<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 SEPTEMBER 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 8,100,824 shares at November 10, 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
September 30, 1997 and December 31, 1996
(Unaudited)..................................................................3
Consolidated Statements of Income
for the Nine Months Ended September 30,
1997 and 1996 (Unaudited)....................................................4
Consolidated Statements of Income
for the Three Months Ended September 30,
1997 and 1996 (Unaudited)....................................................5
Consolidated Statement of Changes in
Stockholders' Equity for the Nine
Months Ended September 30, 1997 (Unaudited)..................................6
Consolidated Statements of Cash Flows
for the Nine Months Ended September 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............................................................10-18
PART II - OTHER INFORMATION
ITEM 1 THROUGH ITEM 6.............................................................19
SIGNATURES..............................................................................20
EXHIBIT 27 - Financial Data Schedule....................................................21
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents:
Cash and Due From Banks $ 12,939,000 $ 12,078,000
Federal Funds Sold 3,375,000 17,680,000
------------- -------------
Total Cash and Cash Equivalents 16,314,000 29,758,000
Due from Bank - Interest-Bearing 1,000,000 1,000,000
Securities:
Available for Sale, at Fair Value 40,296,000 41,648,000
Held to Maturity, at Cost (Fair Value $40,187,000
and $26,339,000) 40,093,000 26,395,000
Loans 169,270,000 165,070,000
Less - Allowance for Possible Loan Losses 4,642,000 5,115,000
------------- -------------
Net Loans 164,628,000 159,955,000
Premises and Equipment, net 3,317,000 3,260,000
Other Real Estate, net (Note 1) 2,128,000 2,211,000
Other Assets, net 6,425,000 6,428,000
Intangible Assets, net (Note 2) 674,000 869,000
------------- -------------
TOTAL ASSETS $ 274,875,000 $ 271,524,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand - Noninterest-Bearing $ 57,442,000 $ 58,421,000
- Interest-Bearing 32,365,000 31,846,000
Savings 82,158,000 80,832,000
Time 61,871,000 64,325,000
Certificates of Deposit over $100,000 6,337,000 4,465,000
------------- -------------
Total Deposits 240,173,000 239,889,000
Securities Sold Under Agreements to Repurchase 1,002,000 --
Accrued Expenses and Other Liabilities 3,022,000 2,599,000
------------- -------------
Total Liabilities 244,197,000 242,488,000
STOCKHOLDERS' EQUITY
Common Stock 8,164,000 8,161,000
Capital in Excess of Par Value 13,113,000 13,103,000
Retained Earnings 9,728,000 8,105,000
Net Unrealized Holding Losses on
Securities Available for Sale (33,000) (39,000)
Treasury Stock at Cost (63,406 shares) (294,000) (294,000)
------------- -------------
Total Stockholders' Equity 30,678,000 29,036,000
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 274,875,000 $ 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>
Nine Months Ended September 30
----------------------------------------
1997 1996
------------ ------------
<S> <C> <C>
INTEREST INCOME
Loans, including Fees $ 10,741,000 $ 10,424,000
Securities:
Taxable 3,369,000 2,712,000
Nontaxable 143,000 53,000
Federal Funds Sold 340,000 286,000
Time Deposit with Bank 43,000 46,000
------------ ------------
TOTAL INTEREST INCOME 14,636,000 13,521,000
------------ ------------
INTEREST EXPENSE
Savings and Interest-Bearing Demand Deposits 2,041,000 1,712,000
Time Deposits and Certificates of Deposit
over $100,000 2,582,000 2,594,000
Other Borrowings 10,000 1,000
------------ ------------
TOTAL INTEREST EXPENSE 4,633,000 4,307,000
------------ ------------
NET INTEREST INCOME 10,003,000 9,214,000
Provision for Possible Loan Losses 360,000 280,000
------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 9,643,000 8,934,000
OTHER INCOME
Service Charges on Deposit Accounts 1,029,000 1,045,000
(Losses) Gains on Securities Transactions (15,000) (14,000)
Brokerage Commissions 279,000 230,000
Other Income 330,000 577,000
------------ ------------
TOTAL OTHER INCOME 1,623,000 1,838,000
------------ ------------
OTHER EXPENSES
Salaries and Employee Benefits 4,019,000 3,639,000
Net Occupancy Expense 668,000 585,000
Equipment Expense 521,000 422,000
OREO Expense - Cost of Operations, net 92,000 286,000
- Valuation Adjustments 130,000 705,000
Other Operating Expenses (Note 3) 2,083,000 2,071,000
------------ ------------
TOTAL OTHER EXPENSES 7,513,000 7,708,000
------------ ------------
INCOME BEFORE TAXES 3,753,000 3,064,000
Provision for Income Taxes 1,401,000 1,202,000
------------ ------------
NET INCOME $ 2,352,000 $ 1,862,000
============ ============
Average Common Shares Outstanding (Note 4) 8,380,554 8,189,402
Income per Common Share $ 0.28 $ 0.23
============ ============
</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 September 30
--------------------------------------
1997 1996
----------- -----------
<S> <C> <C>
INTEREST INCOME
Loans, including Fees $ 3,671,000 $ 3,481,000
Securities:
Taxable 1,169,000 984,000
Nontaxable 62,000 19,000
Federal Funds Sold 78,000 100,000
Time Deposit with Bank 14,000 16,000
----------- -----------
TOTAL INTEREST INCOME 4,994,000 4,600,000
----------- -----------
INTEREST EXPENSE
Savings and Interest-Bearing Demand Deposits 697,000 611,000
Time Deposits and Certificates of Deposit
over $100,000 870,000 866,000
Other Borrowings 10,000 1,000
----------- -----------
TOTAL INTEREST EXPENSE 1,577,000 1,478,000
----------- -----------
NET INTEREST INCOME 3,417,000 3,122,000
Provision for Possible Loan Losses 120,000 120,000
----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 3,297,000 3,002,000
OTHER INCOME
Service Charges on Deposit Accounts 334,000 346,000
(Losses) Gains on Securities Transactions (1,000) (5,000)
Brokerage Commissions 94,000 78,000
Other Income 133,000 170,000
----------- -----------
TOTAL OTHER INCOME 560,000 589,000
----------- -----------
OTHER EXPENSES
Salaries and Employee Benefits 1,386,000 1,204,000
Net Occupancy Expense 237,000 195,000
Equipment Expense 178,000 150,000
OREO Expense - Cost of Operations, net 28,000 71,000
- Valuation Adjustments 15,000 125,000
Other Operating Expenses (Note 3) 714,000 582,000
----------- -----------
TOTAL OTHER EXPENSES 2,558,000 2,327,000
----------- -----------
INCOME BEFORE TAXES 1,299,000 1,264,000
Provision for Income Taxes 483,000 497,000
----------- -----------
NET INCOME $ 816,000 $ 767,000
=========== ===========
Average Common Shares Outstanding (Note 4) 8,449,666 8,206,018
Income per Common Share $ 0.10 $ 0.09
=========== ===========
</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 -- -- 2,352,000 -- --
Change in Net Unrealized
Holding Losses on
Securities Available for Sale -- -- -- 6,000 --
Stock Options Exercised 3,000 10,000 -- -- --
Cash Dividends, $.09 per share -- -- (729,000) -- --
-------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1997 $ 8,164,000 $13,113,000 $ 9,728,000 $ (33,000) $ (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>
NINE MONTHS ENDED
SEPTEMBER 30
--------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 2,352,000 $ 1,862,000
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization of Premises and Equipment 431,000 350,000
Amortization of Intangible Assets 206,000 188,000
Accretion of Securities Discount, net (79,000) (63,000)
Provision for Possible Loan Losses 360,000 280,000
Provision for Possible Losses on Other Real Estate, net 130,000 705,000
Gain on Sale of Other Real Estate -- (89,000)
Loss on Securities Transactions, net 15,000 14,000
Loans Made or Acquired and Held for Sale -- (720,000)
Proceeds from Loans Held for Sale -- 721,000
Gain on Sales of Loans Held for Sale -- (2,000)
Decrease in Interest Receivable 101,000 421,000
Increase in Other Receivables (25,000) (1,592,000)
Increase in Accrued Expenses and Other Liabilities 504,000 1,047,000
Other (240,000) (490,000)
------------ ------------
Net Cash Provided by Operating Activities 3,755,000 2,632,000
------------ ------------
Cash Flows from Investing Activities:
Securities Available for Sale:
Proceeds from Maturities 3,069,000 3,522,000
Proceeds from Sales/Calls Prior to Maturity 11,070,000 16,895,000
Purchases (12,712,000) (23,341,000)
Securities Held to Maturity:
Proceeds from Maturities 4,777,000 2,500,000
Proceeds from Calls Prior to Maturity 1,000,000 3,002,000
Purchases (19,475,000) (10,999,000)
Increase in Loans Outstanding, net (5,162,000) (1,872,000)
Capital Expenditures (488,000) (338,000)
Advances Made on Other Real Estate (605,000) (161,000)
Proceeds from Sale of Other Real Estate 687,000 1,068,000
Other (11,000) 3,000
------------ ------------
Net Cash Used in Investing Activities (17,850,000) (9,721,000)
------------ ------------
Cash Flows from Financing Activities:
Increase in Total Deposits, net 284,000 11,705,000
Increase in Short-Term Borrowings, net 1,002,000 --
Redemption of Class A Preferred Stock -- (717,000)
Cash Dividends on Preferred Stock -- (106,000)
Cash Dividends on Common Stock (648,000) --
Proceeds from Stock Options Exercised 13,000 3,000
------------ ------------
Net Cash Provided by Financing Activities 651,000 10,885,000
------------ ------------
Net (Decrease) Increase in Cash and Cash Equivalents (13,444,000) 3,796,000
Cash and Cash Equivalents, Beginning of Period 29,758,000 14,962,000
------------ ------------
Cash and Cash Equivalents, End of Period $ 16,314,000 $ 18,758,000
============ ============
</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>
NINE MONTHS ENDED
SEPTEMBER 30,1997
-----------------
<S> <C>
Balance, beginning of period, net $ 2,211,000
Transfer from loans 256,000
Advances 605,000
Sales of properties (687,000)
Charge-offs or write-downs (657,000)
Decrease in valuation allowance, net 400,000
-----------
Balance, end of period, net $ 2,128,000
===========
</TABLE>
NOTE 2: INTANGIBLE ASSETS
Categories of net intangible assets are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1997 1996
------------ -----------
<S> <C> <C>
Purchased Mortgage Servicing Rights $ 54,000 $ 83,000
Core Deposit Premiums 580,000 665,000
Premium on Purchased Home Equity
Lines of Credit 40,000 121,000
-------- --------
Net Intangible Assets $674,000 $869,000
======== ========
</TABLE>
8
<PAGE> 9
NOTE 3: SUPPLEMENTARY STATEMENTS OF INCOME INFORMATION
Major categories of Other Operating Expenses are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ ---------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
FDIC Assessment $ 21,000 $ 33,000 $ 7,000 $ -
Legal 157,000 264,000 50,000 (8,000)
Bonding and Insurance 113,000 168,000 48,000 56,000
Consulting Fees 162,000 157,000 67,000 50,000
Credit Reports/Filing Fees 74,000 98,000 22,000 26,000
Examinations 135,000 126,000 45,000 42,000
Postage & Freight 118,000 107,000 46,000 27,000
Telephone 148,000 99,000 48,000 20,000
Amortization - Intangibles 206,000 188,000 53,000 63,000
Automated Services 122,000 116,000 30,000 49,000
Stationery & Printing 203,000 178,000 67,000 62,000
Advertising 163,000 168,000 78,000 76,000
Dues and Subscriptions 47,000 44,000 18,000 14,000
Employee/Customer Rel. 60,000 54,000 21,000 18,000
Directors' Fees 98,000 89,000 33,000 28,000
MAC Fees 89,000 89,000 31,000 30,000
All Others 167,000 93,000 50,000 29,000
---------- ---------- ---------- ---------
$2,083,000 $2,071,000 $ 714,000 $ 582,000
========== ========== ========== =========
</TABLE>
NOTE 4: AVERAGE COMMON SHARES OUTSTANDING
Average common shares outstanding include both outstanding stock options
which have exercise prices below that of the average prices of the common stock
and performance-based stock options which are contingently issuable.
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 September 30, 1997 and results of operations for the three and
nine months ended September 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 September 30, 1997 and for the
three and nine months ended September 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 nine months ended September 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 during the
third quarter changed little from the previous quarter. Consumer loan
delinquencies in New Jersey increased during the quarter especially among banks
with significant credit card portfolios. Loan demand from developers of
residential real estate remained the strongest sector of the market for the
Corporation during the third quarter. The total volume of commercial and
industrial loans and deposits appeared to have remained stagnant, with gains in
market share achieved at the expense of the competition.
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"), completed installation of a new teller
terminal and processing system which should allow tellers to service their
customers better. In August, the Bank opened a new branch in a neighboring town,
Parsippany, where prospects for commercial business appear to be numerous.
10
<PAGE> 11
At September 30, 1997, total assets were $274,875,000 a $3.4 million
(1.2%) increase over the December 31, 1996 total. Deposits grew only $284,000
(.1%) during the same period, while gross loans increased $4.2 million (2.5%).
The major change in earning assets since year end is a $14.3 million (80.9%)
decrease in federal funds sold which was largely offset by a $12.3 million
(18.1%) increase in the securities portfolio.
In general, banks in the Corporation's market area have had difficulty in
attracting and retaining consumer deposits due to the high yields recently
obtainable in mutual funds and other investment alternatives. The Corporation
has also chosen not to compete for highly volatile certificates of deposit over
$100,000, which make up only 2.6% of its deposit base at September 30, 1997.
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 I 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 September 30, 1997.
As of September 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 1 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.
11
<PAGE> 12
<TABLE>
<CAPTION>
Actual
Amount Ratio
------ -----
<S> <C> <C>
As of September 30, 1997:
Total Capital (to Risk-Weighted Assets):
CORPORATION ............................... $31,204,000 16.4%
Bank ...................................... $28,730,000 15.2%
Tier 1 Capital (to Risk-Weighted Assets):
CORPORATION ............................... $28,799,000 15.2%
Bank ...................................... $26,332,000 13.9%
Tier 1 Capital (to Average Assets):
CORPORATION ............................... $28,799,000 10.6%
Bank ...................................... $26,332,000 9.7%
As of December 31, 1996:
Total Capital (to Risk-Weighted Assets):
CORPORATION ............................... $29,424,000 15.5%
Bank ...................................... $26,831,000 14.2%
Tier 1 Capital (to Risk-Weighted Assets):
CORPORATION ............................... $27,032,000 14.3%
Bank ...................................... $24,446,000 12.9%
Tier 1 Capital (to Average Assets):
CORPORATION ............................... $27,032,000 10.5%
Bank ...................................... $24,446,000 9.5%
</TABLE>
<TABLE>
<CAPTION>
For Capital
Adequacy Purposes
Amount Ratio
------ -----
<S> <C> <C>
As of September 30, 1997:
Total Capital (to Risk-Weighted Assets):
CORPORATION ............................... greater than or equal to $15,207,000 greater than or equal to 8.0%
Bank ...................................... greater than or equal to $15,169,000 greater than or equal to 8.0%
Tier 1 Capital (to Risk-Weighted Assets):
CORPORATION ............................... greater than or equal to $7,604,000 greater than or equal to 4.0%
Bank ...................................... greater than or equal to $7,585,000 greater than or equal to 4.0%
Tier 1 Capital (to Average Assets):
CORPORATION ............................... greater than or equal to $10,895,000 greater than or equal to 4.0%
Bank ...................................... greater than or equal to $10,878,000 greater than or equal to 4.0%
As of December 31, 1996:
Total Capital (to Risk-Weighted Assets):
CORPORATION ............................... greater than or equal to $15,148,000 greater than or equal to 8.0%
Bank ...................................... greater than or equal to $15,106,000 greater than or equal to 8.0%
Tier 1 Capital (to Risk-Weighted Assets):
CORPORATION ............................... greater than or equal to $7,574,000 greater than or equal to 4.0%
Bank ...................................... greater than or equal to $7,553,000 greater than or equal to 4.0%
Tier 1 Capital (to Average Assets):
CORPORATION ............................... greater than or equal to $10,321,000 greater than or equal to 4.0%
Bank ...................................... greater than or equal to $10,312,000 greater than or equal to 4.0%
</TABLE>
<TABLE>
<CAPTION>
To Be Well Capitalized
Under Prompt Corrective
Action Provisions
Amount Ratio
------ -----
<S> <C> <C>
As of September 30, 1997:
Total Capital (to Risk-Weighted Assets):
CORPORATION ............................... greater than or equal to $19,009,000 greater than or equal to 10.0%
Bank ...................................... greater than or equal to $18,961,000 greater than or equal to 10.0%
Tier 1 Capital (to Risk-Weighted Assets):
CORPORATION ............................... greater than or equal to $11,406,000 greater than or equal to 6.0%
Bank ...................................... greater than or equal to $11,377,000 greater than or equal to 6.0%
Tier 1 Capital (to Average Assets):
CORPORATION ............................... greater than or equal to $13,618,000 greater than or equal to 5.0%
Bank ...................................... greater than or equal to $13,598,000 greater than or equal to 5.0%
As of December 31, 1996:
Total Capital (to Risk-Weighted Assets):
CORPORATION ............................... greater than or equal to $18,935,000 greater than or equal to 10.0%
Bank ...................................... greater than or equal to $18,882,000 greater than or equal to 10.0%
Tier 1 Capital (to Risk-Weighted Assets):
CORPORATION ............................... greater than or equal to $11,361,000 greater than or equal to 6.0%
Bank ...................................... greater than or equal to $11,329,000 greater than or equal to 6.0%
Tier 1 Capital (to Average Assets):
CORPORATION ............................... greater than or equal to $12,902,000 greater than or equal to 5.0%
Bank ...................................... greater than or equal to $12,889,000 greater than or equal to 5.0%
</TABLE>
12
<PAGE> 13
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 other real estate ("ORE"). It is the Corporation's
policy to place a loan on nonaccrual status when, in the opinion of management,
the ultimate collectibility of the principal or interest on the loan becomes
doubtful. As a general rule, a commercial or real estate loan more than 90 days
past due with respect to principal or interest is classified as a nonaccrual
loan. Installment loans generally are not placed on nonaccrual status but,
instead, are charged off at 90 days past due, except where the loans are
secured and foreclosure proceedings have commenced. 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 consists entirely of loan collateral that has been formally
repossessed. At the time of classification as ORE, loans are reduced to the
fair value of the collateral (if less than the loan receivable) by charge-offs
against the allowance for possible loan losses. ORE is carried on the books at
the lower of cost or fair value, less estimated costs to sell. Subsequent
valuation adjustments to the fair value of the collateral are charged or
credited to current operations.
13
<PAGE> 14
<TABLE>
<CAPTION>
SEPTEMBER 30 December 31
1997 1996
---------- ----------
<S> <C> <C>
Loans 30-89 days past due .............. $1,030,000 $1,023,000
========== ==========
Nonaccrual loans:
Commercial and commercial real
estate ............................. $ 582,000 $ 886,000
Residential real estate
mortgage ........................... 55,000 104,000
Installment .......................... 126,000 63,000
---------- ----------
Total nonaccrual loans ............. 763,000 1,053,000
---------- ----------
Loans past due 90 days or more:
Commercial and commercial real
estate ............................. 10,000 46,000
Residential real estate
mortgage ........................... 91,000 61,000
Installment .......................... 49,000 45,000
---------- ----------
Total loans past due 90 days
or more .......................... 150,000 152,000
---------- ----------
Total nonperforming loans .......... $ 913,000 $1,205,000
---------- ----------
Other real estate, net ................. $2,128,000 $2,211,000
---------- ----------
Total nonperforming assets ............. $3,041,000 $3,416,000
========== ==========
Restructured loans ..................... $1,492,000 $1,540,000
---------- ----------
Total nonperforming assets and
restructured loans ................... $4,533,000 $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 $151,000. Management
believes that the net carrying value of ORE at September 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.
14
<PAGE> 15
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
September 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 $2,273,000 and $2,426,000 at
September 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 September 30, 1997 of $4.6 million, or 508.4% of nonperforming
loans and 2.7% 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.
15
<PAGE> 16
LIQUIDITY
At September 30, 1997, the Corporation's liquidity consisted of cash and
due from banks of $12.9 million, federal funds sold of $3.4 million and
securities available for sale of $40.3 million. Management deems these amounts
to be more than adequate to meet its short-term cash needs.
The parent company held $2.5 million of cash and cash equivalents at the
Bank at September 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 ("FASB") 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 comprehensive 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
16
<PAGE> 17
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.
NINE MONTHS ENDED SEPTEMBER 30, 1997. The Corporation recorded net income
of $2,352,000 or $.28 per common share, as compared to $1,862,000, or $.23 per
common share for the same period in 1996, an increase of $490,000 (26.3%). Net
interest income increased $789,000 (8.6%) in 1997 versus 1996, total other
income decreased $215,000 (11.7%) while total other expense decreased $195,000
(2.5%) from 1996 levels. The provision for possible loan losses increased
$80,000 (28.6%) from 1996 to 1997.
The increase in net interest income was entirely due to a $25.2 million
(11.1%) increase in average earning assets, as the tax-equivalent net interest
margin fell from 5.45% for the first nine months of 1996 to 5.35% for the same
period in 1997. The increased volume was made possible by a $22.1 million
(10.1%) 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.
Most of the decrease in total other income is due to the fact that during
the first nine months of 1996 there were $281,000 of nonrecurring miscellaneous
income items, primarily loan recoveries in excess of prior charge-offs. Total
other expense decreased $195,000 (2.5%), due entirely to a $769,000 (77.6%)
reduction in OREO expenses, especially valuation adjustments. These expenses
decreased as the number of remaining ORE properties dwindled in 1997. Normal
operating expenses, excluding ORE expenses, rose $574,000 (8.55%) in 1997 versus
1996, due in part to the opening of new branch offices in November, 1996 and
August, 1997. See Note 3 of Notes to Consolidated Financial Statements for an
analysis of changes in the remaining other expense accounts.
17
<PAGE> 18
THREE MONTHS ENDED SEPTEMBER 30, 1997. The $49,000 (6.4%) increase in net
income in 1997 versus 1996 is directly the result of growth in net interest
income, since other income declined slightly in the quarter while other expense
increased $231,000 (9.9%).
Net interest income rose $295,000 (9.5%) in 1997 as compared to 1996,
largely the result of a $21.8 million (9.3%) increase in average earning assets.
A small contribution was made by a three basis point increase in the
tax-equivalent net interest margin.
Other income decreased $29,000 (4.9%) in 1997 versus 1996, despite a
$16,000 (20.5%) increase in brokerage commissions. The major reason for the
decrease is that the third quarter of 1996 contained some $38,000 of
nonrecurring miscellaneous income items, primarily loan recoveries in excess of
prior charge-offs. The largest contributor to the increase in other expense is
the expense related to operating two additional branches in 1997 as compared to
1996.
18
<PAGE> 19
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
None
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
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
RAMAPO FINANCIAL CORPORATION
----------------------------
(Registrant)
Date: November 13, 1997 By: /s/ Walter A. Wojcik, Jr.
---------------------- -------------------------
Treasurer
Date: November 13, 1997 By: /s/ Mortimer J. O'Shea
---------------------- ----------------------
President and CEO
</TABLE>
20
<TABLE> <S> <C>
<ARTICLE> 9
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 12,939,000
<INT-BEARING-DEPOSITS> 1,000,000
<FED-FUNDS-SOLD> 3,375,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 40,296,000
<INVESTMENTS-CARRYING> 40,093,000
<INVESTMENTS-MARKET> 40,187,000
<LOANS> 169,270,000
<ALLOWANCE> 4,642,000
<TOTAL-ASSETS> 274,875,000
<DEPOSITS> 240,173,000
<SHORT-TERM> 1,002,000
<LIABILITIES-OTHER> 3,022,000
<LONG-TERM> 0
0
0
<COMMON> 8,164,000
<OTHER-SE> 22,514,000
<TOTAL-LIABILITIES-AND-EQUITY> 274,875,000
<INTEREST-LOAN> 10,741,000
<INTEREST-INVEST> 3,512,000
<INTEREST-OTHER> 383,000
<INTEREST-TOTAL> 14,636,000
<INTEREST-DEPOSIT> 4,623,000
<INTEREST-EXPENSE> 4,633,000
<INTEREST-INCOME-NET> 10,003,000
<LOAN-LOSSES> 360,000
<SECURITIES-GAINS> (15,000)
<EXPENSE-OTHER> 7,513,000
<INCOME-PRETAX> 3,753,000
<INCOME-PRE-EXTRAORDINARY> 3,753,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,352,000
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
<YIELD-ACTUAL> 5.31
<LOANS-NON> 763,000
<LOANS-PAST> 150,000
<LOANS-TROUBLED> 1,492,000
<LOANS-PROBLEM> 151,000
<ALLOWANCE-OPEN> 5,115,000
<CHARGE-OFFS> 946,000
<RECOVERIES> 113,000
<ALLOWANCE-CLOSE> 4,642,000
<ALLOWANCE-DOMESTIC> 4,642,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
