<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 March 31, 1999
---------------------------------------
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, 201-339-4600
including area code
----------------------------------------
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 April 30, 1999.
--------------
$.01 par value common sock - 2,742,924 shares outstanding
<PAGE>
PAMRAPO BANCORP, INC.
AND SUBSIDIARIES
INDEX
Page
PART I - FINANCIAL INFORMATION Number
--------
Item 1: Financial Statements
Consolidated Statements of Financial Condition at
March 31, 1999 and December 31, 1998 (Unaudited) 1
Consolidated Statements of Income for the Three
Months Ended March 31, 1999 and 1998 (Unaudited) 2
Consolidated Statements of Comprehensive Income for
the Three Months Ended March 31, 1999 and 1998 (Unaudited) 3
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 1998 (Unaudited) 4-5
Notes to Consolidated Financial Statements 6
Item 2: Management's: Discussion and Analysis of Financial
Condition and Results of Operations 7-12
Item 3: Quantitative: and Qualitative Disclosure About Market Risk 13-14
PART II - OTHER INFORMATION 15-16
SIGNATURES 17
<PAGE>
PAMRAPO BANCORP, INC.AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
-------------- --------------
ASSETS 1999 1998
- ------- -------------- --------------
<S> <C> <C>
Cash and amounts due from depository institutions $ 12,426,202 $ 12,547,045
Interest-bearing deposits in other banks 14,300,000 15,500,000
-------------- -------------
Total cash and cash equivalents 26,726,202 28,047,045
Securities available for sale 9,261,157 9,651,512
Investment securities held to maturity;
estimated fair value of $1,972,000 (1999)
and $1,998,000 (1998) 1,998,192 1,998,142
Mortgage-backed securities held to maturity; estimated
fair value of $126,481,000 (1999) and $121,920,000 (1998) 125,514,940 120,400,191
Loans receivable 247,983,752 239,009,990
Foreclosed real estate 834,224 1,237,097
Investment in real estate 266,846 270,539
Premises and equipment 4,648,891 4,695,440
Federal Home Loan Bank stock, at cost 3,243,200 3,097,200
Interest receivable 2,445,524 2,364,340
Excess of cost over assets acquired 151,624 181,949
Other assets 2,718,535 2,520,712
------------ ------------
Total assets $425,793,087 $413,474,157
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Deposits $337,615,076 $325,985,283
Advances from Federal Home Loan Bank 28,583,100 28,583,100
Other borrowed money 246,994 252,535
Advance payments by borrowers for taxes and insurance 2,927,409 2,911,061
Other liabilities 6,473,769 5,969,273
------------ ------------
Total liabilities 375,846,348 363,701,252
------------ ------------
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 outstanding 34,500 34,500
Paid-in capital in excess of par value 18,906,768 18,906,768
Retained earnings - substantially restricted 44,419,149 44,217,856
Accumulated other comprehensive income -
Unrealized gain on securities available for sale, net 12,256 39,715
Treasury stock, at cost; 607,076 shares (13,425,934) (13,425,934)
------------ ------------
Total stockholders' equity 49,946,739 49,772,905
------------ ------------
Total liabilities and stockholders' equity $425,793,087 $413,474,157
============ ============
</TABLE>
See notes to consolidated financial statements.
-1-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1999 1998
------------ -----------
<S> <C> <C>
Interest income:
Loans $ 5,088,960 $ 4,741,404
Mortgage-backed securities 2,050,070 2,231,183
Investments and other interest-earning assets 328,939 234,375
------------ -----------
Total interest income 7,467,969 7,206,962
------------ -----------
Interest expense:
Deposits 2,788,714 2,813,725
Advances and other borrowed money 419,206 220,114
------------ -----------
Total intrest expense 3,207,920 3,033,839
------------ -----------
Net interest income 4,260,049 4,173,123
Provision for loan losses 75,000 75,000
------------ -----------
Net interest income after provision for loan losses 4,185,049 4,098,123
------------ -----------
Non-interest income:
Fees and service charges 245,482 202,087
Miscellaneous 122,561 136,546
------------ -----------
Total non-interest income 368,043 338,633
------------ -----------
Non-interest expenses:
Salaries and employee benefits 1,541,789 1,399,473
Net occupancy expense of premises 291,349 236,868
Equipment 269,099 242,956
Advertising 54,250 32,260
Loss on foreclosed real estate 4,875 17,484
Federal insurance premium 48,336 47,457
Amortization of intangibles 30,325 30,325
Miscellaneous 609,586 609,315
------------ -----------
Total non-interest expenses 2,849,609 2,616,138
------------ -----------
Income before income taxes 1,703,483 1,820,618
Income taxes 613,776 665,633
------------ -----------
Net income $ 1,089,707 $ 1,154,985
============ ===========
Net income per common share:
Basic/diluted $ 0.38 $ 0.41
============ ===========
Dividends per common share $ 0.3125 $ 0.28
============ ===========
Weighted average number of common shares
and common stock equivalents outstanding:
Basic/diluted 2,842,924 2,842,924
============ ===========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
PAMRAPO BAMCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHRENSIVE INCOME
------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1999 1998
---------- -----------
<S> <C> <C>
Net income $1,089,707 $1,154,985
---------- -----------
Other comprehensive income (loss), net of income taxes:
Gross unrealized holding (loss) gain on
securities available for sale (42,959) 24,814
Deferred income taxes 15,500 (8,900)
---------- -----------
Other comprehensive (loss) income (27,459) 15,914
---------- -----------
Comprehensive income $1,062,248 $1,170,899
========== ===========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
PAMRAPO BANCORP,INC.AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,089,707 $ 1,154,985
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation of premises and equipment
and investment in real estate 151,902 109,124
Accretion of deferred fees, premiums and discounts, net 10,203 (47,365)
Provision for loan losses 75,000 75,000
Provision for losses on foreclosed real estate 25,000 12,000
(Gain) on sales of foreclosed real estate (25,512) (1,826)
(Increase) decrease in interest receivable (81,184) 95,170
(Increase) decrease in other assets (182,323) 792,008
Increase in other liabilities 504,496 1,099,937
Amortization of intangibles 30,325 30,325
------------ ----------
Net cash provided by operating activities 1,597,614 3,319,358
------------ ----------
Cash flow from investing activities:
Proceeds from calls and maturities of securities available for sale - 1,000,000
Principal repayments on securities available for sale 351,610 242,139
Purchases of securities available for sale (15,474) (19,504)
Principal repayments on
mortgage-backed securities held to maturity 9,899,421 6,715,467
Purchases of mortgage-backed securities held to maturity (15,081,080) (2,042,725)
Purchases of loans - (108,000)
Proceeds from sales of student loans 41,809 57,722
Net change in loans receivable (8,752,654) (4,835,051)
Proceeds from sales of foreclosed real estate 133,385 190,326
Additions to premises and equipment (101,660) (250,381)
Purchase of Federal Home Loan Bank stock (146,000) (117,800)
------------- -----------
Net cash (used in) provided by investing activities (13,670,643) 832,193
-------------- ------------
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
PAMRAPO BANCORP,INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASHFLOWS
------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Cash flows from financing activities:
Net increase in deposits $11,629,793 $1,633,882
Net (decrease) in other borrowed money (5,541) (5,116)
Net increase in payments by borrowers for taxes and insurance 16,348 1,626,461
Cash dividends paid (888,414) (796,019)
-------------- --------------
Net cash provided by financing activities 10,752,186 2,459,208
-------------- --------------
Net (decrease) increase in cash and cash equivalents (1,320,843) 6,610,759
Cash and cash equivalents - beginning 28,047,045 13,306,794
-------------- --------------
Cash and cash equivalents - ending $26,726,202 $19,917,553
============== ==============
Supplemental information:
Transfer of loans receivable to foreclosed real estate $ - $ 260,883
============== ==============
Loans to facilitate sales of foreclosed real estate $ 270,000 $ -
============== ==============
Change in unrealized gain on securities available for sale, net $ (27,459) $ 15,914
============== ==============
of deferred income taxes
Cash paid during the period for:
Income taxes $ - $ -
============== ==============
Interest on deposits and borrowings $ 3,207,920 $ 3,033,839
============== ==============
</TABLE>
See notes to consolidated financial statements.
-5-
<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 months ended March 31,
1999, are not necessarily indicative of the results which may be expected for
the entire fiscal year.
3. NET INCOME PER COMMON SHARE
---------------------------
Basic net income per common share is based on the weighted average number of
common shares actually outstanding. Diluted net income per share is calculated
by adjusting the weighted average number of shares of common stock outstanding
to include the effect of stock options if dilutive, using the treasury stock
method.
-6-
<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 March 31, 1999 totalled $425.8 million, which
represents an increase of $12.3 million or 2.97% as compared with $413.5
million at December 31, 1998.
Securities available for sale at March 31, 1999 decreased $391,000 or 4.05% to
$9.3 million when compared with $9.7 million at December 31, 1998. The decrease
during the three months ended March 31, 1999, resulted primarily from repayments
on securities available for sale of $352,000 along with a decrease in net
unrealized gains of $43,000.
Investment securities held to maturity remained unchanged at $2.0 million at
March 31, 1999 and December 31, 1998. Mortgage-backed securities held to
maturity increased $5.1 million or 4.24% to $125.5 million at March 31, 1999
when compared to $120.4 million at December 31, 1998. The increase during three
months ended March 31, 1999, resulted from purchases of $15.1 million, which
were sufficient to offset principal repayments of $9.9 million.
Net loans amounted to $248.0 million at March 31, 1999 as compared to $239.0
million at December 31, 1998, which represents an increase of $9.0 million or
3.77%. The increase, during the three months ended March 31, 1999, resulted
primarily from loan originations exceeding principal repayments.
Foreclosed real estate totalled $834,000 and $1.2 million at March 31, 1999 and
December 31, 1998, respectively. During the three months ended March 31, 1999,
two foreclosed real estate properties with a combined book value of $378,000
were sold. At March 31, 1999, foreclosed real estate consisted of eleven
properties, five of which are under contract for sale.
Total deposits at March 31, 1999 totalled $337.6 million as compared with $326.0
million at December 31, 1998, representing an increase of $11.6 million or
3.56%.
Advances from the Federal Home Loan Bank ("FHLB") amounted to $28.6 million at
March 31, 1999 and December 31, 1998.
Stockholders' equity totalled $49.9 million and $49.8 million at March 31, 1999
and December 31, 1998, respectively.
Comparison of Operating Results for the Three Months Ended March 31, 1999 and
1998
Net income decreased $65,000 or 5.63% to $1.090 million for the three months
ended March 31, 1999 compared with $1.155 million for the same 1998 period. The
decrease in net income during the 1999 period resulted from increases in total
interest expense and non-interest expenses, which were partially offset by
increases in total interest income and non-interest income and a decrease in
income taxes.
-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 March 31, 1999 and
1998 (Cont'd.)
Interest income on loans increased by $348,000 or 7.34% to $5.089 million during
the three months ended March 31, 1999 when compared with $4.741 million for the
same 1998 period. The increase during the 1999 period resulted from an increase
of $30.3 million in the average balance of loans outstanding sufficient to
offset a fifty-four basis point decrease in the yield earned on the loan
portfolio. Interest on mortgage-backed securities decreased $181,000 or 8.11%
to $2.050 million during the three months ended March 31, 1999 when compared
with $2.231 million for the same 1998 period. The decrease during the 1999
period resulted primarily from decreases of twenty-nine basis points in the
yield earned on the mortgage-backed securities and $5.1 million in the average
balance of such portfolio outstanding. Interest earned on investments and other
interest-earning assets increased by $95,000 or 40.60% to $329,000 during the
three months ended March 31, 1999, when compared to $234,000 during the same
1998 period primarily due to an increase of $10.2 million in the average balance
of such assets outstanding sufficient to offset a one hundred and three basis
point decrease in the yield earned on such portfolio.
Interest expense on deposits decreased $25,000 or 0.89% to $2.789 million during
the three months ended March 31, 1999 when compared to $2.814 million during the
same 1998 period. Such decrease was primarily attributable to a decrease of
twenty six basis points in the cost of interest-bearing deposits sufficient to
offset an increase of $18.5 million in the average balance of interest-bearing
deposits. Interest expense on advances and other borrowed money increased by
$199,000 or 90.45% to $419,000 during the three months ended March 31, 1999 when
compared with $220,000 during the same 1998 period, primarily due to an increase
of $15.0 million in the average balance of advances outstanding from the FHLB
sufficient to offset a fifty-four basis point decrease in the cost of advances
and other borrowed money.
Net interest income increased $87,000 or 2.08% during the three months ended
March 31, 1999 when compared with the same 1998 period. Such increase was due
to an increase in total interest income of $261,000, sufficient to offset an
increase in total interest expense of $174,000. The Bank's net interest rate
spread decreased from 4.06% in 1998 to 3.79% in 1999. The decrease in the
interest rate spread resulted from a decrease of forty-five basis points in the
yield earned on interest-earning assets sufficient to offset an eighteen basis
point decrease in the cost of interest-bearing liabilities.
During the three months ended March 31, 1999 and 1998, the Bank provided $75,000
each 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 the changes in general market conditions and in the nature and
volume of the Bank's loan activity. The Bank intends to continue to provide for
loan losses based on its periodic review of the loan portfolio and general
market conditions. At March 31, 1999, December 31, 1998 and March 31, 1998, the
Bank's non-performing loans, which were delinquent ninety days or more, totalled
$5.1 million or 1.19% of total assets, $4.6 million or 1.11% of total assets and
$6.0 million or 1.57% of total assets, respectively. At March 31, 1999, $1.2
million of non-performing loans were accruing interest and $3.9 million were on
non-accrual status. The non-performing loans primarily consist of one-to-four
family mortgage loans. During the three months ended March 31, 1999 and 1998,
the Bank charged off loans aggregating $1,000 and $133,000, respectively. The
allowance for loan losses amounted to $2.4 million at March 31, 1999,
representing 0.97% of total loans and 47.1% of loans delinquent ninety days or
more and $2.3 million at December 31, 1998, representing 0.94% of total loans
and 50.0% of loans delinquent ninety days or more.
-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 Three Months Ended March 31, 1999 and
1998 (Cont'd.)
Non-interest income increased $29,000 or 8.55% to $368,000 during the three
months ended March 31, 1999 from $339,000 during the same 1998 period. The
increase resulted from an increase in fees and service charges of $43,000,
sufficient to offset a decrease in miscellaneous income of $14,000.
Non-interest expenses increased by $234,000 or 8.94% to $2.8 million during the
three months ended March 31, 1999 when compared with $2.6 million during the
same 1998 period. Salaries and employee benefits, net occupancy expense,
equipment, advertising and federal insurance premium increased $143,000,
$54,000, $26,000, $22,000 and $1,000, respectively, which was sufficient to
offset a decrease in loss on foreclosed real estate of $12,000 during the 1999
period when compared with the same 1998 period. The 1999 non-interest expenses
include increased operating costs resulting from opening a new branch office in
Jamesburg, New Jersey in October 1998.
Income taxes totalled $614,000 and $666,000 during the three months ended March
31, 1999 and 1998, respectively. The decrease during the 1999 period resulted
from a decrease in pre-tax income.
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 4%. The Bank's liquidity averaged 9.96% during the
month of March 1999. The Bank adjusts its liquidity levels in order to meet
funding needs for deposit outflows, payment of real estate taxes from escrow
accounts on mortgage loans, repayment of borrowings, when applicable, and loan
funding commitments. The Bank also adjusts its liquidity level as appropriate to
meet its asset/liability objectives.
The Bank's primary sources of funds are deposits, amortization and prepayments
of loans and mortgage-backed securities principal, FHLB advances, maturities of
investment securities and funds provided from operations. While scheduled loan
and mortgage-backed securities amortization and maturing investment securities
are a relatively predictable source of funds, deposit flow and loan and
mortgage-backed securities prepayments are greatly influenced by market interest
rates, economic conditions and competition. The Bank invests its excess funds
in federal funds and overnight deposits with the FHLB, which provides liquidity
to meet lending requirements. Interest-bearing deposits at March 31, 1999
amounted to $14.3 million.
-9-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Liquidity and Capital Resources (Cont'd.)
The Bank's liquidity, represented by cash and cash equivalents, is a product of
its operating, investing and financing activities. These activities are
summarized below:
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------
1999 1998
--------- ----------
(In Thousands)
<S> <C> <C>
Cash and cash equivalents - beginning $ 28,047 $13,307
-------- -------
Operating activities:
Net income 1,090 1,155
Adjustments to reconcile net income to
net cash provided by operating activities 508 2,164
-------- -------
Net cash provided by operating activities 1,598 3,319
Net cash (used in) provided by investing activities (13,671) 832
Net cash provided by financing activities 10,752 2,460
-------- -------
Net (decrease) increase in cash and cash equivalent (1,321) 6,611
-------- -------
Cash and cash equivalents - ending $ 26,726 $19,918
======== =======
</TABLE>
Cash was generated by operating activities during the three months ended March
31, 1999. The primary source of cash was net income. Cash dividends paid during
the three months ended March 31, 1999 and 1998 amounted to $888,000 and
$796,000, respectively.
The primary sources of investing activity of the Bank are lending and the
purchase of mortgage-backed securities. Net loans amounted to $248.0 million
and $239.0 million at March 31, 1999 and December 31, 1998, respectively.
Securities available for sale totalled $9.3 million and $9.7 million at March
31, 1999 and December 31, 1998, respectively. Mortgage-backed securities held to
maturity totalled $125.5 million and $120.4 million at March 31, 1999 and
December 31, 1998, respectively. In addition to funding new loan production and
mortgage-backed securities purchases through operating 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 which provide an additional source of funds. At March 31, 1999,
advances from the FHLB amounted to $28.6 million.
-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 anticipates that it will have sufficient funds available to meet its
current loan commitments. At March 31, 1999, the Bank has outstanding
commitments to originate mortgage loans of $15.6 million and to purchase
mortgage-backed securities of $2.0 million. Certificates of deposit scheduled
to mature in one year or less at March 31, 1999, totalled $138.2 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 4.0% of its adjusted total assets. The Capital rule further requires
each savings institution to maintain total capital equal to at least 8.0% of its
risk-weighted assets.
The following table sets forth the Bank's capital position at March 31, 1999, as
compared to the minimum regulatory capital requirements:
<TABLE>
<CAPTION>
To Be Well
Capitalized
Under Prompt
Minimum Capital Corrective
Actual Requirements Actions Provisions
--------------------------- ---------------------- ------------------------
Amount Ratio Amount Ratio Amount Ratio
------------- ----------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total Capital
(to risk-weighted assets) $44,196 21.07% $16,779 8.00% $20,974 10.00%
Tier 1 Capital
(to risk-weighted assets) 42,560 20.29% - - 12,584 6.00%
Core (Tier 1) Capital
(to adjusted total assets) 42,560 10.03% 16,977 4.00% 21,221 5.00%
Tangible Capital
(to adjusted total assets) 42,560 10.03% 6,366 1.50% - -
</TABLE>
-11-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Thrift Rechartering Legislation
The proposed legislation regarding elimination of the federal thrift charter and
related issues remains pending before Congress. The Bank, whose deposits are
insured by Savings Associations Insurance Fund ("SAIF"), is unable to predict
whether such legislation will be enacted, the extent to which the legislation
would restrict or disrupt its operations or whether the Bank Insurance Fund
("BIF") or SAIF funds will eventually merge.
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.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Bank's
computer programs that would have date sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in a
system failure or miscalculations causing disruptions of operations, including
among other things, a temporary inability to process transactions, or engage in
similar normal business activities.
Based on a recent assessment, the Bank has determined that it will be required
to modify or replace portions of its software so that its computer systems will
properly utilize dates beyond December 31, 1999. The Bank presently believes
that with modifications to existing software and conversion to new software, the
Year 2000 Issue can be mitigated. However, if such modifications and
conversions are not made, or are not completed timely, the Year 2000 Issue may
have a material impact on the operations of the Bank.
The Bank has initiated formal communications with all or its significant
suppliers and vendors to determine the extent to which the Bank is vulnerable to
those third parties failure to remediate their own Year 2000 Issues. The Bank
will utilize both internal and external resources to reprogram, or replace, and
test the software for year 2000 modifications. The Bank expects to complete the
Year 2000 project no later than June 30, 1999. To date, the Bank has incurred
costs of approximately $300,000 related to the assessment of and preliminary
efforts in connection with its Year 2000 project and the development of a
remediation plan. It is anticipated that additional costs related to Y2K
compliance will not exceed $100,000. The Bank has completed general and branch
operating contingency plans in the event of unforeseen problems. In the event
that any of the Bank's major customers, significant suppliers, or other vendors
do not successfully achieve Year 2000 compliance in a timely manner, the Bank's
business or operations could be adversely affected. There can be no assurances,
however, that such plans or the performances by any of the Bank's suppliers and
vendors will be effective to remedy all potential problems.
-12-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Management of Interest Rate Risk. The ability to maximize net interest income
is largely dependent upon the achievement of a positive interest rate spread
that can be sustained during fluctuations in prevailing interest rates.
Interest rate sensitivity is a measure of the difference between amounts of
interest-earning assets and interest-bearing liabilities which either reprice or
mature within a given period of time. The difference, or the interest rate
repricing "gap", provides an indication of the extent to which an institution's
interest rate spread will be affected by changes in interest rates. A gap is
considered positive when the amount of interest-rate sensitive assets exceeds
the amount of interest-rate sensitive liabilities, and is considered negative
when the amount of interest rate sensitive liabilities exceeds the amount of
interest-rate sensitive assets. Generally, during a period of rising interest
rates, a negative gap within shorter maturities would adversely affect net
interest income, while a positive gap within shorter maturities would result in
an increase in net interest income, and during a period of falling interest
rates, a negative gap within shorter maturities would result in an increase in
net interest income while a positive gap within shorter maturities would result
in a decrease in net interest income.
Because the Bank's interest-bearing liabilities which mature or reprice within
short periods exceed its interest-earning assets with similar characteristics,
material and prolonged increases in interest rates generally would adversely
affect net interest income, while material and prolonged decreases in interest
rates generally would have a positive effect on net interest income.
The Bank's current investment strategy is to maintain an overall securities
portfolio that provides a source of liquidity and that contributes to the Bank's
overall profitability and asset mix within given quality and maturity
considerations. The securities portfolio is concentrated in U.S. Treasury and
federal government agency securities providing high asset quality to the overall
balance sheet mix. Securities classified as available for sale provide
management with the flexibility to make adjustments to the portfolio given
changes in the economic or interest rate environment, to fulfill unanticipated
liquidity needs, or to take advantage of alternative investment opportunities.
Net Portfolio Value. The Bank's interest rate sensitivity is monitored by
management through the use of the OTDS model which estimates the change in the
Bank's net portfolio value ("NPV") over a range of interest rate scenarios. NPV
is the present value of expected cash flows from assets, liabilities, and off-
balance sheet contracts. The NPV ratio, under any interest rate scenario, is
defined as the NPV in that scenario divided by the market value of assets in the
same scenario. The OTS produces its analysis based upon data submitted on the
Bank's quarterly Thrift Financial Reports. The following table sets forth the
Bank's NPV as of December 31, 1998, the most recent date the Bank's NPV was
calculated by the OTS.
-13-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
<TABLE>
<CAPTION>
NPV as
Change in Percent of Portfolio
Interest Rates Net Portfolio Value Value of Assets
-------------------------------------------- -----------------------------------
In Basis Points Dollar Percent NPV Change In
(Rate Shock) Amount Change Change Ratio Basis Points
- --------------- ----------- ------------- ------------- ------------- ----------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
400 $28,663 $(28,642) (50) 7.26% (610)
300 36,407 (20,897) (36) 9.02 (434)
200 44,194 (13,110) (23) 10.70 (266)
100 51,349 (5,955) (10) 12.18 (118)
Static 57,304 - - 13.36 -
-100 62,083 4,779 8 14.26 90
-200 66,550 9,245 16 15.07 171
-300 72,241 14,936 26 16.08 272
-400 77,787 20,482 36 17.03 367
</TABLE>
Certain shortcomings are inherent in the methodology used in the above interest
rate risk measurements. Modeling changes in NPV require the making of certain
assumptions which may or may not reflect the manner in which actual yields and
costs respond to changes in market interest rates. In this regard, the NPV
model presented assumes that the composition of the Bank's interest sensitive
assets and liabilities existing at the beginning of a period remains constant
over the period being measured and also assumes that a particular change in
interest rates is reflected uniformly across the yield curve regardless of the
duration to maturity or repricing of specific assets and liabilities.
Accordingly, although the NPV measurements and net interest income models
provide an indication of the Bank's interest rate risk exposure at a particular
point in time, such measurements are not intended to and do not provide a
precise forecast of the effect of changes in market interest rates on the Bank's
net interest income and will differ from actual results.
14
<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 in the aggregate
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
---------------------------------------------------
The Annual Stockholders' Meeting was held on April 28, 1999. The
following matters were submitted to the stockholders:
1. Election of two directors:
A. Directors elected at the meeting for terms to expire in
2002.
<TABLE>
<CAPTION>
Number of Shares
------------------------
For Withheld
---------- ------------
<S> <C> <C>
Mr. Daniel J. Masarelli 2,613,800 33,308
Mr. Francis J. O'Donnell 2,611,545 35,563
</TABLE>
The following directors' terms of office as a director
continued after the meeting:
(i) Mr. William J. Campbell
(ii) Mr. John A. Morecraft
(iii) Dr. Jamie Portela
(iv) Mr. James Kennedy
-15-
<PAGE>
PAMRAPO BANCORP, INC.
PART II (Cont'd.)
ITEM 4. Submission of Matters to a Vote of Security Holders (Cont'd.)
---------------------------------------------------
<TABLE>
<CAPTION>
Number of Shares
--------------------------------
For Against Abstained
---------- --------- ----------
<S> <C> <C> <C>
2. The ratification of Radies & Co., LLC
as independent auditors of the
Corporation for the fiscal year
ending December 31, 1999. 2,608,752 33,522 4,834
</TABLE>
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
-16-
<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: May 17, 1999 By /s/ William J. Campbell
--------------------------------------------
William J. Campbell
President and Chief Executive Officer
Date: May 17, 1999 By: /s/ Gary J. Thomas
--------------------------------------------
Gary J. Thomas
Vice President, Chief Financial Officer
-17-
<PAGE>
Exhibit 11.0
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
-----------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1999
------------------
<S> <C>
Net income $ 1,089,707
===========
Weighted average shares outstanding - basic and diluted 2,842,924
===========
Basic and diluted earnings per share $ 0.38
===========
</TABLE>
-18-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 12,426,202
<INT-BEARING-DEPOSITS> 14,300,000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,261,157
<INVESTMENTS-CARRYING> 127,513,132
<INVESTMENTS-MARKET> 128,453,000
<LOANS> 250,358,624
<ALLOWANCE> 2,374,872
<TOTAL-ASSETS> 425,793,087
<DEPOSITS> 337,615,076
<SHORT-TERM> 28,830,094
<LIABILITIES-OTHER> 9,401,178
<LONG-TERM> 0
0
0
<COMMON> 34,500
<OTHER-SE> 49,912,239
<TOTAL-LIABILITIES-AND-EQUITY> 425,793,087
<INTEREST-LOAN> 5,088,960
<INTEREST-INVEST> 2,050,070
<INTEREST-OTHER> 328,939
<INTEREST-TOTAL> 7,467,969
<INTEREST-DEPOSIT> 2,788,714
<INTEREST-EXPENSE> 3,207,920
<INTEREST-INCOME-NET> 4,260,049
<LOAN-LOSSES> 75,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,849,609
<INCOME-PRETAX> 1,703,483
<INCOME-PRE-EXTRAORDINARY> 1,703,483
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,089,707
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
<YIELD-ACTUAL> 7.56
<LOANS-NON> 3,935,000
<LOANS-PAST> 1,153,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,739,891
<ALLOWANCE-OPEN> 2,300,000
<CHARGE-OFFS> 1,028
<RECOVERIES> 900
<ALLOWANCE-CLOSE> 2,374,872
<ALLOWANCE-DOMESTIC> 739,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,635,872
</TABLE>
