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Section 1: 10-Q (10-Q)

10Q 20180331_Taxonomy2016

 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

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: 0-50275



BCB Bancorp, Inc.

(Exact name of registrant as specified in its charter)



 

New Jersey

 

26-0065262

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

I.D. No.)

 

 

104-110 Avenue C Bayonne, New Jersey

 

07002

(Address of principal executive offices)

 

(Zip Code)

(201) 823-0700

(Registrant’s telephone number, including area code)

 



Not Applicable

(Former name, former address and former fiscal year if changed since last report)

 

Indicate by check mark 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       No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).       Yes       No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “accelerated filer, larger accelerated filer, non-accelerated filer, smaller reporting company, or emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

Large Accelerated Filer

 

  

Accelerated Filer

 

 

 

 

 

 

Non-Accelerated Filer

 

 (Do not check if a smaller reporting company)

  

Smaller Reporting Company   

 

 



 

 

 

 

 

 



 

 

 

Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).      Yes      No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 7th, 2018, BCB Bancorp, Inc., had 15,687,376 shares of common stock, no par value, outstanding.



 

 

 


 

BCB BANCORP INC. AND SUBSIDIARIES

INDEX

 



 

 

 

 

 

 

 

 

 

 

  

Page

 

PART I. CONSOLIDATED FINANCIAL INFORMATION

  

 

 

 

 

 

Item 1. Consolidated Financial Statements

  

 

 

 

 

 

Consolidated Statements of Financial Condition as of March 31, 2018 (unaudited) and December 31, 2017

  

 

1

  

 

 

Consolidated Statements of Income for the three months ended March 31, 2018 and 2017 (unaudited)

  

 

2

  



 

 

 

 

Consolidated Statements of Comprehensive Income for the three months ended March 31, 2018 and 2017 (unaudited)

 

 

3

 

 

 

Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2018 and 2017 (unaudited)

  

 

4

  



Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017 (unaudited)

  

 

5

  



Notes to Unaudited Consolidated Financial Statements

  

 

  

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

 

38

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

  

 

43

 

 

 

Item 4. Controls and Procedures

  

 

43

  

 

 

PART II. OTHER INFORMATION

  

 

44

 

 

 

Item 1. Legal Proceedings

  

 

44

  

 

 

Item 1A. Risk Factors

  

 

45

  

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

  

 

45

  

 

 

Item 3. Defaults Upon Senior Securities

  

 

45

  

 

 

Item 4. Mine Safety Disclosures

  

 

45

  

 

 

Item 5. Other Information

  

 

45

  

 

 

Item 6. Exhibits

 

 

45 

 







 

 

 


 

PART I. CONSOLIDATED FINANCIAL INFORMATION

ITEM I. CONSOLIDATED FINANCIAL STATEMENTS

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

(In Thousands, Except Share and Per Share Data, Unaudited)



 



 

 

 

 

 



 

 

 

 

 



March 31,

 

December 31,



2018

 

2017



 

 

 

 

 

ASSETS

 

 

 

 

 

Cash and amounts due from depository institutions

$

13,299 

 

$

16,460 

Interest-earning deposits

 

124,035 

 

 

107,775 

  Total cash and cash equivalents

 

137,334 

 

 

124,235 



 

 

 

 

 

Interest-earning time deposits

 

980 

 

 

980 

Debt securities available for sale

 

119,158 

 

 

114,295 

Equity investments

 

8,166 

 

 

8,294 

Loans held for sale

 

208 

 

 

1,295 

Loans receivable, net of allowance for loan losses

 

 

 

 

 

  of $18,337 and $17,375 respectively

 

1,764,597 

 

 

1,643,677 

Federal Home Loan Bank of New York stock, at cost

 

10,886 

 

 

10,211 

Premises and equipment, net

 

18,295 

 

 

18,768 

Accrued interest receivable

 

6,052 

 

 

6,153 

Other real estate owned

 

1,412 

 

 

532 

Deferred income taxes

 

6,144 

 

 

5,144 

Other assets

 

9,081 

 

 

9,253 

   Total Assets

$

2,082,313 

 

$

1,942,837 



 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 



 

 

 

 

 

LIABILITIES

 

 

 

 

 

Non-interest bearing deposits

$

211,251 

 

$

201,043 

Interest bearing deposits

 

1,480,102 

 

 

1,368,327 

 Total deposits

 

1,691,353 

 

 

1,569,370 

Borrowed funds

 

200,000 

 

 

185,000 

Subordinated debentures

 

4,124 

 

 

4,124 

Other liabilities and accrued interest payable

 

9,450 

 

 

7,889 

   Total Liabilities

 

1,904,927 

 

 

1,766,383 



 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

Preferred stock: $0.01 par value, 10,000,000 shares authorized;

 

 

 

 

 

 issued and outstanding 1,342 shares of series C 6% and series D 4.5% noncumulative

 

 

 

 

 

 perpetual preferred stock (liquidation value $10,000 per share) at March 31, 2018 and

 

 

 

 

 

 December 31, 2017

 

 -

 

 

 -

Additional paid-in capital preferred stock

 

13,241 

 

 

13,241 

Common stock: no par value; 20,000,000 shares authorized; issued 17,586,243 and 17,572,942

 

 

 

 

 

 at March 31, 2018 and December 31, 2017, respectively, outstanding 15,055,480 shares and

 

 

 

 

 

 15,042,179 shares, at March 31, 2018 and December 31, 2017, respectively

 

 -

 

 

 -

Additional paid-in capital common stock

 

164,512 

 

 

164,230 

Retained earnings

 

33,728 

 

 

31,241 

Accumulated other comprehensive (loss)

 

(4,979)

 

 

(3,142)

Treasury stock, at cost, 2,530,763 shares at March 31, 2018 and December 31, 2017

 

(29,116)

 

 

(29,116)

   Total Stockholders' Equity

 

177,386 

 

 

176,454 



 

 

 

 

 

    Total Liabilities and Stockholders' Equity

$

2,082,313 

 

$

1,942,837 



 

 

 

 

 



See accompanying notes to unaudited consolidated financial statements.







1

 


 

 



BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Income

(In Thousands, Except for Per Share Amounts, Unaudited)





 

 

 

 

 



 

 

 

 

 



Three Months Ended March 31,



 

2018

 

 

2017



 

 

 

 

 

Interest income:

 

 

 

 

 

 Loans, including fees

$

19,521 

 

$

17,542 

 Mortgage-backed securities

 

699 

 

 

527 

 Municipal bonds and other debt

 

104 

 

 

103 

 FHLB stock and other interest earning assets

 

618 

 

 

283 

    Total interest income

 

20,942 

 

 

18,455 



 

 

 

 

 

Interest expense:

 

 

 

 

 

 Deposits:

 

 

 

 

 

    Demand

 

797 

 

 

673 

    Savings and club

 

97 

 

 

99 

    Certificates of deposit

 

2,730 

 

 

2,011 



 

3,624 

 

 

2,783 

    Borrowings

 

878 

 

 

1,067 

      Total interest expense

 

4,502 

 

 

3,850 



 

 

 

 

 

Net interest income

 

16,440 

 

 

14,605 

Provision for loan losses

 

1,342 

 

 

498 



 

 

 

 

 

Net interest income after provision for loan losses

 

15,098 

 

 

14,107 



 

 

 

 

 

Non-interest income:

 

 

 

 

 

  Fees and service charges

 

710 

 

 

796 

  Gain on sales of loans

 

583 

 

 

338 

  Loss on bulk sale of impaired loans held in portfolio

 

(24)

 

 

 -

  Gain on sales of other real estate owned

 

 -

 

 

1,151 

  Unrealized loss on equity investments

 

(127)

 

 

 -

  Other

 

2,244 

 

 

28 

     Total non-interest income

 

3,386 

 

 

2,313 



 

 

 

 

 

Non-interest expense:

 

 

 

 

 

  Salaries and employee benefits

 

6,267 

 

 

6,090 

  Occupancy and equipment

 

2,062 

 

 

2,158 

  Data processing and service fees

 

729 

 

 

653 

  Professional fees

 

505 

 

 

363 

  Director fees

 

201 

 

 

180 

  Regulatory assessments

 

239 

 

 

361 

  Advertising and promotional

 

85 

 

 

143 

  Other real estate owned, net

 

31 

 

 

42 

  Merger related costs

 

145 

 

 

 -

  Other

 

1,747 

 

 

1,572 

     Total non-interest expense

 

12,011 

 

 

11,562 



 

 

 

 

 

Income before income tax provision

 

6,473 

 

 

4,858 

Income tax provision

 

1,841 

 

 

1,945 



 

 

 

 

 

Net Income

$

4,632 

 

$

2,913 

Preferred stock dividends

 

166 

 

 

118 

Net Income available to common stockholders

$

4,466 

 

$

2,795 



 

 

 

 

 

Net Income per common share-basic and diluted

 

 

 

 

 

Basic

$

0.30 

 

$

0.25 

Diluted

$

0.29 

 

$

0.25 



 

 

 

 

 

Weighted average number of common shares outstanding

 

 

 

 

 

Basic

 

15,048 

 

 

11,278 

Diluted

 

15,181 

 

 

11,360 



See accompanying notes to unaudited consolidated financial statements.

 

2

 


 

BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In Thousands, Unaudited)







 

 

 

 

 



Three Months Ended March 31,



2018

 

2017



 

 

 

 

 



 

 

 

 

 

Net Income

$

4,632 

 

$

2,913 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

Unrealized (losses) gains on available-for-sale debt securities:

 

 

 

 

 

Unrealized holding (losses) gains arising during the period (a)

 

(1,711)

 

 

859 

Other comprehensive (loss) income

 

(1,711)

 

 

859 

Comprehensive income

$

2,921 

 

$

3,772 





(a)

Represents the net change of the unrealized (loss) gain on available-for-sale debt securities. Including an unrealized (loss) gain of ($2,380,000) and $1,453,000, respectively, less deferred taxes of ($669,000) and $594,000 respectively.



See accompanying notes to unaudited consolidated financial statements.







 

3

 


 





BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity

(In Thousands, Except Share and Per Share Data, Unaudited) 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Preferred Stock

 

Common Stock

 

Additional             Paid-In Capital

 

Retained Earnings

 

Treasury Stock

 

Accumulated Other Comprehensive Income (Loss)

 

Total



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance at January 1, 2018

$

 -

 

$

 -

 

$

177,471 

 

$

31,241 

 

$

(29,116)

 

$

(3,142)

 

$

176,454 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of Stock Options (200 shares)

 

 -

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

 -

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 -

 

 

 -

 

 

85 

 

 

 -

 

 

 -

 

 

 -

 

 

85 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends payable on Series C 6% and Series D 4.5% noncumulative perpetual preferred stock

 

 -

 

 

 -

 

 

 -

 

 

(166)

 

 

 -

 

 

 -

 

 

(166)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends on common stock ($0.14 per share declared)

 

 -

 

 

 -

 

 

 -

 

 

(2,025)

 

 

 -

 

 

 -

 

 

(2,025)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend Reinvestment Plan

 

 -

 

 

 -

 

 

80 

 

 

(80)

 

 

 -

 

 

 -

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Purchase Plan

 

 -

 

 

 -

 

 

115 

 

 

 -

 

 

 -

 

 

 -

 

 

115 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 -

 

 

 -

 

 

 -

 

 

4,632 

 

 

 -

 

 

 -

 

 

4,632 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification of unrealized gains on AFS equity securities

 

 -

 

 

 -

 

 

 -

 

 

126 

 

 

 -

 

 

(126)

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(1,711)

 

 

(1,711)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance at March 31, 2018

$

 -

 

$

 -

 

$

177,753 

 

$

33,728 

 

$

(29,116)

 

$

(4,979)

 

$

177,386 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Preferred Stock

 

Common Stock

 

Additional             Paid-In Capital

 

Retained Earnings

 

Treasury Stock

 

Accumulated Other Comprehensive Income (Loss)

 

Total



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance at January 1, 2017

$

 -

 

$

 -

 

$

135,881 

 

$

28,159 

 

$

(29,103)

 

$

(3,856)

 

$

131,081 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redemption of Series A and B Preferred Stock

 

 -

 

 

 -

 

 

(11,720)

 

 

 -

 

 

 -

 

 

 -

 

 

(11,720)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series D Preferred Stock

 

 -

 

 

 -

 

 

5,237 

 

 

 -

 

 

 -

 

 

 -

 

 

5,237 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 -

 

 

 -

 

 

30 

 

 

 -

 

 

 -

 

 

 -

 

 

30 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury Stock purchases

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(8)

 

 

 -

 

 

(8)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends payable on Series C 6% and Series D 4.5% noncumulative perpetual preferred stock

 

 -

 

 

 -

 

 

 -

 

 

(118)

 

 

 -

 

 

 -

 

 

(118)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends on common stock ($0.14 per share declared)

 

 -

 

 

 -

 

 

 -

 

 

(1,505)

 

 

 -

 

 

 -

 

 

(1,505)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend Reinvestment Plan

 

 -

 

 

 -

 

 

72 

 

 

(72)

 

 

 -

 

 

 -

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Purchase Plan

 

 -

 

 

 -

 

 

242 

 

 

 -

 

 

 -

 

 

 -

 

 

242 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 -

 

 

 -

 

 

 -

 

 

2,913 

 

 

 -

 

 

 -

 

 

2,913 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

859 

 

 

859 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance at March 31, 2017

$

 -

 

$

 -

 

$

129,742 

 

$

29,377 

 

$

(29,111)

 

$

(2,997)

 

$

127,011 

See accompanying notes to unaudited consolidated financial statements.

















4

 


 

























































 

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In Thousands, Unaudited)





 

 

 

 

 



Three Months Ended March 31,



2018

 

2017

Cash Flows from Operating Activities :

 

 

 

 

 

  Net Income

$

4,632 

 

$

2,913 

  Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

        Depreciation of premises and equipment

 

600 

 

 

688 

        Amortization and accretion, net

 

(266)

 

 

(347)

        Provision for loan losses

 

1,342 

 

 

498 

        Deferred income tax (benefit)

 

(331)

 

 

710 

        Loans originated for sale

 

(4,747)

 

 

(6,476)

        Proceeds from sales of loans

 

6,417 

 

 

10,197 

        Gain on sales of loans originated for sale

 

(583)

 

 

(338)

        Gains on sales of other real estate owned

 

 -

 

 

(1,151)

        Fair value adjustment of OREO

 

 

 

 -

        Loss on equity investments

 

127 

 

 

 -

        Loss on bulk sale of impaired loans held in portfolio

 

24 

 

 

 -

        Stock-based compensation expense

 

85 

 

 

30 

        Decrease (increase) in interest receivable

 

101 

 

 

(141)

        Decrease in other assets

 

172 

 

 

2,347 

        Increase (decrease) in accrued interest payable

 

77 

 

 

(40)

        Increase (decrease) in other liabilities

 

1,484 

 

 

(405)

Net Cash Provided by Operating Activities

 

9,135 

 

 

8,485 

Cash flows from investing activities:

 

 

 

 

 

        Proceeds from calls on securities available for sale

 

7,330 

 

 

5,052 

        Purchases of securities available for sale

 

(14,645)

 

 

(15,048)

        Proceeds from sales of other real estate owned

 

 -

 

 

2,091 

        Proceeds from bulk sale of impaired loans held

 

250 

 

 

 -

        Net increase in loans receivable

 

(123,078)

 

 

(43,717)

        Additions to premises and equipment

 

(127)

 

 

(1,561)

        (Purchase) Redemption of Federal Home Loan Bank of New York stock

 

(675)

 

 

315 

Net Cash Used In Investing Activities

 

(130,945)

 

 

(52,868)

Cash flows from financing activities:

 

 

 

 

 

        Net increase in deposits

 

121,983 

 

 

121,639 

        Proceeds from Federal Home Loan Bank of New York advances

 

60,000 

 

 

 -

        Repayments of Federal Home Loan Bank of New York advances

 

(45,000)

 

 

 -

        Net change in short-term debt

 

 -

 

 

(20,000)

        Purchases/adjustments of treasury stock

 

 -

 

 

(8)

        Cash dividends paid on common stock

 

(2,025)

 

 

(1,505)

        Cash dividends paid on preferred stock

 

(166)

 

 

(118)

        Net proceeds from issuance of common stock

 

115 

 

 

242 

        Net proceeds from issuance of preferred stock

 

 -

 

 

5,237 

        Net payment on redemption of preferred stock

 

 -

 

 

(11,720)

        Exercise of stock options

 

 

 

 -

Net Cash Provided by Financing Activities

 

134,909 

 

 

93,767 



 

 

 

 

 

Net Increase In Cash and Cash Equivalents

 

13,099 

 

 

49,384 

Cash and Cash Equivalents-Beginning

 

124,235 

 

 

65,038 



 

 

 

 

 

Cash and Cash Equivalents-Ending

$

137,334 

 

$

114,422 



 

 

 

 

 

Supplementary Cash Flow Information:

 

 

 

 

 

     Cash paid during the year for:

 

 

 

 

 

        Income taxes

$

143 

 

$

71 

        Interest

$

4,425 

 

$

3,890 



 

 

 

 

 



 

 

 

 

 

Non-cash items:

 

 

 

 

 

        Transfer of loans to other real estate owned

$

881 

 

$

 -



See accompanying notes to unaudited consolidated financial statements



5

 


 





BCB Bancorp Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

Note 1 – Basis of Presentation



The accompanying unaudited consolidated financial statements include the accounts of BCB Bancorp, Inc. (the “Company”) and the Company’s wholly owned subsidiaries, BCB Community Bank (the “Bank”), BCB Holding Company Investment Company, BCB New York Asset Management, Inc. and Pamrapo Service Corporation. The Company’s business is conducted principally through the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.



The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X and, therefore, do not necessarily include all information that would be included in audited consolidated financial statements. The information furnished reflects all adjustments that are, in the opinion of management, necessary for a fair presentation of consolidated financial condition and results of operations. All such adjustments are of a normal recurring nature. These results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2018 or any other future period. The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statement of financial condition and revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates.



These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the year ended December 31, 2017, which are included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission. In preparing these consolidated financial statements, the Company evaluated the events and transactions that occurred between March 31, 2018, and the date these consolidated financial statements were issued.



Recent Accounting Pronouncements



In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which will supersede the current revenue recognition requirements in Topic 605, Revenue Recognition. The ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year. The scope of ASC 606 excludes net interest income and other revenues associated with financial assets and liabilities, including loans, leases, securities and derivatives, which would then exclude the majority of the Company's revenues. However, the recognition and measurement of certain non-interest income items such as gain on sale of other real estate owned and deposit-related fees, could be affected by ASC 606. The Company adopted the guidance effective January 1, 2018, using the modified retrospective method. Implementation of the guidance did not have a material impact on the Company's consolidated financial statements.



In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will supersede the current lease requirements in Topic 840. The ASU requires lessees to recognize a right of use asset and related lease liability for all leases, with a limited exception for short-term leases. Leases will be classified as either finance or operating, with the classification affecting the pattern of expense recognition in the statement of income. Currently, leases are classified as either capital or operating, with only capital leases recognized on the balance sheet. The reporting of lease related expenses in the statements of operations and cash flows will be generally consistent with the current guidance. The new guidance will be effective for the Company in 2019. Once effective, the standard will be applied using a modified retrospective transition method to the beginning of the earliest period presented. The Company is currently assessing the impacts this new standard will have on its consolidated financial statements.



In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. ASU 2016-13 requires entities to report “expected” credit losses on financial instruments and other commitments to extend credit rather than the current “incurred loss” model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the consolidated financial statements. The amendments are effective for the Company in 2020. The Company has begun evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements and results of operations. The effect of this change cannot be ascertained at this point, and will depend upon factors including asset components, asset quality and market conditions at the adoption date.



In May 2017, the FASB issued ASU 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting”. The amendments in this update requires that an entity account for the effects of a modification unless the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified, the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. ASU 2017-09 is effective for the Company on a prospective basis in 2018. Due to prospective application, the new guidance does not expect to have an impact on the Company’s consolidated financial statements.



ASU 2017-08, "Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities." ASU 2017-08 was issued to enhance the accounting for the amortization of premiums for purchased callable debt securities. This amendment requires that the amortization of the premium be shortened to the earliest call date. For public business entities, ASU 2017-08 is effective for fiscal years after December 15, 2018, and interim periods within those fiscal years. The adoption of ASU 2017-08 had no effect on the Company’s consolidated financial statements.



In January 2016, the FASB issued ASU 2016-01, “Financial Instruments- Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” This guidance amends existing guidance to improve accounting standards for financial instruments including clarification and simplification of accounting and disclosure requirements and the requirement for public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. These amendments are effective for public business entities for annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company recorded a cumulative effect adjustment to the balance sheet as of January 1, 2018 in the amount of $126,000, representing the unrealized gain of $175,000 at December 31, 2017 net of taxes of $49,000. For the three months ended March 31, 2018, the Company recorded a loss to the income statement in the amount of $127,000. In addition to the change noted above, adoption of this standard will impact the fair value disclosures included in Note 7.



In February 2018, the FASB issued ASU No. 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The ASU required a reclassification from accumulated other comprehensive income to retained earnings for stranded tax

6

 


 

effects resulting from the newly enacted federal corporate income tax rate as a result of the Tax Cuts and Jobs Act. The amount of the reclassification is the difference between the historical corporate income tax rate and the newly enacted twenty-one percent corporate income tax rate. The Company chose to early adopt the new standard for the year ending December 31, 2017, as allowed under the new standard. The amount of the reclassification for the Company was $557,000, as shown in the Consolidated Statement of Changes in Shareholders’ Equity in the Company’s Form 10-K filing for the year ended December 31, 2017, subject to Staff Accounting Bulletin 118, Income Tax Implications of the Tax Cuts and Jobs Act (“SAB 118”). SAB 118 provides a measurement period not to extend beyond one year of the enactment date to adjust the accounting for certain elements of the tax reform. The Company does not anticipate a material adjustment to tax expense during the measurement period.

7

 


 



Note 2 – Reclassification



Certain amounts as of December 31, 2017 and for the three month period ended March 31, 2017, respectively have been reclassified to conform to the current period’s presentation. These changes had no effect on the Company’s results of operations or financial position.





Note 3 – Pension and Other Postretirement Plans

The Company assumed, through the merger with Pamrapo Bancorp, Inc., a non-contributory defined benefit pension plan covering all eligible employees of Pamrapo Savings Bank. Effective January 1, 2010, the defined benefit pension plan (“Pension Plan”), was frozen by Pamrapo Savings Bank. All benefits for eligible participants accrued in the “Pension Plan” to the freeze date have been retained. Accordingly, no employees are permitted to commence participation in the Pension Plan and future salary increases and future years of service are not considered when computing an employee’s benefits under the Pension Plan. The Pension Plan is funded in conformity with the funding requirements of applicable government regulations. The Company also acquired through the merger with Pamrapo Bancorp, Inc. a supplemental executive retirement plan (“SERP”) in which certain former employees of Pamrapo Savings Bank are covered. A SERP is an unfunded non-qualified deferred retirement plan. Participants who retire at the age of 65 (the “Normal Retirement Age”), are entitled to an annual retirement benefit equal to 75% of compensation reduced by their retirement plan annual benefits. Participants retiring before the Normal Retirement Age receive the same benefits reduced by a percentage based on years of service to the Company and the number of years prior to the Normal Retirement Age that participants retire.





Net periodic pension benefit for the three months ended March 31, 2018 and March 31, 2017 was $10,000 and $9,000 respectively.  Net periodic postretirement cost for the SERP plan for the three months ended March 31, 2018 and March 31, 2017 was $3,000 and $4,000 respectively. 





8

 


 

Note 3 – Pension and Other Postretirement Plans (Continued) 



The Company, under the plan approved by its stockholders on April 28, 2011 (“2011 Stock Plan”), authorized the issuance of up to 900,000 shares of common stock of the Company pursuant to grants of stock options. Employees and directors of the Company and the Bank are eligible to participate in the 2011 Stock Plan. All stock options will be granted in the form of either "incentive" stock options or "non-qualified" stock options. Incentive stock options have certain tax advantages that must comply with the requirements of Section 422 of the Internal Revenue Code. Only employees are permitted to receive incentive stock options. On September 13, 2017, a grant of 350,000 options was declared for members of the Board of Directors and Executive Officers which vest at a rate of 10% per year and 20% per year, respectively, commencing on the first anniversary of the grant date. On September 16, 2016, a grant of 160,000 options was declared for members of the Board of Directors and the Chief Executive Officer, which vest at a rate of 10% per year and 33% per year, respectively, commencing on the first anniversary of the grant date. On December 2, 2015, a grant of 120,000 options and on March 7, 2014, a grant of 110,000 options was declared for certain members of the Board of Directors which vest at a rate of 10% per year, over ten years commencing on the first anniversary of the grant date.









 

 

 

 

 

 

 

 



 

Number of  Option

 

 

 

 

 

 



  

Shares

 

 

Range of Exercise Prices

 

 

Weighted Average Exercise Price



 

 

 

 

 

 

 

 

Outstanding at December 31, 2017

 

889,300 

 

$

8.93-13.32

 

$

11.42 



 

 

 

 

 

 

 

 

Options granted                                         

 

 -

 

 

 -

 

 

 -

Options exercised                                        

 

(200)

 

 

10.55 

 

 

10.55 

Options forfeited                                    

 

 -

 

 

 -

 

 

 -

Options expired                                      

 

 -

 

 

 -

 

 

 -



 

 

 

 

 

 

 

 

Outstanding at March 31, 2018

 

889,100 

 

$

8.93-13.32

 

$

10.91 





As of March 31, 2018, stock options which were granted and were exercisable totaled 183,867 stock options.





It is Company policy to issue new shares upon share option exercise. Expected future compensation expense relating to the 705,233 shares of unvested options outstanding as of March 31, 2018 was $1,566,000 over a weighted average period of 7.18 years.











 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

Number of  Option

 

 

 

 

 

 



  

Shares

 

 

Range of Exercise Prices

 

 

Weighted Average Exercise Price



 

 

 

 

 

 

 

 

Outstanding at December 31, 2016

 

575,000