<PAGE>
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, 1996
----------------------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to _____________________
Commission File Number 0-18014
-------
PAMRAPO BANCORP, INC.
- - ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 22-2984813
- - ----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
611 Avenue C, Bayonne, New Jersey 07002
- - ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 201-339-4600
--------------------------
Indicate by check X whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No______
--
The number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date July 31, 1996.
-------------
$.01 par value common stock - 3,280,964 shares outstanding
<PAGE>
PAMRAPO BANCORP, INC.
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition
at June 30, 1996 and December 31, 1995 (Unaudited) 1
Consolidated Statements of Income for
the Three Months and Six Months Ended
June 30, 1996 and 1995 (Unaudited) 2
Consolidated Statement of Cash Flows
for the Six Months Ended
June 30, 1996 and 1995 (Unaudited) 3 - 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations 6 - 13
PART II - OTHER INFORMATION 14
SIGNATURES 15
</TABLE>
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
Assets 1996 1995
- - ------ ------------ ------------
<S> <C> <C>
Cash and amounts due from depository institutions $ 10,238,835 $ 9,293,609
Interest-bearing deposits in other banks 4,500,000 4,500,000
Federal funds sold 100,000 100,000
------------ ------------
Total cash and cash equivalents 14,838,835 13,893,609
Securities available for sale 26,146,013 28,427,064
Investment securities held to maturity, estimated
fair value of $99,000 - 99,000
Mortgage-backed securities held to maturity, net;
estimated fair value of $92,599,000 (1996) and $97,329,000 (1995) 94,233,619 96,564,583
Loans receivable, net 214,637,884 218,140,313
Foreclosed real estate, net 2,170,917 1,467,396
Investment in real estate, net 307,465 307,375
Premises and equipment, net 3,652,400 3,716,785
Federal Home Loan Bank of New York stock, at cost 3,072,600 3,072,600
Interest receivable, net 2,856,533 2,954,256
Excess of cost over assets acquired 485,200 545,850
Other assets 3,151,612 2,175,799
------------ ------------
Total assets $365,553,078 $371,364,630
============ ============
Liabilities and stockholders' equity
- - ------------------------------------
Liabilities
- - -----------
Deposits $302,539,951 $298,900,764
Advances from Federal Home Loan Bank of New York 583,100 7,583,100
Other borrowed money 351,858 459,855
Advance payments by borrowers for taxes and insurance 1,851,576 1,632,215
Other liabilities 3,683,362 3,413,267
------------ ------------
Total liabilities 309,009,847 311,989,201
============ ===========
Stockholders' equity
- - --------------------
Preferred stock; authorized 3,000,000 shares;
issued and outstanding - none
Common stock; par value $.01; authorized
7,000,000 shares; 3,450,000 shares issued;
3,280,964 shares (1996) and 3,393,034 shares (1995) outstanding 34,500 34,500
Paid-in capital in excess of par value 18,906,768 18,906,768
Retained earnings - substantially restricted 41,679,729 41,284,431
Unrealized loss on securities available for sale, net (266,707) (41,154)
Debt of employee stock ownership plan (49,594) (148,781)
Treasury stock, at cost;
169,036 shares (1996) and 56,966 shares (1995) (3,761,465) (660,335)
------------ ------------
Total stockholders' equity 56,543,231 59,375,429
------------ ------------
Total liabilities and stockholders' equity $365,553,078 $371,364,630
============ ============
</TABLE>
See notes to consolidated financial statements.
- 1 -
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- --------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Loans $4,793,984 $5,043,244 $ 9,735,202 $10,166,585
Mortgage-backed securities 1,878,422 2,024,793 3,836,486 4,030,575
Investments and other interest-earning assets 317,396 280,891 593,559 573,506
---------- ---------- ----------- -----------
Total interest income 6,989,802 7,348,928 14,165,247 14,770,666
---------- ---------- ----------- -----------
Interest expense:
Deposits 2,787,938 2,681,006 5,581,127 5,192,181
Advances and other borrowed money 27,812 187,518 137,357 456,406
---------- ---------- ----------- -----------
Total interest expense 2,815,750 2,868,524 5,718,484 5,648,587
---------- ---------- ----------- -----------
Net interest income 4,174,052 4,480,404 8,446,763 9,122,079
Provision for loan losses 150,000 100,000 300,000 200,000
---------- ---------- ----------- -----------
Net interest income
after provision for loan losses 4,024,052 4,380,404 8,146,763 8,922,079
---------- ---------- ----------- -----------
Non-interest income:
Fees and service charges 108,575 117,906 216,553 232,062
Miscellaneous 48,412 40,667 99,391 113,097
---------- ---------- ----------- -----------
Total non-interest income 156,987 158,573 315,944 345,159
---------- ---------- ----------- -----------
Non-interest expenses:
Salaries and employee benefits 1,320,369 1,150,989 2,643,474 2,395,821
Net occupancy expense of premises 185,795 151,040 383,898 315,827
Equipment 179,651 169,836 375,370 352,121
Advertising 26,979 29,422 69,926 69,359
Loss on foreclosed real estate 49,089 51,693 113,714 99,960
Federal insurance premium 172,339 181,815 347,412 363,629
Amortization of intangibles 30,325 30,325 60,650 60,650
Miscellaneous 586,385 672,393 1,421,699 1,151,782
---------- ---------- ----------- -----------
Total non-interest expenses 2,550,932 2,437,513 5,416,143 4,809,149
---------- ---------- ----------- -----------
Income before income taxes 1,630,107 2,101,464 3,046,564 4,458,089
Income taxes 587,742 731,377 800,119 1,545,695
---------- ---------- ----------- -----------
Net income $1,042,365 $1,370,087 $ 2,246,445 $ 2,912,394
========== ========== =========== ===========
Net income per common share
and common stock equivalents $ .32 $ .40 $ .67 $ .86
========== ========== =========== ===========
Dividends per common share $ .225 $ .175 $ .450 $ .350
========== ========== =========== ===========
Weighted average number of common shares
and common stock equivalents outstanding 3,312,506 3,439,275 3,377,183 3,395,033
========== ========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
- 2 -
<PAGE>
PAMRAPO BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,246,445 $ 2,912,394
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of premises and equipment and investment in real estate 160,217 157,846
Amortization of deferred fees, premiums and discounts, net (79,667) (103,856)
Provision for loan losses 300,000 200,000
Provision for losses on foreclosed real estate 47,000 30,000
Loss on sale of foreclosed real estate 12,393 7,635
Decrease in interest and dividends receivable, net 97,723 208,795
(Increase) in other assets (843,363) (121,690)
Increase in other liabilities 270,095 272,387
Amortization of intangibles 60,650 60,650
Amortization of cost of stock contributed to
Management Recognition and Retention Plan and Trust - 9,718
Reduction in debt of Employee Stock Ownership Plan 99,187 99,187
------------ ------------
Net cash provided by operating activities 2,370,680 3,733,066
------------ ------------
Cash flows from investing activities:
Proceeds from maturities of securities available for sale 2,000,000 5,000,000
Purchases of securities available for sale (2,013,209) -
Principal repayments on securities available for sale 1,905,072 398,027
Proceeds from maturities of investment securities held to maturity 99,000 -
Purchases of mortgage-backed securities held to maturity (5,013,295) -
Principal repayments on mortgage-backed securities held to maturity 7,293,383 6,768,276
Purchase of loans (45,500) -
Proceeds from sale of student loans 415,524 375,906
Net change in loans receivable 1,976,660 2,277,673
Proceeds from sale of foreclosed real estate 254,559 185,741
Additions to investment in real estate (6,900) -
Additions to premises and equipment (89,022) (170,622)
(Purchase) of Federal Home Loan Bank of New York stock - (48,000)
------------ ------------
Net cash provided by investing activities 6,776,272 14,787,001
------------ ------------
Cash flows from financing activities:
Net increase (decrease) in deposits 3,639,187 (5,125,396)
Repayment of advances from Federal Home Loan Bank of New York (7,000,000) (10,000,000)
Repayment of other borrowed money (107,997) (104,647)
Increase in advance payments by borrowers for taxes and insurance 219,361 55,035
Purchase of treasury stock (3,761,063) -
Proceeds from sale of treasury stock 327,973 721,382
Cash dividends paid (1,519,187) (1,187,562)
------------ ------------
Net cash (used in) financing activities (8,201,726) (15,641,188)
------------ ------------
Net increase in cash and cash equivalents 945,226 2,878,879
Cash and cash equivalents - beginning 13,893,609 12,134,632
------------ ------------
Cash and cash equivalents - ending $ 14,838,835 $ 15,013,511
============ ============
</TABLE>
See notes to consolidated financial statements.
- 3 -
<PAGE>
PAMRAPO BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Supplemental information:
Transfer of loans receivable to foreclosed real estate $ 1,504,973 $ 938,403
============ ============
Loans to facilitate sale of forclosed real estate $ 487,500 $ 232,500
============ ============
Change in unrealized gain on securities available for sale, net $ 225,553 $ 287,365
============ ============
Debt incurred in connection with purchase of office building $ - $ 325,000
============ ============
Cash paid during the period for:
Income taxes $ 1,341,053 $ 1,305,161
============ ============
Interest on deposits and borrowings $ 5,718,484 $ 5,648,587
============ ============
</TABLE>
See notes to consolidated financial statements.
- 4 -
<PAGE>
PAMRAPO BANCORP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. PRINCIPLES OF CONSOLIDATION
- - -------------------------------
The consolidated financial statements include the accounts of Pamrapo Bancorp,
Inc. (the "Corporation"), and its wholly owned subsidiaries, Pamrapo Savings
Bank, SLA (the "Bank") and Pamrapo Service Corp, Inc. The Corporation's
business is conducted principally through the Bank. All significant
intercompany accounts and transactions have been eliminated in consolidation.
2. BASIS OF PRESENTATION
- - -------------------------
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and regulation S-X and do not
include information or footnotes necessary for a complete presentation of
financial condition, results of operations, and cash flows in conformity with
generally accepted accounting principles. However, in the opinion of
management, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the consolidated financial statements
have been included. The results of operations for the three and six months
ended June 30, 1996, are not necessarily indicative of the results which may
be expected for the entire fiscal year.
3. NET INCOME PER COMMON SHARE
- - -------------------------------
Net income per common share is based on the weighted average number of common
shares actually outstanding plus the shares that would be outstanding assuming
the exercise of dilutive stock options, all of which are considered to be
common stock equivalents. The number of common shares that would be issued
from the exercise of stock options has been reduced by the number of common
shares that could have been purchased from the proceeds at the average market
price of the Corporation's common stock.
- 5 -
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
CHANGES IN FINANCIAL CONDITION
- - ------------------------------
The Corporation's assets at June 30, 1996 totaled $365.6 million, which
represents a decrease of $5.8 million or 1.56% as compared with $371.4 million
at December 31, 1995.
Securities available for sale at June 30, 1996 decreased $2.3 million or 8.10%
to $26.1 million when compared with $28.4 million at December 31, 1995. The
decrease during the six months ended June 30, 1996, resulted primarily from
repayments on and maturities of securities available for sale of $3.9 million
along with an increase in unrealized loss on such portfolio of $358,000 which
offset purchases of securities available for sale of $2.0 million.
Investments securities held to maturity of $99,000 at December 31, 1995
matured during the six months ended June 30, 1996.
Mortgage-backed securities held to maturity decreased $2.4 million or 2.48% to
$94.2 million at June 30, 1996 when compared to $96.6 million at December 31,
1995. The decrease during the six months ended June 30, 1996, resulted
primarily from repayments on mortgage-backed securities of $7.3 million which
offset purchases of such securities of $5.0 million.
Net loans amounted to $214.6 million at June 30, 1996 as compared to $218.1
million at December 31, 1995, which represents a decrease of $3.5 million or
1.60%. The decrease, during the six months ended June 30, 1996, resulted
primarily from the transfer of $1.5 million in loans to foreclosed real estate
and loan principal repayments exceeding loan originations by $2.0 million.
Foreclosed real estate amounted to $2.2 million, $2.1 million and $1.5 million
at June 30, 1996, March 31, 1996 and December 31, 1995, respectively. At June
30, 1996, foreclosed real estate consisted of twenty-one properties, of which
fifteen were residential, four were land and two were commercial. At March
31, 1996 and December 31, 1995, foreclosed real estate consisted of nineteen
and sixteen properties, respectively. During the three months ended June 30,
1996, four properties with a combined book value of $409,000 were sold and
another four properties with a combined book value of $519,000 remain under
contract for sale.
Total deposits at June 30, 1996 increased $3.6 million or 1.20% to $302.5
million when compared with $298.9 million at December 31, 1995.
Advances from the Federal Home Loan Bank of New York ("FHLB") amounted to
$583,000 and $7.6 million at June 30, 1996 and December 31, 1995,
respectively. The decrease, during the six months ended June 30, 1996,
resulted from a repayment of short-term advances from the FHLB of $7.0
million.
Stockholders' equity totaled $56.5 million and $59.4 million at June 30, 1996
and December 31, 1995, respectively. During the six months ended June 30, 1996,
the Corporation repurchased 169,000 shares of its common stock at prices ranging
from $19.50 to $23.00 per share, totaling $3.8 million, under the stock
repurchase program and issued 56,930 shares of its common stock from treasury
stock for $328,000 as a result of the exercise of stock options by directors,
officers and employees.
- 6 -
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
COMPARISON OF OPERATING RESULTS FOR THE
- - ---------------------------------------
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
-----------------------------------------
Net income decreased $328,000 or 23.94% to $1.042 million for the three months
ended June 30, 1996 compared with $1.370 million for the same 1995 period.
The decrease in net income during the 1996 period resulted from decreases in
total interest income and non-interest income, along with increases in non-
interest expenses and provision for loan losses, which were partially offset
by decreases in total interest expense and income taxes.
Interest income on loans decreased $249,000 or 4.94% to $4.8 million during
the three months ended June 30, 1996 when compared with $5.0 million during
the same 1995 period. The decrease during the 1996 period resulted from a
decrease in the yield earned on the loan portfolio along with a decrease in
the average balance of loans outstanding. Interest on mortgage-backed
securities decreased $147,000 or 7.26% to $1.88 million during the three
months ended June 30, 1996 when compared with $2.02 million for the same 1995
period. The decrease during the 1996 period resulted from decreases in both
the average balance of mortgage-backed securities outstanding and the yield
thereon. Interest earned on investments and other interest-earning assets
increased by $36,000 or 12.81% to $317,000 during the three months ended June
30, 1996, when compared to $281,000 during the same 1995 period, primarily due
to an increase in the average balance of such assets outstanding.
Interest expense on deposits increased $107,000 or 3.99% to $2.8 million
during the three months ended June 30, 1996 when compared to $2.7 million
during the same 1995 period. Such increase was primarily attributable to an
increase in the cost of such deposits. Interest expense on advances and other
borrowed money decreased by $160,000 or 85.11% to $28,000 during the three
months ended June 30, 1996 when compared with $188,000 during the same 1995
period, primarily due to a decrease in the average balance of advances
outstanding from the FHLB.
Net interest income decreased $306,000 or 6.83% during the three months ended
June 30, 1996 when compared with the same 1995 period. Such decrease was due
to a decrease in total interest income of $359,000 which more than offset a
decrease in total interest expense of $53,000.
During the three months ended June 30, 1996 and 1995, the Bank provided
$150,000 and $100,000, respectively, for loan losses. The allowance for loan
losses is based on management's evaluation of the risk inherent in its loan
portfolio and gives due consideration to the changes in general market
conditions and in the nature and volume of the Bank's loan activity. The Bank
intends to continue to provide for loan losses based on its periodic review of
the loan portfolio and general market conditions. At June 30, 1996, March 31,
1996 and December 31, 1995, the Bank's non-performing loans, which were
delinquent 90 days or more, totaled $10.2 million, $9.1 million and $10.9
million, respectively. When non-performing loans are combined with foreclosed
real estate, the resulting non-performing assets totaled at June 30, 1996,
March 31, 1996 and December 31, 1995, $12.4 million, $11.2 million and $12.4
million, respectively, which represent 3.39%, 3.04% and 3.34%, respectively,
of total assets. Approximately $1.0 million of the $1.1 million increase in
non-performing loans in the second quarter of 1996 was in one-to-four family
residential category with over $500,000 attributable to two borrowers. At
- 7 -
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
COMPARISON OF OPERATING RESULTS FOR THE
- - ---------------------------------------
THREE MONTHS ENDED JUNE 30, 1996 AND 1995 (Cont'd)
-----------------------------------------
June 30, 1996, $4.0 million of non-performing loans were accruing interest and
$6.2 million were on non-accrual status. During the three months ended June
30, 1996 and 1995, the Bank transferred $511,000 and $818,000,
respectively, of loans to foreclosed real estate. The non-performing loans
primarily consist of one-to-four family mortgage loans. During the three
months ended June 30, 1996 and 1995, the Bank had net loan charge offs
aggregating $111,000 and $561,000, respectively. The allowance for loan
losses amounted to $2.770 million at June 30, 1996, representing 1.27% of
total loans and 27.17% of loans delinquent ninety days or more and $2.725
million at December 31, 1995, representing 1.22% of total loans and 25.09% of
loans delinquent ninety days or more.
Non-interest income decreased nominally by $2,000 or 1.26% to $157,000 during
the three months ended June 30, 1996 from $159,000 during the same 1995
period. The decrease resulted from a decrease in fees and service charges of
$9,000 which offset an increase in miscellaneous income of $7,000.
Non-interest expenses increased by $113,000 or 4.63% to $2.55 million during
the three months ended June 30, 1996 when compared with $2.44 million during
the same 1995 period. Salaries and employees benefits, net occupancy expense
and equipment increased $169,000, $35,000 and $10,000, respectively, which was
sufficient to offset decreases in advertising, loss on foreclosed real estate,
federal insurance premium and miscellaneous expenses of $2,000, $3,000,
$10,000 and $86,000, respectively, during the 1996 period when compared with
the same 1995 period.
Income taxes totaled $588,000 and $731,000 during the three months ended June
30, 1996 and 1995, respectively. The decrease during the 1996 period resulted
from a decrease in pre-tax income.
COMPARISON OF OPERATING RESULTS FOR THE
- - ---------------------------------------
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
---------------------------------------
Net income decreased $666,000 or 22.87% to $2.246 million for the six months
ended June 30, 1996 compared with $2.912 million for the same 1995 period.
The decrease in net income during the 1996 period resulted from decreases in
total interest income and non-interest income, along with increases in total
interest expense, non-interest expenses and provision for loan losses, which
were partially offset by a decrease in income taxes.
- 8 -
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
COMPARISON OF OPERATING RESULTS FOR THE
- - ---------------------------------------
SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (Cont'd)
---------------------------------------
Interest income on loans decreased $432,000 or 4.25% to $9.7 million
during the six months ended June 30, 1996 when compared with $10.2 million
during the same 1995 period. The decrease during the 1996 period resulted
from a decrease in the yield earned on the loan portfolio along with a
decrease in the average balance of loans outstanding. Interest on mortgage-
backed securities decreased $195,000 or 4.84% to $3.8 million during the six
months ended June 30, 1996 when compared with $4.0 million for the same 1995
period. The decrease during the 1996 period resulted from decreases in both
the average balance of mortgage-backed securities outstanding and the yield
earned thereon. Interest earned on investments and other interest-earning
assets increased by $20,000 or 3.48% to $594,000 during the six months ended
June 30, 1996, when compared to $574,000 during the same 1995 period primarily
due to an increase in the average balance of such assets outstanding.
Interest expense on the deposits increased $389,000 or 7.49% to $5.6 million
during the six months ended June 30, 1996 when compared to $5.2 million during
the same 1995 period. Such increase was primarily attributable to an increase
in the cost of such deposits. Interest expense on advances and other borrowed
money decreased by $319,000 or 69.96% to $137,000 during the six months ended
June 30, 1996 when compared with $456,000 during the same 1995 period,
primarily due to a decrease in the average balance of advances outstanding
from the FHLB.
Net interest income decreased $675,000 or 7.40% during the six months ended
June 30, 1996 when compared with the same 1995 period. Such decrease was due
to a decrease in total interest income of $606,000 along with an increase in
total interest expense of $69,000.
During the six months ended June 30, 1996 and 1995, the Bank provided $300,000
and $200,000, respectively, for loan losses. The allowance for loan losses is
based on management's evaluation of the risk inherent in its loan portfolio
and gives due consideration to the changes in general market conditions and in
the nature and volume of the Bank's loan activity. The Bank intends to
continue to provide for loan losses based on its periodic review of the loan
portfolio and general market conditions. At June 30, 1996 and December 31,
1995, the Bank's non-performing loans, which were delinquent 90 days or more,
totaled $10.2 million or 2.79% of total assets and $10.9 million or 2.94% of
total assets, respectively. At June 30, 1996, $4.0 million of non-performing
loans were accruing interest and $6.2 million were on non-accrual status.
During the six months ended June 30, 1996 and 1995, the Bank transferred $1.5
million and $938,000, respectively, of loans to foreclosed real estate. The
non-performing loans primarily consist of one-to-four family mortgage loans.
During the six months ended June 30, 1996 and 1995, the Bank had net loan
charge offs aggregating $255,000 and $675,000, respectively. The allowance
for loan losses amounted to $2.770 million at June 30, 1996, representing
1.27% of total loans and 27.17% of loans delinquent ninety days or more and
$2.725 million at December 31, 1995, representing 1.22% of total loans and
25.09% of loans delinquent ninety days or more.
- 9 -
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
COMPARISON OF OPERATING RESULTS FOR THE
- - ---------------------------------------
SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (Cont'd)
---------------------------------------
Non-interest income decreased by $29,000 or 8.41% to $316,000 during the six
months ended June 30, 1996 from $345,000 during the same 1995 period. The
decrease resulted from decreases in fees and service charges and miscellaneous
income of $15,000 and $14,000, respectively.
Non-interest expenses increased by $607,000 or 12.62% to $5.4 million during
the six months ended June 30, 1996 when compared with $4.8 million during the
same 1995 period. Salaries and employees benefits, net occupancy expense,
equipment, loss on foreclosed real estate and miscellaneous expenses increased
$247,000, $68,000, $23,000, $14,000 and $270,000, respectively, which was
sufficient to offset a decrease in federal insurance premium of $17,000,
during the 1996 period when compared with the same 1995 period. The increase
in miscellaneous expenses resulted primarily from a non-recurring expense of
$250,000 related to the 1996 Annual Meeting of Stockholders.
Income taxes totaled $800,000 and $1.5 million during the six months ended
June 30, 1996 and 1995, respectively. The decrease during the 1996 period
resulted from a decrease in pre-tax income and a reduction in income tax
expense of $293,000 resulting from the exercise of non-statutory stock
options.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
The Bank is required to maintain mimimum levels of liquid assets as defined by
the Office of Thrift Supervision (the "OTS") regulations. This requirement,
which may vary from time to time, depending upon economic conditions and
deposit flows, is based upon a percentage of deposits and short-term
borrowings. The required ratio currently is 5%. The Bank's liquidity
averaged 9.12% during the month of June 1996. The Bank adjusts its liquidity
levels in order to meet funding needs for deposit outflows, payment of real
estate taxes from escrow accounts on mortgage loans, repayment of borrowings,
when applicable, and loan funding commitments. The Bank also adjusts its
liquidity level as appropriate to meet its asset/liability objectives.
The Bank's primary sources of funds are deposits, amortization and prepayments
of loans and mortgage-backed securities principal, FHLB advances, maturities
of investment securities and funds provided from operations. While scheduled
loan and mortgage-backed securities amortization and maturing investment
securities are a relatively predictable source of funds, deposit flow and loan
and mortgage-backed securities prepayments are greatly influenced by market
interest rates, economic conditions and competition. The Bank invests its
excess funds in federal funds and overnight deposits with the FHLB, which
provides liquidity to meet lending requirements. Federal funds sold and
interest-bearing deposits at June 30, 1996 amounted to $100,000 and $4.5
million, respectively.
- 10 -
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES (Cont'd)
- - -------------------------------
The Bank's liquidity, represented by cash and cash equivalents, is a product
of its operating, investing and financing activities. These activities are
summarized below:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1995
--------- ---------
(In Thousands)
<S> <C> <C>
Cash and cash equivalents -
Beginning $13,894 $12,135
------- -------
Operating activities:
Net Income 2,246 2,912
Adjustment to reconcile net
income to net cash provided
by operating activities 125 821
------- -------
Net cash provided by operating
activities 2,371 3,733
Net cash provided by
investing activities 6,776 14,787
Net cash (used in)
financing activities (8,202) (15,641)
------- -------
Net increase in
cash and cash equivalents 945 2,879
------- -------
Cash and cash equivalents -
Ending $14,839 $15,014
======= =======
</TABLE>
Cash was generated by operating activities during the six months ended June
30, 1996. The primary sources of cash was net income and investing
activities. Funds used on financing activities resulted primarily from a $7.0
million reduction in short-term FHLB advances and the utilization of $3.8
million to repurchase 169,000 shares of common stock at prices ranging from
$19.50 to $23.00 per share, which more than offset a net increase in deposits
of $3.6 million. Additionally, during the six months ended June 30, 1996, the
Corporation issued 56,930 shares of its common stock out of treasury stock for
$328,000 as a result of the exercise of stock options by directors, officers
and employees. Cash dividends paid during the six months ended June 30, 1996
and 1995 amounted to $1.5 million and $1.2 million, respectively.
The primary sources of investing activity are lending and the purchase of
mortgage-backed securities. Net loans amounted to $214.6 million and $218.1
million at June 30, 1996 and December 31, 1995, respectively. Securities
available for sale totaled $26.1 million and $28.4 million at June 30, 1996
and December 31, 1995, respectively. Mortgage-backed securities held to
maturity totaled $94.2 million and $96.6 million at June 30, 1996 and December
31, 1995, respectively. In addition to funding new loan production and the
purchase of mortgage-backed securities through operations and financing
activities, such activities were funded by principal repayments on existing
loans and mortgage-backed securities.
- 11 -
<PAGE>
PAMRAPO BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES (Cont'd)
- - -------------------------------
Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments,
such as federal funds and interest-bearing deposits. If the Bank requires
funds beyond its ability to generate them internally, borrowing agreements
exit with the FHLB which provide an additional source of funds. At June 30,
1996, advances from the FHLB amounted to $583,100.
The Bank anticipates that it will have sufficient funds available to meet its
current loan commitments. At June 30, 1996, the Bank has outstanding
commitments to originate mortgage loans of $7.4 million, to purchase mortgage-
backed securities of $1.0 million and to purchase investment securities of
$1.0 million. Certificates of deposit scheduled to mature in one year or less
at June 30, 1996, totaled $115.1 million. Management believes that, based
upon its experience and the Bank's deposit flow history, a significant portion
of such deposits will remain with the Bank.
Under OTS regulations, three separate measurements of capital adequacy
(the "Capital Rule") are required. The Capital Rule requires each savings
institution to maintain tangible capital equal to at least 1.5% and core
capital equal to at least 3.0% of its adjusted total assets. The core capital
requirement has been effectively increased to 4.0% since under OTS regulations
an institution with less than 4.0% core capital is deemed to be "under
capitalized". The Capital Rule further requires each savings institution to
maintain total capital equal to at least 8.0% of its risk-weighted assets.
The following table sets forth the Bank's capital position at June 30, 1996,
as compared to the minimum regulatory capital requirements:
<TABLE>
<CAPTION>
Amount Percent of adjusted assets
------ --------------------------
(Dollars in millions)
<S> <C> <C>
Tangible capital:
Requirement $ 5,458 1.50%
Actual 47,522 13.06%
------- -----
Excess $42,064 11.56%
======= =====
Core Capital:
Requirement $14,555 4.00%
Actual 47,522 13.06%
------- -----
Excess $32,967 9.06%
======= =====
Risk-based capital:
Requirement $14,644 8.00%
Actual 48,548 26.52%
------- -----
Excess $33,904 18.52%
======= =====
</TABLE>
- 12 -
<PAGE>
PAMRAPO BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES (Cont'd)
- - -------------------------------
The OTS issued final regulations which set forth the methodology for
calculating an interest rate risk component that will be incorporated in the
OTS regulatory capital rules. Under the new regulations, only savings
associations with "above normal" interest rate risk exposure would be required
to maintain additional capital. The dollar amount of capital would be an
addition to the existing risk-based capital requirement. The OTS recently
deferred the implementation of this regulation. It is estimated that under
the new regulation, the Bank's risk-based capital requirement would increase
by approximately $2.2 million at June 30, 1996 and the Bank would continue to
exceed the OTS capital regulations. The Bank is considered a "Well
Capitalized" institution under the OTS' prompt corrective action regulations.
SUPERVISORY EXAMINATION
- - -----------------------
The Bank's financial statements are periodically examined by the OTS, Federal
Deposit Insurance Corporation ("FDIC") and New Jersey Department of Banking,
as part of their regulatory oversight of the thrift industry. As a result of
these examinations, the regulators can direct that the Bank make adjustments
to its financial statements based on their findings.
RECAPITALIZATION OF SAIF AND OTHER LEGISLATIVE MATTERS
- - ------------------------------------------------------
Legislative initiatives regarding the recapitalization of the Savings
Association Insurance Fund ("SAIF") of the FDIC, deposit insurance premiums,
FICO bond interest, the merger of the SAIF and Bank Insurance Fund ("BIF"),
financial industry regulatory structure, and the revision of thrift and bank
charters are still pending before Congress. Management cannot predict the
ultimate impact any final legislation or regulatory actions may have on the
operations of the Corporation. Without passage of legislation addressing the
FDIC insurance premium disparity, the Bank, like other thrifts, will continue to
pay deposit insurance premiums significantly higher than banks. As long as such
premium differential continues, it may have adverse consequences on the
Corporation's earnings and the Corporation may be placed at a substantial
competitive disadvantage to commercial banking organizations by the BIF.
Legislation has been passed by Congress and sent to the President for signature
which would require institutions to recapture their bad debt reserves maintained
after 1987 for income tax purposes. Management does not believe that this
legislation will have a material impact on the operations of the Company.
- 13 -
<PAGE>
PAMRAPO BANCORP, INC.
PART II
ITEM 1. Legal Proceedings
-----------------
On February 15, 1994, Bank Pulska Kasa Opieki S.A. filed a complaint in the
United States District Court, District of New Jersey against the Bank and
Chemical Banking Corporation, Civil No. 94-663. See Form 10-K for the
fiscal year ended December 31, 1995 for further discussion.
Neither the Corporation nor the Bank are involved in any pending legal
proceedings other than routine legal proceedings occurring in the ordinary
course of business, which involve amounts which in the aggregate are
believed by management to be immaterial to the financial condition of the
Corporation and the Bank, except as discussed above.
ITEM 2. Changes in Securities
---------------------
Not applicable.
ITEM 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
ITEM 5. Exhibits and Reports on Form 8-K
--------------------------------
(a) The following Exhibits are filed as part of this report.
3.1 Certification of Incorporation of Pamrapo Bancorp, Inc.*
3.2 By-Laws of Pamrapo Bancorp, Inc.*
11.0 Computation of earnings per share (filed herewith).
27.0 Financial data schedule (filed herewith).
*Incorporated herein by reference to Form S-1, Registration
Statement, as amended, filed on August 11, 1989,
Registration Number 33-30370.
(b) Reports on Form 8-K
None
- 14 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAMRAPO BANCORP, INC.
Date: August 8, 1996 By: /s/ William J. Campbell
-------------------------- -------------------------------------
William J. Campbell
President and Chief Executive Officer
Date: August 8, 1996 By: /s/ Gary J. Thomas
-------------------------- -------------------------------------
Gary J. Thomas
Vice President, Chief Financial Officer
- 15 -
<PAGE>
Exhibit 11.0
PAMRAPO BANCORP, INC.
AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
----------------------------------------------
<TABLE>
<CAPTION>
Three Six
Months Ended Months Ended
June 30, 1996 June 30, 1996
------------- -------------
<S> <C> <C>
Net income $ 1,042,365 $ 2,246,445
============ ============
Weighted average common shares outstanding 3,308,409 3,373,003
Common stock equivalents
due to dilutive effect of stock options 4,097 4,180
------------ ------------
Total weighted average
common shares and equivalents outstanding 3,312,506 3,377,183
============ ============
Primary earnings per share $ 0.32 $ 0.67
============ ============
Total weighted average common
shares and equivalents outstanding
for fully diluted computation 3,312,506 3,377,183
============ ============
Fully diluted earnings per share $ 0.32 $ 0.67
============ ============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS LEGEND CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 10,238,835
<INT-BEARING-DEPOSITS> 4,500,000
<FED-FUNDS-SOLD> 100,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 26,146,013
<INVESTMENTS-CARRYING> 94,233,619
<INVESTMENTS-MARKET> 92,599,000
<LOANS> 217,407,751
<ALLOWANCE> 2,769,867
<TOTAL-ASSETS> 365,553,078
<DEPOSITS> 302,539,951
<SHORT-TERM> 934,958
<LIABILITIES-OTHER> 5,534,938
<LONG-TERM> 0
0
0
<COMMON> 34,500
<OTHER-SE> 56,508,731
<TOTAL-LIABILITIES-AND-EQUITY> 365,553,078
<INTEREST-LOAN> 9,735,202
<INTEREST-INVEST> 4,430,045
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 14,165,247
<INTEREST-DEPOSIT> 5,581,127
<INTEREST-EXPENSE> 5,718,484
<INTEREST-INCOME-NET> 8,446,763
<LOAN-LOSSES> 300,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,416,143
<INCOME-PRETAX> 3,046,564
<INCOME-PRE-EXTRAORDINARY> 3,046,564
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,246,445
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
<YIELD-ACTUAL> 0<F1>
<LOANS-NON> 6,192,000
<LOANS-PAST> 4,002,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,725,000
<CHARGE-OFFS> 318,256
<RECOVERIES> 63,123
<ALLOWANCE-CLOSE> 2,769,867
<ALLOWANCE-DOMESTIC> 724,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,045,867
<FN>
<F1>Not contained in the Form 10-Q
</FN>
</TABLE>
