-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UqKom+AbHJERPibXfjp+VwMUyJINiXDHkOU/ZakPWM913AvEzTAVrjnmUQ/PbnJk 92jRoGssjOC3ulVbxKJe+w== 0000928385-02-002816.txt : 20020814 0000928385-02-002816.hdr.sgml : 20020814 20020814132046 ACCESSION NUMBER: 0000928385-02-002816 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAMRAPO BANCORP INC CENTRAL INDEX KEY: 0000854071 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036] IRS NUMBER: 222984813 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18014 FILM NUMBER: 02733809 BUSINESS ADDRESS: STREET 1: 611 AVE C CITY: BAYONNE STATE: NJ ZIP: 07002 BUSINESS PHONE: 2013394600 MAIL ADDRESS: STREET 2: 611 AVENUE C CITY: BAYONNE STATE: NY ZIP: 07002 10-Q 1 d10q.txt FORM 10-Q 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, 2002 ------------- 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) NEW JERSEY 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 July 31, 2002. ------------- $.01 par value common stock - 5,133,986 shares outstanding PAMRAPO BANCORP, INC. AND SUBSIDIARIES INDEX Page Number ------ PART I - FINANCIAL INFORMATION Item 1: Financial Statements Consolidated Statements of Financial Condition at June 30, 2002 and December 31, 2001 (Unaudited) 1 Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2002 and 2001 (Unaudited) 2 Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended June 30, 2002 and 2001 (Unaudited) 3 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001 (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 PAMRAPO BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) June 30, December 31, 2002 2001 ------------- ------------- ASSETS Cash and amounts due from depository institutions $ 41,059,542 $ 22,688,885 Securities available for sale 4,830,665 5,304,032 Investment securities held to maturity; estimated fair value of $3,142,000 (2002) and $5,017,000 (2001) 3,000,000 5,000,000 Mortgage-backed securities held to maturity; estimated fair value of $123,828,000 (2002) and $124,578,000 (2001) 119,739,494 122,417,611 Loans receivable 381,548,950 369,238,574 Foreclosed real estate 238,141 238,141 Investment in real estate 220,338 227,033 Premises and equipment 4,669,682 4,830,735 Federal Home Loan Bank stock, at cost 4,403,400 3,796,100 Interest receivable 2,935,763 2,944,226 Other assets 3,365,801 2,953,505 ------------- ------------- Total assets $ 566,011,776 $ 539,638,842 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $ 429,056,290 $ 416,586,795 Advances from Federal Home Loan Bank of New York 77,340,000 67,340,000 Other borrowed money 163,960 178,176 Advance payments by borrowers for taxes and insurance 3,516,737 3,516,532 Other liabilities 6,855,574 4,494,164 ------------- ------------- Total liabilities 516,932,561 492,115,667 ------------- ------------- Stockholders' equity: Preferred stock; authorized 3,000,000 shares; issued and outstanding - none -- -- Common stock; par value $.01; authorized 7,000,000 shares; 6,900,000 shares and 3,450,000 shares, respectively, issued; 5,133,986 shares and 2,577,293 shares, respectively, outstanding 69,000 34,500 Paid-in capital in excess of par value 18,872,268 18,906,768 Retained earnings - substantially restricted 49,446,747 47,621,056 Accumulated other comprehensive income - unrealized gain on securities available for sale 205,461 195,784 Treasury stock, at cost; 1,766,014 and 872,707 shares, respectively (19,514,261) (19,234,933) ------------- ------------- Total stockholders' equity 49,079,215 47,523,175 ------------- ------------- Total liabilities and stockholders' equity $ 566,011,776 $ 539,638,842 ============= =============
See notes to consolidated financial statements. -1- PAMRAPO BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ------------------------- ------------------------- 2002 2001 2002 2001 ----------- ----------- ----------- ----------- Interest income: Loans $ 7,410,862 $ 6,609,507 $14,774,967 $13,057,440 Mortgage-backed securities 1,980,494 1,900,611 4,040,938 3,887,954 Investments and other interest-earning assets 200,563 417,659 379,492 758,988 ----------- ----------- ----------- ----------- Total interest income 9,591,919 8,927,777 19,195,397 17,704,382 ----------- ----------- ----------- ----------- Interest expense: Deposits 2,876,787 3,947,194 5,878,059 7,892,765 Advances and other borrowed money 902,822 540,632 1,818,899 1,055,746 ----------- ----------- ----------- ----------- Total interest expense 3,779,609 4,487,826 7,696,958 8,948,511 ----------- ----------- ----------- ----------- Net interest income 5,812,310 4,439,951 11,498,439 8,755,871 Provision for loan losses 225,000 60,000 435,000 120,000 ----------- ----------- ----------- ----------- Net interest income after provision for loan losses 5,587,310 4,379,951 11,063,439 8,635,871 ----------- ----------- ----------- ----------- Non-interest income: Fees and service charges 314,305 293,071 656,650 557,541 Miscellaneous 189,853 98,869 377,910 277,001 ----------- ----------- ----------- ----------- Total non-interest income 504,158 391,940 1,034,560 834,542 ----------- ----------- ----------- ----------- Non-interest expenses: Salaries and employee benefits 1,835,679 1,667,976 3,522,443 3,329,862 Net occupancy expense of premises 296,039 295,267 564,554 622,465 Equipment 332,324 306,078 617,113 605,603 Advertising 51,464 50,474 89,777 95,781 Miscellaneous 727,320 830,002 1,415,069 1,542,436 ----------- ----------- ----------- ----------- Total non-interest expenses 3,242,826 3,149,797 6,208,956 6,196,147 ----------- ----------- ----------- ----------- Income before income taxes 2,848,642 1,622,094 5,889,043 3,274,266 Income taxes 1,023,185 598,877 2,132,370 1,207,405 ----------- ----------- ----------- ----------- Net income $ 1,825,457 $ 1,023,217 $ 3,756,673 $ 2,066,861 =========== =========== =========== =========== Net income per common share: Basic/diluted $ 0.36 $ 0.20 $ 0.73 $ 0.40 =========== =========== =========== =========== Dividends per common share $ 0.1875 $ 0.18 $ 0.375 $ 0.36 =========== =========== =========== =========== Weighted average number of common shares and common stock equivalents outstanding: Basic/diluted 5,134,289 5,155,474 5,131,178 5,165,530 =========== =========== =========== ===========
See notes to consolidated financial statements. -2- PAMRAPO BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, -------------------------- -------------------------- 2002 2001 2002 2001 ----------- ----------- ----------- ----------- Net income $ 1,825,457 $ 1,023,217 $ 3,756,673 $ 2,066,861 ----------- ----------- ----------- ----------- Other comprehensive (loss) income, net of income taxes: Gross unrealized holding (loss) gain on securities available for sale (1,175) 17,848 36,177 85,466 Deferred income taxes (13,100) (6,400) (26,500) (30,800) ----------- ----------- ----------- ----------- Other comprehensive (loss) income (14,275) 11,448 9,677 54,666 ----------- ----------- ----------- ----------- Comprehensive income $ 1,811,182 $ 1,034,665 $ 3,766,350 $ 2,121,527 =========== =========== =========== ===========
See notes to consolidated financial statements. -3- PAMRAPO BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, ---------------------------- 2002 2001 ------------ ------------ Cash flows from operating activities: Net income $ 3,756,673 $ 2,066,861 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of premises and equipment and investment in real estate 307,965 288,750 Accretion of deferred fees, premiums and discounts, net (68,273) (3,272) Provision for loan losses 435,000 120,000 Provision for losses on foreclosed real estate -- 20,037 (Gain) on sales of foreclosed real estate -- (7,653) Decrease (increase) in interest receivable 8,463 (49,051) (Increase) in other assets (438,796) (749,410) Increase in other liabilities 2,361,410 4,799,710 ------------ ------------ Net cash provided by operating activities 6,362,442 6,485,972 ------------ ------------ Cash flows from investing activities: Principal repayments on securities available for sale 527,435 475,677 Purchases of securities available for sale (22,415) (39,772) Purchases of investment securities held to maturity -- (3,000,000) Proceeds from calls of investment securities held to maturity 2,000,000 2,000,000 Principal repayments on mortgage-backed securities held to maturity 19,564,397 12,876,991 Purchases of mortgage-backed securities held to maturity (16,933,651) (4,036,119) Net change in loans receivable (12,625,208) (34,341,194) Proceeds from sales of foreclosed real estate -- 213,417 Additions to premises and equipment (140,217) (246,598) Purchase of Federal Home Loan Bank of New York stock (607,300) (299,900) ------------ ------------ Net cash (used in) investing activities (8,236,959) (26,397,498) ------------ ------------ Cash flows from financing activities: Net increase in deposits 12,469,495 31,159,374 Net increase in advances from Federal Home Loan Bank of New York 10,000,000 -- Net (decrease) in other borrowed money (14,216) (13,126) Net increase in payments by borrowers for taxes and insurance 205 657,657 Cash dividends paid (1,930,982) (1,855,969) Purchase of treasury stock (279,328) (405,000) ------------ ------------ Net cash provided by financing activities 20,245,174 29,542,936 ------------ ------------ Net increase in cash and cash equivalents 18,370,657 9,631,410 Cash and cash equivalents - beginning 22,688,885 14,253,854 ------------ ------------ Cash and cash equivalents - ending $ 41,059,542 $ 23,885,264 ============ ============
See notes to consolidated financial statements. -4- PAMRAPO BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, ----------------------- 2002 2001 ---------- ---------- Supplemental information: Transfer of loans receivable to foreclosed real estate $ -- $ 33,264 ========== ========== Cash paid during the period for: Income taxes $2,329,660 $ 724,854 ========== ========== Interest on deposits and borrowings $7,740,661 $8,674,135 ========== ==========
See notes to consolidated financial statements. -5- 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 Regulation 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 month periods ended June 30, 2002, 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, 2002 or 2001, or during the three and six months then ended. On April 30, 2002 , the Board of Directors declared a two-for-one stock split which was paid on May 29, 2002 in the form of a stock dividend on the Company's common stock to shareholders of record on May 15, 2002. Net income per common share, dividends per common share, and weighted average number of common shares outstanding have been adjusted to reflect the two-for-one stock split. 4. SUBSEQUENT EVENT On July 2, 2002, the State of New Jersey enacted changed in its corporate business tax law. Among these changes are two which significantly impact the Bank: (a) an increase in the tax rate, from 3% to 9%, applicable to the Bank's pre-tax income and (b) the elimination of the previously permitted exclusion from pre-tax income of certain dividends received. These changes are retroactive to January 1, 2002. The Company has determined that the cumulative effect of the tax law change, through July 2, 2002, was a decrease to net income of approximately $99,000, which includes, net of the effect of federal income taxes, the recording of additional current state tax for the six months ended June 30, 2002, and the adjustment of state deferred tax assets. This adjustment will be recorded in July 2002. -6- PAMRAPO BANCORP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statement This Form 10-Q may include certain forward-looking statements based on current management expectations. The Company's actual results could differ materially from those management expectations. Factors that could cause future results to vary from current management expectations include, but are not limited to, general economic conditions, legislative and regulatory changes, monetary and fiscal policies of the federal government, changes in tax policies, rates and regulations of federal, state and local tax authorities, changes in interest rates, deposit flows, the cost of funds, demand for loan products, demand for financial services, competition, changes in the quality or composition of loan and investment portfolios of Pamrapo Savings Bank, SLA, the Company's wholly-owned subsidiary, (the "Bank"), changes in accounting principles, policies or guidelines, and other economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services and prices. Further description of the risks and uncertainties to the business are included in the Company's other filings with the Securities and Exchange Commission. Changes in Financial Condition The Company's assets at June 30, 2002 totaled $566.0 million, which represents an increase of $26.4 million or 4.89% as compared with $539.6 million at December 31, 2001. Cash and amounts due from depository institution totaled $41.1 million and $22.7 at June 30, 2002 and December 31, 2001, respectively. Securities available for sale at June 30, 2002 decreased $473,000 or 8.92% to $4.8 million when compared with $5.3 million at December 31, 2001. The decrease during the six months ended June 30, 2002, resulted primarily from repayments on securities available for sale of $527,000, sufficient to offset an increase in net unrealized gain of $36,000 and purchases of $22,000. Investment securities held to maturity at June 30, 2002 decreased $2.0 million or 40.00% to $3.0 million when compared with $5.0 million at December 31, 2001. The decrease during the six months ended June 30, 2002 resulted primarily from calls of such securities of $2.0 million. Mortgage-backed securities held to maturity decreased $2.7 million or 2.21% to $119.7 million at June 30, 2002 when compared to $122.4 million at December 31, 2001. The decrease during the six months ended June 30, 2002, resulted primarily from principal repayments of $19.6 million sufficient to offset purchases of $16.9 million. Net loans amounted to $381.5 million at June 30, 2002, as compared to $369.2 million at December 31, 2001, which represents an increase of $12.3 million or 3.33%. The increase during the six months ended June 30, 2002 resulted primarily from loan originations exceeding principal repayments. Foreclosed real estate remained unchanged at $238,000 at June 30, 2002 and December 31, 2001. At June 30, 2002, foreclosed real estate consisted of two properties, one of which with a book value of $83,000 is under contract for sale. Deposits at June 30, 2002 totaled $429.1 million as compared with $416.6 million at December 31, 2001, representing an increase of $12.5 million or 3.00%. -7- PAMRAPO BANCORP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Changes in Financial Condition (Cont'd.) Advances from the Federal Home Loan Bank ("FHLB") increased $10.0 million or 14.86% to $77.3 million at June 30, 2002, when compared to $67.3 million at December 31, 2001. Stockholders' equity totaled $49.1 million and $47.5 million at June 30, 2002 and December 31, 2001, respectively. The increase of $1.6 million was primarily the result of the net income for six months ended June 30, 2002, of $3.8 million, partially offset by the Company's repurchase of 10,300 shares of its common stock at an aggregate cost of $279,000, along with cash dividend paid of $1.9 million. Comparison of Operating Results for the Three Months Ended June 30, 2002 and 2001 Net income increased $802,000 or 78.40% to $1.8 million for the three months ended June 30, 2002 compared with $1.0 million for the same 2001 period. The increase in net income during the 2002 period resulted from increases in total interest income and non-interest income, and a decrease in total interest expense, which were partially offset by increases in provision for loan losses, non-interest expenses and income taxes. Interest income on loans increased by $801,000 or 12.12% to $7.4 million during the three months ended June 30, 2002 when compared with $6.6 million for the same 2001 period. The increase during the 2002 period resulted from an increase of $57.4 million in the average balance of loans outstanding which was sufficient to offset a thirty-seven basis point decrease in the yield earned on the loan portfolio. Interest on mortgage-backed securities increased $80,000 or 4.21% to $2.0 million during the three months ended June 30, 2002 when compared with $1.9 million for the same 2001 period. The increase during the 2002 period resulted from an increase of $9.8 million in the average balance of mortgage-backed securities outstanding which was sufficient to offset a decrease of twenty-five basis points in the yield earned on mortgage-backed securities. Interest earned on investments and other interest-earning assets decreased by $217,000 to $201,000 during the three months ended June 30, 2002, when compared to $418,000 during the same 2001 period primarily due to a decrease of 319 basis points in the yield earned on such portfolio. Interest expense on deposits decreased $1.1 million or 27.11% to $2.88 million during the three months ended June 30, 2002 when compared to $3.95 million during the same 2001 period. Such decrease was primarily attributable to a decrease of 126 basis points in the cost of interest-bearing deposits, sufficient to offset an increase of $18.4 million in the average balance of interest-bearing deposits. Interest expense on advances and other borrowed money increased by $362,000 or 66.91% to $903,000 during the three months ended June 30, 2002 when compared with $541,000 during the same 2001 period, primarily due to an increase of $35.9 million in the average balance of advances outstanding from the FHLB, sufficient to offset a 101 basis point decrease in the cost of advances and other borrowed money. Net interest income increased $1.4 million or 30.90% during the three months ended June 30, 2002 when compared with the same 2001 period. Such increase was due to an increase in total interest income of $664,000 along with a decrease in total interest expense of $708,000. The Bank's net interest rate spread increased from 3.25% in 2001 to 3.89% in 2002. The increase in the interest rate spread resulted from a decrease of 110 basis points in the cost of interest-bearing liabilities, sufficient to offset a forty-six basis point decrease in the yield earned on interest-earning assets. -8- 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 June 30, 2002 and 2001 (Cont'd.) During the three months ended June 30, 2002 and 2001, the Bank provided $225,000 and $60,000, 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, 2002 and 2001, the Bank's non-performing loans, which were delinquent ninety days or more, totaled $3.0 million or 0.53% of total assets and $4.4 million or 0.87% of total assets, respectively. At June 30, 2002, $1.0 million of non-performing loans were accruing interest and $2.0 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, 2002 and 2001, the Bank charged off loans aggregating $115,000 and $41,000, respectively. The allowance for loan losses amounted to $2.4 million at June 30, 2002, representing 0.63% of total loans and 80.89% of loans delinquent ninety days or more, and $1.9 million at June 30, 2001, representing 0.56% of total loans and 44.46% of loans delinquent ninety days or more. Non-interest income increased $112,000 or 28.57% to $504,000 during the three months ended June 30, 2002 from $392,000 during the same 2001 period. The increase resulted from increases in fees and service charges of $21,000 and miscellaneous income of $91,000. Non-interest expenses increased by $93,000 or 2.95% to $3.243 million during the three months ended June 30, 2002 when compared with $3.150 million during the same 2001 period. Salaries and employee benefits, occupancy, equipment and advertising increased $168,000, $1,000, $26,000 and $1,000, respectively, which was sufficient to offset a decrease in miscellaneous expenses of $103,000 during the 2002 period when compared with the same 2001 period. Income taxes totaled $1.0 million and $599,000 during the three months ended June 30, 2002 and 2001, respectively. The increase during the 2002 period resulted from an increase in pre-tax income. Comparison of Operating Results for the Six Months Ended June 30, 2002 and 2001 Net income increased $1.7 million or 81.76% to $3.8 million for the six months ended June 30, 2002 compared with $2.1 million for the same 2001 period. The increase in net income during the 2002 period resulted from increases in total interest income and non-interest income, along with a decrease in total interest expense, sufficient to offset increases in provision for loan losses, non-interest expense and income taxes. Interest income on loans increased by $1.7 million or 13.15% to $14.8 million during the six months ended June 30, 2002 when compared with $13.1 million for the same 2001 period. The increase during the 2002 period resulted from an increase of $62.9 million in the average balance of loans outstanding which was sufficient to offset a forty-four basis point decrease in the yield earned on the loan portfolio. Interest on mortgage-backed securities increased $153,000 or 3.94% to $4.04 million during the six months ended June 30, 2002 when compared with $3.89 million for the same 2001 period. The increase during the 2002 period resulted from an increase of $9.4 million in the average balance of mortgage- -9- PAMRAPO BANCORP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Comparison of Operating Results for the Six Months Ended June 30, 2002 and 2001 (Cont'd.) backed securities outstanding, which was sufficient to offset a decrease of twenty-five basis points in the yield earned on mortgage-backed securities. Interest earned on investments and other interest-earning assets decreased by $380,000 or 50.07% to $379,000 during the six months ended June 30, 2002, when compared to $759,000 during the same 2001 period primarily due to decreases of 282 basis points in the yield earned on such portfolio and $2.1 million in the average balance of such assets outstanding. Interest expense on deposits decreased $2.0 million or 25.53% to $ 5.9 million during the six months ended June 30, 2002 when compared to $7.9 million during the same 2001 period. Such decrease was primarily attributable to a decrease of 126 basis points in the cost of interest-bearing deposits, sufficient to offset an increase of $22.4 million in the average balance of interest-bearing deposits. Interest expense on advances and other borrowed money increased by $763,000 or 72.25% to $1.82 million during the six months ended June 30, 2002 when compared with $1.06 million during the same 2001 period which was primarily due to an increase of $35.5 million in the average balance of advances outstanding from the FHLB, sufficient to offset a seventy-nine basis point decrease in the cost of advances and other borrowed money. Net interest income increased $2.7 million or 31.32% during the six months ended June 30, 2002 when compared with the same 2001 period. Such increase was due to an increase in total interest income of $1.49 million, along with a decrease in total interest expense of $1.25 million. The Bank's net interest rate spread increased from 3.27% in 2001 to 3.90% in 2002. The increase in the interest rate spread resulted from a decrease of 108 basis points in the cost of interest-bearing liabilities sufficient to offset a forty-five basis point decrease in the yield earned on interest-earning assets. During the six months ended June 30, 2002 and 2001, the Bank provided $435,000 and $120,000, respectively, as a provision for loan losses. During the past year Pamrapo's loan originations increased to approximately $120 million. The increase in the provision for losses on loans in 2002 reflects management's response to the increase in loan activity and its desire to raise the allowance on loan losses to a level more closely in line with industry norms. 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, 2001 and 2000, the Bank charged off loans aggregating $178,000 and $134,000, respectively. Non-interest income increased $200,000 or 23.95% to $1.0 million during the six months ended June 30, 2002 from $835,000 during the same 2001 period. The increase resulted from increases in fees and service charges of $99,000 and miscellaneous income of $101,000. Non-interest expenses increased by $13,000 to $6.209 million during the six months ended June 30, 2002 when compared with $6.196 million during the same 2001 period. Salaries and employee benefits and equipment increased $192,000 and $11,000, respectively, which was sufficient to offset decreases in occupancy, advertising and miscellaneous expenses of $57,000, $6,000 and $127,000, respectively, during the 2002 period when compared with the same 2001 period. Income taxes totaled $2.1 million and $1.2 million during the six months ended June 30, 2002 and 2001, respectively. The increase during the 2002 period resulted from an increase in pre-tax income. -10- 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 levels of liquid assets under the Office of Thrift Supervision (the "OTS") regulations sufficient to ensure the Bank's safe and sound operation. The Bank's liquidity averaged 11.13% during the month of June 2002. 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'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, 2002 and 2001. Cash dividends paid during the six months ended June 30, 2002 and 2001 amounted to $1.93 million and $1.86 million, respectively. The primary sources of investing activity are lending and the purchase of mortgage-backed securities. Net loans amounted to $381.5 million and $369.2 million at June 30, 2002 and December 31, 2001, respectively. Securities available for sale totaled $4.8 million and $5.3 million at June 30, 2002 and December 31, 2001, respectively. Mortgage-backed securities held to maturity totaled $119.7 million and $122.4 million at June 30, 2002 and December 31, 2001, 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, 2002, advances from the FHLB amounted to $77.3 million. The Bank anticipates that it will have sufficient funds available to meet its current loan commitments. At June 30, 2002, the Bank has outstanding commitments to originate loans of $12.0 million and to purchase investment securities of $2.0 million. Certificates of deposit scheduled to mature in one year or less at June 30, 2002, totaled $165.1 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- PAMRAPO BANCORP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources (Cont'd.) The following table sets forth the Bank's capital position at June 30, 2002, as compared to the minimum regulatory capital requirements:
Under Prompt Minimum Capital Corrective Actual Requirements Actions Provisions ------------------ ------------------ ------------------- Amount Ratio Amount Ratio Amount Ratio ------- ----- ------- ----- ------- ----- Total Capital (to risk-weighted assets) $45,236 15.51% $23,332 8.00% $29,165 10.00% Tier 1 Capital (to risk-weighted assets) 42,878 14.70% -- -- 17,499 6.00% Core (Tier 1) Capital (to adjusted total assets) 42,878 7.61% 22,536 4.00% 28,170 5.00% Tangible Capital (to adjusted total assets) 42,878 7.61% 8,451 1.50% -- --
Sale of Branches On April 18, 2002, the Bank entered into an agreement to sell deposits, furniture, fixtures and leasehold improvements at its two Brick, New Jersey branch offices (the "Branches") to another financial institution (the "Purchaser"). The amount to be paid by the Bank to the Purchaser in consideration of the assumption by the Purchaser of the deposit liabilities shall equal the outstanding balances and accrued interest on the deposit liabilities as of the close of business on the closing date reduced by certain adjustments. The deposit premium shall be $700,000, which includes the carrying value of the leasehold improvements and furniture and fixtures. In the event the assumed deposits as of the closing date are less than $20.0 million, the purchase price shall be reduced to an amount equal to 2% of the amount of assumed deposits. At June 30, 2002, the deposits at the Branches were approximately $21.3 million and the book value of the furniture, fixtures and leasehold improvements was $247,000. The sale of branches is expected to be closed in the third quarter of 2002. -12- 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. 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 OTS 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, 2002, the most recent date the Bank's NPV was calculated by the OTS. -13- PAMRAPO BANCORP, INC. AND SUBSIDIARIES QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
NPV as Percent of Portfolio Change in Net Portfolio Value Value of Assets Interest Rates ------------------------------------------ ----------------------------- In Basis Points Dollar Percent NPV Change In (Rate Shock) Amount Change Change Ratio Basis Points - ----------------- ------- -------- ------- ------ ------------ (Dollars in Thousands) 300 $32,207 $(47,673) (60) 6.04% (754) 200 47,953 (31,926) (40) 8.70% (488) 100 64,165 (15,714) (20) 11.26% (232) Static 79,880 -- -- 13.58% -- -100 90,150 10,270 13 14.99% 141
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- 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 The Annual Stockholders' Meeting was held on May 1, 2002. The following matters were submitted to the stockholders: 1. Election of two directors: A. Directors elected at the meeting for terms to expire in 2005. Number of Shares --------------------- For Withheld --------- -------- Mr. Daniel J. Masarelli 2,309,816 33,795 Mr. Francis J. O'Donnell 2,306,116 37,495 The following directors' terms of office as a director continued after the meeting: (i) Mr. William J. Campbell (ii) Dr. Jamie Portela (iii) Mr. John A. Morecraft (iv) Mr. James Kennedy Number of Shares ----------------------------- For Against Abstained --------- ------- --------- 2. The ratification of Radics & Co., LLC as independent auditors of the Company for the fiscal year ending December 31, 2002. 2,288,935 44,706 9,970 -15- PAMRAPO BANCORP, INC. PART II 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). 99.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). 99.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). * Incorporated herein by reference to 10-K Annual Report for the fiscal year ended December 31, 2001, filed with the Securities and Exchange Commission on March 30, 2002, Commission File No. 000-18014. (b) Reports on Form 8-K None. -16- 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, 2002 By /s/ WILLIAM J. CAMPBELL -------------------- ---------------------------------------- William J. Campbell President and Chief Executive Officer Date: August 14, 2002 By: /s/ KENNETH D. WALTER -------------------- --------------------------------------- Kenneth D. Walter Vice President and Chief Financial Officer -17- EX-11.0 3 dex110.txt EXHIBIT 11.0 Exhibit 11.0 PAMRAPO BANCORP, INC. AND SUBSIDIARIES STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Six Months Ended June 30, 2002 June 30, 2002 ------------------- -------------------- Net income $ 1,825,457 $ 3,756,673 =========== =========== Weighted average shares outstanding - basic and diluted 5,134,289 5,131,178 =========== =========== Basic and diluted earnings per share $ 0.36 $ 0.73 =========== ===========
EX-99.1 4 dex991.txt EXHIBIT 99.1 Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Pamrapo Bancorp, Inc. (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William J. Campbell, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. August 14, 2002 /s/ WILLIAM J. CAMPBELL -------------------------------- Chief Executive Officer EX-99.2 5 dex992.txt EXHIBIT 99.2 Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Pamrapo Bancorp, Inc. (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kenneth D. Walter, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. August 14, 2002 /s/ KENNETH D. WALTER -------------------------------- Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----