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 March 31, 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, June 15, 2006:
$0.10 par value common stock - 0 (zero) shares outstanding
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited)
Consolidated Statements of Financial Condition 1
at March 31, 2006 and December 31, 2005
Consolidated Statements of Income for the Three Months Ended 2
March 31, 2006 and 2005
Consolidated Statements of Cash Flows for the Three Months 3
Ended March 31, 2006 and 2005
Notes to Consolidated Financial Statements 5
Item 2: Management's Discussion and Analysis of 10
Financial Condition and Results of Operations
Item 3: Quantitative and Qualitative Disclosure About Market Risk 13
Item 4: Controls and Procedures 13
PART II - OTHER INFORMATION 14
SIGNATURES 15
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
(Unaudited)
March 31, December 31,
2006 2005
------------ ------------
(In Thousands)
ASSETS
Cash and amounts due from depository institutions $ 5,015 $ 5,745
Interest-bearing deposits in other banks 13,456 22,324
Money market funds 20 20
------------ ----------
Cash and Cash Equivalents 18,491 28,089
Securities available for sale 15,418 15,514
Investment securities held to maturity 178,588 173,078
Mortgage-backed securities held to maturity 147,867 150,101
Loans receivable, net of allowance for loan losses $986
and $878, respectively 383,607 378,708
Premises and equipment 28,809 28,679
Federal Home Loan Bank of New York stock 1,374 1,387
Interest receivable 3,916 3,798
Bank owned life insurance 15,769 15,640
Other assets 2,643 2,766
------------ ----------
Total Assets $ 796,482 $ 797,760
============ ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Deposits $641,020 $643,813
Federal Home Loan Bank of New York advances 9,250 9,702
Advance payments by borrowers for taxes and insurance 2,127 2,063
Other liabilities 4,109 3,524
------------ ----------
Total Liabilities 656,506 659,102
------------ ----------
STOCKHOLDER'S EQUITY
Common stock 1 1
Paid-in capital 799 799
Retained earnings - substantially restricted 139,180 137,820
Accumulated other comprehensive (loss) income -
unrealized (loss) gain on securities available for sale, net (4) 38
------------ ----------
Total Stockholder's Equity 139,976 138,658
------------ ----------
Total Liabilities and Stockholder's Equity $ 796,482 $ 797,760
=============== ==========
See notes to consolidated financial statements.
1
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Unaudited)
Three Months Ended
March 31,
-----------------------------------
2006 2005
---------------- ----------------
(In thousands)
INTEREST INCOME
Loans $ 5,684 $ 4,920
Mortgage-backed securities held to maturity 1,767 1,632
Investment securities held to maturity 1,517 1,288
Securities available for sale 125 126
Other interest-earning assets 218 142
---------------- ----------------
Total Interest Income 9,311 8,108
---------------- ----------------
INTEREST EXPENSE
Deposits 3,445 2,090
Borrowings 106 -
---------------- ----------------
Total Interest Expense 3,551 2,090
---------------- ----------------
Net Interest Income 5,760 6,018
PROVISION FOR LOAN LOSSES 57 (16)
---------------- ----------------
Net Interest Income after Provision for Loan Losses 5,703 6,034
---------------- ----------------
NON-INTEREST INCOME
Commissions on sales of title policies 232 -
Fees and service charges on deposits 91 82
Fees and service charges on loans 47 36
Net gain from sale of mortgage loans originated for sale 1 10
Other 257 311
---------------- ----------------
Total Non-Interest Income 628 439
---------------- ----------------
NON-INTEREST EXPENSES
Salaries and employee benefits 2,441 1,969
Net occupancy expense of premises 409 242
Equipment 359 259
Data processing fees 330 344
Advertising 210 160
Federal insurance premium 21 20
Other 504 462
---------------- ----------------
Total Non-Interest Expenses 4,274 3,456
---------------- ----------------
Income before Income Taxes 2,057 3,017
INCOME TAXES 697 1,050
---------------- ----------------
Net Income $ 1,360 $ 1,967
================ ================
See notes to consolidated financial statements.
2
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
Three Months Ended
March 31,
-------------------------------
2006 2005
-------------- ------------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,360 $ 1,967
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation of premises and equipment 288 145
Amortization of premises and accretion of discounts on securities (11) 27
Accretion of deferred loan fees and discounts (33) (105)
Net gain on sale of mortgage loans originated for sale (1) (10)
Mortgage loans originated for sale (149) (622)
Proceeds from sales of mortgage to loans originated for sale 150 632
Provision for loan losses 57 (16)
(Increase) in interest receivable (118) (122)
(Increase) in cash surrender value of bank owned life insurance (129) (129)
(Increase) decrease in other assets 123 128
Increase (decrease) in interest payable (290) 38
Increase (decrease) in other liabilities 905 59
-------------- --------------
Net Cash Provided by Operating Activities 2,152 1,992
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from repayments on securities available for sale - -
Proceeds from maturities and calls of securities available for sale 34 4
Purchases of securities available for sale (25) (25)
Proceeds from maturities and calls of investment securities held to
maturity - 3,060
Purchases of investment securities held to maturity (5,500) (12,000)
Principal repayments on mortgage-backed securities held to maturity 5,849 5,558
Purchases of mortgage-backed securities held to maturity (3,600) (15,554)
Net increase in loans receivable (4,923) 3,134
Additions to premises and equipment (418) (2,276)
(Purchase) redemption of Federal Home Loan Bank of New York stock 13 -
Purchase of bank owned life insurance - -
-------------- --------------
Net Cash Used in Investing Activities (8,570) (18,099)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits (2,792) 26,199
Increase in advance payments by borrowers for taxes and insurance 64 -
Federal Home Loan Bank of New York advances - 251
Repayments of Federal Home Loan Bank of New York advances (452) -
Initial capitalization of mutual holding company - (200)
-------------- --------------
Net Cash Provided by Financing Activities (3,180) 26,250
-------------- --------------
Net Increase (Decrease) in Cash and Cash Equivalents (9,598) 10,143
CASH AND CASH EQUIVALENTS - BEGINNING 28,089 19,944
-------------- --------------
CASH AND CASH EQUIVALENTS - ENDING $18,491 $30,087
============== ==============
See notes to consolidated financial statements.
3
ROMA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont'd)
----------------------------------------------
(Unaudited)
Three Months Ended
March 31,
-------------------------------
2006 2005
-------------- ------------
(In thousands)
SUPPLEMENTARY CASH FLOWS INFORMATION
Income taxes paid, net $ 811 $ -
============== ==============
Interest paid $ 3,841 $ 2,052
============== ==============
See notes to consolidated financial statements.
4
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. Currently, all of the outstanding stock of Roma Bank is held by Roma
Financial Corporation and all of the outstanding stock of Roma Financial
Corporation is 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 Savings Association 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 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. After completion of the offering, Roma Financial Corporation, MHC will
own 69% of the outstanding stock of Roma Financial Corporation. We anticipate
that the primary business activity of Roma Financial Corporation, MHC going
forward will be to own a majority of Roma Financial Corporation's stock.
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 intercompany accounts and transactions have been eliminated in
consolidation.
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.
5
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
the 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 March 31, 2006.
6
NOTE F- INVESTMENT SECURITIES
The following tables set forth the composition of our securities portfolio as of
March 31, 2006 and December 31, 2005 (in thousands):
(Unaudited)
March 31, 2006 December 31, 2005
------------------- --------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
-------- -------- -------- --------
Available for sale:
Mortgage backed securities $ 82 $ 89 $ 121 $ 130
Obligations of state and local political
subdivisions 10,000 10,177 10,010 10,219
US Government Obligations 3,000 2,958 3,000 2,961
Equity Shares 50 50 50 50
Mutual Fund Shares 2,292 2,144 2,266 2,154
-------- -------- -------- --------
Total $ 15,424 $ 15,418 $ 15,447 $ 15,514
======== ======== ======== ========
(Unaudited)
March 31, 2006 December 31, 2005
------------------- --------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
-------- -------- -------- --------
Investments held to maturity:
US Government Obligations $177,268 $173,025 $172,263 $168,647
Obligations of state and local political
subdivisions 1,320 1,343 815 837
-------- -------- -------- --------
Total $178,588 $174,368 $173,078 $169,484
======== ======== ======== ========
(Unaudited)
March 31, 2006 December 31, 2005
------------------- --------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
-------- -------- -------- --------
Mortgage backed securities held to maturity:
GNMA $ 6,951 $ 6,914 $ 7,454 $ 7,450
FHLMC 80,293 78,325 80,155 78,972
FNMA 56,697 53,390 58,389 57,800
CMO's 3,926 3,688 4,103 3,889
-------- -------- -------- --------
Total $147,867 $142,317 $150,101 $148,111
======== ======== ======== ========
7
NOTE G- LOANS RECEIVABLE, NET
Loans receivable, net at March 31, 2006 and December 31, 2005 were comprised of
the following (in thousands):
(Unaudited)
March 31, December 31,
2006 2005
---------- ----------
Real estate mortgage loans:
Conventional 1-4 family $ 190,994 $ 191,634
Commercial and multi-family 59,737 53,614
---------- ----------
250,731 245,248
---------- ----------
Construction 13,558 20,020
---------- ----------
Consumer:
Equity and second mortgages 120,602 118,318
Other 2,505 1,577
---------- ----------
123,107 119,895
---------- ----------
Commercial 3,121 2,351
---------- ----------
Total loans 390,518 387,514
---------- ----------
Less:
Allowance for loan losses 935 878
Deferred loan fees and discounts 236 269
Loans in process 5,739 7,659
---------- ----------
6,910 8,806
---------- ----------
Total loans receivable, net $ 383,607 $ 373,708
========== ==========
NOTE H- DEPOSITS
A summary of deposits by type of account are summarized as follows (in
thousands):
(Unaudited)
March 31, 2006 December 31, 2005
-------------------------- -----------------------------
Weighted Weighted
Avg. Int. Avg. Int.
Amount Rate Amount Rate
---------- ------------ ---------- ---------------
Demand:
Non-interest bearing checking $ 21,203 0.00% $ 20,661 0.00%
Interest bearing checking 96,735 0.53% 100,721 0.54%
---------- ------------ ---------- ---------------
117,938 0.44% 121,382 0.45%
Savings and club 206,754 0.92% 208,109 0.93%
Certificates of deposit 316,328 3.57% 314,322 3.48%
---------- ------------ ---------- ---------------
Total $ 641,020 2.17% $ 643,813 2.08%
========== ============ ========== ===============
8
The Company has contractual obligations for certificates of deposit that mature
as follows:
(in thousands)
March 31,
2006
------------
One year or less $ 223,919
After one to three years 61,355
After three years 31,054
------------
$ 316,328
============
NOTE I- PREMISES AND EQUIPMENT
Premises and equipment consisted of the following (in thousands):
Estimated (Unaudited)
Useful March 31, December 31,
Lives 2006 2005
---------- ------------ ------------
Land-future development - $ 1,054 $ 1,054
Construction in progress - 617 569
Land and land improvements - 5,271 5,271
Buildings and improvements 20-50 yrs 22,494 22,234
Furnishings and equipment 3-10 yrs. 6,440 6,331
--------- ---------
Total premises and equipment 35,876 35,459
Accumulated depreciation 7,067 6,780
--------- ---------
Total $ 28,809 $ 28,679
========= =========
NOTE J- FEDERAL HOME LOAN BANK ADVANCES
At March 31, 2006 and December 31, 2005 the Bank had outstanding Federal Home
Bank of New York advances as follows (in thousands):
(Unaudited)
March 31, 2006 December 31, 2005
----------------------- ------------------------
Interest Interest
Amount Rate Amount Rate
------- -------- ------- --------
Maturing:
September 15, 2010 $ 9,250 4.49% $ 9,702 4.49%
======= ==== ======= ====
9
A schedule of the principal obligation 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 3,477
----------
$ 9,250
==========
NOTE K- RETIREMENT PLANS-COMPONENTS OF NET PERIODIC PENSION COST
(Unaudited)
Three Months Ended
March 31,
----------------------------
2006 2005
----------- -----------
Service cost $ 86 $ 70
Interest cost 112 103
Expected return on plan assets (149) (127)
Transition (asset)/obligation - 6
Amortization of unrecognized net loss 17 8
Unrecognized past service liability 15 14
----------- -----------
Net periodic benefit expense $ 81 $ 74
=========== ===========
NOTE L- CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
In the normal course of business, the Bank enters into off-balance sheet
arrangements consisting of commitments to fund mortgage loans and lines of
credit. The outstanding loans commitments at March 31, 2006 were as follows:
(in thousands)
March 31,
2006
-------------
Mortgage loans $ 20,660
Commercial lines of credit 1,863
Other unused lines of credit 33,312
Commercial letters of credit 781
------------
$ 56,616
============
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;
10
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 March 31, 2006 and December 31, 2005
Total assets fell slightly to $796.5 million at March 31, 2006, as compared to
$797.8 million at December 31, 2005.
Deposits
Deposits fell by $2.8 million during the quarter, from $643.8 million at
December 31, 2005 to $641.0 million at March 31,2006. During the second half of
2005, the Bank experienced significant deposit growth, particularly during
September and October when deposit promotions were conducted in conjunction with
the opening of the Bank's eighth branch office location and the celebration of
the Bank's eighty-fifth anniversary. The certificate terms for these deposit
promotions were primarily three and six months. The reduction in deposits during
the first quarter of 2006 reflects an outflow of a portion of these certificates
as they matured.
Borrowed Money
The $452,000 reduction in borrowed money during the quarter ended March 31, 2006
is due to the regularly scheduled principal payment. At March 31, 2006, the
Bank's outstanding Federal Home Loan Bank advances totaled $9.3 million compared
to $9.7 million at December 31, 2005.
11
Loans
During the first quarter of 2006, loans receivable, net, grew by $4.9 million to
$383.6 million at March 31, 2006 from $378.7 million at December 31, 2005. The
increase was primarily in home equity loans, which rose by $2.3 million to
$102.6 million; commercial loans (including multi-family and commercial real
estate mortgages), which rose by $2.1 million to $68.4 million and loans secured
by deposit accounts, which nearly doubled from $l.1 million to $2.0 million.
Investments (Including Mortgage-Backed Securities)
The investment portfolio increased by $3.2 million to $341.9 million at March
31, 2006 from $338.7 million at December 31, 2005. Funds in excess of those
needed for loans were principally deployed into short term agency securities,
which increased by approximately $5.5 million during the first quarter of 2006.
This increase offset a $2.2 million decrease in mortgage-backed securities held
to maturity, which totaled $l47.9 million at March 31, 2006 compared to $l50.1
million at December 31, 2005. Securities classified as available for sale,
totaled $15.4 million at March 31, 2006 compared to $15.5 million at December
31, 2005.
Other Assets
Other than a reduction in cash and cash equivalents which declined approximately
$ 9.6 million between December 31, 2005 and March 31, 2006 as a result of
deposit outflow and the funding of loans and investments, all other categories
of other assets remained relatively stable during the quarter ended March 31,
2006.
Comparison of Operating Results for the Three Months Ended March 31, 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 for the first quarter of 2006 compared to the same
quarter in 2005. Net income for the quarter ended March 31, 2006 was $l.4
million, representing a 30.9% decrease from net income of $2.0 million for the
quarter ended March 31, 2005. During the first 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, the increase in
non-interest expense on a quarter-to-quarter comparison resulting from the
occupancy and additional staffing of the new Washington Town Center corporate
headquarters and main office during the second half of 2005 contributed to the
decline in net income between periods.
Interest Income
The interest income growth of $l.2 million reflects a substantial increase in
the loan portfolio between periods as residential loans increased $25.2 million
and commercial loans increased $25.5 million. Additionally, interest income
during the current quarter benefited from comparably higher interest rates.
While short term interest rates increased sharply, in direct response to the
Federal Reserve's program of rate hikes during 2005, long-term generally did not
respond as sharply, but did slowly and gradually increase.
Interest Expense
Interest expense increased $l.5 million as a result of significant deposit
growth of nearly $38.5 million between periods and the higher level of
prevailing interest rates paid on deposits during the first quarter of 2006 as
compared to the first quarter of 2005. Additionally, the Bank borrowed funds
from the Federal Home Loan Bank during the fourth quarter of 2005 in the form of
a five year fixed rate advance, and interest paid on these borrowed funds is
reflected in interest expense for the quarter ended March 31, 2006.
12
Provision for Loan Losses
The provision for loan losses increased by $73,000, reflecting the significant
growth in the loan portfolio. The Bank's asset quality ratios declined slightly
between years: the ratio of non-performing loans to total loans was 0.44% at
March 31, 2006 as compared to .l5% at March 31, 2005. The negative provision for
loan losses for the quarter ended March 31, 2005, was due to an improvement in
the classification of loans during the quarter which permitted the partial
recovery of previous provisions.
Non-interest Income
Non-interest income increased $189,000 from period to period. Revenues generated
by General Abstract & Title Agency, acquired in March 2005, represents $233,000
of the increase.
Non-interest Expenses
This category increased $818,000 over half of which reflects the additional
employee compensation and related benefit costs during the second half of 2005
for personnel associated with the opening of an eighth branch office, additional
staff for the corporate office and the staff of General Abstract & Title Agency,
acquired in March 2005. Facilities expense experienced a substantial increase
between periods, primarily as a result of the opening of the new corporate
headquarters and main office. Marketing and advertising expense grew between
periods as the Bank expanded its radio and print advertising to promote its new
branch office, expand its branding and a special March Mortgage promotion.
General Abstract & Title Agency added over $300,000 in aggregate expense between
periods.
Income Taxes
Income tax expense of $697,000 represented 33.8% of income before taxes for the
quarter ended March 31, 2006. Income tax expense of $l.1 million represented
34.8% of income before taxes for the quarter ended March 31, 2005.
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 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 March 31, 2006.
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 March
31, 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 March 31, 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.
13
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 2 - Unregistered Sales of Equity Securities and Use of Proceeds
None
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
14
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: June 29, 2006 /s/Peter A. Inverso
--------------------------------
Peter A. Inverso
President and Chief
Executive Officer
Date: June 29, 2006 /s/Sharon L. Lamont
--------------------------------
Sharon L. Lamont
Chief Financial Officer
15