United States
Securities and Exchange Ccommission
Washington, D.C. 20549
Form 10-Q
(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, 2004
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-10971
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Abigail Adams National Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 52-1508198
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1130 Connecticut Ave., NW, Washington, DC 20036
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(Address of principal executive offices) (Zip Code)
202.772.3600
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(Registrant's telephone number, including area code)
n/a
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(Former name, former address and former fiscal year, if changed since last
report)
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
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of November 11, 2004, registrant had outstanding 3,020,913 shares of
common stock.
Table of Contents
Part I - Financial Information Page
- -------------------------------- ----
Item 1- Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Income 2
Condensed Consolidated Statements of Changes in Stockholders' Equity 3
Condensed Consolidated Statements of Cash Flows 4
Notes to Condensed Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis 6
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 14
Item 4 - Controls and Procedures 14
Part II - Other Information
Item 1 - Legal Proceedings 14
Item 2 - Changes in Securities, Use of Proceeds and Issuer
Purchases of Equity Securities 14
Item 3 - Defaults Upon Senior Securities 14
Item 4 - Submission of Matters to Vote of Security Holders 14
Item 5 - Other Information 14
Item 6 - Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit 31.1 16
Exhibit 31.2 17
Exhibit 32 18
Abigail Adams National Bancorp, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
September 30, 2004 (unaudited) and December 31, 2003
September 30, 2004 December 31, 2003
---------------------- --------------------
Assets
Cash and due from banks $8,136,837 $9,746,854
Federal funds sold 6,356,000 8,690,315
Interest-earning deposits in other banks 5,248,937 10,130,699
Investment securities available for sale at fair value 34,192,807 30,456,229
Investment securities held to maturity (market values of
$15,115,146 and $13,901,669 for 2004 and 2003, respectively) 15,122,413 13,961,384
Loans 167,617,392 156,034,227
Less: allowance for loan losses (2,457,073) (2,119,448)
---------------------- --------------------
Loans, net 165,160,319 153,914,779
---------------------- --------------------
Premises and equipment, net 1,161,898 1,475,535
Other assets 3,439,836 3,530,000
---------------------- --------------------
Total assets $238,819,047 $231,905,795
====================== ====================
Liabilities and Stockholders' Equity
Liabilities:
Deposits
Noninterest-bearing deposits $61,221,230 $56,828,660
Interest-bearing deposits 140,937,060 135,927,747
---------------------- --------------------
Total deposits 202,158,290 192,756,407
Short-term borrowings 3,901,265 5,390,326
Long-term debt 7,353,517 10,030,117
Other liabilities 1,249,881 853,863
---------------------- --------------------
Total liabilities 214,662,953 209,030,713
---------------------- --------------------
Commitments and contingencies (Note 2)
Stockholders' equity:
Common stock, $0.01 par value, authorized 5,000,000 shares; issued
3,037,353 shares in 2004 and 3,030,783 shares in 2003;
outstanding 3,020,913 shares in 2004 and 3,014,343 shares in 2003 30,374 30,308
Additional paid-in capital 17,277,434 17,241,143
Retained earnings 7,034,196 5,578,431
Less: Treasury stock, 17,170 shares in 2004 and 16,440 in 2003,
at cost (113,088) (98,349)
Accumulated other comprehensive income (loss) (72,822) 123,549
---------------------- --------------------
Total stockholders' equity 24,156,094 22,875,082
---------------------- --------------------
Total liabilities and stockholders' equity $238,819,047 $231,905,795
====================== ====================
See Notes to Condensed Consolidated Financial Statements
1
Abigail Adams National Bancorp, Inc. and Ssubsidiary
Condensed Consolidated Statements of Income
For the Periods Ended September 30, 2004 and 2003
(Unaudited)
For the three months ended For the nine months ended
September 30, September 30,
--------------------------------- --------------------------------
2004 2003 2004 2003
--------------- -------------- -------------- --------------
Interest Income
Interest and fees on loans $2,914,670 $2,633,737 $8,471,407 $8,101,459
Interest and dividends on investment securities 516,064 443,992 1,534,158 1,108,151
Other interest income 63,838 41,807 105,850 117,753
--------------- -------------- -------------- --------------
Total interest income 3,494,572 3,119,536 10,111,415 9,327,363
--------------- -------------- -------------- --------------
Interest Expense
Interest on deposits 426,593 440,143 1,194,364 1,382,993
Interest on short-term borrowings 4,847 11,521 16,161 40,053
Interest on long-term debt 68,900 77,927 213,228 177,473
--------------- -------------- -------------- --------------
Total interest expense 500,340 529,591 1,423,753 1,600,519
--------------- -------------- -------------- --------------
Net interest income 2,994,232 2,589,945 8,687,662 7,726,844
Provision for loan losses 105,000 90,000 315,000 471,065
--------------- -------------- -------------- --------------
Net interest income after provision for loan 2,889,232 2,499,945 8,372,662 7,255,779
losses
--------------- -------------- -------------- --------------
Noninterest income
Service charges on deposit accounts 349,592 419,638 1,165,261 1,263,894
Gain on sale of investment securities 47,116 40,800 87,381 70,052
Other income 60,912 72,843 116,776 197,123
--------------- -------------- -------------- --------------
Total noninterest income 457,620 533,281 1,369,418 1,531,069
--------------- -------------- -------------- --------------
Noninterest expense
Salaries and employee benefits 918,333 829,574 2,710,636 2,434,166
Occupancy and equipment expense 337,720 342,319 1,011,291 945,197
Professional fees 90,927 67,824 288,249 186,428
Data processing fees 74,992 114,894 339,315 337,222
Other operating expense 366,819 336,329 1,094,153 988,076
--------------- -------------- -------------- --------------
Total noninterest expense 1,788,791 1,690,940 5,443,644 4,891,089
--------------- -------------- -------------- --------------
Income before provision for income taxes 1,558,061 1,342,286 4,298,436 3,895,759
Provision for income taxes 620,471 533,090 1,711,468 1,553,413
--------------- -------------- -------------- --------------
Net Income $937,590 $809,196 $2,586,968 $2,342,346
=============== ============== ============== ==============
Earnings per share:
Basic $0.31 $0.27 $0.86 $0.78
Diluted $0.31 $0.27 $0.86 $0.78
Average common shares outstanding:
Basic 3,019,342 3,010,793 3,016,021 3,007,993
Diluted 3,027,489 3,024,720 3,026,634 3,023,278
Dividends per share: $0.125 $0.125 $0.38 $0.37
See Notes to Condensed Consolidated Financial Statements
2
Abigail Adams National Bancorp, Inc. and Subsidiary
Condensed Consolidated Statements of Changes in Stockholders' Equity
Nine Months Ended September 30, 2004 and 2003
(Unaudited)
Accumulated
Additional Other
Common Paid-in Retained Treasury Comprehensive
Stock Capital Earnings Stock Income (loss) Total
------------- --------------- --------------- --------------- --------------- -- -------------
Balance at December 31, 2002 30,211 $17,185,310 $3,886,313 ($98,349) $188,356 $21,191,841
Comprehensive income:
Net income -- -- 2,342,346 -- -- 2,342,346
Change in net unrealized gain on
investment securities available for
sale, net of taxes of $(219,466) -- -- -- -- (321,310) (321,310)
-------------
Total comprehensive income -- -- -- -- -- 2,021,036
-------------
Dividends declared ($0.37 per share) -- -- (1,097,742) -- -- (1,097,742)
Issuance of shares under Stock Option
Programs 97 55,833 -- -- -- 55,930
-------------- --------------- --------------- --------------- --------------- -- -------------
Balance at September 30, 2003 $30,308 $17,241,143 $5,130,917 ($98,349) ($132,954) $22,171,065
============== =============== =============== =============== =============== == =============
Balance at December 31, 2003 $30,308 $17,241,143 $5,578,431 ($98,349) $123,549 $22,875,082
Comprehensive income:
Net income -- -- 2,586,968 -- -- 2,586,968
Change in net unrealized loss
on investment securities available
for sale, net of taxes of ($134,128) -- -- -- -- (196,371) (196,371)
-------------
Total comprehensive income -- -- -- -- -- 2,390,597
Dividends declared ($0.38 per share) -- -- (1,131,203) -- -- (1,131,203)
Redemption of shares under ESOP -- -- -- (14,739) -- (14,739)
Issuance of shares under Stock
Option Programs 66 36,291 -- -- -- 36,357
-------------- --------------- --------------- --------------- --------------- -- -------------
Balance at September 30, 2004 $30,374 $17,277,434 $7,034,196 ($113,088) ($72,822) 24,156,094
============== =============== =============== =============== =============== == =============
See Notes to Condensed Consolidated Financial Statements
3
Abigail Adams National Bancorp, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2004 and 2003
(Unaudited)
2004 2003
------------- ---------------
Cash flows from operating activities:
Net income $2,586,968 $2,342,346
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses 315,000 471,065
Depreciation and amortization 222,268 220,128
Accretion of loan discounts and fees (178,563) (177,801)
Gain on sale of investment securities (87,381) (70,052)
Net discount (accretion)/premium amortization on investment securities 74,152 70,392
Decrease in other assets 224,290 426,237
Increase in other liabilities 396,019 522
------------- ---------------
Net cash provided by operating activities 3,552,753 3,282,837
------------- ---------------
Cash flows from investing activities:
Proceeds from maturities of investment securities held to maturity 2,000,000 11,000,000
Proceeds from maturities of investment securities available for sale -- 18,500,000
Proceeds from repayment of mortgage-backed securities held to maturity 794,876 1,416,886
Proceeds from repayment of mortgage-backed securities available for sale 1,121,224 1,892,095
Proceeds from the sale of investment securities available for sale 3,707,807 1,000,000
Purchase of investment securities held to maturity (3,976,000) (16,499,375)
Purchase of investment securities available for sale (8,862,783) (36,599,870)
Net (increase) decrease in interest-bearing deposits in other banks 4,881,762 (20,991,401)
Net (increase) decrease in loans (11,381,977) 6,914,222
Purchase of premises and equipment, net 91,369 (496,357)
------------- ---------------
Net cash used in investing activities (11,623,722) (33,863,800)
------------- ---------------
Cash flows from financing activities:
Net increase in transaction and savings deposits 8,516,464 22,874,057
Net increase (decrease) in time deposits 885,419 (6,766,640)
Net decrease in short-term borrowings (1,489,061) (1,005,512)
Repayment of Federal Home Loan Bank borrowings (2,676,600) (469,685)
Proceeds from Federal Home Loan Bank borrowings -- 10,000,000
Proceeds from issuance of common stock, net of expenses 36,357 55,930
Payment of distributions from ESOP (14,739) --
Cash dividends paid to common stockholders (1,131,203) (1,097,742)
------------- ---------------
Net cash provided by financing activities 4,126,637 23,590,408
------------- ---------------
Net decrease in cash and cash equivalents (3,944,332) (6,990,555)
Cash and cash equivalents at beginning of year 18,437,169 15,976,161
------------- ---------------
Cash and cash equivalents at end of period $14,492,837 $8,985,606
============= ===============
Supplementary disclosures:
Interest paid on deposits and borrowings $1,419,856 $1,495,010
============= ===============
Income taxes paid $1,585,000 $1,020,000
============= ===============
See Notes to Condensed Consolidated Financial Statements
4
Abigail Adams National Bancorp, Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
1. Basis of presentation
Abigail Adams National Bancorp, Inc. (the "Company") is the parent company of
The Adams National Bank (the "Bank"). As used herein, the term Company includes
the Bank, unless the context otherwise requires.
The Company prepares its consolidated financial statements on the accrual basis
and in conformity with accounting principles generally accepted in the United
States, the instructions for Form 10-Q, and regulation S-X. The accompanying
financial statements are unaudited except for the balance sheet at December 31,
2003, which was derived from the audited consolidated financial statements as of
that date. The unaudited information furnished herein reflects all adjustments
(consisting of normal recurring accruals) which are, in the opinion of
management, necessary to a fair statement of the results for the interim periods
presented. These statements should be read in conjunction with the consolidated
financial statements and accompanying notes included with the Company's 2003
Annual Report to Stockholders, since they do not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America. Operating results for the nine months ended September 30,
2004 (unaudited) are not necessarily indicative of the results that may be
expected for the year ending December 31, 2004. Certain reclassifications may
have been made to amounts previously reported for 2003 to conform with the 2004
presentation.
2. Contingent Liabilities
In the normal course of business, there are various outstanding commitments and
contingent liabilities, such as commitments to extend credit and standby letters
of credit that are not reflected in the accompanying consolidated financial
statements. No material losses are anticipated as a result of these
transactions. There were no material changes in outstanding commitments or
contingent liabilities, since December 31, 2003.
3. Earnings per share
Basic earnings per share computations are based upon the weighted average number
of shares outstanding during the periods. Diluted earnings per share
computations are based upon the weighted average number of shares outstanding
during the period plus the dilutive effect of outstanding stock options and
stock performance awards. The following table provides a reconciliation between
the computation of basic EPS and diluted EPS:
For the 3 months For the 9 months
ended September 30 ended September 30
------------------------------- -------------------------------
2004 2003 2004 2003
------------- -------------- ------------- --------------
Weighted Average Shares 3,019,342 3,010,793 3,016,021 3,007,993
Effect of dilutive stock options 8,147 13,927 10,613 15,285
------------- -------------- ------------- --------------
Dilutive potential average common shares 3,027,489 3,024,720 3,026,634 3,023,278
============= ============== ============= ==============
4. Stock-based compensation plans
At September 30, 2004, the Company has five stock-based compensation plans. The
Company continues to account for grants under its stock option plans based on
the recognition and measurement principals of APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. There were no new
stock-based compensation plans issued during the periods presented.
5. Securities
The amortized cost and estimated fair value of investment securities to be held
to maturity and investment securities available for sale at September 30, 2004
and December 31, 2003 are as follows:
5
Amortized Gross Gross Estimated
Unrealized Unrealized Fair
Cost Basis Gains Losses Value
------------- ------------- -------------- --------------
September 30, 2004:
Investment Securities - available for
sale:
U.S. government agencies and
corporations $17,995,975 $19,780 $85,017 $17,930,738
Mortgage-backed securities 6,747,213 22,971 62,233 6,707,951
Marketable equity securities 9,572,180 172,526 190,588 9,554,118
------------- ------------- -------------- --------------
Total $34,315,368 $215,277 $337,838 $34,192,807
============= ============= ============== ==============
Investment Securities - held to
maturity:
U.S. government agencies and
corporations $13,477,137 38,348 46,240 $13,469,245
Mortgage-backed securities 1,645,276 2,657 2,032 1,645,901
------------- ------------- -------------- --------------
Total $15,122,413 $41,005 $48,272 $15,115,146
============= ============= ============== ==============
December 31, 2003:
Investment Securities - available for
sale:
U.S. government agencies and $12,000,000 $13,900 $123,760 $11,890,140
corporations
Mortgage-backed securities 7,897,502 17,049 94,937 7,819,614
Marketable equity securities 10,350,790 460,929 65,244 10,746,475
------------- ------------- -------------- --------------
Total $30,248,292 $491,878 $283,941 $30,456,229
============= ============= ============== ==============
Investment Securities - held to
maturity:
U.S. government agencies and $11,499,462 $21,343 $76,860 $11,443,945
corporations
Mortgage-backed securities 2,461,922 331 4,529 2,457,724
------------- ------------- -------------- --------------
Total $13,961,384 $21,674 $81,389 $13,901,669
============= ============= ============== ==============
The fair value of investment securities with unrealized losses by length of time
that the individual securities have been in a continuous loss position at
September 30, 2004, is presented in the following table:
Continuous unrealized losses existing for:
(Dollars in thousands) less than 12 months greater than 12 months Total
--------------------------- ---------------------------- -------------------------
Fair Value Unrealized Fair Value Unrealized Fair Value Unrealized
Losses Losses Losses
------------- ------------- ------------ --------------- ------------ ------------
U.S. government agencies $7,913 $88 $1,956 $44 $9,869 $132
Mortgage-backed securities 1,006 2 2,873 62 3,879 64
Equity securities 3,231 96 1,946 94 5,177 190
------------- ------------- ------------ --------------- ------------ ------------
Total $12,150 $186 $6,775 $200 $18,925 $386
============= ============= ============ =============== ============ ============
The unrealized losses that existed at September 30, 2004, are the result of
market changes in interest rates, since the securities' purchase. The unrealized
losses associated with these investments are considered temporary as the Company
has both the intent and ability to hold these investment securities for a period
of time sufficient to allow for any anticipated recovery in fair value.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Abigail Adams National Bancorp, Inc. (the "Company") is the parent of The Adams
National Bank (the "Bank"), a national bank with six full-service branches
located in the greater metropolitan Washington, D.C. area. The Company reports
its financial results on a consolidated basis with the Bank.
The following analysis of financial condition and results of operations should
be read in conjunction with the Company's Consolidated Financial Statements and
Notes thereto for the year ended December 31, 2003.
6
Results of Operations
Overview
The Company recorded net income of $938,000 for the three months ended September
30, 2004, as compared to $809,000 for the third quarter of 2003. Diluted
earnings per share were $0.31 and $0.27 for the third quarter of 2004 and 2003,
respectively. The 15.9% increase in net income compared to the same quarter last
year was predominantly due to a 15.6% increase in net interest income. The
return on average assets was 1.56% and the return on average equity was 15.69%
for the third quarter of 2004, compared to a return on average assets of 1.47%
and a return on average equity of 14.53% for the same period last year.
The Company recorded net income for the first nine months of 2004 of $2,587,000,
or $0.86 per share diluted, for an annualized return on average assets of 1.52%
and an annualized return on average equity of 14.78%. Net income for the current
year increased 10.4%, as compared to the same period in 2003. In comparison, net
income for the nine months ended September 30, 2003 was $2,342,000 or $0.78 per
share diluted, with a return on average assets of 1.50% and a return on average
equity of 14.30%. The increase in net income in 2004 compared to 2003 was
predominately due to a 12.4% increase in net interest income combined with a
33.1% decrease in the provision for loan losses and was offset by a 11.3%
increase in nonoperating expenses and a 10.6% decrease in noninterest income.
Book value per share was $8.00 at September 30, 2004, an increase of $0.64 from
the book value per share of $7.36 at September 30, 2003. The key components of
net income are discussed in the following paragraphs.
Analysis of Net Interest Income
Net interest income, which is the sum of interest and certain fees generated by
earning assets minus interest paid on deposits and other funding sources, is the
principal source of the Company's earnings. Net interest income for the quarter
ended September 30, 2004 increased 15.6% to $2,994,000 from $2,590,000 for the
third quarter of 2003. The growth in net interest income was attributable to the
growth in average earning assets. Average loans increased 8.9% to $162,229,000,
compared to $149,008,000 for the third quarter of 2003. Average investment
securities increased 12.7% to $46,239,000 compared to $41,023,000 in the prior
year. The yield on average assets was 6.10%, an increase of 16 basis points from
the third quarter of 2003.
Average interest bearing liabilities increased 4.8% to $151,443,000 in the third
quarter of 2004 compared to the third quarter of 2003. The cost of
interest-bearing funds decreased 14 basis points to 1.31%, as compared to 1.45%
for the third quarter of 2003. The decrease in the cost of interest-bearing
funds was due to the repricing of existing deposits at lower interest rates.
Our net interest margin, which is net interest income as a percentage of average
interest-earning assets, was 5.22% for the third quarter of 2004, an increase of
29 basis points from 4.93% for the third quarter of 2003. The net interest
spread, which is the difference between the average interest rate earned on
interest-earning assets and interest paid on interest-bearing liabilities, was
4.79% for the third quarter of 2004, reflecting an increase of 30 basis points
from the 4.49% reported in the third quarter of 2003.
The net interest income for the first nine months of 2004 totaled $8,688,000, an
increase of $961,000 or 12.4%, as compared to $7,727,000 for the same period in
2003. Average earning assets increased 9.1% to $217,146,000, as compared to
$199,005,000 reported last year. Earning assets were funded with a 4.7% increase
in the Company's average interest-bearing liabilities and a 23.9% increase in
noninterest-bearing deposits. The improvement in the net interest income was a
result of the increase in average earning assets combined with a decrease in the
cost of interest-bearing liabilities. The net interest spread was 4.90% and the
net interest margin was 5.34% for the first nine months of 2004, reflecting an
increase of 18 basis points in net interest spread and an increase of 15 basis
points in net interest margin, compared to the same period in 2003.
The following table presents the average balances, net interest income and
interest yields/rates for the third quarter and the year-to-date periods of 2004
and 2003.
7
Distribution of Assets, Liabilities and Stockholders' Equity Yields and Rates
For the Three Months Ended September 30, 2004 and 2003
(Dollars in thousands)
2004 2003
------------------------------- --------------------------------
Interest Interest
Average Income/ Average Average Income Average
Balances Expense Rates Balances Expense Rates
---------- ---------- --------- ---------- ---------- ----------
Assets
Loans (1) $162,229 $2,915 7.13% $149,008 $2,634 7.01%
Investment securities 46,239 516 4.43% 41,023 444 4.29%
Federal funds sold 10,390 34 1.30% 8,835 19 0.85%
Interest-earning bank balances 8,555 29 1.34% 9,565 23 0.95%
---------- ---------- ---------- ----------
Total earning assets 227,413 3,494 6.10% 208,431 3,120 5.94%
---------- ---------- ---------- ----------
Allowance for loan losses (2,366) (2,344)
Cash and due from banks 8,392 7,186
Other assets 4,913 4,657
---------- ----------
Total assets $238,352 $217,930
========== ==========
Liabilities and Stockholders' Equity
Savings, NOW and money market
accounts 88,933 203 0.91% $79,935 196 0.97%
Certificates of deposit 49,892 223 1.77% 47,481 244 2.04%
Short term borrowings 3,350 5 0.59% 6,710 12 0.71%
Long-term debt 9,268 69 2.95% 10,399 78 2.98%
---------- ---------- ---------- ----------
Total interest-bearing 151,443 500 1.31% 144,525 530 1.45%
liabilities
---------- ---------- ---------- ----------
Noninterest-bearing deposits 61,928 50,037
Other liabilities 1,277 1,269
Stockholders' equity 23,704 22,099
---------- ----------
Total liabilities and
stockholders' equity $238,352 $217,930
========== ==========
Net interest income 2,994 $2,590
========== ==========
Net interest spread 4.79% 4.49%
Net interest margin 5.22% 4.93%
(1) The loan averages are stated net of unearned income and include loans on
which the accrual of interest has been discontinued.
8
Distribution of Assets, Liabilities and Stockholders' Equity Yields and Rates
For the Nine Months Ended September 30, 2004 and 2003
(Dollars in thousands)
2004 2003
------------------------------- --------------------------------
Interest Interest
Average Income/ Average Average Income Average
Balances Expense Rates Balances Expense Rates
---------- ---------- --------- ---------- ---------- ----------
Assets
Loans (1) $159,077 $8,472 7.11% $151,388 $8,101 7.15%
Investment securities 45,904 1,534 4.46% 32,396 1,108 4.57%
Federal funds sold 5,151 46 1.19% 7,906 60 1.01%
Interest-earning bank balances 7,014 60 1.14% 7,315 58 1.06%
---------- ---------- ---------- ----------
Total earning assets 217,146 10,112 6.22% 199,005 9,327 6.27%
---------- ---------- ---------- ----------
Allowance for loan losses (2,257) (2,356)
Cash and due from banks 8,018 7,456
Other assets 4,906 4,595
---------- ----------
Total assets $227,813 $208,700
========== ==========
Liabilities and Stockholders' Equity
Savings, NOW and money market
accounts $82,512 544 0.88% $74,895 596 1.06%
Certificates of deposit 48,335 651 1.80% 48,511 787 2.17%
Short term borrowings 3,828 16 0.56% 6,731 40 0.79%
Long-term debt 9,641 213 2.95% 7,712 177 3.06%
---------- ---------- ---------- ----------
Total interest-bearing 144,316 1,424 1.32% 137,849 1,600 1.55%
liabilities
---------- ---------- ---------- ----------
Noninterest-bearing deposits 58,858 47,513
Other liabilities 1,262 1,431
Stockholders' equity 23,377 21,907
---------- ----------
Total liabilities and $227,813 $208,700
stockholders' equity
========== ==========
Net interest income $8,688 $7,727
========== ==========
Net interest spread 4.90% 4.72%
Net interest margin 5.34% 5.19%
(1) The loan averages are stated net of unearned income and include loans on
which the accrual of interest has been discontinued.
Noninterest Income
Total noninterest income consists primarily of service charges on deposits and
other fee-based services, as well as gains on the sales of investment securities
and loans. Noninterest income decreased 14.1% in the third quarter of 2004 to
$458,000 from $533,000 reported in the third quarter of 2003. Service charges on
deposit accounts totaled $350,000, a decrease of 16.7% from the prior year total
of $420,000. The decrease in service charge income was predominantly due to a
lower level of overdraft and ATM fees. Other income, consisting of other
fee-based services and the gain on the sale of loans, decreased in the third
quarter of 2004 by 16.4% to $61,000, compared to $73,000 reported for the third
quarter of 2003. The gain on sale of the guaranteed portion of SBA loans totaled
$13,000 and was $21,000 less in the third quarter of 2004 than 2003. The gain on
the sale of investment securities for the third quarter of 2004 was $47,000,
compared to $41,000 recognized in 2003.
Total noninterest income for the nine months ended September 30, 2004 was
$1,369,000, a decrease of $162,000 or 10.6%, compared to $1,531,000 for the same
period in 2003. Service charges decreased $99,000 to a total of $1,165,000,
compared the same period last year, due predominantly to a decrease in the level
of overdraft and ATM fees. Other income totaled $117,000, which was a decrease
of $80,000, compared $197,000 reported for the first nine months of 2003. The
9
gain on the sale of the guaranteed portion of SBA loans was $17,000 less than
the prior year period. The gain on the sale of investment securities was $87,000
for the first nine months of 2004, as compared to $70,000 for the same period in
2003.
Noninterest Expense
Total noninterest expense for the third quarter of 2004 totaled $1,789,000, an
increase of 5.8% or $98,000, as compared to $1,691,000 reported for third
quarter of 2003. Salaries and benefits expense increased 10.6% to $918,000,
compared to $830,000, due to increased staffing and the related cost of
benefits. Professional fees increased 33.8% to a total of $91,000, compared to
$68,000 for the third quarter of 2003, as a result of an increase in legal fees.
Data processing fees decreased 34.8% to $75,000, compared to $115,000, as a
result of a temporary decrease in core processing fees. Other operating expense
totaling $367,000 increased 9.2% or $31,000 in the third quarter of 2004
compared to 2003. The efficiency ratio improved in the third quarter of 2004 to
51.8%, compared to 54.1% for the same period in 2003.
Total noninterest expense for the nine months ended September 30, 2004 increased
$553,000 or 11.3% to $5,444,000, as compared to $4,891,000 for the same period
in 2003. The Company's efficiency ratio was 54.1%, up from the 52.8% reported in
2003, as a result of the decrease in noninterest income combined with the
increase in noninterest expense. Salaries and benefit expense increased $276,000
or 11.3% to a total of $2,711,000, due to additional staff and the related
benefit expense. Professional fees increased 54.8% to $288,000, as a result of
an increase in legal fees. Occupancy and equipment increased 7.0% to $1,011,000,
due the expenses associated with opening a branch office in September 2003. Data
processing expense increased slightly in 2004 to $339,000. All other operating
expenses increased 10.7% to $1,094,000, as compared to $988,000 reported for the
same period in 2003.
Income Tax Expense
Income tax expense totaled $620,000 for the third quarter ended September 30,
2004, an increase of 16.3% from the income tax expense reported for the third
quarter of 2003. The increase in income tax expense was a result of the 16.1%
increase in the Company's pretax income, as compared to the third quarter of
2003. The effective tax rate for the third quarter of 2004 was 39.8%, compared
to 39.7% for the third quarter of 2003.
Income tax expense for the first nine months ended September 30, 2004 increased
$158,000 or 10.2% to a total of $1,711,000, compared to the same period in 2003,
as a result of an increase in pretax net income. The Company's effective tax
rate was 39.8%, as compared to 39.9% for the same period in 2003.
Financial Condition
Overview
Total assets were $238,819,000 at September 30, 2004, compared to $231,906,000
at December 31, 2003, an increase of $6,913,000 or 3.0%. The increase in total
assets was primarily attributable to a 7.4% increase in loans and an 11.0%
increase in investment securities. Total liabilities increased 2.7% or
$5,632,000 to $214,663,000, primarily due to an increase in deposits. Total
stockholders' equity increased 5.6% to $24,156,000, as compared to December 31,
2003. The book value per share of common stock issued and outstanding at
September 30, 2004 was $8.00, compared to $7.59 at December 31, 2003.
Loans
Total loans outstanding at September 30, 2004 increased 7.4% or $11,583,000 from
December 31, 2003 to a balance of $167,617,000. Commercial real estate loans
grew 14.6% from the previous year-end, while commercial loan balances remained
flat. Loan originations during the first nine months of 2004 showed signs of
improvement as compared to the same period in 2003.
Investments securities
Investment securities available-for-sale are carried at estimated fair value and
totaled $34,193,000 at September 30, 2004, an increase of $3,737,000 or 12.3%
from the balance at December 31, 2003. Investment securities classified as
held-to-maturity were $15,122,000 at September 30, 2004, an increase of
$1,161,000 or 8.3% from the December 31, 2003 balance totaling $13,961,000.
10
Short-term investments
Short-term investments consisting of federal funds and interest earning deposits
in banks totaled $11,605,000, a decrease of 38.3% from the total of $18,821,000
at December 31, 2003. Short-term funds were used in part to fund the growth in
loans and investment securities.
Deposits
Deposits are the Company's primary source of funds. Total deposits increased
4.9% or $9,402,000 to $202,158,000 at September 30, 2004, as compared to
December 31, 2003. Noninterest-bearing deposits totaled $61,221,000, an increase
of $4,392,000 or 7.7% from the previous year-end. Interest-bearing deposits were
$140,937,000, a 3.7% increase from the balance of $135,928,000 at December 31,
2003. The largest increase in interest bearing accounts were the NOW accounts,
with a 13.6% increase compared to December 31, 2003.
Short-term borrowings
Short-term borrowings consisting of repurchase agreements decreased $1,489,000
or 27.6% to a balance of $3,901,000 at September 30, 2004, compared to December
31, 2003.
Long-term debt
Long-term debt consisted of term loans from the Federal Home Loan Bank of
Atlanta ("FHLB") and totaled $7,354,000 at September 30, 2004, a decrease of
$2,676,000 from the previous year-end, as a result of the repayment of a matured
advance and scheduled payments.
Stockholders' Equity
Stockholders' equity at September 30, 2004 was $24,156,000, an increase of
$1,281,000 or 5.6% from December 31, 2003. The increase was primarily due to
earnings of $2,587,000, less the dividends paid on the Company's common stock
totaling $1,131,000, combined with the change in the unrealized loss on
available-for-sale investment securities totaling $196,000.
Asset Quality
Loan Portfolio and Adequacy of the Allowance for Loan Losses
Management believes the allowance for loan losses accounting policy is critical
to the portrayal and understanding of our financial condition and results of
operations. As such, selection and application of this "critical accounting
policy" involves judgments, estimates, and uncertainties that are susceptible to
change. In the event that different assumptions or conditions were to prevail,
and depending upon the severity of such changes, the possibility of materially
different financial condition or results of operations is a reasonable
likelihood.
The Company manages the risk characteristics of its entire loan portfolio in an
effort to maintain an adequate allowance for loans losses and identify problem
loans so that the risks in the portfolio can be identified on a timely basis.
Management performs a periodic analysis of risk factors that includes the
primary sources of repayment on individual loans, liquidity and financial
condition of borrowers and guarantors, and the adequacy of collateral. Loans
subject to individual reviews are analyzed and segregated by risk according to
the Company's internal risk rating scale. Management also considers the
character of the loan portfolio, changes in nonperforming and past-due loans,
historical loss experience, concentrations of loans to specific borrowers and
industries, and general and regional economic conditions, as well as other
factors existing at the determination date. This review takes into account the
judgment of the individual loan officers, the credit risk manager, senior
management and the Board of Directors. The Company also has an independent loan
review performed by an outside consultant periodically throughout the year.
Although credit policies are designed to minimize risk, management recognizes
that loan losses will occur and that the amount of these losses will fluctuate
depending on the risk characteristics of the loan portfolio.
The allowance for loan losses is established through provisions for loan losses
as a charge to earnings based upon management's ongoing evaluation. The
provision for loan losses for the nine months ended September 30, 2004 was
$315,000, compared to $471,000 for the same period in 2003. The balance of the
allowance for loan losses was $2,457,000 or 1.47% of total loans at September
30, 2004, compared to $2,119,000 or 1.36% of loans at December 31, 2003. Net
loan recoveries were $23,000 in 2004. During 2003, the weaken economic
environment had adversely impacted the cash flows of some of our small
commercial and commercial real estate borrowers, and as a result the Company
11
experienced an increase in nonperforming loans. The increase in the provision is
intended to address known and inherent losses that are both probable and
estimable at September 30, 2004. While historical losses have been modest, the
current economic conditions of the market area and the concentration of loans in
the higher risk classifications (e.g. commercial and industrial, and commercial
real estate mortgages) warrant maintenance of the allowance for loan losses at
its current level. Management believes that the allowance for loan losses at
September 30, 2004 is adequate given past experience and the underlying
assessment of the Company's loan portfolio.
The following table presents an analysis of the allowance for loan losses at
September 30, 2004 and December 31, 2003.
2004 2003
---------- ----------
(Dollars in thousands)
---------- --- ----------
Balance at beginning of period $2,119 $2,297
Loans charged off:
Commercial 81 829
Real estate - commercial -- --
Real estate - residential -- --
Construction and development -- --
Installment - individuals 3 4
---------- ----------
Total charge-offs 84 833
---------- ----------
Recoveries:
Commercial 106 23
Real estate - commercial -- --
Real estate - residential -- --
Construction and development -- --
Installment - individuals 1 41
---------- ----------
Total recoveries 107 64
---------- ----------
Net (recoveries) charge-offs (23) 769
---------- ----------
Provision for loan losses 315 591
---------- ----------
Balance at end of period $2,457 $2,119
========== ==========
Ratio of net (recoveries)
charge-offs to average loans (0.01%) 0.51%
Nonperforming Assets
Nonperforming assets include nonaccrual loans, restructured loans, past-due
loans and other real estate owned. Past due loans are loans that are 90 days or
more delinquent and still accruing interest. There was one loan past-due and
still accruing interest at September 30, 2004 totaling $332,000, compared to no
loans past-due at December 31, 2003. Total nonperforming loans decreased at
September 30, 2004 to $2,270,000, with balances of $1,436,000 guaranteed by the
SBA. Nonperforming loans represented 1.09% of total assets. In comparison,
nonperforming loans at December 31, 2003 were 1.24% of total assets and totaled
$2,873,000, with balances of $1,665,000 guaranteed by the SBA. The largest
nonperforming loans are a commercial SBA loan with a balance of $570,000 and a
commercial real estate loan with a balance of $307,000.
The following table presents nonperforming assets by category at September 30,
2004 and December 31, 2003.
2004 2003
---------- ----------
(Dollars in thousands)
-------------------------
Nonaccrual loans:
Commercial $1,852 $2,133
Real Estate 418 740
Installment - individuals --
---------- ----------
Total nonaccrual loans 2,270 2,873
---------- ----------
Past-due loans:
Commercial 332 --
---------- ----------
Total nonperforming assets $2,602 $2,873
========== ==========
Nonperforming assets exclusive of SBA guarantee $894 $1,208
Ratio of nonperforming assets to gross loans 1.55% 1.84%
Ratio of nonperforming assets to total assets 1.09% 1.24%
Allowance for loan losses to nonperforming assets 94% 74%
Loans totaling $6,710,000 and $7,290,000 at September 30, 2004 and December 31,
2003, respectively, were classified as monitored credits subject to management's
attention and are not reported in the preceding table. The classifications of
the monitored credits are reviewed on a quarterly basis. The balances of the
monitored credits guaranteed by the SBA totaled $1,951,000 and $1,552,000 as of
September 30, 2004 and December 31, 2003, respectively.
12
Liquidity and Capital Resources
Liquidity
Liquidity is a product of the Company's operating, investing, and financing
activities and is represented by cash and cash equivalents. Principal sources of
funds are from deposits, short and long term debt, principal and interest
payments on outstanding loans, maturity of investment securities, and funds
provided from operations. Overall, net cash and cash equivalents decreased for
the period ended September 30, 2004 to a balance of $14,493,000, as compared to
the balance of $18,437,000 at December 31, 2003. Liquid assets represented 6.07%
of total assets at September 30, 2004, as compared to 7.95% of total assets at
December 31, 2003.
The Company has additional sources of liquidity available through unpledged
investment securities available-for-sale totaling $28,746,000, and unsecured
lines of credit available from correspondent banks, which can provide up to
$16,000,000, as well as a credit facility through its membership in the FHLB of
Atlanta.
Capital Resources
Capital levels are monitored by management on a quarterly basis in relation to
financial forecasts for the year and regulatory requirements. The Company and
the Bank continue to maintain a strong capital position. The following table
presents the Company's and the Bank's capital position relative to their various
minimum statutory and regulatory capital requirements at September 30, 2004. The
Company and the Bank are considered "well-capitalized" under regulatory
guidelines.
Company Bank
------------------------- ------------------------- Minimal Capital
Amount Ratio Amount Ratio Requirements
---------- ----------- ----------- ---------- ---------------------
(Dollars in thousands)
Leverage ratio $24,229 10.17% $23,873 10.02% 4.00%
Tier 1 risk-based ratio 24,229 12.50% 23,873 12.33% 4.00%
Total risk-based ratio 26,650 13.75% 26,544 13.71% 8.00%
Forward Looking Statements
When used in this Form 10-Q, 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, among
other things, changes in economic conditions in the Company's market area,
changes in policies by regulatory agencies, fluctuations in interest rates,
demand for loans in the Company's market areas 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 results 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.
13
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to various market risks in the normal course of
conducting its' business. Market risk is the potential loss arising from adverse
changes in interest rates, prices, and liquidity. The Company has established
the Asset/Liability Committee (ALCO) to monitor and manage those risks. ALCO
meets periodically and is responsible for approving asset/liability policies,
formulating and implementing strategies to improve balance sheet and income
statement positioning, and monitoring the interest rate sensitivity. The Company
manages its interest rate risk sensitivity through the use of a simulation model
that projects the impact of rate shocks, rate cycles, and rate forecast
estimates on the net interest income and economic value of equity (the net
present value of expected cash flows from assets and liabilities). These
simulations provide a test for embedded interest rate risk and takes into
consideration factors such as maturities, reinvestment rates, prepayment speeds,
repricing limits, decay rates and other factors. The results are compared to
risk tolerance limits set by ALCO policy. Based on the Company's most recent
interest rate sensitivity analysis, the impact to the net interest income and
economic value of equity are well within the tolerance limits for both a rising
or declining interest rate environment and sensitivity to market risk is
moderate.
Item 4 - Controls and Procedures
As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of the principal
executive officer and principal financial officer, of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation,
the principal executive officer and principal financial officer concluded that
the Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms. There was no change in the Company's internal control over financial
reporting during the Company's most recently completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
PART II.
Item 1 - Legal Proceedings
None
Item 2- Changes in Securities, Use of Proceeds, and Issuer Purchases of
Equity Securities
None
Item 3- Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 31.1 Certification of the Chief Executive Officer
Exhibit 31.2 Certification of the Chief Financial Officer
Exhibit 32 Certification of Chief Executive Officer and
Chief Financial Officer
14
(b) Reports on Form 8-K
The Company filed a Form 8-K on October 25, 2004 to report
that the Company had issued a press release announcing
earnings for the three month period ending September 30,
2004.
The Company filed a Form 8-K on July 23, 2004 to report that
the Company had issued a press release announcing earnings
for the three month period ending June 30, 2004.
The Company filed a Form 8-K on May 3, 2004 to report that
the Company had issued a press release announcing earnings
for the three month period ending March 31, 2004.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
ABIGAIL ADAMS NATIONAL BANCORP, INC.
-------------------------------------
Registrant
Date: November 12, 2004 /s/ Jeanne D. Hubbard
----------------- ---------------------------------
Jeanne D. Hubbard
Chairwoman of the Board,
President and Director
(Principal Executive Officer)
15
Exhibit 31.1
I, Jeanne D. Hubbard, President and Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Abigail Adams
National Bancorp;
2. Based on my knowledge, this 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
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 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-15 (e) and 15d-15(e)) for the registrant and we
have:
a) designed such disclosure controls and procedures, or caused such
disclosures and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made know to us by others within
those entities, particularly during the period in which this report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any changes in the registrant's internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth quarter in the case of
an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: November 12, 2004 /s/ Jeanne D. Hubbard
------------------- ------------------------------------
Jeanne D. Hubbard
President and Chief Executive Officer
16
Exhibit 31.2
I, Karen E. Troutman, Sr. Vice President and Chief Financial Officer, certify
that:
1. I have reviewed this quarterly report on Form 10-Q of The Abigail Adams
National Bancorp;
2. Based on my knowledge, this 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
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 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-15 (e) and 15d-15(e)) for the registrant and we
have:
a) designed such disclosure controls and procedures, or caused such
disclosures and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made know to us by others within
those entities, particularly during the period in which this report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any changes in the registrant's internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth quarter in the case of
an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: November 12, 2004 /s/ Karen E. Troutman
------------------ ----------------------------------
Karen E. Troutman
Sr. Vice President and
Chief Financial Officer
17
Exhibit 32
Certification of Chief Executive Officer and Chief Financial Officer
Jeanne D. Hubbard, President and Chief Executive Officer, and Karen E. Troutman,
Senior Vice President and Chief Financial Officer of Abigail Adams National
Bancorp, Inc. (the "Company") each certify in her capacity as an officer of the
Company that she has reviewed the quarterly report on Form 10-Q for the quarter
ended September 30, 2004 and that to the best of her knowledge:
(1) the report fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934; and
(2) the information contained in the report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
The purpose of this statement is solely to comply with Title 18, Chapter 63,
Section 1350 of the United States Code, as amended by Section 906 of the
Sarbanes-Oxley Act of 2002.
Date: November 12, 2004 /s/ Jeanne D. Hubbard
----------------- --------------------------
Jeanne D. Hubbard
Chief Executive Officer
Date: November 12, 2004 /s/ Karen E. Troutman
----------------- --------------------------
Karen E. Troutman
Chief Financial Officer
18