<PAGE> 1
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
[ ] 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 0-7806
RAMAPO FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-1946561
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
64 MOUNTAIN VIEW BOULEVARD, WAYNE, NEW JERSEY 07470
(Address of principal executive offices) (Zip Code)
(201) 696-6100
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report).
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 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock $1.00 par value 8,097,199 shares at August 5, 1996.
1
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RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
PAGE
NUMBER
------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at
June 30, 1996 and December 31, 1995
(Unaudited).................................... 3
Consolidated Statements of Income
for the Six Months Ended June 30,
1996 and 1995 (Unaudited)...................... 4
Consolidated Statements of Income
for the Three Months Ended June 30,
1996 and 1995 (Unaudited)...................... 5
Consolidated Statement of Changes in
Stockholders' Equity for the Six
Months Ended June 30, 1996 (Unaudited)......... 6
Consolidated Statements of Cash Flows
for the Six Months Ended June 30,
1996 and 1995 (Unaudited)...................... 7
Notes to Consolidated Financial
Statements (Unaudited)......................... 8-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................. 10-18
PART II - OTHER INFORMATION
ITEM 1 THROUGH ITEM 6................................... 19
SIGNATURES....................................................... 20
2
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents:
Cash and Due From Banks $ 11,124,000 $ 9,160,000
Federal Funds Sold 6,316,000 5,802,000
------------- ------------
Total Cash and Cash Equivalents 17,440,000 14,962,000
Due from Bank- Interest-Bearing 1,000,000 1,000,000
Securities:
Available for Sale, at Fair Value 35,590,000 39,328,000
Held to Maturity, at Cost 25,610,000 20,030,000
Loans 160,945,000 160,580,000
Less: Allowance for Possible Loan Losses 5,486,000 4,853,000
------------- ------------
Net Loans 155,459,000 155,727,000
Premises and Equipment, net 2,684,000 2,675,000
Other Real Estate, net (Note 1) 3,391,000 4,408,000
Other Assets, net 7,147,000 7,883,000
Intangible Assets, net (Note 2) 377,000 503,000
------------- ------------
TOTAL ASSETS $ 248,698,000 $246,516,000
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand - Noninterest-Bearing $ 46,348,000 $ 49,761,000
- Interest-Bearing 29,568,000 25,740,000
Savings 74,212,000 73,348,000
Time 64,333,000 64,005,000
Certificates of Deposit over $100,000 4,326,000 4,208,000
------------- ------------
Total Deposits 218,787,000 217,062,000
Accrued Expenses and Other Liabilities 2,502,000 2,205,000
------------- ------------
Total Liabilities 221,289,000 219,267,000
STOCKHOLDERS' EQUITY
Class A Preferred Stock (Note 3) -- 717,000
Common Stock 8,161,000 8,160,000
Capital in Excess of Par Value 13,103,000 13,101,000
Retained Earnings 6,468,000 5,479,000
Net Unrealized Holding (Losses) Gains
on Securities Available for Sale (29,000) 86,000
Treasury Stock at Cost (63,406 shares) (294,000) (294,000)
------------- ------------
Total Stockholders' Equity 27,409,000 27,249,000
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $248,698,000 $246,516,000
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
3
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RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30
-----------------------------
1996 1995
---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans, including Fees $6,943,000 $7,039,000
Securities:
Taxable 1,728,000 1,236,000
Nontaxable 34,000 34,000
Federal Funds Sold 186,000 700,000
Time Deposit with Bank 30,000 --
---------- ----------
TOTAL INTEREST INCOME 8,921,000 9,009,000
---------- ----------
INTEREST EXPENSE
Savings and Interest-Bearing Demand Deposits 1,101,000 1,158,000
Time Deposits and Certificates of Deposit
over $100,000 1,728,000 1,799,000
Other Borrowings -- 12,000
---------- ----------
TOTAL INTEREST EXPENSE 2,829,000 2,969,000
---------- ----------
NET INTEREST INCOME 6,092,000 6,040,000
Provision for Possible Loan Losses 160,000 675,000
---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 5,932,000 5,365,000
OTHER INCOME
Service Charges on Deposit Accounts 699,000 742,000
Losses on Securities Transactions (9,000) --
Brokerage Commissions 152,000 166,000
Other Income 407,000 388,000
---------- ----------
TOTAL OTHER INCOME 1,249,000 1,296,000
---------- ----------
OTHER EXPENSES
Salaries and Employee Benefits 2,435,000 2,244,000
Net Occupancy Expense 390,000 366,000
Equipment Expense 272,000 278,000
OREO Expense - Cost of Operations, net 215,000 221,000
- Valuation Adjustments 580,000 675,000
Other Operating Expenses (Note 4) 1,489,000 1,924,000
---------- ----------
TOTAL OTHER EXPENSES 5,381,000 5,708,000
---------- ----------
INCOME BEFORE TAXES 1,800,000 953,000
Provision for Income Taxes 705,000 82,000
---------- ----------
NET INCOME $1,095,000 $ 871,000
========== ==========
Average Common Shares Outstanding 8,181,094 8,096,449
Income per Common Share $ 0.13 $ 0.10
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
4
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RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30
-------------------------------
1996 1995
---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans, including Fees $3,513,000 $3,511,000
Securities:
Taxable 881,000 795,000
Nontaxable 17,000 17,000
Federal Funds Sold 110,000 287,000
Time Deposit with Bank 15,000 -
---------- ----------
TOTAL INTEREST INCOME 4,536,000 4,610,000
---------- ----------
INTEREST EXPENSE
Savings and Interest-Bearing Demand Deposits 577,000 580,000
Time Deposits and Certificates of Deposit
over $100,000 860,000 1,032,000
---------- ----------
TOTAL INTEREST EXPENSE 1,437,000 1,612,000
---------- ----------
NET INTEREST INCOME 3,099,000 2,998,000
Provision for Possible Loan Losses 40,000 225,000
---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 3,059,000 2,773,000
OTHER INCOME
Service Charges on Deposit Accounts 348,000 380,000
Losses on Securities Transactions (33,000) -
Brokerage Commissions 86,000 83,000
Other Income 133,000 114,000
---------- ----------
TOTAL OTHER INCOME 534,000 577,000
---------- ----------
OTHER EXPENSES
Salaries and Employee Benefits 1,226,000 1,129,000
Net Occupancy Expense 201,000 179,000
Equipment Expense 142,000 136,000
OREO Expense - Cost of Operations, net 73,000 66,000
- Valuation Adjustments 255,000 300,000
Other Operating Expenses (Note 4) 721,000 1,030,000
---------- ----------
TOTAL OTHER EXPENSES 2,618,000 2,840,000
---------- ----------
INCOME BEFORE TAXES 975,000 510,000
Provision for Income Taxes 383,000 44,000
---------- ----------
NET INCOME $ 592,000 $ 466,000
========== ==========
Average Common Shares Outstanding 8,213,897 8,096,449
Income per Common Share $ 0.07 $ 0.05
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE> 6
RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
NET UNREALIZED
HOLDING GAINS (LOSSES)
CLASS A CAPITAL ON SECURITIES
PREFERRED COMMON IN EXCESS OF RETAINED AVAILABLE TREASURY
STOCK STOCK PAR VALUE EARNINGS FOR SALE STOCK
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 $ 717,000 $8,160,000 $13,101,000 $5,479,000 $ 86,000 $(294,000)
Net Income for the Period - - - 1,095,000 - -
Redemption of Class A
Preferred Stock (Note 3) (717,000) - - (106,000) - -
Change in Net Unrealized
Holding Gains on
Securities Available for Sale - - - - (115,000) -
Stock Options Exercised - 1,000 2,000 - - -
--------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1996 $ - $8,161,000 $13,103,000 $6,468,000 $ (29,000) $(294,000)
============================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE> 7
RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
1996 1995
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 1,095,000 $ 871,000
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization of Premises and Equipment 230,000 226,000
Amortization of Intangible Assets 125,000 145,000
Accretion of Securities Discount, net (33,000) (202,000)
Provision for Possible Loan Losses 160,000 675,000
Net Provision for Possible Losses on Other Real Estate 580,000 675,000
Gain on Sale of Other Real Estate (84,000) (10,000)
Loss on Securities Transactions, net 9,000 -
Loans Made or Acquired and Held for Sale (720,000) (153,000)
Proceeds from Loans Held for Sale 731,000 126,000
Gain on Sales of Loans Held for Sale (11,000) (2,000)
Decrease (Increase) in Interest Receivable 147,000 (252,000)
Increase (Decrease) in Accrued Expenses and Other Liabilities 297,000 (1,066,000)
Other 668,000 85,000
------------ ------------
Net Cash Provided by Operating Activities 3,194,000 1,118,000
------------ ------------
Cash Flows from Investing Activities:
Securities Available for Sale:
Proceeds from Maturities 1,511,000 20,000
Proceeds from Sales/Calls Prior to Maturity 14,931,000 -
Purchases (12,874,000) (9,628,000)
Securities Held to Maturity:
Proceeds from Maturities 500,000 1,000,000
Proceeds from Sales/Calls Prior to Maturity 3,002,000 -
Purchases (9,079,000) (23,512,000)
Net Decrease in Loans Outstanding 108,000 5,665,000
Capital Expenditures (243,000) (43,000)
Advances Made on Other Real Estate (150,000) (352,000)
Payments Received on Other Real Estate - 2,672,000
Proceeds from Sale of Other Real Estate 671,000 1,184,000
Other 3,000 -
------------ ------------
Net Cash Used in Investing Activities (1,620,000) (22,994,000)
------------ ------------
Cash Flows from Financing Activities:
Net Increase in Total Deposits 1,724,000 10,149,000
Redemption of Subordinated Debentures - (1,292,000)
Redemption of Class A Preferred Stock (Note 3) (717,000) (500,000)
Preferred Stock Dividends Paid (Note 3) (106,000) (56,000)
Stock Options Exercised 3,000 -
------------ ------------
Net Cash Provided by Financing Activities 904,000 8,301,000
------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents 2,478,000 (13,575,000)
Cash and Cash Equivalents, Beginning of Period 14,962,000 42,486,000
------------ ------------
Cash and Cash Equivalents, End of Period $ 17,440,000 $ 28,911,000
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
7
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The condensed consolidated financial statements included herein have
been prepared by the Registrant without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Registrant believes
that the disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Registrant's latest
annual report on Form 10-K. This financial information reflects, in the opinion
of management, all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial position and results of operations for
the interim periods. The results of operations for such interim periods are not
necessarily indicative of the results for the full year. Certain
reclassifications have been made to the 1995 financial statements to conform to
the 1996 presentation.
NOTE 1: OTHER REAL ESTATE
A summary of activity in other real estate is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996
----------------
<S> <C>
Balance, beginning of period, net $4,408,000
Advances 150,000
Sales of properties (587,000)
Charge-offs or write-downs (8,000)
Increase in valuation allowance, net (572,000)
----------
Balance, end of period, net $3,391,000
==========
</TABLE>
NOTE 2: INTANGIBLE ASSETS
Categories of net intangible assets are as follows:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1996 1995
-------- -----------
<S> <C> <C>
Purchased Mortgage Servicing Rights $103,000 $123,000
Core Deposit Premiums 99,000 151,000
Premium on Purchased Home Equity
Lines of Credit 175,000 229,000
-------- --------
Net Intangible Assets $377,000 $503,000
======== ========
</TABLE>
8
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NOTE 3: PREFERRED STOCK REDEMPTION
During the first quarter of 1996, the Corporation redeemed $717,000 of
Class A preferred stock and paid cumulative dividends on that stock of
approximately $106,000. This action was taken with regulatory approval.
NOTE 4: SUPPLEMENTARY STATEMENTS OF INCOME INFORMATION
Major categories of Other Operating Expense are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30 JUNE 30
--------------------------- ---------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
FDIC Fees $ 33,000 $ 323,000 $ 16,000 $ 162,000
Legal 272,000 205,000 118,000 105,000
Bonding and Insurance 112,000 129,000 55,000 66,000
Consulting Fees 107,000 213,000 38,000 111,000
Credit Reports/Filing Fees 72,000 64,000 40,000 35,000
Examinations 84,000 130,000 42,000 70,000
Postage & Freight 80,000 94,000 37,000 47,000
Telephone 79,000 84,000 40,000 43,000
Amortization - Intangibles 125,000 145,000 62,000 62,000
Automated Services 67,000 89,000 39,000 53,000
Stationery & Printing 116,000 107,000 58,000 66,000
Advertising 92,000 88,000 53,000 48,000
Dues and Subscriptions 30,000 30,000 15,000 16,000
Employee/Customer Rel 36,000 26,000 21,000 12,000
Directors' Fees 61,000 51,000 33,000 38,000
Correspondent Banks' Fees 17,000 38,000 10,000 21,000
All Others 106,000 108,000 44,000 75,000
---------- ---------- ---------- ----------
$1,489,000 $1,924,000 $ 721,000 $1,030,000
========== ========== ========== ==========
</TABLE>
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the Corporation's financial
condition as of June 30, 1996 and results of operations for the three and six
months ended June 30, 1996 and 1995 should be read in conjunction with the
Consolidated Financial Statements and related Notes thereto, included in the
Registrant's latest Annual Report on Form 10-K, and the other information
herein. The information as of June 30, 1996 and for the three and six months
ended June 30, 1996 and 1995 is derived from unaudited financial data but, in
the opinion of management of the Corporation, reflects all adjustments (which
comprise only normal recurring accruals) necessary for a fair presentation of
the financial condition and results of operations at that date and for those
periods. The results of operations for the three and six months ended June 30,
1996 are not necessarily indicative of the results which may be expected for any
other period.
FINANCIAL CONDITION AND RECENT OPERATING ENVIRONMENT
GENERAL. Economic conditions in the Corporation's market area during
the second quarter of 1996 showed signs of improvement over the first quarter.
With the onset of warmer weather after a severe winter, real estate developers
reported strong sales of new homes. Existing home sales appeared to match the
increased activity seen nationwide. Real estate values were stable or slightly
improved during the quarter as mortgage rates remained at relatively attractive
levels. The Corporation also has not experienced the rise in consumer loan
delinquencies that has occurred nationwide.
The competition for deposits and loans remains heated in the
Corporation's market area. Active "cold calling" by officers at all levels of
the Corporation on businesses in its trade area has attracted new depositors and
borrowers. Many of these customers felt neglected by their former banks which
had recently undergone mergers. The Corporation's banking subsidiary, The Ramapo
Bank, (the "Bank") has taken over the lease of a branch banking site in a
community contiguous to Wayne. The Bank expects to open the branch for business
in the fourth quarter. Also, the Bank is acquiring approximately $10 million of
deposits from another financial institution which is closing a branch in close
proximity to one of the Bank's offices.
The Corporation's total assets increased by $2.2 million (.9%) during
the first six months of 1996, with growth during the second quarter of $8.3
million (3.4%), more than offsetting a decline of $6.1 million (2.5%) in the
first quarter. The decline in deposits during the first quarter (a recurring
seasonal phenomenom) was also reversed during the second quarter. Overall, total
deposits rose $1.7 million (.8%) for the six months and $7.6 million (3.6%) for
the second quarter. Demand deposits, both noninterest-bearing and
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<PAGE> 11
interest-bearing, showed the largest gains in the second quarter. Commercial
lenders were particularly successful in attracting deposits along with loan
business during the quarter. The return to a more normal level of business
activity by several large commercial depositors also boosted deposit levels
during this period.
CAPITAL ADEQUACY AND REGULATORY MATTERS
As noted in Form 10-Q for the first quarter of 1996, both the
Corporation and its principal subsidiary, the Bank, were released from
regulatory orders during the first quarter of 1996.
The Corporation had been operating under a Written Agreement with the
Federal Reserve Bank of New York (the "FRB") since November, 1993. Based on a
limited-scope inspection by the FRB as of September 30, 1995 which noted the
continued improvement in the Corporation's operations, the Written Agreement was
terminated in March, 1996.
The Bank had been operating under a Memorandum of Understanding (the
"MOU") issued by the Federal Deposit Insurance Corporation (the "FDIC") and the
New Jersey Department of Banking (the "State") in May, 1995. The MOU replaced a
more onerous order to cease and desist which had been jointly issued by the FDIC
and State in November, 1992. The MOU was terminated in March, 1996 as a result
of the FDIC's examination of the Bank as of December 31, 1995.
The Corporation's capital raising efforts in October, 1994, when $11.7
million of new capital was added, and its continued profitability since then,
have resulted in the Corporation's and the Bank's being considered "well
capitalized" by their respective regulators.
11
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The following table reflects the capital ratios as of the specified dates:
<TABLE>
<CAPTION>
REQUIRED
REGULATORY
JUNE 30 DECEMBER 31 CAPITAL
1996 1995 RATIOS (%)
------- ----------- -----------
<S> <C> <C> <C>
CORPORATION
Tier 1 leverage capital............................... 10.28% 10.08% *
Risk based capital
Tier 1............................................. 13.72% 13.37% 4.00%
Total (Tier 1 and Tier 2).......................... 14.99% 14.66% 8.00%
BANK
Tier 1 leverage capital............................... 9.21% 8.62% *
Risk based capital
Tier 1............................................. 12.31% 11.45% 4.00%
Total (Tier 1 and Tier 2).......................... 13.58% 12.74% 8.00%
</TABLE>
* Three percent minimum, with most bank holding companies required to
maintain an additional 1% to 2%. Capital adequacy is determined through
the examination process.
12
<PAGE> 13
ASSET QUALITY
Management has devoted significant time and resources to reducing
levels of problem assets. These efforts have resulted in nonperforming assets
declining from $33.4 million at December 31, 1993 to $8.7 million and $4.8
million at December 31, 1995 and June 30, 1996, respectively. The June 30, 1996
total represents just 1.9% of total assets.
The following table sets forth, as of the dates indicated, the
components of the Corporation's delinquent loans, nonperforming assets and
restructured loans. Nonperforming assets consist of nonaccrual loans, accruing
loans 90 days or more delinquent and other real estate ("ORE"). It is the
Corporation's policy to place a loan on nonaccrual status when, in the opinion
of management, the ultimate collectibility of the principal or interest on the
loan becomes doubtful. As a general rule, a commercial or real estate loan more
than 90 days past due with respect to principal or interest is classified as a
nonaccrual loan. Installment loans generally are not placed on nonaccrual
status but, instead, are charged off at 90 days past due, except where the
loans are secured and foreclosure proceedings have commenced. Loans are
considered restructured loans if, for economic or legal reasons, a concesssion
has been granted to the borrower related to the borrower's financial
difficulties that the creditor would not otherwise consider. The Corporation
has restructured certain loans in instances where a determination was made that
greater economic value will be realized under new terms than through
foreclosure, liquidation, or other disposition. ORE includes both loan
collateral that has been formally repossessed and collateral that is in the
Bank's possession and under its control without legal transfer of title. At the
time of classification as ORE, loans are reduced to the fair value of the
collateral (if less than the loan receivable) by charge-offs against the
allowance for possible loan losses. ORE is carried on the books at the lower of
cost or fair value, less estimated costs to sell. Subsequent valuation
adjustments to the fair value of the collateral are charged or credited to
current operations.
13
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<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1996 1995
---------- -----------
<S> <C> <C>
Loans 30-89 days past due .............. $3,321,000 $ 3,644,000
========== ===========
Nonaccrual loans:
Commercial and commercial real
estate ............................. $ 584,000 $ 3,459,000
Residential real estate
mortgage ........................... 200,000 375,000
Installment .......................... 152,000 356,000
---------- -----------
Total nonaccrual loans ............. 936,000 4,190,000
---------- -----------
Loans past due 90 days or more:
Commercial and commercial real
estate ............................. 280,000 37,000
Residential real estate
mortgage ........................... 132,000 53,000
Installment .......................... 105,000 51,000
---------- -----------
Total loans past due 90 days
or more .......................... 517,000 141,000
---------- -----------
Total nonperforming loans .......... $1,453,000 $ 4,331,000
---------- -----------
Other real estate, net ................. $3,391,000 $ 4,408,000
---------- -----------
Total nonperforming assets ............. $4,843,000 $ 8,739,000
========== ===========
Restructured loans ..................... $1,768,000 $ 1,702,000
---------- -----------
Total nonperforming assets and
restructured loans ................... $6,611,000 $10,441,000
========== ===========
</TABLE>
Of the loans in the 30-89 days past due category only 2 loans totaling
$1.2 million are considered potential problem loans. The largest of the two is a
$1.1 million commercial loan secured by real estate.
14
<PAGE> 15
Management believes that the net carrying value of ORE at June 30, 1996
equaled the lower of such assets' balances when transferred to ORE or the
estimated fair value (after reduction for estimated selling costs) of the
properties acquired. Given current real estate and economic conditions in the
Corporation's market, however, no assurance can be given as to the extent to
which the Corporation will realize its current carrying value, the Corporation's
ability to continue to dispose of any significant amount of ORE or the period of
time it will take for the Corporation to achieve further reductions in the
amount of its ORE.
ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible loan
losses is determined by management based upon its evaluation of the known, as
well as the inherent, risks within the Corporation's loan portfolio and is
maintained at a level considered adequate to provide for potential loan losses.
The allowance for possible loan losses is increased by provisions charged to
expense and recoveries of prior charge-offs, and is reduced by charge-offs. In
establishing the allowance for possible loan losses, management considers, among
other factors, previous loss experience, the performance of individual loans in
relation to contract terms, the size of particular loans, the risk
characteristics of the loan portfolio generally, the current status and credit
standing of borrowers, management's judgment as to prevailing and anticipated
real estate values, other economic conditions in the Corporation's market and
other factors affecting credit quality. Management also evaluates loan
impairment in accordance with SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan" and SFAS No. 118 - "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosure". SFAS No. 114 and SFAS No. 118
define an impaired loan as a loan where, according to current information and
events, it is unlikely that the creditor will be able to collect all amounts due
according to the contractual terms of the loan agreement. Impairment can be
measured by the present value of expected cash flows (net of estimated costs to
sell) discounted at the loan's effective interest rate or the fair value of the
collateral if the loan is collateral dependent. If the value of the impaired
loan is less than the recorded investment in the loan, management is required to
establish a valuation allowance, or adjust existing valuation allowances, with a
corresponding charge or credit to the provision for possible loan losses. At
June 30, 1996, the Corporation evaluated impairment under SFAS No. 114 and SFAS
No. 118 for those loans that cannot be easily grouped into homogeneous pools of
loans and collectively evaluated for impairment. These loans are primarily
commercial and real estate development loans which are collateral dependent.
Management believes the allowance for possible loan losses at June 30, 1996 of
$5.5 million, 377.6% of nonperforming loans and 3.4% of total loans, was
adequate. Management continues to actively monitor the Corporation's asset
quality and to charge off loans against the allowance for possible loan losses
as it deems appropriate. For the six months ended June 30, 1996, recoveries
exceeded charge-offs by $473,000. Although management believes it uses the best
information available to make determinations with respect to the allowance for
possible loan losses, future adjustments may be necessary if economic
15
<PAGE> 16
conditions differ substantially from the assumptions used in making the initial
determinations.
LIQUIDITY
At June 30, 1996, the Bank's liquidity consisted of cash and due from
banks of $11.1 million, federal funds sold of $6.3 million and securities
available for sale of $35.6 million. Management deems these amounts to be more
than adequate to meet its short-term cash needs.
The parent company had $2.5 million of cash and cash equivalents at
June 30, 1996. Its cash flows from operations are essentially break-even. These
funds are available for general corporate purposes.
RESULTS OF OPERATIONS
GENERAL. The Corporation's results of operations are dependent
primarily on its net interest and dividend income, which is the difference
between interest earned on its loans and investments and the interest paid on
interest-bearing liabilities. The Corporation's net income is also affected by
the generation of noninterest income, which primarily consists of service fees
on deposit accounts and other fee income. Net interest income is determined by
(i) the difference between yields earned on interest-earning assets and rates
paid on interest-bearing liabilities ("interest rate spread") and (ii) the
relative amounts of interest-earning assets and interest-bearing liabilities.
The Corporation's interest rate spread is affected by regulatory, economic and
competitive factors that influence interest rates, loan demand and deposit flows
and general levels of nonperforming assets. In addition, net income is affected
by the level of operating expenses and establishment of loan loss reserves and
ORE reserves.
The operations of the Corporation and the entire banking industry are
significantly affected by prevailing economic conditions, competition and the
monetary and fiscal policies of governmental agencies. Lending activities are
influenced by the demand for and supply of real estate, competition among
lenders, the level of interest rates and the availability of funds. Deposit
flows and costs of funds are influenced by prevailing market rates of interest,
primarily on competing investments, account maturities and the levels of
personal income and savings in the market area.
In prior periods, the level of the Corporation's nonperforming assets
significantly affected the Corporation's operating results due to the amounts of
the provisions for loan losses, which are charged against income, as well as the
expenses and losses related to ORE. As reported earlier, nonperforming assets
have been reduced to $4.8 million or 1.9% of total assets, at June 30, 1996.
Although the second quarter of 1996 marked the seventh consecutive
profitable quarter for the Corporation, management believes that sustained
16
<PAGE> 17
performance on a level with higher-earning peers is dependent upon its ability
to further reduce levels of nonperforming assets and curtail additions to the
valuation allowance for losses on ORE. Management anticipates that it can
reduce its provisions to the ORE valuation allowance because fewer ORE
properties remain, and because they are properly carried on the Corporation's
books at the lower of cost or fair value (less cost to sell), based on updated
appraisals. Also, management has demonstrated its ability to successfully
restructure certain nonperforming loans and sell its ORE properties at or near
current book value.
SIX MONTHS ENDED JUNE 30, 1996. The Corporation recorded net income of
$1,095,000 or $.13 per common share, for the first six months of 1996 as
compared to net income of $871,000, or $.10 per common share for the same period
in 1995. The Corporation benefited from net operating loss carryforwards in 1995
and thus recorded no federal income tax provision; in 1996, the Corporation is
fully taxable for financial reporting purposes. On a pre-tax basis, therefore,
income was $1,800,000 for the first six months of 1996, an increase of $847,000
(88.9%) over the first six months of 1995. The most significant reason for the
increase in pre-tax income is a $515,000 reduction in the provision for possible
loan losses. This was made possible by the continued improvement in asset
quality. A $290,000 decrease in FDIC assessment fees in 1996 versus 1995 is
another reason for the rise in pre-tax income.
Net interest income showed a modest increase of $52,000 in 1996 versus
1995. This increase was all due to a $1.2 million increase in interest-earning
assets and a decreased volume of interest-bearing liabilities. Rates on
interest-earning assets and interest-bearing liabilities were lower in 1996
versus 1995. The increase in interest-earning assets was primarily reflected in
a $1.0 million time deposit due from another financial institution.
Other income decreased $47,000 in 1996 as compared to 1995 primarily
due to a $43,000 decline in service charges on deposit accounts. Salaries
and employee benefits increased $191,000 for the six month period in 1996
largely due to increased benefit costs. Small increases in occupancy and
equipment expenses in 1996 as compared to 1995 were more than offset by a
reduction in ORE related expenses of $101,000. Other operating expenses showed
the largest decrease, $435,000, during the comparable six month periods. FDIC
fees were reduced by $290,000 in 1996 versus 1995 due to a reduction in
insurance rates and an improvement in the Bank's risk rating. Future FDIC fees
should remain at statutory minimum levels as long as the Bank's risk profile
does not change. See Note 4 of Notes to Consolidated Financial Statements for an
analysis of the remaining changes.
THREE MONTHS ENDED JUNE 30, 1996. The Corporation had net income of
$592,000, or $.07 per common share in 1996 compared to $466,000 or $.05 per
common share for the second quarter of 1995. On a pre-tax basis, earnings were
$975,000 in 1996 as compared to $510,000 in 1995 - a $465,000, or 91.2%,
increase. A $101,000 increase in net interest income, a $185,000 reduction in
the provision for possible loan losses and a $146,000 reduction in FDIC fees
17
<PAGE> 18
are the most significant reasons for the 1996 improvement.
Net interest income increased because of a $1.5 million rise in average
interest-earning assets and a $4.4 million drop in average nonaccrual loans
compared to the second quarter of 1995. The reduction in the provision for
possible loan losses was largely the result of recoveries exceeding charge-offs
during the quarter as well as improved loan quality. Management anticipates that
future quarterly provisions to the allowance for possible loan losses will be
lower than in 1995. The reduction in FDIC fees signals the Corporation's return
to health.
Other income decreased $43,000 during the quarter compared to 1995,
primarily due to a $33,000 loss recorded for securities transactions. Total
other expenses decreased by $2.1 million compared to 1995. Increases in salaries
and benefits, occupancy and equipment were more than offset by reductions in ORE
expenses and other operating expenses. For an analysis of the changes in other
operating expenses, see Note 4 of Notes to Consolidated Financial Statements.
18
<PAGE> 19
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Reference is made to Part II, Item 1 of the Corporation's Form 10-Q for
June 30, 1995. The suit against the Corporation by a former employee
referred to therein was voluntarily dismissed with prejudice early in
August, 1996. Accrued expenses related to this matter of approximately
$100,000 will not be realized and thus will be reversed during the
third quarter of 1996.
The Corporation and its subsidiaries are party, in the ordinary course
of business, to litigation involving collection matters, contract
claims and other miscellaneous causes of action arising from its
business. Management does not consider that any such proceedings depart
from usual routine litigation and in its judgment, neither the
Corporation's consolidated financial position nor its results of
operations will be affected materially by any present proceedings.
ITEM 2 - CHANGES IN THE RIGHTS OF SECURITY HOLDERS
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
See Form 10-Q for March 31, 1996 concerning the 1996 annual meeting of
stockholders held on April 30, 1996.
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
19
<PAGE> 20
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.
RAMAPO FINANCIAL CORPORATION
(Registrant)
Date: August 13, 1996 By: /s/ Walter A. Wojcik, Jr.
-------------------------
Treasurer
Date: August 13, 1996 By: /s/ Mortimer J. O'Shea
----------------------
President and CEO
20
<PAGE> 21
EXHIBIT INDEX
-------------
Exhibit 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 11,124,000
<INT-BEARING-DEPOSITS> 1,000,000
<FED-FUNDS-SOLD> 6,316,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 35,590,000
<INVESTMENTS-CARRYING> 25,610,000
<INVESTMENTS-MARKET> 25,414,000
<LOANS> 160,945,000
<ALLOWANCE> 5,486,000
<TOTAL-ASSETS> 248,698,000
<DEPOSITS> 218,787,000
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,502,000
<LONG-TERM> 0
0
0
<COMMON> 8,161,000
<OTHER-SE> 19,248,000
<TOTAL-LIABILITIES-AND-EQUITY> 248,698,000
<INTEREST-LOAN> 6,943,000
<INTEREST-INVEST> 1,762,000
<INTEREST-OTHER> 216,000
<INTEREST-TOTAL> 8,921,000
<INTEREST-DEPOSIT> 2,829,000
<INTEREST-EXPENSE> 2,829,000
<INTEREST-INCOME-NET> 6,092,000
<LOAN-LOSSES> 160,000
<SECURITIES-GAINS> (9,000)
<EXPENSE-OTHER> 5,396,000
<INCOME-PRETAX> 1,800,000
<INCOME-PRE-EXTRAORDINARY> 1,095,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,095,000
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
<YIELD-ACTUAL> 5.49
<LOANS-NON> 936,000
<LOANS-PAST> 517,000
<LOANS-TROUBLED> 1,768,000
<LOANS-PROBLEM> 1,220,000
<ALLOWANCE-OPEN> 4,853,000
<CHARGE-OFFS> 214,000
<RECOVERIES> 687,000
<ALLOWANCE-CLOSE> 5,486,000
<ALLOWANCE-DOMESTIC> 5,486,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
