend income

 

106

 

44

 

189

 

87

 

Total interest income

 

18,730

 

14,108

 

36,088

 

27,839

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

Savings, NOW and money market deposits

 

801

 

859

 

1,638

 

1,743

 

Certificates of deposit of $100,000 or more

 

209

 

341

 

384

 

670

 

Other time deposits

 

121

 

86

 

216

 

171

 

Federal funds purchased and repurchase agreements

 

140

 

131

 

269

 

255

 

Federal Home Loan Bank advances

 

302

 

43

 

547

 

83

 

Junior subordinated debentures

 

342

 

342

 

683

 

683

 

Total interest expense

 

1,915

 

1,802

 

3,737

 

3,605

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

16,815

 

12,306

 

32,351

 

24,234

 

Provision for loan losses

 

500

 

600

 

1,200

 

1,150

 

Net interest income after provision for loan losses

 

16,315

 

11,706

 

31,151

 

23,084

 

 

 

 

 

 

 

 

 

 

 

Non interest income:

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

878

 

846

 

1,677

 

1,647

 

Fees for other customer services

 

861

 

908

 

1,546

 

1,561

 

Net securities (losses) gains

 

(16

)

310

 

(1,128

)

648

 

Title fee income

 

461

 

398

 

783

 

684

 

Other operating income

 

108

 

6

 

216

 

32

 

Total non interest income

 

2,292

 

2,468

 

3,094

 

4,572

 

 

 

 

 

 

 

 

 

 

 

Non interest expense:

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

6,412

 

5,326

 

12,618

 

10,720

 

Occupancy and equipment

 

1,933

 

1,418

 

3,548

 

2,609

 

Technology and communications

 

766

 

617

 

1,483

 

1,159

 

Marketing and advertising

 

649

 

533

 

1,070

 

881

 

Professional services

 

400

 

312

 

756

 

621

 

FDIC assessments

 

346

 

220

 

634

 

436

 

Acquisition costs and branch restructuring

 

300

 

 

4,734

 

 

Amortization of core deposit intangible

 

96

 

15

 

154

 

31

 

Other operating expenses

 

1,222

 

914

 

2,140

 

1,806

 

Total non interest expense

 

12,124

 

9,355

 

27,137

 

18,263

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

6,483

 

4,819

 

7,108

 

9,393

 

Income tax expense

 

2,165

 

1,567

 

2,384

 

3,028

 

Net income

 

$

4,318

 

$

3,252

 

$

4,724

 

$

6,365

 

Basic earnings per share

 

$

0.37

 

$

0.36

 

$

0.41

 

$

0.70

 

Diluted earnings per share

 

$

0.37

 

$

0.36

 

$

0.41

 

$

0.70

 

 

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

 

4



Table of Contents

 

 

BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (unaudited)

(In thousands)

 

 

 

For the

 

For the

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Net Income

 

$

4,318

 

$

3,252

 

$

4,724

 

$

6,365

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Change in unrealized net gains (losses) on securities available for sale, net of reclassification and deferred income taxes

 

4,179

 

(8,536

)

7,590

 

(9,143

)

Adjustment to pension liability, net of deferred income taxes

 

(3

)

49

 

(7

)

88

 

Unrealized (losses) gains on cash flow hedge, net of deferred income taxes

 

(256

)

156

 

(347

)

173

 

Total other comprehensive income (loss)

 

3,920

 

(8,331

)

7,236

 

(8,882

)

Comprehensive income (loss)

 

$

8,238

 

$

(5,079

)

$

11,960

 

$

(2,517

)

 

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

 

5



Table of Contents

 

 

BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (unaudited)

(In thousands, except per share amounts)

 

 

 

Common
Stock

 

Surplus

 

Retained
Earnings

 

Treasury
Stock

 

Accumulated
Other
Comprehensive
Loss

 

Total

 

Balance at January 1, 2014

 

$

113

 

$

111,377

 

$

61,441

 

$

(235

)

$

(13,236

)

$

159,460

 

Net income

 

 

 

 

 

4,724

 

 

 

 

 

4,724

 

Shares issued under the dividend reinvestment plan (“DRP”)

 

 

 

310

 

 

 

 

 

 

 

310

 

Shares issued in the acquisition of FNBNY Bancorp, net of offering costs (240,598 shares)

 

2

 

5,946

 

 

 

 

 

 

 

5,948

 

Stock awards granted and distributed

 

1

 

(432

)

 

 

431

 

 

 

 

Stock awards forfeited

 

 

 

58

 

 

 

(58

)

 

 

 

Vesting of stock awards

 

 

 

 

 

 

 

(147

)

 

 

(147

)

Exercise of stock options

 

 

 

(2

)

 

 

9

 

 

 

7

 

Tax effect of stock plans

 

 

 

30

 

 

 

 

 

 

 

30

 

Share based compensation expense

 

 

 

593

 

 

 

 

 

 

 

593

 

Cash dividend declared, $0.46 per share

 

 

 

 

 

(5,287

)

 

 

 

 

(5,287

)

Other comprehensive income, net of deferred income taxes

 

 

 

 

 

 

 

 

 

7,236

 

7,236

 

Balance at June 30, 2014

 

$

116

 

$

117,880

 

$

60,878

 

$

 

$

(6,000

)

$

172,874

 

 

 

 

Common
Stock

 

Surplus

 

Retained
Earnings

 

Treasury
Stock

 

Accumulated
Other
Comprehensive
Loss

 

Total

 

Balance at January 1, 2013

 

$

89

 

$

64,208

 

$

55,102

 

$

(309

)

$

(418

)

$

118,672

 

Net income

 

 

 

 

 

6,365

 

 

 

 

 

6,365

 

Shares issued under the dividend reinvestment plan (“DRP”)

 

1

 

3,003

 

 

 

 

 

 

 

3,004

 

Stock awards granted and distributed

 

1

 

(435

)

 

 

434

 

 

 

 

Stock awards forfeited

 

 

 

9

 

 

 

(9

)

 

 

 

Vesting of stock awards

 

 

 

 

 

 

 

(149

)

 

 

(149

)

Tax effect of stock plans

 

 

 

(9

)

 

 

 

 

 

 

(9

)

Share based compensation expense

 

 

 

662

 

 

 

 

 

 

 

662

 

Cash dividend declared, $0.23 per share

 

 

 

 

 

(2,069

)

 

 

 

 

(2,069

)

Other comprehensive loss, net of deferred income taxes

 

 

 

 

 

 

 

 

 

(8,882

)

(8,882

)

Balance at June 30, 2013

 

$

91

 

$

67,438

 

$

59,398

 

$

(33

)

$

(9,300

)

$

117,594

 

 

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

 

6



Table of Contents

 

 

BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

(In thousands)

 

 

 

For the

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2014

 

2013

 

Cash flows from operating activities:

 

 

 

 

 

Net Income

 

$

4,724

 

$

6,365

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Provision for loan losses

 

1,200

 

1,150

 

Depreciation and amortization

 

1,246

 

948

 

Net amortization on securities

 

1,685

 

2,987

 

Increase in cash surrender value of bank owned life insurance

 

(141

)

 

Amortization of core deposit intangible

 

154

 

31

 

Share based compensation expense

 

593

 

662

 

Net securities losses (gains)

 

1,128

 

(648

)

Increase in accrued interest receivable

 

(777

)

(132

)

Increase in other assets

 

(5,811

)

(70

)

Increase in accrued expenses and other liabilities

 

4,820

 

4,359

 

Net cash provided by operating activities

 

8,821

 

15,652

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of securities available for sale

 

(208,973

)

(210,801

)

Purchases of securities, restricted

 

(266,592

)

(19,873

)

Purchases of securities held to maturity

 

(30,936

)

(32,781

)

Proceeds from sales of securities available for sale

 

234,749

 

75,165

 

Redemption of securities, restricted

 

265,536

 

16,852

 

Maturities, calls and principal payments of securities available for sale

 

36,510

 

97,170

 

Maturities, calls and principal payments of securities held to maturity

 

26,763

 

57,420

 

Net increase in loans

 

(101,313

)

(102,956

)

Proceeds from sales of other real estate owned, net

 

2,242

 

 

Purchase of premises and equipment

 

(2,321

)

(2,748

)

Net cash acquired in business combination

 

2,926

 

 

Net cash used in investing activities

 

(41,409

)

(122,552

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Net increase in deposits

 

42,119

 

45,785

 

Net increase (decrease) in federal funds purchased

 

6,000

 

(9,000

)

Net increase in FHLB advances

 

8,804

 

60,000

 

Repayment of acquired unsecured debt

 

(1,450

)

 

Net increase (decrease) in repurchase agreements

 

22

 

(1,089

)

Net proceeds from issuance of common stock

 

310

 

3,004

 

Net proceeds from exercise of stock options

 

7

 

 

Repurchase of surrendered stock from vesting of restricted stock awards

 

(147

)

(149

)

Excess tax benefit (expense) from share based compensation

 

30

 

(9

)

Cash dividends paid

 

(5,287

)

(2,069

)

Other, net

 

(192

)

 

Net cash provided in financing activities

 

50,216

 

96,473

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

17,628

 

(10,427

)

Cash and cash equivalents at beginning of period

 

45,573

 

51,249

 

Cash and cash equivalents at end of period

 

$

63,201

 

$

40,822

 

 

 

 

 

 

 

Supplemental Information-Cash Flows:

 

 

 

 

 

Cash paid for:

 

 

 

 

 

Interest

 

$

3,656

 

$

3,592

 

Income tax

 

$

883

 

$

2,937

 

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

Securities which settled in the subsequent period

 

$

5,372

 

$

6,726

 

Transfers from portfolio loans to OREO

 

$

577

 

$

 

 

 

 

 

 

 

Acquisition of noncash assets and liabilities:

 

 

 

 

 

Fair value of assets acquired

 

$

207,121

 

$

 

Fair value of liabilities assumed

 

$

212,547

 

$

 

 

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

 

7



Table of Contents

 

 

BRIDGE BANCORP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. BASIS OF PRESENTATION

 

Bridge Bancorp, Inc. (the “Company”) is a bank holding company incorporated under the laws of the State of New York. The Company’s business currently consists of the operations of its wholly-owned subsidiary, The Bridgehampton National Bank (the “Bank”). The Bank’s operations include its real estate investment trust subsidiary, Bridgehampton Community, Inc. (“BCI”), a financial title insurance subsidiary, Bridge Abstract LLC (“Bridge Abstract”), and an investment services subsidiary, Bridge Financial Services LLC that was formed on March 26, 2014. In addition to the Bank, the Company has another subsidiary Bridge Statutory Capital Trust II which was formed in 2009. In accordance with current accounting guidance, the trust is not consolidated in the Company’s financial statements.

 

The accompanying Unaudited Consolidated Financial Statements, which include the accounts of the Company and its wholly-owned subsidiary, the Bank, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The Unaudited Consolidated Financial Statements included herein reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. In preparing the interim financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reported periods. Such estimates are subject to change in the future as additional information becomes available or previously existing circumstances are modified. Actual future results could differ significantly from those estimates. The annualized results of operations for the three months and six months ended June 30, 2014 are not necessarily indicative of the results of operations that may be expected for the entire fiscal year. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain reclassifications have been made to prior year amounts, and the related discussion and analysis, to conform to the current year presentation. These reclassifications did not have an impact on net income or total stockholders’ equity. The Unaudited Consolidated Financial Statements should be read in conjunction with the Audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

 

2. EARNINGS PER SHARE

 

Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) No. 260-10-45 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (“EPS”).  The restricted stock awards and restricted stock units granted by the Company contain non-forfeitable rights to dividends and therefore are considered participating securities.  The two-class method for calculating basic EPS excludes dividends paid to participating securities and any undistributed earnings attributable to participating securities.

 

The computation of EPS for the three and six months ended June 30, 2014 and 2013 is as follows:

 

 

 

Three months ended,

 

Six months ended,

 

 

 

June 30,

 

June 30,

 

(In thousands, except per share data)

 

2014

 

2013

 

2014

 

2013

 

Net Income

 

$

4,318

 

$

3,252

 

$

4,724

 

$

6,365

 

Less: Dividends paid on and earnings allocated to participating securities

 

(103

)

(88

)

(101

)

(169

)

Income attributable to common stock

 

$

4,215

 

$

3,164

 

$

4,623

 

$

6,196

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, including participating securities

 

11,660

 

9,105

 

11,587

 

9,042

 

Less: weighted average participating securities

 

(279

)

(247

)

(271

)

(239

)

Weighted average common shares outstanding

 

11,381

 

8,858

 

11,316

 

8,803

 

Basic earnings per common share

 

$

0.37

 

$

0.36

 

$

0.41

 

$

0.70

 

 

 

 

 

 

 

 

 

 

 

Income attributable to common stock

 

$

4,215

 

$

3,164

 

$

4,623

 

$

6,196

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

11,381

 

8,858

 

11,316

 

8,803

 

Weighted average common equivalent shares outstanding

 

 

 

 

 

Weighted average common and equivalent shares outstanding

 

11,381

 

8,858

 

11,316

 

8,803

 

Diluted earnings per common share

 

$

0.37

 

$

0.36

 

$

0.41

 

$

0.70

 

 

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There were 42,330 and 49,362 options outstanding at June 30, 2014 and June 30, 2013, respectively, that were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of common stock and were, therefore, antidilutive. The $16.0 million in convertible trust preferred securities outstanding at June 30, 2014, were not included in the computation of diluted earnings per share because the assumed conversion of the trust preferred securities was antidilutive.

 

3. STOCK BASED COMPENSATION PLANS

 

The Compensation Committee of the Board of Directors determines stock options and restricted stock awarded under the Bridge Bancorp, Inc. Equity Incentive Plan (“Plan”) and the Company accounts for this Plan under the FASB ASC No. 718 and 505. On May 4, 2012, the stockholders of the Company approved the Company’s 2012 Stock-Based Incentive Plan which supersedes the Bridge Bancorp, Inc. Equity Incentive Plan that was approved in 2006 (the “2006 Plan”). The plan provides for the grant of stock-based and other incentive awards to officers, employees and directors of the Company.

 

No new grants of stock options were awarded and no compensation expense was attributable to stock options for the six months ended June 30, 2014 and June 30, 2013 because all stock options were vested.

 

The intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the market price of our common stock as of the reporting date.  The intrinsic value of options exercised during the six months ended June 30, 2014 and June 30, 2013, was $1,000 and $0, respectively. The intrinsic value of options outstanding and exercisable at June 30, 2014 and June 30, 2013 was $0.

 

A summary of the status of the Company’s stock options as of and for the six months ended June 30, 2014 is as follows:

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

Number

 

Average

 

Remaining

 

Aggregate

 

 

 

of

 

Exercise

 

Contractual

 

Intrinsic

 

(Dollars in thousands, except per share amounts)

 

Options

 

Price

 

Life

 

Value

 

Outstanding, January 1, 2014

 

45,395

 

$

25.54

 

 

 

 

 

Granted

 

 

 

 

 

 

 

Exercised

 

(1,274

)

$

24.00

 

 

 

 

 

Forfeited

 

(1,230

)

$

25.25

 

 

 

 

 

Expired

 

(561

)

$

24.00

 

 

 

 

 

Outstanding, June 30, 2014

 

42,330

 

$

25.61

 

2.22 years

 

 

 

Vested and Exercisable, June 30, 2014

 

42,330

 

$

25.61

 

2.22 years

 

 

 

 

 

 

Number of

 

Exercise

 

Range of Exercise Prices

 

Options

 

Price

 

 

 

37,199

 

$

25.25

 

 

 

3,000

 

$

26.55

 

 

 

2,131

 

$

30.60

 

 

 

42,330

 

 

 

 

During the six months ended June 30, 2014 restricted stock awards of 74,823 shares were granted. Of the 74,823 shares granted, 53,425 shares vest over seven years with a third vesting after years five, six and seven, 17,898 shares vest over five years with a third vesting after years three, four and five and the remaining 3,500 shares vest ratably over approximately two years. During the six months ended June 30, 2013, restricted stock awards of 72,940 shares were granted. Of the 72,940 shares granted, 51,175 shares vest over seven years with one third vesting after each of the years five, six and seven; 12,652 shares vest over five years with one third vesting after each of the years three, four and five; and the remaining 9,113 shares vest ratably over approximately five years. Compensation expense attributable to restricted stock awards was $263,000 and $514,000 for the three and six months ended June 30, 2014, respectively, and $288,000 and $587,000 for the three and six months ended June 30, 2013, respectively.

 

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A summary of the status of the Company’s unvested restricted stock as of and for the six months ended June 30, 2014 is as follows:

 

 

 

 

 

Weighted

 

 

 

 

 

Average Grant-Date

 

 

 

Shares

 

Fair Value

 

Unvested, January 1, 2014

 

197,599

 

$

21.18

 

Granted

 

74,823

 

$

25.42

 

Vested

 

(23,695

)

$

21.58

 

Forfeited

 

(2,398

)

$

22.33

 

Unvested, June 30, 2014

 

246,329

 

$

22.42

 

 

In April 2009, the Company adopted a Directors Deferred Compensation Plan. Under the Plan, independent directors may elect to defer all or a portion of their annual retainer fee in the form of restricted stock units. In addition, Directors receive a non-election retainer in the form of restricted stock units.  These restricted stock units vest ratably over one year and have dividend rights but no voting rights. In connection with this Plan, the Company recorded expenses of approximately $39,000 and $79,000 for the three and six months ended June 30, 2014, respectively, and $36,000 and $75,000 for the three and six months ended June 30, 2013, respectively.

 

4. SECURITIES

 

The following table summarizes the amortized cost and fair value of the available for sale and held to maturity investment securities portfolio at June 30, 2014 and December 31, 2013 and the corresponding amounts of unrealized gains and losses therein:

 

 

 

June 30, 2014

 

 

 

 

 

Gross

 

Gross

 

Estimated

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

(In thousands)

 

Cost

 

Gains

 

Losses

 

Value

 

Available for sale:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

$

125,653

 

$

106

 

$

(3,200

)

$

122,559

 

State and municipal obligations

 

58,973

 

447

 

(271

)

59,149

 

U.S. GSE residential mortgage-backed securities

 

55,629

 

438

 

(63

)

56,004

 

U.S. GSE residential collateralized mortgage obligations

 

290,775

 

412

 

(4,165

)

287,022

 

U.S. GSE commercial mortgage-backed securities

 

3,046

 

 

(134

)

2,912

 

U.S. GSE commercial collateralized mortgage obligations

 

32,080

 

178

 

(58

)

32,200

 

Other Asset backed securities

 

49,396

 

 

(1,095

)

48,301

 

Corporate Bonds

 

20,819

 

107

 

(6

)

20,920

 

Total available for sale

 

636,371

 

1,688

 

(8,992

)

629,067

 

 

 

 

 

 

 

 

 

 

 

Held to maturity:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

11,268

 

104

 

(46

)

11,326

 

State and municipal obligations

 

51,504

 

1,564

 

(5

)

53,063

 

U.S. GSE residential mortgage-backed securities

 

7,342

 

 

(137

)

7,205

 

U.S. GSE residential collateralized mortgage obligations

 

63,812

 

684

 

(1,805

)

62,691

 

U.S. GSE commercial mortgage-backed securities

 

10,034

 

39

 

(87

)

9,986

 

U.S. GSE commercial collateralized mortgage obligations

 

38,186

 

332

 

(488

)

38,030

 

Corporate Bonds

 

22,916

 

142

 

(18

)

23,040

 

Total held to maturity

 

205,062

 

2,865

 

(2,586

)

205,341

 

Total securities

 

$

841,433

 

$

4,553

 

$

(11,578

)

$

834,408

 

 

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December 31, 2013

 

 

 

 

 

Gross

 

Gross

 

Estimated

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

(In thousands)

 

Cost

 

Gains

 

Losses

 

Value

 

Available for sale:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

$

164,278

 

$

15

 

$

(11,536

)

$

152,757

 

State and municipal obligations

 

62,141

 

602

 

(1,087

)

61,656

 

U.S. GSE residential mortgage-backed securities

 

14,609

 

36

 

(210

)

14,435

 

U.S. GSE residential collateralized mortgage obligations

 

285,595

 

559

 

(6,963

)

279,191

 

U.S. GSE commercial mortgage-backed securities

 

3,076

 

 

(242

)

2,834

 

U.S. GSE commercial collateralized mortgage obligations

 

26,740

 

194

 

(24

)

26,910

 

Non Agency commercial mortgage-backed securities

 

3,658

 

 

(80

)

3,578

 

Other Asset backed securities

 

34,970

 

42

 

(1,194

)

33,818

 

Total available for sale

 

595,067

 

1,448

 

(21,336

)

575,179

 

 

 

 

 

 

 

 

 

 

 

Held to maturity:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

11,254

 

 

(375

)

10,879

 

State and municipal obligations

 

67,232

 

863

 

(179

)

67,916

 

U.S. GSE residential mortgage-backed securities

 

8,001

 

 

(312

)

7,689

 

U.S. GSE residential collateralized mortgage obligations

 

68,197

 

537

 

(3,655

)

65,079

 

U.S. GSE commercial mortgage-backed securities

 

10,132

 

 

(356

)

9,776

 

U.S. GSE commercial collateralized mortgage obligations

 

13,627

 

 

(706

)

12,921

 

Corporate Bonds

 

22,885

 

203

 

(9

)

23,079

 

Total held to maturity

 

201,328

 

1,603

 

(5,592

)

197,339

 

Total securities

 

$

796,395

 

$

3,051

 

$

(26,928

)

$

772,518

 

 

The following table summarizes the amortized cost, fair value and maturities of the available for sale and held to maturity investment securities portfolio at June 30, 2014. 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.

 

 

 

June 30, 2014

 

 

 

Amortized

 

Fair

 

(In thousands)

 

Cost

 

Value

 

Maturity

 

 

 

 

 

Available for sale:

 

 

 

 

 

Within one year

 

$

16,648

 

$

16,780

 

One to five years

 

29,727

 

29,940

 

Five to ten years

 

150,836

 

148,199

 

Beyond ten years

 

439,160

 

434,148

 

Total

 

$

636,371

 

$

629,067

 

 

 

 

 

 

 

Held to maturity:

 

 

 

 

 

Within one year

 

$

7,040

 

$

7,063

 

One to five years

 

41,517

 

41,742

 

Five to ten years

 

40,885

 

41,883

 

Beyond ten years

 

115,620

 

114,653

 

Total

 

$

205,062

 

$

205,341

 

 

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Table of Contents

 

 

Securities with unrealized losses at June 30, 2014 and December 31, 2013, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

 

 

 

Less than 12 months

 

Greater than 12 months

 

June 30, 2014

 

 

 

Unrealized

 

 

 

Unrealized

 

(In thousands)

 

Fair Value

 

losses

 

Fair Value

 

losses

 

Available for sale:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

$

 

$

 

$

114,950

 

$

3,200

 

State and municipal obligations

 

6,698

 

27

 

13,017

 

244

 

U.S. GSE residential mortgage-backed securities

 

 

 

1,550

 

63

 

U.S. GSE residential collateralized mortgage obligations

 

67,582

 

384

 

124,854

 

3,781

 

U.S. GSE commercial mortgage-backed securities

 

 

 

2,912

 

134

 

U.S. GSE commercial collateralized mortgage obligations

 

18,731

 

58

 

 

 

Other Asset backed securities

 

33,317

 

833

 

14,984

 

262

 

Corporate Bonds

 

4,994

 

6

 

 

 

Total available for sale

 

131,322

 

1,308

 

272,267

 

7,684

 

 

 

 

 

 

 

 

 

 

 

Held to maturity:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

 

 

7,404

 

46

 

State and municipal obligations

 

 

 

641

 

5

 

U.S. GSE residential mortgage-backed securities

 

 

 

7,205

 

137

 

U.S. GSE residential collateralized mortgage obligations

 

5,940

 

58

 

32,032

 

1,747

 

U.S. GSE commercial mortgage-backed securities

 

 

 

4,179

 

87

 

U.S. GSE commercial collateralized mortgage obligations

 

6,593

 

35

 

8,514

 

453

 

Corporate Bonds

 

5,982

 

18

 

1,000

 

 

Total held to maturity

 

$

18,515

 

$

111

 

$

60,975

 

$

2,475

 

 

 

 

Less than 12 months

 

Greater than 12 months

 

December 31, 2013

 

 

 

Unrealized

 

 

 

Unrealized

 

(In thousands)

 

Fair Value

 

losses

 

Fair Value

 

losses

 

Available for sale:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

$

128,468

 

$

8,915

 

$

23,966

 

$

2,621

 

State and municipal obligations

 

23,765

 

1,046

 

966

 

41

 

U.S. GSE residential mortgage-backed securities

 

10,410

 

210

 

 

 

U.S. GSE residential collateralized mortgage obligations

 

218,415

 

6,476

 

12,757

 

487

 

U.S. GSE commercial mortgage-backed securities

 

2,834

 

242

 

 

 

U.S. GSE commercial collateralized mortgage obligations

 

4,912

 

24

 

 

 

Non Agency commercial mortgage-backed securities

 

3,578

 

80

 

 

 

Other Asset backed securities

 

21,144

 

1,103

 

2,906

 

91

 

Total available for sale

 

413,526

 

18,096

 

40,595

 

3,240

 

 

 

 

 

 

 

 

 

 

 

Held to maturity:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

10,879

 

375

 

 

 

State and municipal obligations

 

24,079

 

178

 

385

 

1

 

U.S. GSE residential mortgage-backed securities

 

7,689

 

312

 

 

 

U.S. GSE residential collateralized mortgage obligations

 

29,570

 

2,169

 

17,752

 

1,486

 

U.S. GSE commercial mortgage-backed securities

 

9,776

 

356

 

 

 

U.S. GSE commercial collateralized mortgage obligations

 

12,921

 

706

 

 

 

Corporate Bonds

 

1,993

 

7

 

999

 

2

 

Total held to maturity

 

$

96,907

 

$

4,103

 

$

19,136

 

$

1,489

 

 

Other-Than-Temporary-Impairment

 

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant. The investment securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities classified as available for sale or held-to-maturity are generally evaluated for OTTI under FASB ASC 320, Accounting for Certain Investments in Debt and Equity Securities. In determining OTTI under the FASB ASC 320 model, management considers many factors, including: (1) the length of time and the

 

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extent to which the fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

 

At June 30, 2014, the majority of unrealized losses on both the available for sale and held to maturity securities are related to the Company’s U.S. GSE securities and U.S. GSE residential collateralized mortgage obligations.  The decrease in fair value of the U.S. GSE securities and U.S. GSE residential collateralized mortgage obligations is attributable to changes in interest rates and not credit quality.  The Company does not have the intent to sell these securities and it is more likely than not that it will not be required to sell the securities before their anticipated recovery. Therefore, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2014.

 

Proceeds from sales of securities available for sale were $36.0 million and $28.6 million for the three months ended June 30, 2014 and 2013, respectively.  Proceeds from sales of securities available for sale were $234.7 million and $75.2 million for the six months ended June 30, 2014 and 2013, respectively.  Net losses of $16,000 and net gains of $0.3 million were realized on these sales during the three months ended June 30, 2014 and 2013, respectively. Net losses of $1.1 million and net gains of $0.6 million were realized on these sales during the six months ended June 30, 2014 and 2013, respectively.  Proceeds from calls of securities were $2.2 million and $15.0 million for the three months ended June 30, 2014 and 2013, respectively.  Proceeds from calls of securities were $2.5 million and $46.7 million for the six months ended June 30, 2014 and 2013, respectively.

 

Securities having a fair value of approximately $410.2 million and $397.5 million at June 30, 2014 and December 31, 2013, respectively, were pledged to secure public deposits and Federal Home Loan Bank and Federal Reserve Bank overnight borrowings.  The Bank did not hold any trading securities during the six months ended June 30, 2014 or the year ended December 31, 2013.

 

The Bank is a member of the Federal Home Loan Bank (“FHLB”) of New York. Members are required to own a particular amount of stock based on the level of borrowings and other factors, and may invest in additional amounts.  The Bank is a member of the Atlantic Central Banker’s Bank (“ACBB”) and is required to own ACBB stock. The Bank is also a member of the Federal Reserve Bank (“FRB”) system and required to own FRB stock.  FHLB, ACBB and FRB stock is carried at cost and periodically evaluated for impairment based on ultimate recovery of par value.  Both cash and stock dividends are reported as income.  The Bank owned approximately $10.7 million and $7.0 million in FHLB, ACBB and FRB stock at June 30, 2014 and December 31, 2013.  These amounts were reported as restricted securities in the consolidated balance sheets.

 

5. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

 

FASB ASC No. 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair values:

 

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

 

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

 

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Assets and liabilities measured on a recurring basis:

 

 

 

 

 

Fair Value Measurements at

 

 

 

 

 

June 30, 2014 Using:

 

 

 

 

 

 

 

Significant

 

 

 

 

 

 

 

Quoted Prices In

 

Other

 

Significant

 

 

 

 

 

Active Markets for

 

Observable

 

Unobservable

 

 

 

Carrying

 

Identical Assets

 

Inputs

 

Inputs

 

(In thousands)

 

Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Financial Assets:

 

 

 

 

 

 

 

 

 

Available for sale securities:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

$

122,559

 

 

 

$

122,559

 

 

 

State and municipal obligations

 

59,149

 

 

 

59,149

 

 

 

U.S. GSE residential mortgage-backed securities

 

56,004

 

 

 

56,004

 

 

 

U.S. GSE residential collateralized mortgage obligations

 

287,022

 

 

 

287,022

 

 

 

U.S. GSE commercial mortgage-backed securities

 

2,912

 

 

 

2,912

 

 

 

U.S. GSE commercial collateralized mortgage obligations

 

32,200

 

 

 

32,200

 

 

 

Other Asset backed securities

 

48,301

 

 

 

48,301

 

 

 

Corporate Bonds

 

20,920

 

 

 

20,920

 

 

 

Total available for sale

 

$

629,067

 

 

 

$

629,067

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

Derivatives

 

$

(740

)

 

 

$

(740

)

 

 

 

 

 

 

 

Fair Value Measurements at

 

 

 

 

 

December 31, 2013 Using:

 

 

 

 

 

 

 

Significant

 

 

 

 

 

 

 

Quoted Prices In

 

Other

 

Significant

 

 

 

 

 

Active Markets for

 

Observable

 

Unobservable

 

 

 

Carrying

 

Identical Assets

 

Inputs

 

Inputs

 

(In thousands)

 

Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Financial Assets:

 

 

 

 

 

 

 

 

 

Available for sale securities:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

$

152,757

 

 

 

$

152,757

 

 

 

State and municipal obligations

 

61,656

 

 

 

61,656

 

 

 

U.S. GSE residential mortgage-backed securities

 

14,435

 

 

 

14,435

 

 

 

U.S. GSE residential collateralized mortgage obligations

 

279,191

 

 

 

279,191

 

 

 

U.S. GSE commercial mortgage-backed securities

 

2,834

 

 

 

2,834

 

 

 

U.S. GSE commercial collateralized mortgage obligations

 

26,910

 

 

 

26,910

 

 

 

Non Agency commercial mortgage-backed securities

 

3,578

 

 

 

3,578

 

 

 

Other Asset backed securities

 

33,818

 

 

 

33,818

 

 

 

Total available for sale

 

$

575,179

 

 

 

$

575,179

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

Derivatives

 

$

(164

)

 

 

$

(164

)

 

 

 

14



Table of Contents

 

 

Assets measured at fair value on a non-recurring basis are summarized below:

 

 

 

 

 

Fair Value Measurements at

 

 

 

 

 

June 30, 2014 Using:

 

 

 

 

 

</