Back to GetFilings.com
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED COMMISSION FILE NUMBER
MARCH 31, 2003 0-24630
MAHASKA INVESTMENT COMPANY
(Exact Name of Registrant as Specified in its Charter)
IOWA 42-1003699
(State of Incorporation) (I.R.S. Employer Identification No.)
222 First Avenue East, Oskaloosa, Iowa 52577
Telephone Number (641) 673-8448
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months 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 X No______
-----
As of April 30, 2003, there were 3,878,446 shares of common stock $5 par value
outstanding.
PART I -- Item 1. Financial Statements
MAHASKA INVESTMENT COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(unaudited)
(dollars in thousands) March 31, December 31,
2003 2002
--------- ------------
ASSETS
Cash and due from banks ...................................................... $ 14,504 $ 11,441
Interest-bearing deposits in banks ........................................... 3,549 2,662
Federal funds sold ........................................................... 5,689 1,950
--------- ------------
Cash and cash equivalents ................................................ 23,742 16,053
--------- ------------
Investment securities:
Available for sale ....................................................... 95,250 91,193
Held to maturity (fair value of $15,442 as of March 31, 2003
and $17,511 as of December 31, 2002) ................................... 14,715 16,671
Loans ........................................................................ 367,176 306,024
Allowance for loan losses .................................................... (4,643) (3,967)
--------- ------------
Net loans ................................................................ 362,533 302,057
--------- ------------
Loan pool participations ..................................................... 85,982 82,341
Premises and equipment, net .................................................. 9,468 8,376
Accrued interest receivable .................................................. 4,924 4,403
Goodwill ..................................................................... 12,976 9,351
Other intangible assets ...................................................... 1,509 1,034
Other assets ................................................................. 7,486 6,303
--------- ------------
Total assets ........................................................... $ 618,585 $ 537,782
========= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand ................................................................... $ 35,509 $ 29,236
NOW and Super NOW ........................................................ 60,341 44,848
Savings .................................................................. 109,998 102,358
Certificates of deposit .................................................. 254,409 219,104
--------- ------------
Total deposits ......................................................... 460,257 395,546
Federal funds purchased ...................................................... 7,975 1,500
Federal Home Loan Bank advances .............................................. 69,259 69,293
Notes payable ................................................................ 8,300 -
Long-term debt ............................................................... 10,310 10,310
Other liabilities ............................................................ 6,619 5,435
--------- ------------
Total liabilities ...................................................... 562,720 482,084
--------- ------------
Shareholders' equity:
Common stock, $5 par value; authorized 20,000,000 shares; issued
4,912,849 shares as of March 31, 2003 and December 31, 2002............. 24,564 24,564
Capital surplus .......................................................... 12,936 12,942
Treasury stock at cost, 1,018,286 shares as of March 31, 2003,
and 982,341 shares as of December 31, 2002 ............................. (12,566) (11,963)
Retained earnings ........................................................ 29,085 28,375
Accumulated other comprehensive income ................................... 1,846 1,780
--------- ------------
Total shareholders' equity ............................................. 55,865 55,698
--------- ------------
Total liabilities and shareholders' equity ............................. $ 618,585 $ 537,782
========= ============
See accompanying notes to consolidated financial statements.
PART I -- Item 1. Financial Statements, Continued
MAHASKA INVESTMENT COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited) Three Months Ended
(dollars in thousands, except per share amounts) March 31,
------------------------
2003 2002
----------- ------------
Interest income:
Interest and fees on loans .............................................................. $5,793 $5,856
Interest and discount on loan pool participations ....................................... 2,159 2,697
Interest on bank deposits ............................................................... 3 6
Interest on federal funds sold .......................................................... 19 17
Interest on investment securities:
Available for sale .................................................................... 992 699
Held to maturity ...................................................................... 225 319
----------- -----------
Total interest income ............................................................... 9,191 9,594
----------- -----------
Interest expense:
Interest on deposits:
NOW and Super NOW ..................................................................... 61 74
Savings ............................................................................... 369 477
Certificates of deposit ............................................................... 2,334 2,440
Interest on federal funds purchased ..................................................... 8 14
Interest on Federal Home Loan Bank advances ............................................. 971 1,319
Interest on notes payable ............................................................... 47 100
Interest on long-term debt .............................................................. 132 -
----------- -----------
Total interest expense .............................................................. 3,922 4,424
----------- -----------
Net interest income ................................................................. 5,269 5,170
Provision for loan losses ................................................................... 160 260
----------- -----------
Net interest income after provision for loan losses ................................. 5,109 4,910
----------- -----------
Noninterest income:
Service charges ......................................................................... 551 511
Data processing income .................................................................. 57 57
Mortgage origination fees ............................................................... 170 121
Other operating income .................................................................. 216 191
----------- -----------
Total noninterest income ............................................................ 994 880
----------- -----------
Noninterest expense:
Salaries and employee benefits .......................................................... 2,138 1,711
Net occupancy ........................................................................... 662 532
Professional fees ....................................................................... 123 172
Other intangible asset amortization ..................................................... 79 72
Other operating expense ................................................................. 875 967
----------- -----------
Total noninterest expense ........................................................... 3,877 3,454
----------- -----------
Income before income tax expense .................................................... 2,226 2,336
Income tax expense .......................................................................... 887 849
----------- -----------
Net income .......................................................................... $1,339 $1,487
=========== ===========
Earnings per common share - basic ........................................................... $.0.34 $.0.38
Earnings per common share - diluted ......................................................... $.0.33 $.0.38
Dividends per common share .................................................................. $.0.16 $.0.16
See accompanying notes to consolidated financial statements.
PART I -- Item 1. Financial Statements, Continued
MAHASKA INVESTMENT COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited) Three Months Ended
(in thousands) March 31,
------------------------
2003 2002
----------- -----------
Net income ........................................................................... $1,339 $1,487
Other Comprehensive Income:
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during
the period, net of tax ....................................................... 66 (405)
----------- -----------
Other comprehensive income (loss), net of tax ........................................ 66 (405)
----------- -----------
Comprehensive income ................................................................. $1,405 $1,082
=========== ===========
See accompanying notes to consolidated financial statements.
PART I -- Item 1. Financial Statements, Continued
MAHASKA INVESTMENT COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) Three Months Ended
(dollars in thousands) March 31,
------------------------
2003 2002
----------- -----------
Cash flows from operating activities:
Net income ................................................................. $ 1,339 $ 1,487
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................................ 428 369
Provision for loan losses ................................................ 160 260
Amortization of investment securities and loans premiums ................. 250 94
Accretion of investment securities and loan discounts .................... (53) (62)
Decrease (increase) in other assets ...................................... 195 (175)
Increase in other liabilities ............................................ 212 380
----------- -----------
Net cash provided by operating activities .............................. 2,531 2,353
----------- -----------
Cash flows from investing activities:
Investment securities available for sale:
Proceeds from maturities ................................................. 1,740 3,529
Purchases ................................................................ (5,523) (14,747)
Investment securities held to maturity:
Proceeds from maturities ................................................. 1,979 1,064
Purchases ................................................................ - (244)
Net (increase) decrease in loans ........................................... (238) 8,335
Purchases of loan pool participations ...................................... (15,006) (8,397)
Resale of loan pool participations ......................................... 113 -
Principal recovery on loan pool participations ............................. 11,252 10,260
Purchases of premises and equipment ........................................ (279) (194)
Proceeds from sale of premises and equipment ............................... - 21
Proceeds from acquisition .................................................. 2,523 -
----------- -----------
Net cash used in investing activities .................................. (3,439) (373)
----------- -----------
Cash flows from financing activities:
Net increase in deposits ................................................... 1,771 9,280
Net increase (decrease) in federal funds purchased ......................... 6,475 (10,650)
Federal Home Loan Bank advances ............................................ - 1,000
Repayment of Federal Home Loan Bank advances ............................... (4,038) (18)
Advances on notes payable .................................................. 8,800 3,000
Principal payments on notes payable ........................................ (3,173) -
Dividends paid ............................................................. (629) (619)
Purchases of treasury stock ................................................ (640) (63)
Proceeds from exercise of stock options .................................... 31 -
----------- -----------
Net cash provided by financing activities .............................. 8,597 1,930
----------- -----------
Net increase in cash and cash equivalents .............................. 7,689 3,910
Cash and cash equivalents at beginning of period ............................... 16,053 15,837
----------- -----------
Cash and cash equivalents at end of period ..................................... $ 23,742 $ 19,747
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ................................................................. $ 3,967 $ 1,463
=========== ===========
Income taxes ............................................................. $ 95 $ 219
=========== ===========
See accompanying notes to consolidated financial statements.
1. Basis of Presentation
The accompanying consolidated statements of income, the consolidated
statements of comprehensive income, and the consolidated statements of
cash flow for the three months ended March 31, 2003 and 2002 and the
consolidated statements of condition as of December 31, 2002 and March
31, 2003 include the accounts and transactions of Mahaska Investment
Company (the "Company") and its five wholly-owned subsidiaries, Mahaska
State Bank, Central Valley Bank, Pella State Bank, Midwest Federal
Savings and Loan, Belle Plaine Service Corp., and MIC Financial, Inc.
All material intercompany balances and transactions have been
eliminated in consolidation.
The accompanying consolidated financial statements have been prepared
by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and
regulations. Although management believes that the disclosures are
adequate to make the information presented not misleading, it is
suggested that these interim consolidated financial statements be read
in conjunction with the Company's most recent audited financial
statements and notes thereto. In the opinion of management, the
accompanying consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as of March 31, 2003, and the results of
operations for the three months ended March 31, 2003 and 2002, and cash
flows for the three months ended March 31, 2003 and 2002.
The results for the three months ended March 31, 2003 may not be
indicative of results for the year ending December 31, 2003, or for any
other period.
2. Consolidated Statements of Cash Flows
In the consolidated statements of cash flows, cash and cash equivalents
include cash and due from banks, interest-bearing deposits in banks,
and federal funds sold.
3. Income Taxes
Federal income tax expense for the three months ended March 31, 2003
and 2002 was computed using the consolidated effective federal tax
rate. The Company also recognized income tax expense pertaining to
state franchise taxes payable individually by the subsidiary banks.
4. Earnings Per Common Share
Basic earnings per common share computations are based on the weighted
average number of shares of common stock actually outstanding during
the period. The weighted average number of shares for the three-month
periods ended March 31, 2003 and 2002 was 3,914,174 and 3,871,038,
respectively. Diluted earnings per share amounts are computed by
dividing net income by the weighted average number of shares and all
dilutive potential shares outstanding during the period. The
computation of diluted earnings per share used a weighted average
number of shares outstanding of 4,014,405 and 3,937,121 for the three
months ended March 31, 2003 and 2002, respectively.
5. Effect of New Financial Accounting Standards
In June 2001, The Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 143,
"Accounting for Asset Retirement Obligations." SFAS No. 143 requires
the Company to record the fair value of an asset retirement obligation
as a liability in the period in which it incurs a legal obligation
associated with the retirement of tangible long-lived assets that
result from the acquisition, construction, development, and/or normal
use of the assets. The Company also records a corresponding asset,
which is depreciated over the life of the asset. The Company adopted
SFAS No. 143 on January 1, 2003 with no material effect on its
financial statements.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections." SFAS No. 145 amends existing guidance on
reporting gains and losses on the extinguishment of debt to prohibit
the classification of the gain or loss as extraordinary, as the use of
such extinguishments have become part of the risk management strategy
of many companies. SFAS No. 145 also amends SFAS No. 13 to require
sale-leaseback accounting for certain lease modifications that have
economic effects similar to sale-leaseback transactions. The provisions
of the Statement related to the rescission of SFAS No. 4 are applied in
fiscal years beginning after May 15, 2002. The provisions of the
Statement related to SFAS No. 13 were effective for transactions
occurring after May 15, 2002. The adoption of SFAS No. 145 did not have
a material effect on the Company's financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This Statement addresses
financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force ("EITF")
Issue No 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs
Incurred in a Restructuring)." The provisions of this Statement are
effective for exit and disposal activities that are initiated after
December 31, 2002. The effect of this Statement is not material.
In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions," which amends SFAS No. 72, "Accounting for
Certain Acquisitions of Banking or Thrift Institutions" and no longer
requires the separate recognition and subsequent amortization of
goodwill that was originally required by SFAS No. 72. SFAS No. 147 also
amended SFAS No. 144, "Accounting for Impairment or Disposal of
Long-Lived Assets," to include in its scope long-term
customer-relationship intangible assets (such as core deposit
intangibles). For the nine months of 2002 prior to the issuance and
adoption of SFAS No. 147, the Company had continued to amortize
unidentifiable intangible assets in accordance with the provisions of
SFAS No. 72. The adoption of SFAS No. 147 on October 1, 2002, permitted
the Company to cease this amortization through the remaining three
months of 2002 and reverse the amortization recorded from January 1,
2002 through September 30, 2002 in the amount of $335,000.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees Including
Indirect Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45
requires disclosures be made by a guarantor in its interim and annual
financial statements about its obligations under certain guarantees
that it has issued. It also requires the recognition of a liability by
a guarantor at the inception of certain guarantees that is has issued
and that a guarantor recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing
the guarantee. The initial recognition and initial measurement
provisions of this Interpretation are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. The
disclosure requirements are effective for financial statements of
interim or annual periods ending after December 15, 2002. The adoption
of FIN 45 did not have a material effect on the Company's financial
statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure, an amendment of
FASB Statement No. 123." This Statement amends FASB No. 123,
"Accounting for Stock-Based Compensation," to provide alternative
methods of transition for a voluntary change to the fair value method
of accounting for stock-based employee compensation. In addition, this
Statement amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures of both annual and interim financial statements.
Certain of the disclosure modification are required for fiscal years
ending after December 15, 2002. The Company has not adopted the
voluntary change to the fair value based method of accounting for
stock-based employee compensation as of March 31, 2003.
In January 2003, the FASB issued interpretation No. 46, "Consolidation
of Variable Interest Entities" ("FIN 46"). FIN 46 addresses
consolidation by business enterprises of variable interest entities
that have certain characteristics. It requires a business enterprise
that has a controlling interest in a variable interest entity (as
defined by FIN 46) to include the assets, liabilities, and results of
the activities of the variable interest entity in the consolidated
financial statements of the business enterprise. FIN 46 applies
immediately to variable interest entities created after January 31,
2003, and to variable interest entities in which an enterprise obtains
and interest after that date. For variable interests acquired before
February 1, 2003, it applies in the first fiscal year or interim
period beginning after June 15, 2003. The impact of adopting FIN 46
will not be material as the Company does not presently have any
variable interest entities.
6. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting
principles generally accepted in the united states of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates. A significant
estimate that is particularly sensitive to change is the allowance for
loan losses.
7. Acquisition of Belle Plaine Service Corp.
On February 1, 2003, the Company effectively completed its acquisition
of the Belle Plaine Service Corp. and its wholly-owned subsidiary
Citizens Bank and Trust Company of Hudson, Iowa. The acquisition was
treated as a purchase transaction in accordance with FASB Statements
No. 141 and No. 142. The following table summarizes the assets acquired
and liabilities assumed as of February 1, 2003:
Assets: Amount
Investment Securities 380
Loans (net of allowance) 60,402
Fixed Assets 1,120
Other Assets 11,521
Goodwill 4,179
Total Assets 77,602
Liabilities:
Deposits 62,940
Fed Home Loan Bank Advances 3,956
Notes Payable 2,673
Other Liabilities 934
Total Liabilities 70,503
8. Stock Incentive Plan
The Company has a stock incentive plan under which up to 750,000
shares of common stock are reserved for issuance pursuant to options
or other awards which may be granted to officers, key employees and
certain nonaffiliated directors of the Company. The exercise price of
each option equals the market price of the Company's stock on the date
of grant. The option's maximum term is ten years, with vesting
occurring at the rate of thirty-three percent on the one-year
anniversary of the date of grant, sixty-six percent vesting on the
two-year anniversary, and one hundred percent vesting on the
three-year anniversary of the date of the grant. The Company applies
APB Opinion No. 25 and related interpretations in accounting for this
plan. Accordingly, no compensation cost has been recognized in the
financial statements for the stock options.
Had compensation cost for the Company's stock incentive plan been
determined in accordance with FASB Statement No. 123, "Accounting for
Stock-Based Compensation," the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated
below:
3 Months Ended March 31
2003 2002
---- ----
Net income (dollars in thousands):
As reported $1,339 1,487
Pro forma $1,293 1,479
Earnings per share:
As reported--basic $.34 $.38
As reported--diluted $.33 $.38
Pro forma--basic $.33 $.37
Pro forma--diluted $.33 $.37
PART I -- Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
QUARTER ENDED MARCH 31, 2003
The Company consummated its acquisition of the Belle Plaine Service Corp.
("BPSC") and its wholly-owned subsidiary Citizens Bank & Trust Company ("CB&T")
effective February 1, 2003. The acquisition was accounted for as a purchase
transaction in accordance with Financial Accounting Standards Board ("FASB")
Statement No. 141, with the results of operations for the first quarter of 2003
including income and expense of the acquired entities for the months of February
and March 2003. Assets and liabilities acquired are reflected in the March 31,
2003 statement of condition.
The Company recorded net income of $1,339,000 for the quarter ended March 31,
2003, compared with net income of $1,487,000 for the quarter ended March 31,
2002, a decrease of $148,000 or 10 percent. The decrease in net income was
primarily due to a narrowing of the net interest margin and higher non-interest
expense. Basic earnings per share for the first quarter of 2003 were $.34 versus
$.38 for the first quarter of 2002. Diluted earnings per share were $.33 in 2003
and $.38 for the first quarter of 2002. Net income and earnings per share for
the first quarter of 2002 have been restated to reflect the adoption of FASB
Statement No. 147 on October 1, 2002, which allowed the Company to cease
amortization of goodwill retroactive to January 1, 2002. Actual weighted average
shares outstanding were 3,914,174 and 3,871,038 for the first quarter of 2003
and 2002, respectively. The Company's return on average assets for the quarter
ended March 31, 2003 was .93 percent compared with a return of 1.12 percent for
the quarter ended March 31, 2002. The Company's return on average equity was
9.60 percent for the three months ended March 31, 2003 versus 11.75 percent for
the three months ended March 31, 2002.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income is computed by subtracting total interest expense from total
interest income. Fluctuations in net interest income can result from the changes
in the volumes of assets and liabilities as well as changes in interest rates.
Market interest rates on a national and local level remained relatively constant
during the first quarter of 2003. The Company's net interest income for the
quarter ended March 31, 2003 increased $99,000 or 2 percent to $5,269,000 from
$5,170,000 for the three months ended March 31, 2002. Total interest income was
$403,000 or 4 percent lower in the first quarter of 2003 compared with the same
period in 2002 primarily due to reduction in interest rates. The Company's total
interest expense for the first quarter of 2003 decreased $502,000 or 11 percent
compared with the same period in 2002 due to the lower interest rate
environment. The Company's net interest margin on a federal tax-equivalent basis
for the first quarter of 2003 decreased to 3.99 percent from 4.21 percent in the
first quarter of 2002. Net interest margin is a measure of the net return on
interest-earning assets and is computed by dividing annualized net interest
income by the average of total interest-earning assets for the period. The net
interest margin declined as the increase in net interest income was
proportionately less than the increase
in average earning assets. The Company's overall yield on earning assets
declined to 6.91 percent for the first quarter of 2003 compared with 7.76
percent for the first quarter of 2002. The rate on interest-bearing liabilities
decreased in the first quarter of 2003 to 3.25 percent compared to 3.91 percent
for the first quarter of 2002.
Interest income and fees on loans decreased $63,000 or 1 percent in the first
quarter of 2003 compared to the same period in 2002, due to a combination of
lower interest rates and lower average loan volumes. The average yield on loans
decreased to 6.88 percent for the first quarter of 2003, compared to 7.50
percent in the first quarter of 2002. Excluding the loans acquired with the
addition of CB&T, average loans were $14,659,000 or 5 percent lower in the first
quarter of 2003 compared with 2002. The yield on the Company's loan portfolio is
affected by the amount of nonaccrual loans (which do not earn interest income),
the mix of the portfolio (real estate loans generally have a lower overall yield
than commercial and agricultural loans), the effects of competition and the
interest rate environment on the amounts and volumes of new loan originations,
and the mix of variable rate versus fixed rate loans in the Company's portfolio.
The lower interest rates were not beneficial to the Company as variable rate
loans tied to prime were adjusted downward and produced less interest income.
Renewing fixed-rate loans have been rewritten at lower rates reflecting the
market interest rate environment. Additionally, many of the borrowers have
refinanced their real estate mortgages outside the Company to take advantage of
long-term fixed-rate loans. The Company has typically not retained this type of
loan in its portfolio in order to reduce interest rate risk. New loan demand by
customers in the market areas served by the Company has become "soft" as general
economic conditions have deteriorated and potential borrowers are less willing
to increase their debt load.
Interest and discount income on loan pool participations decreased $538,000 or
20 percent in the first quarter of 2003 compared with 2002, as a result of lower
volume of loan pool participations. Interest income and discount collected on
the loan pool participations for the three months ended March 31, 2003 was
$2,159,000 compared with $2,697,000 collected in the first quarter of 2002. The
10.3 percent yield on loan pool participations was consistent in the first
quarter of 2003 and 2002. The average loan pool participation investment balance
was $21,707,000 or 20 percent lower in the first quarter of 2003 than in 2002.
Collections, loan sales, and fewer purchases of loan pools in 2002 and the first
quarter of 2003 all contributed to the reduced volume of pools. These loan pool
participations are pools of performing and distressed and nonperforming loans
that the Company has purchased at a discount from the aggregate outstanding
principal amount of the underlying loans. Income is derived from this investment
in the form of interest collected and the repayment of the principal in excess
of the purchase cost which is herein referred to as "discount recovery." The
Company recognizes interest income and discount recovery on its loan pool
participations on a cash basis. The loan pool participations have traditionally
been a high-yield activity for the Company, but this yield has fluctuated from
period to period based on the amount of cash collection, discount recovery, and
net collection expenses of the servicer in any given period. The income and
yield on loan pool participations may vary in future periods due to the volume
and discount rate on loan pools purchased.
Interest income on investment securities increased $199,000 or 20 percent in the
quarter ended March 31, 2003, compared with the quarter ended March 31, 2002 due
to increased volume in the portfolio. Interest income on investment securities
totaled $1,217,000 for the first quarter of 2003 compared with $1,018,000 in
2002. The average balance of investments in 2003 was $108,031,000, up from
$75,247,000 in the first quarter of 2002. Investment volume increased as loan
and loan pool volumes declined. The yield on the Company's investment portfolio
in the first quarter of 2003 decreased to 4.83 percent from 5.89 percent in the
comparable period of 2002 reflecting new purchases and reinvestment of maturing
securities at lower market interest rates.
Interest expense on deposits was $227,000 less in the first quarter of 2003
compared with 2002 mainly due to the lowered national and local market interest
rate environment. Average interest-bearing deposits for the first quarter of
2003 were $47,744,000 greater compared with the same period in 2002, primarily
due to the acquisition of CB&T. The weighted average rate paid on
interest-bearing deposits was 2.79 percent in the first quarter of 2003 compared
with 3.42 percent in the first quarter of 2002. The full benefit of lower market
deposit rates may not be realized if the competitive environment forces the
Company to pay above-market rates to attract or retain deposits in future
periods.
Interest expense on borrowed funds was $275,000 less in the first quarter of
2003 compared with 2002, primarily due to the lower interest rate environment
and the reduction in Federal Home Loan Bank advances. Interest expense on
Federal Home Loan Bank advances was $348,000 lower in the first quarter of 2003
reflecting the Company's paydown of advances. Interest expense on notes payable
decreased $53,000 in the first quarter of 2003 compared with 2002 reflecting
lower average borrowings on the Company's commercial bank line of credit. The
Company's notes payable line is variable with the national prime rate and any
changes in this rate will affect the amount of interest expense incurred in
future periods. Interest expense on the trust preferred borrowings totaled
$132,000 for the current year quarter. This liability was not present in the
first quarter of 2002.
Provision for Loan Losses
The Company recorded a provision for loan losses of $160,000 in the first
quarter of 2003 compared with $260,000 in the first quarter of 2002. Management
determines an appropriate provision based on its evaluation of the adequacy of
the allowance for loan losses in relationship to a continuing review of problem
loans, the current economic conditions, actual loss experience and industry
trends. Management believes that the allowance for loan losses is adequate based
on the inherent risk in the portfolio as of March 31, 2003, however, growth in
the loan portfolio and the uncertainty of the general economy require that
management continue to evaluate the adequacy of the allowance for loan losses
and make additional provisions in future periods as deemed necessary.
Other Income
Other income results from the charges and fees collected by the Company from its
customers for various services performed, data processing income received from
nonaffiliated banks, miscellaneous other income and gains (or losses) from the
sale of investment securities held in the available for sale category. Total
other income was $114,000 or 13 percent greater in the first quarter of 2003
compared with 2002. Most of the increase was due to higher service charge income
and origination fees for loans sold on the secondary market.
Other Expense
Total other noninterest expense for the quarter ended March 31, 2003 was
$423,000 greater compared to noninterest expense for the first quarter of 2002.
Other expense includes all the costs incurred to operate the Company except for
interest expense, the loan loss provision and income taxes. Salaries and
benefits expense for the first quarter of 2003 was $427,000 or 25 percent
greater compared with 2002 as a result of increased salary levels, performance
compensation expense and health insurance costs, plus the costs related to
additional employees of the acquired institution. Occupancy expense increased by
$130,000 in the first quarter of 2003 compared with the three months ended March
31, 2002 due to the acquired institution and due to higher maintenance costs of
data processing equipment.
Income Tax Expense
The Company incurred income tax expense of $887,000 for the three months ended
March 31, 2003 compared with $849,000 for the three months ended March 31, 2002.
The effective income tax rate as a percent of income before taxes for the three
months ended March 31, 2003 and 2002 was 39.8 percent and 36.3 percent,
respectively.
FINANCIAL CONDITION
Total assets as of March 31, 2003 were $618,585,000 compared with $537,782,000
as of December 31, 2002, an increase of $80,803,000. Included in the March 31,
2003 total was $75,746,000 attributable to BPSC. As of March 31, 2003, the
Company had $5,689,000 in federal funds sold and $7,975,000 federal funds
purchased compared with $1,950,000 sold and $1,500,000 purchased as of December
31, 2002. The Company's liquidity needs are usually highest in the second and
third quarters of each year due to seasonal loan demand and minimal deposit
growth in the first nine months of the year. Federal funds are purchased on a
short-term basis to meet this liquidity need.
Investment Securities
Investment securities available for sale totaled $95,250,000 as of March 31,
2003. This is an increase of $4,057,000 from December 31, 2002 as securities
were purchased for the portfolio. Investment securities classified as held to
maturity declined to $14,715,000 as of March 31, 2003, compared with $16,671,000
on December 31, 2002, as the proceeds from maturities were reinvested in
available for sale securities.
Loans
Total loans were $367,176,000 as of March 31, 2003, compared with $306,024,000
as of December 31, 2002, an increase of $61,152,000. CB&T loans totaled
$60,228,000 as of March 31, 2003. Minimal loan growth was noted in the first
quarter of 2003 as loan demand remained stagnant. As of March 31, 2003, the
Company's loan to deposit ratio (excluding loan pool investments) was 79.8
percent compared with a year-end 2002 loan to deposit ratio of 77.4 percent. The
increase in the loan to deposit ratio is attributable to the greater loan to
deposit ratio of CB&T. As of March 31, 2003, loans secured by real estate
(including 1 to 4 family, multi-family, commercial and agricultural) comprised
the largest category in the portfolio at approximately 65 percent of total
loans. Agricultural loans and commercial loans were each approximately 16
percent of total loans. Loans to individuals and other loans constituted
approximately 3 percent.
Loan Pool Participations
As of March 31, 2003, the Company had loan pool participations of $85,982,000,
an increase of $3,641,000 or 4 percent from the December 31, 2002 balance of
$82,341,000. The increase in the loan pool participations is the result of
purchases of loan pools during the first quarter of $15,006,000, which was
offset by collections during the period. The loan pool investment balance shown
as an asset on the Company's Statement of Condition represents the discounted
purchase cost of the loan pool participations. The average loan pool
participation balance of $84,705,000 for the first three months of 2003 was
$21,707,000 or 20 percent lower than the average balance of $106,412,000 for the
first quarter of 2002. Collections in excess of new purchases throughout 2002
resulted in the lower average balance.
Goodwill and Other Intangible Assets
Goodwill increased to $12,976,000 as of March 31, 2003 from $9,351,000 as of
December 31, 2002, reflecting the excess of the purchase price over the fair
value of the assets acquired of BPSC and its subsidiary CB&T. Total goodwill
from the transaction was $3,625,000. Other intangible assets consist of core
deposit intangibles. A valuation study was performed by an independent entity to
determine the estimated value and useful life of the core deposit intangible
related to the acquisition of BPSC. The estimated value was determined to be
$554,000 and the estimated life was 10 years. The estimated value of the core
deposit intangible will be amortized utilizing an accelerated method over the
estimated life of the deposit base. The Company has additional core deposit
intangibles from previous acquisitions that it is currently amortizing in a
similar manner.
Deposits
Total deposits as of March 31, 2003 were $460,257,000 compared with $395,546,000
as of December 31, 2002, an increase of $64,711,000. Total deposits of CB&T were
$60,994,000 as of March 31, 2003. Certificates of deposit remain the largest
category of deposits at March 31, 2003 representing approximately 55 percent of
total deposits. Excluding the acquired CB&T, deposits grew 1 percent during the
first quarter of 2003.
Borrowed Funds/Notes Payable
The Company had $7,975,000 in Federal Funds purchased on March 31, 2003. There
was $1,500,000 in Federal Funds purchased on December 31, 2002. During the first
quarter of 2003, the Company had an average balance of Federal Funds purchased
of $2,169,000. Advances from the Federal Home Loan Bank totaled $69,259,000 as
of March 31, 2003 compared with $69,293,000 as of December 31, 2002. Notes
payable increased to $8,300,000 on March 31, 2003 to fund the acquisition of
BPSC. The Company had no borrowings on its notes payable line as of December 31,
2002. Long-term debt was $10,310,000 as of March 31, 2003 and December 31, 2002.
Nonperforming Assets
The Company's nonperforming assets totaled $4,658,000 (1.27 percent of total
loans) as of March 31, 2003, compared to $2,778,000 (.91 percent of total loans)
as of December 31, 2002. All nonperforming asset totals and related ratios
exclude the loan pool participations. The following table presents the
categories of nonperforming assets as of March 31, 2003 compared with December
31, 2002:
Nonperforming Assets
(dollars in thousands)
March 31, December 31,
2003 2002
---- ----
Nonaccrual $1,208 $1,038
Loans 90 days past due 2,575 1,401
Troubled debt restructurings 755 206
Other real estate owned 120 133
------ ------
$4,658 $2,778
====== ======
Nonperforming assets acquired from CB&T as of March 31, 2003, were as follows:
nonaccrual - $102,000, loans 90 days past due - none, troubled debt
restructurings - $549,000, and other real estate owned - none. From December 31,
2002 to March 31, 2003, the Company's nonaccrual loans increased $68,000. Loans
ninety days past due increased $1,174,000 mainly due to delays in renewing
agricultural lines of credit attributable to the departure of an ag loan
officer. Other real estate owned decreased by $13,000 as one piece of property
held in
this category was sold. The Company's allowance for loan losses as of March 31,
2003 was $4,643,000, which was 1.26 percent of total loans as of that date. This
compares with an allowance for loan losses of $3,967,000 as of December 31,
2002, which was 1.30 percent of total loans. The allowance for loan losses
increased $676,000 during the quarter, with $604,000 of the increase
attributable to the acquired CB&T. As of March 31, 2003, the allowance for loan
losses was 99.68 percent of nonperforming loans compared with 142.80 percent as
of December 31, 2002. Based on the inherent risk in the loan portfolio,
management believes that as of March 31, 2003, the allowance for loan losses is
adequate. For the three months ended March 31, 2003, the Company's net loan
charge-offs were $91,000 compared with net charge-offs of $41,000 during the
quarter ended March 31, 2002.
Capital Resources
Total shareholders' equity was 9.0 percent of total assets as of March 31, 2003
and 10.4 percent of December 31, 2002. The decrease in shareholders' equity to
assets was due to the acquisition, which was done with cash. No additional
shares were issued. The Company's Tier 1 Capital Ratio was 12.0 percent of
risk-weighted assets as of March 31, 2003 and was 14.7 percent as of December
31, 2002, compared to a 4.0 percent regulatory requirement. Risk-based capital
guidelines require the classification of assets and some off-balance-sheet items
in terms of credit-risk exposure and the measuring of capital as percentage of
the risk-adjusted asset totals. Tier 1 Capital is the Company's total common
shareholders' equity plus the trust preferred security reduced by goodwill.
Management believes that, as of March 31, 2003, the Company and its subsidiary
banks meet all capital adequacy requirements to which they are subject. As of
that date, all the bank subsidiaries were "well capitalized" under regulatory
prompt corrective action provisions. During the first quarter of 2003, the
Company repurchased 39,000 shares of common stock on the open market in
accordance with the terms of its previously-approved stock repurchase
authorization. On February 20, 2003, the board of directors authorized the
extension of the Company's stock repurchase program of up to five percent of the
outstanding shares through December 31, 2003. Based on the total shares
outstanding as of the date the repurchase was originally authorized, a total of
196,525 shares could be repurchased. Through March 31, 2003, a total of 59,000
shares have been repurchased by the Company. A total of 3,055 shares were issued
during the quarter for options exercised under previously-awarded grants. A cash
dividend of $.16 per share was paid to shareholders on March 17, 2003.
Liquidity
Liquidity management involves meeting the cash flow requirements of depositors
and borrowers. The Company conducts liquidity management on both a daily and
long-term basis; and it adjusts its investments in liquid assets based on
expected loan demand, projected loan maturities and payments, estimated cash
flows from the loan pool participations, expected deposit flows, yields
available on interest-bearing deposits, and the objectives of its
asset/liability management program. The Company had liquid assets (cash and cash
equivalents) of $23,742,000 as of March 31, 2003, compared with $16,053,000 as
of December 31, 2002. Most of the increase during the quarter was in cash and
due from banks and in federal funds sold. Investment securities classified as
available for sale
could be sold to meet liquidity needs if necessary. Additionally, the bank
subsidiaries maintain lines of credit with correspondent banks and the Federal
Home Loan Bank that would allow them to borrow federal funds on a short-term
basis if necessary. The Company also maintains a line of credit with a major
commercial bank that provides liquidity for the purchase of loan pool
participations and other corporate needs. Management believes that the Company
has sufficient liquidity as of March 31, 2003 to meet the needs of borrowers and
depositors.
Commitments and Contingencies
In the ordinary course of business, the Company is engaged in various issues
involving litigation. Management believes that none of this litigation is
material to the Company's results of operations.
Critical Accounting Policies
The Company has identified two critical accounting policies and practices
relative to the financial condition and results of operation. These two
accounting policies relate to the allowance for loan losses and to loan pool
accounting.
The allowance for loan losses is based on management's opinion, and is adequate
to absorb losses in the existing portfolio. In evaluating the portfolio,
management takes into consideration numerous factors, including current economic
conditions, prior loan loss experience, the composition of the loan portfolio,
and management's estimate of probable credit losses. The allowance for loan loss
is established through a provision for loss based on management's evaluation of
the risk inherent in the loan portfolio, the composition of the portfolio,
specific impaired loans, and current economic conditions. Such evaluation, which
includes a review of all loans on which full collectibility may not be
reasonably assured, considers among other matters, the estimated net realizable
value or the fair value of the underlying collateral, economic conditions,
historical loss experience, and other factors that warrant recognition in
providing for an adequate allowance for loan loss.
The loan pool accounting practice relates to management's opinion that the
investment amount reflected on the Company's financial statements does not
exceed the estimated net realizable value or the fair value of the underlying
collateral securing the purchased loans. In evaluating the purchased loan
portfolio, management takes into consideration many factors, including the
borrowers' current financial situation, the underlying collateral, current
economic conditions, historical collection experience, and other factors
relative to the collection process.
In the event that management's evaluation of the level of the allowance for loan
losses is inadequate, the Company would need to increase its provision for loan
losses. If the estimated realizable value of the loan pool participations is
understated, the Company's yield on the loan pools would be reduced.
Part I - Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Market risk is the risk of earnings volatility that results from adverse changes
in interest rates and market prices. The Company's market risk is primarily
comprised of interest rate risk arising from its core banking activities of
lending and deposit taking. Interest rate risk is the risk that changes in
market interest rates may adversely affect the Company's net interest income.
Management continually develops and applies strategies to mitigate this risk.
The Company has not experienced any material changes to its market risk position
since December 31, 2002, from that disclosed in the Company's 2002 Form 10-K
Annual Report. Management does not believe that the Company's primary market
risk exposures and how those exposures were managed in the first three months of
2003 changed when compared to 2002.
The Company uses a third-party computer software simulation modeling program to
measure its exposure to potential interest rate changes. For various assumed
hypothetical changes in market interest rates, numerous other assumptions are
made such as prepayment speeds on loans and securities backed by mortgages, the
slope of the Treasury yield curve, the rates and volumes of the Company's
deposits and the rates and volumes of the Company's loans. This analysis
measures the estimated change in net interest income in the event of
hypothetical changes in interest rates. This analysis of the Company's interest
rate risk was presented in the Form 10-K filed by the Company for the year ended
December 31, 2002.
Part I - Item 4. Controls and Procedures.
Within the 90-day period prior to the filing of this report, an evaluation was
carried out under the supervision and with the participation of the Company's
management, including the Chief Executive Officer ("CEO") and Chief Financial
Officer ("CFO"), of the effectiveness or our disclosure controls and procedures.
Based on that evaluation, the CEO and CFO have 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 Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within time periods specified in Securities and Exchange Commission
rules and forms. Subsequent to the date of their evaluation, there were no
significant changes in the Company's internal controls, including any corrective
actions with regard to significant deficiencies and material weaknesses.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
With the exception of the historical information contained in this report, the
matters described herein contain forward-looking statements that involve risk
and uncertainties that individually or mutually impact the matters herein
described, including but not limited to financial projections, product demand
and market acceptance, the effect of economic conditions, the impact of
competitive products and pricing, governmental regulations, results of
litigation, technological difficulties and/or other factors outside the control
of the Company, which are detailed from time to time in the Company's SEC
reports. The Company disclaims any intent or obligation to update these
forward-looking statements.
Part II - Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits and financial statement schedules are filed as part
of this report:
Exhibits
--------
3.1 Articles of Incorporation, as amended through April 30, 1998,
of Mahaska Investment Company. The Articles of Incorporation,
as amended, of Mahaska Investment Company are incorporated by
reference to the Company's quarterly report on Form 10-Q for
the quarter ended September 30, 1998.
3.2 Bylaws of Mahaska Investment Company. The Amended and Restated
Bylaws of Mahaska Investment Company dated July 23, 1998, are
incorporated by reference to the Company's quarterly report on
Form 10-Q for the Quarter ended September 30, 1998.
10.1 Mahaska Investment Company Employee Stock Ownership Plan &
Trust as restated and amended. This Plan & Trust is
incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.
10.2.1 1993 Stock Incentive Plan. This 1993 Stock Incentive Plan is
incorporated by reference to Form S-1 Registration Number
33-81922 of Mahaska Investment Company.
10.2.2 1996 Stock Incentive Plan. This 1996 Stock Incentive Plan is
incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
10.2.3 1998 Stock Incentive Plan. This 1998 Stock Incentive Plan is
incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
10.3 States Resources Corp. Loan Participation and Servicing
Agreement dated February 5, 1999 between States Resources
Corp. and Mahaska Investment Company. This agreement is
incorporated herein by reference to the Form 10-K report filed
by Mahaska Investment Company for the Year ended December 31,
1999.
10.5 Amended and Restated Credit Agreement dated June 30, 2000
between Mahaska Investment Company and Harris Trust and
Savings Bank. This Amended and Restated Credit Agreement is
incorporated herein by reference to the Form 10-Q report filed
by Mahaska Investment Company for the Quarter ended September
30, 2000.
10.5.1 Second Amendment to Amended and Restated Credit agreement
dated October 15, 2002 between Mahaska Investment Company and
Harris Trust and Savings Bank. This amendment is incorporated
herein by reference to the Form 10-K report filed by Mahaska
Investment Company for the Year ended December 31, 2002.
10.6 Stock Purchase Agreement By and Between Mahaska Investment
Company and Belle Plaine Service Corp. dated October 4, 2002.
This agreement is incorporated herein by reference to the Form
10-K report filed by Mahaska Investment Company for the Year
ended December 31, 2002.
11 Computation of Per Share Earnings.
99.1 Certification of Chief Executive Officer pursuant to 18
USC (S) 1350.
99.2 Certification of Chief Financial Officer pursuant to 18
USC (S) 1350.
(b) Reports on Form 8-K: No reports on Form 8-K were required to be filed
during the three months ended March 31, 2003.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Mahaska Investment Company
--------------------------
(Registrant)
By:/s/ Charles S. Howard
---------------------
Charles S. Howard
Chairman, President, Chief Executive
Officer
May 9, 2003
-----------
Dated
By:/s/ David A. Meinert
--------------------
David A. Meinert
Executive Vice President
and Chief Financial Officer
(Principal Accounting Officer)
May 9, 2003
-----------
Dated
CERTIFICATION
I, Charles S. Howard, President and Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Mahaska
Investment Company;
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 statement made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as 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 officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were 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.
May 9, 2003
- -----------
Date
/s/ Charles S. Howard
---------------------
Charles S. Howard
President and Chief Executive Officer
CERTIFICATION
I, David A. Meinert, Executive Vice President and Chief Financial
Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Mahaska
Investment Company;
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 statement made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as 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 officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were 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.
May 9, 2003
- -----------
Date
/s/ David A. Meinert
--------------------
David A. Meinert
Executive Vice President and Chief Financial Officer