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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended                                                                         March 31, 2004                                                                 

OR

For the transition period from                                                           to                                                       

Commission File Number  0-18014

PAMRAPO BANCORP, INC.

(Exact name of registrant as specified in its charter)

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        

$.01 par value common stock — 4,974,313 shares outstanding

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PAMRAPO BANCORP, INC.

AND SUBSIDIARIES

INDEX

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PAMRAPO BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

See notes to consolidated financial statements.

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PAMRAPO BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

See notes to consolidated financial statements.

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PAMRAPO BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

See notes to consolidated financial statements.

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PAMRAPO BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See notes to consolidated financial statements.

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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 U.S. 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, 2004, 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.

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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, 2004 totaled $638.8 million, which represents an increase of $1.9 million as compared with $636.9 million at December 31, 2003.

Securities available for sale at March 31, 2004, decreased $80,000 or 2.0% to $3.8 million when compared with $3.9 million at December 31, 2003. The decrease during the three months ended March 31, 2004, resulted primarily from repayments on securities available for sale of $96,000, sufficient to offset an increase in net unrealized gain of $8,000 and purchases of $8,000.

Investment securities held to maturity at March 31, 2004, remained unchanged at $9.4 million when compared with December 31, 2003. Mortgage-backed securities held to maturity at March 31, 2004 decreased $6.6 million or 3.0% to $211.8 million when compared with $218.4 million at December 31, 2003. During the three months ended March 31, 2004, repayments of mortgage-backed securities held to maturity amounted to $11.4 million, partially offset by purchases of $5.0 million.

Net loans amounted to $378.7 million at March 31, 2004, as compared to $378.6 million at December 31, 2003, which represents an increase of $106,000. The increase during the three months ended March 31, 2004 resulted primarily from loan origination exceeding principal repayments.

Deposits at March 31, 2004 totaled $489.9 million as compared with $492.2 million at December 31, 2003, representing a decrease of $2.3 million.

Advances from the Federal Home Loan Bank (“FHLB”) increased $2.0 million or 2.3% to $89.0 million at March 31, 2004, when compared to $87.0 million at December 31, 2003.

Stockholders’ equity totaled $52.2 million and $51.3 million at March 31, 2004, and December 31, 2003, respectively. The increase of $907,000 was primarily the result of the net income for three months ended March 31, 2004, of $1.9 million, partially offset by cash dividends paid of $1.0 million.

Comparison of Operating Results for the Three Months Ended March 31, 2004 and 2003

Net income increased $99,000 or 5.4% to $1.9 million for the three months ended March 31, 2004, compared with $1.8 million for the same 2003 period. The increase in net income during the 2004 period resulted from decreases in total interest expense and provision for loan losses along with an increase in non-interest income which were partially offset by a decrease in total interest income along with increases in non-interest expenses and income taxes.

Interest income on loans decreased by $798,000 or 11.5% to $6.1 million during the three months ended March 31, 2004, when compared with $6.9 million for the same 2003 period. The decrease during the 2004 period resulted from a decrease of sixty-nine basis points in the yield earned on loans, along with a decrease of $8.3 million or 2.2% in the average balance of loans outstanding. Interest on mortgage-backed securities increased $329,000 or 15.5% to $2.5 million during the three months ended March 31, 2004, when compared with $2.1 million for the same 2003 period. The increase during the 2004 period resulted from an increase of $61.9 million or 39.7% in the average balance of mortgage-backed securities outstanding, which was sufficient to offset a decrease of ninety-four basis points in the yield earned on the mortgage-backed securities. Interest earned on

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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, 2004 and 2003 (Cont’d.)

investments and other interest-earning assets decreased by $44,000 or 15.3% to $244,000 during the three months ended March 31, 2004, when compared to $288,000 during the same 2003 period primarily due to a decrease of $4.6 million or 15.2% in the average balance of such assets outstanding sufficient to offset an increase of one basis point in the yield earned on such portfolio.

Interest expense on deposits decreased $600,000 or 22.9% to $2.0 million during the three months ended March 31, 2004, when compared to $2.6 million during the same 2003 period. Such decrease was primarily attributable to a decrease of seventy basis points in the cost of interest-bearing deposits, which was sufficient to offset an increase of $32.4 million or 7.6% in the average balance of interest-bearing deposits. Interest expense on advances and other borrowed money decreased by $201,000 or 20.1% to $798,000 during the three months ended March 31, 2004, when compared with $999,000 during the same 2003 period, primarily due to a 112 basis point decrease in the cost of advances and other borrowed money, sufficient to offset an increase of $3.8 million in the average balance of advances outstanding.

Net interest income increased $288,000 or 5.0% during the three months ended March 31, 2004 when compared with the same 2003 period. Such increase was due to a decrease in total interest expense of $801,000, sufficient to offset a decrease in total interest income of $513,000. The Bank’s net interest rate spread decreased to 3.62% in 2004 from 3.69% in 2003. The decrease in the interest rate spread resulted from a decrease of eighty-five basis points in the yield of interest-earning assets sufficient to offset seventy-eight basis point decrease in the cost of interest-bearing liabilities.

During the three months ended March 31, 2004 and 2003, the Bank provided $10,000 and $30,000, 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, 2004 and 2003, the Bank’s non-performing loans, which were delinquent ninety days or more, totaled $1.8 million or 0.28% of total assets and $2.5 million or 0.41% of total assets, respectively. At March 31, 2004, $874,000 of non-performing loans were accruing interest and $924,000 were on nonaccrual status. The non-performing loans primarily consist of one-to-four family mortgage loans. During the three months ended March 31, 2004 and 2003, the Bank charged off loans aggregating $27,000 and $7,000, respectively. The allowance for loan losses amounted to $2.5 million at March 31, 2004, representing 0.65% of total loans and 138.9% of loans delinquent ninety days or more, and $2.6 million at March 31, 2003, representing 0.67% of total loans and 103.8% of loans delinquent ninety days or more.

Non-interest income increased $39,000 or 6.8% to $612,000 during the three months ended March 31, 2004, from $573,000 during the same 2003 period, which resulted from an increase in miscellaneous income of $60,000 partially offset by a decrease in fees and service charges of $21,000.

Non-interest expenses increased by $210,000 or 6.7% to $3.4 million during the three months ended March 31, 2004, when compared with $3.2 million during the same 2003 period. Salaries and employee benefits, advertising and miscellaneous expenses increased $212,000, $18,000 and $51,000, respectively, which was sufficient to offset decreases in net occupancy and equipment of $13,000 and $58,000, respectively, during the 2004 period when compared with the same 2003 period.

Income taxes totaled $1.30 million and $1.26 million during the three months ended March 31, 2004 and 2003, respectively. The increase during the 2004 period resulted from an increase in pre-tax income of $136,000.

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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 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 2.97% during the month of March 2004. 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, 2004 and 2003. The primary source of cash was net income. Cash dividends paid during the three months ended March 31, 2004 and 2003, amounted to $1.045 million and $1.029 million, respectively.

The primary sources of investing activity are lending and the purchase of mortgage-backed securities. Net loans amounted to $378.7 million and $378.6 million at March 31, 2004, and December 31, 2003, respectively. Securities available for sale totaled $3.8 million and $3.9 million at March 31, 2004 and December 31, 2003, respectively. Mortgage-backed securities held to maturity totaled $211.8 million and $218.4 million at March 31, 2004, and December 31, 2003. 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, 2004, advances from the FHLB amounted to $89.0 million.

The Bank anticipates that it will have sufficient funds available to meet its current loan commitments. At March 31, 2004, the Bank had outstanding commitments to originate loans of $15.4 million. Certificates of deposit scheduled to mature in one year or less at March 31, 2004, totaled $175.0 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 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.

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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 March 31, 2004, as compared to the minimum regulatory capital requirements (dollars in thousands):

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.

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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, 2003, the most recent date the Bank’s NPV was calculated by the OTS.

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PAMRAPO BANCORP, INC. AND SUBSIDIARIES

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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.

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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-15(e) and 15d-15(e) 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 for 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.

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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.  Other Information

None

ITEM 6.  Exhibits and Reports on Form 8-K

(a) The following Exhibits are filed as part of this report.

(b) Reports on Form 8-K

None.

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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.