SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
---------
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--------- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2006
---------------------------------------------
OR
---------
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
--------------------------------------------------------------------------------
(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 [ ] No [X]
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 [ ] Non-accelerated filer [X]
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, August 1, 2006:
$0.10 par value common stock - 32,731,875 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 June 30, 2006 and December 31, 2005 (Unaudited)
Consolidated Statements of Income for the Three and Six Months Ended 3
June 30, 2006 and 2005 (Unaudited)
Consolidated Statements of Cash Flows for the Six Months 4
Ended June 30, 2006 and 2005 (Unaudited)
Notes to Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of 11
Financial Condition and Results of Operations
Item 3: Quantitative and Qualitative Disclosure About Market Risk 15
Item 4: Controls and Procedures 15
PART II - OTHER INFORMATION 16
SIGNATURES 17
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
(Unaudited)
June 30, December 31,
2006 2005
--------- ---------
(In Thousands)
Assets
Cash and amounts due from depository institutions $ 5,040 $ 5,745
Interest-bearing deposits in other banks 98,722 22,324
Money market funds 40,021 20
--------- ---------
Cash and Cash Equivalents 143,783 28,089
Securities available for sale 16,983 15,514
Investment securities held to maturity 176,592 173,078
Mortgage-backed securities held to maturity 151,446 150,101
Loans receivable, net of allowance for loan losses $1,014
and $878, respectively 406,342 378,708
Premises and equipment 28,775 28,679
Federal Home Loan Bank of New York stock 1,442 1,387
Interest receivable 4,520 3,798
Bank owned life insurance 15,903 15,640
Other assets 2,818 2,766
--------- ---------
Total Assets $ 948,604 $ 797,760
========= =========
Liabilities and Stockholder's Equity
Liabilities
Deposits $ 792,694 $ 643,813
Federal Home Loan Bank of New York advances 8,793 9,702
Advance payments by borrowers for taxes and insurance 2,293 2,063
Other liabilities 3,326 3,524
--------- ---------
Total Liabilities 807,106 659,102
--------- ---------
Stockholder's Equity
Common stock,$0.10 par value, 45,000,000 authorized; 10,000 issued and outstanding 1 1
Paid-in capital 799 799
Retained earnings - substantially restricted 140,769 137,820
Accumulated other comprehensive (loss) income -
unrealized (loss) gain on securities available for sale, net (71) 38
--------- ---------
Total Stockholder's Equity 141,498 138,658
--------- ---------
Total Liabilities and Stockholder's Equity $ 948,604 $ 797,760
========= =========
See notes to consolidated financial statements
2
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
-------- -------- -------- --------
(In thousands) (In thousands)
Interest Income
Loans $ 6,023 $ 4,928 $ 11,707 $ 9,848
Mortgage-backed securities held to maturity 1,755 1,810 3,522 3,442
Investment securities held to maturity 1,561 1,418 3,078 2,706
Securities available for sale 130 125 255 251
Other interest-earning assets 402 158 620 300
-------- -------- -------- --------
Total Interest Income 9,871 8,439 19,182 16,547
-------- -------- -------- --------
Interest Expense
Deposits 3,614 2,564 7,059 4,654
Borrowings 191 - 297 -
-------- -------- -------- --------
Total Interest Expense 3,805 2,564 7,356 4,654
-------- -------- -------- --------
Net Interest Income 6,066 5,875 11,826 11,893
Provision for (recovery of) loan losses 79 (87) 136 (103)
-------- -------- -------- --------
Net Interest Income after Provision for (Recovery of)
Loan Losses 5,987 5,962 11,690 11,996
-------- -------- -------- --------
Non-Interest Income
Commissions on sales of title policies 415 264 647 264
Fees and service charges on deposits 99 91 190 173
Fees and service charges on loans 60 43 107 79
Net gain from sale of mortgage loans - 3 1 13
Other 355 256 612 567
-------- -------- -------- --------
Total Non-Interest Income 929 657 1,557 1,096
-------- -------- -------- --------
Non-Interest Expense
Salaries and employee benefits 2,494 2,088 4,935 4,057
Net occupancy expense 390 231 799 473
Equipment 403 305 762 564
Data processing fees 357 322 687 666
Advertising 217 197 427 357
Federal insurance premium 20 20 41 40
Other 588 458 1,092 920
-------- -------- -------- --------
Total Non-Interest Expense 4,469 3,621 8,743 7,077
-------- -------- -------- --------
Income before Income Taxes 2,447 2,998 4,504 6,015
Income Taxes 858 996 1,555 2,046
-------- -------- -------- --------
Net Income $ 1,589 $ 2,002 $ 2,949 $ 3,969
======== ======== ======== ========
See notes to consolidated financial statements.
3
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
Six Months Ended
June 30,
----------------------
2006 2005
--------- ---------
(In thousands)
Cash Flows from Operating Activities
Net income $ 2,949 $ 3,969
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 582 299
Amortization of premiums and accretion of discounts on securities - 40
Accretion of deferred loan fees and discounts (39) (152)
Net gain on sale of mortgage loans originated for sale (1) (13)
Mortgage loans originated for sale (149) (923)
Proceeds from sales of mortgage loans originated for sale 150 936
Provision for (recovery of) loan losses 136 (103)
(Increase) in interest receivable (722) (341)
(Increase) in cash surrender value of bank owned life insurance (264) (259)
(Increase) in other assets (53) (42)
Increase (decrease) in interest payable (23) 144
Increase (decrease) in other liabilities (97) 1,233
--------- ---------
Net Cash Provided by Operating Activities 2,469 4,789
--------- ---------
Cash Flows from Investing Activities
Proceeds from maturities and calls of securities available for sale 49 8
Purchases of securities available for sale (1,708) (50)
Proceeds from maturities and calls of investment securities held to
maturity 5,000 18,060
Purchases of investment securities held to maturity (8,500) (28,000)
Principal repayments on mortgage-backed securities held to maturity 12,139 12,812
Purchases of mortgage-backed securities held to maturity (13,495) (30,746)
Net increase in loans receivable (27,729) (10,333)
Additions to premises and equipment (678) (5,223)
Purchase of Federal Home Loan Bank of New York stock (56) (182)
--------- ---------
Net Cash Used in Investing Activities (34,978) (43,654)
--------- ---------
Cash Flows from Financing Activities
Net increase in deposits 148,882 41,443
Increase in advance payments by borrowers for taxes and insurance 230 703
Federal Home Loan Bank of New York advances 158,000 -
Repayments of Federal Home Loan Bank of New York advances (158,909) -
Initial capitalization of mutual holding company - (200)
--------- ---------
Net Cash Provided by Financing Activities 148,203 41,946
--------- ---------
Net Increase in Cash and Cash Equivalents 115,694 3,081
Cash and Cash Equivalents - Beginning 28,089 19,944
--------- ---------
Cash and Cash Equivalents - Ending $ 143,783 $ 23,025
========= =========
See notes to consolidated financial statements.
4
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont'd)
----------------------------------------------
(Unaudited)
Six Months Ended
June 30,
----------------------
2006 2005
--------- ---------
(In thousands)
Supplementary Cash Flows Information
Income taxes paid, net $ 1,274 $ 2,072
========= =========
Interest paid $ 7,379 $ 4,509
========= =========
See notes to consolidated financial statements.
5
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - ORGANIZATION
Roma Financial Corporation 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. Roma Financial
Corporation'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. At June 30, 2006, all of the outstanding stock of Roma Bank was held
by Roma Financial Corporation and all of the outstanding stock of Roma Financial
Corporation was held by Roma Financial Corporation, MHC.
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 Roma Financial Corporation.
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 Roma Financial
Corporation 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 seven branch offices located in Mercer
and Burlington 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 Roma Financial Corporation (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 at a cost of $8.1 million on July 11, 2006.
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."). 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, 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
six month periods ended June 30, 2006 and 2005. The results of operations for
the three and six month periods ended June 30, 2006 and 2005 are not necessarily
indicative of the results which may be expected for an entire fiscal year or
other interim periods.
The data in the consolidated statements of condition for December 31, 2005 was
derived from the Company's Registration Statement on Form S-1 (File No.
333-132415), as amended, filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended. That data, along with the
interim financial
6
information presented in the consolidated statements of financial condition,
income and cash flows should be read in conjunction with the 2005 consolidated
financial statements as presented in the Form S-1.
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.
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 chance
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 to
the provisions to 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 on the
Company's consolidated financial position or results of operations.
NOTE D - EARNINGS PER SHARE
Earnings per share was not meaningful for any of the periods shown as the
Company had no publicly-held shares during the periods.
NOTE E - STOCK BASED COMPENSATION
The Company had no stock-based compensation as of or prior to June 30, 2006.
NOTE F - INVESTMENT SECURITIES
The following tables set forth the composition of our securities portfolio as of
June 30, 2006 and December 31, 2005 (in thousands):
June 30, 2006 December 31, 2005
-------------------- --------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---------- -------- ---------- --------
Available for sale:
Mortgage-backed securities $ 1,734 $ 1,730 $ 121 $ 130
Obligations of state and local political
subdivisions 10,007 10,122 10,010 10,219
US Government Obligations 2,995 2,949 3,000 2,961
Equity Shares 50 50 50 50
Mutual Fund Shares 2,317 2,132 2,266 2,154
------- ------- ------- -------
Total $17,103 $16,983 $15,447 $15,514
======= ======= ======= =======
7
June 30, 2006 December 31, 2005
-------------------- --------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---------- -------- ---------- --------
Investments held to maturity:
US Government Obligations $175,272 $170,701 $172,263 $168,647
Obligations of state and local political
subdivisions 1,320 1,315 815 837
-------- -------- -------- --------
Total $176,592 $172,016 $173,078 $169,484
======== ======== ======== ========
June 30, 2006 December 31, 2005
-------------------- --------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---------- -------- ---------- --------
Mortgage-backed securities held to maturity:
GNMA $ 6,508 $ 6,433 $ 7,454 $ 7,450
FHLMC 80,461 77,414 80,155 78,972
FNMA 58,762 56,846 58,389 57,800
CMO's 5,715 5,470 4,103 3,889
-------- -------- -------- --------
Total $151,446 $146,163 $150,101 $148,111
======== ======== ======== ========
Securities held as available for sale have been adjusted to market value at June
30, 2006 and December 31, 2005. Investments held to maturity and mortgage-backed
securities are recorded at amortized cost. The decline in market values of these
investments is 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 June 30, 2006 and December 31, 2005 were comprised of
the following (in thousands):
June 30, December 31,
2006 2005
-------- --------
Real estate mortgage loans:
Conventional 1-4 family $213,546 $191,634
Commercial and multi-family 61,503 53,614
-------- --------
275,049 245,248
-------- --------
Construction 10,390 20,020
-------- --------
Consumer:
Equity and second mortgages 123,428 118,318
Other 1,096 1,577
-------- --------
124,524 119,895
-------- --------
Commercial 3,025 2,351
-------- --------
Total loans 412,988 387,514
-------- --------
Less:
Allowance for loan losses 1,014 878
Deferred loan fees 243 269
Loans in process 5,389 7,659
-------- --------
6,646 8,806
-------- --------
Total loans receivable, net $406,342 $378,708
======== ========
8
NOTE H - DEPOSITS
A summary of deposits by type of account are summarized as follows (in
thousands):
June 30, 2006 December 31, 2005
--------------------- ---------------------
Weighted Weighted
Avg. Int. Avg. Int.
Amount Rate Amount Rate
------ ---- ------ ----
Demand:
Non-interest bearing checking $ 25,564 0.00% $ 20,661 0.00%
Interest bearing checking 100,032 0.53% 100,721 0.54%
-------- ---- -------- ----
125,596 0.42% 121,382 0.45%
Savings and club 353,035 0.54% 208,109 0.93%
Certificates of deposit 314,063 3.86% 314,322 3.48%
-------- ---- -------- ----
Total $792,694 1.84% $643,813 2.08%
======== ==== ======== ====
At June 30, 2006 the Company has contractual obligations for certificates of
deposit that mature as follows (in thousands):
One year or less $223,102
After one to three years 52,689
After three years 38,272
--------
$314,063
========
NOTE I - PREMISES AND EQUIPMENT
Premises and equipment consisted of the following (in thousands):
Estimated
Useful June 30, December 31,
Lives 2006 2005
--------- -------- ------------
Land -future development - $ 1,054 $ 1,054
Construction in progress - 712 569
Land and land improvements - 5,271 5,271
Buildings and improvements 20-50 yrs 22,381 22,234
Furnishings and equipment 3-10 yrs. 6,719 6,331
------- -------
Total premises and equipment 36,137 35,459
Accumulated depreciation 7,362 6,780
------- -------
Total $28,775 $28,679
======= =======
9
NOTE J - FEDERAL HOME LOAN BANK ADVANCES
At June 30, 2006 and December 31, 2005, the Bank had outstanding Federal Home
Bank of New York advances as follows (in thousands):
June 30, 2006 December 31, 2005
----------------- -----------------
Interest Interest
Amount Rate Amount Rate
------ ---- ------ ----
Maturing:
September 15, 2010 $8,793 4.49% $9,702 4.49%
====== ==== ====== ====
A schedule of principal payments is as follows (in thousands):
One year or less $1,839
More than one year through three years 3,934
More than three years through five years 3,020
------
$8,793
======
NOTE K - RETIREMENT PLANS
Components of net periodic pension cost is as follows ( in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------
2006 2005 2006 2005
----- ----- ----- -----
Service cost $ 86 $ 70 $ 172 $ 140
Interest cost 112 103 224 206
Expected return on plan assets (149) (127) (298) (254)
Transition (asset)/obligation - 6 - 12
Amortization of unrecognized net loss 17 8 34 16
Unrecognized past service liability 15 14 30 28
----- ----- ----- -----
Net periodic benefit expense $ 81 $ 74 $ 162 148
===== ===== ===== =====
10
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 mortgage loans and lines of
credit. The outstanding loans commitments at June 30, 2006 were as follows (in
thousands):
June 30,
2006
-------
Mortgage loans $ 9,970
Commercial lines of credit 6,310
Other unused lines of credit 32,684
Commercial letters of credit 969
-------
$49,933
=======
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.
Any of the forward-looking statements that we make in this report and in other
public statements we make may turn out to be wrong because of inaccurate
assumptions we might make, because of the factors illustrated above or because
of other factors that we cannot foresee. Consequently, no forward-looking
statement can be guaranteed.
Comparison of Financial Condition at June 30, 2006 and December 31, 2005
Total assets increased by $150.8 million to $948.6 million at June 30, 2006
compared to $797.8 million at December 31, 2005. The increase was primarily
caused by an infusion of funds generated by subscriptions to purchase shares of
the Company's common stock which increased cash and cash equivalents by $115.7
million. Additionally, net loans increased by $27.6 million, and securities,
both available for sale and held to maturity, increased by $6.3 million.
11
Deposits
Total deposits increased by $148.9 million or 23.1% to $792.7 million at June
30, 2006 compared to $643.8 million at December 31, 2005. The increase was
primarily the result of temporary deposits of $146.6 million from subscribers to
purchase shares in the Company's stock offering. At the closing of the offering
on July 11, 2006 a portion of the subscription funds were moved out of deposits
and became part of stockholders' equity, and excess subscriptions received were
returned to subscribers. From December 31, 2005 to June 30, 2006, checking
accounts increased by $4.2 million to $125.6 million and certificates of
deposits and other savings accounts decreased by $1.9 million after adjusting
for the $146.6 million in deposits related to the stock offering.
Borrowed Money
The $.9 million reduction in borrowed money during the six months ended June 30,
2006 is due to regularly scheduled principal payments. At June 30, 2006, the
Bank's outstanding Federal Home Loan Bank advances totaled $8.8 million compared
to $9.7 million at December 31, 2005.
Loans
Net loans increased by $27.6 million or 7.3% to $406.3 million at June 30, 2006
from $378.7 million at December 31, 2005. The increase was primarily in one to
four family mortgage loans, which benefited from a special promotion during the
month of March 2006. This category increased by $21.9 million to $213.5 million
at June 30, 2006 compared to $191.6 million at December 31, 2005. Home equity
loans increased by $5.1 million over December 31, 2005 to reach $123.4 million
at June 30, 2006. Commercial and multi-family real estate, commercial and
construction loans decreased, on a combined basis $.1 million to $74.9 million
at June 30, 2006.
Investments (Including Mortgage-Backed Securities)
The investment portfolio increased by $6.3 million to $345.0 million at June 30,
2006 compared to $338.7 million at December 31, 2005. Funds in excess of those
needed for loans were principally deployed into short term agency and municipal
securities, which increased by $3.5 million to $176.6 million at June 30, 2006
compared to $173.1 million at December 31, 2005. Mortgage-backed securities
increased by $1.3 million to $151.4 million at June 30, 2006 compared to $150.1
million at December 31, 2005. Securities classified as available for sale
increased by $1.5 million to $17.0 million at June 30, 2006 compared to $15.5
million at December 31, 2005. The continuation of the flat yield curve continued
to make short-term investments a more attractive option during the period.
Other Assets
All other categories of assets remained relatively stable with an increase of
$1.2 million from December 31, 2005 to June 30, 2006.
Comparison of Operating Results for the Three Months Ended June 30, 2006 and
2005
General
During the current quarter, the flat yield curve continued to negatively impact
the Bank's margins, putting a strain on net interest income and contributing to
a decline in net income in the second quarter of 2006 compared to the same
quarter in 2005. Net income for the quarter ended June 30, 2006 was $l.6
million, representing a 20.6% decrease from net income of $2.0 million for the
quarter ended June 30, 2005. During the second quarter of 2005, the yield curve
was more positively sloped; providing a more favorable spread between longer
term lending and shorter term deposit rates. Additionally, non-interest expense
increased $ .8 million due to higher occupancy and staff costs which contributed
to the decline in net income between periods.
Interest Income
Interest income increased by $1.4 million to $9.9 million for the three months
ended June 30, 2006 compared to $8.4 million for the three months ended June 30,
2005. Interest income from equity loans increased by $.5 million to $1.9
million. The increase was primarily due to growth in the equity loan portfolio;
the balance of equity loans as of June 30, 2006 was $22.1 million higher than at
June 30, 2005. Interest income from commercial loans increased by $.6 million to
$1.3 million. The increase was primarily due to an increase in the commercial
loan portfolio of $24.5 million between June 30, 2005 and June 30, 2006.
Interest income from mortgage loans remained stable during the comparable
period. Interest income from other interest earning assets increased by $.2
million due primarily to the increase in overnight funds related to the stock
offering. The average portfolio yields for the three months ended June 30, 2006
on loans and investments were 6.07% and 4.40% respectively, compared to 5.75%
and 4.05% for the same period in 2005.
12
Interest Expense
Interest expense increased by $1.2 million to $3.8 million for the three months
ended June 30, 2006 compared to $2.6 million for the three months ended June 30,
2005. This increase is due to a combination of a higher level of deposits and
higher prevailing interest rates. Total deposits at June 30, 2005 were $617.8
million as compared to $792.7 million at June 30, 2006. Deposits as of June 30,
2006 included $146.6 million of temporary deposits received for subscription
orders in the stock offering. The Bank also borrowed funds from the Federal Home
Loan Bank in September of 2005 as a five year fixed rate advance. Additionally,
during the current quarter the Company borrowed on various occasions overnight
funds from the Federal Home Loan Bank. The increase in borrowings resulted in a
$.2 million increase in interest expense on borrowings as compared to second
quarter 2005.
Provision for Loan Losses
Loan provisions were nearly $.1 million during the current quarter compared to a
negative provision (recovery) of nearly $.1 million in the comparable quarter of
2005. The increase is reflective of the significant growth in the loan portfolio
and a 25 basis point increase, effective January 2006, of the provision for
secured commercial loan originations. The negative provision for loan losses for
the quarter ended June 30, 2005 was due to an improvement in the classification
of loans which permitted the partial recovery of previous provisions.
Non-Interest Income
Non-interest income increased by $272 thousand to $929 thousand for the three
months ended June 30, 2006 compared to $659 thousand for the three months ended
June 30, 2005. The increase was primarily due to an increase in commissions on
sales of title insurance policies of $151 thousand to $415 thousand for second
quarter 2006 compared to $264 thousand for second quarter 2005.
Non-Interest Expense
Non-interest expense increased by $.8 million to $4.5 million for the three
months ended June 30, 2006 compared to $3.6 million for the three months ended
June 30, 2005. Salaries and related employee benefits increased by $.4 million
to $2.5 million compared to $2.1 million. Net occupancy expense increased $.2
million to $.4 million compared to $.2 million. The increases in compensation
and occupancy expense were primarily related to the opening of the Company's
eighth branch and corporate headquarters in September of 2005.
Income Taxes
Income tax expense for the three months ended June 30, 2006 was $.9 million
compared to $1.0 million for the same period in 2005. Income tax expense for the
three months ended June 30, 2006 and June 30, 2005 represented 35.1% and 33.2%
of net income before income taxes, respectively.
Comparison of Operating Results for the Six Months Ended June 30, 2006 and 2005
General
During the six months ended June 30, 2006 a flat yield curve continued to
negatively impact the Company's margins, putting a strain on net interest income
and contributing to a decline in net income compared to the same period in 2005.
Net income decreased by $1.1 million to $2.9 million for the six months ended
June 30, 2006 from $4.0 million for the same period in 2005. The decrease was
primarily the result of an increase of $1.7 million in non-interest expense. Net
interest income before the provision for loan losses decreased by $.1 million to
$11.8 million from $11.9 million. An increase of $2.6 million in interest income
was offset by a $2.7 million increase in interest expense. The year to date
interest rate spread decreased 34 basis points between periods.
13
Interest Income
Interest income increased by $2.6 million to $19.2 million in the current six
month period compared to $16.6 million in the same period last year. Interest
income from equity loans increased by $1.0 million to $3.6 million compared to
$2.5 million. This increase was primarily due to a $22.1 million increase in the
balance of equity loans at June 30, 2006 as compared to the balance at June 30,
2005. Interest income from commercial loans increased by $1.0 million to $2.4
million compared to $1.4 million. This increase was primarily due to a $24.5
million increase in the commercial loan portfolio between June 30, 2005 and June
30, 2006. Interest income from investments increased by $.5 million to $6.9
million compared to $6.4 million. This was due to a $5.0 million increase in the
balance of the investment portfolio at June 30, 2006 as compared to June 30,
2005 as well as higher interest rates on new securities purchased. The average
portfolio yields for the six months ended June 30, 2006 on loans and investments
were 6.03% and 4.38% respectively, compared to 5.76% and 4.01% for the same
period in 2005. Interest income from other interest earning assets increased by
$.3 million primarily due to the increase in overnight funds related to the
stock offering.
Interest Expense
Interest expense increased by $2.7 million to $7.4 million for the six months
ended June 30, 2006 compared to $4.7 million for the six months ended June 30,
2005. The increase in interest expense was primarily due to a $174.9 million
increase in deposits between June 30, 2005 and June 30, 2006. Of this increase
$146.6 million was directly related to temporary deposits resulting from the
stock offering. In addition, higher interest rates were paid on deposits during
the first six months of 2006 as compared to the same period in 2005.
Additionally, the Company borrowed funds from the Federal Home Loan Bank in
September of 2005 in the form of a five year fixed rate advance, and had other
overnight and short-term borrowings from the Federal Home Loan Bank during the
first six months of 2006 that were not present in the 2005 period.
Provision for Loan Losses
The provision for loan losses increased by $239 thousand to $136 thousand for
the six months ended June 30, 2006 compared to a recovery of $103 thousand
during the six months ended June 30, 2005. The increase is reflective of the
significant growth in the loan portfolio and a 25 basis points increase,
effective January 2006, in the provision for secured commercial loan
originations. The ratio of non-performing loans to total loans increased from
..13% at June 30, 2005 to 1.09% at June 30, 2006. The negative provision for loan
losses for the six months ended June 30, 2005 was due to an improvement in the
classification of loans which permitted the partial recovery of previous
provisions.
Non-Interest Income
Non-interest income increased by $.5 million to $1.6 million for the six months
ended June 30, 2006 compared to $1.1 million for the six months ended June 30,
2005. Revenues generated by General Abstract & Title Agency which was acquired
in March 2005 represented $.4 million of the increase.
Non-Interest Expense
Non-interest expense increased by $1.7 million to $8.8 million for the six
months ended June 30, 2006 compared to $7.1 million for the six months ended
June 30, 2005. Salaries and employee benefits, occupancy and equipment
aggregated represented $1.4 million of the increase. The increase in these
categories is primarily related to the opening of an eighth branch office and
corporate headquarters in September of 2005 and the acquisition of General
Abstract & Title Agency in March of 2005.
Income Taxes
Income tax expense decreased by $.4 million to $1.6 million for the six months
ended June 30, 2006 compared to $2.0 million for the six months ended June 30,
2005. Income tax expense at June 30, 2006 and June 30, 2005 represented 34.6%
and 34.0% respectively of net income before income taxes.
14
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 June 30, 2006.
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 that 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 March 31, 2006, the most recent date the NPV was calculated by the
OTS.
NPV as Percent of Portfolio
Change in NPV Value of Assets
Interest Rates ----------------------------------------------- -------------------------------
in Basis Points Change in
Dollar Percent NPV Basis
(Rate Shock) Amount Change Change Ratio Points
------------------ ------------- ------------ ------------ ------------- --------------
+300bp 126,142 (39,497) -24% 16.35% - 389bp
+200bp 139,300 (26,340) -16% 17.69% - 253bp
+100bp 152,647 (12,992) -8% 19.00% - 122bp
0bp 165,639 - 0% 20.21% -
-100bp 177,482 (11,843) 7% 21.27% + 106bp
-200bp 184,343 (18,704) 11% 21.82% + 161bp
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 June
30, 2006. 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 June 30, 2006.
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.
15
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
There were no material pending legal proceedings to which the Company
or its subsidiaries is a party other that ordinary routine litigation
incidental to their respective businesses.
ITEM 1A - Risk Factors
This item is not yet applicable to the Company because the Company has
not yet filed an annual report on Form 10-K.
ITEM 2 - Unregistered Sales of Equity Securities and Use of Proceeds
The effective date of the Company's Registration Statement on Form S-1
(File No. 333-132415) was May 15, 2006. The offering commenced on May
22, 2006. All of the securities that were registered were sold in the
offering. Sandler O'Neill & Partners, L.P. acted as underwriter. The
title of the securities registered is Common stock, par value $.10 per
share. A total of 9,819,562 shares were sold for an aggregate offering
price of $98,195,620. Offering expenses were approximately $2.1
million, including underwriters fees and expenses of approximately
$971,000, and net proceeds were approximately $96.1 million. The
Company made a capital contribution to Roma Bank of 50% of the net
proceeds and loaned $8,117,500 to the Roma Bank Employee Stock
Ownership Plan for the purchase of 811,750 shares in the offering. The
balance was retained by the Company as working capital and deposited
with Roma Bank.
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
16
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: August 10, 2006 /s/Peter A. Inverso
--------------------------------
Peter A. Inverso
President and
Chief Executive Officer
Date: August 10, 2006 /s/Sharon L. Lamont
--------------------------------
Sharon L. Lamont
Chief Financial Officer
17