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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
--------------------------------------------------
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)
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, including area code 201-339-4600
-----------------------
Indicate by check X whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ______
-----
The number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date April 29, 2003.
--------------
$.01 par value common stock - 5,145,986 shares outstanding
PAMRAPO BANCORP, INC.
AND SUBSIDIARIES
INDEX
Page
PART I - FINANCIAL INFORMATION Number
----------
Item 1: Financial Statements
Consolidated Statements of Financial Condition
at March 31, 2003 and December 31, 2002 (Unaudited) 1
Consolidated Statements of Income for the
Three Months Ended March 31, 2003 and 2002 (Unaudited) 2
Consolidated Statements of Comprehensive Income for the
Three Months Ended March 31, 2003 and 2002 (Unaudited) 3
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2003 and 2002 (Unaudited) 4
Notes to Consolidated Financial Statements 5
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 6 - 9
Item 3: Quantitative and Qualitative Disclosure About Market Risk 10 - 11
Item 4: Controls and Procedures 12
PART II - OTHER INFORMATION 13
SIGNATURES 14
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
(Unaudited)
March 31, December 31,
ASSETS 2003 2002
- ------ ------------- -------------
Cash and amounts due from depository institutions $ 2,740,544 $ 6,172,543
Interest-bearing deposits in other banks 21,703,129 17,684,844
------------- -------------
Total cash and cash equivalents 24,443,673 23,857,387
Securities available for sale 4,346,386 4,542,528
Investment securities held to maturity;
estimated fair value of $7,568,000 (2003)
and $7,461,000 (2002) 7,085,029 7,095,209
Mortgage-backed securities held to maturity; estimated
fair value of $175,281,000 (2003) and $151,972,000 (2002) 170,012,657 146,138,326
Loans receivable 381,399,740 389,864,704
Foreclosed real estate 155,340 155,340
Investment in real estate 210,295 213,643
Premises and equipment 4,364,440 4,417,239
Federal Home Loan Bank stock, at cost 4,403,400 4,403,400
Interest receivable 3,030,248 2,982,315
Other assets 4,789,059 4,988,854
------------- -------------
Total assets $ 604,240,267 $ 588,658,945
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Deposits $ 465,123,518 $ 445,507,415
Advances from Federal Home Loan Bank of New York 79,340,000 84,340,000
Other borrowed money 141,544 149,166
Advance payments by borrowers for taxes and insurance 3,979,426 3,835,862
Other liabilities 4,075,787 4,070,229
------------- -------------
Total liabilities 552,660,275 537,902,672
------------- -------------
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 issued; 5,145,986 shares, outstanding 69,000 69,000
Paid-in capital in excess of par value 18,937,168 18,937,168
Retained earnings - substantially restricted 51,706,741 50,889,220
Accumulated other comprehensive income -
Unrealized gain on securities available for sale 248,744 242,546
Treasury stock, at cost; 1,754,014 shares (19,381,661) (19,381,661)
------------- -------------
Total stockholders' equity 51,579,992 50,756,273
------------- -------------
Total liabilities and stockholders' equity $ 604,240,267 $ 588,658,945
============= =============
See notes to consolidated financial statements.
-1-
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Unaudited)
Three Months Ended
March 31,
-------------------------------
2003 2002
-------------- --------------
Interest income:
Loans $ 6,931,445 $ 7,364,105
Mortgage-backed securities 2,124,358 2,060,444
Investments and other interest-earning assets 287,933 178,929
------------ ------------
Total interest income 9,343,736 9,603,478
------------ ------------
Interest expense:
Deposits 2,623,870 3,001,272
Advances and other borrowed money 999,496 916,077
------------ ------------
Total interest expense 3,623,366 3,917,349
------------ ------------
Net interest income 5,720,370 5,686,129
Provision for loan losses 30,000 210,000
------------ ------------
Net interest income after provision for loan losses 5,690,370 5,476,129
------------ ------------
Non-interest income:
Fees and service charges 342,015 342,345
Miscellaneous 230,784 188,057
------------ ------------
Total non-interest income 572,799 530,402
------------ ------------
Non-interest expenses:
Salaries and employee benefits 1,715,438 1,686,764
Net occupancy expense of premises 260,488 268,515
Equipment 361,820 284,789
Advertising 44,348 38,313
Federal insurance premium 17,948 18,484
Miscellaneous 756,417 669,265
------------ ------------
Total non-interest expenses 3,156,459 2,966,130
------------ ------------
Income before income taxes 3,106,710 3,040,401
Income taxes 1,259,992 1,109,185
------------ ------------
Net income $ 1,846,718 $ 1,931,216
------------ ------------
Net income per common share:
Basic/diluted $ 0.36 $ 0.37
============ ============
Dividends per common share $ 0.20 0.1875
============ ============
Weighted average number of common shares and common stock equivalents
outstanding:
Basic/diluted 5,145,986 5,151,698
============ ============
See notes to consolidated financial statements.
-2-
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-----------------------------------------------
(Unaudited)
Three Months Ended
March 31,
-------------------------------
2003 2002
-------------- --------------
Net income $ 1,846,718 $ 1,931,216
------------ ------------
Other comprehensive income, net of income taxes:
Gross unrealized holding gain on securities
available for sale 10,298 37,352
Deferred income taxes (4,100) (13,400)
------------ ------------
Other comprehensive income 6,198 23,952
------------ ------------
Comprehensive income $ 1,852,916 $ 1,955,168
============ ============
See notes to consolidated financial statements.
-3-
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
Three Months Ended
March 31,
-------------------------------
2003 2002
-------------- --------------
Cash flows from operating activities:
Net income $ 1,846,718 $ 1,931,216
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of premises and equipment
and investment in real estate 155,002 147,283
Amortization of premiums and discounts, net 97,498 17,436
Accretion of deferred loan fees, net 65,012 (64,510)
Provision for loan losses 30,000 210,000
(Increase) in interest receivable (47,933) (74,380)
Decrease (increase) in other assets 195,695 (649,832)
Increase in other liabilities 5,558 2,458,873
------------ ------------
Net cash provided by operating activities 2,347,550 3,976,086
------------ ------------
Cash flow from investing activities:
Principal repayments on securities available for sale 213,186 258,167
Purchases of securities available for sale (8,396) (11,438)
Proceeds from calls of investment securities held to maturity - 2,000,000
Principal repayments on mortgage-backed securities held
to maturity 15,971,561 10,910,007
Purchases of mortgage-backed securities held to maturity (39,931,560) (10,883,494)
Net change in loans receivable 8,369,952 (19,700,473)
Additions to premises and equipment (98,855) (14,312)
Purchase of Federal Home Loan Bank of New York stock - (607,300)
------------ ------------
Net cash (used in) investing activities (15,484,112) (18,048,843)
------------ ------------
Cash flows from financing activities:
Net increase in deposits 19,616,103 2,541,302
Net (decrease) increase in advances from Federal Home Loan Bank
of New York (5,000,000) 5,000,000
Net (decrease) in other borrowed money (7,622) (7,037)
Net increase in payments by borrowers for
taxes and insurance 143,564 150,253
Cash dividends paid (1,029,197) (966,486)
Purchase of treasury stock - (269,200)
------------ ------------
Net cash provided by financing activities 13,722,848 6,448,832
------------ ------------
Net increase (decrease) in cash and cash equivalents 586,286 (7,623,925)
Cash and cash equivalents - beginning 23,857,387 22,688,885
------------ ------------
Cash and cash equivalents - ending $ 24,443,673 $ 15,064,960
============ ============
Supplemental information:
Cash paid during the period for:
Interest on deposits and borrowings $ 3,699,930 $ 3,991,567
============ ============
See notes to consolidated financial statements.
-4-
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 Company'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 months ended March 31, 2003, 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 March
31, 2003 or 2002, or during the three 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 for the
three months ended March 31, 2002.
-5-
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 March 31, 2003 totaled $604.2 million, which represents
an increase of $15.5 million or 2.6% as compared with $588.7 million at December
31, 2002.
Securities available for sale at March 31, 2003, decreased $197,000 or 4.3% to
$4.3 million when compared with $4.5 million at December 31, 2002. The decrease
during the three months ended March 31, 2003, resulted primarily from repayments
on securities available for sale of $213,000, sufficient to offset an increase
in net unrealized gain of $10,000 and purchases of $8,000.
Investment securities held to maturity at March 31, 2003, remained unchanged at
$7.1 million when compared with December 31, 2002. Mortgage-backed securities
held to maturity at March 31, 2003 increased $23.9 million or 16.4% to $170.0
million when compared with $146.1 million at December 31, 2002. During the three
months ended March 31, 2003, purchases of mortgage-backed securities held to
maturity amounted to $39.9 million, offset by repayments of $16.0 million.
Net loans amounted to $381.4 million at March 31, 2003, as compared to $389.9
million at December 31, 2002, which represents a decrease of $8.5 million or
2.2%. The decrease during the three months ended March 31, 2003 resulted
primarily from principal repayments exceeding loan origination.
Foreclosed real estate remained unchanged at $155,000 at March 31, 2003 and
December 31, 2002, respectively.
Deposits at March 31, 2003 totaled $465.1 million as compared with $445.5
million at December 31, 2002, representing an increase of $19.6 million or 4.4%.
Advances from the Federal Home Loan Bank ("FHLB") decreased $5.0 million or 5.9%
to $79.3 million at March 31, 2003, when compared to $84.3 million at December
31, 2002, due to repayments.
Stockholders' equity totaled $51.6 million and $50.8 million at March 31, 2003,
and December 31, 2002, respectively. The increase of $824,000 was primarily the
result of the net income for three months ended March 31, 2003, of $1.8 million,
partially offset by cash dividends paid of $1.0 million.
Comparison of Operating Results for the Three Months Ended March 31, 2003 and
2002
Net income decreased $84,000 or 4.4% to $1.8 million for the three months ended
March 31, 2003, compared with $1.9 million for the same 2002 period. The
decrease in net income during the 2003 period resulted from a decrease in total
interest income along with increases in non-interest expenses and income taxes
which were offset by an increase in non-interest income along with decreases in
interest expense and in provision for loan losses.
Interest income on loans decreased by $433,000 or 5.9% to $6.9 million during
the three months ended March 31, 2003, when compared with $7.4 million for the
same 2002 period. The decrease during the 2003 period resulted from a decrease
of fifty-five basis points in the yield earned on loans, which was partially
offset by an increase of $5.2 million or 1.4% in the average balance of loans
outstanding. Interest on mortgage-backed securities increased $64,000 or 3.1% to
$2.12 million during the three months ended March 31, 2003, when compared with
$2.06 million for the same 2002 period. The increase during the 2002 period
resulted from an increase of $26.2 million or 20.2% in the average balance of
mortgage-backed securities outstanding, which
-6-
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Comparison of Operating Results for the Three Months Ended March 31, 2003 and
2002 (Cont'd.)
was sufficient to offset a decrease of ninety-one basis points in the yield
earned on the mortgage-backed securities. Interest earned on investments and
other interest-earning assets increased by $109,000 or 60.9% to $288,000 during
the three months ended March 31, 2003, when compared to $179,000 during the same
2002 period primarily due to an increase of $15.1 million or 99.8% in the
average balance of such assets outstanding sufficient to offset a decrease of
ninety-three basis points in the yield earned on such portfolio.
Interest expense on deposits decreased $377,000 or 12.6% to $2.6 million during
the three months ended March 31, 2003, when compared to $3.0 million during the
same 2002 period. Such decrease was primarily attributable to a decrease of
sixty-one basis points in the cost of interest-bearing deposits, which was
sufficient to offset an increase of $35.8 million or 9.2% in the average balance
of interest-bearing deposits. Interest expense on advances and other borrowed
money increased by $83,000 or 9.1% to $999,000 during the three months ended
March 31, 2003, when compared with $916,000 during the same 2002 period,
primarily due to an increase of $13.1 million or 18.5% in the average balance of
advances outstanding from the FHLB, sufficient to offset a forty-one basis point
decrease in the cost of advances and other borrowed money.
Net interest income increased $34,000 or 0.60% during the three months ended
March 31, 2003 when compared with the same 2002 period. Such increase was due to
a decrease in total interest expense of $294,000, sufficient to offset a
decrease in total interest income of $260,000. The Bank's net interest rate
spread decreased to 3.69% in 2003 from 3.91% in 2002. The decrease in the
interest rate spread resulted from a decrease of seventy-eight basis points in
the yield of interest-earning assets sufficient to offset fifty-five basis point
decrease in the cost of interest-bearing liabilities.
During the three months ended March 31, 2003 and 2002, the Bank provided $30,000
and $210,000, 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 March 31, 2003 and 2002,
the Bank's non-performing loans, which were delinquent ninety days or more,
totaled $2.5 million or 0.41% of total assets and $3.5 million or 0.64% of total
assets, respectively. At March 31, 2003, $1.2 million of non-performing loans
were accruing interest and $1.3 million were on nonaccrual status. The
non-performing loans primarily consist of one-to-four family mortgage loans.
During the three months ended March 31, 2003 and 2002, the Bank charged off
loans aggregating $7,000 and $63,000, respectively. The allowance for loan
losses amounted to $2.6 million at March 31, 2003, representing 0.67% of total
loans and 103.8% of loans delinquent ninety days or more, and $2.3 million at
March 31, 2002, representing 0.58% of total loans and 65.7% of loans delinquent
ninety days or more.
Non-interest income increased $43,000 or 8.1% to $573,000 during the three
months ended March 31, 2003, from $530,000 during the same 2002 period, which
resulted from an increase in miscellaneous income.
Non-interest expenses increased by $190,000 or 6.4% to $3.2 million during the
three months ended March 31, 2003, when compared with $3.0 million during the
same 2002 period. Salaries and employee benefits, equipment, advertising and
miscellaneous expenses increased $28,000, $77,000, $6,000 and $87,000,
respectively, which was sufficient to offset a decrease in net occupancy of
$8,000 during the 2003 period when compared with the same 2002 period.
-7-
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Comparison of Operating Results for the Three Months Ended March 31, 2003 and
2002 (Cont'd.)
Income taxes totaled $1.3 million and $1.1 million during the three months ended
March 31, 2003 and 2002, respectively. The increase during the 2003 period
resulted from increases in pre-tax income and the state income tax rate from
3.0% to 9.0%.
Liquidity and Capital Resources
The Bank is required by Office of Thrift Supervision (the "OTS") regulations to
maintain sufficient liquidity to ensure the Bank's safe and sound operation. The
Bank's liquidity averaged 5.86% during the month of March 2003. 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 three months ended March
31, 2003 and 2002. The primary source of cash was net income. Cash dividends
paid during the three months ended March 31, 2003 and 2002, amounted to $1.03
million and $966,000, respectively.
The primary sources of investing activity are lending and the purchase of
mortgage-backed securities. Net loans amounted to $381.4 million and $389.9
million at March 31, 2003, and December 31, 2002, respectively. Securities
available for sale totaled $4.3 million and $4.5 million at March 31, 2003 and
December 31, 2002, respectively. Mortgage-backed securities held to maturity
totaled $170.0 million and $146.1 million at March 31, 2003, and December 31,
2002. In addition to funding new loan production and mortgage-backed securities
purchases through operating and financing activities, such activities were
funded by principal repayments on existing loans and mortgage-backed securities.
Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments,
such as federal funds and interest-bearing deposits. If the Bank requires funds
beyond its ability to generate them internally, borrowing agreements exist with
the FHLB which provide an additional source of funds. At March 31, 2003,
advances from the FHLB amounted to $79.3 million.
The Bank anticipates that it will have sufficient funds available to meet its
current loan commitments. At March 31, 2003, the Bank had outstanding
commitments to originate loans of $10.3 million and to purchase mortgage-backed
securities of $5.0 million. Certificates of deposit scheduled to mature in one
year or less at March 31, 2003, 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.
-8-
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Liquidity and Capital Resources (Cont'd.)
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 at
least 4.0% of its adjusted total assets. The Capital Rule further requires each
savings institution to maintain total capital equal to at least 8.0% of its
risk-weighted assets.
The following table sets forth the Bank's capital position at March 31, 2003, as
compared to the minimum regulatory capital requirements (dollars in thousands):
To Be Well
Capitalized
Under Prompt
Minimum Capital Corrective
Actual Requirements Actions Provisions
--------------------------- --------------------------- ---------------------------
Amount Ratio Amount Ratio Amount Ratio
------------ ------------ ------------ ------------ ------------ ------------
Total Capital
(to risk-weighted assets) $ 45,943 14.93% $ 24,617 8.00% $ 30,771 10.00%
Tier 1 Capital
(to risk-weighted assets) 43,411 14.11% - - 18,463 6.00%
Core (Tier 1) Capital
(to adjusted total assets) 43,411 7.21% 24,074 4.00% 30,092 5.00%
Tangible Capital
(to adjusted total assets) 43,411 7.21% 9,028 1.50% - -
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.
-9-
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 December 31, 2002, the most recent date the Bank's NPV was
calculated by the OTS.
-10-
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
---------------------------------------------------------
NPV as
Change in Percent of Portfolio
Interest Rates Net Portfolio Value Value of Assets
--------------------------------------- ------------------------------
In Basis Points Dollar Percent NPV Change In
(Rate Shock) Amount Change Change Ratio Basis Points
- ----------------- ------------ ------------ ----------- ----------- --------------
(Dollars in Thousands)
300 $40,694 $(43,474) (52) 6.96 % (628)
200 56,628 (27,541) (33) 9.39 (385)
100 72,946 (11,222) (13) 11.73 (151)
Static 84,168 - - 13.24 -
-100 87,137 2,969 4 13.57 33
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.
-11-
PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONTROLS AND PROCEDURES
-----------------------
As of a date within 90 days of filing date of this report, based on an
evaluation of the Company's disclosure controls and procedures (as defined in
Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934), each
of the Chief Executive Officer and the Chief Financial Officer of the Company
has concluded that the Company's disclosure controls and procedures are
effective to ensure that information required to be disclosed by the Company in
its Exchange Act reports is recorded, processed, summarized and reported within
the applicable time periods specified by the SEC's rules and forms.
There were no significant changes in the Company's internal controls or in any
other factors that could significantly affect those controls subsequent to the
date of the most recent evaluation of the Company's internal controls by the
Company, including any corrective actions with regard to any significant
deficiencies or material weaknesses.
-12-
PAMRAPO BANCORP, INC.
PART II
ITEM 1. Legal Proceedings
-----------------
Neither the Company nor the Bank is 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
---------------------------------------------------
None.
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, 2000, filed
with the Securities and Exchange Commission on March
30, 2001, Commission File No. 000-18014.
(b) Reports on Form 8-K
None.
-13-
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: April 29, 2003 By /s/ William J. Campbell
---------------------------- -------------------------------------
William J. Campbell
President and Chief Executive Officer
Date: April 29, 2003 By: /s/ Kenneth D. Walter
---------------------------- -------------------------------------
Kenneth D. Walter
Vice President and Chief Financial
Officer
-14-
CERTIFICATIONS
I, William J. Campbell, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Pamrapo Bancorp,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the period presented in
this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: April 29, 2003
/s/ William J. Campbell
-------------------------------
William J. Campbell
Chief Executive Officer
I, Kenneth D. Walter, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Pamrapo Bancorp,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the period presented in
this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: April 29, 2003
/s/ Kenneth D. Walter
---------------------------
Kenneth D. Walter
Chief Financial Officer