|
|
I
TEM 7.
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Forward-Looking Statements
This
Annual Report on Form 10-K contains forward-looking statements which may be
identified by the use of such words as believe, expect, anticipate,
should, planned, estimated, and potential. Examples of forward-looking
statements include, but are not limited to, estimates with respect to our
financial condition and results of operation and business that are subject to
various factors which could cause actual results to differ materially from
these estimates including, but not limited to, changes in the real estate
market or local economy, changes in interest rates, changes in laws and
regulations to which we are subject, and competition in our primary market
area.
Any
or all of our forward-looking statements in this Annual Report and in any other
public statements we make may turn out to be wrong. They can be affected by
inaccurate assumptions we might make or unknown risks and uncertainties.
Consequently, no forward-looking statements can be guaranteed. We disclaim any
obligation to subsequently revise any forward-looking statements to reflect
events or circumstances after the date of such statements, or to reflect the occurrence
of anticipated or unanticipated events.
General
Rome
Bancorp commenced operations on October 6, 1999, when Rome
Savings converted from a New
York mutual savings bank to a New York mutual holding company structure whereby
Rome Savings became a wholly-owned subsidiary of Rome Bancorp, a majority owned
subsidiary of Rome, MHC.
On April 27, 2004, Rome Savings converted from a New York-chartered
savings bank regulated by the New York State Banking Department and the FDIC to
a federal savings bank regulated by the OTS.
On March 30, 2005, Rome, MHC converted from
mutual to stock form (the Conversion). In connection with the Conversion, the
61.5% of outstanding shares of Rome Bancorp common stock owned by Rome, MHC
were sold to depositors of Rome Savings and the public (the Offering).
Following the completion of the Conversion and Offering, Rome Bancorp was
succeeded by a new, fully public, Delaware corporation with the same name and
Rome, MHC ceased to exist.
On
October 12, 2010, Berkshire Hills Bancorp, Inc., the parent company of
Berkshire Bank, and the Company entered into an Agreement and Plan of Merger
pursuant to which the Company will merge with and into Berkshire Hills Bancorp,
Inc. Concurrent with the merger, it is expected that the Bank will merge with
and into Berkshire Bank. The transaction is subject to customary closing
conditions, including the receipt of regulatory approvals and approval by the
shareholders of the Company, and is currently expected to be completed on or
about April 1, 2011.
Rome Bancorps sole business is conducted by its wholly-owned
subsidiary, Rome Savings. Rome Savings principal business is accepting
deposits from the general public and using those deposits to make residential
and commercial real estate loans, as well as commercial and consumer loans to
individuals and small businesses primarily in Oneida County and also elsewhere
in New York State. Rome Savings also invests in long and short-term marketable
securities and other liquid investments.
2010 Highlights and Overview
The following discussion focuses on the factors affecting the
consolidated financial condition of Rome Bancorp as of the two years ended
December 31, 2010 and 2009 and Rome Bancorps results of operations for the
three years ended December 31, 2010. The consolidated financial statements and
related notes for the three years ended December 31, 2010 should be read in
conjunction with this review.
The
preparation of consolidated financial statements requires management to make
estimates and assumptions. Changes in these estimates and assumptions affect
the reported amounts of certain assets, liabilities, revenue and expenses.
Different amounts could be reported under different conditions, or if different
assumptions were used in the application of these accounting policies.
Rome Savings
results of operations depend primarily on its net interest income, which is the
difference between the
38
interest income it earns on its loans and investments and the interest
it pays on its deposits and other interest-bearing liabilities. Net interest
income is affected by the relative amounts of interest-bearing assets and
interest-bearing liabilities and the interest rates earned or paid on these
balances. Rome Savings operations are also affected by non-interest income, such as
service fees and gains and losses on sales of securities and loans, the
provision for loan losses and non-interest expense such as salaries and
employee benefits, occupancy costs, and other general and administrative
expenses. Financial institutions in general, including Rome Savings, are
significantly affected by economic conditions, competition and the monetary and
fiscal policies of the federal government. Lending activities are influenced by
the demand for and supply of housing, competition among lenders, interest rate
conditions and fund availability. Rome Savings operations and lending are
principally concentrated in the Central New York area, and therefore its
operations and earnings are influenced by the economics of the area it operates
in. Deposit balances and cost of funds are influenced by prevailing market
rates on competing investments, customer preferences and levels of personal
income and savings in Rome Savings
primary market area.
Net income for 2010 decreased to $2.3 million compared to $3.1 million
in the prior year. The significant factors and trends impacting 2010, which are
discussed in greater depth below, were as follows:
|
|
|
Net interest income before loan loss provision for 2010 increased to
$13.7 million from $13.0 million in 2009. Decreases in average year over year
market rates resulted in declines in both the yields earned on earning assets
and the Companys cost of funds. Rome Bancorps ratio of interest earning
assets to interest bearing liabilities increased to 131.71% in 2010 from
128.39% in the prior year, while the yield on earning assets decreased to
5.56% in 2010 from 5.62% in 2009. The cost of funds decreased to 1.32% in
2010 from 1.77% the previous year.
|
|
Rome Bancorps provision for loan losses increased to $1.8 million in
2010 from $300,000 in 2009. The higher provision in 2010 was primarily
necessitated by credit quality declines for two commercial credits and an
increase in non-performing loans.
|
|
Non-interest income increased to $3.4 million in 2010 from $2.5
million in 2009. This current year increase was primarily due to gains
realized on the sales of real estate, securities and residential mortgage
originations.
|
|
Non-interest expense increased from $10.7 million in 2009 to $11.9 in
2010. The majority of this increase is related to strategic planning and
acquisition expenses incurred.
|
Critical Accounting Policies
It is managements opinion that accounting estimates covering certain
aspects of the business have more significance than others due to the relative
importance of those areas to overall performance, or the level of subjectivity
required in making these estimates. Management of Rome Bancorp considers the
accounting policy relating to the allowance for loan losses to be a critical
accounting policy given the uncertainty in evaluating the level of the
allowance required for probable incurred credit losses and the material effect
that such judgments can have on the results of operations. Managements
quarterly evaluation of the adequacy of the allowance considers Rome Bancorps
historical loan loss experience, review of specific loans, current economic
conditions and such other factors considered appropriate to estimate losses.
Management uses presently available information to estimate probable incurred
losses on loans; however, future additions to the allowance may be necessary
based on changes in estimates, assumptions or economic conditions. Significant
factors that could give rise to changes in these estimates include, but are not
limited to, changes in economic conditions in the local area, concentrations of
risk and declines of local property values.
Management also considers the accounting policy relating to the
impairment of long lived assets to be a critical accounting policy due to the
subjectivity and judgment involved and the material effect an impairment loss
could have on the results of operations. A decline in the fair value of a long
lived asset below cost that is deemed to be other than temporary is charged to
earnings resulting in the establishment of a new cost basis for the asset.
Management continually reviews the current value of its long lived assets for
evidence of other than temporary impairment.
These critical policies and their application are reviewed periodically
by the Audit Committee and the Board of Directors. All accounting policies are
important, and as such, we encourage the reader to review each of the policies
included in the notes to the Consolidated Financial Statements to obtain a
better understanding of how our financial performance is reported.
39
Management of Interest Rate Risk
Interest rate risk is the most significant market risk affecting Rome
Bancorp. Other types of market risk, such as movements in foreign currency
exchange rates and commodity prices, do not arise in the normal course of Rome
Bancorps business operations. Interest rate risk can be defined as an exposure
to a movement in interest rates that could have an adverse effect on Rome
Bancorps net interest income. Interest rate risk arises naturally from the
imbalance in the repricing, maturity, and/or cash flow characteristics of
assets and liabilities. In periods of falling interest rates, prepayments of
loans typically increase, which would lead to reduced net interest income if
such proceeds could not be reinvested at a comparable spread. Also in a falling
rate environment, certain categories of deposits may reach a point where market
forces prevent further reduction in the interest rate paid on those
instruments. Generally, during extended periods when short-term and long-term
interest rates are relatively close, a flat yield curve may lead to smaller net
interest margins thereby reducing net interest income. The net effect of these
circumstances is reduced interest income, offset only by a nominal decrease in
interest expense, thereby narrowing the net interest margin.
Managing interest rate risk is of primary importance to Rome Bancorp.
The responsibility for interest rate risk management is the function of Rome
Bancorps ALCO, which includes the President and Chief Executive Officer,
Executive Vice President and Chief Financial Officer, Vice President and
Controller, other members of Senior Management and certain members of Rome
Bancorps Board of Directors. Rome Bancorps ALCO meets at least quarterly to
review Rome Bancorps asset/liability policies and identify and measure
potential risks to earnings due to changes in interest rates. The primary goal
of Rome Bancorps interest rate risk management is to minimize the potential
loss in net interest income that could arise from changes in interest rates.
A simulation model is the primary tool used to assess the impact of
changes in interest rates on net interest income. Key assumptions used in the
model include prepayment speeds on loans and mortgage-backed securities, loan
volumes and pricing and customer preferences, and sensitivity to changing
rates. These assumptions are compared to actual results and revised as
necessary. Rome Bancorps analysis compares net interest income under a
scenario of no change from current interest rates with one of a 100, 200 and
300 basis point increase in interest rates and one of a 100 basis point
decrease in rates. The change in interest rates is assumed to occur in the
first twelve months following the current financial statement date. Net
interest income is measured for each of the three forecasted twelve-month
periods following the balance sheet date. Rome Bancorps policy is that net
interest income should not vary by more than 20% for each of the three
forecasted twelve-month periods. At December 31, 2010, based on simulation
model results, Rome Bancorp was within these guidelines.
40
The following table sets forth at December 31, 2010 and 2009 the
estimated percentage and dollar change in Rome Bancorps net interest income
resulting from changes in interest rates over a one year period. Certain
assumptions have been made in preparing the table below. Although management
believes these assumptions to be reasonable, the interest rate sensitivity of
assets and liabilities and the estimated effects of changes in interest rates
on net interest income indicated in the following table could vary
substantially if different assumptions were used or if actual experience
differs from such assumptions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
Annual Net Interest Income
|
|
Annual Net Interest Income
|
|
|
|
|
|
|
|
Change in
Interest Rates
in
Basis Points(1)
|
|
Dollar
Amount
|
|
Dollar
Change
From Base
|
|
Percentage
Change
From
Base
|
|
Dollar
Amount
|
|
Dollar
Change
From Base
|
|
Percentage
Change
From
Base
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
+300
|
|
|
$
|
13,362
|
|
$
|
443
|
|
|
3.43
|
%
|
$
|
13,456
|
|
$
|
(280
|
)
|
|
(2.04
|
)%
|
+200
|
|
|
|
13,217
|
|
|
298
|
|
|
2.31
|
|
|
13,537
|
|
|
(199
|
)
|
|
(1.45
|
)
|
+100
|
|
|
|
13,067
|
|
|
148
|
|
|
1.15
|
|
|
13,599
|
|
|
(137
|
)
|
|
(1.00
|
)
|
Base
|
|
|
|
12,919
|
|
|
|
|
|
|
|
|
13,736
|
|
|
|
|
|
|
|
-100
|
|
|
|
12,254
|
|
|
(665
|
)
|
|
(5.15
|
)
|
|
13,240
|
|
|
(496
|
)
|
|
(3.61
|
)
|
|
|
(1)
|
Assumes an instantaneous
uniform change in interest rates. Basis point equals 0.01%.
|
The
above table reflects that as of both December 31, 2010 and 2009, Rome Bancorp
had a relatively low risk of volatility in net interest income due to interest
rate fluctuations. The interest rate risk modeled as of December 31, 2010
exhibited positive variances in periods of rising interest rates and a negative
variance in a model depicting decreasing interest rates. In the upward rate
environments, the most immediate interest rate risk lies with the Companys
$69.2 million of time deposits, a portion of which will reprice upwards during the
period in relation to changes in prevailing interest rates. However, in the
simulation of a 100 basis point decrease in rates, the decrease in net interest
income is primarily attributable to assumed reductions in the rates on the
Companys loan portfolio which would not be entirely offset by the cost
decreases on interest bearing liabilities.
41
Analysis of Net Interest Income
Average Balances, Interest and Average Yields. The following table sets
forth certain information relating to Rome Bancorps average balance sheets and
reflects the average yield on interest-earnings assets and average cost of
interest-bearing liabilities, interest earned and interest paid for the periods
indicated. Such yields and costs are derived by dividing income or expense by
the average balance of interest-earning assets or interest-bearing liabilities,
respectively, for the periods presented. Average balances are derived from
daily balances over the periods indicated. The average balances for loans are
net of allowance for loan losses, but include non-accrual loans. Interest
income on securities includes a tax equivalent adjustment for bank qualified
municipals.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Balances, Interest and Average Yields for the years
ended
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
December 31, 2009
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
Average
Balance
|
|
Interest
Income/
Expense
|
|
Average
Yield/
Cost
|
|
Average
Balance
|
|
Interest
Income/
Expense
|
|
Average
Yield/
Cost
|
|
Average
Balance
|
|
Interest
Income/
Expense
|
|
Average
Yield/
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
279,391
|
|
$
|
15,968
|
|
|
5.72
|
%
|
$
|
289,010
|
|
$
|
16,763
|
|
|
5.80
|
%
|
$
|
288,630
|
|
$
|
17,561
|
|
|
6.08
|
%
|
Securities
|
|
|
16,303
|
|
|
715
|
|
|
4.38
|
|
|
11,557
|
|
|
529
|
|
|
4.58
|
|
|
7,488
|
|
|
392
|
|
|
5.24
|
|
Federal funds sold & other interest bearing deposits
|
|
|
4,632
|
|
|
8
|
|
|
0.17
|
|
|
7,456
|
|
|
11
|
|
|
0.15
|
|
|
1,250
|
|
|
26
|
|
|
2.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earnings assets
|
|
|
300,326
|
|
|
16,691
|
|
|
5.56
|
|
|
308,023
|
|
|
17,303
|
|
|
5.62
|
|
|
297,368
|
|
|
17,979
|
|
|
6.05
|
|
Noninterest-earning assets
|
|
|
28,086
|
|
|
|
|
|
|
|
|
27,609
|
|
|
|
|
|
|
|
|
29,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
328,412
|
|
|
|
|
|
|
|
$
|
335,632
|
|
|
|
|
|
|
|
$
|
327,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings accounts
|
|
$
|
84,776
|
|
$
|
339
|
|
|
0.40
|
|
$
|
82,315
|
|
$
|
330
|
|
|
0.40
|
|
$
|
80,971
|
|
$
|
446
|
|
|
0.55
|
|
Time deposits
|
|
|
70,651
|
|
|
1,252
|
|
|
1.77
|
|
|
72,291
|
|
|
1,852
|
|
|
2.56
|
|
|
72,347
|
|
|
2,634
|
|
|
3.64
|
|
Money market accounts
|
|
|
18,145
|
|
|
176
|
|
|
0.97
|
|
|
15,125
|
|
|
189
|
|
|
1.25
|
|
|
9,833
|
|
|
193
|
|
|
1.97
|
|
Other interest bearing deposits
|
|
|
15,481
|
|
|
59
|
|
|
0.38
|
|
|
13,970
|
|
|
55
|
|
|
0.40
|
|
|
13,357
|
|
|
69
|
|
|
0.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
189,053
|
|
|
1,826
|
|
|
0.97
|
|
|
183,701
|
|
|
2,426
|
|
|
1.32
|
|
|
176,508
|
|
|
3,342
|
|
|
1.89
|
|
Borrowings
|
|
|
38,970
|
|
|
1,191
|
|
|
3.06
|
|
|
56,216
|
|
|
1,824
|
|
|
3.25
|
|
|
50,737
|
|
|
1,545
|
|
|
3.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
228,023
|
|
|
3,017
|
|
|
1.32
|
|
|
239,917
|
|
|
4,250
|
|
|
1.77
|
|
|
227,245
|
|
|
4,887
|
|
|
2.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
|
33,730
|
|
|
|
|
|
|
|
|
30,065
|
|
|
|
|
|
|
|
|
29,331
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
7,022
|
|
|
|
|
|
|
|
|
7,033
|
|
|
|
|
|
|
|
|
5,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
268,775
|
|
|
|
|
|
|
|
|
277,015
|
|
|
|
|
|
|
|
|
262,425
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
59,637
|
|
|
|
|
|
|
|
|
58,617
|
|
|
|
|
|
|
|
|
64,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
328,412
|
|
|
|
|
|
|
|
$
|
335,632
|
|
|
|
|
|
|
|
$
|
327,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
13,674
|
|
|
|
|
|
|
|
|
13,053
|
|
|
|
|
|
|
|
|
13,092
|
|
|
|
|
Tax equivalent adjustment on securities
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income per consolidated financial statements
|
|
|
|
|
$
|
13,670
|
|
|
|
|
|
|
|
$
|
13,041
|
|
|
|
|
|
|
|
$
|
13,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest rate spread
|
|
|
|
|
|
|
|
|
4.24
|
%
|
|
|
|
|
|
|
|
3.85
|
%
|
|
|
|
|
|
|
|
3.90
|
%
|
Net interest margin
|
|
|
|
|
|
|
|
|
4.55
|
%
|
|
|
|
|
|
|
|
4.24
|
%
|
|
|
|
|
|
|
|
4.40
|
%
|
Ratio of interest-earning assets to interest-bearing liabilities
|
|
|
|
|
|
|
|
|
1.32
|
x
|
|
|
|
|
|
|
|
1.28
|
x
|
|
|
|
|
|
|
|
1.31
|
x
|
42
Rate Volume Analysis
.
The following table analyzes the dollar amount of changes in interest income
and interest expense for major components of interest-earning assets and
interest-bearing liabilities. It shows the amount of the change in interest
income or expense caused by either changes in outstanding balances (volume) or
changes in interest rates. The effect of a change in volume is measured by
applying the average rate during the first period to the volume change between
the two periods. The effect of changes in rate is measured by applying the
change in rate between the two periods to the average volume during the first
period. Changes attributable to both rate and volume, which cannot be
segregated, have been allocated proportionately to the absolute value of the
change due to volume and the change due to rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate Volume Analysis
|
|
|
|
|
|
|
|
Year Ended December 31, 2010
Compared to Year Ended December 31, 2009
|
|
Year Ended December 31, 2009
Compared to Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
Increases (decreases) due to
|
|
Increases (decreases) due to
|
|
|
|
|
|
|
|
|
|
Rate
|
|
Volume
|
|
Net
|
|
Rate
|
|
Volume
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( in thousands)
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
(245
|
)
|
$
|
(550
|
)
|
$
|
(795
|
)
|
$
|
(837
|
)
|
$
|
39
|
|
$
|
(798
|
)
|
Securities
|
|
|
(32
|
)
|
|
218
|
|
|
186
|
|
|
(76
|
)
|
|
213
|
|
|
137
|
|
Federal funds sold & other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits
|
|
|
1
|
|
|
(4
|
)
|
|
(3
|
)
|
|
(142
|
)
|
|
127
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earnings assets
|
|
|
(276
|
)
|
|
(336
|
)
|
|
(612
|
)
|
|
(1,055
|
)
|
|
379
|
|
|
(676
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings accounts
|
|
|
(1
|
)
|
|
10
|
|
|
9
|
|
|
(123
|
)
|
|
7
|
|
|
(116
|
)
|
Time deposits
|
|
|
(558
|
)
|
|
(42
|
)
|
|
(600
|
)
|
|
(780
|
)
|
|
(2
|
)
|
|
(782
|
)
|
Money market accounts
|
|
|
(50
|
)
|
|
37
|
|
|
(13
|
)
|
|
(109
|
)
|
|
104
|
|
|
(5
|
)
|
Other interest bearing deposits
|
|
|
(2
|
)
|
|
6
|
|
|
4
|
|
|
(16
|
)
|
|
3
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
(611
|
)
|
|
11
|
|
|
(600
|
)
|
|
(1,028
|
)
|
|
112
|
|
|
(916
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
(74
|
)
|
|
(559
|
)
|
|
(633
|
)
|
|
113
|
|
|
166
|
|
|
279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
(685
|
)
|
|
(548
|
)
|
|
(1,233
|
)
|
|
(915
|
)
|
|
278
|
|
|
(637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in interest income
|
|
$
|
409
|
|
$
|
212
|
|
$
|
621
|
|
$
|
(140
|
)
|
$
|
101
|
|
$
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparison of Financial Condition at December
31, 2010 and December 31, 2009
Rome
Bancorps total assets at December 31, 2010 were $327.2 million, a decrease of
$2.7 million from $329.9 million at December 31, 2009. The majority of this
decrease was attributable to contraction of the Companys loan portfolio.
Cash
and cash equivalents increased to $18.8 million at December 31, 2010 from $7.6
million a year earlier due to deposit inflows and the proceeds from sales of
mortgages originated. Securities available for sale were $13.1 million at
December 31, 2010, an increase of $3.1 million from $10.0 million at December
31, 2009. This increase was due to the purchase of ten bonds, partially offset
by sales, principal reductions and maturities in the existing securities
portfolio.
Total gross loans decreased by $19.3 million, or 6.7%, to $268.4
million at December 31, 2010 from $287.7 million at December 31, 2009. During
the year ended December 31, 2010, Rome Bancorp originated approximately $56.9
million of loans. The Companys residential mortgage loan portfolio, decreased
by $13.8 million, or 8.7%, primarily due to the sale of the majority of the
Companys 2010 originations of thirty year termed fixed-rate mortgages into the
secondary market. The decision to sell these originations was made to control
potential interest rate risk in periods of future rising interest rates. The
Companys non-performing loans as a percentage of total loans increased to
1.13% at December 31, 2010 as compared to 0.67% at December 31, 2009, primarily
due to increased delinquencies and decreased loan balances. The allowance for
loan losses as a percent of non-performing loans decreased to 81.9% at December
31, 2010, from 111.4% at December 31, 2009.
43
Total deposits increased by $8.7 million or 4.0% from $216.6 million at
December 31, 2009 to $225.3 million at December 31, 2010, as depositors chose
insured bank deposit accounts over other available investments. The Company
recorded growth in all deposit categories except for time deposits, which
declined by $2.7 million, or 3.8%. Money market balances grew by $3.8 million,
or 24.1%, in 2010, increasing from $15.7 million at December 31, 2009 to $19.5
million at December 31, 2010. Non-interest bearing deposits increased by $2.7
million, or 8.5%, over the past year. Savings deposits increased $3.2 million
from $82.0 million at December 31, 2009 to $85.2 million at December 31, 2010.
Other interest bearing deposits increased by $1.7 million, or 11.2%, from $15.2
million at December 31, 2009 to $16.9 million at year end 2010.
Comparison of Results of Operations for the
Years Ended December 31, 2010 and December 31, 2009
General.
Net income
for the year ended December 31, 2010 decreased to $2.3 million from $3.1
million for the year ended December 31, 2009. The decrease in net income was
attributable to an increase the provision for loan losses of $1.5 million and
an increase in non-interest expense of $1.2 million which were partially offset
by increases in net interest income before provision for loan losses and
non-interest income of $629,000 and $828,000 respectively and a decrease in
income tax expense of $385,000.
Net Interest Income.
The Company recorded net interest income before provision for loan losses of
$13.7 million in 2010 and $13.0 million in 2009. The changes in the components
of net interest income are discussed in detail below.
Interest Income.
Interest income decreased by $604,000 for the year ended December 31, 2010,
from $17.3 million for the year ended December 31, 2009. Interest income earned
on the loan portfolio decreased to $16.0 million in 2010 from $16.8 million in
2009. Average balances of the loan portfolio declined to $279.4 million in 2010
from $289.0 million in 2009, primarily due to the continued sale of the
Companys residential mortgage originations into the secondary market. The
yield on loans in 2010 decreased to 5.72% compared to 5.80% in 2009 concurrent
with the decline in overall underlying interest rates. Interest and dividend
income on securities increased in 2010 primarily due to growth in the available
for sale portfolio. Average securities increased to $16.3 million in 2010 from
$11.6 million in 2009 while their tax equivalent yields decreased to 4.38% from
4.58% over the same period. Interest income of other short-term investments,
including federal funds sold, dropped from $11,000 in 2009 to $8,000 in 2010.
Interest Expense.
Interest expense decreased to $3.0 million in 2010 from $4.3 million in 2009
due to decreases in both the average balances of outstanding interest bearing
liabilities and the cost of those funds. Interest expense on borrowings
decreased from $1.8 million in 2009 to $1.2 million in 2010 as the average
balances decreased from $56.2 million in 2009 to $39.0 million in the current
year. The Company utilized deposit inflows and loan sale proceeds to reduce
fixed rate advances upon maturity. The average rate paid on borrowings
decreased to 3.06% in 2010 from 3.25% in 2009. The average rate paid on interest
bearing deposits in 2010 decreased to 0.97% from 1.32% in 2009, principally due
to lower rates paid on time deposits, consistent with current market trends.
The average balance of interest bearing deposits increased to $189.1 million in
2010 from $183.7 million in 2009.
Provision
for Loan Losses.
The Company recorded a provision for
loan losses of $1.8 million in 2010, compared to $300,000 in 2009. The majority
of the loan loss provision is attributable to the decline in collateral value
securing one commercial credit facility and the charge-off of a large
commercial credit in the fourth quarter of 2010. This charge-off was
necessitated by deterioration late in 2010 of the borrowers financial
position, raising uncertainty as to the source of loan repayment. Management is
continuing to closely monitor these credits. In addition, the balance of
non-performing loans increased in 2010. The majority of the non-performing
loans are in the mortgage portfolio and management believes these loans are
generally well collateralized. The allowance for loan losses increased to $2.5
million or 0.93% of total loans at December 31, 2010 compared to $2.1 million
and 0.74% of total loans at December 31, 2009. The allowance for loan losses as
a percent of non-performing loans decreased to 81.9% at December 31, 2010 from
111.4% at December 31, 2009. Management considers these ratios to be
appropriate due to the current composition of the loan portfolio and level of
non-performing loans. Non-performing loans, consisting of non-accrual loans and
loans 90 days past due and still accruing, were $3.0 million or 1.13% of total
loans at December 31, 2010 compared to $1.9 million or 0.67% at December 31,
2009. Rome Savings does not originate or hold subprime mortgage loans or securities
collateralized by subprime loans.
44
In determining the level of the provision for loan losses necessary to
absorb probable incurred credit losses, management considers historical loan
loss experience, review of specific loans, the level of and trend in
non-performing loans, the level of and trend in net loan charge-offs, the
dollar amount and mix of the loan portfolio, as well as general economic
conditions and real estate trends in Rome Bancorps market area, which can
impact the inherent risk of loss in Rome Bancorps loan portfolio. As a result
of these factors, management determined that a provision of $1.8 million was
appropriate in 2010.
Non-Interest Income.
The
following table summarizes changes in the major components of non-interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
$ Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
Gain on securities
|
|
$
|
156
|
|
$
|
73
|
|
$
|
83
|
|
|
113.70
|
%
|
Gain on sale of real
estate
|
|
|
419
|
|
|
2
|
|
|
417
|
|
|
99.52
|
|
Gain on sale of loans
|
|
|
493
|
|
|
155
|
|
|
338
|
|
|
218.06
|
|
Service charges
|
|
|
1,861
|
|
|
1,815
|
|
|
46
|
|
|
2.53
|
|
Other income
|
|
|
421
|
|
|
477
|
|
|
(56
|
)
|
|
(11.74
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest income
|
|
$
|
3,350
|
|
$
|
2,522
|
|
$
|
828
|
|
|
32.83
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income increased $828,000 to $3.4 million in 2010 from
$2.5 million in 2009. During 2010, the Company sold six investment securities,
yielding gains of $156,000; in 2009, two investments were sold at a total gain
of $73,000. Also, in 2010, the Company sold a commercial real estate parcel
adjacent to one of its branch locations at a gain of $419,000. The increase in
gains realized on loan sales represents an increase in both the volume of loans
sold and the average gain per sale. Service charge income increased
commensurate with deposit and loan activity. The decrease in other income is
primarily attributable to the loss of rental income on the aforementioned
commercial real estate parcel sold.
Non-Interest Expense.
Non-interest
expense increased to $11.9 million for the year ended December 31, 2010
compared to $10.7 million for the year ended December 31, 2009. The following
table summarizes changes in the major components of non-interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
$ Change
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee
benefits
|
|
$
|
6,295
|
|
$
|
6,143
|
|
$
|
152
|
|
|
2.47
|
%
|
Occupancy and equipment
expense
|
|
|
1,941
|
|
|
1,918
|
|
|
23
|
|
|
1.20
|
|
Regulatory assessments
|
|
|
321
|
|
|
416
|
|
|
(95
|
)
|
|
(22.84
|
)
|
Outside consulting and
professional fees
|
|
|
1,414
|
|
|
421
|
|
|
993
|
|
|
235.87
|
|
Other expense
|
|
|
1,890
|
|
|
1,791
|
|
|
99
|
|
|
5.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense
|
|
$
|
11,861
|
|
$
|
10,689
|
|
$
|
1,172
|
|
|
10.96
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in 2010 salaries and employee benefits expense is
principally due to higher costs related to stock-based benefit plans, which
increased directly with increases in the Companys average stock price
throughout 2010. The current year decline in regulatory assessment rates
reflects the special assessment charged in 2009 to all banks insured by the
FDIC. The 2010 increase in outside consulting and professional fees is the
result of costs incurred by the Company for strategic planning activities,
culminating with the impending merger with Berkshire Hills Bancorp, Inc., as
discussed in Note 20 of the Notes to the Consolidated Financial Statements.
Major components of the increase in other expenses were in the areas of
advertising, loan operations expense and insurance expense.
Income Tax Expense.
Income
tax expense decreased to $1.1 million for 2010 from 2009 income tax expense of
$1.5 million. The decrease is attributable to lower pre-tax earnings, partially
offset by the nondeductible nature of some acquisition costs incurred.
Comparison of Results of Operations for the
Years Ended December 31, 2009 and December 31, 2008
General.
Net income
for the year ended December 31, 2009 increased to $3.1 million from $2.9
million for the year ended December 31, 2008. The increase in net income was
attributable to an increase in non-interest income of $578,000, partially
offset by a decrease in net interest income before provision for loan losses of
$26,000, and increases in non-interest expense and income tax expense of
$279,000 and $91,000, respectively.
45
Net Interest Income.
The Company recorded net interest income of $13.0 million in 2009 and $13.1
million in 2008. The changes in the components of net interest income are
discussed in detail below.
Interest Income.
Interest income decreased by $663,000 for the year ended December 31, 2009,
from $18.0 million for the year ended December 31, 2008. Interest income earned
on the loan portfolio decreased to $16.8 million in 2009 from $17.6 million in
2008. Average balances of the loan portfolio remained constant at approximately
$289 million in both 2009 and 2008. The yield on loans in 2009 decreased to
5.80% compared to 6.08% in 2008 concurrent with the decline in overall
underlying interest rates. Interest and dividend income on securities increased
in 2009 primarily due to growth in the available for sale portfolio. Average
securities increased to $11.6 million in 2009 from $7.5 million in 2008 while
their tax equivalent yields decreased to 4.58% from 5.24% over the same period.
Interest income of other short-term investments, including federal funds sold,
dropped from $26,000 in 2008 to $11,000 in 2009, as a result of a decrease in
the yield earned on these funds, again driven by declines in market interest
rates throughout latter 2008 and into 2009.
Interest Expense.
Interest expense decreased to $4.3 million in 2009 from $4.9 million in 2008
primarily due to a decrease in the cost of funds, consistent with current
market trends, partially offset by increases in the average balances of
outstanding borrowings and deposits. Interest expense on borrowings increased
from $1.5 million in 2008 to $1.8 million in 2009 as the average balances
increased from $50.7 million in 2008 to $56.2 million in 2009. The average rate
paid on these borrowings increased to 3.25% in 2009 from 3.04% in 2008, as the
Company restructured its floating rate debt into longer term fixed-rate
maturities in order to take advantage of the historically low interest rate
levels. The average rate paid on interest bearing deposits in 2009 decreased to
1.32% from 1.89% in 2008, principally due to lower rates paid on time deposits
and savings accounts.
Provision for Loan Losses.
The Company recorded a provision for loan losses of $300,000 in both 2009 and
2008. While the level of non-performing loans has increased in 2009, the
Company had a reduction in its actual loan losses from 2008 levels. Net loan
charge-offs decreased to $104,000 in 2009 from $274,000 in the prior year. The
allowance for loan losses increased to $2.1 million or 0.74% of total loans at
December 31, 2009 compared to $1.9 million and 0.64% of total loans at December
31, 2008. The allowance for loan losses as a percent of non-performing loans
decreased to 111.4% at December 31, 2009 compared to 152.1% at December 31,
2008. Management considered these ratios to be appropriate due to the
composition of the loan portfolio and level of non-performing loans. Non-performing
loans, consisting of non-accrual loans and loans 90 days past due and still
accruing, were $1.9 million or 0.67% of total loans at December 31, 2009
compared to $1.3 million or 0.42% at December 31, 2008.
In determining the level of the provision for loan losses necessary to
absorb probable incurred credit losses, management considers historical loan
loss experience, review of specific loans, the level of and trend in
non-performing loans, the level of and trend in net loan charge-offs, the dollar
amount and mix of the loan portfolio, as well as general economic conditions
and real estate trends in Rome Bancorps market area, which can impact the
inherent risk of loss in Rome Bancorps loan portfolio. As a result of these
factors, management determined that a provision of $300,000 was appropriate in
2009.
46
Non-Interest Income.
The
following table summarizes changes in the major components of non-interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
$
Change
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on securities
|
|
$
|
73
|
|
$
|
(265
|
)
|
$
|
338
|
|
|
127.55
|
%
|
Gain on sale of loans
|
|
|
155
|
|
|
17
|
|
|
138
|
|
|
811.76
|
|
Service charges
|
|
|
1,815
|
|
|
1,706
|
|
|
109
|
|
|
6.39
|
|
Other income
|
|
|
479
|
|
|
486
|
|
|
(7
|
)
|
|
(1.44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest income
|
|
$
|
2,522
|
|
$
|
1,944
|
|
$
|
578
|
|
|
29.73
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income increased $578,000 to $2.5 million in 2009 from
$1.9 million in 2008. During 2009, the Company sold two investment securities,
yielding gains of $73,000; no investments were sold in 2008. In contrast, in
2008, in relation to declines in global investment markets, the Company
recognized a write-down of $265,000 on its investment in a large blue chip
mutual fund, due to impairment that was determined to be other than temporary
under generally accepted accounting principles. In light of the low interest
rate environment existent in 2009, the Company opted to sell the majority of
its current year fixed-rate thirty year termed residential mortgage
originations into the secondary market. Loan sales increased to $11.2 million
in 2009, compared to $1.2 million in 2008, accounting for the increase in gains
on loan sales. Service charge income increased commensurate with deposit and
loan activity.
Non-Interest Expense.
Non-interest
expense increased to $10.7 million for the year ended December 31, 2009
compared to $10.4 million for the year ended December 31, 2008. The following
table summarizes changes in the major components of non-interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
$
Change
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee
benefits
|
|
$
|
6,143
|
|
$
|
5,733
|
|
$
|
410
|
|
|
7.15
|
%
|
Occupancy and equipment
expense
|
|
|
1,918
|
|
|
1,903
|
|
|
15
|
|
|
0.79
|
|
Regulatory assessments
|
|
|
416
|
|
|
140
|
|
|
276
|
|
|
197.14
|
|
Outside consulting and
professional fees
|
|
|
421
|
|
|
580
|
|
|
(159
|
)
|
|
(27.41
|
)
|
Other expense
|
|
|
1,791
|
|
|
2,054
|
|
|
(263
|
)
|
|
(12.80
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense
|
|
$
|
10,689
|
|
$
|
10,410
|
|
$
|
279
|
|
|
(2.68
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in salaries and employee benefits is largely related to
higher defined benefit pension plan expense resulting from a 2008 decline in
the market value of plan assets. Due to overall higher assessment rates charged
to all banks insured by the FDIC, as well as a special assessment, the
Companys FDIC and regulatory assessment expense increased to $416,000 in 2009
from $140,000 in the prior year. In 2009 the Company required less legal,
professional and consulting services. Major components of the decrease in other
expenses were in the areas of other real estate owned and contribution expense.
Due to a reduction in other real estate owned during 2009, the Companys
expense decreased by $98,000 to $10,000 in 2009. Contribution expense decreased
from $151,000 in 2008 to $17,000 in 2009 due to the 2008 donation of a parcel
of Company owned real estate to the Rome Rescue Mission, Inc.
Income Tax Expense.
Income
tax expense was $1.5 million for 2009, an increase of $91,000 from 2008 income
tax expense of $1.4 million. The increase is attributable to higher pre-tax
earnings.
Liquidity and Capital Resources
Liquidity describes our ability to meet the financial obligations that
arise during the ordinary course of business. Liquidity is primarily needed to
meet the borrowing and deposit withdrawal requirements of our customers and to
fund current and planned expenditures. Rome Bancorps primary sources of funds
consist of deposits, scheduled amortization and prepayments of loans and
mortgage-backed securities, maturities and sales of investments, interest
bearing deposits at other financial institutions and funds provided from
operations. Rome Savings also has a written agreement with the Federal Home
Loan Bank of New York that allows it to borrow up to $61.2 million on a line of
credit. At December 31, 2010, Rome Savings had no outstanding borrowings
against this line of credit, but did have bullet maturity and amortizing notes
totaling $35.7 million. At December 31, 2010, the Company also had
approximately $8.3 million in unused short term borrowing capacity at the
Federal Reserve Bank of New York.
47
Loan repayments and maturing investment securities are a relatively
predictable source of funds. However, deposit flows, calls of investment
securities, and prepayments of loans and mortgage-backed securities are
strongly influenced by interest rates, general and local economic conditions,
and competition in the marketplace. These factors reduce the predictability of
the timing of these sources of funds.
Rome Bancorps primary investing activities include the origination of
loans and to a lesser extent the purchase of investment securities. In 2010,
Rome Bancorp originated approximately $56.9 million in loans compared to
approximately $51.5 million in 2009. Purchases of investment securities were
$5.6 million in 2010 and $7.5 million in 2009. At December 31, 2010, Rome
Bancorp had loan commitments to borrowers of approximately $13.3 million, and
customer available letters and lines of credit of approximately $18.6 million.
Total deposits were $225.3 million at December 31, 2010, an increase of
4.0% from $216.6 million at December 31, 2009. Time deposit accounts scheduled
to mature within one year were $48.8 million at December 31, 2010. Based on our
deposit retention experience and current pricing strategy, we anticipate that a
significant portion of these time deposits will remain with Rome Bancorp. We
are committed to maintaining a strong liquidity position therefore, Rome
Bancorp monitors its liquidity position on a daily basis. Rome Bancorp
anticipates that it will have sufficient funds to meet its current funding
commitments. The marginal cost of new funding however, whether from deposits or
from borrowings from the Federal Home Loan Bank, will be carefully considered
as Rome Bancorp monitors its liquidity needs. Therefore, in order to minimize
its cost of funds, Rome Bancorp may consider additional borrowings from the
Federal Home Loan Bank in the future.
During 2010 Rome Bancorp repurchased 22,568 outstanding shares of its
common stock at a total cost of $201,000. Rome Bancorp paid cash dividends of
$0.36 per share in 2010, requiring a cash outlay of $2.3 million.
At December 31, 2010 and 2009, Rome Savings exceeded each of the
applicable regulatory capital requirements. Rome Savings leverage (Tier 1)
capital at December 31, 2010 and 2009 was $57.8 million and $54.0 million or
17.57% and 16.27% of adjusted assets, respectively. In order to be classified
as well-capitalized by the OTS and the FDIC at December 31, 2010 and 2009,
Rome Savings was required to have leverage (Tier 1) capital of $16.5 million
and $16.6 million, respectively, or 5.0% of adjusted assets. To be classified
as a well-capitalized bank by the OTS and FDIC, Rome Savings must also have a
risk-based total capital ratio of 10.0%. At December 31, 2010 and 2009, Rome
Savings had a risk-based total capital ratio of 25.41% and 23.04%,
respectively.
Rome Bancorp does not anticipate any material capital expenditures, nor
does it have any balloon or other payments due on any long-term obligations or
any off-balance sheet items other than debt as described in Note 7 of Notes to
the Consolidated Financial Statements and the commitments and unused lines and
letters of credit noted above.
Off-Balance Sheet Arrangements
Rome Bancorp does not have any off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on Rome Bancorps
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
Recently Adopted Accounting Pronouncements
In June 2009, FASB issued Accounting Standard Update (ASU) Number
2009-16, Accounting for Transfers of Financial Assets an Amendment of FASB
Statement No. 140. The new accounting requirement amends previous guidance
relating to the transfers of financial assets and eliminates the concept of a
qualifying special purpose entity. This statement must be applied as of the
beginning of each reporting entitys first annual reporting period that begins
after November 15, 2009, for interim periods within that first annual reporting
period and for interim and annual reporting periods thereafter. This statement
must be applied to transfers occurring on or after the effective date.
Additionally, on and after the effective date, the concept of a qualifying
special-purpose entity is no longer relevant for accounting purposes.
Therefore, formerly qualifying special-purpose entities should be evaluated for
consolidation by reporting entities on and after the effective date in
accordance with the applicable consolidation guidance. Additionally, the
disclosure provisions of this statement were also amended and apply to
transfers that occurred both before and after the effective date of this
statement. The adoption did not have a material impact on the Companys
consolidated financial position, results of operations or cash flows.
48
ASC Topic 810-10-65-2, Amendments to FASB Interpretation No. 46(R),
which amended guidance for consolidation of variable interest entities by
replacing the quantitative-based risks and rewards calculation for determining
which enterprise, if any, has a controlling financial interest in a variable
interest entity with an approach focused on identifying which enterprise has
the power to direct the activities of a variable interest entity that most
significantly impact the entitys economic performance and (1) the obligation
to absorb losses of the entity of (2) the right to receive benefits from the
entity. This statement also requires additional disclosures about an enterprises
involvement in variable interest entities. This statement became effective as
of the beginning of each reporting entitys first annual reporting period that
begins after November 15, 2009, for interim periods within the first annual
reporting period, and for interim and annual reporting periods thereafter.
Early adoption is prohibited. The adoption did not have a material impact on
the Companys consolidated financial position, results of operations or cash
flows.
On July 21, 2010, the FASB issued ASU No 2010-20,Disclosures about the
Credit Quality of Financing Receivables and the Allowance for Credit Losses,
which requires significant new disclosures about the allowance for credit
losses and the credit quality of financing receivables. The requirements are
intended to enhance transparency regarding credit losses and the credit quality
of loan and lease receivables. Under this statement, allowance for credit
losses and fair value are to be disclosed by portfolio segment, which credit
quality information, impaired financing receivables and non-accrual status are
to be presented by class of financing receivable. The disclosures are to be
presented at the level of disaggregation that management uses when assessing
and monitoring the portfolios risk and performance. This ASU is effective for
interim and annual reporting periods on or after December 15, 2010. See Note 4
to the Notes to the Financial Statements Loans.
In January 2011, FASB issued Accounting Standards Update No 2011-11,
Deferral of the Effective Date of Disclosures about Troubled Debt
Restructurings in Update No. 2010-20. The amendments in this update
temporarily delay the effective date of the disclosures about troubled debt
restructurings in Accounting Standards Update No. 2010-20, Receivables (Topic
310): Disclosures about the Credit Quality of Financing Receivables and the
Allowance for Credit Losses, for public entities. The delay is intended to
allow the Board time to complete its deliberations on what constitutes a troubled
debt restructuring. The effective date of the new disclosures about troubled
debt restructurings for public entities and the guidance for determining what
constitutes a troubled debt restructuring will then be coordinated.
|
|
I
TEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
The
information is included in Managements Discussion and Analysis of Financial
Condition and Results of Operations - Management of Interest Rate Risk.
49
|
|
I
TEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
Rome Bancorp, Inc and Subsidiary
Index to Consolidated Financial Statements
50
R
EPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of
Directors
Rome Bancorp, Inc.
Rome, New York
We have audited the accompanying consolidated balance sheets of Rome
Bancorp, Inc. and subsidiary as of December 31, 2010 and 2009 and the related
consolidated statements of income, shareholders equity and comprehensive
income, and cash flows for each of the three years in the period ended December
31, 2010. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). 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. The
Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated 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 Rome
Bancorp, Inc. and subsidiary as of December 31, 2010 and 2009 and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2010, in conformity with U.S. generally accepted
accounting principles.
|
|
/s/ Crowe
Horwath LLP
|
|
|
|
Crowe Horwath LLP
|
|
Cleveland,
Ohio
|
|
March 18,
2011
|
|
51
ROME
BANCORP, INC. AND SUBSIDIARY
C
onsolidated
Balance Sheets
December 31, 2010 and 2009
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
Assets
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
5,707
|
|
$
|
6,547
|
|
Federal funds sold and other short-term
investments
|
|
|
13,098
|
|
|
1,027
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
|
18,805
|
|
|
7,574
|
|
Securities available for sale, at fair
value
|
|
|
13,070
|
|
|
10,024
|
|
Securities held to maturity (fair value of
$1,459 and $1,502 at December 31, 2010 and 2009, respectively)
|
|
|
1,416
|
|
|
1,431
|
|
Federal Home Loan Bank stock
|
|
|
3,385
|
|
|
3,222
|
|
Loans held for sale
|
|
|
920
|
|
|
|
|
Loans, net of allowance of $2,490 and
$2,132
|
|
|
265,937
|
|
|
285,617
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net
|
|
|
5,814
|
|
|
6,041
|
|
Accrued interest receivable
|
|
|
1,100
|
|
|
1,117
|
|
Bank-owned life insurance
|
|
|
9,812
|
|
|
9,415
|
|
Other assets
|
|
|
6,952
|
|
|
5,481
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
327,211
|
|
$
|
329,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
Non-interest bearing
|
|
$
|
34,502
|
|
$
|
31,790
|
|
Savings
|
|
|
85,211
|
|
|
82,031
|
|
Money market
|
|
|
19,516
|
|
|
15,726
|
|
Time
|
|
|
69,204
|
|
|
71,903
|
|
Other interest bearing
|
|
|
16,892
|
|
|
15,189
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
225,325
|
|
|
216,639
|
|
|
|
|
|
|
|
|
|
Federal home Loan Bank advances
|
|
|
35,661
|
|
|
47,869
|
|
Other liabilities
|
|
|
5,570
|
|
|
5,049
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
266,556
|
|
|
269,557
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
Common stock, $.01 par value; 30,000,000
shares authorized; issued: 9,895,757 shares; outstanding: 6,777,551 and
6,800,119 shares at December 31, 2010 and 2009, respectively;
|
|
|
99
|
|
|
99
|
|
Additional paid-in capital
|
|
|
63,194
|
|
|
62,794
|
|
Retained earnings
|
|
|
37,507
|
|
|
37,588
|
|
Treasury stock, at cost; 3,118,206 and
3,095,638 shares at December 31, 2010 and 2009, respectively
|
|
|
(36,921
|
)
|
|
(36,720
|
)
|
Accumulated other comprehensive income
(loss)
|
|
|
(1,621
|
)
|
|
(1,574
|
)
|
Unallocated shares of employee stock
ownership plan (ESOP) 232,309 and 278,275 shares at December 31, 2010 and
2009, respectively
|
|
|
(1,603
|
)
|
|
(1,822
|
)
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
60,655
|
|
|
60,365
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
327,211
|
|
$
|
329,922
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to consolidated financial statements.
52
ROME
BANCORP, INC. AND SUBSIDIARY
C
onsolidated
Statements of Income
Years ended December 31, 2010, 2009 and 2008
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
15,968
|
|
$
|
16,763
|
|
$
|
17,561
|
|
Securities
|
|
|
711
|
|
|
517
|
|
|
367
|
|
Other short-term investments
|
|
|
8
|
|
|
11
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
16,687
|
|
|
17,291
|
|
|
17,954
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,826
|
|
|
2,426
|
|
|
3,342
|
|
Borrowings
|
|
|
1,191
|
|
|
1,824
|
|
|
1,545
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
3,017
|
|
|
4,250
|
|
|
4,887
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
13,670
|
|
|
13,041
|
|
|
13,067
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
1,796
|
|
|
300
|
|
|
300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan
losses
|
|
|
11,874
|
|
|
12,741
|
|
|
12,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
income:
|
|
|
|
|
|
|
|
|
|
|
Service charges
|
|
|
1,861
|
|
|
1,815
|
|
|
1,706
|
|
Gain on sale of loans
|
|
|
493
|
|
|
155
|
|
|
17
|
|
Net gain (loss) on securities
|
|
|
156
|
|
|
73
|
|
|
(265
|
)
|
Gain (loss) on sale of real estate
|
|
|
419
|
|
|
2
|
|
|
(18
|
)
|
Earnings on bank owned life insurance
|
|
|
397
|
|
|
409
|
|
|
408
|
|
Other income
|
|
|
24
|
|
|
68
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest income
|
|
|
3,350
|
|
|
2,522
|
|
|
1,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
expense:
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
6,295
|
|
|
6,143
|
|
|
5,733
|
|
Building, occupancy and equipment
|
|
|
1,941
|
|
|
1,918
|
|
|
1,903
|
|
FDIC and OTS assessments
|
|
|
321
|
|
|
416
|
|
|
140
|
|
Outside consulting and professional fees
|
|
|
1,414
|
|
|
421
|
|
|
580
|
|
ATM service fees
|
|
|
210
|
|
|
251
|
|
|
236
|
|
Other
|
|
|
1,680
|
|
|
1,540
|
|
|
1,818
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense
|
|
|
11,861
|
|
|
10,689
|
|
|
10,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
|
3,363
|
|
|
4,574
|
|
|
4,301
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
|
1,102
|
|
|
1,487
|
|
|
1,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,261
|
|
$
|
3,087
|
|
$
|
2,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
0.35
|
|
$
|
0.47
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$
|
0.35
|
|
$
|
0.47
|
|
$
|
0.41
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to
consolidated financial statements.
53
ROME BANCORP, INC. AND SUBSIDIARY
C
onsolidated Statements of Shareholders
Equity and Comprehensive Income
Years ended December 31, 2010, 2009 and 2008
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Additional
paid-in
capital
|
|
Retained
earnings
|
|
Treasury
Stock
|
|
Accumulated
other
comprehensive
income (loss)
|
|
Unallocated
ESOP
shares
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2007
|
|
$
|
99
|
|
$
|
61,884
|
|
$
|
36,179
|
|
$
|
(26,488
|
)
|
$
|
(376
|
)
|
$
|
(2,261
|
)
|
$
|
69,037
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
2,905
|
|
|
|
|
|
|
|
|
|
|
|
2,905
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,836
|
)
|
|
|
|
|
(1,836
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of 731,750 treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
(8,174
|
)
|
|
|
|
|
|
|
|
(8,174
|
)
|
Exercise of stock options and related tax benefit 2,201 shares, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization and tax benefits of stock option and restricted share
grants
|
|
|
|
|
|
280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280
|
|
Dividends paid ($0.34 per share)
|
|
|
|
|
|
|
|
|
(2,387
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,387
|
)
|
ESOP shares released for allocation (45,965 shares)
|
|
|
|
|
|
276
|
|
|
|
|
|
|
|
|
|
|
|
219
|
|
|
495
|
|
Adjustment to initially apply pension guidance, net of tax (Note 9)
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2008
|
|
|
99
|
|
|
62,440
|
|
|
36,721
|
|
|
(34,662
|
)
|
|
(2,212
|
)
|
|
(2,042
|
)
|
|
60,344
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
3,087
|
|
|
|
|
|
|
|
|
|
|
|
3,087
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
638
|
|
|
|
|
|
638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of 260,788 treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
(2,058
|
)
|
|
|
|
|
|
|
|
(2,058
|
)
|
Exercise of stock options and related tax benefit 2,041 shares, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization and tax benefits of stock option and restricted share
grants
|
|
|
|
|
|
190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
190
|
|
Dividends paid ($0.34 per share)
|
|
|
|
|
|
|
|
|
(2,220
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,220
|
)
|
ESOP shares released for allocation (45,964 shares)
|
|
|
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
|
220
|
|
|
384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2009
|
|
|
99
|
|
|
62,794
|
|
|
37,588
|
|
|
(36,720
|
)
|
|
(1,574
|
)
|
|
(1,822
|
)
|
|
60,365
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
2,261
|
|
|
|
|
|
|
|
|
|
|
|
2,261
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47
|
)
|
|
|
|
|
(47
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of 22,568 treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
(201
|
)
|
|
|
|
|
|
|
|
(201
|
)
|
Amortization and tax benefits of stock option and restricted share
grants
|
|
|
|
|
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
188
|
|
Dividends paid ($0.36 per share)
|
|
|
|
|
|
|
|
|
(2,342
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,342
|
)
|
ESOP shares released for allocation (45,966 shares)
|
|
|
|
|
|
212
|
|
|
|
|
|
|
|
|
|
|
|
219
|
|
|
431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2010
|
|
$
|
99
|
|
$
|
63,194
|
|
$
|
37,507
|
|
$
|
(36,921
|
)
|
$
|
(1,621
|
)
|
$
|
(1,603
|
)
|
$
|
60,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to
consolidated financial statements.
54
ROME
BANCORP, INC. AND SUBSIDIARY
C
onsolidated Statements of Cash Flows
Years ended December 31, 2010, 2009 and 2008
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,261
|
|
$
|
3,087
|
|
$
|
2,905
|
|
Adjustments to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
478
|
|
|
513
|
|
|
563
|
|
Decrease
(increase) in accrued interest receivable
|
|
|
17
|
|
|
(32
|
)
|
|
39
|
|
Provision
for loan losses
|
|
|
1,796
|
|
|
300
|
|
|
300
|
|
Net
loss on other than temporary securities impairment
|
|
|
|
|
|
|
|
|
265
|
|
Net
gains on securities transactions
|
|
|
(156
|
)
|
|
(73
|
)
|
|
|
|
Gain
on sales of loans
|
|
|
(493
|
)
|
|
(155
|
)
|
|
(17
|
)
|
Proceeds
from sale of loans
|
|
|
20,067
|
|
|
11,173
|
|
|
1,180
|
|
Origination
of loans for sale
|
|
|
(20,494
|
)
|
|
(11,018
|
)
|
|
(1,163
|
)
|
Net
accretion/amortization on securities
|
|
|
121
|
|
|
7
|
|
|
3
|
|
Increase
in cash surrender value of Bank-owned life insurance
|
|
|
(397
|
)
|
|
(409
|
)
|
|
(408
|
)
|
(Gain)
loss on sale of other real estate
|
|
|
(410
|
)
|
|
(2
|
)
|
|
18
|
|
Increase
(decrease) in other liabilities
|
|
|
521
|
|
|
(237
|
)
|
|
(3,527
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
income tax (benefit) expense
|
|
|
(143
|
)
|
|
(107
|
)
|
|
126
|
|
(Increase)
decrease in other assets
|
|
|
(1,822
|
)
|
|
(526
|
)
|
|
3,122
|
|
Allocation
of ESOP shares
|
|
|
431
|
|
|
384
|
|
|
495
|
|
Amortization
of stock-based compensation
|
|
|
228
|
|
|
228
|
|
|
280
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
2,005
|
|
|
3,133
|
|
|
4,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Net decrease (increase) in loans
|
|
|
18,379
|
|
|
12,344
|
|
|
(18,216
|
)
|
Proceeds from sales of securities available for sale
|
|
|
1,303
|
|
|
1,314
|
|
|
|
|
Proceeds from maturities and principal reductions of securities
available for sale
|
|
|
1,198
|
|
|
349
|
|
|
921
|
|
Purchases of securities available for sale
|
|
|
(5,553
|
)
|
|
(7,477
|
)
|
|
(3,244
|
)
|
Purchases of securities held to maturity
|
|
|
|
|
|
|
|
|
(326
|
)
|
Proceeds from maturities and principal reductions of securities held
to maturity
|
|
|
10
|
|
|
9
|
|
|
23
|
|
Proceeds from sale of real estate owned
|
|
|
205
|
|
|
525
|
|
|
253
|
|
Purchases of premises and equipment, net
|
|
|
(251
|
)
|
|
(176
|
)
|
|
(361
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
15,291
|
|
|
6,888
|
|
|
(20,950
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Decrease in time deposits
|
|
|
(2,699
|
)
|
|
(235
|
)
|
|
(1,071
|
)
|
Increase in other deposits
|
|
|
11,385
|
|
|
10,942
|
|
|
3,971
|
|
Repayments of borrowings
|
|
|
(27,083
|
)
|
|
(33,409
|
)
|
|
(12,709
|
)
|
Advances on borrowings
|
|
|
14,875
|
|
|
14,954
|
|
|
38,700
|
|
Purchase of treasury stock
|
|
|
(201
|
)
|
|
(2,058
|
)
|
|
(8,174
|
)
|
Dividends
|
|
|
(2,342
|
)
|
|
(2,220
|
)
|
|
(2,387
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(6,065
|
)
|
|
(12,026
|
)
|
|
18,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
11,231
|
|
|
(2,005
|
)
|
|
1,561
|
|
Cash and cash equivalents at beginning of year
|
|
|
7,574
|
|
|
9,579
|
|
|
8,018
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
18,805
|
|
$
|
7,574
|
|
$
|
9,579
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
55
ROME BANCORP, INC. AND SUBSIDIARY
Consolidated
Statements of Cash Flows (continued)
Years
ended December 31, 2010, 2009 and 2008
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
Other non-cash activities:
|
|
|
|
|
|
|
|
|
|
|
Transfers from loans to real estate owned
|
|
$
|
65
|
|
$
|
192
|
|
$
|
505
|
|
Financing of sale of real estate owned
|
|
|
563
|
|
|
|
|
|
|
|
Cash paid during the year
for:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
3,044
|
|
|
4,244
|
|
|
4,795
|
|
Income taxes
|
|
|
2,075
|
|
|
1,097
|
|
|
1,514
|
|
See accompanying notes to consolidated
financial statements.
56
|
|
|
(1)
|
Bu
siness
|
|
|
|
|
Rome Bancorp, Inc. (the
Company) is a registered savings and loan holding company, organized under
the laws of Delaware and is the parent company of The Rome Savings Bank and
its subsidiaries (Rome Savings or the Bank). The Company provides
traditional community banking services for individuals and small-to
medium-sized businesses, through the Banks five branches in Oneida County of
New York State.
|
|
|
|
(2)
|
Summary
of Significant Accounting Policies
|
|
|
|
|
(a) Basis of Presentation
|
|
|
|
|
|
The consolidated
financial statements have been prepared in conformity with U.S. generally
accepted accounting principles. Amounts in the prior years consolidated
financial statements are reclassified when necessary to conform with the
current years presentation. Reclassifications had no affect on prior year
net income or shareholders equity. A description of the significant
accounting policies is presented below. To prepare financial statements in
conformity with U.S. generally accepted accounting principles, management
makes estimates and assumptions based on the available information.
Management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance
sheet and disclosures of contingent assets and liabilities and the reported
amounts of revenues and expenses for the period. Significant estimates
include the allowance for loan losses, valuation of securities, deferred tax
assets and employee benefit obligations. Actual results could differ from
those estimates.
|
|
|
|
|
|
The consolidated
financial statements include the accounts of the Rome Bancorp, Inc. and its
wholly-owned subsidiary. All significant inter-company accounts and
transactions are eliminated in consolidation.
|
|
|
|
|
(b) Securities
|
|
|
|
|
|
The Company classifies
its debt securities as either available-for-sale or held-to-maturity as the
Company does not hold any securities considered to be trading.
Held-to-maturity securities are those debt securities the Company has the
ability and intent to hold until maturity. All other debt securities are
classified as available for sale. Equity securities with readily determinable
fair values are classified as available for sale.
|
|
|
|
|
|
Held-to-maturity
securities are recorded at amortized cost. Available-for-sale securities are
recorded at fair value. Unrealized holding gains and losses, net of the
related deferred tax effect, on available-for-sale securities are excluded
from earnings and reported as accumulated other comprehensive income, a
component of shareholders equity, until realized.
|
|
|
|
|
|
Management evaluates
securities for other than temporary impairment (OTTI) at least on a
quarterly basis and more frequently when economic or market conditions
warrant such an evaluation.
|
|
|
|
|
|
Premiums and discounts
are amortized or accreted over the life of the related security as an
adjustment to yield using the interest method. Dividend and interest income
are recognized when earned on the accrual method. Purchases and sales are
recorded on a trade date basis with settlement occurring shortly thereafter.
Realized gains and losses on securities sold are derived using the specific
identification method for determining the cost of securities sold.
|
|
|
|
|
|
Management evaluates
securities for other-than-temporary impairment (OTTI) on at least a
quarterly basis, and more frequently when economic or market conditions
warrant such an evaluation. For securities in an unrealized loss position,
management considers the extent and
|
57
|
|
|
|
|
duration of the
unrealized loss, and the financial condition and near-term prospects of the
issuer. Management also assesses whether it intends to sell, or it is more
likely than not that it will be required to sell, a security in an unrealized
loss position before recovery of its amortized cost basis. If either of the
criteria regarding intent or requirement to sell is met, the entire
difference between amortized cost and the fair market value is recognized as
impairment through earnings. For debt securities that do not meet the
aforementioned criteria, the amount of impairment is split into two
components as follows: 1) OTTI related to credit loss, which must be
recognized in the income statement and 2) OTTI related to other factors,
which is recognized in other comprehensive income. The credit loss is defined
as the difference between the present value of the cash flows expected to be
collected and the amortized cost basis. For equity securities, the entire
amount of impairment is recognized through earnings.
|
|
|
|
|
|
In order to determine
OTTI for purchased beneficial interests that, on the purchase date, were not
highly rated, the Company compares the present value of the remaining cash
flows as estimated at the preceding evaluation date to the current expected
remaining cash flows. OTTI is deemed to have occurred if there has been an
adverse change in the remaining expected future cash flows.
|
|
|
|
|
(c) Federal Home Loan Bank (FHLB) Stock
|
|
|
|
|
|
The Bank is a member of the FHLB system. Members
are required to own a certain amount of stock based on the level of
borrowings and other factors, and may invest in additional amounts. FHLB
stock is carried at cost, classified as a restricted security, and
periodically evaluated for impairment based on ultimate recovery of par
value. Both cash and stock dividends are reported as income.
|
|
|
|
|
(d) Loans Held for Sale
|
|
|
|
|
|
Mortgage loans originated and intended for sale in the secondary market
are carried at the lower of the aggregate cost or fair value, as determined
by outstanding commitments from investors. Net unrealized losses, if any, are
recorded as a valuation reserve and charged to earnings.
|
|
|
|
|
|
Mortgage loans held for sale are generally sold with servicing rights
retained. The carrying value of mortgage loans sold is reduced by the amount
allocated to the servicing right. Gains and losses on sales of mortgage loans
are based on the difference between the selling price and the carrying value
of the related loan sold.
|
|
|
|
|
(e) Loans
|
|
|
|
|
|
Loans are reported at
the principal amount outstanding net of loans in process, net deferred loan
fees and costs and an allowance for loan losses. Origination fees and certain
direct origination costs related to lending activities are deferred and
amortized over the life of the related loans. The Company has the ability and
intent to hold its loans for the foreseeable future or until maturity or
payoff.
|
|
|
|
|
|
Interest
on loans is accrued and included in income at contractual rates applied to
principal outstanding. The accrual of interest on loans (including impaired
loans) is generally discontinued, and previously accrued interest is
reversed, when loan payments are 90 days or more past due, or when, by the
judgment of management, collectibility becomes uncertain. Subsequent
recognition of income occurs only to the extent that payment is received.
Loans are generally returned to an accrual status when both principal and
interest become current and the loan is determined to be performing in
accordance with the applicable loan terms.
|
|
|
|
|
|
Most
of the Companys business activity is with customers located within Oneida
County, New York. Therefore, the Companys exposure to credit risk is
significantly affected by changes in the economy in the Oneida County area.
The majority of the Companys loan
|
58
|
|
|
|
|
portfolio
is 1-4 family real estate, commercial real estate and consumer loans. These
loans are largely secured by underlying real estate or consumer collateral.
Repayment of these loans is dependent on general economic conditions and
unemployment levels in the Companys market area.
|
|
|
|
|
|
The
repayment of commercial loans depends on a large degree on the results of
operations, cash flow and management of the related businesses. These loans
may be affected to a greater extent by adverse commerce conditions or the
economy in general. Accordingly, the nature of these loans makes them more
difficult for management to monitor and evaluate.
|
|
|
|
|
(f) Allowance for Loan Losses
|
|
|
|
|
|
The allowance for loan
losses is a valuation allowance for probable incurred credit losses. The
allowance for loan losses is increased by the provision for loan losses
charged to operations and is decreased by the charge-off of loans, net of
recoveries. Loans are charged off when management determines that ultimate
success of the loans collectibility is remote.
|
|
|
|
|
|
Managements evaluation
of the adequacy of the allowance considers the Companys historical loan loss
experience, review of specific loans, current economic conditions and such
other factors considered appropriate to estimate losses. Management uses
presently available information to estimate probable losses on loans;
however, future additions to the allowance may be necessary based on changes
in estimates, assumptions or economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Companys allowance for loan losses and may require
the Company to recognize additions to the allowance based on their judgment
of information available to them at the time of their examination.
|
|
|
|
|
|
The allowance consists
of specific and general components. The specific component relates to loans
that are individually classified as impaired or loans otherwise classified as
substandard or doubtful. The general component covers non-classified loans
and is based on historical loss experience adjusted for current factors.
|
|
|
|
|
|
The allowance for loan
losses is evaluated on a quarterly basis by management in order to maintain
the allowance at a level sufficient to absorb probable incurred loan losses
based upon known and inherent risks in the loan portfolio.
|
|
|
|
|
|
The Company estimates
losses on impaired loans based on the present value of expected future cash
flows (discounted at the loans effective interest rate) or the fair value of
the underlying collateral if the loan is collateral dependent. An impairment
loss exists if the recorded investment in a loan exceeds the value of the
loan as measured by the aforementioned methods. Impairment losses are
included as a component of the allowance for loan losses. A loan is
considered impaired when it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. Generally, all commercial mortgage loans and commercial loans
greater than $250,000 in a non-accrual status are considered impaired.
Commercial mortgage loans and commercial loans less than $250,000 and all
residential mortgage loans, consumer loans and education loans are evaluated
collectively for impairment by portfolio since they are homogeneous and
generally carry smaller individual balances. The Company recognizes interest
income on impaired loans using the cash basis of income recognition. Cash
receipts on impaired loans are generally applied according to the terms of
the loan agreement, or as a reduction of principal, based upon managements
judgment and the related factors discussed above. All classes of residential
1-4 family, commercial real estate, commercial loans and other commercial
loans that become delinquent beyond 90 days are analyzed and a charge-off is
taken when it is determined that the underlying collateral, if any, is not
sufficient to offset the indebtedness.
|
59
|
|
|
|
|
The
general component covers non-impaired loans and is based on historical loss
experience adjusted for current factors. The historical loss experience is
determined by portfolio segment and is based on the actual loss history
experienced by the Company over the most recent four years. This actual loss
experience is supplemented with other economic factors based on the risks
present for each portfolio segment. These economic factors include
consideration of the following: levels of and trends in delinquencies and impaired
loans; levels of and trends in charge-offs and recoveries; trends in volume
and terms of loans; effects of any changes in underwriting standards; other
changes in lending policies, procedures and practices; experience, ability
and depth of lending management and other related staff; national and local
economic trends and conditions; industry conditions and effects of changes in
credit concentrations. The following portfolio segments have been identified:
Residential 1-4 Family Mortgage, Commercial Real Estate, Commercial Loans,
and Other Consumer Loans. The risk characteristics of each of the
identified portfolio segments are as follows:
|
|
|
|
|
|
Residential 1-4 Family Mortgage
- Subject to adverse
employment conditions in the local economy leading to increased default rate;
decreased market values from oversupply in a geographic area; impact to
borrowers ability to maintain payments in the event of incremental rate
increases on adjustable rate mortgages.
|
|
|
|
|
|
Commercial Real Estate
- Subject to adverse
various market conditions that cause a decrease in market value or lease
rates; the potential for environmental impairment from events occurring on
subject or neighboring properties; obsolescence in location or function.
|
|
|
|
|
|
Commercial Loans
- Borrowers may be
subject to industry conditions including decreases in product demand;
increasing material or other production costs that cannot be immediately
recaptured in the sales or distribution cycle; interest rate increases that
could have an adverse impact on profitability; non-payment of credit that has
been extended under normal vendor terms for goods sold or services extended;
interruption related to the importing or exporting of production materials or
sold products.
|
|
|
|
|
|
Other Consumer Loans
- Subject to adverse
employment conditions in the local economy which may lead to higher default
rates; decreases in the value of underlying collateral.
|
|
|
|
|
|
If a troubled debt
restructuring is considered to be a collateral dependent loan, the loan is
reported, net, at the fair value of the collateral. For troubled debt
restructurings that subsequently default, the Company determines the amount
of reserve in accordance with the accounting policy for the allowance for
loan losses.
|
|
|
|
|
(g) Real Estate Owned
|
|
|
|
|
|
Real estate acquired
through foreclosure or deed in lieu of foreclosure is recorded at fair value
less estimated costs to sell. Write-downs from cost to fair value which are
required at the time of foreclosure are charged to the allowance for loan
losses. Adjustments to the carrying value of such properties that result from
subsequent declines in value are charged to operations in the period in which
the declines occur. Operating costs associated with the properties are
charged to expense as incurred.
|
|
|
|
|
(h) Premises and Equipment
|
|
|
|
|
|
Land is carried at cost
and buildings and improvements and furniture and equipment are carried at
cost less accumulated depreciation and amortization. Depreciation is computed
on the straight-line method over the estimated useful lives of the assets (7
to 40 years for buildings and 3 to 10 years for furniture and equipment).
|
|
|
|
|
(i) Employee Benefit Plans
|
60
|
|
|
|
|
The Company maintains a
non-contributory defined benefit pension plan that covers approximately 50% of
all current full time employees. The Companys Board of Directors amended the
plan in December of 2002 to cease the accrual of any further benefits. The
benefits under the pension plan are based on the employees years of service
and compensation. Pension expense is the net of service cost and interest
cost, return on plan assets and amortization of gains and losses not
immediately recognized. The Companys funding policy is to contribute
annually at least the minimum required to meet the funding standards set
forth under provisions of the Employee Retirement Income Security Act of
1974.
|
|
|
|
|
|
The Company provides
health care and life insurance benefits to certain retired full time
employees. The estimated costs of providing benefits are accrued over the
years the employees render services necessary to earn those benefits.
|
|
|
|
|
|
The Company has a
defined contribution 401(k) Savings Plan for all employees. Employees are
permitted to contribute up to 75% of base pay to the Savings Plan, subject to
certain limitations. The Company matches 50% of each employees contributions
up to a limit of 3% of the employees base pay.
|
|
|
|
|
|
The Company also
sponsors a non-contributory Employee Stock Ownership Plan (ESOP) covering
substantially all full time employees. The number of shares allocable to
participants of the Plan is determined by the Board of Directors. Allocations
to individual participant accounts are based on participant compensation. As
shares are committed to be released to participants, the Company reports
compensation expense equal to the current market price of the shares and the
shares become outstanding for earnings per share computations. Dividends on
allocated shares reduce retained earnings; dividends on unallocated ESOP
shares reduce debt and accrued interest.
|
|
|
|
|
(j) Income Taxes
|
|
|
|
|
|
The Company and its
subsidiaries file a consolidated tax return. Deferred tax assets and
liabilities are the expected future amounts attributable to temporary
differences between the financial statement carrying amounts of assets and
liabilities and their respective tax bases. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in the period that
includes the enactment date.
|
|
|
|
|
|
A tax position is
recognized as a benefit only if it is more likely than not that the tax
position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax
benefit that is greater than 50% likely of being realized on examination. For
tax positions not meeting the more likely than not test, no tax benefit is
recorded. The Company recognizes interest and or penalties related to income
tax matters in income tax expense.
|
|
|
|
|
(k) Cash and Cash Equivalents
|
|
|
|
|
|
For purposes of
reporting cash flows, cash and cash equivalents include cash on hand, amounts
due from banks, and federal funds sold which represents short-term highly
liquid investments. Net cash flows are reported for customer loan and deposit
transactions, interest bearing deposits in other financial institutions, and
federal funds purchased agreements.
|
|
|
|
|
(l) Financial Instruments With Off-Balance Sheet Risk
|
|
|
|
|
|
The Companys
off-balance sheet financial instruments are limited to commitments to extend
credit and standby letters of credit. The Companys policy is to record such
instruments when funded.
|
|
|
|
|
(m) Comprehensive Income
|
61
|
|
|
|
|
Comprehensive
income consists of net income and other comprehensive income. Other
comprehensive income includes unrealized gains and losses on securities
available for sale and changes in the funded status of the pension plan,
which are also recognized as separate components of equity.
|
|
|
|
|
(n) Loss Contingencies
|
|
|
|
|
|
Loss
contingencies, including claims and legal actions arising in the ordinary
course of business, are recorded as liabilities when the likelihood of loss
is probable and an amount or range of loss can be reasonably estimated.
Management does not believe there now are such matters that will have a
material effect on the financial statements.
|
|
|
|
|
(o) Earnings Per Share
|
|
|
|
|
|
Basic
earnings per common share is net income divided by the weighted average
number of common shares outstanding during the period. ESOP shares are
considered outstanding for this calculation unless unearned. All outstanding
unvested share-based payment awards that contain rights to nonforfeitable
dividends are considered participating securities for this calculation.
Diluted earnings per common share includes the dilutive effect of additional
potential common shares issuable under stock options. Earnings and dividends
per share are restated for all stock splits and stock dividends through the
date of issuance of the financial statements.
|
|
|
|
|
(p) Segment Reporting
|
|
|
|
|
|
The Companys
operations are solely in the financial services industry providing
traditional community banking services in the geographical region of Oneida
County and surrounding areas in New York State. While revenue streams and
costs of various products and services are monitored, operations are managed
and financial performance is evaluated on a Company-wide basis. Accordingly,
the Company has determined that it has no reportable business segments.
|
|
|
|
|
(q) Bank Owned Life Insurance
|
|
|
|
|
|
The Company has
purchased life insurance policies on certain key officers and employees.
Company owned life insurance is recorded at the amount that can be realized
under the insurance contract at the balance sheet date, which is the cash
surrender value adjusted for other charges or other amounts due that are
probable at settlement.
|
|
|
|
|
(r) Stock-based compensation
|
|
|
|
|
|
Compensation cost is recognized for stock
options and restricted stock awards issued to employees, based on the fair
value of these awards at the date of grant. A Black-Scholes model is utilized
to estimate the fair value of stock options, while the market price of the
Companys common stock at the date of grant is used for restricted stock
awards. Compensation cost is recognized over the required service period,
generally defined as the vesting period. For awards with graded vesting,
compensation cost is recognized on a straight-line basis over the requisite
service period for the entire award
|
|
|
|
|
(s) Transfers of Financial Assets
|
|
|
|
|
|
Transfers of financial
assets are accounted for as sales, when control over the assets has been
relinquished. Control over transferred assets is deemed to be surrendered
when the assets have been isolated from the Company, the transferee obtains
the right (free of conditions that constrain it from taking advantage of that
right) to pledge or exchange the transferred assets,
|
62
|
|
|
|
|
and the Company does
not maintain effective control over the transferred assets through an
agreement to repurchase them before their maturity.
|
|
|
|
|
(t) Dividend Restriction
|
|
|
|
|
|
Banking regulations
require maintaining certain capital levels and may limit the dividends paid
by the bank to the holding company or by the holding company to shareholders.
|
|
|
|
|
(u) Fair Value of Financial Instruments
|
|
|
|
|
|
Fair values of
financial instruments are estimated using relevant market information and
other assumptions, as more fully disclosed in a separate note. Fair value
estimates involve uncertainties and matters of significant judgment regarding
interest rates, credit risk, prepayments, and other factors, especially in
the absence of broad markets for particular items. Changes in assumptions or
in market conditions could significantly affect these estimates.
|
|
|
|
|
(v) Recently Adopted Accounting Pronouncements
|
|
|
|
|
|
In June 2009, FASB
issued Accounting Standard Update (ASU) Number 2009-16, Accounting for
Transfers of Financial Assets an Amendment of FASB Statement No. 140. The
new accounting requirement amends previous guidance relating to the transfers
of financial assets and eliminates the concept of a qualifying special
purpose entity. This statement must be applied as of the beginning of each
reporting entitys first annual reporting period that begins after November
15, 2009, for interim periods within that first annual reporting period and
for interim and annual reporting periods thereafter. This statement must be
applied to transfers occurring on or after the effective date. Additionally,
on and after the effective date, the concept of a qualifying special-purpose
entity is no longer relevant for accounting purposes. Therefore, formerly
qualifying special-purpose entities should be evaluated for consolidation by
reporting entities on and after the effective date in accordance with the
applicable consolidation guidance. Additionally, the disclosure provisions of
this statement were also amended and apply to transfers that occurred both
before and after the effective date of this statement. The adoption did not
have a material impact on the Companys consolidated financial position,
results of operations or cash flows.
|
|
|
|
|
|
ASC Topic 810-10-65-2,
Amendments to FASB Interpretation No. 46(R), which amended guidance for
consolidation of variable interest entities by replacing the quantitative-based
risks and rewards calculation for determining which enterprise, if any, has a
controlling financial interest in a variable interest entity with an approach
focused on identifying which enterprise has the power to direct the
activities of a variable interest entity that most significantly impact the
entitys economic performance and (1) the obligation to absorb losses of the
entity of (2) the right to receive benefits from the entity. This statement
also requires additional disclosures about an enterprises involvement in
variable interest entities. This statement became effective as of the
beginning of each reporting entitys first annual reporting period that
begins after November 15, 2009, for interim periods within the first annual
reporting period, and for interim and annual reporting periods thereafter.
Early adoption is prohibited. The adoption did not have a material impact on
the Companys consolidated financial position, results of operations or cash
flows.
|
|
|
|
|
|
On July 21, 2010, the FASB
issued ASU No 2010-20,Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses, which requires significant
new disclosures about the allowance for credit losses and the credit quality
of financing receivables. The requirements are intended to enhance
transparency regarding credit losses and the credit quality of loan and lease
receivables. Under this statement, allowance for credit losses and fair value
are to be disclosed by portfolio segment, which credit quality information,
impaired financing receivables and non-accrual status are to be presented by
class of financing receivable. The disclosures are to be presented at the
level of disaggregation that management
|
63
|
|
|
|
|
uses when assessing and
monitoring the portfolios risk and performance. This ASU is effective for
interim and annual reporting periods on or after December 15, 2010. See Note
4 to the Notes to the Financial Statements Loans.
|
|
|
|
|
|
In January 2011, FASB
issued Accounting Standards Update No 2011-11, Deferral of the Effective
Date of Disclosures about Troubled Debt Restructurings in Update No.
2010-20. The amendments in this update temporarily delay the effective date
of the disclosures about troubled debt restructurings in Accounting Standards
Update No. 2010-20, Receivables (Topic 310): Disclosures about the Credit
Quality of Financing Receivables and the Allowance for Credit Losses, for
public entities. The delay is intended to allow the Board time to complete
its deliberations on what constitutes a troubled debt restructuring. The
effective date of the new disclosures about troubled debt restructurings for
public entities and the guidance for determining what constitutes a troubled
debt restructuring will then be coordinated.
|
64
|
|
(3)
|
Securities
|
|
|
|
Securities
are summarized as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Gross
unrealized
gains
|
|
Gross
unrealized
losses
|
|
Fair
value
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal obligations
|
|
$
|
1,670
|
|
$
|
115
|
|
$
|
|
|
$
|
1,785
|
|
Corporate bonds
|
|
|
10,672
|
|
|
258
|
|
|
4
|
|
|
10,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
12,342
|
|
|
373
|
|
|
4
|
|
|
12,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity and other securities
|
|
|
350
|
|
|
9
|
|
|
|
|
|
359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,692
|
|
$
|
382
|
|
$
|
4
|
|
$
|
13,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government securities
|
|
$
|
1,309
|
|
$
|
43
|
|
$
|
|
|
$
|
1,352
|
|
Other bonds
|
|
|
107
|
|
|
|
|
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,416
|
|
$
|
43
|
|
$
|
|
|
$
|
1,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Gross
unrealized
gains
|
|
Gross
Unrealized
Losses
|
|
Fair
value
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal obligations
|
|
$
|
2,294
|
|
$
|
119
|
|
$
|
|
|
$
|
2,413
|
|
Corporate bonds
|
|
|
6,597
|
|
|
85
|
|
|
39
|
|
|
6,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
8,891
|
|
|
204
|
|
|
39
|
|
|
9,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity and other securities
|
|
|
872
|
|
|
96
|
|
|
|
|
|
968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,763
|
|
$
|
300
|
|
$
|
39
|
|
$
|
10,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government securities
|
|
$
|
1,316
|
|
$
|
71
|
|
$
|
|
|
$
|
1,387
|
|
Mortgage-backed securities-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GNMA
|
|
|
1
|
|
|
|
|
|
|
|
|
1
|
|
Other bonds
|
|
|
114
|
|
|
|
|
|
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,431
|
|
$
|
71
|
|
$
|
|
|
$
|
1,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
investment securities shown above with unrealized losses at December 31, 2010
and 2009 were in a continuous loss position for less than 12 months.
|
|
|
|
As
of December 31, 2010, the Companys security portfolio consisted of 43
securities, 4 of which were in an unrealized loss position. All of unrealized
losses are related to the Companys corporate bond portfolio. These bonds are
of high credit quality (rated A or higher.) The fair value is expected to
recover as the bond(s) approach maturity. Because the decline in fair value
is attributable to changes in interest rates and current market conditions,
and not credit quality, and because the Company does not have the intent to sell
these securities and it is likely that it will not be required to sell the
securities before their anticipated recovery, the Company does not consider
these securities to be other-than-temporarily impaired at December 31, 2010.
|
65
|
|
|
Included in the Companys equity securities is an investment in a
mutual fund which purchases blue chip common stocks. The downturn in the
equity markets during 2008 caused a decrease in the market value of such
fund. During the fourth quarter of 2008, in connection with its ongoing
review of long term asset values, the Company determined that this investment
had been other than temporarily impaired, as defined by generally accepted
accounting principles. Accordingly, an impairment charge of $265,000
(pre-tax) was recorded to lower the carrying value of this security to then
current fair market value of $472,000. This charge reduced 2008 net earnings
by $162,000, net of tax, or $0.02 per diluted share. As this investment is
classified as an available for sale security, shareholders equity had
already been reduced by the amount of the unrealized loss, net of taxes. The
other than temporary write-down does not necessarily mean that the value
has been permanently lost. During the second quarter of 2010, the Company
sold the majority of its investment in this security at a gain of $119,000.
At December 31, 2010, the Companys remaining investment in this equity fund
had an unrealized gain of $9,000.
|
|
|
|
The following table presents the amortized cost and fair value of
debt securities based on the contractual maturity date (dollars in
thousands). Expected maturities will differ from contractual maturities
because issuers may have the right to call or prepay obligations without call
or prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Fair
Value
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
Due within one year
|
|
$
|
1,917
|
|
$
|
1,939
|
|
Due after one year through five years
|
|
|
8,872
|
|
|
9,161
|
|
Due after five years through ten years
|
|
|
1,553
|
|
|
1,611
|
|
Due after ten years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,342
|
|
$
|
12,711
|
|
|
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
Due within one year
|
|
$
|
1,000
|
|
$
|
1,036
|
|
|
Due after one year through five years
|
|
|
309
|
|
|
316
|
|
Due after five years through ten years
|
|
|
|
|
|
|
|
Due after ten years
|
|
|
107
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,416
|
|
$
|
1,459
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross gains
of $156,000, $73,000 and $0 were realized on sales of securities in 2010,
2009 and 2008, respectively. The proceeds from the sales of securities were
$1.3 million, $1.3 million and $0 in 2010, 2009 and 2008, respectively. The
tax provision related to these realized gains was $62,000, $29,000 and $0,
respectively.
|
|
|
|
Securities pledged at both year ends 2010 and 2009 had a carrying
amount of $1.3 million. These securities collateralize state and Treasury
department programs. At year end 2010 and 2009, there were no holdings of
securities of any one issuer in an amount greater than 10% of shareholders
equity.
|
66
|
|
(4)
|
Loans
|
|
|
|
Loans are
summarized as follows at December 31(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
Mortgage
loans:
|
|
|
|
|
|
|
|
Residential (1-4 family)
|
|
$
|
141,741
|
|
$
|
155,547
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
48,510
|
|
|
52,557
|
|
Construction and land
|
|
|
2,951
|
|
|
4,381
|
|
|
|
|
|
|
|
|
|
Total mortgage loans
|
|
|
193,202
|
|
|
212,485
|
|
|
|
|
|
|
|
|
|
Other loans:
|
|
|
|
|
|
|
|
Commercial
|
|
|
29,994
|
|
|
30,429
|
|
Automobile loans
|
|
|
7,526
|
|
|
9,377
|
|
Property improvement and equipment
|
|
|
23,485
|
|
|
19,251
|
|
Other consumer
|
|
|
14,220
|
|
|
16,207
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
268,427
|
|
|
287,749
|
|
Allowance
for loan losses
|
|
|
2,490
|
|
|
2,132
|
|
|
|
|
|
|
|
|
|
Net loans
|
|
$
|
265,937
|
|
$
|
285,617
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company
serviced loans for third parties totaling $34,339,000 and $18,101,000 at
December 31, 2010 and 2009, respectively.
|
|
|
|
Changes in
the allowance for loan losses are summarized as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
Balance at
beginning of period
|
|
$
|
2,132
|
|
$
|
1,936
|
|
$
|
1,910
|
|
Provision
charged to operations
|
|
|
1,796
|
|
|
300
|
|
|
300
|
|
Loans
charged off
|
|
|
(1,505
|
)
|
|
(170
|
)
|
|
(348
|
)
|
Recoveries
|
|
|
67
|
|
|
66
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
end of period
|
|
$
|
2,490
|
|
$
|
2,132
|
|
$
|
1,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The recorded
investment in loans presented in the tables that follow, includes principal
outstanding adjusted for net unearned loan origination fees and costs. The
recorded investment does not include accrued interest receivable, as the
effect is not considered to be material.
|
67
|
|
|
The
following table presents the balance in the allowance for loan losses and the
recorded investment in loans by portfolio segment and based on impairment
method as of December 31, 2010 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
Real Estate
|
|
Commercial
Real Estate
|
|
Construction
Loans
|
|
Commercial
Loans
|
|
Auto
Loans
|
|
Property
Improvement
Loans
|
|
Other
Consumer
Loans
|
|
Total
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending allowance balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
|
|
$
|
267
|
|
$
|
|
|
$
|
580
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
847
|
|
Collectively evaluated for impairment
|
|
|
251
|
|
|
246
|
|
|
2
|
|
|
679
|
|
|
63
|
|
|
191
|
|
|
211
|
|
|
1,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending allowance balance
|
|
$
|
251
|
|
$
|
513
|
|
$
|
2
|
|
$
|
1,259
|
|
$
|
63
|
|
$
|
191
|
|
$
|
211
|
|
$
|
2,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
|
|
$
|
944
|
|
$
|
|
|
$
|
2,232
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
3,176
|
|
Collectively evaluated for impairment
|
|
|
141,741
|
|
|
47,566
|
|
|
2,951
|
|
|
27,762
|
|
|
7,526
|
|
|
23,485
|
|
|
14,220
|
|
|
265,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending loans balance
|
|
$
|
141,741
|
|
$
|
48,510
|
|
$
|
2,951
|
|
$
|
29,994
|
|
$
|
7,526
|
|
$
|
23,485
|
|
$
|
14,220
|
|
$
|
268,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company
has no commitments to lend additional amounts to customers with loans that
are classified as troubled debt restructurings.
|
68
|
|
|
Impaired
loans were as follows at December 31, 2010 and 2009 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Year end loans with no
allocated allowance for loan losses
|
|
$
|
|
|
$
|
165
|
|
Year end loans with
allocated allowance for loan losses
|
|
|
3,176
|
|
|
533
|
|
|
|
|
|
|
|
|
|
Amount of the allowance
for loan losses allocated
|
|
|
847
|
|
|
242
|
|
|
|
|
|
|
|
|
|
Net investment in impaired loans
|
|
$
|
2,329
|
|
$
|
456
|
|
|
|
|
|
|
|
|
|
Following
is information related to impaired loans for the three years ended December 31,
2010 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average of individually
impaired loans during year
|
|
$
|
2,356
|
|
$
|
704
|
|
$
|
904
|
|
Interest income recognized
during impairment
|
|
|
63
|
|
|
|
|
|
|
|
Cash-basis interest income
recognized
|
|
|
63
|
|
|
|
|
|
|
|
The following
table presents loans individually evaluated for impairment by class of loans as
of December, 31, 2010. All evaluated loans had related loan loss allowances
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid
Principal
Balance
|
|
Recorded
Investment
|
|
Allowance
for
Loan Losses
Allocated
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate
|
|
$
|
944
|
|
$
|
944
|
|
$
|
267
|
|
Commercial Loans
|
|
|
2,232
|
|
|
2,232
|
|
|
580
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,176
|
|
$
|
3,176
|
|
$
|
847
|
|
|
|
|
|
|
|
|
|
|
|
|
The principal balances of loans not accruing interest amounted to $2.2
million and $1.9 million at December 31, 2010 and 2009, respectively.
Loans 90 days or more past due and accruing interest amounted to $847,000 and
$43,000 at December 31, 2010 and 2009, respectively. The balance of impaired
loans is higher than loans in non-accrual status at December 31, 2010 because a
commercial credit that has been identified as impaired due to a decline in
collateral value continues to perform in accordance with the terms of the loan.
The differences between the amount of interest income that would have been
recorded if non-accrual loans had been paid in accordance with their original
terms and the amount of interest income that was recorded during the years
ended December 31, 2010, 2009 and 2008 was $33,800, $65,300 and $85,800,
respectively. There are no commitments to extend further credit on non-accruing
loans. Nonaccrual loans and loans past 90 days still on accrual include both
smaller balance homogenous loans that are collectively evaluated for impairment
and individually classified impaired loans.
69
The following table presents the recorded investment in nonaccrual and
loans past due over 90 days still on accrual by class of loans as of December
31, 2010 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
Nonaccrual
Loans
|
|
Loans
Past Due
Over 90 Days
Still Accruing
|
|
|
|
|
|
|
|
|
Residential Mortgages
|
|
$
|
609
|
|
$
|
837
|
|
Commercial Mortgages
|
|
|
981
|
|
|
|
|
Construction and Land
Loans
|
|
|
|
|
|
|
|
Commercial Loans
|
|
|
311
|
|
|
|
|
Auto Loans
|
|
|
42
|
|
|
|
|
Property Improvement Loans
|
|
|
232
|
|
|
10
|
|
Other Consumer Loans
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,192
|
|
$
|
847
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the aging of the recorded investment in
past due loans, including nonaccrual loans, as of December 31, 2010 by class
of loans (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59
Days
Past Due
|
|
60-89
Days
Past Due
|
|
Greater
than
90 Days
Past Due
|
|
Total
Past
Due
|
|
Loans
Not
Past
Due
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgages
|
|
$
|
826
|
|
$
|
449
|
|
$
|
1,446
|
|
$
|
2,721
|
|
$
|
139,020
|
|
Commercial Mortgages
|
|
|
|
|
|
227
|
|
|
981
|
|
|
1,208
|
|
|
47,302
|
|
Construction and Land
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,951
|
|
Commercial Loans
|
|
|
221
|
|
|
137
|
|
|
311
|
|
|
669
|
|
|
29,325
|
|
Auto Loans
|
|
|
109
|
|
|
62
|
|
|
42
|
|
|
213
|
|
|
7,313
|
|
Property Improvement Loans
|
|
|
|
|
|
30
|
|
|
242
|
|
|
272
|
|
|
23,213
|
|
Other Consumer Loans
|
|
|
245
|
|
|
25
|
|
|
17
|
|
|
287
|
|
|
13,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,401
|
|
$
|
930
|
|
$
|
3,039
|
|
$
|
5,370
|
|
$
|
263,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company categorizes loans into risk categories based on relevant information
about the ability of borrowers to service their debt such as: current financial
information, historical payment experience, credit documentation, public
information, and current economic trends, among other factors. The Company
analyzes loans individually by classifying the loans as to credit risk. This
analysis includes loans with an outstanding balance greater than $400,000 and
non-homogeneous loans, such as commercial and commercial real estate loans.
This analysis is performed on an annual basis. The Company uses the following
definitions for risk ratings:
|
|
|
Special Mention.
Loans classified as special mention are
generally protected but have one or more potential weaknesses that deserves
managements close attention. If left uncorrected, these potential weaknesses
may result in deterioration of the repayment prospects for the loan or of the
institutions credit position at some future date.
|
|
|
|
Substandard.
Loans classified as substandard are inadequately protected by the
current net worth and paying capacity of the obligor or of the collateral
pledged, if any. Loans so classified have a well-defined weakness or
weaknesses that jeopardize the liquidation of the debt. They are
characterized by the distinct possibility that the institution will sustain
some loss if the deficiencies are not corrected.
|
|
|
|
Doubtful.
Loans classified as doubtful have all the weaknesses inherent in
those classified as substandard, with the added characteristic that the
weaknesses make collection or liquidation in full, on the basis of currently
existing facts, conditions, and values, highly questionable and improbable.
|
Loans not meeting the
criteria above that are analyzed individually as part of the above described
process are
70
considered
to be pass rated loans. Loans listed as not rated are either less than $400,000
or are included in groups of homogeneous loans. As of December 31, 2010, and
based on the most recent analysis performed, the risk category of loans by
class of loans is as follows (dollars in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not
Rated
|
|
Pass
|
|
Special
Mention
|
|
Sub-
standard
|
|
Doubtful
|
|
Total
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgages
|
|
$
|
139,609
|
|
$
|
686
|
|
$
|
|
|
$
|
1,446
|
|
$
|
|
|
$
|
141,741
|
|
Commercial Mortgages
|
|
|
10,027
|
|
|
34,634
|
|
|
227
|
|
|
3,622
|
|
|
|
|
|
48,510
|
|
Construction Loans
|
|
|
2,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,951
|
|
Commercial Loans
|
|
|
11,043
|
|
|
13,572
|
|
|
2,084
|
|
|
3,276
|
|
|
19
|
|
|
29,994
|
|
Consumer Loans
|
|
|
43,831
|
|
|
1,400
|
|
|
|
|
|
|
|
|
|
|
|
45,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Loans
|
|
$
|
207,461
|
|
$
|
50,292
|
|
$
|
2,311
|
|
$
|
8,344
|
|
$
|
19
|
|
$
|
268,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A substantial portion of the Companys loans are mortgage and
consumer loans in Oneida County. Accordingly, the ultimate collectibility of
a substantial portion of the Companys loan portfolio is susceptible to
changes in market conditions in this area. A majority of the Companys loan
portfolio is secured by real estate. Other than general economic risks,
management is not aware of any material concentrations of credit risk to any
industry or individual borrower. The Company does not originate sub-prime
mortgage loans and has not purchased investments collateralized by sub-prime
loans.
|
|
|
(5)
|
Premises and Equipment
|
|
|
|
Premises and equipment at December 31 are summarized as follows
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
2,627
|
|
$
|
2,638
|
|
Buildings
and improvements
|
|
|
6,407
|
|
|
6,374
|
|
Furniture
and equipment
|
|
|
8,356
|
|
|
8,186
|
|
|
|
|
|
|
|
|
|
|
|
|
17,390
|
|
|
17,198
|
|
Less
accumulated depreciation and amortization
|
|
|
11,576
|
|
|
11,157
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,814
|
|
$
|
6,041
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense included in building, occupancy
and equipment expense amounted to $478,000, $513,000 and $563,000 during the
years ended December 31, 2010, 2009 and 2008, respectively.
|
71
|
|
(6)
|
Deposits
|
|
|
|
Contractual maturities of time deposits at December 31 are summarized
as follows (dollars in thousands):
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
Within one
year
|
|
$
|
48,834
|
|
One through
two years
|
|
|
11,178
|
|
Two through
three years
|
|
|
2,591
|
|
Three
through four years
|
|
|
3,565
|
|
Four through
five years
|
|
|
3,036
|
|
|
|
|
|
|
Total time deposits
|
|
$
|
69,204
|
|
|
|
|
|
|
|
|
|
At December 31, 2010 and 2009, time deposits with balances of
$100,000 or more totaled approximately $17,030,000 and $16,485,000,
respectively.
|
|
|
|
Interest expense on deposits for the years ended December 31 is
summarized as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
$
|
339
|
|
$
|
330
|
|
$
|
446
|
|
Money market
|
|
|
176
|
|
|
189
|
|
|
193
|
|
Time
|
|
|
1,252
|
|
|
1,852
|
|
|
2,634
|
|
Other
interest bearing
|
|
|
59
|
|
|
55
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,826
|
|
$
|
2,426
|
|
$
|
3,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7)
|
Federal Home Loan Bank Advances
|
|
|
|
The Company is a member of the Federal Home Loan Bank of New York
(FHLB-NY). As a member, the Company is required to own capital stock in the
FHLB-NY and is authorized to apply for advances from the FHLB-NY. Each
advance is payable at its maturity date with a prepayment penalty for fixed
rate advances. The Company has a blanket pledge on $98.8 million of their
one-to-four family mortgage loans as collateral for these borrowings. The
following is a summary of advances and amortizing notes from the FHLB-NY at
December 31 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overnight
line of credit
|
|
$
|
|
|
$
|
1,100
|
|
Fixed rate
advances
|
|
|
35,661
|
|
|
46,769
|
|
|
|
|
|
|
|
|
|
Total
borrowings
|
|
$
|
35,661
|
|
$
|
47,869
|
|
|
|
|
|
|
|
|
|
72
|
|
|
Advances at December 31,
2010 have maturity dates as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of Rates
|
|
Average Rate
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
1.27% - 3.91
|
%
|
|
3.20
|
%
|
|
$
|
11,267
|
|
2012
|
|
1.31% - 2.75
|
%
|
|
2.68
|
%
|
|
|
9,132
|
|
2013
|
|
1.84% - 3.36
|
%
|
|
3.10
|
%
|
|
|
4,712
|
|
2014
|
|
2.45% - 3.64
|
%
|
|
3.27
|
%
|
|
|
3,931
|
|
2015
|
|
2.07% - 4.24
|
%
|
|
3.35
|
%
|
|
|
3,619
|
|
Due after
2015
|
|
4.29% - 4.36
|
%
|
|
4.34
|
%
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
$
|
35,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2010, the Company had additional availability on its FHLB line
of credit of $61.2 million. This line of credit is subject to periodic review
and renewal. At December 31, 2010, the Company also had approximately $8.3
million in unused short term borrowing capacity at the Federal Reserve Bank
of New York, which is collateralized by a portion of the consumer loan
portfolio.
|
|
|
(8)
|
Income Taxes
|
|
|
|
The components of income tax expense (benefit) attributable to income
from operations for the years ended December 31 consist of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
1,112
|
|
$
|
1,513
|
|
$
|
1,143
|
|
State
|
|
|
133
|
|
|
81
|
|
|
127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,245
|
|
|
1,594
|
|
|
1,270
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
12
|
|
|
(130
|
)
|
|
172
|
|
State
|
|
|
(155
|
)
|
|
23
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(143
|
)
|
|
(107
|
)
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
$
|
1,102
|
|
$
|
1,487
|
|
$
|
1,396
|
|
|
|
|
|
|
|
|
|
|
|
|
73
|
|
|
Actual tax expense differs from expected tax expense, computed by
applying the U.S. Federal statutory tax rate of 34% to income before income
taxes for the years ended December 31, as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
Computed
expected tax expense
|
|
$
|
1,143
|
|
$
|
1,555
|
|
$
|
1,462
|
|
Increases (decreases) in income taxes
resulting from:
|
|
|
|
|
|
|
|
|
|
|
State taxes, net of Federal tax benefit
|
|
|
(14
|
)
|
|
69
|
|
|
54
|
|
Tax exempt interest, net
|
|
|
(6
|
)
|
|
(11
|
)
|
|
(19
|
)
|
Tax exempt increase in cash surrender value
of life insurance
|
|
|
(135
|
)
|
|
(139
|
)
|
|
(139
|
)
|
Non-deductible ESOP expense
|
|
|
24
|
|
|
16
|
|
|
57
|
|
Non-deductible transaction costs
|
|
|
92
|
|
|
|
|
|
|
|
Other, net
|
|
|
(2
|
)
|
|
(3
|
)
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,102
|
|
$
|
1,487
|
|
$
|
1,396
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
32.7
|
%
|
|
32.5
|
%
|
|
32.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax liabilities
for December 31 are (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
Deferred tax
assets:
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
963
|
|
$
|
758
|
|
Accrued postretirement benefits
|
|
|
1,080
|
|
|
922
|
|
Deferred compensation
|
|
|
674
|
|
|
639
|
|
Stock-based compensation and benefits
|
|
|
412
|
|
|
488
|
|
Unrealized loss on investments due to other
than temporary impairment charge
|
|
|
2
|
|
|
100
|
|
Accrued pension cost
|
|
|
366
|
|
|
329
|
|
Nonaccrual interest
|
|
|
63
|
|
|
53
|
|
Other
|
|
|
48
|
|
|
9
|
|
|
|
|
|
|
|
|
|
Total gross deferred tax assets
|
|
|
3,608
|
|
|
3,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax
liabilities:
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(215
|
)
|
|
(217
|
)
|
Undistributed income of subsidiary
|
|
|
(67
|
)
|
|
|
|
Unrealized gains on available-for-sale
securities
|
|
|
(151
|
)
|
|
(104
|
)
|
Deferred loan costs
|
|
|
(86
|
)
|
|
(113
|
)
|
Mortgage servicing rights
|
|
|
(105
|
)
|
|
(49
|
)
|
Other
|
|
|
(1
|
)
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
Total gross deferred tax liabilities
|
|
|
(625
|
)
|
|
(491
|
)
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
2,983
|
|
$
|
2,807
|
|
|
|
|
|
|
|
|
|
74
|
|
|
Realization of deferred tax assets is dependent upon the generation
of future taxable income or the existence of sufficient taxable income within
the carryback period. A valuation allowance is provided when it is more
likely than not that some portion of the deferred tax assets will not be
realized. In assessing the need for a valuation allowance, management
considers the scheduled reversal of the deferred tax liabilities, the level
of historical taxable income and projected future taxable income over the
periods in which the temporary differences comprising the deferred tax assets
will be deductible. Management believes that no valuation allowance is
necessary.
|
|
|
|
In accordance with ASC 740, the Company has not recognized deferred
tax liabilities with respect to Rome Savings Federal and state base-year
reserves of approximately $3.4 million at December 31, 2010, since the
Company does not expect that these amounts will become taxable in the
foreseeable future. Under the tax laws, as amended, events that would result
in taxation of these reserves include redemptions of Rome Savings stock or
certain excess distributions to Rome Bancorp, Inc. The unrecognized deferred
tax liability at December 31, 2010 with respect to the base-year reserve was
approximately $1.3 million.
|
|
|
|
At December 31, 2010 and 2009, the Company had approximately $52,000
and $27,000, respectively, of unrecognized tax benefits and interest. As of
December 31, 2010 and 2009, $52,000 and $27,000, respectively, of these tax
benefits would affect the effective tax rate if recognized. As of December
31, 2010 and 2009, accrued interest related to uncertain tax positions was
$4,000 and $3,000, respectively, net of the related federal tax benefit. The
Company accounts for interest and penalties related to uncertain tax
positions as part of its provision for federal and state income taxes.
|
|
|
|
The Company is subject to U.S. federal income tax as well as New York
state income tax. The Company is no longer subject to federal examination for
years prior to 2007 and for New York State examination for years prior to
2006. The Companys 2006-2008 tax years are currently under New York State
examination. Management anticipates no material impact to the Companys
financial position as a result of this examination.
|
|
|
|
Unrecognized Tax Benefits
|
|
|
|
A reconciliation of the beginning and ending amount of unrecognized
tax benefits (excluding interest and the federal income tax benefit of
unrecognized state tax benefits) is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Balance at January 1
|
|
$
|
34
|
|
$
|
24
|
|
$
|
64
|
|
Additions based on tax
positions related to the current year
|
|
|
31
|
|
|
3
|
|
|
3
|
|
Additions based on tax
positions of prior years
|
|
|
5
|
|
|
7
|
|
|
21
|
|
Reductions for tax positions
of prior years
|
|
|
(9
|
)
|
|
|
|
|
|
|
Reductions due to statute
of limitations
|
|
|
(2
|
)
|
|
|
|
|
|
|
Settlements
|
|
|
|
|
|
|
|
|
(64
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
$
|
59
|
|
$
|
34
|
|
$
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9)
|
Pension and Postretirement Benefits
|
|
|
|
The Company maintains a non-contributory defined benefit pension plan
that covers approximately 50% of all current full time employees. The
Companys Board of Directors amended the plan in December of 2002 to cease
the accrual of any further benefits. In addition, the Company provides health
care and life insurance benefits to certain retired full time employees.
|
|
|
|
The following table sets forth the changes in the Companys pension
and postretirement plans accumulated benefit obligations, fair value of
assets and funded status and amounts recognized in the consolidated balance
sheets at December 31, 2010 and 2009(dollars in thousands):
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension benefits
|
|
Postretirement benefits
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
6,043
|
|
$
|
5,951
|
|
$
|
2,363
|
|
$
|
2,564
|
|
Service cost
|
|
|
|
|
|
|
|
|
17
|
|
|
19
|
|
Interest cost
|
|
|
351
|
|
|
346
|
|
|
138
|
|
|
149
|
|
Amendments and settlements
|
|
|
(95
|
)
|
|
(112
|
)
|
|
|
|
|
|
|
Actuarial(gain)/ loss
|
|
|
273
|
|
|
204
|
|
|
292
|
|
|
(315
|
)
|
Benefits paid
|
|
|
(340
|
)
|
|
(346
|
)
|
|
(105
|
)
|
|
(97
|
)
|
Participant contributions
|
|
|
|
|
|
|
|
|
47
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
|
6,232
|
|
|
6,043
|
|
|
2,752
|
|
|
2,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
|
5,306
|
|
|
4,971
|
|
|
|
|
|
|
|
|
Actual return on plan assets
|
|
|
522
|
|
|
793
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
|
|
|
|
|
|
58
|
|
|
54
|
|
Settlements
|
|
|
(95
|
)
|
|
(112
|
)
|
|
|
|
|
|
|
Participant contributions
|
|
|
|
|
|
|
|
|
47
|
|
|
43
|
|
Benefits paid
|
|
|
(340
|
)
|
|
(346
|
)
|
|
(105
|
)
|
|
(97
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
|
5,393
|
|
|
5,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of year (plan assets less benefit obligations)
|
|
$
|
(839
|
)
|
$
|
(737
|
)
|
$
|
(2,752
|
)
|
$
|
(2,363
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions as of measurement dates - December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.50
|
%
|
|
6.00
|
%
|
|
5.50
|
%
|
|
6.00
|
%
|
Expected return on plan assets
|
|
|
9.00
|
%
|
|
9.00
|
%
|
|
|
|
|
|
|
|
Rate of compensation increase
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
Amounts
recognized in accumulated other comprehensive income (net of tax) at December
31 consist of (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension benefits
|
|
Postretirement benefits
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial gain (loss)
|
|
$
|
(1,918
|
)
|
$
|
(1,988
|
)
|
$
|
58
|
|
$
|
240
|
|
Prior service credit
(cost)
|
|
|
|
|
|
|
|
|
12
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(1,918
|
)
|
$
|
(1,988
|
)
|
$
|
70
|
|
$
|
257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated net unrecognized loss and prior service credit that
will be amortized from other comprehensive loss into net periodic benefit
cost over the next fiscal year are $(317,000) and $7,000, respectively.
|
|
|
|
The long term rate of return on plan assets assumption was set based
on historical returns earned by equities and fixed income securities,
adjusted to reflect expectations of future returns as applied to the plans
target allocation of asset classes. Equities and fixed income securities were
assumed to earn real rates of return in the ranges of 5-9% and 2-6%,
respectively. The long term inflation rate was estimated to be 3%. When
|
76
|
|
|
these overall return expectations are applied to the plans target
allocation, the expected rate of return is determined to be 9%, which is
roughly the midpoint of the range of expected return.
|
|
|
|
The Companys pension plan weighted average allocations at December
31, 2010 and 2009, by asset category are summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
Plan assets at December 31,
|
|
|
|
|
|
Asset
Category
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
Equity Securities
|
|
|
65
|
%
|
|
63
|
%
|
Debt Securities
|
|
|
35
|
%
|
|
37
|
%
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
The Companys long-term investment objective is to be invested 65% in
equity securities and 35% in debt securities. Plan assets are invested in
diversified investment funds of the RSI Retirement Trust (the Trust), a
private placement investment fund. The investment funds include a series of
equity and bond mutual funds or commingled trust funds, each with its own
investment objectives, investment strategies and risks, as detailed in the
statement of Investment Objectives and Guidelines. The Trust has been given
discretion by the Plan Sponsor to determine the appropriate strategic asset
allocation versus plan liabilities as governed by the Trusts Statement of
Investment Objectives and Guidelines (the Guidelines). The Trust is
prohibited from investing in securities of investment companies. If the plan
is underfunded under the Guidelines, the bond fund will be temporarily
increased to 50% in order to lessen asset volatility. When the plan is no
longer underfunded, the bond fund portion will be decreased back to 35%.
Asset rebalancing is performed at least annually, with interim adjustments
made when the equity and fixed income allocations vary by more than 10% from
their respective targets (i.e., a 20% policy range guideline).
|
|
|
|
The long-term investment objectives are to maintain plan assets at a
level that will sufficiently cover long-term obligations and to generate a
return on plan assets that will meet or exceed the rate at which long-term
obligations will grow. The investment goal is to achieve investment results
that will contribute o the proper funding of the pension plan by exceeding
the rate of inflation over the long-term. In addition, investment managers
for the Trust are expected to provide above average performance when compared
to their peer managers. Performance volatility is also monitored. Risk/volatility
is further managed by the distinct investment objectives of each of the Trust
funds and the diversification within each fund.
|
|
|
|
Fair Value of Plan Assets:
|
|
Fair value is the exchange price that would be received for an asset
in the principal or most advantageous market for the asset in an orderly
transaction between market participants on the measurement date. There are
three levels of inputs that may be used to measure fair value. Entities are
required to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value.
|
|
|
|
The Company used the following methods and significant assumptions to
estimate the fair value of the investments held as plan assets. The fair
values for investment securities are determined by quoted market prices, if
available (Level 1). For securities where quoted prices are not available,
fair values are calculated based on market prices of similar securities
(Level 2). For securities where quoted prices or market prices of similar
securities are not available, fair values are calculated using discounted
cash flows or other market indicators (Level 3). The Plan assets include no
investments that are classified as Level 3 for basis of fair market
valuation.
|
77
|
|
|
The fair value
of plan assets at December 31, 2010, by asset category, is as follows
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at
December 31, 2010 Using:
|
|
Plan Assets:
|
|
Carrying
Value
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
observable
Inputs
(Level 2)
|
|
|
|
|
|
|
|
|
|
Equity Mutual Funds:
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Large-Cap Funds
|
|
$
|
487
|
|
|
487
|
|
|
|
|
|
|
|
|
|
|
|
|
Small-Cap Funds
|
|
|
646
|
|
|
646
|
|
|
|
|
Equity Trusts:
|
|
|
|
|
|
|
|
|
|
|
Large-Cap
|
|
|
1,631
|
|
|
|
|
|
1,631
|
|
International
|
|
|
741
|
|
|
|
|
|
741
|
|
Fixed Income Trusts
|
|
|
1,888
|
|
|
|
|
|
1,888
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,393
|
|
$
|
1,133
|
|
$
|
4,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the fiscal year ended December 31, 2011, the Company expects to
make the minimum required contribution of $5,000 to the pension plan. The
following estimated future benefit payments, which reflect expected future
service, as appropriate, are expected to be paid (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Category
|
|
Pension Benefits
|
|
Postretirement Benefits
|
|
|
|
|
|
|
|
Fiscal 2011
|
|
|
$
|
365
|
|
|
|
$
|
141
|
|
|
Fiscal 2012
|
|
|
|
383
|
|
|
|
|
144
|
|
|
Fiscal 2013
|
|
|
|
409
|
|
|
|
|
152
|
|
|
Fiscal 2014
|
|
|
|
419
|
|
|
|
|
155
|
|
|
Fiscal 2015
|
|
|
|
434
|
|
|
|
|
155
|
|
|
Fiscal 2016-2020
|
|
|
|
2,288
|
|
|
|
|
816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of net periodic benefit cost and other amounts
recognized in other comprehensive income include the following (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension benefits
|
|
Postretirement benefits
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
2010
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
17
|
|
$
|
19
|
|
$
|
21
|
|
Interest cost
|
|
|
351
|
|
|
346
|
|
|
353
|
|
|
138
|
|
|
149
|
|
|
147
|
|
Expected return on assets
|
|
|
(460
|
)
|
|
(431
|
)
|
|
(673
|
)
|
|
|
|
|
|
|
|
|
|
Settlement charge
|
|
|
|
|
|
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
325
|
|
|
383
|
|
|
|
|
|
(19
|
)
|
|
(8
|
)
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost (benefit)
|
|
|
216
|
|
|
298
|
|
|
(186
|
)
|
|
136
|
|
|
160
|
|
|
160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (gain) loss
|
|
|
211
|
|
|
(157
|
)
|
|
3,280
|
|
|
292
|
|
|
(315
|
)
|
|
(30
|
)
|
Recognition of loss
|
|
|
|
|
|
|
|
|
(134
|
)
|
|
|
|
|
|
|
|
|
|
Amortization of prior
service cost
|
|
|
(325
|
)
|
|
(383
|
)
|
|
|
|
|
19
|
|
|
8
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in other
comprehensive income
|
|
|
(114
|
)
|
|
(540
|
)
|
|
3,146
|
|
|
311
|
|
|
(307
|
)
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in net
periodic benefit cost and other comprehensive income
|
|
$
|
102
|
|
$
|
(242
|
)
|
$
|
2,960
|
|
$
|
447
|
|
$
|
(147
|
)
|
$
|
138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the quarter ended March 31, 2008, the Company recorded a
curtailment charge of $134,000 related to a partial settlement of the defined
benefit pension plan. In December of 2002, the Companys Board of
|
78
|
|
|
Directors amended the defined benefit pension plan to cease the
accrual of further benefits. There is no assumed increase in the per capita
cost of current health care benefits since the employer contributions are
fixed with the retiree paying for any cost increases.
|
|
|
(10)
|
Stock Option Plan
|
On May 3,
2000, the Companys shareholders approved the Rome Bancorp, Inc. 2000 Stock
Option Plan (the 2000 Stock Option Plan). The primary objective of the 2000
Stock Option Plan is to provide officers and directors with a proprietary
interest in the Company and an incentive to encourage such persons to remain
with the Company.
Under the
2000 Stock Option Plan, 517,952 shares of authorized but unissued common stock
are reserved for issuance upon option exercises. The Company also has the
alternative to fund the 2000 Stock Option Plan with treasury stock. Options
under the plan may be either non-qualified stock options or incentive stock
options. Each option entitles the holder to purchase one share of common stock
at an exercise price equal to the fair market value on the date of grant. On
June 28, 2000, 382,357 options were awarded at an exercise price of $2.19 per
share. These options have a ten-year term and vested at a rate of 20% per year
from the grant date. At December 31, 2010 and 2009 the remaining contractual
life of these options was 0 years and 0.5 years, respectively.
On May 3,
2006, the Companys shareholders approved the Rome Bancorp, Inc. 2006 Stock
Option Plan (the 2006 Stock Option Plan), which also has the primary
objective of providing officers and directors with a proprietary interest in
the Company and an incentive to encourage such persons to remain with the
Company. Under the 2006 Stock Option Plan, 590,000 shares of authorized but
unissued common stock are reserved for issuance upon option exercises. The
Company also has the alternative to fund the 2006 Stock Option Plan with
treasury stock. Options under the plan may be either non-qualified stock
options or incentive stock options.
Each option
entitles the holder to purchase one share of common stock at an exercise price
equal to the fair market value on the date of grant. On May 24, 2006, 354,000
options were awarded at an exercise price of $12.84 per share. These options
have a ten-year term and vest at a rate of 20% per year from the grant date.
The fair value of the 2006 options awarded was estimated on the date of grant
using a closed form option valuation (Black-Scholes) model and the following
assumptions: risk free interest rate 4.60%, an expected term of 6.5 years,
expected stock price volatility of 8.25% and a dividend yield of 2.52%. At December
31, 2010 and December 31, 2009 the remaining contractual life of these options
was 5.4 years and 6.4 years, respectively.
Under FASB
guidance, stock-based compensation expense of $1.69 per option granted under
the 2006 Stock Option Plan is being recorded over the sooner of the vesting
period of the options, or upon the date at which a recipient becomes eligible
for normal or early retirement under the Companys defined benefit plan. At May
24, 2006, certain awardees met the retirement eligibility criteria and
accordingly, stock-based compensation expense of $350,000 related to their
options was expensed immediately. Total compensation cost related to the
Companys stock option plans was $50,000 for each of the three years ended
December 31, 2010.
Information
related to the stock option plans during each year follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Intrinsic value of options
exercised
|
|
$
|
|
|
$
|
18,000
|
|
$
|
25,000
|
|
Cash received from option
exercises
|
|
|
|
|
|
|
|
|
|
|
Tax benefit realized from
option exercises
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair
value of options granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010, there was $21,000 of total unrecognized
compensation cost related to nonvested stock options granted under the Plan.
The cost is expected to be recognized over a weighted-average period of 0.42
years. At December 31, 2010, the intrinsic value of all outstanding options
and exercisable options was $0.
|
79
The
following table presents the stock option activity for the year ended December
31, 2010:
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
Shares
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
|
Outstanding at beginning
of year
|
|
|
354,000
|
|
$
|
12.84
|
|
Exercised
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
354,000
|
|
$
|
12.84
|
|
|
|
|
|
|
|
|
|
Exercisable at end of year
|
|
|
283,200
|
|
$
|
12.84
|
|
|
|
|
|
|
|
|
|
|
|
|
All outstanding stock options are expected to vest.
|
|
|
(11)
|
Recognition and Retention Plan
|
|
|
|
The Companys shareholders approved the Rome Bancorp, Inc. 2000 Recognition
and Retention Plan (2000 RRP) on May 3, 2000. The purpose of the plan is to
promote the long-term interests of the Company and its shareholders by
providing a stock-based compensation program to attract and retain officers
and directors. During 2000, 119,742 shares were awarded under the 2000 RRP.
The shares vested at a rate of 20% per year from the grant date. The fair
market value of the shares awarded under the plan was $262,000 at the grant
date, and was amortized to compensation expense on a straight-line basis over
the vesting periods of the underlying shares.
|
|
|
|
The Companys shareholders approved the Rome Bancorp, Inc. 2006
Recognition and Retention Plan (2006 RRP) on May 3, 2006 in order to
further promote the long-term interests of the Company and its shareholders
by providing a stock-based compensation program to attract and retain
officers and directors.
|
|
|
|
On May 24, 2006, 168,300 shares were awarded under the 2006 RRP.
These shares vest at a rate of 20% per year from the grant date. The fair
market value of the shares awarded under the plan was $2.2 million at the
grant date, and is being amortized over the sooner of the vesting period of
the awards, or upon the date at which a recipient becomes eligible for normal
or early retirement under the Companys defined benefit plan. At May 24,
2006, certain awardees met the retirement eligibility criteria and
accordingly, stock-based compensation expense of $1.1 million related to
their 2006 RRP awards was expensed immediately. Stock-based compensation
expense of $178,000, $178,000 and $231,000 related to RRP awards was recorded
in 2010, 2009 and 2008, respectively. The remaining unearned compensation
cost has been shown as a reduction of shareholders equity. The shares
awarded under the RRP were transferred from treasury stock at cost with the
difference between the fair market value on the grant date and the cost of
the shares recorded as additional paid-in capital.
|
|
|
|
A summary of changes in the Companys nonvested shares for the year
follows:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-Average
Grant-Date Fair Value
|
|
|
|
|
|
|
|
Nonvested at January 1,
2010
|
|
|
67,320
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
Vested
|
|
|
33,660
|
|
$
|
12.84
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31,
2010
|
|
|
33,660
|
|
$
|
12.84
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010, there was $74,000 of total unrecognized
compensation cost related to nonvested shares granted under the RRP. The cost
is expected to be recognized over a weighted-average period of 0.4 years. The
total fair value of shares vested during the years ended December 31, 2010,
2009 and 2008 was $303,000, $300,000 and $384,000.
80
|
|
(12)
|
Other Employee Benefits
|
|
|
|
The Company has a defined contribution 401(k) Savings Plan for all
full time salaried employees. Employees are permitted to contribute up to 75%
of base pay to the Savings Plan, subject to certain limitations. The Company
matches 50% of each employees contributions up to a limit of 3% of the
employees base pay. Contributions to the defined contribution 401(k) Savings
Plan were $92,000, $88,000 and $86,000 during the years ended December 31,
2010, 2009 and 2008, respectively.
|
|
|
|
In connection with establishing an ESOP in 1999, the ESOP borrowed
$933,000 from the Company to purchase 453,488 shares of the Companys common
stock. The loan bears interest at 8% and is payable in fifteen annual
installments. At December 31, 2010, 362,780 of the original ESOP shares had
been released or committed to be released of which 90,708 remained as
unallocated shares.
|
|
|
|
On March 30, 2005, in connection with the Companys second-step
conversion and stock offering, the ESOP borrowed $2,360,000 from the Company
to purchase an additional 236,000 shares of the Companys common stock. The
loan bears interest at 5% and is payable in fifteen annual installments. At
December 31, 2010, 94,399 of these shares had been released or committed to be
released and 141,601 remained as unallocated shares.
|
|
|
|
The fair value of the unallocated shares on December 31, 2010 was
$2.9 million. The Company recognized compensation expense of $431,000,
$384,000 and $495,000 in 2010, 2009 and 2008, respectively in connection with
the ESOP.
|
|
|
|
The Company has
also adopted a Benefit Restoration Plan for the Companys CEO. This plan
provides the beneficiary with the benefits that would otherwise be due to him
as a participant in the 401(k) plan and the employee stock ownership plan if
such benefits were not limited by certain provisions of the Internal Revenue
Code. In addition, in the event the beneficiary retires prior to the end of
the ESOP loan term, the plan will provide him a benefit equal to the value of
the shares of Rome Bancorp that would have been allocated to his account
under the ESOP had he remained employed through the end of the ESOP loan
term. The liability associated with this plan was $665,000 and $527,000 at
December 31, 2010 and December 31, 2009, respectively.
|
81
|
|
(13)
|
Comprehensive Income (Loss)
|
|
|
|
Comprehensive income represents net income and other comprehensive
income (loss) which is the net change in the unrealized gains or losses on
securities available-for-sale and unrealized gains and losses on pension and
postretirement liabilities, net of taxes. The following summarizes the
components of other comprehensive income (loss) (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) arising
during the period
|
|
$
|
78
|
|
$
|
1,136
|
|
$
|
(3,325
|
)
|
Reclassification adjustment for net
realized (gain) loss included in net income
|
|
|
(156
|
)
|
|
(73
|
)
|
|
265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), before
tax
|
|
|
(78
|
)
|
|
1,063
|
|
|
(3,060
|
)
|
Deferred tax expense (benefit)
|
|
|
(31
|
)
|
|
425
|
|
|
(1,224
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of
tax
|
|
$
|
(47
|
)
|
$
|
638
|
|
$
|
(1,836
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following is a summary of the accumulated other comprehensive income (loss)
balances, net of tax (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at
12/31/09
|
|
2010
Change
|
|
Balance
at
12/31/10
|
|
|
|
|
|
|
|
|
|
Unrealized gains on available for sale securities
|
|
$
|
156
|
|
$
|
71
|
|
$
|
227
|
|
Unrealized gains (losses) on pension and postretirement benefits
|
|
|
(1,730
|
)
|
|
(118
|
)
|
|
(1,848
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,574
|
)
|
$
|
(47
|
)
|
$
|
(1,621
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14)
|
Commitments and Contingencies
|
|
|
|
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. These financial instruments consist of commitments to extend
credit and involve, to varying degrees, elements of credit, market and
interest rate risk in excess of the amounts recognized in the consolidated
balance sheet. Credit risk represents the accounting loss that would be
recognized at the reporting date if obligated counterparties failed
completely to perform as contracted. Market risk represents risk that future
changes in market prices make financial instruments less valuable.
|
|
|
|
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 some of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Company evaluates
each customers creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on managements evaluation of the customers financial
position. Collateral held varies, but may include real estate, accounts
receivable, inventory, property, plant and equipment and income-producing
commercial properties. Substantially all commitments to extend credit, if
exercised, will represent loans secured by real estate.
|
82
|
|
|
At December 31, 2010 and 2009 the Company was committed to originate
mortgage and other loans of approximately $13.3 million and $7.5 million,
respectively. At December 31, 2010 and December 31, 2009, the Companys fixed
rate loan commitments totaled $12.6 million and $7.5 million, respectively.
The range of interest rates on these fixed rate commitments was 4.125% to
7.00% at December 31, 2010 and 4.50% to 6.75% at December 31, 2009.
Commitments under unused lines of credit and letters of credit were approximately
$18.6 million and $19.4 million at December 31, 2010 and 2009, respectively.
|
|
|
|
The Companys exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for loan commitments is
represented by the contractual or notional amount of these instruments. The
Company uses the same credit policies in making commitments as it does for
on-balance sheet instruments. The Company controls its credit risk through
credit approvals, limits, and monitoring procedures.
|
|
|
|
In the normal course of business, there are various outstanding legal
proceedings. In the opinion of management, the aggregate amount involved in
such proceedings is not material to the financial condition or results of
operations of the Company.
|
|
|
(15)
|
Earnings Per Share
|
|
|
|
The following summarizes the computation of earnings per share for
the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
2,261
|
|
$
|
3,087
|
|
$
|
2,905
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average basic shares outstanding
|
|
|
6,784
|
|
|
6,900
|
|
|
7,353
|
|
Less:
Average unallocated ESOP shares
|
|
|
(261
|
)
|
|
(307
|
)
|
|
(353
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Average basic shares
|
|
|
6,523
|
|
|
6,593
|
|
|
7,000
|
|
Basic
earnings per share
|
|
$
|
0.35
|
|
$
|
0.47
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
2,261
|
|
$
|
3,087
|
|
$
|
2,905
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average basic shares outstanding
|
|
|
6,523
|
|
|
6,593
|
|
|
7,000
|
|
Effect of
dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
|
|
|
1
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,523
|
|
|
6,594
|
|
|
7,003
|
|
Diluted
earnings per share
|
|
$
|
0.35
|
|
$
|
0.47
|
|
$
|
0.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options for 354,000 shares of common stock were not considered
in computing diluted earnings per common share for each of the three years
ended December 31, 2010 because they were anti-dilutive.
|
|
|
(16)
|
Shareholders Equity and Regulatory Matters
|
|
|
|
The Company and Rome Savings are subject to various regulatory
requirements administered by the federal banking agencies and Rome Savings is
a federal savings bank regulated by the Office of Thrift Supervision (OTS).
The Company is a Delaware corporation and is regulated as a savings and loan
holding company by the OTS. The Bank must obtain regulatory approval to pay cash dividends
to the Company.
|
83
|
|
|
Rome Savings is required to maintain certain reserves of vault cash
and/or deposits with the Federal Reserve Bank of New York. The amount of this
reserve requirement, included in cash on hand, is $1.9 million at December
31, 2010.
|
|
|
|
The Companys ability to pay dividends is primarily dependent upon
the ability of its subsidiary bank to pay dividends to the Company. The
payment of dividends by Rome Savings is subject to continued compliance with
minimum regulatory capital requirements. In addition, regulatory approval is
generally required prior to Rome Savings declaring dividends in an amount in
excess of net income for that year plus net income retained in the preceding
two years. Further, under the OTS conversion regulations, the Company could
not return any capital, other than ordinary dividends, to its stockholders
during the three years following the conversion and offering completed in
March of 2005.
|
|
|
|
Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, Rome Savings must meet specific guidelines that
involve quantitative measures of assets, liabilities, and certain off-balance
sheet items as calculated under regulatory accounting practices.
|
|
|
|
Capital amounts are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors. Failure to
meet minimum capital requirements can initiate certain mandatory and possibly
additional discretionary, actions by the regulators that, if undertaken,
could have a direct material effect on the Companys and Banks financial
statements.
|
|
|
|
The Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA), established capital levels for which insured institutions are
categorized as well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, or critically undercapitalized.
|
|
|
|
As of May 17, 2010, the most recent notification from the OTS
categorized Rome Savings as well capitalized under the regulatory framework
for prompt corrective actions. There have been no conditions or events since
that notification that management believes have changed Rome Savings
category. Management believes, as of December 31, 2010, that the Company and
Bank meet and exceed all capital adequacy requirements to which they are
subject.
|
|
|
|
The Qualified Thrift lender test requires at least 65% of assets be
maintained in housing-related finance and other specified areas. If this test
is not met, limits are placed on growth, branching, new investments, FHLB
advances and dividends, or the Bank must convert to a commercial bank
charter. Management believes that this test is met.
|
84
|
|
|
The following is a summary of Rome Savings actual capital amounts
and ratios compared to the regulatory minimum capital adequacy requirements
and the OTS and FDIC requirements for classification as a well capitalized
institution under prompt corrective action provisions (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
adequacy
requirements
|
|
To be classified as
Well-capitalized
under prompt
corrective action
provisions
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk weighted assets):
|
|
$
|
60,319
|
|
25.41
|
%
|
$
|
18,993
|
|
>=8
|
%
|
$
|
23,741
|
|
>=10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to risk weighted assets):
|
|
|
57,829
|
|
24.36
|
%
|
|
9,497
|
|
>=4
|
%
|
|
14,245
|
|
>=6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to adjusted assets):
|
|
|
57,829
|
|
17.57
|
%
|
|
13,165
|
|
>=4
|
%
|
|
16,456
|
|
>=5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk weighted assets):
|
|
$
|
55,866
|
|
23.04
|
%
|
$
|
19,394
|
|
>=8
|
%
|
$
|
24,243
|
|
>=10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to risk weighted assets):
|
|
|
54,046
|
|
22.29
|
%
|
|
9,697
|
|
>=4
|
%
|
|
14,546
|
|
>=6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to adjusted assets):
|
|
|
54,046
|
|
16.27
|
%
|
|
9,963
|
|
>=3
|
%
|
|
16,605
|
|
>=5
|
%
|
85
|
|
|
Following is
a reconciliation of Rome Savings GAAP shareholders equity to regulatory
Tier 1 capital at December 31, 2010 and 2009 (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
December 31,
2010
|
|
December 31,
2009
|
|
|
|
|
|
|
|
GAAP Shareholders Equity
|
|
$
|
56,473
|
|
$
|
52,540
|
|
Plus: Minority interest in consolidated subsidiary and other
comprehensive loss related to ASC 715
|
|
|
1,848
|
|
|
1,730
|
|
Less: Disallowed assets and unrealized gains on available-for- sale
securities, net of tax
|
|
|
(492
|
)
|
|
(224
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital
|
|
|
57,829
|
|
|
54,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Allowance for loan losses
|
|
|
2,490
|
|
|
2,132
|
|
Allowed unrealized gain on available-for-sale securities
|
|
|
|
|
|
|
|
Less: Real estate held for investment
|
|
|
|
|
|
(312
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Regulatory Capital
|
|
$
|
60,319
|
|
$
|
55,866
|
|
|
|
|
|
|
|
|
|
|
|
|
(17)
|
Fair Value
|
|
|
|
|
Fair value is the exchange
price that would be received for an asset or paid to transfer a liability
(exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants on the
measurement date. There are three levels of inputs that may be used to
measure fair values:
|
|
|
|
|
|
Level 1: Quoted prices (unadjusted) for identical assets or
liabilities in active markets that the entity has the ability to access as of
the measurement date.
|
|
|
|
|
|
Level 2: Significant other observable inputs other than Level 1
prices such as quoted prices for similar assets or liabilities; quoted prices
in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data.
|
|
|
|
|
|
Level 3: Significant unobservable inputs that reflect a reporting
entitys own assumptions about the assumptions that market participants would
use in pricing an asset or liability.
|
|
|
|
|
The fair values of securities available for sale are determined by
obtaining quoted prices on nationally recognized securities exchanges (Level
1 inputs) or matrix pricing, which is a mathematical technique widely used to
in the industry to value debt securities without relying exclusively on
quoted prices for the specific securities but rather by relying on the
securities relationship to other benchmark quoted securities (Level 2
inputs).
|
|
|
|
|
The fair value of impaired loans with specific allocations of the
allowance for loan losses is generally based on recent real estate
appraisals. These appraisals may utilize a single valuation approach or a
combination of approaches including comparable sales and the income approach.
Adjustments are routinely made in the appraisal process by the independent
appraisers to adjust for differences between the comparable sales and income
data available. Such adjustments are usually significant and typically result
in a Level 3 classification of the inputs for determining fair value.
|
86
Assets
measured at fair value on a recurring basis are summarized below (in
thousands):
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
at December 31, 2010 Using
|
|
|
|
|
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
|
|
|
|
|
Available for sale
securities:
|
|
|
|
|
|
|
|
State and municipal
obligations
|
|
$
|
|
|
$
|
1,785
|
|
Corporate bonds
|
|
|
1,605
|
|
|
9,321
|
|
Equity and other
securities
|
|
|
39
|
|
|
320
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,644
|
|
$
|
11,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
at December 31, 2009 Using
|
|
|
|
|
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
|
|
|
|
|
Available for sale securities:
|
|
|
|
|
|
|
|
State and municipal
obligations
|
|
$
|
|
|
$
|
2,413
|
|
Corporate bonds
|
|
|
|
|
|
6,643
|
|
Equity and other
securities
|
|
|
568
|
|
|
400
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
568
|
|
$
|
9,456
|
|
|
|
|
|
|
|
|
|
Assets measured at fair
value on a non-recurring basis are summarized below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
at December 31, 2010 Using
|
|
|
|
|
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
|
|
$
|
|
|
$
|
677
|
|
Commercial loans
|
|
|
|
|
|
|
|
|
1,652
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
$
|
|
|
$
|
2,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
at December 31, 2009 Using
|
|
|
|
|
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
|
|
$
|
|
|
$
|
396
|
|
Commercial loans
|
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
$
|
|
|
$
|
456
|
|
|
|
|
|
|
|
|
|
|
|
|
87
|
|
|
The following represent impairment charges recognized during the
period:
|
|
|
|
|
Impaired loans, which are measured for impairment using the fair
value of the collateral for collateral dependent loans, had a carrying amount
of $3.2 million, with a valuation allowance of $847,000, resulting in a
$348,000 additional provision for loan losses for the year ended December 31,
2010. At December 31, 2009, impaired loans had a carrying amount of $698,000,
with a valuation allowance of $242,000, resulting in no additional provision
for loan losses for the year ended December 31, 2009.
|
|
|
|
|
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments:
|
|
|
|
|
|
Cash and cash equivalents:
For these short-term instruments that generally mature in ninety days or
less, the carrying value approximates fair value.
|
|
|
|
|
|
Securities:
The
fair values of securities available for sale are determined by obtaining
quoted prices on nationally recognized securities exchanges (Level 1 inputs)
or matrix pricing, which is a mathematical technique widely used to in the
industry to value debt securities without relying exclusively on quoted
prices for the specific securities but rather by relying on the securities
relationship to other benchmark quoted securities (Level 2 inputs).
|
|
|
|
|
|
Federal Home Loan Bank Stock:
It
is not practicable to determine the value of FHLB stock due to restrictions
placed on its transferability.
|
|
|
|
|
|
Loans:
The fair
values for all loans are estimated using discounted cash flow analyses, using
interest rates currently being offered for loans with similar terms to
borrowers of similar credit rating. The carrying amount of accrued interest
receivable approximates its fair value. The Company has not considered market
illiquidity in estimating the fair value of loans due to uncertain and
inconsistent market pricing being experienced at December 31, 2010 and 2009.
|
|
|
|
|
|
Deposits:
The fair
values of demand deposits (interest and non-interest checking) savings
accounts and money market accounts are, by definition, equal to the amount
payable on demand at the reporting date (i.e., their carrying amounts). Fair
values for fixed-rate certificates of deposits, are estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on these products to a schedule of aggregated expected monthly
maturities on time deposits.
|
|
|
|
|
|
FHLB advances:
Fair
values of long-term borrowings are estimated using a discounted cash flow
approach, based on current market rates for similar borrowings. The fair
value of accrued interest approximates carrying value.
|
|
|
|
|
|
Off-balance-sheet instruments:
Fair values for the Companys off-balance-sheet instruments (lines of credit
and commitments to fund loans) are based on fees currently charged to enter
into similar agreements, taking into account the remaining terms of the
agreements and the counterparties credit standing. The fair value of these
financial instruments is immaterial and has therefore been excluded from the
table below.
|
88
|
|
|
The estimated carrying values and fair values of the Companys
financial instruments, not previously presented, for December 31 are as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
Carrying
amount
|
|
Fair
value
|
|
Carrying
amount
|
|
Fair
value
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
18,805
|
|
$
|
18,805
|
|
$
|
7,574
|
|
$
|
7,574
|
|
Securities available for sale
|
|
|
13,070
|
|
|
13,070
|
|
|
10,024
|
|
|
10,024
|
|
Securities held to maturity
|
|
|
1,416
|
|
|
1,459
|
|
|
1,431
|
|
|
1,502
|
|
Loans, net
|
|
|
265,937
|
|
|
269,942
|
|
|
285,617
|
|
|
288,524
|
|
Loans held for sale
|
|
|
920
|
|
|
937
|
|
|
|
|
|
|
|
Federal Home Loan Bank
|
|
|
3,385
|
|
|
n/a
|
|
|
3,222
|
|
|
n/a
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest receivable
|
|
|
1,100
|
|
|
1,100
|
|
|
1,117
|
|
|
1,117
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing deposits
|
|
|
34,502
|
|
|
34,502
|
|
|
31,790
|
|
|
31,790
|
|
Interest bearing deposits
|
|
|
190,823
|
|
|
191,028
|
|
|
184,849
|
|
|
185,320
|
|
FHLB advances
|
|
|
35,661
|
|
|
36,580
|
|
|
47,869
|
|
|
48,342
|
|
Accrued interest payable
|
|
|
100
|
|
|
100
|
|
|
127
|
|
|
127
|
|
|
|
|
It is not practicable to determine the fair value of FHLB stock due
to restrictions placed on its transferability. Fair value estimates are made
at a specific point in time, based on relevant market information and
information about the financial instrument. 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.
|
|
|
(18)
|
Parent Company Only
Financial Statements
|
|
|
|
Presented below is the condensed balance sheet of the Parent Company
as of December 31, 2010 and 2009 and statement of income and statement of
cash flows for the years ended December 31, 2010, 2009 and 2008 (in
thousands):
|
|
|
|
|
|
|
|
|
Condensed
Balance Sheets
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
1,736
|
|
$
|
4,106
|
|
Investment in subsidiary bank
|
|
|
56,403
|
|
|
52,470
|
|
|
|
|
|
|
|
|
|
Loan receivable from ESOP
|
|
|
1,862
|
|
|
2,075
|
|
Other assets
|
|
|
850
|
|
|
1,756
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
60,851
|
|
$
|
60,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
196
|
|
$
|
42
|
|
Total shareholders equity
|
|
|
60,655
|
|
|
60,365
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
60,851
|
|
$
|
60,407
|
|
|
|
|
|
|
|
|
|
89
|
|
|
|
|
|
|
|
|
|
|
Condensed
Statements of Income
|
|
2010
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
Interest and investment
income
|
|
$
|
279
|
|
$
|
182
|
|
$
|
172
|
|
Dividends from subsidiary
bank
|
|
|
|
|
|
8,000
|
|
|
10,300
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income
|
|
|
279
|
|
|
8,182
|
|
|
10,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss on securities
|
|
|
|
|
|
|
|
|
265
|
|
Other operating expenses
|
|
|
1,414
|
|
|
507
|
|
|
574
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before income taxes and dividends in excess of net income/equity in
undistributed income of subsidiary bank
|
|
|
(1,135
|
)
|
|
7,675
|
|
|
9,633
|
|
Equity in undistributed income (dividends in excess of net income) of
subsidiary bank
|
|
|
3,396
|
|
|
(4,588
|
)
|
|
(6,728
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,261
|
|
$
|
3,087
|
|
$
|
2,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Statements of Cash Flows
|
|
2010
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,261
|
|
$
|
3,087
|
|
$
|
2,905
|
|
Adjustments
to reconcile net income to cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
(Equity
in undistributed earnings of)/dividends in excess of net income of subsidiary
bank
|
|
|
(3,396
|
)
|
|
4,588
|
|
|
6,728
|
|
Amortization of stock-based compensation
|
|
|
228
|
|
|
228
|
|
|
280
|
|
Net loss on securities other than temporarily impaired
|
|
|
|
|
|
|
|
|
265
|
|
Decrease (increase) in other assets
|
|
|
311
|
|
|
(99
|
)
|
|
(139
|
)
|
Increase (decrease) in other liabilities
|
|
|
154
|
|
|
(43
|
)
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash (used in) provided by operating activities
|
|
|
(442
|
)
|
|
7,761
|
|
|
10,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
Decrease in loan to ESOP
|
|
|
213
|
|
|
202
|
|
|
190
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by investing activities
|
|
|
213
|
|
|
202
|
|
|
190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock
|
|
|
(201
|
)
|
|
(2,058
|
)
|
|
(8,174
|
)
|
Dividends
|
|
|
(2,342
|
)
|
|
(2,220
|
)
|
|
(2,387
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in financing activities
|
|
|
(2,141
|
)
|
|
(4,278
|
)
|
|
(10,561
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in
cash and cash equivalents
|
|
|
(2,370
|
)
|
|
3,685
|
|
|
(303
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
at beginning of year
|
|
|
4,106
|
|
|
421
|
|
|
724
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
at end of year
|
|
$
|
1,736
|
|
$
|
4,106
|
|
$
|
421
|
|
|
|
|
|
|
|
|
|
|
|
|
90
(19) Selected Quarterly Financial Data
(Unaudited)
Selected
quarterly financial data for 2010 and 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Quarter Ending
|
|
|
|
|
|
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
|
|
|
(In thousands, except per share amounts)
|
Net interest income
|
|
$
|
3,467
|
|
$
|
3,434
|
|
$
|
3,436
|
|
$
|
3,333
|
|
Net interest income after provision for loan losses
|
|
|
3,417
|
|
|
3,019
|
|
|
3,361
|
|
|
2,077
|
|
Net income
|
|
|
1,146
|
|
|
694
|
|
|
838
|
|
|
(417
|
)
|
Earnings per
common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
$
|
0.18
|
|
$
|
0.11
|
|
$
|
0.13
|
|
$
|
(0.06
|
)
|
Diluted
|
|
|
0.18
|
|
|
0.11
|
|
|
0.13
|
|
|
(0.06
|
)
|
The 2010
fourth quarter loss was primarily the result of the recording of a loan loss
provision of $1.3 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Quarter Ending
|
|
|
|
|
|
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
|
|
|
(In thousands, except per share amounts)
|
|
Net interest
income
|
|
$
|
3,250
|
|
$
|
3,230
|
|
$
|
3,257
|
|
$
|
3,304
|
|
Net interest
income after provision for loan losses
|
|
|
3,250
|
|
|
3,030
|
|
|
3,257
|
|
|
3,204
|
|
Net income
|
|
|
707
|
|
|
647
|
|
|
908
|
|
|
825
|
|
Earnings per
common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
$
|
0.11
|
|
$
|
0.10
|
|
$
|
0.14
|
|
$
|
0.13
|
|
Diluted
|
|
|
0.11
|
|
|
0.10
|
|
|
0.14
|
|
|
0.13
|
|
(20) Impending Merger
On October 12, 2010, Berkshire Hills Bancorp, Inc. (Berkshire), the
parent company of Berkshire Bank, and the Company entered into an Agreement and
Plan of Merger pursuant to which the Company will merge with and into
Berkshire. Under the terms of the Merger Agreement, 70% of the outstanding
shares of Rome Bancorp common stock will be converted into the right to receive
0.5658 shares of Berkshire common stock for each share of Rome Bancorp and the
remaining 30% of outstanding shares of Rome Bancorp will be exchanged for
$11.25 in cash. Rome Bancorp stockholders will have the right to elect to
receive cash or Berkshire common stock as outlined above, subject to 70% of
Rome Bancorp common stock receiving Berkshire common stock and the proration
procedures contained in the Merger Agreement. Concurrent with the merger, it is
expected that the Bank will merge with and into Berkshire Bank. The transaction
is subject to customary closing conditions, including the receipt of regulatory
approvals and approval by the shareholders of the Company, and is currently
expected to be completed on or about April 1, 2011. The directors and executive
officers of Rome Bancorp have agreed to vote their shares in favor of the
approval of the Merger Agreement at the stockholders meeting to be held to vote
on the proposed transaction. If the merger is not consummated under certain
circumstances, Rome Bancorp has agreed to pay Berkshire a termination fee of
$3.5 million.
91
|
|
I
TEM 9.
|
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
None.
|
|
I
TEM 9A.
|
CONTROLS AND PROCEDURES
|
Evaluation of Disclosure Controls and Procedures
Management, including the Companys President and Chief Executive
Officer and Executive Vice President and Chief Financial Officer, has evaluated
the effectiveness of the Companys disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the
period covered by this report. Based upon that evaluation, the Companys
President and Chief Executive Officer and Executive Vice President and Chief
Financial Officer concluded that the disclosure controls and procedures were
effective to ensure that information required to be disclosed in the reports
the Company files and submits under the Exchange Act is (i) recorded,
processed, summarized and reported as and when required, and (ii) accumulated and
communicated to the Companys management, including the President and Chief
Executive Officer and Executive Vice President and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure.
MANAGEMENTS REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
The management of Rome Bancorp is responsible for establishing and
maintaining adequate internal control over financial reporting. Rome Bancorps
internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. generally
accepted accounting principles. Rome Bancorps internal control over financial
reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of assets of Rome Bancorp; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of Rome
Bancorp are being made only in accordance with authorizations of management and
directors of Rome Bancorp and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of Rome Bancorps assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of Rome Bancorps internal control over
financial reporting as of December 31, 2010. In making this assessment,
management used the criteria set forth by the Committee for Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework. Based on our assessment and those criteria, management concluded
that Rome Bancorp maintained effective internal control over financial
reporting as of December 31, 2010.
92
This annual report does not contain an attestation report of the
Companys registered public accounting firm regarding internal control over
financial reporting. Managements report was not subject to attestation by the
Companys registered public accounting firm pursuant to temporary rules of the
SEC that permit the Company to provide only managements report in this annual
report.
|
|
/s/ Charles
M. Sprock
|
|
|
|
Charles M.
Sprock
|
Chairman of the
Board, President and Chief Executive Officer
|
March 18,
2011
|
|
|
|
/s/ David C.
Nolan
|
|
|
|
David C.
Nolan
|
Executive
Vice President and Chief Financial Officer
|
March 18,
2011
|
There have been no changes in the Companys internal control over
financial reporting identified in connection with the evaluation that occurred
during the Companys last fiscal quarter that has materially affected, or that
is reasonably likely to materially affect, the Companys internal control over
financial reporting.
|
|
I
TEM 9B.
|
OTHER INFORMATION
|
None.
93
P
ART III
|
|
I
TEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
The names
of the directors and certain other information about them as of December 31,
2010 are set forth below:
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Age(1)
|
|
Term Expires
|
|
Position(s)
Held with Rome Bancorp
|
|
Director
Since
|
|
|
|
|
|
|
|
|
|
|
|
Bruce R.
Engelbert
|
|
73
|
|
2013
|
|
Director
|
|
1982
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
David C.
Grow
|
|
67
|
|
2013
|
|
Director
|
|
1992
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Kirk B.
Hinman
|
|
59
|
|
2011
|
|
Director
|
|
1994
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Dale A.
Laval
|
|
62
|
|
2012
|
|
Director
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John A.
Reinhardt
|
|
73
|
|
2013
|
|
Director
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles M.
Sprock
|
|
71
|
|
2011
|
|
Chairman,
President and
Chief Executive Officer
|
|
1980
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J.
Valentine
|
|
68
|
|
2011
|
|
Director
|
|
1993
|
(2)
|
|
|
|
|
|
|
(1)
|
As of December 31, 2010.
|
(2)
|
Includes service as a
trustee of Rome Savings prior to the formation of Rome Bancorp in 1999.
|
The principal occupation and business experience of each director and
named executive officer is set forth below. Unless otherwise indicated, each of
the following persons has held his or her present position for the last five
years.
Bruce R. Engelbert
is a retired President of Engelberts Jewelers, Inc., a retail jewelry
business.
David C. Grow
has been a partner at the law firm of McMahon and Grow since 1975. The firm
serves as counsel to Rome Savings.
Kirk B. Hinman
has served as the President of Rome Strip Steel Company, Inc. since 1989.
Dale A. Laval
is the retired
Chairman of Independent Audit Associates, Inc. (IAA), a regional outsource
company specializing in financial institution internal audit and loan review.
Mr. Laval has over thirty-seven years experience in the financial services
industry.
John A. Reinhardt
is a retired Executive Director of the
Madison County Industrial Development Agency. In addition, Mr. Reinhardt has
over thirty years experience in the financial services industry. Mr. Reinhardt
was elected to the Madison County Board of Supervisors in November 2007.
Charles M. Sprock
is the Chairman of the Board, President and Chief Executive Officer of Rome
Savings and Rome Bancorp.
Michael J. Valentine
is the Chairman and retired President of Mele Manufacturing Company, Inc.,
which manufactures and imports products in the jewel case, stationery, custom
packaging and sports flooring businesses.
94
Executive Officers Who Are Not Directors
David C. Nolan
,
age 57, was named Executive Vice-President and Chief Financial Officer of Rome
Bancorp in January of 2006. Prior to being named Executive Vice-President he
served as Treasurer and Chief Financial Officer of Rome Bancorp since its
inception and Rome Savings since 1984.
The Board of Directors annually elects the executive officers of Rome
Bancorp. The elected officers hold office until their respective successors
have been elected and qualified, or until death, resignation or removal by the
Board of Directors.
Meetings of the Board of Directors and
Committees
Rome Bancorps Board of Directors currently consists of seven members.
Rome Bancorps Certificate of Incorporation provides that the Board shall be
divided into three classes, as nearly equal in number as possible. The Board of
Directors oversees our business and monitors the performance of our management.
In accordance with our corporate governance procedures, the Board of Directors
does not involve itself in the day-to-day operations of Rome Bancorp. Rome
Bancorps executive officers and management oversee the day-to-day operations
of Rome Bancorp. Our directors fulfill their duties and responsibilities by
attending regular meetings of the Board which are held on a monthly basis. Our
directors also discuss business and other matters with the Chairman, other key
executives, and our principal external advisers (legal counsel, auditors,
financial advisors and other consultants).
The Board of Directors held 13 meetings during the fiscal year ended
December 31, 2010. Each incumbent director attended at least 75% of the
meetings of the Board of Directors.
Committees of the Board
The Board of Directors of Rome Bancorp has established the following
committees:
Executive Committee
.
The Executive Committee exercises the powers of the Board of Directors between
Board meetings. It approves loans within Rome Savings authority and reviews
the loan portfolio. Directors Grow, Reinhardt, Sprock and Valentine currently
serve as members of the committee. Mr. Sprock is the Chairman of the Committee.
The Executive Committee met twelve times in the 2010 fiscal year.
Management Committee
.
The Management Committee assesses the structure of the management team and the
overall performance of Rome Bancorp and Rome Savings. The Committee oversees
executive compensation by approving salary increases and reviews general
personnel matters such as staff performance evaluations. Directors Engelbert,
Hinman and Valentine serve on the committee. Mr. Valentine is the Chairman of
the Committee. All members of the Management Committee are independent
directors as defined in The Nasdaq Stock Market listing standards. The Management
Committee met one time in the 2010 fiscal year.
Audit Committee
.
The Audit Committee oversees and monitors our financial reporting process and
internal control system, reviews and evaluates the audit performed by our
independent auditors and reports any substantive issues found during the audit
to the Board. The Audit Committee is directly responsible for the appointment,
compensation and oversight of the work of our independent auditors. The
Committee also reviews and approves all transactions with affiliated parties.
The Audit Committee is chaired by Director Hinman, with Directors Engelbert and
Valentine as members. The Board of Directors of Rome Bancorp adopted a written
charter for the Audit Committee, a copy of which was attached as
Appendix A
to the proxy statement filed by Rome Bancorp on April 1, 2010. All members of
the Audit Committee are independent directors as defined in The Nasdaq Stock
Market listing standards and the Securities Exchange Act of 1934, as amended,
and the regulations promulgated thereunder. Rome Bancorp believes that Director
Hinman qualifies as an audit committee financial expert, as that term is
defined by applicable SEC regulations, and the Board of Directors has
designated him as such. The committee met four times in the 2010 fiscal year.
95
Nominating and
Corporate Governance Committee.
The Nominating and
Corporate Governance Committee meets to recommend the nomination of Directors
to the full Board to fill the terms for the upcoming year or to fill vacancies
during a term. The Nominating and Corporate Governance Committee will consider
recommendations from shareholders if submitted in a timely manner in accordance
with the procedures established in the bylaws and will apply the same criteria
to all persons being considered. Directors Engelbert, Grow, Laval and Reinhardt
currently serve on the Committee with Director Engelbert serving as Chairman of
the Committee. All members of the Nominating and Corporate Governance Committee
are independent directors as defined in The Nasdaq Stock Market listing
standards. The Nominating and Corporate Governance Committee met one time
during the 2010 fiscal year. The Board of Directors has adopted a written
charter for the Nominating and Corporate Governance Committee, which was attached
as
Appendix B
to the proxy statement filed by Rome Bancorp on March 30,
2007.
In accordance with our bylaws, recommendations or nominations of
individuals for election to the Board at an annual meeting of shareholders may
be made by any shareholder of record of Rome Bancorp entitled to vote for the
election of directors at such meeting who provides timely notice in writing to
the secretary. With respect to an election of directors to be held at an annual
meeting of shareholders, to be timely, a shareholders notice must be delivered
to or received by the secretary not later than sixty (60) days in advance of
such meeting if such meeting is to be held on a day which is within thirty (30)
days preceding the anniversary of the previous years annual meeting, or ninety
(90) days in advance of the meeting if the meeting is to be held on or after
the anniversary of the previous years annual meeting. With respect to an
election to be held at an annual meeting of shareholders held at another time,
or at a special meeting of shareholders for the election of directors, a
shareholders notice must be received by the secretary by the close of business
on the tenth (10th) day following the date on which notice of such meeting is
first given to shareholders. The shareholders notice to the secretary must set
forth certain information regarding the proposed nominee and the shareholder
making such recommendation or nomination. If a nomination is not properly
brought before the meeting in accordance with Rome Bancorps bylaws, the
chairperson of the meeting may determine that the nomination was not properly
brought before the meeting and shall not be considered. For additional
information about Rome Bancorps director nomination requirements, please see
Rome Bancorps bylaws.
It is the policy of the Committee to select individuals as director
nominees who shall have the highest personal and professional integrity, who
shall have demonstrated exceptional ability and judgment and who shall be most
effective, in conjunction with the other nominees to the Board, in collectively
serving the long-term interests of the shareholders. Shareholder nominees are
analyzed by the Committee in the same manner as nominees that are identified by
the Committee. Rome Bancorp does not pay a fee to any third party to identify
or evaluate nominees.
Code of Ethics
Rome Bancorp has adopted a Code of Conduct and Ethics, which applies to
all employees, directors and officers of Rome Bancorp including the principal
executive officer, principal financial officer, principal accounting officer,
or controller, or persons performing similar functions. The Code of Conduct and
Ethics meets the requirements of a code of ethics as defined by Item 406 of
Regulation S-K. The Code of Conduct and Ethics was filed as Exhibit 14.1 to the
Form 10-KSB for the year ended December 31, 2003, and has not changed.
You may obtain
a copy of the Code of Conduct and Ethics, free of charge, by sending a request
in writing to Crystal M. Seymore, Secretary, Rome Bancorp, Inc., 100 W.
Dominick Street, Rome, New York 13440-5810.
96
|
|
I
TEM 11.
|
EXECUTIVE COMPENSATION
|
Director Compensation
Meeting Fees.
Each
non-employee director of Rome Bancorp receives an annual retainer equal to
$8,000. In addition, the non-employee Chairmen of the Audit and Management
Committees receive annual retainers of $5,000 and $2,000, respectively. Other
non-employee members of the Audit Committee also receive an annual retainer of
$2,500. Employee directors of Rome Bancorp do not receive fees for attendance
at Board of Directors or committee meetings. Each non-employee director
receives the following fees:
|
|
|
fee of $800
per Board of Directors meeting attended;
|
|
|
|
fee of $375
per Executive Committee meeting attended;
|
|
|
|
fee of $325
per committee meeting attended for all other committees; and
|
|
|
|
fee of $275
per conference attended.
|
Total
directors meeting and committee fees for fiscal 2010 were $180,200. Directors
are also entitled to the protection of certain indemnification provisions in
our Certificate of Incorporation and bylaws.
Deferred Compensation Plan, Recognition and Retention
Plans and Stock Option Plans.
In addition,
our directors are eligible to participate the in Directors Deferred Compensation
Plan of Rome Bancorp, Inc. as well as each of the two Stock Option Plans and
Recognition and Retention Plans maintained by Rome Bancorp. These benefit plans
are discussed under Deferred Compensation Plan, Stock Option Plans and
Recognition and Retention Plans.
The
following table sets forth information regarding compensation earned by the
non-employee directors of Rome Bancorp during the last fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees
Earned or
Paid in Cash
($)
(1)
|
|
Stock
Awards
($)
(2)
|
|
Option
Awards
($)
(3)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
Bruce R. Engelbert
|
|
|
39,275
|
|
|
30,302
|
|
|
9,986
|
|
|
79,563
|
|
David C. Grow
|
|
|
29,925
|
|
|
30,302
|
|
|
9,986
|
|
|
70,213
|
|
Kirk B. Hinman
|
|
|
35,125
|
|
|
30,302
|
|
|
9,986
|
|
|
75,413
|
|
Dale A. Laval
|
|
|
22,755
|
|
|
30,302
|
|
|
9,986
|
|
|
63,043
|
|
John A. Reinhardt
|
|
|
29,725
|
|
|
|
|
|
|
|
|
29,725
|
|
Michael J. Valentine
|
|
|
39,720
|
|
|
30,302
|
|
|
9,986
|
|
|
80,008
|
|
|
|
|
|
|
(1)
|
Includes
retainer payments, meeting fees, and committee and/or chairmanship fees
earned during the fiscal year, whether such fees were paid currently or
deferred.
|
(2)
|
Represents
the aggregate grant date fair value calculated in accordance with FASB ASC
718 for financial statement purposes. For more information concerning the
assumptions used for these calculations, please refer to the footnotes to the
audited financial statements. This amount does not reflect the value of
dividends paid on unvested restricted stock. The total number of unvested
restricted stock awards outstanding to each non-employee director at December
31, 2010 was: Director Engelbert, 2,360; Director Grow, 2,360; Director
Hinman, 2,360; Director Laval, 2,360; Director Reinhardt, 0; Director
Valentine, 2,360.
|
(3)
|
Represents
the aggregate grant date fair value calculated in accordance with FASB ASC
718 for financial statement purposes. For more information concerning the
assumptions used for these calculations, please refer to the footnotes to the
audited financial statements. The total number of unexercised options
outstanding to each non-employee director at December 31, 2010 was: Director
Engelbert, 29,500; Director Grow, 29,500; Director Hinman, 29,500; Director
Laval, 29,500; Director Reinhardt, 0; Director Valentine, 29,500.
|
97
Executive
Compensation
The
table below sets forth the compensation of each of our named executive officers
for 2010 and 2009.
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Principal Positions
|
|
Year
|
|
Salary
(1)
($)
|
|
Bonus
(1)
($)
|
|
Stock
Awards
(2)
($)
|
|
Option
Awards
(3)
($)
|
|
Nonequity
Incentive Plan
Compensation
(1)
($)
|
|
Nonqualified
Deferred
Compensation
Earnings
(4)
($)
|
|
All Other
Compensation
(5)
($)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles M. Sprock,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman, President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Chief Executive
|
|
|
2010
|
|
|
275,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
84,337
|
|
|
359,337
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
275,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
55,000
|
|
|
0
|
|
|
77,084
|
|
|
407,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David C. Nolan,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President and Chief
|
|
|
2010
|
|
|
136,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
38,479
|
|
|
174,479
|
|
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
136,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
32,894
|
|
|
168,894
|
|
|
|
|
|
|
(1)
|
The
figures shown for salary and bonus represent amounts earned for the fiscal
year, whether or not actually paid during such year.
|
(2)
|
Represents
aggregate grant date fair value calculated in accordance with FASB ASC 718
for financial statement purposes. For more information concerning the
assumptions used for these calculations, please refer to the audited
financial statements. This amount does not reflect the value of dividends
paid on unvested restricted stock, which are included in the Summary
Compensation Table under the caption All Other Compensation. Under the
provisions of FASB ASC 718, because Mr. Sprock and Mr. Nolan met the
eligibility criteria for retirement or early retirement under the Companys
defined benefit plan, their grants were expensed in 2006, even though the
awards vest ratably over a five year period.
|
(3)
|
Represents
the aggregate grant date fair value calculated in accordance with FASB ASC
718 for financial statement purposes. For more information concerning the
assumptions used for these calculations, please refer to the footnotes to the
audited financial statements. Under the provisions of FASB ASC 718, because
Mr. Sprock and Mr. Nolan met the eligibility criteria for retirement or early
retirement under the Companys defined benefit plan, their grants were
expensed in 2006, even though the awards vest ratably over a five year
period.
|
(4)
|
Includes
for each named executive officer (a) the increase (if any) for the fiscal
year in the present value of the individuals accrued benefit (whether not
vested) under each tax-qualified and non-qualified actuarial or defined
benefit plan calculated by comparing the present value of each individuals
accrued benefit under each such plan in accordance with FASB ASC 715 as of
the plans measurement date in such fiscal year to the present value of the
individuals accrued benefit as of the plans measurement date in the prior
fiscal year.
|
(5)
|
For
2010, represents 401(k) plan contributions of $6,280 and $4,080, ESOP plan
allocations of $43,924 and $31,083, interest and dividends earned on unvested
RRP shares of $8,290 and $3,316 and Benefit Restoration Plan contributions of
$25,843 and $0 for Mr. Sprock and Mr. Nolan, respectively. The named
executive officers participate in certain group life, health, disability
insurance and medical reimbursement plans, not disclosed in the Summary
Compensation Table, that are generally available to salaried employees and do
not discriminate in scope, terms and operation. We provide certain non-cash
perquisites and personal benefits to Mr. Sprock that do not exceed $10,000 in
the aggregate and are not included in the reported figures.
|
Compensation Plan
Recognition and Retention Plans.
The
Rome Bancorp, Inc. 2000 Recognition and Retention Plan and the Rome Bancorp,
Inc. 2006 Recognition and Retention Plan have each been adopted by our Board of
Directors and approved by our shareholders. The Recognition and Retention Plans
provide for the grant of restricted stock awards to certain officers, employees
and non-employee directors of Rome Bancorp, Rome Savings or any affiliate
approved by the administrative committee. These restricted stock awards
(Awards) constitute a right to receive a certain number of shares of common
stock of Rome Bancorp upon the Award holders satisfaction of certain requirements,
such as completion of five years of service with Rome Bancorp, with accelerated
vesting upon death, disability, retirement or change in control as defined in
the plan. As a general rule, if the Award holder fails to fulfill the
requirements contained in the restricted stock award, the Award will not vest.
Instead, the Award will be forfeited and canceled. The Recognition and
Retention Plans are not subject to the Employee Retirement Income Security Act
of 1974, as amended, and are not a tax-qualified plan under the Internal
Revenue Code.
As required
by the terms of the Recognition and Retention Plans, Rome Bancorp has
established a trust and contributed certain amounts of money or property as
determined by the Board of Directors, in its discretion.
98
No contributions by participants will be permitted. The trustee will
invest the assets of the trust primarily in the shares of our common stock that
will be used to make restricted stock awards. The trust currently holds 118,000
shares available for future awards.
The
Recognition and Retention Plans are administered by the Board, which has broad
discretionary powers under the plans. The Board of Directors has the authority
to suspend or terminate the plans in whole or in part at any time by giving
written notice to the administrative committee, but the Recognition and
Retention Plans may not be terminated while there are outstanding Awards that
will vest in the future.
Stock Option Plans
.
The Rome Bancorp, Inc. 2000 Stock Option
Plan and the Rome Bancorp, Inc. 2006 Stock Option Plan have each been adopted
by our Board of Directors and approved by our shareholders. The Option Plans
provide for the grant, to certain officers, employees and outside directors of
Rome Bancorp, Rome Savings or any affiliate approved by the administrative
committee, of options to purchase common stock of Rome Bancorp (Options) at a
stated price during a specified period or term. If the Option is not exercised
during its term, it will expire. The Stock Option Plans currently have 359,003
options reserved that may be granted in future. Options vest on a change in
control as defined in the Option Plans. The Option Plans are not subject to the
Employee Retirement Income Security Act of 1974, as amended, and are not
tax-qualified plans under the Internal Revenue Code.
There were
no stock-based grants made to the named executive officers in the last fiscal
year.
Stock Awards and Stock Option Grants
Outstanding
The
following tables set forth information regarding stock awards, stock options
and similar equity compensation outstanding at December 31, 2010, whether
granted in 2010 or earlier, including awards that have been transferred other
than for value.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Option
Exercise Price
($)
|
|
Option
Expiration
Date
|
|
Number of
Shares
or Units of
Stock
That Have
Not Vested
|
|
Market Value
of Shares or
Units of Stock
That Have Not
Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(#)
|
|
($)
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles M. Sprock
|
|
|
118,000
|
|
|
29,500
|
(2)
|
|
12.84
|
|
|
5/24/2016
|
|
|
11,800
|
(2)
|
|
141,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David C. Nolan
|
|
|
47,200
|
|
|
11,800
|
(2)
|
|
12.84
|
|
|
5/24/2016
|
|
|
4,720
|
(2)
|
|
56,734
|
|
|
|
|
|
|
(1)
|
Market value is calculated
on the basis of $12.02 per share, which is the closing sales price for our
common stock on December 31, 2010.
|
(2)
|
Vest in 20% installments per
year with first installment vesting on May 24, 2007 and each anniversary
thereafter. Options vest on a change in control as defined in the plans.
|
Pension Benefits
Pension Plan.
Rome
Savings maintains a tax-qualified pension plan that covers substantially all
employees who are age 21 or older and have at least one year of service. Rome
Savings froze benefits under this tax-qualified pension plan as of December
2002. Rome Savings continues to maintain this plan to provide benefits to those
individuals who were participants and had accrued a benefit prior to December
2002.
99
Other Benefits
Employee
Stock Ownership Plan
.
This plan is a tax-qualified
plan that covers substantially all employees who have at least one year of
service and are age 21 or older. Rome Bancorp has lent this plan enough money
to purchase 232,309 shares that are currently unallocated.
Although
contributions to this plan are discretionary, Rome Savings intends to
contribute enough money each year to make the required principal and interest
payments on the loans from Rome Bancorp. The plan has pledged the shares as
collateral for the loans and is holding them in a suspense account.
The plan will release a portion of the pledged shares annually,
allocating the shares released each year among the accounts of participants in
proportion to their salary for the year. For example, if a participants salary
for a year represents 1% of the total salaries of all participants for the
year, the plan would allocate to that participant 1% of the shares released for
the year. Participants direct the voting of shares allocated to their accounts.
Shares in the suspense account will usually be voted in a way that mirrors the
votes which participants cast for shares in their individual accounts. On a
change in control as defined in the ESOP, all amounts are vested, the loan
under the ESOP will repaid from the proceeds of unallocated shares, the
remaining unallocated shares will be allocated to participants in the ESOP and
the ESOP is terminated..
Benefit
Restoration Plan.
Rome Bancorp has also adopted a Benefit Restoration Plan for Mr.
Sprock. This plan provides Mr. Sprock with the benefits that would otherwise be
due to him as a participant in the 401(k) plan and the employee stock ownership
plan if such benefits were not limited by certain provisions of the Internal
Revenue Code. At the closing date of the Merger, the Benefit Restoration Plan
will be terminated and Mr. Sprock will be entitled to a cash lump sum payment
equal to $358,560, subject to applicable withholding.
Deferred Compensation Plan
.
Rome Savings has
established the Directors Deferred Compensation Plan of Rome Bancorp, Inc. for
the benefit of non-employee directors. Under the Directors Deferred
Compensation Plan, each non-employee director may make an annual election to
defer receipt of all or a portion of his or her director fees received from
Rome Bancorp and Rome Savings. The deferred amounts are allocated to a deferral
account and credited with interest at an annual rate equal to the rate on the
highest yielding one-year certificate of deposit issued by Rome Savings during
the year or according to the investment return of other assets as may be
selected by the Board of Directors.
The
Directors Deferred Compensation Plan is an unfunded, non-qualified plan that
provides for distribution of the amounts deferred to participants or their
designated beneficiaries upon the occurrence of certain events such as death,
retirement, disability or termination of employment (as those terms are defined
in the Directors Deferred Compensation Plan). We have established an
irrevocable grantor trust to hold assets for the payment of benefits under
the Directors Deferred Compensation Plan. The assets of the trust are
considered to be part of the general assets of Rome Savings and will be subject
to the claims of its general creditors. Earnings on the trusts assets will be
taxable to Rome Savings. At the closing date of the Merger, the Directors
Deferred Compensation Plan will be terminated and payments will be made to
directors from the trust.
Termination
and Change in Control Benefits
Employment
Agreements.
Rome Bancorp and Rome Savings have
each entered into an employment agreement with Charles M. Sprock to secure his
services as Chairman, President and Chief Executive Officer. The employment
agreement with Rome Bancorp has a three-year term that will be automatically
extended on a daily basis so that the remaining term will always be three years
unless written notice of non-renewal is given by the Board of Directors of Rome
Bancorp or Mr. Sprock. The employment agreement with Rome Savings also has a
three-year term which may be extended by the Board in the absence of an
objection by Mr. Sprock for an additional year upon the anniversary date of the
agreement so that the remaining unexpired term will be three years. These
agreements provide for a minimum annual salary of $275,000, and participation
on generally applicable terms and conditions in other compensation and fringe
benefit plans. They also guarantee customary
100
corporate indemnification and errors and omissions insurance coverage
throughout the employment term and for six years after termination.
Rome
Bancorp and Rome Savings may terminate Mr. Sprocks employment, and he may
resign, at any time with or without cause. However, in the event of termination
by Rome Bancorp or Rome Savings during the term without cause, Rome Bancorp and
Rome Savings will owe Mr. Sprock severance benefits generally equal to the
value of the cash compensation and fringe benefits that he would have received
if he had continued working for an additional three years. In particular, Mr.
Sprock would be entitled to: (i) a lump sum payment equal to the present value
of the amount he would have earned in salary had he continued working an
additional three years, and (ii) a lump sum payment equal to the present value
of the additional contributions or benefits that he would have earned under the
Rome Savings pension plan, 401(k) plan, and ESOP had he continued to work an
additional three years. The employment agreements also provide for the cash out
of any stock options, stock appreciation rights, or restricted stock as if Mr.
Sprock were fully vested at the time of his termination and the continuation of
coverage under the life, health, and disability insurance plans of Rome Savings
or Rome Bancorp for an additional three years. The same severance benefits
would be payable if he resigns during the term following: (i) a loss of title,
office or membership on the Board of Directors, (ii) a material reduction in
duties, functions, or responsibilities, (iii) the involuntary relocation of Mr.
Sprocks principal place of employment to a location over 50 miles in distance
from Rome Savings principal office in Rome, New York, or (iv) any other material
breach of contract by Rome Bancorp that is not cured within 30 days. Mr. Sprock
may resign for any reason following a change in control and collect severance
benefits as if he had been discharged without cause. The employment agreements
also provide certain uninsured death and disability benefits.
Under the
employment agreements, Mr. Sprock has agreed that in the event his employment
terminates, either voluntarily or involuntarily, under circumstances in which
he is not entitled to severance benefits, he will not compete with Rome Savings
or Rome Bancorp or take a position with any of its competitors within Oneida
County, New York for a period of one year following termination.
If Rome
Bancorp or Rome Savings experiences a change in ownership, a change in
effective ownership or control or a change in the ownership of a substantial
portion of their assets as contemplated by section 280G of the Internal Revenue
Code, a portion of any severance payments under the employment agreement might
constitute an excess parachute payment under current federal tax laws. Any
excess parachute payment would be subject to a 20% federal excise tax payable
by the executive. Neither Rome Savings nor Rome Bancorp could claim a federal
income tax deduction for an excess parachute payment. The employment agreement
with Rome Bancorp requires Rome Bancorp to indemnify Mr. Sprock against the
financial effects of such an excise tax.
Contemporaneously
with the execution of the Merger Agreement, Berkshire, Berkshire Bank, Rome
Bancorp and Rome Savings entered into a settlement agreement (Settlement
Agreement) with Mr. Sprock. In accordance with Mr. Sprocks Settlement
Agreement, at the closing date of the merger, Mr. Sprocks employment
agreements will be terminated and he will be entitled to a cash lump sum
payment from Rome Bancorp equal to $1,025,067, in lieu of the payment due under
the employment agreements. However, because Mr. Sprock is considered a
specified employee under Section 409A of the Internal Revenue Code, such
payment cannot be made to him until six months following his separation from
service (as defined in Internal Revenue Code Section 409A) with Rome Bancorp
or its successor, Berkshire. Accordingly, the Settlement Agreement provides for
the cash severance payment to be held in a rabbi trust for the benefit of Mr.
Sprock and invested in investment-grade fixed-income securities, mutual funds
or other pooled investment vehicles. The cash severance payment, as adjusted
for investment experience, will be distributed on the first day of the seventh
month following Mr. Sprocks separation from service, subject to applicable
income withholding taxes.
Berkshire
and Berkshire Bank have entered into a Non-Competition and Consulting Agreement
with Mr. Sprock pursuant to which Mr. Sprock will perform consulting services
as a liaison to The Rome Savings Bank Foundation for a period of six months
following the merger. In addition, Mr. Sprock will agree not to compete with
Berkshire and Berkshire Bank for a period of eighteen months following the
merger for the benefit of any business within 25 miles of any office of
Berkshire or Berkshire Bank or any subsidiary. During such eighteen month
period, Mr. Sprock has also agreed not to solicit or offer employment to any
101
employee of
Berkshire or Berkshire Bank or any of their subsidiaries or affiliates that
would cause such person(s) to terminate employment and accept employment with
or provide services to any business that competes with Berkshire or Berkshire
Bank within 25 miles of any office of Berkshire or Berkshire Bank or any
subsidiary. In exchange for the consulting services and the agreement not to
compete or solicit, Berkshire and Berkshire Bank have agreed to pay Mr. Sprock $225,000,
payable in monthly installments over the consulting period.
Change
of Control Agreement
.
Rome Savings has entered into a three-year change of control agreement
with Mr. David C. Nolan and into two-year change of control agreements with four
other officers of Rome Savings and a one-year change in control agreement with
one other officer of Rome Savings. The term of these agreements is for three
years for Mr. Nolan and for one or two years for the other officers with annual
one-year extensions. Generally, Rome Savings may terminate the employment of
any officer covered by these agreements, with or without cause, at any time
prior to a change of control without obligation for severance benefits. Rome
Savings would pay severance benefits if the officer is terminated without cause
within 12 months following a change of control (as such term is defined in the
agreements) or if the officer resigns within 12 months after a change of
control following a loss of title, office or membership on the Board of
Directors, material reduction in duties, functions, compensation or
responsibilities, or involuntary relocation of his or her principal place of
employment to a location over 30 miles from Rome, New York. The severance
benefits would generally be equal to the compensation reflected in the
officers salary and bonus earned for the year prior to the year in which the
change of control occurs multiplied by three in the case of Mr. Nolan and one
or two in the case of the other officers.
If
Rome Savings or Rome Bancorp experiences a change in ownership, a change in
effective ownership or control or a change in the ownership of a substantial
portion of their assets as contemplated by section 280G of the Internal Revenue
Code, a portion of any severance payments under the change of control
agreements might constitute an excess parachute payment under current federal
tax laws. Any excess parachute payment would be subject to a federal excise tax
payable by the officer and would be non-deductible by Rome Savings and Rome
Bancorp for federal income tax purposes. The change of control agreements do
not provide a tax indemnity for such amounts.
Rome Bancorp provides additional benefits,
not included in the previous tables, to the named executive officers in the
event of retirement or termination
of employment in certain circumstances and in the event of a change in control.
Contemporaneously
with the execution of the Merger Agreement, Berkshire, Berkshire Bank, Rome
Bancorp and Rome Savings entered into settlement agreements (Settlement
Agreements) with Mr. Nolan and five other senior officers of the Rome Bancorp
and Rome Savings in order to quantify and settle the benefits owed to the
executives under the Change of Control Agreements. In accordance with their respective Settlement
Agreements, the change in control agreements for Mr. Nolan and five other
senior officers of Rome Savings will be terminated, effective as of the closing
date of the Merger, and in lieu of any payments or benefits under such change
in control agreements, the executives will be entitled to the payments set
forth in the Settlement Agreements on the earlier of the date of executives
termination of employment by Berkshire, Berkshire Bank, Rome Bancorp or Rome Savings
or 90 days after the closing date at which time, the executives employment
will terminate. Notwithstanding the foregoing, an executive who is terminated
for cause will not be entitled to any payment under either the change in
control agreement or Settlement Agreement. For this purpose, cause will be
defined as personal dishonesty, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other than traffic violations
or similar offenses) or a final cease and desist order and will be determined
in the good faith and sole discretion of Mr. Sprock. Rome Savings or Berkshire
Bank will pay lump sum cash severance payments to Mr. Nolan in the amount of
$408,018, less tax withholding, and to the other five senior officers who are
entitled to such payments under the Settlement Agreements an aggregate amount
of $737,714, less tax withholding.
During the
period prior to their termination of employment, the cash severance payment
will be held in a
102
rabbi trust for the benefit of each officer and invested in
investment-grade fixed-income securities, mutual funds or other pooled
investment vehicles. Upon termination of employment, the cash severance
payment, as adjusted for investment experience and subject to applicable
withholding tax, will be distributed to the officer. In addition, for the
period that each executive continues in the employment of Berkshire and
Berkshire Bank following the closing date, such officers base salary will be
increased to two times the officers current base salary.
|
|
IT
EM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
Principal Shareholders of Rome Bancorp
The
following table shows certain information for persons who we know beneficially
owned 5% or more of our common stock as of December 31, 2010. In general,
beneficial ownership includes those shares over which a person has voting or
investment power. In this proxy statement, voting power is the power to vote
or direct the voting of shares, and investment power includes the power to
dispose or direct the disposition of shares. Beneficial ownership also includes
the number of shares that a person has the right to acquire within 60 days
(such as through the exercise of stock options) after December 31, 2010. We
obtained the information provided in the following table from filings with the
SEC and with Rome Bancorp.
|
|
|
|
|
|
|
|
Name and Address of
Beneficial Owner
|
|
Amount and Nature of
Beneficial Ownership
|
|
Percent(1)
|
|
|
|
|
|
|
|
Employee
Stock Ownership Plan Trust of Rome Bancorp, Inc.
100 West Dominick Street
Rome, New York 13440-5810
|
|
689,488
|
(2)
|
|
10.17
|
%
|
|
|
Dimensional
Fund Advisors LP
Palisades West, Bldg. 1, 6300 Bee Cave Road
Austin, Texas 78746
|
|
460,673
|
(3)
|
|
6.80
|
%
|
|
|
Charles M.
Sprock, Chairman, CEO & President
Rome Bancorp, Inc.
100 W. Dominick Street
Rome, New York 13440
|
|
438,592
|
(4)
|
|
6.47
|
%
|
|
|
Water Island
Capital LLC
41 Madison Avenue, Floor 42
New York, NY 10010
|
|
417,872
|
(5)
|
|
6.17
|
|
|
|
|
|
|
|
|
(1)
|
Percentages
with respect to each person or group of persons have been calculated based
upon 6,777,551 shares of Rome Bancorp common stock, the number of shares
outstanding as of December 31, 2010.
|
(2)
|
The ESOP is administered by an ESOP Committee (ESOP Committee) and
its assets are held in trust by a trustee (Plan Trustee). The number of
shares listed as beneficially owned represents the entire number of shares of
Rome Bancorp common stock held by RSGroup Trust Company, as Plan Trustee, as
of December 31, 2010. As of December 31, 2010, 457,179 of such shares of Rome
Bancorp common stock had been allocated to individual accounts established
for participating employees and their beneficiaries, and 232,309 of such
shares were held, unallocated, for allocation in future years. In general,
participating employees and their beneficiaries have the power and authority
to direct the voting of shares of Rome Bancorp common stock allocated to their
individual accounts. Such allocated shares are, therefore, not included as
shares over which the reporting person has sole or shared voting power. The
reporting person, through the Plan Trustee, has shared voting power over
unallocated Rome Bancorp common stock. Any unallocated Rome Bancorp common
stock is generally required to be voted by the Plan Trustee in the same
proportion as Rome Bancorp common stock which has been allocated to
participants is directed to be voted. The ESOP, through the Plan Trustee (who
is instructed by the ESOP Committee) shares dispositive power over all
unallocated common stock held by the reporting person. The ESOP,
|
103
|
|
|
|
|
acting through the Plan Trustee (who is instructed by the ESOP
Committee) shares dispositive power over allocated Rome Bancorp common stock
with participating employees and their beneficiaries, who have the right to
determine whether Rome Bancorp common stock allocated to their respective
accounts will be tendered in response to a tender offer but otherwise have no
dispositive power. Any unallocated Rome Bancorp common stock is generally
required to be tendered by the Plan Trustee in the same proportion as Rome
Bancorp common stock which has been allocated to Participants is directed to
be tendered. In limited circumstances, ERISA may confer upon the Plan Trustee
the power and duty to control the voting and tendering of Rome Bancorp common
stock allocated to the accounts of participating employees and beneficiaries
who fail to exercise their voting and/or tender rights. The ESOP disclaims
voting power with respect to such allocated Rome Bancorp common stock.
|
(3)
|
Based on a Schedule 13G/A dated December 31, 2010 and filed with the
SEC on February 11, 2011 by Dimensional Fund Advisors LP. Dimensional Fund Advisors
LP is an investment advisor to four investment companies registered under the
Investment Company Act of 1940, and serves as investment manager to certain
other commingled group trusts and separate accounts. In its role as
investment advisor or manager, Dimensional Fund Advisors LP possesses
investment and/or voting power over the shares owned by the investment
companies, the trusts and the accounts.
|
(4)
|
Details of
Mr. Sprocks beneficial ownership are detailed on the Security Ownership of
Management table, on the following page of this document.
|
(5)
|
Based on a
Schedule 13G dated December 31, 2010 and filed with the SEC on February 9,
2011 by Water Island Capital LLC. Water Island Capital LLC is an investment
advisor registered under the Investment Company Act of 1940.
|
Security Ownership of Management
The
following table shows the number of shares of Rome Bancorps common stock
beneficially owned by each director and executive officer and all directors and
executive officers of Rome Bancorp as a group, as of December 31, 2010. Except
as otherwise indicated, each person and each group shown in the table has sole
voting and investment power with respect to the shares of common stock listed
next to their name. See Principal Shareholders of Rome Bancorp for a
definition of beneficial ownership.
|
|
|
|
|
|
|
|
|
|
Name
|
|
Position with Rome
Bancorp(1)
|
|
Amount and Nature of
Beneficial Ownership(2)(10)
|
|
Percent of
Common Stock
Outstanding(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce R.
Engelbert (4)
|
|
Director
|
|
126,565
|
|
|
1.87
|
%
|
|
|
|
|
|
|
|
|
|
|
|
David C.
Grow (5)
|
|
Director
|
|
128,434
|
|
|
1.89
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Kirk B.
Hinman (6)
|
|
Director
|
|
326,123
|
|
|
4.81
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Dale A.
Laval (7)
|
|
Director
|
|
39,900
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
David C.
Nolan (8)
|
|
Executive
Vice President and Chief Financial Officer
|
|
194,748
|
|
|
2.87
|
%
|
|
|
|
|
|
|
|
|
|
|
|
John A.
Reinhardt (11)
|
|
Director
|
|
1,450
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles M.
Sprock (9)
|
|
Chairman,
President and Chief Executive Officer
|
|
438,592
|
|
|
6.47
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Michael J.
Valentine
|
|
Director
|
|
156,296
|
|
|
2.31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
All
directors and executive officers as a group (8 persons)(12)
|
|
|
|
1,690,383
|
|
|
24.94
|
%
|
|
|
|
|
|
|
|
* Less than one
percent of the total outstanding shares of common stock.
|
(1)
|
Titles are for both Rome Bancorp and Rome Savings.
|
(2)
|
Includes unvested restricted stock awards of 2,360 shares made to
each outside director, with the exception of Mr. Reinhardt, under the Rome
Bancorp, Inc. 2006 Recognition and Retention Plan. Includes unvested
restricted stock awards of 11,800 and 4,720 shares awarded to Mr. Sprock and
Mr. Nolan, respectively, under the Rome Bancorp,
|
104
|
|
|
|
Inc. 2006 Recognition and Retention Plan. Each recipient of a
restricted share award has sole voting power, but no investment power, over
the common stock covered by the award. The restricted stock will vest at the
rate of 20% per year on each anniversary date of the grant, with accelerated
vesting upon death, disability, retirement or change in control.
|
(3)
|
Based on a total of 6,777,551 shares of Rome Bancorps common stock
outstanding as of December 31, 2010.
|
(4)
|
Includes 20,784 shares held in Mr. Engelberts Individual Retirement
and Deferred Compensation Accounts and 16,918 shares held by Mr. Engelberts
spouse.
|
(5)
|
Includes 24,152 shares held in Mr. Grows Individual Retirement
Account and 2,381 shares held individually by Mr. Grows spouse.
|
(6)
|
Includes 3,401 shares held in Mr. Hinmans Individual Retirement
Account; 111,016 shares held jointly with Mr. Hinmans spouse; 5,401 shares
held as custodian for a minor; 5,000 shares held by a trust over which Mr.
Hinman exercises control; and 125,123 shares held by Rome Strip Steel Co.,
Inc. of which Mr. Hinman serves as President.
|
(7)
|
Includes 3,500 shares held in Mr. Lavals Individual Retirement
Account.
|
(8)
|
Includes 22,401 shares held in trust pursuant to the Employee Stock
Ownership Plan that have been allocated as of December 31, 2010 over which
Mr. Nolan has voting power, subject to the legal duties of the ESOP Trustee,
but no investment power, except in limited circumstances.
|
(9)
|
Includes 8,118 shares held individually by Mr. Sprocks spouse and
34,011 shares held in trust pursuant to the ESOP that have been allocated as
of December 31, 2010 over which Mr. Sprock has voting power, subject to the
legal duties of the ESOP trustee, but no investment power, except in limited
circumstances.
|
(10)
|
Includes 23,600 shares of common stock that may be acquired by each
outside director with the exception of Mr. Reinhardt, pursuant to vested
options granted to them under the Rome Bancorp, Inc. 2006 Stock Option Plan.
Includes 47,200 and 118,000 shares of common stock that may be acquired by
Mr. Nolan and Mr. Sprock, respectively, pursuant to vested options granted to
them under the Rome Bancorp, Inc. 2006 Stock Option Plan.
|
(11)
|
Includes 750 shares held jointly with Mr. Reinhardts spouse and 700
shares held in Mr. Reinhardts spouses IRA.
|
(12)
|
The number of shares for all executive officers and directors as a
group of eight persons includes 232,309 shares held by the ESOP Trust that
have not been allocated to eligible participants as of December 31, 2010,
over which certain directors and executive officers may be deemed to have
shared investment power, thereby causing such directors and executive
officers to be beneficial owners of such shares. Each of such directors and
executive officers disclaims beneficial ownership of such shares and
accordingly, such shares are not attributed to them individually. The
individual participants in the ESOP have shared voting power with the ESOP
Trustee.
|
The
following table sets forth the aggregate information of our equity compensation
plans in effect as of December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan category
|
|
Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
|
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a))
1
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Equity compensation plans approved by
security holders
|
|
|
|
354,000
|
|
|
|
$
|
12.84
|
|
|
|
|
490,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by
security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
354,000
|
|
|
|
$
|
12.84
|
|
|
|
|
490,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The number of securities remaining for future issuance under equity
compensation plans includes: 136,061 shares available for issuance under the
2000 Stock Option Plan, 236,000 shares available for issuance under the 2006
Stock Option Plan and 118,000 shares available for issuance under the 2006
Recognition and Retention Plan.
|
105
|
|
I
TEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
Certain Relationships and Related Party
Transactions
Rome Savings has made loans or extended credit to its executive
officers and directors and also to certain persons related to executive
officers and directors. All such loans were made by Rome Savings in the
ordinary course of business and were not made on more favorable terms, nor did
they involve more than the normal risk of collectibility or present unfavorable
features. Residential mortgage loans are made to employees who are not offered
a reduced rate. The mortgage loans have the same underwriting terms that apply
to non-employee borrowers. All loans made by Rome Savings to related persons
and employees were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable loans with
persons not related to the lender.
Rome Bancorps authority to extend credit to directors, executive
officers, and 10% shareholders, as well as entities controlled by such persons,
is currently governed by the requirements of Sections 22(g) and 22(h) of the
Federal Reserve Board and Regulation O of the Federal Reserve Board thereunder.
Among other things, these provisions require that extensions of credit to
insiders: (i) be made on terms that are substantially the same as, and follow
credit underwriting procedures that are not less stringent than, those
prevailing for comparable transactions with unaffiliated persons and that do not
involve more than the normal risk of repayment or present other unfavorable
features; and (ii) do not exceed certain limitations on the amount of credit
extended to such persons, individually and in aggregate, which limits are
based, in part, on the amount of Rome Bancorps capital. Rome Bancorp intends
that any transactions in the future between Rome Bancorp and its executive
officers, directors, holders of 10% or more of the shares of any class of its
common stock and affiliates thereof, will contain terms no less favorable to
Rome Bancorp than could have been obtained by it in arms-length negotiations
with unaffiliated persons and will be approved by a majority of independent
outside directors of Rome Bancorp not having any interest in the transaction.
We retain the services of the law firm of McMahon and Grow. David C.
Grow, a director of Rome Bancorp and Rome Savings, is a partner of McMahon and
Grow. For 2010, we paid $35,433 in legal fees to this law firm. All future
affiliated transactions will be made or entered into on terms that are no less
favorable to Rome Bancorp than those that can be obtained from an unaffiliated
third party. All related party transactions are approved by the Audit
Committee.
Board of Directors Independence
The Board of Directors is comprised of a majority of directors who
qualify as independent according to NASDAQ market listing standards. Based upon
the term independent as defined by NASDAQ Stock Market listing standards, the
Board of Directors has determined that six of our seven directors (Bruce R.
Engelbert, David C. Grow, Kirk B. Hinman, Dale A. Laval, John A. Reinhardt and
Michael J. Valentine) are independent. All members of each the Audit Committee
and Compensation Committee are independent directors.
106
Annually, the Board of Directors reviews the relationships that each
director has with the Company as well as the criteria and standards for
determining independence. Upon review the Board of Directors affirmatively
determines which directors are considered independent
Charles
M. Sprock is the only executive officer who served as a member of the Companys
Board of Directors. Mr. Sprock did not serve as a member of the Compensation
Committee or similar board committee of another entity during 2010, which
entity had an executive officer serving on the Board of Directors of Rome
Bancorp or its Compensation Committee. Consequently, there are no interlocking
relationships that might affect the determination of the compensation of
executive officers of Rome Bancorp.
|
|
I
TEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
During
the fiscal years ended December 31, 2010 and December 31, 2009, Rome Bancorp
retained and paid Crowe Horwath LLP, its independent registered public
accounting firm, to provide audit and other services. The following table
displays the aggregate fees for professional audit services for the audit of
the financial statements for the years ended December 31, 2010 and 2009 and
fees billed for other services during those periods by our independent
registered public accounting firm.
|
|
|
|
|
|
|
|
|
|
Audit Fees
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
Audit fees (1)
|
|
$
|
174,405
|
|
$
|
160,000
|
|
Audit related-fees (2)
|
|
|
14,110
|
|
|
|
|
Tax fees (3)
|
|
|
22,300
|
|
|
19,100
|
|
All other fees
|
|
|
16,020
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
226,835
|
|
$
|
179,100
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Audit
fees consisted of audit work performed in the preparation of financial
statements as well as work generally only the independent auditors can
reasonably be expected to provide, such as statutory audits.
|
(2)
|
Audit
related fees consist of fees for services that are reasonably related to the
performance of the audit of the consolidated financial statements and are not
reported under Audit Fees. This category includes fees related to the
issuance of consents issued for inclusions of the audited financial
statements in S-4 and 10-K filings.
|
(3)
|
Tax
fees consisted of assistance with matters related to tax compliance and
consulting.
|
(4)
|
Other
fees include services related to strategic planning and acquisition
activities.
|
Audit Committee Preapproval Policy
The
Audit Committee shall preapprove all auditing services and permitted non-audit
services (including the fees and terms) to be performed for Rome Bancorp by its
independent registered public accounting firm, subject to the
de minimis
exception for non-audit services described below which are approved by the
Committee prior to completion of the audit.
Exception.
The preapproval requirement set forth above,
shall not be applicable with respect to non-audit services if:
|
|
|
the
aggregate amount of all such services provided constitutes no more than five
percent of the total amount of revenues paid by Rome Bancorp to its
independent registered public accounting firm during the fiscal year in which
the services are provided;
|
|
|
|
such
services were not recognized by Rome Bancorp at the time of the engagement to
be non-audit services; and
|
107
|
|
|
such
services are promptly brought to the attention of the Committee and approved
prior to the completion of the audit by the Committee or by one or more
members of the Committee who are members of the Board of Directors to whom
authority to grant such approvals has been delegated by the Committee.
|
Delegation
.
The
Committee may delegate to one or more designated members of the Committee the
authority to grant required preapprovals. The decisions of any member to whom
authority is delegated under this paragraph to preapprove activities under this
subsection shall be presented to the full Committee at its next scheduled
meeting.
The
Audit Committee preapproved all of the services performed by Crowe Horwath LLP
pursuant to the policies outlined above.
P
ART IV
|
|
I
TEM 15.
|
EXHIBITS, FINANCIAL STATEMENTS
|
|
|
(a)
Documents filed as part of the report:
|
|
|
|
Report of
Independent Registered Accounting Firm
|
|
Consolidated
Balance Sheets at December 31, 2010 and 2009
|
|
Consolidated
Statements of Operations for the years ended December 31, 2010, 2009 and 2008
|
|
Consolidated
Statements of Stockholders Equity for the years ended December 31, 2010,
2009 and 2008
|
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008
|
(b) The
following exhibits are either filed as part of this report or are incorporated
herein by reference:
|
|
2.1
|
Amended and Restated Plan
of Conversion and Agreement and Plan of Reorganization. (1)
|
2.2
|
Agreement and Plan of
Merger By and Between Berkshire Hills Bancorp, Inc. and Rome Bancorp, Inc.
(9)
|
3.1
|
Certificate of
Incorporation of New Rome Bancorp, Inc. (1)
|
3.2
|
Bylaws of New Rome
Bancorp, Inc. (1)
|
4.1
|
Form of Stock Certificate
of New Rome Bancorp, Inc. (1)
|
10.1
|
Form of Employee Stock
Ownership Plan of Rome Bancorp, Inc. (2)
|
10.2
|
Amendment No. 1 to
Employee Stock Ownership Plan of Rome Bancorp, Inc. (1)
|
10.3
|
Amendment No. 2 to
Employee Stock Ownership Plan of Rome Bancorp, Inc. (1)
|
10.4
|
Form of Executive
Employment Agreement by and between Charles M. Sprock and Rome Bancorp, Inc.
(2)
|
10.5
|
Amended and restated form
of One Year Change in Control Agreement by and among certain officers and
Rome Bancorp, Inc. and The Rome Savings Bank. (8)
|
10.6
|
Amended and restated form
of Employment Agreement between New Rome Bancorp, Inc. and Charles M. Sprock.
(8)
|
10.7
|
Amended and Restated form
of Employment Agreement between The Rome Savings Bank and Charles M. Sprock.
(8)
|
10.8
|
Rome Bancorp, Inc. 2000
Stock Option Plan. (3)
|
10.9
|
Rome Bancorp, Inc. 2000
Recognition and Retention Plan. (3)
|
10.10
|
Amended and Restated
Benefit Restoration Plan of Rome Bancorp, Inc. (4)
|
10.11
|
Amended and Restated
Directors Deferred Compensation Plan of Rome Bancorp, Inc. (4)
|
10.12
|
Loan Agreement by and
between the Employee Stock Ownership Plan Trust of Rome Bancorp, Inc. and
Rome Bancorp, Inc. (5)
|
10.13
|
Amendment No. 3 to the
Employee Stock Ownership Plan of Rome Bancorp, Inc. (6)
|
10.14
|
Rome Bancorp, Inc. 2006
Stock Option Plan. (7)
|
108
|
|
10.15
|
Rome Bancorp, inc. 2006
Recognition and Retention Plan. (7)
|
10.16
|
Amendment No. 4 to the
Employee Stock Ownership Plan of Rome Bancorp, Inc.
|
10.17
|
Amendment to the Amended
and Restated Directors Deferred Compensation Plan of Rome Bancorp, Inc.
|
10.18
|
Amendment to the Amended
and Restated Benefit Restoration Plan of Rome Bancorp, Inc.
|
10.19
|
Settlement Agreement
between Berkshire Hills Bancorp, Inc., Berkshire Bank, Rome Bancorp, Inc.,
The Rome Savings Bank and Charles M. Sprock.
|
10.20
|
Settlement Agreement
between Berkshire Hills Bancorp, Inc., Berkshire Bank, Rome Bancorp, Inc.,
The Rome Savings Bank and David C. Nolan.
|
10.21
|
Non-Competition and
Consulting Agreement between Berkshire Hills Bancorp, Inc., Berkshire Bank
and Charles M. Sprock.14.1
|
14.1
|
Code of Conduct and
Ethics. (7)
|
21.1
|
Subsidiaries of the
Company. (1)
|
23.1
|
Consent of Crowe Horwath
LLP.
|
31.1
|
Rule 13a-14a/15d-14a
Certifications.
|
32.1
|
Section 1350
Certifications.
|
|
|
|
(1)
|
Incorporated by reference
to Rome Bancorp, Inc.s Form S-1 (Registration No. 333-121245), filed with
the Commission on December 14, 2004, as amended.
|
(2)
|
Incorporated by reference
to Rome Bancorp, Inc.s Form SB-2 (Registration No. 333-80487), filed with
the Commission on June 11, 1999, as amended.
|
(3)
|
Incorporated by reference
to Rome Bancorp, Inc.s Proxy Statement on Schedule 14A, filed with the
Commission on April 5, 2000 and amended on April 2, 2001.
|
(4)
|
Incorporated by reference
to Rome Bancorp, Inc.s Form 8-K filed with the Commission on December 27,
2005.
|
(5)
|
Incorporated by reference
to Rome Bancorp, Inc.s Form 8-K filed with the Commission on March 29, 2005.
|
(6)
|
Incorporated by reference
to Rome Bancorp, Inc.s Form 8-K filed with the Commission on August 29,
2005.
|
(7)
|
Incorporated by reference
to Rome Bancorp, Inc.s Form S-8 filed with the commission on May 19, 2006,
as amended.
|
(8)
|
Incorporated
by reference to Rome Bancorp Inc.s Form 8-K filed with the commission on
December 3, 2007.
|
(9)
|
Incorporated by reference
to Rome Bancorp, Inc.s Proxy Statement on Schedule 14A, filed with the
Commission on February 2, 2011.
|
109
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
|
|
R
OME
B
ANCORP
, I
NC
.
|
|
|
By:
/s/Charles
M. Sprock
|
|
President, Chairman of the Board and
|
|
Chief Executive Officer
|
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/Charles
M. Sprock
|
|
Chairman of
the Board,
President and Chief
Executive Officer
(Principal Executive Officer)
|
|
March 18,
2011
|
|
|
|
|
Charles M.
Sprock
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/David C.
Nolan
|
|
Executive
Vice-President
and Chief Financial Officer
(Principal Financial Officer)
|
|
March 18,
2011
|
|
|
|
|
David C.
Nolan
|
|
|
|
|
|
|
|
|
/s/Mary
Faith Messenger
|
|
Vice
President and
Controller
(Principal Accounting
Officer)
|
|
March 18,
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/Bruce R.
Engelbert
|
|
Director
|
|
March 18,
2011
|
|
|
|
|
|
Bruce R.
Engelbert
|
|
|
|
|
|
|
|
|
|
/s/David C.
Grow
|
|
Director
|
|
March 18,
2011
|
|
|
|
|
|
David C.
Grow
|
|
|
|
|
|
|
|
|
|
/s/Kirk B.
Hinman
|
|
Director
|
|
March 18,
2011
|
|
|
|
|
|
Kirk B.
Hinman
|
|
|
|
|
|
|
|
|
|
/s/Michael
J. Valentine
|
|
Director
|
|
March 18,
2011
|
|
|
|
|
|
Michael J.
Valentine
|
|
|
|
|
|
|
|
|
|
/s/Dale A.
Laval
|
|
Director
|
|
March 18,
2011
|
|
|
|
|
|
Dale A.
Laval
|
|
|
|
|
|
|
|
|
|
/s/John A. Reinhardt
|
|
Director
|
|
March 18,
2011
|
|
|
|
|
|
John A.
Reinhardt
|
|
|
|
|
110
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