<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 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
--------------------------------------------------------------------------------
(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 October 31, 2000.
----------------
$.01 par value common stock - 2,597,737 shares outstanding
<PAGE>
PAMRAPO BANCORP, INC.
AND SUBSIDIARIES
INDEX
Page
PART I - FINANCIAL INFORMATION Number
------------
Consolidated Statements of Financial Condition
at September 30, 2000 and December 31, 1999 (Unaudited) 1
Consolidated Statements of Income for the
Three Months and Nine Months Ended
September 30, 2000 and 1999 (Unaudited) 2
Consolidated Statements of Comprehensive Income
for the Three Months and Nine Months Ended
September 30, 2000 and 1999 (Unaudited) 3
Consolidated Statements of Cash Flows for the
Nine Months Ended September 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
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 2000 1999
------ ------------- -------------
<S> <C> <C>
Cash and amounts due from depository institutions $11,974,979 $11,862,080
Interest-bearing deposits in other banks 1,200,000 19,200,000
------------- -------------
Total cash and cash equivalents 13,174,979 31,062,080
Securities available for sale 5,702,981 6,428,631
Investment securities held to maturity; estimated
fair value of $8,611,000 (2000) and $7,586,000 (1999) 8,996,207 7,995,941
Mortgage-backed securities held to maturity; estimated
fair value of $114,894,000 (2000) and $118,324,000 (1999) 116,418,125 120,823,781
Loans receivable 296,790,898 268,280,380
Foreclosed real estate 421,196 456,196
Investment in real estate 244,691 255,769
Premises and equipment 4,724,741 4,471,586
Federal Home Loan Bank stock, at cost 3,496,200 3,243,200
Interest receivable 2,822,310 2,553,908
Excess of cost over assets acquired - 60,649
Other assets 3,045,434 2,388,330
------------- -------------
Total assets $ 455,837,762 $ 448,020,451
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 372,447,964 $ 361,924,668
Advances from Federal Home Loan Bank of New York 27,583,100 30,583,100
Other borrowed money 211,331 229,696
Advance payments by borrowers for taxes and insurance 2,697,198 2,946,639
Other liabilities 6,782,620 4,082,384
------------- -------------
Total liabilities 409,722,213 399,766,487
------------- -------------
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 2,597,737 (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 46,006,553 45,474,883
Unrealized (loss) on securities available for sale (13,484) (46,874)
Treasury stock, at cost; 852,263 shares (2000) and 722,076
shares (1999) (18,818,788) (16,115,313)
------------- -------------
Total stockholders' equity 46,115,549 48,253,964
------------- -------------
Total liabilities and stockholders' equity $ 455,837,762 $ 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 Nine Months Ended
September 30, September 30,
-------------------------------- -----------------------------------
2000 1999 2000 1999
--------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Interest income:
Loans $ 5,984,994 $ 5,465,429 $ 17,285,038 $ 15,934,433
Mortgage-backed securities 2,015,540 2,041,198 6,154,955 6,187,822
Investments and other interest-earning assets 321,480 405,800 1,158,744 1,079,636
------------ ------------ ------------ ------------
Total interest income 8,322,014 7,912,427 24,598,737 23,201,891
------------ ------------ ------------ ------------
Interest expense:
Deposits 3,525,195 3,047,807 10,019,965 8,771,816
Advances and other borrowed money 393,965 428,185 1,226,048 1,271,088
------------ ------------ ------------ ------------
Total interest expense 3,919,160 3,475,992 11,246,013 10,042,904
------------ ------------ ------------ ------------
Net interest income 4,402,854 4,436,435 13,352,724 13,158,987
Provision for loan losses 60,000 75,000 180,000 225,000
------------ ------------ ------------ ------------
Net interest income after provision for loan losses 4,342,854 4,361,435 13,172,724 12,933,987
------------ ------------ ------------ ------------
Non-interest income:
Fees and service charges 253,701 251,286 767,705 761,489
Miscellaneous 125,595 131,084 360,861 426,774
------------ ------------ ------------ ------------
Total non-interest income 379,296 382,370 1,128,566 1,188,263
------------ ------------ ------------ ------------
Non-interest expenses:
Salaries and employee benefits 1,650,490 1,469,124 4,950,856 4,551,023
Net occupancy expense of premises 286,025 275,294 873,633 850,369
Equipment 219,187 278,601 809,378 815,530
Advertising 68,926 10,497 281,750 142,867
Loss on foreclosed real estate 12,531 776 25,259 28,873
Amortization of intangibles - 30,325 60,649 90,975
Miscellaneous 800,761 733,311 2,188,192 2,072,923
------------ ------------ ------------ ------------
Total non-interest expenses 3,037,920 2,797,928 9,189,717 8,552,560
------------ ------------ ------------ ------------
Income before income taxes 1,684,230 1,945,877 5,111,573 5,569,690
Income taxes 612,649 709,204 1,858,065 2,025,660
------------ ------------ ------------ ------------
Net income $ 1,071,581 $ 1,236,673 $ 3,253,508 $ 3,544,030
============ ============ ============ ============
Net income per common share:
Basic/diluted $ 0.41 $ 0.45 $ 1.23 $ 1.27
============ ============ ============ ============
Dividends per common share $ 0.3450 $ 0.3125 $ 1.0350 $ 0.9375
============ ============ ============ ============
Weighted average number of common shares and common stock
equivalents outstanding:
Basic/diluted 2,618,306 2,742,924 2,643,858 2,785,049
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-----------------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------- -----------------------------------
2000 1999 2000 1999
--------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Net income $ 1,071,581 $ 1,236,673 $ 3,253,508 $ 3,544,030
--------------- --------------- ---------------- -----------------
Other comprehensive income (loss), net of income taxes:
Gross unrealized holding loss on securities
available for sale 70,957 (23,318) 52,290 (148,749)
Deferred income taxes (25,600) 8,400 (18,900) 53,600
--------------- --------------- ---------------- -----------------
Other comprehensive income (loss) 45,357 (14,918) 33,390 (95,149)
--------------- --------------- ---------------- -----------------
Comprehensive income $ 1,116,938 $ 1,221,755 $ 3,286,898 $ 3,448,881
=============== =============== ================ =================
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------------
2000 1999
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,253,508 $ 3,544,030
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation of premises and equipment and investment in real estate 438,076 413,986
Accretion of deferred fees, premiums and discounts, net (13,501) (24,639)
Provision for loan losses 180,000 225,000
Provision for losses on foreclosed real estate 5,000 60,000
(Gain) on sales of foreclosed real estate - (48,418)
(Increase) in interest receivable (268,402) (256,964)
(Increase) decrease in other assets (676,004) 95,925
Increase (decrease) in other liabilities 2,700,236 (1,793,862)
Amortization of intangibles 60,649 90,975
------------- -------------
Net cash provided by operating activities 5,679,562 2,306,033
------------- -------------
Cash flow from investing activities:
Proceeds from calls and maturities of securities available for sale - 2,000,000
Principal repayments on securities available for sale 810,624 895,617
Purchases of securities available for sale (59,236) (47,376)
Purchases of investment securities held to maturity (1,000,000) (7,997,500)
Principal repayments on mortgage-backed securities held to maturity 13,430,229 24,324,573
Purchases of mortgage-backed securities held to maturity (9,174,892) (28,056,770)
Purchases of loans (982,400) (131,000)
Proceeds from sales of student loans 116,730 98,419
Net change in loans receivable (27,614,742) (28,469,016)
Proceeds from sales of foreclosed real estate 10,000 268,570
Additions to premises and equipment (680,153) (260,224)
Purchase of Federal Home Loan Bank of New York stock (253,000) (146,000)
------------- -------------
Net cash (used in) investing activities (25,396,840) (37,520,707)
------------- -------------
Cash flows from financing activities:
Net increase in deposits 10,523,296 29,075,191
Net (decrease) in advances from Federal Home Loan Bank of New York (3,000,000) -
Net (decrease) in other borrowed money (18,365) (16,958)
Net (decrease) increase in payments by borrowers for taxes and insurance (249,441) 492,622
Cash dividends paid (2,721,838) (2,602,742)
Purchase of treasury stock (2,703,475) (2,375,000)
------------- -------------
Net cash provided by financing activities 1,830,177 24,573,113
------------- -------------
Net (decrease) in cash and cash equivalents (17,887,101) (10,641,561)
Cash and cash equivalents - beginning 31,062,080 28,047,045
------------- -------------
Cash and cash equivalents - ending $ 13,174,979 $ 17,405,484
============= =============
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 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 $ - $ 666,750
============== ==============
Cash paid during the period for:
Income taxes $ 1,909,780 $ 1,761,654
============== ==============
Interest on deposits and borrowings $ 11,246,013 $ 10,042,904
============== ==============
</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 nine months ended September 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 stock options, if dilutive, using the treasury stock
method. There were no potentially dilutive contracts or securities outstanding
at either September 30, 2000 or 1999 or during the three or nine 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 September 30, 2000 totalled $455.8 million, which
represents an increase of $7.8 million or 1.74% as compared with $448.0 million
at December 31, 1999.
Cash and cash equivalents at September 30, 2000 decreased $17.9 million or
57.56% to $13.2 million when compared with $31.1 million at December 31, 1999.
The decrease during the nine months ended September 30, 2000, resulted primarily
from a decrease in investment in interest-bearing deposits of other banks of
$18.0 million. The cash was used primarily to fund loan originations.
Securities available for sale at September 30, 2000 decreased $726,000 or 11.29%
to $5.7 million when compared with $6.4 million at December 31, 1999. The
decrease during the nine months ended September 30, 2000, resulted primarily
from repayments on securities available for sale of $811,000, sufficient to
offset the decrease in unrealized loss on such securities of $71,000.
Investment securities held to maturity increased $1.0 million or 12.50% to $9.0
million at September 30, 2000 when compared to $8.0 million at December 31,
1999. The increase during the nine months ended September 30, 2000 resulted from
a purchase of investment securities of $1.0 million. Mortgage-backed securities
held to maturity decreased $4.4 million or 3.64% to $116.4 million at September
30, 2000 when compared to $120.8 million at December 31, 1999. The decrease
during the nine months ended September 30, 2000, resulted primarily from
principal repayments of $13.4 million, which were sufficient to offset purchases
of $9.2 million.
Net loans amounted to $296.8 million at September 30, 2000, as compared to
$268.3 million at December 31, 1999, which represents an increase of $28.5
million or 10.62%. The increase, during the nine months ended September 30,
2000, resulted primarily from loan originations and purchases exceeding
principal repayments.
Foreclosed real estate totalled $421,000 and $456,000 at September 30, 2000 and
December 31, 1999, respectively. At September 30, 2000, foreclosed real estate
consisted of six properties, three of which have a combined book value of
$301,000 and are under contract for sale.
Total deposits at September 30, 2000 totalled $372.4 million as compared with
$361.9 million at December 31, 1999, representing an increase of $10.5 million
or 2.90%.
Advances from the Federal Home Loan Bank ("FHLB") amounted to $27.6 million and
$30.6 million at September 30, 2000 and December 31, 1999, respectively. The
$3.0 million decline was the result of repayments of $10.0 million which more
than offset new borrowings of $7.0 million.
Stockholders' equity totalled $46.1 million and $48.3 million at September 30,
2000 and December 31, 1999, respectively. The decrease of $2.2 million was
primarily the result of the Company's repurchase of 130,187 shares of its common
stock at an aggregate cost of $2.7 million.
-7-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Comparison of Operating Results for the Three Months Ended September 30, 2000
and 1999
Net income decreased $165,000 or 13.34% to $1.1 million for the three months
ended September 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.
Interest income on loans increased by $520,000 or 9.52% to $6.0 million during
the three months ended September 30, 2000 when compared with $5.5 million for
the same 1999 period. The increase during the 2000 period resulted from an
increase of $25.0 million in the average balance of loans outstanding along with
a one basis point increase in the yield earned on the loan portfolio. Interest
on mortgage-backed securities decreased $25,000 or 1.22% to $2.016 million
during the three months ended September 30, 2000 when compared with $2.041
million for the same 1999 period. The decrease during the 2000 period resulted
primarily from decrease of $3.3 million in the average balance of
mortgage-backed securities, sufficient to offset an increase of nine basis
points in the yield earned on the mortgage-backed securities. Interest earned on
investments and other interest-earning assets decreased by $85,000 or 20.94% to
$321,000 during the three months ended September 30, 2000, when compared to
$406,000 during the same 1999 period primarily from a decrease of $8.0 million
in the average balance, sufficient to offset an eighty-two 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 $477,000 or 15.65% to $3.5 million during
the three months ended September 30, 2000 when compared to $3.0 million during
the same 1999 period. Such increase was primarily attributable to increases of
thirty-nine basis points in the cost of interest-bearing deposits and $15.1
million in the average balance of interest-bearing deposits. Interest expense on
advances and other borrowed money decreased by $34,000 or 7.94% to $394,000
during the three months ended September 30, 2000 when compared with $428,000
during the same 1999 period, primarily due to a decrease of $2.6 million in the
average balance of advances outstanding from the FHLB sufficient to offset a six
basis point increase in the cost of advances and other borrowed money.
Net interest income decreased $33,000 or .74% during the three months ended
September 30, 2000 when compared with the same 1999 period. Such decrease was
due to an increase in total interest expenses of $443,000, sufficient to offset
an increase in total interest income of $410,000. The net interest rate spread
decreased from 3.74% in 1999 to 3.53% in 2000. The decrease in the interest rate
spread resulted from an increase of thirty-five basis points in the cost of
interest-bearing liabilities partially offset by a fourteen basis point increase
in the yield earned on interest-earning assets.
During the three months ended September 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
-8-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
conditions. At September 30, 2000, December 31, 1999 and September 30, 1999, the
Bank's non-performing loans, which were delinquent ninety days or more, totalled
$4.1 million or 0.91% of total assets, $4.2 million or 0.94% of total assets and
$4.4 million or 1.01% of total assets, respectively. At September 30, 2000, $1.1
million of non-performing loans were accruing interest and $3.0 million were on
nonaccrual status. The non-performing loans primarily consist of one-to-four
family mortgage loans. During the three months ended September 30, 2000 and
1999, the Bank charged off loans aggregating $85,000 and $202,000, respectively.
The allowance for loan losses amounted to $2.1 million at September 30, 2000,
representing 0.68% of total loans and 50.06% 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.
Non-interest income decreased $3,000 or .79% to $379,000 during the three months
ended September 30, 2000 from $382,000 during the same 1999 period. The decrease
resulted from a decrease in miscellaneous income of $6,000, sufficient to offset
an increase in fees and service charges of $3,000.
Non-interest expenses increased by $240,000 or 8.58% to $3.0 million during the
three months ended September 30, 2000 when compared with $2.8 million during the
same 1999 period. Salaries and employee benefits, net occupancy expense,
advertising, loss on foreclosed real estate and miscellaneous expenses increased
$181,000, $11,000, $58,000, $12,000 and $68,000, respectively, which was
sufficient to offset decreases in equipment and amortization of intangibles of
$60,000 and $30,000, respectively, during the 2000 period when compared with the
same 1999 period.
Income taxes totalled $613,000 and $709,000 during the three months ended
September 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 Nine Months Ended September 30, 2000 and
1999
Net income decreased $290,000 or 8.18% to $3.3 million for the nine months ended
September 30, 2000 compared with $3.5 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 $1.35 million or 8.48% to $17.3 million
during the nine months ended September 30, 2000 when compared with $15.9 million
for the same 1999 period. The increase during the 2000 period resulted from an
increase of $24.8 million in the average balance of loans outstanding sufficient
to offset a ten basis point decrease in the yield earned on the loan portfolio.
Interest on mortgage-backed securities decreased $33,000 or .53% to $6.16
million during the nine months ended September 30, 2000 when compared with $6.19
million for the same 1999 period. The decrease during the 2000 period resulted
primarily from a decrease $1.7 million in the average balance of such portfolio
outstanding sufficient to offset an increase of five basis points in the yield
earned on the mortgage-backed securities. Interest earned on investments and
other interest-earning assets increased by $79,000 or 7.31% to $1.2 million
during the nine months ended September 30, 2000, when compared to $1.1 million
during the same 1999 period primarily due to a eighty-three basis point increase
in the yield earned on such portfolio sufficient to offset a decrease of $1.5
million 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.
-9-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Interest expense on deposits increased $1.2 million or 13.64% to $10.0 million
during the nine months ended September 30, 2000 when compared to $8.8 million
during the same 1999 period. Such increase was primarily attributable to
increases of twenty six basis points in the cost of interest-bearing deposits
and $20.9 million in the average balance of interest-bearing deposits. Interest
expense on advances and other borrowed money decreased by $45,000 or 3.54% to
$1.23 million during the nine months ended September 30, 2000 when compared with
$1.27 million during the same 1999 period, primarily due to a decrease of $1.2
million in the average balance of advances outstanding from the FHLB sufficient
to offset a four basis point increase in the cost of advances and other borrowed
money.
Net interest income increased $194,000 or 1.47% during the nine months ended
September 30, 2000 when compared with the same 1999 period. Such increase was
due to an increase in total interest income of $1.4 million, sufficient to
offset an increase in total interest expense of $1.2 million. The net interest
rate spread decreased from 3.80% in 1999 to 3.62% in 2000. The decrease in the
interest rate spread resulted from an increase of twenty-three basis points in
the cost of interest-bearing liabilities sufficient to offset a five 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 $21.5 million increase in average interest-earning assets
exceeded the interest expense related to the $19.7 million increase in average
interest-bearing liabilities.
During the nine months ended September 30, 2000 and 1999, the Bank provided
$180,000 and $225,000, 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
nine months ended September 30, 2000 and 1999, the Bank charged off loans
aggregating $123,000 and $559,000, respectively.
Non-interest income decreased $59,000 or 4.97% to $1.13 million during the nine
months ended September 30, 2000 from $1.19 million during the same 1999 period.
The decrease resulted from a decrease in miscellaneous income of $66,000
sufficient to offset an increase in fees and service charges of $7,000.
Non-interest expenses increased by $637,000 or 7.45% to $9.2 million during the
nine months ended September 30, 2000 when compared with $8.6 million during the
same 1999 period. Salaries and employee benefits, net occupancy expense,
advertising, and miscellaneous expenses increased $400,000, $23,000, $139,000
and $115,000, respectively, which was sufficient to offset decreases in
equipment, loss on foreclosed real estate and amortization of intangibles of
$7,000, $4,000, and $30,000, respectively, during the 2000 period when compared
with the same 1999 period.
Income taxes totalled $1.9 million and $2.0 million during the nine months ended
September 30, 2000 and 1999, respectively. The decrease during the 2000 period
resulted from a decrease in pre-tax income.
-10-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Liquidity and Capital Resources
The Bank is required to maintain minimum levels of liquid assets as defined by
the Office of Thrift Supervision (the "OTS") regulations. This requirement,
which may vary from time to time, depending upon economic conditions and deposit
flows, is based upon a percentage of deposits and short-term borrowings. The
required ratio currently is 4%. The Bank's liquidity averaged 4.96% during the
month of September 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.
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 September 30, 2000
amounted to $1.2 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 nine months ended
September 30, 2000. The primary source of cash was net income. Cash dividends
paid during the nine months ended September 30, 2000 and 1999 amounted to $2.7
million and $2.6 million, respectively.
The primary sources of investing activity are lending and the purchase of
mortgage-backed securities. Net loans amounted to $296.8 million and $268.3
million at September 30, 2000 and December 31, 1999, respectively. Securities
available for sale totalled $5.7 million and $6.4 million at September 30, 2000
and December 31, 1999, respectively. Mortgage-backed securities held to maturity
totalled $116.4 million and $120.8 million at September 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 September 30, 2000,
advances from the FHLB amounted to $27.6 million.
The Bank anticipates that it will have sufficient funds available to meet its
current loan commitments. At September 30, 2000, the Bank has outstanding
commitments to originate loans of $9.8 million. Certificates of deposit
scheduled to mature in one year or less at September 30, 2000, totalled $162.3
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.
-11-
<PAGE>
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
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 September 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) $ 46,073 19.22% $ 19,175 8.00% $ 23,969 10.00%
Tier 1 Capital
(to risk-weighted assets) 44,389 18.52% - - 14,382 6.00%
Core (Tier 1) Capital
(to adjusted total assets) 44,389 9.78% 18,160 4.00% 22,700 5.00%
Tangible Capital
(to adjusted total assets) 44,389 9.78% 6,810 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 June 30, 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> <C>
300 $ 27,983 $ (29,574) (51) 6.50 % (593)
200 37,554 (20,004) (35) 8.52 (391)
100 47,638 (9,920) (17) 10.54 (189)
Static 57,558 - - 12.43 -
-100 65,838 8,280 14 13.93 150
-200 70,816 13,258 23 14.78 235
-300 76,794 19,236 33 15.79 336
</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
---------------------------------------------------
Not applicable.
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: November 10, 2000 By /s/ William J. Campbell
---------------------------- -----------------------------------------
William J. Campbell
President and Chief Executive Officer
Date: November 10, 2000 By: /s/ Gary J. Thomas
---------------------------- ----------------------------------------
Gary J. Thomas
Vice President, Chief Financial Officer
-16-
