SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------------------------
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ___________
Commission File Number 0-27170
CLASSIC BANCSHARES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 61-1289391
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
344 SEVENTEENTH STREET, ASHLAND, KENTUCKY 41101
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(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (606) 326-2801
--------------
Check here whether the issuer (1) has filed all reports required to be
filed by Section 13or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
As of November 8, 2002, there were 1,322,500 shares of the Registrant's
common stock issued and 1,105,486 outstanding
Transitional Small Disclosure (check one): Yes [ ] No [X]
CLASSIC BANCSHARES, INC.
INDEX
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Page
Number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2002 (Unaudited)
and March 31, 2002 3
Consolidated Statements of Income for the three and six months
ended September 30, 2002 and 2001 4
Consolidated Statements of Comprehensive Income for the three
and six months ended September 30, 2002 and 2001 5
Consolidated Statements of Stockholders' Equity for the six months
ended September 30, 2002 (Unaudited) and Year Ended March 31, 2002 6
Consolidated Statements of Cash Flows for the six months ended
September 30, 2002 and 2001 7-8
Notes to Consolidated Financial Statements 9-11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11-16
PART II. OTHER INFORMATION 17
Certifications of Principal Executive Officer and Principal Financial Officer 18-19
Signatures 20
Index to Exhibits 21
CLASSIC BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, MARCH 31,
2002 2002
---- ----
(UNAUDITED)
ASSETS
------
Cash and due from bank $ 7,327,183 $ 5,400,046
Federal funds sold -- --
Securities available for sale 27,175,656 25,803,491
Mortgage-backed and related securities available for sale 8,362,174 9,063,617
Loans receivable, net 174,476,604 160,315,663
Real estate acquired in the settlement of loans 75,500 77,622
Accrued interest receivable 1,148,881 1,158,144
Federal Home Loan Bank stock 1,908,300 1,480,300
Premises and equipment, net 5,854,619 5,366,126
Cost in excess of fair value of net assets acquired (goodwill), net of
accumulated amortization 5,554,549 5,554,549
Other assets 1,261,561 1,227,518
------------- -------------
TOTAL ASSETS $ 233,145,027 $ 215,447,076
------------ ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Non-interest bearing demand deposits $ 20,309,459 $ 20,404,210
Savings, NOW, and money market demand deposits 61,834,214 57,433,787
Other time deposits 91,276,445 81,036,439
------------- -------------
Total deposits 173,420,118 158,874,436
Securities sold under agreements to repurchase 5,328,859 5,395,941
Advances from Federal Home Loan Bank 27,956,015 27,401,157
Other short-term borrowings 456,480 445,806
Accrued expenses and other liabilities 561,552 501,744
Accrued interest payable 355,317 374,276
Accrued income taxes 56,411 --
Deferred income taxes 1,013,899 472,761
------------- -------------
Total Liabilities $ 209,148,651 $ 193,466,121
------------- -------------
Commitments and contingencies
Stockholders' Equity
Common stock, $.01 par value, 1,322,500 shares
issued and 1,105,486 shares outstanding $ 13,225 $ 13,225
Additional paid-in capital 20,373,556 20,373,556
Retained earnings - substantially restricted 6,350,846 5,136,114
Accumulated other comprehensive income (loss) 807,714 (325,896)
Unearned ESOP shares (643,310) (643,310)
Unearned RRP shares (17,653) (18,812)
Treasury stock, at cost (2,888,002) (2,553,922)
------------- -------------
Total Stockholders' Equity $ 23,996,376 $ 21,980,955
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 233,145,027 $ 215,447,076
------------------------------------------ ============= =============
See accompanying Accountant's Review Report and notes to
consolidated financial statements.
3
CLASSIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
2002 2001 2002 2001
---- ---- ---- ----
INTEREST INCOME
---------------
Loans $ 3,058,586 $ 3,083,549 $ 6,065,897 $ 6,097,653
Investment securities 383,356 344,400 769,719 692,633
Mortgage-backed securities 113,530 45,756 241,162 90,127
Other interest earning assets 1,299 3,479 3,600 6,404
----------- ----------- ----------- -----------
TOTAL INTEREST INCOME 3,556,771 3,477,184 7,080,378 6,886,817
----------- ----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits 1,021,308 1,419,955 1,997,277 2,957,229
Interest on FHLB Advances 246,346 184,595 509,938 382,735
Interest on other borrowed funds 17,621 37,454 34,778 76,095
----------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE 1,285,275 1,642,004 2,541,993 3,416,059
----------- ----------- ----------- -----------
NET INTEREST INCOME 2,271,496 1,835,180 4,538,385 3,470,758
Provision for loss on loans 50,000 70,500 210,000 140,500
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOSS ON LOANS 2,221,496 1,764,680 4,328,385 3,330,258
----------- ----------- ----------- -----------
NON-INTEREST INCOME
Service charges and other fees 341,321 292,984 644,656 588,666
Gain on sale of securities -- 775 4,189 775
Other income 54,615 51,215 107,082 88,847
----------- ----------- ----------- -----------
TOTAL NON-INTEREST INCOME 395,936 344,974 755,927 678,288
----------- ----------- ----------- -----------
NON-INTEREST EXPENSES
Employee compensation and benefits 851,311 673,870 1,609,996 1,332,353
Occupancy and equipment expense 231,195 238,913 475,805 475,415
Federal deposit insurance premiums 6,667 3,170 13,717 6,785
(Gain) loss on foreclosed real estate (1,918) 6,185 13,319 (9,266)
Other general and administrative expenses 526,840 451,684 1,074,764 926,161
----------- ----------- ----------- -----------
TOTAL NON-INTEREST EXPENSE 1,614,095 1,373,822 3,187,601 2,731,448
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 1,003,337 735,832 1,896,711 1,277,098
Income tax expense 275,132 191,937 512,979 319,765
----------- ----------- ----------- -----------
NET INCOME 728,205 543,895 1,383,732 957,333
=========== =========== =========== ===========
Basic earnings per share $ 0.70 $ 0.51 $ 1.32 $ 0.90
Diluted earnings per share $ 0.64 $ 0.50 $ 1.22 $ 0.88
See accompanying Accountant's Review Report and notes to
consolidated financial statements.
4
CLASSIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
2002 2001 2002 2001
---- ---- ---- ----
NET INCOME $ 728,205 $ 543,895 $ 1,383,732 $ 957,333
----------- ----------- ----------- -----------
Other comprehensive income, net of tax:
Unrealized holding gains (losses) on securities
during the period, net of tax 638,129 259,848 1,129,491 226,063
Reclassification adjustments for realized gains
(losses) included in earnings, net of tax -- (511) 4,119 (511)
----------- ----------- ----------- -----------
Other comprehensive income 638,129 259,337 1,133,610 225,552
----------- ----------- ----------- -----------
COMPREHENSIVE INCOME (LOSS) $ 1,366,334 $ 803,232 $ 2,517,342 $ 1,182,885
=========== =========== =========== ===========
ACCUMULATED OTHER COMPREHENSIVE INCOME $ 807,714 $ 54,479 $ 807,714 $ 54,479
=========== =========== =========== ===========
See accompanying Accountant's Review Report and notes to
consolidated financial statements.
5
CLASSIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NET UNREALIZED
GAIN (LOSS) ON
ADDITIONAL AVAILABLE UNEARNED
COMMON PAID - IN RETAINED FOR SALE ESOP
STOCK CAPITAL EARNINGS SECURITIES SHARES
----- ------- -------- ---------- ------
BALANCES AT APRIL 1, 2001 $ 13,225 $ 20,317,385 $ 3,275,716 $ (171,073) $ (689,320)
Net income for the year
ended March 31, 2002 -- -- 2,199,887 -- --
Dividend paid ($.32 per share) -- -- (339,489) -- --
ESOP shares earned -- 22,519 -- -- 46,010
RRP shares earned -- -- -- -- --
RRP shares granted -- 1,250 -- -- --
Tax benefit from RRP -- 32,402 -- -- --
Purchased 24,000 treasury shares -- -- -- -- --
Change in unrealized gain -- -- -- -- --
(loss) on available for sale
securities, net of applicable
deferred income taxes of $79,757 -- -- -- (154,823) --
------------ ------------ ------------ ------------ ------------
BALANCES AT MARCH 31, 2002 13,225 20,373,556 5,136,114 (325,896) (643,310)
Net income for the six months
ended September 30, 2002 -- -- 1,383,732 -- --
Dividend paid ($.08 per share) -- -- (169,000) -- --
RRP shares earned -- -- -- -- --
Purchased 15,100 shares -- -- -- -- --
Change in unrealized gain
(loss) on available for sale
securities, net of applicable
deferred income taxes of $416,095 -- -- -- 1,133,610 --
------------ ------------ ------------ ------------ ------------
BALANCES AT SEPTEMBER 30, 2002 $ 13,225 $ 20,373,556 $ 6,350,846 $ 807,714 $ (643,310)
============ ============ ============ ============ ============
UNEARNED
RRP TREASURY
SHARES STOCK TOTAL
------ ----- -----
BALANCES AT APRIL 1, 2001 $ (58,434) $ (2,227,192) $ 20,460,307
Net income for the year
ended March 31, 2002 -- -- 2,199,887
Dividend paid ($.32 per share) -- -- (339,489)
ESOP shares earned -- -- 68,529
RRP shares earned 43,810 -- 43,810
RRP shares granted (4,188) 2,938 --
Tax benefit from RRP -- -- 32,402
Purchased 24,000 treasury shares -- (329,668) (329,668)
Change in unrealized gain -- -- --
(loss) on available for sale
securities, net of applicable
deferred income taxes of $79,757 -- -- (154,823)
------------ ------------ ------------
BALANCES AT MARCH 31, 2002 (18,812) (2,553,922) 21,980,955
Net income for the six months
ended September 30, 2002 -- -- 1,383,732
Dividend paid ($.08 per share) -- -- (169,000)
RRP shares earned 1,159 -- 1,159
Purchased 15,100 shares -- (334,080) (334,080)
Change in unrealized gain
(loss) on available for sale
securities, net of applicable
deferred income taxes of $416,095 -- -- 1,133,610
------------ ------------ ------------
BALANCES AT SEPTEMBER 30, 2002 $ (17,653) $ (2,888,002) $ 3,996,376
============ ============ ============
See accompanying Accountant's Review Report and notes to
consolidated financial statements.
6
CLASSIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
SEPTEMBER 30,
-------------
2002 2001
OPERATING ACTIVITIES ---- ----
--------------------
Net Income $ 1,383,732 $ 957,333
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 197,308 250,971
Provision for loss on loans 210,000 140,500
Gain on sale of securities available for sale (4,189) (775)
Loss (gain) on foreclosed real estate 11,547 (11,527)
Federal Home Loan Bank stock dividends (42,400) (50,100)
Deferred income tax (benefit) expense (42,843) 2,981
Net amortization of mortgage-backed and investment Securities 37,429 77,557
RRP shares earned 1,159 41,213
Decrease (increase) in:
Accrued interest receivable 9,263 (23,673)
Other assets (39,523) 112,846
Increase (decrease) in:
Accrued interest payable (18,959) (90,212)
Accrued income taxes 56,411 (8,118)
Accounts payable and accrued expenses 57,920 (236,938)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,816,855 1,162,058
------------ ------------
INVESTING ACTIVITIES
--------------------
Securities:
Proceeds from sale, maturities or calls 1,447,800 617,300
Purchased (1,408,175) (1,348,223)
Mortgage-backed securities:
Principal payments 975,902 642,708
Purchase of Federal Home Loan Bank Stock (385,600) --
Loan originations and principal payments, net (14,446,941) (8,580,271)
Proceeds from sale of foreclosed real estate 66,566 224,284
Purchases of software -- (1,747)
Purchases of premises and equipment (680,322) (117,425)
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (14,430,770) (8,563,374)
------------ ------------
See accompanying Accountant's Review Report and notes to
consolidated financial statements.
7
CLASSIC BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
SEPTEMBER 30,
------------------------------
2002 2001
---- ----
FINANCING ACTIVITIES
--------------------
Net increase in deposits $ 14,545,682 $ 2,743,027
Net proceeds from FHLB borrowings 554,858 4,079,083
(Decrease) increase in securities sold under agreements to repurchase (67,082) 1,317,487
Net increase in short-term borrowings 10,674 221,388
Purchase of treasury stock (334,080) (276,659)
Dividends paid (169,000) (171,642)
------------ ------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES 14,541,052 7,912,684
------------ ------------
Increase (decrease) in cash and cash equivalents 1,927,137 511,368
Cash and cash equivalent at beginning of period 5,400,046 5,606,391
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,327,183 $ 6,117,759
============ ============
ADDITIONAL CASH FLOWS AND SUPPLEMENTARY INFORMATION
Cash paid during the period for:
Interest on deposits and borrowings $ 1,028,138 $ 983,257
Taxes $ 450,000 $ 324,902
Assets acquired in settlement of loans $ 76,000 $ 242,472
Net unrealized (loss) gain on securities available for sale $ 1,133,610 $ 225,552
See accompanying Accountant's Review Report and notes to
consolidated financial statements.
8
CLASSIC BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) PRINCIPLES OF CONSOLIDATION
---------------------------
The financial statements for fiscal year 2003 are presented for Classic
Bancshares, Inc. (the "Company") and its wholly owned subsidiary, Classic Bank.
The consolidated balance sheets for September 30, 2002 and March 31, 2002 are
for the Company and Classic Bank. The consolidated statements of income include
the operations of the Company and Classic Bank for the three and six months
ended September 30, 2002 and 2001.
(2) BASIS OF PRESENTATION
---------------------
The accompanying Consolidated Financial Statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Regulation
S-B. Accordingly, they do not include all the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the Consolidated Financial Statements
contain all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial condition of Classic Bancshares, Inc.
as of September 30, 2002, and the results of operations for all interim periods
presented. Operating results for the six months ended September 30, 2002 are not
necessarily indicative of the results that may be expected for the fiscal year
ended March 31, 2003.
Certain financial information and footnote disclosures normally
included in annual financial statements prepared in conformity with generally
accepted accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The unaudited interim
consolidated financial statements presented herein should be read in conjunction
with the annual consolidated financial statements of the Company as of and for
the fiscal year ended March 31, 2002.
(3) EARNINGS PER SHARE
------------------
Earnings per share are presented pursuant to the provisions of SFAS No.
128, "Earnings Per Share." Basic earnings per share are calculated based on the
weighted average number of common shares outstanding during the respective
periods.
Diluted earnings per share are computed taking into consideration
common shares outstanding and dilutive potential common shares to be issued
under the Company's stock option plans and recognition and retention plan.
The weighted average number of shares used in the basic earnings per
share computations was 1,047,618 and 1,061,039 for the three-month periods ended
September 30, 2002 and 2001, respectively and 1,051,259 and 1,060,440 for the
six-month periods ended September 30, 2002 and 2001. The weighted average number
of shares used in the diluted earnings per share computations was 1,132,189 and
1,093,560 for the three-month periods ended September 30, 2002 and 2001,
respectively and 1,135,830 and 1,092,961 for the six-month period ended
September 30, 2002 and 2001, respectively.
Options to purchase 187,850 shares of common stock were outstanding at
September 30, 2002 but 7,000 of those shares were not included in the
computation of diluted earnings per share due to their anti-dilutive effect.
Options to purchase 180,750 shares of common stock were outstanding at September
30, 2001 but 10,550 of those shares were not included in the computation of
diluted earnings per share due to their anti-dilutive effect.
(4) GOODWILL AND OTHER INTANGIBLES
------------------------------
In July 2001, the Financial Accounting Standards Board issued Statement
No. 142, Goodwill and Other Intangible Assets. This Statement addresses
financial accounting and reporting for acquired goodwill and other intangible
assets and how they should be accounted for after they have been initially
recognized in the financial statements. This Statement provides specific
guidance for testing goodwill for impairment. This Statement specifically
relates to the Company in that it changes the accounting for goodwill that the
Company currently has on its balance sheet. The Statement outlines that goodwill
9
should not be amortized but should be tested for impairment on an annual basis
and between annual tests in certain circumstances. Impairment is the condition
that exists when the carrying amount of goodwill exceeds its implied fair value.
The annual goodwill impairment test may be performed any time during the fiscal
year provided the test is performed at the same time every year.
The Statement is effective for fiscal years beginning after December
15, 2001. However, early application is permitted for entities with fiscal years
beginning after March 15, 2001. An entity has six months from the date it
initially applies this statement to complete the impairment test. The Company
adopted Statement No. 142 effective April 1, 2001. As a result of the adoption
of Statement No. 142, the Company will discontinue the amortization of its
goodwill and will only record impairment losses if deemed necessary in future
periods.
The changes in the carrying amount of goodwill for the six months ended
September 30, 2002, are as follows:
($000s) BANKING SEGMENT
---------------
Balance as of April 1, 2002 $5,555
Goodwill acquired --
Impairment losses --
Goodwill written off related to
disposal of reporting unit --
------
Balance as of September 30, 2002 $5,555
------
The transitional goodwill impairment test was performed in the second quarter of
the Company's 2002 fiscal year. The fair value of that reporting unit was
estimated using a multiple of earnings as determined by current industry
information. The testing indicated that the fair value of the reporting unit
exceeded the carrying amount of the net assets (including goodwill). The Banking
segment will be tested for impairment in the third quarter of the Company's 2003
fiscal year. The fair value of the reporting unit will be estimated using a
multiple of earnings as determined by current industry information.
(5) EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
------------------------------------
The Company has an Employee Stock Ownership Plan (ESOP), which covers
substantially all employees. The ESOP borrowed $1,058,000 from the Company, and
purchased 105,800 common shares, equal to 8% of the total number of shares
issued in the conversion. The loan is for a term of twenty-five years. The
Company's subsidiary bank makes scheduled discretionary contributions to the
ESOP sufficient to service the debt. Shares are allocated to participants'
accounts under the shares allocated method. The cost of shares committed to be
released and unallocated shares is reported as a reduction of stockholders'
equity. Compensation expense is recorded based on the average fair market value
of the ESOP shares when committed to be released. Furthermore, ESOP shares that
have not been committed to be released are not considered outstanding. The
expense under the ESOP was $25,985 and $16,414 for the three months ended
September 30, 2002 and 2001, respectively and $48,855 and $32,447 for the six
months ended September 30, 2002 and 2001, respectively. As of September 30,
2002, the Company considered 64,331 shares as unearned ESOP shares with a fair
value of $1,444,231.
(6) STOCK OPTION AND INCENTIVE PLAN AND RECOGNITION AND RETENTION PLAN
------------------------------------------------------------------
On July 29, 1996, the shareholders of the Company ratified the adoption
of the Company's 1996 Stock Option and Incentive Plan and the Recognition and
Retention Plan ("RRP"). Pursuant to the Stock Option Plan, 132,250 shares of the
Company's common stock are reserved for issuance, of which the Company has
granted options on 106,774 shares at $10.8125 per share, options on 19,000
shares at $13.375 per share, options on 4,500 shares at $13.875 per share,
options on 626 shares at $13.75 per share, options on 200 shares at $13.625 per
share, options on 450 shares at $12.313 per share and options on 400 shares at
$16.75 per share. Pursuant to the Recognition and Retention Plan, 52,900 shares
of the Company's common stock are reserved for issuance, of which the Company
has granted awards on 52,786 shares. At the end of the quarter, 300 of the stock
options remain ungranted due to forfeitures and 114 RRP shares remain ungranted.
Ungranted RRP shares are included in treasury stock at cost.
10
On July 27, 1998, the shareholders of the Company ratified the adoption
of the Company's 1998 Premium Price Stock Option Plan. Pursuant to the Premium
Price Stock Option Plan, 50,000 shares of the Company's common stock is reserved
for issuance of which the Company has granted options on 5,000 shares at $16.295
per share, options on 5,550 shares at $14.988 per share, options on 24,000
shares at $11.275 per share and options on 14,350 shares at $13.544 per share.
At the end of the quarter, 1,100 of the stock options remain ungranted due to
forfeitures.
On August 13, 2001, the shareholders of the Company ratified the
adoption of the Company's 2001 Premium Price Stock Option Plan. Pursuant to the
Premium Price Stock Option Plan, 50,000 shares of the Company's common stock is
reserved for issuance, of which the Company has granted options on 7,000 shares
at $22.549 per share. At the end of the quarter, 43,000 of the stock options
remain ungranted.
(7) CASH DIVIDEND
-------------
On October 21, 2002, the Board declared a cash dividend of $.08 per
share payable on November 18, 2002 to shareholders of record on November 4,
2002.
(8) CONSTRUCTION OF NEW FACILITY
----------------------------
In April 2002, the Company acquired land in Greenup, Kentucky for the
purpose of constructing a new branch bank. The total estimated cost of the new
branch, including land, improvements and furnishings, totals approximately
$925,000. At the September 30, 2002, the Company had spent approximately
$613,000 towards the purchase of land and the construction of the new facility.
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
-------------------
The Company's total assets increased $17.7 million from $215.4 million
at March 31, 2002 to $233.1 million at September 30, 2002. The increase was due
primarily to an increase in loans of $14.2 million, an increase in cash and cash
equivalents of approximately $1.9 million, an increase in investment securities
of approximately $1.4 million, an increase in FHLB stock of $400,000 and an
increase in premise and equipment of approximately $500,000 offset by a decrease
in mortgage-backed securities of approximately $700,000.
Net loans receivable increased $14.2 million from $160.3 million at
March 31, 2002 to $174.5 million at September 30, 2002. Consistent with the
Company's strategic plan, the growth in loans was primarily in the areas of
consumer and commercial business loans. Consumer loans increased approximately
$7.8 million, commercial business loans increased approximately $4.0 million,
commercial real estate loans increased approximately $1.4 million and 1-4 family
mortgage loans increased approximately $1.0 million.
Investment securities increased approximately $1.4 from $25.8 million
at March 31, 2002 to $27.2 million at September 30, 2002 primarily due to an
increase in the market value of these available for sale securities. Purchases
of investment securities during the period of $1.4 million were offset by sales,
maturities and calls of $1.4 million. Mortgage-backed securities decreased
approximately $700,000 from $9.1 million at March 31, 2002 to $8.4 million at
September 30, 2002. The decrease was primarily due to principal repayments
during the period partially offset by an increase in the market value of these
available for sale securities.
11
Net deposits increased $14.5 million from $158.9 million at March 31,
2002 to $173.4 million at September 30, 2002. Savings, NOW and money market
accounts increased approximately $4.3 million and other time deposits consisting
primarily of certificates of deposit increased approximately $10.2 million. The
increase in deposits was used to fund loan growth. In the first quarter of the
2003 fiscal year, the Company funded loan growth primarily utilizing short-term,
variable rate borrowings, however during the second quarter of the fiscal year
the Company was able to increase deposits at attractive rates to fund growth.
Several factors contributed to the increased deposits in the second quarter,
including the attraction of a large public fund deposit account, deposits from
equity fund disintermediation and an increase in certificate of deposit accounts
through competitive market pricing in order to lengthen liability maturities.
Total stockholders' equity was $22.0 million at March 31, 2002 compared
to $24.0 million at September 30, 2002. The increase was due to net income
recorded for the period and an increase in the market value of available for
sale securities offset by the purchase of treasury stock and cash dividends
paid.
FORWARD-LOOKING STATEMENTS
--------------------------
When used in this Form 10-QSB and in future filings by the Company with
the Securities and Exchange Commission (the "SEC"), in the Company's press
releases or other public or shareholder communications, and in oral statements
made with the approval of an authorized executive officer, the words or phrases
"will likely result", "are expected to", "will continue", "is anticipated",
"estimate", "project" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to certain risks and
uncertainties, including changes in economic conditions in the Company's market
area including unemployment levels and plant closings, changes in real estate
values in the Company's market area, changes in policies by regulatory agencies,
fluctuations in interest rates, demand for loans in the Company's market area
and competition, that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The Company
wishes to advise readers that the factors listed above could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ materially from any opinions or statements expressed
with respect to future periods in any current statements.
The Company does not undertake - and specifically declines any
obligation - to publicly release the result of any revisions, which may be made
to any forward-looking statements to reflect events or circumstances after the
date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
RESULTS OF OPERATIONS - COMPARISON OF OPERATING RESULTS FOR THE THREE AND SIX
-----------------------------------------------------------------------------
MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
----------------------------------------
GENERAL. The Company's results of operations depend primarily upon the
level of net interest income, which is the difference between the interest
income earned on its interest-earning assets such as loans and investments, and
the costs of the Company's interest-bearing liabilities, primarily deposits and
borrowings. Results of operations are also dependent upon the level of the
Company's non-interest income, including fee income and service charges, and
affected by the level of its non-interest expenses, including its general and
administrative expenses. Net interest income depends upon the volume of
interest-earning assets and interest-bearing liabilities and the interest rates
earned or paid on them, respectively.
The Company reported net income of $728,000 for the three months ended
September 30, 2002 compared to net income of $544,000 for the three months ended
September 30, 2001. The increase in net income of $184,000 between the two
periods was primarily the result of an increase in net interest income of
$436,000, an increase in non-interest income of $51,000 and a decrease in
provision for loss on loans of $21,000 partially offset by an increase in
non-interest expense of $241,000 and an increase in income taxes of $83,000.
12
The Company reported net income of $1.4 million for the six months
ended September 30, 2002 compared to net income of $957,000 for the six months
ended September 30, 2001. The increase in income of $427,000 between the two
periods was primarily the result of an increase in net interest income of $1.1
million and an increase in non-interest income of $78,000 partially offset by an
increase in provision for loss on loans of $70,000, an increase in non-interest
expenses of $456,000 and an increase in income taxes of $193,000.
INTEREST INCOME. Total interest income increased $80,000 for the three
months ended September 30, 2002 and increased $194,000 for the six months ended
September 30, 2002 as compared to the three and six months ended September 30,
2001. The increase in interest income for the three and six-month period was due
to an increase in the average balance of interest-earning assets of $32.8
million for the three-month period and an increase of $33.0 million for the
six-month period offset by a decrease in the yield earned on interest-earning
assets. The increase in the average balance of interest-earning assets was due
primarily to an increase in the average balance of loans and an increase in the
average balance of mortgage-backed securities. The average balance of loans
increased $25.9 million for the three-month period and $25.4 million for the
six-month period. The average balance of mortgage-backed securities increased
$6.7 million for the three-month period and $5.6 million for the six-month
period. The average yield on interest-earning assets was 7.0% for the three and
six months ended September 30, 2002 compared to 8.1% for the same periods in
2001. Tax equivalent adjustments were made to the yield. The decrease in the
yield was due to the repricing of assets during the period in a declining
interest rate environment.
INTEREST EXPENSE. Interest expense decreased $356,000 and $874,000 for
the three and six months ended September 30, 2002 as compared to the same period
in 2001. Interest expense decreased for the periods primarily due to a decrease
in the average rate paid on interest-bearing liabilities offset by an increase
in the average balance of interest-bearing liabilities. The average rate paid on
interest-bearing liabilities was 2.8% for the three and six months ended
September 30, 2002 compared to 4.3% and 4.5% for the three and six months ended
September 30, 2001. The decrease in the average rate paid on interest-bearing
liabilities was due to a significant decline in interest rates in the past
twelve months. Most of the Company's interest-bearing liabilities have repriced
to lower interest in the past twelve months. All of the Company's borrowings
during the period of the interest rate decreases were short-term with variable
rates allowing the cost of the borrowings to decrease as rates decreased. Within
the past nine months, some of the borrowings have been restructured to
long-term, fixed rate borrowings. At September 30, 2002, the Company's FHLB
borrowings had an average remaining maturity of 3.2 years and an average cost of
3.6%.
The average balance of interest-bearing liabilities increased $31.2
million for the three months ended September 30, 2002 compared to the same
period in 2001 and the average balance of interest-bearing liabilities increased
$30.0 million for the six months ended September 30, 2002 compared to the same
period in 2001. The increase in these balances is primarily the result of an
increase in the average balance of interest-bearing transaction accounts, an
increase in the average balance of certificate of deposit accounts and an
increase in the average balance of FHLB borrowings.
The resulting interest rate spread was 4.2% for the three and six
months ended September 30, 2002 compared to 3.8% and 3.6% for the same periods
in 2001.
PROVISION FOR LOAN LOSSES. The Company's provision for loan losses
totaled $50,000 and $210,000 for the three and six months ended September 30,
2002 compared to $71,000 and $141,000 for the three and six months ended
September 30, 2001 based on management's overall assessment of the loan
portfolio. The provision recorded for the three and six-month period was based
on management's evaluation of the Company's current portfolio including factors
such as the quality of the portfolio, the increase in loans that are not secured
by 1-4 family real estate and overall growth in the loan portfolio. Management
continually monitors the Company's allowance for loan losses and makes
adjustments as economic conditions, portfolio quality and portfolio diversity
13
dictates. Although the Company maintains its allowance for loan losses at a
level which the Board considers to be adequate to provide for probable incurred
losses on existing loans, there can be no assurance that future losses will not
exceed estimated amounts or that additional provisions for loan losses will not
be required for future periods.
NON-INTEREST INCOME. Non-interest income increased approximately
$51,000 and $78,000 for the three and six months ended September 30, 2002
compared to the same period in 2001. The increase for the three and six-month
period is primarily the result of an increase in service charges and other fees
on deposits of $48,000 and $56,000, respectively. The increase in service
charges and other fees on deposits for the periods is the result of an increased
core deposit base. Non-interest income also increased for the three and
six-month period due to an increase in other income of $3,000 and $19,000,
respectively. Non-interest income also increased for the six-month period due to
an increase of $3,000 in the gain recorded on the sale of securities.
NON-INTEREST EXPENSE. Non-interest expenses increased $241,000 and
$456,000 for the three and six months ended September 30, 2002 compared to the
same periods in 2001. Non-interest expenses increased $241,000 for the
three-month period due to an increase in employee compensation and benefits of
$177,000, an increase in stationary, printing and supplies expense of $15,000,
an increase in communications expense of $13,000, an increase in marketing and
advertising expense of $23,000, an increase in federal deposit insurance
premiums of $3,000 and an increase in other general administrative expenses of
$26,000 offset by a decrease in occupancy and equipment expense of $8,000 and a
decrease in the loss on foreclosed real estate of $8,000.
Non-interest expenses increased $456,000 for the six-month period due
to an increase in employee compensation and benefits of $278,000, an increase in
federal deposit insurance premiums of $7,000, an increase in the loss on
foreclosed real estate of $23,000, an increase in stationary, printing and
supplies of $47,000, an increase in marketing and advertising of $54,000, an
increase in taxes paid on capital and deposits of $21,000, an increase in
professional fees of $13,000 and an increase in other general and administrative
expenses of $13,000.
Employee compensation and benefits increased for the two periods
primarily due to the hiring of staff for our new Greenup County banking office
which opened in August 2002; an increase in costs related to incentive-based
compensation programs; and an increase in ESOP expense due to the increase in
the average market price of the Company's stock. Stationary, printing and
supplies expense also increased due to expenses related to the opening of the
new Greenup County office.
Advertising increased due to the undertaking of an aggressive
advertising campaign utilizing the endorsement of a national celebrity. The
increase for the six-month period in the loss reported on foreclosed real estate
was due to the write-down of a piece of foreclosed real estate.
INCOME TAX EXPENSE. Income tax expense increased $83,000 and $193,000
for the three and six months ended September 30, 2002 primarily due to an
increase in income before income taxes for each period.
NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES
---------------------------------------------------
The allowance for loan losses is calculated based upon an evaluation
and assessment of pertinent factors underlying the types and qualities of the
Company's loans. Management considers such factors as the payment status of a
loan, the borrower's ability to repay the loan, the estimated fair value of the
underlying collateral, anticipated economic conditions that may affect the
borrower's repayment ability and the Company's historical charge-offs. The
Company's allowance for loan losses as of September 30, 2002 was $1.8 million or
1.0% of the total loans. The March 31, 2002 allowance for loan loss was $1.6
million, or 1.0% of total loans. The Company recorded a provision for loan
losses of $210,000 for the six-month period, and had net charge-offs of $15,000
for the six-month period. The allowance for loan losses at September 30, 2002
was allocated as follows: $362,000 to one-to-four family real estate loans,
$20,000 to commercial real estate, $69,000 to commercial business loans, $38,000
to consumer loans and $1.3 million remained unallocated.
14
The ratio of non-performing assets to total assets is one indicator of
other exposure to credit risk. Non-performing assets of the Company consist of
non-accruing loans, accruing loans delinquent 90 days or more, and foreclosed
assets, which have been acquired as a result of foreclosure or deed-in-lieu of
foreclosure. For all periods presented the Company had no troubled debt
restructurings. The following table sets forth the amount of non-performing
assets at the periods indicated.
September 30, 2002 March 31, 2002
------------------ --------------
(Dollars in Thousands)
Non-Accruing Loans ...................... $388 $412
Accruing Loans Delinquent 90 Days or More 343 244
Foreclosed Assets ....................... 80 82
---- ----
Total Non-Performing Assets ............. $810 $738
Total Non-Performing Assets as a
Percentage of Total Assets ..... .3% .3%
Total non-performing assets increased $72,000 from March 31, 2002 to
September 30, 2002 due primarily to an increase in accruing 1-4 family real
estate loans delinquent 90 days or more. Management continually pursues
collection of these loans in order to decrease the level of non-performing
assets.
OTHER ASSETS OF CONCERN. Other than the non-performing assets set forth
in the table above, as of September 30, 2002, there were no loans with respect
to which known information about the possible credit problems of the borrowers
or the cash flows of the security properties have caused management to have
concerns as to the ability of the borrowers to comply with present loan
repayment terms and which may result in the future inclusion of such items in
the non-performing asset categories.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company's most liquid assets are cash and cash equivalents. The
levels of these assets are dependent on the Company's operating, financing, and
investing activities. At September 30, 2002 and March 31, 2002, cash and cash
equivalents totaled $7.3 million and $5.4 million, respectively. The Company's
primary sources of funds include principal and interest payments on loans (both
scheduled and prepayments), maturities of investment securities and principal
payments from mortgage-backed securities, deposits and Federal Home Loan Bank of
Cincinnati advances and other borrowings. While scheduled loan and
mortgage-backed security repayments and proceeds from maturing investment
securities are relatively predictable, deposit flows and early repayments are
more influenced by interest rates, general economic conditions and competition.
Certificates of deposit as of September 30, 2002 maturing within one year
totaled $63.8 million.
Liquidity management is both a short- and long-term responsibility of
management. The Company adjusts its investments in liquid assets based upon
management's assessment of expected loan demand, projected purchases of
investment and mortgage-backed securities, expected deposit flows, yields
available on interest-bearing deposits, and liquidity of its asset/liability
management program. Excess liquidity is generally invested in interest-bearing
overnight deposits and other short-term liquid asset funds. If funds are
required beyond the funds generated internally, the subsidiaries of the Company
have the ability to borrow funds from the FHLB and other third parties. At
September 30, 2002, the Company had $28.0 million in borrowings outstanding with
the FHLB. On a limited basis, the Company at times utilizes repurchase
agreements for the generation of additional funds from our established
relationship business customers. At September 30, 2002, the Company had $5.3
million of repurchase agreements with existing relationship based business
customers.
At September 30, 2002, the Company had outstanding commitments to fund
loans of $14.7 million. The Company anticipates that it will have sufficient
funds available to meet its current commitments principally through the use of
current liquid assets and through its borrowing capacity with the FHLB.
15
Classic Bank is subject to the regulatory capital requirements of the
Federal Deposit Insurance Corporation (the "FDIC"). The following table
summarizes, as of September 30, 2002, the capital requirements applicable to
Classic Bank and its actual capital ratios. As of September 30, 2002, Classic
Bank was in compliance with its capital requirements.
REGULATORY ACTUAL CAPITAL
CAPITAL REQUIREMENT CLASSIC BANK
------------------- ---------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
(Dollars in Thousands)
Total Capital
(to Risk Weighted Assets) $13,457 8.0% $17,979 10.7%
Tier 1 Capital
(to Adjusted Total Assets) 8,871 4.0 16,156 7.3
The Company is subject to the regulatory capital requirements of the
Federal Reserve Board that generally parallels the capital requirements for FDIC
insured banks. The following table summarizes, as of September 30, 2002, the
capital requirements applicable to the Company and its actual capital ratios. As
of September 30, 2002, the Company was in compliance with its capital
requirements.
REGULATORY ACTUAL CAPITAL
CAPITAL REQUIREMENT CLASSIC BANK
------------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
(Dollars in Thousands)
Total Capital
(to Risk Weighted Assets) $13,495 8.0% $19,456 11.5%
Tier 1 Capital
(to Adjusted Total Assets) 8,963 4.0 17,633 7.9
IMPACT OF INFLATION AND CHANGING PRICES
---------------------------------------
The consolidated financial statements and related data presented herein
have been prepared in accordance with generally accepted accounting principles
which require the measurement of financial position and operating results in
terms of historical dollars without considering changes in the relative
purchasing power of money over time due to inflation. The primary impact of
inflation on the operations of the Company is reflected in increased operating
costs. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates, generally, have a more significant impact on a financial
institution's performance than does inflation. Interest rates do not necessarily
move in the same direction or to the same extent as the prices of goods and
services.
DISCLOSURE AND INTERNAL CONTROLS
--------------------------------
The Company has adopted interim disclosure controls and procedures
designed to facilitate the Company's financial reporting. The interim disclosure
controls currently consist of communications among the Chief Executive Officer,
the Chief Financial Officer and each department head to identify any
transactions, events, trends, risks or contingencies which may be material to
the Company's operations. The Company's disclosure controls also include certain
internal controls adopted in connection with applicable accounting guidelines.
Finally, the Chief Executive Officer, Chief Financial Officer, the Audit
Committee and the Company's independent auditors also meet on a quarterly basis
and discuss the Company's material accounting policies. The Company has
evaluated the effectiveness of these interim disclosure controls within the 90
days prior to the filing of this report.
The Company maintains internal controls and has evaluated such controls
within 90 days of the filing of this report. There have not been any significant
changes in such internal controls subsequent to the date of their evaluation
16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of Shareholders (the "Meeting") of Classic
Bancshares, Inc. was held on August 6, 2002. The matters approved
by shareholders at the Meeting and the number of votes cast for,
against or withheld (as well as the number of abstentions as to
each matter are as follows:
PROPOSAL NUMBER OF VOTES
-------- ------------------------------------
Broker
For Withheld Non-votes
--- -------- ---------
Election of the following directors for the terms indicated:
C. Cyrus Reynolds (three years) 870,922 0 0
David B. Barbour (three years) 870,922 0 0
Jeffery P. Lopez, M.D. (three years) 870,922 0 0
The ratification of the appointment of Smith,
Goolsby, Artis & Reams, P.S.C. as the
Company's auditors for the fiscal year ending
March 31, 2003 870,922 0 0
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 28 Accountant's Review Report
Exhibit 99.1 Certification of David B. Barbour pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.2 Certification of Lisah M. Frazier pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
b. Reports on Form 8-K
The Registrant filed the following current reports on Form
8-K during the three months ended September 20, 2003:
Press release, dated July 22, 2002 announcing earnings for the
quarter ending June 30, 2002 and declaring a cash dividend.
Presentation for analysts and investors presented on July 25,
2002 at the 2002 Keefe, Bruyette & Woods Community Bank Investor
Conference and on August 6, 2002 at the Company's Annual Meeting
of Stockholders.
17
Certification of Principal Executive Officer and Principal
Financial Officer CERTIFICATION FOR QUARTERLY REPORT ON FORM 10-QSB
I, David B. Barbour, certify that:
1) I have reviewed this quarterly report on Form 10-QSB of Classic
Bancshares, Inc.;
2) Based on my knowledge, this quarterly report does not contain any
untrue statements of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3) Based on my knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as a date within 90 day prior to the
filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether material or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6) The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in other
factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002 /s/ David B. Barbour
----------------- -----------------------------------------------------
David B. Barbour, President, Chief Executive Officer
and Director (Duly Authorized Officer)
18
Certification of Principal Executive Officer and Principal
Financial Officer CERTIFICATION FOR QUARTERLY REPORT ON FORM 10-QSB
I, Lisah M. Frazier, certify that:
7) I have reviewed this quarterly report on Form 10-QSB of Classic
Bancshares, Inc.;
8) Based on my knowledge, this quarterly report does not contain any
untrue statements of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
9) Based on my knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
10) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as a date within 90 day prior to the
filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
11) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether material or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
12) The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in other
factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002 /s/ Lisah M. Frazier
----------------- ----------------------------------------------------
Lisah M. Frazier, Chief Operating Officer, Treasurer
and Chief Financial Officer (Principal Financial
Officer)
19
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLASSIC BANCSHARES, INC.
REGISTRANT
Date: November 13, 2002 /s/ David B. Barbour
----------------- ----------------------------------------------------
David B. Barbour, President, Chief Executive Officer
and Director (Duly Authorized Officer)
Date: November 13, 2002 /s/ Lisah M. Frazier
----------------- ----------------------------------------------------
Lisah M. Frazier, Chief Operating Officer, Treasurer
and Chief Financial Officer (Principal Financial
Officer)
20
INDEX TO EXHIBITS
Exhibit
Number
------
28 Accountant's Review Report
99.1 Certification of David B. Barbour Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certification of Lisah M. Frazier Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
21