<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1997
[ ] 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 8,099,449 shares at May 7, 1997.
1
<PAGE> 2
RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at
March 31, 1997 and December 31, 1996
(Unaudited)................................................................................... 3
Consolidated Statements of Income
for the Three Months Ended March 31,
1997 and 1996 (Unaudited)..................................................................... 4
Consolidated Statement of Changes in
Stockholders' Equity for the Three
Months Ended March 31, 1997 (Unaudited)....................................................... 5
Consolidated Statements of Cash Flows
for the Three Months Ended March 31,
1997 and 1996 (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................................................................................9-16
PART II - OTHER INFORMATION
ITEM 1 THROUGH ITEM 6................................................................................17-18
SIGNATURES.......................................................................................................19
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents:
Cash and Due From Banks $ 11,447,000 $ 12,078,000
Federal Funds Sold 8,750,000 17,680,000
------------- -------------
Total Cash and Cash Equivalents 20,197,000 29,758,000
Due from Bank- Interest-Bearing 1,000,000 1,000,000
Securities:
Available for Sale, at Fair Value 44,549,000 41,648,000
Held to Maturity, at Cost 34,315,000 26,395,000
Loans 160,960,000 165,070,000
Less: Allowance for Possible Loan Losses 5,154,000 5,115,000
------------- -------------
Net Loans 155,806,000 159,955,000
Premises and Equipment, net 3,166,000 3,260,000
Other Real Estate, net (Note 1) 1,946,000 2,211,000
Other Assets, net 6,466,000 6,428,000
Intangible Assets, net (Note 2) 791,000 869,000
------------- -------------
TOTAL ASSETS $ 268,236,000 $ 271,524,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand - Noninterest-Bearing $ 55,611,000 $ 58,421,000
- Interest-Bearing 30,442,000 31,846,000
Savings 80,413,000 80,832,000
Time 63,559,000 64,325,000
Certificates of Deposit over $100,000 5,956,000 4,465,000
------------- -------------
Total Deposits 235,981,000 239,889,000
Accrued Expenses and Other Liabilities 2,817,000 2,599,000
------------- -------------
Total Liabilities 238,798,000 242,488,000
STOCKHOLDERS' EQUITY
Common Stock 8,163,000 8,161,000
Capital in Excess of Par Value 13,110,000 13,103,000
Retained Earnings 8,577,000 8,105,000
Net Unrealized Holding Losses on
Securities Available for Sale (118,000) (39,000)
Treasury Stock at Cost (63,406 shares) (294,000) (294,000)
------------- -------------
Total Stockholders' Equity 29,438,000 29,036,000
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 268,236,000 $ 271,524,000
============= =============
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 4
RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1997 1996
----------- ----------
<S> <C> <C>
INTEREST INCOME
Loans, including Fees $ 3,498,000 $3,430,000
Securities
Taxable 1,026,000 847,000
Nontaxable 35,000 17,000
Federal Funds Sold 162,000 76,000
Time Deposit with Bank 14,000 15,000
----------- ----------
TOTAL INTEREST INCOME 4,735,000 4,385,000
----------- ----------
INTEREST EXPENSE
Savings and Interest-Bearing Demand Deposits 661,000 524,000
Time Deposits and Certificates of Deposit
over $100,000 851,000 868,000
----------- ----------
TOTAL INTEREST EXPENSE 1,512,000 1,392,000
----------- ----------
NET INTEREST INCOME 3,223,000 2,993,000
Provision for Possible Loan Losses 120,000 120,000
----------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 3,103,000 2,873,000
OTHER INCOME
Service Charges on Deposit Accounts 343,000 351,000
(Loss) Gain on Securities Transactions, net (8,000) 24,000
Brokerage Commissions 81,000 66,000
Other Income 99,000 274,000
----------- ----------
TOTAL OTHER INCOME 515,000 715,000
----------- ----------
OTHER EXPENSES
Salaries and Employee Benefits 1,295,000 1,209,000
Net Occupancy Expense 204,000 189,000
Equipment Expense 171,000 130,000
OREO Expense- Cost of Operations, net 36,000 142,000
- Valuation Provisions 60,000 325,000
Other Operating Expenses (Note 3) 706,000 768,000
----------- ----------
TOTAL OTHER EXPENSES 2,472,000 2,763,000
----------- ----------
INCOME BEFORE TAXES 1,146,000 825,000
Provision for Income Taxes 432,000 322,000
----------- ----------
NET INCOME $ 714,000 $ 503,000
=========== ==========
Weighted Average Common Shares Outstanding 8,097,849 8,096,449
Income per Common Share $ 0.09 $ 0.06
=========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 5
RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Net Unrealized
Holding
Losses
Capital on Securities
Common in Excess of Retained Available Treasury
Stock Par Value Earnings for Sale Stock
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 $ 8,161,000 $13,103,000 $8,105,000 ($ 39,000) ($294,000)
Net Income for the Period -- -- 714,000 -- --
Change in Net Unrealized
Holding Losses on
Securities Available for Sale -- -- -- (79,000) --
Stock Options Exercised 2,000 7,000 -- -- --
Cash Dividends Declared, $.03 per share (242,000)
------------------------------------------------------------------------
BALANCE, March 31, 1997 $ 8,163,000 $13,110,000 $8,577,000 ($118,000) ($294,000)
========================================================================
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE> 6
RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 714,000 $ 503,000
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization of Premises and Equipment 153,000 112,000
Amortization of Intangible Assets 78,000 63,000
Accretion of Securities Discount, net (29,000) (13,000)
Provision for Possible Loan Losses 120,000 120,000
Net Provision for Possible Losses on Other Real Estate 60,000 325,000
Gain on Sale of Other Real Estate -- (78,000)
Loss (Gain) on Securities Transactions, net 8,000 (24,000)
Loans Made or Acquired and Held for Sale -- (349,000)
Proceeds from Loans Held for Sale -- 349,000
Decrease in Interest Receivable 133,000 457,000
Increase in Accrued Expenses and Other Liabilities 57,000 151,000
Other (36,000) (10,000)
------------ ------------
Net Cash Provided by Operating Activities 1,258,000 1,606,000
------------ ------------
Cash Flows from Investing Activities:
Securities Available for Sale:
Proceeds from Maturities 11,000 11,000
Proceeds from Calls Prior to Maturity 1,965,000 12,024,000
Purchases (4,988,000) (6,459,000)
Securities Held to Maturity:
Proceeds from Maturities 2,025,000 --
Proceeds from Sales/Calls Prior to Maturity 1,000,000 3,002,000
Purchases (10,945,000) (5,115,000)
Net Decrease in Loans Outstanding 4,156,000 3,846,000
Capital Expenditures (59,000) (129,000)
Advances Made on Other Real Estate (176,000) (117,000)
Proceeds from Sale of Other Real Estate 254,000 350,000
Other -- 3,000
------------ ------------
Net Cash Used in Investing Activities (6,757,000) 7,416,000
------------ ------------
Cash Flows from Financing Activities:
Net Decrease in Total Deposits (3,909,000) (5,884,000)
Redemption of Class A Preferred Stock -- (717,000)
Cash Dividends on Preferred Stock -- (106,000)
Cash Dividends on Common Stock (162,000) --
Proceeds from Stock Options Exercised 9,000 --
------------ ------------
Net Cash Provided by Financing Activities (4,062,000) (6,707,000)
------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents (9,561,000) 2,315,000
Cash and Cash Equivalents, Beginning of Period 29,758,000 14,962,000
------------ ------------
Cash and Cash Equivalents, End of Period $ 20,197,000 $ 17,277,000
============ ============
</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.
NOTE 1: OTHER REAL ESTATE
A summary of activity in other real estate is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1997
------------------
<S> <C>
Balance, beginning of period, net $ 2,211,000
Advances 176,000
Sales of properties (254,000)
Charge-offs or write-downs (127,000)
Increase in valuation allowance, net (60,000)
-----------
Balance, end of period, net $ 1,946,000
===========
</TABLE>
NOTE 2: INTANGIBLE ASSETS
Categories of net intangible assets are as follows:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
-------- --------
<S> <C> <C>
Purchased Mortgage Servicing Rights $ 73,000 $ 83,000
Core Deposit Premiums 624,000 665,000
Premium on Purchased Home Equity
Lines of Credit 94,000 121,000
-------- --------
Net Intangible Assets $791,000 $869,000
======== ========
</TABLE>
7
<PAGE> 8
NOTE 3: SUPPLEMENTARY STATEMENTS OF OPERATIONS INFORMATION
Major categories of Other Operating Expenses are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------------
1997 1996
---- -----
<S> <C> <C>
FDIC Fees $ 7,000 $ 17,000
Legal 60,000 154,000
Bonding and Insurance 41,000 57,000
Consulting Fees 55,000 69,000
Credit Reports/Filing Fees 24,000 32,000
Examinations 45,000 42,000
Postage & Freight 33,000 43,000
Telephone 45,000 39,000
Amortization - Intangibles 78,000 63,000
Automated Services 40,000 28,000
Stationery & Printing 69,000 58,000
Advertising 41,000 39,000
Dues and Subscriptions 15,000 15,000
Employee/Customer Relations 14,000 15,000
Directors Fees 30,000 28,000
Correspondent Banks' Fees 27,000 7,000
All Others 82,000 62,000
-------- --------
$706,000 $768,000
======== ========
</TABLE>
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDI-
TION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Corporation's financial
condition as of March 31, 1997 and results of operations for the three months
ended March 31, 1997 and 1996 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
contained elsewhere herein. The information as of March 31, 1997 and for the
three months ended March 31, 1997 and 1996 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, 1997 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 first three months of 1997 continued the trend of slow growth established
during the second half of 1996. A mild winter helped real estate developers get
an early start on construction projects, which the Corporation expects to
benefit from in the form of loans in the second quarter. The twenty-five basis
point increase in the Corporation's base lending rate that occurred in late
March resulted from the Federal Reserve Bank's increase of the same magnitude in
the overnight federal funds rate. While this increase had little effect on
borrowers' demand for loans, further increases in lending rates would tend to
slow down loan demand and affect borrowers' ability to repay variable rate loans
that are tied to the Corporation's base or prime rate.
The Corporation's market area remains highly competitive. Calling
efforts by officers at all levels of the Corporation on businesses in its trade
area have begun to attract new depositors and borrowers. Because the Corporation
is committed to providing a high level of personal service along with the latest
technology, management believes that it is well-positioned to attract customers
from rivals that were recently merged into large out-of-state institutions. The
Corporation recently introduced its Commercial Access product, which permits
business customers to access their own account information via personal computer
and initiate internal transfers, wire transfers and stop payment orders.
The Corporation's total assets declined $3.3 million (1.2%) during the
first quarter of 1997. The decrease was the result of a $3.9 million (1.6%)
decline in deposits during the same period.
9
<PAGE> 10
The $8.9 million (50.5%) and $4.1 million (2.6%) decrease in federal funds sold
and net loans, respectively, were offset in large part by a $10.8 million
(15.9%) increase in investment securities.
The deposit decrease was primarily in the noninterest-bearing demand
category, which fell $2.8 million (4.8%). The Corporation has experienced
similar declines in demand deposits during the first quarters of prior years
because these months represent a slow period in the business cycles of several
large commercial depositors. Average deposits for April, 1997 have rebounded to
a higher level than that seen at December 31, 1996.
REGULATORY CAPITAL
The Corporation and its principal subsidiary, The Ramapo Bank ("Bank"),
are subject to various regulatory capital requirements administered by the
federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory - and possibly additional discretionary - actions by
regulators that if undertaken could have a direct material effect on the
Corporation's and Bank's financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Corporation and
Bank each must meet specific capital guidelines that involve quantitative
measures of their respective assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Corporation's and
Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Corporation and the Bank to maintain minimum amounts and
ratios (set forth in the table below) of total and Tier 1 capital (as defined in
the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as
defined) to average assets (as defined). Management believes, as of March 31,
1997, that the Corporation and the Bank meet all capital adequacy requirements
to which they are subject.
As of March 31, 1997, the most recent notification from the Federal
Deposit Insurance Corporation ("FDIC") categorized the Bank as "well
capitalized" under the regulatory framework for prompt corrective action. The
Corporation was notified by the Federal Reserve Bank of New York ("FRB") that it
was "well capitalized" based on the FRB's examination as of June 30, 1996. To be
categorized as "well capitalized" the Corporation and the Bank must maintain
minimum toal risk-based, Tier l risk-based and Tier 1 leverage ratios as set
forth in the table below. There are no conditions or events since those
notifications that management believes have changed the Corporation's or the
Bank's respective category.
10
<PAGE> 11
<TABLE>
<CAPTION>
FOR CAPITAL
ACTUAL ADEQUACY PURPOSES
------ -----------------
AMOUNT RATIO AMOUNT RATIO
------ ----- ------ -----
<S> <C> <C> <C> <C>
AS OF MARCH 31, 1997:
Total Capital (to Risk-Weighted Assets):
Corporation................................ $ 29,953,000 16.0% (greater than/equal to)$14,963,000 (greater than/equal to)8.0%
Bank....................................... $ 27,400,000 14.7% (greater than/equal to)$14,923,000 (greater than/equal to)8.0%
Tier 1 Capital (to Risk-Weighted Assets):
Corporation................................ $ 27,581,000 14.8% (greater than/equal to)$ 7,482,000 (greater than/equal to)4.0%
Bank....................................... $ 25,033,000 13.4% (greater than/equal to)$ 7,461,000 (greater than/equal to)4.0%
Tier 1 Capital (to Average Assets):
Corporation................................ $ 27,581,000 10.4% (greater than/equal to)$10,570,000 (greater than/equal to)4.0%
Bank....................................... $ 25,033,000 9.5% (greater than/equal to)$10,555,000 (greater than/equal to)4.0%
AS OF DECEMBER 31, 1996:
Total Capital (to Risk-Weighted Assets):
Corporation................................ $ 29,424,000 15.5% (greater than/equal to)$15,148,000 (greater than/equal to)8.0%
Bank....................................... $ 26,831,000 14.2% (greater than/equal to)$15,106,000 (greater than/equal to)8.0%
Tier 1 Capital (to Risk-Weighted Assets):
Corporation................................ $ 27,032,000 14.3% (greater than/equal to)$ 7,574,000 (greater than/equal to)4.0%
Bank....................................... $ 24,446,000 12.9% (greater than/equal to)$ 7,553,000 (greater than/equal to)4.0%
Tier 1 Capital (to Average Assets):
Corporation................................ $ 27,032,000 10.5% (greater than/equal to)$10,321,000 (greater than/equal to)4.0%
Bank....................................... $ 24,446,000 9.5% (greater than/equal to)$10,312,000 (greater than/equal to)4.0%
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
PROMPT CORRECTIVE
ACTION PROVISIONS
-----------------
AMOUNT RATIO
------ -----
<S> <C> <C>
AS OF MARCH 31, 1997:
Total Capital (to Risk-Weighted Assets):
Corporation................................ (greater than/equal to)$18,704,000 (greater than/equal to)10.0%
Bank....................................... (greater than/equal to)$18,654,000 (greater than/equal to)10.0%
Tier 1 Capital (to Risk-Weighted Assets:
Corporation................................ (greater than/equal to)$11,222,000 (greater than/equal to) 6.0%
Bank....................................... (greater than/equal to)$11,192,000 (greater than/equal to) 6.0%
Tier 1 Capital (to Average Assets):
Corporation................................ (greater than/equal to)$13,212,000 (greater than/equal to) 5.0%
Bank....................................... (greater than/equal to)$13,194,000 (greater than/equal to) 5.0%
AS OF DECEMBER 31, 1996:
Total Capital (to Risk-Weighted Assets):
Corporation................................ (greater than/equal to)$18,935,000 (greater than/equal to)10.0%
Bank....................................... (greater than/equal to)$18,882,000 (greater than/equal to)10.0%
Tier 1 Capital (to Risk-Weighted Assets):
Corporation................................ (greater than/equal to)$11,361,000 (greater than/equal to) 6.0%
Bank....................................... (greater than/equal to)$11,329,000 (greater than/equal to) 6.0%
Tier 1 Capital (to Average Assets):
Corporation................................ (greater than/equal to)$12,902,000 (greater than/equal to) 5.0%
Bank....................................... (greater than/equal to)$12,889,000 (greater than/equal to) 5.0%
</TABLE>
11
<PAGE> 12
ASSET QUALITY
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
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.
12
<PAGE> 13
<TABLE>
<CAPTION>
MARCH 31 December 31
1997 1996
---------- -----------
<S> <C> <C>
Loans 30-89 days past due ...... $1,322,000 $1,023,000
========== ==========
Nonaccrual loans:
Commercial and commercial real
estate ..................... $1,375,000 $ 886,000
Residential real estate
mortgage ................... 104,000 104,000
Installment .................. 63,000 63,000
---------- ----------
Total nonaccrual loans ..... 1,542,000 1,053,000
---------- ----------
Loans past due 90 days or more:
Commercial and commercial real
estate ..................... 34,000 46,000
Residential real estate
mortgage ................... 256,000 61,000
Installment .................. 44,000 45,000
---------- ----------
Total loans past due 90 days
or more .................. 334,000 152,000
---------- ----------
Total nonperforming loans .. $1,876,000 $1,205,000
---------- ----------
Other real estate, net ......... $1,946,000 $2,211,000
---------- ----------
Total nonperforming assets ..... $3,822,000 $3,416,000
========== ==========
Restructured loans ............. $1,724,000 $1,540,000
---------- ----------
Total nonperforming assets and
restructured loans ........... $5,546,000 $4,956,000
========== ==========
</TABLE>
The only loans 30-89 days past due that are considered to be potential
problem loans are several small installment loans totaling $81,000. Management
believes that the net carrying value of ORE at March 31, 1997 is equal to 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.
13
<PAGE> 14
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, 1997, 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. The Corporation's impaired loans totaled
$3,099,000 and $2,426,000 at March 31, 1997 and December 31, 1996,
respectively, the amount of its commercial nonaccrual and restructured loan
portfolios on those dates. Management believes the allowance for
possible loan losses at March 31, 1997 of $5.2 million, or 274.7% of
nonperforming loans and 3.2% 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. 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, 1997, the Bank's liquid assets consisted of cash and due
from banks of $11.4 million, federal funds sold of $8.8 million and securities
available for sale of $44.5 million.
14
<PAGE> 15
Management deems these amounts to be more than adequate to meet its short-term
cash needs.
The parent company held $2.4 million of cash and cash equivalents at
the Bank at March 31, 1997. Its cash flows from operations are essentially
break-even. These funds are available for general corporate purposes.
Management believes that future earnings should be sufficient to allow
for substantial growth and payment of dividends without having to raise
additional capital.
IMPACT OF NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued SFAS No. 128, "Earnings
Per Share", in February 1997. This Statement specifies the computation,
presentation, and disclosure requirements for earnings per share. The Statement
becomes effective for both interim and annual periods ending after December 15,
1997. Earlier application is not permitted. The Corporation has elected not to
disclose pro forma EPS amounts computed using this Statement in the notes to
financial statements in periods prior to required adoption as is permitted.
RESULTS OF OPERATIONS
GENERAL. The Corporation's results of operations are dependent
primarily on its net interest income, which 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. 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. 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.
The reduction in nonperforming assets has led to a significant
reduction in expenses related to these assets. For the three months ended March
31, 1997, ORE-related expenses totaled $96,000 as compared to $467,000 during
the same period in 1996. Management expects that future quarterly ORE-related
expenses will be similar to or less than that incurred in the first quarter of
1997.
THREE MONTHS ENDED MARCH 31, 1997. The Corporation recorded net income
of $714,000, or $.09 per common share, for the first three months of 1997 as
compared to $503,000, or $.06 per common share for the same period in 1996, an
increase of 41.9%. Net interest income increased by $230,000 in 1997 versus
1996, total other income decreased by $200,000 while other expense decreased
15
<PAGE> 16
$291,000 from 1996 levels. The provision for possible loan losses was the same
in 1997 as in the prior year's first quarter.
The increase in net interest income was entirely due to an increased
volume of earning assets, as the net interest margin fell from 5.51% on a
tax-equivalent basis in the first quarter of 1996 to 5.31% for the 1997 quarter.
The increased volume was made possible by a $26.1 million increase in average
deposits in 1997 as compared to 1996; about half of this increase is due to
deposits acquired from another commercial bank and the opening of a new branch
office, both of which occurred in the fourth quarter of 1996.
The decrease in total other income is primarily due to the fact that
during the first quarter of 1996 there were $193,000 of nonrecurring
miscellaneous income items. The reduction in other expense was chiefly due to a
$371,000 decrease in ORE-related expenses, which reflect the lower level of ORE
in 1997 versus 1996. See Note 3 of Notes to Consolidated Financial Statements
for an analysis of changes in the remaining other expense accounts.
16
<PAGE> 17
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 1997 annual meeting of stockholders was held on May
6, 1997. The sole item of business was the election of three directors
of the Corporation.
In accordance with the nominations described in the Corporation's
definitive Proxy Statement dated March 21, 1997, previously filed with
the Commission, the three (3) individuals named therein for reelection
at the annual meeting, Louis S. Miller, Mortimer J. O'Shea and Victor
C. Otley, Jr., were reelected for three year terms expiring in 2000.
The results of the balloting for the election of Directors were as
follows:
<TABLE>
<CAPTION>
ABSTENTIONS AND
NAME TERM OF OFFICE VOTES FOR VOTES WITHHELD BROKER NON-VOTES
---- -------------- --------- -------------- ----------------
<S> <C> <C> <C> <C>
Louis S. Miller Three Years 6,679,794 73,574 0
Mortimer J. O'Shea Three Years 6,712,315 41,053 0
Victor C. Otley, Jr. Three Years 6,670,165 83,203 0
</TABLE>
The names of the Corporation's four other directors, and the years in
which their respective terms will expire, are as follows: Donald W.
Barney (1998), Richard S. Miller (1998), Erwin D. Knauer (1999), and
James R. Kaplan (1999).
17
<PAGE> 18
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - The following Exhibit is being
filed herewith:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
18
<PAGE> 19
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 9, 1997 By: /s/ Walter A. Wojcik, Jr.
--------------- -------------------------------
Treasurer
Date: May 9, 1997 By: /s/ Mortimer J. O'Shea
--------------- -------------------------------
President and CEO
19
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 11,447,000
<INT-BEARING-DEPOSITS> 1,000,000
<FED-FUNDS-SOLD> 8,750,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 44,549,000
<INVESTMENTS-CARRYING> 34,315,000
<INVESTMENTS-MARKET> 33,747,000
<LOANS> 160,960,000
<ALLOWANCE> 5,154,000
<TOTAL-ASSETS> 268,236,000
<DEPOSITS> 235,981,000
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,817,000
<LONG-TERM> 0
0
0
<COMMON> 8,163,000
<OTHER-SE> 21,275,000
<TOTAL-LIABILITIES-AND-EQUITY> 268,236,000
<INTEREST-LOAN> 3,498,000
<INTEREST-INVEST> 1,061,000
<INTEREST-OTHER> 176,000
<INTEREST-TOTAL> 4,735,000
<INTEREST-DEPOSIT> 1,512,000
<INTEREST-EXPENSE> 1,512,000
<INTEREST-INCOME-NET> 3,223,000
<LOAN-LOSSES> 120,000
<SECURITIES-GAINS> (8,000)
<EXPENSE-OTHER> 2,472,000
<INCOME-PRETAX> 1,146,000
<INCOME-PRE-EXTRAORDINARY> 1,146,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 714,000
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
<YIELD-ACTUAL> 5.28
<LOANS-NON> 1,542,000
<LOANS-PAST> 334,000
<LOANS-TROUBLED> 1,724,000
<LOANS-PROBLEM> 81,000
<ALLOWANCE-OPEN> 5,115,000
<CHARGE-OFFS> 145,000
<RECOVERIES> 64,000
<ALLOWANCE-CLOSE> 5,154,000
<ALLOWANCE-DOMESTIC> 5,154,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
