|
|
 | | | |
- close
- close
- close
- close
Rome Bancorp 10-Q 2009 UNITED STATES FORM 10-Q Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2009 Commission file number 000-27481 Rome Bancorp, Inc.
100 West Dominick Street, Rome, NY 13440-5810 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes x No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes o No x Indicate the number of shares outstanding of each class of issuer’s classes of common stock as of the last practicable date:
ROME BANCORP, INC. TABLE OF CONTENTS 2 ROME BANCORP, INC. AND SUBSIDIARY
See accompanying notes to unaudited condensed consolidated financial statements. 3 ROME BANCORP, INC. AND SUBSIDIARY
See accompanying notes to unaudited condensed consolidated financial statements. 4 ROME BANCORP, INC. AND SUBSIDIARY
See accompanying notes to unaudited condensed consolidated financial statements. 5 ROME BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows continued on next page. 6 ROME
BANCORP, INC. AND SUBSIDIARY
See accompanying notes to unaudited condensed consolidated financial statements. 7 ROME
BANCORP, INC. (1) The accompanying unaudited condensed consolidated financial statements include the accounts of Rome Bancorp, Inc. (“Rome Bancorp” or the “Company”) and The Rome Savings Bank (the “Bank”), a wholly-owned subsidiary of the Company, as of September 30, 2009 and December 31, 2008 and for the three and nine month periods ended September 30, 2009 and 2008. All inter-company accounts and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of management, the unaudited condensed consolidated financial statements include all necessary adjustments, consisting of normal recurring accruals, necessary for a fair presentation for the periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading; however, the results of operations and other data presented for the periods presented are not necessarily indicative of results to be expected for the entire fiscal year. Management has evaluated all significant events and transactions that occurred after September 30, 2009 through November 5, 2009 (financial statement issuance date), for potential recognition or disclosure in these condensed consolidated financial statements. The data in the condensed consolidated balance sheet for December 31, 2008 was derived from the Company’s 2008 Annual Report on Form 10-K. That data, along with the interim financial information presented in the condensed consolidated balance sheet, statements of income, statement of shareholders’ equity and comprehensive income and statements of cash flows should be read in conjunction with the 2008 consolidated financial statements, including the notes thereto, included in the Company’s Annual Report on Form 10-K. Amounts in the prior period’s consolidated financial statements are reclassified when necessary to conform with the current period’s presentation. (2) Earnings per Common Share The Company has stock compensation awards with non-forfeitable dividend rights which are considered participating securities. As such, earnings per share is computed using the two-class method as required by FASB Accounting Standards Codification (“ASC”) Topic 260-10, “Earnings per Share.” Basic earnings per common share is computed by dividing net income allocated to common stock by the weighted average number of common shares outstanding during the period which excludes the participating securities. ESOP shares are considered outstanding for this calculation unless unearned. Diluted earnings per common share includes the dilutive effect of additional potential common shares from stock-based compensation plans, but excludes awards considered participating securities. The following summarizes the computation of earnings per share for the three and nine month periods ended September 30, 2009 and 2008. 8
(3) Other Comprehensive Income (Loss)
9 (4) Securities
All of the gross unrealized losses on available for sale securities at both September 30, 2009 and December 31, 2009 were less than one year in duration. The detail of these losses and the carrying value (at estimated fair value) of the underlying securities available for sale are summarized below (in thousands):
10 Management evaluates securities for other than temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. Included in the Company’s equity securities is an investment in a mutual fund which purchases blue chip common stocks. The downturn in the equity markets during 2008 caused a decrease in the market value of such fund. During the fourth quarter of 2008, in connection with its ongoing review of long term asset values, the Company determined that this investment had been other than temporarily impaired, as defined by generally accepted accounting principles. Accordingly, an impairment charge of $265,000 (pre-tax) was recorded to lower the carrying value of this security to the fair value of $472,000. There were no investments deemed by management to be other than temporarily impaired at September 30, 2009. The following table presents the amortized cost and fair value of debt securities based on the contractual maturity date (in thousands). Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties.
Securities pledged at both September 30, 2009 and December 31, 2008 had a carrying amount of $1.3 million. These securities collateralize state and Treasury department programs. As of these dates, there were no holdings of securities of any one issuer in an amount greater than 10% of shareholders’ equity. 11
12
13
14
15
16
To estimate the market value of its available for sale security portfolio, the Company obtains current market pricing from quoted market sources or using pricing for similar securities. The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value.
17 The following methods and assumptions were used by the Company in estimating fair values of financial instruments:
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements Statements included in this discussion and in future filings by Rome Bancorp, Inc. (“Rome Bancorp” or the “Company”) with the Securities and Exchange Commission, in Rome Bancorp press releases, and in oral statements made with the approval of an authorized executive officer, which are not historical or current facts, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Rome Bancorp wishes to caution readers not to place undue reliance on such forward-looking statements, which speak only as of the date made. Rome Bancorp disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events. General The Company is a Delaware corporation regulated by the Office of Thrift Supervision (“OTS”) as a savings and loan holding company, whose sole business is conducted by its wholly-owned subsidiary, The Rome Savings Bank (the “Bank”) The Bank’s principal business is accepting deposits from the general public and using those deposits to make residential and commercial real estate loans, as well as commercial and consumer loans to individuals and small businesses primarily in Oneida County and also elsewhere in New York State. The Bank also invests in long-and short-term marketable securities and other liquid investments. 19 Since its conversion to a federal charter on April 27, 2004, the Bank has been regulated by the OTS as a federal savings bank. Overview The Bank’s results of operations depend primarily on its net interest income, which is the difference between the interest income it earns on its loans and investments and the interest it pays on its deposits and other interest-bearing liabilities. Net interest income is affected by the relative amounts of interest-bearing assets and interest-bearing liabilities and the interest rates earned or paid on these balances. The Bank’s operations are also affected by non-interest income, such as service fees and gains and losses on sales of securities, the provision for loan losses and non-interest expense such as salaries and employee benefits, occupancy costs, and other general and administrative expenses. Financial institutions in general, including the Bank, are significantly affected by economic conditions, competition and the monetary and fiscal policies of the federal government. Lending activities are influenced by the demand for and supply of housing, competition among lenders, interest rate conditions and funds availability. The Bank’s operations and lending are principally concentrated in the Central New York area, therefore its operations and earnings are influenced by the economics of such area. Deposit balances and cost of funds are influenced by prevailing market rates on competing investments, customer preferences and levels of personal income and savings in the Bank’s primary market area. Net income for the third quarter of 2009 increased to $908,000, from the prior year’s third quarter net income of $815,000. The significant factors and trends impacting the third quarter of 2009, which are discussed in greater depth below, were as follows:
Critical Accounting Policies The preparation of consolidated financial statements requires management to make estimates and assumptions. Changes in these estimates and assumptions affect the reported amounts of certain assets, liabilities, revenue and expenses. Different amounts could be reported under different conditions, or if different assumptions were used in the application of these accounting policies. It is management’s opinion that accounting estimates covering certain aspects of the business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity required in making these estimates. Management of the Company considers the accounting policy relating to the allowance for loan losses to be a critical accounting policy given the uncertainty in evaluating the level of the allowance required for probable credit losses and the material effect that such judgments can have on the results of operations. Management’s quarterly evaluation of the adequacy of the allowance considers the Company’s historical loan loss experience, review of specific loans, current economic conditions and such other 20 factors considered appropriate to estimate losses. Management uses presently available information to estimate probable losses on loans; however, future additions to the allowance may be necessary based on changes in estimates, assumptions or economic conditions. Significant factors that could give rise to changes in these estimates include, but are not limited to, changes in economic conditions in the local area, concentrations of risk and declines of local property values. Management also considers the accounting policy relating to the impairment of long lived assets to be a critical accounting policy due to the subjectivity and judgment involved and the material effect an impairment loss could have on the results of operations. A decline in the fair value of a long lived asset below cost that is deemed to be other than temporary is charged to earnings resulting in the establishment of a new cost basis for the asset. Management continually reviews the current value of its long lived assets for evidence of other than temporary impairment. The Company’s critical policies and their application are reviewed periodically by the Audit Committee and the Board of Directors. All accounting policies are important, and as such, the Company encourages the reader to review each of the policies included in Note 2 to the consolidated financial statements reported on the Company’s 2008 Annual Report on Form 10-K to obtain a better understanding of how its financial performance is reported. Analysis of Net Interest Income Average Balances, Interest and Average Yields - The following table sets forth certain information relating to the Company’s average balance sheets and reflects the average yield on interest-earnings assets and average cost of interest-bearing liabilities, interest earned and interest paid for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of interest-earning assets or interest-bearing liabilities, respectively, for the periods presented. Average balances are derived from daily balances over the periods indicated. The average balances for loans are net of allowance for loan losses, but include non-accrual loans. Interest income on securities includes a tax equivalent adjustment for bank qualified municipals. 21
(1) Includes tax equivalent adjustment for the Company’s tax-exempt municipal securities. 22
(1) Includes tax equivalent adjustment for the Company’s tax-exempt municipal securities. 23 Rate Volume Analysis – The following table analyzes the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It shows the amount of the change in interest income or expense caused by either changes in outstanding balances (volume) or changes in interest rates. The effect of a change in volume is measured by applying the average rate during the first period to the volume change between the two periods. The effect of changes in rate is measured by applying the change in rate between the two periods to the average volume during the first period. Changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the absolute value of the change due to volume and the change due to rate.
(1) Includes tax equivalent adjustment for the Company’s tax-exempt municipal securities. Comparison of Financial Condition at September 30, 2009 and December 31, 2008: Total assets at September 30, 2009 remained relatively constant at $338.0 million compared to $337.9 million at December 31, 2008. Changes within the categories of assets include a contraction in the Company’s net loan portfolio, which decreased by $13.0 million, or 4.4%, from $298.5 million at December 31, 2008 to $285.5 million at September 30, 2009. As a result of the current economic climate, demand for loans declined from normal levels during the third quarter of 2009. During the first nine months of 2009, the Company originated approximately $39.9 million of loans, compared to approximately $49.4 million of loans originated in the same period of 2008. The majority of the loan originations for this year to date have been mortgage loans. In addition, the Company has been selling a larger percentage of its residential loan originations into the secondary market. Loan sales through nine months of 2009 were $7.3 million, compared to $861,000 for the first nine months of 2008. Partially offsetting the decrease in the loan portfolio was an increase in the balance of available for sale securities resulting from investment purchases of $7.2 million during the first three quarters of 2009. Cash balances increased to $17.1 million at September 30, 2009, from $9.6 million at year end 2008, due to an influx of deposits and the aforementioned reduction in the loan portfolio. The continued uncertainty in the United States investment markets has encouraged investors to exit those markets in favor of insured deposit accounts. Total deposits increased to $216.4 million at September 30, 2009 from $205.9 million at December 31, 2008. During the first nine months of 2009, savings deposits increased by $3.4 million, or 4.3%, and money market balances increased by $3.9 million, or 32.4%. Time deposits increased by $207,000, or 0.3%, to $72.3 million at September 30, 2009 from $72.1 million at year end 24 2008. Balances of non-interest bearing deposits increased by $3.1 million, or 10.8%, while other interest bearing deposits decreased by $86,000, or 0.6%, over the first three quarters of 2009. As a result of decreased loan originations and increases in deposit balances, the Company was able to pay down debt during the first nine months of 2009. Borrowings from the Federal Home Loan Bank of New York (“FHLB”) decreased from $66.3 million at December 31, 2008 to $55.6 million at the end of the current quarter. Comparison of Operating Results for the Three-Month Periods Ended September 30, 2009 and 2008 General During the three months ended September 30, 2009, the Company recorded net income of $908,000, compared to $815,000 for the third quarter of 2008. The increase in net income is comprised of a reduction in the provision for loan losses of $100,000 and an increase in non-interest income of $56,000, partially offset by a decrease in net interest income before the provision for loan losses of $19,000, an increase in non-interest expense of $12,000 and an increase in income tax expense of $ 32,000. Diluted earnings per share increased to $0.14 per diluted share for the quarter ended September 30, 2009 from $0.11 per diluted share in the quarter ended September 30, 2008. Average diluted shares decreased to 6,578,187 for the third quarter of 2009 from 6,778,831 in the same period of 2008 due to the Company’s stock repurchases over the past year. Net Interest Income Net interest income before loan loss provision for the quarter ended September 30, 2009 decreased by $19,000 or 0.6%, compared to the same quarter of 2008. This decrease is attributable to decreases in market rates on interest earning assets and interest bearing liabilities. Rates on earning assets fell faster than the cost of the Company’s other borrowings, resulting in the slight decline in overall net interest income. Interest Income Interest income decreased to $4.3 million for the quarter ended September 30, 2009 from $4.5 million for the same quarter of 2008. Average loan balances for the third quarter of 2009 were $284.0 million, a decrease of $6.6 million from the average outstanding loans for the third quarter of 2008. The yield on the Company’s loan portfolio for the quarter ended September 30, 2009 decreased to 5.80% from a yield of 6.02% for the same period last year, reflecting the effect of decreases in the prime rate over the past year. Interest income on securities increased by $61,000 from $96,000 for the quarter ended September 30, 2008 to $157,000 for the quarter ended September 30, 2009. The average balance of securities increased by $4.5 million, or 54.9%, from the third quarter of 2008 to $12.7 million for the current quarter and the tax equivalent yield on the Company’s securities increased to 4.98% to 4.91%. Finally, interest income on federal funds sold and other interest bearing deposits decreased by $2,000 to $4,000 for the quarter ended September 30, 2009 from the same quarter in 2008 due primarily to lower interest rates paid on those funds. By contrast, the average balance of interest bearing deposits increased to $11.1 million in the third quarter of 2009 from $1.2 million in the same period of 2008. Interest Expense Interest expense decreased to $1.1 million for the quarter ended September 30, 2009 from $1.2 million for the same quarter of 2008. Interest expense on deposits decreased to $586,000 for the quarter ended September 30, 2009 from $813,000 for the quarter ended September 30, 2008, due to lower rates paid on deposits consistent with market trends over the past year. This was partially offset by an increase in the average 25 balance of interest-bearing deposits to $186.4 million for the quarter ended September 30, 2009, from $178.1 million for the same period of 2008. Interest expense on borrowed funds increased to $466,000 for the quarter ended September 30, 2009 from $410,000 for the comparative quarter of 2008 due to an increase in the average balance of borrowings to $55.1 million in the current quarter compared to $52.3 million in the third quarter of 2008. The rate on the Company’s borrowings increased to 3.35% during the third quarter of 2009 from 3.13% in the same quarter of 2008 as the Company restructured its short-term debt into longer maturity advances. Provision for Loan Losses The Company recorded no provision for loan losses in the third quarter of 2009, compared to a $100,000 loan loss provision in the same period of 2008. During the current quarter, net loan charge-offs decreased to $23,000, compared to net charge-offs of $134,000 in the third quarter of 2008. Asset quality remained favorable at September 30, 2009 with non-performing loans as a percent of loans of 0.62% and the allowance for loan losses as a percent of non-performing loans of 115.9% at September 30, 2009, compared to 0.42% and 152.1%, respectively, at December 31, 2008. While the Company has seen an increase in non-performing loans in 2009, management believes that these loans are adequately collateralized. The allowance for loan losses as a percentage of loans increased to 0.72% at September 30, 2009 compared to 0.64% at December 31, 2008. In determining the appropriate provision for loan losses, management considers the level of and trend in non-performing loans, the level of and trend in net loan charge-offs, the dollar amount and mix of the loan portfolio, as well as general economic conditions and real estate trends in the Company’s market area, which can impact the inherent risk of loss in the Company’s loan portfolio. Non-Interest Income and Non-Interest Expense Non-interest income increased $56,000 to $665,000 in the third quarter of 2009 from $609,000 in the same period of 2008. In the third quarter of 2009, the Company sold one investment security, realizing a gain of $26,000; there were no securities sales in the same period of 2008. The remainder of the increase in non-interest income is directly attributable to an increase in the gains realized on sales of residential mortgages to the secondary market as a greater volume of loans have been sold in 2009. Non-interest expense slightly increased by $12,000 to $2.6 million in the third quarter of 2009 from $2.5 million in the same quarter of 2008. Income tax expense for the third quarter of 2009 increased to $460,000 from $428,000 in the same period of 2008, primarily due to the increase in pre-tax income. Comparison of Operating Results for the Nine-Month Periods Ended September 30, 2009 and 2008 General Net income for both the nine months ended September 30, 2009 and 2008 was $2.3 million. Net interest income before loan loss provision remained constant at $9.7 million for year to date 2009 and 2008. During the nine months ended September 30, 2009, the Company recorded an additional $100,000 in the provision for loan losses, additional non-interest income of $132,000, an increase in non-interest expense of $143,000, and a $61,000 reduction in income tax expense, compared to the same period of 2008. Diluted earnings per share increased to $0.34 per diluted share for the nine months ended September 30, 2009 in comparison to $0.32 per diluted share for the same period of 2008. The year-to-date 2009 average outstanding diluted shares decreased to 6,604,623 from 6,957,623 due to treasury stock purchases. 26 Net Interest Income Net interest income before loan loss provision was $9.7 million in both the nine months ended September 30, 2009 and 2008. Throughout 2009 the Company has realized decreases in both the yields on earning assets and its cost of funds as well as increases in the average balances of earning assets and interest bearing liabilities. Interest Income Interest income decreased to $13.0 million for the nine month period ended September 30, 2009 from $13.4 million for the first nine months of 2008. Average earning assets for the first half of 2009 increased to $307.8 million from $293.9 million in the same period of 2008. The yield on earning assets decreased to 5.65% for the nine months ended September 30, 2009, from 6.11% for the same period of 2008. Average loan balances for the first nine months of 2009 were $290.7 million, an increase of $5.1 million over the average outstanding loans for the same period of 2008. The yield on the Company’s loan portfolio for the nine months ended September 30, 2009 was 5.81% compared to a yield of 6.14% for the same period last year, reflecting decreases in underlying interest rates. Interest income on securities increased $97,000 from $265,000 for the nine months ended September 30, 2008 to $362,000 for the nine months ended September 30, 2009 as the average balance of the investment portfolio increased to $10.5 million for the first three quarters of 2009 from $7.1 million during the same period of 2008. Finally, interest income on federal funds sold and other interest bearing deposits decreased by $13,000 to $8,000 for the first nine months of 2009 from the same period in 2008 due to rate decreases. Interest Expense Interest expense decreased to $3.3 million for the nine months ended September 30, 2009 from $3.7 million for the nine months ended September 30, 2008. Interest expense on deposits decreased to $1.9 million for the nine months ended September 30, 2009 from $2.6 million for the nine months ended September 30, 2008 as a result of a decrease in the cost of these deposits from 1.94% to 1.38% partially offset by an increase in the average balance of interest bearing deposits to $183.7 million this year to date from $176.4 million during the first nine months of 2008. Interest expense on borrowed funds increased to $1.4 million for the nine months ended September 30, 2009 from $1.1 million for the comparative period of 2008 primarily due to an increase in the average balance of borrowings to $56.3 million in the current year to date as compared to $46.5 million in the nine months ended 2008. The increase in outstanding debt was partially offset by a decrease in the rate paid on these borrowings from 3.25% for the nine months ended September 30, 2008 to 3.23% for the same period this year. The increased borrowings were used to fund the aforementioned investments in loans, securities and purchases of treasury stock that have been made over the past year. Provision for Loan Losses The Company recorded a $200,000 provision for loan losses in the first three quarters of 2009 versus $100,000 in the first nine months of 2008. The higher 2009 provision was deemed necessary due to management’s judgment that one of its commercial creditors may be experiencing financial difficulties, despite that borrower’s current ability to service its loans. The Company’s loss experience for the first nine months of 2009 remains favorable with year to date net loan charge-offs of $54,000, compared to net loan charge-offs of $126,000 for the same period of 2008. In determining the appropriate provision for loan losses, management considers the level of and trend in non-performing loans, the level of and trend in net loan charge-offs, the dollar amount and mix of the loan portfolio, as well as general economic conditions and real estate trends in the Company’s market area, which can impact the inherent risk of loss in the Company’s loan portfolio. 27 Non-Interest Income and Non-Interest Expense Non-interest income increased to $1.8 million for the first three quarters of 2009 from $1.7 million for the same period of 2008. The increase is attributable to gains on sales of residential mortgages and a $26,000 gain on the sale of an investment security. Non-interest expense increased to $8.0 million in the first nine months of 2009 compared to $7.9 million in the same period of 2008, principally due to an increase in deposit insurance and regulatory assessments of $250,000, increasing to $339,000 for the first nine months of 2009 from $89,000 for the same period of 2008. This increase was the result in the industry-wide increase in Federal Deposit Insurance Corporation (“FDIC”) regular deposit insurance rates. On February 27, 2009, the FDIC adopted a final rule that initially raised the assessment rate schedule, uniformly across all four risk categories into which the FDIC assigns insured institutions, by seven basis points (annualized) of insured deposits beginning on January 1, 2009. Under the final rule, the Bank’s assessment rate was 8.44 basis points (annualized) for the third quarter of 2009. On September 29, 2009, the FDIC published a Notice of Proposed Rulemaking that would require insured institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012. The FDIC also voted to adopt a uniform three-basis point increase in assessment rates effective on January 1, 2011. We expect that we may be required to prepay an estimated $830,000 on December 30, 2009 for our fourth quarter of 2009 and all of 2010, 2011 and 2012 FDIC assessments. Income tax expense for the first nine months of 2009 decreased to $1.1 million from $1.2 million in the same period of 2008, due to the decrease in pre-tax income and an increase in favorable permanent tax benefits. Liquidity and Capital Resources The Company’s primary sources of funds consist of deposits, scheduled amortization and prepayments of loans and mortgage-backed securities, maturities of investments, interest-bearing deposits at other financial institutions and funds provided from operations. The Bank also has a written agreement with the FHLB that allows it to borrow up to $44.1 million. At September 30, 2009, the Bank had no outstanding borrowings against this line of credit, and outstanding advances and amortizing notes totaling $55.6 million. During the first nine months of 2009 the Company decreased its overall FHLB borrowings by $10.7 million. Loan repayments and maturing investment securities are a relatively predictable source of funds. However, deposit flows, calls of investment securities, and prepayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and local economic conditions, and competition in the marketplace. These factors reduce the predictability of the timing of these sources of funds. The Company’s primary investing activities include the origination of loans, and to a lesser extent, the purchase of investment securities. For the nine months ended September 30, 2009, the Company originated loans of approximately $39.9 million, compared to $49.4 of loans in the same period of 2008. The Company has been selling a larger percentage of its residential loan originations into the secondary market. Loan sales through nine months of 2009 were $7.3 million, compared to $861,000 for the first nine months of 2008. During 2009, the Company has invested in bonds, as available yields have become more attractive. Year to date 2009 bond purchases were $7.2 million, compared to purchases of $2.3 million in the same period of 2008. At September 30, 2009, the Company had loan commitments to borrowers of approximately $8.2 million, and available letters and lines of credit of approximately $19.3 million. Time deposit accounts scheduled to mature within one year were $51.9 million at September 30, 2009. Based on the Company’s deposit retention experience and current pricing strategy, the Company anticipates that a significant portion of these time deposits will remain with the Company. The Company is committed to 28 maintaining a strong liquidity position; therefore, the Company monitors its liquidity position on a daily basis. The Company anticipates that the Company will have sufficient funds to meet the Company’s current funding commitments. The marginal cost of new funding however, whether from deposits or borrowings from the FHLB, will be carefully considered as the Company monitors its liquidity needs. Therefore, in order to minimize its cost of funds, the Company may consider additional borrowings from the FHLB in the future. At September 30, 2009, the Bank exceeded each of the applicable regulatory capital requirements. The Bank’s leverage (Tier 1) capital at September 30, 2009 was $53.0 million, or 15.58% of adjusted assets. In order to be classified as “well-capitalized” by the OTS, the Bank is required to have leverage (Tier 1) capital of $17.0 million, or 5.0% of adjusted assets. To be classified as a well-capitalized bank by the OTS, the Bank must also have a total risk-based capital ratio of 10.0%. At September 30, 2009, the Bank had a total risk-based capital ratio of 22.51%. The Company paid cash dividends of $0.255 per share during the nine-month period ended September 30, 2009 totaling $1.7 million. During the first quarter of 2009, the Company’s Board of Directors authorized the repurchase of 446,000 shares of the Company’s outstanding common stock. Through September 30, 2009, $1.4 million was expended to repurchase 181,588 shares. The Company does not anticipate any material capital expenditures, nor does it have any balloon or other payments due on any long-term obligations or any off-balance sheet items other than the commitments and unused lines of credit noted above. Off-Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Item 3. Quantitative and Qualitative Disclosures about Market Risk There has been no material change in the Company’s interest rate risk profile since December 31, 2008. For a more complete discussion of the Company’s asset and liability management policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2008 Form 10-K. Item 4. Controls and Procedures Management, including the Company’s President and Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports the Company files and submits under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to the Company’s management, including the Company’s President and Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. There have been no significant changes in the Company’s internal controls over financial reporting identified in connection with the evaluation that occurred during the Company’s last fiscal quarter that has materially affected, or that is reasonably likely to materially affect, the Company’s internal control over financial reporting. 29 Part II - OTHER INFORMATION
There have been no other material changes to the Company’s risk factors previously disclosed in the Company’s Form 10-K for the year ending December 31, 2008.
The following table provides information with respect to purchases made by or on behalf of the Company or any affiliated purchases (as defined in Rule 106-18 (a)(3) under the Securities Exchange Act of 1934) of the Company’s common stock during the quarter ended September 30, 2009. 30 COMPANY PURCHASES OF EQUITY SECURITIES
31
32 SIGNATURES Pursuant to the requirement 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. ROME BANCORP, INC.
33 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||
