**Roebling Financial Corp, Inc.**

 

 

 

 

**2007**

**ANNUAL**

**REPORT**

----

 

 

 

 

**ROEBLINGFINANCIALCORP,INC.**

**2007****ANNUALREPORT**

 

 

**TABLE OF CONTENTS**

 

 

| President’s Message                                                                    |   | 1         |
|----------------------------------------------------------------------------------------------|--------|-----------|
|                                                                                         |   |      |
| Corporate Profile and Stock Market                            Information                    |   | 2         |
|                                                                                         |   |      |
| Selected Consolidated Financial Information                                                  |   | 3         |
|                                                                                         |   |      |
| Management’s Discussion and Analysis of

Financial Condition and Results of Operations |   |  

4 |
|                                                                                         |   |      |
| Report of Independent Registered Public Accounting                            Firm           |   | 16        |
|                                                                                         |   |      |
| Consolidated Financial Statements                                                            |   | 17        |
|                                                                                         |   |      |
| Notes to Consolidated Financial Statements                                                   |   | 23        |
|                                                                                         |   |      |
| Office Locations and Other Corporate                            Information                  |   | 46        |

             

             

             

             

             

             

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To our            Shareholders and Customers:

 

On            behalf of our directors, officers and staff, I am pleased to present the 2007 Annual            Report to the Shareholders. Your Company experienced another year of exceptional            growth. Total assets grew to $147.0 million, an increase of $16.2 million or 12%, total            net loans reached $102.8 million, an increase of 9% over the prior year and total            deposits grew to $119.2 million, an increase of 15%. This would not have been possible            without the commitment of our directors and staff, and the loyalty of our            customers.

 

Our            two newest branches in Delran and Westampton continue to grow and increase in market            share. During the past year we introduced a high-yield money market deposit account.            This premium product has been received well in all of our markets.

 

We            continue to believe that the best way to create long-term value for our shareholders is            to build our franchise by attracting core deposits and serving the credit needs of our            communities. As we watch the recent headlines, we are even more convinced that the            right choice is to stick to our community banking roots. We do not have any investments            in the collateralized debt obligations and subprime mortgages that so many banks are            now writing down.

 

We            remain grateful to our customers for their business and the support of our            shareholders. 

 

Sincerely,

 

/s/            Frank J. Travea, III

 

Frank            J. Travea, III

President and Chief Executive Officer

 

 

*Route 130 South & Delaware Avenue, P O Box            66, Roebling, NJ 08554 (609) 499-9400*

 

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**Roebling Financial Corp**,**Inc.**

**Corporate Profile**

 

Roebling Financial Corp, Inc. (the “Company”) is a New            Jersey corporation which was organized in 2004 and became the successor to Roebling            Financial Corp, Inc., a federal corporation, after the completion of the second step            mutual-to-stock conversion of Roebling Financial Corp., MHC (the “MHC”) on            September 30, 2004. The Company is the holding company parent of Roebling Bank and its            principal asset is its investment in Roebling Bank. In connection with the second step            conversion, the Company sold 910,764 shares of common stock to the public, raising $7.8            million in net cash proceeds. Each share of the former Roebling Financial Corp, Inc.            (other than shares held by the MHC) was converted into 3.9636 shares of the new            Company.

 

We currently conduct our business through Roebling Bank (the            “Bank”) with five full service offices located in Roebling, New Egypt,            Westampton and Delran, New Jersey and an administrative center also located in            Westampton, New Jersey. We offer a broad range of deposit and loan products to            individuals, families and small businesses in our market area. At September 30, 2007,            we had consolidated assets of $147.0 million, deposits of $119.2 million, and            stockholders’ equity of $16.7 million.

 

| **Stock Market Information** |
|------------------------------|

 

Our common stock is traded on the over-the-counter market with            quotations available on the OTC Bulletin Board under the symbol “RBLG.” The            following table reflects high and low bid quotations and dividends declared for each            quarter for the past two fiscal years. The quotations reflect inter-dealer prices,            without retail mark-up, mark-down, or commission, and may not represent actual            transactions.

             

 

| **Quarter** **Ended** |   | **High** |   | **Low** |   | **Dividends** |
|----------------------------|--------|----------|--------|---------|--------|---------------|
|                       |   |     |   |    |   |          |
| September 30, 2007         |   | $12.55   |   | $10.20  |   | -             |
| June 30, 2007              |   | 14.00    |   | 11.73   |   | -             |
| March 31, 2007             |   | 12.91    |   | 12.25   |   | -             |
| December 31, 2006          |   | 13.40    |   | 12.10   |   | $.10          |
| September 30, 2006         |   | 13.90    |   | 10.75   |   | -             |
| June 30, 2006              |   | 10.85    |   | 10.25   |   | -             |
| March 31, 2006             |   | 10.49    |   | 9.88    |   | -             |
| December 31, 2005          |   | 9.95     |   | 9.45    |   | $.10          |

             

As of September 30, 2007 there were 1,718,473 shares of our common stock            outstanding and approximately 520 holders of record. This number does not reflect the            number of persons or entities who held stock in nominee or “street” name            through various brokerage firms. The Company declared its third dividend on November 5,            2007. A cash dividend of $.10 per share was declared, payable to stockholders of record            as of November 26, 2007, with payment on December 17, 2007. The payment of future            dividends will be subject to the periodic review of the financial condition, results of            operations and capital requirements of the Company and Bank.

2

 

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**Selected Consolidated Financial Information**

 

|                                                                                                                       |                                                                         | **At or for the Year Ended September 30,** |      |
|----------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------|--------------------------------------------|-----------|
|                                                                                                                       |                                                                         | **2007**                                   |      | **2006** |   | **2005** |   |
|                                                                                                                       | **(Dollars in thousands, except per share                            data)** |
|                                                                                                                       |                                                                         |                                       |      |   |   |   |   |   |   |   |
| **Selected Balance Sheet Data:**                                                                                           |                                                                         |                                       |      |   |   |   |   |   |   |   |
| Assets                                                                                                                     |                                                                         | $                                          | 147,008   |   | $ | 130,607 |   | $ | 111,859 |   |
| Loans receivable, net                                                                                                      |                                                                         |                                       | 102,772   |   |   | 94,014 |   |   | 76,551 |   |
| Securities                                                                                                                 |                                                                         |                                       | 34,899    |   |   | 27,602 |   |   | 27,718 |   |
| Deposits                                                                                                                   |                                                                         |                                       | 119,208   |   |   | 103,682 |   |   | 84,856 |   |
| Borrowed funds                                                                                                             |                                                                         |                                       | 9,500     |   |   | 9,300 |   |   | 10,000 |   |
| Shareholders’ equity                                                                                                 |                                                                         |                                       | 16,708    |   |   | 16,410 |   |   | 16,048 |   |
| **Selected Results of Operations:**                                                                                        |                                                                         |                                       |      |   |   |   |   |   |   |   |
| Interest income                                                                                                            |                                                                         | $                                          | 7,975     |   | $ | 6,650 |   | $ | 5,117 |   |
| Interest expense                                                                                                           |                                                                         |                                       | 3,483     |   |   | 2,212 |   |   | 1,218 |   |
| Net interest income                                                                                                        |                                                                         |                                       | 4,491     |   |   | 4,438 |   |   | 3,899 |   |
| Provision for loan losses                                                                                                  |                                                                         |                                       | 47        |   |   | 132 |   |   | 89 |   |
| Non-interest income                                                                                                        |                                                                         |                                       | 563       |   |   | 463 |   |   | 475 |   |
| Non-interest expense                                                                                                       |                                                                         |                                       | 4,417     |   |   | 3,988 |   |   | 3,208 |   |
| Net income                                                                                                                 |                                                                         |                                       | 339       |   |   | 430 |   |   | 611 |   |
| **Per Share Data:**                                                                                                        |                                                                         |                                       |      |   |   |   |   |   |   |   |
| Earnings per share – basic                                                                                           |                                                                         | $                                          | 0.21      |   | $ | 0.26 |   | $ | 0.38 |   |
| Earnings per share – diluted                                                                                         |                                                                         |                                       | 0.21      |   |   | 0.26 |   |   | 0.38 |   |
| Book value per share                                                                                                       |                                                                         |                                       | 9.72      |   |   | 9.58 |   |   | 9.38 |   |
| Weighted average basic shares outstanding                                                                                  |                                                                         |                                       | 1,644,407 |   |   | 1,632,681 |   |   | 1,612,531 |   |
| Weighted average diluted shares outstanding                                                                                |                                                                         |                                       | 1,653,182 |   |   | 1,641,774 |   |   | 1,624,133 |   |
| **Performance Ratios:**                                                                                                    |                                                                         |                                       |      |   |   |   |   |   |   |   |
| Return on average assets                                                                                                   |                                                                         |                                       | 0.25      | % |   | 0.36 | % |   | 0.59 | % |
| Return on average equity                                                                                                   |                                                                         |                                       | 2.06      |   |   | 2.67 |   |   | 3.87 |   |
| Net interest rate spread                                                                                                   |                                                                         |                                       | 2.76      |   |   | 3.36 |   |   | 3.53 |   |
| Net interest margin                                                                                                        |                                                                         |                                       | 3.49      |   |   | 3.93 |   |   | 3.93 |   |
| Efficiency ratio                                                                                                           |                                                                         |                                       | 87.40     |   |   | 81.37 |   |   | 73.33 |   |
| Dividend payout ratio                                                                                                      |                                                                         |                                       | 0.48      |   |   | 0.39 |   |   | — |   |
| Average interest-earning assets to averageinterest-bearing liabilities                                                     |                                                                         |                                       | 1.27      | x |   | 1.29 | x |   | 1.33 | x |
| **Asset Quality Ratios:**                                                                                                  |                                                                         |                                       |      |   |   |   |   |   |   |   |
| Non-performing loans to total assets                                                                                       |                                                                         |                                       | 0.33      | % |   | 0.37 | % |   | 0.05 | % |
| Non-performing loans to total loans, net                                                                                   |                                                                         |                                       | 0.47      |   |   | 0.51 |   |   | 0.08 |   |
| Net charge-offs to average loans                                                                                           |                                                                         |                                       | 0.00      |   |   | 0.00 |   |   | 0.01 |   |
| Allowance for loan losses to total loans at period                            end                                          |                                                                         |                                       | 0.72      |   |   | 0.74 |   |   | 0.74 |   |
| Allowance for loan losses                            to non-performing loans                            at period end |                                                                         |                                       | 1.55      | x |   | 1.45 | x |   | 10.16 | x |
| **Capital Ratios:**                                                                                                        |                                                                         |                                       |      |   |   |   |   |   |   |   |
| Average equity to average assets                                                                                           |                                                                         |                                       | 12.12     | % |   | 13.59 | % |   | 15.17 | % |
| Equity to assets at period end                                                                                             |                                                                         |                                       | 11.37     |   |   | 12.57 |   |   | 14.35 |   |

 

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3

 

 

**MANAGEMENT’S DISCUSSION AND ANALYSIS**

**OF            FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**Forward-Looking Statements**

 

The Private Securities Litigation Reform Act of 1995 contains safe            harbor provisions regarding forward-looking statements. When used in this discussion,            the words “intends”, “believes”, “anticipates”,            “contemplates”, “expects”, and similar expressions are intended            to identify forward-looking statements. Such statements are subject to certain risks            and uncertainties which could cause actual results to differ materially from those            projected. Those risks and uncertainties include changes in interest rates, the ability            to control costs and expenses and general economic conditions. We undertake no            obligation to publicly release the results of any revisions to those forward-looking            statements which may be made to reflect events or circumstances after the date hereof            or to reflect the occurrence of unanticipated events.

 

*Since we conduct no significant business other than owning all of the            common stock of Roebling Bank, references in this discussion to “we,”            “us,” and “our,” refer collectively to Roebling Financial Corp,            Inc. and Roebling Bank.*

 

**General**

Roebling Financial Corp, Inc. is the successor to the former mid-tier            holding company subsidiary of Roebling Financial Corp., MHC (the “MHC”),            which completed its second step conversion to stock form on September 30, 2004. In            connection with the second step conversion, the Company sold 910,764 shares to the            public for $10 per share (including 72,861 shares purchased by the Company’s            employee stock ownership plan with funds borrowed from the Company). As a result of the            second step conversion, each stockholder in the MHC’s former mid-tier holding            company subsidiary (other than the MHC, whose shares were cancelled) received 3.9636            shares of the Company’s common stock in exchange for each share held and the            Company became the sole shareholder in Roebling Bank.

 

Our results of operations depend primarily on our net interest income,            which is the difference between the interest earned on interest-earning assets,            primarily loans and investments, and the interest paid on interest-bearing liabilities,            primarily deposits and borrowings. It is also a function of the composition of assets            and liabilities and the relative amount of interest-earning assets to interest-bearing            liabilities. Our results of operations are also affected by our provisions for loan            losses, non-interest income and non-interest expense. Non-interest income consists            primarily of service charges and fees. Non-interest expense consists primarily of            compensation and benefits, occupancy and equipment, data processing fees and other            operating expenses. Our results of operations may also be affected significantly by            economic and competitive conditions, changes in market interest rates, governmental            policies and actions of regulatory authorities.

 

**Critical Accounting Policies, Judgments and Estimates**

 

The accounting and reporting policies of Roebling Financial Corp, Inc.            conform with the accounting principles generally accepted in the United States of            America and general practices within the financial services industry. The preparation            of the financial statements in conformity with accounting principles generally accepted            in the United States of America requires management to make estimates and assumptions            that affect the amounts reported in the financial statements and the accompanying            notes. Actual results could differ from those estimates.

 

4

 

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We consider accounting policies involving significant judgments and            assumptions by management that have, or could have, a material impact on the carrying            value of certain assets or on income to be critical accounting policies. We consider            the allowance for loan losses to be a critical accounting policy.

 

**Allowance for Loan Losses**. Determining the            amount of the allowance for loan losses necessarily involves a high degree of judgment.            The allowance for loan losses is the estimated amount considered necessary to cover            credit losses inherent in the loan portfolio at the balance sheet date. The allowance            is established through the provision for loan losses, which is charged against income.            Management performs an evaluation of the adequacy of the allowance for loan losses on a            quarterly basis, at a minimum. Consideration is given to a variety of factors including            current economic conditions, delinquency statistics, composition of the loan portfolio,            loss experience, the adequacy of the underlying collateral, the financial strength of            the borrowers, results of internal loan reviews, geographic and industry            concentrations, and other factors related to the collectibility of the loan portfolio.            The valuation is inherently subjective as it requires material estimates, including the            amounts and timing of expected future cash flows expected to be received on impaired            loans, which may be susceptible to significant change.

 

Our methodology for analyzing the allowance for loan losses consists of            several components. Specific allocations are made for loans that are determined to be            impaired. A loan is considered to be impaired when, based on current information, it is            probable that we will be unable to collect all amounts due according to the contractual            terms of the loan agreement. For such loans, a specific allowance is established when            the present value of expected future cash flows or, for collateral-dependent loans, the            fair value of the collateral, adjusted for market conditions and selling expenses, is            less than the carrying value of the loan. The general allocation is determined by            segregating the remaining loans into groups by type and purpose of loan and applying a            reserve percentage to each group. The reserve percentage is based on inherent losses            associated with each type of lending, as well as historical loss factors. We also look            at the level of our allowance in proportion to nonperforming loans and total loans. We            have established an overall range that we have determined is prudent based on            historical and industry data. An unallocated allowance represents the excess of the            total allowance, determined to be in the established range, over the specific and            general allocations.

 

While we believe that we use the best information available to perform            our loan loss allowance analysis, adjustments to the allowance in the future may be            necessary. Changes in underlying estimates could result in the requirement for            additional provisions for loan losses. For example, a rise in delinquency rates may            cause us to increase the reserve percentages we apply to loan groups for purposes of            calculating general allocations, or may require additional specific allocations for            impaired loans. In addition, actual loan losses may be significantly more than the            reserves we have established. Each of these scenarios would require additional            provisions, which could have a material negative effect on our financial results. The            ratio of the allowance for loan losses to total loans outstanding was .72% and .74% at            September 30, 2007 and 2006, respectively. A 25% increase in this ratio would have            increased the allowance by $187,000 and $176,000 at September 30, 2007 and 2006,            respectively.

 

**Business Strategy**

 

Our business strategy has been to operate as a well-capitalized            independent financial institution dedicated to providing convenient access and quality            service at competitive prices. Historically, we have sought to implement this strategy            by maintaining a substantial part of our assets in loans secured by one-to-four family            residential real estate located in our market area and home equity and consumer loans.            In recent years, we have diversified our portfolio to include a higher percentage of            commercial real estate, multifamily and construction loans, which are generally secured            by properties in our market area.

 

5

 

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We intend to continue to emphasize a variety of deposit and loan            products, with the latter consisting primarily of one-to-four family mortgages, home            equity loans, commercial real estate and construction loans. We have grown our branch            network, which has expanded our geographic reach, and may consider the acquisition of            other financial institutions or branches. In fiscal 2006 we opened our fifth retail            banking office, located in Delran, Burlington County. In fiscal 2005 we relocated our            loan center from a leased facility in Roebling to a leased site in Westampton Township,            Burlington County and also centralized our back-office and administrative operations            and opened a retail banking facility at this site. We introduced online bill payment in            2006 to enhance our internet banking product, which we launched in 2005. Online banking            has been very well received by our customer base.

 

**Management of Interest Rate Risk and Market Risk**

 

Because the majority of our assets and liabilities are sensitive to            changes in interest rates, our most significant form of market risk is interest rate            risk, or changes in interest rates. We may be more vulnerable to an increase or            decrease in interest rates depending upon 1) the duration and repricing characteristics            of our interest-earning assets and interest-bearing liabilities at a given point in            time, 2) the time horizon and 3) the level of interest rates.

 

We have established an asset/liability committee that consists of the            Chairman of our Board of Directors and two outside Directors, our President and members            of our management team. The committee meets on a semiannual basis to review loan and            deposit pricing and production volumes, interest rate risk analyses, liquidity and            borrowing needs, and a variety of other asset and liability management topics. General            asset/liability matters are discussed at the Board’s regular meetings.

 

To reduce the effect of interest rate changes on net interest income, we            have adopted various strategies to enable us to improve the matching of            interest-earning asset maturities to interest-bearing liability maturities. The            principal elements of these strategies include seeking to:

 

|   | **•** | originate loans with adjustable rate features or shorter                            term fixed rates for portfolio and sell longer term fixed rate                            mortgages; |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | maintain a high percentage of low-cost transaction and                            savings accounts which tend to be less interest rate sensitive when                            interest rates rise; |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | lengthen the maturities of our liabilities when it would                            be cost effective through the pricing and promotion of longer term                            certificates of deposit; |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | maintain an investment portfolio, with short to                            intermediate terms to maturity or adjustable interest rates, that                            provides a stable cash flow, thereby providing investable funds in                            varying interest rate cycles. |
|--------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Although we have historically made a significant effort to maintain a            high level of lower-cost deposits as a method of enhancing profitability, this has            become increasingly difficult in the current rate and competitive environment. As            interest rates have risen, the banking industry has seen a migration of deposits into            money market and certificate of deposit accounts and out of checking and savings            accounts. Likewise, our core deposit ratio (non-certificate of deposit accounts to            total deposits) decreased to 46% at September 30, 2007 from 51% at September 30,            2006.

 

6

 

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Exposure to interest rate risk is closely monitored by our management.            Our objective is to maintain a consistent level of profitability within acceptable risk            tolerances across a broad range of potential interest rate environments. In addition to            various analyses, we use the Office of Thrift Supervision (“OTS”) Net            Portfolio Value (“NPV”) Model, which calculates changes in net portfolio            value, to monitor our exposure to interest rate risk. NPV is equal to the estimated            present value of assets minus the present value of liabilities plus the net present            value of off-balance-sheet contracts. The Interest Rate Risk Exposure Report shows the            degree to which balance sheet line items and net portfolio value are potentially            affected by a 100 to 300 basis point (1/100th of a percentage point) upward            and downward parallel shift (shock) in the Treasury yield curve.

             

The following table represents our Net Portfolio Value calculations at            September 30, 2007. This data was calculated by the OTS, based upon information we            provided to them.

             

|                  |                    |                    |                                                       |       |   |         |   |                 |   |           |   |   |   |   |   |   |
|-----------------------|-------------------------|-------------------------|------------------------------------------------------------|------------|--------|--------------|--------|----------------------|--------|----------------|--------|--------|--------|--------|--------|--------|
|                  | **Net Portfolio Value** |                    | **Net Portfolio Value****as % of Present Value of Assets** |
| **Change****in Rate** |                    | **Estimated****Amount** |                                                       | **Change** |   | **% Change** |   | **NVP****Ratio (1)** |   | **Change (2)** |
|                  |                    | **($ in thousands)**    |                                                       |       |   |         |   |                 |   |           |   |
|                  |                    |                    |                                                       |       |   |         |   |                 |   |           |   |   |   |   |   |   |
| +300 bp               |                    | $                       | 12,094                                                     |       | $      | (5,492       | )      | (31                  | )%     |           | 8.30   | %      |   | -326   |   | bp     |
| +200 bp               |                    |                    | 14,083                                                     |       |   | (3,503       | )      | (20                  | )%     |           | 9.52   |   |   | -204   |   | bp     |
| +100 bp               |                    |                    | 15,919                                                     |       |   | (1,666       | )      | (9                   | )%     |           | 10.01  |   |   | -95    |   | bp     |
| 0 bp                  |                    |                    | 17,585                                                     |       |   |         |   |                 |   |           | 11.56  |   |   |   |   | bp     |
| -100 bp               |                    |                    | 18,612                                                     |       |   | 1,027        |   | 6                    | %      |           | 12.12  |   |   | + 56   |   | bp     |
| -200 bp               |                    |                    | 19,234                                                     |       |   | 1,648        |   | 9                    | %      |           | 12.44  |   |   | + 88   |   | bp     |
| - 300 bp (3)          |                    |                    |                                                       |       |   |         |   |                 |   |           |   |   |   |   |   |   |
|                       |                         |                         |                                                            |            |        |              |        |                      |        |                |        |        |        |        |        |        |  |  |  |  |  |  |

             

| (1) | Calculated as the estimated NPV divided by the present                            value of assets. |
|-----|----------------------------------------------------------------------------------------------------|

| (2) | Calculated as the increase (decrease) in the NPV ratio                            assuming the indicated change in interest rates over the estimated NPV                            ratio assuming no change in interest rates. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | No calculation was available from the OTS. |
|-----|--------------------------------------------|

             

The above table indicates that in the event of a sudden and sustained            increase in prevailing market interest rates, the Bank’s net portfolio value            would be expected to decrease. Conversely, a decrease in interest rates would benefit            net portfolio value.

 

Computations of prospective effects of hypothetical interest rate            changes are based on numerous assumptions, including relative levels of market interest            rates, prepayments and deposit run-offs, and should not be relied upon as indicative of            actual results. Certain shortcomings are inherent in such computations. Although            certain assets and liabilities may have similar maturities or periods of repricing,            they may react at different times and in different degrees to changes in the market            interest rates. The interest rates on certain types of assets and liabilities may            fluctuate in advance of changes in market interest rates, while rates on other types of            assets and liabilities may lag behind changes in market interest rates. Certain assets,            such as adjustable rate mortgages, generally have features which restrict changes in            interest rates on a short term basis and over the life of the asset. In the event of a            change in interest rates, prepayments and early withdrawal levels could deviate            significantly from those assumed in making the calculations set forth above.            Additionally, an increased credit risk may result as the ability of many borrowers to            service their debt may decrease in the event of an interest rate increase.

 

7

 

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**Comparison of Financial Condition at September 30, 2007 and            2006**

 

***Assets.***Total assets increased $16.2            million, or 12.4%, to $147.0 million at September 30, 2007, from $130.8 million at            September 30, 2006. This increase is largely attributable to an $8.8 million increase            in net loans receivable and a $7.3 million increase in the securities portfolio. The            loans receivable, net, portfolio increased by 9.3% to $102.8 million at September 30,            2007 from $94.0 million at September 30, 2006, while the securities portfolio            increased by 26.4% to $34.9 million from $27.6 million during the same period. The            majority of the change in loans receivable, net is attributable to increases of $6.6            million and $5.6 million in the one-to-four family residential mortgage and home equity            loan portfolios, respectively, offset by a $2.6 million decrease in the construction            and land loan portfolios. Loans secured by one-to-four family residences, including            home equity loans, have historically comprised the majority of the loan portfolio.            While we expect these loans to continue to be a significant part of the loan portfolio,            we intend to continue to increase commercial lending, primarily mortgage-secured and,            as a result, anticipate a continued shift in the ratio of one-to-four family mortgages            and commercial related loans, including multifamily, commercial real estate and            construction and land loans. The one-to-four family and home equity loan portfolios            represented 69.5% of loans receivable, net at September 30, 2007 and 63.0% at September            30, 2006.

 

***Liabilities.***Total liabilities            increased $15.9 million to $130.3 million at September 30, 2007 from $114.4 million at            September 30, 2006. Deposits increased by $15.5 million, or 15.0%, to $119.2 million at            September 30, 2007 from $103.7 million at September 30, 2006, while borrowed funds            increased by $200,000 during the same period, to $9.5 million at September 30, 2007,            from $9.3 million at September 30, 2006. We opened our fifth and newest retail banking            office in September, 2006 in Delran, following the opening of our fourth branch in            August, 2005 in Westampton, both in Burlington County, New Jersey. Increases in            deposits of $17.2 million for fiscal 2007 came from these newest branch offices. The            increase in total deposits was primarily attributable to an increase in certificate of            deposit accounts, which increased by $13.8 million, to $64.4 million at September 30,            2007, from $50.6 million at September 30, 2006, primarily as a result of promotional            specials. Money market accounts also increased, by $5.6 million in fiscal 2007, related            to the introduction of a new premium-rate money market account. Other deposit accounts            decreased by a total of $3.9 million in the same period. As interest rates rose over            the past few years, the deposit market became increasingly competitive. Depositors have            shifted money into higher-costing certificate of deposit and money market accounts and            out of lower-costing checking and savings accounts. The banking industry in general has            seen an increase in certificates of deposit and a decrease in core deposits. With these            changes in our deposit portfolio, our ratio of core deposit accounts (non-certificates            of deposit) to total deposits has decreased to 46% at September 30, 2007 from 51% at            September 30, 2006. We expect the deposit market to continue to be extremely            competitive and it will be an ongoing challenge to increase core deposits and market            share. As of June 30, 2007, the latest date for which branch deposit data is available            from the FDIC, our market share increased in both the Roebling marketplace and New            Egypt compared to June 30, 2006.

             

***Stockholders’ Equity.***Stockholder’s equity was $16.7 million at September 30, 2007,            increasing slightly from $16.4 million at September 30, 2006. The largest components of            the change in stockholders’ equity for the year ended September 30, 2007 include            net income of $339,000 and a decrease in the unrealized loss on available-for-sale            securities, adjusted for deferred income taxes, which added $240,000 to equity. During            the same period, other significant changes to equity include a decrease of $164,000 for            the payment of dividends, and decreases of $151,000 and $132,000 for the purchase of            shares for the deferred compensation and restricted stock plans, respectively. In            addition, the amortization of ESOP shares, the allocation of restricted stock plan            shares, the exercise of stock options and the tax benefit associated with stock benefit            plans added $112,000, $53,000, $22,000 and $21,000, respectively. Lastly, the            adjustment to initially apply Statement of Financial Accounting Standards No. 158            (“SFAS No. 158”) resulted in a $42,000 reduction of stockholders’            equity. SFAS No. 158 requires an employer to recognize the overfunded or underfunded            status of a defined benefit postretirement plan as an asset or liability in its            statement of financial position and to recognize changes in that funded status through            comprehensive income in the year in which the changes occur.

 

8

 

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**Average Balance Sheet, Interest Rates and Yields**

 

The following tables set forth certain information relating to our            average balance sheet and reflects the average yield on assets and average cost of            liabilities for the periods indicated. Such yields and costs are derived by dividing            income or expense by the average balance of assets or liabilities, respectively, for            the periods presented.

 

 

|                                                                            |   | **For the Year Ended September 30,** |    | **For the Year Ended September 30,** |         |
|---------------------------------------------------------------------------------|--------|--------------------------------------|---------|--------------------------------------|--------------|
|                                                                            |   | **2007**                             |    | **2006**                             |         |
|                                                                            |   | **Average****Balance**               |    | **Interest**                         |         | **Average****Yield/Cost** |   | **Average****Balance** |   | **Interest** |   | **Average****Yield/Cost** |   |
|                                                                            |   |                                 |    |                                 | **(Actual)** |   |   |   |   |   |   | **(Actual)** |   |   |   |
|                                                                            |   | **(Dollars in thousands)**           |    | **(Dollars in thousands)**           |         |
| Interest-earning assets:                                                        |   |                                 |    |                                 |         |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans receivable (1)                                                            |   | $                                    | 96,229  |                                 | $            | 6,545 |   | 6.80 | % | $ | 85,134 |   | $ | 5,629 |   | 6.61 | % |
| Investment securities                                                           |   |                                 | 30,695  |                                 |         | 1,326 |   | 4.32 |   |   | 26,749 |   |   | 974 |   | 3.64 |   |
| Other interest-earning assets (2)                                               |   |                                 | 1,848   |                                 |         | 104 |   | 5.63 |   |   | 974 |   |   | 47 |   | 4.83 |   |
| Total interest-earning assets                                                   |   |                                 | 128,772 |                                 |         | 7,975 |   | 6.19 |   |   | 112,857 |   |   | 6,650 |   | 5.89 |   |
| Non-interest-earning assets                                                     |   |                                 | 6,866   |                                 |         |   |   |   |   |   | 5,803 |   |   |   |   |   |   |
| Total assets                                                                    |   | $                                    | 135,638 |                                 |         |   |   |   |   | $ | 118,660 |   |   |   |   |   |   |
|                                                                            |   |                                 |    |                                 |         |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                   |   |                                 |    |                                 |         |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing checking                                                       |   | $                                    | 8,993   |                                 |         | 24 |   | 0.27 |   | $ | 10,395 |   |   | 22 |   | 0.21 |   |
| Savings accounts                                                                |   |                                 | 17,705  |                                 |         | 104 |   | 0.59 |   |   | 20,898 |   |   | 119 |   | 0.57 |   |
| Money market accounts                                                           |   |                                 | 11,830  |                                 |         | 421 |   | 3.56 |   |   | 7,706 |   |   | 193 |   | 2.51 |   |
| Certificates of deposit                                                         |   |                                 | 55,685  |                                 |         | 2,611 |   | 4.69 |   |   | 38,336 |   |   | 1,449 |   | 3.78 |   |
| Borrowings                                                                      |   |                                 | 7,448   |                                 |         | 324 |   | 4.35 |   |   | 10,010 |   |   | 429 |   | 4.29 |   |
| Total interest-bearing liabilities                                              |   |                                 | 101,661 |                                 |         | 3,484 |   | 3.43 |   |   | 87,345 |   |   | 2,212 |   | 2.53 |   |
| Non-interest-bearing liabilities (3)                                            |   |                                 | 17,543  |                                 |         |   |   |   |   |   | 15,191 |   |   |   |   |   |   |
| Total liabilities                                                               |   |                                 | 119,204 |                                 |         |   |   |   |   |   | 102,536 |   |   |   |   |   |   |
| Stockholders’ equity                                                      |   |                                 | 16,434  |                                 |         |   |   |   |   |   | 16,124 |   |   |   |   |   |   |
| Total liabilities and stockholders’                            equity     |   | $                                    | 135,638 |                                 |         |   |   |   |   | $ | 118,660 |   |   |   |   |   |   |
| Net interest income                                                             |   |                                 |    |                                 | $            | 4,491 |   |   |   |   |   |   | $ | 4,438 |   |   |   |
| Interest rate spread (4)                                                        |   |                                 |    |                                 |         |   |   | 2.76 | % |   |   |   |   |   |   | 3.36 | % |
| Net interest margin (5)                                                         |   |                                 |    |                                 |         |   |   | 3.49 | % |   |   |   |   |   |   | 3.93 | % |
| Ratio of average interest-earning assetsto average interest-bearing liabilities |   |                                 |    |                                 |         |   |   | 126.67 | % |   |   |   |   |   |   | 129.21 | % |

 

_________________________________

| (1) | Average balances include non-accrual loans. Interest                            income includes amortization of net deferred loan fees and (costs) of                            $48,000 and $64,000 for the fiscal years 2007 and 2006,                            respectively. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Includes interest-bearing deposits in other financial                            institutions and FHLB stock. Tax exempt interest is not presented on a                            taxable equivalent basis. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Includes average non-interest-bearing deposits of                            $16,217,000 and $14,359,000 for the years ended September 30, 2007 and                            2006, respectively. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Interest rate spread represents the difference between                            the average yield on interest-earning assets and the average cost of                            interest-bearing liabilities. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Net interest margin represents net interest income as a                            percentage of average interest-earning assets. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------|

 

9

 

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**Rate/Volume Analysis**

 

The table below sets forth certain information regarding changes in our            interest income and interest expense for the periods indicated. For each category of            interest-earning assets and interest-bearing liabilities, the table distinguishes            between: (i) changes attributable to volume (changes in average volume multiplied            by prior period’s rate); and (ii) changes attributable to rates (changes in            rate multiplied by old average volume). For purposes of this table, the net change            attributable to the combined impact of rate and volume has been allocated            proportionally to the absolute dollar amounts of change in each.

             

             

|                              |   |                                               |   |     |                         |                                               |   |   |   |       |   |     |   |    |   |   |   |   |   |   |   |
|-----------------------------------|--------|----------------------------------------------------|--------|----------|------------------------------|----------------------------------------------------|--------|--------|--------|------------|--------|----------|--------|---------|--------|--------|--------|--------|--------|--------|--------|
|                              |   | **Year Ended September 30,**                       |   |     | **Year Ended September 30,** |                                               |
|                              |   | **2007 vs. 2006**                                  |   |     |                         | **2006 vs. 2005**                                  |   |
|                                   |        | **Increase                            (Decrease)** |        |          |                              | **Increase                            (Decrease)** |        |
|                              |   | **Due to**                                         |   |     |                         | **Due to**                                         |   |
|                              |   | **Volume**                                         |   | **Rate** |                         | **Net**                                            |   |   |   | **Volume** |   | **Rate** |   | **Net** |   |
|                              |   | **(In thousands)**                                 |   |
|                              |   |                                               |   |     |                         |                                               |   |   |   |       |   |     |   |    |   |   |   |   |   |   |   |
| Interest-earning assets:          |   |                                               |   |     |                         |                                               |   |   |   |       |   |     |   |    |   |   |   |   |   |   |   |
| Loans receivable                  |   | $                                                  | 751    |     | $                            | 165                                                |   | $      | 916    |       |   |     | $      | 1,071   |   | $      | 539    |   | $      | 1,610  |   |
| Investment securities             |   |                                               | 156    |     |                         | 196                                                |   |   | 352    |       |   |     |   | (94     | )      |   | 43     |   |   | (51    | )      |
| Other interest-earning assets     |   |                                               | 48     |     |                         | 9                                                  |   |   | 57     |       |   |     |   | (27     | )      |   | 1      |   |   | (26    | )      |
| Total interest-earning assets     |   | $                                                  | 955    |     | $                            | 370                                                |   | $      | 1,325  |       |   |     | $      | 950     |   | $      | 583    |   | $      | 1,533  |   |
|                              |   |                                               |   |     |                         |                                               |   |   |   |       |   |     |   |    |   |   |   |   |   |   |   |
| Interest-bearing liabilities:     |   |                                               |   |     |                         |                                               |   |   |   |       |   |     |   |    |   |   |   |   |   |   |   |
| Interest-bearing checking         |   | $                                                  | (3     | )        | $                            | 5                                                  |   | $      | 2      |       |   |     | $      | (2      | )      | $      | 5      |   | $      | 3      |   |
| Savings accounts                  |   |                                               | (19    | )        |                         | 4                                                  |   |   | (15    | )          |   |     |   | (10     | )      |   | 4      |   |   | (6     | )      |
| Money market accounts             |   |                                               | 128    |     |                         | 100                                                |   |   | 228    |       |   |     |   | 18      |   |   | 102    |   |   | 120    |   |
| Certificates of deposit           |   |                                               | 759    |     |                         | 403                                                |   |   | 1,162  |       |   |     |   | 331     |   |   | 329    |   |   | 660    |   |
| Borrowings                        |   |                                               | (112   | )        |                         | 7                                                  |   |   | (105   | )          |   |     |   | 186     |   |   | 31     |   |   | 217    |   |
| Total interest-bearingLiabilities |   | $                                                  | 753    |     | $                            | 519                                                |   | $      | 1,272  |       |   |     | $      | 523     |   | $      | 471    |   | $      | 994    |   |
|                              |   |                                               |   |     |                         |                                               |   |   |   |       |   |     |   |    |   |   |   |   |   |   |   |
| Net interest income               |   | $                                                  | 202    |     | $                            | (149                                               | )      | $      | 53     |       |   |     | $      | 427     |   | $      | 112    |   | $      | 539    |   |

 

 

**Comparison of Results of Operations for the Years Ended September 30,            2007 and 2006**

 

***Net Income***. Net income for the year            ended September 30, 2007 was $339,000 ($0.21 per diluted share), a decrease of $91,000            or 21.2%, from $430,000 ($0.26 per diluted share) for the year ended September 30,            2006. Although net interest income and non-interest income both increased, these            increases were more than offset by an increase in non-interest expense, substantially            attributable to the costs incurred with our newest branch, which opened in September,            2006.

             

***Interest Income.***The average balance            of total interest-earning assets for the year ended September 30, 2007 increased by            $15.9 million compared to the year ended September 30, 2006, while the average yield            increased to 6.19% from 5.89%. The increase in total interest income of $1.3 million            for the year ended September 30, 2007 is comprised primarily of an increase in interest            income of $916,000 on loans receivable and an increase of $352,000 in interest income            on investment securities. Average loan receivable balances increased by $11.1            million

 

10

 

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for            the year ended September 30, 2007 compared to the same 2006 period, while the average            yield increased to 6.80% from 6.61%. For the year ended September 30, 2007, the average            balance of investment securities increased by $3.9 million compared to the same 2006            period, while the average yield increased to 4.32% from 3.64%. The improvement in yield            on investment securities is primarily the result of the reinvestment of funds from            maturing securities and the purchase of additional securities at current market rates            which were significantly higher than the rates on securities which were outstanding in            2006.

             

***Interest Expense.***Interest expense            increased by $1.3 million to $3.5 million for the year ended September 30, 2007 from            $2.2 million for the same 2006 period. The increase in interest expense was due to an            increase in average interest-bearing liability balances of $14.3 million as well as an            increase in the average cost of interest-bearing liabilities to 3.43% from 2.53%.            Average interest-bearing deposit balances increased by $16.9 million with an increase            in the average cost to 3.35% for the year ended September 30, 2007 compared to 2.30%            for the same 2006 period, while average borrowings decreased by $2.6 million, with a            slight increase in the average cost to 4.35% from 4.29%.The            increase in deposit costs for the year ended September 30, 2007 is largely the result            of the growth in the certificate of deposit portfolio. Mirroring the current trends in            the industry in a very competitive market, depositors have shifted funds into            higher-costing certificate of deposit and money market accounts and out of            lower-costing checking and savings accounts.

             

***Net Interest Income.***Net interest            income increased $54,000 to $4.5 million for the year ended September 30, 2007,            compared to $4.4 million for the year ended September 30, 2006. Reflecting the recent            rate environment and yield curve, the Company’s spread and margin compressed            during the year, as the average yield on total interest-earning assets for the year            ended September 30, 2007 increased by 30 basis points compared to the year ended            September 30, 2006, while the overall cost of funds increased 90 basis points for the            same period. As a result, the interest rate spread narrowed by 60 basis points, to            2.76% for the year ended September 30, 2007 compared to 3.36% for the year ended            September 30, 2006, while the net interest margin tightened by 44 basis points, to            3.49% from 3.93% in the same time period.

             

***Provision for Losses on Loans.***The            provision for loan losses is charged to operations to bring the total allowance for            loan losses to a level that represents management’s best estimate of the losses            inherent in the portfolio, based on a review by management of the following            factors:

 

|   | **•** | historical experience; |
|--------|------------|------------------------|

|   | **•** | volume; |
|--------|------------|---------|

|   | **•** | type of lending conducted by the Bank; |
|--------|------------|----------------------------------------|

|   | **•** | industry standards; |
|--------|------------|---------------------|

|   | **•** | the level and status of past due and non-performing                            loans; |
|--------|------------|---------------------------------------------------------------------------------------|

|   | **•** | the general economic conditions in the Bank’s                            lending area; and |
|--------|------------|--------------------------------------------------------------------------------------------------|

|   | **•** | other factors affecting the collectibility of the loans                            in its portfolio. |
|--------|------------|------------------------------------------------------------------------------------------------------|

 

Our methodology for analyzing the allowance for loan losses consists of            two components: general and specific allowances. A general valuation allowance is            determined by applying estimated loss factors to various aggregate loan categories.            Specific valuation allowances are created when management believes that the            collectibility of a specific loan has been impaired and a loss is probable. The            allowance level is reviewed on a quarterly basis, at a minimum.

             

11

 

----

Determining the amount of the allowance for loan losses necessarily            involves a high degree of judgment. The allowance for loan losses is maintained at a            level that represents management’s best estimate of losses in the loan portfolio            at the balance sheet date. However, there can be no assurance that the allowance for            losses will be adequate to cover losses which may be realized in the future, and that            additional provisions for losses will not be required. In addition, regulatory            agencies, as part of their examination process, periodically review the allowance for            loan losses and may require us to recognize adjustments to the allowance based on their            judgment regarding the adequacy of the allowance for loan losses at the time of their            examination.

             

The provision for loan losses was $47,000 for the year ended September            30, 2007, compared to $132,000 for the same 2006 period. The decrease in the provision            in fiscal 2007 is due to slower growth in the loan portfolio, as well as a change in            the composition within the loan portfolio. The allowance for loan losses was $750,000            or .72% of total loans outstanding at September 30, 2007, compared to $703,000 or .74%            of total loans outstanding at September 30, 2006. The ratio of the allowance for loan            losses to non-performing loans increased to 1.55 times at September 30, 2007 from 1.45            times at September 30, 2006. Non-performing loans, expressed as a percentage of total            loans, decreased to .47% at September 30, 2007 from .51% at September 30,            2006.

             

***Non-interest Income.***Non-interest            income increased $100,000, or 21.5%, to $563,000 for the year ended September 30, 2007,            compared to $463,000 for same period in 2006. The increase in non-interest income is            primarily attributable to a $48,000 increase in loan fees for the year ended September            30, 2007 compared to the same 2006 period and a $55,000 increase in account servicing            and other fees for the same period. The increase in loan fees is primarily attributable            to the receipt of prepayment fees on loans that paid off, a non-refundable commitment            fee received for a loan application that did not close and late charges paid. The            increase in account servicing and other fees is due primarily to higher non-sufficient            / uncollected fund fees and fees from ATM / debit card transactions.

             

***Non-interest Expense.***Non-interest            expense increased $430,000, or 10.8%, to $4.4 million for the year ended September 30,            2007, from $4.0 million for the same period in 2006, with the most significant            increases in compensation and benefits, occupancy and equipment expense and other            expense. The majority of the increases in these categories is attributable to the            opening of the Bank’s fifth and newest retail branch in Delran, New Jersey, which            opened in September, 2006. Compensation and benefits increased by $251,000 for the year            ended September 30, 2007 compared to the same 2006 period, with the increase due to            staffing for the Delran facility, as well as staff additions to accommodate the            continued growth of the Bank in both the retail banking and lending areas.Occupancy and equipment increased by $89,000 for the year ended            September 30, 2007 compared to the same 2006 period, with the increase related to the            Delran office. Other expense increased by $70,000 for year ended September 30, 2007            compared to the same 2006 period, with the increase primarily related to marketing            expenses for the Delran area as well as higher costs related to ATM and debit card            transactions. Delran is an entry into another new marketplace for the Bank, which we            anticipate will enable us to increase our deposit and lending base over time. While we            expect that the projected growth from our newest branches will result in increased            profitability for the Company over the long-term, earnings will be suppressed in the            short-term until the new branches become profitable. There may be increased expenses in            the future as a result of additional awards that may be granted under stock benefit            plans. We also anticipate increased expenses in fiscal 2008 related to compliance with            the Sarbanes-Oxley Act.

             

***Income Taxes***. The provision for            income taxes decreased $100,000 to $250,000 for the year ended September 30, 2007 from            $350,000 for the year ended September 30, 2006. The decrease in tax expense is            attributable primarily to the decrease in pre-tax earnings. The effective tax rate            decreased to 43% for the 2007 fiscal year from 45% for the 2006 fiscal year.

             

12

 

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**Liquidity and Capital Resources**

 

Liquidity is the ability to fund assets and meet obligations as they            come due. Liquidity risk is the risk of not being able to obtain funds at a reasonable            price within a reasonable period of time to meet financial commitments when due. We are            required under federal regulations to maintain a sufficient level of liquid assets            (including specified short-term securities and certain other investments), as            determined by management and reviewed for adequacy by regulators during examinations.            Roebling Bank is also subject to federal regulations that impose certain minimum            capital requirements. See Note 12 to our consolidated financial statements.

             

Our liquidity, represented by cash and cash equivalents and investment            securities, is a product of our operating, investing and financing activities. Our            primary sources of liquidity are deposits, loan and investment security repayments and            sales, and borrowed funds. While scheduled payments from the amortization and maturity            of loans, investment securities and short-term investments are relatively predictable            sources of funds, deposit flows, loan and mortgage-backed security prepayments and            investment security calls are greatly influenced by general interest rates, economic            conditions and competition. We monitor projected liquidity needs to ensure that            adequate liquidity is maintained on a daily and long-term basis. We have the ability to            borrow from the FHLB of New York, or others, should the need arise. As of September 30,            2007, we had $9.5 million in outstanding borrowings from the FHLB of New            York.

             

Cash flows from financing activities decreased by approximately $2.6            million during the year ended September 30, 2007 to $15.3 million compared to $17.9            million in the prior fiscal year, primarily due to a reduction in the amount of net            deposit inflows. The Company’s primary use of cash was in investing activities,            including loan disbursements and purchases of investment securities. Cash used in            investment activities decreased $2.5 million to $15.9 million compared to $18.4 million            in the prior fiscal year.

             

**Off-Balance Sheet Arrangements**

 

We are a party to financial instruments with off-balance sheet risk in            the normal course of business to meet the financing needs of our customers and to            reduce our exposure to fluctuations in interest rates. These financial instruments            include commitments to extend credit and involve, to varying degrees, elements of            credit and interest rate risk in excess of the amount recognized in the statements of            financial condition. The contract or notional amounts of those instruments reflect the            extent of our involvement in particular classes of financial instruments.

 

Our exposure to credit loss in the event of nonperformance by the other            party to the financial instrument for commitments to extend credit is represented by            the contractual notional amounts of those instruments. We use the same credit policies            in making commitments and conditional obligations as we do for on-balance-sheet            instruments. We generally do not require collateral or other security to support            financial instruments with credit risk, with the exception of letters of            credit.

 

Commitments to extend credit are agreements to lend to a customer as            long as there is no violation of any condition established in the contract. Commitments            generally have fixed expiration dates or other termination clauses and may require            payment of a fee. Since many of the commitments are expected to expire without being            drawn upon, the total commitments do not necessarily represent future cash            requirements. We have approved lines of credit unused but accessible to borrowers            totaling $11.9 million and $7.8 million at September 30, 2007 and 2006,            respectively.

 

At September 30, 2007 and 2006, we had $9.2 million and $3.8 million in            outstanding commitments to fund loans and $235,000 and $119,000 in outstanding            commercial letters of credit, respectively. There were no outstanding commitments to            sell loans or purchase investment securities at September 30, 2007.

 

13

 

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**Impact of Inflation and Changing Prices**

 

The consolidated financial statements presented herein have been            prepared in accordance with accounting principles generally accepted in the United            States of America, which require the measurement of financial position and operating            results without considering the change in the relative purchasing power of money over            time due to inflation. The impact of inflation is reflected in the increased cost of            our operations. Unlike industrial companies, nearly all of our assets and liabilities            are financial in nature. As a result, our earnings are impacted by changes in interest            rates, which are influenced by inflationary expectations. Our asset/liability            management strategy seeks to minimize the effects of changes in interest rates on our            net income.

 

**Recent Accounting Pronouncements**

 

In July 2006, the FASB issued FASB Interpretation No. 48,            “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement            No. 109” (FIN 48), which clarifies the accounting for uncertainty in tax            positions. This Interpretation requires that companies recognize in their financial            statements the impact of a tax position, if that position is more likely than not of            being sustained on audit, based on the technical merits of the position. The provisions            of FIN 48 are effective for fiscal years beginning after December 15, 2006, with the            cumulative effect of the change in accounting principle recorded as an adjustment to            opening retained earnings. The Company does not expect the adoption of this            interpretation to have a material effect on its financial condition or results of            operations.

 

In September 2006, the FASB issued Statement of Financial Accounting            Standards SFAS No. 157, “Fair Value Measurements,” which defines fair            value, establishes a framework for measuring fair value under U.S. GAAP, and expands            disclosures about fair value measurements. SFAS No. 157 applies to other accounting            pronouncements that require or permit fair value measurements. The new guidance is            effective for financial statements issued for fiscal years beginning after November 15,            2007, and for interim periods within those fiscal years. We are currently evaluating            the potential impact, if any, of the adoption of FASB Statement No. 157 on our            consolidated financial position, results of operations and cash flows.

 

In September 2006, the FASB issued Emerging Issues Task Force            (“EITF”) Issue No.06-5, “Accounting for Purchases of Life Insurance -            Determining the Amount That Could Be Realized in Accordance with FASB Technical            Bulletin No. 85-4, Accounting for Purchases of Life Insurance.” The scope of EITF            06-5 consists of various issues relating to accounting for life insurance policies            purchased by entities protecting against the loss of “key persons.” The            issues are clarifications of previously issued guidance on FASB Technical Bulletin No.            85-4. EITF 06-5 is effective for fiscal years beginning after December 15, 2006. The            Company does not expect EITF 06-05 will have a material impact on its financial            position, results of operations and cash flows.

             

In February 2007, the FASB issued SFAS No. 159, “The Fair Value            Option for Financial Assets and Financial Liabilities - Including an amendment of FASB            Statement No. 115.” This statement permits an entity to choose to measure many            financial instruments and certain other items at fair value. A business entity will            report unrealized gains and losses on items for which the fair value option has been            elected in earnings at each subsequent reporting date. The fair value option 1) may be            applied instrument by instrument, with a few exceptions, such as investments otherwise            accounted for by the equity method, 2) is irrevocable (unless a new election date            occurs) and 3) is applied only to entire instruments and not to portions of            instruments. The statement is effective as of the beginning of an entity’s first            fiscal year that begins after November 15, 2007. The Company is currently evaluating            the impact of this pronouncement.

             

14

----

 

In March 2007, the FASB ratified EITF No. 06-10 “Accounting for            Collateral Assignment Split-Dollar Life Insurance Agreements”. EITF 06-10            provides guidance for determining a liability for the postretirement benefit obligation            as well as recognition and measurement of the associated asset on the basis of the            terms of the collateral assignment agreement. EITF 06-10 is effective for fiscal years            beginning after December 15, 2007. The Company does not expect EITF 06-10 will have a            material impact on its financial position, results of operations and cash            flows.

             

                            In June 2007, the FASB issued Emerging            Issues Task Force (“EITF”) Issue No. 06-11, “Accounting for Income            Tax Benefits of Dividends on Share-Based Payment Awards”. EITF Issue No. 06-11            addresses a company’s recognition of an income tax benefit received on dividends            that are (a) paid to employees holding equity-classified non-vested shares,            equity-classified non-vested share units, or equity-classified outstanding share            options and (b) charged to retained earnings under SFAS No. 123(R). The EITF reached a            consensus that a realized income tax benefit from dividends or dividend equivalents            that are charged to retained earnings and are paid to employees for equity classified            nonvested equity shares, nonvested equity share units and outstanding equity share            options should be recognized as an increase to additional paid-in capital. The amount            recognized in additional paid-in capital for the realized income tax benefit from            dividends on those awards should be included in the pool of excess tax benefits            available to absorb tax deficiencies on share-based payment awards. Unrealized income            tax benefits from dividends on equity-classified employee share-based payment awards            should be excluded from the pool of excess tax benefits available to absorb potential            future tax deficiencies. The accounting treatment of the income tax benefits from these            dividends would be applied on a prospective basis. EITF Issue No. 06-11 is effective            for fiscal years beginning after December 15, 2007. The company does not expect that            EITF Issue No. 06-11 will have a material impact on its financial condition or results            of operations.

 

15

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----

 

| **Fontanella and Babitts**

CERTIFIED PUBLIC ACCOUNTANTS |  

                             

                             

534 Union Boulevard

Totowa Boro, New Jersey 07512

Tel:    (973) 595-5300

Fax:    (973) 595-5890 |
|----------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING            FIRM**

 

 

To the            Board of Directors

Roebling Financial Corp, Inc. and Subsidiary

 

 

We have            audited the accompanying consolidated statements of financial condition of Roebling            Financial Corp, Inc. and Subsidiary, as of September 30, 2007 and 2006, and the related            consolidated statements of income, comprehensive income, stockholders’ equity and            cash flows for the years then ended. These consolidated financial statements are the            responsibility of the Company’s management. Our responsibility is to express an            opinion on these consolidated financial statements based on our audits.

 

We            conducted our audits in accordance with 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. An audit includes examining, on a test            basis, evidence supporting the amounts and disclosures in the consolidated financial            statements. An audit also includes assessing the accounting principles used and            significant estimates made by management, as well as evaluating the overall financial            statement presentation. We believe that our audits provide a reasonable basis for our            opinion.

 

In our            opinion, the consolidated financial statements referred to above present fairly, in all            material respects, the financial position of Roebling Financial Corp, Inc. and            Subsidiary, at September 30, 2007 and 2006, and the results of their operations and            cash flows for the years then ended in conformity with U.S. generally accepted            accounting principles.

 

As            discussed in Note 1, the Company changed its method of accounting for Defined Benefit            Pension and Other Postretirement Plans and its method of accounting for share-based            payments in 2007.

 

 

                                                                                                                 

 

December 19, 2007

 

 

 

 

 

 

**-16-**

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION**

 

|                                                                                    | September 30, |        |
|-----------------------------------------------------------------------------------------|---------------|-------------|
|                                                                                    | 2007          |        |   | 2006 |   |
|                                                                                    |          |        |   |   |   |   |   |
| Assets                                                                                  |          |        |   |   |   |   |   |
|                                                                                    |          |        |   |   |   |   |   |
| Cash and due from banks                                                                 | $             | 2,582,785   |   |   | $ | 2,777,702 |   |
| Interest-bearing deposits                                                               |          | 877,275     |   |   |   | 602,543 |   |
|                                                                                    |          |        |   |   |   |   |   |
| Total cash and cash equivalents                                                         |          | 3,460,060   |   |   |   | 3,380,245 |   |
|                                                                                    |          |        |   |   |   |   |   |
| Securities available for sale                                                           |          | 34,657,309  |   |   |   | 27,206,912 |   |
| Securities held to maturity; approximate fair value                            of       |          |        |   |   |   |   |   |
| $243,000 (2007) and $397,000 (2006)                            respectively             |          | 242,058     |   |   |   | 395,448 |   |
| Loans receivable, net                                                                   |          | 102,771,656 |   |   |   | 94,013,947 |   |
| Accrued interest receivable                                                             |          | 766,065     |   |   |   | 646,733 |   |
| Federal Home Loan Bank of New York stock, at                            cost            |          | 596,000     |   |   |   | 575,400 |   |
| Premises and equipment                                                                  |          | 3,611,600   |   |   |   | 3,832,656 |   |
| Other assets                                                                            |          | 902,937     |   |   |   | 772,864 |   |
|                                                                                    |          |        |   |   |   |   |   |
| Total assets                                                                            | $             | 147,007,685 |   |   | $ | 130,824,205 |   |
|                                                                                    |          |        |   |   |   |   |   |
| Liabilities and stockholders’                            equity                   |          |        |   |   |   |   |   |
|                                                                                    |          |        |   |   |   |   |   |
| Liabilities                                                                             |          |        |   |   |   |   |   |
|                                                                                    |          |        |   |   |   |   |   |
| Deposits                                                                                | $             | 119,207,507 |   |   | $ | 103,682,361 |   |
| Borrowed funds                                                                          |          | 9,500,000   |   |   |   | 9,300,000 |   |
| Advances from borrowers for taxes and                            insurance              |          | 429,485     |   |   |   | 417,781 |   |
| Other liabilities                                                                       |          | 1,162,918   |   |   |   | 1,013,851 |   |
|                                                                                    |          |        |   |   |   |   |   |
| Total liabilities                                                                       |          | 130,299,910 |   |   |   | 114,413,993 |   |
|                                                                                    |          |        |   |   |   |   |   |
| Commitments and contingencies                                                           |          | —     |   |   |   | — |   |
|                                                                                    |          |        |   |   |   |   |   |
| Stockholders’ equity                                                              |          |        |   |   |   |   |   |
|                                                                                    |          |        |   |   |   |   |   |
| Serial preferred stock, par value $.10, authorized                            5,000,000 |          |        |   |   |   |   |   |
| shares, no shares issued                                                                |          | —     |   |   |   | — |   |
| Common stock; par value $.10; shares authorized and                            shares   |          |        |   |   |   |   |   |
| issued of 20,000,000 and 1,718,473 at September 30,                            2007;    |          |        |   |   |   |   |   |
| 20,000,000 and 1,712,259 at September 30, 2006;                            respectively |          | 171,847     |   |   |   | 171,226 |   |
| Additional paid-in-capital                                                              |          | 10,428,731  |   |   |   | 10,354,309 |   |
| Unallocated employee stock ownership plan                            shares             |          | (542,955    | ) |   |   | (620,520 | ) |
| Unallocated restricted stock plan shares                                                |          | (131,809    | ) |   |   | (54,331 | ) |
| Stock purchased for deferred compensation                            plan               |          | (151,024    | ) |   |   | — |   |
| Retained earnings - substantially restricted                                            |          | 6,989,982   |   |   |   | 6,814,613 |   |
| Accumulated other comprehensive loss:                                                   |          |        |   |   |   |   |   |
| Unrealized loss on securities available for sale, net of                            tax |          | (15,338     | ) |   |   | (255,085 | ) |
| Defined benefit plan, net of tax                                                        |          | (41,659     | ) |   |   | — |   |
|                                                                                    |          |        |   |   |   |   |   |
| Total stockholders’ equity                                                        |          | 16,707,775  |   |   |   | 16,410,212 |   |
|                                                                                    |          |        |   |   |   |   |   |
| Total liabilities and stockholders’                            equity             | $             | 147,007,685 |   |   | $ | 130,824,205 |   |

 

See accompanying notes            to consolidated financial statements.

 

**-17-**

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**CONSOLIDATED STATEMENTS OF INCOME**

 

|                               |   | Year EndedSeptember 30, |
|------------------------------------|--------|-------------------------|
|                               |   | 2007                    |   | 2006 |
|                               |   |                    |   |   |   |   |
| Interest income:                   |   |                    |   |   |   |   |
| Loans receivable                   |   | $                       | 6,544,829 |   | $ | 5,628,526 |
| Securities                         |   |                    | 1,326,131 |   |   | 974,144 |
| Other interest-earning assets      |   |                    | 103,879 |   |   | 47,487 |
|                               |   |                    |   |   |   |   |
| Total interest income              |   |                    | 7,974,839 |   |   | 6,650,157 |
|                               |   |                    |   |   |   |   |
| Interest expense:                  |   |                    |   |   |   |   |
| Deposits                           |   |                    | 3,159,364 |   |   | 1,783,601 |
| Borrowed funds                     |   |                    | 323,985 |   |   | 428,797 |
|                               |   |                    |   |   |   |   |
| Total interest expense             |   |                    | 3,483,349 |   |   | 2,212,398 |
|                               |   |                    |   |   |   |   |
| Net interest income                |   |                    | 4,491,490 |   |   | 4,437,759 |
| Provision for loan losses          |   |                    | 47,000 |   |   | 132,000 |
|                               |   |                    |   |   |   |   |
| Net interest income after          |   |                    |   |   |   |   |
| provision for loan losses          |   |                    | 4,444,490 |   |   | 4,305,759 |
|                               |   |                    |   |   |   |   |
| Non-interest income:               |   |                    |   |   |   |   |
| Loan fees                          |   |                    | 99,161 |   |   | 51,537 |
| Account servicing and other        |   |                    | 463,262 |   |   | 408,340 |
| Gain on sale of loans              |   |                    | 177 |   |   | 3,051 |
|                               |   |                    |   |   |   |   |
| Total non-interest income          |   |                    | 562,600 |   |   | 462,928 |
|                               |   |                    |   |   |   |   |
| Non-interest expense:              |   |                    |   |   |   |   |
| Compensation and benefits          |   |                    | 2,505,057 |   |   | 2,254,220 |
| Occupancy and equipment            |   |                    | 650,316 |   |   | 560,936 |
| Service bureau and data processing |   |                    | 438,556 |   |   | 420,902 |
| Federal insurance premiums         |   |                    | 12,692 |   |   | 11,303 |
| Other                              |   |                    | 810,782 |   |   | 740,323 |
|                               |   |                    |   |   |   |   |
| Total non-interest expense         |   |                    | 4,417,403 |   |   | 3,987,684 |
|                               |   |                    |   |   |   |   |
| Income before income taxes         |   |                    | 589,687 |   |   | 781,003 |
| Income taxes                       |   |                    | 250,413 |   |   | 350,600 |
|                               |   |                    |   |   |   |   |
| Net income+F7                      |   | $                       | 339,274 |   | $ | 430,403 |
|                               |   |                    |   |   |   |   |
| Basic earnings per share           |   | $                       | 0.21 |   | $ | 0.26 |
|                               |   |                    |   |   |   |   |
| Diluted earnings per share         |   | $                       | 0.21 |   | $ | 0.26 |
|                               |   |                    |   |   |   |   |
| Weighted average shares            |   |                    |   |   |   |   |
| outstanding - basic                |   |                    | 1,644,407 |   |   | 1,632,681 |
| Weighted average shares            |   |                    |   |   |   |   |
| outstanding - diluted              |   |                    | 1,653,182 |   |   | 1,641,774 |

 

See            accompanying notes to consolidated financial statements.

**-18-**

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME**

 

 

|                                                                                                          |   | Year EndedSeptember 30, |
|---------------------------------------------------------------------------------------------------------------|--------|-------------------------|
|                                                                                                          |   | 2007                    |   | 2006 |
|                                                                                                          |   |                    |   |   |   |   |
|                                                                                                          |   |                    |   |   |   |   |
| Net income                                                                                                    |   | $                       | 339,274 |   | $ | 430,403 |
|                                                                                                          |   |                    |   |   |   |   |
| Other comprehensive income,                                                                                   |   |                    |   |   |   |   |
| net of income taxes:                                                                                          |   |                    |   |   |   |   |
| Unrealized holding gains on securities                                                                        |   |                    |   |   |   |   |
| available for sale, net of income taxes                                                                       |   |                    |   |   |   |   |
| of $159,433 and $19,562, respectively

                             

                              |   |                    | 239,747 |   |   | 29,416 |
|                                                                                                          |   |                    |   |   |   |   |
| Comprehensive income                                                                                          |   | $                       | 579,021 |   | $ | 459,819 |

 

 

See            accompanying notes to consolidated financial statements.

 

 

**-19-**

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS’            EQUITY**

 

|                                                                      |   | CommonStock |    | AdditionalPaid-inCapital |   | UnallocatedESOPShares |   |   | UnallocatedRSPShares |   |   | CommonStock forDeferredCompensation |     |   | RetainedEarnings |   |     | AccumulatedOtherCompensationIncome (Loss) |   |   | Total     |   |
|---------------------------------------------------------------------------|--------|-------------|---------|--------------------------|--------|-----------------------|--------|--------|----------------------|--------|--------|-------------------------------------|----------|--------|------------------|--------|----------|-------------------------------------------|--------|--------|-----------|--------|
|                                                                      |   |        |    |                     |   |                  |   |   |                 |   |   |                                |     |   |             |   |     |                                      |   |   |      |   |   |   |   |   |   |   |   |   |
| Balance - September 30, 2005                                              |   | $           | 171,004 |                     | $      | 10,326,722            |   | $      | (698,085             | )      |   | $                                   | (14,067  | )      |             | $      | —  |                                      |   | $      | 6,546,979 |   |   | $ | (284,501 | ) |   | $ | 16,048,052 |   |
| Dividends paid on common stock                                            |   |        | — |                     |   | —               |   |   | —              |   |   |                                | —  |   |             |   | —  |                                      |   |   | (162,769  | )      |   |   | — |   |   |   | (162,769 | ) |
| Net income                                                                |   |        | — |                     |   | —               |   |   | —              |   |   |                                | —  |   |             |   | —  |                                      |   |   | 430,403   |   |   |   | — |   |   |   | 430,403 |   |
| Amortization of ESOP shares                                               |   |        | — |                     |   | 20,167                |   |   | 77,565               |   |   |                                | —  |   |             |   | —  |                                      |   |   | —   |   |   |   | — |   |   |   | 97,732 |   |
| Change in unrealized gain (loss) on                            securities |   |        |    |                     |   |                  |   |   |                 |   |   |                                |     |   |             |   |     |                                      |   |   |      |   |   |   |   |   |   |   |   |   |
| available for sale, net of tax                                            |   |        | — |                     |   | —               |   |   | —              |   |   |                                | —  |   |             |   | —  |                                      |   |   | —   |   |   |   | 29,416 |   |   |   | 29,416 |   |
| Exercise of stock options                                                 |   |        | 222     |                     |   | 7,738                 |   |   | —              |   |   |                                | —  |   |             |   | —  |                                      |   |   | —   |   |   |   | — |   |   |   | 7,960 |   |
| Common stock acquired by RSP                                              |   |        | — |                     |   | (6,645                | )      |   | —              |   |   |                                | (64,226  | )      |             |   | —  |                                      |   |   | —   |   |   |   | — |   |   |   | (70,871 | ) |
| Allocation of RSP shares                                                  |   |        | — |                     |   | —               |   |   | —              |   |   |                                | 23,962   |   |             |   | —  |                                      |   |   | —   |   |   |   | — |   |   |   | 23,962 |   |
| Tax benefit of stock benefit plans                                        |   |        | — |                     |   | 6,327                 |   |   | —              |   |   |                                | —  |   |             |   | —  |                                      |   |   | —   |   |   |   | — |   |   |   | 6,327 |   |
|                                                                      |   |        |    |                     |   |                  |   |   |                 |   |   |                                |     |   |             |   |     |                                      |   |   |      |   |   |   |   |   |   |   |   |   |
| Balance - September 30, 2006                                              |   |        | 171,226 |                     |   | 10,354,309            |   |   | (620,520             | )      |   |                                | (54,331  | )      |             |   | —  |                                      |   |   | 6,814,613 |   |   |   | (255,085 | ) |   |   | 16,410,212 |   |
|                                                                      |   |        |    |                     |   |                  |   |   |                 |   |   |                                |     |   |             |   |     |                                      |   |   |      |   |   |   |   |   |   |   |   |   |
| Dividends paid on common stock                                            |   |        | — |                     |   | —               |   |   | —              |   |   |                                | —  |   |             |   | —  |                                      |   |   | (163,905  | )      |   |   | — |   |   |   | (163,905 | ) |
| Net income                                                                |   |        | — |                     |   | —               |   |   | —              |   |   |                                | —  |   |             |   | —  |                                      |   |   | 339,274   |   |   |   | — |   |   |   | 339,274 |   |
| Amortization of ESOP shares                                               |   |        | — |                     |   | 34,574                |   |   | 77,565               |   |   |                                | —  |   |             |   | —  |                                      |   |   | —   |   |   |   | — |   |   |   | 112,139 |   |
| Change in unrealized gain (loss) on                            securities |   |        |    |                     |   |                  |   |   |                 |   |   |                                |     |   |             |   |     |                                      |   |   |      |   |   |   |   |   |   |   |   |   |
| available for sale, net of tax                                            |   |        | — |                     |   | —               |   |   | —              |   |   |                                | —  |   |             |   | —  |                                      |   |   | —   |   |   |   | 239,747 |   |   |   | 239,747 |   |
| Common stock acquired for deferred                                        |   |        |    |                     |   |                  |   |   |                 |   |   |                                |     |   |             |   |     |                                      |   |   |      |   |   |   |   |   |   |   |   |   |
| compensation plan                                                         |   |        | — |                     |   | —               |   |   | —              |   |   |                                |     |   |             |   | (151,024 | )                                         |   |   | —   |   |   |   | — |   |   |   | (151,024 | ) |
| Exercise of stock options                                                 |   |        | 621     |                     |   | 21,718                |   |   | —              |   |   |                                | —  |   |             |   | —  |                                      |   |   | —   |   |   |   | — |   |   |   | 22,339 |   |
| Common stock acquired by RSP                                              |   |        | — |                     |   | (2,173                | )      |   | —              |   |   |                                | (130,260 | )      |             |   | —  |                                      |   |   | —   |   |   |   | — |   |   |   | (132,433 | ) |
| Allocation of RSP shares                                                  |   |        | — |                     |   | (281                  | )      |   | —              |   |   |                                | 52,782   |   |             |   | —  |                                      |   |   | —   |   |   |   | — |   |   |   | 52,501 |   |
| Tax benefit of stock benefit plans                                        |   |        | — |                     |   | 20,584                |   |   | —              |   |   |                                | —  |   |             |   | —  |                                      |   |   | —   |   |   |   | — |   |   |   | 20,584 |   |
| Adjustment to initially apply FASB                                        |   |        |    |                     |   |                  |   |   |                 |   |   |                                |     |   |             |   |     |                                      |   |   |      |   |   |   |   |   |   |   |   |   |
| Statement No. 158, net of tax                                             |   |        | — |                     |   | —               |   |   | —              |   |   |                                | —  |   |             |   | —  |                                      |   |   | —   |   |   |   | (41,659 | ) |   |   | (41,659 | ) |
|                                                                      |   |        |    |                     |   |                  |   |   |                 |   |   |                                |     |   |             |   |     |                                      |   |   |      |   |   |   |   |   |   |   |   |   |
| Balance - September 30, 2007                                              |   | $           | 171,847 |                     | $      | 10,428,731            |   | $      | (542,955             | )      |   | $                                   | (131,809 | )      |             | $      | (151,024 | )                                         |   | $      | 6,989,982 |   |   | $ | (56,997 | ) |   | $ | 16,707,775 |   |

 

See            accompanying notes to consolidated financial statements.

 

**-20-**

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

 

 

|                                                                             | Year EndedSeptember 30, |        |
|----------------------------------------------------------------------------------|-------------------------|-------------|
|                                                                             | 2007                    |        |   | 2006 |   |
|                                                                             |                    |        |   |   |   |   |   |
| Cash flows from operating activities:                                            |                    |        |   |   |   |   |   |
| Net income                                                                       | $                       | $ 339,274   |   |   | $ | 430,403 |   |
| Adjustments to reconcile net income to                                           |                    |        |   |   |   |   |   |
| net cash provided by operating activities:                                       |                    |        |   |   |   |   |   |
| Depreciation                                                                     |                    | 329,865     |   |   |   | 279,232 |   |
| Amortization of premiums and discounts, net                                      |                    | (3,378      | ) |   |   | 9,514 |   |
| Amortization of deferred loan fees and costs,                            net     |                    | (48,235     | ) |   |   | (63,550 | ) |
| Provision for loan losses                                                        |                    | 47,000      |   |   |   | 132,000 |   |
| Origination of loans held for sale, net of                            repayments |                    | (142,061    | ) |   |   | (1,806,289 | ) |
| Gain on sale of loans                                                            |                    | (177        | ) |   |   | (3,251 | ) |
| Proceeds from sale of loans held for sale                                        |                    | 142,238     |   |   |   | 1,809,540 |   |
| Increase in other assets                                                         |                    | (182,132    | ) |   |   | (198,641 | ) |
| Increase in accrued interest receivable                                          |                    | (119,332    | ) |   |   | (169,992 | ) |
| Increase in other liabilities                                                    |                    | 107,407     |   |   |   | 238,228 |   |
| Amortization/allocation of ESOP and RSP                                          |                    | 164,640     |   |   |   | 121,694 |   |
|                                                                             |                    |        |   |   |   |   |   |
| Net cash provided by operating activities                                        |                    | 635,109     |   |   |   | 778,888 |   |
|                                                                             |                    |        |   |   |   |   |   |
| Cash flows from investing activities:                                            |                    |        |   |   |   |   |   |
| Proceeds from maturities of certificates of                            deposit   |                    | -           |   |   |   | 300,000 |   |
| Purchase of securities available for sale                                        |                    | (17,413,771 | ) |   |   | (2,969,147 | ) |
| Proceeds from sales of securities available for                            sale  |                    | 367,083     |   |   |   | - |   |
| Proceeds from payments and maturities of                                         |                    |        |   |   |   |   |   |
| securities available for sale                                                    |                    | 9,998,934   |   |   |   | 2,962,085 |   |
| Proceeds from payments and maturities                                            |                    |        |   |   |   |   |   |
| of securities held to maturity                                                   |                    | 153,305     |   |   |   | 161,804 |   |
| Loan disbursements, net of principal                            repayments       |                    | (8,843,264  | ) |   |   | (17,531,581 | ) |
| (Purchase) redemption of Federal Home Loan Bank                            Stock |                    | (20,600     | ) |   |   | 26,200 |   |
| Purchase of premises and equipment                                               |                    | (108,809    | ) |   |   | (1,346,158 | ) |
|                                                                             |                    |        |   |   |   |   |   |
| Net cash used in investing activities                                            |                    | (15,867,122 | ) |   |   | (18,396,797 | ) |
|                                                                             |                    |        |   |   |   |   |   |

 

See            accompanying notes to consolidated financial statements.

 

**-21-**

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**CONSOLIDATED STATEMENTS OF CASH FLOWS            (CONT’D)**

 

|                                                                                |   | Year EndedSeptember 30, |       |
|-------------------------------------------------------------------------------------|--------|-------------------------|------------|
|                                                                                |   | 2007                    |       | 2006 |   |
|                                                                                |   |                    |       |   |   |   |   |
| Cash flows from financing activities:                                               |   |                    |       |   |   |   |   |
| Net increase in deposits                                                            |   |                    | 15,525,146 |   |   | 18,826,737 |   |
| Net increase (decrease) in short-term borrowed                            funds     |   |                    | 1,200,000  |   |   | (700,000 | ) |
| Repayment of long-term borrowed funds                                               |   |                    | (1,000,000 | ) |   | — |   |
| Increase in advance payments by borrowers                                           |   |                    |       |   |   |   |   |
| for taxes and insurance                                                             |   |                    | 11,705     |   |   | 22,015 |   |
| Dividends paid                                                                      |   |                    | (163,905   | ) |   | (162,769 | ) |
| Purchase of common shares by RSP                                                    |   |                    | (132,433   | ) |   | (70,871 | ) |
| Proceeds from exercise of stock options                                             |   |                    | 22,339     |   |   | 7,960 |   |
| Purchase of common shares for deferred compensation                            plan |   |                    | (151,024   | ) |   | — |   |
|                                                                                |   |                    |       |   |   |   |   |
| Net cash provided by financing activities                                           |   |                    | 15,311,828 |   |   | 17,923,072 |   |
|                                                                                |   |                    |       |   |   |   |   |
|                                                                                |   |                    |       |   |   |   |   |
| Net increase in cash and cash equivalents                                           |   |                    | 79,815     |   |   | 305,163 |   |
|                                                                                |   |                    |       |   |   |   |   |
| Cash and cash equivalents - beginning                                               |   |                    | 3,380,245  |   |   | 3,075,082 |   |
|                                                                                |   |                    |       |   |   |   |   |
| Cash and cash equivalents - ending                                                  |   | $                       | 3,460,060  |   | $ | 3,380,245 |   |
|                                                                                |   |                    |       |   |   |   |   |
| Supplemental Disclosures of Cash Flow                            Information        |   |                    |       |   |   |   |   |
|                                                                                |   |                    |       |   |   |   |   |
| Cash paid for:                                                                      |   |                    |       |   |   |   |   |
| Interest on deposits and borrowed funds                                             |   | $                       | 3,478,671  |   | $ | 2,217,341 |   |
|                                                                                |   |                    |       |   |   |   |   |
| Income taxes                                                                        |   | $                       | 498,316    |   | $ | 442,157 |   |

 

See            accompanying notes to consolidated financial statements.

 

**-22-**

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL            STATEMENTS**

 

**1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

The            following is a description of the more significant accounting policies used in            preparation of the accompanying consolidated financial statements of Roebling Financial            Corp, Inc. and Subsidiary (the “Company”).

 

Principles of Consolidation

 

The            consolidated financial statements are comprised of the accounts of Roebling Financial            Corp, Inc. and its wholly-owned subsidiary, Roebling Bank (the “Bank”). All            significant intercompany accounts and transactions have been eliminated in            consolidation.

 

Basis of Consolidated Financial Statement Presentation

 

The            consolidated financial statements have been prepared in conformity with accounting            principles generally accepted in the United States of America. In preparing the            consolidated financial statements, management is required to make estimates and            assumptions that affect the reported amount of assets and liabilities as of the date of            the statement of financial condition and revenues and expenses for the period then            ended. Actual results could differ significantly from those estimates. Material            estimates that are particularly susceptible to significant changes in the near term            relate to the determination of the allowance for loan losses, the valuation of            foreclosed real estate and the assessment of prepayment risks associated with            mortgage-backed securities. Management believes that the allowance for loan losses            considers all known and inherent losses, foreclosed real estate is appropriately valued            and prepayment risks associated with mortgage-backed securities are properly            recognized. While management uses available information to recognize losses on loans            and foreclosed real estate, future additions to the allowance for loan losses or            further writedowns of foreclosed real estate may be necessary based on changes in            economic conditions in the Company’s market area. Additionally, assessments of            prepayment risks related to mortgage-backed securities are based upon current market            conditions, which are subject to frequent change.

 

In            addition, various regulatory agencies, as an integral part of their examination            process, periodically review the Company’s allowance for loan losses and            foreclosed real estate. Such agencies may require the Company to recognize additions to            the allowance for loan losses or additional writedowns on foreclosed real estate based            on their judgments about information available to them at the time of their            examination.

 

Concentration of Risk

 

The            Company’s lending activity is concentrated in loans secured by real estate            located in the State of New Jersey.

 

The            Company’s loan portfolio is predominantly made up of 1-to-4 family residential            mortgage and home equity loans, the majority of which are secured by properties located            in Burlington County. These loans are secured by lien positions on the respective real            estate properties and are subject to the Company’s loan underwriting policies. In            general, the Company’s loan portfolio performance is dependent upon the local            economic conditions.

 

Interest-Rate Risk

 

The            Company is principally engaged in the business of attracting deposits from the general            public and using these deposits to make loans secured by real estate and, to a lesser            extent, consumer and commercial loans and to purchase mortgage-backed and investment            securities. The potential for interest-rate risk exists as a result of the shorter            duration of the Company’s interest-sensitive liabilities compared to the            generally longer duration of interest-sensitive assets.

 

In a            rising interest rate environment, liabilities will generally reprice faster than            assets, and there may be a reduction in the market value of long-term assets and net            interest income. For this reason, management regularly monitors the maturity and            interest-rate structure of the Company’s assets and liabilities in order to            control its level of interest-rate risk and to plan for future volatility.

 

**-23-**

 

----

****ROEBLING FINANCIAL CORP, INC. AND            SUBSIDIARY****

****NOTES TO CONSOLIDATED FINANCIAL            STATEMENTS****

 

**1. SUMMARY OF SIGNIFICANT ACCOUNTING            POLICIES****(Cont’d)**

 

Cash            and Cash Equivalents

 

Cash            and cash equivalents include cash and amounts due from depository institutions,            interest-bearing accounts and federal funds sold. For the purpose of the statements of            cash flows, the Company considers all highly liquid debt instruments with original            maturities of three months or less to be cash equivalents.

 

Investments and Mortgage-backed Securities

 

Debt            securities over which there exists positive intent and ability to hold to maturity are            classified as held-to-maturity securities and reported at amortized cost. Debt and            equity securities that are bought and held principally for the purpose of selling them            in the near term are classified as trading securities and reported at fair value, with            unrealized holding gains and losses included in earnings. Debt and equity securities            not classified as trading securities, nor as held-to-maturity securities, are            classified as available-for-sale securities and reported at fair value, with unrealized            holding gains or losses, net of deferred income taxes, reported in a separate component            of stockholders’ equity.

 

Premiums and discounts on all securities are amortized/accreted using            the interest method. Interest and dividend income on securities, which includes            amortization of premiums and accretion of discounts, is recognized in the financial            statements when earned. The adjusted cost basis of an identified security sold or            called is used for determining security gains and losses recognized in the statements            of income.

 

In            December 2003, the Emerging Issues Task Force issued EITF 03-1, “The Meaning of            Other-Than-Temporary Impairment and Its Application to Certain Investments.” This            statement from the EITF addresses disclosure requirements regarding information about            temporarily impaired investments. The requirements are effective for fiscal years            ending after December 15, 2003, for all entities that have debt or marketable equity            securities with market values below carrying values. The requirements apply to            investments in debt and marketable equity securities that are accounted for under            Statement of Financial Accounting Standards (“SFAS”) No. 115,            “Accounting for Certain Investments in Debt and Equity            Securities.”

 

Loans and Allowance for Loan Losses

 

Loans            receivable are stated at unpaid principal balances, less the allowance for loan losses            and net deferred loan origination fees and discounts.

 

Loan            fees and certain direct loan origination costs are deferred, and the net fee or cost is            recognized as an adjustment to interest income using the interest method over the            contractual life of the loans, adjusted for prepayments.

 

An            allowance for loan losses is maintained at a level considered necessary to provide for            loan losses based upon the evaluation of known and inherent losses in the loan            portfolio. Management of the Company, in determining the allowance for loan losses,            considers the credit risks inherent in its loan portfolio and changes in the nature and            volume of its loan activities, along with the general economic and real estate market            conditions. The Company utilizes a two tier approach: (1) identification of problem            loans and establishment of specific loss allowances on such loans; and (2)            establishment of general valuation allowances on the remainder of its loan portfolio.            The Company maintains a loan review system which allows for a periodic review of its            loan portfolio and the early identification of impaired problem loans. Such system            takes into consideration, among other things, delinquency status, size of loans, type            of collateral and financial condition of the borrowers. A loan is deemed to be impaired            when, based on current information and events, it is probable that the Company will be            unable to collect all amounts due according to the contractual terms of the loan            agreement. All loans identified as impaired are evaluated independently. The Company            does not aggregate such loans for evaluation purposes. Loan impairment is measured            based on the present value of expected future cash flows discounted at the loan’s            effective interest rate or, as a practical expedient, at the loan’s observable            market price or the fair value of the collateral if the loan is collateral dependent.            General valuation allowances are based upon a combination of factors including, but not            limited to, actual loan loss experience, composition of the loan portfolio, current            economic conditions and management’s judgment.

 

 

**-24-**

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**1. SUMMARY OF SIGNIFICANT ACCOUNTING            POLICIES****(Cont’d)**

 

Loans and Allowance for Loan Losses(Cont’d)

 

Regardless of the extent of the analysis of customer performance,            portfolio evaluations, trends or risk management processes established, certain            inherent, but undetected losses are probable within the loan portfolio. This is due to            several factors including inherent delays in obtaining information regarding a            customer’s financial condition or changes in their conditions, the judgmental            nature of individual loan evaluations, collateral assessments and the interpretation of            economic trends, and the sensitivity of assumptions utilized to establish allocated            allowances for homogeneous groups of loans, among other factors. An unallocated            allowance is maintained to recognize the existence of these exposures. These other            credit risk factors are regularly reviewed and revised by management where conditions            indicate that the estimates initially applied are different from actual            results.

 

The            Company accounts for its transfers and servicing of financial assets in accordance with            SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and            Extinguishments of Liabilities.” SFAS No. 140 revises the standards for            accounting for the securitizations and other transfers of financial assets and            collateral. Transfers of financial assets for which the Company has surrendered control            of the financial assets are accounted for as sales to the extent that consideration            other than beneficial interests in the transferred assets is received in exchange.            Retained interests in a sale or securitization of financial assets are measured at the            date of transfer by allocating the previous carrying amount between the assets            transferred and based on their relative estimated fair values. The fair values of            retained servicing rights and any other retained interests are determined based on the            present value of expected future cash flows associated with those interests and by            reference to market prices for similar assets. There were no transfers of financial            assets to related or affiliated parties. As of September 30, 2007 and 2006, the Company            has not recorded mortgage servicing assets due to the immateriality of the amount that            would have been capitalized based upon the limited amount of assets secured by the            Company.

 

Uncollected interest on loans that are contractually past due is charged            off, or an allowance is established based on management’s periodic evaluation.            The allowance is established by a charge to interest income and income is subsequently            recognized only to the extent that cash payments are received until, in            management’s judgment, the borrower’s ability to make periodic interest and            principal payments is reestablished, in which case the loan is returned to accrual            status. At a minimum, an allowance is generally established for all interest payments            that are more than 90 days delinquent.

 

Premises and Equipment

 

Land is            carried at cost. Premises and equipment are carried at cost less accumulated            depreciation and amortization. Significant renovations and additions are capitalized.            When assets are retired or otherwise disposed of, the cost and related accumulated            depreciation are removed from the accounts and any resulting gain or loss is reflected            in income for the period. The cost of maintenance and repairs is charged to expense as            incurred. The Company computes depreciation on a straight-line basis over the estimated            useful lives of the assets.

 

Real            Estate Owned

 

Real            estate properties acquired through, or in lieu of, loan foreclosure are initially            recorded at the lower of cost or fair value at the date of foreclosure. Costs relating            to development and improvement of property are capitalized, whereas costs relating to            the holding of property are expensed. Subsequent valuations are periodically performed            by management, and an allowance for losses is established by a charge to operations if            the carrying value of a property exceeds its fair value less estimated selling cost.            Gains and losses from sale of these properties are recognized as they occur. Income            from operating properties is recorded in operations as earned.

 

Income Taxes

 

Federal            income taxes and state taxes have been provided on the basis of reported income.            Deferred income taxes are provided for certain items in income and expense which enter            into the determination of income for financial reporting purposes in different periods            than for income tax purposes.

 

-**25**-

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**1. SUMMARY OF SIGNIFICANT ACCOUNTING            POLICIES****(Cont’d)**

 

Accounting for Stock-Based Compensation

 

Effective October 1, 2006, the Company adopted SFAS No. 123 (revised),            “Share-Based Payment”, issued by the Financial Accounting Standards Board            (“FASB”). SFAS No. 123 (revised) requires compensation costs related to            share-based payments transactions to be recognized in the financial statements over the            period the employee provides service in exchange for the reward. Prior to adopting SFAS            No. 123 (revised), the Company measured the compensation cost of its stock compensation            plans using the “intrinsic value based method” specified in Accounting            Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued            to Employees”.

 

Included in Note 13 to the consolidated financial statements are the            required proforma disclosures.

 

Earnings Per Share

 

Basic            earnings per share is computed by dividing net income for the year by the weighted            average number of shares of common stock outstanding, adjusted for unearned shares of            the Employee Stock Ownership Plan (“ESOP”). Diluted earnings per share is            computed by adjusting the weighted average number of shares of common stock outstanding            to include the effect of outstanding stock options and compensation grants, if            dilutive, using the treasury stock method.

 

The            following is a summary of the Company’s earnings per share            calculations:

 

|                                 |   | Year EndedSeptember 30, |
|--------------------------------------|--------|-------------------------|
|                                 |   | 2007                    |   | 2006 |
|                                 |   |                    |   |   |   |   |
| Net income                           |   | $                       | 339,274 |   | $ | 430,403 |
|                                 |   |                    |   |   |   |   |
| Weighted average common shares       |   |                    |   |   |   |   |
| outstanding for computation of       |   |                    |   |   |   |   |
| basic EPS (1)                        |   |                    | 1,644,407 |   |   | 1,632,681 |
|                                 |   |                    |   |   |   |   |
| Common-equivalent shares due to      |   |                    |   |   |   |   |
| the dilutive effect of stock options |   |                    |   |   |   |   |
| and RSP awards                       |   |                    | 8,775 |   |   | 9,093 |
|                                 |   |                    |   |   |   |   |
| Weighted-average common shares       |   |                    |   |   |   |   |
| for computation of diluted EPS       |   |                    | 1,653,182 |   |   | 1,641,774 |
|                                 |   |                    |   |   |   |   |
| Earnings per common share:           |   |                    |   |   |   |   |
| Basic                                |   | $                       | 0.21 |   | $ | 0.26 |
| Diluted                              |   | $                       | 0.21 |   | $ | 0.26 |

 

Reclassifications

 

Certain            prior period amounts have been reclassified to conform to the current period            presentation.

 

 

-**26**-

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**2. SECURITIES AVAILABLE FOR SALE**

 

|                                   |   | September 30, 2007 |       |
|----------------------------------------|--------|--------------------|------------|
|                                   |   | Amortized          |       |   | Gross Unearned |   |   | Estimated |   |
|                                   |   | Cost               |       |   | Gains |   | Losses |   |   | Fair Value |   |
| Investment Securities                  |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government and Agency Securities: |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Due within one year                    |   | $                  | 7,499,005  |   |   | $ | — |   | $ | 50,497 |   |   | $ | 7,448,508 |   |
| Due after one year through five years  |   |               | 9,500,000  |   |   |   | 64,456 |   |   | 32,443 |   |   |   | 9,532,013 |   |
| Due after five years through ten years |   |               | 3,000,000  |   |   |   | 15,472 |   |   | 2,580 |   |   |   | 3,012,892 |   |
| Marketable Equity Securities           |   |               | 2,888      |   |   |   | 21,436 |   |   | — |   |   |   | 24,324 |   |
|                                   |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed Securities             |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| GNMA                                   |   |               | 335,822    |   |   |   | 2,581 |   |   | — |   |   |   | 338,403 |   |
| FHLMC                                  |   |               | 8,968,307  |   |   |   | 9,979 |   |   | 43,957 |   |   |   | 8,934,329 |   |
| FNMA                                   |   |               | 5,376,825  |   |   |   | 28,736 |   |   | 38,721 |   |   |   | 5,366,840 |   |
|                                   |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                   |   | $                  | 34,682,847 |   |   | $ | 142,660 |   | $ | 168,198 |   |   | $ | 34,657,309 |   |

 

 

|                                   |   | September 30, 2006 |       |
|----------------------------------------|--------|--------------------|------------|
|                                   |   | Amortized          |       |   | Gross Unearned |   |   | Estimated |   |
|                                   |   | Cost               |       |   | Gains |   | Losses |   |   | Fair Value |   |
| Investment Securities                  |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government and Agency Securities: |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Due within one year                    |   | $                  | 8,250,000  |   |   | $ | — |   | $ | 106,597 |   |   | $ | 8,143,403 |   |
| Due after one year through five years  |   |               | 11,747,572 |   |   |   | 1,410 |   |   | 255,781 |   |   |   | 11,493,201 |   |
| Due after five years through ten years |   |               | 2,250,000  |   |   |   | 15,705 |   |   | 18,398 |   |   |   | 2,247,307 |   |
| Marketable Equity Securities           |   |               | 2,888      |   |   |   | 19,476 |   |   | - |   |   |   | 22,364 |   |
|                                   |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed Securities             |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| GNMA                                   |   |               | 1,119,535  |   |   |   | 4,293 |   |   | 320 |   |   |   | 1,123,508 |   |
| FHLMC                                  |   |               | 2,086,704  |   |   |   | 7,732 |   |   | 29,616 |   |   |   | 2,064,820 |   |
| FNMA                                   |   |               | 2,174,931  |   |   |   | 2,484 |   |   | 65,106 |   |   |   | 2,112,309 |   |
|                                   |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                   |   | $                  | 27,631,630 |   |   | $ | 51,100 |   | $ | 475,818 |   |   | $ | 27,206,912 |   |

 

Securities available for sale with a carrying value of approximately            $753,000 and $494,000, as of September 30, 2007 and 2006, respectively, are pledged as            security for deposits of governmental entities under the provisions of the Governmental            Unit Deposit Protection Act (GUDPA). Securities with a carrying value of approximately            $13,973,000 and $17,069,000 are pledged as collateral for Federal Home Loan Bank            advances as of September 30, 2007 and 2006, respectively. In addition, securities with            a carrying value of approximately $494,000 and $483,000 are pledged as collateral to            the Federal Reserve Bank as of September 30, 2007 and 2006, respectively.

 

During            the year ended September 30, 2007, proceeds from the sale of securities available for            sale totaled approximately $367,000, with no gain or loss on sale. There were no sales            of investment securities or mortgage-backed securities during the year ended September            30, 2006.

 

 

-**27**-

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**2. SECURITIES AVAILABLE FOR            SALE****(Cont’d)**

 

Provided below is a summary of securities available for sale which were            in an unrealized loss position at September 30, 2007 and 2006. Approximately $134,000            or 80% and $462,000 or 97% of the unrealized loss, as of September 30, 2007 and 2006,            respectively, was comprised of securities in a continuous loss position for twelve            months or more. The Company has the ability and intent to hold these securities until            such time as the value recovers or the securities mature. Further, the Company believes            the deterioration in value is attributable to changes in market interest rates and not            credit quality of the issuer.

 

|                                  |   | September 30, 2007  |      |
|---------------------------------------|--------|---------------------|-----------|
|                                  |   | Under One Year      |      | One Year or More |   |
|                                  |   | EstimatedFair Value |      | GrossUnrealizedLoss |   | EstimatedFair Value |   | GrossUnrealizedLoss |   |
|                                  |   |                |      |   |   |   |   |   |   |   |   |   |   |
| U.S. Government and Agency Securities |   | $                   | 747,420   |   | $ | 2,580 |   | $ | 11,666,065 |   | $ | 82,940 |   |
|                                  |   |                |      |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed Securities            |   |                |      |   |   |   |   |   |   |   |   |   |   |
| FHLMC                                 |   |                | 5,105,316 |   |   | 24,380 |   |   | 894,513 |   |   | 19,577 |   |
| FNMA                                  |   |                | 1,369,355 |   |   | 6,843 |   |   | 1,349,746 |   |   | 31,878 |   |
|                                  |   |                |      |   |   |   |   |   |   |   |   |   |   |
| Total available for sale              |   | $                   | 7,222,091 |   | $ | 33,803 |   | $ | 13,910,324 |   | $ | 134,395 |   |

 

 

|                                  |   | September 30, 2006  |      |
|---------------------------------------|--------|---------------------|-----------|
|                                  |   | Under One Year      |      | One Year or More |   |
|                                  |   | EstimatedFair Value |      | GrossUnrealizedLoss |   | EstimatedFair Value |   | GrossUnrealizedLoss |   |
|                                  |   |                |      |   |   |   |   |   |   |   |   |   |   |
| U.S. Government and Agency Securities |   | $                   | —   |   | $ | — |   | $ | 19,616,796 |   | $ | 380,776 |   |
|                                  |   |                |      |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed Securities            |   |                | —   |   |   | — |   |   | 391,478 |   |   | 320 |   |
| FHLMC                                 |   |                | 300,267   |   |   | 1,801 |   |   | 980,766 |   |   | 27,815 |   |
| FNMA                                  |   |                | 722,786   |   |   | 12,492 |   |   | 1,225,794 |   |   | 52,614 |   |
|                                  |   |                |      |   |   |   |   |   |   |   |   |   |   |
| Total available for sale              |   | $                   | 1,023,053 |   | $ | 14,293 |   | $ | 22,214,834 |   | $ | 461,525 |   |

 

|   | **3. SECURITIES HELD TO MATURITY** |
|--------|------------------------------------|

 

|                       |   | September 30, 2007 |    |
|----------------------------|--------|--------------------|---------|
|                       |   | Amortized          |    | Gross Unrealized |   | Estimated |   |
|                       |   | Cost               |    | Gains |   | Losses |   | Fair Value |   |
| Mortgage-backed Securities |   |               |    |   |   |   |   |   |   |   |   |   |   |
| CMO (FNMA)                 |   | $                  | 8,196   |   | $ | 32 |   | $ | 12 |   | $ | 8,216 |   |
| GNMA                       |   |               | 36,386  |   |   | 366 |   |   | — |   |   | 36,752 |   |
| FHLMC                      |   |               | 90,161  |   |   | 1,489 |   |   | — |   |   | 91,650 |   |
| FNMA                       |   |               | 107,315 |   |   | 69 |   |   | 1,296 |   |   | 106,088 |   |
|                       |   |               |    |   |   |   |   |   |   |   |   |   |   |
|                       |   | $                  | 242,058 |   | $ | 1,956 |   | $ | 1,308 |   | $ | 242,706 |   |

 

 

-**28**-

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

|   | **3. SECURITIES HELD TO MATURITY**(Cont’d) |
|--------|--------------------------------------------------|

 

|                                  |   | September 30, 2006 |    |
|---------------------------------------|--------|--------------------|---------|
|                                  |   | Amortized          |    | Gross Unrealized |   | Estimated |   |
|                                  |   | Cost               |    | Gains |   | Losses |   | Fair Value |   |
| Investment Securities                 |   |               |    |   |   |   |   |   |   |   |   |   |   |
| U.S. Government and Agency Securities |   |               |    |   |   |   |   |   |   |   |   |   |   |
| Due after five through ten years      |   | $                  | 54,855  |   | $ | 387 |   | $ | — |   | $ | 55,242 |   |
|                                  |   |               |    |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed Securities            |   |               |    |   |   |   |   |   |   |   |   |   |   |
| CMO (FNMA)                            |   | $                  | 25,432  |   | $ | 74 |   | $ | 41 |   | $ | 25,465 |   |
| GNMA                                  |   |               | 58,619  |   |   | 582 |   |   | — |   |   | 59,201 |   |
| FHLMC                                 |   |               | 103,820 |   |   | 781 |   |   | — |   |   | 104,610 |   |
| FNMA                                  |   |               | 152,713 |   |   | 899 |   |   | 1,219 |   |   | 152,293 |   |
|                                  |   |               |    |   |   |   |   |   |   |   |   |   |   |
|                                  |   | $                  | 395,448 |   | $ | 2,723 |   | $ | 1,260 |   | $ | 396,911 |   |

 

Securities held to maturity with a carrying value of approximately            $26,000 and $51,000 are pledged as collateral for Federal Home Loan Bank advances as of            September 30, 2007 and 2006, respectively.

 

|   | **4. LOANS RECEIVABLE, NET** |
|--------|------------------------------|

 

|                                       |   | September 30, |
|--------------------------------------------|--------|---------------|
|                                       |   | 2007          |   | 2006 |
| Mortgage loans:                            |   |          |   |   |   |   |
|   One-to-four family residential      |   | $             | 43,806,047 |   | $ | 37,200,342 |
|   Multi-family residential            |   |          | 3,868,450 |   |   | 4,315,504 |
| Commercial real estate                     |   |          | 15,495,886 |   |   | 15,550,275 |
| Construction and land                      |   |          | 15,017,093 |   |   | 18,986,784 |
|                                            |        |               |  |  |  |  |
|                                            |        |               | 78,187,476 |  |  | 76,052,905 |
|                                       |   |          |   |   |   |   |
| Consumer and other loans:                  |   |          |   |   |   |   |
|   Home equity                    |   |          | 27,628,486 |   |   | 21,994,906 |
| Other consumer                             |   |          | 265,429 |   |   | 174,739 |
| Commercial                                 |   |          | 2,266,921 |   |   | 2,756,549 |
|                                       |   |          |   |   |   |   |
|                                       |   |          | 30,160,836 |   |   | 24,926,194 |
|                                       |   |          |   |   |   |   |
| Total loans                                |   |          | 108,348,312 |   |   | 100,979,099 |
|                                       |   |          |   |   |   |   |
| Less:                                      |   |          |   |   |   |   |
| Loans in process                           |   |          | 4,868,201 |   |   | 6,256,783 |
| Net deferred loan origination fees (costs) |   |          | (41,281 | ) |   | 5,133 |
| Allowance for loan losses                  |   |          | 749,736 |   |   | 703,236 |
|                                       |   |          |   |   |   |   |
|                                       |   |          | 5,576,656 |   |   | 6,965,152 |
|                                       |   |          |   |   |   |   |
|                                       |   | $             | 102,771,656 |   | $ | 94,013,947 |

 

 

-**29**-

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**4. LOANS RECEIVABLE,            NET****(Cont’d)**

 

At            September 30, 2007 and 2006, non-accrual loans for which interest had been discontinued            totaled approximately $430,000 and $434,000, respectively. Interest income actually            recognized on non-accrual loans totaled approximately $700 and $5,100 for the years            ended September 30, 2007 and 2006, respectively. Interest income that would have been            recognized, had the loans been current and performing in accordance with the original            terms of their contracts, totaled approximately $38,100 and $13,100 for the years ended            September 30, 2007 and 2006, respectively.

 

Activity in the allowance for loan losses is summarized as            follows:

 

|                        |   | Year EndedSeptember 30, |    |
|-----------------------------|--------|-------------------------|---------|
|                        |   | 2007                    |    |   | 2006 |   |
|                        |   |                    |    |   |   |   |   |   |
| Balance - beginning         |   | $                       | 703,236 |   |   | $ | 573,199 |   |
| Provision charged to income |   |                    | 47,000  |   |   |   | 132,000 |   |
| Charge offs                 |   |                    | (500    | ) |   |   | (1,963 | ) |
|                        |   |                    |    |   |   |   |   |   |
| Balance - ending            |   | $                       | 749,736 |   |   | $ | 703,236 |   |

 

The            activity with respect to loans to directors, officers and associates of such persons is            as follows:

 

 

|                    | Year EndedSeptember 30, |     |
|-------------------------|-------------------------|----------|
|                    | 2007                    |     | 2006 |   |
|                    |                    |     |   |   |   |   |
| Balance - beginning     | $                       | 915,324  |   | $ | 1,017,502 |   |
| Loan disbursements      |                    | 148,169  |   |   | 154,700 |   |
| Collection of principal |                    | (299,636 | ) |   | (195,902 | ) |
| Other changes           |                    | —  |   |   | (60,976 | ) |
|                    |                    |     |   |   |   |   |
| Balance - ending        | $                       | 763,857  |   | $ | 915,324 |   |
|                    |                    |     |   |   |   |   |

 

|   | **5. ACCRUED INTEREST RECEIVABLE** |
|--------|------------------------------------|

 

 

|                       | September 30, |    |
|----------------------------|---------------|---------|
|                       | 2007          |    | 2006 |   |
|                       |          |    |   |   |   |   |
| Loans receivable           | $             | 458,750 |   | $ | 423,759 |   |
| Mortgage-backed securities |          | 66,379  |   |   | 22,140 |   |
| Investment securities      |          | 240,936 |   |   | 200,834 |   |
|                       |          |    |   |   |   |   |
|                       | $             | 766,065 |   | $ | 646,733 |   |
|                       |          |    |   |   |   |   |

 

 

 

-**30**-

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**6. PREMISES AND EQUIPMENT**

 

|                              | September 30, |      |
|-----------------------------------|---------------|-----------|
|                              | 2007          |      | 2006 |   |
|                              |          |      |   |   |   |   |
| Land                              | $             | 1,427,120 |   | $ | 1,383,450 |   |
| Building and improvements         |          | 2,611,170 |   |   | 2,586,375 |   |
| Furniture, fixtures and equipment |          | 1,049,613 |   |   | 1,009,696 |   |
|                              |          |      |   |   |   |   |
|                              |          | 5,087,903 |   |   | 4,979,518 |   |
|                              |          |      |   |   |   |   |
| Less accumulated depreciation     |          | 1,476,303 |   |   | 1,146,862 |   |
|                              |          |      |   |   |   |   |
|                              | $             | 3,611,600 |   | $ | 3,832,656 |   |

 

Useful            lives generally used in the calculation of depreciation are as follows:

 

|   | Buildings | 25 to 50 years |
|--------|-----------|----------------|

|   | Paving and other building related additions | 5 to 10 years |
|--------|---------------------------------------------|---------------|

|   | Furniture and equipment | 5 to 10 years |
|--------|-------------------------|---------------|

 

|   | **7. LOAN SERVICING** |
|--------|-----------------------|

 

Mortgage loans serviced for others are not included in the accompanying            consolidated statements of financial condition. The unpaid principal balances of these            loans are summarized as follows:

 

|                     |   | September 30, |
|--------------------------|--------|---------------|
|                     |   | 2007          |   | 2006 |
| Mortgage loan portfolios |   |          |   |   |   |   |
| serviced for:            |   |          |   |   |   |   |
| FNMA                     |   | $             | 6,730,790 |   | $ | 7,393,563 |
| Other                    |   |          | 485,813 |   |   | 1,023,181 |
|                     |   |          |   |   |   |   |
|                     |   | $             | 7,216,603 |   | $ | 8,416,744 |

 

Custodial escrow balances maintained in connection with loan servicing            totaled approximately $92,000 and $100,000, at September 30, 2007 and 2006,            respectively.

 

|   | **8. DEPOSITS** |
|--------|-----------------|

 

|                               |   | September 30,       |   |
|------------------------------------|--------|---------------------|--------|
|                               |   | 2007                |   | 2006 |   |
|                               |   | WeightedAverageRate |   |   | Amount |   | WeightedAverageRate |   |   | Amount |   |
|                               |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing deposits      |   | 0.00                | %      |   | $ | 16,156,475 |   | 0.00 | % |   | $ | 16,232,014 |   |
| Interest-bearing checking accounts |   | 0.29                | %      |   |   | 7,768,595 |   | 0.21 | % |   |   | 9,340,174 |   |
| Money market accounts              |   | 3.49                | %      |   |   | 14,298,266 |   | 3.35 | % |   |   | 8,746,526 |   |
| Savings accounts                   |   | 0.60                | %      |   |   | 16,545,758 |   | 0.58 | % |   |   | 18,753,895 |   |
| Certificates of deposits           |   | 4.80                | %      |   |   | 64,438,413 |   | 4.49 | % |   |   | 50,609,752 |   |
|                               |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Total deposits                     |   | 3.11                | %      |   | $ | 119,207,507 |   | 2.60 | % |   | $ | 103,682,361 |   |

 

 

-**31**-

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

| **8. DEPOSITS (Cont'd)** |   |
|--------------------------|--------|

 

Deposit            accounts with balances of $100,000 or more totaled approximately $32,499,000 and            $23,348,000 at September 30, 2007 and 2006, respectively. Deposit balances in excess of            $100,000 are not federally insured, with the exception of IRA’s, which are            insured to $250,000.

 

Scheduled maturities of certificates of deposit are as follows (in            thousands):

 

|                   |   | September 30, |
|------------------------|--------|---------------|
|                   |   | 2007          |   | 2006 |
|                   |   |          |   |   |   |   |
| 1 year or less         |   | $             | 54,698 |   | $ | 43,064 |
| Over 1 year to 3 years |   |          | 6,216 |   |   | 4,923 |
| Over 3 years           |   |          | 3,524 |   |   | 2,623 |
|                   |   |          |   |   |   |   |
|                   |   | $             | 64,438 |   | $ | 50,610 |

 

Interest expense on deposits is summarized as follows:

 

|                               | Year EndedSeptember 30, |
|------------------------------------|-------------------------|
|                               | 2007                    |   | 2006 |
|                               |                    |   |   |   |   |
| Interest-bearing checking accounts | $                       | 23,899 |   | $ | 22,215 |
| Money market accounts              |                    | 421,673 |   |   | 193,496 |
| Savings accounts                   |                    | 104,017 |   |   | 118,605 |
| Certificates of deposit            |                    | 2,609,775 |   |   | 1,449,285 |
|                               |                    |   |   |   |   |
| Total                              | $                       | 3,159,364 |   | $ | 1,783,601 |

 

| **9. BORROWED FUNDS** |   |
|-----------------------|--------|

 

The            Company has available overnight lines of credit and a one-month overnight repricing            line of credit with the Federal Home Loan Bank of New York (“FHLB”),            totaling $22.9 million and $18.6 million at September 30, 2007 and 2006, respectively,            subject to the terms and conditions of the lender’s overnight advance program. As            of September 30, 2007 and 2006, the Company had a $2.5 million and a $1.3 million            balance, respectively, in the overnight line of credit at a rate of 5.24% and 5.55%,            respectively.

 

At            September 30, 2007 and 2006, fixed rate advances have contractual maturities as            follows:

 

|                 |   |   |               |      |                |               |   |   |   |                |   |   |   |   |
|----------------------|--------|--------|--------------------|-----------|---------------------|--------------------|--------|--------|--------|---------------------|--------|--------|--------|--------|
|                 |   |   | September 30, 2007 |      |                | September 30, 2007 |   |
|                 |   |   | Amount             |      | WeightedAverageRate |               |   | Amount |   | WeightedAverageRate |   |
| Due by September 30, |   |   |               |      |                |               |   |   |   |                |   |   |   |   |
| 2007                 |   |   | $                  | —   |                | —            |   |   | $      | 1,000,000           |   |   | 3.09   | %      |
| 2008                 |   |   |               | 2,000,000 |                | 3.98               | %      |   |   | 2,000,000           |   |   | 3.98   | %      |
| 2009                 |   |   |               | 1,000,000 |                | 4.41               | %      |   |   | 1,000,000           |   |   | 4.41   | %      |
| 2010                 |   |   |               | 4,000,000 |                | 4.43               | %      |   |   | 4,000,000           |   |   | 4.43   | %      |
|                 |   |   |               |      |                |               |   |   |   |                |   |   |   |   |
|                 |   |   | $                  | 7,000,000 |                | 4.30               | %      |   | $      | 8,000,000           |   |   | 4.15   | %      |

 

At            September 30, 2007 and 2006, the FHLB borrowings were secured by pledges of the            Company’s investment in the capital stock of the FHLB totaling $596,000 and            $575,400 and mortgage-backed and other securities with a carrying value of            approximately $14.0 million and $17.1 million, respectively.

 

-**32**-

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**10. INCOME TAXES**

 

The            Bank qualifies as a savings institution under the provisions of the Internal Revenue            Code and was therefore, prior to September 30, 1996, permitted to deduct from taxable            income an allowance for bad debts based upon eight percent of taxable income before            such deduction, less certain adjustments. Retained earnings, at September 30, 2007 and            2006, include approximately $306,000 of such bad debt, which, in accordance with FASB            Statement No. 109, “Accounting for Income Taxes,” is considered a permanent            difference between the book and income tax basis of loans receivable, and for which            income taxes have not been provided. If such amount is used for purposes other than for            bad debt losses, including distributions in liquidation, it will be subject to income            tax at the then current rate.

 

The            components of income taxes are summarized as follows:

 

|                            |   | Year EndedSeptember 30, |          |
|---------------------------------|--------|-------------------------|----------|
|                            |   | 2007                    |     | 2006 |  |
|                            |   |                    |     |   |   |   |  |
|                            |   |                    |     |   |   |   |  |
| Current tax expense:            |   |                    |     |   |   |   |  |
| Federal                         |   | $                       | 387,262  |   | $ | 314,253 |  |
| State                           |   |                    | 119,932  |   |   | 90,311 |  |
|                            |   |                    |     |   |   |   |  |
|                            |   |                    | 507,194  |   |   | 404,564 |  |
|                            |   |                    |     |   |   |   |  |
| Deferred tax expense (benefit): |   |                    |     |   |   |   |  |
| Federal                         |   |                    | (195,036 | ) |   | (42,498 | ) |
| State                           |   |                    | (61,745  | ) |   | (11,466 | ) |
|                            |   |                    |     |   |   |   |  |
|                            |   |                    | (256,781 | ) |   | (53,964 | ) |
|                            |   |                    |     |   |   |   |  |
|                            |   | $                       | 250,413  |   | $ | 350,600 |  |

 

The            provision for income taxes differs from that computed at the federal statutory rate of            34% as follows:

 

|                                   |   |                    |    |   |   |   |    |   |
|----------------------------------------|--------|-------------------------|---------|--------|--------|--------|---------|---|
|                                   |   | Year EndedSeptember 30, |         |
|                                   |   | 2007                    |    |   | 2006   |        |
|                                   |   |                    |    |   |   |   |    |   |
| Tax at federal statutory rates         |   | $                       | 200,494 |   |   | $      | 265,541 |   |
|                                   |   |                    |    |   |   |   |    |   |
| Increase in tax resulting from:        |   |                    |    |   |   |   |    |   |
| State taxes, net of federal tax effect |   |                    | 38,403  |   |   |   | 52,038  |   |
| Other items                            |   |                    | 11,516  |   |   |   | 33,021  |   |
|                                   |   |                    |    |   |   |   |    |   |
|                                   |   | $                       | 250,413 |   |   | $      | 350,600 |   |
|                                   |   |                    |    |   |   |   |    |   |
| Effective rate                         |   |                    | 43      | %      |   |   | 45      | % |
|                                   |   |                    |    |   |   |   |    |   |

 

 

 

-**33**-

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**10. INCOME            TAXES****(Cont’d)**

 

The            following temporary differences gave rise to deferred tax assets and            liabilities:

 

|                                                                        |   | September 30, |
|-----------------------------------------------------------------------------|--------|---------------|
|                                                                        |   | 2007          |   |   | 2006 |
|                                                                        |   |          |   |   |   |   |   |
| Deferred tax assets:                                                        |   |          |   |   |   |   |   |
| Allowance for loan losses                                                   |   | $             | 299,444 |   |   | $ | 280,872 |
| Unrealized loss on securities available for                            sale |   |          | 10,200 |   |   |   | 169,632 |
| Accrual to cash adjustments, net                                            |   |          | 176,653 |   |   |   | — |
| Pension funding status                                                      |   |          | 27,704 |   |   |   | — |
|                                                                        |   |          |   |   |   |   |   |
| Total deferred tax assets                                                   |   |          | 514,001 |   |   |   | 450,504 |
|                                                                        |   |          |   |   |   |   |   |
| Deferred tax liabilities:                                                   |   |          |   |   |   |   |   |
| Depreciation                                                                |   |          | 11,898 |   |   |   | 32,969 |
| Accrual to cash adjustments, net                                            |   |          | — |   |   |   | 33,397 |
| Deferred loan origination fees and costs, net                               |   |          | 81,969 |   |   |   | 82,889 |
| Discounts on investments                                                    |   |          | 1,630 |   |   |   | 7,798 |
|                                                                        |   |          |   |   |   |   |   |
| Total deferred tax liabilities                                              |   |          | 95,497 |   |   |   | 157,053 |
|                                                                        |   |          |   |   |   |   |   |
| Net deferred tax asset included in other                            assets  |   | $             | 418,504 |   |   | $ | 293,451 |

 

**11. 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 and to reduce its own            exposure to fluctuations in interest rates. These financial instruments include            commitments to extend credit. Those instruments involve, to varying degrees, elements            of credit and interest-rate risk in excess of the amount recognized in the statements            of financial condition. The contract or notional amounts of those instruments reflect            the extent of the Company’s involvement in particular classes of financial            instruments.

 

The            Company’s exposure to credit loss in the event of nonperformance by the other            party to the financial instrument for commitments to extend credit is represented by            the contractual notional amount of those instruments. The Company uses the same credit            policies in making commitments and conditional obligations as it does for            on-balance-sheet instruments.

 

With            the exception of letters of credit, the Company does not require collateral or other            security to support financial instruments with credit risk, unless noted            otherwise.

 

Commitments to extend credit are agreements to lend to a customer as            long as there is no violation of any condition established in the contract. Commitments            generally have fixed expiration dates or other termination clauses and may require            payment of a fee. Since many of the commitments are expected to expire without being            drawn upon, the total commitment amounts do not necessarily represent future cash            requirements. The Company has approved lines of credit unused but accessible to            borrowers totaling $11.9 million and $7.8 million, at September 30, 2007 and 2006,            respectively.

 

At            September 30, 2007 and 2006, the Company had $9.2 million and $3.8 million in            outstanding commitments to fund loans and $235,000 and $119,000 in outstanding            commercial letters of credit, respectively. There were no outstanding commitments to            sell loans or to purchase investment securities at September 30, 2007 or            2006.

 

 

-**34**-

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**12. REGULATORY CAPITAL**

 

The            Bank is subject to various regulatory capital requirements administered by the federal            banking agencies. Failure to meet minimum capital requirements can initiate certain            mandatory, and possible additional discretionary actions, by regulators, that if            undertaken, could have a direct material effect on the Bank’s financial            statements. Under capital adequacy guidelines and the regulatory framework for prompt            corrective action, the Bank must meet specific capital guidelines that involve            quantitative measures of the Bank’s assets, liabilities, and certain            off-balance-sheet items, as calculated under regulatory accounting practices. The            Bank’s capital amounts and classification are also subject to qualitative            judgments by the regulators about components, risk weightings and other            factors.

 

Quantitative measures established by regulation to ensure capital            adequacy require the Bank to maintain minimum amounts and ratios (set forth in the            following table) of tangible and core capital (as defined in the regulations) to total            assets and of total risk-based capital (as defined) to risk-weighted assets (as            defined). Management believes, as of September 30, 2007, that the Bank meets all            capital adequacy requirements to which it is subject.

 

As of            February 2006, the most recent notification from the Office of Thrift Supervision (OTS)            categorized the Bank as “well capitalized” under the regulatory framework            for prompt corrective action. To be categorized as “well capitalized,” the            Bank must maintain minimum total risk-based and core ratios, as set forth in the            accompanying table. There are no conditions or events since that notification that            management believes have changed the institution’s category.

 

The            following table presents a reconciliation of capital per GAAP and regulatory capital at            the dates indicated (in thousands):

 

|                                   |   | September 30, |
|----------------------------------------|--------|---------------|
|                                   |   | 2007          |   | 2006 |
|                                   |   |          |   |   |   |   |
|                                   |   |          |   |   |   |   |
| GAAP capital                           |   | $             | 12,428 |   | $ | 12,016 |
| Add (subtract): Unrealized (gain) loss |   |          |   |   |   |   |
| on securities available for sale       |   |          | 15 |   |   | 255 |
|                                   |   |          |   |   |   |   |
| Core and tangible capital              |   |          | 12,443 |   |   | 12,271 |
| Add: General allowance for loan losses |   |          | 750 |   |   | 703 |
| Unrealized gains on equity securities  |   |          |   |   |   |   |
| available for sale                     |   |          | 10 |   |   | 9 |
|                                   |   |          |   |   |   |   |
| Total risk-based capital               |   | $             | 13,203 |   | $ | 12,983 |

 

 

 

-**35**-

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**12. REGULATORY            CAPITAL****(Cont’d)**

 

The            Bank’s actual capital amounts and ratios are presented in the following            table:

 

|                     |   |   |   |   |                         |   |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |    |   |
|--------------------------|--------|--------|--------|--------|------------------------------|--------|--------|----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------|--------|
|                     |   | Actual |   |   | For CapitalAdequacy Purposes |   |   | To Be Well-Capitalized UnderPrompt CorrectiveAction Provisions |
|                     |   | Amount |   |   | Ratio                        |   |   | Amount                                                         |   |   | Ratio  |   |   | Amount |   |   | Ratio  |
|                     |   |   |   |   |                         |   |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |    |   |
| As of September 30, 2007 |   |   |   |   |                         |   |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |    |   |
| Tangible capital         |   | $      | 12,443 |   |                         | 8.46   | %      |                                                           |   | $      | 2,205  |   |   | 1.50   | %      |   |   |   | N/A    |   |   | — |   |
| Tier 1 (core) capital    |   |   | 12,443 |   |                         | 8.46   | %      |                                                           |   |   | 5,881  |   |   | 4.00   | %      |   |   | $      | 7,352  |   |   | 5.00    | %      |
| Risk-based capital:      |   |   |   |   |                         |   |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |    |   |
| Tier 1                   |   |   | 12,443 |   |                         | 13.32  | %      |                                                           |   |   | 3,736  |   |   | 4.00   | %      |   |   |   | 5,604  |   |   | 6.00    | %      |
| Total                    |   |   | 13,203 |   |                         | 14.14  | %      |                                                           |   |   | 7,472  |   |   | 8.00   | %      |   |   |   | 9,340  |   |   | 10.00   | %      |
|                     |   |   |   |   |                         |   |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |    |   |
| As of September 30, 2006 |   |   |   |   |                         |   |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |    |   |
| Tangible capital         |   | $      | 12,271 |   |                         | 9.37   | %      |                                                           |   | $      | 1,965  |   |   | 1.50   | %      |   |   |   | N/A    |   |   | — |   |
| Tier 1 (core) capital    |   |   | 12,271 |   |                         | 9.37   | %      |                                                           |   |   | 5,241  |   |   | 4.00   | %      |   |   | $      | 6,551  |   |   | 5.00    | %      |
| Risk-based capital:      |   |   |   |   |                         |   |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |    |   |
| Tier 1                   |   |   | 12,271 |   |                         | 14.15  | %      |                                                           |   |   | 3,469  |   |   | 4.00   | %      |   |   |   | 5,203  |   |   | 6.00    | %      |
| Total                    |   |   | 12,983 |   |                         | 14.97  | %      |                                                           |   |   | 6,938  |   |   | 8.00   | %      |   |   |   | 8,672  |   |   | 10.00   | %      |

 

**13. BENEFIT PLANS**

 

Deferred Compensation Plan

 

The            Company maintains a deferred compensation plan for both the directors and            employees.

 

The            directors’ arrangement is an individual contract between the Company and each            participating director and can be terminated at any time. Directors may participate at            their own discretion. The Company secures each separate deferred compensation agreement            by purchasing an investment grade life insurance contract on each participating            director. The Company is the owner and beneficiary of each contract. The use of the            investment grade insurance contracts as the funding source of the program allows the            Company to take advantage of preferential tax treatment provided to insurance contracts            qualified under IRS Sections 101 and 7702.

 

The            employees’ arrangement meets the requirements of Sections 401(a) and 401(k) of            the Internal Revenue Code. Employees generally become eligible when they have attained            age 21 and have one year of service. Each participant may elect to have his            compensation reduced by up to the maximum amount allowed by law. The reduction is            contributed to the plan. During 2007, the Company contributed 100% of the first 3% of            participants’ contributions and 50% of the next 2%, for a maximum match of 4%.            All participants become 100% vested upon entering the plan. Contributions to the plan            by the Company totaled approximately $36,600 and $38,000 for the years ended September            30, 2007 and 2006, respectively.

 

Directors Consultation and Retirement Plan

 

The            Company maintains a Directors Consultation and Retirement Plan (“DRP”) to            provide retirement benefits to directors of the Company who are not officers or            employees (“Outside Directors”). Any director who has served as an Outside            Director shall be a participant in the DRP, and payments under the DRP commence once            the Outside Director retires as a director of the Company. The DRP provides a            retirement benefit based on the number of years

 

 

-**36**-

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**13. BENEFIT PLANS****(Cont’d)**

 

Directors Consultation and Retirement Plan(Cont’d)

 

of            service to the Company. Outside Directors who have completed not less than 12 years of            service shall receive a benefit equal to (50%) + 2.889% times the number of years of            service in excess of 12, multiplied by the average monthly board fee in effect at the            time of retirement. The maximum benefit shall be 85% of such monthly board fee.            Benefits shall be paid for a maximum of 84 months to the retired directors, a surviving            spouse, or the director’s estate. The DRP is an unfunded nonqualified pension            plan, which is not anticipated to ever hold assets for investment. Any contributions            made to the DRP will be used to immediately pay DRP benefits as they come due. The            Company does not expect to make any contributions to the DRP in fiscal 2008.

 

In            September, 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for            Defined Benefit Pension and Other Postretirement Plans”, an amendment of FASB            Statement Nos. 87, 88, 106, and 132(R). SFAS No. 158 requires an employer to recognize            the overfunded or underfunded status of a defined benefit postretirement plan as an            asset or liability in its statement of financial position and to recognize changes in            that funded status through comprehensive income in the year in which the changes occur.            The Company has adopted this provision of the Statement as of September 30, 2007. SFAS            No. 158 also requires employers to measure the funded status of plans as of the date of            its year-end statement of financial position. The Company currently uses a measurement            date of July 1. This requirement is effective for the year ended September 30,            2009.

 

The            following table summarizes the incremental effect of applying SFAS No. 158 on            individual line items in the Consolidated Statement of Financial Condition as of            September 30, 2007:

 

|                                                      |   | **Before****Adoption****of SFAS No. 158** |    | **Impact****of****SFAS No. 158** |   | **After****Adoption****of SFAS No. 158** |   |
|-----------------------------------------------------------|--------|-------------------------------------------|---------|----------------------------------|--------|------------------------------------------|--------|
|                                                           |        | (In thousands)                            |         |
| Other assets                                              |   | $                                         | 876     |                             | $      | 27                                       |   | $ | 903 |   |
| Total assets                                              |   |                                      | 146,981 |                             |   | 27                                       |   |   | 147,008 |   |
| Other liabilities                                         |   |                                      | 1,094   |                             |   | 69                                       |   |   | 1,163 |   |
| Total liabilities                                         |   |                                      | 130,231 |                             |   | 69                                       |   |   | 130,300 |   |
| Accumulated other comprehensive loss,defined benefit plan |   |                                      | — |                             |   | (42                                      | )      |   | (42 | ) |
| Total stockholders’ equity                          |   |                                      | 16,750  |                             |   | (42                                      | )      |   | 16,708 |   |
|                                                      |   |                                      |    |                             |   |                                     |   |   |   |   |
|                                                      |   |                                      |    |                             |   |                                     |   |   |   |   |

 

As of            September 30, 2007, accumulated other comprehensive loss, defined benefit plan,            includes a net loss of $22,697 and prior service cost of $18,962, net of tax. For the            year ended September 30, 2008, $44 of net loss and $10,808 of prior service cost is            expected to be recognized as a component of net periodic pension cost.

 

 

-**37**-

 

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**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**13. BENEFIT PLANS****(Cont’d)**

 

Directors Consultation and Retirement Plan(Cont’d)

 

The            following table summarizes changes in the DRP’s projected benefit obligations and            the fair value of the DRP assets:

 

|                                     |   | At or for the Year EndingSeptember 30, |     |
|------------------------------------------|--------|----------------------------------------|----------|
|                                     |   | 2007                                   |     | 2006 |   |
| Change in Benefit Obligation:            |   |                                   |     |   |   |   |   |
|                                     |   |                                   |     |   |   |   |   |
| Benefit obligation at beginning of year  |   | $                                      | 353,781  |   | $ | 348,054 |   |
| Service cost                             |   |                                   | 15,456   |   |   | 15,660 |   |
| Interest cost                            |   |                                   | 23,436   |   |   | 19,940 |   |
| Actuarial (gain) loss                    |   |                                   | (18,238  | ) |   | (27,323 | ) |
| Annuity payments                         |   |                                   | —  |   |   | (2,550 | ) |
|                                     |   |                                   |     |   |   |   |   |
| Benefit obligation at end of year        |   |                                   | 374,435  |   |   | 353,781 |   |
|                                     |   |                                   |     |   |   |   |   |
| Change in plan assets:                   |   |                                   |     |   |   |   |   |
|                                     |   |                                   |     |   |   |   |   |
| Market value of assets - beginning       |   |                                   | —  |   |   | — |   |
| Employer contributions                   |   |                                   | —  |   |   | 2,550 |   |
| Annuity payments                         |   |                                   | —  |   |   | (2,550 | ) |
|                                     |   |                                   |     |   |   |   |   |
| Market value of assets - ending          |   |                                   | —  |   |   | — |   |
|                                     |   |                                   |     |   |   |   |   |
| Funded status                            |   |                                   | (374,435 | ) |   | (353,781 | ) |
| Amount contributed during fourth quarter |   |                                   | —  |   |   | — |   |
| Unrecognized loss                        |   |                                   | —  |   |   | 58,729 |   |
| Unrecognized past service liability      |   |                                   | —  |   |   | 42,380 |   |
|                                     |   |                                   |     |   |   |   |   |
| Accrued plan cost included in            |   |                                   |     |   |   |   |   |
| other liabilities                        |   | $                                      | (374,435 | ) | $ | (252,672 | ) |

 

Pension            benefits expected to be paid for the fiscal years ending September 30 are $0 in 2008,            $8,943 in 2009, $11,403 in 2010, $27,494 in 2011, $31,728 in 2012 and a total of            $255,347 in 2013-2017. These amounts are based on the same assumptions used to measure            the benefit obligation at September 30, 2007 and include estimated future service. The            components of the net periodic plan cost are as follows:

 

|                                                                           |   | Year EndedSeptember 30, |   |
|--------------------------------------------------------------------------------|--------|-------------------------|--------|
| Net periodic plan cost included                                                |   |                    |   |   |   |   |   |
| the following components:                                                      |   |                    |   |   |   |   |   |
| Service cost                                                                   |   | $                       | 15,456 |   | $ | 15,660 |   |
| Interest cost                                                                  |   |                    | 23,436 |   |   | 19,940 |   |
| Unrecognized loss                                                              |   |                    | 2,700  |   |   | 6,204 |   |
| Amortization of unrecognized past service                            liability |   |                    | 10,808 |   |   | 10,808 |   |
|                                                                           |   |                    |   |   |   |   |   |
| Net periodic plan cost included in                                             |   |                    |   |   |   |   |   |
| compensation and benefits                                                      |   | $                       | 52,400 |   | $ | 52,612 |   |

 

A            discount rate of 6.625% and a rate of increase in future compensation levels of and            5.00% was assumed in the plan valuation for the years ended September 30, 2007 and            2006.

 

-**38**-

 

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**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**13. BENEFIT            PLANS****(Cont’d)**

 

Stock Option Plan

 

On            January 25, 1999, the stockholders of the Company approved a stock option plan (the            “1999 Plan”), while on January 30, 2006, the stockholders ratified a 2006            Stock Option Plan (the “2006 Plan”), collectively, the “Plans”.            The Plans authorize the issuance of up to an additional 77,670 and 91,076 shares,            respectively, of common stock by the Company upon the exercise of stock options that            may be awarded to officers, directors, key employees, and other persons providing            services to the Company. Shares issued on the exercise of options may be authorized but            unissued shares, treasury shares or shares acquired on the open market. The options            granted under the Plans constitute either Incentive Stock Options or Non-Incentive            Stock Options. On January 30, 2006, and September 6, 2006, options to purchase 54,642            and 58,800 shares, respectively, were granted pursuant to the 2006 Plan. The options            were granted at an exercise price equal to the fair market value of the Company’s            common stock on the date of grant, expire not more than 10 years after the date of            grant and are immediately exercisable.

 

The            following table summarizes activity under the Plans for the years ended September 30,            2007 and 2006:

 

|                               |   | Year Ended September 30, |   |
|------------------------------------|--------|--------------------------|--------|
|                               |   | 2007                     |   |   |   | 2006 |   |
|                               |   | Number ofShares          |   |   |   | WeighedAverageExercisePrice |   |   |   | Numberof Shares |   |   |   | WeightedAverageExercisePrice |   |
|                               |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding at beginning of period |   | 125,870                  |   |   |   | $ | 10.641 |   |   |   | 14,642 |   |   |   | $ | 3.595 |   |
| Granted                            |   | —                  |   |   |   |   | — |   |   |   | 113,442 |   |   |   |   | 11.412 |   |
| Exercised                          |   | (6,214                   | )      |   |   |   | 3.595 |   |   |   | (2,214 | ) |   |   |   | 3.595 |   |
| Forfeited                          |   | (2,000                   | )      |   |   |   | 12.725 |   |   |   | — |   |   |   |   | — |   |
|                               |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding at end of period       |   | 117,656                  |   |   |   | $ | 10.977 |   |   |   | 125,870 |   |   |   | $ | 10.641 |   |
|                               |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Options exercisable at period end  |   | 117,656                  |   |   |   |   |   |   |   |   | 125,870 |   |   |   |   |   |   |

 

The            following table summarizes all stock options outstanding as of September 30, 2007, all            of which are exercisable:

 

|     |   |   |      |   |   | Weighted Average |
|----------|--------|--------|-----------|--------|--------|------------------|
| Exercise |   |   | Number    |   |   | Remaining        |
| Price    |   |   | of Shares |   |   | Contractual Life |
|     |   |   |      |   |   |             |
| $ 3.595  |   |   | 6,214     |   |   | 1.4 years        |
| 10.000   |   |   | 54,642    |   |   | 8.3 years        |
| 12.725   |   |   | 56,800    |   |   | 8.3 years        |
|     |   |   |      |   |   |             |
| $10.977  |   |   | 117,656   |   |   | 8.3 years        |

 

On            October 1, 2006, the Company adopted Statement of Financial Accounting Standards No.            123 (revised), (“SFAS 123(R)”), Share-Based Payment. SFAS 123(R) replaces            SFAS No. 123 and supersedes APB 25, Accounting for Stock Issued to Employees. Under            SFAS 123(R), compensation cost is recognized prospectively for new and modified awards            over the related vesting period of such awards. Results for prior periods have not been            restated. Prior to October 1, 2006, the Company accounted for these Plans under the            recognition and measurement principles of APB 25 and related interpretations using the            intrinsic value method. In accordance with APB 25, no compensation cost related to            these plans was reflected in net income prior to fiscal 2007, as all options granted            under the Plans had an exercise price equal to the market value of the underlying            common stock on the grant date.

 

 

-**39**-

 

----

**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**13. BENEFIT PLANS****(Cont’d)**

 

Stock Option Plan(Cont’d)

 

The            following table illustrates the effect on net income and earnings per share if the            Company had applied the fair value recognition provisions of Financial Accounting            Standards Board Statement No. 123 (“SFAS No. 123”), Accounting for            Stock-Based Compensation, to the option grants:

 

|                                                                                                                                                                                      |   | Year EndedSeptember 30,2006 |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------|
|                                                                                                                                                                                      |   |                        |    |   |
| Net income, as reported                                                                                                                                                                   |   | $                           | 430,403 |   |
|                                                                                                                                                                                      |   |                        |    |   |
| Deduct: Total stock-based compensation                            expensedetermined under fair value based method for                            stockoptions, net of related tax effects |   |                        | 296,644 |   |
|                                                                                                                                                                                      |   |                        |    |   |
| Pro forma net income                                                                                                                                                                      |   | $                           | 133,759 |   |
|                                                                                                                                                                                      |   |                        |    |   |
| Earnings per common share:                                                                                                                                                                |   |                        |    |   |
| Basic – as reported                                                                                                                                                                 |   | $                           | 0.26    |   |
| Basic – pro forma                                                                                                                                                                   |   | $                           | 0.08    |   |
| Diluted – as reported                                                                                                                                                               |   | $                           | 0.26    |   |
| Diluted – pro forma                                                                                                                                                                 |   | $                           | 0.08    |   |

 

The            weighted-average fair value of each option granted in 2006 using the Black-Scholes            options pricing model was $4.35. Significant weighted average assumptions used in the            model included a dividend yield of 1.00%; expected volatility of 39.64%; risk-free            interest rate of 4.53%, and expected life of 5 years.

 

Restricted Stock Plan

 

On            January 25, 1999, the stockholders of the Company approved a restricted stock plan (the            “1999 Plan”), while on January 30, 2006, the stockholders ratified a 2006            Restricted Stock Plan (the “2006 Plan”), collectively, the            “Plans”. The Plans provide for the award of shares of restricted stock to            directors, officers and employees. The 1999 Plan

and the            2006 Plan provide for the purchase of 31,066 and 36,430 shares of common stock,            respectively, in the open market to fund such awards. All of the Common Stock to be            purchased by the Plan will be purchased at the fair market value on the date of            purchase. Awards under the Plan are made in recognition of expected future services to            the Company by its directors, officers, and key employees responsible for            implementation of the policies adopted by the Company’s Board of Directors and as            a means of providing a further retention incentive. Under the 1999 Plan, 18,017 shares            were awarded in fiscal 1999 while 2,101, 2,626, and 2,240 shares were awarded in fiscal            2005, 2006, and 2007, respectively, with a grant-date fair value of $9.75, $9.70, and            $12.50 per share, respectively. The awards vest 20% on the date of grant and 20% each            of the next four years. On January 30, 2006, 13,110 shares were awarded pursuant to the            2006 Plan. The awards vest 1/3 on the date of grant and 1/3 as of each of the next two            years. Compensation expense on Plan shares is recognized over the vesting periods based            on the market value of the stock on the date of grant. Recipients of awards receive            compensation payments equal to dividends paid prior to the date of vesting within 30            days of each dividend payment date. Plan expense was approximately $60,500 and $84,100            for the years ended September 30, 2007 and 2006, respectively.

 

Effective upon the consummation of the Bank’s initial stock            offering, an Employee Stock Ownership Plan (“ESOP”) was established for all            eligible employees who had completed a twelve-month period of employment with the Bank            and at least 1,000 hours of service, and had attained the age of 21. The ESOP used            $156,800 in proceeds from a term loan to purchase 62,149 shares of Bank common stock            during the stock offering. In fiscal 2004, the ESOP purchased 72,861 shares of common            stock in the second-step conversion with the proceeds of a $776,000 loan from the            Company, which has a 10-year term and an interest rate of 4.75%. $47,000 of the            proceeds were used to payoff the prior outstanding debt.

 

 

-**40**-

 

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**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**13. BENEFIT PLANS****(Cont’d)**

 

Restricted Stock Plan(Cont’d)

 

Shares            purchased with the loan proceeds were initially pledged as collateral for the loans and            are held in a suspense account for future allocation among participants. Contributions            to the ESOP and shares released from the suspense account are in an amount proportional            to the loan repayment. Shares are allocated among the participants on the basis of            compensation, as described by the Plan, in the year of allocation.

 

The            ESOP is accounted for in accordance with Statement of Position 93-6, “Accounting            for Employee Stock Ownership Plans,” which was issued by the American Institute            of Certified Public Accountants in November 1993. Accordingly, the ESOP shares pledged            as collateral are reported as unallocated ESOP shares in the statements of financial            condition. As shares are committed to be released from collateral, the Bank reports            compensation expense equal to the current market price of the shares, and the shares            become outstanding for basic net income per common share computations. ESOP            compensation expense was approximately $112,000 and $98,000 for the years ended            September 30, 2007 and 2006, respectively.

 

Employee Stock Ownership Plan

 

The            ESOP shares were as follows, as adjusted for the exchange:

 

|                            |   | Year EndedSeptember 30, |    |
|---------------------------------|--------|-------------------------|---------|
|                            |   | 2007                    |    | 2006 |   |
|                            |   |                    |    |   |   |   |   |
| Allocated shares                |   |                    | 57,094  |   |   | 59,565 |   |
| Shares committed to be released |   |                    | — |   |   | — |   |
| Unreleased shares               |   |                    | 64,053  |   |   | 73,204 |   |
|                            |   |                    |    |   |   |   |   |
| Total ESOP shares               |   |                    | 121,147 |   |   | 132,769 |   |
|                            |   |                    |    |   |   |   |   |
| Fair value of unreleased shares |   | $                       | 803,865 |   | $ | 922,370 |   |

 

**14. CHARTER CONVERSION, STOCK OFFERING, AND            REORGANIZATION**

 

On            April 8, 2004, the Boards of Directors of Roebling Financial Corp., MHC (the            “MHC”), Roebling Financial Corp, Inc., and Roebling Bank adopted a plan to            convert from the mutual holding company form of organization to a fully public holding            company structure (the “Conversion”). The former Roebling Financial Corp,            Inc. was a federally chartered mid-tier mutual holding company with approximately 54%            of its stock being held by the MHC and the remaining 46% being held by public            shareholders. The Conversion was completed on September 30, 2004. At that time, the MHC            merged into the Bank, and no longer exists. Roebling Financial Corp, Inc. was succeeded            by a new New Jersey corporation known as Roebling Financial Corp, Inc. Common shares            representing the ownership interest of the MHC were sold in a subscription offering and            a community offering. Common shares owned by public shareholders (shareholders other            than the MHC) were converted into the right to receive new shares of Roebling Financial            Corp, Inc. common stock determined pursuant to an exchange ratio. The exchange ratio            ensured that immediately after the Conversion and exchange of existing shares for new            shares, the public shareholders owned the same aggregate percentage of Roebling            Financial Corp, Inc. common stock that they owned immediately prior to the Conversion,            excluding any shares purchased in the offering.

 

 

-**41**-

 

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**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**14. CHARTER CONVERSION, STOCK OFFERING, AND            REORGANIZATION****(Cont’d)**

 

Roebling Financial Corp, Inc. sold 910,764 shares of common stock at            $10.00 per share in the offering completed on September 30, 2004, including 72,861            shares purchased by the ESOP. In addition, each of the outstanding shares of common            stock of Roebling Financial Corp, Inc. (195,960 shares, excluding the MHC) was            converted into 3.9636

shares            of the new Roebling Financial Corp, Inc. resulting in 776,639 outstanding shares. A            total of 1,687,403 shares were outstanding as a result of the offering and share            exchange. Net cash proceeds from the offering were as follows (in            thousands):

 

| Total cash proceeds (910,764 shares)                                               |   | $      | 9,108  |   |
|------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Offering costs                                                                     |   |   | (648   | )      |
|                                                                               |   |   |   |   |
| Net offering proceeds                                                              |   |   | 8,460  |   |
| Assets received from the MHC                                                       |   |   | 95     |   |
|                                                                               |   |   |   |   |
| Increase in common stock and additional paid-in                            capital |   |   | 8,555  |   |
| Shares purchased by the ESOP (72,861 shares)                                       |   |   | (729   | )      |
|                                                                               |   |   |   |   |
| Net cash proceeds                                                                  |   | $      | 7,826  |   |

 

The            Conversion and related transactions were accounted for at historical cost, with no            resulting change in the historical carrying amounts of assets and liabilities.            Consolidated stockholders’ equity increased by the net cash proceeds from the            offering. Share and per share data for all periods have been adjusted to reflect the            additional shares outstanding as a result of the offering and share            exchange.

 

**15. FAIR VALUES OF FINANCIAL INSTRUMENTS**

 

The            following methods and assumptions were used by the Company in estimating fair values of            financial instruments as disclosed herein:

 

Cash            and Cash Equivalents and Certificates of Deposit

 

The            carrying amounts of cash and short-term instruments approximate their fair            value.

 

Investment and Mortgage-Backed Securities

 

Fair            values for securities, excluding restricted equity securities, are based on quoted            market prices. The carrying values of restricted equity securities approximate fair            values.

 

Loans Receivable

 

For            variable-rate loans that reprice frequently and have no significant change in credit            risk, fair values are based on carrying values. Fair values for certain mortgage loans            and other consumer loans are based on quoted market prices of similar loans sold in            conjunction with securitization transactions, adjusted for differences in loan            characteristics. Fair values for commercial real estate and commercial loans are            estimated using discounted cash flow analyses, using interest rates currently being            offered for loans with similar terms to borrowers of similar credit quality. Fair            values for impaired loans are estimated using discounted cash flow analyses or            underlying collateral values, where applicable.

 

-**42**-

 

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**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**15. FAIR VALUES OF FINANCIAL            INSTRUMENTS****(Cont’d)**

 

Deposit Liabilities

 

The            fair value of demand deposits, savings deposits and money market accounts were the            amounts payable on demand. The fair values of certificates of deposit were based on the            discounted value of contractual cash flows. The discount rate was estimated using the            rate currently offered for deposits of similar remaining maturities.

 

Short-Term Borrowings

 

The            carrying amounts of federal funds purchased, and other short-term borrowings maturing            within 90 days approximate their fair values. Fair values of other short-term            borrowings are estimated using discounted cash flow analyses based on the            Company’s current incremental borrowing rates for similar types of borrowing            arrangements.

 

Long-Term Debt

 

The            fair value of long-term debt is estimated using discounted cash flow analysis based on            the current incremental borrowing rates for similar types of borrowing            arrangements.

 

Accrued Interest Receivable

 

The            carrying amounts of accrued interest approximate their fair values.

 

Federal Home Loan Bank of New York Stock

 

Federal            Home Loan Bank of New York stock is valued at cost.

 

Off-Balance-Sheet Instruments

 

In the            ordinary course of business the Company has entered into off-balance-sheet financial            instruments consisting of commitments to extend credit. Such financial instruments are            recorded in the financial statements when they are funded. Their fair value would            approximate fees currently charged to enter into similar agreements.

 

The            carrying values and estimated fair values of financial instruments are as follows (in            thousands):

 

|                          |   |               |    |      |   |               |   |           |   |      |    |   |   |    |   |
|-------------------------------|--------|--------------------|---------|-----------|--------|--------------------|--------|----------------|--------|-----------|---------|--------|--------|---------|--------|
|                          |   | September 30, 2007 |    |      |   | September 30, 2006 |   |
|                          |   | CarryingAmount     |    | FairValue |   |               |   | CarryingAmount |   | FairValue |    |
| Financial Assets              |   |               |    |      |   |               |   |           |   |      |    |   |   |    |   |
|                          |   |               |    |      |   |               |   |           |   |      |    |   |   |    |   |
| Cash and cash equivalents     |   | $                  | 3,460   |      | $      | 3,460              |   |           |   | $         | 3,380   |   | $      | 3,380   |   |
| Securities available for sale |   |               | 34,657  |      |   | 34,657             |   |           |   |      | 27,207  |   |   | 27,207  |   |
| Securities held to maturity   |   |               | 242     |      |   | 243                |   |           |   |      | 395     |   |   | 397     |   |
| Loans receivable              |   |               | 102,772 |      |   | 102,010            |   |           |   |      | 94,014  |   |   | 92,536  |   |
| Accrued interest receivable   |   |               | 766     |      |   | 766                |   |           |   |      | 647     |   |   | 647     |   |
| FHLB stock                    |   |               | 596     |      |   | 596                |   |           |   |      | 575     |   |   | 575     |   |
|                          |   |               |    |      |   |               |   |           |   |      |    |   |   |    |   |
| Financial Liabilities         |   |               |    |      |   |               |   |           |   |      |    |   |   |    |   |
|                          |   |               |    |      |   |               |   |           |   |      |    |   |   |    |   |
| Deposits                      |   |               | 119,208 |      |   | 119,352            |   |           |   |      | 103,682 |   |   | 103,528 |   |
| Borrowed funds                |   |               | 9,500   |      |   | 9,464              |   |           |   |      | 9,300   |   |   | 9,143   |   |

 

 

 

-**43**-

 

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**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**15. FAIR VALUES OF FINANCIAL            INSTRUMENTS****(Cont’d)**

 

Off-Balance-Sheet Instruments(Cont’d)

 

The            fair value estimates are made at a discrete point in time based on relevant market            information and information about the financial instruments. Fair value estimates are            based on judgments regarding future expected loss experience, current economic            conditions, risk characteristics of various financial instruments, and other factors.            These estimates are subjective in nature and involve uncertainties and matters of            significant judgment and, therefore, cannot be determined with precision. Changes in            assumptions could significantly affect the estimates. Further, the foregoing estimates            may not reflect the actual amount that could be realized if all or substantially all of            the financial instruments were offered for sale.

 

In            addition, the fair value estimates were based on existing on-and-off balance sheet            financial instruments without attempting to value the anticipated future business and            the value of assets and liabilities that are not considered financial instruments.            Other significant assets and liabilities that are not considered financial assets and            liabilities include real estate owned, premises and equipment, and advances from            borrowers for taxes and insurance. In addition, the tax ramifications related to the            realization of the unrealized gains and losses have a significant effect on fair value            estimates and have not been considered in any of the estimates.

 

Finally, reasonable comparability between financial institutions may not            be likely due to the wide range of permitted valuation techniques and numerous            estimates which must be made given the absence of active secondary markets for many of            the financial instruments. The lack of uniform valuation methodologies introduces a            greater degree of subjectivity to these estimated fair values.

 

**16. RECENT ACCOUNTING PRONOUNCEMENTS**

 

In July            2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in            Income Taxes - an Interpretation of FASB Statement No. 109” (FIN 48), which            clarifies the accounting for uncertainty in tax positions. This Interpretation requires            that companies recognize in their financial statements the impact of a tax position, if            that position is more likely than not of being sustained on audit, based on the            technical merits of the position. The provisions of FIN 48 are effective for fiscal            years beginning after December 15, 2006, with the cumulative effect of the change in            accounting principle recorded as an adjustment to opening retained earnings. The            Company does not expect the adoption of this interpretation to have a material effect            on its financial condition or results of operations.

 

In            September 2006, the FASB issued Statement of Financial Accounting Standards SFAS No.            157, “Fair Value Measurements,” which defines fair value, establishes a            framework for measuring fair value under U.S. GAAP, and expands disclosures about fair            value measurements. SFAS No. 157 applies to other accounting pronouncements that            require or permit fair value measurements. The new guidance is effective for financial            statements issued for fiscal years beginning after November 15, 2007, and for interim            periods within those fiscal years. We are currently evaluating the potential impact, if            any, of the adoption of FASB Statement No. 157 on our consolidated financial position,            results of operations and cash flows.

 

In            September 2006, the FASB issued Emerging Issues Task Force (“EITF”) Issue            No.06-5, “Accounting for Purchases of Life Insurance - Determining the Amount            That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting            for Purchases of Life Insurance.” The scope of EITF 06-5 consists of various            issues relating to accounting for life insurance policies purchased by entities            protecting against the loss of “key persons.” Those issues are            clarifications of previously issued guidance on FASB Technical Bulletin No. 85-4. EITF            06-5 is effective for fiscal years beginning after December 15, 2006. The Company does            not expect EITF 06-05 will have a material impact on its financial position, results of            operations and cash flows.

 

In            February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial            Assets and Financial Liabilities - Including an amendment of FASB Statement No.            115.” This statement permits an entity to choose to measure many financial            instruments and certain other items at fair value. A business entity will report            unrealized gains and losses on items for which the fair value option has been elected            in earnings at each subsequent reporting date. The fair value option 1) may be applied            instrument by instrument, with a few exceptions, such as investments

 

-**44**-

 

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**ROEBLING FINANCIAL CORP, INC. AND SUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

**16. RECENT ACCOUNTING            PRONOUNCEMENTS****(Cont’d)**

 

otherwise accounted for by the equity method, 2) is irrevocable (unless            a new election date occurs) and 3) is applied only to entire instruments and not to            portions of instruments. The statement is effective as of the beginning of an            entity’s first fiscal year that begins after November 15, 2007. The Company is            currently evaluating the impact of this pronouncement.

 

In            March 2007, the FASB ratified EITF No. 06-10 “Accounting for Collateral            Assignment Split-Dollar Life Insurance Agreements”. EITF 06-10 provides guidance            for determining a liability for the postretirement benefit obligation as well as            recognition and measurement of the associated asset on the basis of the terms of the            collateral assignment agreement. EITF 06-10 is effective for fiscal years beginning            after December 15, 2007. The Company does not expect EITF 06-10 will have a material            impact on its financial position, results of operations and cash flows.

 

In June            2007, the FASB issued EITF Issue No. 06-11, “Accounting for Income Tax Benefits            of Dividends on Share-Based Payment Awards”. EITF Issue No. 06-11 addresses a            company’s recognition of an income tax benefit received on dividends that are (a)            paid to employees holding equity-classified non-vested shares, equity-classified            non-vested share units, or equity-classified outstanding share options and (b) charged            to retained earnings under SFAS No. 123(R). The EITF reached a consensus that a            realized income tax benefit from dividends or dividend equivalents that are charged to            retained earnings and are paid to employees for equity classified nonvested equity            shares, nonvested equity share units and outstanding equity share options should be            recognized as an increase to additional paid-in capital. The amount recognized in            additional paid-in capital for the realized income tax benefit from dividends on those            awards should be included in the pool of excess tax benefits available to absorb tax            deficiencies on share-based payment awards. Unrealized income tax benefits from            dividends on equity-classified employee share-based payment awards should be excluded            from the pool of excess tax benefits available to absorb potential future tax            deficiencies. The accounting treatment of the income tax benefits from these dividends            would be applied on a prospective basis. EITF Issue No. 06-11 is effective for fiscal            years beginning after December 15, 2007. The company does not expect that EITF Issue            No. 06-11 will have a material impact on its financial condition or results of            operations.

 

 

-**45**-

 

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***ROEBLING FINANCIAL CORP, INC.***

 

***BOARD OF DIRECTORS AND EXECUTIVE OFFICERS***

 

John J. Ferry, Chairman of the Board of Directors

*President, John J. Ferry Enterprises, Inc.*

John A. LaVecchia, Director and Vice Chairman

*Senior Sales Consultant, Colonial Auto Complex*

Frank J. Travea, III,*President and Chief            Executive Officer*

Janice A. Summers,*Senior Vice President, Chief            Operating Officer and*

*Chief Financial Officer*

Mark V. Dimon, Director and Treasurer

*Sole Proprietor, Dimon Oil Corp.*

Joan K. Geary, Director and Secretary

*President, Keating Realty Company*

George N. Nyikita, Director

*Retired Executive Director, Burlington County Bridge            Commission*

Robert R. Semptimphelter, Sr., Director

*Principal, Farnsworth & Semptimphelter, LLC*

 

***ROEBLING BANK OFFICERS***

 

Frank J. Travea, III,*President and            CEO*

Janice A. Summers,*Senior Vice President, COO            and CFO*

John W. Clawges,*Senior**Vice President and Senior Lending Officer*

Bonnie L. Horner,*Vice President, Consumer            Lending*

 

***ROEBLING BANK OFFICES***

 

*Route 130 South and Delaware Avenue, Roebling, New            Jersey*

*34 Main Street, Roebling, New Jersey*

*8 Jacobstown Road, New Egypt, New Jersey*

*3104 Bridgeboro Road, Delran, New Jersey*

*1934 Route 541, Westampton, New Jersey (Banking and Administrative            Center)*

 

|   | ***CORPORATE OFFICE***                                                                            |                                       | ***TRANSFER AGENT***                                                                                                                                                                       |
|--------|---------------------------------------------------------------------------------------------------|--------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        | *Route 130 South and Delaware Avenue*

*Roebling, New Jersey 08554*                               |                                       | *Registrar and Transfer Company**10 Commerce Drive**Cranford, New Jersey 07016*                                                                                                            |
|   |                                                                                              |                                       |                                                                                                                                                                                       |
|   | ***INDEPENDENT AUDITORS****Fontanella and Babitts**534 Union Boulevard**Totowa, New Jersey 07512* |  

                              | ***SPECIAL COUNSEL***

*Malizia Spidi & Fisch, PC*

*901 New York Avenue, N.W., Suite 210                            East**Washington, D.C. 20001*

                              |

 

*Our Annual Report for the year ended September 30, 2007 as filed with            the Securities & Exchange Commission on Form 10-KSB, including exhibits, is            available without charge upon written request. For a copy of the Form 10-KSB, please            contact Frank* *J. Travea, III            at our Corporate Office. The Annual Meeting of Stockholders will be held on            January* *28, 2008 at 11:00 a.m.            at Bung’s Tavern, 2031 Route 130 South, Burlington, New Jersey.*

 

*46*

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**Roebling Financial Corp, Inc.**

 

**Route 130 South and Delaware Avenue**

**Roebling, New Jersey 08554**

 

**PHONE: (609) 499-9400**

**FAX: (609) 668-6253**

 

**Stock Listing on the OTC Bulletin Board – Symbol            “RBLG”**