<PAGE>
SECURITIES AND EXCHANGE COMMISSIONSECURITIES
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, 1997
----------------------------
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
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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 Number)
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, 1997.
-------------
$.01 par value common stock - 2,842,924 shares outstanding
<PAGE>
PAMRAPO BANCORP, INC.
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
PART I - FINANCIAL INFORMATION Number
------
<S> <C>
Consolidated Statements of Financial Condition
at June 30, 1997 and December 31, 1996 (Unaudited) 1
Consolidated Statements of Income for the
Three Months and Six Months Ended
June 30, 1997 and 1996 (Unaudited) 2
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996 (Unaudited) 3 - 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations 6 - 12
PART II - OTHER INFORMATION 13
SIGNATURES 14
</TABLE>
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Assets
- ------
Cash and amounts due from depository institutions $ 10,008,313 $ 12,042,656
Interest-bearing deposits in other banks 1,500,000 9,000,000
Federal funds sold 100,000 100,000
------------ ------------
Total cash and cash equivalents 11,608,313 21,142,656
Securities available for sale 15,322,564 22,232,193
Mortgage-backed securities held to maturity; estimated
fair value of $125,008,000 (1997) and $96,099,000(1996) 125,747,945 96,726,545
Loans receivable 204,374,144 207,405,393
Foreclosed real estate 1,478,672 1,995,801
Investment in real estate 292,695 300,080
Premises and equipment 3,551,998 3,630,828
Federal Home Loan Bank stock, at cost 2,979,400 2,979,400
Interest receivable 2,699,052 2,677,043
Excess of cost over assets acquired 363,900 424,550
Other assets 2,568,164 3,395,989
------------ ------------
Total assets $370,986,847 $362,910,478
============ ============
Liabilities and stockholders' equity
- ------------------------------------
Liabilities
- -----------
Deposits $302,350,186 $300,785,420
Advances from Federal Home Loan Bank of New York 13,583,100 3,583,100
Other borrowed money 1,033,552 293,094
Advance payments by borrowers for taxes and insurance 2,451,720 1,598,104
Other liabilities 4,313,563 3,141,799
------------ ------------
Total liabilities 323,732,121 309,401,517
------------ ------------
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; 2,842,924 shares (1997)
and 3,155,964 shares (1996) outstanding 34,500 34,500
Paid-in capital in excess of par value 18,906,768 18,906,768
Retained earnings-substantially restricted 41,924,108 40,944,218
Unrealized loss on securities available for sale (184,716) (196,935)
Treasury stock, at cost; 607,076 shares (1997) and 294,036 shares (1996) (13,425,934) (6,179,590)
------------ ------------
Total stockholders' equity 47,254,726 53,508,961
------------ ------------
Total liabilities and stockholders' equity $370,986,847 $362,910,478
============ ============
</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,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Interest income:
Loans $4,620,845 $4,793,984 $9,348,763 $ 9,735,202
Mortgage-backed securities 2,213,142 1,878,422 4,061,236 3,836,486
Investments and other interest-earning assets 300,371 317,396 662,089 593,559
---------- ---------- ---------- -----------
Total interest income 7,134,358 6,989,802 14,072,088 14,165,247
---------- ---------- ---------- -----------
Interest expense:
Deposits 2,745,259 2,787,938 5,471,002 5,581,127
Advances and other borrowed money 230,848 27,812 301,598 137,357
---------- ---------- ---------- -----------
Total interest expense 2,976,107 2,815,750 5,772,600 5,718,484
---------- ---------- ---------- -----------
Net interest income 4,158,251 4,174,052 8,299,488 8,446,763
Provision for loan losses 150,000 150,000 300,000 300,000
---------- ---------- ---------- -----------
Net interest income after provision for loan losses 4,008,251 4,024,052 7,999,488 8,146,763
---------- ---------- ---------- -----------
Non-interest income:
Fees and service charges 212,312 108,575 397,408 216,553
Gain on sale of mortgage-backed securities - - 111,583 -
Miscellaneous 72,072 48,412 172,276 99,391
---------- ---------- ---------- -----------
Total non-interest income 284,384 156,987 681,267 315,944
---------- ---------- ---------- -----------
Non-interest expenses:
Salaries and employee benefits 1,182,317 1,320,369 2,372,387 2,643,474
Net occupancy expense of premises 192,020 185,795 392,598 383,898
Equipment 208,105 179,651 412,087 375,370
Advertising 12,729 26,979 49,366 69,926
Loss on foreclosed real estate 43,941 49,089 87,861 113,714
Federal insurance premium 49,230 172,339 98,090 347,412
Amortization of intangibles 30,325 30,325 60,650 60,650
Miscellaneous 561,920 586,385 1,120,847 1,421,699
---------- ---------- ---------- -----------
Total non-interest expenses 2,280,587 2,550,932 4,593,886 5,416,143
---------- ---------- ---------- -----------
Income before income taxes 2,012,048 1,630,107 4,086,869 3,046,564
Income taxes 751,578 587,742 1,513,530 800,119
---------- ---------- ---------- -----------
Net income $1,260,470 $1,042,365 $2,573,339 $ 2,246,445
========== ========== ========== ===========
Net income per common share
and common stock equivalents $ 0.44 $ 0.32 $ 0.86 $ 0.67
========== ========== ========== ===========
Dividends per common share $ 0.25 $ 0.225 $ 0.50 $ 0.45
========== ========== ========== ===========
Weighted average number of common shares
and common stock equivalents outstanding 2,843,913 3,312,506 2,997,991 3,377,183
========== ========== ========== ===========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,573,339 $ 2,246,445
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation of premises and equipment and investment in real estate 161,794 160,217
Accretion of deferred fees, premiums and discounts, net (71,610) (79,667)
Gain on sales of mortgage-backed securities (111,583) -
Provision for loan losses 300,000 300,000
Provision for losses on foreclosed real estate 76,747 47,000
(Gain) loss on sales of foreclosed real estate (28,238) 12,393
(Increase) decrease in interest receivable (22,009) 97,723
Decrease (increase) in other assets 816,125 (843,363)
Increase in other liabilities 1,171,764 270,095
Amortization of intangibles 60,650 60,650
Reduction in debt of Employee Stock Ownership Plan - 99,187
------------- -------------
Net cash provided by operating activities 4,926,979 2,370,680
------------- -------------
Cash flows from investing activities:
Proceeds from maturities of securities available for sale 2,000,000 2,000,000
Proceeds from sales of securities available for sale 3,992,226 -
Principal repayments on securities available for sale 940,810 1,905,072
Purchases of securities available for sale (32,147) (2,013,209)
Proceeds from maturities of investment securities held to maturity - 99,000
Proceeds from sales of mortgage-backed securities 3,640,635 -
Principal repayments on mortgage-backed securities held to maturity 6,516,232 7,293,383
Purchases of mortgage-backed securities held to maturity (39,151,759) (5,013,295)
Purchase of loans (332,550) (45,500)
Proceeds from sales of student loans 133,713 415,524
Net change in loans receivable 3,293,359 1,976,660
Proceeds from sales of foreclosed real estate 294,691 254,559
Additions to premises and equipment and investment in real estate (75,579) (95,922)
------------- -------------
Net cash (used in) provided by investing activities (18,780,369) 6,776,272
------------- -------------
Cash flows from financing activities:
Net increase in deposits 1,564,766 3,639,187
Net increase (decrease) in advances from
Federal Home Loan Bank of New York 10,000,000 (7,000,000)
Net increase (decrease) in other borrowed money 740,458 (107,997)
Increase in advance payments by borrowers for taxes and insurance 853,616 219,361
Purchase of treasury stock (7,369,153) (3,761,063)
Proceeds from sale of treasury stock 34,339 327,973
Cash dividends paid (1,504,979) (1,519,187)
------------- -------------
Net cash provided by (used in) financing activities 4,319,047 (8,201,726)
------------- -------------
Net (decrease) increase in cash and cash equivalents (9,534,343) 945,226
Cash and cash equivalents - beginning 21,142,656 13,893,609
------------- -------------
Cash and cash equivalents - ending $ 11,608,313 $ 14,838,835
============= =============
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Supplemental information:
Transfer of loans receivable to foreclosed real estate $ 449,371 $1,504,973
========== ==========
Loans to facilitate sales of foreclosed real estate $ 623,300 $ 487,500
========== ==========
Change in unrealized gain on securities available for sale $ 12,219 $ 225,553
========== ==========
Cash paid during the period for:
Income taxes, net of refunds $ 534,382 $1,341,053
========== ==========
Interest on deposits and borrowings $5,772,600 $5,718,484
========== ==========
</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 regulations 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, 1997, 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, 1997 totalled $371.0 million, which
represents an increase of $8.1 million or 2.23% as compared with $362.9 million
at December 31, 1996.
Securities available for sale at June 30, 1997 decreased $6.9 million or 31.08%
to $15.3 million when compared with $22.2 million at December 31, 1996. The
decrease during the six months ended June 30, 1997, resulted primarily from
maturities of securities available for sale of $2.0 million, repayments on
securities available for sale of $941,000 and sales of securities available for
sale of $4.0 million.
Mortgage-backed securities held to maturity increased $29.0 million or 29.99% to
$125.7 million at June 30, 1997 when compared to $96.7 million at December 31,
1996. The increase during the six months ended June 30, 1997, resulted from
purchases of mortgage-backed securities of $39.2 million, sufficient to offset
principal repayments of $6.5 million and sales of mortgage-backed securities of
$3.6 million. During the six months ended June 30, 1997, certain mortgage-backed
securities held to maturity were sold which had principal outstanding of less
than 15.0% of the original face amount.
Net loans amounted to $204.4 million at June 30, 1997 as compared to $207.4
million at December 31, 1996, which represents a decrease of $3.0 million or
1.45%. The decrease, during the six months ended June 30, 1997, resulted
primarily from loan principal repayments exceeding loan originations.
Foreclosed real estate was $1.5 million at June 30, 1997 compared with $2.0
million at December 31, 1996. During the six months ended June 30, 1997, eleven
foreclosed real estate properties with a combined book value of $900,000 were
sold. At June 30, 1997, foreclosed real estate consisted of sixteen properties,
five of which are under contract for sale.
Total deposits at June 30, 1997 totalled $302.4 million as compared with $300.8
million at December 31, 1996.
Advances from the Federal Home Loan Bank of New York ("FHLB") amounted to $13.6
million and $3.6 million at June 30, 1997 and December 31, 1996, respectively.
The increase, during the six months ended June 30, 1997, resulted from short-
term advances from the FHLB of $10.0 million and these funds were used for
general corporate purposes.
Stockholders' equity totalled $47.3 million and $53.5 million at June 30, 1997
and December 31, 1996, respectively. During the six months ended June 30, 1997,
the Corporation repurchased 318,900 shares of its common stock at prices ranging
from $19.50 to $23.50 per share for a total of $7.4 million and issued 5,860
shares of its common stock out of treasury stock for $34,000 as a result of the
exercise of stock options by the officers and employees.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND
1996
Net income increased $218,000 or 20.92% to $1.26 million for the three months
ended June 30, 1997 compared with $1.04 million for the same 1996 period. The
increase in net income during the 1997 period resulted from increases in total
interest income and non-interest income, along with a decrease in non-interest
expenses, which were partially offset by increases in total interest expense and
income taxes.
-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, 1997 AND
1996 (CONT'D.)
Interest income on loans decreased $173,000 or 3.61% to $4.6 million during the
three months ended June 30, 1997 when compared with $4.8 million during the same
1996 period. The decrease during the 1997 period resulted from a decrease of
$9.2 million in the average balance of loans outstanding sufficient to offset a
six basis point increase in the yield earned on the loan portfolio. Interest on
mortgage-backed securities increased $335,000 or 17.84% to $2.2 million during
the three months ended June 30, 1997 when compared with $1.9 million for the
same 1996 period. The increase during the 1997 period resulted primarily from a
increase of $19.3 million in the average balance of such portfolio outstanding.
Interest earned on investments and other interest-earning assets decreased by
$17,000 or 5.36% to $300,000 during the three months ended June 30, 1997, when
compared to $317,000 during the same 1996 period primarily due to an decrease of
$6.0 million in the average balance of such assets outstanding sufficient to
offset a one-hundred-forty-two basis point increase in the yield earned on such
portfolio.
Interest expense on deposits decreased $43,000 or 1.54% to $2.745 million during
the three months ended June 30, 1997 when compared to $2.788 million during the
same 1996 period. Such decrease was primarily attributable to a decrease of
$4.4 million in the average balance of interest-bearing deposits. Interest
expense on advances and other borrowed money increased by $203,000 to $231,000
during the three months ended June 30, 1997 when compared with $28,000 during
the same 1996 period, primarily due to an increase of $11.7 million in the
average balance of advances outstanding from the FHLB and other borrowed money
along with a seventy-seven basis point increase in the cost of advances and
borrowed money.
Net interest income decreased $16,000 or .38% during the three months ended June
30, 1997 when compared with the same 1996 period. Such decrease was due to an
increase in total interest expense of $160,000, sufficient to offset an increase
in total interest income of $144,000. The Bank's net interest rate spread was
4.21% in 1997 compared with 4.27% in 1996. The decrease in the interest rate
spread resulted from an increase of twelve basis points in the cost of interest-
bearing liabilities sufficient to offset an increase of six basis points in the
yield on interest-bearing assets.
During each of the three months ended June 30, 1997 and 1996, the Bank provided
$150,000 as a provision for loan loses. The allowance for loan losses is based
on management's evaluation of the risk inherent in its loan portfolio and gives
due consideration to changes in general market conditions and in the nature and
volume of the Bank's loan activities. 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, 1997, December 31, 1996 and June 30, 1996, the
Bank's non-performing loans, which were delinquent ninety days or more, totalled
$8.8 million or 2.37% of total assets, $10.5 million or 2.89% of total assets
and $10.2 million or 2.79% of total assets, respectively. At June 30, 1997,
$2.3 million of non-performing loans were accruing interest and $6.5 million
were on nonaccrual status. During the three months ended June 30, 1997 and
1996, the Bank transferred $299,000 and $551,000, 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, 1997 and
1996, the Bank charged off loans aggregating $249,000 and $144,000,
respectively. The allowance for loan losses amounted to $2.677 million at
June 30, 1997, representing 1.28% of total loans and 30.46% of loans delinquent
ninety days or more and $2.8 million at December 31, 1996, representing 1.32% of
total loans and 26.69% of loans delinquent ninety days or more.
-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, 1997 AND
1996 (CONT'D.)
Non-interest income increased $127,000 or 80.89% to $284,000 during the three
months ended June 30, 1997 from $157,000 during the same 1996 period. The
increase resulted from increases in fees and service charges and miscellaneous
income of $103,000 and $24,000, respectively.
Non-interest expenses decreased by $270,000 or 10.58% to $2.3 million during the
three months ended June 30, 1997 when compared with $2.6 million during the same
1996 period. Salaries and employees' benefits, advertising, loss on foreclosed
real estate, federal insurance premium and miscellaneous expenses decreased
$138,000, $14,000, $5,000, $123,000 and $24,000, respectively, which was
sufficient to offset increases in net occupancy expense and equipment of $6,000
and $28,000, respectively, during the 1997 period when compared with the same
1996 period. The decrease in federal insurance premium resulted from a
reduction in the premium paid on assessable deposits from 23 basis points in
1996 to 6.4 basis points commencing on January 1, 1997.
Income taxes totalled $752,000 and $588,000 during the three months ended June
30, 1997 and 1996, respectively. The increase during the 1997 period resulted
from an increase in pre-tax income.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Net income increased $327,000 or 14.56% to $2.6 million for the six months ended
June 30, 1997 compared with $2.2 million for the same 1996 period. The increase
in net income during the 1997 period resulted from an increase in non-interest
income, along with a decrease in non-interest expenses, which were partially
offset by a decrease in total interest income and increases in total interest
expense and income taxes.
Interest income on loans decreased $386,000 or 3.97% to $9.3 million during the
six months ended June 30, 1997 when compared with $9.7 million during the same
1996 period. The decrease during the 1997 period resulted from a decrease of
$9.7 million in the average balance of loans outstanding sufficient to offset a
five basis point increase in the yield earned on the loan portfolio. Interest on
mortgage-backed securities increased $225,000 or 5.87% to $4.1 million during
the six months ended June 30, 1997 when compared with $3.8 million for the same
1996 period. The increase during the 1997 period resulted primarily from an
increase of $10.5 million in the average balance of such portfolio outstanding
sufficient to offset a twenty-three basis point decrease in the yield earned
thereon. Interest earned on investments and other interest-earning assets
increased by $68,000 or 11.45% to $662,000 during the six months ended June 30,
1997, when compared to $594,000 during the same 1996 period primarily due to an
increase of one-hundred-ten basis points in the yield earned of such assets
which more than offset a decrease of $1.9 million in the average balance of such
portfolio outstanding.
Interest expense on deposits decreased $10,000 or 1.79% to $5.5 million during
the six months ended June 30, 1997 when compared to $5.6 million during the same
1996 period. Such decrease was primarily attributable to a decrease of $1.3
million in the average balance of interest-bearing deposits along with a
decrease of six basis points in the cost of interest-bearing deposits. Interest
expense on advances and other borrowed money increased by $165,000 to $302,000
during the six months ended June 30, 1997 when compared with $137,000 during the
same 1996 period, primarily due to an increase of $3.9 million in the average
balance of advances outstanding from the FHLB and other borrowed money along
with an increase of one-hundred-twenty-four basis points in the cost of advances
and borrowed money.
-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, 1997 AND 1996
(Cont'd.)
Net interest income decreased $148,000 or 1.75% during the six months ended June
30, 1997 when compared with the same 1996 period. Such decrease was due to an
increase in total interest expense of $55,000, along with a decrease in total
interest income of $93,000. The Bank's net interest rate spread decreased from
4.27% in 1996 to 4.24% in 1997. The decrease in the interest rate spread
resulted from a decrease of three basis points in the yield earned on interest-
earning assets.
During each of the six months ended June 30, 1997 and 1996, the Bank provided
$300,000 as a provision 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 changes in general market conditions and in the nature and
volume of the Bank's loan activities. 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, 1997, December 31, 1996 and June 30, 1996, the
Bank's non-performing loans, which were delinquent ninety days or more, totalled
$8.8 million or 2.37% of total assets, $10.5 million or 2.89% of total assets
and $10.2 million or 2.79% of total assets, respectively. At June 30, 1997 $2.3
million of non-performing loans were accruing interest and $6.5 million were on
non-accrual status. During the six months ended June 30, 1997 and 1996, the Bank
transferred $449,000 and $1.5 million, 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, 1997 and 1996, the Bank
charged off loans aggregating $434,000 and $318,000, respectively. The allowance
for loan losses amounted to $2.677 million at June 30, 1997, representing 1.28%
of total loans and 30.46% of loans delinquent ninety days or more and $2.8
million at December 31, 1996, representing 1.32% of total loans and 26.69% of
loans delinquent ninety days or more.
Non-interest income increased $365,000 or 115.51% to $681,000 during the six
months ended June 30, 1997 from $316,000 during the same 1996 period. The
increase resulted from increases in fees and service charges, gain on sale of
mortgage-backed securities and miscellaneous income of $181,000, $111,000 and
$73,000, respectively.
Non-interest expenses decreased by $822,000 or 15.18% to $4.6 million during the
six months ended June 30, 1997 when compared with $5.4 million during the same
1996 period. Salaries and employees benefits, advertising, loss on foreclosed
real estate, federal insurance premium and miscellaneous expenses decreased
$271,000, $21,000, $26,000, $249,000 and $301,000, respectively, which was
sufficient to offset increases in net occupancy expense and equipment of $9,000
and $37,000, respectively, during the 1997 period when compared with the same
1996 period. The decrease in federal insurance premium resulted from a reduction
in the premium paid on assessable deposits from twenty-three basis points in
1996 to 6.4 basis points commencing on January 1, 1997. The decrease in
miscellaneous expenses resulted primarily from a decrease in non-recurring
expense of $250,000 related to the 1996 Annual Meeting of Stockholders.
Income taxes totalled $1.5 million and $800,000 during the six months ended June
30, 1997 and 1996, respectively. The increase during the 1997 period resulted
from an increase in pre-tax income. The 1996 income tax expense included a
$293,000 reduction of such expense resulting from the exercise of non-statutory
stock options.
-9-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
The Bank is required to maintain minimum 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 5.51% during the
month of June 1997. 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 relatively predictable sources 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, 1997 amounted to $100,000 and $1.5 million, respectively.
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
March 31,
------------------------------
1997 1996
--------- --------
(In Thousands)
<S> <C> <C>
Cash and cash equivalents - beginning $ 21,143 $ 13,894
--------- --------
Operating activities:
Net income 2,573 2,246
Adjustments to reconcile net income to
net cash provided by operating activities 2,354 125
--------- --------
Net cash provided by operating activities 4,927 2,371
Net cash (used in) provided by investing activities (18,781) 6,776
Net cash provided by (used in) financing activities 4,319 (8,202)
--------- --------
Net (decrease) increase in cash and cash equivalents (9,535) 945
--------- --------
Cash and cash equivalents - ending $ 11,608 $ 14,839
========= ========
</TABLE>
-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.)
Cash was generated by operating activities during the six months ended June 30,
1997. The primary source of cash was net income. Funds provided by financing
activities resulted primarily from a $10.0 million increase in short-term FHLB
advances, which more than offset the utilization of $7.4 million to repurchase
318,900 shares of common stock at prices ranging from $19.50 to $23.50 per
share. Additionally, during the three months ended June 30, 1997, the
Corporation issued 5,860 shares of its common stock out of treasury stock for
$34,000 as a result of the exercise of stock options by officers and employees.
Cash dividends paid during each of the six months ended June 30, 1997 and 1996
amounted to $1.5 million.
The primary sources of investing activity of the Bank are lending and the
purchase of mortgage-backed securities. Net loans amounted to $204.4 million and
$207.4 million at June 30, 1997 and December 31, 1996, respectively. Securities
available for sale totalled $15.3 million and $22.2 million at June 30, 1997 and
December 31, 1996, respectively. Mortgage-backed securities held to maturity
totalled $125.7 million and $96.7 million at June 30, 1997 and December 31,
1996, respectively. In addition to funding new loan production and mortgage-
backed securities purchases through operations and financing activities, such
activities were funded by principal repayments on existing loans and mortgage-
backed securities.
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 exist with
the FHLB and other financial institutions which provides an additional source of
funds. At June 30, 1997, advances from the FHLB amounted to $13.6 million.
The Bank anticipates that it will have sufficient funds available to meet its
current loan commitments. At June 30, 1997, the Bank has outstanding
commitments to originate mortgage loans of $6.4 million and to purchase
mortgage-backed securities of $2.0 million. Certificates of deposit scheduled
to mature in one year or less at June 30, 1997, totalled $112.6 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
"undercapitalized". The Capital Rule further requires each savings institution
to maintain total capital equal to at least 8.0% of its risk-weighted assets.
-11-
<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 following table sets forth the Bank's capital position at June 30, 1997, as
compared to the minimum regulatory capital requirements:
<TABLE>
<CAPTION>
Percent of
Amount Adjusted Assets
-------------- ----------------
(In Thousands)
<S> <C> <C>
Tangible Capital:
Requirement $ 5,545 1.50%
Actual 46,183 12.49
------- ------
Excess $40,638 10.99%
======= ======
Core Capital:
Requirement $11,090 3.00%
Actual 46,183 12.49
------- ------
Excess $35,093 9.49%
======= ======
Risk-based Capital:
Requirement $14,249 8.00%
Actual 48,162 27.04
------- ------
Excess $33,913 19.04%
======= ======
</TABLE>
SUPERVISORY EXAMINATION
The Bank's financial statements are periodically examined by the OTS, the
Federal Deposit Insurance Corporation("FDIC") and the New Jersey Department of
Banking and Insurance 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.
-12-
<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. On April 11,
1997, settlement negotiations were completed and as a result, management
believes that no further liabilities will be incurred in connection with
this lawsuit. See Form 10-K for the fiscal year ended December 31, 1996
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.
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
---------------------------------------------------
None
ITEM 5. Exhibits and Reports on Form 8-K
--------------------------------
(a) The following Exhibits are filed as part of this report.
3.1 Certificate 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
-13-
<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 13, 1997 By: /s/ William J. Campbell
-------------------------- ----------------------------------------
William J. Campbell
President and Chief Executive Officer
Date: August 13, 1997 By: /s/ Gary J. Thomas
-------------------------- ---------------------------------------
Gary J. Thomas
Vice President, Chief Financial Officer
-14-
<PAGE>
Exhibit 11.0
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
-----------------------------------------------
<TABLE>
<CAPTION>
Six Three
Months Ended Months Ended
June 30, 1997 June 30, 1997
------------- -------------
<S> <C> <C>
Net income $ 2,573,339 $ 1,260,470
============= ==============
Weighted average number of common
shares outstanding 2,997,911 2,843,913
Common stock equivalents due to dilutive
effect of stock options - -
------------- --------------
Total weighted average number of common
shares and equivalents outstanding 2,997,911 2,843,913
============= ==============
Primary earnings per share $ 0.86 $ 0.44
============= ==============
Total weighted average number of common
shares and equivalents outstanding for
fully diluted computation 2,997,911 2,843,913
============= ==============
Fully diluted earnings per share $ 0.86 $ 0.44
============= ==============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 10,008,313
<INT-BEARING-DEPOSITS> 1,500,000
<FED-FUNDS-SOLD> 100,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15,322,564
<INVESTMENTS-CARRYING> 125,747,945
<INVESTMENTS-MARKET> 125,008,000
<LOANS> 207,051,465
<ALLOWANCE> 2,677,321
<TOTAL-ASSETS> 370,986,847
<DEPOSITS> 302,350,186
<SHORT-TERM> 14,616,652
<LIABILITIES-OTHER> 6,765,283
<LONG-TERM> 0
0
0
<COMMON> 34,500
<OTHER-SE> 47,220,226
<TOTAL-LIABILITIES-AND-EQUITY> 370,986,847
<INTEREST-LOAN> 9,348,763
<INTEREST-INVEST> 4,061,236
<INTEREST-OTHER> 662,089
<INTEREST-TOTAL> 14,072,088
<INTEREST-DEPOSIT> 5,471,002
<INTEREST-EXPENSE> 5,772,600
<INTEREST-INCOME-NET> 8,299,488
<LOAN-LOSSES> 300,000
<SECURITIES-GAINS> 111,583
<EXPENSE-OTHER> 4,593,886
<INCOME-PRETAX> 4,086,869
<INCOME-PRE-EXTRAORDINARY> 4,086,869
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,573,339
<EPS-PRIMARY> .86
<EPS-DILUTED> .86
<YIELD-ACTUAL> 4.79
<LOANS-NON> 6,470,000
<LOANS-PAST> 2,318,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,800,000
<CHARGE-OFFS> 434,450
<RECOVERIES> 11,771
<ALLOWANCE-CLOSE> 2,677,321
<ALLOWANCE-DOMESTIC> 698,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,979,321
</TABLE>
