10-Q 1 b313101_10q.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2001 ( ) Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______ to _______. Commission file number: 1-12165 Bridge View Bancorp (Exact name of registrant as specified in its charter) New Jersey 22-3461336 ---------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification) 457 Sylvan Avenue, Englewood Cliffs, NJ 07632 (Address of principal executive offices) (Zip Code) 201-871-7800 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Exchange Act: Title of each class: Name of each exchange on which registered: Common Stock, No Par Value American Stock Exchange Securities registered pursuant to Section 12(g) of the Exchange Act: None Indicate by check mark whether the Issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. YES (X) NO___ APPLICABLE TO CORPORATE ISSUERS: Indicate the number of shares outstanding of the Registrant's classes of common stock, as of the last practicable date. 3,226,145 shares of Common Stock as of July 31, 2001 1 INDEX BRIDGE VIEW BANCORP Part I - Financial Information Item 1. Financial Statement Consolidated Statements of Financial Condition as of June 30, 2001(unaudited) and December 31, 2000 Consolidated Statements of Income for the three months ended June 30, 2001 and 2000 (unaudited) and the six months ended June 30, 2001 and 2000 (unaudited) Consolidated Statements of Cash Flows for the six months ended June 30, 2001 and 2000 (unaudited) Notes to Unaudited Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Explanatory Note: This Form 10-Q contains certain "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 which involve risks and uncertainties. Such statements are not historical facts and include expressions about management's confidence, strategies, and expectations about new and existing programs, products, relationships, opportunities, technology, and market conditions. These statements may be identified by the use of such words as "believe," "expect," "anticipate," "should," "may," "potential," or similar statements or variations of such terms. Examples of forward looking statements include but are not limited to, estimates with respect to the financial condition, results of operations, and business of Bridge View Bancorp, that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include: changes in general, economic and market conditions, legislative and regulatory conditions, or the development of an interest rate environment which adversely affects Bridge View Bancorp's interest rate margin or other income anticipated from operations and investments. As used in this Form 10-Q "we" and "us" and " our" refer to Bridge View Bancorp and its consolidated subsidiary Bridge View Bank, depending on the context. 2 BRIDGE VIEW BANCORP CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (in thousands)

See notes to unaudited consolidated financial statements. 3 BRIDGE VIEW BANCORP CONSOLIDATED STATEMENTS OF INCOME (unaudited, in thousands)

See notes to unaudited consolidated financial statements. 4 BRIDGE VIEW BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands)

See notes to unaudited consolidated financial statements. 5 BRIDGE VIEW BANCORP AND SUBSIDIARIES Notes to Unaudited Consolidated Financial Statements (1) Summary of Significant Accounting Policies The accompanying consolidated financial statements include the accounts of Bridge View Bancorp (the Company) and its direct and indirect wholly-owned subsidiaries, Bridge View Bank, Bridge View Investment Company, and Bridge View Delaware, Inc. (the Bank). All significant inter-company accounts and transactions have been eliminated in consolidation. Certain accounts in prior periods have been restated to conform to the current presentation. The consolidated condensed financial statements included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The accompanying consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Such adjustments are of a normal recurring nature. These consolidated unaudited financial statements should be read in conjunction with the audited financial statements and the notes thereto as of and for the year ended December 31, 2000. The results for the six months ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ended December 31, 2001. Organization The Company is a New Jersey Corporation and registered bank holding company with the Board of Governors of the Federal Reserve System. The Bank is a commercial bank which provides a full range of banking servicies to individuals and corporate customers in New Jersey. Both the Company and the Bank are subject to competition from other financial institutions. The Bank is regulated by state and federal agencies and is subject to periodic examinations by those regulatory authorities. Basis of Financial Presentation The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statement of financial condition and revenues and expenses for the year. Actual results could differ significantly from those estimates. Certain prior period amounts have been reclassified to conform to the financial statements presentation of 2001. The reclassifications have no effect upon stockholders' equity or net income as previously reported. 6 Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses. In connection with the determination of the allowance for loan losses, management generally obtains independent appraisals for significant properties. Securities Available for Sale Management determines the appropriate classification of securities at the time of purchase. If management has the intent and the Bank has the ability at the time of purchase to hold securities until maturity, they are classified as investment securities. Securities to be held for indefinite periods of time and not intended to be held to maturity are classified as securities available for sale. Gains or losses on sales of securities available for sale are based upon the specific identification method. Securities available for sale are reported at fair value with changes in the carrying value from period to period included as a separate component of stockholders' equity. Securities Held to Maturity Investment securities are carried at the principal amount outstanding, adjusted for amortization of premiums and accretion of discounts using a method that approximates the level-yield method over the terms of the securities. Investment securities are carried at the principal amount outstanding because the Bank has the ability and it is management's intention to hold these securities to maturity. (2) Retained Earnings - Stock Dividend The Company declared a 10% Stock Dividend (the "2001 Stock Dividend") on March 1, 2001 and paid the dividend on April 2, 2001. Retained earnings decreased by the market value of shares issued in connection with the 2001 Stock Dividend. Earnings per share and all share data has been restated to reflect the effect of the 2001 stock dividend. 7 (3) Earnings Per Share Reconciliation The reconciliation of the numerator and the denominator of Basic EPS with that of Diluted EPS is presented for the three month periods and the six month periods ended June 30, 2001 and 2000, respectively.(in thousands, except share data)

8 (4) Comprehensive Income Total comprehensive income is presented for the three month periods and the six months periods ended June 30, 2001 and 2000, respectively.

9 (5) Recent Accounting Pronouncements SFAS No. 141 / SFAS No. 142 On July 20, 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies the criteria that acquired intangible assets must meet to be recognized and reported apart from goodwill. Statement 142 will require that goodwill and intangible assets with indefinite useful lives no longer will be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 will also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Statement 142 requires that goodwill and any intangible assets determined to have an indefinite useful life that are acquired in a purchase business combination after June 30, 2001 will not be amortized, but will continue to be evaluated for impairment in accordance with the appropriate pre-Statement 142 requirements. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be amortized prior to the adoption of Statement 142. The Company is required to adopt the provisions of Statement 141 immediately. The initial adoption of Statement 141 had no impact on the Company's consolidated financial statements. The Company is required to adopt Statement No. 142 effective January 1, 2002. The Company currently has no recorded goodwill or intangible assets and does not anticipate that the initial adoption of Statement 142 will have a significant impact on the Company's consolidated financial statements. SFAS No. 140 In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (A Replacement of FASB Statement 125)." SFAS No. 140 supersedes and replaces the guidance in SFAS No. 125 and, accordingly, provides guidance on the following topics: securitization transactions involving financial assets, sales of financial assets such as receivables, loans, and securities; factoring transactions and wash sales; servicing assets and liabilities, collateralized borrowing arrangements, securities lending transactions; repurchase transactions; loan participations; and extinguishment of liabilities. While most of the provisions of SFAS No. 140 were effective for transactions entered into after March 31, 2001, companies with fiscal year ends that hold beneficial interests from previous securitizations were required to make additional disclosures in their December 31, 2000 financial statements. The initial adoption of SFAS No. 140 did not have a material impact on the Company's financial statements. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The following discussion and analysis of financial condition and results of operations should be read in conjunction with the Company's consolidated financial statements and the notes thereto included herein. When necessary, reclassifications have been made to prior years' data throughout the following discussion and analysis for purposes of comparability. RESULTS OF OPERATIONS - Three Months Ended June 30, 2001 and 2000 and Six Months Ended June 30, 2001 and 2000 The Company's results of operations depend primarily on its net interest income, which is the difference between the interest earned on its interest-earning assets and the interest paid on funds borrowed to support those assets, primarily deposits. Net interest margin is the difference between the weighted average rate received on interest-earning assets and the weighted average rate paid on interest-bearing liabilities, as well as the average level of interest-earning assets as compared with that of interest-bearing liabilities. Net income is also affected by the amount of non-interest income and other operating expenses. NET INCOME For the three months ended June 30, 2001, net income increased by $82,000 or 8.2% to $1,088,000 from $1,006,000 for the three months ended June 30, 2000. For the six months ended June 30, 2001, net income reached $2,068,000, an increase of $196,000 or 10.5%, when compared to net income of $1,872,000 for the six months ended June 30, 2000. The increase in net income for the first half of 2001 compared to 2000 is the product of a 4.6% increase in net interest income to $5,601,000 from $5,353,000 in the prior year. This increase was derived by a $318,000 or 4.4% increase in interest income from $7,285,000 in 2000 to $7,603,000 in 2001 coupled with a $70,000 or 3.6%, increase in interest expense during the same time period. The Company experienced an 18.6% increase in fee income reaching $862,000 for the six months ended June 30, 2001 from $727,000 for the same period in 2000. Interest expense fell $71,000 or 7.5% for the three month period ended June 30, 2001 compared to the three month period ended June 30, 2000. Interest expense increased $70,000 or 3.6% to $2,002,000 for the six month period ended June 30, 2001 compared to $1,932,000 for the six month period ended June 30, 2000. These fluctuations directly reflect the current interest rate environment. 11 On a per share basis, basic and diluted earnings per share were $0.34 and $0.33 for the quarter ended June 30, 2001 as compared to $0.31 and $0.31 for the quarter ended June 30, 2000. For the first half of 2001, basic and diluted earnings per share were $0.64 and $0.62 as compared to $0.58 and $0.57 for the first half of 2000. Share data has been restated to include the effect of the 2001 Stock Dividend. PROVISION FOR LOAN LOSSES For the quarter ended June 30, 2001, the Company's provision for loan losses was $30,000, a decrease of $10,000 from the provision of $40,000 for the quarter ended June 30, 2000. The provision for the six months ended June 30, 2001 was $40,000 as compared to $90,000 for the six months ended June 30, 2000. The decreased provision reflects management's view of the economy of its service area and the strength of the Company's loan portfolio. NON-INTEREST INCOME Non-interest income, which was primarily attributable to service fees received from deposit accounts, amounted, for the three months ended June 30, 2001, to $448,000, an increase of $47,000, or 11.7%, from $401,000 for the three months ended June 30, 2000. For the six months ended June 30, 2001, non-interest income reached $862,000, an increase of $135,000 or 18.6% above the non-interest income level of $727,000 for the six months ended June 30, 2000. NON-INTEREST EXPENSE Non-interest expense for the quarter ended June 30, 2001, amounted to $1,621,000, an increase of $34,000 or 2.1% from $1,587,000 for the quarter ended June 30, 2000. For the six months ended June 30, 2001, non-interest expense totaled $3,241,000, an increase of $176,000 or 5.7%, from $3,065,000 for the six months ended June 30, 2000. This increase continues to be related, primarily, to occupancy expense, data processing fees, customary increases for salary and employee benefits, as well as other administrative expenses resulting from the Company's growth since the second quarter of 2000. INCOME TAX EXPENSE The income tax provision, which includes both federal and state taxes, for the quarters ended June 30, 2001 and 2000 was $587,000 and $560,000, respectively. For the first half of 2001 and 2000, the income tax provision totaled $1,114,000 and $1,053,000, respectively. The increase in income taxes is a direct result of the increase in income before taxes in 2001. FINANCIAL CONDITION: June 30, 2001 and December 31, 2000 At June 30, 2001, the Company's total assets were $232,194,000 compared to $234,927,000 at December 31, 2000, a decrease of 1.2%. Total loans experienced a 1.8% increase to $135,657,000 at June 30, 2001 from $133,255,000 at December 31, 2000. Total deposits at June 30, 2001 were $204,539,000, 1.8% lower than the $208,365,000 at December 31, 2000. 12 LOAN PORTFOLIO At June 30, 2001, the Company's total loans were $135,657,000, an increase of $2,402,000 or 1.8% over total loans of $133,255,000 at December 31, 2000. The increase in the loan portfolio continues to be attributable to the effect of continued customer referrals, selective marketing, and continued growth within the local Bergen County community. Management believes that the Company will remain successful in loan acquisition within this market due to the fact that, through mergers and acquisitions, the Company's trade area is now primarily served by large institutions, frequently headquartered out of state. Management believes that it is not cost-efficient for these larger institutions to provide the level of personal service to small business borrowers. The Company's loan portfolio consists of commercial loans, real estate loans, and consumer loans. Commercial loans are made for the purpose of providing working capital, financing the purchase of equipment or inventory, as well as for other business purposes. Real estate loans consist of loans secured by commercial or residential real property and loans for the construction of commercial or residential property. Consumer loans are made for the purpose of financing the purchase of consumer goods, home improvements, and other personal needs, and are generally secured by the personal property being purchased. The Company's loans are primarily to businesses and individuals located in eastern Bergen County, New Jersey. The Company has not made loans to borrowers outside of the United States. Commercial lending activities are focused primarily on lending to small business borrowers. The Company believes that its strategy of customer service, competitive rate structures, and selective marketing have enabled the Company to gain market entry to local loans. Bank mergers and lending restrictions at larger banks competing with the Company have also contributed to the Company's efforts to attract borrowers. The following table sets forth the classification of the Company's loans by major category as of June 30, 2001 and December 31, 2000, respectively:

13 ASSET QUALITY The Company's principal assets are its loans. Inherent in the lending function is the risk of the borrower's inability to repay a loan under its existing terms. Risk elements include non-accrual loans, past due and restructured loans, potential problem loans, loan concentrations, and other real estate owned. Non-performing assets include loans that are not accruing interest (non-accrual loans) as a result of principal or interest being in default for a period of 90 days or more. When a loan is classified as non-accrual, interest accruals discontinue and all past due interest, including interest applicable to prior years, is reversed and charged against current income. Until the loan becomes current, any payments received from the borrower are applied to outstanding principal until such time as management determines that the financial condition of the borrower and other factors merit recognition of such payments of interest. The Company attempts to minimize overall credit risk through loan diversification and its loan approval procedures. Due diligence begins at the time a borrower and the Company begin to discuss the origination of a loan. Documentation, including a borrower's credit history, materials establishing the value and liquidity of potential collateral, the purpose of the loan, the source and timing of the repayment of the loan, and other factors are analyzed before a loan is submitted for approval. Loans made are also subject to periodic audit and review. The following table sets forth information concerning the Company's non-performing assets as of the dates indicated: Non-Performing Assets (dollars in thousands)

As of June 30, 2001, the Company had no non-accrual loans. At December 31, 2000, the Company had one non-accrual loan which represented a line of credit. Other than as disclosed above, there were no loans where information about possible credit problems of borrowers causes management to have serious doubts as to the ultimate collectibility of such loans. As of June 30, 2001 and December 31, 2000, there were no concentrations of loans exceeding 25% of the Company's total loans and the Company had no foreign loans. The Company's loans are primarily to businesses and individuals located in eastern Bergen County, New Jersey. 14 ALLOWANCE FOR LOAN LOSSES The allowance for loan losses is a reserve established through charges to earnings in the form of a provision for loan losses. The Company attempts to maintain an allowance for loan losses at a sufficient level to provide for losses inherent in the loan portfolio. Loan losses are charged directly to the allowance when they occur and any recovery is credited to the allowance. Risks within the loan portfolio are analyzed on a continuous basis by the Company's officers, by external independent loan review auditors, and by the Company's audit committee. A risk system, consisting of multiple grading categories, is utilized as an analytical tool to assess risk and appropriate reserves. In addition to the risk system, management further evaluates risk characteristics of the loan portfolio under current and anticipated economic conditions and considers such factors as the financial condition of the borrower, past and expected loss experience, and other factors which management feels deserve recognition in establishing an appropriate reserve. These estimates are reviewed at least quarterly, and, as adjustments become necessary, they are realized in the periods in which they become known. Additions to the allowance are made by provisions charged to the expense and the allowance is reduced by net-chargeoffs (i.e. loans judged to be uncollectible are charged against the reserve, less any recoveries on the loans.) Although management attempts to maintain the allowance at an adequate level, future addition to the allowance may be required based upon changes in market conditions. Additionally, various regulatory agencies periodically review the allowance for loan losses. These agencies may require additional provisions based upon their judgment about information available to them at the time of their examination. The Company's allowance for loan losses totaled $1,486,000 and $1,371,000 at June 30, 2001 and 2000, respectively. This increase in the allowance is due to the continued growth of the loan portfolio. The following is a summary of the reconciliation of the allowance for loan losses for the six month periods ended June 30, 2001 and 2000, respectively:

15 INVESTMENT SECURITIES The Company maintains an investment portfolio to fund increased loan demand or deposit withdrawals and other liquidity needs and to provide an additional source of interest income. The portfolio is composed of U.S. Treasury Securities, obligation of U.S. Government Agencies, selected municipal and state obligations, stock in the Federal Home Loan Bank ("FHLB"), and equity securities of another financial institution. Management determines the appropriate classification of securities at the time of purchase. At June 30, 2001, $23,282,000 of the Company's investment securities were classified as held to maturity and $29,960,000 were classified as available for sale. At June 30, 2001, the Company held no securities which it classified as trading securities. At June 30, 2001, total investment securities were $53,242,000, a decrease of $2,427,000 or 4.4%, from total investment securities of $55,669,000 at December 31, 2000. This decrease in investment securities from year end 2000 to first half 2001 reflects the maturity of investment securities which will be used to fund loan growth. The following table sets forth the carrying value of the Company's security portfolio as of the dates indicated. 16 A comparative summary of securities available for sale at June 30, 2001 and December 31, 2000 is as follows (in thousands):

A comparative summary of securities held to maturity at June 30, 2001 and December 31, 2000 is as follows (in thousands):

17 The following table sets forth as of June 30, 2001, the maturity distribution of the Company's debt investment portfolio: Maturity of Debt Investment Securities June 30, 2001 (in thousands)

The Company sold no securities from its portfolio during the first six months of 2001 or 2000. 18 DEPOSITS Deposits are the Company's primary source of funds. The Company experienced a decrease in deposit balances of $3,826,000 or 1.8% to $204,539,000 at June 30, 2001 as compared to $208,365,000 at December 31, 2000. This decrease was due mainly to the loss of time deposits, which experienced a $7,916,000, or 13.0%, decrease resulting from declining deposit rate offerings. Within the decrease in total deposits, interest bearing demand deposits grew $14,988,000 or 32.8% from December 31, 2000 to June 30, 2001. The Company has no foreign deposits, nor are there any material concentrations of deposits. The following table sets forth the amount of various types of deposits for each of the periods indicated (in thousands):

The Company does not actively solicit short-term deposits of $100,000 or more because of the liquidity risks posed by such deposits. The following table summarizes the maturity distribution of certificates of deposit of denominations of $100,000 or more as of June 30, 2001 (in thousands). Three months or less $ 18,860 Over three months through twelve months 10,288 Over one year through three years 0 Over three years 0 ----------- TOTAL $ 29,148 =========== 19 LIQUIDITY The Company's liquidity is a measure of its ability to fund loans, withdrawals or maturities of deposits, and other cash outflows in a cost-effective manner. The Company's principal sources of funds are deposits, scheduled amortization and prepayments of loan principal, maturities of investment securities, and funds provided by operations. While scheduled loan payments and maturing investments are relatively predictable sources of funds, deposit flow and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. The Company's total deposits equaled $204,539,000 at June 30, 2001 as compared to $208,365,000 at December 31, 2000. Although there has been a decrease in funds provided by deposit inflows during this period, the Company is sufficiently funded to provide for the Company's loan demand and excess funds have been invested in investment securities and federal funds sold. Through the Company's investment portfolio, the Company has generally sought to obtain a safe, yet slightly higher yield than would have been available to the Company as a net seller of overnight federal funds while still maintaining liquidity. Through its investments portfolio, the Company also attempts to manage its maturity gap by seeking maturities of investments which coincide as closely as possible with maturities of deposits. The Bank's investment portfolio also includes securities held for sale to provide liquidity for anticipated loan demand and other liquidity needs. Although the Bank has traditionally been a net "seller" of federal funds, the Bank does maintain lines of credit with the Federal Home Loan Bank of New York, Summit Bank, and Bank of New York for "purchase" of federal funds in the event that temporary liquidity needs arise. Management believes that the Company's current sources of funds provide adequate liquidity for the current cash flow needs of the Company. 20 INTEREST RATE SENSITIVITY ANALYSIS The principal objective of the Company's asset and liability management function is to evaluate the interest-rate risk included in certain balance sheet accounts; determine the level of risk appropriate given the Company's business focus, operating environment, capital and liquidity requirements; establish prudent asset concentration guidelines; and manage the risk consistent with Board approved guidelines. The Company seeks to reduce the vulnerability of its operations to changes in interest rates and to manage the ratio of interest-rate sensitive assets to interest-rate sensitive liabilities within specified maturities or repricing dates. The Company's actions in this regard are taken under the guidance of the Asset/Liability Committee (ALCO) of the Board of Directors. The ALCO generally reviews the Company's liquidity, cash flow needs, maturities of investments, deposits and borrowings, and current market conditions and interest rates. One of the monitoring tools used by the ALCO is an analysis of the extent to which assets and liabilities are interest rate sensitive and measures the Company's interest rate sensitivity "gap". An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. Accordingly, during a period of rising rates, a negative gap may result in the yield on the institution's assets increasing at a slower rate than the increase in its cost of interest-bearing liabilities resulting in a decrease in net interest income. Conversely, during a period of falling interest rates, an institution with a negative gap would experience a repricing of its assets at a slower rate than its interest-bearing liabilities which, consequently, may result in its net interest income growing. The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at the periods indicated which are anticipated by the Company, based upon certain assumptions, to reprice or mature in each of the future time periods presented. Except as noted, the amount of assets and liabilities which reprice or mature during a particular period were determined in accordance with the earlier of the term to repricing or the contractual terms of the asset or liability. Because the Bank has no interest bearing liabilities with a maturity greater than five years, management believes that a static gap for the over five year time period reflects a more accurate assessment of interest rate risk. The Company's loan repayment assumptions are based upon actual historical repayment rates. 21 Cumulative Rate Sensitive Balance Sheet June 30, 2001 (in thousands)

22 CAPITAL A significant measure of the strength of a financial institution is its capital base. The Company's federal regulators have classified and defined Company capital into the following components: (1) Tier I Capital, which includes tangible shareholders' equity for common stock and qualifying perpetual preferred stock, and (2) Tier II Capital, which includes a portion of the allowance for possible loan losses, certain qualifying long-term debt, and preferred stock which does not qualify for Tier I Capital. Minimum capital levels are regulated by risk-based capital adequacy guidelines which require certain capital as a percent of the Company's assets and certain off-balance sheet items adjusted for predefined credit risk factors (risk-adjusted assets). A Bank Holding Company is required to maintain, at a minimum, Tier I Capital as a percentage of risk-adjusted assets of 4.0% and combined Tier I and Tier II Capital as a percentage risk-adjusted assets of 8.0%. In addition to the risk-based guidelines, the Company's regulators require that an institution which meets the regulator's highest performance and operation standards maintain a minimum leverage ratio (Tier I Capital as a percentage of tangible assets) of 3.0%. For those institutions with higher levels of risk or that are experiencing or anticipating significant growth, the minimum leverage ratio will be evaluated through the ongoing regulatory examination process. The following table summarizes the risk-based and leverage capital ratios for the Bank at June 30, 2001, as well as the required minimum regulatory capital ratios: Capital Adequacy Minimum June 30, Regulatory 2001 Requirements -------- ------------ Risk-Based Capital: Tier I Capital Ratio 17.04% 4.0% Total Capital Ratio 18.14% 8.0% Leverage Ratio 10.68% 3.0% IMPACT OF INFLATION AND CHANGING PRICES The consolidated financial statements of the Company and notes thereto, presented elsewhere herein, have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time and due to inflation. The impact of inflation is reflected in the increased cost of the Company's operations. Unlike most industrial companies, nearly all of the assets and liabilities of the Company are monetary. As a result, interest rates have a greater impact on the Company's performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services. 23 PART II OTHER INFORMATION Item 1. Legal proceedings - NONE The Company and the Bank are periodically parties to or otherwise involved in legal proceedings arising in the normal course of business, such as claims to enforce liens, claims involving the making and servicing of real property loans, and other issues incident to the Bank's business. Management does not believe that there is any pending or threatened proceedings against the Company or the Bank which, if determined adversely, would have a material effect on the business, financial position or results of operations of the Company or the Bank. Item 2. Changes in securities - NONE Item 3. Defaults upon senior securities - NONE Item 4. Submission of matters to a vote of securities holders The Company's Annual Meeting was held on May 17, 2001. At the Annual Meeting, the following matter was voted on: 1. ELECTION OF DIRECTORS - The following directors received the following votes:

All nominees were reelected. 2. APPROVAL OF THE BRIDGE VIEW BANCORP 2001 EMPLOYEE STOCK OPTION PLAN 3. APPROVAL OF THE BRIDGE VIEW BANCORP 2001 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS Item 5. Other information - NONE Item 6. Exhibits and reports on Form 8-K - NONE 24 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. By: /s/ Albert F. Buzzetti ----------------------------- (Registrant - Bridge View Bancorp) Albert F. Buzzetti President and Chief Executive Officer Date: August 13, 2001 25

BRIDGE VIEW BANCORP 10-Q