United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Period Ended June 30, 1996
Commission File Number: 0-15830
Raritan Bancorp Inc.
(exact name of registrant as specified in its charter)
Delaware 22-2792402
(State of Incorporation) (I.R.S. Employer
Identification Number)
9 West Somerset Street, Raritan, New Jersey 08869
(address of principal executive offices) (zip code)
908-725-0080
(Registrant's telephone number, including area code)
Indicate by check mark 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 period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days.
X Yes No
--- ---
Applicable only to corporate issuers:
As of August 7, 1996, 1,539,785 common shares, $.01 par value per
share were outstanding.
PAGE
<PAGE>
RARITAN BANCORP INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS 1
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 6
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS 11
ITEM 2 CHANGES IN THE RIGHTS OF THE CORPORATION'S
SECURITY HOLDERS 11
ITEM 3 DEFAULTS BY THE CORPORATION ON ITS SENIOR
SECURITIES 11
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 11
ITEM 5 OTHER INFORMATION 11
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 12
PAGE
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RARITAN BANCORP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars In thousands, except per share data)
</TABLE>
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
(Unaudited) (Audited)
- -------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and due from banks $ 7,572 $ 8,586
Federal funds sold 8,800 31,300
- -------------------------------------------------------------------------------
Total cash and cash equivalents 16,372 39,886
Securities available-for-sale,
at fair value 57,395 50,547
Investment securities, net (fair
value: $54,490 at June 30, 1996
and $60,831 at December 31,
1995) 56,108 61,406
Loans: 206,930 195,639
Less: Unearned income 435 467
Allowance for loan losses 2,465 2,582
- -------------------------------------------------------------------------------
Net loans 204,030 192,590
- -------------------------------------------------------------------------------
Banking premises and equipment, net 3,620 3,231
Federal Home Loan Bank of
New York stock, at cost 2,669 2,669
Accrued interest receivable 2,052 1,859
Other assets 2,464 2,622
- -------------------------------------------------------------------------------
Total assets $344,710 $354,810
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Liabilities and Shareholders'
Equity:
Due to depositors:
Interest-bearing $293,731 $294,210
Non-interest-bearing 19,951 20,828
- -------------------------------------------------------------------------------
Total deposits 313,682 315,038
Borrowings 206 10,206
Accrued interest payable 52 61
Accrued expenses and other
liabilities 5,382 3,157
- -------------------------------------------------------------------------------
Total liabilities 319,322 328,462
- -------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock, $.01 par value,
2,000,000 shares authorized,
none issued
Common stock, $.01 par value,
3,500,000 shares authorized,
1,725,000 shares issued with
1,422,689 shares outstanding
at June 30, 1996 and 1,492,189
shares outstanding at
December 31, 1995 17 17
Additional paid-in capital 10,596 10,598
Retained earnings 18,913 17,801
Fair value adjustment of securities
available for sale, net of tax (126) 416
Less: Unallocated common stock
acquired by the ESOP (206) (206)
Cost of common stock in
treasury, 302,311 shares at
June 30, 1996 and 232,811
shares at December 31,1995 (3,806) (2,278)
- -------------------------------------------------------------------------------
Total shareholders' equity 25,388 26,348
Commitments and contingencies
- -------------------------------------------------------------------------------
Total liabilities and shareholders'
equity $344,710 $354,810
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
RARITAN BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, March 31,
- -----------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on real estate
loans $ 3,182 $ 2,972 $ 6,278 $ 5,804
Interest and fees on other loans 922 895 1,825 1,751
Interest and dividends on
investment securities:
Taxable 1,747 1,869 3,439 3,751
Tax-exempt 13 14 26 27
Interest on deposits in other
banks 198 62 513 157
- ----------------------------------------------------------------------------------------------------------------------
Total interest income 6,062 5,812 12,081 11,490
- ----------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposit accounts 3,158 3,176 6,368 6,035
Interest on borrowings 5 113 15 261
- ----------------------------------------------------------------------------------------------------------------------
Total interest expense 3,163 3,289 6,383 6,296
- ----------------------------------------------------------------------------------------------------------------------
Net interest income 2,899 2,523 5,698 5,194
Provision for loan losses 75 75 150 150
- ----------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 2,824 2,448 5,548 5,044
Other income:
Service charges and other income 178 148 352 299
Gains on net securities transactions 1 56 1 56
- ----------------------------------------------------------------------------------------------------------------------
Total other income 179 204 353 355
- ----------------------------------------------------------------------------------------------------------------------
Operating expenses:
Salaries and employee benefits 1,031 835 1,938 1,688
Occupancy expense 171 162 370 321
FDIC insurance premium 44 168 87 337
Net cost of operation of
other real estate 15 19 23 39
Other operating expenses 472 514 1,032 1,020
- ----------------------------------------------------------------------------------------------------------------------
Total operating expenses 1,733 1,698 3,450 3,405
- ----------------------------------------------------------------------------------------------------------------------
Income before income tax expense 1,270 954 2,451 1,994
Income tax expense 466 347 904 734
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 804 $ 607 $ 1,547 $ 1,260
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Average number of shares outstanding 1,551,668 1,642,697 1,574,776 1,634,416
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Net income per share $ 0.52 $ 0.37 $ 0.98 $ 0.77
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
Raritan Bancorp Inc. and Subsidiary
Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,547 $ 1,260
Adjustments to reconcile net income
to net cash provided by operating
activities:
Increase in accrued interest
receivable (193) (80)
Amortization on securities, net 103 45
Provision for loan losses 150 150
Gain on net securities transactions (1) (56)
(Decrease) in accrued interest
payable (9) (18)
Increase in accrued expenses 1,342 192
(Increase) decrease in prepaid expenses 53 (181)
Depreciation 179 184
Deferred income taxes (19) (14)
Increase in income taxes payable (71) (76)
Net increase (decrease), other 1,320 (543)
- -------------------------------------------------------------------------------
Total cash provided by operating
activities 4,401 863
- -------------------------------------------------------------------------------
Cash flows from investing
activities:
Proceeds from call and repayments
of securities available-for-sale 9,201 2,625
Proceeds from repayments of
investment securities, net 5,251 5,075
Proceeds from sales of securities
available-for-sale - 56
Purchase of securities available-
for-sale (16,916) -
Purchase of Federal Home Loan
Bank of New York stock - (672)
Net disbursements from loans (11,563) (8,883)
Proceeds from disposal of real
estate acquired by foreclosure - 40
Capital expenditures (568) (10)
- -------------------------------------------------------------------------------
Net cash used in investing activities (14,595) (1,769)
- -------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in demand deposits,
money market accounts, NOW accounts,
prime performance accounts, and
savings accounts (7,993) (13,814)
Net increase in market-rate
certificates 6,637 16,206
Common stock sold under stock option plan 30 150
Treasury stock acquired, at cost (1,561) -
Repayment of advance from Federal Home
Loan Bank of New York (10,000) -
Net change in borrowing under repurchase
agreement - (5,892)
Cash dividends paid (433) (395)
- -------------------------------------------------------------------------------
Net cash used in financing activities (13,320) (3,745)
- -------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (23,514) (4,651)
Cash and cash equivalents at
beginning of period 39,886 16,343
- -------------------------------------------------------------------------------
Cash and cash equivalents at
end of period $16,372 $11,692
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Supplemental schedule of cash
flow information:
Interest paid $ 6,392 $ 6,314
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Income taxes paid $ 994 $ 824
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Mortgage loans originated to
refinance the disposal of real
estate acquired by foreclosure $ - $ 75
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
RARITAN BANCORP INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: The consolidated financial statements include the
accounts of the Raritan Bancorp Inc. ("Corporation") and its
wholly-owned subsidiary, The Raritan Savings Bank ("Bank").
The consolidated balance sheet at June 30, 1996, the consolidated
statements of income for the three and six month periods ended
June 30, 1996 and 1995, and the consolidated statements of cash
flows for the six month periods ended June 30, 1996 and 1995,
have been prepared by the Corporation without audit. In the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial
condition, results of operations, and changes in cash flows at
June 30, 1996 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been omitted. These
consolidated financial statements are to be read in conjunction
with the December 31, 1995 audited financial statements and notes
thereto.
Interim results are not necessary indicative of results for the
full year.
Note 2: Securities Available-for-Sale, at fair value, and
Investment Securities, net:
The amortized cost of securities and their estimated fair values
at June 30, 1996, were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------------------
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
Securities available-for-sale, at fair value:
U.S. Treasury securities and obligations of
U.S. Government agencies $24,429 $ 14 $ (149) $24,294
Obligations of states and political subdivisions 710 37 - 747
Mortgage-backed securities issued by Federal agencies 32,443 281 (370) 32,354
- ----------------------------------------------------------------------------------------------------------------------
$57,582 $332 $ (519) $57,395
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Investment securities, net:
Mortgage-backed securities issued by Federal agencies $56,108 $ 10 $(1,628) $54,490
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE
<PAGE>
The amortized cost of securities and their estimated fair values
at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------------------
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
Securities available-for-sale, at fair value:
U.S. Treasury securities and obligations of
U.S. Government agencies $12,533 $ 51 $ - $12,584
Obligations of states and political subdivisions 761 43 - 804
Mortgage-backed securities issued by Federal agencies 36,630 579 (50) 37,159
- ----------------------------------------------------------------------------------------------------------------------
$49,924 $673 $ (50) $50,547
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Investment securities, net:
Mortgage-backed securities issued by Federal agencies $61,406 $ - $(575) $60,831
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
During the six month period ended June 30, 1996 a security
classified as available-for-sale in the amount of $50,000 was
called at a gain of $1,000. During the six month period ended
June 30, 1995 an equity security previously written-off was
redeemed at a gain of $56,000.
<PAGE>
Note 3: Loans and Allowance for Loan Losses
Loans are summarized as follows:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
(Unaudited) (Audited)
- -----------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Real estate:
Conventional $154,145 $147,673
Construction 10,955 8,536
- -----------------------------------------------------------------------------------
165,100 156,209
Consumer loans 32,001 28,886
Commercial loans 9,829 10,544
- -----------------------------------------------------------------------------------
$206,930 $195,639
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
The activity in the allowance for loan losses follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
- ------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Balance at beginning of period $2,606 $2,715 $2,582 $2,729
Provision charged to operations 75 75 150 150
Charge-offs (217) (3) (271) (92)
Recoveries 1 14 4 14
- -------------------------------------------------------------------------------------------------------------
Balance at end of period $2,465 $2,801 $2,465 $2,801
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE
<PAGE>
Non-performing loans (over 90 days delinquent), real estate
acquired by foreclosure (included in Other Assets) and non-accrual
loans less than 90 days delinquent, totaled $2,776,000
and $1,225,000 at June 30, 1996 and December 31, 1995,
respectively, as follows:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
- -----------------------------------------------------------------------------------------------------------------
Number Amount Number Amount
Description: of Loans (In thousands) of Loans (In Thousands)
- -----------------------------------------------------------------------------------------------------------------
(Unaudited) (Audited)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First mortgage loans 7 $ 900 3 $ 317
Construction loan 1 135 - -
Home equity loans 1 38 2 36
Second mortgage loans - - 2 98
Consumer loans 1 16 - -
Commrecial loans 3 413 2 326
Loans with modified terms 3 267 3 278
- -----------------------------------------------------------------------------------------------------------------
Total non-performing loans 16 1,769 12 1,055
Real estate acquired by foreclosure 1 170 1 170
- -----------------------------------------------------------------------------------------------------------------
17 1,939 13 1,225
Non-accrual loans less than 90 days delinquent 4 837 - -
- -----------------------------------------------------------------------------------------------------------------
21 $2,776 13 $1,225
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The loss of interest on loans charged-off, non-performing loans,
real estate acquired by foreclosure and non-accrual loans less
than 90 days delinquent totaled approximately $55,000 and
$110,000 for the second quarter and first six months of 1996,
compared to $71,000 and $126,000, respectively, for the
corresponding 1995 periods.
At June 30, 1996 and December 31, 1995, the Corporation had
impaired loans totaling $1,769,000 and $1,055,000, respectively.
The Corporation calculated a total allowance for impaired loans
of $150,000 and $122,000 at June 30, 1996 and December 31, 1995,
respectively. Impaired loans averaged $1,794,000 and $1,806,000
for the three months and six month periods ended June 30, 1996,
respectively, compared to $1,395,000 and $1,365,000 for the
comparable 1995 periods. Interest income totaling $3,000 and
$26,000 was recognized, all on a cash basis, on impaired loans
for the three and six month periods ended June 30, 1996,
respectively, compared to $4,000 and $7,000 for the comparable
1995 periods, respectively.
Note 4: Subsequent Event: Effective August 1, 1996, the
Manville Savings Bank, SLA ("Manville") was merged with, and into
the Bank pursuant to a merger agreement. As part of the merger,
124,596 common shares of the Corporation were issued. Proceeds
from the issuance of these shares were estimated to be
approximately $2.0 million. The transaction was accounted for
using the purchase method of accounting. At the time of merger,
Manville's total assets were approximately $14.1 million and
total deposits totaled approximately $12.9 million.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
At June 30, 1996, the Corporation's total assets decreased to
$344.7 million from $354.8 million at December 31, 1995. Net
loans and deposits increased to $204.0 million and $313.7
million at June 10, 1996, respectively, from $192.6 million and
$315.0 million, respectively, at December 31, 1995. Deposits
outflows, exclusive of interest credited, exceeded inflows by
$7.7 million during the first six months of 1996.
Non-performing loans (over 90 days delinquent), real estate
acquired by foreclosure and non-accrual loans less than 90 days
delinquent totaled $2,776,000 or 1.36% of total net loans plus
real estate acquired by foreclosure at June 30, 1996, compared to
$1,225,000 or 0.64% of total net loans plus real estate acquired
by foreclosure at December 31, 1995.
During each of the three and six month periods ended June 30,
1996 and 1995, the Corporation added $75,000 and $150,000,
respectively, to the allowance for loan losses. The identical
provisions were in response to a strengthening economy and
recovering real estate market in central New Jersey, together
with aggressive recognition and resolution of existing and
potential problem areas. The overall loan portfolio is also
reviewed when calculating the provision.
Non-performing loans (over 90 days delinquent), real estate
acquired by foreclosure (included in Other Assets) and non-
accrual loans less than 90 days delinquent totaled $2,776,000 and
$1,225,000 at June 30, 1996 and December 31, 1995, respectively,
as follows:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
- ---------------------------------------------------------------------------------------------------------------
Number Amount Number Amount
Description: of Loans (In thousands) of Loans (In Thousands)
- ---------------------------------------------------------------------------------------------------------------
(Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First mortgage loans 7 $ 900 3 $ 317
Construction loans 1 135 - -
Home equity loans 1 38 2 36
Second mortgage loans - - 2 98
Consumer loans 1 16 - -
Commrecial loans 3 413 2 326
Loans with modified terms 3 267 3 278
- ---------------------------------------------------------------------------------------------------------------
Total non-performing loans 16 1,769 12 1,055
Real estate acquired by foreclosure 1 170 1 170
- ---------------------------------------------------------------------------------------------------------------
17 1,939 13 1,225
Non-accrual loans less than 90 days delinquent 4 837 - -
- ---------------------------------------------------------------------------------------------------------------
21 $2,776 13 $1,225
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Of the sixteen non-performing loans at June 30, 1996, fifteen
($1,753,000) are collateralized by real estate and one ($16,000)
is unsecured. Real estate acquired by foreclosure consists of
one single-family residence. The four non-accrual loans are
secured by real estate.
Based on a review of each individual non-performing loan and non-
accrual loan less than 90 days delinquent, and loans rated loss,
doubtful, substandard and special mention according to regulatory
definition, a specific allowance of $1,033,000 has been allocated
to such loans, together with a general allowance of $1,432,000 on
the remaining loan portfolio taken as a whole. During the quarter
ended June 30, 1996 loans totaling $217,000 were charged off, while
loans totaling $271,000 were charged off during the first six
months of 1995.
On an ongoing basis, management reviews the overall adequacy of the
allowance for loan losses based on an evaluation of the risk
characteristics of the loan portfolio both on potential individual
problem loans, and on the aggregate loan portfolio taken as a
whole. Such factors as the financial condition of the borrower,
the fair value of the underlying collateral and other items which,
in management's opinion, deserve recognition in estimating the
adequacy of the allowance for loan losses are evaluated. When
reviewing the adequacy of the allowance for loan losses, management
reviews the status of the current (and potential) non-performing
loans, delinquency trends, coverage ratios and various economic and
other factors, and determines what levels of allowance for loan
losses are necessary to absorb current losses in the loan
portfolio.
Shareholders' equity totaled $25.4 million, or $17.85 per share at
June 30, 1996, compared to $26.3 million, or $17.66 per share at
December 31, 1995. The decrease in shareholders' equity is the
result of net income totaling $1,547,000 for the six months ended
June 30, 1996, the issuance of 3,000 shares of common stock for
$30,000 via the exercise of stock options, offset by a decrease in
the fair value adjustment of securities available-for-sale of
$542,000, dividend payments of $433,000 to shareholders and the
repurchase of 72,500 shares of the Corporation's common stock for
$1,559,000.
Results of Operations:
Raritan Bancorp Inc. and its subsidiary recorded net income of
$804,000 for the second quarter of 1996 compared to $607,000 for
the same period in 1995. For the first six months of 1996, net
income was $1,547,000 compared to $1,260,000 for the corresponding
period in 1995.
Net interest income increased for the second quarter of 1996 to
$2,899,000 from $2,523,000, or 14.9%, for the comparable quarter in
1995, as a result of an increase in average net earning assets to
$34.0 million from $30.9 million a year earlier, together with an
increase in the interest rate spread to 3.07% from 2.75% a year
earlier. Net interest income increased for the first six months of
1996 to $5,698,000 from $5,194,000, or 9.7%, for the corresponding
period in 1995, as a result of an increase in average net earning
assets to $34.3 million from $30.0 million a year earlier, together
with an increase in the interest rate spread to 3.00% from 2.87% a
year earlier. The increased spreads are the result of investing
available funds into higher-yielding loan products instead of
lower-yielding investment securities.
Net interest income for the second quarter and first six months of
1996 was also affected by the loss of interest on non-performing
loans, non-accrual loans and real estate acquired by foreclosure.
Generally, when a loan becomes more than ninety days delinquent,
the Corporation ceases to accrue income and deducts interest income
on that loan which had previously been accrued into interest income
for such period of time. The loss of interest on loans charged
off, non-performing loans, non-accrual loans,and real estate
acquired by foreclosure for the second quarter and first six months
of 1996 was approximately $55,000 and $110,000, respectively,
compared to $71,000 and $126,000, respectively, for the
corresponding 1995 periods.
The provision for loans losses for the second quarter and first six
months of both 1996 and 1995 was $75,000 and $150,000,
respectively. As described in the discussion of the Corporation's
financial condition, the identical provisions were in response to
a strengthening economy and recovering real estate market in
central New Jersey, together with aggressive recognition and
resolution of existing and potential problem areas. The overall
loan portfolio is also reviewed when calculating the provision.
Management calculated the provision based on a review of the
required allowance at June 30, 1996. All non-performing loans and
loans rated loss, doubtful, substandard and special mention
according to regulatory definition were reviewed and a specific
allowance of $1,033,000 was determined to be adequate by comparing
the existing loan balances with the value of supporting collateral.
A review of the remaining loan portfolio was made and a general
allowance of approximately $1,432,000 was deemed reasonable and was
established by assigning risk factors to the various loan
categories based on the collateral securing the appropriate loans
and historical trends.
Other expenses for the second quarter and first six months of 1996
were $1,733,000 and $3,450,000, respectively, compared to
$1,698,000 and $3,405,000 for the corresponding periods in 1995.
Salaries and employee benefits increased $196,000, or 23.5%, to
$1,031,000 for the second quarter of 1996 from $835,000 for the
comparable period in 1995, and increased $250,000, or 14.8%, to
$1,938,000 from $1,688,000 for the first six months of 1995. Merit
and cost of living adjustments contributed to the increase,
together with a $175,000 ESOP contribution. The FDIC insurance
premium decreased $124,000, or 73.8%, and $250,000, or 74.2%, for
the second quarter and first six months of 1996, respectively,
compared to the corresponding 1995 periods, as a result of the
reduction in the FDIC's Bank Insurance Fund's insurance premium
rates. Net cost of operation of other real estate decreased $4,000
and $16,000, for the second quarter and first six months of 1996,
respectively, from the corresponding 1995 periods as most
provisions and expenditures had already been made in prior periods
to bring the properties to saleable condition. Other expenses,
exclusive of a $200,000 reversal of an expense accrual, increased
by 30.7% for the second quarter of 1996 when compared to the
corresponding 1995 period as a result of increases in outside
services expenses, supervisory examination and outside audit fees,
consultant fees and office supplies. Other expenses, exclusive of
the aforementioned $200,000 reversal of an expense accrual,
increased 20.8% for the first half of 1996 when compared to the
corresponding 1995 period as a result of an increase in outside
services expense,supervisory examination and outside audit fees,
consultant fees, marketing expenses and office supplies.
The Corporation's annualized return on average total assets and
average shareholders' equity was 0.94% and 12.76%,respectively, for
the second quarter of 1996, compared to 0.74% and 9.63%,
respectively, for the comparable period in 1995. For the first six
months of 1996, the annualized return on average total assets and
average shareholders' equity was .90% and 12.08%, respectively,
compared to .76% and 10.21%, respectively, for the corresponding
periods in 1995.
Liquidity and Capital Resources
The Corporation's liquidity is a measure of its ability to fund
loans and withdrawal of deposits in a cost-effective manner. The
Corporation's principal sources of funds are deposits, scheduled
amortization and repayment of loan principal, maturities of
investment securities and funds provided by operations. At June,
30, 1996, the Corporation's liquid assets (cash and cash
equivalents and investment securities maturing in one year or less)
totaled $20.9 million which represents 6.1% of total assets.
The Corporation's main liquidity demands come from loan
disbursements which totaled approximately $39.2 million for the
first six months of 1996. At June 30, 1996 outstanding
commitments to extend credit totaled $37.8 million. Management
believes that the Corporation has adequate sources of liquidity to
fund these commitments.
The Bank has a borrowing arrangement with the Federal Home Loan
Bank of New York which can provide additional funds, if needed. At
June 30, 1996, this borrowing capacity totaled $35.4 million.
Both the Corporation and the Bank are subject to regulatory capital
requirements mandated by the Federal Reserve Board (FRB) and the
Federal Deposit Insurance Corporation (FDIC), respectively. Both
are required to maintain minimum capital requirements, defined by
both the FRB and FDIC as risk-based ratio capital (Tier 1 and
Total) and leverage capital ratio.
The following chart presents the minimum capital requirement ratios
and the actual ratios for both the Corporation and the Bank:
<PAGE>
<TABLE>
<CAPTION>
June 30, 1996
- ----------------------------------------------------------------------------------------------------
Required Actual Excess
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
THE CORPORATION:
Risk-based capital:
Tier 1 4.00% 13.180% 9.180%
Total 8.00 14.431 6.431
Leverage capital ratio 4.00 7.08 3.08
THE BANK:
Risk-based capital:
Tier 1 4.00% 13.174% 9.174%
Total 8.00 14.425 6.425
Leverage capital ratio 4.00 7.01 3.01
</TABLE>
<PAGE>
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
Not applicable.
PAGE
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RARITAN BANCORP INC.
(Registrant)
8/7/96 Arlyn D. Rus
Date (Signature)
Chairman, President and CEO
Director
8/7/96 Thomas F. Tansey
Date (Signature)
Executive Vice President,
Chief Operating Officer and
Treasurer
Director
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