<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 JUNE 30, 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 August 8, 1997.
1
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RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at
June 30, 1997 and December 31, 1996
(Unaudited) ..................................................................................... 3
Consolidated Statements of Income
for the Six Months Ended June 30,
1997 and 1996 (Unaudited) ....................................................................... 4
Consolidated Statements of Income
for the Three Months Ended June 30,
1997 and 1996 (Unaudited)....................................................................... 5
Consolidated Statement of Changes in
Stockholders' Equity for the Six
Months Ended June 30, 1997 (Unaudited) .......................................................... 6
Consolidated Statements of Cash Flows
for the Six Months Ended June 30,
1997 and 1996 (Unaudited) ....................................................................... 7
Notes to Consolidated Financial Statements (Unaudited) .......................................... 8-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.................................................................................... 10-19
PART II - OTHER INFORMATION
ITEM 1 THROUGH ITEM 6..................................................................................... 20
SIGNATURES......................................................................................................... 21
EXHIBIT 27 - Financial Data Schedule .............................................................................. 22
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents:
Cash and Due From Banks $ 16,260,000 $ 12,078,000
Federal Funds Sold 4,675,000 17,680,000
------------ ------------
Total Cash and Cash Equivalents 20,935,000 29,758,000
Due from Bank- Interest-Bearing 1,000,000 1,000,000
Securities:
Available for Sale, at Fair Value 41,045,000 41,648,000
Held to Maturity, at Cost (Fair Value
$40,097,000 and $26,339,000) 40,295,000 26,395,000
Loans 166,026,000 165,070,000
Less- Allowance for Possible Loan Losses 4,752,000 5,115,000
------------ ------------
Net Loans 161,274,000 159,955,000
Premises and Equipment, net 3,203,000 3,260,000
Other Real Estate, net (Note 1) 1,684,000 2,211,000
Other Assets, net 6,605,000 6,428,000
Intangible Assets, net (Note 2) 726,000 869,000
------------ ------------
TOTAL ASSETS $276,767,000 $271,524,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand - Noninterest-Bearing $ 61,326,000 $ 58,421,000
- Interest-Bearing 34,398,000 31,846,000
Savings 79,607,000 80,832,000
Time 62,725,000 64,325,000
Certificates of Deposit over $100,000 5,526,000 4,465,000
------------ ------------
Total Deposits 243,582,000 239,889,000
Securities Sold Under Agreements to Repurchase 2,000 --
Accrued Expenses and Other Liabilities 3,110,000 2,599,000
------------ ------------
Total Liabilities 246,694,000 242,488,000
STOCKHOLDERS' EQUITY
Common Stock 8,163,000 8,161,000
Capital in Excess of Par Value 13,110,000 13,103,000
Retained Earnings 9,156,000 8,105,000
Net Unrealized Holding Losses on
Securities Available for Sale (62,000) (39,000)
Treasury Stock at Cost (63,406 shares) (294,000) (294,000)
------------ ------------
Total Stockholders' Equity 30,073,000 29,036,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $276,767,000 $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>
Six Months Ended June 30
----------------------------
1997 1996
---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans, including Fees $7,070,000 $6,943,000
Securities:
Taxable 2,200,000 1,728,000
Nontaxable 81,000 34,000
Federal Funds Sold 262,000 186,000
Time Deposit with Bank 29,000 30,000
---------- ----------
TOTAL INTEREST INCOME 9,642,000 8,921,000
---------- ----------
INTEREST EXPENSE
Savings and Interest-Bearing Demand Deposits 1,344,000 1,101,000
Time Deposits and Certificates of Deposit
over $100,000 1,712,000 1,728,000
---------- ----------
TOTAL INTEREST EXPENSE 3,056,000 2,829,000
---------- ----------
NET INTEREST INCOME 6,586,000 6,092,000
Provision for Possible Loan Losses 240,000 160,000
---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 6,346,000 5,932,000
OTHER INCOME
Service Charges on Deposit Accounts 695,000 699,000
Losses on Securities Transactions (14,000) (9,000)
Brokerage Commissions 185,000 152,000
Other Income 197,000 407,000
---------- ----------
TOTAL OTHER INCOME 1,063,000 1,249,000
---------- ----------
OTHER EXPENSES
Salaries and Employee Benefits 2,633,000 2,435,000
Net Occupancy Expense 431,000 390,000
Equipment Expense 343,000 272,000
OREO Expense- Cost of Operations, net 64,000 215,000
- Valuation Adjustments 115,000 580,000
Other Operating Expenses (Note 3) 1,369,000 1,489,000
---------- ----------
TOTAL OTHER EXPENSES 4,955,000 5,381,000
---------- ----------
INCOME BEFORE TAXES 2,454,000 1,800,000
Provision for Income Taxes 918,000 705,000
---------- ----------
NET INCOME $1,536,000 $1,095,000
========== ==========
Average Common Shares Outstanding 8,345,995 8,181,094
Income per Common Share $ 0.18 $ 0.13
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 5
RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30
---------------------------
1997 1996
---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans, including Fees $3,572,000 $3,513,000
Securities:
Taxable 1,174,000 881,000
Nontaxable 46,000 17,000
Federal Funds Sold 100,000 110,000
Time Deposit with Bank 15,000 15,000
---------- ----------
TOTAL INTEREST INCOME 4,907,000 4,536,000
---------- ----------
INTEREST EXPENSE
Savings and Interest-Bearing Demand Deposits 683,000 577,000
Time Deposits and Certificates of Deposit
over $100,000 861,000 860,000
---------- ----------
TOTAL INTEREST EXPENSE 1,544,000 1,437,000
---------- ----------
NET INTEREST INCOME 3,363,000 3,099,000
Provision for Possible Loan Losses 120,000 40,000
---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 3,243,000 3,059,000
OTHER INCOME
Service Charges on Deposit Accounts 352,000 348,000
Losses on Securities Transactions (6,000) (33,000)
Brokerage Commissions 104,000 86,000
Other Income 98,000 133,000
---------- ----------
TOTAL OTHER INCOME 548,000 534,000
---------- ----------
OTHER EXPENSES
Salaries and Employee Benefits 1,338,000 1,226,000
Net Occupancy Expense 227,000 201,000
Equipment Expense 172,000 142,000
OREO Expense- Cost of Operations, net 28,000 73,000
- Valuation Adjustments 55,000 255,000
Other Operating Expenses (Note 3) 663,000 721,000
---------- ----------
TOTAL OTHER EXPENSES 2,483,000 2,618,000
---------- ----------
INCOME BEFORE TAXES 1,308,000 975,000
Provision for Income Taxes 486,000 383,000
---------- ----------
NET INCOME $ 822,000 $ 592,000
========== ==========
Average Common Shares Outstanding 8,360,646 8,213,897
Income per Common Share $ 0.10 $ 0.07
========== ==========
</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
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 -- -- 1,536,000 -- --
Change in Net Unrealized
Holding Losses on
Securities Available for Sale -- -- -- (23,000) --
Stock Options Exercised 2,000 7,000 -- -- --
Cash Dividends, $.03 per share -- -- (485,000) -- --
-------------------------------------------------------------------------------
BALANCE, JUNE 30, 1997 $ 8,163,000 $13,110,000 $9,156,000 ($62,000) ($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
------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 1,536,000 $ 1,095,000
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization of Premises and Equipment 299,000 230,000
Amortization of Intangible Assets 153,000 125,000
Accretion of Securities Discount, net (55,000) (33,000)
Provision for Possible Loan Losses 240,000 160,000
Provision for Possible Losses on Other Real Estate, net 115,000 580,000
Gain on Sale of Other Real Estate -- (84,000)
Loss on Securities Transactions, net 14,000 9,000
Loans Made or Acquired and Held for Sale -- (720,000)
Proceeds from Loans Held for Sale -- 731,000
Gain on Sales of Loans Held for Sale -- (11,000)
(Increase) Decrease in Interest Receivable (34,000) 147,000
Increase in Accrued Expenses and Other Liabilities 591,000 297,000
Other (286,000) 668,000
----------- -----------
Net Cash Provided by Operating Activities 2,573,000 3,194,000
----------- -----------
Cash Flows from Investing Activities:
Securities Available for Sale:
Proceeds from Maturities 1,116,000 1,511,000
Proceeds from Sales/Calls Prior to Maturity 8,108,000 14,931,000
Purchases (8,618,000) (12,874,000)
Securities Held to Maturity:
Proceeds from Maturities 2,131,000 500,000
Proceeds from Calls Prior to Maturity 1,000,000 3,002,000
Purchases (17,032,000) (9,079,000)
(Increase) Decrease in Loans Outstanding, net (1,432,000) 108,000
Capital Expenditures (243,000) (243,000)
Advances Made on Other Real Estate (271,000) (150,000)
Proceeds from Sale of Other Real Estate 556,000 671,000
Other (10,000) 3,000
----------- -----------
Net Cash Used in Investing Activities (14,695,000) (1,620,000)
----------- -----------
Cash Flows from Financing Activities:
Increase in Total Deposits, net 3,693,000 1,724,000
Increase in Short-Term Borrowings, net 2,000 --
Redemption of Class A Preferred Stock -- (717,000)
Cash Dividends on Preferred Stock -- (106,000)
Cash Dividends on Common Stock (405,000) --
Proceeds from Stock Options Exercised 9,000 3,000
----------- -----------
Net Cash Provided by Financing Activities 3,299,000 904,000
----------- -----------
Net (Decrease) Increase in Cash and Cash Equivalents (8,823,000) 2,478,000
Cash and Cash Equivalents, Beginning of Period 29,758,000 14,962,000
----------- -----------
Cash and Cash Equivalents, End of Period $20,935,000 $17,440,000
=========== ===========
</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.
NOTE 1: OTHER REAL ESTATE
A summary of activity in other real estate is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997
-------------
<S> <C>
Balance, beginning of period, net $ 2,211,000
Advances 271,000
Sales of properties (556,000)
Charge-offs or write-downs (127,000)
Increase in valuation allowance, net (115,000)
-----------
Balance, end of period, net $ 1,684,000
===========
</TABLE>
NOTE 2: INTANGIBLE ASSETS
Categories of net intangible assets are as follows:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
-------- --------
<S> <C> <C>
Purchased Mortgage Servicing Rights $ 63,000 $ 83,000
Core Deposit Premiums 596,000 665,000
Premium on Purchased Home Equity
Lines of Credit 67,000 121,000
-------- --------
Net Intangible Assets $726,000 $869,000
======== ========
</TABLE>
8
<PAGE> 9
NOTE 3: SUPPLEMENTARY STATEMENTS OF INCOME INFORMATION
Major categories of Other Operating Expenses are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30 JUNE 30
---------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
FDIC Fees $ 14,000 $ 33,000 $ 7,000 $ 16,000
Legal 107,000 272,000 47,000 118,000
Bonding and Insurance 65,000 112,000 24,000 55,000
Consulting Fees 95,000 107,000 40,000 38,000
Credit Reports/Filing Fees 52,000 72,000 28,000 40,000
Examinations 90,000 84,000 45,000 42,000
Postage & Freight 72,000 80,000 39,000 37,000
Telephone 100,000 79,000 55,000 40,000
Amortization - Intangibles 153,000 125,000 75,000 62,000
Automated Services 92,000 67,000 52,000 39,000
Stationery & Printing 136,000 116,000 67,000 58,000
Advertising 85,000 92,000 44,000 53,000
Dues and Subscriptions 29,000 30,000 14,000 15,000
Employee/Customer Rel. 39,000 36,000 25,000 21,000
Directors' Fees 65,000 61,000 35,000 33,000
Correspondent Banks' Fees 58,000 17,000 31,000 10,000
All Others 117,000 106,000 35,000 44,000
---------- ---------- -------- --------
$1,369,000 $1,489,000 $663,000 $721,000
========== ========== ======== ========
</TABLE>
9
<PAGE> 10
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, 1997 and results of operations for the three and six
months ended June 30, 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 June 30, 1997 and for the
three and six months ended June 30, 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 and six
months ended June 30, 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 remained
stable during the second quarter of 1997. The Federal Reserve Board left
interest rates unchanged at its May and July meetings, signaling its
satisfaction with the overall economy. The Treasury yield curve has flattened
in recent weeks primarily as a result of a decline in long-term interest rates.
Historically, lower mortgage rates follow such a decline which then stimulates
residential housing construction. The Corporation has experienced an increase
in loan demand from developers of residential real estate during the quarter
but loan demand from other commercial sectors remained sluggish.
The Corporation operates in a densely populated, highly competitive
market area. Calling efforts by officers at all levels of the Corporation on
businesses in its trade area have resulted in increased awareness of Ramapo's
capabilities as well as in 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 out-of-state institutions. Thus far
in 1997, the Corporation has introduced two new products aimed at retaining
existing commercial customers and attracting new ones. The first is the
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 second is the Treasury Plus product,
which sweeps excess demand deposits into a repurchase agreement account which
pays a market rate of interest. Additionally, the Corporation's principal
subsidiary, The Ramapo Bank ("Bank"), recently received regulatory approval to
establish a new branch in a neighboring town. The new Parsippany branch is
scheduled to open in mid-August, 1997.
10
<PAGE> 11
After a decline of $3.3 million (1.2%) during the first quarter of
1997, the Corporation's total assets increased $8.5 million (3.2%) during the
second quarter. The asset increase resulted from a $7.6 million (3.2%) increase
in deposits during the same period. Comparing June 30, 1997 results to December
31, 1996, total assets and total deposits increased $5.2 million (1.9%) and $3.7
million (1.5%), respectively. The major change in earning assets since year end
is a $13.0 million (73.6%) decrease in federal funds sold which were used to buy
securities, which increased $13.3 million (19.5%).
The deposit increases for the three and six months ended June 30, 1997
were primarily in the demand deposit category. Such deposit activity is largely
due to a number of commercial customers who generate more cash flow in the
warmer months than in the winter months.
REGULATORY CAPITAL
The Corporation and 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 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, that the
Corporation and Bank meet all capital adequacy requirements to which they are
subject as of June 30, 1997.
As of June 30, 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 Bank must maintain
minimum total risk-based, Tier l risk-based and Tier 1 leverage ratios as set
11
<PAGE> 12
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.
12
<PAGE> 13
<TABLE>
<CAPTION>
FOR CAPITAL
ACTUAL ADEQUACY PURPOSES
------------------- --------------------------
AMOUNT RATIO AMOUNT RATIO
------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
AS OF JUNE 30, 1997:
Total Capital
(to Risk-Weighted Assets):
Corporation ................ $30,648,000 15.8% more than or equal to $15,497,000 more than or equal to 8.0%
Bank ....................... $28,141,000 14.6% more than or equal to $15,458,000 more than or equal to 8.0%
Tier 1 Capital
(to Risk-Weighted Assets):
Corporation ................. $28,198,000 14.6% more than or equal to $7,748,000 more than or equal to 4.0%
Bank ........................ $25,697,000 13.3% more than or equal to $7,729,000 more than or equal to 4.0%
Tier 1 Capital
(to Average Assets):
Corporation ................. $28,198,000 10.5% more than or equal to $10,789,000 more than or equal to 4.0%
Bank ........................ $25,697,000 9.5% more than or equal to $10,774,000 more than or equal to 4.0%
As of December 31, 1996:
Total Capital
(to Risk-Weighted Assets):
Corporation ................. $29,424,000 15.5% more than or equal to $15,148,000 more than or equal to 8.0%
Bank ........................ $26,831,000 14.2% more than or equal to $15,106,000 more than or equal to 8.0%
Tier 1 Capital
(to Risk-Weighted Assets):
Corporation ................. $27,032,000 14.3% more than or equal to $7,574,000 more than or equal to 4.0%
Bank ........................ $24,446,000 12.9% more than or equal to $7,553,000 more than or equal to 4.0%
Tier 1 Capital
(to Average Assets):
Corporation ................. $27,032,000 10.5% more than or equal to $10,321,000 more than or equal to 4.0%
Bank ........................ $24,446,000 9.5% more than or equal to $10,312,000 more than or equal to 4.0%
</TABLE>
<TABLE>
<CAPTION>
TO BE WELL CAPITALIZED
UNDER PROMPT CORRECTIVE
ACTION PROVISIONS
------------------------------------------
AMOUNT RATIO
------ -----
<S> <C> <C> <C> <C>
AS OF JUNE 30, 1997:
Total Capital
(to Risk-Weighted Assets):
Corporation ................................ more than or equal to $19,371,000 more than or equal to 10.0%
Bank ....................................... more than or equal to $19,323,000 more than or equal to 10.0%
Tier 1 Capital
(to Risk-Weighted Assets):
Corporation ................................ more than or equal to $11,623,000 more than or equal to 6.0%
Bank ....................................... more than or equal to $11,594,000 more than or equal to 6.0%
Tier 1 Capital
(to Average Assets):
Corporation ................................ more than or equal to $13,487,000 more than or equal to 5.0%
Bank ....................................... more than or equal to $13,467,000 more than or equal to 5.0%
As of December 31, 1996:
Total Capital
(to Risk-Weighted Assets):
Corporation ................................ more than or equal to $18,935,000 more than or equal to 10.0%
Bank ....................................... more than or equal to $18,882,000 more than or equal to 10.0%
Tier 1 Capital
(to Risk-Weighted Assets):
Corporation ................................ more than or equal to $11,361,000 more than or equal to 6.0%
Bank ....................................... more than or equal to $11,329,000 more than or equal to 6.0%
Tier 1 Capital
(to Average Assets):
Corporation ................................ more than or equal to $12,902,000 more than or equal to 5.0%
Bank ....................................... more than or equal to $12,889,000 more than or equal to 5.0%
</TABLE>
13
<PAGE> 14
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. The restructured category consists
of one loan where a concession was granted to the borrower prior to the
adoption of SFAS No. 114, "Accounting by Creditors for Impairment of a Loan."
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.
14
<PAGE> 15
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
---------- ----------
<S> <C> <C>
Loans 30-89 days past due ...... $1,136,000 $1,023,000
========== ==========
Nonaccrual loans:
Commercial and commercial real
estate ..................... $ 838,000 $ 886,000
Residential real estate
mortgage ................... 34,000 104,000
Installment .................. 126,000 63,000
---------- ----------
Total nonaccrual loans ..... 998,000 1,053,000
---------- ----------
Loans past due 90 days or more:
Commercial and commercial real
estate ..................... 57,000 46,000
Residential real estate
mortgage ................... 152,000 61,000
Installment .................. 24,000 45,000
---------- ----------
Total loans past due 90 days
or more .................. 233,000 152,000
---------- ----------
Total nonperforming loans .. $1,231,000 $1,205,000
---------- ----------
Other real estate, net ......... $1,684,000 $2,211,000
---------- ----------
Total nonperforming assets ..... $2,915,000 $3,416,000
========== ==========
Restructured loans ............. $1,508,000 $1,540,000
---------- ----------
Total nonperforming assets and
restructured loans ........... $4,423,000 $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 $114,000. Management
believes that the net carrying value of ORE at June 30, 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.
15
<PAGE> 16
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, 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
$2,546,000 and $2,426,000 at June 30, 1997 and December 31, 1996, respectively,
the amount of its commercial nonaccrual and restructured loan portfolios and
other qualifying loans, if any, on those dates. Management believes the
allowance for possible loan losses at June 30, 1997 of $4.8 million, or 386.0%
of nonperforming loans and 2.9% 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.
16
<PAGE> 17
LIQUIDITY
At June 30, 1997, the Bank's liquid assets consisted of cash and due
from banks of $16.3 million, federal funds sold of $4.7 million and securities
available for sale of $41.0 million. 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 June 30, 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.
In June, 1997, the FASB issued two additional Statements. SFAS No.
130, "Reporting Comprehensive Income", establishes standards for reporting and
display of comrehensive income and its components (revenues, expenses, gains,
and losses) in a full set of general-purpose financial statements. The
Statement is effective for fiscal years beginning after December 15, 1997;
earlier application is permitted. The Corporation has elected not to adopt this
Statement prior to its effective date and has not determined which financial
statement will be utilized to display comprehensive income. The second
Statement, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information", requires that a public business enterprise report
financial and descriptive information about its reportable operating segments.
The Statement becomes effective for fiscal years beginning after December 15,
1997; earlier application is permitted. The Corporation has elected not to
adopt this Statement prior to its effective date and has not determined if it
has any reportable segments.
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
17
<PAGE> 18
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.
SIX MONTHS ENDED JUNE 30, 1997. The Corporation recorded net income of
$1,536,000, or $.18 per common share, as compared to $1,095,000, or $.13 per
common share for the same period in 1996, an increase of 40.3%. Net interest
income increased $494,000 (8.1%) in 1997 versus 1996, total other income
decreased $186,000 (14.9%) while total other expense decreased $426,000 (7.9%)
from 1996 levels. The provision for possible loan losses increased $80,000 (50%)
from 1996 to 1997.
The increase in net interest income was entirely due to an increased
volume of earning assets, as the tax-equivalent net interest margin fell from
5.50% for the first six months of 1996 to 5.34% for the same period in 1997. The
increased volume was made possible by a $24.8 million (4.7%) 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 due to the fact that during the
first six months of 1996 there were $243,000 of nonrecurring miscellaneous
income items, primarily loan recoveries in excess of prior chargeoffs. The
decrease in total other expense is entirely due to a $616,000 (77.5%) decrease
in OREO expenses, which were partly offset by an increase in normal operating
expenses of $190,000 (3.3%). The reduction in nonperforming assets has led to
a significant reduction in expenses related to these assets. For the six
months ended June 30, 1997, OREO expenses totaled $179,000 as compared to
$795,000 during the same period in 1996. Management expects that future
quarterly OREO expenses will be similar to or less than that incurred in 1997.
See Note 3 of Notes to Consolidated Financial Statements for an analysis of
changes in the remaining other expense accounts.
THREE MONTHS ENDED JUNE 30, 1997. The positive trends of net interest
income growth and OREO expense reduction which were experienced in the first
quarter of 1997 continued in the second quarter of 1997. They are the primary
reasons for the $230,0000 (38.9%) increase in net income, from $592,000 or $.07
per common share in 1996 to $822,000, or $.10 per common share in 1997.
Net interest income rose $264,000 (8.5%) during the second quarter of
1997 versus 1996, entirely on the strength of a $25.3 million (11.1%) increase
in average earning assets. Although the tax-equivalent net interest margin fell
12 basis points in the 1997 quarter versus 1996, at 5.38% it compares very
favorably to peer institutions.
18
<PAGE> 19
The increase of $80,000 in the provision for possible loan losses in
1997 is the result of two monthly provisions of $40,000 each that were not taken
in 1996 due to loan recoveries credited to the loan loss reserve. Other income
increased only $14,000 in the 1997 quarter versus 1996, largely due to a
reduction in losses on securities transactions from ($33,000) in 1996 to
($6,000) in 1997.
OREO expenses dropped $245,000 in the 1997 quarter versus 1996, which
is in line with the shrinking number of OREO properties.
19
<PAGE> 20
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
See Form 10-Q for March 31, 1997 concerning the 1997 annual meeting of
stockholders held on May 6, 1997.
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
20
<PAGE> 21
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, 1997 By: /s/ Walter A. Wojcik, Jr.
------------------ -------------------------
Walter A. Wojcik, Jr
Treasurer
Date: August 13, 1997 By: /s/ Mortimer J. O'Shea
----------------- -------------------------
Mortimer J. O'Shea
President and CEO
21
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 16,260,000
<INT-BEARING-DEPOSITS> 1,000,000
<FED-FUNDS-SOLD> 4,675,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 41,045,000
<INVESTMENTS-CARRYING> 40,295,000
<INVESTMENTS-MARKET> 40,097,000
<LOANS> 166,026,000
<ALLOWANCE> 4,752,000
<TOTAL-ASSETS> 276,767,000
<DEPOSITS> 243,582,000
<SHORT-TERM> 2,000
<LIABILITIES-OTHER> 3,110,000
<LONG-TERM> 0
0
0
<COMMON> 8,163,000
<OTHER-SE> 21,910,000
<TOTAL-LIABILITIES-AND-EQUITY> 276,767,000
<INTEREST-LOAN> 7,070,000
<INTEREST-INVEST> 2,281,000
<INTEREST-OTHER> 291,000
<INTEREST-TOTAL> 9,642,000
<INTEREST-DEPOSIT> 3,056,000
<INTEREST-EXPENSE> 3,056,000
<INTEREST-INCOME-NET> 6,586,000
<LOAN-LOSSES> 240,000
<SECURITIES-GAINS> (14,000)
<EXPENSE-OTHER> 4,955,000
<INCOME-PRETAX> 2,454,000
<INCOME-PRE-EXTRAORDINARY> 2,454,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,536,000
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
<YIELD-ACTUAL> 5.31
<LOANS-NON> 998,000
<LOANS-PAST> 233,000
<LOANS-TROUBLED> 1,708,000
<LOANS-PROBLEM> 114,000
<ALLOWANCE-OPEN> 5,115,000
<CHARGE-OFFS> 696,000
<RECOVERIES> 93,000
<ALLOWANCE-CLOSE> 4,752,000
<ALLOWANCE-DOMESTIC> 4,752,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
