Bridge Bancorp, Inc. (NASDAQ:BDGE), the parent company of The Bridgehampton National Bank (“BNB”), today announced third quarter results for 2016.
Highlights of the Company’s financial results for the quarter include:
- Net income of $8.9 million, an increase of $1.0 million or 12% over 2015, and $.50 per diluted share.
- Returns on average assets and equity were .93% and 9.78%, respectively.
- Core(1) net income was $9.0 million and $.51 per diluted share, an increase of 5% over 2015.
- Core returns on average assets and equity were .95% and 9.91%, respectively.
- Net interest income increased $1.6 million to $30.7 million, with a net interest margin of 3.61%.
- Total assets of $3.8 billion at September 2016, 9% higher than September 2015.
- Loan growth of $.3 billion or 12% compared to September 2015.
- Deposits of $2.9 billion at September 2016, including $1.1 billion in non-interest bearing demand deposits.
- Continued solid asset quality metrics and reserve coverage.
- All capital ratios exceed the fully phased in requirements of Basel III rules.
- Declared a dividend of $.23 during the quarter.
“This is the first quarter we can compare our performance year-over-year inclusive of the Community National Bank acquisition. We continue to see benefits from this acquisition, especially through operating leverage as evidenced in our lower efficiency and expense-to-assets ratios,” noted Kevin M. O’Connor, President and CEO.
Net Earnings and Returns
Net income for the quarter was $8.9 million or $.50 per diluted share, compared to $7.9 million or $.45 per diluted share for the third quarter of 2015. Net income for the quarter ended September 30, 2015 included $.6 million of costs, net of income taxes, associated with the CNB acquisition, and a gain on the sale of loans, net of income taxes, of $.2 million. Net income for the nine months ended September 2016 was $26.3 million or $1.50 per diluted share, compared to $13.1 million or $.94 per diluted share in 2015.
Core net income for the third quarter was $9.0 million or $.51 per diluted share, compared to $8.5 million or $.49 per diluted share, for the same period in 2015. Core net income reflects the quarterly results adjusted for certain costs, net of tax, related to the CNB acquisition and a gain on the sale of loans in 2015. Returns on average assets and equity for the third quarter of 2016 were .93% and 9.78%, compared to .91% and 9.25% in 2015, respectively, while core returns on average assets and equity for the third quarter of 2016 were .95% and 9.91%, compared to .98% and 10.00% in 2015, respectively. Return on average tangible common equity for the third quarter of 2016 was 14.24% compared to 13.37% in 2015. Core return on average tangible common equity for the third quarter of 2016 was 14.72% compared to 14.78% in 2015.
Interest income increased $3.0 million for the third quarter of 2016 over 2015 as average earning assets increased by 9% or $272.7 million, while the net interest margin decreased to 3.61% from 3.71% in the third quarter of 2015. The net interest margin in both periods reflects greater than expected cash flows associated with acquired loans. The increase in average earning assets reflects growth in loans and securities. The decrease in the net interest margin reflects the higher costs of borrowings associated with the $80 million in subordinated debentures issued in September 2015, federal funds purchased and repurchase agreements, and FHLB advances.
The provision for loan losses was $2.0 million for the quarter, $0.5 million higher than the third quarter of 2015. The higher provision in the third quarter of 2016 is due to portfolio growth as well as certain acquired loans being refinanced by BNB. Acquired loans are recorded at fair value at acquisition, effectively netting estimated future losses against the loan balances whereas loans originated and refinanced by BNB have recorded reserves. The Company recognized net charge-offs of $.4 million in the third quarter of 2016 compared to net charge-offs of $.1 million for the same period in 2015.
Total non-interest income was $4.0 million for the third quarter of 2016, $.1 million higher than 2015, resulting from an increase in customer fee income offset by a decrease in gain on sale of loans.
Non-interest expense for the third quarter of 2016 decreased to $19.2 million from $19.4 million in 2015, which included $.9 million in costs associated with the CNB acquisition. Non-interest expense in 2015 excluding CNB acquisition related costs was $18.5 million. The 2016 non-interest expense compared to the adjusted 2015 noninterest expense, reflects an increase in salaries expense, investments in technology, and additional marketing costs, partially offset by a decrease in amortization of CNB related intangible assets. Additionally, the Company’s ratio of operating expenses to average assets decreased to 2.03% in the third quarter of 2016 from 2.23% in 2015. Core operating expenses to average assets decreased to 1.98% in the third quarter of 2016 from 2.05% in 2015.
Balance Sheet and Asset Quality
Total assets were $3.8 billion at September 30, 2016, $326.7 million higher than September 2015. Average earning assets for the third quarter 2016 increased $272.7 million or 9% compared to September 2015. Total loans at September 2016 of $2.6 billion reflect growth of $285.0 million or 12% over September 2015. This increase in loans was funded by growth in borrowings including the $80 million in subordinated debentures issued in September 2015. Demand deposits totaled $1.1 billion at September 2016, representing 38% of total deposits and an increase of $67.8 million or 6% higher than September 2015.
Asset quality measures remained strong, as non-performing assets, comprised exclusively of non-performing loans, were $2.1 million or .05% of total assets and .08% of total loans at September 2016 compared to $1.4 million or .04% of total assets and .06% of total loans at September 2015. Loans 30 to 89 days past due increased $1.3 million to $4.0 million at September 2016, with $2.3 million representing CNB acquired loans. Loans past due 90 days and still accruing at September 2016 were comprised of acquired loans of $1.0 million, a decrease of $3.1 million, compared to September 2015.
The allowance for loan losses increased $4.1 million to $24.3 million at September 2016 from $20.2 million as of September 2015. The allowance as a percentage of loans was .94% at September 30, 2016 compared to .88% at September 30, 2015. The allowance as a percentage of BNB originated loans was 1.19%, based on BNB originated loans totaling $2.1 billion, at September 2016, compared to 1.30%, based on BNB originated loans totaling $1.6 billion, at September 2015. The decline in the allowance as a percentage of BNB originated loans reflects an improving economy and increasing collateral values.
Stockholders’ equity grew $22.2 million to $362.6 million at September 2016, compared to $340.4 million at September 2015. The growth reflects earnings, capital raised in connection with the Dividend Reinvestment Plan, and an increase in the fair value of available for sale investment securities, partially offset by shareholders’ dividends. The Company’s capital ratios exceed all fully phased in capital requirements under the Basel III rules and the Bank remains classified as well capitalized.
“Although the turmoil in the financial markets has subsided somewhat since the Brexit vote at the end of the second quarter, market uncertainty continues. While it is unlikely the Federal Reserve will raise rates going into a U.S. Election, some economists are calling for a raise in December. We will continue to deploy our capital as opportunities arise. During the quarter we reinvested in our bond portfolio as rates rose slightly in the third quarter,” noted Mr. O’Connor.
Challenges and Opportunities
“The regulatory focus on commercial real estate (CRE) loan concentrations has not abated. We continue to invest in people and systems that allow us to execute on our business model, while addressing regulatory concerns. Our primary strategic focus is to take advantage of the market opportunities arising from the acquisitions of local competitors. Our community banking model positions us well to acquire customers who value a locally managed institution,” stated Mr. O’Connor.
About Bridge Bancorp, Inc.
Bridge Bancorp, Inc. is a bank holding company engaged in commercial banking and financial services through its wholly owned subsidiary, The Bridgehampton National Bank. Established in 1910, BNB, with assets of approximately $3.8 billion, operates 40 retail branch locations serving Long Island and the greater New York metropolitan area. In addition, the Bank operates two loan production offices: one in Manhattan, and one in Riverhead, New York. Through its branch network and its electronic delivery channels, BNB provides deposit and loan products and financial services to local businesses, consumers and municipalities. Title insurance services are offered through BNB’s wholly owned subsidiary, Bridge Abstract. Bridge Financial Services, Inc. offers financial planning and investment consultation. For more information visit www.bridgenb.com.
BNB also has a rich tradition of involvement in the community, supporting programs and initiatives that promote local business, the environment, education, healthcare, social services and the arts.
Please see the attached tables for selected financial information (PDF embedded below).
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