SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
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X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--------- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2007
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OR
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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 000-52000
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ROMA FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
UNITED STATES 51-0533946
------------------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
2300 Route 33, Robbinsville, New Jersey 08691
--------------------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (609) 223-8300
-----------------------------------------
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 whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer" and "large accelerated filer" in Rule 12b-2 of the Exchange
Act (Check one):
Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date, October 29, 2007:
$0.10 par value common stock - 31,749,919 shares outstanding
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Statements of Financial Condition 2
at September 30, 2007 and December 31, 2006 (Unaudited)
Consolidated Statements of Income for the Three and Nine Months Ended 3
September 30, 2007 and 2006 (Unaudited)
Consolidated Statements of Changes in Stockholders' Equity for the 4
Nine Months Ended September 30, 2007 and 2006 (Unaudited)
Consolidated Statements of Cash Flows for the Nine Months 5
Ended September 30, 2007 and 2006 (Unaudited)
Notes to Consolidated Financial Statements 7
Item 2: Management's Discussion and Analysis of 13
Financial Condition and Results of Operations
Item 3: Quantitative and Qualitative Disclosure About Market Risk 19
Item 4: Controls and Procedures 19
PART II - OTHER INFORMATION 20
SIGNATURES 21
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
(Unaudited)
September 30, December 31,
2007 2006
--------- ---------
(In thousands, except for
share and per share data)
ASSETS
Cash and amounts due from depository institutions $ 6,733 $ 7,219
Interest-bearing deposits in other banks 25,680 26,521
Money market funds 13,995 30,961
--------- ---------
Cash and Cash Equivalents 46,408 64,701
Securities available for sale 19,103 19,331
Investment securities held to maturity 163,450 169,927
Mortgage-backed securities held to maturity 135,266 144,480
Loans receivable, net of allowance for loan losses $1,492
and $1,169, respectively 450,087 420,382
Premises and equipment 32,148 30,669
Federal Home Loan Bank of New York stock 1,440 1,432
Interest receivable 5,171 4,598
Bank owned life insurance 18,630 16,185
Other assets 5,182 4,376
--------- ---------
Total Assets $ 876,885 $ 876,081
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 23,988 $ 25,109
Interest bearing 612,665 600,863
--------- ---------
Total deposits 636,653 625,972
Federal Home Loan Bank of New York advances 6,429 7,863
Advance payments by borrowers for taxes and insurance 2,537 2,275
Other liabilities 8,696 5,317
--------- ---------
Total Liabilities 654,315 641,427
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, $0.10 par value; 45,000,000 authorized; 32,731,875 issued;
31,749,919 and 32,731,875, respectively, outstanding 3,274 3,274
Paid-in capital 97,313 97,069
Retained earnings 147,030 143,068
Unearned shares held by Employee Stock Ownership Plan (7,441) (7,847)
Treasury stock, 981,956 shares at September 30, 2007 (16,700) --
Accumulated other comprehensive (loss) (906) (910)
--------- ---------
Total Stockholders' Equity 222,570 234,654
--------- ---------
Total Liabilities and Stockholders' Equity $ 876,885 $ 876,081
========= =========
See notes to consolidated financial statements.
2
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
------------ ------------ ------------ ------------
(In thousands, except for share and per share data)
INTEREST INCOME
Loans $ 7,094 $ 6,372 $ 20,506 $ 18,079
Mortgage-backed securities held to maturity 1,731 1,829 5,232 5,351
Investment securities held to maturity 2,106 1,671 5,867 4,749
Securities available for sale 202 156 462 411
Other interest-earning assets 481 646 2,105 1,266
------------ ------------ ------------ ------------
Total Interest Income 11,614 10,674 34,172 29,856
------------ ------------ ------------ ------------
INTEREST EXPENSE
Deposits 4,378 3,682 12,689 10,742
Borrowings 74 97 238 393
------------ ------------ ------------ ------------
Total Interest Expense 4,452 3,779 12,927 11,135
------------ ------------ ------------ ------------
Net Interest Income 7,162 6,895 21,245 18,721
PROVISION FOR LOAN LOSSES 141 97 367 233
------------ ------------ ------------ ------------
Net Interest Income after Provision for Loan Losses 7,021 6,798 20,878 18,488
------------ ------------ ------------ ------------
NON-INTEREST INCOME
Commissions on sales of title policies 336 372 941 1,019
Fees and service charges on deposits 161 205 744 395
Fees and service charges on loans 34 79 95 186
Income from bank owned life insurance 204 175 564 513
Other 197 186 604 461
------------ ------------ ------------ ------------
Total Non-Interest Income 932 1,017 2,870 2,574
------------ ------------ ------------ ------------
NON-INTEREST EXPENSE
Salaries and employee benefits 3,015 2,624 8,837 7,560
Net occupancy expense 446 404 1,368 1,202
Equipment 446 342 1,233 1,104
Data processing fees 351 282 1,004 969
Advertising 182 193 590 620
Federal insurance premium 18 20 56 61
Contributions 6 3,451 29 3,523
Other 480 531 1,872 1,551
------------ ------------ ------------ ------------
Total Non-Interest Expense 4,944 7,847 14,989 16,590
------------ ------------ ------------ ------------
Income Before Income Taxes 3,009 (32) 8,759 4,472
INCOME TAXES 1,125 (133) 3,127 1,422
------------ ------------ ------------ ------------
Net Income $ 1,884 $ 101 $ 5,632 $ 3,050
============ ============ ============ ============
Net income per common share
Basic $ .06 $ .00 $ .18 $ .13
------------ ------------ ------------ ------------
Diluted $ .06 $ .00 $ .18 $ .13
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
Basic 31,490,916 22,584,994 31,801,019 22,584,994
============ ============ ============ ============
Diluted 31,490,916 22,584,994 31,801,019 22,584,994
============ ============ ============ ============
Dividends declared per common share $ .06 N/A $ .18 N/A
============ ============ ============ ============
See notes to consolidated financial statements.
3
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
----------------------------------------------------------
(Unaudited, in thousands)
Retained Accumulated
Earnings Unearned Other
Common Paid - In Substantially ESOP Treasury Comprehensive
Stock Capital Restricted Shares Stock Income(Loss) Total
------------ ------------ ------------- ------------ ------------ --------------- ------------
Balance December 31, 2005 $ 1 $ 799 $ 137,820 $ - $ - $ 38 $ 138,658
------------
Net income for the nine months
ended September 30, 2006 3,050 3,050
Other comprehensive income,
unrealized gain on available
for sale securities, net of taxes
of $98 164 164
------------
Total comprehensive income 3,214
------------
Issuance of common stock,
net of expenses 3,272 96,141 99,413
ESOP shares earned 69 135 204
Common stock acquired by
ESOP (8,117) (8,117)
------------ ------------ ------------- ------------ ------------ --------------- ------------
Balance September 30, 2006 $ 3,273 $ 97,009 $ 140,870 $ (7,982) $ - $ 202 $ 233,372
============ ============ ============= ============ ============ =============== ============
Balance December 31, 2006 $ 3,274 $ 97,069 $ $143,068 $ (7,847) $ - $ (910) $ 234,654
------------
Net income for the nine months
ended September 30, 2007 5,632 5,632
Other comprehensive income, net of taxes:
Unrealized gain on available
for sale securities, net of
taxes of $37 (57) (57)
Pension cost 61 61
------------
Total comprehensive income 5,636
------------
Purchase of treasury shares -
981,956 shares (16,700) (16,700)
ESOP shares earned 244 406 650
Cash dividends declared (1,670) (1,670)
------------ ------------ ------------- ------------ ------------ --------------- ------------
Balance September 30, 2007 $ 3,274 $ 97,313 $ 147,030 $ (7,441) $ (16,700) $ (906) $ 222,570
============ ============ ============= ============ ============ =============== ============
See notes to consolidated financial statements.
4
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
Nine Months Ended
September 30,
--------------------
2007 2006
-------- --------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,632 $ 3,050
Adjustments to reconcile net income to net cash provided by operating
activities:
Cash contribution to foundation - 167
Depreciation 933 878
Amortization of premiums and accretion of discounts on securities (102) (24)
Accretion of deferred loan fees and discounts (63) (30)
Net gain on sale of mortgage loans originated for sale (1) (4)
Mortgage loans originated for sale (122) (483)
Proceeds from sales of mortgage loans originated for sale 123 487
Provision for loan losses 367 233
ESOP share earned 650 204
Pension cost 61 -
(Increase) in interest receivable (573) (573)
(Increase) in cash surrender value of bank owned life insurance (445) (401)
(Increase) in other assets (751) (282)
Increase in interest payable 651 304
Increase in other liabilities 2,178 278
-------- --------
Net Cash Provided by Operating Activities 8,538 3,804
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and calls of securities available for sale 217 85
Purchases of securities available for sale (78) (5,313)
Proceeds from maturities and calls of investment securities held to maturity 52,060 24,000
Purchases of investment securities held to maturity (45,580) (22,845)
Principal repayments on mortgage-backed securities held to maturity 22,244 19,152
Purchases of mortgage-backed securities held to maturity (12,936) (15,495)
Purchase of bank owned life insurance (2,000) -
Net increase in loans receivable (30,027) (36,046)
Additions to premises and equipment (2,412) (1,088)
Purchase of Federal Home Loan Bank of New York stock (8) (50)
-------- --------
Net Cash (Used in) Investing Activities (18,520) (37,600)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 10,681 (18,183)
Increase in advance payments by borrowers for taxes and insurance 262 235
Dividends paid and declared to minority stockholders (1,120) -
Repayments of Federal Home Loan Bank of New York advances (1,434) (1,371)
Proceeds from issuance of common stock, net of ESOP - 91,129
Purchase of treasury stock (16,700) -
-------- --------
Net Cash Provided by (Used in) Financing Activities (8,311) 71,810
-------- --------
Net Increase (decrease) in Cash and Cash Equivalents (18,293) 38,014
CASH AND CASH EQUIVALENTS - BEGINNING 64,701 28,089
-------- --------
CASH AND CASH EQUIVALENTS - ENDING $ 46,408 $ 66,103
======== ========
See notes to consolidated financial statements.
5
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont'd)
----------------------------------------------
(Unaudited)
Nine Months Ended
September 30,
-----------------------
2007 2006
---------- ----------
SUPPLEMENTARY CASH FLOWS INFORMATION
Income taxes paid, net $ 3,343 $ 1,958
========== ==========
Interest paid $ 12,276 $ 10,831
========== ==========
Loan receivable transferred to Real Estate Owned $ 18 $ -
========== ==========
Contribution of stock to foundation $ - $ 3,273
========== ==========
See notes to consolidated financial statements.
6
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - ORGANIZATION
Roma Financial Corporation (the "Company") is a federally-chartered corporation
organized in January 2005 for the purpose of acquiring all of the capital stock
that Roma Bank issued in its mutual holding company reorganization. The
Company's principal executive offices are located at 2300 Route 33,
Robbinsville, New Jersey 08691 and its telephone number at that address is (609)
223-8300.
Roma Financial Corporation, MHC is a federally-chartered mutual holding company
that was formed in January 2005 in connection with the mutual holding company
reorganization. Roma Financial Corporation, MHC has not engaged in any
significant business since its formation. So long as Roma Financial Corporation
MHC is in existence, it will at all times own a majority of the outstanding
stock of the Company.
Roma Bank is a federally-chartered stock savings bank. It was originally founded
in 1920 and received its federal charter in 1991. Roma Bank's deposits are
federally insured by the Deposit Insurance Fund as administered by the Federal
Deposit Insurance Corporation. Roma Bank is regulated by the Office of Thrift
Supervision and the Federal Deposit Insurance Corporation. The Office of Thrift
Supervision also regulates Roma Financial Corporation, MHC and the Company as
savings and loan holding companies.
Roma Bank offers traditional retail banking services, one-to four-family
residential mortgage loans, multi-family and commercial mortgage loans,
construction loans, commercial business loans and consumer loans, including home
equity loans and lines of credit. Roma Bank currently operates from its main
office in Robbinsville, New Jersey, and eight branch offices located in Mercer,
Burlington and Ocean Counties, New Jersey. Roma Bank maintains a website at
www.romabank.com.
A Registration Statement on Form S-1 (File No. 333-132415), as amended, was
filed by the Company with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended, relating to the offering for sale of up to
8,538,750 shares (subject to increase to 9,819,652 shares) of its common stock.
For a further discussion of the stock offering, see the final prospectus as
filed on May 23, 2006 with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) of the Rules and Regulations of the Securities Act of 1933. The
offering closed July 11, 2006 and the net proceeds from the offering were
approximately $96.1 million (gross proceeds of $98.2 million for the issuance of
9,819,562 shares, less offering costs of approximately $2.1 million). The
Company also issued 22,584,995 shares to Roma Financial Corporation, MHC and
327,318 shares to the Roma Bank Community Foundation, Inc., resulting in a total
of 32,731,875 shares issued and outstanding after the completion of the
offering. A portion of the proceeds were loaned to the Roma Bank Employee Stock
Ownership Plan (ESOP) to purchase 811,750 shares of the Company's stock in the
offering at a cost of $8.1 million on July 11, 2006.
On August 9, 2007, the Company announced a ten percent stock repurchase plan,
equivalent to 981,956 shares, in the open market, based on stock availability,
price and the Company's financial performance. The repurchase was completed
August 27, 2007. A new stock repurchase plan, for five percent of the currently
outstanding shares was announced on October 24, 2007 and has commenced
repurchasing shares.
NOTE B - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Roma Financial
Corporation (the "Company"), its wholly-owned subsidiary, Roma Bank (the "Bank")
and the Bank's wholly-owned subsidiaries, Roma Capital Investment Co. (the
"Investment Co.") and General Abstract and Title Agency (the "Title Co."). The
consolidation also includes the Company's majority owned investment in RomAsia
Bank (in organization). All significant inter-company accounts and transactions
have been eliminated in consolidation. These statements were prepared in
accordance with instructions for Form 10-Q and Rule 10-01 of Regulation S-X and,
therefore, do not include information or footnotes necessary for a complete
presentation of financial condition, results of operations, and cash flows in
conformity with generally accepted accounting principles in the United States of
America.
In the opinion of management, all adjustments, consisting of only normal
recurring adjustments or accruals, which are necessary for a fair presentation
of the consolidated financial statements have been made at and for the three and
nine month periods ended September 30, 2007 and 2006. The results of operations
for the three and nine month periods ended September 30, 2007 and 2006 are not
necessarily indicative of the results which may be expected for an entire fiscal
year or other interim periods.
7
The data in the consolidated statements of financial condition for December 31,
2006 was derived from the Company's audited consolidated financial statements
for that date. That data, along with the interim financial information presented
in the consolidated statements of financial condition, income, changes in
stockholders' equity and cash flows should be read in conjunction with the 2006
audited consolidated financial statements for the year ended December 31, 2006,
including the notes thereto included in the Company's Annual Report on Form
10-K.
The Investment Co. was incorporated in the State of New Jersey effective
September 4, 2004, and began operations October 1, 2004. The Investment Co. is
subject to the investment company provisions of the New Jersey Corporation
Business Tax Act. The Title Co. was incorporated in the State of New Jersey
effective March 7, 2005 and commenced operations April 1, 2005. RomAsia Bank is
in organization and has an application pending with the Office of Thrift
Supervision to be a federal savings bank. The Company has advanced $900,000 as
organization capital and intends to maintain a 60% ownership interest in RomAsia
Bank upon completion of the organization. As presently contemplated, RomAsia
Bank will need to raise $15.0 million in initial capital including the
investment to be made by the Company.
The consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America. In
preparing the consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the consolidated statements of financial condition
and revenues and expenses for the periods then ended. Actual results could
differ significantly from those estimates.
A material estimate that is particularly susceptible to significant change
relates to the determination of the allowance for loan losses. The allowance for
loan losses represents management's best estimate of losses known and inherent
in the portfolio that are both probable and reasonable to estimate. While
management uses the most current information available to estimate losses on
loans, actual losses are dependent on future events and, as such, increases in
the allowance for loan losses may be necessary.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for loan losses.
Such agencies may require the Bank to recognize additions to the allowance based
on their judgments about information available to them at the time of their
examinations.
NOTE C - CONTINGENCIES
The Company, from time to time, is a party to routine litigation that arises in
the normal course of business. In the opinion of management, the resolution of
such litigation, if any, would not have a material adverse effect, as of
September 30, 2007, on the Company's consolidated financial position or results
of operations.
NOTE D - EARNINGS PER SHARE
Basic earnings per share is based on the weighted average number of common
shares actually outstanding adjusted for Employee Stock Ownership Plan ("ESOP")
shares not yet committed to be released. Diluted EPS is calculated by adjusting
the weighted average number of shares of common stock outstanding to include the
effect of contracts or securities exercisable or which could be converted into
common stock, if dilutive, using the treasury stock method. During the periods
presented, diluted EPS did not differ from basic EPS as there were no existing
contracts or securities exercisable or convertible into common stock during
these periods. Shares issued and reacquired during any period are weighted for
the portion of the period they were outstanding. The 10,000 shares issued to
Roma Financial Corporation, MHC in connection with the Company's reorganization
in 2005 were "replaced" with 22,584,994 shares representing 69% of the shares
issued in the Company's initial public offering. This transaction is analogous
to a stock split or significant stock dividend, therefore, net income per common
share for those shares has been retroactively restated for all periods
presented.
NOTE E - STOCK BASED COMPENSATION
The Company had no stock-based compensation as of, or prior to, September 30,
2007, except as described below.
The Company has an Employee Stock Ownership Plan ("ESOP") for the benefit of
employees who meet the eligibility requirements defined in the plan. The ESOP
trust purchased 811,750 shares of common stock as part of the stock offering
using proceeds of a loan from the Company. The total cost of shares purchased by
the ESOP trust was $8.1 million, reflecting a cost of $10 per share. The Bank
will make cash contributions to the ESOP on a quarterly basis
8
sufficient to enable the ESOP to make the required loan payments to the Company.
The loan bears an interest rate of 8.25% with principal and interest payable in
equal quarterly installments over a fifteen year period. The loan is secured by
the shares of the stock purchased.
Shares purchased with the loan proceeds were initially pledged as collateral for
the loan and are held in a suspense account for future allocation among
participants. Contributions to the ESOP and shares released from the suspense
account will be allocated among the participants on the basis of compensation,
as described by the Plan, in the year of allocation. The Company accounts for
its ESOP in accordance with Statement of Position ("SOP") 93-6, "Employer's
Accounting for Employee Stock Ownership Plans", issued by the Accounting
Standards Division of the American Institute of Certified Public Accountants. As
shares are committed to be released from collateral, the Company reports
compensation expense equal to the current market price of the shares, and the
shares become outstanding for earnings per share computations. The Company made
its first loan payment in October 2006. As of September 30, 2007 there were
744,103 unearned shares. The Company's ESOP compensation expense was $220
thousand and $650 thousand, respectively, for the three and nine months ended
September 30, 2007.
NOTE F - INVESTMENT SECURITIES
The following tables set forth the composition of the securities portfolio as of
September 30, 2007 and December 31, 2006 (in thousands):
September 30, 2007 December 31, 2006
----------------------- ----------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
------- ------- ------- -------
Available for sale:
Mortgage-backed securities $ 1,290 $ 1,307 $ 1,507 $ 1,524
Obligations of state and local political
subdivisions 10,019 10,128 10,015 10,155
US Government Obligations 2,000 1,999 2,000 1,979
Equity Shares 3,630 3,362 3,630 3,447
Mutual Fund Shares 2,447 2,307 2,368 2,226
------- ------- ------- -------
Total $19,386 $19,103 $19,520 $19,331
======= ======= ======= =======
September 30, 2007 December 31, 2006
----------------------- ----------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
------- ------- ------- -------
Investments securities held to maturity:
US Government Obligations $160,735 $160,376 $168,332 $166,303
Obligations of state and local political
subdivisions 2,715 2,771 1,595 1,631
-------- -------- -------- --------
Total $163,450 $163,147 $169,927 $167,934
======== ======== ======== ========
September 30, 2007 December 31, 2006
----------------------- ----------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
------- ------- ------- -------
Mortgage-backed securities held to maturity:
GNMA $ 4,507 $ 4,540 $ 5,630 $ 5,610
FHLMC 78,402 77,652 79,822 78,979
FNMA 44,263 43,910 53,880 53,190
CMO's 8,094 7,970 5,148 4,978
-------- -------- -------- --------
Total $135,266 $134,072 $144,480 $142,757
======== ======== ======== ========
9
Securities held as available for sale have been adjusted to fair value at
September 30, 2007 and December 31, 2006. Investment securities held to maturity
and mortgage-backed securities held to maturity are recorded at amortized cost.
The declines in fair value of these investments are due to interest rate
changes, not credit risk. The Company has the ability to, and intends to, hold
the investments until maturity. Therefore, no impairment has been recorded.
NOTE G - LOANS RECEIVABLE, NET
Loans receivable, net at September 30, 2007 and December 31, 2006 were comprised
of the following (in thousands):
September 30, December 31,
2007 2006
-------- --------
Real estate mortgage loans:
Conventional 1-4 family $219,117 $207,755
Commercial and multi-family 77,795 65,848
-------- --------
296,912 273,603
-------- --------
Construction 29,206 23,956
-------- --------
Consumer:
Equity and second mortgages 130,935 127,450
Other 1,099 1,347
-------- --------
132,034 128,797
-------- --------
Commercial 3,604 3,724
-------- --------
Total loans 461,756 430,380
-------- --------
Less:
Allowance for loan losses 1,492 1,169
Deferred loan fees 116 176
Loans in process 10,061 8,353
-------- --------
11,669 9,698
-------- --------
Total loans receivable, net $450,087 $420,382
======== ========
NOTE H - DEPOSITS
A summary of deposits by type of account as of September 30, 2007 and December
31, 2006 is as follows (dollars in thousands):
September 30, 2007 December 31, 2006
---------------------- ------------------------
Weighted Weighted
Avg. Int. Avg. Int.
Amount Rate Amount Rate
-------- ------- -------- ---------
Demand:
Non-interest bearing
checking $ 23,988 0.00% $ 25,109 0.00%
Interest bearing checking 93,727 0.53% 98,278 0.53%
-------- ---- -------- ----
117,715 0.42% 123,387 0.42%
Savings and club 177,588 0.93% 185,925 0.93%
Certificates of deposit 341,350 4.58% 316,660 4.30%
-------- ---- -------- ----
Total $636,653 2.79% $625,972 2.53%
======== ==== ======== ====
10
At September 30, 2007, the Company had contractual obligations for certificates
of deposit maturing as follows (in thousands):
One year or less $ 261,464
After one to three years 71,496
After three years 8,390
---------
Total $ 341,350
=========
NOTE I - PREMISES AND EQUIPMENT
Premises and equipment consisted of the following as of September 30, 2007 and
December 31, 2006 (in thousands):
Estimated
Useful September 30, December 31,
Lives 2007 2006
---------- ------------- ------------
Land -future development - $ 1,054 $ 1,054
Construction in progress - 1,554 2,598
Land and land improvements - 5,428 5,428
Buildings and improvements 20-50 yrs 25,472 22,611
Furnishings and equipment 3-10 yrs. 7,531 6,936
-------- --------
Total premises and equipment 41,039 38,627
Accumulated depreciation 8,891 7,958
-------- --------
Total $ 32,148 $ 30,669
======== ========
NOTE J - FEDERAL HOME LOAN BANK ADVANCES
At September 30, 2007 and December 31, 2006, the Company had outstanding Federal
Home Bank of New York advances as follows (dollars in thousands):
September 30, 2007 December 31, 2006
---------------------- -------------------
Interest Interest
Amount Rate Amount Rate
------- -------- ------- --------
Maturing:
September 15, 2010 $ 6,429 4.49 % $ 7,863 4.49%
======= ===== ======= ====
A schedule of principal payments is as follows (in thousands):
One year or less $ 1,988
More than one year through three years 4,441
More than three years through five years 0
-------
Total $ 6,429
=======
11
NOTE K - RETIREMENT PLANS
Components of net periodic pension cost for the three and nine months ended
September 30, 2007 and 2006 were as follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2007 2006 2007 2006
----- ----- ----- -----
Service cost $ 85 $ 86 $ 255 $ 258
Interest cost 122 112 366 336
Expected return on plan assets (160) (149) (480) (447)
Amortization of unrecognized net loss 9 17 27 51
Amortization of unrecognized
past service liability 11 15 33 45
----- ----- ----- -----
Net periodic benefit expense $ 67 $ 81 $ 201 $ 162
===== ===== ===== =====
NOTE L - CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
In the normal course of business, the Company enters into off-balance sheet
arrangements consisting of commitments to fund residential and commercial loans
and lines of credit. Outstanding loan commitments at September 30, 2007 were as
follows (in thousands):
September 30,
2007
------------
Residential mortgage and equity loans $ 4,532
Commercial loans committed not closed 20,412
Commercial lines of credit 14,236
Consumer unused lines of credit 33,296
Commercial letters of credit 4,317
--------
Total $ 76,793
========
NOTE M - ACCUMULATED OTHER COMPREHENSIVE (LOSS)
Components of accumulated other comprehensive (loss) at September 30, 2007 and
December 31, 2006 were as follows (in thousands):
September 30, December 31,
2007 2006
------- -------
Unrealized loss on securities available for sale $ (283) $ (189)
Pension plan liability (1,255) (1,316)
------- -------
(1,538) (1,505)
Deferred income taxes 632 595
------- -------
Accumulated other comprehensive (loss) $ (906) $ (910)
======= =======
12
NOTE N - SUBSEQUENT EVENT
Roma Financial Corporation, the holding company of Roma Bank, announced on
October 24, 2007 that its Board of Directors has authorized a stock repurchase
program pursuant to which the Company intends to repurchase up to 5% of its
outstanding shares (excluding shares held by Roma Financial Corp. MHC, the
Company's mutual holding company), or up to 441,880 shares. The timing of the
repurchases will depend on certain factors, including but not limited to, market
conditions and prices, the Company's liquidity requirements and alternative uses
of capital. Any repurchased shares will be held as treasury stock and will be
available for general corporate purposes.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Form 10-Q contains forward-looking statements, which can be identified by
the use of words such as "believes," "expects," "anticipates," "estimates" or
similar expressions. Forward - looking statements include:
o Statements of our goals, intentions and expectations;
o Statements regarding our business plans, prospects, growth and operating
strategies;
o Statements regarding the quality of our loan and investment portfolios; and
o Estimates of our risks and future costs and benefits.
These forward-looking statements are subject to significant risks and
uncertainties. Actual results may differ materially from those contemplated by
the forward-looking statements due to, among others, the following factors:
o General economic conditions, either nationally or in our market area, that
are worse than expected;
o Changes in the interest rate environment that reduce our interest margins
or reduce the fair value of financial instruments;
o Our ability to enter into new markets and/or expand product offerings
successfully and take advantage of growth opportunities;
o Increased competitive pressures among financial services companies;
o Changes in consumer spending, borrowing and savings habits;
o Legislative or regulatory changes that adversely affect our business;
o Adverse changes in the securities markets;
o Our ability to successfully manage our growth; and
o Changes in accounting policies and practices, as may be adopted by the bank
regulatory agencies, the Financial Accounting Standards Board or the Public
Company Accounting Oversight Board.
No forward looking statement can be guaranteed and we specifically disclaim any
obligation to update such statements.
Comparison of Financial Condition at September 30, 2007 and December 31, 2006
Total assets increased by $.8 million to $876.9 million at September 30, 2007
compared to $876.1 million at December 31, 2006. Total liabilities increased
$12.9 million to $654.3 million at September 30, 2007 compared to $641.4 million
at December 31, 2006. Stockholders' equity decreased $12.1 million during the
first nine months of 2007 to $222.6 million at September 30, 2007 compared to
$234.7 million at December 31, 2006. The decrease in stockholders' equity was
primarily due to the repurchase of minority shareholder stock in the amount of
$16.7 million.
Deposits
Total deposits increased $10.7 million to $636.7 million at September 30, 2007
compared to $626.0 million at December 31, 2006. Non-interest bearing demand
deposits decreased $1.1 million to $24.0 million at September 30, 2007 compared
to $25.1 million at December 31, 2006. Non-interest bearing demand deposits
decreased $1.1 million during the first quarter of 2007 and recovered $.8
million of that decrease during the second and third quarters of 2007. Interest
bearing demand deposits decreased $4.6 million to $93.7 million at September 30,
2007 compared to $98.3 million at December 31, 2006. Savings and club accounts
decreased $8.3 million to $177.6 million at September 30, 2007 compared to
$185.9 million at the prior year end. Certificates of deposit increased $24.7
million to $341.4 million at September 30, 2007 compared to $316.7 million at
December 31, 2006.
Investments (Including Mortgage-Backed Securities)
The investment portfolio decreased $15.9 million to $317.8 million at September
30, 2007 compared to $333.7 million at December 31, 2006. Securities available
for sale decreased $228 thousand to $19.1 million at September 30, 2007
13
primarily due to repayments of $217 thousand. Investments held to maturity
decreased $6.4 million to $163.5 million at September 30, 2007 compared to
$169.9 million at December 31, 2006. The decrease was primarily due to
maturities of securities in this category. Mortgage-backed securities decreased
$9.2 million to $135.3 million at September 30, 2007 compared to $144.5 million
at December 31, 2006, as repayments exceeded purchases.
Loans
Net loans increased by $29.7 million to $450.1 million at September 30, 2007
compared to $420.4 million at December 31, 2006. Net loans during the third
quarter of 2007 increased $8.0 million. Conventional one to four family loans
increased $11.3 million to $219.1 million at September 30, 2007 compared to
$207.8 million at December 31, 2006. The growth in this category was primarily
due to the repeat of the March mortgage promotion program. Residential loan
demand overall remained soft. Commercial and multi-family real estate loans
increased $12.0 million to $77.8 million at September 30, 2007 compared to $65.8
million at December 31, 2006. Commercial loan demand improved during the second
and third quarters of 2007, but it remains highly affected by intense rate
competition. Consumer and other loans increased $3.2 million to $132.0 million
at September 30, 2007 compared to $128.8 million at December 31, 2006.
Construction loans increased $5.3 million during the first nine months 2007,
primarily in commercial construction loans. Commercial loans decreased by $120
thousand.
Other Assets
All other assets excluding cash and cash equivalents increased $5.3 million from
December 31, 2006 to September 30, 2007. The increase was primarily due to the
purchase of $2.0 million in additional bank owned life insurance and $2.4
million in premises and equipment purchases.
Borrowed Money
The $1.4 million decrease in advances from the Federal Home Loan Bank of New
York (FHLBNY) at September 30, 2007 as compared to December 31, 2006 was due to
scheduled principal payments. At September 30, 2007, the outstanding FHLBNY
balance was $6.4 million.
Other Liabilities
Other liabilities increased $3.4 million to $8.7 million at September 30, 2007.
The increase was primarily due to an increase of $.5 million in dividends
payable, recording of amounts received into escrow from the organizers of
RomAsia Bank of $.6 million, increase of $.2 million for RomAsia Bank
liabilities, increase of $.9 million in interest payable on deposits, increase
of $.5 in accrued expenses, and other minor increases in various accounts
aggregating $.6 million.
Comparison of Operating Results for the Three Months Ended September 30, 2007
and 2006
General
Net income increased $1.8 million to $1.9 million for the three months ended
September 30, 2007 compared to $.1 million for the three months ended September
30, 2006. Net income in the third quarter of 2006 was skewed by the contribution
of cash and stock to the Roma Bank Community Foundation. Net interest income
increased $.3 million in the third quarter of 2007 compared to the same quarter
of 2006. Non-interest expense increased $.5 million after adjusting 2006
non-interest expense for the $3.5 million contribution to the Foundation.
Interest Income
Interest income increased by $.9 million to $11.6 million for the three months
ended September 30, 2007 compared to $10.7 million for the three months ended
September 30, 2006. Interest income from loans increased $.7 million to $7.1
million for the three months ended September 30, 2007. Interest income from
residential mortgages and equity loans increased $.1 million each. Interest
income from commercial and multi-family loans and commercial loans in the
aggregate increased $.6 million from the third quarter of 2006.
Interest income from mortgage-backed securities decreased $.1 million for the
three months ended September 30, 2007 compared to September 30, 2006. This was
primarily due to a decrease of $11.1 million in the mortgage backed security
portfolio from September 30, 2006 to September 30, 2007. Interest income on
investment securities held to maturity increased $.4 million for the comparable
three month periods in 2007 and 2006. Although the investments
14
held to maturity security portfolio decreased $8.5 million from September 30,
2006 to September 30, 2007, maturing securities were invested at higher interest
rates. Interest income from securities available for sale increased minimally
during the period. Interest income from other interest earning assets decreased
$.2 million, primarily due to lower balances in overnight funds during the
months of August and September 2007 as funds were deployed into loans and the
stock repurchase program.
Interest Expense
Interest expense increased $.7 million to $4.5 million for the three month
period ended September 30, 2007 compared to $3.8 million during the three months
ended September 30, 2006. The increase was primarily due to a $.7 million
increase in interest paid on deposits. This increase was a result of higher
interest rates, an increase in the average balance of deposits, and the growth
in certificates as a percentage of total deposits. The weighted average interest
rate at September 30, 2007 was 2.79% compared to 2.43% at September 30, 2006.
Interest expense on borrowed money decreased minimally reflecting a reduction in
the average outstanding balance of the FHLBNY borrowings.
Provision for Loan Losses
The loan loss provision for the three months ended September 30, 2007 increased
$44 thousand to $141 thousand compared to $97 thousand for the three months
ended September 30, 2006, reflecting an increase in the loan portfolio.
Non-Interest Income
Non-interest income decreased minimally by $85 thousand from period to period.
Commissions on sales of title policies and income from bank owned life insurance
both increased over the prior year's comparable quarter. The bank owned life
insurance income increase was primarily due to the purchase of an additional
$2.0 million of life insurance in early August 2007.
Non-Interest Expense
Non-interest expense decreased $2.9 million to $4.9 million for the three months
ended September 30, 2007 compared to $7.8 million for the three months ended
September 30, 2006. The decrease was primarily the result of funding the Roma
Bank Community Foundation with a contribution of $3.3 million in Company stock
and $.2 million in cash in the quarter ending September 30, 2006. Salaries and
employee benefits increased $.4 million to $3.0 million for the three months
ended September 30, 2007 compared to $2.6 million for the same period in 2006.
This increase reflects an increase of approximately $50 thousand to staff the
Plumsted Township branch which opened in January of 2007; $86 thousand in
consulting fees for RomAsia Bank; and annual salary adjustments of approximately
4%. In the aggregate, all other non-interest expenses, after adjusting 2006 for
the $3.5 million contribution, increased $542 thousand. This increase was
primarily due to approximately $146 thousand in organizational costs for RomAsia
Bank.
Income Taxes
Income tax expense was $1.1 million for the three months ended September 30,
2007, compared to a tax benefit of $133 thousand for the three months ended
September 30, 2006. The income tax expense for the third quarter of 2007
represented an effective rate of 37.4%.
Comparison of Operating Results for the Nine Months Ended September 30, 2007 and
2006
General
Net income increased $2.6 million to $5.6 million for the nine months ended
September 30, 2007 compared to $3.1 million for the nine months ended September
30, 2006. The increase was primarily due to the effect on net income in the nine
months ended September 30, 2006 of the contribution to the Roma Bank Community
Foundation. Net interest income increased $2.5 million for the nine months ended
September 30, 2007 as compared to the same period in 2006. Non-interest expense
increased $1.9 million after 2006 non-interest expense for the $3.5million
contribution to the Foundation.
Interest Income
Interest income increased $4.3 million to $34.2 million for the nine months
ended September 30, 2007 compared to $29.9 million for the nine months ended
September 30, 2006. Interest income from loans increased $2.4 million to
15
$20.5 million for the nine months ended September 30, 2007. Interest income from
residential mortgages increased $.6 million and interest income from equity
loans increased $.5 million. The weighted average interest rates for residential
mortgage and equity loans at September 30, 2007 were 5.75% and 6.26%,
respectively, compared to 5.69% and 6.18%, respectively, at the same period in
2006. Interest income from commercial and multi-family mortgage loans and
commercial loans increased in the aggregate $1.3 million period to period. The
weighted average interest rate for commercial and multi-family mortgage loans
and commercial loans in the aggregate, were 7.57% at September 30, 2007 and
7.60% at September 30, 2006.
Interest income from mortgage-backed securities held to maturity decreased $119
thousand for the comparable nine month periods in 2007 and 2006. Interest income
from investments held to maturity increased $1.2 million to $5.9 million for the
nine months ended September 30, 2007 compared to $4.7 million for the same
period in 2006. Interest rates on securities that matured in the mortgage-backed
security and investments held to maturity category generally were below
prevailing rates, and to the extent that cash flows from maturities were
reinvested, they were able to be reinvested at more favorable rates. Interest
income on securities available for sale changed minimally from period to period.
Interest income on other interest earning assets increased $.8 million to $2.1
million for the nine months ended September 30, 2007. This increase was
primarily due to a higher level of average overnight and money market funds
during the current nine month period compared to the same period in 2006.
Interest Expense
Interest expense increased $1.8 million to $12.9 million for the nine months
ended September 30, 2007 compared to $11.1 million for the comparable period in
2006. The increase was primarily due to a $1.9 million increase in interest paid
on deposits, reflecting an increase in the average balance of deposits and
higher interest rates. The weighted average interest rate on deposits at
September 30, 2007 was 2.79% compared to 2.43% at September 30, 2006. Interest
expense on borrowed money decreased $155 thousand for the nine months ended
September 30, 2007 compared to the same period in 2006 reflecting a reduction in
the average outstanding balance in the liability to the FHLBNY.
Provisions for Loan Losses
The loan loss provision for the nine months ended September 30, 2007 was $367
thousand compared to $233 for the same period in 2006. The increase is
reflective of the growth of $35.8 million in the total loan portfolio between
September 30, 2006 and September 30, 2007. The ratio of non-performing loans to
total loans increased .32% to 1.17% at September 30, 2007 compared to .85% at
September 30, 2006. Commercial real estate loans comprised approximately 93% of
the total non-performing loans. Of the $5.3 million of loans categorized as
non-performing at September 30, 2007, $3.9 million represent commercial
construction loans at September 30, 2007 that have matured and have not yet been
renewed. The obligor on these loans has commitments from other lending
institutions, but as of September 30, 2007 had not yet closed. Non-performing
commercial real estate loans also contains a loan for $.6 million to a
non-profit organization, and a loan for $.4 million on a commercial rental
property. The Bank believes it has sufficient collateral securing all of its
commercial non-performing loans.
Non-interest Income
Non-interest income increased $.3 million to $2.9 million for the nine months
ended September 30, 2007 compared to $2.6 million for the nine months ended
September 30, 2006. The increase was chiefly derived from fees and service
charges on deposits which increased $.3 million, primarily from fees related to
overdraft protection which was instituted in August 2006.
Non-interest Expense
Non-interest expense decreased $1.6 million to $15.0 million for the nine months
ended September 30, 2007 compared to $16.6 million for the nine months ended
September 30, 2006. If non-interest expense in 2006 was adjusted for the
non-recurring $3.5 million contribution to the Roma Bank Community Foundation,
non-interest expense increased $1.9 million for the comparable period in 2007.
Salaries and employee benefits increased $1.3 million to $8.8 million for the
nine months ended September 30, 2007 compared to the same period in 2006 versus
the full period for 2007. This increase represents an increase of $.4 million in
ESOP expense as the plan was only in effect for three of the nine months in
2006; $.2 million in staffing expense for our Plumsted branch which opened in
January of 2007, $86 thousand in costs for RomAsia Bank; and annual salary
adjustments. Net occupancy expense increased $166 thousand from period to
period, with approximately 50% of that increase related to the opening of the
Plumsted branch in January 2007. The remaining portion of the increase is
primarily due to higher snow and ice removal costs in March 2007 and general
increases in overall costs and expenses. In the aggregate all other non-interest
expenses increased $450 thousand for the nine months ended September 30, 2007
compared to the same period in 2006. This increase was
16
primarily due to increases in accounting and consulting fees related to
compliance with Sarbanes-Oxley, higher insurance premiums, costs for printing
and mailing the Company's first annual report and approximately $146 thousand in
organization costs for RomAsia Bank.
Income Taxes
Income tax expense increased $1.7 million to $3.1 million for the nine months
ended September 30, 2007 compared to $1.4 million for the nine months ended
September 30, 2006. Income tax expense represented 35.7% and 31.8% for the
periods ended September 30, 2007 and 2006, respectively. The increase in
effective tax rate in the current period is the result of a smaller portion of
our income being non-taxable.
Critical Accounting Policies
Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and could potentially result in
materially different results under different assumptions and conditions. We
believe that the most critical accounting policy upon which our financial
condition and results of operation depend, and which involves the most complex
subjective decisions or assessments, is the allowance for loan losses.
The allowance for loan losses is the amount estimated by management as necessary
to cover credit losses in the loan portfolio both probable and reasonably
estimable at the balance sheet date. The allowance is established through the
provision for loan losses which is charged against income. In determining the
allowance for loan losses, management makes significant estimates and has
identified this policy as one of our most critical. The methodology for
determining the allowance for loan losses is considered a critical accounting
policy by management due to the high degree of judgment involved, the
subjectivity of the assumptions utilized and the potential for changes in the
economic environment that could result in changes to the amount of the recorded
allowance for loan losses.
As a substantial amount of our loan portfolio is collateralized by real estate,
appraisals of the underlying value of property securing loans are critical in
determining the amount of the allowance required for specific loans. Assumptions
for appraisals are instrumental in determining the value of properties. Overly
optimistic assumptions or negative changes to assumptions could significantly
affect the valuation of a property securing a loan and the related allowance
determined. The assumptions supporting such appraisals are carefully reviewed by
management to determine that the resulting values reasonably reflect amounts
realizable on the related loans.
Management performs a monthly evaluation of the adequacy of the allowance for
loan losses. We consider a variety of factors in establishing this estimate
including, but not limited to, current economic conditions, delinquency
statistics, geographic and industry concentrations, the adequacy of the
underlying collateral, the financial strength of the borrower, results of
internal loan reviews and other relevant factors. This evaluation is inherently
subjective as it requires material estimates by management that may be
susceptible to significant change based on changes in economic and real estate
market conditions.
The evaluation has a specific and general component. The specific component
relates to loans that are delinquent or otherwise identified as problem loans
through the application of our loan review process. All such loans are evaluated
individually, with principal consideration given to the value of the collateral
securing the loan. Specific allowances are established as required by this
analysis. The general component is determined by segregating the remaining loans
by type of loan. We also analyze historical loss experience, delinquency trends,
general economic conditions and geographic and industry concentrations.
Actual loan losses may be significantly more than the allowances we have
established which could have a material negative effect on our financial
results.
The Company uses the asset and liability method of accounting for deferred
income taxes. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. If
current available information raises doubt as to the realization of the deferred
tax assets, a valuation allowance is established. The Company considers the
determination of this valuation allowance to be a critical accounting policy
because of the need to exercise significant judgment including projections of
future taxable income. These judgments and estimates are reviewed on a continual
basis as regulatory and business factors change. A valuation allowance for
deferred tax assets may be required if the amount of taxes recoverable through
loss carry-back declines, or if the Company projects lower levels of future
taxable income. Such a valuation allowance would be established through a charge
to income tax expense, which would adversely affect the Company's operating
results.
17
New Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes--an
interpretation of FASB Statement No. 109" (FIN 48), which clarifies the
accounting for uncertainty in tax positions. This Interpretation requires that
companies recognize in their financial statements the impact of a tax position,
if that position is more likely than not of being sustained on audit, based on
the technical merits of the position. The provisions of FIN 48 are effective for
fiscal years beginning after December 15, 2006, with the cumulative effect of
the change in accounting principle recorded as an adjustment to opening retained
earnings. The adoption of FIN 48 did not have a material effect on the
consolidated financial statements.
In September 2006, the FASB issued Statement No. 157, Fair Value Measurements,
which defines fair value, establishes a framework for measuring fair value under
GAAP, and expands disclosures about fair value measurements. FASB Statement No.
157 applies to other accounting pronouncements that require or permit fair value
measurements. The new guidance is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and for interim periods within
those fiscal years. We are currently evaluating the potential impact, if any, of
the adoption of FASB Statement No. 157 on our consolidated financial position,
results of operations and cash flows.
In September of 2006, the FASB issued Statement No. 158, "Employers' Accounting
for Defined Benefit Pension and other Postretirement Plans" which required that
an employer that sponsors one more single-employer defined benefit plans to
recognize the funded status of a benefit plan, measured as the difference
between plan assets at fair value and the benefit obligation in the statement of
financial position The statement also required the recognition as a component of
other comprehensive income, net of tax, the gains or losses and prior service
costs or credits as they arise. The statement is effective for fiscal years
ending after December 15, 2006. Accordingly, FASB 158 adjustments are reflected
in these consolidated financial statements.
In February of 2007, the FASB issued Statement No. 159, "The Fair Value Option
for Financial Assets and Financial Liabilities-Including an amendment of FASB
Statement No. 115." Statement No. 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. Unrealized gains
and losses on items for which the fair value option has been elected will be
recognized in earnings at each subsequent reporting date. Statement No. 159 is
effective for our Company on January 1, 2008. The Company is evaluating the
impact that the adoption of Statement No. 159 will have on our consolidated
financial statements.
In March 2007, the FASB ratified EITF Issue No. 06-11, "Accounting for Income
Tax Benefits of Dividends on Share-Based Payment Awards." EITF 06-11 requires
companies to recognize the income tax benefit realized from dividends or
dividend equivalents that are charged to retained earnings and paid to employees
for nonvested equity-classified employee share-based payment awards as an
increase to additional paid-in capital. EITF 06-11 is effective for fiscal years
beginning after September 15, 2007. The Company does not expect EITF 06-11 will
have a material impact on its financial position, results of operations or cash
flows.
In March 2007, the FASB ratified Emerging Issues Task Force Issue No. 06-10
"Accounting for Collateral Assignment Split-Dollar Life Insurance Agreements"
(EITF 06-10). EITF 06-10 provides guidance for determining a liability for the
postretirement benefit obligation as well as recognition and measurement of the
associated asset on the basis of the terms of the collateral assignment
agreement. EITF 06-10 is effective for fiscal years beginning after December 15,
2007. The Company is currently assessing the impact of EITF 06-10 on its
consolidated financial position and results of operations.
On September 7, 2006, the Task Force reached a conclusion on EITF Issue No.
06-5, "Accounting for Purchases of Life Insurance - Determining the Amount That
Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4,
Accounting for Purchases of Life Insurance" ("EITF 06-5"). The scope of EITF
06-5 consists of six separate issues relating to accounting for life insurance
policies purchased by entities protecting against the loss of "key persons." The
six issues are clarifications of previously issued guidance on FASB Technical
Bulletin No. 85-4. EITF 06-5 is effective for fiscal years beginning after
December 15, 2006. The adoption of EITF Issue No. 06-05 did not have a material
effect on the consolidated financial statements.
In May 2007, the FASB issued FASB FSP FIN 48-1 "Definition of Settlement in FASB
Interpretation No. 48". FSP FIN 48-1 provides guidance on how to determine
whether a tax position is effectively settled for the purpose of recognizing
previously unrecognized tax benefits. FSP FIN 48-1 is effective retroactive to
January 1, 2007. The adoption of FSB FUB 48-1 did not have a material impact on
the consolidated financial position, results of operations or cash flows.
18
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk
Asset and Liability Management
The majority of the Company's assets and liabilities are monetary in nature.
Consequently, the Company's most significant form of market risk is interest
rate risk. The Company's assets, consisting primarily of mortgage loans, have
generally longer maturities than the Company's liabilities, consisting primarily
of short-term deposits. As a result, a principal part of the Company's business
strategy is to manage interest rate risk and reduce the exposure of its net
interest income to changes in market interest rates. Management of the Company
does not believe that there has been a material adverse change in market risk
during the three months ended September 30, 2007.
Net Portfolio Value
The Company's interest rate sensitivity is monitored by management through the
use of the OTS model which estimates the change in the Company's net portfolio
value ("NPV") over a range of interest rate scenarios. NPV is the present value
of expected cash flows from assets, liabilities, and off-balance sheet
contracts. The NPV ratio, under any interest rate scenario, is defined as the
NPV in the scenario divided by the market value of assets in the same scenario.
The OTS produces its analysis based upon data submitted on the Company's
quarterly Thrift Financial Reports. The following table sets forth the Company's
NPV as of June 30, 2007, the most recent date the NPV was calculated by the OTS
(dollars in thousands):
NPV as Percent of Portfolio
NPV Value of Assets
Change In ----------------------------------------------- -------------------------------
Interest rates Change in
In Basic Points Dollar Percent NPV Basis
(Rate Shock) Amount Change Change Ratio Points
------------------ ------------- ------------ ------------ ------------- --------------
+300bp $ 164,265 $ (42,956) -21% 20.18% -371bp
+200bp 178,887 (28,334) -14% 21.50% -239bp
+100bp 193,357 (13,864) -7% 22.75% -114bp
0bp 207,221 - 0% 23.89% -
-100bp 220,135 12,914 +6% 24.91% +101bp
-200bp 229,358 22,137 +11% 25.57% +167bp
Management of the Company believes that there has not been a material adverse
change in the market risk during the three months ended September 30, 2007.
ITEM 4 - Controls and Procedures
An evaluation was performed under the supervision, and with the participation of
the Company's management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures (as defined in Rule l3a-l5(e)
promulgated under the Securities Exchange Act of 1934, as amended) as of
September 30, 2007. Based on such evaluation, the Company's Chief Executive
Officer and Chief Financial Officer have concluded that the Company's disclosure
controls and procedures are effective as of September 30, 2007.
No change in the Company's internal controls over financial reporting (as
defined in Rule l3a-l5(f) promulgated under the Securities Exchange Act of 1934,
as amended) occurred during the most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
19
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
There were no material pending legal proceedings at September 30, 2007
to which the Company or its subsidiaries is a party other that
ordinary routine litigation incidental to their respective businesses.
ITEM 1A - Risk Factors
Management does not believe there were any material changes to the
risk factors presented in the Company's Form 10-K for the year ended
December 31, 2006 during the most recent quarter.
ITEM 2 - Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table reports information regarding repurchases of the
Company's common stock during the quarter ended September 30, 2007.
Total Number of Maximum
Total Shares Purchased Numbr of Shares
Number Average As Part of That May Yet Be
of Shares Price Paid Publicly Purchased Under
Period Repurchased Per Share Announced Plans the Plan
------------------------ ------------ ---------- ----------------- ----------------
July 1-31, 2007 - - - -
August 1-31, 2007 981,956 $17.01 981,956 -
September 1-30, 2007 - - - -
------------ ---------- ----------------- ----------------
Total 981,956 $17.01 981,956 -
============ ========== ================= ================
On August 9, 2007, the Company announced a ten percent stock repurchase
plan, equivalent to 981,956 shares, in the open market, based on stock
availability, price and the Company's financial performance. The
repurchase was completed August 27, 2007. A new stock repurchase plan,
for five percent of the currently outstanding shares was announced on
October 24, 2007 and has commenced repurchasing.
ITEM 3 - Defaults Upon Senior Securities
None
ITEM 4 - Submission of Matters to a Vote of Security Holders
None
ITEM 5 - Other Information
None
ITEM 6 - Exhibits
31 Certifications of the Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13a-14(a)
32 Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
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.
ROMA FINANCIAL CORPORATION
(Registrant)
Date: November 2, 2007 /s/Peter A. Inverso
-------------------------------------
Peter A. Inverso
President and Chief Executive Officer
Date: November 2, 2007 /s/Sharon L. Lamont
-------------------------------------
Sharon L. Lamont
Chief Financial Officer
21