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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 31, 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 0-23533
MYSTIC FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3401049
- -------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
60 HIGH STREET
MEDFORD, MASSACHUSETTS 02155
- ---------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 395-2800
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 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 February 13, 2003, 1,468,803 shares of the registrant's common stock
were outstanding.
MYSTIC FINANCIAL, INC. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION Page
--------------------- ----
Item 1 Financial Statements:
Consolidated Balance Sheets - December 31, 2002
and June 30, 2002 3
Consolidated Statements of Income - Three and Six Months
Ended December 31, 2002 and 2001 4
Consolidated Statements of Changes in Stockholders'
Equity - Six Months Ended December 31, 2002 and 2001 5
Consolidated Statements of Cash Flows - Six Months
Ended December 31, 2002 and 2001 6
Notes to Unaudited Consolidated Financial Statements -
December 31, 2002 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3 Quantitative and Qualitative Disclosures About
Market Risk 23
Item 4 Controls and Procedures 23
PART II OTHER INFORMATION
-----------------
Item 5 Other Information 23
Item 6 Exhibits and Reports on Form 8-K 23
SIGNATURES 24
- ----------
2
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets
(In Thousands)
December 31, June 30,
2002 2002
------------ --------
(Unaudited)
Assets
Cash and due from banks $ 10,036 $ 18,155
Federal funds sold 2,749 10,653
Short-term investments 14,074 5,804
-------- --------
Total cash and cash equivalents 26,859 34,612
Securities available for sale, at fair value 99,578 65,900
Federal Home Loan Bank stock, at cost 2,932 2,932
Loans, net of allowance for loan losses of
$2,173 and $2,063, respectively 260,151 243,743
Mortgage loans held for sale - 1,231
Bank premises and equipment, net 3,035 2,885
Real estate held for investment, net 1,575 1,586
Accrued interest receivable 1,858 1,784
Due from Co-operative Central Bank 929 929
Other assets 1,121 1,131
-------- --------
$398,038 $356,733
======== ========
Liabilities and Stockholders' Equity
Deposits $314,196 $267,438
Federal Home Loan Bank borrowings 51,568 58,135
Subordinated Debt 5,000 5,000
Mortgagors' escrow accounts 924 792
Accrued expenses and other liabilities 1,223 1,445
-------- --------
Total liabilities 372,911 332,810
-------- --------
Stockholders' equity
Preferred stock, $.01 par value, 1,000,000
shares authorized; none issued - -
Common stock, $.01 par value, 5,000,000 shares
authorized; 2,722,125 and 2,719,125, issued
respectively 27 27
Additional paid-in capital 25,765 25,699
Retained earnings 17,612 17,099
Treasury stock, at cost, 1,253,322 shares (17,124) (17,124)
Accumulated other comprehensive income 693 350
Unearned ESOP shares (1,455) (1,622)
Unearned RRP stock (391) (506)
-------- --------
Total stockholders' equity 25,127 23,923
-------- --------
$398,038 $356,733
======== ========
See accompanying notes to unaudited consolidated financial statements.
3
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Statements of Income
(In Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
--------------------------- ---------------------------
December 31, December 31, December 31, December 31,
2002 2001 2002 2001
------------ ------------ ------------ ------------
(Unaudited)
Interest and dividend income:
Interest and fees on loans $4,401 $4,204 $ 8,793 $8,489
Interest and dividends on securities 812 571 1,572 1,062
Other interest 126 115 237 331
------ ------ ------- ------
Total interest and dividend income 5,339 4,890 10,602 9,882
------ ------ ------- ------
Interest expense:
Deposits 1,879 1,865 3,689 3,817
Federal Home Loan Bank borrowings 741 660 1,501 1,332
Subordinated debt 70 - 147 -
------ ------ ------- ------
Total interest expense 2,690 2,525 5,337 5,149
------ ------ ------- ------
Net interest income 2,649 2,365 5,265 4,733
Provision for loan losses 50 80 125 155
------ ------ ------- ------
Net interest income, after provision for
loan losses 2,599 2,285 5,140 4,578
Other income:
Customer service fees 248 238 508 446
Gain (loss) on sales of securities
available for sale, net (128) 10 (128) 27
Gain on sale of loans 197 - 344 67
Miscellaneous 45 48 54 10
------ ------ ------- ------
Total other income 362 296 778 550
------ ------ ------- ------
Operating expenses:
Salaries and employee benefits 1,457 1,146 2,820 2,241
Occupancy and equipment expenses 320 225 613 458
Data processing expenses 85 83 172 164
Other general and administrative expenses 577 476 1,078 928
------ ------ ------- ------
Total operating expenses 2,439 1,930 4,683 3,791
------ ------ ------- ------
Income before income taxes 522 651 1,235 1,337
Provision for income taxes 212 255 487 525
------ ------ ------- ------
Net income $ 310 $ 396 $ 748 $ 812
====== ====== ======= ======
Earnings per share - basic $ 0.23 $ 0.26 $ 0.56 $ 0.53
====== ====== ======= ======
Weighted average shares outstanding - basic 1,330 1,497 1,325 1,542
====== ====== ======= ======
Earnings per share - diluted $ 0.22 $ 0.26 $ 0.54 $ 0.51
====== ====== ======= ======
Weighted average shares outstanding - diluted 1,381 1,534 1,374 1,584
====== ====== ======= ======
See accompanying notes to unaudited consolidated financial statements.
4
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Statements of Changes in Stockholders' Equity
Six Months Ended December 31, 2002 and 2001
(In Thousands)
(Unaudited)
Accumulated
Additional Other Unearned Unearned Total
Common Paid-In Retained Treasury Comprehensive ESOP RRP Stockholders'
Stock Capital Earnings Stock Income Shares Stock Equity
------ ---------- -------- -------- ------------- -------- -------- -------------
Balance at June 30, 2002 $27 $25,699 $17,099 $(17,124) $350 $(1,622) $(506) $23,923
-------
Comprehensive income:
Net income - - 748 - - - - 748
Change in net unrealized gain
on securities available for
sale, net of tax effects - - - - 343 - - 343
-------
Total comprehensive income - - - - - - - 1,091
-------
Dividend paid ($0.18 per share) - - (235) - - - - (235)
Stock options exercised (3,000
shares) - 36 - - - - - 36
Decrease in unearned ESOP shares - 30 - - - 167 - 197
Decrease in unearned RRP stock - - - - - - 115 115
--- ------- ------- -------- ---- ------- ----- -------
Balance at December 31, 2002 $27 $25,765 $17,612 $(17,124) $693 $(1,455) $(391) $25,127
=== ======= ======= ======== ==== ======= ===== =======
Balance at June 30, 2001 $27 $25,643 $15,956 $(10,055) $118 $(1,967) $(707) $29,015
-------
Comprehensive income:
Net income - - 812 - - - - 812
Change in net unrealized gain
on securities available for
sale, net of tax effects - - - - 75 - - 75
-------
Total comprehensive income - - - - - - - 887
Dividend paid ($0.16 per share) - - (245) - - - - (245)
Purchase of treasury stock - - - (4,148) - - - (4,148)
Decrease in unearned ESOP shares - 2 - - - 179 - 181
Decrease in unearned RRP stock - - - - - - 100 100
--- ------- ------- -------- ---- ------- ----- -------
Balance at December 31, 2001 $27 $25,645 $16,523 $(14,203) $193 $(1,788) $(607) $25,790
=== ======= ======= ======== ==== ======= ===== =======
See accompanying notes to unaudited consolidated financial statements
5
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Statements of Cash Flows
(In Thousands)
Six Months Ended
----------------------------
December 31, December 31,
2002 2001
------------ ------------
(Unaudited)
Cash flows from operating activities:
Net income $ 748 $ 812
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for loan losses 125 155
Net amortization of securities 193 44
(Gain) loss on sales of securities available
for sale 128 (27)
Amortization of unearned ESOP shares 197 181
Amortization of unearned RRP stock 115 100
Depreciation expense 253 194
Net change in mortgage loans held for sale 1,231 (25)
Increase in accrued interest receivable (74) (150)
Increase (decrease) in other assets (234) 123
Decrease in accrued expenses and other
liabilities (222) (156)
-------- --------
Net cash provided by operating activities 2,460 1,251
-------- --------
Cash flows from investing activities:
Activity in available for sale securities
Sales 6,445 1,469
Maturities, prepayment and calls 10,751 7,843
Purchases (50,608) (34,234)
Loans originated, net of payments received (16,533) (8,268)
Purchases of banking premises and equipment (392) (106)
-------- --------
Net cash used by investing activities (50,337) (33,296)
-------- --------
Cash flows from financing activities:
Net increase in deposits 46,758 10,102
Proceeds from borrowings - 6,000
Repayment of borrowings (6,567) (2,016)
Net increase in mortgagors' escrow accounts 132 96
Proceeds from exercise of stock options 36 -
Dividends paid (235) (245)
Purchase of treasury stock - (4,148)
-------- --------
Net cash provided by financing activities 40,124 9,789
-------- --------
Net change in cash and cash equivalents (7,753) (22,256)
Cash and cash equivalents at beginning of period 34,612 46,129
-------- --------
Cash and cash equivalents at end of period $ 26,859 $ 23,873
======== ========
Supplemental cash flow information:
Interest paid $ 5,292 $ 5,149
Income taxes paid 685 490
6
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 1 - Financial Statements
Notes to Unaudited Consolidated Financial Statements
December 31, 2002
1) Basis of Presentation and Consolidation
The unaudited consolidated interim financial statements of Mystic
Financial, Inc. and subsidiary ("Mystic" or the "Company") presented herein
should be read in conjunction with the consolidated financial statements
for the year ended June 30, 2002, included in the Annual Report on Form 10-
K of Mystic Financial, Inc., the holding company for Medford Co-operative
Bank (the "Bank").
The significant accounting policies followed by the Company for interim
financial reporting are consistent with the accounting policies followed
for annual financial reporting. The unaudited consolidated interim
financial statements herein have been prepared in accordance with
accounting principles generally accepted in the United States of America
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by accounting principles generally
accepted in the United States of America for complete consolidated
financial statements.
In the opinion of management, the consolidated financial statements reflect
all adjustments (consisting solely of normal recurring accruals) necessary
for a fair presentation of such information. Interim results are not
necessarily indicative of results to be expected for the entire year.
2) Commitments and Contingencies
At December 31, 2002, the Bank had outstanding commitments to originate
loans amounting to approximately $12.9 million, and unadvanced funds on
construction loans, lines of credit and equity loans amounting to
approximately $12.1, $10.6 and $6.1 million, respectively. The Bank has
sold loans with recourse in the amount of $3.0 million. In connection with
these loans, there is an off-balance sheet contingent liability in the
amount of $47,000 at December 31, 2002.
3) Earnings Per Share
Basic earnings per share represents income available to common stock
divided by the weighted-average number of common shares outstanding during
the period. In calculating earnings per share, the number of shares of
common stock outstanding is reduced by the number of shares held by the
Company's Employee Stock Ownership Plan (the "ESOP") and the Company's 1999
Recognition and Retention Plan (the "RRP") that have not been allocated or
are not committed for release to participants' individual accounts. Diluted
earnings per share reflects additional common shares that would have been
outstanding if dilutive potential common shares had been issued, as well as
any adjustment to income that would result from the assumed conversion.
Potential common shares that may be issued by the Company relate solely to
outstanding stock options and unearned RRP shares and are determined using
the treasury stock method.
7
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 1 - Financial Statements
Notes to Unaudited Consolidated Financial Statements
December 31, 2002
4) Book Value Per Share
Book value per share was $18.13 as of December 31, 2002 and $16.98 as of
December 31, 2001. In calculating book value per share, the number of
shares of common stock outstanding is reduced by the number of shares held
by the ESOP that have not been allocated or are not committed to be
released to participants' individual accounts, unearned RRP shares and
treasury stock. There were 1,386,189 and 1,625,656 shares of common stock
outstanding as of December 31, 2002 and 2001, respectively, for purposes of
calculating the Company's book value per share.
5) Securities
The following table sets forth the Company's securities at the dates
indicated.
December 31, 2002 June 30, 2002
-------------------- --------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ----- --------- -----
(In Thousands)
Securities available for sale:
U.S. Government & federal
agency obligations $51,138 $51,653 $25,198 $25,517
Mortgage-backed securities 33,762 34,635 28,759 29,112
Other bonds & obligations 10,638 10,685 8,668 8,685
Marketable equity securities 2,877 2,605 2,698 2,586
------- ------- ------- -------
Total $98,415 $99,578 $65,323 $65,900
======= ======= ======= =======
6) Loans
The following table presents selected data relating to the composition of
the Company's loan portfolio by type of loan on the dates indicated.
December 31, 2002 June 30, 2002
--------------------- ---------------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
Residential mortgage loans $157,464 60.5% $153,915 63.1%
Commercial real estate loans 63,679 24.5% 58,889 24.2%
Commercial loans 19,157 7.4% 16,215 6.7%
Consumer loans 746 0.3% 1,004 0.4%
Home equity loans 7,023 2.7% 4,965 2.0%
Construction loans 26,548 10.2% 20,991 8.6%
-------- ----- -------- -----
Total loans 274,617 105.6% 255,979 105.0%
Less:
Deferred loan origination fees 179 0.1% 197 0.1%
Unadvanced principal 12,114 4.7% 9,976 4.1%
Allowance for loan losses 2,173 0.8% 2,063 0.8%
-------- ----- -------- -----
Loans, net $260,151 100.0% $243,743 100.0%
======== ===== ======== =====
8
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 1 - Financial Statements
Notes to Unaudited Consolidated Financial Statements
December 31, 2002
7) Allowance for Loan Losses
The following table analyzes activity in the Company's allowance for loan
losses for the periods indicated.
Six Months Ended Six Months Ended
December 31, 2002 December 31, 2001
----------------- -----------------
(Dollars in Thousands)
Average loans, net $251,223 $220,145
Period-end net loans $260,151 $223,148
Allowance for loan losses at beginning of period $ 2,063 $ 1,784
Provision for loan losses 125 155
Plus recoveries 14 1
Loans charged-off (29) (16)
-------- --------
Allowance for loan losses at end of period $ 2,173 $ 1,924
======== ========
Non-performing loans $ 296 $ 3
======== ========
Ratios:
Allowance for loan losses to period-end net loans 0.84% 0.86%
Net charge-offs to average loans, net -0.01% -0.01%
8) Deposits and Borrowed Funds
The following tables set forth the various types of deposit accounts at the
Company and the balances in these accounts as well as the borrowings of the
Company at the dates indicated.
December 31, 2002 June 30, 2002
--------------------- ---------------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
Deposits:
Savings deposits $ 59,303 18.9% $ 52,762 19.7%
NOW accounts 25,856 8.2% 26,971 10.1%
IOLTA accounts 17,735 5.6% 22,397 8.4%
Money market deposits 55,220 17.6% 21,466 8.0%
Demand deposits 22,167 7.1% 19,856 7.4%
Certificates of deposit 133,915 42.6% 123,986 46.4%
-------- ----- -------- -----
Total deposits $314,196 100.0% $267,438 100.0%
======== ===== ======== =====
Borrowed funds:
Advances from Federal Home Loan
Bank of Boston:
Maturities less than one year $ 10,550 20.5% $ 11,532 19.8%
Maturities greater than one year 41,018 79.5% 46,603 80.2%
-------- ----- -------- -----
Total borrowed funds $ 51,568 100.0% $ 58,135 100.0%
======== ===== ======== =====
9
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
December 31, 2002
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion compares the financial condition of Mystic
Financial, Inc. ("Mystic" or the "Company") and its wholly owned
subsidiary, Medford Co-operative Bank (the "Bank"), at December 31, 2002 to
June 30, 2002, and the results of operations for the three and six months
ended December 31, 2002, compared to the same periods in 2001. This
discussion and analysis should be read in conjunction with the consolidated
financial statements and related notes thereto included within this report.
Forward-looking Statements
The Company and the Bank may from time to time make written or oral
"forward-looking statements." These forward-looking statements may be
contained in this quarterly filing with the Securities and Exchange
Commission (the "SEC"), the Annual Report to Shareholders, other filings
with the SEC, and in other communications by the Company and the Bank,
which are made in good faith pursuant to the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. The words "may,"
"could," "should," "would," "believe," "anticipate," "estimate," "expect,"
"intend," "plan" and similar expressions are intended to identify forward-
looking statements.
Forward-looking statements include statements with respect to the Company's
beliefs, plans, objectives, goals, expectations, anticipations, estimates
and intentions, that are subject to significant risks and uncertainties.
The following factors, many of which are subject to change based on various
other factors beyond the Company's control, and other factors discussed in
this Form 10-Q, as well as other factors identified in the Company's
filings with the SEC and those presented elsewhere by management from time
to time, could cause its financial performance to differ materially from
the plans, objectives, expectations, estimates and intentions expressed in
such forward-looking statements:
* the strength of the United States economy in general and the strength
of the local economies in which the Company and the Bank conduct
operations;
* the effects of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies of the Federal Reserve
Board;
* inflation, interest rate, market and monetary fluctuations;
* the timely development of and acceptance of new products and services
and the perceived overall value of these products and services by
users, including the features, pricing and quality compared to
competitors' products and services;
* the willingness of users to substitute competitors' products and
services for the Company's and the Bank's products and services;
* the Company's and the Bank's success in gaining regulatory approval
of their products and services, when required;
* the impact of changes in financial services' laws and regulations
(including laws concerning taxes, banking, securities and insurance);
10
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
December 31, 2002
* the impact of technological changes;
* acquisitions;
* changes in consumer spending and saving habits; and
* the Company's and the Bank's success at managing the risks involved
in their business.
This list of important factors is not exclusive. The Company or the Bank
does not undertake to update any forward-looking statement, whether written
or oral, that may be made from time to time by or on behalf of the Company
or the Bank.
General
The Bank completed its conversion from a mutual to a stock institution and
was simultaneously acquired by the Company on January 8, 1998. The
Company's principal business activity consists of the ownership of the
Bank. The Company also invests in short-term investment grade marketable
securities and other liquid investments.
The Bank is a Massachusetts chartered stock co-operative bank founded in
1886 with three full-service offices in Medford, Massachusetts and three
other full-service offices located in Lexington, Arlington and Bedford,
Massachusetts. The business of the Bank consists of attracting deposits
from the general public and using these funds to originate various types of
loans primarily in eastern Middlesex County, Massachusetts, including
mortgage loans secured by one-to-four family residences, commercial loans
secured by general business assets and commercial real estate loans secured
by commercial property, and to invest in U.S. Government and federal agency
and other securities. To a lesser extent, the Bank engages in various forms
of consumer and home equity lending.
The Bank has one active subsidiary, Mystic Securities Corporation, which
was established for the sole purpose of acquiring and holding investment
securities. All securities held by Mystic Securities Corporation are
investments which are permissible for banks to hold under Massachusetts
law.
The Company's profitability depends primarily on its net interest income,
which is the difference between the interest income it earns on its loans
and investment portfolio and its cost of funds, which consists mainly of
interest paid on deposits and on borrowings from the Federal Home Loan Bank
of Boston. Net interest income is affected by the relative amounts of
interest-earning assets and interest-bearing liabilities and the interest
rates earned or paid on these balances. When interest-earning assets
approximate or exceed interest-bearing liabilities, any positive interest
rate spread will generate net interest income.
The level of other income and operating expenses also affects the Company's
profitability. Other income consists primarily of service fees, loan
servicing and other loan fees. Operating expenses consist of salaries and
benefits, occupancy related expenses, and other general operating expenses.
11
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
December 31, 2002
Average Balances, Interest and Average Yields
The following tables set forth certain information relating to the
Company's average balance sheet and reflect the interest earned on assets
and interest cost of liabilities for the periods indicated and the average
yields earned and rates paid for the periods indicated. Such yields and
costs are derived by dividing income or expense by the average monthly
balances of assets and liabilities, respectively, for the periods
presented. Average balances are derived from daily balances. Loans on non-
accrual status are included in the average balances of loans shown in the
tables. The securities in the following tables are presented at amortized
cost.
12
MYSTIC FINANCIAL, INC. AND SUBSIDIARY
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS
THREE MONTHS ENDED DECEMBER 31, 2002 AND 2001
Three Months Ending December 31, 2002 Three Months Ending December 31, 2001
------------------------------------- -------------------------------------
Average Interest Yield/ Average Interest Yield/
Balance Income/Expense Rate Balance Income/Expense Rate
------- -------------- ------ ------- -------------- ------
(Dollars in thousands)
INTEREST-EARNING ASSETS:
Total loans, net $255,376 $4,401 6.89% $221,446 $4,204 7.59%
Securities available for sale 81,821 812 3.97% 47,613 571 4.80%
Other earning assets 33,971 126 1.48% 16,954 115 2.71%
-------- ------ -------- ------
Total interest-earning assets 371,168 5,339 5.75% 286,013 4,890 6.84%
------ ------
Cash and due from banks 9,716 7,767
Other assets 7,816 6,837
-------- --------
Total assets $388,700 $300,617
======== ========
INTEREST-BEARING LIABILITIES:
Regular and other deposits $ 57,329 230 1.59% $ 45,953 243 2.10%
NOW and IOLTA accounts 40,156 88 0.87% 34,584 83 0.95%
Money market deposits 47,692 293 2.44% 19,677 109 2.20%
Certificates of deposit 133,165 1,268 3.78% 108,558 1,430 5.23%
-------- ------ -------- ------
Total interest-bearing deposits 278,342 1,879 2.68% 208,772 1,865 3.54%
FHLB borrowings 56,197 741 5.23% 44,393 660 5.90%
Subordinated debt 5,000 70 5.48% - - -
-------- ------ -------- ------
Total interest-bearing liabilities 339,539 2,690 3.14% 253,165 2,525 3.96%
------ ------
Demand deposit accounts 22,459 19,347
Other liabilities 1,992 1,571
-------- --------
Total liabilities 363,990 274,083
Stockholders' equity 24,710 26,534
-------- --------
Total liabilities and stockholders' equity $388,700 $300,617
======== ========
Net interest income $2,649 $2,365
====== ======
Interest rate spread 2.61% 2.88%
Net interest margin 2.85% 3.31%
Interest earning assets/interest-bearing
liabilities 1.09x 1.13x
13
MYSTIC FINANCIAL, INC. AND SUBSIDIARY
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS
SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001
Six Months Ending December 31, 2002 Six Months Ending December 31, 2001
------------------------------------- -------------------------------------
Average Interest Yield/ Average Interest Yield/
Balance Income/Expense Rate Balance Income/Expense Rate
------- -------------- ------ ------- -------------- ------
(Dollars in thousands)
INTEREST-EARNING ASSETS:
Total loans, net $251,223 $ 8,793 7.00% $220,145 $8,489 7.71%
Securities available for sale 74,143 1,572 4.24% 42,705 1,062 4.97%
Other earning assets 28,632 237 1.66% 20,307 331 3.26%
-------- ------- -------- ------
Total interest-earning assets 353,998 10,602 5.99% 283,157 9,882 6.98%
------- ------
Cash and due from banks 9,056 7,504
Other assets 7,780 6,852
-------- --------
Total assets $370,834 $297,513
======== ========
INTEREST-BEARING LIABILITIES:
Regular and other deposits $ 55,682 506 1.80% $ 45,028 483 2.13%
NOW and IOLTA accounts 38,391 176 0.91% 33,988 178 1.04%
Money market deposits 35,644 438 2.44% 19,660 264 2.66%
Certificates of deposit 131,506 2,569 3.88% 107,276 2,892 5.35%
-------- ------- -------- ------
Total interest-bearing deposits 261,223 3,689 2.80% 205,952 3,817 3.68%
FHLB borrowings 57,165 1,501 5.21% 44,504 1,332 5.94%
Subordinated debt 5,000 147 5.75% - - -
-------- ------- -------- ------
Total interest-bearing liabilities 323,388 5,337 3.27% 250,456 5,149 4.08%
------- ------
Demand deposit accounts 20,989 18,492
Other liabilities 1,993 1,511
-------- --------
Total liabilities 346,370 270,459
Stockholders' equity 24,464 27,054
-------- --------
Total liabilities and stockholders' equity $370,834 $297,513
======== ========
Net interest income $5,265 $4,733
====== ======
Interest rate spread 2.72% 2.90%
Net interest margin 2.97% 3.34%
Interest earning assets/interest-bearing
liabilities 1.09x 1.13x
14
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
December 31, 2002
Rate/Volume Analysis
The following table sets forth certain information regarding changes in
interest income and interest expense of the Company for the periods
indicated. For each category of interest-earning asset and interest-bearing
liability, information is provided on changes attributable to: (i) changes
in volume (changes in volume multiplied by old rate); and (ii) changes in
rates (change in rate multiplied by old volume). Changes in rate-volume
(changes in rate multiplied by the changes in volume) are allocated between
changes in rate and changes in volume.
Three Months Ended December 31,
2002 vs 2001
Increase (decrease)
-------------------------------
Due To
------------------
Rate Volume Total
---- ------ -----
(In thousands)
Interest and dividend income:
Loans, net $(298) $ 495 $ 197
Securities available for sale (76) 317 241
Other earning assets (9) 20 11
----- ----- -----
Total (383) 832 449
----- ----- -----
Interest expense:
Savings deposits 503 (516) (13)
NOW and IOLTA accounts (6) 11 5
Money market deposits 13 171 184
Certificates of deposits (890) 728 (162)
----- ----- -----
Total deposits (380) 394 14
Borrowed funds (60) 141 81
Subordinated debt - 70 70
----- ----- -----
Total (440) 605 165
----- ----- -----
Change in net interest income $ 57 $ 227 $ 284
===== ===== =====
15
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
December 31, 2002
Six Months Ended December 31,
2002 vs 2001
Increase (decrease)
-------------------------------
Due To
------------------
Rate Volume Total
---- ------ -----
(In thousands)
Interest and dividend income:
Loans, net $ (575) $ 879 $ 304
Securities available for sale (128) 638 510
Other earning assets (563) 469 (94)
------- ------ -----
Total (1,266) 1,986 720
------- ------ -----
Interest expense:
Savings deposits (42) 65 23
NOW and IOLTA accounts 51 (53) (2)
Money market deposits (20) 194 174
Certificates of deposits (1,797) 1,474 (323)
------- ------ -----
Total deposits (1,808) 1,680 (128)
Borrowed funds (128) 297 169
Subordinated debt - 147 147
------- ------ -----
Total (1,936) 2,124 188
------- ------ -----
Change in net interest income $ 670 $ (138) $ 532
======= ====== =====
Financial Condition and Results of Operations
Comparison of Financial Condition at December 31, 2002 and June 30, 2002
The Company's total assets amounted to $398.0 million at December 31, 2002
compared to $356.7 million at June 30, 2002, an increase of $41.3 million
or 11.6%. The increase in total assets is primarily a result of continued
loan growth and increases in securities available for sale funded by
deposit growth.
Cash and cash equivalents decreased to $26.9 million at December 31, 2002
from $34.6 million at June 30, 2002, a decrease of $7.8 million or 22.4%.
The decrease in cash and cash equivalents was primarily due to an increase
in securities available for sale. Securities increased to $99.6 million at
December 31, 2002 from $65.9 million at June 30, 2002, an increase of $33.7
million or 51.1%.
Net loans increased by $16.4 million or 6.7% to $260.2 million or 65.4% of
total assets at December 31, 2002 as compared to $243.7 million or 68.3% of
total assets at June 30, 2002. Growth in
16
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
December 31, 2002
commercial real estate loans, commercial loans, residential mortgage loans,
home equity loans and construction loans accounted for the increase due to
the Company's continued emphasis on loan originations.
Total deposits increased by $46.8 million to $314.2 million at December 31,
2002 from $267.4 million at June 30, 2002 reflecting increases in nearly
all deposit categories. Certificates of deposit increased by $9.9 million
or 8.0% to $133.9 million at December 31, 2002 from $124.0 million at June
30, 2002. Money market accounts increased by $33.8 million or 157.2% to
$55.2 million at December 31, 2002 from $21.5 million at June 30, 2002.
Savings accounts increased by $6.5 million or 12.4% to $59.3 million at
December 31, 2002 from $52.8 million at June 30, 2002. The increase in
deposits resulted from deposit promotions geared to obtain market share in
light of the sale of Medford Bank to Citizens Bank and the success of the
Bedford branch that opened in June 2002.
Stockholders' equity increased by $1.2 million to $25.1 million at December
31, 2002 from $23.9 million at June 30, 2002 as a result of an increase in
the net unrealized gain on securities available for sale of $343,000, net
income of $748,000, stock options exercised of $36,000, a reduction in
unearned RRP stock of $115,000, and a reduction in unearned ESOP shares of
$197,000, offset by dividends paid of $235,000.
Comparison of the Operating Results for the Three and Six Months Ended
December 31, 2002 and 2001
Net Income. Net income was $310,000 and $748,000 for the three and six
months ended December 31, 2002, compared to $396,000 and $812,000 for the
three and six months ended December 31, 2001. Return on average assets was
..32% and .40% for the three and six months ended December 31, 2002,
compared to .53% and .55% for the three and six months ended December 31,
2001. Return on average equity was 5.02% and 6.12% for the three and six
months ended December 31, 2002, compared to 5.97% and 6.00% for the three
and six months ended December 31, 2001.
The decrease in income before income taxes of $129,000 for the three months
ended December 31, 2002 compared to the three months ended December 31,
2001 was attributable to an increase in total interest and dividend income
of $449,000 and an increase in other income of $66,000, offset by an
increase in total interest expense of $165,000 and an increase in operating
expenses of $509,000.
The decrease in income before income taxes of $102,000 for the six months
ended December 31, 2002 compared to the six months ended December 31, 2001
was attributable to an increase in total interest and dividend income of
$720,000, an increase in other income of $228,000 and a decrease in
provision for loan losses of $30,000, offset by an increase in total
interest expense of $188,000 and an increase in operating expenses of
$892,000.
17
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
December 31, 2002
Interest and Dividend Income. Total interest and dividend income increased
by $449,000 or 9.2% to $5.3 million for the three months ended December 31,
2002 from $4.9 million for the three months ended December 31, 2001. The
increase in interest income was a result of a higher level of loans and
securities available for sale resulting from general asset growth,
partially offset by a decrease in the average yield on interest-earning
assets caused by generally declining interest rates. The average balance of
net loans for the three months ended December 31, 2002 was $255.4 million
compared to $221.5 million for the three months ended December 31, 2001.
The average yield on net loans was 6.89% for the three months ended
December 31, 2002 compared to 7.59% for the three months ended December 31,
2001.
The average balance of securities available for sale for the three months
ended December 31, 2002 was $81.8 million compared to $47.6 million for the
three months ended December 31, 2001. This increase was due to a higher
volume of loan sales and refinances and deposit growth. The average yield
on securities available for sale was 3.97% for the three months ended
December 31, 2002 compared to 4.80% for the three months ended December 31,
2001. The average balance of other earning assets for the three months
ended December 31, 2002 was $34.0 million compared to $17.0 million for the
three months ended December 31, 2001. The average yield on other earning
assets was 1.48% for the three months ended December 31, 2002 compared to
2.71% for the three months ended December 31, 2001. The average yield on
other earning assets declined because of the short-term repricing intervals
of these assets combined with several decreases in short-term interest
rates made by the Federal Reserve Bank.
Total interest and dividend income increased by $720,000 or 7.3% to $10.6
million for the six months ended December 31, 2002 from $9.9 million for
the six months ended December 31, 2001. The increase in interest income was
a result of a higher level of loans and securities available for sale
resulting from general asset growth, partially offset by a decrease in the
average yield on interest-earning assets caused by generally declining
interest rates. The average balance of net loans for the six months ended
December 31, 2002 was $251.2 million compared to $220.1 million for the six
months ended December 31, 2001. The average yield on net loans was 7.00%
for the six months ended December 31, 2002 compared to 7.71% for the six
months ended December 31, 2001.
The average balance of securities available for sale for the six months
ended December 31, 2002 was $74.1 million compared to $42.7 million for the
six months ended December 31, 2001. This increase was due to a higher
volume of loan sales and refinances and deposit growth. The average yield
on securities available for sale was 4.24% for the six months ended
December 31, 2002 compared to 4.97% for the six months ended December 31,
2001. The average balance of other earning assets for the six months ended
December 31, 2002 was $28.6 million compared to $20.3 million for the six
months ended December 31, 2001. The average yield on other earning assets
was 1.66% for the six months ended December 31, 2002 compared to 3.26% for
the six months ended December 31, 2001. The average yield on other earning
assets declined because of the short-term
18
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
December 31, 2002
repricing intervals of these assets combined with several decreases in
short-term interest rates made by the Federal Reserve Bank.
Interest Expense. Total interest expense increased by $165,000 or 6.5% to
$2.7 million for the three months ended December 31, 2002 from $2.5 million
for the three months ended December 31, 2001. Average interest-bearing
deposits increased by $69.6 million or 33.3% to $278.3 million for the
three months ended December 31, 2002. Average borrowings increased by $11.8
million to $56.2 million for the three months ended December 31, 2002 from
$44.4 million for the three months ended December 31, 2001. The average
rate on interest-bearing deposits decreased 86 basis points to 2.68% for
the three months ended December 31, 2002 from 3.54% for the three months
ended December 31, 2001, while the average rate on borrowed funds decreased
67 basis points to 5.23% from 5.90% during the same period. Interest
expense on subordinated debt for the three months ended December 31, 2002
was $70,000 as compared to $0 for the three months ended December 31, 2001.
Average subordinated debt for the three months ended December 31, 2002 was
$5 million with an average rate of 5.48%. The Company did not have any
subordinated debt during the comparable 2001 period.
Total interest expense increased by $188,000 or 3.7% to $5.3 million for
the six months ended December 31, 2002 from $5.1 million for the six months
ended December 31, 2001. Average interest-bearing deposits increased by
$55.3 million or 26.8% to $261.2 million for the six months ended December
31, 2002. Average borrowings increased by $12.7 million to $57.2 million
for the six months ended December 31, 2002 from $44.5 million for the six
months ended December 31, 2001. The average rate on interest-bearing
deposits decreased 88 basis points to 2.80% for the six months ended
December 31, 2002 from 3.68% for the six months ended December 31, 2001,
while the average rate on borrowed funds decreased 73 basis points to 5.21%
from 5.94% during the same period. Interest expense on subordinated debt
for the six months ended December 31, 2002 was $147,000 as compared to $0
for the six months ended December 31, 2001. Average subordinated debt for
the six months ended December 31, 2002 was $5 million with an average rate
of 5.75%. The Company did not have any subordinated debt during the
comparable 2001 period.
Net Interest Income. Net interest income for the three months ended
December 31, 2002 was $2.6 million as compared to $2.4 million for the
three months ended December 31, 2001. The $284,000 increase can be
attributed to a combination of the $449,000 increase in interest and
dividend income, offset by the $165,000 increase in interest expense on
deposits, borrowed funds and subordinated debt. The average yield on
interest earning assets decreased 109 basis points to 5.75% for the three
months ended December 31, 2002 from 6.84% for the three months ended
December 31, 2001, while the average cost on interest-bearing liabilities
decreased by 82 basis points to 3.14% for the three months ended December
31, 2002 from 3.96% for the three months ended December 31, 2001. As a
result, the interest rate spread decreased to 2.61% for the three months
ended December 31, 2002 from 2.88% for the three months ended December 31,
2001.
19
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
December 31, 2002
Net interest income for the six months ended December 31, 2002 was $5.3
million as compared to $4.7 million for the six months ended December 31,
2001. The $532,000 increase can be attributed to a combination of the
$720,000 increase in interest and dividend income, offset by the $188,000
increase in interest expense on deposits, borrowed funds and subordinated
debt. The average yield on interest earning assets decreased 99 basis
points to 5.99% for the six months ended December 31, 2002 from 6.98% for
the six months ended December 31, 2001, while the average cost on interest-
bearing liabilities decreased by 81 basis points to 3.27% for the six
months ended December 31, 2002 from 4.08% for the six months ended December
31, 2001. As a result, the interest rate spread decreased to 2.72% for the
six months ended December 31, 2002 from 2.90% for the six months ended
December 31, 2001.
Provision for Loan Losses. The provision for loan losses for the three and
six months ended December 31, 2002 was $50,000 and $125,000, respectively,
compared to $80,000 and $155,000 for the three and six months ended
December 31, 2001. At December 31, 2002, the balance of the allowance for
loan losses was $2.2 million or .84% of net loans. At December 31, 2001,
the balance of the allowance for loan losses was $1.9 million or .86% of
net loans.
Other Income. Other income was $362,000 for the three months ended December
31, 2002 compared to $296,000 for the three months ended December 31, 2001.
Other income increased $66,000, or 22.3%, which is primarily the result of
$197,000 in gains on the sale of loans into the secondary market, offset by
a net loss of $128,000 on the sale of investment securities. Other income
was $778,000 for the six months ended December 31, 2002 compared to
$550,000 for the six months ended December 31, 2001. The $228,000 increase
was primarily the result of an increase of $277,000 in gains on the sale of
loans into the secondary market and $62,000 in service fees, offset by an
increase in net loss on the sale of investment securities of $155,000. The
increased gains on loan sales reflects increased originations of fixed-rate
residential mortgage loans as borrowers refinanced these loans in order to
take advantage of low interest rates. The Company sells substantially all
of the fixed-rate residential real estate loans it originates into the
secondary market in order to reduce interest rate risk.
Operating Expenses. Operating expenses increased by $509,000 or 26.4% to
$2.4 million for the three months ended December 31, 2002 from $1.9 million
for the three months ended December 31, 2001. Salaries and employee
benefits increased by $311,000, occupancy and equipment expenses increased
by $95,000 and advertising expenses increased by $60,000. This increase in
operating expenses was caused by increased salary expenses in the
administrative and lending areas, marketing expenses incurred to capture
deposit market share and expenses to operate the branch office opened in
Bedford, Massachusetts in June 2002.
20
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
December 31, 2002
Operating expenses increased by $892,000 or 23.5% to $4.7 million for the
six months ended December 31, 2002 from $3.8 million for the six months
ended December 31, 2001. Salaries and employee benefits increased by
$579,000, occupancy and equipment expenses increased by $155,000 and
advertising expenses increased by $97,000. This increase in operating
expenses was caused by increased salary expenses in the administrative and
lending areas, marketing expenses incurred to capture deposit market share
and expenses to operate the branch office opened in Bedford, Massachusetts
in June 2002.
Asset/Liability Management
A principal operating objective of the Company is to produce stable
earnings by achieving a favorable interest rate spread that can be
sustained during fluctuations in prevailing interest rates. Since the
Company's principal interest-earning assets have longer terms to maturity
than its primary source of funds, i.e. deposit liabilities, increases in
general interest rates will generally result in an increase in the
Company's cost of funds before the yield on its asset portfolio adjusts
upward. Banking institutions have generally sought to reduce their exposure
to adverse changes in interest rates by attempting to achieve a closer
match between the periods in which their interest-bearing liabilities and
interest-earning assets can be expected to reprice through the origination
of adjustable-rate mortgages and loans with shorter terms and the purchase
of other shorter term interest-earning assets.
The term "interest rate sensitivity" refers to those assets and
liabilities, which mature and reprice periodically in response to
fluctuations in market rates and yields. Thrift institutions have
historically operated in a mismatched position with interest-sensitive
liabilities exceeding interest-sensitive assets in the short-term time
periods. As noted above, one of the principal goals of the Bank's
asset/liability program is to more closely match the interest rate
sensitivity characteristics of the asset and liability portfolios.
In order to properly manage interest rate risk, the Board of Directors has
established an Asset/Liability Management Committee ("ALCO") made up of
members of management to monitor the difference between the Company's
maturing and repricing assets and liabilities and to develop and implement
strategies to decrease the "negative gap" between the two. The primary
responsibilities of the committee are to assess the Company's
asset/liability mix, recommend strategies to the Board that will enhance
income while managing the Company's vulnerability to changes in interest
rates and report to the Board the results of the strategies used.
21
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
December 31, 2002
Liquidity and Capital Resources
The Company's primary sources of funds consist of deposits, borrowings,
repayment and prepayment of loans, sales and participations of loans,
maturities of securities and interest-bearing deposits, and funds provided
from operations. While scheduled repayments of loans and maturities of
securities are predictable sources of funds, deposit flows and loan
prepayments are greatly influenced by the general level of interest rates,
economic conditions, and competition. The Company uses its liquidity
resources primarily to fund existing and future loan commitments, to fund
net deposit outflows, to invest in other interest-earning assets, to
maintain liquidity, and to meet operating expenses.
The Company is required to maintain adequate levels of liquid assets. This
requirement, which may be varied depending upon economic conditions and
deposit flows, is based upon a percentage of deposits and short-term
borrowings. The Company has historically maintained a level of liquid
assets in excess of regulatory requirements. The Company's liquidity ratio
at December 31, 2002 was 100.1%, using the short-term assets to short-term
liabilities formula defined under the Federal Deposit Insurance
Corporation's Uniform Bank Performance Reports.
A major portion of the Company's liquidity consists of cash and cash
equivalents, short-term U.S. Government and federal agency obligations, and
corporate bonds. The level of these assets is dependent upon the Company's
operating, investing, lending and financing activities during any given
period.
Liquidity management is both a daily and long-term function of management.
If the Company requires funds beyond its ability to generate them
internally, the Company believes it could borrow additional funds from the
FHLB. At December 31, 2002, the Company had outstanding borrowings of $51.6
million and an available line of credit of $3.5 million from the FHLB.
22
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
December 31, 2002
At December 31, 2002, the Company had $12.9 million in outstanding
commitments to originate loans. The Company anticipates that it will have
sufficient funds available to meet its current loan origination
commitments. Certificates of deposit which are scheduled to mature in one
year or less totaled $74.2 million at December 31, 2002. Based upon
historical experience, management believes that a significant portion of
such deposits will remain with the Bank.
At December 31, 2002, the Company and the Bank exceeded all of their
regulatory capital requirements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
In management's opinion, there has been no material change in market risk
since disclosed in Item 7A of the Company's Annual Report on Form 10-K for
the year ended June 30, 2002. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Asset Liability
Management."
Item 4. Controls and Procedures
During the 90-day period prior to the filing date of this report,
management, including the Company's President and Chief Executive Officer
and Senior Vice President and Chief Financial Officer, evaluated the
effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based upon, and as of the date of that evaluation,
the President and Chief Executive Officer and Senior Vice President and
Chief Financial Officer concluded that the disclosure controls and
procedures were effective, in all material respects, to ensure that
information required to be disclosed in the reports the Company files and
submits under the Exchange Act is recorded, processed, summarized and
reported as and when required.
There have been no significant changes in the Company's internal controls
or in other factors which could significantly affect internal controls
subsequent to the date the Company carried out its evaluation. There were
no significant deficiencies or material weaknesses identified in the
evaluation and therefore, no corrective actions were taken.
23
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
December 31, 2002
PART II. OTHER INFORMATION
Item 5. Other Information
The Company's Chief Executive Officer and Chief Financial Officer have
furnished statements relating to the Company's Form 10-Q for the quarter
ended December 31, 2002 pursuant to 18 U.S.C. section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002. These statements
are attached hereto as Exhibit 99.1.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Certifications of President and CEO and Senior Vice President
and CFO pursuant to Section 906 of the Sarbanes-Oxley Act.
(b) Reports on Form 8-K
The Company filed a Form 8-K on October 23, 2002 to disclose
Regulation FD Materials in connection with management's presentation
of the Company's Annual Meeting of Stockholders held on October 23,
2002.
24
Mystic Financial, Inc. and Subsidiaries
Part II - Other Information
Signatures
December 31, 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MYSTIC FINANCIAL, INC.
(Registrant)
Date: February 13, 2003 By: /s/ Ralph W. Dunham
----------------- -------------------------------
Ralph W. Dunham
President and Chief Executive
Officer
Date: February 13, 2003 By: /s/ Anthony J. Patti
----------------- -------------------------------
Anthony J. Patti
Senior Vice President, Chief
Financial Officer and Treasurer
25
CERTIFICATIONS
I, Ralph W. Dunham, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Mystic
Financial, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement 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; and
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 officer 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 of a date within 90 days 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 officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the 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 or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
26
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there significant changes in
internal controls or 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: February 13, 2003 /s/ Ralph W. Dunham
----------------- ------------------------------------
Ralph W. Dunham
President and Chief Executive
Officer
27
I, Anthony J. Patti, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Mystic
Financial, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement 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; and
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 officer 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 of a date within 90 days 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 officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the 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 or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
28
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there significant changes in
internal controls or 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: February 13, 2003 /s/ Anthony J. Patti
----------------- ------------------------------------
Anthony J. Patti
Senior Vice President and Chief
Financial Officer
29