<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
-----------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------- ----------------------------
Commission File Number 0-18014
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PAMRAPO BANCORP, INC.
-------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 22-2984813
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(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 July 31, 2000.
-------------
$.01 par value common stock - 2,618,724 shares outstanding
<PAGE>
PAMRAPO BANCORP, INC.
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
PART I - FINANCIAL INFORMATION Number
-------------
<S> <C>
Item 1: Financial Statements
Consolidated Statements of Financial Condition
at June 30, 2000 and December 31, 1999 (Unaudited) 1
Consolidated Statements of Income for the Three Months
and Six Months Ended June 30, 2000 and 1999 (Unaudited) 2
Consolidated Statements of Comprehensive Income for the
Three Months and Six Months Ended June 30, 2000 and 1999 (Unaudited) 3
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2000 and 1999 (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
SIGNATURES 16
</TABLE>
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------- ------------
<S> <C> <C>
ASSETS
------
Cash and amounts due from depository institutions $ 14,364,991 $ 11,862,080
Interest-bearing deposits in other banks 4,569,471 19,200,000
------------ ------------
Total cash and cash equivalents 18,934,462 31,062,080
Securities available for sale 5,887,125 6,428,631
Investment securities held to maturity; estimated
fair value of $8,567,000 (2000) and $7,586,000 (1999) 8,996,118 7,995,941
Mortgage-backed securities held to maturity; estimated
fair value of $117,780,000 (2000) and $118,324,000 (1999) 121,109,209 120,823,781
Loans receivable 283,318,692 268,280,380
Foreclosed real estate 456,196 456,196
Investment in real estate 248,384 255,769
Premises and equipment 4,535,733 4,471,586
Federal Home Loan Bank stock, at cost 3,496,200 3,243,200
Interest receivable 2,701,986 2,553,908
Excess of cost over assets acquired - 60,649
Other assets 2,777,107 2,388,330
------------ ------------
Total assets $452,461,212 $448,020,451
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Deposits $371,194,857 $361,924,668
Advances from Federal Home Loan Bank of New York 25,583,100 30,583,100
Other borrowed money 217,576 229,696
Advance payments by borrowers for taxes and insurance 2,661,279 2,946,639
Other liabilities 6,391,318 4,082,384
------------ ------------
Total liabilities 406,048,130 399,766,487
------------ ------------
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; shares outstanding
2,623,724 (2000) and 2,727,924 (1999) 34,500 34,500
Paid-in capital in excess of par value 18,906,768 18,906,768
Retained earnings - substantially restricted 45,838,091 45,474,883
Unrealized (loss) on securities available for sale (58,841) (46,874)
Treasury stock, at cost; 826,276 shares (2000) and
722,076 shares (1999) (18,307,436) (16,115,313)
------------ ------------
Total stockholders' equity 46,413,082 48,253,964
------------ ------------
Total liabilities and stockholders' equity $452,461,212 $448,020,451
============ ============
</TABLE>
See notes to consolidated financial statements.
-1-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- -----------------------------------
2000 1999 2000 1999
--------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Interest income:
Loans $5,707,968 $5,380,044 $11,300,044 $10,469,004
Mortgage-backed securities 2,045,470 2,096,554 4,139,415 4,146,624
Investments and other interest-earning assets 415,536 344,897 837,264 673,836
---------- ---------- ----------- -----------
Total interest income 8,168,974 7,821,495 16,276,723 15,289,464
---------- ---------- ----------- -----------
Interest expense:
Deposits 3,316,639 2,935,295 6,494,770 5,724,009
Advances and other borrowed money 384,040 423,697 832,083 842,903
---------- ---------- ----------- -----------
Total interest expense 3,700,679 3,358,992 7,326,853 6,566,912
---------- ---------- ----------- -----------
Net interest income 4,468,295 4,462,503 8,949,870 8,722,552
Provision for loan losses 60,000 75,000 120,000 150,000
---------- ---------- ----------- -----------
Net interest income after provision for loan losses 4,408,295 4,387,503 8,829,870 8,572,552
---------- ---------- ----------- -----------
Non-interest income:
Fees and service charges 263,472 264,721 514,004 510,203
Miscellaneous 106,635 173,129 235,266 295,690
---------- ---------- ----------- -----------
Total non-interest income 370,107 437,850 749,270 805,893
---------- ---------- ----------- -----------
Non-interest expenses:
Salaries and employee benefits 1,632,478 1,540,110 3,300,366 3,081,899
Net occupancy expense of premises 287,596 283,726 587,608 575,075
Equipment 307,560 267,830 590,191 536,929
Advertising 79,504 78,120 212,824 132,370
Loss on foreclosed real estate 5,534 23,222 12,728 28,097
Amortization of intangibles 30,324 30,325 60,649 60,650
Miscellaneous 705,466 681,690 1,387,431 1,339,612
---------- ---------- ----------- -----------
Total non-interest expenses 3,048,462 2,905,023 6,151,797 5,754,632
---------- ---------- ----------- -----------
Income before income taxes 1,729,940 1,920,330 3,427,343 3,623,813
Income taxes 632,985 702,680 1,245,416 1,316,456
---------- ---------- ----------- -----------
Net income $1,096,955 $1,217,650 $ 2,181,927 $ 2,307,357
========== ========== =========== ===========
Net income per common shares:
Basic/diluted $0.42 $0.44 $0.82 $0.82
========== ========== =========== ===========
Dividends per common share $0.3450 $0.3125 $0.69 $0.6250
========== ========== =========== ===========
Weighted average number of common shares and
common stock equivalents outstanding
Basic/diluted 2,630,515 2,770,397 2,656,775 2,806,460
========== ========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
----------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
2000 1999 2000 1999
--------------- --------------- --------------- ----------------
Net income $1,096,955 $1,217,650 $2,181,927 $2,307,357
---------- ---------- ---------- ----------
Other comprehensive income (loss), net of
income taxes:
Gross unrealized holding gain (loss) on
securities available for sale 16,982 (82,472) (18,667) (125,431)
Deferred income taxes (6,100) 29,700 6,700 45,200
---------- ---------- ---------- ----------
Other comprehensive income (loss) 10,882 (52,772) (11,967) (80,231)
---------- ---------- ---------- ----------
Comprehensive income $1,107,837 $1,164,878 $2,169,960 $2,227,126
========== ========== ========== ==========
</TABLE>
-3-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------
2000 1999
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $2,181,927 $2,307,357
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of premises and equipment and investment in real estate 294,602 305,321
Accretion of deferred fees, premiums and discounts, net (28,971) (21,600)
Provision for loan losses 120,000 150,000
Provision for losses on foreclosed real estate - 50,000
(Gain) on sales of foreclosed real estate - (39,177)
(Increase) in interest receivable (148,078) (85,958)
(Increase) in other assets (382,077) (108,506)
Increase (decrease) in other liabilities 2,308,934 (330,716)
Amortization of intangibles 60,649 60,650
---------------- ---------------
Net cash provided by operating activities 4,406,986 2,287,371
---------------- ---------------
Cash flows from investing activities:
Principal repayments on securities available for sale 542,755 694,204
Purchases of securities available for sale (37,918) (31,105)
Purchases of investment securities held to maturity (1,000,000) (1,997,500)
Principal repayments on mortgage-backed securities held to maturity 8,789,425 18,116,460
Purchases of mortgage-backed securities held to maturity (9,174,892) (19,098,971)
Purchases of loans (430,200) (131,000)
Proceeds from sales of student loans 116,730 83,982
Net change in loans receivable (14,698,007) (23,061,251)
Proceeds from sales of foreclosed real estate - 247,550
Additions to premises and equipment (351,364) (228,269)
Purchase of Federal Home Loan Bank of New York stock (253,000) (146,000)
---------------- ---------------
Net cash (used in) investing activities (16,496,471) (25,551,900)
---------------- ---------------
Cash flows from financing activities:
Net increase in deposits 9,270,189 23,316,668
Net (decrease) in advances from Federal Home Loan Bank of New York (5,000,000) -
Net (decrease) in other borrowed money (12,120) (11,192)
Net (decrease) increase in payments by borrowers for taxes and insurance (285,360) 12,836
Cash dividends paid (1,818,719) (1,745,578)
Purchase of treasury stock (2,192,123) (2,375,000)
---------------- ---------------
Net cash (used in) provided by financing activities (38,133) 19,197,734
---------------- ---------------
Net (decrease) in cash and cash equivalents (12,127,618) (4,066,795)
Cash and cash equivalents - beginning 31,062,080 28,047,045
---------------- ---------------
Cash and cash equivalents - ending $ 18,934,462 $ 23,980,250
=============== ===============
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------
2000 1999
----------------- ----------------
<S> <C> <C>
Supplemental information:
Transfer of loans receivable to foreclosed real estate $ - $ 45,000
=========== ===========
Loans to facilitate sales of foreclosed real estate $ - $ 355,500
=========== ===========
Cash paid during the period for:
Income taxes $ 1,259,780 $ 1,061,654
=========== ===========
Interest on deposits and borrowings $ 7,262,634 $ 6,567,037
=========== ===========
</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 "Company") and its wholly owned subsidiaries, Pamrapo Savings Bank,
SLA (the "Bank") and Pamrapo Service Corp, Inc. The Corporation's business is
conducted principally through the Bank. All significant intercompany accounts
and transactions have been eliminated in consolidation.
2. BASIS OF PRESENTATION
---------------------
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and regulations S-X and do not
include information or footnotes necessary for a complete presentation of
financial condition, results of operations, and cash flows in conformity with
generally accepted accounting principles. However, in the opinion of management,
all adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of the consolidated financial statements have been included.
The results of operations for the three and six months ended June 30, 2000, 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 contracts or securities exercisable or which could be
converted into common stock, if dilutive, using the treasury stock method. There
were no potentially dilutive contracts or securities outstanding at either June
30, 2000 or 1999 or during the three and six months then ended.
-6-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Changes in Financial Condition
The Company's assets at June 30, 2000 totalled $452.5 million, which represents
an increase of $4.5 million or 1.00% as compared with $448.0 million at December
31, 1999.
Securities available for sale at June 30, 2000 decreased $542,000 or 8.43% to
$5.9 million when compared with $6.4 million at December 31, 1999. The decrease
during the six months ended June 30, 2000, resulted primarily from repayments on
securities available for sale of $543,000.
Investment securities held to maturity increased $1.0 million or 12.50% to $9.0
million at June 30, 2000 when compared to $8.0 million at December 31, 1999. The
increase during the six months ended June 30, 2000 resulted from a purchase of
investment securities $1.0 million. Mortgage-backed securities held to maturity
increased $285,000 or .24% to $121.1 million at June 30, 2000 when compared to
$120.8 million at December 31, 1999. The increase during the six months ended
June 30, 2000, resulted primarily from purchases of $9.2 million, which were
sufficient to offset principal repayments of $8.8 million.
Net loans amounted to $283.3 million at June 30, 2000, as compared to $268.3
million at December 31, 1999, which represents an increase of $15.0 million or
5.59%. The increase, during the six months ended June 30, 2000, resulted
primarily from loan originations exceeding principal repayments.
Foreclosed real estate remained unchanged at $456,000 at June 30, 2000 and
December 31, 1999, respectively. At June 30, 2000, foreclosed real estate
consisted of six properties of which two properties with a combined book value
of $171,000 are under contract for sale.
Total deposits at June 30, 2000 totalled $371.2 million as compared with $361.9
million at December 31, 1999, representing an increase of $9.3 million or 2.57%.
Advances from the Federal Home Loan Bank ("FHLB") amounted to $25.6 million and
$30.6 million at June 30, 2000 and December 31, 1999, respectively. The $5.0
million decline was the result of debt repayment of $10.0 million which more
than offset new borrowings of $5.0 million.
Stockholders' equity totalled $46.4 million and $48.3 million at June 30, 2000
and December 31, 1999, respectively. The decrease of $1.9 million was primarily
the result of the Company's repurchase of 104,200 shares of its common stock at
an aggregate cost of $2.2 million.
Comparison of Operating Results for the Three Months Ended June 30, 2000 and
1999
Net income decreased $121,000 or 9.93% to $1.1 million for the three months
ended June 30, 2000 compared with $1.2 million for the same 1999 period. The
decrease in net income during the 2000 period resulted from increases in total
interest expense and non-interest expenses and a decrease in non-interest
income, which were partially offset by an increase in total interest income and
decreases in provision for loan losses and income taxes.
-7-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Interest income on loans increased by $328,000 or 6.10% to $5.7 million during
the three months ended June 30, 2000 when compared with $5.4 million for the
same 1999 period. The increase during the 2000 period resulted from an increase
of $22.2 million in the average balance of loans outstanding sufficient to
offset a twenty basis point decrease in the yield earned on the loan portfolio.
Interest on mortgage-backed securities decreased $52,000 or 2.48% to $2.045
million during the three months ended June 30, 2000 when compared with $2.097
million for the same 1999 period. The decrease during the 2000 period resulted
primarily from decrease of $3.7 million in the average balance of
mortgage-backed securities, sufficient to offset an increase of three basis
points in the yield earned on the mortgage-backed securities. Interest earned on
investments and other interest-earning assets increased by $71,000 or 20.58% to
$416,000 during the three months ended June 30, 2000, when compared to $345,000
during the same 1999 period primarily due to a 124 basis point increase in the
yield earned on such portfolio. The increased yield on investments and other
interest-earning assets is indicative of higher market interest rates available
on short-term investments.
Interest expense on deposits increased $382,000 or 13.02% to $3.3 million during
the three months ended June 30, 2000 when compared to $2.9 million during the
same 1999 period. Such increase was primarily attributable to increases of
twenty-one basis points in the cost of interest-bearing deposits and $21.9
million in the average balance of interest-bearing deposits. Interest expense on
advances and other borrowed money decreased by $40,000 or 9.43% to $384,000
during the three months ended June 30, 2000 when compared with $424,000 during
the same 1999 period, primarily due to a decrease of $3.0 million in the average
balance of advances outstanding from the FHLB sufficient to offset a seven basis
point increase in the cost of advances and other borrowed money.
Net interest income increased $6,000 or .13% during the three months ended June
30, 2000 when compared with the same 1999 period. Such increase was due to an
increase in total interest income of $348,000, sufficient to offset an increase
in total interest expense of $342,000. The net interest rate spread decreased
from 3.87% in 1999 to 3.68% in 2000. The decrease in the interest rate spread
resulted from an increase of seventeen basis points in the cost of
interest-bearing liabilities and a one basis point decrease in the yield earned
on interest-earning assets. Net interest income increased despite the decline in
interest rate spread as the interest income provided by the $18.5 million
increase in average interest-earning assets exceeded the interest expense
related to the $18.8 million increase in average interest-bearing liabilities.
During the three months ended June 30, 2000 and 1999, the Bank provided $60,000
and $75,000, respectively, 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 June 30, 2000, December 31,
1999 and June 30, 1999, the Bank's non-performing loans, which were delinquent
ninety days or more, totalled $4.3 million or 0.96% of total assets, $4.2
million or 0.94% of total assets and $4.5 million or 1.04% of total assets,
respectively. At June 30, 2000, $1.4 million of non-performing loans were
accruing interest and $2.9 million were on nonaccrual status. The non-performing
loans primarily consist of one-to-four family mortgage loans. During the three
months ended June 30, 2000 and 1999, the Bank charged off loans aggregating
$16,000 and $355,000, respectively. The allowance for loan losses amounted to
$2.1 million at June 30, 2000, representing 0.72% of total loans and 48.28% of
loans delinquent ninety days or more, and $2.0 million at December 31, 1999,
representing 0.73% of total loans and 47.62% 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
---------------------------------------------
Non-interest income decreased $68,000 or 15.53% to $370,000 during the three
months ended June 30, 2000 from $438,000 during the same 1999 period. The
increase resulted from decreases in fees and service charges of $2,000 and
miscellaneous income of $66,000.
Non-interest expenses increased by $143,000 or 4.92% to $3.0 million during the
three months ended June 30, 2000 when compared with $2.9 million during the same
1999 period. Salaries and employee benefits, net occupancy expense, equipment,
advertising, and miscellaneous expenses increased $92,000, $4,000, $40,000,
$2,000 and $23,000, respectively, which was sufficient to offset a decrease in
loss on foreclosed real estate of $17,000 during the 2000 period when compared
with the same 1999 period.
Income taxes totalled $633,000 and $703,000 during the three months ended June
30, 2000 and 1999, respectively. The decrease during the 2000 period resulted
from a decrease in pre-tax income.
Comparison of Operating Results for the Six Months Ended June 30, 1999 and 1999
Net income decreased $125,000 or 5.42% to $2.2 million for the six months ended
June 30, 2000 compared with $2.3 million for the same 1999 period. The decrease
in net income during the 2000 period resulted from increases in total interest
expense and non-interest expenses and a decrease in non-interest income, which
were partially offset by an increase in total interest income and decreases in
provision for loan losses and income taxes.
Interest income on loans increased by $831,000 or 7.94% to $11.3 million during
the six months ended June 30, 2000 when compared with $10.5 million for the same
1999 period. The increase during the 2000 period resulted from an increase of
$24.7 million in the average balance of loans outstanding sufficient to offset a
sixteen basis point decrease in the yield earned on the loan portfolio. Interest
on mortgage-backed securities decreased $7,000 or .17% to $4.14 million during
the six months ended June 30, 2000 when compared with $4.15 million for the same
1999 period. The decrease during the 2000 period resulted primarily from a
decrease $1.0 million in the average balance of such portfolio outstanding
sufficient to offset an increase of four basis points in the yield earned on the
mortgage-backed securities. Interest earned on investments and other
interest-earning assets increased by $163,000 or 24.18% to $837,000 during the
six months ended June 30, 2000, when compared to $674,000 during the same 1999
period primarily due to a 143 basis point increase in the yield earned on such
portfolio sufficient to offset a decrease of $256,000 in the average balance of
such assets. The increased yield on investments and other interest-earning
assets is indicative of higher market interest rates available on short-term
investments.
Interest expense on deposits increased $771,000 or 13.47% to $6.5 million during
the six months ended June 30, 2000 when compared to $5.7 million during the same
1999 period. Such increase was primarily attributable to increases of twenty
basis points in the cost of interest-bearing deposits and $24.1 million in the
average balance of interest-bearing deposits. Interest expense on advances and
other borrowed money decreased by $11,000 or 1.30% to $832,000 during the six
months ended June 30, 2000 when compared with $843,000 during the same 1999
period, primarily due to an decrease of $550,000 in the average balance of
advances outstanding from the FHLB sufficient to offset a three basis point
increase in the cost of advances and other borrowed money.
-9-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Net interest income increased $227,000 or 2.60% during the six months ended June
30, 2000 when compared with the same 1999 period. Such increase was due to an
increase in total interest income of $987,000, sufficient to offset an increase
in total interest expense of $760,000. The net interest rate spread decreased
from 3.83% in 1999 to 3.70% in 2000. The decrease in the interest rate spread
resulted from an increase of seventeen basis points in the cost of
interest-bearing liabilities sufficient to offset a four basis point increase in
the yield earned on interest-earning assets. Net interest income increased
despite the decline in interest rate spread as the interest income provided by
the $23.5 million increase in average interest-earning assets exceeded the
interest expense related to the $23.5 million increase in average
interest-bearing liabilities.
During the six months ended June 30, 2000 and 1999, the Bank provided $120,000
and $150,000, respectively, 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. During the six months ended
June 30, 2000 and 1999, the Bank charged off loans aggregating $38,000 and
$356,000, respectively.
Non-interest income decreased $57,000 or 7.07% to $749,000 during the six months
ended June 30, 2000 from $806,000 during the same 1999 period. The decrease
resulted from a decrease in miscellaneous income of $61,000 sufficient to offset
an increase in fees and service charges of $4,000.
Non-interest expenses increased by $397,000 or 6.90% to $6.2 million during the
six months ended June 30, 2000 when compared with $5.8 million during the same
1999 period. Salaries and employee benefits, net occupancy expense, equipment,
advertising, and miscellaneous expenses increased $218,000, $13,000, $53,000,
$81,000 and $47,000, respectively, which was sufficient to offset a decrease in
loss on foreclosed real estate of $15,000 during the 2000 period when compared
with the same 1999 period.
Income taxes totalled $1.2 million and $1.3 million during the six months ended
June 30, 2000 and 1999, respectively. The decrease during the 2000 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 7.24% during the
month of June 2000. 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
---------------------------------------------
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 June 30, 2000 amounted
to $4.6 million.
The Bank's liquidity, represented by cash and cash equivalents, is a product of
its operating, investing and financing activities.
Cash was generated by operating activities during the six months ended June 30,
2000. The primary source of cash was net income. Cash dividends paid during the
six months ended June 30, 2000 and 1999 amounted to $1.8 million and $1.7
million, respectively.
The primary sources of investing activity are lending and the purchase of
mortgage-backed securities. Net loans amounted to $283.3 million and $268.3
million at June 30, 2000 and December 31, 1999, respectively. Securities
available for sale totalled $5.9 million and $6.4 million at June 30, 2000 and
December 31, 1999, respectively. Mortgage-backed securities held to maturity
totalled $121.1 million and $120.8 million at June 30, 2000 and December 31,
1999, 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 June 30, 2000, advances
from the FHLB amounted to $25.6 million.
The Bank anticipates that it will have sufficient funds available to meet its
current loan commitments. At June 30, 2000, the Bank has outstanding commitments
to originate loans of $12.5 million. Certificates of deposit scheduled to mature
in one year or less at June 30, 2000, totalled $153.6 million. Management
believes that, based upon its experience and the Bank's deposit flow history, a
significant portion of such deposits will remain with the Bank.
Under OTS regulations, three separate measurements of capital adequacy (the
"Capital Rule") are required. The Capital Rule requires each savings institution
to maintain tangible capital equal to at least 1.5% and core capital equal to
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.
-11-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The following table sets forth the Bank's capital position at June 30, 2000, 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) $45,672 19.70% $18,550 8.00% $23,187 10.00%
Tier 1 Capital
(to risk-weighted assets) 44,012 18.98% - - 13,912 6.00%
Core (Tier 1) Capital
(to adjusted total assets) 44,012 9.75% 18,056 4.00% 22,570 5.00%
Tangible Capital
(to adjusted total assets) 44,012 9.75% 6,771 1.50% - -
</TABLE>
-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 March 31, 2000, 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
Percent of Portfolio
Change in Net Portfolio Value Value of Assets
Interest Rates --------------------------------------------- ------------------------------
In Basis Points Dollar Percent NPV Change
(Rate Shock) Amount Change Change Ratio Basis Points
---------------- ------------ ------------- ------------ ----------- --------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
300 $25,852 $(27,231) (51) 6.14% (560)
200 34,721 (18,361) (35) 8.05 (369)
100 43,982 (9,101) (17) 9.96 (178)
Static 53,082 - - 11.74 -
-100 60,664 7,582 14 13.15 141
-200 65,019 11,936 22 13.92 218
-300 69,710 16,627 31 14.72 298
</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 Company 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 Company 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
---------------------------------------------------
This information was reported in the Company's Form 10-Q for the
quarter ended March 31, 2000.
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
-15-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PAMRAPO BANCORP, INC.
Date: August 14, 2000 By: /s/ William J. Campbell
--------------------- -------------------------------------
William J. Campbell
President and Chief Executive Officer
Date: August 14, 2000 By: /s/ Gary J. Thomas
--------------------- -------------------------------------
Gary J. Thomas
Vice President, Chief Financial Officer
-16-
