<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 September 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
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 October 31, 1997.
----------------
$.01 par value common sock - 2,842,924 shares outstanding
<PAGE>
PAMRAPO BANCORP, INC.
AND SUBSIDIARIES
INDEX
Page
Number
PART I - FINANCIAL INFORMATION --------
Consolidated Statements of Financial Condition
at September 30, 1997 and December 31, 1996 (Unaudited) 1
Consolidated Statements of Income for the
Three Months and Nine Months Ended
September 30, 1997 and 1996 (Unaudited) 2
Consolidated Statements of Cash Flows for the
Nine Months Ended September 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 - 13
PART II - OTHER INFORMATION 14
SIGNATURES 15
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1997 1996
- ------ ------------ ------------
<S> <C> <C>
Cash and amounts due from depository institutions $ 9,300,055 $ 12,042,656
Interest-bearing deposits in other banks 2,200,000 9,000,000
Federal funds sold 100,000 100,000
------------ ------------
Total cash and cash equivalents 11,600,055 21,142,656
Securities available for sale 14,152,432 22,232,193
Mortgage-backed securities held to maturity; estimated
fair value of $125,633,000 (1997) and $96,099,000 (1996) 124,908,966 96,726,545
Loans receivable 207,340,609 207,405,393
Foreclosed real estate 1,442,724 1,995,801
Investment in real estate 289,002 300,080
Premises and equipment 3,770,018 3,630,828
Federal Home Loan Bank stock, at cost 2,979,400 2,979,400
Interest receivable 2,546,781 2,677,043
Excess of cost over assets acquired 333,575 424,550
Other assets 2,594,157 3,395,989
------------ ------------
Total assets $371,957,719 $362,910,478
============ ============
Liabilities and stockholders' equity
- ------------------------------------
Liabilities
- ----------
Deposits $301,644,102 $300,785,420
Advances from Federal Home Loan Bank of New York 13,583,100 3,583,100
Other borrowed money 1,891,437 293,094
Advance payments by borrowers for taxes and insurance 2,709,333 1,598,104
Other liabilities 4,122,237 3,141,799
------------ ------------
Total liabilities 323,950,209 309,401,517
------------ ------------
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 42,483,580 40,944,218
Unrealized gain (loss) on securities available for sale 8,596 (196,935)
Treasury stock, at cost; 607,076 shares (1997) and 294,036 shares (1996) (13,425,934) (6,179,590)
------------ ------------
Total stockholders' equity 48,007,510 53,508,961
------------ ------------
Total liabilities and stockholders' equity $371,957,719 $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 Nine Months Ended
September 30, September 30,
--------------------- ------------------------
1997 1996 1997 1996
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Loans $4,619,414 $4,804,534 $13,968,177 $14,539,736
Mortgage-backed securities 2,292,995 1,853,014 6,354,231 5,689,500
Investments and other interest-earning assets 221,634 339,411 883,723 932,970
---------- ---------- ----------- -----------
Total interest income 7,134,043 6,996,959 21,206,131 21,162,206
---------- ---------- ----------- -----------
Interest expense:
Deposits 2,781,069 2,804,487 8,252,071 8,385,614
Advances and other borrowed money 245,053 14,222 546,651 151,579
---------- ---------- ----------- -----------
Total interest expense 3,026,122 2,818,709 8,798,722 8,537,193
---------- ---------- ----------- -----------
Net interest income 4,107,921 4,178,250 12,407,409 12,625,013
Provision for loan losses 150,000 150,000 450,000 450,000
---------- ---------- ----------- -----------
Net interest income after provision for loan losses 3,957,921 4,028,250 11,957,409 12,175,013
---------- ---------- ----------- -----------
Non-interest income:
Fees and service charges 220,728 117,114 618,136 333,667
Gain on sale of mortgage-backed securities - - 111,583 -
Miscellaneous 152,557 30,782 324,833 130,173
---------- ---------- ----------- -----------
Total non-interest income 373,285 147,896 1,054,552 463,840
---------- ---------- ----------- -----------
Non-interest expenses:
Salaries and employee benefits 1,166,336 1,303,252 3,538,723 3,946,726
Net occupancy expense of premises 227,302 178,499 619,900 562,397
Equipment 206,350 199,672 618,437 575,042
Advertising 32,863 24,965 82,229 94,891
Loss on foreclosed real estate 79,732 121,680 167,593 235,394
Federal insurance premium 47,430 2,200,428 145,520 2,547,840
Amortization of intangibles 30,325 30,325 90,975 90,975
Miscellaneous 610,375 696,495 1,731,222 2,118,194
---------- ---------- ----------- -----------
Total non-interest expenses 2,400,713 4,755,316 6,994,599 10,171,459
---------- ---------- ----------- -----------
Income (loss) before income taxes (benefit) 1,930,493 (579,170) 6,017,362 2,467,394
Income taxes (benefit) 665,290 (206,578) 2,178,820 593,541
---------- ---------- ----------- -----------
Net income (loss) $1,265,203 $ (372,592) $ 3,838,542 $ 1,873,853
========== ========== =========== ===========
Net income (loss) per common share and common stock
$ .44 $ (.11) $ 1.30 $ $.56
========== ========== =========== ===========
Dividends per common share $ .25 $ .225 $ .75 $ .675
========== ========== =========== ===========
Weighted average number of common shares
and common stock equivalents outstanding 2,842,924 3,265,898 2,946,248 3,340,088
========== ========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,838,542 $ 1,873,853
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of premises and equipment
and investment in real estate 248,379 241,611
Amortization of deferred fees, premiums and
discounts, net (105,341) (108,531)
Gain on sales of mortgage-backed securities (111,583) --
Provision for loan losses 450,000 450,000
Provision for losses on foreclosed real estate 124,747 140,503
(Gain) on sale of foreclosed real estate (35,356) (1,785)
Decrease in interest receivable 130,262 172,227
Decrease (increase) in other assets 681,332 (1,375,325)
Increase in other liabilities 980,438 1,359,033
Amortization of intangibles 90,975 90,975
Reduction in debt of Employee Stock Ownership Plan -- 148,781
------------ ------------
Net cash provided by operating activities 6,292,395 2,991,342
------------ ------------
Cash flows from investing activities:
Proceeds from calls and maturities of securities
available for sale 3,000,000 2,000,000
Proceeds from sales on securities available
for sale 3,992,226 -
Principal repayments on securities available
for sale 1,411,719 2,507,804
Purchases of securities available for sale (48,756) (3,033,517)
Proceeds from maturities of investment securities
held to maturity - 99,000
Proceeds from sales on mortgage-backed securities
held to maturity 3,640,635 -
Principal repayments on mortgage-backed
securities held to maturity 11,329,243 10,735,343
Purchases of mortgage-backed securities held
to maturity (43,158,257) (7,008,611)
Purchase of loans (391,550) (108,500)
Proceeds from sale of student loans 457,623 694,570
Net change in loans receivable (196,504) 4,589,555
Proceeds from sale of foreclosed real estate 482,386 327,237
Additions to premises and equipment and investment
in real estate (376,491) (126,919)
Redemption of Federal Home Loan Bank stock - 93,200
------------ ------------
Net cash (used in) provided by investing
activities (19,857,726) 10,769,162
------------ ------------
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1997 1996
----------- ------------
<S> <C> <C>
Cash flows from financing activities:
Net increase in deposits 858,682 1,748,498
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 1,598,343 (162,131)
Net increase in advance payments by borrowers for
taxes and insurance 1,111,229 412,384
Purchase of treasury stock (7,369,153) (4,711,063)
Proceeds from sale of treasury stock 34,339 327,973
Cash dividends paid (2,210,710) (2,248,404)
----------- ------------
Net cash provided by (used in) financing activities 4,022,730 (11,632,743)
----------- ------------
Net (decrease) increase in cash and cash equivalents (9,542,601) 2,127,761
Cash and cash equivalents - beginning 21,142,656 13,893,609
----------- ------------
Cash and cash equivalents - ending $11,600,055 $ 16,021,370
=========== ============
Supplemental information:
Transfer of loans receivable to foreclosed real estate $ 894,000 $ 1,615,009
=========== ============
Loans to facilitate sales of foreclosed real estate $ 875,300 $ 800,000
=========== ============
Unrealized gain (loss) on securities available for sale $ 205,531 $ (138,145)
=========== ============
Cash paid during the period for:
Income taxes, net of refunds $ 1,334,382 $ 1,941,053
=========== ============
Interest on deposits and borrowings $ 8,798,722 $ 8,537,193
=========== ============
</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 nine months ended
September 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 September 30, 1997 totalled $372.0 million, which
represents an increase of $9.1 million or 2.51% as compared with $362.9 million
at December 31, 1996.
Securities available for sale at September 30, 1997 decreased $8.0 million or
36.04% to $14.2 million when compared with $22.2 million at December 31, 1996.
The decrease during the nine months ended September 30, 1997, resulted primarily
from maturities and calls of securities available for sale of $3.0 million,
repayments on securities available for sale of $1.4 million and sales of
securities available for sale of $4.0 million.
Mortgage-backed securities held to maturity increased $28.2 million or 29.16% to
$124.9 million at September 30, 1997 when compared to $96.7 million at December
31, 1996. The increase during the nine months ended September 30, 1997, resulted
from purchases of mortgage-backed securities of $43.2 million, sufficient to
offset principal repayments of $11.3 million and sales of $3.5 million. During
the nine months ended September 30, 1997, certain mortgage-backed securities
held to maturity which had principal outstanding of less than 15.0% of the
original face amount were sold.
Net loans amounted to $207.3 million at September 30, 1997 as compared to $207.4
million at December 31, 1996.
Foreclosed real estate decreased from $2.0 million at December 31, 1996 to $1.4
million at September 30, 1997. During the nine months ended September 30, 1997,
fifteen foreclosed real estate properties with a combined book value of $1.3
million were sold. At September 30, 1997, foreclosed real estate consisted of
eighteen properties, six of which are under contract for sale.
Total deposits at September 30, 1997 totalled $301.6 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 September 30, 1997 and December 31, 1996,
respectively. The increase, during the nine months ended September 30, 1997,
resulted from short-term advances from the FHLB of $10.0 million, which were
used for general corporate purposes.
Other borrowed money amounted to $1.9 million and $293,000 at September 30, 1997
and December 31, 1996, respectively. The increase, during the nine months ended
September 30, 1997, resulted from drawing on a line of credit with another
financial institution of $1.6 million. The funds were used for general
corporate purposes.
Stockholders' equity totalled $48.0 million and $53.5 million at September 30,
1997 and December 31, 1996, respectively. During the nine months ended September
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.
-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 SEPTEMBER 30, 1997
AND 1996
Net income amounted to $1.3 million for the three months ended September 30,
1997 compared with a loss of $373,000 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. The 1996 results include a charge for the one-time special assessment of
$2.0 million to recapitalize the Savings Association Insurance Fund ("SAIF").
Interest income on loans decreased $186,000 or 3.87% to $4.6 million during the
three months ended September 30, 1997 when compared with $4.8 million during the
same 1996 period. The decrease during the 1997 period resulted primarily from a
decrease of $8.2 million in the average balance of loans outstanding. Interest
on mortgage-backed securities increased $440,000 or 23.75% to $2.3 million
during the three months ended September 30, 1997 when compared with $1.9 million
for the same 1996 period. The increase during the 1997 period resulted
primarily from an increase of $20.3 million in the average balance of such
portfolio outstanding along with a twenty-eight basis point increase in the
yield earned on such portfolio. Interest earned on investments and other
interest-earning assets decreased by $117,000 or 34.51% to $222,000 during the
three months ended September 30, 1997, when compared to $339,000 during the same
1996 period primarily due to a decrease of $11.0 million in the average balance
of such assets outstanding sufficient to offset an increase of one hundred one
basis points in the yield earned on such portfolio.
Interest expense on deposits decreased $24,000 or .86% to $2.781 million during
the three months ended September 30, 1997 when compared to $2.805 million during
the same 1996 period. Such decrease was primarily attributable to a decrease of
$4.0 million in the average balance of interest-bearing deposits sufficient to
offset an increase of two basis points increase in cost of such deposits.
Interest expense on advances and other borrowed money increased by $231,000 to
$245,000 during the three months ended September 30, 1997 when compared with
$14,000 during the same 1996 period, primarily due to an increase of $13.7
million in the average balance of advances outstanding from the FHLB and other
borrowed money along with a fifty-four basis point increase in the cost of
advances and borrowed money.
Net interest income decreased $70,000 or 1.68% during the three months ended
September 30, 1997 when compared with the same 1996 period. Such decrease was
due to an increase in total interest expense of $207,000, sufficient to offset
an increase in total interest income of $137,000. The Bank's net interest rate
spread decreased slightly from 4.26% in 1996 to 4.24% in 1997. The decrease in
the interest rate spread resulted from an increase of fifteen basis points in
the cost of interest-bearing liabilities sufficient to offset an increase of
thirteen basis points in the yield earned on interest-bearing assets.
During each of the three months ended September 30, 1997 and 1996, the Bank
provided $150,000 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 September 30, 1997, December 31,
1996 and September 30, 1996, the Bank's non-performing loans, which were
delinquent ninety days or more, totalled $7.5 million or 2.00% of total assets,
$10.5 million or 2.89% of total assets and $10.7 million or 2.95% of total
assets, respectively. At September 30, 1997, $1.8 million of non-performing
loans were accruing interest and $5.7 million were on nonaccrual status.
-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 SEPTEMBER 30, 1997
AND 1996 (CONT'D.)
During the three months ended September 30, 1997 and 1996, the Bank transferred
$445,000 and $110,000, 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 September 30, 1997 and 1996, the Bank charged off
loans aggregating $298,000 and $10,000, respectively. The allowance for loan
losses amounted to $2.5 million at September 30, 1997, representing 1.19% of
total loans and 33.99% 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 $225,000 or 152.03% to $373,000 during the three
months ended September 30, 1997 from $148,000 during the same 1996 period. The
increase resulted from increases in fees and service charges and miscellaneous
income of $104,000 and $121,000, respectively. The increase, during the 1997
period, in the fees and service charges resulted from a revised service fees
schedule on various depository services. The increase, during the 1997 period,
in miscellaneous income resulted primarily from commissions earned on the sales
of annuities and mutual funds by Pamrapo Financial Center.
Non-interest expenses decreased by $2.4 million or 49.52% to $2.4 million during
the three months ended September 30, 1997 when compared with $4.8 million during
the same 1996 period. During the three months ended September 30, 1996,
legislation was enacted which, among other things, imposed a special one-time
assessment on SAIF member institutions, including the Bank. The special
assessment levied amounted to 65.7 basis points on SAIF assessable deposits held
as of March 31, 1995. The Bank took a charge of $2.0 million as a result of
such assessment. Non-interest expenses, excluding the above-mentioned one-time
special assessment decreased by $332,000 or 12.11%. Salaries and employee
benefits, loss on foreclosed real estate, federal insurance premium and
miscellaneous expenses decreased $137,000, $42,000, $130,000 and $86,000,
respectively, which more than offset increases in net occupancy, equipment and
advertising of $49,000, $7,000 and $8,000, 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.
The decrease in miscellaneous expenses resulted primarily from the absence in
1997 of non-recurring expenses of $50,000 related to the 1996 Annual Meeting of
Stockholders.
Income taxes amounted to $665,000 during the three months ended September 30,
1997 as compared to a credit of $207,000 during the same 1996 period. The
increase during the 1997 period resulted from an increase in pre-tax income.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
1996
Net income increased $1.965 million or 104.86% to $3.8 million for the nine
months ended September 30, 1997 compared with $1.9 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. The 1996 results include a charge for
the one-time special assessment of $2.0 million to recapitalize the SAIF.
-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 NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
1996 (Cont'd.)
Interest income on loans decreased $572,000 or 3.93% to $14.0 million during the
nine months ended September 30, 1997 when compared with $14.5 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 four basis point increase in the yield earned on the loan portfolio. Interest
on mortgage-backed securities increased $664,000 or 11.67% to $6.4 million
during the nine months ended September 30, 1997 when compared with $5.7 million
for the same 1996 period. The increase during the 1997 period resulted primarily
from an increase of $16.0 million in the average balance of such portfolio
outstanding sufficient to offset an eighteen basis point decrease in the yield
earned on such portfolio. Interest earned on investments and other interest-
earning assets decreased by $49,000 or 5.25% to $884,000 during the nine months
ended September 30, 1997, when compared to $933,000 during the same 1996 period
primarily due to a decrease of $5.2 million in the average balance of such
assets outstanding sufficient to offset an increase of one-hundred-eleven basis
points in the yield earned on such portfolio.
Interest expense on deposits decreased $134,000 or 1.60% to $8.3 million during
the nine months ended September 30, 1997 when compared to $8.4 million during
the same 1996 period. Such decrease was primarily attributable to a decrease of
$3.0 million in the average balance of interest-bearing deposits along with a
three basis point decrease in the cost of such deposits. Interest expense on
advances and other borrowed money increased by $395,000 to $547,000 during the
nine months ended September 30, 1997 when compared with $152,000 during the same
1996 period, primarily due to an increase of $7.2 million in the average balance
of advances outstanding from the FHLB and other borrowed money along with an
increase of one-hundred-nine basis point increase in the cost of advances and
borrowed money.
Net interest income decreased $218,000 or 1.73% during the nine months ended
September 30, 1997 when compared with the same 1996 period. Such decrease was
due to an increase in total interest expense of $262,000, sufficient to offset
an increase in total interest income of $44,000. The Bank's net interest rate
spread decreased from 4.27% in 1996 to 4.19% in 1997. The decrease in the
interest rate spread resulted from an increase of six basis points in the cost
of interest-bearing liabilities along with a decrease of two basis points in the
yield earned on interest-earning assets.
During each of the nine months ended September 30, 1997 and 1996, the Bank
provided $450,000 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 September 30, 1997, December 31, 1996 and
September 30, 1996, the Bank's non-performing loans, which were delinquent
ninety days or more, totalled $7.5 million or 2.00% of total assets, $10.5
million or 2.89% of total assets and $10.7 million or 2.95% of total assets,
respectively. At September 30, 1997 $1.8 million of non-performing loans were
accruing interest and $5.7 million were on non-accrual status. During the nine
months ended September 30, 1997 and 1996, the Bank transferred $894,000 and $1.6
million, respectively, of loans to foreclosed real estate. The non-performing
loans primarily consist of one-to-four family mortgage loans. During the nine
months ended September 30, 1997 and 1996, the Bank charged off loans aggregating
$733,000 and $328,000, respectively. The allowance for loan losses amounted to
$2.5 million at September 30, 1997, representing 1.19% of total loans and 33.99%
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.
-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 NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
1996 (Cont'd.)
Non-interest income increased $591,000 or 127.37% to $1.1 million during the
nine months ended September 30, 1997 from $464,000 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 $284,000, $112,000 and
$195,000, respectively. The increase, during the 1997 period, in the fees and
service charges resulted from a revised service fees schedule on various
depository services. The increase, during the 1997 period, in the miscellaneous
income resulted primarily from commissions earned on the sales of annuities and
mutual funds by Pamrapo Financial Center.
Non-interest expenses decreased by $3.2 million or 31.23% to $7.0 million during
the nine months ended September 30, 1997 when compared with $10.2 million during
the same 1996 period. On September 30, 1996, legislation was enacted which,
among other things, imposed a special one-time assessment on SAIF member
institutions, including the Bank. The special assessment levied amounted to 65.7
basis points on SAIF assessable deposits held as of March 31, 1995. The Bank
took a charge of $2.0 million as a result of such assessment. Non-interest
expenses, excluding the above-mentioned one-time special assessment, decreased
by $1.2 million or 14.15%. Salaries and employee benefits, advertising, loss on
foreclosed real estate, federal insurance premium and miscellaneous expenses
decreased $408,000, $13,000, $68,000, $380,000 and $387,000, respectively, which
more than offset increases in net occupancy expense and equipment of $58,000 and
$43,000, 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. The decrease in miscellaneous
expenses resulted primarily from the absence in 1997 of non-recurring expenses
of $300,000 related to the 1996 Annual Meeting of Stockholders.
Income taxes totalled $2.2 million and $594,000 during the nine months ended
September 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.
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 5.52% during the
month of September 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.
-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 primary sources of funds are deposits, amortization and prepayments
of loans and mortgage-backed securities principal, FHLB advances, other
borrowings, 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 September 30, 1997 amounted to $100,000 and
$2.2 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>
Nine Months Ended
September 30,
------------------
1997 1996
-------- -------
(In Thousands)
<S> <C> <C>
Cash and cash equivalents - beginning $ 21,143 $ 13,894
-------- --------
Operating activities:
Net income 3,839 1,874
Adjustments to reconcile net income to
net cash provided by operating activities 2,453 1,117
-------- --------
Net cash provided by operating activities 6,292 2,991
Net cash (used in) provided by
investing activities (19,858) 10,769
Net cash provided by (used in)
financing activities 4,023 (11,633)
-------- --------
Net (decrease) increase in cash and cash
equivalents (9,543) 2,127
-------- --------
Cash and cash equivalents - ending $ 11,600 $ 16,021
======== ========
</TABLE>
Cash was generated by operating activities during the nine months ended
September 30, 1997. The primary source of cash was net income. Funds provided
by financing activities resulted primarily from a $11.6 million increase in
short-term FHLB advances and other borrowings, at September 30, 1997, as
compared to September 30, 1996, 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 nine months ended
September 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 the nine months ended
September 30, 1997 amounted to $2.2 million.
-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 primary sources of investing activity of the Bank are lending and the
purchase of mortgage-backed securities. Net loans amounted to $207.3 million
and $207.4 million at September 30, 1997 and December 31, 1996, respectively.
Securities available for sale totalled $14.2 million and $22.2 million at
September 30, 1997 and December 31, 1996, respectively. Mortgage-backed
securities held to maturity totalled $124.9 million and $96.7 million at
September 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 provide additional sources of
funds. At September 30, 1997, borrowings from these institutions amounted to
$15.5 million.
The Bank anticipates that it will have sufficient funds available to meet its
current loan commitments. At September 30, 1997, the Bank has outstanding
commitments to originate mortgage loans of $12.0 million. Certificate of
deposits scheduled to mature in one year or less at September 30, 1997, totalled
$115.7 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.
-12-
<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 September 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 $ 5,553 1.50%
Actual 47,465 12.82
------- -----
Excess $41,912 11.32%
======= =====
Core Capital:
Requirement $11,106 3.00%
Actual 47,465 12.82
------- -----
Excess $36,359 9.82%
======= =====
Risk-based Capital:
Requirement $14,314 8.00%
Actual 49,360 27.59
------- -----
Excess $35,046 19.59%
======= =====
</TABLE>
SUPERVISORY EXAMINATION
The Bank's financial statements are periodically examined by the OTS, the
Federal Deposit Insurance Corporation 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.
-13-
<PAGE>
PAMRAPO BANCORP, INC.
PART II
ITEM 1. Legal Proceedings
-----------------
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
-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: November 10, 1997 By: /s/ William J. Campbell
------------------------ ------------------------------------
William J. Campbell
President and Chief Executive Officer
Date: November 10, 1997 By: /s/ Gary J. Thomas
------------------------ ------------------------------------
Gary J. Thomas
Vice President, Chief Financial Officer
-15-
<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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,300,055
<INT-BEARING-DEPOSITS> 2,200,000
<FED-FUNDS-SOLD> 100,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,152,432
<INVESTMENTS-CARRYING> 124,908,966
<INVESTMENTS-MARKET> 125,633,000
<LOANS> 209,875,417
<ALLOWANCE> 2,534,808
<TOTAL-ASSETS> 371,957,719
<DEPOSITS> 301,644,102
<SHORT-TERM> 15,474,537
<LIABILITIES-OTHER> 6,831,570
<LONG-TERM> 0
0
0
<COMMON> 34,500
<OTHER-SE> 47,973,010
<TOTAL-LIABILITIES-AND-EQUITY> 371,957,719
<INTEREST-LOAN> 13,968,177
<INTEREST-INVEST> 6,354,231
<INTEREST-OTHER> 883,723
<INTEREST-TOTAL> 21,206,131
<INTEREST-DEPOSIT> 8,252,071
<INTEREST-EXPENSE> 8,798,722
<INTEREST-INCOME-NET> 12,407,409
<LOAN-LOSSES> 450,000
<SECURITIES-GAINS> 111,583
<EXPENSE-OTHER> 6,994,599
<INCOME-PRETAX> 6,017,362
<INCOME-PRE-EXTRAORDINARY> 6,017,362
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,838,542
<EPS-PRIMARY> 1.30
<EPS-DILUTED> 1.30
<YIELD-ACTUAL> 4.74
<LOANS-NON> 5,696,000
<LOANS-PAST> 1,759,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,677,321
<CHARGE-OFFS> 298,196
<RECOVERIES> 5,683
<ALLOWANCE-CLOSE> 2,534,808
<ALLOWANCE-DOMESTIC> 639,582
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,895,226
</TABLE>
<PAGE>
Exhibit 11.0
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
-----------------------------------------------
<TABLE>
<CAPTION>
Nine Three
Months Ended Months Ended
September 30, September 30,
1997 1997
------------- -------------
<S> <C> <C>
Net income $3,838,542 $1,265,203
========== ==========
Weighted average number of common
shares outstanding 2,946,248 2,842,924
Common stock equivalents
due to dilutive effect of stock
options -- --
---------- ----------
Total weighted average number of
common shares and equivalents
outstanding 2,946,248 2,842,924
========== ==========
Primary earnings per share $ 1.30 $ 0.44
========== ==========
Total weighted average number of common
shares and equivalents outstanding
for fully diluted computation 2,946,248 2,842,924
========== ==========
Fully diluted earnings per share $ 1.30 $ 0.44
========== ==========
</TABLE>
