<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 MARCH 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-7806
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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
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(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 May 10, 1996.
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RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
PAGE
NUMBER
------
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at
March 31, 1996 and December 31, 1995
(Unaudited).................................................. 3
Consolidated Statements of Income for the Three Months
Ended March 31, 1996 and 1995 (Unaudited).................... 4
Consolidated Statement of Changes in
Stockholders' Equity for the Three
Months Ended March 31, 1996 (Unaudited)...................... 5
Consolidated Statements of Cash Flows
for the Three Months Ended March 31,
1996 and 1995 (Unaudited).................................... 6
Notes to Consolidated Financial State-
ments (Unaudited)............................................ 7-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.................................................... 9-15
PART II - OTHER INFORMATION
ITEM 1 THROUGH ITEM 6................................................. 16-17
SIGNATURES.............................................................. 18
2
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ -------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents:
Cash and Due From Banks $ 8,624,000 $ 9,160,000
Federal Funds Sold 8,653,000 5,802,000
------------ ------------
Total Cash and Cash Equivalents 17,277,000 14,962,000
Due from Bank- Interest-Bearing 1,000,000 1,000,000
Securities:
Available for Sale, at Fair Value 33,698,000 39,328,000
Held to Maturity, at Cost 22,144,000 20,030,000
Loans 156,847,000 160,580,000
Less: Allowance for Possible Loan Losses 5,086,000 4,853,000
------------ ------------
Net Loans 151,761,000 155,727,000
Premises and Equipment, net 2,687,000 2,675,000
Other Real Estate, net (Note 1) 3,928,000 4,408,000
Other Assets, net 7,474,000 7,883,000
Intangible Assets, net (Note 2) 440,000 503,000
------------ ------------
TOTAL ASSETS $240,409,000 $246,516,00
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand - Noninterest-Bearing $ 43,088,000 $ 49,761,000
- Interest-Bearing 25,450,000 25,740,000
Savings 73,046,000 73,348,000
Time 65,109,000 64,005,000
Certificates of Deposit over $100,000 4,486,000 4,208,000
------------ ------------
Total Deposits 211,179,000 217,062,000
Accrued Expenses and Other Liabilities 2,356,000 2,205,000
------------ ------------
Total Liabilities 213,535,000 219,267,000
STOCKHOLDERS' EQUITY (Note 3)
Class A Preferred Stock - 717,000
Common Stock 8,160,000 8,160,000
Capital Paid in Excess of Par Value 13,101,000 13,101,000
Retained Earnings 5,876,000 5,479,000
Net Unrealized Holding Gains on
Securities Available for Sale 31,000 86,000
Treasury Stock at Cost (63,406 shares) (294,000) (294,000)
------------ ------------
Total Stockholders' Equity 26,874,000 27,249,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $240,409,000 $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>
Three Months Ended March 31
---------------------------
1996 1995
---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans, including Fees $3,430,000 $3,528,000
Securities
Taxable 847,000 441,000
Nontaxable 17,000 17,000
Federal Funds Sold 76,000 413,000
Time Deposit with Bank 15,000 -
---------- ---------
TOTAL INTEREST INCOME 4,385,000 4,399,000
---------- ---------
INTEREST EXPENSE
Savings and Interest-Bearing Demand Deposits 524,000 578,000
Time Deposits and Certificates of Deposit
over $100,000 868,000 767,000
Other Borrowings - 12,000
---------- ---------
TOTAL INTEREST EXPENSE 1,392,000 1,357,000
---------- ---------
NET INTEREST INCOME 2,993,000 3,042,000
Provision for Possible Loan Losses 120,000 450,000
---------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 2,873,000 2,592,000
OTHER INCOME
Service Charges on Deposit Accounts 351,000 362,000
Gain on Securities Transactions, net 24,000 -
Brokerage Commissions 66,000 83,000
Other Income 274,000 274,000
---------- ---------
TOTAL OTHER INCOME 715,000 719,000
---------- ---------
OTHER EXPENSES
Salaries and Employee Benefits 1,209,000 1,115,000
Net Occupancy Expense 189,000 187,000
Equipment Expense 130,000 142,000
OREO Expense- Cost of Operations, net 142,000 155,000
- Valuation Provisions 325,000 375,000
Other Operating Expenses (Note 4) 768,000 894,000
---------- ---------
TOTAL OTHER EXPENSES 2,763,000 2,868,000
---------- ---------
INCOME BEFORE TAXES 825,000 443,000
Provision for Income Taxes 322,000 38,000
---------- ----------
NET INCOME $ 503,000 $ 405,000
========== ==========
Weighted Average Common Shares Outstanding 8,096,449 8,096,449
Income per Common Share $ 0.06 $ 0.05
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
4
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RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Net Unrealized
Holding Gains
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 - - - 503,000 - -
Redemption of Class A
Preferred Stock (Note 3) (717,000) - - (106,000) - -
Change in Net Unrealized
Holding Gains on
Securities Available for Sale - - - - (55,000) -
------------------------------------------------------------------------------------------
BALANCE, March 31, 1996 $ - $8,160,000 $13,101,000 $5,876,000 $31,000 ($294,000)
==========================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
5
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RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
1996 1995
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 503,000 405,000
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization of Premises and Equipment 112,000 115,000
Amortization of Intangible Assets 63,000 83,000
Accretion of Securities Discount, net (13,000) (41,000)
Provision for Possible Loan Losses 120,000 450,000
Net Provision for Possible Losses on Other Real Estate 325,000 375,000
Gain on Sale of Other Real Estate (78,000) -
Gain on Securities Transactions, net (24,000) -
Loans Made or Acquired and Held For Sale (349,000) (123,000)
Proceeds from Loans Held for Sale 349,000 125,000
Gain on Sales of Loans Held for Sale - (2,000)
Decrease (Increase) in Interest Receivable 457,000 (129,000)
Increase in Accrued Expenses and Other Liabilities 151,000 1,783,000
Other (10,000) (190,000)
---------- ------------
Net Cash Provided by Operating Activities 1,606,000 2,851,000
---------- ------------
Cash Flows from Investing Activities:
Securities Available for Sale:
Proceeds from Maturities 11,000 10,000
Proceeds from Sales/Calls Prior to Maturity 12,024,000 -
Purchases (6,459,000) (9,628,000)
Securities Held to Maturity:
Proceeds from Sales/Calls Prior to Maturity 3,002,000 -
Purchases (5,115,000) (15,600,000)
Net Decrease in Loans Outstanding 3,846,000 5,390,000
Capital Expenditures (129,000) (17,000)
Advances Made on Other Real Estate (117,000) (120,000)
Proceeds from Sale of Other Real Estate 350,000 87,000
Other 3,000 -
---------- ------------
Net Cash Provided by (Used in) Investing Activities 7,416,000 (19,878,000)
---------- ------------
Cash Flows from Financing Activities:
Net (Decrease) Increase in Total Deposits (5,884,000) 8,287,000
Redemption of Subordinated Debentures - (1,292,000)
Redemption of Class A Preferred Stock (Note 3) (717,000) -
Preferred Stock Dividends Paid (Note 3) (106,000) -
---------- ------------
Net Cash (Used in) Provided by Financing Activities (6,707,000) 6,995,000
----------- ------------
Net Increase (Decrease) in Cash and Cash Equivalents 2,315,000 (10,032,000)
Cash and Cash Equivalents, Beginning of Period 14,962,000 42,486,000
----------- ------------
Cash and Cash Equivalents, End of Period $17,277,000 $ 32,454,000
=========== ============
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE> 7
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>
THREE MONTHS ENDED
MARCH 31, 1996
-----------------
<S> <C>
Balance, beginning of period, net $4,408,000
Advances 117,000
Sales of properties (272,000)
Charge-offs or write-downs (8,000)
Increase in valuation allowance, net (317,000)
----------
Balance, end of period, net $3,928,000
==========
</TABLE>
NOTE 2: INTANGIBLE ASSETS
Categories of net intangible assets are as follows:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1996 1995
-------- ---------
<S> <C> <C>
Purchased Mortgage Servicing Rights $113,000 $123,000
Core Deposit Premiums 125,000 151,000
Premium on Purchased Home Equity
Lines of Credit 202,000 229,000
-------- --------
Net Intangible Assets $440,000 $503,000
======== ========
</TABLE>
7
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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 OPERATIONS INFORMATION
Major categories of Other Operating Expenses are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------------
1996 1995
---- ----
<S> <C> <C>
FDIC Fees $ 17,000 $161,000
Legal 154,000 100,000
Bonding and Insurance 57,000 63,000
Consulting Fees 69,000 102,000
Credit Reports/Filing Fees 32,000 29,000
Examinations 42,000 60,000
Postage & Freight 43,000 47,000
Telephone 39,000 41,000
Amortization - Intangibles 63,000 63,000
Automated Services 28,000 36,000
Stationery & Printing 58,000 41,000
Advertising 39,000 40,000
Dues and Subscriptions 15,000 14,000
Employee/Customer Relations 15,000 14,000
Directors Fees 28,000 13,000
Correspondent Banks' Fees 7,000 17,000
All Others 62,000 53,000
-------- --------
$768,000 $894,000
======== ========
</TABLE>
8
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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 March 31, 1996 and results of operations for the three months
ended March 31, 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 March 31, 1996 and for the three months ended
March 31, 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 months ended March 31, 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 remained
lackluster during the first three months of 1996. The retail sector was affected
by corporate restructurings and the higher debt loads that normally follow
holiday season expenditures. The severe winter experienced in northern New
Jersey led to higher utility and maintenance costs for families and businesses
alike. Commercial real estate development was especially hampered by the
weather, although this type of activity is generally at a low point during the
winter months. The lowering of the prime rate in February was a positive move
for current and potential borrowers that often encourages spending and leads to
economic expansion. However, recent economic analyses seem to point to higher
interest rates before year-end which would have a negative effect on loan
demand.
On the competitive front, the Corporation should benefit from the three
acquisitions of major New Jersey banks by out-of-state institutions that are
being implemented in 1996. As ownership and management of competing
organizations become more remote, the Corporation's business development efforts
should generate new loan and deposit business from small businesses and
professionals in our market area. Also, the Corporation believes it can attract
a substantial amount of retail customers who prefer to do business with a
community-based organization. The Corporation's competitive position was further
enhanced by the termination of all regulatory orders during the first quarter.
(See "Capital Adequacy and Regulatory Matters" below.)
The Corporation's total assets declined $6.1 million (2.5%) during the
first quarter of 1996. The decrease was the result of a $5.9 million (2.7%)
decline in deposits during the same period. Declines in net loans and securities
of $4.0 million (2.6%) and $3.5 million (5.9%), respectively, were offset in
part by a $2.9 million (49.1%) increase in federal funds sold. In addition,
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<PAGE> 10
the Corporation redeemed the remaining $717,000 of Class A preferred stock.
The deposit decrease was primarily in noninterest-bearing demand
accounts, which declined $6.7 million (13.4%). Several large commercial
depositors maintained lower than average deposit levels during the quarter which
reflected a slow period in their business cycles. Deposit levels rebounded in
April, with total deposits averaging almost $219 million.
CAPITAL ADEQUACY AND REGULATORY MATTERS
Both the Corporation and its principal subsidiary, The Ramapo Bank (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.
10
<PAGE> 11
The following table reflects the capital ratios as of the specified dates:
<TABLE>
<CAPTION>
REQUIRED
REGULATORY
MARCH 31 DECEMBER 31 CAPITAL
1996 1995 RATIOS (%)
----- ---- ----------
<S> <C> <C> <C>
CORPORATION
Tier 1 leverage capital 10.33% 10.08% *
Risk based capital:
Tier 1 13.63% 13.37% 4.00%
Total (Tier 1 and Tier 2) 14.90% 14.66% 8.00%
BANK
Tier 1 leverage capital 9.21% 8.62% *
Risk based capital:
Tier 1 12.15% 11.45% 4.00%
Total (Tier 1 and Tier 2) 13.42% 12.74% 8.00%
</TABLE>
* Three percent minimum, with most banking organizations required to maintain
an additional 1% to 2%. Capital adequacy is determined through the
examination process.
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 $6.3
million at December 31, 1995 and March 31, 1996, respectively. The March 31,
1996 total represents just 2.6% 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 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
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<PAGE> 12
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.
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1996 1995
----- ----
<S> <C> <C>
Loans 30-89 days past due.......................... $ 4,580,000 $ 3,644,000
=========== ===========
Nonaccrual loans:
Commercial and commercial real
estate........................................ $ 1,618,000 $ 3,459,000
Residential real estate
mortgage...................................... 375,000 375,000
Installment...................................... 155,000 356,000
----------- -----------
Total nonaccrual loans......................... 2,148,000 4,190,000
----------- -----------
Loans past due 90 days or more:
Commercial and commercial real
estate........................................ 69,000 37,000
Residential real estate
mortgage...................................... 123,000 53,000
Installment...................................... 67,000 51,000
Total loans past due 90 days ----------- -----------
or more...................................... 259,000 141,000
----------- -----------
Total nonperforming loans...................... $ 2,407,000 $ 4,331,000
----------- -----------
Other real estate, net............................. $ 3,928,000 $ 4,408,000
----------- -----------
Total nonperforming assets......................... $ 6,335,000 $ 8,739,000
=========== ===========
Restructured loans................................. $ 3,291,000 $ 1,702,000
----------- -----------
Total nonperforming assets and
restructured loans............................... $ 9,626,000 $10,441,000
=========== ===========
</TABLE>
Of the loans in the 30-89 days past due category, only $1.4
million are considered potential problem loans. Chief among the problem loans
is a $1.1 million commercial loan secured by real estate. During the quarter,
a $1.7 million nonaccrual commercial loan was restructured.
12
<PAGE> 13
Management believes that the net carrying value of ORE at March
31, 1996 equaled the lower of such assets' balances when transferred to ORE or
the estimated fair value at that date (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 a
significant reduction 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
March 31, 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 March 31, 1996 of
$5.1 million, or 211.3% of nonperforming 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
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<PAGE> 14
appropriate. 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 conditions differ substantially
from the assumptions used in making the initial determinations.
LIQUIDITY
At March 31, 1996, the Bank's liquidity consisted of federal
funds sold of $8.7 million and securities available for sale of $33.7 million.
Management deems these amounts to be more than adequate to meet its short-term
cash needs.
The parent company had $2.6 million of cash and cash
equivalents at March 31, 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 consists primarily 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 $6.3 million or 2.6% of total assets,
at March 31,1996.
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<PAGE> 15
Although the first quarter of 1996 marked the sixth consecutive
profitable quarter for the Corporation, management believes that sustained
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.
THREE MONTHS ENDED MARCH 31, 1996. The Corporation recorded net
income of $503,000, or $.06 per common share, for the first quarter of 1996 as
compared to net income of $405,000, or $.05 per common share, for the same
period in 1995. A reduction in the provision for possible loan losses of
$330,000 plus a reduction of total other expenses of $105,000 were the primary
reasons that income before taxes increased $382,000 in the first quarter of
1996 as compared to 1995. Due to the adequacy of the allowance for possible
loan losses, management anticipates that future quarterly provisions to the
allowance will be similar to those charged to operations during the first
quarter. The Corporation moved to a fully taxable status for financial
reporting purposes in 1996, resulting in an increase in the provision for
income taxes of $284,000. At December 31, 1995, the Corporation had a Federal
net operating loss carryforward of $3.3 million of which $2.5 million expires
in 2009 and the remainder in 2010 and a state net operating loss carryforward
of $11.9 million which expires as follows: $800,000 in 1998, $2.0 million in
1999, $6.7 million in 2008, $1.6 million in 2001 and $800,000 in 2002.
The small decrease in net interest income of $49,000 was
entirely rate related, since average earning assets increased in 1996 versus
1995. Average securities and due from banks-interest-bearing increased $26.8
million in the first quarter of 1996 versus 1995, while average federal funds
sold and loans decreased $23.0 million and $2.9 million, respectively. The drop
in rate was mainly due to a 48 basis point drop in the Corporation's base
lending rate, from 8.82% in 1995 to 8.34% in 1996.
Other income for 1996 remained very close to the 1995 level.
The $94,000 increase in salaries and employee benefits reflects salary increases
given to officers and staff as of January 1, 1996 and increased benefit costs.
ORE related expenses declined $63,000 in 1996 versus 1995 and other operating
expenses dropped $126,000. In particular, FDIC fees dropped $144,000 for the
quarter when compared to the first quarter of 1995 due to a reduction in rates
and a reduction in the Bank's risk rating. Future FDIC fees should remain at
very low levels. See Note 4 of Notes to Consolidated Financial Statements for
an analysis of the remaining changes.
15
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
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
The Corporation's 1996 annual meeting of stockholders was held on
April 30, 1996. The sole item of business was the election of two
directors of the Corporation.
In accordance with the nominations described in the Corporation's
definitive Proxy Statement dated March 22, 1996, previously filed with
the Commission, the two (2) individuals named therein for reelection
at the annual meeting, Erwin D. Knauer and James R. Kaplan, were
reelected for three year terms expiring in 1999. The results of the
balloting for the election of Directors were as follows:
<TABLE>
<CAPTION>
TERM OF VOTES
NAME OFFICE VOTES FOR WITHHELD
---- ------- --------- --------
<S> <C> <C> <C>
Erwin D. Knauer Three years 7,029,814 70,880
James R. Kaplan Three years 7,027,894 72,800
</TABLE>
The names of the Corporation's five other directors, and the years in
which their respective terms will expire, are as follows: Donald W.
Barney (1998), Richard S. Miller (1998), Louis S. Miller (1997),
Mortimer J. O'Shea (1997) and Victor C. Otley, Jr. (1997).
16
<PAGE> 17
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
17
<PAGE> 18
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: May 14, 1995 By: /s/ Walter A. Wojcik, Jr.
----------------------- --------------------------
Treasurer
Date: May 14, 1995 By: /s/ Mortimer J. O'Shea
---------------------- --------------------------
President and CEO
18
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 8,624,000
<INT-BEARING-DEPOSITS> 1,000,000
<FED-FUNDS-SOLD> 8,653,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 33,698,000
<INVESTMENTS-CARRYING> 22,144,000
<INVESTMENTS-MARKET> 22,129,000
<LOANS> 156,847,000
<ALLOWANCE> 5,086,000
<TOTAL-ASSETS> 240,409,000
<DEPOSITS> 211,179,000
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,356,000
<LONG-TERM> 0
0
0
<COMMON> 8,160,000
<OTHER-SE> 18,714,000
<TOTAL-LIABILITIES-AND-EQUITY> 240,409,000
<INTEREST-LOAN> 3,430,000
<INTEREST-INVEST> 864,000
<INTEREST-OTHER> 91,000
<INTEREST-TOTAL> 4,385,000
<INTEREST-DEPOSIT> 1,392,000
<INTEREST-EXPENSE> 1,392,000
<INTEREST-INCOME-NET> 2,993,000
<LOAN-LOSSES> 120,000
<SECURITIES-GAINS> 24,000
<EXPENSE-OTHER> 2,763,000
<INCOME-PRETAX> 825,000
<INCOME-PRE-EXTRAORDINARY> 503,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 503,000
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
<YIELD-ACTUAL> 5.49
<LOANS-NON> 2,148,000
<LOANS-PAST> 259,000
<LOANS-TROUBLED> 3,291,000
<LOANS-PROBLEM> 1,366,000
<ALLOWANCE-OPEN> 4,853,000
<CHARGE-OFFS> 37,000
<RECOVERIES> 150,000
<ALLOWANCE-CLOSE> 5,086,000
<ALLOWANCE-DOMESTIC> 5,086,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
