Bridge Bancorp, Inc.
2009 AnnuAl RepoRt
TOP PHOTO- Loper’s Store, Main Street, Bridgehampton 1900’s-Became the first Bridgehampton National Bank. BOTTOM PHOTO- Bridgehampton National Bank Corporate Headquarters, Built 1997.
Total Assets
(at December 31, dollars in millions)
Total Deposits
1000
800
600
400
200
0
800
700
600
500
400
300
200
100
0
BRIDGE BANCoRP, INC. // 2009 Annual Report
Total Assets
(at December 31, in millions)
Total Deposits
(at December 31, in millions)
Net Income
(in millions)
$1,000
$897.3
800
600
400
200
0
$800
$793.5
700
600
500
400
300
200
100
0
$10
8
6
4
2
0
Return on
Average Equity
(percentage)
$8.8
25%
15.6%
20
15
10
5
0
’05
’06
’07
’08
’09
’05
’06
’07
’08
’09
’05
’06
’07
’08
’09
’05
’06
’07
’08
’09
25
20
15
10
5
0
Return on
Average Equity
(percentage)
Net Income
(dollars in millions)
10
8
6
4
2
0
Financial Highlights
(in thousands, except per share data and financial ratios)
For the year ended December 31,
2009
2008
EARNINGS
Net income
Return on average equity
Return on average assets
BALANCE SHEET
Assets
Deposits
Loans
Stockholders’ equity
PER SHARE DATA
Diluted earnings per share
Regular cash dividends declared per common share
Book value
$ 8,763
$ 8,750
15.58%
1.06%
16.29%
1.24%
$ 897,257
$ 793,538
$ 448,038
$ 61,855
$
$
$
1.43
0.92
9.88
$ 839,059
$ 659,085
$ 429,683
$ 56,139
$
$
$
1.43
0.92
9.08
Bridge Bancorp, Inc. (“the Company”), a New York corporation (NASDAQ®: BDGE), is a one bank holding company engaged in
commercial banking and financial services through its wholly owned subsidiary, The Bridgehampton National Bank (“the Bank”).
With assets of nearly $900 million, the Bank operates in markets throughout Suffolk County, New York. Established in 1910 by
farmers and merchants, the Bank provides a full range of products and services to businesses, individuals and municipalities.
As a true community bank, it has a steadfast commitment to enhancing the quality of life in the markets it serves by
supporting programs and initiatives that promote local business, protect the environment, focus on the arts and education,
assist with healthcare and social services and reach out to youth.
The Bridgehampton National Bank provides deposit and loan products and financial services through its full service branch
network and electronic delivery channels. Title insurance services are offered through the Bank’s wholly owned subsidiary,
Bridge Abstract. The Bank currently operates 16 retail branches in Bridgehampton, Cutchogue, East Hampton, East Hampton
Village, Greenport, Hampton Bays, Mattituck, Montauk, Peconic Landing in Greenport, Sag Harbor, Shirley, Southampton,
South ampton Village, Southold, Wading River and Westhampton Beach. In 2010, the Bank plans to open new branches in Center
Moriches, Deer Park and Patchogue, New York.
page 1
My Fellow Shareholders,
I am privileged, along with our Board of Directors and my
colleagues, to have the opportunity to lead Bridgehampton
National Bank at this historic moment, the celebration of its
100th birthday. A landmark corporate anniversary provides
the opportunity to reflect on our history and achievements,
recognize our founders and prior leadership, and celebrate
their contributions. The lessons we learn in the process can
help us evolve and grow, creating new stories and successes
for our community for the next 100 years.
Kevin M. O’Connor
President and Chief Executive Officer
page 2
Total Loans by Type (at December 31, 2009)
AVERAGE YIELD OF 6.69%
15% EQUITY LOANS
2% CONSUMER LOANS
17% COMMERCIAL LOANS
3% LAND LOANS
1% CONSTRUCTION LOANS
14% RESIDENTIAL MORTGAGES
47% COMMERCIAL MORTGAGES
BRIDGE BANCoRP, INC. // 2009 Annual Report
Total Loans by Type (at December 31, 2009)
AVERAGE YIELD OF 6.69%
Our position today, as one of the preeminent community banks in this country, reflects the successful efforts
of all involved. It began with the vision of our founders who 100 years ago believed their community needed a bank and
who endeavored to create a bank that needed a community. Although many things have changed over the past century,
it is gratifying to see how much this sentiment still rings true. While in 1910 we had only one branch and a handful
of employees, and today we have 16 branches with nearly 200 employees, our essential values of integrity, service
Total Loans by Type (at December 31, 2009)
and community commitment are still the principles guiding our actions. Our community bank is built on developing
AVERAGE YIELD OF 6.69%
solid long-term relationships with customers, their families and shareholders. Indeed, we have worked with many
customers for generations and have grown alongside them as they build, expand and realize their dreams.
47% COMMERCIAL MORTGAGES
The list of prominent community members who played a role in founding and leading the Bank for the last
century reads like a “who’s who” of Long Island’s East End. Their involvement as shareholders, customers and
advocates established the identity and mission for the Bank. They created the blueprint we follow: focus on the
customer, recognize opportunities and manage for long-term success. Today, the number of communities we serve
has expanded, our list of prominent customers and shareholders has grown, but the mission and vision remain the
same. We value the legacy created by these visionaries and will foster it for the next century.
14% RESIDENTIAL MORTGAGES
18% COMMERCIAL LOANS
15% EQUITY LOANS
3% LAND LOANS
2% CONSUMER LOANS
15% EQUITY LOANS
14% RESIDENTIAL MORTGAGES
2% CONSUMER LOANS
47% COMMERCIAL MORTGAGES
17% COMMERCIAL LOANS
3% LAND LOANS
1% CONSTRUCTION LOANS
1% CONSTRUCTION LOANS
Total Deposits by Type (at December 31, 2009)
AVERAGE COST OF INTEREST BEARING DEPOSITS OF 1.37%
Total Deposits by Type (at December 31, 2009)
Total Loans by Type (at December 31, 2009)
Total Deposits by Type (at December 31, 2009)
Total Loans by Type (at December 31, 2009)
AVERAGE COST OF INTEREST BEARING DEPOSITS OF 1.37%
AVERAGE YIELD OF 6.69%
AVERAGE COST OF INTEREST BEARING DEPOSITS OF 1.37%
AVERAGE YIELD OF 6.69%
Total Loans by Type (at December 31, 2009)
AVERAGE YIELD OF 6.69%
15% SAVINGS & NOW
40% MONEY MARKETS
18% CERTIFICATES OF DEPOSIT
27% DEMAND DEPOSITS
15% EQUITY LOANS
2% CONSUMER LOANS
17% COMMERCIAL LOANS
3% LAND LOANS
1% CONSTRUCTION LOANS
14% RESIDENTIAL MORTGAGES
47% COMMERCIAL MORTGAGES
40% MONEY MARKETS
27% DEMAND DEPOSITS
18% CERTIFICATES OF DEPOSIT
15% SAVINGS & NOW
47% COMMERCIAL MORTGAGES
18% COMMERCIAL LOANS
15% EQUITY LOANS
14% RESIDENTIAL MORTGAGES
3% LAND LOANS
2% CONSUMER LOANS
1% CONSTRUCTION LOANS
15% SAVINGS & NOW
40% MONEY MARKETS
15% EQUITY LOANS
14% RESIDENTIAL MORTGAGES
18% CERTIFICATES OF DEPOSIT
27% DEMAND DEPOSITS
2% CONSUMER LOANS
47% COMMERCIAL MORTGAGES
17% COMMERCIAL LOANS
3% LAND LOANS
1% CONSTRUCTION LOANS
Total Deposits by Type (at December 31, 2009)
AVERAGE COST OF INTEREST BEARING DEPOSITS OF 1.37%
Total Deposits by Type (at December 31, 2009)
Total Deposits by Type (at December 31, 2009)
AVERAGE COST OF INTEREST BEARING DEPOSITS OF 1.37%
AVERAGE COST OF INTEREST BEARING DEPOSITS OF 1.37%
15% SAVINGS & NOW
40% MONEY MARKETS
18% CERTIFICATES OF DEPOSIT
27% DEMAND DEPOSITS
15% SAVINGS & NOW
40% MONEY MARKETS
18% CERTIFICATES OF DEPOSIT
27% DEMAND DEPOSITS
page 3
40% MONEY MARKETS
27% DEMAND DEPOSITS
18% CERTIFICATES OF DEPOSIT
15% SAVINGS & NOW
Over the past 100 years, we have experienced economic cycles of varying magnitude: booms and bubbles,
depressions and recessions. Through each challenge, our Company has emerged stronger and more resilient. This
past year is another example of this success, and despite a continuing weak economy, we achieved significant cor-
porate and financial milestones, while remaining true to our mission. We successfully opened a new office in Shirley,
a new full-service branch in East Hampton and have plans for offices in Center Moriches, Deer Park and Patchogue.
Our 2009 financial results were again strong. We recorded significant growth in net interest income, offset to
a degree by additional expenses for potential problem loans and costs associated with higher levels of FDIC deposit
insurance and expenses related to building our infrastructure and branch network. Our customer base grew and
assets expanded, as we continued providing loans to our local communities, funded by deposits gathered through
our branch network. Our business model, in some ways, remains simple. We provide locally based banking services:
loans, deposits, cash management and electronic banking in the communities we serve to customers we know.
Decisions are made locally by decision makers who understand the market.
During 2009, we fortified our balance sheet by adding $16 million in new capital, accomplished through a
successful private placement. This was a local initiative completed without the assistance or cost of retaining out-
side firms, a testament to the confidence of our major constituents: shareholders, customers and the community.
This additional capital will fuel our growth and help to strengthen our organization by supporting lending and
investments within the communities we serve. While many banks in this economic downturn curtailed lending, we
continued to seek qualified loan opportunities. Finally, during the past year we created a dividend reinvestment
Peconic Landing
Greenport
Southold
Mattituck
Cutchogue
Sag Harbor
Wading River
East Hampton Village
East Hampton
Montauk
Deer Park
Patchogue
Shirley
Hampton Bays
Bridgehampton
Southampton
Southampton Village
Westhampton Beach
Center Moriches
Coming Soon: Center Moriches, Deer Park, Patchogue
page 4
BRIDGE BANCoRP, INC. // 2009 Annual Report
plan, offering shareholders the opportunity to more fully participate in the growth of our Company. Over 10% of
shareholders are now enrolled and we expect this will generate significant additional capital, annually.
Our continued success did not go unnoticed. We were pleased to again receive recognition as one of the
preeminent community banks in the country. For the second consecutive year we were named an “All Star”, one of
only 32 banks, out of 8,000, singled out by Sandler O’Neill, a prominent investment firm specializing in the banking
industry. We were again named a top performing bank by the ICBA (Independent Community Bankers Association).
And, following our 2008 listing on NASDAQ, we were added to the Russell 3000. The Russell indexes are widely
followed broad market indexes representing the 3,000 largest U.S. stocks, in terms of market capitalization. Bridge
Bancorp’s addition in June 2009 demonstrated the increased market value of our Company.
Recognizing the legacy of our founders, we approach the marketplace with clear focus and direction. Our
competition, growing larger, more impersonal and distant, remains distracted by a myriad of issues related to the
economic turmoil of the past several years. This, along with the uneven economic landscape, provides tremendous
opportunities for progressive, locally managed institutions. We continue to add customer relationships in both
new and mature markets. These new customers, disenchanted and frustrated by the larger banks, are receptive to
working with strong, local community banks.
In 1910, the year we were founded, customers viewed their banker as a partner in their business. In return, the
banker knew their name, understood their business and provided personal access to decision makers. Over the
past year, we have seen customers return to our Company from the large institutions, where they were lost and
Bridge Bancorp rings the NASDAQ® closing bell, March 5, 2010 as part of the 100th Anniversary Celebration.
page 5
marginalized. Our “old fashioned” way of doing business, when paired with technologies like online banking and bill
pay, remote deposit capture, and other electronic services is a strength. In 2009, our technology team continued to
develop and improve our offerings based on testing, experience and customer feedback. Our personal approach to
banking paired with technology, provides a unique customer expe rience evidenced by the growth of customer rela-
tionships over the past year.
Our continued growth and ability to deliver shareholder value is the result of the successful collaboration of
a dedicated management team, a motivated staff and a supportive and insightful board of directors, including our
newest member, Rudolph J. Santoro, CPA. The talent and commitment of our team is characterized by their tenure
of service. Over the past century, we have been guided by individuals whose core values and experiences built a
solid foundation for our future. For over 40 years, Tom Halsey has been a valued member of our board, and we wish
him well as he retires this year.
Community connection continues to be at the core of this Company. Our involvement in supporting and
assisting local non-profit organizations is a fundamental aspect of our reputation. In 2009, we were proud to raise
funds for local food pantries, whose resources were stressed by the economic downturn. Employees and customers
reached into their own pockets to raise funds and collect hundreds of pounds of food. Our staff logs thousands of
hours every year in volunteer efforts and we are proud of their involvement.
Looking ahead at the economy and the business environment, the forecast is still cloudy and difficult
to predict. The real estate and housing market, while showing signs of improvement, remain areas of concern.
Bank Headquarters, Bridgehampton, Main Street, 1930’s.
Former Bank Headquarters, Bridgehampton, Main Street, 2009.
page 6
BRIDGE BANCORP, INC. // 2009 Annual Report
The employment picture including anemic job creation and a high jobless rate represent a headwind to economic
recovery. Concerns related to government policies, proposed regulation and taxes create enormous uncertainty for
businesses and consumers as they evaluate their economic well-being and future plans.
In assessing the local economy, I rely heavily on personal contact with customers, who I believe are begin-
ning to sense an upturn. We are well positioned to capitalize on and embrace market opportunities. We continue to
follow a clear and defined path bringing our successful model of community banking to new markets. Our branches
are built around talented, respected bankers with solid relationships in their communities. They establish credibility
for the Bank in new markets, where our name is less of a brand, and attract customers who appreciate our style of
personal, service-oriented banking. We will continue a prudent cost-management program and improve efficiency,
while maintaining and developing the best professional team possible. Embracing our history, we will continue to
employ the successful strategies that have delivered value to our shareholders yesterday, today and, we believe, into
the next century.
As we begin this historic year, we can proudly say we are 100 Years Strong.
Sincerely,
Kevin M. O’Connor
President and Chief Executive Officer
A Sincere Thank You
For over 40 years, Bridgehampton National Bank has been privileged to have the guidance and
counsel of Tom Halsey, a member of our Board of Directors. A true son of the east end of Long Island,
his family have been local farmers for 13 generations. A graduate of Bridgehampton High School in
1957, he followed with an agricultural engineering degree from Cornell University in 1961. He
brought his education back with him and today, with his son, runs Halsey Farm & Nursery. In 1968,
he became a member of the Bridgehampton National Bank Board of Directors. Through out the years,
he has been proactively involved in local government, serving as a member of the Agriculture Advisory
Commission that created the innovative concept of municipal purchase of development rights to help
protect valuable agricultural lands from the pressure of residential development. He also served as
chairman of the Southampton Town Planning Board, a member of the Nassau/Suffolk regional
planning board and was elected a Southampton Town Councilperson. His departure from the board
will give him more time for his other passions: ice-boat racing, surf fishing, golf and, of course, his five
grandchildren. He and his wife, Dot, have two children, Adam Halsey and Jocelyn Armus.
“ If retiring means giving
up farming, I hope I
never retire.”
Tom Halsey
Board Member Since 1968
page 7
BANKING OFFICES
Headquarters
631.537.1000
BridgeHampton
631.537.8834
CutCHogue
631.734.5002
east Hampton
631.324.8480
east Hampton Village
631.324.8481
greenport
631.477.0220
Hampton Bays
631.728.9041
mattituCk
631.298.0190
montauk
631.668.6400
peConiC landing
(greenport)
631.477.8150
sag HarBor
631.725.6622
sHirley
631.281.1245
soutHampton,
County road 39
631.283.1286
soutHampton Village
631.287.6504
soutHold
631.765.1500
Wading riVer
631.929.4250
WestHampton BeaCH
631.288.7756
www.bridgenb.com
Bridge aBstraCt llC
2200 Montauk Highway
P.O. Box 3031
Bridgehampton, NY 11932
631.537.5750
www.bridgeabstractllc.com
INVESTOR RELATIONS
Exchange: NASDAQ®
Symbol: BDGE
Howard H. Nolan, CPA
Senior Executive Vice President and Corporate Secretary
2200 Montauk Highway, P.O. Box 3005
Bridgehampton, NY 11932
631.537.1000
hnolan@bridgenb.com
Shareholders seeking information about the Company may access
presentations, press releases and government filings through the
Bank’s website: www.bridgenb.com.
STOCK TRANSFER AGENT AND REGISTRAR
Registrar and Transfer Co.
10 Commerce Drive
Cranford, NJ 07016
800.368.5948
www.rtco.com
Shareholders that would like to make changes to the name, address or
ownership of their stock, consolidate accounts, eliminate duplicate
mailings, or replace lost certificates or dividend checks, should contact
Registrar and Transfer Co.
SECURITIES COUNSEL
Luse Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, NW, Suite 400
Washington, DC 20015-2035
NOTICE OF ANNUAL MEETING
The Annual Meeting of Shareholders is scheduled for
11:00 a.m. on Friday, May 7, 2010 in the Community Room,
Bridgehampton National Bank, 2200 Montauk Highway,
Bridgehampton, NY 11932.
Harvesting Potatoes, 1930’s
Harvest, 2009
page 8
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(cid:95)(cid:95)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
Commission File No. 000-34096
BRIDGE BANCORP, INC.
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of incorporation or organization)
11-2934195
(IRS Employer Identification Number)
2200 MONTAUK HIGHWAY, BRIDGEHAMPTON, NEW YORK
(Address of principal executive offices)
11932
(Zip Code)
Registrant’s telephone number, including area code: (631) 537-1000
Securities registered under Section 12 (b) of the Exchange Act:
Title of each class
Common Stock, Par Value of $0.01 Per Share
Name of each exchange on which registered
The Nasdaq Stock Market, LLC
Securities registered under Section 12 (g) of the Exchange Act:
(Title of Class)
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes (cid:134)(cid:3)No (cid:95)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes (cid:134)(cid:3)No (cid:95)(cid:3)
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 (cid:95)(cid:3)No (cid:134)
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 [ ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) of this chapter is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:95)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer (cid:134)(cid:3)Accelerated filer (cid:95)(cid:3)Non-accelerated filer (cid:134)(cid:3)Smaller reporting company (cid:134)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:134)(cid:3)No (cid:95)
The approximate aggregate market value of the voting stock held by non-affiliates of the Registrant, based upon the closing price of
the Common Stock on June 30, 2009, was $155,793,371.
The number of shares of the Registrant’s common stock outstanding on March 8, 2010 was 6,284,070.
Portions of the following documents are incorporated into the Parts of this Report on Form 10-K indicated below:
The Registrant’s definitive Proxy Statement for the 2010 Annual Meeting to be filed pursuant to Regulation 14A on or before April
30, 2010 (Part III).
TABLE OF CONTENTS
PART I
Item 1
Item 1A
Item 1B
Item 2
Item 3
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Item 4
Reserve
PART II
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
PART III
Item 10
Item 11
Item 12
Item 13
Item 14
PART IV
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item 15
Exhibits and Financial Statement Schedules
SIGNATURES
EXHIBIT INDEX
2
7
9
9
9
9
10
12
13
30
32
63
63
63
63
63
64
64
64
64
65
66
PART I
Item 1. Business
Bridge Bancorp, Inc. (the “Registrant” or “Company”) is a registered bank holding company for The Bridgehampton National Bank
(the “Bank”). The Bank was established in 1910 as a national banking association and is headquartered in Bridgehampton, New York.
The Registrant was incorporated under the laws of the State of New York in 1988, at the direction of the Board of Directors of the
Bank for the purpose of becoming a bank holding company pursuant to a plan of reorganization; under which the former shareholders
of the Bank became the shareholders of the Company. Since commencing business in March 1989, after the reorganization, the
Registrant has functioned primarily as the holder of all of the Bank’s common stock. In May 1999, the Bank established a real estate
investment trust subsidiary, Bridgehampton Community, Inc. (“BCI”) as an operating subsidiary. The assets transferred to BCI are
viewed by the bank regulators as part of the Bank’s assets in consolidation. The operations of the Bank also include Bridge Abstract
LLC (“Bridge Abstract”), a wholly owned subsidiary of the Bank which is a broker of title insurance services. In October 2009, the
Company formed Bridge Statutory Capital Trust II (the “Trust”) a wholly owned subsidiary, which sold $16.0 million of 8.5%
cumulative convertible Trust Preferred Securities (the “Trust Preferred Securities”) in a private placement to accredited investors.
The Bank operates sixteen branches on eastern Long Island. Federally chartered in 1910, the Bank was founded by local farmers and
merchants. For nearly a century, the Bank has maintained its focus on building customer relationships in this market area. The mission
of the Company is to grow through the provision of exceptional service to its customers, its employees, and the community. The
Company strives to achieve excellence in financial performance and build long term shareholder value. The Bank engages in full
service commercial and consumer banking business, including accepting time, savings and demand deposits from the consumers,
businesses and local municipalities surrounding its branch offices. These deposits, together with funds generated from operations and
borrowings, are invested primarily in: (1) commercial real estate loans; (2) home equity loans; (3) construction loans; (4) residential
mortgage loans; (5) secured and unsecured commercial and consumer loans; (6) FHLB, FNMA, GNMA and FHLMC mortgage-
backed securities and collateralized mortgage obligations; (7) New York State and local municipal obligations; and (8) U.S
government sponsored entity (“U.S. GSE”) securities. The Bank also offers the CDARS program, providing up to $50.0 million of
FDIC insurance to its customers. In addition, the Bank offers merchant credit and debit card processing, automated teller machines,
cash management services, lockbox processing, online banking services, remote deposit capture, safe deposit boxes and individual
retirement accounts. Through its title insurance abstract subsidiary, the Bank acts as a broker for title insurance services. The Bank’s
customer base is comprised principally of small businesses, municipal relationships and consumer relationships.
The Bank employs 195 people on a full-time and part-time basis. The Bank provides a variety of employment benefits and considers
its relationship with its employees to be positive. In addition, the Company has an equity incentive plan under which it may issue
shares of the common stock of the Company.
All phases of the Bank’s business are highly competitive. The Bank faces direct competition from a significant number of financial
institutions operating in its market area, many with a statewide or regional presence, and in some cases, a national presence. There is
also competition for banking business from competitors outside of its market areas. Most of these competitors are significantly larger
than the Bank, and therefore have greater financial and marketing resources and lending limits than those of the Bank. The fixed cost
of regulatory compliance remains high for community banks as compared to their larger competitors that are able to achieve
economies of scale. The Bank considers its major competition to be local commercial banks as well as other commercial banks with
branches in the Bank’s market area. Other competitors include mortgage brokers and financial services firms other than financial
institutions such as investment and insurance companies. Increased competition within the Bank’s market areas may limit growth and
profitability. Additionally, as the Bank’s market area expands westward, competitive pressure in new markets is expected to be
strong. The title insurance abstract subsidiary also faces competition from other title insurance brokers as well as directly from the
companies that underwrite title insurance. In New York State, title insurance is obtained on most transfers of real estate and mortgage
transactions.
The Bank’s principal market area is located in Suffolk County, New York. Suffolk County is located on the eastern portion of Long
Island and has a population of approximately 1.5 million. Eastern Long Island is semi-rural. Surrounded by water and including the
Hamptons and North Fork, the region is a recreational destination for the New York metropolitan area, and a highly regarded resort
locale world-wide. While the local economy flourishes in the summer months as a result of the influx of tourists and second
homeowners, the year-round population has grown considerably in recent years, resulting in a reduction of the seasonal fluctuations in
the economy. Industries represented in the marketplace include retail establishments; construction and trades; restaurants and bars;
lodging and recreation; professional entities; real estate; health services; passenger transportation and agricultural and related
businesses. During the last decade, the Long Island wine industry has grown with an increasing number of new wineries and vineyards
locating in the region each year. The vast majority of businesses are considered small businesses employing fewer than ten full-time
employees. In recent years, more national chains have opened retail stores within the villages on the north and south forks of the
island. Major employers in the region include the municipalities, school districts, hospitals, and financial institutions.
Page -2-
Since 2007, the Bank has opened five new branches. In January 2007, the Bank opened a branch in the Village of Southampton; in
February 2007, in Cutchogue; and in September 2007, the Bank opened its first branch in the Town of Riverhead, located in Wading
River. During 2009, the Bank opened two new branches. In April 2009, the Bank opened a new branch in Shirley and in December
2009, the Bank opened a new full service branch facility in the Village of East Hampton. The opening of the branch facilities in
Wading River and Shirley, move the Bank geographically westward and demonstrate our commitment to traditional growth through
branch expansion. In November 2008, the Bank received approval from the Office of the Comptroller of the Currency (“OCC”) to
open a new branch facility in Deer Park, New York. In addition, in July 2009, the Bank received approval from the OCC to open a
new branch in Center Moriches, New York, and in March 2010, the Bank received approval from the OCC to open a new branch in
Patchogue, New York. The Bank anticipates opening the Center Moriches branch in the first half of 2010. The Deer Park and
Patchogue branch locations are expected to open during the second half of 2010.
The Bank routinely adds to its menu of products and services, continually meeting the needs of consumers and businesses. We believe
positive outcomes in the future will result from the expansion of our geographic footprint, investments in infrastructure and
technology, such as BridgeNEXUS, our remote deposit capture product, lockbox processing, and continued focus on placing our
customers first. In January 2009, the Bank launched Bridge Investment Services, offering a full range of investment products and
services through a third party broker dealer. The Bank plans to roll out its new commercial online bill paying service, as well as a new
mobile banking product during the first half of 2010.
The Company, the Bank and its subsidiaries with the exception of the real estate investment trust, which files its own federal and state
tax return, report their income on a consolidated basis using the accrual method of accounting and are subject to federal and state
income taxation. In general, banks are subject to federal income tax in the same manner as other corporations. However, gains and
losses realized by banks from the sale of available for sale securities are generally treated as ordinary income, rather than capital gains
or losses. The Bank is subject to the New York State Franchise Tax on Banking Corporations based on certain criteria. The taxation of
net income is similar to federal taxable income subject to certain modifications.
REGULATION AND SUPERVISION
The Bridgehampton National Bank
The Bank is a national bank organized under the laws of the United States of America. The lending, investment, and other business
operations of the Bank are governed by federal law and regulations and the Bank is prohibited from engaging in any operations not
specifically authorized by such laws and regulations. The Bank is subject to extensive regulation by the Office of the Comptroller of
the Currency (“OCC”) and to a lesser extent by the Federal Deposit Insurance Corporation (“FDIC”), as its deposit insurer as well as
by the Board of Governors of the Federal Reserve System. The Bank’s deposit accounts are insured up to applicable limits by the
FDIC under its Deposit Insurance Fund (“DIF”). A summary of the primary laws and regulations that govern the operations of the
Bank are set forth below.
Loans and Investments
There are no restrictions on the type of loans a national bank can originate and/or purchase. However, OCC regulations govern the
Bank’s investment authority. Generally, a national bank is prohibited from investing in corporate equity securities for its own account.
Under OCC regulations, a national bank may invest in investment securities, which is generally defined as securities in the form of a
note, bond or debenture. The OCC classifies investment securities into five different types and, depending on its type, a national bank
may have the authority to deal in and underwrite the security. The OCC has also permitted national banks to purchase certain
noninvestment grade securities that can be reclassified and underwritten as loans.
Lending Standards
The federal banking agencies adopted uniform regulations prescribing standards for extensions of credit that are secured by liens on
interests in real estate or made for the purpose of financing the construction of a building or other improvements to real estate. Under
these regulations, all insured depository institutions, such as the Bank, must adopt and maintain written policies that establish
appropriate limits and standards for extensions of credit that are secured by liens or interests in real estate or are made for the purpose
of financing permanent improvements to real estate. These policies must establish loan portfolio diversification standards, prudent
underwriting standards (including loan-to-value limits) that are clear and measurable, loan administration procedures, and
documentation, approval and reporting requirements. The real estate lending policies must reflect consideration of the Interagency
Guidelines for Real Estate Lending Policies that have been adopted by the federal bank regulators.
Federal Deposit Insurance
The Bank is a member of the DIF, which is administered by the FDIC. Deposit accounts at the Bank are insured by the FDIC,
generally up to a maximum of $100,000 for each separately insured depositor and up to a maximum of $250,000 for self-directed
retirement accounts. However, the FDIC increased the deposit insurance available on all deposit accounts to $250,000, effective until
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June 30, 2010. In addition, certain non interest-bearing transaction accounts maintained with financial institutions participating in the
FDIC’s Temporary Liquidity Guarantee Program are fully insured regardless of the dollar amount until June 30, 2010. The Bank has
opted to participate in the FDIC’s Temporary Liquidity Guarantee Program. See “Temporary Liquidity Guarantee Program” below.
The FDIC imposes an assessment against all depository institutions for deposit insurance. This assessment is based on the risk
category of the institution and, prior to 2009, ranged from 5 to 43 basis points of the institution’s deposits. In 2008, as a result of a
decrease in the reserve ratio of the DIF, the FDIC issued a proposed rule establishing a Restoration Plan for the DIF. On December 22,
2008, the FDIC published a final rule raising the current deposit insurance assessment rates uniformly for all institutions by 7 basis
points (to a range from 12 to 50 basis points) for the first quarter of 2009. However, the FDIC approved an extension of the comment
period on the parts of the proposed rulemaking that would become effective on April 1, 2009. On February 27, 2009, the FDIC issued
a second final rule, to be effective April 1, 2009, to change the way that the FDIC’s assessment system differentiates for risk and to set
new assessment rates beginning with the second quarter of 2009. In May 2009, the FDIC issued a final rule to impose an emergency
special assessment of 5 basis points on all banks based on their total assets less tier one capital as of June 30, 2009. The special
assessment was payable on September 30, 2009. During the second quarter of 2009, the Company recorded an expense of $375,000
related to the FDIC special assessment. On November 12, 2009, the FDIC issued a final rule that required insured institutions to
prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012. The FDIC
also adopted a uniform 3 basis point increase in assessment rates effective on January 1, 2011. The Company’s prepayment of FDIC
assessments for 2010, 2011 and 2012 was $3.8 million which will be amortized to expense over three years.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is
in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition
imposed by the FDIC. We do not know of any practice, condition or violation that might lead to termination of deposit insurance.
In addition to the FDIC assessments, the Financing Corporation (FICO) is authorized to impose and collect, with the approval of the
FDIC, assessments for anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to
recapitalize the former Federal Savings and Loan Insurance Corporation. The bonds issued by the FICO are due to mature in 2017
through 2019. For the quarter ended December 31, 2009, the annualized FICO assessment was equal to 1.10 basis points for each
$100 in domestic deposits maintained at an institution.
Temporary Liquidity Guarantee Program
On October 14, 2008, the FDIC announced a new program – the Temporary Liquidity Guarantee Program. This program has two
components. One, the Debt Guarantee Program (“DGP”), guarantees newly issued senior unsecured debt of the participating
organizations, up to certain limits established for each institution, issued between October 14, 2008 and October 31, 2009. The FDIC
will pay the unpaid principal and interest on an FDIC-guaranteed debt instrument upon the uncured failure of the participating entity
to make a timely payment of principal or interest in accordance with the terms of the instrument. The guarantee will remain in effect
until December 31, 2012. In return for the FDIC’s guarantee, participating institutions will pay the FDIC a fee based on the amount
and maturity of the debt. The Bank has opted to participate in the DGP component of the Temporary Liquidity Guarantee Program
however, there is no guaranteed debt issued to date. In order to ensure a smooth phase out of the DGP, the FDIC established a limited
emergency guarantee facility. If an institution is unable to issue non-guaranteed debt to replace the maturing senior unsecured debt as
of October 31, 2009, the institution can apply for an emergency guarantee facility. If the application is approved, the FDIC will
guarantee the senior unsecured debt issued on or before April 30, 2010. Participating institutions will pay the FDIC a fee equal to an
annualized assessment rate of a minimum of 300 basis points.
The other component of the program provides full federal deposit insurance coverage for non-interest bearing transaction deposit
accounts, regardless of dollar amount, until June 30, 2010. An annualized 10 basis point assessment on balances in non interest-
bearing transaction accounts that exceed the existing deposit insurance limit of $250,000 will be assessed on a quarterly basis to
insured depository institutions that have not opted out of this component of the Temporary Liquidity Guarantee Program. The Bank
has opted to participate in this component of the Temporary Liquidity Guarantee Program.
Capitalization
Under OCC regulations, all national banks are required to comply with minimum capital requirements. For an institution determined
by the OCC to not be anticipating or experiencing significant growth and to be, in general, a strong banking organization, rated
composite 1 under the Uniform Financial Institutions Ranking System established by the Federal Financial Institutions Examination
Council, the minimum capital leverage requirement is a ratio of Tier I capital to total assets of 3%. For all other institutions, the
minimum leverage capital ratio is not less than 4%. Tier I capital is the sum of common shareholders’ equity, non-cumulative
perpetual preferred stock (including any related surplus) and minority investments in certain subsidiaries, less intangible assets (except
for certain servicing rights and credit card relationships) and certain other specified items.
The OCC regulations require national banks to maintain certain levels of regulatory capital in relation to regulatory risk-weighted
assets. The ratio of regulatory capital to regulatory risk-weighted assets is referred to as a bank’s “risk-based capital ratio.” Risk-based
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capital ratios are determined by allocating assets and specified off-balance sheet items (including recourse obligations, direct credit
substitutes and residual interests) to four risk-weighted categories ranging from 0% to 100%, with higher levels of capital being
required for the categories perceived as representing greater risk. For example, under the OCC’s risk-weighting system, cash and
securities backed by the full faith and credit of the U.S. government are given a 0% risk weight, loans secured by one-to-four family
residential properties generally have a 50% risk weight, and commercial loans have a risk weighting of 100%.
National banks, such as the Bank, must maintain a minimum ratio of total capital to risk-weighted assets of at least 8%, of which at
least one-half must be Tier I capital. Total capital consists of Tier I capital plus Tier 2 or supplementary capital items, which include
allowances for loan losses in an amount of up to 1.25% of risk-weighted assets, cumulative preferred stock and certain other capital
instruments, and a portion of the net unrealized gain on equity securities. The includable amount of Tier 2 capital cannot exceed the
amount of the institution’s Tier I capital. Banks that engage in specified levels of trading activities are subject to adjustments in their
risk based capital calculation to ensure the maintenance of sufficient capital to support market risk.
The OCC, along with the other federal banking agencies, has adopted a regulation providing that the agencies will take into account
the exposure of a bank’s capital and economic value to changes in interest rate risk in assessing a bank’s capital adequacy. The OCC
also has authority to establish individual minimum capital requirements in appropriate cases upon a determination that an institution’s
capital level is, or is likely to become, inadequate in light of the particular circumstances.
Safety and Soundness Standards
Each federal banking agency, including the OCC, has adopted guidelines establishing general standards relating to internal controls,
information and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality,
earnings and compensation, fees and benefits. In general, the guidelines require, among other things, appropriate systems and practices
to identify and manage the risks and exposures specified in the guidelines. The guidelines prohibit excessive compensation as an
unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to
the services performed by an executive officer, employee, director, or principal shareholder.
Prompt Corrective Regulatory Action
Federal law requires, among other things, that federal bank regulatory authorities take “prompt corrective action” with respect to
institutions that do not meet minimum capital requirements. For these purposes, the statute establishes five capital tiers: well
capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.
The OCC may order national banks which have insufficient capital to take corrective actions. For example, a bank which is
categorized as “undercapitalized” would be subject to growth limitations and would be required to submit a capital restoration plan,
and a holding company that controls such a bank would be required to guarantee that the bank complies with the restoration plan. A
“significantly undercapitalized” bank would be subject to additional restrictions. National banks deemed by the OCC to be “critically
undercapitalized” would be subject to the appointment of a receiver or conservator.
Dividends
Under federal law and applicable regulations, a national bank may generally declare a dividend, without approval from the OCC, in an
amount equal to its year-to-date net income plus the prior two years’ net income that is still available for dividend.
Transactions with Affiliates and Insiders
Sections 23A and 23B of the Federal Reserve Act govern transactions between a national bank and its affiliates, which includes the
Company. The Federal Reserve Board has adopted Regulation W, which comprehensively implements and interprets Sections 23A
and 23B, in part by codifying prior Federal Reserve Board interpretations under Sections 23A and 23B.
An affiliate of a bank is any company or entity that controls, is controlled by or is under common control with the bank. A subsidiary
of a bank that is not also a depository institution or a “financial subsidiary” under federal law is not treated as an affiliate of the bank
for the purposes of Sections 23A and 23B; however, the OCC has the discretion to treat subsidiaries of a bank as affiliates on a case-
by-case basis. Sections 23A and 23B limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with
any one affiliate to an amount equal to 10% of such bank’s capital stock and surplus, and limit all such transactions with all affiliates
to an amount equal to 20% of such capital stock and surplus. The statutory sections also require that all such transactions be on terms
that are consistent with safe and sound banking practices. The term “covered transaction” includes the making of loans, purchase of
assets, issuance of guarantees and other similar types of transactions. Further, most loans by a bank to any of its affiliates must be
secured by collateral in amounts ranging from 100 to 130 percent of the loan amounts. In addition, any covered transaction by an
association with an affiliate and any purchase of assets or services by an association from an affiliate must be on terms that are
substantially the same, or at least as favorable, to the bank as those that would be provided to a non-affiliate.
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A bank’s loans to its executive officers, directors, any owner of more than 10% of its stock (each, an insider) and any of certain
entities affiliated with any such person (an insider’s related interest) are subject to the conditions and limitations imposed by Section
22(h) of the Federal Reserve Act and the FRB’s Regulation O thereunder. Under these restrictions, the aggregate amount of the loans
to any insider and the insider’s related interests may not exceed the loans-to-one-borrower limit applicable to national banks. All loans
by a bank to all insiders and insiders’ related interests in the aggregate may not exceed the bank’s unimpaired capital and unimpaired
surplus. With certain exceptions, loans to an executive officer, other than loans for the education of the officer’s children and certain
loans secured by the officer’s residence, may not exceed the greater of $25,000 or 2.5% of the bank’s unimpaired capital and
unimpaired surplus, but in no event more than $100,000. Regulation O also requires that any proposed loan to an insider or a related
interest of that insider be approved in advance by a majority of the board of directors of the bank, with any interested director not
participating in the voting, if such loan, when aggregated with any existing loans to that insider and the insider’s related interests,
would exceed either $500,000 or the greater of $25,000 or 5% of the bank’s unimpaired capital and surplus. Generally, such loans
must be made on substantially the same terms as, and follow credit underwriting procedures that are no less stringent than, those that
are prevailing at the time for comparable transactions with other persons and must not present more than a normal risk of collectibility.
An exception is made for extensions of credit made pursuant to a benefit or compensation plan of a bank that is widely available to
employees of the bank and that does not give any preference to insiders of the bank over other employees of the bank.
Examinations and Assessments
The Bank is required to file periodic reports with and is subject to periodic examination by the OCC. Federal regulations generally
require annual on-site examinations for all depository institutions and annual audits by independent public accountants for all insured
institutions. The Bank is required to pay an annual assessment to the OCC to fund its supervision.
Community Reinvestment Act
Under the Community Reinvestment Act (“CRA”), the Bank has a continuing and affirmative obligation consistent with its safe and
sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA
does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to
develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The
CRA requires the OCC in connection with its examination of the Bank, to assess its record of meeting the credit needs of its
community and to take that record into account in its evaluation of certain applications by the Bank. For example, the regulations
specify that a bank’s CRA performance will be considered in its expansion (e.g., branching) proposals and may be the basis for
approving, denying or conditioning the approval of an application. As of the date of its most recent regulatory examination, the Bank
was rated “satisfactory” with respect to its CRA compliance.
USA PATRIOT Act
The USA PATRIOT Act of 2001 gave the federal government new powers to address terrorist threats through enhanced domestic
security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements.
The USA PATRIOT Act also required the federal banking agencies to take into consideration the effectiveness of controls designed to
combat money laundering activities in determining whether to approve a merger or other acquisition application of a member
institution. Accordingly, if the Bank engages in a merger or other acquisition, our controls designed to combat money laundering
would be considered as part of the application process. The Bank has established policies, procedures and systems designed to comply
with these regulations.
Bridge Bancorp, Inc.
The Company, as a bank holding company controlling the Bank, is subject to the Bank Holding Company Act of 1956, as amended
(“BHCA”), and the rules and regulations of the Federal Reserve Board under the BHCA applicable to bank holding companies. The
Company is required to file reports with, and otherwise comply with the rules and regulations of the Federal Reserve Board.
These regulatory authorities have extensive enforcement authority over the institutions that they regulate to prohibit or correct
activities that violate law, regulation or a regulatory agreement or which are deemed to be unsafe or unsound banking practices.
Enforcement actions may include the appointment of a conservator or receiver, the issuance of a cease and desist order, the
termination of deposit insurance, the imposition of civil money penalties on the institution, its directors, officers, employees and
institution-affiliated parties, the issuance of directives to increase capital, the issuance of formal and informal agreements, the removal
of or restrictions on directors, officers, employees and institution-affiliated parties, and the enforcement of any such mechanisms
through restraining orders or other court actions. Any change in laws and regulations, whether by the OCC, the FDIC, the Federal
Reserve Board or through legislation, could have a material adverse impact on the Bank and the Company and their operations and
stockholders. Additional information on regulatory requirements is set forth in Note 14 to the Consolidated Financial Statements.
The Company had nominal results of operations for 2009, 2008 and 2007 on a parent-only basis. In 2009, the Company completed
the private placement of $16.0 million in aggregate liquidation amount of 8.50% cumulative convertible trust preferred securities (the
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"TPS”), through its subsidiary, Bridge Statutory Capital Trust II. The TPS have a liquidation amount of $1,000 per security and the
TPS shares are convertible into our common stock, at an effective conversion price of $31 per share. The TPS mature in 30 years but
are callable by the company at par any time after September 30, 2014. During 2008, the Company received approval and began
trading on the NASDAQ Global Select Market under the symbol “BDGE”. Equity incentive plan grants of stock options and stock
awards are recorded directly to the holding company. The Company’s sources of funds are dependent on dividends from the Bank, its
own earnings, additional capital raised and borrowings. The information in this report reflects principally the financial condition and
results of operations of the Bank. The Bank’s results of operations are primarily dependent on its net interest income. The Bank also
generates non interest income, such as fee income on deposit accounts and merchant credit and debit card processing programs,
income from its title insurance abstract subsidiary, and net gains on sales of securities and loans. The level of its non interest expenses,
such as salaries and benefits, occupancy and equipment costs, other general and administrative expenses, expenses from its title
insurance abstract subsidiary, and income tax expense, further affects the Bank’s net income.
The Company files certain reports with the Securities and Exchange Commission (“SEC”) under the federal securities laws. The
Company’s operations are also subject to extensive regulation by other federal, state and local governmental authorities and it is
subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of its operations.
Management believes that the Company is in substantial compliance, in all material respects, with applicable federal, state and local
laws, rules and regulations. Because the Company’s business is highly regulated, the laws, rules and regulations applicable to it are
subject to regular modification and change. There can be no assurance that these proposed laws, rules and regulations, or any other
laws, rules or regulations, will not be adopted in the future, which could make compliance more difficult or expensive or otherwise
adversely affect the Company’s business, financial condition or prospects.
OTHER INFORMATION
Through a link on the Investor Relations section of the Bank’s website of www.bridgenb.com, copies of the Company’s Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to those reports filed or
furnished pursuant to Section 13(a) for 15(d) of the Exchange Act, are made available, free of charge, as soon as reasonably
practicable after electronically filing such material with, or furnishing it to, the SEC. Copies of such reports and other information also
are available at no charge to any person who requests them or at www.sec.gov. Such requests may be directed to Bridge Bancorp, Inc.,
Investor Relations, 2200 Montauk Highway, PO Box 3005, Bridgehampton, NY 11932, (631) 537-1000.
Item 1A. Risk Factors
Concentration of Loan Portfolio
The Bank generally invests a significant portion of its assets in loans secured by commercial and residential real estate properties
located in eastern Long Island. A downturn in real estate values and economic conditions on eastern Long Island could have a
significant impact on the value of collateral securing the loans as well as the ability for the repayment of loans. See a further
discussion in “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition
– Loans.”
Changes in Interest Rates Could Affect Profitability
The ability to earn a profit, like most financial institutions, depends on the net interest income, which is the difference between the
interest income that the Bank earns on its interest-bearing assets, such as loans and investments, and the interest expense that the Bank
pays on its interest-bearing liabilities, such as deposits. The Bank’s profitability depends on its ability to manage its assets and
liabilities during periods of changing market interest rates.
A sustained decrease in market interest rates could adversely affect the Bank’s earnings. When interest rates decline, borrowers tend to
refinance higher-rate, fixed-rate loans at lower rates. Under those circumstances, the Bank would not be able to reinvest those
prepayments in assets earning interest rates as high as the rates on those prepaid loans or in investment securities. In addition, the
majority of the Bank’s loans are at variable interest rates, which would adjust to lower rates.
In a period of rising interest rates, the interest income earned on the Bank’s assets may not increase as rapidly as the interest paid on
its liabilities. In an increasing interest rate environment, the Bank’s cost of funds is expected to increase more rapidly than interest
earned on its loan and investment portfolio as the primary source of funds is deposits with generally shorter maturities than those on
its loans and investments. This makes the balance sheet more liability sensitive in the short term.
Geographic Location and Competition
The Bank’s market area is located in Suffolk County on eastern Long Island and its customer base is mainly located in the towns of
East Hampton, Southampton, Southold and Riverhead. In 2009, the Bank expanded its market areas to include a branch in Shirley,
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New York located in the town of Brookhaven. During 2010 the Bank plans to continue to expand westward to Center Moriches and
Patchogue, New York located in the Town of Brookhaven and Deer Park, New York located within the town of Babylon. Competition
in the banking and financial services industry remains intense. The profitability of the Bank depends on the continued ability to
successfully compete. The Bank competes with commercial banks, savings banks, insurance companies, and brokerage and
investment banking firms. Many of our competitors have substantially greater resources and lending limits than the Bank and may
offer certain services that the Bank does not provide. In addition, competitors recently have been offering deposits at higher rates and
loans with lower fixed rates, more attractive terms and less stringent credit structures than the Bank has been willing to offer.
Furthermore, the high cost of living on the twin forks of eastern Long Island creates staff recruitment and retention challenges.
The Company’s Future Depends on Successful Growth of its Subsidiary
The Company’s primary business activity for the foreseeable future will be to act as the holding company of the Bank. Therefore, the
Company’s future profitability will depend on the success and growth of this subsidiary.
The Loss of Key Personnel Could Impair our Future Success
Our future success depends in part on the continued service of our executive officers, other key management, as well as our staff, and
on our ability to continue to attract, motivate, and retain additional highly qualified employees. The loss of services of one or more of
our key personnel or our inability to timely recruit replacements for such personnel, or to otherwise attract, motivate, or retain
qualified personnel could have an adverse effect on our business, operating results, and financial condition. In February 2008, the
Company’s Chief Retail Banking Officer (“CRBO”) resigned and in March 2008, the Company hired James Manseau as the
Company’s CRBO.
In addition, Kevin M. O’Connor was appointed to the Board of Directors in October 2007 and became President and Chief Executive
Officer effective January 1, 2008 succeeding Thomas J. Tobin. Mr. Tobin assumed his new role as President Emeritus and Advisor to
the Board effective January 1, 2008 through March 2, 2010, his retirement date. Effective as of March 3, 2010, Mr. Tobin was
retained on a part time basis as the co-chair of the Enterprise Risk Management Committee. Mr. Tobin remains a member of the
Board of Directors.
Highly Regulated Environment
The Bank and Company are subject to extensive regulation, supervision and examination by the OCC, FDIC, the Federal Reserve
Board and the SEC. Such regulation and supervision govern the activities in which a financial institution and its holding company may
engage and are intended primarily for the protection of the consumer. Recently regulators have intensified their focus on the USA
PATRIOT Act’s anti-money laundering and Bank Secrecy Act compliance requirements. In order to comply with regulations,
guidelines and examination procedures in this area as well as other areas of the Bank, we have been required to adopt new policies and
procedures and to install new systems. We cannot be certain that the policies, procedures, and systems we have in place are flawless
and there is no assurance that in every instance we are in full compliance with these requirements. Regulatory authorities have
extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the
operation of an institution. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, or
legislation, may have a material impact on our operations.
We May Be Adversely Affected By Current Economic and Market Conditions
The national and global economic downturn that began in 2007 has resulted in unprecedented levels of financial market volatility
which may depress the market value of financial institutions, limit access to capital or have a material adverse effect on the financial
condition or results of operations of banking companies. Since 2008 significant declines in the values of mortgage-backed securities
and derivative securities by financial institutions, government sponsored entities, and major commercial and investment banks has led
to decreased confidence in financial markets among borrowers, lenders, and depositors, as well as disruption and extreme volatility in
the capital and credit markets and the failure of some entities in the financial sector. As a result, many lenders and institutional
investors have reduced or ceased to provide funding to borrowers. While financial markets appear to be stabilizing and there are a few
positive signs of economic recovery including increased local real estate activity, economic uncertainty remains. Unemployment rates
are high and consumer confidence is low. While the timing of an economic recovery remains unknown this may have an adverse
affect on the Company. Turbulence in the capital and credit markets may adversely affect our liquidity and financial condition and the
willingness of certain counterparties and customers to do business with us.
Increases to the Allowance for Credit Losses May Cause Our Earnings to Decrease
Our customers may not repay their loans according to the original terms, and the collateral securing the payment of those loans may be
insufficient to pay any remaining loan balance. Hence, we may experience significant loan losses, which could have a material adverse
effect on our operating results. We make various assumptions and judgments about the collectibility of our loan portfolio, including
the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans.
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In determining the amount of the allowance for credit losses, we rely on loan quality reviews, past loss experience, and an evaluation
of economic conditions, among other factors. If our assumptions prove to be incorrect, our allowance for credit losses may not be
sufficient to cover losses inherent in our loan portfolio, resulting in additions to the allowance. Material additions to the allowance
would materially decrease our net income.
Bank regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or
loan charge-offs. Any increase in our allowance for credit losses or loan charge-offs as required by these regulatory authorities could
have a material adverse effect on our results of operations and/or financial condition.
Increases in FDIC Insurance Premiums May Cause Our Earnings to Decrease
The Emergency Economic Stabilization Act (“EESA”) temporarily increased the limit on FDIC coverage to $250,000 through June
30, 2010. In addition, we have enrolled in the Temporary Liquidity Guarantee Program for non interest bearing transaction deposit
accounts. On February 27, 2009, the FDIC issued a final rule, effective April 1, 2009, to change the way that the FDIC’s assessment
system differentiates for risk and to set new assessment rates beginning with the second quarter of 2009. In May 2009, the FDIC
issued a final rule to impose an emergency special assessment of 5 basis points on all banks based on their total assets less tier one
capital as of June 30, 2009. The special assessment was payable on September 30, 2009. During the second quarter of 2009, the
Company recorded an expense of $375,000 related to the FDIC special assessment. In November 2009, the FDIC issued a final rule
that required insured institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of
2010, 2011 and 2012. The FDIC also adopted a uniform 3 basis point increase in assessment rates effective on January 1, 2011. The
Company’s prepayment of FDIC assessments on December 31, 2009 was $3.8 million which will be amortized to expense over three
years. This, along with the full utilization or our assessment credit in early 2008 and the increase in FDIC insurance rates, caused the
premiums assessed by the FDIC to increase. These actions have significantly increased our expense in 2009 and will continue to affect
our earnings in future years as long as the increased premiums are in place.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
At present, the Registrant does not own or lease any property. The Registrant uses the Bank’s space and employees without separate
payment. Headquarters are located at 2200 Montauk Highway, Bridgehampton, New York 11932. The Bank’s internet address is
www.bridgenb.com.
All of the Bank’s properties are located in Suffolk County, New York. The Bank’s Main Office in Bridgehampton is owned. The Bank
also owns buildings that house its Montauk Branch located at 1 The Plaza, Montauk; its Southold Branch located at 54790 Main Road,
Southold; its Westhampton Beach Office at 194 Mill Road, Westhampton Beach; its Southampton Village Branch located at 150
Hampton Road, Southampton; and its East Hampton Village Branch located at 8 Gingerbread Lane, East Hampton. The Bank
currently leases out a portion of the Montauk building and the Westhampton Beach building. The Bank leases nine additional
properties on eastern Long Island as branch locations at 32845 Main Road, Cutchogue; 26 Park Place, East Hampton; 218 Front
Street, Greenport; 48 East Montauk Highway, Hampton Bays; Mattituck Plaza, Main Road, Mattituck; 2 Bay Street, Sag Harbor; 425
County Road 39A, Southampton; 6324 Route 25A, Wading River and 630 Montauk Highway, Shirley. Additionally, the Bank utilizes
space for a branch in the retirement community, Peconic Landing at 1500 Brecknock Road, Greenport. In 2008, the Bank entered into
a lease agreement for a branch in Deer Park, New York. In 2009, the Bank entered into a lease agreement for a branch in Center
Moriches, New York and in January 2010 the Bank entered into a lease agreement for a branch in Patchogue, New York. The Bank
has contractual rights to purchase real estate in the Town of Southold which will also be considered as a site for a future branch
facility.
Item 3. Legal Proceedings
The Registrant and its subsidiary are subject to certain pending and threatened legal actions that arise out of the normal course of
business. In the opinion of management at the present time, the resolution of any pending or threatened litigation will not have a
material adverse effect on its consolidated financial statements.
Item 4. Reserve
Page -9-
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
COMMON STOCK INFORMATION
The Company’s common stock was traded on the NASDAQ® over the counter bulletin board market under the symbol, “BDGE” until
June 2008 when it began trading on the NASDAQ Global Select Market. The following table details the quarterly high and low sale
prices of the Company’s common stock since it began trading on the NASDAQ Global Select Market and the high and low bid prices
for the previous periods, and the dividends declared for such periods.
At December 31, 2009 the Company had approximately 654 shareholders of record, not including the number of persons or entities
holding stock in nominee or the street name through various banks and brokers.
COMMON STOCK INFORMATION
By Quarter 2009
First
Second
Third
Fourth
By Quarter 2008
First
Second
Third
Fourth
Stock Prices
High
Low
Dividends
Declared
20.97
27.48
29.25
25.59
$
$
$
$
17.50
19.25
24.33
20.05
$
$
$
$
0.23
0.23
0.23
0.23
Stock Prices
High
Low
Dividends
Declared
24.00
22.75
22.50
21.75
$
$
$
$
20.24
17.75
19.00
17.78
$
$
$
$
0.23
0.23
0.23
0.23
$
$
$
$
$
$
$
$
Stockholders received cash dividends totaling $5.7 million in 2009 and $5.6 million in 2008. The ratio of dividends per share to net
income per share was 65.43% in 2009 compared to 64.74% in 2008.
Page -10-
PERFORMANCE GRAPH
Pursuant to the regulations of the SEC, the graph below compares the performance of the Company with that of the total return for the
NASDAQ® stock market and for certain bank stocks of financial institutions with an asset size $500 million to $1 billion, as reported
by SNL Financial L.C. from December 31, 2004 through December 31, 2009. The graph assumes the reinvestment of dividends in
additional shares of the same class of equity securities as those listed below.
Bridge Bancorp, Inc.
Total Return Performance
Bridge Bancorp, Inc.
NASDAQ Composite
SNL Bank $500M-$1B
160
140
120
100
80
60
40
e
u
l
a
V
x
e
d
n
I
12/31/04
12/31/05
12/31/06
12/31/07
12/31/08
12/31/09
Index
Bridge Bancorp, Inc.
NASDAQ Composite
SNL Bank $500M-$1B
Period Ending
12/31/04
100.00
100.00
100.00
12/31/05
83.47
101.37
104.29
12/31/06
84.13
111.03
118.61
12/31/07
88.46
121.92
95.04
12/31/08
70.50
72.49
60.90
12/31/09
95.27
104.31
58.00
ISSUER PURCHASES OF EQUITY SECURITIES
Total Number
of Shares
Purchased in
Month
Average
Price
Paid per
Share
—
—
—
—
—
—
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs-2006 (1)
141,959
141,959
141,959
Maximum Number (or
Approximate Dollar
Value) of Shares that
May Yet Be Purchased
Under the Plans or
Programs
167,041
167,041
167,041
Period
October 2009
November 2009
December 2009
(1)
-
-
-
The Board of Directors approved a stock repurchase program on March 27, 2006.
The Board of Directors approved repurchase of shares up to 309,000 shares.
There is no expiration date for the stock repurchase plan.
There is no stock repurchase plan that has expired or that has been terminated during the period ended December 31,
2009.
Page -11-
Item 6. Selected Financial Data
Five-Year Summary of Operations
(In thousands, except per share data and financial ratios)
Set forth below are selected consolidated financial and other data of the Company. The Company’s business is primarily the business
of the Bank. This financial data is derived in part from, and should be read in conjunction with, the Consolidated Financial Statements
of the Company.
December 31,
Selected Financial Data:
Securities available for sale
Securities, restricted
Securities held to maturity
Total loans
Total assets
Total deposits
Total stockholders’ equity
Years Ended December 31,
Selected Operating Data:
Total interest income
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Total non interest income
Total non interest expense
Income before income taxes
Income tax expense
Net income
December 31,
Selected Financial Ratios and Other Data:
Return on average equity
Return on average assets
Average equity to average assets
Dividend payout ratio
Diluted earnings per share
Basic earnings per share
Cash dividends declared per common share
2009
2008
2007
2006
2005
$ 306,112
1,205
77,424
448,038
897,257
793,538
61,855
$ 310,695
3,800
43,444
429,683
839,059
659,085
56,139
$ 187,384
2,387
5,836
375,236
607,424
508,909
51,109
$ 202,590
878
9,444
325,997
573,644
504,412
45,539
$ 182,801
1,377
10,012
302,264
533,444
468,025
46,651
$
$
$
$
$
43,368
7,815
35,553
4,150
31,403
6,174
24,765
12,812
4,049
8,763
15.58%
1.06%
6.80%
65.43%
1.43
1.44
0.92
$
$
$
$
$
39,620
9,489
30,131
2,000
28,131
6,064
21,157
13,038
4,288
8,750
16.29%
1.24%
7.62%
64.74%
1.43
1.44
0.92
$
$
$
$
$
35,864
10,437
25,427
600
24,827
5,678
18,168
12,337
4,043
8,294
17.47%
1.38%
7.91%
67.67%
1.36
1.37
0.92
$
$
$
$
$
32,030
8,337
23,693
85
23,608
4,413
16,002
12,019
3,851
8,168
17.68%
1.49%
8.41%
68.98%
1.33
1.33
0.92
$
$
$
$
$
28,713
4,319
24,394
300
24,094
5,105
14,647
14,552
4,929
9,623
20.15%
1.76%
8.71%
58.88%
1.53
1.54
0.91
Page -12-
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
This report may contain statements relating to the future results of the Company (including certain projections and business trends)
that are considered “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 (the “PSLRA”).
Such forward-looking statements, in addition to historical information, which involve risk and uncertainties, are based on the beliefs,
assumptions and expectations of management of the Company. Words such as “expects,” “believes,” “should,” “plans,” “anticipates,”
“will,” “potential,” “could,” “intend,” “may,” “outlook,” “predict,” “project,” “would,” “estimates,” “assumes,” “likely,” and
variations of such similar expressions are intended to identify such forward-looking statements. Examples of forward-looking
statements include, but are not limited to, possible or assumed estimates with respect to the financial condition, expected or anticipated
revenue, and results of operations and business of the Company, including earnings growth; revenue growth in retail banking, lending
and other areas; origination volume in the Company’s consumer, commercial and other lending businesses; current and future capital
management programs; non-interest income levels, including fees from the abstract subsidiary and banking services as well as product
sales; tangible capital generation; market share; expense levels; and other business operations and strategies. For this presentation, the
Company claims the protection of the safe harbor for forward-looking statements contained in the PSLRA.
Factors that could cause future results to vary from current management expectations include, but are not limited to: changes in
economic conditions including an economic recession that could affect the value of real estate collateral and the ability for borrowers
to repay their loans; legislative and regulatory changes, including increases in FDIC insurance rates; monetary and fiscal policies of
the federal government; changes in tax policies, rates and regulations of federal, state and local tax authorities; changes in interest
rates; deposit flows; the cost of funds; demand for loan products and other financial services; competition; changes in the quality and
composition of the Bank’s loan and investment portfolios; changes in management’s business strategies; changes in accounting
principles, policies or guidelines; changes in real estate values and other factors discussed elsewhere in this report, factors set forth
under Item 1A., Risk Factors, and in other reports filed by the Company with the Securities and Exchange Commission. The forward-
looking statements are made as of the date of this report, and the Company assumes no obligation to update the forward-looking
statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.
OVERVIEW
Who We Are and How We Generate Income
Bridge Bancorp, Inc., a New York corporation, is a single bank holding company formed in 1989. On a parent-only basis, the
Company has had minimal results of operations. The Company is dependent on dividends from its wholly owned subsidiary, The
Bridgehampton National Bank (“the Bank”), its own earnings, additional capital raised, and borrowings as sources of funds. The
information in this report reflects principally the financial condition and results of operations of the Bank. The Bank’s results of
operations are primarily dependent on its net interest income, which is mainly the difference between interest income on loans and
investments and interest expense on deposits and borrowings. The Bank also generates non interest income, such as fee income on
deposit accounts and merchant credit and debit card processing programs, income from its title abstract subsidiary, and net gains on
sales of securities and loans. The level of its non interest expenses, such as salaries and benefits, occupancy and equipment costs, other
general and administrative expenses, expenses from its title insurance subsidiary, and income tax expense, further affects the Bank’s
net income. Certain reclassifications have been made to prior year amounts and the related discussion and analysis to conform to the
current year presentation.
Year and Quarterly Highlights
•
•
•
•
•
•
Returns on average equity and average assets of 15.58% and 1.06%, respectively for 2009;
Net income of $2.2 million or $0.36 per diluted share for the fourth quarter 2009 and $8.8 million or $1.43 per
diluted share for 2009, unchanged from prior year levels;
Net interest income increased $5.4 million from 2008 to 2009 with a net interest margin of 4.69% for 2009, and
4.70% for 2008;
Total assets of $897.3 million at December 31, 2009, an increase of 6.9% over the same date last year;
Total loans of $448.0 million at December 31, 2009, an increase of 4.3% from December 31, 2008;
Total investments of $384.7 million at December 31, 2009, an increase of 7.5% over December 31, 2008;
Page -13-
•
•
•
•
•
•
•
Total deposits of $793.5 million at December 31, 2009, an increase of $134.5 million or 20.4% over the same date
last year;
Enhanced capital with the private placement of $16.0 million in Convertible Trust Preferred Securities;
The Company’s capital levels remain strong with a Tier 1 Capital to Quarterly Average Assets ratio of 8.6%. The
Company is positioned well for future growth. Stockholders’ equity totaled $61.9 million at December 31, 2009 as
compared $56.1 million at December 31, 2008;
Declaration of cash dividends totaling $0.92 for 2009;
Launched a Dividend Reinvestment Plan during 2009;
Named for the second straight year as an “All Star” bank by Sandler O’Neill & Partners and recognized as a top
community bank by the ICBA;
The addition of the Company’s common stock to the Russell 3000 stock market index.
Significant Events
The economic events of the past two years have been unprecedented. During 2008, the failure of several large financial institutions
along with the conservatorship of Fannie Mae and Freddie Mac driven by the diminution in housing values and sub-prime mortgage
lending has resulted in multiple actions by the United States government. On October 3, 2008, the Congress passed the Emergency
Economic Stabilization Act of 2008 (“EESA”) which provides up to $700 billion and grants new authorities to the United States
Treasury Department (“Treasury”), the Federal Reserve Board (“FRB”) and the Federal Deposit Insurance Corporation (“FDIC”) for
initiatives to restore stability and liquidity to U.S. markets. Many European nations have also taken actions to inject liquidity and
capital into critical financial institutions in order to stabilize world markets.
On October 14, 2008, the Treasury, FRB and FDIC jointly announced a sweeping plan to invest in banks and thrifts to help restore
confidence in the U.S. banking system. Some of the actions taken by these governmental agencies included: (i) temporarily increasing
FDIC insurance coverage to $250,000 from $100,000 ; (ii) reducing the targeted federal funds rate to between 0 and 0.25% from
2.00% and the discount rate to 0.25% from 2.25%, respectively; (iii) temporarily guaranteeing Money Market mutual funds (iv)
introducing a capital purchase program whereby the Treasury will purchase up to $250 billion in senior preferred shares from healthy
qualifying financial institutions; and (v) introducing a Temporary Liquidity Guarantee Program (“TLGP”) whereby the FDIC will
guarantee newly issued senior unsecured debt on or before June 30, 2009 and provide unlimited FDIC insurance coverage for non-
interest bearing transaction accounts for thirty days without charge followed by an annualized 10 basis point assessment for the
insurance coverage above $250,000 on such accounts effective until December 31, 2009. In November 2008, the Bank opted to
participate in the TLGP. In 2009, the FDIC’s guarantee of unsecured debt was extended to October 31, 2009 and the FDIC insurance
coverage for non-interest bearing transaction accounts to $250,000 was extended to June 30, 2010. In order to ensure a smooth phase
out of the debt guaranteed program on October 31, 2009, the FDIC established a limited emergency guarantee facility. If an institution
is unable to issue non-guaranteed debt to replace the maturing senior unsecured debt as of October 31, 2009, the institution can apply
for an emergency guarantee facility. If the application is approved, the FDIC will guarantee the senior unsecured debt issued on or
before April 30, 2010. Participating institutions will pay the FDIC a fee equal to an annualized assessment rate of a minimum of 300
basis points.
One of the provisions resulting from the EESA was the Treasury’s Capital Purchase Program (“CPP”), which provided direct equity
investment of perpetual preferred stock by the Treasury in qualified financial institutions. The program is voluntary and requires an
institution to comply with a number of restrictions and provisions, including limits on executive compensation, stock redemptions and
declaration of dividends. Applications were due by November 14, 2008 and were subject to approval by the Treasury. In November
2008, the Company filed an application to participate in this program. In order to be eligible to participate in this program, the
Company also filed a proxy statement in November 2008 requesting shareholder approval to amend its certificate of incorporation and
authorize the issuance of preferred stock. On December 12, 2008, the shareholders approved the proposal and on January 7, 2009 the
Company’s application to participate in this program was approved by the Treasury Department. On January 27, 2009, management
and the Board, after careful deliberation and thoughtful review of the relevant issues, determined it was not in our shareholders’ best
interest to participate, and declined the Treasury investment.
On February 27, 2009, the FDIC issued a final rule, effective April 1, 2009, to change the way that the FDIC’s assessment system
differentiates for risk and to set new assessment rates beginning with the second quarter of 2009. In May 2009, the FDIC issued a final
rule to impose an emergency special assessment of 5 basis points on all banks based on their total assets less tier one capital as of June
30, 2009. The special assessment was payable on September 30, 2009. During the second quarter of 2009, the Company recorded an
expense of $375,000 related to the FDIC special assessment. In November 2009, the FDIC issued a final rule that required insured
institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011 and
Page -14-
2012. The FDIC also adopted a uniform 3 basis point increase in assessment rates effective on January 1, 2011. The Company’s
prepayment of FDIC assessments for 2010, 2011 and 2012 was made on December 31, 2009 totaling $3.8 million which will be
amortized to expense over three years. On January 12, 2010, the FDIC approved an advance notice of proposed rulemaking that
requested feedback from the public on whether employee compensation plans pose risks that should be reflected in the deposit
insurance assessment program. The FDIC is concerned that certain compensation structures may encourage risk taking that can result
in losses in the financial system.
Opportunities and Challenges
The economic and competitive landscape has changed dramatically over the past two years. Recognizing that our market areas are
generally affluent, large money center banks increasingly meet their funding needs by aggressively pricing deposits in the Bank’s
markets. Competition for deposits and loans is intense as various banks in the marketplace, large and small, promise excellent service
yet often price their products aggressively. Deposit growth is essential to the Bank’s ability to increase earnings; therefore branch
expansion and building share in our existing markets remain key strategic goals. Controlling funding costs yet protecting the deposit
base along with focusing on profitable growth, presents a unique set of challenges in this operating environment.
Since the second half of 2007 and continuing through 2009, the financial markets experienced significant volatility resulting from the
continued fallout of sub-prime lending and the global liquidity crises. A multitude of government initiatives along with eight rate cuts
by the Federal Reserve totaling 500 basis points have been designed to improve liquidity for the distressed financial markets. The
ultimate objective of these efforts has been to help the beleaguered consumer, and reduce the potential surge of residential mortgage
loan foreclosures and stabilize the banking system. Despite these actions, many of our competitors, due to liquidity concerns, have not
yet fully adjusted their deposit pricing. This contrasts with the impact on assets where yields on loans and securities have declined.
The squeeze between declining asset yields and more slowly declining liability pricing has impacted margins. Effective as of
February 19, 2010, the Federal Reserve increased the discount rate 50 basis points to 0.75%. The Federal Reserve stated that this rate
change was intended to normalize their lending facility and to step away from emergency lending to banks.
Growth and service strategies have the potential to offset the tighter net interest margin with volume as the customer base grows
through expanding the Bank’s footprint, while maintaining and developing existing relationships. Since 2007, the Bank has opened
five new branches. In January 2007, the Bank opened a new branch in the Village of Southampton; in February 2007, in Cutchogue;
and in September 2007, in Wading River. In April 2009, the Bank opened a new branch in Shirley, New York, and in December 2009,
the Bank opened a state-of-the-art branch facility in the Village of East Hampton. The opening of the branch facilities in Wading
River and Shirley, move the Bank geographically westward and demonstrate our commitment to traditional growth through branch
expansion.
In November 2008, the Bank received approval from the Office of the Comptroller of the Currency (“OCC”) to open a new branch
facility in Deer Park, New York. In addition, in July 2009, the Bank received approval from the OCC to open a new branch in Center
Moriches, New York, and in March 2010, the Bank received approval from the OCC to open a new branch in Patchogue, New York.
The Bank anticipates opening the Center Moriches branch in the first half of 2010. The Deer Park and Patchogue branch locations are
expected to open during the second half of 2010.
The Bank routinely adds to its menu of products and services, continually meeting the needs of consumers and businesses. We believe
positive outcomes in the future will result from the expansion of our geographic footprint, investments in infrastructure and
technology, such as BridgeNEXUS, our remote deposit capture product, lockbox processing, and continued focus on placing our
customers first. In January 2009, the Bank launched Bridge Investment Services, offering a full range of investment products and
services through a third party broker dealer. The Bank plans to roll out its new commercial online bill paying service, as well as a new
mobile banking product during the first half of 2010.
As 2010 begins there is still significant economic uncertainty. Unemployment remains high, confidence is low and consumers and
businesses face a myriad of challenges from higher taxes to increased regulations. While there have been some recent positive signs
and real estate activity has increased, management remains cautious about the timeline for a true economic recovery. Corporate
objectives for 2010 include: leveraging our expanding branch network to build customer relationships and grow loans and deposits;
focusing on opportunities and processes that continue to enhance the customer experience at the Bank; improving operational
efficiencies and prudent management of non-interest expense; and maximizing non-interest income through Bridge Abstract as well as
other lines of business. The ability to attract, retain, train and cultivate employees at all levels of the Company remains significant to
meeting these objectives. The Company has made great progress toward the achievement of these objectives, and avoided many of the
problems facing other financial institutions as a result of maintaining discipline in its underwriting, expansion strategies, investing and
general business practices. The Company has capitalized on opportunities presented by the market in 2009 and continues during 2010
to diligently seek opportunities for growth and to strengthen the franchise. The Company recognizes the potential risks of the current
economic environment and will monitor the impact of market events as we consider growth initiatives and evaluate loans and
investments. Management and the Board have built a solid foundation for growth and the Company is positioned to adapt to
anticipated changes in the industry resulting from new regulations and legislative initiatives.
Page -15-
CRITICAL ACCOUNTING POLICIES
Note 1 to our Consolidated Financial Statements for the year ended December 31, 2009 contains a summary of our significant
accounting policies. Various elements of our accounting policies, by their nature, are inherently subject to estimation techniques,
valuation assumptions and other subjective assessments. Our policy with respect to the methodologies used to determine the allowance
for loan losses is our most critical accounting policy. This policy is important to the presentation of our financial condition and results
of operations, and it involves a higher degree of complexity and requires management to make difficult and subjective judgments,
which often require assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions and
estimates could result in material differences in our results of operations or financial condition.
The following is a description of our critical accounting policy and an explanation of the methods and assumptions underlying its
application.
ALLOWANCE FOR LOAN LOSSES
Management considers the accounting policy on the allowance for loan losses to be the most critical and requires complex
management judgment as discussed below. The judgments made regarding the allowance for loan losses can have a material effect on
the results of operations of the Company.
The allowance for loan losses is established and maintained through a provision for loan losses based on probable incurred losses
inherent in the Bank’s loan portfolio. Management evaluates the adequacy of the allowance on a quarterly basis. The allowance is
comprised of both individual valuation allowances and loan pool valuation allowances. If the allowance for loan losses is not
sufficient to cover actual loan losses, the Company’s earnings could decrease.
The Bank monitors its entire loan portfolio on a regular basis, with consideration given to detailed analysis of classified loans,
repayment patterns, probable incurred losses, past loss experience, current economic conditions, and various types of concentrations of
credit. Additions to the allowance are charged to expense and realized losses, net of recoveries, are charged to the allowance.
Individual valuation allowances are established in connection with specific loan reviews and the asset classification process including
the procedures for impairment testing under FASB Accounting Standard Codification (“ASC”) No. 310, “Receivables”. Such
valuation, which includes a review of loans for which full collectibility in accordance with contractual terms is not reasonably assured,
considers the estimated fair value of the underlying collateral less the costs to sell, if any, or the present value of expected future cash
flows, or the loan’s observable market value. Any shortfall that exists from this analysis results in a specific allowance for the loan.
Pursuant to our policy, loan losses must be charged-off in the period the loans, or portions thereof, are deemed uncollectible.
Assumptions and judgments by management, in conjunction with outside sources, are used to determine whether full collectibility of a
loan is not reasonably assured. These assumptions and judgments are also used to determine the estimates of the fair value of the
underlying collateral or the present value of expected future cash flows or the loan’s observable market value. Individual valuation
allowances could differ materially as a result of changes in these assumptions and judgments. Individual loan analyses are periodically
performed on specific loans considered impaired. The results of the individual valuation allowances are aggregated and included in the
overall allowance for loan losses.
Loan pool valuation allowances represent loss allowances that have been established to recognize the inherent risks associated with
our lending activities, but which, unlike individual allowances, have not been allocated to particular problem assets. Pool evaluations
are broken down as follows: first, loans with homogenous characteristics are pooled by loan type and include home equity loans,
residential mortgages, land loans and consumer loans. Then all remaining loans are segregated into pools based upon the risk rating of
each credit. Key factors in determining a credit’s risk rating include management’s evaluation of: cash flow, collateral, guarantor
support, financial disclosures, industry trends and strength of borrowers’ management. The determination of the adequacy of the
valuation allowance is a process that takes into consideration a variety of factors. The Bank has developed a range of valuation
allowances necessary to adequately provide for probable incurred losses inherent in each pool of loans. We consider our own charge-
off history along with the growth in the portfolio as well as the Bank’s credit administration and asset management philosophies and
procedures when determining the allowances for each pool. In addition, we evaluate and consider the impact that economic and
market conditions may have on the portfolio as well as known and inherent risks in the portfolio. Finally, we evaluate and consider the
allowance ratios and coverage percentages of both peer group and regulatory agency data. These evaluations are inherently subjective
because, even though they are based on objective data, it is management’s interpretation of that data that determines the amount of the
appropriate allowance. If the evaluations prove to be incorrect, the allowance for loan losses may not be sufficient to cover losses
inherent in the loan portfolio, resulting in additions to the allowance for loan losses.
The Classification Committee is comprised of members of both management and the Board of Directors. The adequacy of the
allowance is analyzed quarterly, with any adjustment to a level deemed appropriate by the Classification Committee, based on its risk
assessment of the entire portfolio. Based on the Classification Committee’s review of the classified loans and the overall allowance
levels as they relate to the entire loan portfolio at December 31, 2009, management believes the allowance for loan losses has been
established at levels sufficient to cover the probable incurred losses in the Bank’s loan portfolio. Future additions or reductions to the
Page -16-
allowance may be necessary based on changes in economic, market or other conditions. Changes in estimates could result in a material
change in the allowance. In addition, various regulatory agencies, as an integral part of the examination process, periodically review
the allowance for loan losses. Such agencies may require the Bank to recognize adjustments to the allowance based on their judgments
of the information available to them at the time of their examination.
For additional information regarding our allowance for loan losses, see Note 3 to the Consolidated Financial Statements.
NET INCOME
Net income for 2009 totaled $8.8 million or $1.43 per diluted share while net income for 2008 totaled $8.8 million or $1.43 per diluted
share, as compared to net income of $8.3 million, or $1.36 per diluted share for the year ended December 31, 2007. Net income
increased $13,000 or 0.15% compared to 2008 and net income for 2008 increased $0.5 million or 5.5% as compared to 2007.
Significant trends for 2009 include: (i) a $5.4 million or 18.0% increase in net interest income; (ii) a $2.2 million increase in the
provision for loan losses; (iii) a $0.1 million or 1.8% increase in total non interest income; (iv) a $3.6 million or 17.1% increase in
total non interest expenses; and (v) a $0.2 million or 5.6% decrease in income tax expense.
NET INTEREST INCOME
Net interest income, the primary contributor to earnings, represents the difference between income on interest earning assets and
expenses on interest bearing liabilities. Net interest income depends upon the volume of interest earning assets and interest bearing
liabilities and the interest rates earned or paid on them.
The following table sets forth certain information relating to the Company’s average consolidated balance sheets and its consolidated
statements of income for the years indicated and reflect the average yield on assets and average cost of liabilities for the years
indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively,
for the years shown. Average balances are derived from daily average balances and include nonaccrual loans. The yields and costs
include fees, which are considered adjustments to yields. Interest on nonaccrual loans has been included only to the extent reflected in
the consolidated statements of income. For purposes of this table, the average balances for investments in debt and equity securities
exclude unrealized appreciation/depreciation due to the application of FASB ASC 320, “Investments - Debt and Equity Securities.”
Page -17-
Years Ended December 31,
(In thousands)
Interest earning assets:
Loans, net (including loan
2009
Average
Balance
Interest
Average
Yield/
Cost
Average
Balance
2008
Interest
Average
Yield/
Cost
Average
Balance
2007
Interest
Average
Yield/
Cost
fee income)
$
435,694
$
29,167
6.69% $ 397,560
$ 28,040
7.05% $
347,029
$ 26,347
7.59%
Mortgage-backed securities
Tax exempt securities (1)
Taxable securities
Federal funds sold
Deposits with banks
227,471
11,074
76,746
27,298
11,466
5,171
3,381
880
33
13
Total interest earning assets
783,846
44,548
4.87
4.41
3.22
0.29
0.25
5.68
170,592
58,065
27,298
8,575
1,235
8,404
2,930
1,081
183
5
663,325
40,643
4.93
5.05
3.96
2.13
0.40
6.13
120,314
53,599
28,529
12,375
173
5,764
2,823
1,213
638
4
562,019
36,789
4.73
5.19
4.19
5.08
2.31
6.52
Non interest earning assets:
Cash and due from banks
Other assets
Total assets
13,574
29,397
$
826,817
Interest bearing liabilities:
Savings, NOW and money
15,408
26,206
$ 704,939
16,081
22,242
$
600,342
market deposits
$
376,429
$
3,698
0.98% $ 315,481
$
5,681
1.80% $
287,450
$
7,634
2.66%
Certificates of deposit of
$100,000 or more
Other time deposits
Federal funds purchased and
repurchase agreements
Federal Home Loan Bank
term advances
Junior subordinated
debentures
Total interest bearing liabilities
Non interest bearing liabilities:
Demand deposits
Other liabilities
Total liabilities
Stockholders’ equity
Total liabilities and
stockholders’ equity
Net interest income/interest
rate spread (2)
Net interest earning assets/net
interest margin (3)
81,838
68,289
29,607
82
2,263
558,508
205,984
6,086
770,578
56,239
1,974
1,551
401
1
190
7,815
2.41
2.27
1.35
1.22
8.40
1.40
66,578
37,413
2,125
1,148
24,595
478
4,552
—
57
—
448,619
9,489
3.19
3.07
1.94
1.25
—
2.12
35,965
28,044
1,452
1,058
6,035
288
110
—
5
—
357,604
10,437
4.04
3.77
4.71
4.55
—
2.92
197,179
5,428
651,226
53,713
191,022
4,229
552,855
47,487
$
826,817
$ 704,939
$
600,342
36,733
4.28%
31,154
4.01%
26,352
3.60%
$
225,338
4.69%
$ 214,706
4.70%
$
204,415
4.69%
Ratio of interest earning assets
to interest bearing liabilities
140.35%
147.86%
157.16%
Less: Tax equivalent
adjustment
(1,180)
Net interest income
$
35,553
(1,023)
$ 30,131
(925)
$ 25,427
(1)
(2)
(3)
The above table is presented on a tax equivalent basis.
Net interest rate spread represents the difference between the yield on average interest earning assets and the cost of average interest bearing liabilities.
Net interest margin represents net interest income divided by average interest earning assets.
Page -18-
RATE/VOLUME ANALYSIS
Net interest income can be analyzed in terms of the impact of changes in rates and volumes. The following table illustrates the extent
to which changes in interest rates and in the volume of average interest earning assets and interest bearing liabilities have affected the
Bank’s interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i)
changes attributable to changes in volume (changes in volume multiplied by prior rate); (ii) changes attributable to changes in rates
(changes in rates multiplied by prior volume); and (iii) the net changes. For purposes of this table, changes that are not due solely to
volume or rate changes have been allocated to these categories based on the respective percentage changes in average volume and
rate. Due to the numerous simultaneous volume and rate changes during the periods analyzed, it is not possible to precisely allocate
changes between volume and rates. In addition, average earning assets include nonaccrual loans.
Years Ended December 31,
(In thousands)
Interest income on interest earning assets:
Loans (including loan fee income)
Mortgage-backed securities
Tax exempt securities (1)
Taxable securities
Federal funds sold
Deposits with banks
Total interest earning assets
Interest expense on interest bearing liabilities:
Savings, NOW and money market deposits
Certificates of deposit of $100,000 or more
Other time deposits
Federal funds purchased and repurchase
agreements
Federal Home Loan Bank Advances
Junior subordinated debentures
Total interest bearing liabilities
Net interest income
(1) The above table is presented on a tax equivalent basis.
2009 Over 2008
Changes Due To
2008 Over 2007
Changes Due To
Volume
Rate
Net
Change
Volume
Rate
Net
Change
$ 2,603
2,773
857
—
46
10
6,289
$ (1,476)
(103)
(406)
(201)
(196)
(2)
(2,384)
950
432
761
86
(55)
190
2,364
$ 3,925
$
(2,933)
(583)
(358)
(163)
(1)
—
(4,038)
1,654
$
$
$
1,127
2,670
451
(201)
(150)
8
3,905
$ 3,653
2,473
229
(51)
(156)
7
6,155
$(1,960)
167
(122)
(81)
(299)
(6)
(2,301)
689
1,028
311
446
58
(2,642)
(355)
(221)
(256)
(6)
(1,983)
(151)
403
(77)
(56)
190
(1,674)
5,579
2,532
$ 3,623
(3,480)
$ 1,179
$
(948)
4,802
1,693
2,640
107
(132)
(455)
1
3,854
(1,953)
673
90
190
52
The net interest margin remained stable at 4.69% in 2009 compared to 4.70% for the year ended December 31, 2008 and 4.69% in
2007. The yield on average total interest earning assets decreased approximately 45 basis points during 2009 compared to the prior
year and the cost of interest bearing liabilities decreased approximately 72 basis points. The net interest margin during 2009 was also
impacted by the issuance of $16.0 million in junior subordinated debentures.
Net interest income was $35.6 million in 2009 compared to $30.1 million in 2008 and $25.4 million in 2007. The increase in net
interest income of $5.5 million or 18.0% as compared to 2008 primarily resulted from the effect of the increase in the volume of
average total interest earning assets and the decrease in the cost of average total interest bearing liabilities being greater than the effect
of the increase in volume of average total interest bearing liabilities and the decrease in yield on average total interest earning assets.
The increase in net interest income of $4.7 million or 18.5% in 2008 as compared to 2007 primarily resulted from the effect of the
increase in the volume of average total interest earning assets and the decrease in the cost of average total interest bearing liabilities
being greater than the effect of the increase in volume of average total interest bearing liabilities and the decrease in yield on average
total interest earning assets.
Average total interest earning assets grew by $120.5 million or 18.2% to $783.8 million in 2009 compared to $663.3 million in 2008.
During this period, the yield on average total interest earning assets decreased to 5.68% from 6.13%. Average interest earning assets
grew $101.3 million or 18.0% in 2008 from $562.0 million in 2007. During this period, the yield on average total interest earning
assets decreased to 6.13% from 6.52%.
For the year ended December 31, 2009, average loans grew by $38.1 million or 9.6% to $435.7 million as compared to $397.6 million
in 2008 and increased $50.6 million or 14.6% in 2008 as compared to $347.0 million in 2007. Real estate mortgage loans and
Page -19-
commercial loans primarily contributed to the growth. The Bank remains committed to growing loans with prudent underwriting,
sensible pricing and limited credit and extension risk.
For the year ended December 31, 2009, average total investments increased by $75.6 million or 29.5% to $331.5 million as compared
to $256.0 million in 2008 and increased $53.5 million or 26.4% in 2008 as compared to $202.4 million in 2007. To position the
balance sheet for the future and better manage liquidity and interest rate risk, a portion of the available for sale investment securities
portfolio was sold during 2009 resulting in a net gain of $529,000 compared to a net loss of $101,000 in 2007. There were no sales of
securities in 2008. Average federal funds sold increased to $11.5 million or 33.7% in 2009 from $8.6 million in 2008 and decreased
$3.8 million or 30.7% in 2008 as compared to $12.4 million in 2007. The decrease in the average federal funds sold in 2008 was
primarily due to growth in the average loans and investments.
Average total interest bearing liabilities were $558.5 million in 2009 compared to $448.6 million in 2008 and $357.6 million in 2007.
The Bank grew deposits during 2009 as a result of the maturing of three new branches opened during 2007, two new branches opening
during 2009 and the building of new relationships in existing markets. The Bank offered deposit promotions during 2008 and 2007 in
connection with increased competition in the market to reduce potential core deposits outflows. In 2009, the Company completed the
private placement of $16.0 million in aggregate liquidation amount of 8.50% cumulative convertible trust preferred securities (the
"TPS”), through its subsidiary, Bridge Statutory Capital Trust II. The Company issued $16.0 million of junior subordinated debentures
(the “Debentures”) to the trust in exchange for ownership of all of the common security of the trust and the proceeds of the preferred
securities sold by the trust. The junior subordinated debentures bear interest at a fixed rate equal to 8.50% and mature on December
31, 2039. The cost of interest bearing liabilities decreased to 1.40% for 2009 as compared to a cost of 2.12% during 2008 and 2.92%
in 2007. Since the Company’s interest bearing liabilities generally reprice or mature more quickly than its interest earning assets, an
increase in short term interest rates would initially result in a decrease in net interest income. Additionally, the large percentages of
deposits in money market accounts reprice at short term market rates making the balance sheet more liability sensitive. Funding costs
continued to decline in 2009 through prudent management of deposit pricing in response to the Federal Reserve lowering the targeted
federal funds rate and discount rate in December 2008 and maintaining those levels throughout 2009.
For the year ended December 31, 2009, average total deposits increased by $115.9 million or 18.8% to $732.5 million as compared to
average total deposits of $616.7 million for the year ended December 31, 2008. Components of this increase include an increase in
average demand deposits for 2009 of $8.8 million or 4.5% to $206.0 million as compared to average demand deposits for 2008. The
average balances in savings, NOW and money market accounts increased $60.9 million or 19.3% to $376.4 million for the year ended
December 31, 2009 compared to the same period last year. Average balances in certificates of deposit of $100,000 or more and other
time deposits increased $46.1 million or 44.4% to $150.1 million for 2009 as compared to 2008. Average public fund deposits
comprised 17.3% of total average deposits during 2009 and 20.6% of total average deposits during 2008. Average federal funds
purchased and repurchase agreements together with average other borrowed money and average Federal Home Loan Bank term
advances increased $0.5 million or 1.9% for the year ended December 31, 2009 as compared to average balances for the same period
in the prior year.
Total interest income increased to $43.4 million in 2009 from $39.6 million in 2008 and $35.9 million in 2007, an increase of 9.5%
between 2009 and 2008 and a 10.5% increase between 2008 and 2007. The ratio of interest earning assets to interest bearing liabilities
decreased to 140.35% in 2009 as compared to 147.86% in 2008 and 157.16% in 2007. Interest income on loans increased $1.1 million
in 2009 over 2008 and increased $1.7 million in 2008 over 2007 primarily due to growth in the loan portfolio. The yield on average
loans was 6.69% for 2009, 7.05% for 2008 and 7.59% for 2007.
Interest income on investments in residential mortgage-backed, taxable and tax exempt securities increased $2.8 million or 24.3% in
2009 to $14.2 million from $11.4 million in 2008 and increased $2.5 million or 28.4% in 2008 from $8.9 million in 2007. Interest
income on securities included net amortization of premiums on securities of $305,000 in 2009 compared to net accretion of discounts
of $55,000 in 2008 and $22,000 in 2007 as the rate environment changed and prepayments substantially increased on the mortgage-
backed security portfolio. The tax adjusted average yield on total securities decreased to 4.63% in 2009 from 4.85% in 2008 and
4.84% in 2007.
Total interest expense decreased $1.7 million or 17.6% to $7.8 million in 2009 and decreased $0.9 million or 9.1% to $9.5 million in
2008 from $10.4 million in 2007. The decrease in interest expense in 2009 resulted from the Federal Reserve lowering the targeted
federal funds rate and discount rate and the prudent management of deposit pricing. The decrease in interest expense in 2008 resulted
from the lower cost of average interest bearing liabilities. The cost of average interest bearing liabilities was 1.40% in 2009, 2.12% in
2008, and 2.92% in 2007.
Provision for Loan Losses
The Bank’s loan portfolio consists primarily of real estate loans secured by commercial and residential real estate properties located in
the Bank’s principal lending area on eastern Long Island. The interest rates charged by the Bank on loans are affected primarily by the
demand for such loans, the supply of money available for lending purposes, the rates offered by its competitors, the Bank’s
relationship with the customer, and the related credit risks of the transaction. These factors are affected by general and economic
Page -20-
conditions including, but not limited to, monetary policies of the federal government, including the Federal Reserve Board, legislative
policies and governmental budgetary matters.
Loans of approximately $31.7 million or 7.1% of total loans at December 31, 2009 were classified as potential problem loans
compared to $9.8 million or 2.3% at December 31, 2008 and $12.9 million or 3.4% at December 31, 2007. These loans are classified
as potential problem loans as management has information that indicates the borrower may not be able to comply with the present
repayment terms. These loans are subject to increased management attention and their classification is reviewed on at least a quarterly
basis. The increase in the 2009 level of potential problem loans reflects the current economic environment as well as management’s
decision to enhance the asset and credit quality review process of the loan portfolio. This process includes the early identification of
potential problem loans, a more stringent assessment of potential credit weaknesses and expanding the scope and depth of individual
credit reviews.
At December 31, 2009, approximately $30 million of these loans are commercial real estate (“CRE”) loans which are current and well
secured with real estate as collateral. In addition, all but $2.1 million of the CRE loans have personal guarantees. The remaining $1.7
million in classified loans are unsecured and current, have personal guarantees and demonstrate sufficient cash flow to pay the loans.
Due to the structure and nature of the credits, we do not expect to sustain a material loss on these relationships.
CRE loans represented $211.6 million or 47.2% of the total loan portfolio at December 31, 2009 compared to $190.7 million or 44.4%
at December 31, 2008 and $167.8 million or 44.7% at December 31, 2007. The Bank’s underwriting standards for CRE loans requires
an evaluation of the cash flow of the property, the overall cash flow of the borrower and related guarantors as well as the value of the
real estate securing the loan. In addition, the Bank’s underwriting standards for CRE loans are consistent with regulatory requirements
with original loan to value ratios less than or equal to 75%. The Bank considers delinquency trends, cash flow analysis, and the
impact of the local economy on commercial real estate values when evaluating the appropriate level of the allowance for loan losses.
Real estate values in our geographic markets increased significantly from 2000 through 2007. Commencing in 2008, following the
financial crisis and significant downturn in the economy, real estate values began to decline. This decline continued into 2009 and
appears to have stabilized in the fourth quarter of 2009. The estimated decline in residential and commercial real estate values range
from 15-20% from the 2007 levels, depending on the nature and location of the real estate.
As of December 31, 2009 and December 31, 2008, the Company had impaired loans as defined by FASB ASC No. 310,
“Receivables” of $9.1 million and $6.3 million, respectively. For a loan to be considered impaired, management determines after
review whether it is probable that the Bank will not be able to collect all amounts due according to the contractual terms of the loan
agreement. Additionally management applies its normal loan review procedures in making these judgments. Impaired loans include
individually classified nonaccrual loans and troubled debt restructured (“TDR”) loans. For impaired and TDR loans, the Bank
evaluates the fair value of the loan in accordance with FASB ASC 310-10-35-22. For loans that are collateral dependent, the fair
value of the collateral is used to determine the fair value of the loan. The fair value of the collateral is determined based upon recent
appraised values. For unsecured loans, the fair value is determined based on the present value of expected future cash flows
discounted at the loan’s effective interest rate. The fair value of the loan is compared to the carrying value to determine if any write-
down or specific reserve is required. These methods of fair value measurement for impaired and TDR loans are considered level 3
within the fair value hierarchy described in FASB ASC 820-10-50-5.
Nonaccrual loans increased $2.8 million to $5.9 million or 1.32% of total loans at December 31, 2009 from $3.1 million or 0.71% of
total loans at December 31, 2008. Approximately $4.9 million of the nonaccrual loans at December 31, 2009 represent troubled debt
restructured loans where the borrowers are complying with the modified terms of the loans and are currently making payments. In
2008, nonaccrual loans increased $2.9 million to $3.1 million from $0.2 million in 2007. The increase in non accrual loans at
December 31, 2008 was due to a single loan of approximately $2.5 million.
In addition, the Company has one borrower with TDR loans of $3.2 million at December 31, 2009 that are current and are secured
with collateral that has a fair value of approximately $5.4 million as well as personal guarantors. Management believes that the
ultimate collection of principal and interest is reasonably assured and therefore continues to recognize interest income on an accrual
basis. In addition, the Bank has no commitment to lend additional funds to this debtor. The loan was determined to be impaired during
the third quarter of 2008 and since that determination $187,000 of interest income has been recognized. There were no loans
considered to be trouble debt restructurings at December 31, 2007.
The Bank had no foreclosed real estate at December 31, 2009, 2008 and 2007, respectively.
Net charge-offs were $2,058,000 for the year ended December 31, 2009 compared to $1,001,000 for the year ended December 31,
2008 and $158,000 for the year ended December 31, 2007. The ratio of allowance for loan losses to nonaccrual loans was 103%,
129% and 1290%, at December 31, 2009, 2008, and 2007, respectively.
Based on our continuing review of the overall loan portfolio, the current asset quality of the portfolio, the growth in the loan portfolio
and the net charge-offs or recoveries, a provision for loan losses of $4.2 million was recorded in 2009 as compared to $2.0 million in
2008 and $0.6 million in 2007. The allowance for loan losses increased to $6.0 million at December 31, 2009 as compared to $4.0
Page -21-
million at December 31, 2008 and $3.0 million at December 31, 2007. As a percentage of total loans, the allowance was 1.35%, 0.92%
and 0.79% at December 31, 2009, 2008 and 2007, respectively. Management continues to carefully monitor the loan portfolio as well
as real estate trends on eastern Long Island. The Bank’s consistent and rigorous underwriting standards preclude sub-prime lending,
and management remains cautious about the potential for an indirect impact on the local economy and real estate values in the future.
The following table sets forth changes in the allowance for loan losses:
December 31,
(Dollars in thousands)
Allowance for loan losses balance at beginning of period
2009
2008
2007
2006
2005
$
3,953 $
2,954 $
2,512 $
2,383 $
2,188
Charge-offs:
Commercial real estate mortgage loans
Residential real estate mortgage loans
Commercial, financial and agricultural loans
Installment/consumer loans
Real estate construction loans
Total
Recoveries:
Commercial real estate mortgage loans
Residential real estate mortgage loans
Commercial, financial and agricultural loans
Installment/consumer loans
Real estate construction loans
Total
Net (charge-offs) recoveries
Provision for loan losses charged to operations
Balance at end of period
Ratio of net (charge-offs) recoveries during period to average
loans outstanding
Allocation of Allowance for Loan Losses
100
707
796
228
262
2,093
—
6
28
1
—
35
—
480
534
56
—
1,070
—
—
53
16
—
69
—
—
203
23
—
226
—
1
13
54
—
68
—
—
33
50
—
83
—
6
59
62
—
127
—
7
153
129
—
289
—
17
37
30
100
184
(2,058)
4,150
6,045 $
(1,001)
2,000
3,953 $
(158)
600
2,954 $
44
85
2,512 $
(105)
300
2,383
$
(0.47%)
(0.25%)
(0.05%)
0.01%
(0.04%)
The following table sets forth the allocation of the total allowance for loan losses by loan type:
Years Ended December 31,
(Dollars in thousands)
Commercial real estate
mortgage loans
Residential real estate
mortgage loans
Commercial, financial and
agricultural loans
Installment/consumer loans.
Real estate construction
loans
Total
Non Interest Income
2009
Percentage
of Loans
to Total
Loans
2008
Percentage
of Loans
to Total
Loans
2007
Percentage
of Loans
to Total
Loans
Amount
2006
Percentage
of Loans
to Total
Loans
2005
Percentage
of Loans
to Total
Loans
Amount
Amount
Amount
Amount
$
2,452
47.3% $
1,778
44.4% $ 1,820
44.7% $
1,715
51.2% $
1,527
44.9%
2,384
891
279
39
6,045
$
32.0
17.2
2.2
1.3
100.0% $
1,152
696
61
266
3,953
32.4
16.8
2.6
310
484
87
3.8
253
100.0% $ 2,954
33.4
15.6
2.3
4.0
100.0% $
239
358
79
121
2,512
32.6
9.0
2.7
4.5
100.0% $
236
327
110
183
2,383
33.2
12.8
3.2
5.9
100.0%
Total non interest income increased by $0.1 million or 1.8% in 2009 to $6.2 million and increased $0.4 million or 6.8% to $6.1 million
in 2008 as compared to $5.7 million in 2007. The increase in total non interest income in 2009 compared to 2008 was due to $0.5
million in net securities gains partially offset by a $0.2 million decrease in revenues from the title insurance abstract subsidiary, Bridge
Abstract, a $0.07 million decrease in service charges on deposit accounts, a decrease of $0.08 million in fees for other customer
services and a decline of $0.05 million in other operating income. The increase in total non interest income during 2008 compared to
2007 was due to a $0.5 million increase in service charges on deposit accounts, and an increase of $0.025 million in fees for other
customer services partly offset by a $0.2 million decrease in revenues from the title insurance abstract subsidiary, Bridge Abstract, and
a decrease in other operating income of $0.05 million. Excluding net securities gains and losses, total non interest income decreased
$0.4 million or 6.9% in 2009 and increased $0.3 million or 4.9% for the year ended December 31, 2008.
Page -22-
Net security gains of $529,000 were recognized in 2009 compared to no security gains or losses recognized in 2008 and net security
losses of $101,000 recognized in 2007. The sales of securities were due to repositioning of the available for sale investment portfolio.
Bridge Abstract, the Bank’s title insurance abstract subsidiary, generated title fee income of $0.9 million, $1.1 million, and $1.3
million in 2009, 2008 and 2007, respectively. The decrease of $0.2 million or 19.4% in 2009 and the decrease of $0.2 million or
16.4% in 2008, was due to a decrease in the number and average value of transactions processed by the subsidiary.
Fees from other customer services decreased $0.08 million or 4.6% to $1.7 million in 2009 as compared to $1.8 million in 2008. The
decrease was due primarily to lower sales volume in our merchant and debit card cash management services. Fees from other
customer services increased $0.025 million or 1.4% in 2008 as compared to 2007. Service charges on deposit accounts for the year
ended December 31, 2009 totaled $3.0 million, a decrease of $0.07 million as compared to 2008. This decrease predominately
represents lower overdraft fees. For the year ended December 31, 2008, service charges were $3.1 million, an increase of $0.5 million
from 2007.
Other operating income for the year ended December 31, 2009 totaled $67,000, a decrease of $51,000 or 43.2% from $118,000 for the
year ended December 31, 2008, and decreased $48,000 or 28.9% in 2008 from the prior year.
Non Interest Expense
Non interest expenses increased $3.6 million or 17.1% in 2009 to $24.8 million from $21.2 million in 2008, and increased $3.0
million or 16.5% in 2008 from $18.2 million in 2007. The primary components of these changes were higher salaries and employee
benefits, net occupancy expense, furniture and fixture expense, FDIC assessments and other operating expenses. Salaries and benefits
increased $1.4 million or 10.8% in 2009 as compared to 2008 and increased $2.0 million or 18.2% in 2008 as compared to 2007. The
increases in salary and benefits reflect filling vacant positions, hiring new employees to support the Company’s expanding
infrastructure and new branch offices, and the related employee benefit costs associated with the new employees, including higher
medical, and pension expenses.
Net occupancy expense increased $0.4 million or 25.0% to $2.3 million in 2009 from $1.9 million in 2008 and increased $0.2 million
or 7.8% in 2008 from $1.7 million in 2007. Higher net occupancy expenses were due to increases in maintenance and supplies, and
rent expense related to the new branch offices in 2009 as well as annual rent increases in other branch locations. Higher net occupancy
expenses in 2008 were due to increases in depreciation expense and rent expense related to the new branch offices as well as annual
rent increases in other branch locations. Furniture and fixture expense increased $0.2 million or 18.5% to $1.0 million in 2009 from
$0.85 million in 2008 and increased $0.02 million or 2.0% in 2008 from $0.83 million in 2007. The increase in furniture and fixture
expense relates primarily to the opening of new branches. FDIC assessments increased $1.3 million or 489.5% to $1.6 million in 2009
from $0.3 million in 2008 and increased $0.2 million or 304.5% in 2008 from $0.07 million in 2007. The increases during 2009 and
2008 relate to growth in deposits and higher assessment rates. Additionally during 2009, the Bank incurred a special assessment fee
from the FDIC of $0.4 million. Other operating expenses increased $0.3 million or 6.2% to $4.8 million in 2009 from $4.5 million in
2008 and increased $0.6 million or 15.6% in 2008 from $3.9 million in 2007. The increase during 2009 included higher professional
fees associated with legal and consulting fees. The increase during 2008 included higher professional fees associated with the listing
and trading of the Company’s common stock on the NASDAQ Global Select Market, the special shareholders meeting legal work and
outsourced internal audits.
Income Tax Expense
Income tax expense for December 31, 2009, 2008, and 2007 was $4.0 million, $4.3 million and $4.0 million, respectively. The
decrease in 2009 was due to a decrease in income before income taxes of $0.2 million to $12.8 million from $13.0 million in 2008 and
a lower effective tax rate. The increase in income tax expense in 2008 was due to an increase in income before income before taxes of
$0.7 million to $13.0 million from $12.3 million in 2007. The effective tax rate was 31.6%, 32.9% and 32.8% for the years ended
December 31, 2009, 2008, and 2007, respectively.
FINANCIAL CONDITION
The assets of the Company totaled $897.3 million at December 31, 2009, an increase of $58.2 million or 6.9% from the previous year-
end. This increase was primarily driven by growth in total securities, net, of $26.8 million, total loans of $18.4 million, other assets of
$6.9 million, and an increase of $5.3 million in cash and cash equivalents.
This growth in assets was funded principally by growth in deposits fueled by increased sales initiatives and maturation of newer
branches, and borrowings. The deposit growth occurred in all markets and included both new commercial and consumer relationships.
Core retail and commercial deposits increased $111.1 million or 21.3% over the prior year to $632.0 million at December 31, 2009.
Demand deposits increased $30.9 million or 17.1% to $212.1 million at December 31, 2009 compared to $181.2 million at December
31, 2008. Savings, NOW and money market deposits increased $95.5 million or 27.7% to $440.4 million at December 31, 2009 from
$344.9 million at December 31, 2008. Certificates of deposit of $100,000 or more decreased $4.8 million or 6.1% and other time
deposits increased $12.7 million or 23.2%.
Page -23-
Due to the significant growth in deposits, there were no Federal funds purchased and FHLB overnight borrowings at December 31,
2009 compared to $70.9 million at December 31, 2008. In addition, there were no Federal Home Loan Bank term advances as of
December 31, 2009 compared to $30.0 million outstanding at December 31, 2008. Repurchase agreements were flat at $15.0 million
outstanding at December 31, 2009 and December 31, 2008, respectively. During 2008, market opportunities contributed to the fourth
quarter strategy to utilize wholesale funding to increase securities holdings and manage seasonal deposit flows. This strategy enhanced
earnings and assisted in managing the Bank’s liquidity.
Other liabilities increased $3.0 million to $10.3 million at December 31, 2009 from $7.3 million at December 31, 2008 due primarily
to an increase in deferred tax liabilities related to the increase in unrealized gains on securities as of December 31, 2009 compared to
December 31, 2008.
Total stockholders’ equity was $61.9 million at December 31, 2009, an increase of $5.8 million or 10.2% from December 31, 2008
primarily due to net income of $8.8 million, an increase in net unrealized gains on securities of $1.8 million partially offset by the
declaration of dividends totaling $5.7 million and the issuance of shares of common stock pursuant to the equity incentive plan. In
December 2009, the Company declared a quarterly dividend of $0.23 per share. The Company continues its long term trend of
uninterrupted dividends.
Loans
During 2009, the Company continued to experience growth trends in commercial and residential real estate lending. The concentration
of loans in our primary market areas may increase risk. Unlike larger banks that are more geographically diversified, the Bank’s loan
portfolio consists primarily of real estate loans secured by commercial and residential real estate properties located in the Bank’s
principal lending area on eastern Long Island. The markets in which the Company operates have experienced substantial growth in
construction and land development activity over the past several years, which has been a factor in overall loan growth. The local
economic conditions on eastern Long Island have a significant impact on the volume of loan originations and the quality of our loans,
the ability of borrowers to repay these loans, and the value of collateral securing these loans. A considerable decline in the general
economic conditions caused by inflation, recession, unemployment or other factors beyond the Company’s control would impact these
local economic conditions and could negatively affect the financial results of the Company’s operations. Additionally, while the
Company has a significant amount of commercial real estate loans, the majority of which are owner-occupied, decreases in tenant
occupancy may also have a negative effect on the ability of borrowers to make timely repayments of their loans, which would have an
adverse impact on the Company’s earnings.
The interest rates charged by the Bank on loans are affected primarily by the demand for such loans, the supply of money available for
lending purposes, the rates offered by its competitors, the Bank’s relationship with the customer, and the related credit risks of the
transaction. These factors are affected by general and economic conditions including, but not limited to, monetary policies of the
federal government, including the Federal Reserve Board, legislative policies and governmental budgetary matters.
The Bank targets its business lending and marketing initiatives towards promotion of loans that primarily meet the needs of small to
medium-sized businesses. These small to medium-sized businesses generally have fewer financial resources in terms of capital or
borrowing capacity than larger entities. If general economic conditions negatively impact these businesses, the results of operations
and financial condition may be adversely affected.
With respect to the underwriting of loans, there are certain risks, including the risk of non-payment that is associated with each type of
loan that the Bank markets. Approximately 80.6% of the Bank’s loan portfolio at December 31, 2009 is secured by real estate and
approximately 47.3% is comprised of commercial real estate loans. Residential real estate mortgage loans represent 32.0% of the
Bank’s loan portfolio and include home equity lines of credit of approximately 14.7%, residential mortgages of approximately 14.1%,
and residential land loans of approximately 3.2%. Real estate construction loans comprise approximately 1.3% of the Bank’s loan
portfolio. Risks associated with a concentration in real estate loans include potential losses from fluctuating values of land and
improved properties. Home equity loans represent loans originated in the Bank’s geographic markets with original loan to value ratios
generally of 75% or less. The Bank’s residential mortgage portfolio includes approximately $4.3 million in interest only mortgages.
The underwriting standards for interest only mortgages are consistent with the remainder of the loan portfolio and do not include any
features that result in negative amortization. Largest loan concentrations by industry are loans granted to lessors of commercial
property both owner occupied and nonowner occupied. The Bank uses conservative underwriting criteria to better insulate itself from
a downturn in real estate values and economic conditions on eastern Long Island that could have a significant impact on the value of
collateral securing the loans as well as the ability of customers to repay loans.
The remainder of the loan portfolio is comprised of commercial and consumer loans, which represent approximately 19.4% of the
Bank’s loan portfolio. The primary risks associated with commercial loans are the cash flow of the business, the experience and
quality of the borrowers’ management, the business climate, and the impact of economic factors. The primary risks associated with
consumer loans relate to the borrower, such as the risk of a borrower’s unemployment as a result of deteriorating economic conditions
or the amount and nature of a borrower’s other existing indebtedness, and the value of the collateral securing the loan if the Bank must
take possession of the collateral. Consumer loans also have risks associated with concentrations of loans in a single type of loan.
Page -24-
The Bank’s policy for charging off loans is a multi-step process. A loan is considered a potential charge-off when it is in default of
either principal or interest for a period of 90, 120 or 180 days, depending upon the loan type, as of the end of the prior month. In
addition to date criteria, other triggering events may include, but are not limited to, notice of bankruptcy by the borrower or guarantor,
death of the borrower, and deficiency balance from the sale of collateral. These loans identified are presented for evaluation at the
regular meeting of the Classification Committee. The recovery of charged-off balances is actively pursued until the potential for
recovery has been exhausted, or until the expense of collection does not justify the recovery efforts.
Total loans grew $18.4 million or 4.3%, during 2009 and $54.4 million or 14.5% during 2008. Average net loans grew $38.1 million
or 9.6% during 2009 over 2008 and $50.5 million or 14.6% during 2008 when compared to 2007. Real estate mortgage loans were the
largest contributor of the growth for both 2009 and 2008 and increased $16.3 million or 4.8% and $37.5 million or 12.4%,
respectively. Commercial real estate mortgage loans grew $20.9 million or 11.0% during 2009 and residential real estate mortgage
loans grew $4.0 million or 2.8% during 2009. Commercial, financial and agricultural loans increased $4.8 million or 6.6% in 2009
from 2008 and increased $13.5 million or 27.9% in 2008 from 2007. Real estate construction loans decreased $10.3 million or 63.5%
in 2009 and increased $1.3 million or 8.8% in 2008. Installment/consumer loans decreased $1.3 million or 11.4% in 2009 and
increased $2.5 million or 29.6% during 2008. Fixed rate loans represented 25.2%, 23.3% and 19.2% of total loans at December 31,
2009, 2008, and 2007, respectively.
The following table sets forth the major classifications of loans:
December 31,
(In thousands)
Commercial real estate mortgage loans
Residential real estate mortgage loans
Commercial, financial, and agricultural loans
Installment/consumer loans
Real estate construction loans
Total loans
Net deferred loan costs and fees
Allowance for loan losses
Net loans
Selected Loan Maturity Information
2009
2008
2007
2006
2005
$ 211,647
143,312
76,867
9,821
5,906
447,553
485
448,038
(6,045)
$ 441,993
$ 190,727
139,342
72,093
11,081
16,174
429,417
266
429,683
(3,953)
$ 425,730
$ 167,770
125,317
58,637
8,553
14,867
375,144
92
375,236
(2,954)
$ 372,282
$ 166,950
106,189
29,183
8,848
14,767
325,937
60
325,997
(2,512)
$ 323,485
$ 135,570
100,219
38,783
9,827
17,960
302,359
(95)
302,264
(2,383)
$ 299,881
The following table sets forth the approximate maturities and sensitivity to changes in interest rates of certain loans, exclusive of real
estate mortgage loans and installment/consumer loans to individuals as of December 31, 2009:
(In thousands)
Commercial loans
Construction loans (1)
Total
Rate provisions:
Amounts with fixed interest rates
Amounts with variable interest rates
Total
(1)
Within One
Year
After One
But Within
Five Years
After
Five Years
Total
$
$
$
$
12,565
2,470
15,035
12,508
2,527
15,035
$
$
$
$
22,199
444
22,643
21,715
928
22,643
$
$
$
$
42,103
2,992
45,095
$ 76,867
5,906
$ 82,773
33,972
11,123
45,095
$ 68,195
14,578
$ 82,773
Included in the “After Five Years” column, are one-step construction loans that contain a preliminary construction
period (interest only) that automatically converts to amortization at the end of the construction phase.
Page -25-
Past Due, Nonaccrual and Restructured Loans
The following table sets forth selected information about past due, nonaccrual and restructured loans:
December 31,
(In thousands)
Loans 90 days or more past due and still accruing
Nonaccrual loans
Restructured loans - Nonaccrual
Restructured loans - Performing
Other real estate owned, net
Total
Years Ended December 31,
(In thousands)
Gross interest income that has not been paid or recorded
during the year under original terms:
Nonaccrual loans
Restructured loans
Gross interest income recorded during the year:
Nonaccrual loans
Restructured loans
Commitments for additional funds
The following table sets forth impaired loans by loan type:
December 31,
(In thousands)
Nonaccrual Loans:
Commercial real estate mortgage loans
Residential real estate mortgage loans
Commercial, financial, and agricultural loans
Installment/consumer loans
Real estate construction loans
Total
Restructured Loans:
Commercial real estate mortgage loans
Residential real estate mortgage loans
Commercial, financial, and agricultural loans
Installment/consumer loans
Real estate construction loans
Total
Total Impaired Loans
$
$
$
$
$
2009
2008
2007
2006
2005
— $
1,001
4,890
3,229
—
9,120 $
— $
3,068
—
3,229
—
6,297 $
— $
229
—
—
—
229 $
— $
305
118
—
—
423 $
—
658
—
—
—
658
2009
2008
2007
2006
2005
52 $
189
127 $
12
37 $
288
—
189 $
238
—
12 $
—
5 $
—
—
9 $
1
12 $
9
—
38
—
17
—
—
2009
2008
2007
2006
2005
324 $
511
61
105
—
1,001
— $
426
96
6
2,540
3,068
— $
223
6
—
—
229
3,229
4,890
—
—
—
8,119
3,229
—
—
—
—
3,229
—
—
—
—
—
—
— $
182
108
15
—
305
—
—
118
—
—
118
460
198
—
—
—
658
—
—
—
—
—
—
$
9,120 $
6,297 $
229 $
423 $
658
Restructured loans totaled $8.1 million at December 31, 2009, of which $4.9 million of the restructured loans were nonaccrual as of
December 31, 2009.
Securities
Total securities increased to $383.5 million at December 31, 2009 from $354.1 million at December 31, 2008. The available for sale
portfolio decreased 1.5% to $306.1 million from $310.7 million at December 31, 2008. Securities held as available for sale may be
sold in response to, or in anticipation of, changes in interest rates and resulting prepayment risk, or other factors. U.S. government
sponsored entity (“U.S. GSE”) securities increased to $45.9 million at December 31, 2009 from $30.1 million at December 31, 2008,
while state and municipal obligations decreased by $6.8 million, residential mortgage-backed securities decreased by $40.6 million
and residential collateralized mortgage obligations increased by $27.0 million. Securities held to maturity increased 78.2% to $77.4
million at December 31, 2009 compared to $43.4 million at December 31, 2008. Residential collateralized mortgage obligations held
to maturity decreased to $18.3 million at December 31, 2009 from $19.3 at December 31, 2008, while U.S. GSE securities increased
by $5.0 million and state and municipal obligations increased by $30.0 million. Fixed rate securities represented 87.4% of total
securities at December 31, 2009 compared to 84.7% at December 31, 2008. Residential collateralized mortgage obligations
Page -26-
represented approximately 36.6% of the available for sale balance at December 31, 2009 as compared to 27.4% at the prior year-end.
A change in market rates was the primary reason for the net increase in unrealized gains in securities available for sale, which
increased other comprehensive income.
Total securities include restricted securities which represent FHLB and FRB stock, of $1.2 million and $3.8 million at December 31,
2009 and 2008, respectively.
A summary of the amortized cost, gross unrealized gains, gross unrealized losses and estimated fair value of securities is as follows:
The following table sets forth the fair value, amortized cost, maturities and approximated weighted average yield at December 31,
2009. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties. Yields on tax-exempt obligations have been computed on a tax-equivalent basis.
December 31, 2009
(Dollars in
thousands)
Within
One Year
Amortized
Cost
Amount Yield
Fair
Value
Amount
After One But
Within Five Years
After Five But
Within Ten Years
Fair
Value
Amount
Amortized
Cost
Amount Yield
Fair
Value
Amount
Amortized
Cost
Amount Yield
Fair
Value
Amount
After
Ten Years
Amortized
Cost
Amount Yield
Total
Fair
Value
Amount
Amortized
Cost
Amount
Available for sale:
U.S. GSE securities $ 2,892 $
State and municipal
2,791
4.60% $ 34,662 $
34,747 2.14% $ 8,385 $
8,249 3.07% $
— $
— —% $ 45,939 $
45,787
obligations
Residential
mortgage-backed
securities
Residential
collateralized
mortgage
obligations
Total available for
5,972
5,898
4.51
19,712
18,896 4.93
16,121
15,546 6.09
—
— —
41,805
40,340
3,990
4,009
3.83
6,016
5,828 4.32
24,432
23,582 4.33
71,899
68,418
5.12
106,337
101,837
—
— —
—
— —
9,444
9,378 2.86
102,587
100,064
4.44
112,031
109,442
sale
12,854
12,698
4.32
60,390
59,471 3.24
58,382
56,755 4.39
174,486
168,482
4.72
306,112
297,406
Held to maturity:
U.S. GSE securities
State and municipal
obligations
Residential
mortgage-backed
securities
Residential
collateralized
mortgage
obligations
Total held to
maturity
Total securities
—
— —
—
— —
4,927
5,000 4.02
29,724
29,685
1.97
24,241
23,894 3.16
531
525 4.32
—
—
— —
— —
—
—
— —
— —
—
—
— —
—
—
—
— —
4,927
5,000
— —
54,496
54,104
— —
—
—
29,724
$ 42,578 $
29,685
42,383
1.97
2.67% $ 84,631 $
24,241
23,894 3.16
83,365 3.22% $ 63,840 $
5,458
5,525 4.05
18,320
62,280 4.36% $ 193,393 $ 186,802
18,907
4.63
4.71% $ 384,442 $
78,330
77,424
374,830
— —
18,907
18,320
4.63
18,907
18,320
Deposits and Borrowings
Borrowings including Fed Funds purchased, repurchase agreements and FHLB term advances, decreased $100.9 million to $15.0
million at December 31, 2009 from the prior year-end. Total deposits increased $134.5 million or 20.4% in 2009 as compared to 2008.
The growth in deposits is attributable to an increase in core deposits of $111.1 million, driven by the opening of three new branches
during 2007, two new branches opening during 2009 and the building of new relationships in current markets, as well as an increase of
$23.3 million in public funds deposits. Demand deposits increased $30.9 million or 17.1% and Savings, NOW and money market
deposits increased $95.6 million or 27.7% primarily related to core deposits growth. Certificates of deposit of $100,000 or more
decreased $4.8 million or 6.1% from December 31, 2008 and other time deposits increased $12.7 million or 23.2% as compared to the
prior year.
Page -27-
The following table sets forth the remaining maturities of the Bank’s time deposits at December 31, 2009:
(In thousands)
3 Months or less
Over 3 through 6 months
Over 6 through 12 months
Over 12 months through 24 months
Over 24 months through 36 months
Over 36 months through 48 months
Over 48 months through 60 months
Over 60 months
Total
LIQUIDITY
Less than
$100,000
$100,000 or
Greater
$
$
24,847
17,898
17,956
5,445
658
559
122
68
67,553
$
$
23,377
18,277
25,276
3,951
701
1,003
816
—
73,401
Total
48,224
36,175
43,232
9,396
1,359
1,562
938
68
140,954
$
$
The objective of liquidity management is to ensure the sufficiency of funds available to respond to the needs of depositors and
borrowers, and to take advantage of unanticipated earnings enhancement opportunities for Company growth. Liquidity management
addresses the ability of the Company to meet financial obligations that arise in the normal course of business. Liquidity is primarily
needed to meet customer borrowing commitments, deposit withdrawals either on demand or contractual maturity, to repay other
borrowings as they mature, to fund current and planned expenditures and to make new loans and investments as opportunities arise.
The Company’s principal sources of liquidity included cash and cash equivalents of $7.5 million as of December 31, 2009, and
dividends from the Bank. Cash available for distribution of dividends to shareholders of the Company is primarily derived from
dividends paid by the Bank to the Company. During 2009, the Bank declared and paid $4.5 million in cash dividends to the Company.
At December 31, 2009, the Bank had $10.3 million of retained net income available for dividends to the Company. Prior regulatory
approval is required if the total of all dividends declared by the Bank in any calendar year exceeds the total of the Bank’s net income
of that year combined with its retained net income of the preceding two years. In the event that the Company subsequently expands its
current operations, in addition to dividends from the Bank, it will need to rely on its own earnings, additional capital raised and other
borrowings to meet liquidity needs.
The Bank’s most liquid assets are cash and cash equivalents, securities available for sale and securities held to maturity due within one
year. The levels of these assets are dependent upon the Bank’s operating, financing, lending and investing activities during any given
period. Other sources of liquidity include loan and investment securities principal repayments and maturities, lines of credit with other
financial institutions including the Federal Home Loan Bank, growth in core deposits and sources of wholesale funding such as
brokered certificates of deposit. While scheduled loan amortization, maturing securities and short-term investments are a relatively
predictable source of funds, deposit flows and loan and mortgage-backed securities prepayments are greatly influenced by general
interest rates, economic conditions and competition. The Bank adjusts its liquidity levels as appropriate to meet funding needs such as
seasonal deposit outflows, loans, and asset and liability management objectives. Historically, the Bank has relied on its deposit base,
drawn through its full-service branches that serve its market area and local municipal deposits, as its principal source of funding. The
Bank seeks to retain existing deposits and loans and maintain customer relationships by offering quality service and competitive
interest rates to its customers, while managing the overall cost of funds needed to finance its strategies.
During 2009 and 2008, the Bank grew its individual, partnership and corporate account balances (“core deposits”) as well as its level
of public funds. During 2007, the Bank grew its core deposits and reduced its level of public funds. The Bank’s Asset/Liability and
Funds Management Policy allows for wholesale borrowings of up to 25% of total assets. At December 31, 2009, the Bank had
aggregate lines of credit of $217.5 million with unaffiliated correspondent banks to provide short-term credit for liquidity
requirements. Of these aggregate lines of credit, $197.5 million is available on an unsecured basis. The Bank also has the ability, as a
member of the Federal Home Loan Bank (“FHLB”) system, to borrow against unencumbered residential and commercial mortgages
owned by the Bank. The Bank also has a master repurchase agreement with the FHLB, which increases its borrowing capacity. As of
December 31, 2009, there were no overnight borrowings under these lines. The Bank had $15.0 million of securities sold under
agreements to repurchase outstanding as of December 31, 2009 with brokers. In addition, the Bank has an approved broker
relationship for the purpose of issuing brokered certificates of deposit. As of December 31, 2009 the Bank had no brokered certificates
of deposits. As of December 31, 2008, the Bank had issued $5.0 million of brokered certificates of deposit.
Management continually monitors the liquidity position and believes that sufficient liquidity exists to meet all of our operating
requirements. Based on the objectives determined by the Asset and Liability Committee, the Bank’s liquidity levels may be affected
by the use of short-term and wholesale borrowings, and the amount of public funds in the deposit mix. The Asset and Liability
Committee is comprised of members of senior management and the Board. Excess short-term liquidity is invested in overnight federal
funds sold.
Page -28-
CONTRACTUAL OBLIGATIONS
In the ordinary course of operations, the Company enters into certain contractual obligations.
The following represents contractual obligations outstanding at December 31, 2009:
(In thousands)
Operating leases
Purchase obligation
FHLB term advances and repurchase agreements
Junior subordinated debentures
Time deposits
Total contractual obligations outstanding
Total
Amounts
Committed
Less than
One Year
One to
Three Years
Four to
Five Years
Over Five
Years
$
$
4,793 $
250
15,000
16,002
140,954
176,999 $
827 $
250
—
—
127,631
128,708 $
976 $
—
—
—
10,755
11,731 $
925 $
—
5,000
—
2,500
8,425 $
2,065
—
10,000
16,002
68
28,135
COMMITMENTS, CONTINGENT LIABILITIES, AND OFF-BALANCE SHEET ARRANGEMENTS
Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet
customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in
the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk to credit
loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to
make such commitments as are used for loans, often including obtaining collateral at exercise of the commitment. At December 31,
2009, the Company had $25.4 million in outstanding loan commitments and $103.4 million in outstanding commitments for various
lines of credit including unused overdraft lines. The Company also has $1.2 million of standby letters of credit as of December 31,
2009. See Note 12 of the Notes to the Consolidated Financial Statements for additional information on loan commitments and standby
letters of credit.
CAPITAL RESOURCES
Stockholders’ equity increased to $61.9 million at December 31, 2009 from $56.1 million at December 31, 2008 as a result of
undistributed net income; plus the change in net unrealized appreciation in securities available for sale, net of deferred taxes; the
change in pension liability under FASB ASC 715-30, net of deferred taxes; and the issuance of shares of common stock pursuant to
the equity incentive plan; less the declaration of dividends. The ratio of average stockholders’ equity to average total assets decreased
to 6.80% at year end 2009 from 7.62% at year end 2008.
The Company’s capital strength is paralleled by the solid capital position of the Bank, as reflected in the excess of its regulatory
capital ratios over the risk-based capital adequacy ratio levels required for classification as a “well capitalized” institution by the FDIC
(see Note 14 to the Consolidated Financial Statements). During 2009, the Company completed the private placement of $16.0 million
in aggregate liquidation amount of 8.50% cumulative convertible trust preferred securities (the "TPS”), through its subsidiary, Bridge
Statutory Capital Trust II. The TPS have a liquidation amount of $1,000 per security and the TPS shares are convertible into our
common stock, at an effective conversion price of $31 per share. The TPS mature in 30 years but are callable by the Company at par
any time after September 30, 2014. The Company issued $16.0 million of Junior Subordinated Debentures (the “Debentures”) to the
trust in exchange for ownership of all of the common security of the trust and the proceeds of the preferred securities sold by the trust.
In accordance with current accounting guidance, the trust is not consolidated in the Company’s financial statements, but rather the
Debentures are shown as a liability. The Debentures bear interest at a fixed rate equal to 8.50% and mature on December 31, 2039.
Consistent with regulatory requirements, the interest payments may be deferred for up to 5 years, and are cumulative. The Debentures
have the same prepayment provisions as the TPS. The Debentures may be included in Tier I capital (with certain limitations
applicable) under current regulatory guidelines and interpretations. Management believes that the current capital levels along with
future retained earnings will allow the Bank to maintain a position exceeding required capital levels and which is sufficient to support
Company growth. Additionally, the Company has the ability to issue additional common stock, preferred stock and/or trust preferred
securities should the need arise.
The Company had returns on average equity of 15.58%, 16.29%, and 17.47% and returns on average assets of 1.06%, 1.24%, and
1.38%, for the years ended December 31, 2009, 2008, and 2007, respectively. The Company utilizes cash dividends and stock
repurchases to manage capital levels. Cash dividends totaled $5.7 million in 2009 and 2008. The dividend payout ratios for 2009 and
2008 were 65.43% and 64.74%, respectively. The Company continues its trend of uninterrupted dividends. On March 27, 2006, the
Company approved its stock repurchase plan allowing the repurchase of up to 5% of its then current outstanding shares, 309,000
shares. There is no expiration date for the share repurchase plan. The Company considers opportunities for stock repurchases
carefully. The Company did not repurchase any shares in 2009, 2008 or 2007.
Page -29-
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and notes thereto presented herein have been prepared in accordance with U.S. generally
accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars
without considering changes in the relative purchasing power of money over time due to inflation. The primary effect of inflation on
the operations of the Company is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets
and liabilities of a financial institution are monetary in nature. As a result, changes in interest rates have a more significant effect on
the performance of a financial institution than do the effects of changes in the general rate of inflation and changes in prices. Changes
in interest rates could adversely affect our results of operations and financial condition. Interest rates do not necessarily move in the
same direction, or in the same magnitude, as the prices of goods and services. Interest rates are highly sensitive to many factors, which
are beyond the control of the Company, including the influence of domestic and foreign economic conditions and the monetary and
fiscal policies of the United States government and federal agencies, particularly the Federal Reserve Bank.
IMPACT OF PROSPECTIVE ACCOUNTING STANDARDS
For discussion regarding the impact of new accounting standards, refer to Note 1 r) of the notes to Consolidated Financial Statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Management considers interest rate risk to be the most significant market risk for the Company. Market risk is the risk of loss from
adverse changes in market prices and rates. Interest rate risk is the exposure to adverse changes in the net income of the Company as a
result of changes in interest rates.
The Company’s primary earnings source is net interest income, which is affected by changes in the level of interest rates, the
relationship between rates, the impact of interest rate fluctuations on asset prepayments, the level and composition of deposits and
liabilities, and the credit quality of earning assets. The Company’s objectives in its asset and liability management are to maintain a
strong, stable net interest margin, to utilize its capital effectively without taking undue risks, to maintain adequate liquidity, and to
reduce vulnerability of its operations to changes in interest rates.
The Company’s Asset and Liability Committee evaluates periodically, but at least four times a year, the impact of changes in market
interest rates on assets and liabilities, net interest margin, capital and liquidity. Risk assessments are governed by policies and limits
established by senior management, which are reviewed and approved by the full Board of Directors at least annually. The economic
environment continually presents uncertainties as to future interest rate trends. The Asset and Liability Committee regularly utilizes a
model that projects net interest income based on increasing or decreasing interest rates, in order to be better able to respond to changes
in interest rates.
At December 31, 2009, $336.4 million or 87.4% of the Company’s securities had fixed interest rates. Changes in interest rates affect
the value of the Company’s interest earning assets and in particular its securities portfolio. Generally, the value of securities fluctuates
inversely with changes in interest rates. Increases in interest rates could result in decreases in the market value of interest earning
assets, which could adversely affect the Company’s stockholders’ equity and its results of operations if sold. The Company is also
subject to reinvestment risk associated with changes in interest rates. Changes in market interest rates also could affect the type (fixed-
rate or adjustable-rate) and amount of loans originated by the Company and the average life of loans and securities, which can impact
the yields earned on the Company’s loans and securities. Changes in interest rates may affect the average life of loans and mortgage
related securities. In periods of decreasing interest rates, the average life of loans and securities held by the Company may be
shortened to the extent increased prepayment activity occurs during such periods which, in turn, may result in the investment of funds
from such prepayments in lower yielding assets. Under these circumstances the Company is subject to reinvestment risk to the extent
that it is unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on existing loans and
securities. Additionally, increases in interest rates may result in decreasing loan prepayments with respect to fixed rate loans (and
therefore an increase in the average life of such loans), may result in a decrease in loan demand, and make it more difficult for
borrowers to repay adjustable rate loans.
The Company utilizes the results of a detailed and dynamic simulation model to quantify the estimated exposure to net interest income
to sustained interest rate changes. Management routinely monitors simulated net interest income sensitivity over a rolling two-year
horizon. The simulation model captures the seasonality of the Company’s deposit flows and the impact of changing interest rates on
the interest income received and the interest expense paid on all assets and liabilities reflected on the Company’s consolidated balance
sheet. This sensitivity analysis is compared to the asset and liability policy limits that specify a maximum tolerance level for net
interest income exposure over a one-year horizon given a 100 and 200 basis point upward shift in interest rates and a 100 basis point
downward shift in interest rates. A parallel and pro-rata shift in rates over a twelve-month period is assumed.
Page -30-
The following reflects the Company’s net interest income sensitivity analysis at December 31, 2009:
Change in Interest
Rates in Basis Points
(Dollars in thousands)
200
100
Static
(100)
2009
Potential Change
in Net
Interest Income
$ Change
% Change
$
$
$
(1,243)
(545)
—
42
(3.54)%
(1.55)%
—
0.12%
The preceding sensitivity analysis does not represent a Company forecast and should not be relied upon as being indicative of
expected operating results. These hypothetical estimates are based upon numerous assumptions including, but not limited to, the
nature and timing of interest rate levels and yield curve shapes, prepayments on loans and securities, deposit decay rates, pricing
decisions on loans and deposits, and reinvestment and replacement of asset and liability cash flows. While assumptions are developed
based upon perceived current economic and local market conditions, the Company cannot make any assurances as to the predictive
nature of these assumptions including how customer preferences or competitor influences may change.
Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will also differ due to prepayment and
refinancing levels likely deviating from those assumed, the varying impact of interest rate change caps or floors on adjustable rate
assets, the potential effect of changing debt service levels on customers with adjustable rate loans, depositor early withdrawals,
prepayment penalties and product preference changes and other internal and external variables. Furthermore, the sensitivity analysis
does not reflect actions that management might take in responding to, or anticipating changes in interest rates and market conditions.
Page -31-
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
ASSETS
Cash and due from banks
Interest earning deposits with banks
Total cash and cash equivalents
Securities available for sale, at fair value
Securities held to maturity (fair value of $78,330 and $43,890, respectively)
Total securities
Securities, restricted
Loans
Allowance for loan losses
Loans, net
Premises and equipment, net
Accrued interest receivable
Other assets
Total Assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Demand deposits
Savings, NOW and money market deposits
Certificates of deposit of $100,000 or more
Other time deposits
Total deposits
Federal funds purchased and Federal Home Loan Bank overnight borrowings
Federal Home Loan Bank term advances
Repurchase agreements
Junior subordinated debentures
Accrued interest payable
Other liabilities and accrued expenses
Total Liabilities
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; 6,397,088 and 6,386,306 shares issued, respectively;
6,261,216 and 6,184,080 shares outstanding, respectively
Surplus
Retained earnings
Less: Treasury Stock at cost, 135,872 and 202,226 shares, respectively
Accumulated other comprehensive income (loss):
Net unrealized gain on securities, net of deferred income taxes of ($3,457) and ($2,250),
respectively
Pension liability, net of deferred income taxes of $1,166 and $1,060, respectively
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
See accompanying notes to Consolidated Financial Statements.
Page -32-
December 31,
2009
December 31,
2008
$
$
$
$
27,108
7,039
34,147
$
$
306,112
77,424
383,536
1,205
448,038
(6,045)
441,993
21,306
3,679
11,391
897,257
212,137
440,447
73,401
67,553
793,538
—
—
15,000
16,002
531
10,331
835,402
—
—
64
19,950
43,110
(4,791)
58,333
24,744
4,141
28,885
310,695
43,444
354,139
3,800
429,683
(3,953)
425,730
18,377
3,626
4,502
839,059
181,213
344,860
78,165
54,847
659,085
70,900
30,000
15,000
—
672
7,263
782,920
—
—
64
20,452
40,081
(6,309)
54,288
5,249
(1,727)
61,855
897,257
$
3,417
(1,566)
56,139
839,059
$
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Years Ended December 31,
Interest income:
Loans (including fee income)
Mortgage-backed securities
State and municipal obligations
U.S. GSE securities
Federal funds sold
Deposits with banks
Total interest income
Interest expense:
Savings, NOW and money market deposits
Certificates of deposit of $100,000 or more
Other time deposits
Federal funds purchased and repurchase agreements
Federal Home Loan Bank Advances
Junior subordinated debentures
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Non interest income:
Service charges on deposit accounts
Fees for other customer services
Title fee income
Net securities gains (losses)
Other operating income
Total non interest income
Non interest expense:
Salaries and employee benefits
Net occupancy expense
Furniture and fixture expense
Data/Item processing
Advertising
FDIC assessments
Other operating expenses
Total non interest expense
Income before income taxes
Income tax expense
Net income
Basic earnings per share
Diluted earnings per share
Comprehensive Income
See accompanying notes to Consolidated Financial Statements.
2009
2008
2007
$
$
$
$
$
29,167
11,074
2,201
880
33
13
43,368
3,698
1,974
1,551
401
1
190
7,815
35,553
4,150
31,403
2,997
1,678
903
529
67
6,174
14,084
2,337
1,007
486
457
1,574
4,820
24,765
12,812
4,049
8,763
1.44
1.43
10,434
$
$
$
$
$
28,040
8,404
1,907
1,081
183
5
39,620
5,681
2,125
1,148
478
57
—
9,489
30,131
2,000
28,131
3,067
1,759
1,120
—
118
6,064
12,710
1,870
850
481
440
267
4,539
21,157
13,038
4,288
8,750
1.44
1.43
10,369
$
$
$
$
$
26,347
5,764
1,898
1,213
638
4
35,864
7,634
1,452
1,058
288
5
—
10,437
25,427
600
24,827
2,540
1,734
1,339
(101)
166
5,678
10,755
1,734
833
423
429
66
3,928
18,168
12,337
4,043
8,294
1.37
1.36
10,787
Page -33-
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except per share amounts)
Common
Stock
Surplus
$
64
$
21,565
Comprehensive
Income
$
8,294
Retained
Earnings
34,347
$
8,294
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
$
(8,176)
$
(2,261)
(271)
39
94
244
271
(39)
55
(5,610)
Total
$ 45,539
8,294
—
—
149
244
(5,610)
Balance at January 1, 2007
Net income
Stock awards granted
Stock awards forfeited
Exercise of stock options, including tax benefit
Shared based compensation expense
Cash dividend declared, $0.92 per share
Other comprehensive income, net of deferred
taxes:
Change in unrealized net gains in securities
available for sale, net of reclassification and
deferred tax effects
Adjustment to pension liability, net of deferred
tax
Comprehensive Income
Balance at December 31, 2007
$
64
$
21,671
Net income
Stock awards granted
Stock awards forfeited
Vesting of stock awards
Exercise of stock options, including tax benefit
Shared based compensation expense
Cash dividend declared, $0.92 per share
Other comprehensive income, net of deferred
taxes:
Change in unrealized net gains in securities
available for sale, net of reclassification and
deferred tax effects
Adjustment to pension liability, net of deferred
taxes
(1,848)
91
(34)
140
432
Comprehensive Income
Balance at December 31, 2008
$
64
$
20,452
$
$
$
$
Net income
Proceeds from issuance of common stock, net
of offering costs
Stock awards granted
Vesting of stock awards
Exercise of stock options, including tax benefit
Shared based compensation expense
Cash dividend declared, $0.92 per share
Other comprehensive income, net of deferred
taxes:
Change in unrealized net gains in securities
available for sale, net of reclassification and
deferred tax effects
Adjustment to pension liability, net of deferred
taxes
Comprehensive Income
Balance at December 31, 2009
1,738
755
10,787
1,738
1,738
755
755
$
37,031
$
(7,889)
$
232
$ 51,109
8,750
8,750
1,848
(91)
(40)
(137)
(5,665)
3,204
(1,585)
(35)
10,369
$
40,081
$
(6,309)
$
1,851
8,763
8,763
8,750
—
—
(74)
3
432
(5,665)
—
3,204
3,204
(1,585)
(1,620)
—
$ 56,139
8,763
255
—
(53)
64
750
(5,734)
1,832
1,832
(161)
(161)
—
$ 61,855
252
(1,664)
(1)
161
750
3
1,664
(52)
(97)
(5,734)
1,832
(161)
$
10,434
$
64
$
19,950
$
43,110
$
(4,791)
$
3,522
See accompanying notes to Consolidated Financial Statements.
Page -34-
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended December 31,
Cash flows from operating activities:
2009
2008
2007
Net Income
Adjustments to reconcile net income to net cash provided by operating activities:
$
8,763
$
8,750
$
8,294
Provision for loan losses
Depreciation and amortization
Amortization and (accretion), net
Share based compensation expense
Tax expense from the vesting of restricted stock awards
Tax benefit from exercise of stock options
SERP expense
Net securities (gains) losses
Increase in accrued interest receivable
Deferred income tax (benefit) expense
Increase in other assets
Increase (decrease) in accrued expenses and other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of securities available for sale
Purchases of FHLB stock
Purchases of securities held to maturity
Proceeds from sales of securities available for sale
Redemption of FHLB stock
Maturities and calls of securities available for sale
Maturities of securities held to maturity
Principal payments on securities
Net increase in loans
Purchases of premises and equipment
Net cash used in investing activities
Cash flows from financing activities:
Net increase in deposits
Net (decrease) increase in federal funds purchased and FHLB overnight borrowings
Net (decrease) increase in FHLB term advances
Net (decrease) increase in repurchase agreements
Proceeds from issuance of junior subordinated debentures
Net proceeds from exercise of stock options
Net proceeds from issuance of common stock
Repurchase of surrendered stock from exercise of stock options and vesting of
restricted stock awards
Cash dividends paid
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental Information-Cash Flows:
Cash paid for:
Interest
Income tax
Noncash investing and financing activities:
Dividends declared and unpaid at end of period
See accompanying notes to Consolidated Financial Statements.
Page -35-
4,150
1,453
305
750
1
(13)
281
(529)
(53)
(948)
(5,928)
1,261
9,493
(113,975)
(19,514)
(65,838)
13,087
22,109
46,150
25,713
68,727
(20,413)
(4,382)
(48,336)
134,453
(70,900)
(30,000)
—
16,002
47
255
(36)
(5,716)
44,105
5,262
28,885
34,147
7,956
3,264
1,441
$
$
$
$
2,000
1,214
(55)
432
34
(19)
166
—
(919)
441
(863)
(1,468)
9,713
(213,851)
(65,496)
(46,571)
—
64,083
69,496
7,945
27,431
(55,448)
(1,122)
(213,533)
150,176
63,900
20,000
(10,000)
—
—
—
(71)
(5,648)
218,357
14,537
14,348
28,885
9,457
4,419
$
$
$
600
1,223
(22)
244
—
(25)
214
101
(15)
(257)
(1,346)
595
9,606
(37,935)
(16,595)
(5,836)
8,484
15,086
28,978
9,444
18,503
(49,397)
(1,687)
(30,955)
4,497
(11,600)
10,000
25,000
—
149
—
—
(5,612)
22,434
1,085
13,263
14,348
10,651
4,598
1,423
$
1,406
$
$
$
$
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Bridge Bancorp, Inc. (the “Company”) is incorporated under the laws of the State of New York as a single bank holding company.
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”) and a
financial title insurance subsidiary, Bridge Abstract LLC (“Bridge Abstract”).
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. See Note 8 for a
further discussion of Bridge Statutory Capital Trust II.
The financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and general
practices within the financial institution industry. The following is a description of the significant accounting policies that the
Company follows in preparing its Consolidated Financial Statements.
a) Subsequent Events
As defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 855-10, “Subsequent
Events”, subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued
or available to be issued. Financial statements are considered issued when they are widely distributed to shareholders and other
financial statement users for general use and reliance in a form and format that complies with GAAP. Based on the evaluation, the
Company did not identify any subsequent events that would have required an adjustment to the financial statements.
b) Basis of Financial Statement Presentation
The accompanying Consolidated Financial Statements are prepared on the accrual basis of accounting and include the accounts of the
Company and its wholly-owned subsidiary, the Bank. All material intercompany transactions and balances have been eliminated.
The preparation of financial statements, in conformity with U.S. generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities as of the date of each consolidated balance sheet and the related consolidated statement of income for the years then ended.
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 allowance for loan losses, fair values of
financial instruments, deferred taxes, prepayment speeds on mortgage-backed securities, and pension assumptions are particularly
subject to change.
c) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks and federal funds sold,
which mature overnight. Cash flows are reported net for customer loan and deposit transactions, overnight borrowings and federal
funds purchased, Federal Home Loan Bank advances, and repurchase agreements.
d) Securities
Debt and equity securities are classified in one of the following categories: (i) “held to maturity” (management has a positive intent
and ability to hold to maturity), which are reported at amortized cost, (ii) “available for sale” (all other debt and marketable equity
securities), which are reported at fair value, with unrealized gains and losses reported net of tax, as accumulated other comprehensive
income, a separate component of stockholders’ equity, and (iii) “restricted” which represents FHLB and FRB stock which are reported
at cost.
Premiums and discounts on securities are amortized to expense and accreted to income over the estimated life of the respective
securities using the interest method. Gains and losses on the sales of securities are recognized upon realization based on the specific
identification method. Declines in the fair value of securities below their cost that are other than temporary are reflected as realized
losses. In estimating other-than-temporary losses, management considers many factors including: (1) the length of time and extent that
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) the whether the Company has the intent to sell the security or more than likely than not
will be required to sell the security before its anticipated recovery. The assessment of whether an other than temporary decline exists
may involve a high degree of subjectivity and judgment and is based on the information available to management at a point in time.
Page -36-
e) Loans and Loan Interest Income Recognition
Loans are stated at the principal amount outstanding, net deferred origination costs and fees. Loan origination and commitment fees
and certain direct and indirect costs incurred in connection with loan originations are deferred and amortized to income over the life of
the related loans as an adjustment to yield. When a loan prepays, the remaining unamortized net deferred origination fees or costs are
recognized in the current year. Interest on loans is credited to income based on the principal outstanding during the period. Loans that
are 90 days past due are automatically placed on nonaccrual and previously accrued interest is reversed and charged against interest
income. However, if the loan is in the process of collection and the Bank has reasonable assurance that the loan will be fully
collectible based upon individual loan evaluation assessing such factors as collateral and collectibility, accrued interest will be
recognized as earned. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought
current and future payments are reasonably assured.
A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the
scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by
management in determining impairment include payment status and the probability of collecting scheduled principal and interest
payments when due. Loans for which the terms have been modified due to the borrower experiencing financial difficulties are
considered troubled debt restructurings and are classified as impaired. The impairment of a loan is measured at the value of expected
future cash flows using the loan’s effective interest rate, or at the loan’s observable market price or the fair value of the collateral less
costs to sell if the loan is collateral dependent. Generally, the Bank measures impairment of such loans by reference to the fair value of
the collateral less costs to sell. Loans that experience minor payment delays and payment shortfall generally are not classified as
impaired.
f) Allowance for Loan Losses
The Bank monitors its entire loan portfolio on a regular basis, with consideration given to loan growth, detailed analyses of classified
loans, repayment patterns, current delinquencies, probable incurred losses, past loss experience, current economic conditions, and
various types of concentrations of credit. Additions to the allowance are charged to expense and realized losses, net of recoveries, are
charged to the allowance. Based on the determination of management and the Classification Committee, the overall level of allowance
is periodically adjusted to account for the inherent and specific risks within the entire portfolio. Based on the Classification
Committee’s review of the classified loans and the overall allowance levels as they relate to the entire loan portfolio at December 31,
2009, management believes the allowance for loan losses is adequate.
A loan is considered a potential charge-off when it is in default of either principal or interest for a period of 90, 120 or 180 days,
depending upon the loan type, as of the end of the prior month. In addition to delinquency criteria, other triggering events may
include, but are not limited to, notice of bankruptcy by the borrower or guarantor, death of the borrower, and deficiency balance from
the sale of collateral.
While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based
on changes in conditions. In addition, various regulatory agencies, as an integral part of the examination process, periodically review
the Bank’s allowance for loan losses. Such agencies may require the Bank to recognize additions to, or charge-offs against, the
allowance based on their judgment about information available to them at the time of their examination.
g) Premises and Equipment
Buildings, furniture and fixtures and equipment are stated at cost less accumulated depreciation. Buildings and related components are
depreciated using the straight-line method using a useful life of fifty years for buildings and a range of two to ten years for equipment,
computer hardware and software, and furniture and fixtures. Leasehold improvements are amortized over the lives of the respective
leases or the service lives of the improvements, whichever is shorter. Land is recorded at cost.
Improvements and major repairs are capitalized, while the cost of ordinary maintenance, repairs and minor improvements is charged
to expense.
h) Other Real Estate Owned
Other real estate owned consists of real estate acquired by foreclosure or deed in lieu of foreclosure and is recorded at the lower of the
net loan balance at the foreclosure date plus acquisition costs or fair value, less estimated costs to sell. Subsequent valuation
adjustments are made if fair value less estimated costs to sell the property falls below the carrying amount. At December 31, 2009 and
2008, the Company carried no other real estate owned.
Page -37-
i) Loan Commitments and Related Financial Instruments
Financial instruments include off-balance sheet credit instruments, such as unused lines of credit, commitments to make loans and
commercial letters of credit, issued to meet customer-financing needs. The face amount for these items represents the exposure to loss,
before considering customer collateral or ability to repay. Such financial instruments are recorded on the balance sheet when they are
funded.
j) Income Taxes
The Company follows the asset and liability approach, which requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities,
computed using enacted tax rates. Deferred tax assets are recognized if it is more likely than not that a future benefit will be realized.
It is management’s position, as currently supported by the facts and circumstances, that no valuation allowance is necessary against
any of the Company’s deferred tax assets.
The Company adopted FASB ASC 740, Accounting for Uncertainty in Income Taxes (“FIN 48”), as of January 1, 2007. A tax
position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination,
with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50%
likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The
adoption had no affect on the Company’s financial statements.
The Company recognizes interest and/or penalties related to income tax matters in income tax expense. The Company did not have
any amounts accrued for interest and penalties at December 31, 2009 or 2008.
k) Treasury Stock
Repurchases of common stock are recorded as treasury stock at cost. Treasury stock is reissued using the first in, first out method.
l) Earnings Per Share
Basic earnings per common share is net income attributable to common shareholders divided by the weighted average number of
common shares outstanding during the period. Diluted earnings per share, which reflects the potential dilution that could occur if
outstanding stock options were exercised and if junior subordinated debentures were converted into common shares, is computed by
dividing net income by the weighted average number of common shares and common stock equivalents.
m) Dividends
Cash available for distribution of dividends to shareholders of the Company is primarily derived from dividends paid by the Bank to
the Company. Due to regulatory restrictions, dividends from the Bank to the Company at December 31, 2009, were limited to $10.3
million which represents the Bank’s 2009 retained net income and net retained earnings from the previous two years. During 2009,
$4.5 million was declared and paid from the Bank to the Company. Prior regulatory approval is required if the total of all dividends
declared by the Bank in any calendar year exceeds the total of the Bank’s net income of that year combined with its retained net
income of the preceding two years.
n) Segment Reporting
While management monitors the revenue streams of the various products and services, the identifiable segments are not material and
operations are managed and financial performance is evaluated on a Company-wide basis. Accordingly, all of the financial service
operations are considered by management to be aggregated in one reportable operating segment.
o) Stock Based Compensation Plans
FASB ASC No. 718 and 505, “Accounting for Stock-Based Compensation” requires companies to record compensation cost for stock
options and stock awards granted to employees in return for employee service. The cost is measured at the fair value of the options
and awards when granted, and this cost is expensed over the employee service period, which is normally the vesting period of the
options and awards. The Company adopted FASB ASC No. 718 and 505 beginning January 1, 2006 applying the modified prospective
transition method. Under the modified prospective transition method, the financial statements will not reflect restated amounts.
p) Comprehensive Income
Comprehensive income includes net income and all other changes in equity during a period, except those resulting from investments
by owners and distributions to owners. Other comprehensive income includes revenues, expenses, gains and losses that under
Page -38-
generally accepted accounting principles are included in comprehensive income but excluded from net income. Comprehensive
income and accumulated other comprehensive income are reported net of deferred income taxes. Accumulated other comprehensive
income for the Company includes unrealized holding gains or losses on available for sale securities, and the pension liability. FASB
ASC 715-30 “Compensation – Retirement Benefits – Defined Benefit Plans – Pension” requires employers to recognize the
overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position
and to recognize changes in that funded status in the year the changes occur through comprehensive income. Other comprehensive
income is net of reclassification adjustments for realized gains (losses) on sales of available for sale securities.
q) Fair Value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in
Note 13. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk,
prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market
conditions could significantly affect the estimates.
r) New Accounting Standards
In June 2008, the FASB issued FASB ASC 260-10, “Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities”. This ASC 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”). This ASC is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods
within those years. All prior-period EPS data presented shall be adjusted retrospectively. The Company adopted this ASC and the
impact is disclosed in Note 11.
In April 2009, the FASB issued FASB ASC 820-10-65-4, “Determining Fair Value When the Volume and Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”. This ASC emphasizes that even if there
has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s)
used, the objective of a fair value measurement remains the same. It also provides guidance to determine whether transactions are
orderly. FASB ASC 820-10-65-4 is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted
for periods ending after March 15, 2009, if FASB ASC 320-10-65-1, “Recognition and Presentation of Other-Than-Temporary
Impairment” and FASB ASC 825-10-65-1, “Interim Disclosures about Fair Value of Financial Instruments”, are adopted
simultaneously. The adoption of this FSP did not have a material impact on the Company’s financial statements.
In April 2009, the FASB issued FASB ASC 825-10-65-1, “Interim Disclosures about Fair Value of Financial Information”. This
ASC amends FASB ASC 825-10-50, “Disclosures about the Fair Value of Financial Instruments” to require disclosures about fair
value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements.
This ASC also amends FASB ASC 270-10, “Interim Financial Reporting” to require those disclosures in summarized financial
information at interim reporting periods. This ASC shall be effective for interim reporting periods ending after June 15, 2009, with
early adoption permitted for periods ending after March 15, 2009. An entity may early adopt this ASC only if it also elects to early
adopt FASB ASC 820-10-65-4, “Determining Fair Value When the Volume and Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly”, and FASB ASC 320-10-65-1, “Recognition and Presentation of
Other-Than-Temporary Impairments”. The adoption of this ASC at June 30, 2009 did not have a material impact on the results of
operations or financial position as it only required disclosures which are included in Note 13.
In April 2009, the FASB issued FASB ASC 320-10-65-1, “Recognition and Presentation of Other-Than-Temporary Impairments”.
This ASC amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more
operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the
financial statements. The ASC shall be effective for interim and annual reporting periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. Earlier adoption for periods ending before March 15, 2009, is not
permitted. If an entity elects to adopt early either FASB ASC 820-10-65-4, “Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”, or FASB ASC
825-10-65-1, “Interim Disclosures about Fair Value of Financial Instruments”, the entity also is required to adopt early this ASC.
Additionally, if an entity elects to adopt early this ASC, it is required to adopt FASB ASC 820-10-65-4. The adoption of this ASC did
not have a material impact on the Company’s financial statements.
In April 2009, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 111 which amends
Topic 5.M. in the SAB Series entitled “Other than Temporary Impairment of Certain Investments in Debt and Equity Securities”. This
SAB maintains the staff’s previous views related to equity securities and it amends Topic 5.M. to exclude debt securities from its
scope. The adoption of this SAB did not have a material impact on the Company’s financial statements.
In April 2009, the FASB issued FASB ASC 805-20, “Accounting for Assets Acquired and Liabilities Assumed in a Business
Combination That Arise from Contingencies”. This ASC shall be effective for assets or liabilities arising from contingencies in
Page -39-
business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. The adoption of this ASC had no impact on the Company’s financial statements.
In June 2009, the FASB issued Statement of Financial Accounting Standards No. 166, “Accounting for Transfers of Financial Assets,
an Amendment of FASB Statement No. 140” (ASC 860). The new accounting requirement amends previous guidance relating to the
transfers of financial assets and eliminates the concept of a qualifying special purpose entity. This Statement must be applied as of the
beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that
first annual reporting period and for interim and annual reporting periods thereafter. This Statement must be applied to transfers
occurring on or after the effective date. Additionally, on and after the effective date, the concept of a qualifying special-purpose entity
is no longer relevant for accounting purposes. Therefore, formerly qualifying special-purpose entities should be evaluated for
consolidation by reporting entities on and after the effective date in accordance with the applicable consolidation guidance.
Additionally, the disclosure provisions of this Statement should be applied to transfers that occurred both before and after the effective
date of this Statement. The Company does not expect the adoption of this Statement to have a material impact to the Company’s
financial statements.
In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, “Amendments to FASB Interpretation No.
46(R)” (ASC 810), which improves financial reporting by enterprises involved with variable interest entities. This Statement amends
guidance for consolidation of variable interest entities by replacing the quantitative-based risks and rewards calculation for
determining which enterprise, if any, has a controlling financial interest in a variable interest entity with an approach focused on
identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly impact the entity’s
economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. This
Statement also requires additional disclosures about an enterprise’s involvement in variable interest entities. This guidance will be
effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim
periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Early adoption is prohibited.
The Company does not expect the adoption of this Statement to have a material impact to the Company’s financial statements.
In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168, “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles”, which is codified as ASC 105, “Generally Accepted Accounting
Principles”. The objective of this Statement is to replace Statement 162, “The Hierarchy of Generally Accepted Accounting
Principles”, and to establish the FASB Accounting Standards Codification TM as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with
GAAP. Rules and interpretive releases of the Securities and Exchange Commission under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. This Statement is effective for financial statements issued for interim and annual
periods ending after September 15, 2009. The adoption of this Statement will not impact the results of operations or financial position
as it only required disclosures. Beginning with the Quarterly Report on Form 10-Q for September 30, 2009, and in all filings
thereafter, references to Financial Accounting Standards that have been codified in the FASB Accounting Standards Codification have
been replaced with references to the appropriate guidance in the Codification.
In August 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, “Measuring Liabilities at Fair Value”, which
is codified as ASC 820, “Fair Value Measurements and Disclosures”. This Update provides amendments to Topic 820-10, Fair Value
Measurements and Disclosures – Overall, for the fair value measurement of liabilities. This Update provides clarification that in
circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to
measure fair value using a valuation technique that uses the quoted price of the identical liability when traded as an asset, quoted
prices for similar liabilities or similar liabilities when traded as assets, or that is consistent with the principles of Topic 820. The
amendments in this Update also clarify that when estimating the fair value of a liability, a reporting entity is not required to include a
separate input or adjustment to other inputs relating to the existence of a restriction that prevents transfer of the liability. The
amendments in this Update also clarify that both a quoted price in an active market for the identical liability at the measurement date
and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of
the asset are required are Level 1 fair value measurements. The guidance provided in this Update is effective for the first reporting
period (including interim periods) beginning after issuance. The adoption of this Update did not have a material impact to the
Company’s financial statements.
s) Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the FHLB system. 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. FHLB stock is carried at cost and classified as a restricted
security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are
reported as income.
t) Reclassifications
Certain reclassifications have been made to prior year amounts, and the related discussion and analysis, to conform to the current year
presentation.
Page -40-
2. SECURITIES
A summary of the amortized cost, gross unrealized gains and losses and estimated fair value of securities is as follows:
December 31,
(In thousands)
Available for sale:
2009
2008
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
U.S. GSE securities
State and municipal obligations
Residential mortgage-backed
$
45,787
40,340
$
securities
Residential collateralized
mortgage obligations
Total available for sale
Held to maturity:
U.S. GSE securities
State and municipal obligations
Residential mortgage-backed
securities
Residential collateralized
mortgage obligations
Total held to maturity
Total securities
101,837
109,442
297,406
5,000
54,104
—
309
1,473
4,561
2,722
9,065
—
400
—
$
(157)
(8)
$
45,939
41,805
$
29,855
47,848
$
(61)
106,337
143,372
(133)
(359)
112,031
306,112
83,953
305,028
(73)
(8)
—
4,927
54,496
—
—
24,153
—
306
840
3,637
1,094
5,877
—
68
—
$
(27)
(100)
$
30,134
48,588
(54)
146,955
(29)
(210)
85,018
310,695
—
(4)
—
—
24,217
—
18,320
77,424
$ 374,830
$
589
989
10,054
$
(2)
(83)
(442)
18,907
78,330
384,442
$
19,291
43,444
$ 348,472
382
450
6,327
$
$
—
(4)
(214)
19,673
43,890
$ 354,585
All of the residential mortgage-backed securities and residential collateralized mortgage obligations were backed by U.S. Government
Sponsored Entities as of December 31, 2009 and 2008.
Securities with unrealized losses at year-end 2009 and 2008, aggregated by category and length of time that individual securities have
been in a continuous unrealized loss position, are as follows:
December 31,
(In thousands)
Available for sale:
U.S. GSE securities
State and municipal obligations
Residential mortgage-backed
securities
Residential collateralized
mortgage obligations
Total available for sale
Held to maturity:
U.S. GSE securities
State and municipal obligations
Residential mortgage-backed
securities
Residential collateralized
mortgage obligations
Total held to maturity
2009
2008
Less than 12 months
Fair
Value
Unrealized
losses
Greater than 12 months
Unrealized
losses
Fair
Value
Less than 12 months
Greater than 12 months
Fair Value
Unrealized
losses
Fair Value
Unrealized
losses
$
$
$
$
15,637
742
9,879
5,845
32,103
4,927
10,818
—
4,952
20,697
$
$
$
$
157
8
61
133
359
73
8
—
2
83
$
$
$
$
— $
—
— $
—
—
—
4,319
2,160
6,924
—
— $
—
— $
10,300
23,703
$
$
27
51
35
29
142
$
$
— $
701
1,529
—
2,230
$
— $
—
— $
—
—
—
—
— $
—
— $
— $
3,996
—
—
3,996
$
— $
4
—
—
4
$
— $
—
—
—
— $
—
49
19
—
68
—
—
—
—
—
Unrealized losses on securities have not been recognized into income, as the losses on these securities would be expected to dissipate
as they approach their maturity dates. The Company evaluates securities for other-than-temporary impairment periodically and with
increased frequency when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the
extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, whether the market
decline was affected by macroeconomic conditions, and whether the Company has the intent to sell the security or more than likely
than not will be required to sell the security before its anticipated recovery. In analyzing an issuer’s financial condition, the Company
may consider whether the securities are issued by the federal government or its entities, whether downgrades by bond rating agencies
have occurred, and the issuer’s financial condition.
The following table sets forth the fair value, amortized cost and maturities of the securities at December 31, 2009. 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.
Page -41-
December 31, 2009
(In thousands)
Available for sale:
U.S. GSE securities
State and municipal
obligations
Residential mortgage-
backed securities
Residential collateralized
mortgage obligations
Total available for sale
Held to maturity:
U.S. GSE securities
State and municipal
obligations
Residential mortgage-
backed securities
Residential collateralized
mortgage obligations
Total held to maturity
Total securities
Within
One Year
After One But
Within Five Years
After Five But
Within Ten Years
After
Ten Years
Total
Fair Value
Amount
Amortized
Cost
Amount
Fair Value
Amount
Amortized
Cost
Amount
Fair Value
Amount
Amortized
Cost
Amount
Fair Value
Amount
Amortized
Cost
Amount
Fair Value
Amount
Amortized
Cost
Amount
$
2,892 $
2,791
$
34,662 $
34,747
$
8,385 $
8,249
$
— $
— $
45,939 $
45,787
5,972
3,990
—
12,854
5,898
19,712
18,896
16,121
15,546
—
—
41,805
40,340
4,009
6,016
5,828
24,432
23,582
71,899
68,418
106,337
101,837
—
12,698
—
60,390
—
59,471
9,444
58,382
9,378
56,755
102,587
174,486
100,064
168,482
112,031
306,112
109,442
297,406
—
—
—
—
4,927
5,000
29,724
29,685
24,241
23,894
—
—
—
—
531
—
525
—
—
—
—
—
—
—
4,927
5,000
54,496
54,104
—
—
—
29,724
42,578 $
—
29,685
42,383
$
—
24,241
84,631 $
—
23,894
83,365
$
—
5,458
63,840 $
—
5,525
62,280
18,907
18,907
$ 193,393 $
18,320
18,320
186,802
18,907
78,330
$ 384,442 $
18,320
77,424
374,830
$
There were $13.1 million of proceeds on sales of available for sale securities and gross gains of approximately $529,000 realized, in
2009. No securities were sold at a loss in 2009. There were no sales of available for securities in 2008. There were $8.5 million of
proceeds on sales of available for sale securities and gross losses of approximately $101,000 realized, in 2007. There were no sales of
held to maturity securities during 2009, 2008, and 2007.
Securities having a fair value of approximately $247.3 million and $276.0 million at December 31, 2009 and 2008, respectively, were
pledged to secure public deposits and Federal Home Loan Bank and Federal Reserve Bank overnight borrowings. The Company did
not hold any trading securities during the years ended December 31, 2009, 2008 and 2007.
There were no investment holdings of any one issuer that exceeded 10% of stockholders’ equity at December 31, 2009 and 2008,
other than U.S. Government and its Sponsored Entities.
3. LOANS
The following table sets forth the major classifications of loans:
December 31,
(In thousands)
Commercial real estate mortgage loans
Residential real estate mortgage loans
Commercial, financial, and agricultural loans
Installment/consumer loans
Real estate-construction loans
Total loans
Net deferred loan costs and fees
Allowance for loan losses
Net loans
Lending Risk
2009
2008
$
$
211,647
143,312
76,867
9,821
5,906
447,553
485
448,038
(6,045)
441,993
$
$
190,727
139,342
72,093
11,081
16,174
429,417
266
429,683
(3,953)
425,730
The principal business of the Bank is lending, primarily in commercial real estate loans, residential mortgage loans, construction
loans, home equity loans, commercial and industrial loans, land loans and consumer loans. The Bank considers its primary lending
area to be eastern Long Island in Suffolk County, New York, and a substantial portion of the Bank’s loans are secured by real estate in
this area. Accordingly, the ultimate collectability of such a loan portfolio is susceptible to changes in market and economic conditions
in this region.
Page -42-
Allowance for Loan Losses
The following table sets forth changes in the allowance for loan losses:
December 31,
(In thousands)
Allowance for loan losses balance at beginning of period
Charge-offs
Recoveries
Net charge-offs
Provision for loan losses charged to operations
Balance at end of period
Past Due, Nonaccrual and Restructured Loans
2009
2008
2007
$
$
3,953
(2,093)
35
(2,058)
4,150
6,045
$
$
2,954
(1,070)
69
(1,001)
2,000
3,953
$
$
2,512
(226)
68
(158)
600
2,954
As of December 31, 2009 and December 31, 2008, the Company had impaired loans as defined by FASB ASC No. 310,
“Receivables” of $9.1 million and $6.3 million, respectively. For a loan to be considered impaired, management determines after
review whether it is probable that the Bank will not be able to collect all amounts due according to the contractual terms of the loan
agreement. Additionally management applies its normal loan review procedures in making these judgments. Impaired loans include
individually classified nonaccrual loans and troubled debt restructured (“TDR”) loans. For impaired and TDR loans, the Bank
evaluates the fair value of the loan in accordance with FASB ASC 310-10-35-22. For loans that are collateral dependent, the fair
value of the collateral is used to determine the fair value of the loan. The fair value of the collateral is determined based upon recent
appraised values. For unsecured loans, the fair value is determined based on the present value of expected future cash flows
discounted at the loan’s effective interest rate. The fair value of the loan is compared to the carrying value to determine if any write-
down or specific reserve is required. These methods of fair value measurement for impaired and TDR loans are considered level 3
within the fair value hierarchy described in FASB ASC 820-10-50-5.
Nonaccrual loans increased $2.8 million to $5.9 million or 1.31% of total loans at December 31, 2009 from $3.1 million or 0.71% of
total loans at December 31, 2008. Approximately $4.9 million of the nonaccrual loans at December 31, 2009 represent troubled debt
restructured loans where the borrowers are complying with the modified terms of the loans and are currently making payments.
Additionally, the Bank has no commitment to lend additional funds to these debtors. In 2008, nonaccrual loans increased $2.9 million
to $3.1 million from $0.2 million in 2007. The increase in non accrual loans at December 31, 2008 was due to a single loan of
approximately $2.5 million.
In addition, the Company has one borrower with TDR loans of $3.2 million at December 31, 2009 that are current and are secured
with collateral that has a fair value of approximately $5.4 million as well as personal guarantors. Management believes that the
ultimate collection of principal and interest is reasonably assured and therefore continues to recognize interest income on an accrual
basis. In addition, the Bank has no commitment to lend additional funds to this debtor. The loan was determined to be impaired during
the third quarter of 2008 and since that determination $187,000 of interest income has been recognized. There were no loans
considered to be trouble debt restructurings at December 31, 2007.
There were no loans 90 days or more past due that were still accruing interest at December 31, 2009 and 2008.
Individually impaired loans were as follows:
December 31,
(In thousands)
Loans with no allocated allowance for loan loss
Loans with allocated allowance for loan loss
Total
Amount of the allowance for loan losses allocated
2009
2008
$
$
$
9,022
98
9,120
50
$
$
$
6,297
—
6,297
—
Page -43-
December 31,
(In thousands)
Average of individually impaired loans during the year
Interest income recognized during impairment
Cash basis interest income recognized
Related Party Loans
2009
2008
2007
$
$
7,406
135
—
$
1,725
52
—
—
—
—
Certain directors, executive officers, and their related parties, including their immediate families and companies in which they are
principal owners, were loan customers of the Bank during 2009 and 2008.
The following table sets forth selected information about related party loans at December 31, 2009:
(In thousands)
Balance at December 31, 2008
New loans
Effective change in related parties
Advances
Repayments
Balance at December 31, 2009
4. PREMISES AND EQUIPMENT
Premises and equipment consist of:
December 31,
(In thousands)
Land
Construction in progress
Building and improvements
Furniture and fixtures
Leasehold improvements
Less: accumulated depreciation and amortization
Balance
Outstanding
3,267
—
—
34
(827)
2,474
2009
2008
6,142
565
13,905
9,602
3,319
33,533
(12,227)
21,306
$
$
$
6,142
769
11,515
8,372
2,410
29,208
(10,831)
18,377
$
$
$
$
$
Additionally the Bank is in the process of building new branch locations and is committed to spend $0.9 million related to the
construction which is not reflected in the above figures.
5. DEPOSITS
Time Deposits
The following table sets forth the remaining maturities of the Bank’s time deposits at December 31, 2009:
(In thousands)
2010
2011
2012
2013
2014
2015
Total
Less than
$100,000
$100,000 or
Greater
Total
$
$
60,701 $
5,445
658
559
122
68
67,553 $
66,930 $
3,951
701
1,003
816
—
73,401 $
127,631
9,396
1,359
1,562
938
68
140,954
Page -44-
Deposits from principal officers, directors and their affiliates at December 31, 2009 and 2008 were approximately $6.0 million and
$8.7 million, respectively. Public fund deposits at December 31, 2009 and 2008 were $161.6 million and $138.2 million, respectively.
6. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
At December 31, 2009 and 2008, securities sold under agreements to repurchase totaled $15.0 million respectively and were secured
by U.S. GSE, residential mortgage-backed securities and residential collateralized mortgage obligations with a carrying amount of
$22.2 million and $23.4 million, respectively. Securities sold under agreements to repurchase are financing arrangements with $5.0
million maturing during the first quarter of 2013 and $10.0 million maturing during the first quarter of 2015. At maturity, the
securities underlying the agreements are returned to the Company.
Information concerning the securities sold under agreements to repurchase is summarized as follows:
(In thousands)
Average daily balance during the year
Average interest rate during the year
Maximum month-end balance during the year
Weighted average interest rate at year-end
7. FEDERAL HOME LOAN BANK ADVANCES
2009
2008
2007
$
$
15,000
2.35%
15,000
2.35%
$
$
13,183
2.39%
15,000
2.39%
$
$
753
4.50%
25,000
4.50%
As of December 31, 2009, there were no term advances or overnight borrowings outstanding from the Federal Home Loan Bank. As
of December 31, 2008, there was one term advance from the Federal Home Loan Bank for $30.0 million with a fixed interest rate of
0.49% that matured in January 2009. The term advance was payable at its maturity date and was subject to a prepayment penalty. The
term advance was collateralized by $35.3 million of residential mortgage-backed securities as of December 31, 2008. In addition to
the term advance, there was $34.9 million of overnight borrowings from the Federal Home Loan Bank outstanding as of December 31,
2008. The overnight borrowings were collateralized by $15.8 million of securities and a blanket lien on residential mortgages as of
December 31, 2008.
8. JUNIOR SUBORDINATED DEBENTURES
In December 2009, the Company completed the private placement of $16.0 million in aggregate liquidation amount of 8.50%
cumulative convertible trust preferred securities (the "TPS”), through its wholly-owned subsidiary, Bridge Statutory Capital Trust II.
The TPS have a liquidation amount of $1,000 per security and are convertible into our common stock, at an effective conversion price
of $31 per share. The TPS mature in 30 years but are callable by the Company at par any time after September 30, 2014.
The Company issued $16.0 million of junior subordinated debentures (the “Debentures”) to the trust in exchange for ownership of all
of the common security of the trust and the proceeds of the preferred securities sold by the trust. In accordance with current
accounting guidance, the trust is not consolidated in the Company’s financial statements, but rather the Debentures are shown as a
liability. The Debentures bear interest at a fixed rate equal to 8.50% and mature on December 31, 2039. Consistent with regulatory
requirements, the interest payments may be deferred for up to 5 years, and are cumulative. The Debentures have the same prepayment
provisions as the TPS.
The Debentures may be included in Tier I capital (with certain limitations applicable) under current regulatory guidelines and
interpretations.
9. INCOME TAXES
The components of income tax expense are as follows:
Years Ended December 31,
(In thousands)
Current:
Federal
State
Deferred:
Federal
State
Income tax expense
2009
2008
2007
$
$
4,467
530
4,997
(788)
(160)
(948)
4,049
$
$
3,263
584
3,847
399
42
441
4,288
$
$
3,609
691
4,300
(194)
(63)
(257)
4,043
Page -45-
The reconciliation of the expected Federal income tax expense at the statutory tax rate to the actual provision follows:
Years Ended December 31,
(Dollars in thousands)
2009
Percentage
of Pre-tax
Earnings
Amount
2008
2007
Percentage
of Pre-tax
Earnings
Percentage
of Pre-tax
Earnings
Amount
Amount
Federal income tax expense computed by
applying the statutory rate to income before
income taxes
Tax exempt interest
State taxes, net of federal income tax benefit
Other
Income tax expense
$
$
4,362
(682)
302
67
4,049
34% $
(6)
3
1
32% $
4,442
(588)
413
21
4,288
34% $
(4)
3
-
33% $
4,195
(575)
415
8
4,043
34%
(4)
3
-
33%
Deferred income tax assets and liabilities are comprised of the following:
December 31,
(In thousands)
Deferred income tax assets:
Allowance for loan losses
Other
Total
Deferred income tax liabilities:
Pension and SERP expense
Other
Depreciation
Total
Total before other comprehensive income
Deferred income tax liabilities:
Net unrealized gains on securities
Deferred income tax assets:
Net change in pension liability
Net deferred income tax liability
2009
2008
$
$
2,567
749
3,316
1,726
—
1,726
(1,167)
(518)
(580)
(2,265)
1,051
(3,457)
1,166
(1,240)
$
$
(853)
(507)
(263)
(1,623)
103
(2,250)
1,060
(1,087)
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of the State of New York. The
Company is no longer subject to examination by taxing authorities for years before 2005. The Company does not expect the total
amount of unrecognized income tax benefits to significantly increase in the next twelve months.
10. EMPLOYEE BENEFITS
a) Pension Plan and Supplemental Executive Retirement Plan
The Bank maintains a noncontributory pension plan through the New York State Bankers Association Retirement System covering all
eligible employees. Beginning in 2008, the Bank uses a December 31st measurement date for this plan in accordance with FASB ASC
715-30 “Compensation – Retirement Benefits – Defined Benefit Plans – Pension”. Prior to 2008, the Bank used a September 30th
measurement date. In order to properly reflect the change in measurement dates the Bank recorded a net transition adjustment of
$35,000 in 2008.
During 2001, the Bank adopted the Bridgehampton National Bank Supplemental Executive Retirement Plan (“SERP”). The SERP
provides benefits to certain employees, as recommended by the Compensation Committee of the Board of Directors and approved by
the full Board of Directors, whose benefits under the pension plan are limited by the applicable provisions of the Internal Revenue
Code. The benefit under the SERP is equal to the additional amount the employee would be entitled to under the Pension Plan and the
401(k) Plan in the absence of such Internal Revenue Code limitations. During 2008, the assets of the SERP were held in a rabbi trust
to maintain the tax-deferred status of the plan and are subject to the general, unsecured creditors of the Company. As a result, the
assets of the trust are reflected on the Consolidated Balance Sheets of the Company.
Page -46-
Information about changes in obligations and plan assets of the defined benefit pension plan and the defined benefit plan component
of the SERP are as follows:
At December 31,
(In thousands)
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Benefits paid and expected expenses
Assumption changes and other
Benefit obligation at end of year
Change in plan assets, at fair value
Plan assets at beginning of year
Actual return on plan assets
Employer contribution
Benefits paid and actual expenses
Plan assets at end of year
Funded status (plan assets less benefit obligations)
Pension Benefits
2009
2008
SERP Benefits
2009
2008
$
$
$
$
$
5,357
481
318
(225)
1,536
7,467
6,572
1,428
1,400
(217)
9,183
1,716
$
$
$
$
$
$
$
$
4,716
553
348
(270)
10
5,357
6,574
(1,736)
2,000
(266)
6,572
1,481
162
59
—
(211)
1,491
$
$
— $
—
—
—
—
1,054
71
48
—
308
1,481
—
—
—
—
—
1,215
$
(1,491)
$
(1,481)
Amounts recognized in accumulated other comprehensive income at December 31, consist of:
At December 31,
(In thousands)
Net actuarial loss
Prior service cost
Transition obligation
Net amount recognized
Pension Benefits
2009
2008
SERP Benefits
2009
2008
$
$
2,458
99
—
2,557
$
$
1,930
108
—
2,038
$
$
87
—
225
312
$
$
312
—
252
564
The accumulated benefit obligation was $5.8 million and $1.3 million for the pension plan and the SERP, respectively, as of
December 31, 2009. As of December 31, 2008, the accumulated benefit obligation was $4.6 million and $1.2 million for the pension
plan and the SERP, respectively.
Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Income
At December 31,
(In thousands)
Components of net periodic benefit cost and other
amounts recognized in Other Comprehensive Income
Service cost
Interest cost
Expected return on plan assets
Amortization of net loss
Amortization of unrecognized prior service cost
Amortization of unrecognized transition (asset) obligation
Net periodic benefit cost
Net loss (gain)
Prior service cost
Transition obligation
Amortization of net gain
Amortization of prior service cost
Amortization of transition obligation
Deferred taxes
Total recognized in other comprehensive income
Total recognized in net periodic benefit cost and other
Pension Benefits
SERP Benefits
2009
2008
Transition
2007
2007
2009
2008
2007
$
$
$
$
$
481
318
(516)
88
9
—
380
616
—
—
(88)
(9)
—
519
(206)
313
$
$
$
442
279
(495)
—
9
—
235
2,361
—
—
—
(11)
—
2,350
(933)
1,417
111
70
(124)
—
2
—
59
$
$
(24)
451
280
(395)
14
9
—
359
$
$
(1,141) $
—
—
(14)
(9)
—
(1,164)
462
(702)
162
59
—
13
—
28
262
$
$
(211) $
—
—
(13)
—
(28)
(252)
100
(152)
$
$
71
47
—
—
—
28
146
308
—
—
—
—
(28)
280
(111)
169
61
52
—
—
—
28
141
4
—
(64)
—
—
(28)
(88)
35
(53)
88
comprehensive income
$
693
$
1,711
$
35
$
(343) $
110
$
315
$
Page -47-
The estimated net loss, transition obligation and prior service costs for the defined benefit pension plan that will be amortized from
accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $104,000, $0 and $9,000,
respectively. The estimated net gain and unrecognized net transition obligation for the SERP that will be amortized from accumulated
other comprehensive income into net periodic benefit cost over the next fiscal year is $0 and $28,000, respectively.
Expected Long-Term Rate-of-Return
The expected long-term rate-of-return on plan assets reflects long-term earnings expectations on existing plan assets and those
contributions expected to be received during the current plan year. In estimating that rate, appropriate consideration was given to
historical returns earned by plan assets in the fund and the rates of return expected to be available for reinvestment. Average rates of
return over the past 1, 3, 5 and 10-year periods were determined and subsequently adjusted to reflect current capital market
assumptions and changes in investment allocations.
At December 31,
Weighted Average Assumptions Used to
Determine Benefit Obligations
Discount rate
Rate of compensation increase
Weighted Average Assumptions Used to
Determine Net Periodic Benefit Cost
Discount rate
Rate of compensation increase
Expected long-term rate of return
Plan Assets
Pension Benefits
2008
2009
2007
2009
SERP Benefits
2008
2007
5.89%
4.00
6.00%
3.50
6.00%
4.00
7.50
6.00%
4.00
7.75
6.00%
4.00
5.75%
4.50
8.00
4.31%
5.00
4.00%
5.00
—
4.00%
5.00
4.52%
5.00
—
4.52%
5.00
4.69%
5.00
—
The New York State Bankers Retirement System (the “System”) was established in 1938 to provide for the payment of benefits to
employees of participating banks. The System is overseen by a Board of Trustees (“Trustees”), who meet quarterly, and set the
investment policy guidelines.
The System's overall investment strategy is to achieve a mix of approximately 97% of investments for long-term growth and 3% for
near-term benefit payments with a wide diversification of asset types, fund strategies, and fund managers.
Cash equivalents consist primarily of short term investment funds.
Equity securities primarily include investments in common stock and depository receipts.
Fixed income securities include corporate bonds, government issues and mortgage backed securities.
Other financial instruments primarily include rights and warrants.
The weighted average expected long-term rate-of-return is estimated based on current trends in System’s assets as well as projected
future rates of return on those assets and reasonable actuarial assumptions based on the guidance provided by ASOP No. 27 for long
term inflation, and the real and nominal rate of investment return for a specific mix of asset classes. The following assumptions were
used in determining the long-term rate-of-return:
Equity securities
Dividend discount model, the smoothed earnings yield model
and the equity risk premium model.
Fixed income securities
Current yield-to-maturity and forecasts of future yields
Other financial instruments
Comparison of the specific investment’s risk to that of fixed
income and equity instruments and using judgment
The long term rate of return considers historical returns. Adjustments were made to historical returns in order to reflect expectations of
future returns. These adjustments were due to factor forecasts by economists and long-term U.S. Treasury yields to forecast long-term
inflation. In addition forecasts by economists and others for long-term GDP growth were factored into the development of
assumptions for earnings growth and per capital income.
Page -48-
Effective March 2009, the System revised its investment guidelines. The System currently prohibits its investment managers from
purchasing the following investments:
Equity securities
Fixed income securities
Securities in emerging market countries as defined by the
Morgan Stanley Emerging Markets Index, Short sales,
Unregistered securities and
Margin purchases
Securities of BBB quality or less,
CMOs that have an inverse floating rate and whose payments
don't include principal or which aren't certified and
guaranteed by the U.S. Government,
ABSs that aren't issued or guaranteed by the U.S., or its
agencies or its instrumentalities,
Non-agency residential subprime or ALT-A MBSs and
Structured Notes
Other financial instruments
Unhedged currency exposure in countries not defined as "high
income economies" by the World Bank
All other investments not prohibited by the System are permitted. At December 31, 2009 the System holds certain investments which
are no longer deemed acceptable to acquire. These positions will be liquidated when the investment managers deem that such
liquidation is in the best interest of the System.
The target allocations for System assets are shown in the table below:
Target
Allocation
Percentage of Plan Assets
at December 31,
2010
2009
2008
0 - 20%
40 - 60%
40 - 60%
0 - 5%
13.6%
45.9%
40.5%
-
100.0%
10.0%
48.0%
41.4%
0.6%
100.0%
Asset Category
Cash equivalents
Equity securities
Fixed income securities
Other financial instruments
Total
Weighted-
Average
Expected
Long-term
Rate of
Return
-
4.6%
2.1%
-
Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an 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. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs
and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which
the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:
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.
In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value
measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The
System's assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including
the consideration of inputs specific to the asset.
Page -49-
In accordance with FASB ASC 715-20, the following table represents the Plan’s fair value hierarchy for its financial assets measured
at fair value on a recurring basis as of December 31, 2009:
Fair Value Measurements at
December 31, 2009 Using:
Quoted Prices In
Significant
Other
Significant
Active Markets for
Observable
Unobservable
Carrying
Value
Identical Assets
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
(In thousands)
Cash Equivalents:
Short term investment funds
$ 27,239
$ 27,239
Equities:
Common Stock
Depository receipts
Other equities
Total equities
Fixed income securities:
Corporate bonds
Government issues
Collateralized mortgage obligations
Mortgage-backed securities
Other fixed income securities
Total fixed income securities
89,928
$ 89,928
1,258
1,258
997
997
92,183
92,183
19,163
33,475
4,869
22,888
1,133
81,528
19,163
33,475
4,869
22,888
1,133
81,528
Total System Plan Assets
$ 200,950
$ 92,183
$ 108,767
The table below presents a reconciliation of all plan assets measured at fair value using significant unobservable inputs (Level 3) for
period ended December 31, 2009:
(In thousands)
Balance of recurring Level 3 assets at January 1, 2009
Change in unrealized appreciation
Realized losses
Sale proceeds
Balance of recurring Level 3 assets at December 31, 2009
Contributions
Plan
Assets
$
$
790
321
(348)
(763)
—
The Company expects to contribute $1.1 million to the pension plan during 2010.
Estimated Future Payments
The following benefit payments, which reflect expected future service, are expected to be paid as follows:
Year
(In thousands)
2010
2011
2012
2013
2014
Following 5 years
Pension and SERP Payments
$
323
337
362
378
395
2,603
Page -50-
b) 401(k) Plan
A savings plan is maintained under Section 401(k) of the Internal Revenue Code and covers substantially all current employees.
Newly hired employees can elect to participate in the savings plan after completing six months of service. Under the provisions of the
savings plan, employee contributions are partially matched by the Bank with cash contributions. Participants can invest their account
balances into several investment alternatives. The savings plan does not allow for investment in the Company’s common stock.
During the years ended December 31, 2009, 2008 and 2007 the Bank made cash contributions of $181,000, $189,000, and $140,000,
respectively.
c) Equity Incentive Plan
During 2006, the Bridge Bancorp, Inc. Equity Incentive Plan (the “Plan”) was approved by the shareholders to provide for the grant of
options to purchase shares of common stock of the Company and for the award of shares of common stock. The plan supersedes the
Bridge Bancorp, Inc. Equity Incentive Plan that was approved in 1996 and amended in 2001. Of the total 620,000 shares of common
stock approved for issuance under the Plan, 418,995 shares remain available for issuance at December 31, 2009.
The Compensation Committee of the Board of Directors determines options awarded under the Plan. The Company accounts for this
Plan under FASB ASC No. 718 and 505.
The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option-pricing model. No new
grants of stock options were awarded during the years ended December 31, 2009, 2008, and 2007.
A summary of the status of the Company’s stock options as of December 31, 2009 follows:
Outstanding, December 31, 2008
Granted
Exercised
Forfeited
Expired
Outstanding, December 31, 2009
Vested or expected to vest
Exercisable, December 31, 2009
Range of Exercise Prices
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
5.98 years
5.92 years
5.88 years
$
$
$
35,422
35,422
35,422
$
$
$
$
$
$
$
$
$
$
$
22.67
—
17.03
—
—
24.74
24.71
24.61
Exercise
Price
12.53
15.47
24.00
25.25
26.55
30.60
Number
of
Options
81,205
—
(21,800)
—
—
59,405
55,850
49,121
Number
of
Options
600
3,300
5,659
44,443
3,000
2,403
59,405
The aggregate intrinsic value for options outstanding and exercisable as of December 31, 2009 is the same because the options that are
unvested have no intrinsic value.
Page -51-
A summary of activity related to the stock options follows:
December 31,
(In thousands, except per share data)
Intrinsic value of options exercised
Cash received from options exercised
Tax benefit realized from option exercises
Weighted average fair value of options granted
2009
2008
2007
$
$
29
34
13
—
$
75
—
19
—
130
124
25
—
The Company did not grant any stock options in 2009, 2008 and 2007. Compensation expense attributable to options was $42,000,
$39,000 and $44,000 for the years ended December 31, 2009, 2008, and 2007, respectively. As of December 31, 2009, there was
$42,000 of total unrecognized compensation costs related to nonvested stock options granted under the Plan. The cost is expected to
be recognized during 2010.
A summary of the status of the Company’s shares of unvested restricted stock for the year ended December 31, 2009 follows:
Weighted
Average Grant-
Date
Fair Value
Shares
Unvested, December 31, 2008
Granted
Vested
Forfeited
Unvested, December 31, 2009
95,570
58,792
(5,480)
$
$
$
— $
$
148,882
21.55
21.13
23.58
—
21.31
The Company’s Equity Incentive Plan also provides for issuance of restricted stock awards. During the year ended December 31,
2009, the Company granted restricted stock awards of 58,792 shares. Of the 58,792 shares granted, 33,892 shares vest over five years
with a third vesting after years three, four and five. The remaining 24,900 vest ratably over five years beginning in December 2009.
During the year ended December 31, 2008, the Company granted restricted stock awards of 78,970 shares. These awards vest over
five years with a third vesting after years three, four and five. During the year ended December 31, 2007, the Company granted
restricted stock awards of 22,000 shares. These awards vest over five years with a third vesting after years three, four and five. Such
shares are subject to restrictions based on continued service as employees of the Company or employees of subsidiaries of the
Company. Compensation expense attributable to these awards was approximately $656,000, $393,000 and $200,000 for the years
ended December 31, 2009, 2008, and 2007, respectively. The total fair value of shares vested during the years ended December 31,
2009, 2008 and 2007 was $125,000, $286,000 and $50,000, respectively. As of December 31, 2009, there was $2,388,000 of total
unrecognized compensation costs related to nonvested restricted stock awards granted under the Plan. The cost is expected to be
recognized over a weighted-average period of 3.7 years.
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. 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
$52,000 for the year ended December 31, 2009.
11. EARNINGS PER SHARE
FASB ASC 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 granted by the Company contain nonforfeitable 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. Prior period EPS figures have been presented in accordance with this accounting guidance.
Page -52-
The following is a reconciliation of earnings per share for December 31, 2009, 2008 and 2007:
For the Years Ended December 31,
(In thousands, except per share data)
Net Income
Common Equivalent Shares:
Weighted Average Common Shares Outstanding
Weighted Average Common Equivalent Shares Outstanding
Weighted Average Common and Equivalent Shares Outstanding
Basic Earnings per Share
Diluted Earnings per Share
2009
2008
2007
$
8,763
$ 8,750
$
8,294
6,097
35
6,132
6,076
23
6,099
6,072
20
6,092
$
$
1.44
1.43
$
$
1.44
1.43
$
$
1.37
1.36
There were 55,505 options outstanding at December 31, 2009 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 December 31, 2009, were not included in the computation of
diluted earnings per share because the securities’ conversion price was greater than the average market price of common stock and
were, therefore, antidilutive.
12. COMMITMENTS AND CONTINGENCIES AND OTHER MATTERS
In the normal course of business, there are various outstanding commitments and contingent liabilities, such as claims and legal
actions, minimum annual rental payments under non-cancelable operating leases, guarantees and commitments to extend credit, which
are not reflected in the accompanying consolidated financial statements. No material losses are anticipated as a result of these
commitments and contingencies.
a) Leases
At December 31, 2009, the Company was obligated to make minimum annual rental payments under non-cancelable operating leases
for its premises. Projected minimum rentals under existing leases are as follows:
December 31, 2009
(In thousands)
2010
2011
2012
2013
2014
Thereafter
Total minimum rentals
$
$
827
533
443
458
467
2,065
4,793
Certain leases contain rent escalation clauses which are reflected in the figures listed above. In addition, certain leases provide for
additional payments based upon real estate taxes, interest and other charges. Certain leases contain renewal options which are not
reflected. Rental expenses under these leases for the years ended December 31, 2009, 2008 and 2007 approximated $883,000,
$659,000 and $584,000, respectively.
b) Loan commitments
Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet
customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in
the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk of credit
loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to
make such commitments as are used for loans, often including obtaining collateral at exercise of the commitment.
Page -53-
The following represents commitments outstanding:
December 31,
(In thousands)
Standby letters of credit
Loan commitments outstanding (1)
Unused lines of credit
Total commitments outstanding
2009
2008
$
$
1,150
25,380
103,417
129,947
$
$
1,781
27,752
103,237
132,770
(1) Of the $25.4 million of loan commitments outstanding at December 31, 2009, $7.2 million are fixed rate
commitments and $18.2 million are variable rate commitments
c) Other
During 2009, the Bank was required to maintain certain cash balances with the Federal Reserve Bank of New York for reserve and
clearing requirements. The required cash balance at December 31, 2009 was $1.0 million. During 2009, the Federal Reserve Bank of
New York offered higher interest rates on overnight deposits compared to our correspondent banks. Therefore the Bank invested
overnight with the Federal Reserve Bank of New York and the average balance maintained during 2009 was $4.4 million.
During 2009, 2008 and 2007, the Bank maintained an overnight line of credit with the Federal Home Loan Bank of New York
(“FHLB”). The Bank has the ability to borrow against its unencumbered residential and commercial mortgages and investment
securities owned by the Bank. At December 31, 2009, the Bank had aggregate lines of credit of $217.5 million with unaffiliated
correspondent banks to provide short-term credit for liquidity requirements. Of these aggregate lines of credit, $197.5 million is
available on an unsecured basis. As of December 31, 2009, the Bank did not have any such borrowings outstanding.
In March 2001, the Bank entered into a Master Repurchase Agreement with the FHLB whereby the FHLB agrees to purchase
securities from the Bank, upon the Bank’s request, with the simultaneous agreement to sell the same or similar securities back to the
Bank at a future date. Securities are limited, under the agreement, to government securities, securities issued, guaranteed or
collateralized by any agency or instrumentality of the U.S. Government or any government sponsored enterprise, and non-agency AA
and AAA rated mortgage-backed securities. At December 31, 2009, there was $81.2 million available for transactions under this
agreement.
The Bank had $15.0 million of securities sold under agreements to repurchase outstanding as of December 31, 2009 (See Note 6).
13. 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.
The fair value of securities available for sale is determined by obtaining quoted prices on nationally recognized securities exchanges
(Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without
relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark
quoted securities (Level 2 inputs).
Page -54-
Assets and Liabilities Measured on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis are summarized below:
Fair Value Measurements at
December 31, 2009 Using:
Quoted Prices In
Significant
Other
Significant
Active Markets for
Observable
Unobservable
Carrying
Value
Identical Assets
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
(In thousands)
Financial Assets:
Available for sale securities
U.S. GSE securities
State and municipal obligations
Residential mortgage-backed securities
Residential collateralized mortgage obligations
Total available for sale
$
45,939
41,805
106,337
112,031
$ 306,112
$ 45,939
41,805
106,337
112,031
$ 306,112
Fair Value Measurements at
December 31, 2008 Using:
Carrying
Value
Quoted Prices In
Active Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(In thousands)
Financial Assets:
Available for sale securities
U.S. GSE securities
State and municipal obligations
Residential mortgage-backed securities
Residential collateralized mortgage obligations
$
30,134
48,588
146,955
85,018
Total available for sale
$
310,695
$
30,134
48,588
146,955
85,018
$ 310,695
Fair value estimates are made at specific points in time and are based on existing on-and off-balance sheet financial instruments. Such
estimates are generally subjective in nature and dependent upon a number of significant assumptions associated with each financial
instrument or group of financial instruments, including estimates of discount rates, risks associated with specific financial instruments,
estimates of future cash flows, and relevant available market information. Changes in assumptions could significantly affect the
estimates. In addition, fair value estimates do not reflect the value of anticipated future business, premiums or discounts that could
result from offering for sale at one time the Bank’s entire holdings of a particular financial instrument, or the tax consequences of
realizing gains or losses on the sale of financial instruments.
Page -55-
Assets measured at fair value on a non-recurring basis are summarized below:
Fair Value Measurements at
December 31, 2009 Using:
Quoted Prices In
Significant
Other
Significant
Active Markets for
Observable
Unobservable
Identical Assets
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
$ 48
Carrying
Value
$ 48
(In thousands)
Impaired loans
For impaired and TDR loans, the Company evaluates the fair value of the loan in accordance with FASB ASC 310-10-35-22. For
loans that are collateral dependent, the fair value of the collateral is used to determine the fair value of the loan. The fair value of the
collateral is determined based upon recent appraised values. For unsecured loans, the fair value is determined based on the present
value of expected future cash flows discounted at the loan’s effective interest rate. The fair value of the loan is compared to the
carrying value to determine if any write-down or specific reserve is required. These methods of fair value measurement for impaired
and TDR loans are considered level 3 within the fair value hierarchy described in FASB ASC 820-10-50-5. Impaired loans with
allocated allowance for loan losses at December 31, 2009, had a carrying amount of $48,000, which is made up of the outstanding
balance of $98,000, net of a valuation allowance of $50,000. This resulted in an additional provision for loan losses of $50,000 that is
included in the amount reported on the income statement. There were no impaired loans with allocated allowance for loan losses at
December 31, 2008.
The Company used the following method and assumptions in estimating the fair value of its financial instruments:
Cash and Due from Banks and Federal Funds Sold: Carrying amounts approximate fair value, since these instruments are either
payable on demand or have short-term maturities.
Securities Available for Sale and Held to Maturity: The estimated fair values are based on independent dealer quotations on nationally
recognized securities exchanges or matrix pricing, which is a mathematical technique widely used in the industry to value debt
securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to
other benchmark quoted securities.
Restricted Stock: It is not practicable to determine the fair value of FHLB and FRB stock due to restrictions placed on its
transferability.
Loans: The estimated fair values of real estate mortgage loans and other loans receivable are based on discounted cash flow
calculations that use available market benchmarks when establishing discount factors for the types of loans. All nonaccrual loans are
carried at their current fair value. Exceptions may be made for adjustable rate loans (with resets of one year or less), which would be
discounted straight to their rate index plus or minus an appropriate spread.
Deposits: The estimated fair value of certificates of deposits are based on discounted cash flow calculations that use a replacement
cost of funds approach to establishing discount rates for certificates of deposits maturities. Stated value is fair value for all other
deposits.
Borrowed Funds: The estimated fair value of borrowed funds are based on discounted cash flow calculations that use a replacement
cost of funds approach to establishing discount rates for funding maturities.
Junior Subordinated Debentures: The estimated fair value is based on estimates using market data for similarly risk weighted items
taking into consideration the convertible features of the debentures into common stock of the Company.
Accrued Interest Receivable and Payable: For these short-term instruments, the carrying amount is a reasonable estimate of the fair
value.
Off-Balance-Sheet Liabilities: The fair value of off-balance-sheet commitments to extend credit is estimated using fees currently
charged to enter into similar agreements. The fair value is immaterial as of December 31, 2009 and 2008.
Page -56-
The estimated fair values and recorded carrying values of the Company’s financial instruments are as follows:
December 31,
(In thousands)
Financial Assets:
Cash and due from banks
Interest bearing deposits with banks
Securities available for sale
Securities restricted
Securities held to maturity
Loans, net
Accrued interest receivable
Financial liabilities:
Demand and other deposits
Federal funds purchased and Federal Home Loan Bank overnight
borrowings
Federal Home Loan Bank term advances
Repurchase agreements
Junior subordinated debentures
Accrued interest payable
14. REGULATORY CAPITAL REQUIREMENTS
2009
2008
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
$
27,108
7,039
306,112
1,205
77,424
441,993
3,679
$
27,108
7,039
306,112
n/a
78,330
449,496
3,679
$
24,744
4,141
310,695
3,800
43,444
425,730
3,626
$
24,744
4,141
310,695
n/a
43,890
437,265
3,626
793,538
794,512
659,085
660,176
—
—
15,000
16,002
531
—
—
15,210
15,500
531
70,900
30,000
15,000
—
672
70,882
29,998
15,368
—
672
The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital
requirements that involve quantitative measures of the Company’s and Bank’s assets, liabilities, and certain off-balance sheet items
calculated under regulatory accounting practices. The Company’s and Bank’s capital amounts and classifications also are subject to
qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum
amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk weighted assets (as
defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2009, that the
Company and the Bank met all capital adequacy requirements with which it must comply. In April 2009, the Company announced
that its Board of Directors approved and adopted a Dividend Reinvestment Plan (“DRP Plan”) and filed a registration statement on
Form S-3 to register 600,000 shares of common stock with the Securities and Exchange Commission (“SEC”) pursuant to the DRP
Plan. In June 2009, the Company filed a shelf registration statement on Form S-3 to register up to $50 million of securities with the
SEC. In December 2009, the Company completed a private placement of $16.0 million aggregate liquidation amount of 8.50%
cumulative convertible trust preferred securities (the “TPS”) through a newly-formed subsidiary, Bridge Statutory Capital Trust II, a
wholly-owned Delaware statutory trust (the “Trust”). The TPS mature in 30 years, and carry a fixed distribution rate of 8.50%. The
TPS have a liquidation amount of $1,000 per security. The Company has the right to redeem the TPS at par (plus any accrued but
unpaid distributions) at any time after September 30, 2014. As provided in applicable regulations, TPS are included in holding
company Tier 1 capital (up to a limit of 25% of Tier 1 capital).
As of December 31, 2009, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as “well
capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized,” the Bank must
maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table. Since that notification, there
are no conditions or events that management believes have changed the institution’s category.
Page -57-
The Company’s and the Bank’s actual capital amounts and ratios are presented in the following table:
Bridge Bancorp, Inc. (Consolidated)
As of December 31,
(Dollars In thousands)
Total Capital (to risk weighted assets)
Tier 1 Capital (to risk weighted assets)
Tier 1 Capital (to average assets)
As of December 31,
(Dollars In thousands)
Total Capital (to risk weighted assets)
Tier 1 Capital (to risk weighted assets)
Tier 1 Capital (to average assets)
Bridgehampton National Bank
As of December 31,
(Dollars In thousands)
Total Capital (to risk weighted assets)
Tier 1 Capital (to risk weighted assets)
Tier 1 Capital (to average assets)
As of December 31,
(In thousands)
Total Capital (to risk weighted assets)
Tier 1 Capital (to risk weighted assets)
Tier 1 Capital (to average assets)
2009
For Capital
Adequacy
Purposes
Actual
Amount
$ 80,378
74,333
74,333
Ratio
Amount
14.5% $ 44,361
13.4% 22,180
8.6% 34,499
Ratio
8.0%
4.0%
4.0%
2008
For Capital
Adequacy
Purposes
Actual
Amount
$ 58,360
54,288
54,288
Ratio
Amount
11.1% $ 42,137
21,068
10.3%
31,304
6.9%
Ratio
8.0%
4.0%
4.0%
2009
For Capital
Adequacy
Purposes
Actual
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
Ratio
Amount
n/a
n/a
n/a
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
Ratio
Amount
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
Ratio
Amount
$ 74,191
68,146
68,146
Ratio
Amount
13.4% $ 44,337
12.3% 22,168
7.9% 34,494
Ratio
Amount
8.0% $ 55,421
4.0% 33,253
4.0% 43,117
10.0%
6.0%
5.0%
2008
For Capital
Adequacy
Purposes
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
Ratio
Actual
Amount
$ 55,431
51,359
51,359
Ratio
Amount
10.5% $ 42,130
21,065
31,279
9.8%
6.6%
Ratio
Amount
8.0% $ 52,662
31,597
4.0%
39,099
4.0%
10.0%
6.0%
5.0%
Page -58-
15. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
Condensed financial information of Bridge Bancorp, Inc. (Parent Company only) follows:
Condensed Balance Sheets
December 31,
(In thousands)
ASSETS
Cash and cash equivalents
Other assets
Investment in the Bank
Total Assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Junior subordinated debentures
Dividends payable
Other liabilities
Total Liabilities
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
Condensed Statements of Income
Years ended December 31,
(In thousands)
Dividends from the Bank
Interest expense
Non interest expense
Income before income taxes and equity in undistributed earnings of
the Bank
Income tax benefit
Income before equity in undistributed earnings of the Bank
Equity in undistributed (overdistributed) earnings of the Bank
Net income
2009
2008
$
$
$
7,490
300
71,549
79,339
16,002
1,441
41
17,484
61,855
79,339
$
2009
$
$
4,500
190
34
4,276
(69)
4,345
4,418
8,763
$
$
$
$
$
$
4,309
83
53,210
57,602
—
1,423
40
1,463
56,139
57,602
2008
2007
3,000
—
149
2,851
(50)
2,901
5,849
8,750
$
$
11,029
—
1
11,028
—
11,028
(2,734)
8,294
Page -59-
Condensed Statements of Cash Flows
Years ended December 31,
(In thousands)
Cash flows from operating activities:
2009
2008
2007
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$
8,763
$
8,750
$
8,294
Equity in (undistributed) overdistributed earnings of the Bank
(Increase) decrease in other assets
Increase (decrease) in other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Investment in the Bank
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of junior subordinated debentures
Net proceeds from issuance of common stock
Net proceeds from exercise of stock options
Repurchase of surrendered stock from exercise of stock options and vesting
of restricted stock awards
Dividends paid
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
16. OTHER COMPREHENSIVE INCOME (LOSS)
(4,418)
(217)
1
4,129
(11,500)
(11,500)
16,002
255
47
(36)
(5,716)
10,552
3,181
4,309
7,490
$
$
(5,849)
1,319
57
4,277
2,734
197
(13)
11,212
—
—
—
—
—
—
—
—
—
149
(71)
(5,648)
(5,719)
(1,442)
5,751
4,309
—
(5,612)
(5,463)
5,749
2
5,751
$
Other comprehensive income (loss) components and related income tax effects were as follows:
Years Ended December 31,
(In thousands)
Unrealized holding gains (losses) on available for sale securities
Reclassification adjustment for (gains) losses realized in income
Income tax effect
2009
2008
2007
$
$
4,085
(529)
(1,724)
5,314 $
—
(2,110)
2,802
101
(1,165)
Net change in unrealized gain (loss) on available for sale securities
1,832
3,204
1,738
Change in post-retirement obligation
Income tax effect
Net change in post-retirement obligation
Total
(267)
106
(161)
(2,629)
1,044
(1,585)
1,252
(497)
755
$
1,671
$
1,619 $
2,493
The following is a summary of the accumulated other comprehensive income balances, net of income tax:
(In thousands)
Unrealized gains on available for sale securities
Unrealized gains (loss) on pension benefits
Total
Balance as of
December 31,
2008
Current
Period
Change
Balance as of
December 31,
2009
$
$
3,417 $
(1,566)
1,851 $
1,832 $
(161)
1,671 $
5,249
(1,727)
3,522
Page -60-
17. QUARTERLY FINANCIAL DATA (Unaudited)
Selected Consolidated Quarterly Financial Data
2009 Quarter Ended,
(In thousands, except per share amounts)
Interest income
Interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Non interest income
Non interest expenses
Income before income taxes
Income tax expense
Net income
Basic earnings per share
Diluted earnings per share
2008 Quarter Ended,
(In thousands, except per share amounts)
Interest income
Interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Non interest income
Non interest expenses
Income before income taxes
Income tax expense
Net income
Basic earnings per share
Diluted earnings per share
March 31,
June 30,
September 30, December 31,
$
$
$
$
$
$
$
$
11,023
1,940
9,083
900
8,183
1,179
6,089
3,273
1,064
2,209
0.36
0.36
March 31,
9,194
2,546
6,648
200
6,448
1,446
4,989
2,905
935
1,970
0.32
0.32
$
$
$
$
$
$
$
$
10,864
1,935
8,929
1,400
7,529
1,925
6,450
3,004
981
2,023
0.33
0.33
$
$
$
$
10,727 $
1,916
8,811
900
7,911
1,565
6,064
3,412
1,092
2,320 $
0.38 $
0.38 $
10,754
2,024
8,730
950
7,780
1,505
6,162
3,123
912
2,211
0.36
0.36
June 30,
September 30, December 31,
9,558
2,248
7,310
325
6,985
1,609
5,283
3,311
1,076
2,235
0.37
0.37
$
$
$
$
10,075 $
2,266
7,809
550
7,259
1,677
5,401
3,535
1,179
2,356 $
0.39 $
0.39 $
10,793
2,429
8,364
925
7,439
1,332
5,484
3,287
1,098
2,189
0.36
0.36
Page -61-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Audit Committee
Board of Directors
Bridge Bancorp, Inc.
Bridgehampton, New York
We have audited the accompanying consolidated balance sheets of Bridge Bancorp, Inc. as of December 31, 2009 and 2008, and the
related consolidated statements of income, stockholders’ equity and cash flows for each of the years in the three-year period ended
December 31, 2009. We also have audited Bridge Bancorp, Inc’s. internal control over financial reporting as of December 31, 2009,
based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Bridge Bancorp, Inc.’s management is responsible for these consolidated financial statements, for
maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over
financial reporting, included in the Report By Management on Internal Control Over Financial Reporting located in Item 9A. Our
responsibility is to express an opinion on these consolidated financial statements and an opinion on Bridge Bancorp, Inc’s internal
control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of
material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our
audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control, based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Bridge Bancorp, Inc. as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, Bridge Bancorp, Inc. maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
Livingston, New Jersey
March 11, 2010
Crowe Horwath LLP
Page -62-
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of the Company’s management, including the Principal
Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure
controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of
December 31, 2009. Based on that evaluation, the Company’s Principal Executive Officer and Principal Chief Financial Officer
concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by the annual
report.
Report By Management On Internal Control Over Financial Reporting
Management of Bridge Bancorp, Inc. (“the Company”) is responsible for establishing and maintaining an effective system of internal
control over financial reporting. The Company’s system of internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. There are inherent limitations in the effectiveness of any system of internal
control over financial reporting, including the possibility of human error and circumvention or overriding of controls. Accordingly,
even an effective system of internal control over financial reporting can provide only reasonable assurance with respect to financial
statement preparation. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become
inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the Company’s internal control over financial reporting as of December 31, 2009. This assessment was based
on criteria for effective internal control over financial reporting described in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of
December 31, 2009, the Company maintained effective internal control over financial reporting based on those criteria.
The Company’s independent registered public accounting firm that audited the financial statements that are included in this annual
report on Form 10-K, has issued an audit report on the Company’s internal control over financial reporting. The audit report of Crowe
Horwath LLP appears on the previous page.
Changes in Internal Control Over Financial Reporting
There has been no change in the Company’s internal control over financial reporting during the quarter ended December 31, 2009, that
has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
“Item 1 – Election of Directors,” “Compliance with Section 16 (a) of the Exchange Act,” and “Code of Ethics” set forth in the
Registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 7, 2010, are incorporated herein by reference.
Item 11. Executive Compensation
“Compensation of Directors,” “Compensation of Executive Officers,” “Report of the Compensation Committee on Executive
Compensation,” “Compensation Committee Interlocks and Insider Participation,” and “Employment Contracts and Severance
Agreements” set forth in the Registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 7, 2010, are
incorporated herein by reference.
Page -63-
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
“Beneficial Ownership” and “Item 1 – Election of Directors”, set forth in the Registrant’s Proxy Statement for the Annual Meeting of
Shareholders to be held on May 7, 2010, are incorporated herein by reference.
Set forth below is certain information as of December 31, 2009, regarding the Company’s equity compensation plan that has been
approved by stockholders.
Equity Compensation
Plan approved by
Stockholders
1996 Equity Incentive Plan
2006 Equity Incentive Plan
Total
Number of securities to
be Issued upon
Exercise
of outstanding options
and awards
15,462
192,825
208,287
Weighted Average
Exercise Price with
respect to
Outstanding
Stock Options
23.23
25.25
24.74
$
$
$
Number of Securities
Remaining Available
for
Issuance under the Plan
—
418,995
418,995
Item 13. Certain Relationships and Related Transactions, and Director Independence
“Certain Relationships and Related Transactions”, and “Director Nominations” set forth in the Registrant’s Proxy Statement for the
Annual Meeting of Shareholders to be held on May 7, 2010, is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
“Item 2 - Ratification of the Appointment of the Independent Registered Public Accounting Firm” “Fees Paid to Crowe Horwath,” and
“Policy on Audit Committee Pre-approval of Audit and Non-audit Services of Independent Registered Public Accounting Firm” set
forth in the Registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 7, 2010, is incorporated herein by
reference.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) The following Consolidated Financial Statements, including notes thereto, and financial schedules of the Company, required in
response to this item are included in Part II, Item 8.
1.
Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
2.
Financial Statement Schedules
Page No.
32
33
34
35
36
62
Financial Statement Schedules have been omitted because they are not applicable or the required information is shown in the
Consolidated Financial Statements or Notes thereto under Item 8, “Financial Statements and Supplementary Data.”
3.
Exhibits.
See Index of Exhibits on page 66.
Page -64-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
March 11, 2010
March 11, 2010
March 11, 2010
BRIDGE BANCORP, INC.
Registrant
/s/ Kevin M. O’Connor
Kevin M. O’Connor
President and Chief Executive Officer
/s/ Howard H. Nolan
Howard H. Nolan
Senior Executive Vice President, Chief Financial
Officer and Treasurer
/s/ Sarah K. Quinn
Sarah K. Quinn
Vice President, Controller and Principal
Accounting Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
March 11, 2010
March 11, 2010
March 11, 2010
March 11, 2010
March 11, 2010
March 11, 2010
March 11, 2010
March 11, 2010
March 11, 2010
March 11, 2010
March 11, 2010
,Director
,Director
,Director
,Director
,Director
,Director
,Director
,Director
,Director
,Director
,Director
/s/ Marcia Z. Hefter
Marcia Z. Hefter
/s/ Dennis A. Suskind
Dennis A. Suskind
/s/ Kevin M. O’Connor
Kevin M. O’Connor
/s/ Emanuel Arturi
Emanuel Arturi
/s/ Thomas E. Halsey
Thomas E. Halsey
/s/ R. Timothy Maran
R. Timothy Maran
/s/ Charles I. Massoud
Charles I. Massoud
/s/ Albert E. McCoy Jr.
Albert E. McCoy Jr.
/s/ Howard H. Nolan
Howard H. Nolan
/s/ Rudolph J. Santoro
Rudolph J. Santoro
/s/ Thomas J. Tobin
Thomas J. Tobin
Page -65-
EXHIBIT INDEX
Exhibit Number
Description of Exhibit
Exhibit
3.1
3.1(i)
3.1(ii)
3.2
10.1
10.2
10.3
10.5
10.6
23
31.1
31.2
32.1
Certificate of Incorporation of the registrant (incorporated by reference to Registrant’s
amended Form 10, File No. 0-18546, filed October 15, 1990)
Certificate of Amendment of the Certificate of Incorporation of the Registrant (incorporated
by reference to Registrant’s Form 10, File No. 0-18546, filed August 13, 1999)
Certificate of Amendment of the Certificate of Incorporation of the Registrant (incorporated
by reference to Registrant’s Definitive Proxy Statement, File No. 0-18546, filed November
18, 2008)
Revised By-laws of the Registrant (incorporated by reference to Registrant’s Form 8-K, File
No. 0-18546, filed December 17, 2007)
Amended and Restated Employment Contract - Thomas J. Tobin (incorporated by reference
to Registrant’s Form 8-K, File No. 0-18546, filed October 9, 2007)
Amended and Restated Employment Contract – Howard H. Nolan (incorporated by reference
to Registrant’s Form 10-K, File No. 0-18546, filed March 12, 2009)
Employment Contract – Kevin M. O’Connor (incorporated by reference to Registrant’s Form
8-K, File No. 0-18546, filed October 9, 2007)
Equity Incentive Plan (incorporated by reference to Registrant’s Form S-8, File No. 0-18546,
filed August 14, 2006)
Supplemental Executive Retirement Plan (Revised for 409A) (incorporated by reference to
Registrant’s Form 10-K, File No. 0-18546, filed March 14, 2008)
*
*
*
*
*
*
*
*
*
Consent of Independent Registered Public Accounting Firm
Certification of Principal Executive Officer pursuant to Rule 13a-14(a)
Certification of Principal Financial Officer pursuant to Rule 13a-14(a)
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-
14(b) and U.S.C. Section 1350
*
Denotes incorporated by reference.
Page -66-
EXHIBIT 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement on Form S-8 (File Numbers: 333-50933, 333-160240, and
333-158869) of Bridge Bancorp, Inc. of our report dated March 11, 2010 with respect to the consolidated financial statements of
Bridge Bancorp, Inc. and the effectiveness of internal control over financial reporting, which report appears in this Annual Report on
Form 10-K of Bridge Bancorp, Inc. for the year ended December 31, 2009.
Livingston, New Jersey
March 11, 2010
Crowe Horwath LLP
Page -67-
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A)
I, Kevin M. O’Connor, certify that:
1)
2)
3)
4)
I have reviewed this annual report on Form 10-K of Bridge Bancorp, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting;
5)
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 11, 2010
/s/ Kevin M. O’Connor
Kevin M. O’Connor
President and Chief Executive Officer
Page -68-
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A)
I, Howard H. Nolan, certify that:
1)
2)
3)
4)
I have reviewed this annual report on Form 10-K of Bridge Bancorp, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting;
5)
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 11, 2010
/s/ Howard H. Nolan
Howard H. Nolan
Senior Executive Vice President, Chief Financial Officer
and Treasurer
Page -69-
This certification is being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934 (the “Exchange Act”)
and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of
the Exchange Act or otherwise subject to the liability of that section. This certification shall not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act, except as otherwise stated in such filing.
EXHIBIT 32.1
CERTIFICATION PURSUANT TO RULE 13A-14(B) 18 U.S.C. SECTION 1350,
As adopted pursuant to
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Bridge Bancorp, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2009
as filed with the Securities and Exchange Commission on March 11, 2010, (the “Report”), we, Kevin M. O’Connor, President and
Chief Executive Officer of the Company and, Howard H. Nolan, Senior Executive Vice President, Chief Financial Officer and
Treasurer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: March 11, 2010
/s/ Kevin M. O’Connor
Kevin M. O’Connor
President and Chief Executive Officer
/s/ Howard H. Nolan
Howard H. Nolan
Senior Executive Vice President, Chief Financial Officer,
and Treasurer
A signed original of this written statement required by Section 906 has been provided to Bridge Bancorp, Inc. and will be retained by
Bridge Bancorp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Page -70-
Corporate Information
Bridge Bancorp, Inc.
BOARD OF DIRECTORS AND
AFFILIATIONS
Marcia Z. Hefter
Chairperson
Partner
Esseks, Hefter & Angel, LLP
Riverhead and Water Mill, NY
Dennis A. Suskind
Vice Chairperson
Partner, Retired
Goldman, Sachs & Co.
New York, NY
Kevin M. O’Connor
President and Chief Executive Officer
Emanuel Arturi
President and CEO
Knowledge Group, Inc.
New York, NY
Thomas E. Halsey
Owner
Halsey Farm
Water Mill, NY
R. Timothy Maran
Retired
Maran Corporate Risk Associates, Inc.
Southampton, NY
Charles I. Massoud
President
Paumanok Vineyards
Aquebogue, NY
Albert E. McCoy, Jr.
President
W. F. McCoy Petroleum Products Inc.
and McCoy Bus Company Inc.
Bridgehampton, NY
Howard H. Nolan, CPA
Sr. Executive Vice President
Chief Financial Officer,
Corporate Secretary and Treasurer
Rudolph J. Santoro
Partner, Retired
Deloitte LLP
Huntington, NY
Thomas J. Tobin
President Emeritus and
Special Advisor to the Board
COMPANY OFFICERS
Kevin M. O’Connor
President and Chief Executive Officer
Howard H. Nolan, CPA
Sr. Executive Vice President
Chief Financial Officer,
Corporate Secretary and Treasurer
Thomas J. Tobin
President Emeritus and
Special Advisor to the Board
Bridgehampton National Bank
Officers
Kevin M. O’Connor
President and Chief Executive Officer
Howard H. Nolan, CPA
Senior Executive Vice President,
Chief Administrative and Financial Officer
Thomas J. Tobin
President Emeritus and
Special Advisor to the Board
SENIOR VICE PRESIDENTS
Seamus J. Doyle
Senior Business Development Officer
James J. Manseau
Chief Retail Banking Officer
Deborah McGrory
Director of Human Resources
Kevin L. Santacroce
Chief Lending Officer
Thomas H. Simson
Chief Information Officer
VICE PRESIDENTS
William Araneo
Investment Officer
Bridge Investment Services
Steven Bodziner, Esq.
Bridge Abstract LLC
Kimberly Cioch
Commercial Lending
Wading River/Riverhead
Peter M. Coleman
Commercial Lending
North Fork
Michelle Dosch
Director of Electronic Banking
Michael Fearon
Commercial Lending
Deer Park/Shirley
Nancy Foster
Credit and Loan Administrator
Patricia F. Horan
Regional Branch Manager
John B. MacCulley
Commercial Lending
Bridgehampton/Sag Harbor/
Southampton
Theresa Mackey
Private Banker
Marie McAlary
Commercial Lending
Hampton Bays/Westhampton
Nancy Messer
Commercial Lending
North Fork
Maureen P. Mougios
Director of Risk Management
Corrinne Newman
Private Banker
Claudia Pilato
Director of Marketing
Sarah Quinn, CPA
Controller
Donna Wetjen
Director of Branch Operations
Aidan Wood
Commercial Team Leader
ASSISTANT VICE PRESIDENTS
Sharon Abbondondelo
Branch Manager, Westhampton Beach
Sabrina Aucello
Branch Manager, Southampton
Lance Burke
Assistant Controller
Deborah Cosgrove
Facilities Manager
Robert Curtin
Branch Manager, Wading River
Joanne Dougherty
Branch Manager, Cutchogue
and Mattituck
Jeffrey M. Greenwald
Branch Manager, Bridgehampton
Peter Hillick
Consumer Underwriting and
Portfolio Analytics Manager
Erin D. Kaelin
Training and Development Manager
Caroline Kalish
Deposit Operations Manager
Margaret Meighan
Branch Manager, East Hampton
Julia Pratt
Branch Manager, Center Moriches
Maria L. Press
Relationship Manager
Merchant and Electronic
Banking Services
Keith Robertson
Private Banker
Stephanie Saggio
Retail Project Specialist
Raymond Sanchez
Assistant Director of IT
Susan G. Schaefer
Branch Manager, Sag Harbor
Marion Stark
Branch Operations Manager
ASSISTANT CASHIERS
Lisa Babinski
Employment Manager
Mimi Bristel
Marketing Coordinator
Linda Carlson
Branch Manager, Southold
Theresa Ceriello
Commercial Lending
Laura Gorman
Treasury Manager
Tiana Grampus
Branch Operations Coordinator
Julia Hartmann
Relationship Manager
Merchant and Electronic
Banking Services
Emily Healy
Branch Manager, Greenport
and Peconic Landing
Christie G. Pfeil
Branch Manager, Hampton Bays
Jill Ramundo
Branch Manager, Montauk
Gisella Recalde
Commercial Lending
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2200 Montauk Highway, P.O. Box 3005
Bridgehampton, New York 11932
631.537.1000
www.bridgenb.com