<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-K
(Mark One)

|X|     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

                   For the fiscal year ended December 31, 1996

                                       OR

|_|     TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934
   
              For the transition period from _________ to _________

Commission File No. 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)

       Registrant's telephone number, including area code: (201) 696-6100

           Securities registered pursuant to Section 12(b) of the Act:

                                 Not Applicable

           Securities registered pursuant to Section 12(g) of the Act:

                     Common stock, par value $1.00 per share
                     ---------------------------------------
                                (Title of Class)

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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. |_|

As of March 14, 1997, the aggregate market value of the 7,676,520 shares of
Common Stock of the registrant issued and outstanding held by nonaffiliates on
such date was approximately $47.0 million based on the closing sales price of
$6.125 per share of the registrant's Common Stock on March 14, 1997 as listed on
the National Association of Securities Dealers Automated Quotation National
Market System. For purposes of this calculation, it is assumed that directors,
executive officers and beneficial owners of more than 5% of the registrant's
outstanding voting stock are affiliates.

Number of shares of Common Stock outstanding as of March 14, 1997: 8,099,449
<PAGE>   2

                       DOCUMENTS INCORPORATED BY REFERENCE

PART I

Item 1 -  Business                        Page 1 (Ramapo Financial
                                          Corporation), Pages 2 and 3 (To Our
                                          Shareholders), and Pages 7 thru 21
                                          (Management's Discussion and
                                          Analysis of Consolidated Financial
                                          Condition and Results of Operations)
                                          of the Annual Report to Stockholders
                                          for the year ended December 31,
                                          1996 (Exhibit 13).


PART II

Item 6 -  Selected Financial Data         Pages 5 and 6 of the Annual Report to
                                          Stockholders for the year ended
                                          December 31, 1996 (Exhibit 13).

Item 7 -  Management's Discussion         Pages 7 thru 21 of the Annual
          and Analysis of Financial       Report to Stockholders for the year
          Condition and Results of        ended December 31, 1996 (Exhibit 13).
          Operations                    

Item 8 -  Financial Statements and        Pages 22 thru 42 of the Annual Report
          Supplementary Data              to Stockholders for the year ended
                                          December 31, 1996 (Exhibit 13).

PART III

Item 10 - Directors and Executive         All or part of items 10, 11, 12 and 13
          Officers of the Registrant      are contained in the registrant's
                                          definitive Proxy Statement for its
Item 11 - Executive Compensation          1997 Annual Meeting of Stockholders
                                          to be filed with the Securities and
Item 12 - Security Ownership of           Exchange Commission pursuant to
          Certain Beneficial Owners       Regulation 14A.
          and Mangement

Item 13 - Certain Relationships and
          Related Transactions


                                        2
<PAGE>   3

                  RAMAPO FINANCIAL CORPORATION AND SUBSIDIARIES

                    Index to Form 10-K for December 31, 1996

PART I                                                                 Page No.
                                                                       --------

Item 1.  Business                                                            4
Item 2.  Properties                                                         18
Item 3.  Legal Proceedings                                                  18
Item 4.  Submission of Matters to a Vote of Security Holders                18

PART II

Item 5.  Market for Registrant's Common Stock and Related 
           Stockholder Matters                                              19
Item 6.  Selected Financial Data                                            19
Item 7.  Management's Discussion and Analysis of Financial 
           Condition and Results of Operations                              19
Item 8.  Financial Statements and Supplementary Data                        19
Item 9.  Changes in and Disagreements With Accountants on Accounting 
         and Financial Disclosure.                                          19

PART III

Item 10. Directors and Executive Officers of the Registrant                 20
Item 11. Executive Compensation                                             20
Item 12. Security Ownership of Certain Beneficial Owners and Management     20
Item 13. Certain Relationships and Related Transactions                     20

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K    20

SIGNATURES                                                                  22


                                        3
<PAGE>   4

                                    PART I

Item 1. Business.

Description of Business and Market Area

      Ramapo Financial Corporation ("Corporation") is a New Jersey bank holding
company that owns all of the outstanding stock of The Ramapo Bank ("Bank"), a
New Jersey state-chartered commercial bank. The Corporation and the Bank are
headquartered in Wayne, Passaic County, New Jersey, and six of the Bank's seven
offices are in Wayne or nearby communities. The Bank's seventh branch is in the
City of Clifton, a few miles to the east of Wayne. The Bank was founded in 1967
and became a subsidiary of the Corporation in 1974. The Corporation commenced
operations in 1971 when it acquired ownership of Pilgrim State Bank ("Pilgrim").
In June 1993, the Corporation sold the principal banking assets and liabilities
of Pilgrim. As a result, the Bank is the Corporation's principal subsidiary and
its only remaining banking subsidiary. As of December 31, 1996, the Corporation
had consolidated assets, deposits and stockholders' equity of $271.5 million,
$239.9 million and $29.0 million, respectively.

      The Corporation considers its primary banking markets to be the Wayne
area, in which six of its seven offices are located, and the City of Clifton.
The Bank also does business with customers in Essex, Morris and Passaic County
communities that are contiguous to these markets.

      The Wayne area is a combination of upper middle income neighborhoods and
businesses that is located approximately 18 miles west of New York City.
According to 1990 census data, the area has almost 100,000 residents and a
median household income of $55,005, or about one-third higher than the state
average. In Wayne, itself, the median value of a single-family house was
$242,200. The number of private sector jobs in the area approximates the
resident workforce, and companies with corporate headquarters in Wayne include
Union Camp Corporation, GAF Corporation, GEC Marconi Electronic Systems
Corporation, Reckitt & Coleman Inc. and Castrol Inc.

      Clifton is an urban center with a 1990 population of 71,984 and a per
household income that approximates the state average. The Bank's Clifton branch
provides access to a large number of prospective commercial loan customers.

      The Corporation is supervised by the Board of Governors of the Federal
Reserve System ("Federal Reserve"). The Bank is supervised by the Federal
Deposit Insurance Corporation ("FDIC") and the New Jersey Department of Banking
("State"), and its deposits are insured by the FDIC. The Corporation's executive
offices are located at 64 Mountain View Boulevard, Wayne, New Jersey, and its
main telephone number is (201) 696-6100.

General

      The Corporation is a one-bank holding company headquartered in Wayne, New
Jersey whose primary operating subsidiary is the Bank. The Bank conducts a
general commercial and retail community banking business and offers a full range
of traditional deposit and lending services. Commercial services provided by the
Bank include real estate mortgage loans, term loans, revolving credit
arrangements, lines of credit, real estate construction loans, business checking
and savings accounts and certificates of deposit, as well as night depository,
wire transfer and collection services. The Bank recently introduced a product
that allows commercial customers to access their deposit accounts via personal
computer. The Bank also offers a full range of consumer banking services,
including checking, savings, NOW and money market accounts, certificates of
deposit, secured and unsecured loans, installment loans, home equity loans, safe
deposit boxes, holiday club accounts, collection services, money orders and
travelers checks. Automated teller machines at all branch locations plus
telephone access to deposit account information provide convenience to
consumers. The Bank makes brokerage services available to its customers through
an affiliation with Invest Financial Corporation, an independent company. It
also conducts limited trust activities.


                                      4
<PAGE>   5

Regulatory Orders

      Both the Corporation and the Bank were released from regulatory orders
during the first quarter of 1996. The Corporation had been operating under a
Written Agreement ("Written Agreement") with the Federal Reserve Bank of New
York ("FRB") since November, 1993. Based on a limited scope inspection by the
FRB as of September 30, 1995 which noted the continued improvement in the
Corporation's operations, the Written Agreement was terminated in March, 1996.

      The Bank had been operating under a Memorandum of Understanding ("MOU")
issued by the FDIC and the State in May, 1995. The MOU replaced a more onerous
order to cease and desist which had been jointly issued by the FDIC and State in
November, 1992. The MOU was terminated in March, 1996 as a result of the FDIC's
examination of the Bank as of December 31, 1995.

Lending Activities

      Loan Portfolio. As of December 31, 1996, the Corporation's loans, net of
unearned discount, represented 60.8% of its total assets. As of December 31,
1996, its loan portfolio consisted of approximately 64.1% commercial and
commercial real estate loans, 6.6% commercial real estate construction loans,
4.5% residential real estate mortgage loans and 29.8% installment loans. At
December 31, 1996, substantially all of the Bank's loans were to residents of
and businesses located in northern New Jersey.


                                      5
<PAGE>   6

      Set forth below is selected data relating to the composition of the
Corporation's loan portfolio by type of loan and type of security at the dates
indicated. At December 31, 1996, the Corporation had no concentrations of loans
exceeding 10% of total loans in addition to those disclosed below. See "--Loan
Concentrations."

<TABLE>
<CAPTION>
                                                                           At December 31,
                                ---------------------------------------------------------------------------------------------------
                                       1996                  1995                1994                1993               1992
                                ------------------     ---------------     ---------------      ---------------    ----------------
                                 Amount        %        Amount     %        Amount     %         Amount     %       Amount      %
                                --------     -----     --------  -----     --------  -----      --------  -----    --------   -----
                                                                        (Dollars in thousands)
<S>                             <C>           <C>      <C>        <C>      <C>        <C>       <C>        <C>     <C>         <C>  
Commercial and commercial real
  estate......................  $105,819      64.1%    $ 96,469   60.1%    $101,292   61.7%     $114,889   61.6%   $154,508    58.1%
Commercial real estate
  construction................    10,949       6.6       15,177    9.5       18,462   11.2        29,695   15.9      33,527    12.6
Residential real estate
  mortgage (1)................     7,443       4.5        8,772    5.4       10,346    6.3         7,808    4.2      26,414     9.9
Installment...................    40,859      29.8       40,128   25.0       34,211   20.8        34,211   18.3      51,483    19.4
                                --------     -----     --------  -----     --------  -----      --------  -----    --------   -----
    Total.....................  $165,070     100.0%    $160,546  100.0%    $164,311  100.0%     $186,603  100.0%   $265,932   100.0%
                                ========     =====     ========  =====     ========  =====      ========  =====    ========   =====
</TABLE>

----------
(1)   Excludes loans held for sale.


                                         6
<PAGE>   7

      Origination of Loans. The Bank markets its loan programs primarily through
its branch managers and loan officers. In addition, the Bank receives loan
referrals from the SBA due to its Preferred Lender and Certified Lender status.
Existing customers of the Bank may also make referrals of potential loan
customers. The Bank's commercial loan officers also have utilized Dun &
Bradstreet and other similar sources of information to target potential
commercial customers in the Bank's target market. The Bank does not originate
installment loans through automobile dealers or other third party sources.

      The Bank's lending activities are subject to its written,
nondiscriminatory underwriting policies and to loan origination procedures
prescribed by the Bank's Board of Directors and its management. Each loan
request is evaluated to determine the borrower's ability to repay. In addition,
where appropriate, employment and other verifications are obtained. Credit
reports and financial statements are also obtained. Where loans are to be
secured by real estate, property valuations are performed by appraisers approved
by the Bank's Board of Directors.

      The statutory legal limit for loans to one borrower applicable to the Bank
is generally 15% of capital funds at the time the loan is closed, unless an
exception is approved by the State. Such exceptions may be granted only in
limited circumstances. At December 31, 1996 the Bank's legal lending limit was
$4.7 million.

      It is the Bank's policy on purchase money mortgages to record a lien on
the real estate securing the loan (whether commercial or residential) and to
obtain title insurance which insures that the property is free of prior
encumbrances. Borrowers also must obtain hazard insurance policies prior to
closing and, when the property is in a flood plain as designated by the
Department of Housing and Urban Development, must obtain paid flood insurance
policies. The properties securing the Bank's real estate loans are appraised by
independent appraisers approved at least annually by the Board of Directors. For
all real estate loans of $50,000 or more, the Bank also requires that the loan
officer and the Borrower complete an environmental questionnaire to determine if
a Phase I or II environmental audit is necessary. On most residential first
mortgage loans, borrowers also are required to advance funds on a monthly basis
together with each payment of principal and interest to a mortgage escrow
account from which the Bank makes disbursements for items such as real estate
taxes.

      The Board of Directors has adopted a policy setting forth specified levels
of lending authority. All unsecured loans between $15,000 and $350,000, and all
secured loans between $15,000 and $500,000 must be approved by two officers of
the Bank. All unsecured loans between $350,000 and $500,000 and secured loans
between $500,000 and $750,000 must be approved by the unanimous vote of the
Bank's Senior Loan Committee, which includes the Chairman of the Board, the
President and the two lending Senior Vice Presidents of the Bank. Loans in
excess of those amounts and loans receiving less than a unanimous vote for
approval must be approved by the Executive Committee of the Board of Directors
or the full Board of Directors.

      It is management's policy to monitor the Bank's loan portfolio continually
to anticipate and address potential and actual delinquencies. When a borrower
fails to make a payment on a loan, the Bank takes immediate steps to have the
delinquency cured and the loan restored to current status. Generally, as a
matter of policy, the Bank will contact the borrower after a loan has been
delinquent 30 days. If payment is not promptly received, the borrower is
contacted again, and efforts are made to formulate an affirmative plan to cure
the delinquency. With respect to commercial and commercial real estate loans
delinquent 30 days or more, collection efforts are reviewed by the Work Out
Committee to determine appropriate actions to be taken. Generally, after any
loan is delinquent 90 days or more, formal legal proceedings are commenced to
collect amounts owed. Legal proceedings may be commenced prior to such time,
however, and late fees generally are assessed against delinquent borrowers when
allowed by the terms of the loan documents.

      Commercial Lending. The Bank's commercial lending activities are directed
to small and lower middle-market New Jersey-based businesses with $500,000 to
$25 million in annual sales. The Bank's commercial borrowers consist primarily
of firms engaged in manufacturing and distribution, retailers, and professionals
in health care, accounting and law. Generally, the Bank's commercial loans are
secured by the assets of the borrower, which may include accounts receivable,
inventory, equipment and other business assets, such as real estate, and are
guaranteed by the principals of the borrowers. The Bank's commercial loan
portfolio includes loans which may be at least partially secured by real estate
but for which the expected source of repayment for the loan is the cash flow


                                      7
<PAGE>   8

resulting from the borrower's business. For years prior to 1993, the Bank
reported loans that were categorized as commercial real estate loans as part of
its commercial loan portfolio.

      The Bank underwrites its commercial loans primarily on the basis of the
borrower's cash flow and ability to service the debt from earnings and
secondarily on the basis of underlying collateral value, and seeks to structure
such loans to have more than one source of repayment. The borrower is required
to provide the Bank with sufficient information to allow the Bank to determine
the creditworthiness of the borrower, the stability of the borrower's industry
and the competency of management. In most instances, this information consists
of at least three years of financial statements, a statement of projected cash
flows, current financial information on any guarantor and any additional
information on the collateral. For loans with maturities exceeding one year, the
Bank requires that borrowers and guarantors provide updated financial
information at least annually throughout the term of the loan.

      The Bank's commercial loans may be structured as term loans or as lines of
credit. Commercial term loans are generally made to finance the purchase of
assets and have maturities of five years or less. Commercial lines of credit are
typically for the purpose of providing working capital and are usually approved
with a one-year term. The Bank generally requires that line of credit borrowings
be repaid at least 30 consecutive days during the one-year period. The Bank also
offers both commercial and standby letters of credit for its commercial
borrowers. Commercial letters of credit are written for a maximum term of one
year. The terms of standby letters of credit generally do not exceed one year,
although in certain instances, renewable standby letters of credit may be issued
with the approval of the Chairman of the Board, President or one of the lending
Senior Vice Presidents of the Bank and must be reviewed and approved annually.

      The Bank's commercial loans generally have interest rates which float at,
or at some increment over, the Bank's commercial lending base rate. The Bank's
commercial lending base rate is determined by the Chairman of the Board,
President and the lending Senior Vice Presidents of the Bank.

      The Bank participates in various lending programs of the Small Business
Administration (the "SBA") and the New Jersey Economic Development Authority
(the "EDA") and has been designated a Certified Lender and a Preferred Lender by
the SBA. Pursuant to the SBA Certified Lender program, the SBA must make a
decision on loan requests forwarded to it by the Bank within three business days
of receipt of the loan package. If approved, the SBA guarantees loans up to
$750,000 as follows: (i) up to 80% of loans $100,000 or less; and (ii)75% of
loans of more than $100,000. Guaranty fees are based on loan maturity and the
SBA's share. In addition, the Bank is one of approximately 20 New Jersey
financial institutions which participate with the EDA in a state-wide loan pool
for small businesses. Under the terms of this program, the Bank may originate
loans in an amount of up to $1.0 million for fixed asset financing or $500,000
for working capital purposes and the EDA may purchase a participation interest
of up to 25% of the principal amount of the loan and may guarantee an additional
25% of the remaining balance of the loan. Under the terms of the guarantee
programs of both the SBA and the EDA, in the event of a default by the borrower,
the SBA or EDA will pay to the Bank the guaranteed portion of the loan. The Bank
and the SBA or the EDA will rank pari passu with respect to the collateral
securing the loan. Any participation interest in loans purchased by the EDA is
subordinated to the Bank's interest in the event of default.

      Commercial Real Estate Lending. The Bank's commercial real estate
portfolio consists of loans (i) the purpose of which was to acquire or develop
real estate, or (ii) where the primary source of repayment is liquidation of the
real estate held as collateral for the loan. Commercial real estate loans have
been made primarily to builders and developers to finance land acquisition,
development and construction. The commercial real estate loan portfolio includes
loans to finance the acquisition of investment properties, including office
buildings, warehouse space and strip shopping centers.

      Although terms vary, commercial real estate loans generally have
maturities of up to 5 years with payments based on amortization schedules of up
to 25 years. Loans are offered at both fixed interest rates and rates that float
at a margin over the Bank's commercial lending base rate. The exact margin
varies with each loan and is determined based on the risk associated with the
loan. Borrowers generally are charged a commitment fee equal to 1% of the
principal amount of the loan. Loan-to-value ratios on the Bank's commercial real
estate loans when originated normally do not exceed 80% of the lesser of the
appraised value or the purchase price of the property. The amount of the loan
also is determined with reference to the amount of debt that can be supported by
the property's existing cash flow.


                                      8
<PAGE>   9

      As part of the criteria for underwriting mini-permanent loans, the Bank
generally requires these properties to provide sufficient income to satisfy
operating expenses and debt service on the loan, and to provide a reasonable
return to the owners on their investment. In evaluating the loan request, the
Bank generally considers cash flow from leases that have unexpired terms at
least equal to the term of the loan.

      Commercial real estate lending entails additional risks as compared to
residential property lending. Commercial real estate loans typically involve
large loan balances to single borrowers or groups of related borrowers.
Development of commercial real estate projects also may be subject to numerous
land use and environmental issues. The payment experience on such loans is
typically dependent on the successful operation of the real estate project.
These risks can be significantly impacted by supply and demand conditions in the
market for commercial and retail space, and, as such, may be subject to a
greater extent than residential loans to adverse conditions in the real estate
market and in the economy generally.

      Construction Lending. Construction loans include loans for the acquisition
and development of land as well as loans for the construction of
income-producing properties and residential properties. The maximum term of such
loans is 24 months with the first 12 months allocated to development and the
remaining 12 months for sale of the developed property. The Bank generally
requires that the borrower's estimates of development and construction costs be
evaluated by a qualified engineer hired by the Bank but at the expense of the
borrower. Generally, interest payments only are required during the term of the
loan with interest based on a floating rate equal to the Bank's commercial
lending base rate or some increment over that rate. Fees equal to 1-1.5% of the
loan amount generally are charged. The Bank's construction loans generally do
not exceed 70% of the lesser of the total cost of development or the appraised
value of the developed property. Since the primary source of repayment for the
loan is sales of the developed lots, the Bank requires that release prices for
individual lots be calculated such that the loan is repaid in full once 80% of
the land value in the project has been sold and released.

      Residential Real Estate Lending. Prior to 1994, the Corporation and the
Bank had engaged in mortgage origination, underwriting, servicing and document
custodian services. Mortgage loans were sold in the secondary market with
servicing retained. During the first quarter of 1994, the Corporation sold
substantially all of its servicing rights and outsourced the origination of
mortgage loans. Although the outsourcing arrangement has since expired, the Bank
continues to offer residential mortgage loans in its market in a limited way. As
a result, the Corporation anticipates that loans held for sale will decrease in
future periods and that income attributable to the origination and sale of
mortgage loans also will decrease.

      Installment Lending. The Bank's installment loans include new and used
automobile loans, secured and unsecured personal loans, second mortgage loans
and home equity lines of credit. Generally, personal and new automobile
installment loans have a maximum term of 5 years. Installment loans for the
purchase of a used automobile have a maximum term of 4 years. Second mortgage
loans and home equity lines of credit have a maximum term of 15 years. The Bank
will lend up to 75% of the purchase price of a new automobile and, with respect
to used automobiles, 100% of the National Automobile Dealer's Association loan
value. For home equity lines of credit and second mortgage loans, the
combination of all existing loans on the property plus the requested loan may
not exceed 75% of the property's value. With respect to all automobile loans and
home equity and second mortgage loans, the borrower is required to maintain
hazard insurance naming the Bank as loss payee in an amount sufficient to repay
the loan in full in the event of damage to the collateral. Loans secured by
subordinate mortgages on real estate where the prior mortgage has a balance of
$200,000 or greater or where the loan amount exceeds $50,000 must be approved by
the Chairman of the Board, President or one of the lending Senior Vice
Presidents of the Bank. Installment loan applicants are required to complete a
written application which is evaluated using the Bank's credit scoring policy.

      Loan Concentrations. The Bank grants various commercial and installment
loans, principally in northern New Jersey. A substantial portion of the Bank's
commercial loan portfolio consists of loans for which the purpose was to acquire
or develop real estate or for which the primary source or repayment is the
liquidation of the real estate held as collateral. Substantially all of the
commercial real estate securing such loans is located in northern New Jersey.
The ability of borrowers of such loans to repay them in accordance with their
terms, and the ability of the Corporation to realize recoveries in the event of
their default, are highly dependent upon conditions in the northern New Jersey
real estate industry.


                                      9
<PAGE>   10

      The Bank's loan portfolio has certain concentrations of affiliated
borrowers. The three largest concentrations, all of which are involved in
commercial and residential real estate development and management, aggregate
$32,605,000 and $35,233,000 at December 31, 1996 and 1995, respectively.

      The largest borrower concentration consists of loans to a group of
affiliated borrowers with an aggregate outstanding balance of $15,157,000 and
$15,430,000 at December 31, 1996 and 1995, respectively, all of which were
performing and current as to the required principal and interest payments. A
majority of these loans are secured by first mortgages on commercial properties
where third party loan payments paid directly to the Bank are the primary source
of repayment.

      A second concentration involves loans to certain affiliated real estate
development companies whose principal owners have had a long-standing and
excellent relationship with the Bank. Outstanding balances for this group at
December 31, 1996 and 1995 were $10,226,000 and $12,245,000, respectively. All
such loans were performing as of the respective year end dates.

      Another relationship consists of nine loans, primarily for the
construction or renovation of condominium units, totaling $7,222,000 and
$7,558,000 at December 31, 1996 and 1995, respectively. The majority of the
loans are secured by first mortgages on condominium developments with the
principal source of repayment currently consisting of third party lease payments
which are paid directly to the Bank. At December 31, 1996, such lease payments
were sufficient to service the debt in accordance with the restructured terms
and cover all expenses associated with the properties.

Nonbank Subsidiaries

      RFC High Ridge, Inc., RFC Harmony Park, Inc., RFC CKN, Inc., RFC National,
Inc., RFC Center Plaza, Inc. and RFC High Debi Hills, Inc. were organized in
1991. RFC Jefferson, Inc. was organized in 1992 and RFC Deer Trail, Inc. was
organized in 1993. Four of the above nonbank subsidiaries currently hold real
estate or other collateral which was acquired through foreclosure of, or which
was deeded in lieu of foreclosure from, previously contracted debt; the
remainder are inactive. Ramapo Investment Corporation was organized in 1986 for
the purpose of holding certain investments of the Bank. All of these
corporations are wholly-owned subsidiaries of the Bank.

      The Corporation also has a one-third interest in Bancorps' International
Trading Corporation, a multi-bank holding company-sponsored export trading
company, which ceased operations during 1991.

Competition

      The Corporation encounters competition primarily in seeking deposits and
in obtaining loan customers. The level of competition for deposits is quite
high. The Corporation's principal competitors for deposits are other financial
institutions within a few miles of the Bank's offices, including other banks,
savings institutions, and credit unions. Competition among these institutions is
based primarily on interest rates offered, service charges imposed on deposit
accounts, the quality of services rendered, and the convenience of banking
facilities. The Corporation's competitors are generally permitted, subject to
regulatory approval, to establish branches throughout the Corporation's market.
Additional competition for depositors' funds comes from United States Government
securities, private issuers of debt obligations and suppliers of other
investment alternatives for depositors, such as securities firms.

      The Corporation also competes in its lending activities with other
financial institutions such as savings institutions, credit unions, securities
firms, insurance companies, small loan companies, finance companies, mortgage
companies and other sources of funds. Many of the Corporation's nonbank
competitors are not subject to the same extensive federal regulations that
govern bank holding companies and federally insured banks or state regulations
governing state-chartered banks. As a result, such nonbank competitors have
advantages over the Corporation in providing certain services. Many of the
financial institutions with which the Corporation competes in both lending and
deposit activities are larger than the Corporation.


                                      10
<PAGE>   11

Employees

      As of December 31, 1996, the Corporation and its subsidiaries had
approximately 106 full-time equivalent employees. None of the employees are
subject to a collective bargaining agreement. The Corporation considers its
relationships with its employees to be good.

Regulation, Supervision and Governmental Policy

      The banking industry is highly regulated. Statutory and regulatory
controls increase a bank holding company's cost of doing business, limit its
management's options to deploy assets and maximize income, and may significantly
limit the activities of institutions which do not meet regulatory capital or
other requirements. Areas subject to regulation and supervision by the bank
regulatory agencies include, among others: minimum capital levels; dividends;
affiliate transactions; expansion of locations; acquisitions and mergers;
reserves against deposits; deposit insurance premiums; credit underwriting
standards; management and internal controls; investments; and general safety and
soundness of banks and bank holding companies. Supervision, regulation and
examination of the Bank and the Corporation by the bank regulatory agencies are
intended primarily for the protection of depositors, the communities served by
the institutions or other governmental interests, rather than for holders of
stock of the Bank or the Corporation.

      The following is a brief summary of certain statutes, rules and
regulations affecting the Corporation and the Bank. A number of other statutes
and regulations and governmental policies have an impact on their operations.
The Corporation is unable to predict the nature or the extent of the effects on
its business and earnings that fiscal or monetary policies, economic control or
new federal or state legislation may have in the future. The following summary
of applicable statutes and regulations does not purport to be complete and is
qualified in its entirety by reference to such statutes and regulations.

      Bank Holding Company Regulation. The Corporation is registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended (the
"Holding Company Act"), and, as such, is subject to supervision and regulation
by the Federal Reserve. The Corporation is required to file reports with the
Federal Reserve and to furnish such additional information as the Federal
Reserve may require pursuant to the Holding Company Act. The Corporation also is
subject to regular examination by the Federal Reserve and is subject to
regulation by the Department.

      A policy of the Federal Reserve requires the Corporation to act as a
source of financial and managerial strength to the Bank, and to commit resources
to support the Bank. In addition, any loans by the Corporation to the Bank would
be subordinate in right of payment to deposits and certain other indebtedness of
the Bank. The Corporation, however, does not have significant financial
resources apart from its investment in the Bank. The Federal Reserve has adopted
guidelines regarding the capital adequacy of bank holding companies, which
require bank holding companies to maintain specified minimum ratios of capital
to total assets and capital to risk-weighted assets.

      Holding Company Activities. With certain exceptions, the Holding Company
Act prohibits a bank holding company from acquiring direct or indirect ownership
or control of more than 5% of the voting shares of a company that is not a bank
or a bank holding company, or from engaging directly or indirectly in activities
other than those of banking, managing or controlling banks, or providing
services for its subsidiaries. The principal exceptions to these prohibitions
involve certain nonbank activities which, by statute or by Federal Reserve
regulation or order, have been identified as activities closely related to the
business of banking. The activities of the Corporation are subject to these
legal and regulatory limitations under the Holding Company Act and the related
Federal Reserve regulations. Notwithstanding the Federal Reserve's prior
approval of specific nonbanking activities, the Federal Reserve has the power to
order a holding company or its subsidiaries to terminate any activity, or to
terminate its ownership or control of any subsidiary, when it has reasonable
cause to believe that the continuation of such activity or such ownership or
control constitutes a serious risk to the financial safety, soundness or
stability of any bank subsidiary of that holding company. Bank holding companies
and their subsidiaries are also prohibited from


                                      11
<PAGE>   12

engaging in certain tie-in arrangements in connection with any extension of
credit or provision of any property or services.

      Acquisitions of Bank Holding Companies and Banks. Under the Holding
Company Act, any company must obtain approval of the Federal Reserve prior to
acquiring control of the Corporation or the Bank. For purposes of the Holding
Company Act, "control" is defined as ownership of more than 25% of any class of
voting securities of the Corporation or the Bank, the ability to control the
election of a majority of the directors, or the exercise of a controlling
influence over management or policies of the Corporation or the Bank.

      Under the Holding Company Act, a bank holding company must obtain the
prior approval of the Federal Reserve before (i) acquiring direct or indirect
ownership or control of any voting shares of any bank or bank holding company
if, after such acquisition, the bank holding company would directly or
indirectly own or control more than 5% of such shares; (2) acquiring all or
substantially all of the assets of another bank or bank holding company; or (3)
merging or consolidating with another bank holding company. Satisfactory
financial condition, particularly with regard to capital adequacy, and
satisfactory Community Reinvestment Act ("CRA") ratings generally are
prerequisites to obtaining federal regulatory approval to make acquisitions. The
Bank was notified in 1996 that it had received a "Satisfactory" CRA rating by
the FDIC based on the FDIC's CRA examination as of December 31, 1995. In
addition, the Corporation is subject to various requirements under New Jersey
laws concerning future acquisitions, and a company desiring to acquire the
Corporation also may be subject to such laws, depending upon the nature of the
acquiror and the means by which the acquisition would be accomplished.

      The Holding Company Act prohibits the Federal Reserve from approving an
application by a bank holding company to acquire voting shares of a bank located
outside the state in which the operations of the holding company's bank
subsidiaries are principally conducted, unless such an acquisition is
specifically authorized by state law. The State of New Jersey has enacted
reciprocal interstate banking statutes that authorize banks and their holding
companies in New Jersey to be acquired by banks or their holding companies in
states which also have enacted reciprocal banking legislation, and permits New
Jersey banks and their holding companies to acquire banks in such other states.
The Holding Company Act does not place territorial restrictions on the
activities of nonbank subsidiaries of bank holding companies.

      The Change in Bank Control Act and the related regulations of the Federal
Reserve require any person or persons acting in concert (except for companies
required to make application under the Holding Company Act), to file a written
notice with the Federal Reserve before such person or persons may acquire
control of the Corporation or the Bank. The Change in Bank Control Act defines
"control" as the power, directly or indirectly, to vote 25% or more of any
voting securities or to direct the management or policies of a bank holding
company or an insured bank.

      Holding Company Dividends and Stock Repurchases. The Federal Reserve has
the power to prohibit dividends by bank holding companies if their actions
constitute unsafe or unsound practices. The Federal Reserve has issued a policy
statement on the payment of cash dividends by bank holding companies, which
expresses the Federal Reserve's view that a bank holding company should pay cash
dividends only to the extent that the company's net income for the past year is
sufficient to cover both the cash dividends and a rate of earnings retention
that is consistent with the company's capital needs, asset quality, and overall
financial condition. In addition, the Written Agreement required the Corporation
to obtain written approval from the FRB prior to declaring or paying any
dividends while the Written Agreement was in effect.

      As a bank holding company, the Corporation is required to give the Federal
Reserve prior written notice of any purchase or redemption of its outstanding
equity securities if the gross consideration for the purchase or redemption,
when combined with the net consideration paid for all such purchases or
redemptions during the preceding 12 months, is equal to 10% or more of the
Corporation's consolidated net worth. The Federal Reserve may disapprove such a
purchase or redemption if it determines that the proposal would violate any law,
regulation, Federal Reserve order, directive, or any condition imposed by, or
written agreement with, the Federal Reserve. In addition, the Written Agreement
required the Corporation to obtain written approval from the FRB prior to
redeeming or repurchasing any of its outstanding stock while it was in effect.


                                      12
<PAGE>   13

      Bank Regulation. As a state-chartered bank which is not a member of the
Federal Reserve System, the Bank is subject to the primary federal supervision
of the FDIC under the Federal Deposit Insurance Act (the "FDIA"). The prior
approval of the FDIC is required for the Bank to establish or relocate a branch
office or to engage in any merger, consolidation or significant purchase or sale
of assets. The Bank also is subject to regulation and supervision by the State.
In addition, the Bank is subject to numerous federal and state laws and
regulations which set forth specific restrictions and procedural requirements
with respect to the establishment of branches, investments, interest rates on
loans, credit practices, the disclosure of credit terms and discrimination in
credit transactions.

      The FDIC and the State regularly examine the Bank's operations and
condition, including but not limited to capital adequacy, reserves, loans,
investments and management practices. These examinations are for the protection
of the Bank's depositors and the Bank Insurance Fund ("BIF") and not its
stockholder. In addition, the Bank is required to furnish quarterly and annual
reports to the FDIC. The FDIC's enforcement authority includes the power to
remove officers and directors and the authority to issue orders to prevent a
bank from engaging in unsafe or unsound practices or violating laws or
regulations governing its business.

      The FDIC has adopted regulations regarding the capital adequacy of banks
subject to its primary supervision, which require such banks to maintain
specified minimum ratios of capital to total assets and capital to risk-weighted
assets. See "--Regulatory Capital Requirements."

      Statewide branching is permitted in New Jersey. Branch approvals are
subject to statutory standards relating to safety and soundness, competition,
public convenience and CRA performance.

      Bank Dividends. New Jersey law permits the Bank to declare a dividend only
if, after payment thereof, its capital would be unimpaired and its remaining
surplus would equal at least 50 percent of its capital. Under the FDIA, the Bank
is prohibited from declaring or paying dividends or making any other capital
distribution if, after that distribution, the Bank would fail to meet its
regulatory capital requirements. Prior to March 21, 1996, the Bank operated
under regulatory agreements with the FDIC and the State which affected the
payment of dividends. From November, 1992 to May, 1995, the Order prohibited the
Bank from paying dividends. From May, 1995 to March 21, 1996, the MOU required
the Bank to obtain permission from the FDIC and the State before declaring and
paying dividends. The MOU was terminated effective March 21, 1996. The FDIC also
has authority to prohibit the payment of dividends by a bank when it determines
such payment to be an unsafe and unsound banking practice. The FDIC may prohibit
bank holding companies of banks which are deemed to be "significantly
undercapitalized" under the FDIA or which fail to properly submit and implement
capital restoration plans required thereby from paying dividends or making other
capital distributions without the permission of the FDIC. See "--Holding Company
Dividends and Stock Repurchases."

      Restrictions Upon Intercompany Transactions. The Bank is subject to
restrictions imposed by federal law on extensions of credit to, and certain
other transactions with, the Corporation and other affiliates. Such restrictions
prevent the Corporation and such other affiliates from borrowing from the Bank
unless the loans are secured by specified collateral, and require such
transactions to have terms comparable to terms of arms-length transactions with
third persons. Such secured loans and other transactions by the Bank are
generally limited in amount as to the Corporation and as to any other affiliate
to 10% of the Bank's capital and surplus and as to the Corporation and all other
affiliates to an aggregate of 20% of the Bank's capital and surplus. These
regulations and restrictions may limit the Corporation's ability to obtain funds
from the Bank for its cash needs, including funds for acquisitions and for
payment of dividends, interest and operating expenses.

      Real Estate Lending Guidelines. Under FDIC regulations, state banks must
adopt and maintain written policies that establish appropriate limits and
standards for extensions of credit that are secured by liens on or interests in
real estate or are made for the purpose of financing permanent improvements to
real estate. These policies must establish loan portfolio diversification
standards, prudent underwriting standards (including loan-to-value limits that
are clear and measurable), loan administration procedures and documentation,
approval and reporting requirements. A bank's real estate lending policy must
reflect consideration of the Interagency Guidelines for Real Estate Lending
Policies (the "Interagency Guidelines") that have been adopted by the federal
bank


                                      13
<PAGE>   14

regulators. The Interagency Guidelines, among other things, call upon depository
institutions to establish internal loan-to-value limits for real estate loans
that are not in excess of the loan-to-value limits specified in the Guidelines
for the various types of real estate loans. The Interagency Guidelines state,
however, that it may be appropriate in individual cases to originate or purchase
loans with loan-to-value ratios in excess of the supervisory loan-to-value
limits.

      Deposit Insurance. Since the Bank is an FDIC member institution, its
deposits are currently insured to a maximum of $100,000 per depositor through
the BIF, administered by the FDIC, and the Bank is required to pay semiannual
deposit insurance premium assessments to the FDIC.

      The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") included provisions to reform the federal deposit insurance system,
including the implementation of risk-based deposit insurance premiums, and
permits the FDIC to make special assessments on insured depository institutions
in amounts determined by the FDIC to be necessary to give it adequate assessment
income to repay amounts borrowed from the U.S. Treasury and other sources or for
any other purpose the FDIC deems necessary. Pursuant to FDICIA, the FDIC
implemented a transitional risk-based insurance premium system on January 1,
1993 which became the permanent risk-based premium system on January 1, 1994.
Generally, under this system, banks are assessed insurance premiums according to
how much risk they are deemed to present to the BIF. As of January 1, 1996, such
premiums range from 0.00% to 0.27% of insured deposits. Banks with higher levels
of capital and involving a low degree of supervisory concern are assessed lower
premiums than banks with lower levels of capital and/or involving a higher
degree of supervisory concern. Specifically, the assessment rate for an insured
depository institution depends upon the risk classification assigned to the
institution by the FDIC based upon the institution's capital level and
supervisory evaluations. Institutions are assigned to one of three capital
groups--well capitalized, adequately capitalized or undercapitalized--based on
the data reported to regulators for the date closest to the last day of the
seventh month preceding the semiannual assessment period. Well capitalized
institutions are institutions satisfying the following capital ratio standards:
(i) total risk-based capital ratio of 10.0% or greater; (ii) Tier 1 risk-based
capital ratio of 6.0% or greater; and (iii) Tier 1 leverage ratio of 5.0% or
greater. Adequately capitalized institutions are institutions that do not meet
the standards for well capitalized institutions but that satisfy the following
capital ratio standards: (i) total risk-based capital ratio of 8.0% or greater;
(ii) Tier 1 risk-based capital ratio of 4.0% or greater; and (iii) Tier 1
leverage ratio of 4.0% or greater. Undercapitalized institutions consist of
institutions that do not qualify as either "well capitalized" or "adequately
capitalized." Within each capital group, institutions are assigned to one of
three subgroups on the basis of supervisory evaluations by the institution's
primary supervisory authority and such other information as the FDIC determines
to be relevant to the institution's financial condition and the risk posed to
the deposit insurance fund. Subgroup A consists of financially sound
institutions with only a few minor weaknesses. Subgroup B consists of
institutions that demonstrate weaknesses that, if not corrected, could result in
significant deterioration of the institution and increased risk of loss to the
deposit insurance fund. Subgroup C consists of institutions that pose a
substantial probability of loss to the deposit insurance fund unless effective
corrective action is taken. Prior to July 1, 1995, the assessment rates ranged
from 0.23% of deposits for well capitalized institutions in Subgroup A to 0.31%
of deposits for undercapitalized institutions in Subgroup C. The Bank was deemed
an "undercapitalized" institution for deposit insurance assessment purposes
during that time. For the last six months of 1995, the assessment rates ranged
from 0.04% of deposits for well capitalized institutions in Subgroup A to 0.31%
of deposits for undercapitalized institutions in Subgroup C. These rates were
again lowered effective January 1, 1996 to a range of 0.00% to 0.27% of
deposits. Since July 1, 1995, the Bank has been deemed well capitalized for
insurance assessment purposes. The Bank's deposit assessment rate for the first
half of 1996 was 0.3%; since then, it has been 0.00%.

      In addition, the Deposit Insurance Act of 1996 authorized the Financing
Corporation ("FICO") to levy assessments on BIF-assessable deposits and
stipulated that the rate must equal one-fifth the FICO assessment rate that is
applied to deposits assessable by the Savings Association Insurance Fund. The
rate established for the Bank for 1997 through 1999 is .01296%.

      Proposed Standards for Safety and Soundness. Under FDICIA, each federal
banking agency is required to prescribe, by regulation, noncapital safety and
soundness standards for institutions under its authority. The federal banking
agencies, including the Federal Reserve and the FDIC, have proposed standards
covering internal controls,


                                      14
<PAGE>   15

information systems and internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth, compensation, fees,
benefits, and standards for asset quality and earnings sufficiency. An
institution which fails to meet any of these standards, when they are
established, would be required to develop a plan acceptable to the agency,
specifying the steps that the institution will take to meet the standards.
Failure to submit or implement such a plan may subject the institution to
regulatory sanctions. The Corporation believes that the Bank meets the standards
which have been proposed.

      Enforcement Powers. The bank regulatory agencies have broad discretion to
issue cease and desist orders if they determine that the Corporation or its
subsidiaries are engaging in "unsafe or unsound banking practices." In addition,
the federal bank regulatory authorities are empowered to impose substantial
civil money penalties for violations of certain federal banking statutes and
regulations, violation of a fiduciary duty, or violation of a final or temporary
cease and desist order, among other things. Financial institutions, and
directors, officers, employees, controlling shareholders, agents, consultants,
attorneys, accountants, appraisers and others associated with a depository
institution are subject to the imposition of fines, penalties, and other
enforcement actions based upon the conduct of their relationships with the
institution.

       Under the FDIA, the FDIC may be appointed as a conservator or receiver
for a depository institution based upon a number of events and circumstances,
including: (i) consent by the board of directors of the institution; (ii)
cessation of the institution's status as an insured depository institution;
(iii) the institution is undercapitalized and has no reasonable prospect of
becoming adequately capitalized when required to do so, fails to submit an
acceptable capital plan or materially fails to implement an acceptable capital
plan; (iv) the institution is critically undercapitalized or otherwise has
substantially insufficient capital; (v) appointment of a conservator or receiver
by a state banking authority, such as the State; (vii) the institution's assets
are less than its obligations to its creditors and others; (viii) substantial
dissipation in the institution's assets or earnings due to violation of any
statute or regulation or unsafe or unsound practice; (ix) a willful violation of
a cease and desist order that has become final; (x) an inability of the
institution to pay its obligations or meet its depositors' demands in the normal
course of business; or (xi) any concealment of the institution's books, records
or assets or refusal to submit to examination. The Corporation has few assets
other than its investment in the Bank. In the event of the appointment of a
receiver or conservator for the Bank, any remaining equity interest of the
Corporation in the Bank and of the Corporation's stockholders would likely be
eliminated.

      Under the FDIA, the FDIC as a conservator or receiver of a depository
institution has express authority to repudiate contracts with such institution
which it determines to be burdensome or if such repudiation will promote the
orderly administration of the institution's affairs. Certain "qualified
financial contracts", defined to include securities contracts, commodity
contracts, forward contracts, repurchase agreements, and swap agreements,
generally are excluded from the repudiation powers of the FDIC. The FDIC is also
given authority to enforce contracts made by a depository institution
notwithstanding any contractual provision providing for termination, default,
acceleration, or exercise of rights upon, or solely by reason of, insolvency or
the appointment of a conservator or receiver. Insured depository institutions
also are prohibited from entering into contracts for goods, products or services
which would adversely affect the safety and soundness of the institutions.

      Regulatory Capital Requirements. The Federal Reserve and the FDIC have
established guidelines with respect to the maintenance of appropriate levels of
capital by bank holding companies and state-chartered banks that are not members
of the Federal Reserve System ("state nonmember banks"), respectively. The
regulations impose two sets of capital adequacy requirements: minimum leverage
rules, which require bank holding companies and banks to maintain a specified
minimum ratio of capital to total assets, and risk-based capital rules, which
require the maintenance of specified minimum ratios of capital to
"risk-weighted" assets.

      The regulations of the Federal Reserve and the FDIC require bank holding
companies and state non-member banks, respectively, to maintain a minimum
leverage ratio of "Tier 1 capital" (as defined in the risk-based capital
guidelines discussed in the following paragraphs) to total assets of 3.0%.
Although setting a minimum 3.0% leverage ratio, the capital regulations state
that only the strongest bank holding companies and banks, with composite
examination ratings of 1 under the rating system used by the federal bank
regulators, would be permitted to operate at or near such minimum level of
capital. All other bank holding companies and banks are expected to maintain a


                                      15
<PAGE>   16

leverage ratio of at least 1% to 2% above the minimum ratio, depending on the
assessment of an individual organization's capital adequacy by its primary
regulator. Any bank or bank holding company experiencing or anticipating
significant growth would be expected to maintain capital well above the minimum
levels. In addition, the Federal Reserve has indicated that whenever
appropriate, and in particular when a bank holding company is undertaking
expansion, seeking to engage in new activities or otherwise facing unusual or
abnormal risks, it will consider, on a case-by-case basis, the level of an
organization's ratio of tangible Tier 1 capital (after deducting all
intangibles) to total assets in making an overall assessment of capital.

      The risk-based capital rules of the Federal Reserve and the FDIC require
bank holding companies and state nonmember banks to maintain minimum regulatory
capital levels based upon a weighting of their assets and off-balance sheet
obligations according to risk. The risk-based capital rules have two basic
components: a Tier 1 or core capital requirement and a Tier 2 or supplementary
capital requirement. Tier 1 capital consists primarily of common stockholders'
equity, certain perpetual preferred stock (which must be noncumulative with
respect to banks), and minority interests in the equity accounts of consolidated
subsidiaries; less most intangible assets, primarily goodwill. Tier 2 capital
elements include, subject to certain limitations, the allowance for losses on
loans and leases; perpetual preferred stock that does not qualify for Tier 1 and
long-term preferred stock with an original maturity of at least 20 years from
issuance; hybrid capital instruments, including perpetual debt and mandatory
convertible securities; and subordinated debt and intermediate-term preferred
stock.

      The risk-based capital regulations assign balance sheet assets and credit
equivalent amounts of off-balance sheet obligations to one of four broad risk
categories based principally on the degree of credit risk associated with the
obligor. The assets and off-balance sheet items in the four risk categories are
weighted at 0%, 20%, 50% and 100%. These computations result in the total
risk-weighted assets. Most loans are assigned to the 100% risk category, except
for first mortgage loans fully secured by residential property and, under
certain circumstances, residential construction loans, both of which carry a 50%
rating. Most investment securities are assigned to the 20% category, except for
municipal or state revenue bonds, which have a 50% risk-weight, and direct
obligations of or obligations guaranteed by the United States Treasury or United
States Government agencies, which have a 0% risk-weight. In converting
off-balance sheet items, direct credit substitutes, including general guarantees
and standby letters of credit backing financial obligations, are given a 100%
conversion factor. Transaction-related contingencies such as bid bonds, other
standby letters of credit and undrawn commitments, including commercial credit
lines with an initial maturity of more than one year, have a 50% conversion
factor. Short-term, self-liquidating trade contingencies are converted at 20%,
and short-term commitments have a 0% factor.

      The risk-based capital regulations require all banks and bank holding
companies to maintain a minimum ratio of total capital to total risk-weighted
assets of 8%, with at least 4% as core capital. For the purpose of calculating
these ratios, (i) supplementary capital is limited to no more than 100% of core
capital, and (ii) the aggregate amount of certain types of supplementary capital
is limited. In addition, the risk-based capital regulations limit the allowance
for loan losses which may be included as capital to 1.25% of total risk-weighted
assets.

      FDICIA required the federal banking regulators to revise their risk-based
capital rules to take adequate account of interest rate risk, concentration of
credit risk, and the risks of nontraditional activities. The federal banking
regulators, including the Federal Reserve and the FDIC, have issued a new rule,
effective January 1, 1997, that would add a market risk component to the
currently effective risk-based capital standards. Under the new rule, bank
holding companies and banks with higher exposures to market risk such as
interest rate risk may be required to maintain higher levels of capital. In
addition, the federal banking regulators have proposed regulations which allow
the FDIC to increase regulatory capital requirements on a case-by-case basis
based upon the factors including the level and severity of problem and adversely
classified assets and loan portfolio and other concentrations of credit risk.

      At December 31, 1996, the Corporation's total risk-based capital and
leverage capital ratios were 15.5% and 10.5%, respectively. The minimum levels
established by the regulators for these measures are 8.0% and 3.0%,
respectively.


                                      16
<PAGE>   17

      FDICIA also required the federal banking regulators to classify insured
depository institutions by capital levels and to take various prompt corrective
actions to resolve the problems of any institution that fails to satisfy the
capital standards. The FDIC has issued final regulations establishing these
capital levels and otherwise implementing FDICIA's prompt corrective action
provisions. Under FDICIA and these regulations, all institutions, regardless of
their capital levels, are restricted from making any capital distribution or
paying any management fees that would cause the institution to fail to satisfy
the minimum levels for any of its capital requirements.

      Under the FDIC's prompt corrective action regulation, a "well capitalized"
bank is one that is not subject to any regulatory order or directive to meet any
specific capital level and that has or exceeds the following capital levels: a
total risk-based capital ratio of 10%, a Tier 1 risk-based capital ratio of 6%,
and a leverage ratio of 5%. An "adequately capitalized" bank is one that does
not qualify as "well capitalized" but meets or exceeds the following capital
requirements: a total risk-based capital ratio of 8%, a Tier 1 risk-based
capital ratio of 4%, and a leverage ratio of either (i) 4% or (ii) 3% if the
bank has the highest composite examination rating. A bank not meeting these
criteria will be treated as "undercapitalized," "significantly
undercapitalized," or "critically undercapitalized" depending on the extent to
which to which the bank's capital levels are below these standards. A bank that
falls within any of the three "undercapitalized" categories established by the
prompt corrective action regulation will be: (i) subject to increased monitoring
by the appropriate federal banking regulator; (ii) required to submit an
acceptable capital restoration plan within 45 days; (iii) subject to asset
growth limits; and (iv) required to obtain prior regulatory approval for
acquisitions, branching and new lines of businesses. The capital restoration
plan must include a guarantee by the institution's holding company that the
institution will comply with the plan until it has been adequately capitalized
on average for four consecutive quarters, under which the holding company would
be liable up to the lesser of 5% of the institution's total assets or the amount
necessary to bring the institution into capital compliance as of the date it
failed to comply with its capital restoration plan. A significantly
undercapitalized institution, as well as any undercapitalized institution that
did not submit an acceptable capital restoration plan, will be subject to
regulatory demands for recapitalization, broader application of restrictions on
transactions with affiliates, limitations on interest rates paid on deposits,
asset growth and other activities, possible replacement of directors and
officers, and restrictions on capital distributions by any bank holding company
controlling the institution. Any company controlling the institution may be
required to divest its interest in the institution. The senior executive
officers of a significantly undercapitalized institution may not receive bonuses
or increases in compensation without prior approval. A critically
undercapitalized institution is prohibited from making payments of principal or
interest on its subordinated debt, except with respect to debt as approved by
the FDIC or, until July 15, 1996, with respect to subordinated debt outstanding
on July 15, 1991 and not extended or otherwise renegotiated after July 15, 1991.
If an institution's ratio of tangible capital to total assets falls below a
level established by the appropriate federal banking regulator, which may not be
less than 2%, nor more than 65% of the minimum tangible capital level otherwise
required (the "critical capital level"), the institution will be subject to
conservatorship or receivership within 90 days unless periodic determinations
are made that forbearance from such action would better protect the deposit
insurance fund. Unless appropriate findings and certifications are made by the
appropriate federal bank regulatory agencies, a critically undercapitalized
institution must be placed in receivership if it remains critically
undercapitalized on average during the calendar quarter beginning 270 days after
the date it became critically undercapitalized.

      Based on its examination as of December 31, 1995, the FDIC informed the
Bank that the Bank was "well capitalized" under the FDIC's prompt corrective
action regulation.

      Federal regulators have the authority to increase the capital requirements
applicable to banks and bank holding companies in general and to the Corporation
and the Bank in particular. Although no such increases in requirements have been
announced or are anticipated, there can be no assurance that federal banking
regulators will not impose such higher requirements in the future, or that the
Bank would be able to obtain approval of a new or amended capital plan designed
to restore capital to such higher levels.


                                      17
<PAGE>   18

Item 2.  Properties.

      The following table sets forth the location of and certain additional
information regarding the Corporation's offices at December 31, 1996. The
Corporation owns all of its offices except as indicated.

                                                    Net Book
                Year      Total      Total     Value at December   Approximate
Branch         Opened    Deposits  Investment       31, 1996      Square Footage
------         ------    --------  ----------  -----------------  --------------
                                (Dollars in thousands)

Main office     1980     $52,719     $1,698        $1,035            23,000
Packanack       1967      55,114        664           351             4,000
Valley          1972      43,412        738           465             8,000
Clifton         1974      24,257         76            15(1)          2,000
North Haledon   1986(2)   22,420         58             2(3)          2,000
Butler          1986(2)   40,823        240           126(3)          2,000
Fairfield       1996       1,144(4)       4             4(3)          2,000

----------
(1)   Land lease.
(2)   Date acquired.
(3)   Leased.
(4)   Opened October, 1996

      The net book value of the Corporation's investment in premises and
equipment totalled approximately $3.3 million at December 31, 1996. For a
discussion of premises and equipment, see Note 8 of Notes to Consolidated
Financial Statements contained in the Corporation's 1996 Annual Report to
Stockholders.

Item 3. Legal Proceedings.

       The Corporation and its subsidiaries are parties, in the ordinary course
of business, to litigation involving collection matters, contract claims and
other miscellaneous causes of action arising from their 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 4. Submission of Matters to a Vote of Security Holders.

      No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1996.


                                      18
<PAGE>   19

                                    PART II

Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.

      Dividend Policy. The Corporation declared quarterly dividends in each of
the third and fourth quarters of 1996. Prior to these declarations, no dividend
had been paid since February, 1992, when an annual dividend was paid. The
payment of dividends in the future is predicated upon the continued profitable
operations of the Corporation.

      All other required information is incorporated by reference to Page 44 of
the Corporation's 1996 Annual Report to Stockholders.

Item 6. Selected Financial Data.

      The required information is incorporated by reference to Pages 5 and 6 of
the Corporation's 1996 Annual Report to Stockholders.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

      The required information is incorporated by reference to Pages 7 thru 21
of the Corporation's 1996 Annual Report to Stockholders.

Item 8. Financial Statements and Supplementary Data.

      A. Financial Statements

      The required information is incorporated by reference to Pages 22 thru 42
of the Corporation's 1996 Annual Report to Stockholders.

                                                                  Page of
                                                                Annual Report
                                                               to Stockholders
                                                               ---------------

Report of Independent Public Accountants                               42

Ramapo Financial Corporation and Subsidiaries:
      Consolidated Balance Sheets                                      22
      Consolidated Statements of Operations                            23
      Consolidated Statements of Changes in Stockholders' Equity       24
      Consolidated Statements of Cash Flows                            25
      Notes to Consolidated Financial Statements (Notes 1 - 19)       26-41

      B. Supplementary Data

      No supplementary data is included in this report as it is inapplicable,
not required, or the information is included elsewhere in the financial
statements or notes thereto.

Item 9. Changes in and Disagreements With Accountants on Accounting and
        Financial Disclosure.

      Not applicable.


                                      19
<PAGE>   20

                                   PART III

Item 10. Directors and Executive Officers of the Registrant.

      For information concerning the Board of Directors of the Corporation, the
information contained under the section captioned "ITEM 1--ELECTION OF
DIRECTORS" in the Corporation's definitive proxy statement for the Corporation's
1997 Annual Meeting of Stockholders (the "Proxy Statement") to be filed with the
Commission is incorporated herein by reference.

Executive Officers Who Are Not Directors

      The following sets forth information with respect to executive officers of
the Corporation who do not serve on the Board of Directors.

                         Age as of   
Name                   March 31, 1997                Title
----                   --------------                -----

Walter A. Wojcik, Jr.        47       Treasurer of the Corporation and the Bank;
                                      Senior Vice President of the Bank

Item 11. Executive Compensation.

      The information contained under the section captioned "ITEM 1--ELECTION OF
DIRECTORS--Executive Compensation and Other Benefits" in the Proxy Statement is
incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

      (a) Security Ownership of Certain Beneficial Owners: The information
required by Item 403(a) of Reg. S-K is incorporated herein by reference to the
section captioned "Voting Securities and Principal Holders Thereof" in the Proxy
Statement.

      (b) Security Ownership of Management: The information required by Item
403(b) of Reg. S-K is incorporated herein by reference to the section captioned
"ITEM 1--ELECTION OF DIRECTORS--Security Ownership of Management" in the Proxy
Statement.

      (c) Changes in Control: Management of the Corporation knows of no
arrangements, including any pledge by any person of securities of the
Corporation, the operation of which may at a subsequent date result in a change
in control of the Corporation.

Item 13. Certain Relationships and Related Transactions.

       The information required by this item is incorporated herein by reference
to the section captioned "ITEM 1--ELECTION OF DIRECTORS--Certain Relationships
and Related Transactions" in the Proxy Statement.

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

      (a) List of Documents Filed as Part of this Report.

      (1) Financial Statements. The following consolidated financial statements
are filed as a part of this report in Item 8 hereof:


                                      20
<PAGE>   21

      Report of Independent Public Accountants

      Consolidated Balance Sheets as of December 31, 1996 and 1995

      Consolidated Statements of Operations for the Years Ended December 31,
      1996, 1995 and 1994

      Consolidated Statements of Changes in Stockholders' Equity for the Years
      Ended December 31, 1996, 1995 and 1994

      Consolidated Statements of Cash Flows for the Years Ended December 31,
      1996, 1995 and 1994

      Notes to Consolidated Financial Statements

      (2) Financial Statement Schedules. All schedules for which provision is
made in the applicable accounting regulations of the Securities and Exchange
Commission are omitted because of the absence of conditions under which they are
required or because the required information is included in the consolidated
financial statements and related notes thereto.

      (3) Exhibits. The following is a list of exhibits filed as part of this
Annual Report on Form 10-K. 

                                                              Page in
                                                              Sequentially
    No.     Description                                       Numbered Copy
    ---     -----------                                       -------------

    11      Statement re Computation of Per Share Earnings       24
    13      Annual Report to Security Holders                    25
    21      Subsidiaries of the Registrant                       66
    23      Consent of Independent Public Accountants            67
    27      Financial Data Schedule                              68

      (b) Reports on Form 8-K. The Registrant did not file any current reports
on Form 8-K during the quarter ended December 31, 1996.

      (c) Exhibits. The exhibits required by Item 601 of Regulation S-K are
either filed as part of this Annual Report on Form 10-K or incorporated by
reference herein.

      (d) Financial Statements and Schedules Excluded from Annual Report. There
are no other financial statements and financial statement schedules which were
excluded from the Annual Report to Stockholders pursuant to Rule 14a-3(b)(1)
which are required to be included herein.


                                      21
<PAGE>   22

                                  SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) 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


March 27, 1997                          By: /s/ Mortimer J. O'Shea
                                            ----------------------------------
                                            Mortimer J. O'Shea, President and
                                            Chief Executive Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.



/s/ Mortimer J. O'Shea                                            March 27, 1997
----------------------------------------------
Mortimer J. O'Shea, Director,
President and Chief Executive Officer
(Principal Executive Officer)

/s/ Walter A. Wojcik, Jr.                                         March 27, 1997
----------------------------------------------
Walter A. Wojcik, Jr.
Treasurer
(Principal Financial and Accounting Officer)

/s/ Victor C. Otley, Jr.                                          March 27, 1997
-----------------------------------------------
Victor C. Otley, Jr.
Chairman of the Board

/s/ Erwin D. Knauer                                               March 27, 1997
----------------------------------------------
Erwin D. Knauer, Director
Senior Vice President

/s/ Louis S. Miller                                               March 28, 1997
----------------------------------------------
Louis S. Miller
Director

/s/ Richard S. Miller                                             March 27, 1997
-----------------------------------------------
Richard S. Miller
Director


                                      22


<PAGE>   23
                                EXHIBIT INDEX
                                --------------
                                                              
                                                              
    No.     Description                                       
    ---     -----------                                       

    11      Statement re Computation of Per Share Earnings    
    13      Annual Report to Security Holders                 
    21      Subsidiaries of the Registrant                    
    23      Consent of Independent Public Accountants           
    27      Financial Data Schedule