EXHIBIT 13
<PAGE>
Roebling Financial Corp, Inc.
Corporate Profile
On January 31, 2000, our wholly owned subsidiary, Roebling Bank,
completed its reorganization and formed us as their parent holding company. As
part of the reorganization, Roebling Bank's stockholders became our stockholders
and Roebling Financial Corp., MHC became our majority stockholder. Roebling
Financial Corp., MHC, which is owned and controlled by the depositors of
Roebling Bank, was formed as Roebling Bank's mutual holding company in 1997.
Roebling Financial Corp, MHC conducts no significant business or operations of
its own.
We currently conduct our business through Roebling Bank with three full
service offices located in Roebling and New Egypt, New Jersey and a loan center
also located in Roebling, New Jersey. We offer a broad range of deposits and
loan products to individuals, families and small businesses. At September 30,
2000, we had assets of $60.0 million, deposits of $53.5 million, and
stockholder's equity of $5.5 million.
Stock Market Information
Our common stock began trading on the OTC Bulletin Board under the
trading symbol of "ROEB"on January 31, 2000. Prior to January 31, 2000, the
stock of Roebling Bank also traded on the OTC Bulletin Board under the symbol
"ROEB". The following table reflects high and low bid quotations. The quotations
reflect inter-dealer prices, without retail mark-up, mark-down, or commission,
and may not represent actual transactions.
Dividends
Date High ($) Low ($) Declared($)
---- -------- ------- -----------
October 1, 1998 - December 31, 1998 20.00 12.00 --
January 1, 1999 - March 31, 1999 16.50 12.25 --
April 1, 1999 - June 30, 1999 14.75 12.25 --
July 1, 1999 - September 30, 1999 15.00 13.13 --
October 1, 1999 to December 31, 1999 16.50 12.75 --
January 1, 2000 to March 31, 2000 16.00 11.00 --
April 1, 2000 to June 30, 2000 13.00 8.88 --
July 1, 2000 to September 30, 2000 15.00 13.00 --
The number of shareholders of record of common shares on the record
date of December 11, 2000, was approximately 190. This does not reflect the
number of persons or entities who held stock in nominee or "street" name through
various brokerage firms. At December 11, 2000, there were 425,500 common shares
outstanding. We may not declare or pay a cash dividend on any of our shares if
the effect of the declaration or payment of dividends would cause our regulatory
capital to be reduced below (1) the amount required for the liquidation account
established in connection with the reorganization, or (2) the regulatory capital
requirements imposed by the Office of Thrift Supervision.
2
<PAGE>
Selected Financial Information
At or for the
Years Ended September 30,
(Dollars in thousands,
except selected ratios)
2000(1) 1999
------------------- --------------
Selected Balance Sheet Data:
Assets........................................ $ 60,046 $57,879
Loans receivable (net)........................ 40,546 35,745
Deposits...................................... 53,471 50,036
Shareholders' equity.......................... 5,487 4,943
Selected Results of Operations:
Interest income............................... $ 4,073 $ 3,497
Interest expense.............................. 1,558 1,384
Net interest income........................... 2,515 2,113
Non-interest income........................... 371 313
Non-interest expense.......................... 1,984 1,929
Net income.................................... 521 284
Selected Ratios:
Return on average assets...................... 0.88% 0.54%
Return on average equity...................... 10.09 5.94
Average equity to average assets.............. 8.73 9.04
Equity to assets at period end................ 9.14 8.54
Net interest rate spread...................... 3.98 3.77
Net yield on average interest-earning assets.. 4.57 4.31
Non-performing loans to total assets.......... 0.38 0.73
Non-performing loans to total loans (net)..... 0.56 1.19
Earnings per share - basic ................... $1.26 $0.69
Earnings per share - diluted.................. $1.25 $0.69
Average number of shares outstanding.......... 425,500 425,500
--------------
(1) Effective January 31, 2000, Roebling Financial Corp, Inc. was formed as the
holding company for Roebling Bank.
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 contains safe
harbor provisions regarding forward-looking statements. When used in this
discussion, the words "believes", "anticipates", "contemplates", "expects", and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those projected. Those risks and
uncertainties include changes in interest rates, the ability to control costs
and expenses, year 2000 issues and general economic conditions. We undertake no
obligation to publicly release the results of any revisions to those
forward-looking statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Since we conduct no significant business other than owning all of the
common stock of Roebling Bank, references in this discussion to "we," "us," and
"our," refer collectively to Roebling Financial Corp, Inc. and Roebling Bank.
Overview
On January 31, 2000 Roebling Bank completed its reorganization and
formed us as their parent holding company. As part of the reorganization,
Roebling Bank's stockholders became our stockholders and Roebling Financial
Corp., MHC became our majority stockholder. Our common stock continues to trade
on the OTC Bulletin Board under the stock symbol "ROEB".
Despite the rise in interest rates by the Federal Reserve in fiscal
2000, we were able to increase net income and diluted earnings per share 83% and
81%, respectively. For the fiscal year ended September 30, 2000, we earned
$521,000 or $1.25 per diluted share as compared to $284,000, or $.69 per diluted
share for the fiscal year ended September 30, 1999. Additionally, assets
increased $2.2 million over last year, to $60.0 million. Our net loans
outstanding grew by 13%, reflecting strong performance by our loan production
staff. Asset quality continues to remain excellent. Lastly, we worked very hard
to combat the high interest rate environment and increased our interest rate
spread 21 basis points over last year, to 3.98 %.
Management of Interest Rate Risk and Market Risk
Because the majority of our assets and liabilities are sensitive to
changes in interest rates, our most significant form of market risk is interest
rate risk, or changes in interest rates. We are vulnerable to an increase in
interest rates to the extent that our interest-bearing liabilities mature or
reprice more rapidly than our interest-earning assets. Our lending activities
have historically emphasized the origination of adjustable rate and shorter
term, fixed rate loans secured by single-family residences. The primary source
of funds has been deposits with substantially shorter maturities. While having
interest-bearing liabilities that reprice more frequently than interest-earning
assets is generally beneficial to net interest income during a period of
declining interest rates, this type of an asset/liability mismatch is generally
detrimental during periods of rising interest rates.
4
<PAGE>
We have established an asset/liability committee that consists of the
Chairman of our Board of Directors and two outside Directors, our President and
members of our management team. The committee meets on a quarterly basis to
review loan and deposit pricing and production volumes, interest rate risk
analyses, liquidity and borrowing needs, and a variety of other assets and
liability management topics. General asset/liability matters are discussed at
the Board's regular meetings.
To reduce the effect of interest rate changes on net interest income,
we have adopted various strategies to enable us to improve the matching of
interest-earning asset maturities to interest-bearing liability maturities. The
principal elements of these strategies include seeking to:
o originate one to four family residential mortgage loans with adjustable
rate features or shorter term fixed rate loans for portfolio and sell
longer term fixed rate mortgages;
o attract low cost transaction and savings accounts which tend to be less
interest rate sensitive when interest rates rise;
o lengthen the maturities of our liabilities when it would be cost effective
through the pricing and promotion of longer term certificates of deposit;
o maintain an investment portfolio, with short to intermediate terms to
maturity or adjustable interest rates, that provides a stable cash flow,
thereby providing investable funds in varying interest rate cycles.
We have made a significant effort to maintain our level of lower-cost
deposits as a method of enhancing profitability. In the past year, our level of
demand deposits has increased significantly. At September 30, 2000, we had
approximately $33.4 million, or 62%, of our deposits in low-cost savings,
checking and money market accounts. These deposits have traditionally remained
relatively stable and are expected to be only moderately affected in a period of
rising interest rates. This stability has enabled us to offset the impact of
rising rates in other deposit accounts.
Net Portfolio Value
Exposure to interest rate risk is actively monitored by our
management. Our objective is to maintain a consistent level of profitability
within acceptable risk tolerances across a broad range of potential interest
rate environments. In addition to various analyses, we use the Office of Thrift
Supervision ("OTS") Net Portfolio Value ("NPV") Model, which calculates changes
in net portfolio value, to monitor our exposure to interest rate risk. NPV is
equal to the estimated present value of assets minus the present value of
liabilities plus the net present value of off-balance-sheet contracts. The
Interest Rate Risk Exposure Report shows the degree to which balance sheet line
items and net portfolio value are potentially affected by a 100 to 300 basis
point (1/100th of a percentage point) upward and downward parallel shift (shock)
in the Treasury yield curve.
5
<PAGE>
The following table represents our NPV ratios at September 30, 2000.
This data was calculated by the OTS, based upon information we provided to them.
Changes NPV
in Rate Ratio(1) Change(2)
--------- -------- ---------
10.36% -156 bp
+300 bp
10.99% -93 bp
+200 bp
11.54% -38 bp
+100 bp
11.92%
0 bp
12.00% +8 bp
-100 bp
11.94% +3 bp
-200 bp
11.99% +8 bp
-300 bp
(1) Calculated as the estimated NPV divided by present value of assets.
(2) Calculated as the increase (decrease) in the NPV ratio assuming the
indicated change in interest rates over the estimated NPV ratio
assuming no change in interest rates.
Computations of prospective effects of hypothetical interest rate
changes are based on numerous assumptions, including relative levels of market
interest rates, prepayments and deposit run-offs, and should not be relied upon
as indicative of actual results. Certain shortcomings are inherent in such
computations. Although certain assets and liabilities may have similar
maturities or periods of repricing, they may react at different times and in
different degrees to changes in the market interest rates. The interest rates on
certain types of assets and liabilities may fluctuate in advance of changes in
market interest rates, while rates on other types of assets and liabilities may
lag behind changes in market interest rates. Certain assets, such as adjustable
rate mortgages, generally have features which restrict changes in interest rates
on a short term basis and over the life of the asset. In the event of a change
in interest rates, prepayments and early withdrawal levels could deviate
significantly from those assumed in making the calculations set forth above.
Additionally, an increased credit risk may result as the ability of many
borrowers to service their debt may decrease in the event of an interest rate
increase.
6
<PAGE>
Average Balance Sheet, Interest Rates and Yields
The following tables set forth certain information relating to our
average balance sheet and reflects the average yield on assets and average cost
of liabilities for the periods indicated. Such yields and costs are derived by
dividing income or expense by the average balance of assets or liabilities,
respectively, for the periods presented. Average balances are generally derived
from month-end balances. Management does not believe that the use of month-end
balances instead of daily average balances has caused any material differences
in the information presented.
<TABLE>
<CAPTION>
For the Year Ended September 30, For the Year Ended September 30,
--------------------------------- --------------------------------
2000 1999
--------------------------------- --------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
(Actual) (Actual)
(Dollars in thousands) (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1) $39,526 $3,125 7.91% $31,818 $2,505 7.87%
Mortgage-backed securities 5,657 351 6.20 5,375 287 5.34
Investment securities available for sale 23 1 4.35 67 3 4.48
Investment securities held to maturity 8,842 538 6.08 9,302 577 6.20
Other interest-earning assets (2) 933 58 6.22 2,500 125 5.00
------- ------ ------- ------
Total interest-earning assets 54,981 $4,073 7.41 49,062 $3,497 7.13
------ ------
Non-interest-earning assets 4,161 3,863
------- -------
Total assets $59,142 $52,925
======= =======
Interest-bearing liabilities:
Interest-bearing checking $8,129 $107 1.32% $7,648 $110 1.43%
Savings accounts 13,053 328 2.51 11,578 291 2.51
Money market accounts 5,370 177 3.30 4,344 133 3.06
Certificates of deposit 17,953 890 4.96 17,284 835 4.83
Borrowings 891 56 6.29 303 15 4.95
------- ------ ------- ------
Total interest-bearing liabilities 45,396 $1,558 3.43 41,157 $1,384 3.36
----- ------
Non-interest-bearing liabilities (3) 8,582 6,984
------- -------
Total liabilities 53,978 48,141
Stockholders' equity 5,164 4,784
------- -------
Total liabilities and stockholders' $59,142 $52,925
======= =======
equity
Net interest income $2,515 $2,113
====== ======
Interest rate spread (4) 3.98% 3.77%
Net yield on interest-earning assets (5) 4.57% 4.31%
Ratio of average interest-earning assets
to average interest-bearing liabilities 121.11% 119.21%
</TABLE>
---------------------------------
(1) Average balances include non-accrual loans.
(2) Includes interest-bearing deposits in other financial institutions and FHLB
stock.
(3) Includes non-interest-bearing deposits of $7,373 and $6,184 for the years
ended September 30, 2000 and 1999, respectively.
(4) Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(5) Net yield on interest-earning assets represents net interest income as a
percentage of average interest-earning assets.
7
<PAGE>
Rate/Volume Analysis
The table below sets forth certain information regarding changes in our
interest income and interest expense for the periods indicated. For each
category of interest-earning assets and interest-bearing liabilities, the table
distinguishes between (i) changes attributable to volume (changes in average
volume multiplied by prior period's rate); (ii) changes attributable to rates
(changes in rate multiplied by old average volume); (iii) changes in rate-volume
(changes in average volume multiplied by the change in rate).
<TABLE>
<CAPTION>
Year Ended September 30, Year Ended September 30,
---------------------------------- ---------------------------------
2000 vs. 1999 1999 vs. 1998
---------------------------------- ------------------------------
Increase (Decrease) Increase (Decrease)
Due to Due to
------- ------
Rate/ Rate/
Volume Rate Volume Net Volume Rate Volume Net
------ ----- ------ ---- ------ ---- ------ ---
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable $ 606 $ 11 $ 3 $ 620 $ 437 $(137) $ (27) $ 273
Mortgage-backed securities 15 47 2 64 154 (17) (16) 121
Investment securities
available for sale (2) - - (2) (3) (1) - (4)
Investment securities
held to maturity (29) (11) 1 (39) 133 (43) (11) 79
Other interest-earning assets (78) 30 (19) (67) 66 (24) (16) 26
----- ----- ----- ----- ----- ----- ----- -----
Total interest-earning assets $ 512 $ 77 $ (13) $ 576 $ 787 $(222) $ (70) $ 495
===== ===== ===== ===== ===== ===== ===== =====
Interest-bearing liabilities:
Interest-bearing checking 7 (9) (1) (3) 44 (21) (10) 13
Savings accounts 37 - - 37 95 (13) (5) 77
Money market accounts 31 10 3 44 45 (19) (7) 19
Certificates of deposit 32 22 1 55 104 (57) (7) 40
Borrowings 29 4 8 41 14 (8) (7) (1)
----- ----- ----- ----- ----- ----- ----- -----
Total interest-bearing
liabilities $ 136 $ 27 $ 11 $ 174 $ 302 $(118) $ (36) $ 148
===== ===== ===== ===== ===== ===== ===== =====
Net interest income $ 376 $ 50 $ (24) $ 402 $ 485 $(104) $ (34) $ 347
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
Financial Condition
Total assets increased by $2.2 million or 4% to $60.0 million at
September 30, 2000, from $57.9 million at September 30, 1999. This increase is
primarily due to growth in net loans receivable of $4.8 million or 13%, offset
by a reduction in balances of securities and mortgage-backed securities held to
maturity of $2.4 million. Within the loan portfolio, the increase came primarily
from a $2.0 million increase in one to four family residential mortgages, $1.6
million in home equity loans and $1.0 million in net construction loan balances.
The decreases in the held-to-maturity portfolios were due to maturities and
principal repayments.
8
<PAGE>
Deposits increased by $3.5 million or 7% to $53.5 million at September
30, 2000, from $50.0 million at September 30, 1999. Deposits, after interest
credited, increased due primarily to the growth of our newest location in New
Egypt and to an increase in municipal deposits.
Results of Operations
Analysis of Net Interest Income. Our results of operations are
primarily dependent on our net interest income, which is the difference between
the interest income earned on our assets, primarily loans and investments, and
the interest expense on our liabilities, primarily deposits and borrowings. Net
interest income may be affected significantly by general economic and
competitive conditions and policies of regulatory agencies, particularly those
with respect to market interest rates. The results of our operations are also
influenced by the level of non-interest expenses, such as employee salaries and
benefits, and other income, such as loan-related fees and fees on
deposit-related services.
Net Income. Net income increased $237,000 to $521,000 for the year
ended September 30, 2000, as compared to $284,000 for the year ended September
30, 1999. The increase in net income in fiscal 2000 was primarily the result of
a $402,000 increase in net interest income offset by a $26,000 increase in
provision for loan losses and a $141,000 increase in income taxes.
Net Interest Income. Net interest income increased $402,000, or 19%, to
$2.5 million for the year ended September 30, 2000. The increase was primarily
due to higher average balances of net loans receivable offset somewhat by higher
average balances of deposits. Our interest rate spread, which is the difference
between the yield on average interest-earning assets and the cost of average
interest-bearing liabilities, increased to 3.98% for the year ended September
30, 2000, from 3.77% for the year ended September 30, 1999.
Interest Income. Interest income increased to $4.1 million for the year
ended September 30, 2000, from $3.5 million for the year ended September 30,
1999. Interest on loans receivable increased $620,000 or 25%. These increases
were primarily the result of an increase of $7.7 million in the average loans
receivable balance. Interest income on securities held to maturity decreased by
$39,000 for the year ended September 30, 2000, from $577,000 to $538,000, due to
a $460,000 decrease in the average balance as well as a decrease in the yield
from 6.20% to 6.08%. Interest income on mortgage-backed securities increased
$64,000 to $351,000 for the year ended September 30, 2000, from $287,000 for the
year ended September 30, 1999, primarily due to an increase in the yield from
5.34% to 6.20%. Interest income on other interest-earning assets decreased
$67,000 to $58,000 for the year ended September 30, 2000, from $125,000 for the
year ended September 30, 1999. The decrease is largely due to a $1.6 million
decrease in the average balances, partially offset by an increase in the average
yield, from 5.00% to 6.22%. The yield on the average balance of all
interest-earning assets was 7.41% and 7.13% for the years ended September 30,
2000 and 1999, respectively.
Interest Expense. Interest expense increased by $174,000, or 13%, to
$1.6 million for the year ended September 30, 2000, from $1.4 million for the
year ended September 30, 1999, primarily due to a $3.7 million increase in the
average balance of interest-bearing deposit accounts and also to an increase in
the cost of certificates of deposit and money market accounts. The total cost of
interest-bearing liabilities increased slightly to 3.43% for the year ended
September 30, 2000 from 3.36% for the year ended September 30, 1999.
Provision for Loan Losses. The provision for loan losses for fiscal
2000 increased $26,000 to $47,000, from $21,000 for fiscal 1999. We continually
evaluate the adequacy of the allowance for
9
<PAGE>
loan losses, which encompasses the overall risk characteristics of the various
portfolio segments, past experience with losses, the impact of economic
conditions on borrowers and other relevant conditions. We believe the allowance
for loan losses is adequate. However, there can be no assurance that the
allowance for loan losses will be adequate to cover significant losses, if any,
that we might incur in the future.
Non-interest Income. Non-interest income increased $58,000, or 18%, to
$371,000 for the year ended September 30, 2000, as compared to $313,000 for the
year ended September 30, 1999, due to increases in fees received for deposit
account servicing and ATM transaction fees.
Non-interest Expense. Non-interest expense increased by $54,000, or
3%, to $2.0 million. Compensation and employee benefits expense increased by
$46,000 or 4% to $1,076,000. The increase in compensation and benefits expense
during fiscal 2000 was primarily the result of general cost of living and merit
raises to our employees and officers and the addition of a Chief Operating
Officer to the management team. Occupancy and equipment expense increased by
$22,000, or 13%, to $189,000. We opened a separate Loan Center office during the
year to accommodate growth, which contributed largely to the increase in
expenses. Service bureau and data processing expenses increased $43,000, or 19%,
to $267,000 from an increase in overall data processing and check clearing costs
related to the growth in our deposit transaction accounts. Other expenses
decreased $47,000, or 10%, to $436,000 from fiscal year 1999 due largely to a
decrease in legal expenses of $42,000. The fiscal year ended September 30, 1999
had a higher level of legal expenses related to actions related to delinquencies
and foreclosures and the formation of us.
Provision for Income Taxes. The provision for income taxes increased
$142,000 to $334,000 for the year ended September 30, 2000, from $192,000 for
the year ended September 30, 1999. The increase was the result of the increase
in income before taxes. The effective tax rates for fiscal 2000 and 1999 were
39% and 40%, respectively.
Liquidity and Capital Resources
Management believes it has ample cash flows and liquidity to meet its
loan commitments of $125,000 and unused lines of credit of $3.9 million at
September 30, 2000. We have the ability to borrow from the FHLB of New York, or
others, should the need arise. As of September 30, 2000, we had no borrowed
funds.
We are required under federal regulations to monitor certain levels of
liquid assets, which include certain United States government and agency
obligations and other approved investments. Current regulations require that our
subsidiary, Roebling Bank, maintain liquid assets of not less than 4%. For the
quarter ended September 30, 2000, Roebling Bank's regulatory liquidity was
32.14%. Roebling Bank is also subject to federal regulations that impose certain
minimum capital requirements. See Note 12 to our consolidated financial
statements.
Net cash provided by operations was $942,000 and $515,000 for the
years ended September 30, 2000 and 1999, respectively. Cash flows from
operations increased primarily due to an increase in net income.
Net cash used in investing activities for the year ended September 30,
2000 totaled $2.3 million, a decrease of $7.8 million from $10.1 million for the
year ended September 30, 1999. The largest component of the decrease was due to
the $6.0 million decrease in the use of funds relating to
10
<PAGE>
the activity in the securities portfolio. For the year ended September 30, 1999
we used $3.7 million for the purchase of investment and mortgage-backed
securities, net of proceeds from maturities and repayments. For the year ended
September 30, 2000, there were no securities purchased but $2.3 million was
provided by maturities and repayments of investment and mortgage-backed
securities.
Net cash provided by financing activities for the year ended September
30, 2000 totaled $1.3 million compared to $10.8 million for the year ended
September 30, 1999. Net cash provided during the year ended September 30, 2000
resulted primarily from an increase of net deposits of $3.4 million, offset by a
$2 million dollar decrease in borrowings. The net cash provided in the year
ended September 30, 1999 resulted from an increase in deposits of $8.8 million
and an increase in borrowings of $2.0 million.
We monitor projected liquidity needs and determine the levels desired
based upon our commitments to make loans and our ability to generate funds.
Liquidity may be adversely affected by unexpected deposit outflows, excessive
interest rates paid by competitors, adverse publicity relating to the banking
industry and similar matters.
11
<PAGE>
Fontanella and Babitts
CERTIFIED PUBLIC ACCOUNTANTS 534 Union Boulevard
Totowa Boro, New Jersey 07512
Tel: (973) 595-5300
Fax: (973) 595-5890
To the Board of Directors
Roebling Financial Corp, Inc. and Subsidiary
INDEPENDENT AUDITOR'S REPORT
----------------------------
We have audited the accompanying consolidated statements of financial condition
of Roebling Financial Corp, Inc. and Subsidiary, as of September 30, 2000 and
1999, and the related consolidated statements of income, comprehensive income,
stockholders' equity and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Roebling Financial
Corp, Inc. and Subsidiary, at September 30, 2000 and 1999, and the results of
their operations and cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/Fontenella and Babitts
November 3, 2000
12
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
STATEMENTS OF FINANCIAL CONDITION
---------------------------------
<TABLE>
<CAPTION>
September 30,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Assets
------
Cash and due from banks $ 2,774,712 $ 2,545,449
Interest bearing deposits 798,809 1,027,758
------------ ------------
Total cash and cash equivalents 3,573,521 3,573,207
FHLB term deposits - 250,000
Certificates of deposit 300,000 300,000
Securities available for sale 28,600 24,475
Securities held to maturity; approximate fair
value of $8,237,000 (2000) and $9,471,000 (1999) 8,409,550 9,656,934
Mortgage-backed securities held to maturity,
approximate fair value of $5,106,000 (2000) and $6,196,000 (1999) 5,183,781 6,293,910
Loans receivable, net 40,545,961 35,745,242
Real estate owned 43,699 210,549
Accrued interest receivable 393,677 374,728
Federal Home Loan Bank of New York stock, at cost 387,800 293,600
Premises and equipment 1,089,514 1,086,670
Other assets 89,487 69,551
------------ ------------
$ 60,045,590 $ 57,878,866
============ ============
Liabilities and stockholders' equity
------------------------------------
Liabilities
-----------
Deposits $ 53,471,360 $ 50,036,141
Borrowed funds - 2,125,440
Advances from borrowers for taxes and insurance 443,623 419,986
Accrued interest payable 40,014 49,317
Other liabilities 603,229 304,918
------------ ------------
Total liabilities 54,558,226 52,935,802
------------ ------------
Commitments and contingencies - -
Stockholders' equity
Serial preferred stock, no par value, authorized 1,000,000 shares, no shares issued - -
Common stock; par value $.10; authorized 4,000,000 shares; shares
issued and outstanding 425,500; 42,550 42,550
Additional paid-in-capital 1,656,589 1,651,789
Unallocated employee stock ownership plan shares (109,760) (125,440)
Retained earnings - substantially restricted 3,881,524 3,360,351
Accumulated other comprehensive income - unrealized gain on securities
available for sale, net of tax 16,461 13,814
------------ ------------
Total stockholders' equity 5,487,364 4,943,064
------------ ------------
$ 60,045,590 $ 57,878,866
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
STATEMENTS OF INCOME
--------------------
Year Ended
September 30,
-----------------------
2000 1999
---------- ----------
Interest income:
Loans receivable $3,124,784 $2,505,644
Securities available for sale 444 2,572
Securities held to maturity 538,210 577,233
Mortgage-backed securities held to maturity 351,298 286,766
Other interest earning assets 58,347 125,457
---------- ----------
Total interest income 4,073,083 3,497,672
---------- ----------
Interest expense:
Deposits 1,502,199 1,369,440
Borrowed funds 56,021 14,780
---------- ----------
Total interest expense 1,558,220 1,384,220
---------- ----------
Net interest income 2,514,863 2,113,452
Provision for loan losses 47,000 21,000
---------- ----------
Net interest income after
provision for loan losses 2,467,863 2,092,452
---------- ----------
Non-interest income:
Loan fees 56,762 61,539
Account servicing and other 313,183 244,058
Gain on sale of loans 969 7,457
---------- ----------
Total non-interest income 370,914 313,054
---------- ----------
Non-interest expense:
Compensation and benefits 1,076,376 1,030,665
Occupancy and equipment 189,383 167,778
Service bureau and data processing 267,181 223,795
Federal Insurance premiums 14,845 24,585
Other 435,868 482,745
---------- ----------
Total non-interest expense 1,983,653 1,929,568
---------- ----------
Income before income taxes 855,124 475,938
Income taxes 333,951 191,552
---------- ----------
Net income $ 521,173 $ 284,386
========== ==========
Basic earnings per share $ 1.26 $ 0.69
========== ==========
Diluted earnings per share $ 1.25 $ 0.69
========== ==========
Weighted average shares outstanding - basic 413,544 412,172
========== ==========
Weighted average shares outstanding - diluted 417,302 412,935
========== ==========
See accompanying notes to consolidated financial statements.
14
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
STATEMENTS OF COMPREHENSIVE INCOME
----------------------------------
Year Ended
September 30,
---------------------
2000 1999
--------- ---------
Net income $ 521,173 $ 284,386
Other comprehensive income, net of income taxes:
Unrealized holding gains (losses) on
securities available for sale, net of income
taxes (benefit) of $821 and $(219), respectively 2,647 (1,399)
--------- ---------
Comprehensive income $ 523,820 $ 282,987
========= =========
See accompanying notes to consolidated financial statements.
15
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
STATEMENTS OF STOCKHOLDERS' EQUITY
----------------------------------
<TABLE>
<CAPTION>
Accumulated
Additional Unallocated Other
Common Paid-in ESOP Retained Comprehensive
Stock Capital Shares Earnings Income Total
----------- ------------ -------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance - September 30, 1998 $ 42,550 $ 1,645,612 $ (141,120) $ 3,075,965 $ 15,213 $ 4,638,220
Net income - - - 284,386 - 284,386
Amortization of ESOP shares - 6,177 15,680 - - 21,857
Change in unrealized gain
on securities available
for sale, net of tax - - - - (1,399) (1,399)
----------- ----------- ----------- ----------- ----------- -----------
Balance - September 30, 1999 42,550 1,651,789 (125,440) 3,360,351 13,814 4,943,064
Net income - - - 521,173 - 521,173
Amortization of ESOP shares - 4,800 15,680 - - 20,480
Change in unrealized gain
on securities available
for sale, net of tax - - - - 2,647 2,647
----------- ----------- ----------- ----------- ----------- -----------
Balance - September 30, 2000 $ 42,550 $ 1,656,589 $ (109,760) $ 3,881,524 $ 16,461 $ 5,487,364
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
Year Ended
September 30,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 521,173 $ 284,386
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 69,008 70,640
Amortization of premiums and discounts on
investment securities held to maturity, net 15,384 16,750
Amortization of premiums on mortgage-backed securities 17,754 42,590
Amortization of deferred loan fees and costs, net 2,188 (82,736)
Provision for loan losses 47,000 21,000
Provision for losses on real estate owned 1,579 16,021
Gain on sale of loans (969) (7,457)
(Increase) decrease in other assets (19,936) 37,476
Increase in accrued interest receivable (18,949) (40,654)
(Decrease) increase in accrued interest payable (9,303) 3,351
Increase in other liabilities 296,833 132,103
Allocation of ESOP shares 20,480 21,857
------------ ------------
Net cash provided by operations 942,242 515,327
------------ ------------
Cash flows from investing activities:
Net decrease in FHLB term deposits 250,000 2,450,000
Purchase of certificates of deposit - (300,000)
Proceeds from call of securities available for sale - 100,000
Purchase of securities held to maturity - (6,770,547)
Proceeds from maturities of securities held to maturity 1,232,000 5,585,000
Purchase of mortgage-backed securities held to maturity - (4,911,299)
Proceeds from principal repayments of
mortgage-backed securities held to maturity 1,092,375 2,418,695
Loan originations, net of principal repayments (5,611,709) (10,581,673)
Proceeds from sale of loans 719,072 1,981,505
Proceeds from sale of real estate owned 208,970 -
Purchase of Federal Home Loan Bank Stock (94,200) (49,600)
Purchase of premises and equipment (71,852) (18,788)
Proceeds from sale of premises and equipment - 7,000
------------ ------------
Net cash used in investing activities (2,275,344) (10,089,707)
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS (Cont'd)
---------------------------------
<TABLE>
<CAPTION>
Year Ended
September 30,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from financing activities:
Net increase in deposits 3,435,219 8,806,825
Net change in short-term borrowings (2,000,000) 2,000,000
Repayment of ESOP loan (125,440) (15,680)
Increase in advance payments by borrowers for taxes and insurance 23,637 33,471
------------ ------------
Net cash provided by financing activities 1,333,416 10,824,616
------------ ------------
Net increase in cash and cash equivalents 314 1,250,236
Cash and cash equivalents - beginning 3,573,207 2,322,971
------------ ------------
Cash and cash equivalents - ending $ 3,573,521 $ 3,573,207
============ ============
Supplemental Disclosures of Cash Flow Information
-------------------------------------------------
Cash paid for:
Interest on deposits and advances $ 1,567,523 $ 1,380,869
============ ============
Income taxes $ 180,307 $ 119,000
============ ============
Supplemental Schedule of Noncash Investing Activities
-----------------------------------------------------
Transfers from loans receivable to real estate owned $ 43,699 $ 226,570
============ ============
Change in unrealized gain on securities
available for sale, net of tax $ 2,647 $ (1,399)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------
The following is a description of the more significant accounting policies used
in preparation of the accompanying consolidated financial statements of Roebling
Financial Corp, Inc. and Subsidiary (the "Company").
Principles of Consolidation
---------------------------
The consolidated financial statements are comprised of the accounts of Roebling
Financial Corp, Inc. and its wholly-owned subsidiary, Roebling Bank (the
"Bank"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
Basis of Consolidated Financial Statement Presentation
------------------------------------------------------
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amount of assets and liabilities as of the date of the
statement of financial condition and revenues and expenses for the period then
ended. Actual results could differ significantly from those estimates. Material
estimates that are particularly susceptible to significant changes in the near
term relate to the determination of the allowance for loan losses, the valuation
of foreclosed real estate and the assessment of prepayment risks associated with
mortgage- backed securities. Management believes that the allowance for loan
losses is adequate, foreclosed real estate is appropriately valued and
prepayment risks associated with mortgage-backed securities are properly
recognized. While management uses available information to recognize losses on
loans and foreclosed real estate, future additions to the allowance for loan
losses or further writedowns of foreclosed real estate may be necessary based on
changes in economic conditions in the Company's market area. Additionally,
assessments of prepayment risks related to mortgage-backed securities are based
upon current market conditions, which are subject to frequent change.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowance for loan losses
and foreclosed real estate. Such agencies may require the Company to recognize
additions to the allowance for loan losses or additional writedowns on
foreclosed real estate based on their judgements about information available to
them at the time of their examination.
Concentration of Risk
---------------------
The Company's lending and real estate activity is concentrated in real estate
and loans secured by real estate located in the State of New Jersey.
The Company's loan portfolio is predominantly made up of 1 to 4 family unit
first mortgage loans in Burlington County. These loans are typically secured by
first lien positions on the respective real estate properties and are subject to
the Company's loan underwriting policies. In general, the Company's loan
portfolio performance is dependent upon the local economic conditions.
19
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
-----------------------------------------------
Interest-Rate Risk
------------------
The Company is principally engaged in the business of attracting deposits from
the general public and using these deposits to make loans secured by real estate
and, to a lesser extent, consumer loans and to purchase mortgage-backed and
investment securities. The potential for interest-rate risk exists as a result
of the shorter duration of the Company's interest-sensitive liabilities compared
to the generally longer duration of interest-sensitive assets.
In a rising interest rate environment, liabilities will reprice faster than
assets, thereby reducing the market value of long-term assets and net interest
income. For this reason, management regularly monitors the maturity structure of
the Company's assets and liabilities in order to measure its level of
interest-rate risk and to plan for future volatility.
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include cash and amounts due from depository
institutions, interest-bearing accounts and federal funds sold. For the purpose
of the statements of cash flows, the Company considers all highly liquid debt
instruments with original maturities of three months or less to be cash
equivalents.
Investments and Mortgage-backed Securities
------------------------------------------
Debt securities over which there exists positive intent and ability to hold to
maturity are classified as held-to-maturity securities and reported at amortized
cost. Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading securities
and reported at fair value, with unrealized holding gains and losses included in
earnings. Debt and equity securities not classified as trading securities, nor
as held-to-maturity securities, are classified as available-for-sale securities
and reported at fair value, with unrealized holding gains or losses, net of
deferred income taxes, reported in a separate component of stockholders' equity.
Premiums and discounts on all securities are amortized/accreted using the
interest method. Interest and dividend income on securities, which includes
amortization of premiums and accretion of discounts, is recognized in the
financial statements when earned. The adjusted cost basis of an identified
security sold or called is used for determining security gains and losses
recognized in the statements of income.
Loans Receivable
----------------
Loans receivable are stated at unpaid principal balances, less the allowance for
loan losses and net deferred loan origination fees and discounts.
Loan fees and certain direct loan origination costs are deferred, and the net
fee or cost is recognized as an adjustment to interest income using the interest
method over the contractual life of the loans, adjusted for estimated
prepayments based on the Company's historical prepayment experience.
The allowance for loan losses is increased by charges to income and decreased by
charge-offs (net of recoveries). Management's periodic evaluation of the
adequacy of the allowance is based on the Company's past loan loss experience,
known and inherent risks in the portfolio, adverse situations that may affect
the borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions.
20
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
-----------------------------------------------
Loans Receivable (Cont'd)
----------------
Uncollectible interest on loans that are contractually past due is charged off,
or an allowance is established based on management's periodic evaluation. The
allowance is established by a charge to interest income equal to all interest
previously accrued, and income is subsequently recognized only to the extent
that cash payments are received until, in management's judgement, the borrower's
ability to make periodic interest and principal payments is reestablished, in
which case the loan is returned to accrual status.
Premises and Equipment
----------------------
Land is carried at cost. Premises and equipment are carried at cost less
accumulated depreciation and amortization. Significant renovations and additions
are capitalized. When assets are retired or otherwise disposed of, the cost and
related accumulated depreciation are removed from the accounts and any resulting
gain or loss is reflected in income for the period. The cost of maintenance and
repairs is charged to expense as incurred. The Company computes depreciation on
a straight-line basis over the estimated useful lives of the assets.
Real Estate Owned
-----------------
Real estate properties acquired through, or in lieu of, loan foreclosure are
initially recorded at the lower of cost or fair value at the date of
foreclosure. Costs relating to development and improvement of property are
capitalized, whereas costs relating to the holding of property are expensed.
Subsequent valuations are periodically performed by management, and an allowance
for losses is established by a charge to operations if the carrying value of a
property exceeds its fair value less estimated selling cost. Gains and losses
from sale of these properties are recognized as they occur. Income from
operating properties is recorded in operations as earned.
Income Taxes
------------
Federal income taxes and state taxes have been provided on the basis of reported
income. Deferred income taxes are provided for certain items in income and
expenses which enter into the determination of income for financial reporting
purposes in different periods than for income tax purposes.
Accounting for Stock-Based Compensation
---------------------------------------
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation," issued by the Financial Accounting Standards Board
("FASB"), establishes financial accounting and reporting standards for
stock-based employee compensation plans. While all entities are encouraged to
adopt the "fair value based method" of accounting for employee stock
compensation plans, SFAS 123 also allows an entity to continue to measure
compensation cost under such plans using the "intrinsic value based method"
specified in Accounting Principles Board Opinion ("APB") No. 25. The Company has
elected to apply the intrinsic value based method. Included in Note 13 to
consolidated financial statements are the pro forma disclosures required by SFAS
123.
21
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
----------------------------------------------
Earnings Per Share
------------------
Basic earnings per share is computed by dividing net income for the year by the
weighted average number of shares of common stock outstanding, adjusted for
unearned shares of the ESOP. Diluted earnings per share is computed by adjusting
the weighted average number of shares of common stock outstanding to include the
effect of outstanding stock options and compensation grants, if dilutive, using
the treasury stock method.
Reclassification
----------------
Certain amounts for the year ended September 30, 1999, have been reclassified to
conform with the current year's presentation.
2. INVESTMENT SECURITIES
-------------------------
Securities Available For Sale
<TABLE>
<CAPTION>
September 30, 2000
------------------------------------------------
Gross Unrealized
Amortized ---------------------- Carrying
Cost Gains Losses Value
------------------------ ---------- ----------
<S> <C> <C> <C> <C>
Federal National Mortgage
Association Stock $ 2,888 $ 25,712 $ - $ 28,600
============ ======== ========== =========
</TABLE>
<TABLE>
<CAPTION>
September 30, 1999
------------------------------------------------
Gross Unrealized
Amortized ---------------------- Carrying
Cost Gains Losses Value
------------------------ ---------- ----------
<S> <C> <C> <C> <C>
Federal National Mortgage
Association Stock $ 2,888 $ 21,587 $ - $ 24,475
============ ========= ========== =========
</TABLE>
Securities Held to Maturity
<TABLE>
<CAPTION>
September 30, 2000
----------------------------------------------------
Gross Unrealized
Amortized ---------------------- Carrying
Cost Gains Losses Value
------------------------ ----------- ------------
<S> <C> <C> <C> <C>
U.S. Government and Agency Securities:
Due in one year or less $ 250,000 $ - $ 2,578 $ 247,422
Due after one year through five years 4,049,651 - 69,621 3,980,030
Due after five years through ten years 1,948,885 - 79,598 1,869,287
Due after ten years 289,378 6,497 - 295,875
Corporate Debt Instruments:
Due in one year or less 551,526 - 2,368 549,158
Due after one year through five years 1,320,110 - 24,535 1,295,575
------------ --------- ----------- -----------
$ 8,409,550 $ 6,497 $ 178,700 $ 8,237,347
=========== ========= =========== ===========
</TABLE>
22
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
2. INVESTMENT SECURITIES (Cont'd)
-------------------------
<TABLE>
<CAPTION>
September 30, 1999
----------------------------------------------------
Gross Unrealized
Amortized ---------------------- Carrying
Cost Gains Losses Value
------------------------ ----------- ------------
<S> <C> <C> <C> <C>
U.S. Government and Agency Securities:
Due in one year or less $ 242,358 $ 1,835 $ - $ 244,193
Due after one year through five years $ 4,301,916 - 77,316 4,224,600
Due after five years 2,237,586 5,856 84,161 2,159,281
Corporate Debt Instruments:
Due after one year through five years 2,875,074 136 31,815 2,843,395
------------ --------- ---------- -----------
$ 9,656,934 $ 7,827 $ 193,292 $9,471,469
============ ========= ========== ===========
</TABLE>
Securities with a carrying value of $250,000 and $242,000 as of September 30,
2000 and 1999, respectively are pledged as security for deposits of governmental
entities under the provisions of the Governmental Unit Deposit Protection Act
(GUDPA).
There were no sales of securities during the years ended September 30, 2000 and
1999.
3. MORTGAGE-BACKED SECURITIES, HELD TO MATURITY
<TABLE>
<CAPTION>
September 30, 2000
---------------------------------------------------
Gross Unrealized
Amortized ---------------------- Carrying
Cost Gains Losses Value
------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
CMO $ 2,089,613 $ 4,380 $ 58,451 $2,035,542
GNMA 1,249,508 1,659 10,283 1,240,884
FHLMC 884,115 2,000 531 885,584
FNMA 960,545 1,251 18,081 943,715
----------- --------- ----------- -----------
$ 5,183,781 $ 9,290 $ 87,346 $5,105,725
=========== ========= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
September 30, 1999
----------------------------------------------------
Gross Unrealized
Amortized ---------------------- Carrying
Cost Gains Losses Value
------------ ----------- --------- ------------
<S> <C> <C> <C> <C>
CMO $ 2,232,305 $ 1,776 $ 41,075 $ 2,193,006
GNMA 1,628,910 154 30,896 1,598,168
FHLMC 1,284,436 701 13,848 1,271,289
FNMA 1,148,259 1,507 15,853 1,133,913
------------ ----------- --------- -----------
$ 6,293,910 $ 4,138 $ 101,672 $ 6,196,376
============ =========== ========== ===========
</TABLE>
There were no sales of mortgage-backed securities during the years ended
September 30, 2000 and 1999.
23
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
4. LOANS RECEIVABLE, NET
-------------------------
September 30,
----------------------------
2000 1999
------------ ------------
First mortgage loans:
One to four family residential $ 20,997,483 $ 19,036,242
Commercial real estate 2,633,969 2,579,585
Construction 2,186,261 754,901
------------ ------------
25,817,713 22,370,728
------------ ------------
Consumer and other loans:
Home equity 14,836,440 13,234,546
Automobile 193,051 238,372
Secured by deposits 135,382 92,946
Student 39,523 23,609
Unsecured 272,565 278,376
Commercial 240,068 44,501
Mobile home 147,087 112,536
------------ ------------
15,864,116 14,024,886
------------ ------------
Total loans 41,681,829 36,395,614
------------ ------------
Less:
Loans in process 962,335 507,897
Net deferred loan origination (costs) fees (55,148) (32,922)
Allowance for loan losses 228,681 175,397
------------ ------------
1,135,868 650,372
------------ ------------
$ 40,545,961 $ 35,745,242
============ ============
See Note 9 regarding loans pledged to secure borrowings.
At September 30, 2000 and 1999, non-accrual loans for which interest had been
discontinued totaled approximately $155,000 and $385,000, respectively. If
interest income on non-accrual loans had been current in accordance with their
original terms, approximately $13,500 and $59,000 of interest income for the
years ended September 30, 2000 and 1999, respectively, would have been recorded.
Interest income actually recognized on non-accrual loans totaled $14,600 and
$27,700 for the years ended September 30, 2000 and 1999, respectively. At
September 30, 2000, there were no commitments to lend additional funds to
borrowers whose loans are classified as non-accrual.
24
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
4. LOANS RECEIVABLE, NET (Cont'd)
--------------------------
Activity in the allowance for loan losses is summarized as follows:
Year Ending
September 30,
----------------------
2000 1999
--------- ---------
Balance - beginning $ 175,397 $ 279,140
Provision charged to income 47,000 21,000
Charge offs (1,364) (124,743)
Recoveries 7,648 -
--------- ---------
Balance - ending $ 228,681 $ 175,397
========= =========
The activity with respect to loans to directors, officers and associates of such
persons is as follows:
Year Ending
September 30,
----------------------
2000 1999
--------- ---------
Balance - beginning $ 223,401 $ 240,544
Loans originated 142,789 4,150
Collection of principal (178,705) (21,293)
--------- ---------
Balance - ending $ 187,485 $ 223,401
========= =========
All loans are collateralized by deposits and/or real estate.
5. ACCRUED INTEREST RECEIVABLE
-------------------------------
September 30,
-------------------
2000 1999
-------- --------
Loans receivable $242,447 $196,772
Mortgage-backed securities 27,998 38,260
Investments 123,232 139,696
-------- --------
$393,677 $374,728
======== ========
25
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
6. PREMISES AND EQUIPMENT
---------------------------
September 30,
-----------------------
2000 1999
---------- ----------
Land $ 379,435 $ 379,435
Buildings and improvements 870,497 856,389
Furniture, fixtures and equipment 305,252 247,508
---------- ----------
1,555,184 1,483,332
Less accumulated depreciation 465,670 396,662
---------- ----------
$1,089,514 $1,086,670
========== ==========
Useful lives used in the calculation of depreciation are as follows:
Buildings 25 to 50 years
Paving and other building related additions 5 to 10 years
Furniture and equipment 5 to 10 years
7. LOAN SERVICING
-------------------
Mortgage loans serviced for others are not included in the accompanying
consolidated statements of financial condition. The unpaid principal balances of
these loans are summarized as follows:
September 30,
-------------------------
2000 1999
----------- -----------
Mortgage loan portfolios serviced for:
FNMA $15,309,000 $17,293,000
Other 148,000 126,000
----------- -----------
$15,457,000 $17,419,000
=========== ===========
Custodial escrow balances maintained in connection with the foregoing loan
servicing totaled approximately $207,000 and $241,000, at September 30, 2000 and
1999, respectively.
26
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
8. DEPOSITS
------------
Deposits consist of the following major classifications:
<TABLE>
<CAPTION>
September 30,
--------------------------------------------------------
2000 1999
-------------------------- ---------------------------
Weighted Weighted
Average Average
Yield Amount Yield Amount
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Non-interest-bearing deposits -% $ 7,932,475 -% $ 6,844,089
Interest-bearing checking accounts 1.29 8,191,445 1.15 7,558,924
Money market accounts 3.79 4,253,245 2.15 4,919,430
Savings accounts 2.50 12,986,914 2.50 12,975,756
Certificates of deposits 5.60 20,107,281 4.64 17,737,942
----------- ------------
Total deposits 3.21 $53,471,360 2.67 $ 50,036,141
=========== ===========
</TABLE>
The aggregate amount of deposits with a balance of $100,000 or more totaled
approximately $4,484,000 and $2,401,000 at September 30, 2000 and 1999,
respectively.
Scheduled maturities of certificates of deposit are as follows:
September 30,
---------------------------
2000 1999
---------------------------
(In Thousands)
1 year or less $ 15,750 $ 14,332
Over 1 year to 3 years 3,933 2,862
Over 3 years 42 544
----------- ------------
$ 20,107 $ 17,738
=========== ============
Interest expense on deposits is summarized as follows:
Year Ending
September 30,
---------------------------
2000 1999
---------------------------
Interest-bearing checking accounts $ 106,906 $ 108,167
Money market accounts 177,583 135,008
Savings accounts 328,036 291,443
Certificates of deposit 889,674 834,822
------------ -----------
Total $ 1,502,199 $ 1,369,440
============ ===========
27
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
9. BORROWED FUNDS
-------------------
Borrowings consist of the following:
<TABLE>
<CAPTION>
September 30,
-------------------------- Interest
2000 1999 Rate
----------- ---------- ---------------
<S> <C> <C> <C>
Advance from the Federal
Home Loan Bank of New York
maturing on October 1, 1999 $ - $2,000,000 5.60%
ESOP debt requiring quarterly
principal payments of $3,920,
plus interest, maturing during 2007 - 125,440 prime +.375%
----------- ----------
$ - $2,125,440
=========== ==========
</TABLE>
The Company has available an overnight line of credit and a one-month overnight
repricing line of credit with the Federal Home Loan Bank of New York ("FHLB"),
totaling $6,819,000, subject to the terms and conditions of the lender's
overnight advance program. As of September 30, 2000, the Company had no
borrowings under this program
At September 30, 2000 and 1999, the FHLB advances were secured by pledges of the
Company's investment in the capital stock of the FHLB totaling $387,800 and
$293,600 and loans receivable with a carrying value of $3,761,000 and
$4,177,000, respectively.
At September 30, 1999, the ESOP debt is secured by shares of the Company's
common stock.
10. INCOME TAXES
-----------------
The Bank qualifies as a savings institution under the provisions of the Internal
Revenue Code and was therefore, prior to September 30, 1996, permitted to deduct
from taxable income an allowance for bad debts based upon eight percent of
taxable income before such deduction, less certain adjustments. Retained
earnings at September 30, 2000, include approximately $306,000 of such bad debt,
which, in accordance with FASB Statement No. 109, "Accounting for Income Taxes,"
is considered a permanent difference between the book and income tax basis of
loans receivable, and for which income taxes have not been provided. If such
amount is used for purposes other than for bad debt losses, including
distributions in liquidation, it will be subject to income tax at the then
current rate.
28
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
10. INCOME TAXES (Cont'd)
-----------------
The components of income taxes are summarized as follows:
Year Ended
September 30,
-----------------------------
2000 1999
------------- -------------
Current tax expense:
Federal $ 332,658 $ 128,276
State 29,921 5,966
------------- -------------
362,579 134,242
------------- -------------
Deferred tax expense (benefit):
Federal (26,241) 52,531
State (2,387 4,779
------------- -------------
(28,628) 57,310
------------- -------------
$ 333,951 $ 191,552
============= =============
The provision for federal income taxes differs from that computed at the federal
statutory rates of 34% as follows:
Year Ended
September 30,
----------------------------
2000 1999
------------ -------------
Tax at statutory rates $ 290,742 $ 161,819
Increase in tax resulting from:
State taxes, net of federal tax effect 18,172 7,092
Other items 25,037 22,641
------------ -------------
$ 333,951 $ 191,552
============ =============
Effective rate 39% 40%
============ =============
29
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
10. INCOME TAXES (Cont'd)
-----------------
The following temporary differences gave rise to deferred tax assets and
liabilities:
September 30,
----------------------------
2000 1999
-------------- ------------
Deferred tax assets:
Allowance for loan losses $ 71,837 $ 53,607
Depreciation 9,450 9,717
----------------------------
Total deferred tax assets 81,287 63,324
--------------- ------------
Deferred tax liabilities:
Appreciation of securities available for sale 9,251 8,430
Accrual to cash adjustment 61,030 78,676
Deferred loan origination fees and costs, net 40,060 33,020
Discounts on investments 2,083 2,142
----------------------------
Total deferred tax liabilities 112,424 122,268
-------------- ------------
Net deferred tax liability
included in other liabilities $ 31,137 $ 58,944
============== ============
11. COMMITMENTS AND CONTINGENCIES
----------------------------------
Loan Commitments
----------------
The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers and
to reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit. Those instruments involve, to
varying degrees, elements of credit and interest-rate risk in excess of the
amount recognized in the statements of financial condition. The contract or
notional amounts of those instruments reflect the extent of the Company's
involvement in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual notional amount of those instruments. The Company
uses the same credit policies in making commitments and conditional obligations
as it does for on-balance-sheet instruments.
Unless noted otherwise, the Company does not require collateral or other
security to support financial instruments with credit risk.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company has approved equity lines of
credit unused but accessible to borrowers totaling $3.9 million and $3.7
million, at September 30, 2000 and 1999, respectively. The Company's experience
has been that approximately 60 percent of loan commitments are drawn upon by
customers.
30
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
11. COMMITMENTS AND CONTINGENCIES (Cont'd)
----------------------------------
Loan Commitments (Cont'd)
----------------
At September 30, 2000, the Company had outstanding commitments to originate
loans as follows:
Fixed rate home equity loan, 8.25% $ 27,500
Other secured loan, adjustable rate 97,500
--------
$125,000
========
Commitments are for 30 days for variable rate mortgages, 25 days for fixed rate
mortgages and 60 days for construction loans and commercial mortgages. There are
no commitments to sell any of the loans which have already been originated.
12. REGULATORY CAPITAL
-----------------------
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory - and possible additional discretionary-actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items, as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
following table) of tangible and core capital (as defined in the regulations) to
total assets and of total capital (as defined) to risk-weighted assets (as
defined). Management believes, as of September 30, 2000, that the Bank meets all
capital adequacy requirements to which it is subject.
As of August 1999, the most recent notification from the Office of Thrift
Supervision (OTS) categorized the Bank as "well capitalized" under the
regulatory framework for prompt corrective action. To be categorized as "well
capitalized," the Bank must maintain minimum total risk-based and core ratios,
as set forth in the accompanying table. There are no conditions or events since
that notification that management believes have changed the institution's
category.
31
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
12. REGULATORY CAPITAL (Cont'd)
-----------------------
The Bank's actual capital amounts and ratios are also presented in the table.
There is no deduction from capital for interest-rate risk.
<TABLE>
<CAPTION>
To be Well-
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------------------------------- --------------------
Amount Ratio Amount Ratio Amount Ratio
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 2000:
Risk-based capital $ 5,548 15.52% $ 2,861 8.00% $ 3,575 10.00%
Core capital 5,319 8.89% 2,392 4.00% 2,990 5.00%
Tangible capital 5,319 8.89% 897 1.50% N/A -
As of September 30, 1999:
Risk-based capital $ 5,104 14.91% $ 2,738 8.00% $ 3,422 10.00%
Core capital 4,926 8.47% 2,327 4.00% 2,909 5.00%
Tangible capital 4,926 8.47% 873 1.50% N/A -
</TABLE>
13. BENEFIT PLANS
-----------------
Deferred Compensation Plan
--------------------------
The Company maintains a deferred compensation plan for both the directors and
employees.
The directors' arrangement is an individual contract between the Company and
each participating director and can be terminated at any time. Directors may
participate at their own discretion. The Company secures each separate deferred
compensation agreement by purchasing an investment grade life insurance contract
on each participating director. The Company is the owner and beneficiary of each
contract. The use of the investment grade insurance contracts as the funding
source of the program allows the Company to take advantage of preferential tax
treatment provided to insurance contracts qualified under IRS Sections 101 and
7702.
The employees' arrangement meets the requirements of Sections 401(a) and 401(k)
of the Internal Revenue Code. Employees generally become eligible when they have
attained age 21 and have one year of service. Each participant may elect to have
his compensation reduced up to 10%. The reduction is contributed to the plan.
The Company will match 50% of the amount of salary reduction the participant
elects to defer. However, in applying this matching percentage, only salary
reductions of up to 6% of the participant's compensation will be considered. All
participants become 100% vested upon entering the plan. Contributions to the
plan by the Company totaled approximately $10,500 and $8,400 for the years ended
September 30, 2000 and 1999, respectively.
32
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
13. BENEFIT PLANS (Cont'd)
-----------------
Directors Consultation and Retirement Plan
------------------------------------------
The Company maintains a Directors Consultation and Retirement Plan ("DRP") to
provide retirement benefits to directors of the Company who are not officers or
employees ("Outside Directors"). Any director who has served as an Outside
Director shall be a participant in the DRP, and payments under the DRP commence
once the Outside Director retires as a director of the Company. The DRP provides
a retirement benefit based on the number of years of service to the Company.
Outside Directors who have completed not less than 12 years of service shall
receive a benefit equal to (50%) + 2.889% times the number of years of service
in excess of 12, multiplied by the average monthly Board Fee in effect at the
time of retirement. The maximum benefit shall be 85% of such monthly Board Fee.
Benefits shall be paid for a maximum of 84 months to the retired directors, a
surviving spouse, or the director's estate.
At or for
the Year Ending
September 30,
----------------------
2000 1999
--------- ---------
Change in Benefit Obligation:
Benefit obligation at beginning of year $ 166,295 $ 160,843
Service cost 9,122 8,953
Interest cost 12,090 10,599
Actuarial gain (11,813) (6,450)
Annuity payments (10,200) (7,650)
--------- ---------
Benefit obligation at end of year 165,494 166,295
--------- ---------
Change in plan assets:
Market value of assets - beginning - -
Employer contributions 10,200 7,650
Annuity payments (10,200) (7,650)
--------- ---------
Market value of assets - ending - -
--------- ---------
Funded status (165,494) (166,295)
Amount contributed during fourth quarter 2,550 2,550
Unrecognized gain (24,609) (12,796)
Unrecognized past service liability 107,232 118,041
--------- ---------
Accrued plan cost included in other liabilities $ (80,321) $ (58,500)
========= =========
33
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
13. BENEFIT PLANS (Cont'd)
------------------
Directors Consultation and Retirement Plan (Cont'd)
------------------------------------------
<TABLE>
<CAPTION>
Year Ended
September 30,
----------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
Net periodic plan cost included the following components:
Service cost $ 9,122 $ 8,953
Interest cost 12,090 10,599
Amortization of past service cost 10,809 10,809
--------------- ---------------
Net periodic plan cost included in compensation
and benefits $ 32,021 $ 30,361
=============== ===============
</TABLE>
A discount rate of 8.0% and 7.5% and a rate of increase in future compensation
levels of 5.5% and 5.5% were assumed in the plan valuation for the years ended
September 30, 2000 and 1999, respectively.
Supplemental Executive Retirement Plan
The Company had maintained a supplemental retirement plan ("SERP") for the
benefit of the Chief Executive Officer (CEO). During the year ended September
30, 2000, the plan's sole participant terminated his employment with the
Company.
<TABLE>
<CAPTION>
At or for
the Year Ending
September 30,
----------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
Change in Benefit Obligation:
Benefit obligation at beginning of year $ 1,607 $ 1,591
Service cost 441 434
Interest cost 121 107
Actuarial loss - (525)
Curtailment (2,169) -
--------------- ---------------
Benefit obligation at end of year - 1,607
Plan assets - -
--------------- ---------------
Funded status - (1,607)
Unrecognized gain - (301)
Unrecognized past service liability - 730
--------------- ---------------
Accrued plan cost included in other liabilities $ - $ (1,178)
=============== ===============
</TABLE>
34
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
13. BENEFIT PLANS (Cont'd)
------------------
Supplemental Executive Retirement Plan (Cont'd)
--------------------------------------
<TABLE>
<CAPTION>
Year Ended
September 30,
----------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
Net periodic plan cost included the following components:
Service cost $ 441 $ 434
Interest cost 121 107
Amortization of past service cost 5 54
Unrecognized (gain) loss (10) 5
Curtailment (1,784) -
---------------- ----------------
Net periodic plan cost included in compensation
and benefits $ (1,178) $ 600
================ ===============
</TABLE>
A discount rate of 7.50% was assumed in the plan valuation for the year ended
September 30, 1999.
Stock Option Plan
-----------------
On January 25, 1999, the stockholders of the Company approved a stock option
plan (the "Plan"). The Plan provides for authorizing the issuance of an
additional 19,596 shares of common stock by the Company upon the exercise of
stock options awarded to officers, directors, key employees, and other persons
providing services to the Company. The Company may also purchase shares through
the open market. The 19,596 shares of options under the Plan constitute either
Incentive Stock Options or Non- Incentive Stock Options. The following table
summarizes the options granted and exercised under the Plan, during the periods
indicated, and their respective weighted average exercise price:
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------------------
2000 1999
------------------------ -----------------------
Weighted Weighted
Number Average Number Average
of Exercise of Exercise
Shares Price Shares Price
-------- ------------ -------- -----------
<S> <C> <C> <C> <C>
Outstanding at beginning of period 14,308 $ 14.25 - $ -
Granted - - 14,308 14.25
Exercised - - - -
Forfeited (4,900) 14.25 - -
-------- ---------- --------- ----------
Outstanding at end of period 9,408 $ 14.25 14,308 $ 14.25
======== ========== ======== ==========
Options exercisable at year end 9,408 7,154
======== =========
</TABLE>
35
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
13. BENEFIT PLANS (Cont'd)
------------------
SFAS 123, "Accounting for Stock-Based Compensation", if fully adopted, requires
companies to measure employee stock compensation plans based on the fair value
method of accounting. The Company has adopted the disclosure-only provisions of
SFAS 123. Accordingly, the Company applies APB 25,"Accounting for Stock Issued
to Employees," and related interpretations in accounting for its plans. In
accordance with APB 25, no compensation expense has been recognized for its
stock-based compensation plans other than for restricted stock. Pro forma
disclosures as if the Company fully adopted the cost recognition requirements
under SFAS 123 are presented below.
The estimated weighted average fair value of each stock option granted during
fiscal 1999 was estimated as $5.30 on the date of grant. The fair value of
options at the date of grant was estimated using the Black-Scholes model with
the following weighted average assumptions: stock volatility of 16%; risk free
interest rate of 3.875%; and an expected life of 10 years. Had compensation cost
for the grants been determined based upon the fair value at the grant date
consistent with the methodology prescribed under SFAS 123, the Company's pro
forma net income and earnings per share would have been as follows:
Year Ended
September 30,
-------------------------
2000 1999
------------ -----------
Net income $ 529,708 $ 243,930
Basic earnings per share $ 1.28 $ 0.59
Diluted earnings per share $ 1.27 $ 0.59
Restricted Stock Plan
---------------------
On January 25, 1999, the stockholders of the Company approved a restricted stock
plan (the "Plan") which provides for the purchase of 7,838 shares of common
stock in the open market. All of the Common Stock to be purchased by the Plan
will be purchased at the fair market value on the date of purchase. Awards under
the Plan were made in recognition of expected future services to the Company by
its directors, officers, and key employees responsible for implementation of the
policies adopted by the Company's Board of Directors and as a means of providing
a further retention incentive. The expense of the plan will be accrued as shares
vest over a four-year period, beginning February, 1999. Plan expense was $18,000
and $29,000 for the years ended September 30, 2000 and 1999, respectively.
Employee Stock Ownership Plan
-----------------------------
Effective upon the consummation of the Bank's stock offering, an Employee Stock
Ownership Plan ("ESOP") was established for all eligible employees who had
completed a twelve month period of employment with the Bank and at least 1,000
hours of service, and had attained the age of 21. The ESOP used $156,800 in
proceeds from a term loan to purchase 15,680 shares of Bank common stock during
the stock offering. The term loan principal was payable in equal quarterly
installments through September 30, 2007. Interest on the term loan was variable
at a rate of prime plus 37.5 basis points. Each year, the Bank made
discretionary contributions to the ESOP which were equal to the principal and
interest payments required on the term loan. During the year ended September 30,
2000, Roebling Financial Corp, Inc. paid off the ESOP loan to the third party
Bank.
36
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
13. BENEFIT PLANS (Cont'd)
------------------
Employee Stock Ownership Plan (Cont'd)
-------------------------------------
Shares purchased with the loan proceeds were initially pledged as collateral for
the term loan and are held in a suspense account for future allocation among
participants. Contributions to the ESOP and shares released from the suspense
account will be allocated among the participants on the basis of compensation,
as described by the Plan, in the year of allocation.
The ESOP is accounted for in accordance with Statement of Position 93-6,
"Accounting for Employee Stock Ownership Plans," which was issued by the
American Institute of Certified Public Accountants in November 1993.
Accordingly, the ESOP shares pledged as collateral are reported as unallocated
ESOP shares in the statements of financial condition. As shares are committed to
be released from collateral, the Bank reports compensation expense equal to the
current market price of the shares, and the shares become outstanding for basic
net income per common share computations. ESOP compensation expense was $20,000
and $22,000 for the years ended September 30, 2000 and 1999, respectively.
At September 30, 2000 and 1999, the ESOP had unallocated shares of 10,976 and
12,544, respectively. Based upon a $14.75 closing price per share of common
stock on September 30, 2000, the unallocated shares had a fair value of
$161,896.
14. CHARTER CONVERSION, STOCK OFFERING, AND REORGANIZATION
-----------------------------------------------------------
On March 24, 1997, the Bank converted from a state-chartered mutual savings and
loan to a federally - chartered mutual savings bank.
On February 24, 1997, the Board of Directors of the Bank unanimously adopted the
plan of reorganization whereby the Bank would reorganize into a mutual holding
company form of organization.
The Bank applied to the Office of Thrift Supervision and received approval of
transactions contemplated by the plan of reorganization. The plan of
reorganization authorized the Bank to offer stock in one or more stock offerings
up to a maximum of 49.99% of the issued and outstanding shares of its common
stock.
The reorganization was accomplished on October 2, 1997, whereby the Bank, (i)
exchanged its mutual savings association charter for a federal stock savings
bank charter; and (ii) organized a federally chartered mutual holding company
which owns in excess of 50% of the stock of the stock savings bank. Each savings
account of the Bank, at the time of the reorganization, became a savings account
in the newly-formed bank in the same terms and conditions, except the holder of
each such deposit account has liquidation rights, with respect to the holding
company, rather than the Bank.
As a result of the offering, Roebling Financial Corp., M.H.C. received 229,540
shares of the Bank's stock and $100,000 in cash. The Bank's Employee Stock
Ownership Plan purchased 15,680 shares. Roebling Bank received gross proceeds
from the sale of 195,960 shares to the general public, including the ESOP, of
$1,959,600. Expenses associated with the offering totaled $171,438, resulting in
net capital additions to the Bank of $1,688,162, net of the $100,000 used to
capitalize the mutual holding company.
37
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
14. CHARTER CONVERSION, STOCK OFFERING, AND REORGANIZATION (Cont'd)
-----------------------------------------------------------
On January 25, 2000, the Bank's stockholders approved an Agreement and Plan of
Reorganization (the "Plan" or "Reorganization"), providing for the establishment
of a mid-tier stock holding company. The Plan provided for the establishment of
Roebling Financial Corp, Inc. (the Mid-Tier Stock Holding Company) as a stock
holding company parent of the Bank; the stock holding company is majority owned
by Roebling Financial Corp, MHC, the Bank's mutual holding company. The former
holders of the common stock of the Bank became stockholders of Roebling
Financial Corp, Inc. and each outstanding share of common stock (par value $.10
per share) of the Bank was converted into shares of common stock of Roebling
Financial Corp, Inc. on a one-for-one basis. The reorganization was completed on
January 31, 2000.
15. IMPACT OF NEW ACCOUNTING STANDARDS
---------------------------------------
Accounting for Derivative Instruments and Hedging Activities
------------------------------------------------------------
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. In addition, certain provisions of this statement will permit, at
the date of initial adoption of SFAS No. 133, the transfer of any held-to-
maturity security into either the available-for-sale or trading category.
Transfers from the held-to- maturity portfolio at the date of initial adoption
will not call into question the entity's intent to hold other debt securities to
maturity in the future. In June 1999, the FASB issued SFAS 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133." SFAS 137 delays the original effective date of SFAS
133. In accordance with SFAS 137, SFAS 133 is effective for all fiscal quarters
of fiscal years beginning after June 15, 2000. In June 2000, the FASB issued
SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities - an Amendment of FASB Statement No. 133." SFAS 138 adds to the
accounting guidance for derivative instruments and hedging activities. SFAS 133,
as amended by SFAS 138, is not expected to have a material impact on the
Company, which does not intend to adopt the new accounting standards earlier
than required.
16. FAIR VALUES OF FINANCIAL INSTRUMENTS
-----------------------------------------
The following methods and assumptions were used by the Company in estimating
fair values of financial instruments as disclosed herein:
Cash and Short-Term Instruments
-------------------------------
The carrying amounts of cash and short-term instruments approximate their fair
value.
Available-for-Sale and Held-to-Maturity Securities
--------------------------------------------------
Fair values for securities, excluding restricted equity securities, are based on
quoted market prices. The carrying values of restricted equity securities
approximate fair values.
38
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
16. FAIR VALUES OF FINANCIAL INSTRUMENTS (Cont'd)
-----------------------------------------
Loans Receivable
----------------
For variable-rate loans that reprice frequently and have no significant change
in credit risk, fair values are based on carrying values. Fair values for
certain mortgage loans and other consumer loans are based on quoted market
prices of similar loans sold in conjunction with securitization transactions,
adjusted for differences in loan characteristics. Fair values for commercial
real estate and commercial loans are estimated using discounted cash flow
analyses, using interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality. Fair values for impaired loans are
estimated using discounted cash flow analyses or underlying collateral values,
where applicable.
Deposit Liabilities
-------------------
The fair values disclosed for demand deposits are, by definition, equal to the
amount payable on demand at the reporting date. The carrying amounts of
variable-rate, fixed-term money market accounts and certificates of deposit
(CD's) approximate their fair values at the reporting date. Fair values for
fixed-rate CD's are estimated using a discounted cash flow calculation that
applies interest rates currently being offered on certificates to a schedule of
aggregated expected monthly maturities on time deposits.
Short-Term Borrowings
---------------------
The carrying amounts of federal funds purchased, and other short-term borrowings
maturing within 90 days approximate their fair values. Fair values of other
short-term borrowings are estimated using discounted cash flow analyses based on
the Company's current incremental borrowing rates for similar types of borrowing
arrangements.
Long-Term Debt
--------------
The fair value of long-term debt is estimated using discounted cash flow
analysis based on the current incremental borrowing rates for similar types of
borrowing arrangements.
Accrued Interest Receivable
---------------------------
The carrying amounts of accrued interest approximate their fair values.
Off-Balance-Sheet Instruments
-----------------------------
In the ordinary course of business the Company has entered into
off-balance-sheet financial instruments consisting of commitments to extend
credit. Such financial instruments are recorded in the financial statements when
they are funded or related fees are incurred or received.
39
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
16. FAIR VALUES OF FINANCIAL INSTRUMENTS (Cont'd)
-----------------------------------------
The estimated fair values of the Company's financial instruments were as
follows:
September 30, 2000 September 30, 1999
-------------------- ----------------------
Carrying Fair Carrying Fair
Financial Assets Amount Value Amount Value
---------------- ---------- ------- -------- --------
(In Thousands)
Cash and cash equivalents $ 3,574 $ 3,574 $ 3,573 $ 3,573
FHLB term deposits - - 250 250
Certificates of deposit 300 300 300 300
Securities available for sale 2 29 2 24
Securities held to maturity 8,410 8,237 9,657 9,471
Mortgage-backed securities 5,184 5,106 6,294 6,196
Loans receivable 40,546 40,102 35,745 35,100
Accrued interest receivable 394 394 375 375
Financial Liabilities
---------------------
Deposit liabilities 53,471 53,503 50,036 50,318
Borrowed funds - - 2,125 2,125
The fair value estimates are made at a discrete point in time based on relevant
market information and information about the financial instruments. Fair value
estimates are based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various financial
instruments, and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and, therefore, cannot
be determined with precision. Changes in assumptions could significantly affect
the estimates. Further, the foregoing estimates may not reflect the actual
amount that could be realized if all or substantially all of the financial
instruments were offered for sale.
In addition, the fair value estimates were based on existing on-and-off balance
sheet financial instruments without attempting to value the anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Other significant assets and liabilities that are not
considered financial assets and liabilities include real estate owned, premises
and equipment, and advances from borrowers for taxes and insurance. In addition,
the tax ramifications related to the realization of the unrealized gains and
losses have a significant effect on fair value estimates and have not been
considered in any of the estimates.
Finally, reasonable comparability between financial institutions may not be
likely due to the wide range of permitted valuation techniques and numerous
estimates which must be made given the absence of active secondary markets for
many of the financial instruments. The lack of uniform valuation methodologies
introduces a greater degree of subjectivity to these estimated fair values.
40
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
17. PARENT ONLY FINANCIAL INFORMATION
--------------------------------------
Roebling Financial Corp, Inc. operates its wholly owned subsidiary, Roebling
Bank. The earnings of the subsidiary are recognized by the holding company using
the equity method of accounting. Accordingly, earnings of the subsidiary are
recorded as increases in the investment in the subsidiary. The following are the
condensed financial statements for Roebling Financial Corp, Inc. (Parent Company
only)
STATEMENT OF CONDITION
----------------------
September 30,
2000
--------------
Assets
Cash and due from banks $ 40,240
ESOP loan receivable 109,760
Investment in subsidiary 5,337,364
--------------
Total assets $ 5,487,364
==============
Liabilities -
Stockholders' equity $ 5,487,364
--------------
Total liabilities and stockholders' equity $ 5,487,364
==============
STATEMENT OF INCOME
-------------------
From Inception
January 31, 2000 to
September 30, 2000
------------------
Equity in undistributed earnings of subsidiary $ 376,912
--------------
Net income $ 376,912
==============
41
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
17. PARENT ONLY FINANCIAL INFORMATION (Cont'd)
--------------------------------------
STATEMENT OF CASH FLOWS
-----------------------
From Inception
January 31, 2000 to
September 30, 2000
------------------
Cash flows from operating activities:
Net income $376,912
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed earnings of subsidiary (376,912)
--------
Net cash provided by operating activities -
--------
Cash flows from investing activities:
Loan to subsidiary, net of principal repayments (109,760)
--------
Cash flows from financing activities:
Capitalization by Bank at inception 150,000
--------
Net increase in cash and cash equivalents 40,240
Cash and cash equivalents - beginning -
--------
Cash and cash equivalents - ending $ 40,240
========
42
<PAGE>
ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
18. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table contains quarterly financial data (dollars in thousands
except per share data):
Year Ended September 30, 2000
-----------------------------
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------------------
December 31, March 31, June 30, September 30,
1999 2000 2000 2000
------------ ------------ ---------- --------------
<S> <C> <C> <C> <C>
Total interest income $ 956 $ 1,001 $ 1,068 $ 1,036
Total interest expense 366 374 403 415
--------- ---------- ---------- -------------
Net interest income 590 627 665 621
Provision for loan losses 7 9 13 18
Non-interest income 109 95 90 77
Non-interest expense 526 494 497 455
Income taxes 65 84 94 91
--------- ---------- ---------- -------------
Net income $ 101 $ 135 $ 151 $ 134
========= ========== ========== =============
Net income per common share:
Basic $ 0.24 $ 0.33 $ 0.37 $ 0.32
Diluted 0.24 0.33 0.36 0.32
Weighted average number of
common shares outstanding:
Basic 413 413 413 414
Diluted 422 415 416 416
</TABLE>
Year Ended September 30, 1999
-----------------------------
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------------------
December 31, March 31, June 30, September 30,
1998 1999 1999 1999
------------ ------------ ---------- --------------
<S> <C> <C> <C> <C>
Total interest income $ 799 $ 862 $ 879 $ 957
Total interest expense 339 341 349 355
--------- ---------- ---------- -------------
Net interest income 460 521 530 602
Provision for loan losses 1 4 6 10
Non-interest income 95 72 87 59
Non-interest expense 443 470 519 497
Income taxes 43 50 34 65
--------- ---------- ---------- -------------
Net income $ 68 $ 69 $ 58 $ 89
========= ========== ========== =============
Net income per common share:
Basic $ 0.17 $ 0.17 $ 0.14 $ 0.21
Diluted 0.17 0.17 0.14 0.21
Weighted average number of
common shares outstanding:
Basic 411 412 412 413
Diluted 411 413 413 414
</TABLE>
43
