<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Period Ended September 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 November 7, 1996, 1,519,709 common shares, $.01 par value per
share were outstanding.
<PAGE>
RARITAN BANCORP INC.
FORM 10-Q
INDEX
PAGE
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>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RARITAN BANCORP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
(UNAUDITED) (AUDITED)
-------------------- --------------------
ASSETS
- ------
<S> <C> <C>
CASH AND DUE FROM BANKS $ 7,065 $ 8,586
FEDERAL FUNDS SOLD 5,400 31,300
-------------------- --------------------
TOTAL CASH AND CASH EQUIVALENTS 12,465 39,886
SECURITIES AVAILABLE-FOR-SALE, AT FAIR VALUE 53,922 50,547
INVESTMENT SECURITIES, NET (FAIR VALUE: $52,427
AT SEPTEMBER 30, 1996 AND $60,831 AT DECEMBER 31, 1995) 53,769 61,406
LOANS 226,290 195,639
LESS: UNEARNED INCOME 430 467
ALLOWANCE FOR LOAN LOSSES 2,856 2,582
-------------------- --------------------
NET LOANS 223,004 192,590
-------------------- --------------------
BANKING PREMISES AND EQUIPMENT, NET 3,745 3,231
FEDERAL HOME LOAN BANK of NEW YORK STOCK, at COST 2,672 2,669
ACCRUED INTEREST RECEIVABLE 2,189 1,859
OTHER ASSETS 2,410 2,622
-------------------- --------------------
TOTAL ASSETS $ 354,176 $ 354,810
==================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
DUE TO DEPOSITORS:
INTEREST-BEARING $ 300,823 $ 294,210
NON-INTEREST-BEARING 20,421 20,828
-------------------- --------------------
TOTAL DEPOSITS 321,244 315,038
BORROWINGS 154 10,206
ACCRUED INTEREST PAYABLE 57 61
ACCRUED EXPENSES
AND OTHER LIABILITIES 4,964 3,157
-------------------- --------------------
TOTAL LIABILITIES 326,419 328,462
-------------------- --------------------
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 1,531,346 SHARES OUTSTANDING AT
SEPTEMBER 30, 1996 AND 1,492,189 SHARES
OUTSTANDING AT DECEMBER 31, 1995 17 17
ADDITIONAL PAID-IN CAPITAL 11,165 10,598
RETAINED EARNINGS 19,296 17,801
FAIR VALUE ADJUSTMENT OF SECURITIES
AVAILABLE-FOR-SALE, NET OF TAX 5 416
LESS: UNALLOCATED COMMON STOCK ACQUIRED BY THE ESOP (154) (206)
COST OF COMMON STOCK IN TREASURY, 193,654
SHARES AT SEPTEMBER 30, 1996 AND 232,811 SHARES
AT DECEMBER 31, 1995 (2,572) (2,278)
-------------------- --------------------
TOTAL SHAREHOLDERS' EQUITY 27,757 26,348
COMMITMENTS AND CONTINGENCIES
-------------------- --------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 354,176 $ 354,810
==================== ====================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
1
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------------------- -----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
INTEREST AND FEES ON REAL ESTATE LOANS $ 3,460 $ 3,092 $ 9,738 $ 8,896
INTEREST AND FEES ON OTHER LOANS 980 923 2,805 2,674
INTEREST AND DIVIDENDS ON INVESTMENT SECURITIES:
TAXABLE 1,754 1,787 5,193 5,538
TAX-EXEMPT 12 13 38 40
INTEREST ON DEPOSITS IN OTHER BANKS 100 113 613 270
------------ ------------ ------------ ------------
TOTAL INTEREST INCOME 6,306 5,928 18,387 17,418
------------ ------------ ------------ ------------
INTEREST EXPENSE:
INTEREST ON DEPOSIT ACCOUNTS 3,179 3,310 9,547 9,345
INTEREST ON BORROWINGS 5 33 20 294
------------ ------------ ------------ ------------
TOTAL INTEREST EXPENSE 3,184 3,343 9,567 9,639
------------ ------------ ------------ ------------
NET INTEREST INCOME 3,122 2,585 8,820 7,779
PROVISION FOR LOAN LOSSES 150 75 300 225
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,972 2,510 8,520 7,554
OTHER INCOME:
SERVICE CHARGES AND OTHER INCOME 183 144 535 443
GAINS ON NET SECURITIES TRANSACTIONS - - 1 56
------------ ------------ ------------ ------------
TOTAL OTHER INCOME 183 144 536 499
------------ ------------ ------------ ------------
OPERATING EXPENSES:
SALARIES AND EMPLOYEE BENEFITS 859 856 2,797 2,543
OCCUPANCY EXPENSE 187 164 557 486
FDIC INSURANCE PREMIUM 501 26 588 363
NET COST OF OPERATION OF OTHER REAL ESTATE 14 16 37 55
OTHER OPERATING EXPENSES 632 504 1,664 1,524
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 2,193 1,566 5,643 4,971
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAX EXPENSE 962 1,088 3,413 3,082
INCOME TAX EXPENSE 349 411 1,253 1,145
------------ ------------ ------------ ------------
NET INCOME $ 613 $ 677 $ 2,160 $ 1,937
============ ============ ============ ============
AVERAGE NUMBER OF SHARES OUTSTANDING:
PRIMARY 1,667,238 1,645,943 1,615,041 1,632,373
============ ============ ============ ============
FULLY DILUTED 1,668,237 1,645,943 1,615,041 1,637,496
============ ============ ============ ============
NET INCOME PER SHARE:
PRIMARY $ 0.37 $ 0.41 $ 1.34 $ 1.19
============ ============ ============ ============
FULLY DILUTED $ 0.37 $ 0.41 $ 1.34 $ 1.18
============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
RARITAN BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30
--------------------------------------
1996 1995
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 2,160 $ 1,937
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
INCREASE IN ACCRUED INTEREST RECEIVABLE (330) (156)
AMORTIZATION ON SECURITIES, NET 56 184
PROVISION FOR LOAN LOSSES 300 225
GAIN ON NET SECURITIES TRANSACTIONS (1) (56)
DECREASE IN ACCRUED INTEREST PAYABLE (4) (19)
INCREASE IN ACCRUED EXPENSES 640 289
(INCREASE) DECREASE IN PREPAID EXPENSES 3 (17)
DEPRECIATION 279 269
DEFERRED INCOME TAXES (156) 71
INCREASE IN INCOME TAXES PAYABLE 96 161
NET INCREASE, OTHER 1,344 97
----------- ------------
TOTAL CASH PROVIDED BY OPERATING ACTIVITIES $ 4,387 $ 2,985
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM CALL AND REPAYMENTS OF SECURITIES AVAILABLE-
FOR-SALE 13,875 5,900
PROCEEDS FROM REPAYMENTS OF INVESTMENT SECURITIES, NET 7,568 8,845
PROCEEDS FROM SALES OF SECURITIES AVAILABLE-FOR-SALE - 56
PURCHASE OF SECURITIES AVAILABLE-FOR-SALE (16,916) -
REDEMPTION (PURCHASE) OF FEDERAL HOME LOAN BANK
OF NEW YORK STOCK 99 (1,339)
NET DISBURSEMENTS FOR LOANS (18,734) (11,676)
PROCEEDS FROM DISPOSAL OF REAL ESTATE ACQUIRED BY FORECLOSURE - 111
CAPITAL EXPENDITURES (797) (67)
----------- ------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (14,905) 1,830
CASH FLOWS FROM FINANCING ACTIVITIES:
NET DECREASE IN DEMAND DEPOSITS, MONEY MARKET
ACCOUNTS, NOW ACCOUNTS, PRIME PERFORMANCE ACCOUNTS,
AND SAVINGS ACCOUNTS (10,125) (12,364)
NET DECREASE IN MARKET-RATE CERTIFICATES 3,804 20,646
PROCEEDS FROM ISSUANCE OF COMMON STOCK 2,028 150
TREASURY STOCK ACQUIRED, AT COST (1,893) -
REPAYMENT OF BORROWINGS (10,052) (9,843)
CASH DIVIDENDS PAID (665) (594)
----------- ------------
NET CASH USED IN FINANCING ACTIVITIES (16,903) (2,005)
----------- ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (27,421) 2,810
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 39,886 16,343
----------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,465 $ 19,153
=========== ============
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION: FOR THE NINE MONTHS ENDED SEPTEMBER 30
--------------------------------------
1996 1995
----------- ------------
<S> <C> <C>
INTEREST PAID $ 9,571 $ 6,314
========== ==========
INCOME TAXES PAID $ 1,554 $ 824
========== ==========
MORTGAGE LOANS ORIGINATED TO REFINANCE THE
DISPOSAL OF REAL ESTATE ACQUIRED BY FORECLOSURE $ - $ 75
========== ==========
NET LOANS ACQUIRED FROM MANVILLE SAVINGS' MERGER $ 11,911 $ -
========== ==========
NET DEPOSITS ACQUIRED FROM MANVILLE SAVINGS' MERGER $ 12,532 $ -
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<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 September 30, 1996, the consolidated
statements of income for the three and nine month periods ended September 30,
1996 and 1995, and the consolidated statements of cash flows for the nine month
periods ended September 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 September 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 September
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 $22,450 $ 45 $ (95) $22,400
Obligations of states and political
subdivisions 710 36 - 746
Mortgage-backed securities issued by
Federal agencies 30,751 311 (286) 30,776
--------------------------------------------
$53,911 $392 $ (381) $53,922
============================================
Investment securities, net:
Mortgage-backed securities issued by Federal agencies $53,769 $ 9 $(1,351) $52,427
============================================
</TABLE>
4
<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
--------- ---------- ----------- ---------
(Audited)
(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 nine month period ended September 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 nine month period ended September 30, 1995 an equity security
previously written-off was redeemed at a gain of $56,000.
Note 3: Loans and Allowance for Loan Losses:
Loans are summarized as follows:
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------ ----------------
(Unaudited) (Audited)
(In thousands)
<S> <C> <C>
Real estate:
Conventional $172,015 $147,673
Construction 10,008 8,536
----------------------------------
182,023 156,209
Consumer Loans 33,879 28,886
Commercial Loans 10,388 10,544
----------------------------------
$226,290 $195,639
==================================
</TABLE>
The activity in the allowance for loan losses follows:
<TABLE>
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
---------------------------------------------------------------
1996 1995 1996 1995
---- ---- ---- ----
(Unaudited) (Unaudited)
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Balance at beginning of period $2,465 $2,801 $2,582 $2,729
Allowance acquired from
Manville Savings 303 - 303 -
Provision charged to operations 150 75 300 225
Charge-offs ( 69) (10) (340) (103)
Recoveries 7 1 11 16
----------------------- ---------------------------
Balance at end of period $2,856 $2,867 $2,856 $2,867
======================= ===========================
</TABLE>
5
<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 $2,479,000 and $1,225,000 at September 30, 1996 and December
31, 1995, respectively, as follows:
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
Number Amount Number Amount
of Loans (In thousands) of Loans (In thousands)
-------- -------------- --------- -------------
Description: (Unaudited) (Audited)
<S> <C> <C> <C> <C>
First mortgage loans 2 $ 536 3 $ 317
Construction loan 1 93 - -
Home equity loans 2 43 2 36
Second mortgage loans - - 2 98
Commercial loans 2 354 2 326
Loans with modified terms 3 260 3 278
--------------------------------------------------------
Total non-performing loans 10 1,286 12 1,055
Real estate acquired by foreclosure 2 273 1 170
--------------------------------------------------------
12 1,559 13 1,225
Non-accrual loans less than 90 days delinquent 6 920 - -
--------------------------------------------------------
18 $2,479 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 $15,000 and $125,000 for the third quarter and first nine
months of 1996, compared to $53,000 and $179,000, respectively, for the
corresponding 1995 periods.
At September 30, 1996 and December 31, 1995, the Corporation had impaired loans
totaling $1,286,000 and $1,055,000, respectively. The Corporation calculated a
total allowance for impaired loans of $100,000 and $122,000 at September 30,
1996 and December 31, 1995, respectively. Impaired loans averaged $1,630,000 and
$1,264,000 for the three months and nine month periods ended September 30, 1996,
respectively, compared to $1,510,000 and $1,405,000 for the comparable 1995
periods. Interest income totaling $-0- and $27,000 was recognized, all on a
cash basis, on impaired loans for the three and nine month periods ended
September 30, 1996, respectively, compared to $4,000 and $12,000 for the
comparable 1995 periods, respectively.
Note 4: 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 totaled $2.0 million. The transaction was
accounted for using the purchase method of accounting. Negative goodwill
totaling $746,000 was recorded and will be accreted to income over its estimated
useful life using the straight-line method. Net loans and deposits acquired
totaled $11.9 million and $12.5 million, respectively.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
At September 30, 1996, the Corporation's total assets decreased to $354.2
million from $354.8 million at December 31, 1995. Net loans and deposits
increased to $223.0 million and $321.2 million at September 30, 1996,
respectively, from $192.6 million and $315.0 million, respectively, at December
31, 1995. The increase in net loans was affected by the aforementioned
acquisition of $11.9 million net loans from the Manville merger. Deposits
outflows, exclusive of interest credited and the acquisition of $12.5 million
deposits from the Manville merger, exceeded inflows by $15.9 million during the
first nine months of 1996.
6
<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 $2,479,000 or 1.11% of total net loans plus real estate
acquired by foreclosure at September 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 the three and nine month period ended September 30, 1996 the Corporation
added $150,000 and $300,000, respectively, to the allowance for loan losses
compared to $75,000 and $225,000 during the corresponding periods in 1995. The
increased provision was in response to a growing loan portfolio. All non-
performing assets are individually reviewed as well as the overall loan
portfolio when calculating the provision. In addition, a $303,000 allowance
for loan losses was acquired from the Manville merger.
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 $2,479,000 and $1,225,000 at September 30, 1996 and December
31, 1995, respectively, as follows:
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
Number Amount Number Amount
of Loans (In thousands) of Loans (In thousands)
-------- -------------- -------- --------------
Description: (Unaudited) (Audited)
<S> <C> <C> <C> <C>
First mortgage loans 2 $ 536 3 $ 317
Construction loan 1 93 - -
Home equity loans 2 43 2 36
Second mortgage loans - - 2 98
Commercial loans 2 354 2 326
Loans with modified terms 3 260 3 278
-----------------------------------------------------------
Total non-performing loans 10 1,286 12 1,055
Real estate acquired by foreclosure 2 273 1 170
-----------------------------------------------------------
12 1,559 13 1,225
Non-accrual loans less than 90 days delinquent 6 920 - -
-----------------------------------------------------------
18 $2,479 13 $1,225
===========================================================
</TABLE>
Of the ten non-performing loans at September 30, 1996, nine ($1,257,000) are
collateralized by real estate and one ($29,000) is unsecured. Real estate
acquired by foreclosure consists of one single-family residence ($170,000) and
one two-family dwelling ($103,000). The six 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
$1,032,000 has been allocated to such loans, together with a general allowance
of $1,824,000 on the remaining loan portfolio taken as a whole. During the
quarter ended September 30, 1996 loans totaling $69,000 were charged off, while
loans totaling $340,000 were charged off during the first nine months of 1996.
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.
7
<PAGE>
Shareholders' equity totaled $27.8 million, or $18.13 per share at September 30,
1996, compared to $26.3 million, or $17.66 per share at December 31, 1995. The
increase in shareholders' equity is the result of net income totaling $2,160,000
for the nine months ended September 30, 1996, the issuance of 124,596 shares of
stock totaling $2,138,000 pertaining to the Manville merger, the issuance of
3,000 shares of common stock for $28,000 via the exercise of stock options, a
decrease of $52,000 in the ESOP debt, offset by a decrease in the fair value
adjustment of securities available-for-sale of $411,000, dividend payments of
$665,000 to shareholders and the repurchase of 88,439 shares of the
Corporation's common stock for $1,893,000.
Results of Operations:
Raritan Bancorp Inc. and its subsidiary recorded net income of $613,000 for the
third quarter of 1996 compared to $677,000 for the same period in 1995. For the
first nine months of 1996, net income was $2,160,000 compared to $1,937,000 for
the corresponding period in 1995.
Net interest income increased for the third quarter of 1996 to $3,122,000 from
$2,585,000, or 20.8%, for the comparable quarter in 1995, as a result of an
increase in average net earning assets to $37.0 million from $32.3 million a
year earlier, together with an increase in the interest rate spread to 3.25%
from 2.78% a year earlier. Net interest income increased for the first nine
months of 1996 to $8,820,000 from $7,779,000, or 13.4%, for the corresponding
period in 1995, as a result of an increase in average net earning assets to
$35.3 million from $30.8 million a year earlier, together with an increase in
the interest rate spread to 3.09% from 2.84% 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 third quarter and first nine 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 third quarter and first nine months of 1996 was approximately $15,000 and
$125,000, respectively, compared to $53,000 and $179,000, respectively, for the
corresponding 1995 periods.
The provision for loans losses for the third quarter and first nine months of
1996 was $150,000 and $300,000, respectively, compared to $75,000 and $225,000
for the corresponding 1995 periods. As described in the discussion of the
Corporation's financial condition, the increased provision was in response to a
growing loan portfolio. All non-performing assets are individually reviewed for
collectibility as well as the overall loan portfolio when calculating the
provision.
Management calculated the provision based on a review of the required allowance
at September 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 $1,032,000 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 $1,824,000 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 third quarter and first nine months of 1996 were
$2,193,000 and $5,643,000, respectively, compared to $1,566,000 and $4,971,000
for the corresponding periods in 1995. Salaries and employee benefits
increased to $859,000 for the third quarter of 1996 from $856,000 for the
comparable period in 1995, and increased to $2,797,000 from $2,543,000 for the
first nine months of 1995. The addition of five employees as a result of the
Manville merger together with normal merit and cost of living
8
<PAGE>
adjustments contributed to the increase, together with a $175,000 ESOP
contribution, offset by a reduction in health insurance premiums. The FDIC
insurance premium increased $475,000, and $225,000, for the third quarter and
first nine months of 1996, respectively, compared to the corresponding 1995
periods, as a result of an FDIC charge of $453,000 during the third quarter of
1996 which represents a one-time assessment to recapitalize the Savings
Association Insurance Fund. Exclusive of this charge, the regular FDIC premium
for the third quarter and first nine months of 1996 was $48,000 and $135,000,
respectively, compared to $26,000 and $363,000 for the corresponding 1995
periods. The normal recurring 1996 FDIC premium reflects the reduction in the
FDIC's Bank Insurance Fund premium rates. However, the third quarter and first
nine months of 1995 reflects a Bank Insurance Fund assessment refund of
$141,000. Net cost of operation of other real estate decreased $2,000 and
$18,000, for the third quarter and first nine 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 salable condition. Other
operating expenses increased $128,000, or 25.4%, to $632,000, for the third
quarter of 1996 when compared to the third quarter of 1995 as a result of an
increase in outside services expenses, supervisory examination, consultant fees,
marketing and office supplies. Other operating expenses, exclusive of a $200,000
reversal of an expense accrual, increased 22.3% for the first nine months 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, marketing expenses, and office supplies.
The Corporation's annualized return on average total assets and average
shareholders' equity was 0.70% and 9.20%, respectively, for the third quarter of
1996, compared to 0.82% and 10.44%, respectively, for the comparable period in
1995. For the first nine months of 1996, the annualized return on average total
assets and average shareholders' equity was .83% and 11.10%, respectively,
compared to .78% and 10.29%, 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 September, 30, 1996, the Corporation's liquid assets (cash and cash
equivalents and investment securities maturing in one year or less) totaled
$14.5 million which represents 4.1% of total assets.
The Corporation's main liquidity demands come from loan disbursements which
totaled approximately $62.5 million for the first nine months of 1996. At
September 30, 1996 outstanding commitments to extend credit totaled $43.6
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 September 30, 1996, this
borrowing capacity totaled $35.4 million.
9
<PAGE>
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.
<TABLE>
<CAPTION>
The following chart presents the minimum capital requirement ratios and the
actual ratios for both the Corporation and the Bank:
September 30, 1996
------------------
Required Actual Excess
-------- ------ ------
<S> <C> <C> <C>
THE CORPORATION:
Risk-based capital:
Tier 1 4.00% 13.271% 9.271%
Total 8.00 14.523 6.523
Leverage capital ratio 4.00 7.55 3.55
THE BANK:
Risk based capital:
Tier 1 4.00 12.273 8.273
Total 8.00 13.525 5.525
Leverage capital ratio 4.00 6.99 2.99
</TABLE>
10
<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.
11
<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)
Date: November 7, 1996 By: /s/ Arlyn D. Rus
-----------------
Arlyn D. Rus
Chairman, President and
Chief Executive Officer
Director
Date: November 7, 1996 By: /s/ Thomas F. Tansey
---------------------
Thomas F. Tansey
Executive Vice President
Chief Operating Officer &
Treasurer Director
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,065
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,400
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 53,922
<INVESTMENTS-CARRYING> 53,769
<INVESTMENTS-MARKET> 52,427
<LOANS> 226,290
<ALLOWANCE> 2,856
<TOTAL-ASSETS> 354,176
<DEPOSITS> 321,244
<SHORT-TERM> 154
<LIABILITIES-OTHER> 5,021
<LONG-TERM> 0
0
0
<COMMON> 17
<OTHER-SE> 27,740
<TOTAL-LIABILITIES-AND-EQUITY> 354,176
<INTEREST-LOAN> 12,543
<INTEREST-INVEST> 5,231
<INTEREST-OTHER> 613
<INTEREST-TOTAL> 18,387
<INTEREST-DEPOSIT> 9,547
<INTEREST-EXPENSE> 9,567
<INTEREST-INCOME-NET> 8,820
<LOAN-LOSSES> 300
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 5,643
<INCOME-PRETAX> 3,413
<INCOME-PRE-EXTRAORDINARY> 3,413
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,160
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.34
<YIELD-ACTUAL> 3.25
<LOANS-NON> 920
<LOANS-PAST> 1,286
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,582
<CHARGE-OFFS> 340
<RECOVERIES> 11
<ALLOWANCE-CLOSE> 2,856
<ALLOWANCE-DOMESTIC> 2,856
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
