The Company (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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
The Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)
The number of outstanding shares of Common Stock of Fidelity D & D Bancorp, Inc. at April 30, 2003, the latest practicable date was 1,824,913 shares.
PART I. FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheet as of March 31, 2003
and December 31, 2002 3
Consolidated Statement of Income for the three
months ended March 31, 2003 and 2002 4
Consolidated Statement of Changes in Shareholders' Equity
for the three months ended March 31, 2003 and 2002 5
Consolidated Statement of Cash Flows for the three months
ended March 31, 2003 and 2002 6
Notes to Consolidated Financial Statements 7-9
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-17
- -ITEM 3. Quantitative and Qualitative Disclosure about Market Risk 17-19
ITEM 4. Controls and Procedures 20
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 20
ITEM 2. Change in Securities and Use of Proceeds 20
ITEM 3. Defaults upon Senior Securities 20
ITEM 4. Submission of Matters to a Vote of Security Holders 20
ITEM 5. Other Information 20
ITEM 6. Exhibits and Reports on Form 8-K 21
Signatures 22
Certifications 23-25
Exhibit Index 26-30
March 31, 2003 December 31, 2002
(unaudited) (audited)
----------- ---------
ASSETS
Cash and due from banks $ 17,075,315 $ 18,763,322
Interest bearing deposits with financial institutions 464,233 7,455,925
------------ ------------
Total cash and cash equiva1 17,539,548 26,219,247
Held-to-maturity securities 10,030,430 11,778,803
Available-for-sale securities 142,213,672 137,770,804
Loans, net of unearned income 353,757,057 358,161,803
Allowance for loan losses 3,700,951 3,899,753
------------ ------------
Net loans 350,056,106 354,262,050
Loans available-for-sale 33,054,621 28,715,355
Premises and equipment, net 12,641,553 12,735,201
Accrued interest receivable 2,346,196 2,347,332
Foreclosed assets held for sale 515,762 436,932
Life insurance cash surrender valUE 7,023,147 -
Other assets 2,995,004 3,723,511
------------ ------------
Total assets $ 578,416,039 $ 577,989,236
============ ============
LIABILITIES
Deposits:
Noninterest-bearing $ 57,155,821 $ 61,151,465
Certificates of deposit $100,000 or more 135,077,697 129,486,498
Other interest-bearing deposits 217,760,520 223,150,213
------------ ------------
Total deposits 409,994,038 413,788,176
Accrued expenses and other liabilities 4,238,802 4,753,613
Short-term borrowings and repurchase agreements 55,499,538 51,213,014
Long-term debt 63,000,000 63,000,000
------------ ------------
Total liabilities 532,732,378 532,754,803
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock authorized 5,000,000 shares,
no par value, none issued - -
Common stock authorized 10,000,000 shares,
no par value 9,592,826 9,590,142
Accumulated other comprehensive income 1,027,356 1,265,224
Retained earnings 35,087,211 34,600,627
------------ ------------
Subtotal 45,707,393 45,455,993
Less treasury stock (23,731) (221,559)
------------ ------------
Total shareholders' equity 45,683,661 45,234,433
------------ ------------
Total liabilities and shareholders' equity $578,416,039 $577,989,236
============ ============
See notes to consolidated financial statements
Three Months Ended
March 31, 2003 March 31, 2002
-------------- --------------
Interest Income
Interest and fees on loans:
Taxable $ 5,922,083 $ 6,212,886
Nontaxable 105,672 161,446
Interest and fees on leases 91,734 150,527
Interest-bearing deposits with financial institutions 1,905 5,907
Investment securities:
US Government agencies 1,311,771 1,957,983
States & political subdivisions (nontaxable) 111,770 132,469
Other securities 73,841 59,399
Federal funds sold 18,973 49,997
------- ------
Total interest income 7,637,748 8,730,614
---------- ---------
Interest expense
Certificates of deposit of $100,000 or more 1,288,181 1,431,342
Other deposits 1,462,436 2,024,382
Securities sold under repurchase agreements 164,429 305,353
Other short & long term borrowings 890,733 886,995
-------- -------
Total interest expense 3,805,780 4,648,072
---------- ---------
Net interest income 3,831,968 4,082,542
Provision for loan losses 300,000 460,000
-------- -------
Net interest income, after provision for loan losses 3,531,968 3,622,542
---------- ---------
Other income:
Service charges on deposit accounts 384,635 343,443
Gain on sale of investment securities 81,551 19,688
Gain on sale of loans and leases 68,101 81,586
Gain/(loss) on foreclosed assets held for sale (3,528) 84,759
Other income 426,226 442,709
-------- -------
Total other income 956,985 972,184
-------- -------
Other operating expenses:
Salaries and employee benefits 1,660,629 1,591,590
Premises and equipment 697,206 645,002
Advertising 74,267 66,135
Other expenses 862,825 841,858
-------- -------
Total operating expenses 3,294,927 3,144,585
---------- ---------
Income before provision for income taxes 1,194,026 1,450,141
Provision for income taxes 306,726 372,012
-------- -------
Net income $ 887,300 $ 1,078,129
========== ===========
Per share data:
Net Income - Basic $ 0.49 $ 0.59
Net Income - Diluted $ 0.49 $ 0.59
Dividends $ 0.22 $ 0.20
See Notes to Consolidated Financial Statements.
Accumulated Other
Capital Stock Treasury Stock Retained Comprehensive
Shares Amount Shares Amount Earnings Income/(Loss) Total
----------------------------------------------------------------------------------------------------
Balance, December 31, 2001 1,819,168 $ 9,353,452 - $ - $ 32,080,824 $ (1,262,046) $ 40,172,230
---------------
Net income 1,078,129 1,078,129
Change in net unrealized holding
gains/(losses) on available-for-sale
securities, net of reclassification
adjustments and tax effects (646,853) (646,853)
---------------
Comprehensive income 431,276
---------------
Dividends declared ($.20 per share) (363,833) (363,833)
Issuance of shares of common stock
through Dividend Reinvestment Plan 2,976 111,618 111,618
----------------------------------------------------------------------------------------------------
Balance, March 31, 2002 1,822,144 $ 9,465,070 - $ - $ 32,795,120 $ (1,908,899) $ 40,351,291
====================================================================================================
Balance, December 31, 2002 1,825,363 $ 9,590,142 (5,987) $ (221,559) $ 34,600,626 $ 1,265,224 $ 45,234,433
---------------
Net income 887,300 887,300
Change in net unrealized holding
gains/(losses) on available-for-sale
securities, net of reclassification
adjustments and tax effects (237,868) (237,868)
---------------
Comprehensive income 649,432
---------------
Dividends declared ($.22 per share) (400,716) (400,716)
Issuance of shares of common stock
through Stock Option Plan - - 800 29,800 29,800
Issuance of shares of common stock
through Employee Stock Purchase Plan - - 1,264 42,654 42,654
Issuance of shares of common stock
through Dividend Reinvestment Plan 71 2,684 3,317 125,374 128,057
----------------------------------------------------------------------------------------------------
Balance March 31, 2003 1,825,434 $ 9,592,826 (606) $ (23,731) $ 35,087,211 $ 1,027,356 $ 45,683,661
====================================================================================================
2003 2002
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 887,300 $ 1,078,129
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 311,122 302,100
Amortization / (Accretion), net 419,651 (23,766)
Provision for loan losses 300,000 460,000
Deferred income tax (119,439) 353,371
Increase in cash surrender value of life insurance (23,147) -
(Gain)/loss sale of investment securities (81,551) (19,688)
(Gain)/loss on sale of loans and leases (68,101) (81,586)
(Gain)/loss on sale of foreclosed assets held for sale 3,528 (84,759)
Amortization of loan servicing rights 47,615 11,985
Net change in interest receivable 1,136 (522,571)
Net change in other assets 728,507 39,407
Net change in other liabilities (272,834) 327,835
----------- -----------
Net cash provided by operating activities 2,133,787 1,840,457
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of held-to-maturity securities - (9,057,722)
Proceeds from maturity, call and pay down
of held-to-maturity securities 1,722,327 430,450
Proceeds from the sale of available-for-sale 12,093,723 6,019,688
Proceeds from maturity, call and pay down
of available-for-sale securities 18,611,438 12,479,399
Purchase of available-for-sale securities (35,820,487) (5,235,328)
Purchase of life insurance policies (7,000,000) -
(Increase) in federal funds sold - (2,380,000)
Proceeds from sale of available-for-sale loans 939,929 5,557,977
Proceeds from sale of credit card recievables 2,977,526 -
Net change in loans (4,726,322) (13,765,159)
Purchase of bank premises and equipment (217,474) (1,179,530)
Proceeds from sale of foreclosed assets held for sale 313,673 790,479
----------- -----------
Net cash (used in) investing activities (11,105,667) (6,339,746)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in non interest-bearing deposit (3,995,644) (4,234,576)
Net change in interest bearing deposits (5,389,693) 2,621,123
Net change in CD's $100,000 or more 5,591,199 3,405,061
Net change in short term borrowings 4,286,524 (7,044,411)
Dividends paid, net of dividend reinvestment (272,659) (252,216)
Proceeds from employee stock purchase plan 42,654 -
Proceeds from exercise of stock options 29,800 -
----------- -----------
Net cash provided by financing activities 292,181 (5,505,019)
----------- -----------
Net increase/(decrease) in cash and cash equivalents (8,679,699) (10,004,308)
Cash and cash equivalents, beginning 26,219,247 25,644,972
----------- -----------
Cash and cash equivalents, ending $ 17,539,548 $ 15,640,664
=========== ===========
See notes to consolidated financial statements.
1. Nature of Operations and Critical Accounting Policies
Principles of Consolidation
The accompanying unaudited
consolidated financial statements of Fidelity D&D Bancorp, Inc., and its
wholly owned subsidiary, The Fidelity Deposit & Discount Bank (Bank),
(collectively the Company) have been prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP), for
interim financial information and with the instructions to Form 10-Q and Article
10-01 of Regulation S-X. In the opinion of management, all normal recurring
adjustments necessary for a fair presentation of the financial position and
results of operations for the periods have been included. All significant
inter-company balances and transactions have been eliminated in the
consolidation. Prior period amounts are reclassified when necessary to conform
to the current year’s presentation.
The preparation of
financial statements in conformity with GAAP 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 periods. Actual results could differ from those estimates.
For additional information and disclosures required under GAAP, please refer to
the Company’s Annual Report on Form 10-K for the year ended December 31,
2002.
Nature of Operations
The Bank is a commercial
bank chartered by the Commonwealth of Pennsylvania. Having commenced operations
in 1903, the Bank provides a full range of traditional banking services, trust
services and alternative financial products from its main office located in
Dunmore and other branches throughout Lackawanna and Luzerne counties.
Management is responsible
for the fairness, integrity and objectivity of the unaudited financial
statements included in this report. Management prepared the unaudited financial
statements in accordance with GAAP. In meeting its responsibility for the
financial statements, management depends on the Company’s accounting
systems and related internal controls. These systems and controls are designed
to provide reasonable, but not absolute, assurance that the financial records
accurately reflect the transactions of the Company, the Company’s assets
are safeguarded and that financial statements present fairly the financial
position and results of operations of the Company.
In the opinion of
management, the consolidated balance sheets as of March 31, 2003 and December
31, 2002 present fairly the consolidated financial position of the Company as of
those dates and the related statements of income, changes in shareholders’
equity and cash flows for the three months ended March 31, 2003 and 2002,
present fairly the consolidated results of its operations and its cash flows for
the periods then ended. All material adjustments required for fair presentation
have been made. These adjustments are of a normal reoccurring nature. There have
been no material changes in accounting principles, practices or in the method of
application and there have been no retroactive adjustments during this period.
This Quarterly Report on
Form 10-Q should be read in conjunction with the Company’s audited
financial statements for the year ended December 31, 2002 and the notes included
therein, included within the Company’s Annual Report on Form 10-K. The
results of operations for interim periods are not necessarily indicative of the
results of operations to be expected for the entire year.
Critical Accounting Policies
The presentation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect many of the reported amounts and
disclosures. Actual results could differ from these estimates.
A material estimate that is
particularly susceptible to significant change is the determination of the
allowance for loan losses. Management believes that the allowance for loan
losses is adequate and reasonable. The Company’s methodology for
determining the allowance for loan losses is described in “Provision for
Loan Losses” within Management’s Discussion and Analysis. Given the
very subjective nature of identifying and valuing loan losses, it is likely that
well-informed individuals could make materially different assumptions, and
could, therefore calculate a materially different allowance value. While
management uses available information to recognize losses on loans, changes in
economic conditions may necessitate revisions in future years. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the Company’s allowance for loan losses. Such agencies
may require the Company to recognize adjustments to the allowance based on their
judgments of information available to them at the time of their examination.
Another material estimate
is the calculation of fair values of the Company’s investment securities.
The Company receives estimated fair values of investment securities from an
independent valuation service through a broker. In developing these fair values,
the valuation service uses estimates of cash flows based on historical
performance of similar instruments in similar interest rate environments. Based
on experience, management is aware that estimated fair values of investment
securities tend to vary among valuation services. Accordingly, when selling
investment securities, management typically obtains price quotes from more than
one source. The majority of the Company’s investment securities are
classified as available-for-sale. Accordingly, these securities are carried at
fair value on the consolidated balance sheet, with unrealized gains and losses,
net of income tax, excluded from earnings and reported separately through
accumulated other comprehensive income, which is included within
shareholders’ equity.
The fair value of
residential mortgage loans classified as available-for-sale is obtained from the
Federal National Mortgage Association (Fannie Mae). The fair value of SBA loans
classified as available-for-sale is obtained from an outside pricing source. The
market to which the Bank sells mortgage and other loans is restricted and price
quotes from other sources are not typically obtained.
2. Earnings per Share
The following data shows
the amounts used in computing earnings per share and the effects on income and
the weighted average number of shares of dilutive potential common stock for the
three months ended March 31, 2003 and 2002.
Weighted Average Earnings
Income Common Shares per
March 31, 2003 Numerator Denominator Share
--------- ----------- -----
Basic EPS $ 887,300 1,821,275 $0.49
=====
Dilutive effect of potential common stock:
Stock options;
Exercise of outstanding options 10,600
Hypothetical share repurchase at $36.50 (9,624)
-----------------------------------------
Diluted EPS $ 887,300 1,822,250 $0.49
========================================= =====
March 31, 2002
Basic EPS $ 1,078,129 1,819,895 $0.59
=====
Dilutive effect of potential common stock:
Stock options;
Exercise of outstanding options 17,800
Hypothetical share repurchase at $37.00 (16,302)
-----------------------------------------
Diluted EPS $ 1,078,129 1,821,393 $0.59
========================================= =====
As permitted by Accounting
Principles Board Opinion No. 25, the Company uses the intrinsic value method of
accounting for stock compensation plans. Utilizing the intrinsic value method,
compensation cost is measured by the excess of the quoted market price of the
stock as of the grant date (or other measurement date) over the amount an
employee or director must pay to acquire the stock. Stock options issued under
the Company’s stock option plans have no intrinsic value, and accordingly,
no compensation cost is recorded for them.
The following table
illustrates the effect on net income and earnings per share if the Company had
applied the fair value provisions of Statement of Financial Accounting Standards
No. 123, “Accounting for Stock-based Compensation,” to stock options.
Three Months Ended
(Net Income in Thousands) March 31,
2003 2002
---- ----
Net income, as reported $ 887 $ 1,078
Deduct: Total stock option compensation expense determined
under fair value method for all awards, net of tax effects (-) (8)
------ --------
Pro forma net income $ 887 $ 1,070
===== =======
Net Income per share-basic:
As reported $ 0.49 $ 0.59
Pro forma $ 0.49 $ 0.59
Net Income per share-diluted:
As reported $ 0.49 $ 0.59
Pro forma $ 0.49 $ 0.59
4. Bank Owned Life InsuranceThe Bank invested in bank owned life insurance (BOLI) as a source of funding for employee benefit expenses. BOLI involves the purchasing of life insurance by the Bank on a chosen group of employees. The Bank is the owner and beneficiary of the policies. Income generated from the increase in cash surrender value of the policies is included in other income on the income statement.
In addition to historical
information, this Form 10-Q may contain forward-looking statements.
Forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected in the
forward-looking statements. Important factors that might cause such a difference
include, but are not limited to, those discussed in the section entitled,
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations”. Readers are cautioned not to place undue reliance
on these forward-looking statements, which reflect management’s analysis
only as of this date. The Company undertakes no obligation to publicly revise or
update these forward-looking statements to reflect events or circumstances that
arise in the future.
1. Changes in Financial Condition
Deposits
The following table
represents the composition of total deposits as of March 31, 2003 and
comparative funding changes since previous year end.
Dollar Percent
March 31, 2003 December 31, 2002 change change
-------------- ----------------- ------ ------
Noninterest-bearing deposits
----------------------------
Personal $ 24,760,113 $ 22,956,626 $ 1,803,487 7.86%
Non-personal 23,166,990 24,877,991 (1,711,001) -6.88%
Public fund 4,057,811 4,039,547 18,264 0.45%
Bank checks 5,170,907 9,277,301 (4,106,393) -44.26%
- ----------------------------------------------------------------------------------------------------------------------------------
Total $ 57,155,821 $ 61,151,465 $ (3,995,644) -6.53%
==================================================================================================================================
Certificates of deposit
of $100,000 or more
-------------------
Personal $ 81,313,106 $ 79,169,750 $ 2,143,357 2.71%
Non-personal 23,355,960 23,571,462 (215,501) -0.91%
Public fund 24,388,276 21,111,991 3,276,285 15.52%
IRA's 6,020,354 5,633,296 387,058 6.87%
- ----------------------------------------------------------------------------------------------------------------------------------
Total $ 135,077,697 $ 129,486,498 $ 5,591,199 4.32%
==================================================================================================================================
Other interest-bearing deposits
-------------------------------
CD's less than $100,000:
Personal $ 94,964,262 $ 95,302,987 $ (338,725) -0.36%
Non-personal 5,667,463 11,054,526 (5,387,063) -48.73%
Public fund 746,428 633,489 112,939 17.83%
IRA's 20,290,632 20,358,968 (68,336) -0.34%
- ----------------------------------------------------------------------------------------------------------------------------------
sub total 121,668,785 127,349,970 (5,681,185) -4.46%
NOW acounts 39,546,862 40,719,446 (1,172,584) -2.88%
Money market deposits 14,921,294 16,561,358 (1,640,064) -9.90%
Savings and clubs 41,623,580 38,519,440 3,104,140 8.06%
- ----------------------------------------------------------------------------------------------------------------------------------
Total $ 217,760,520 $ 223,150,213 $ (5,389,693) -2.42%
==================================================================================================================================
Total deposits
--------------
Noninterest-bearing deposits $ 57,155,821 $ 61,151,465 $ (3,995,644) -6.53%
Interest-bearing deposits 352,838,217 352,636,711 201,506 0.06%
- ----------------------------------------------------------------------------------------------------------------------------------
Total $ 409,994,038 $ 413,788,176 $ (3,794,137) -0.92%
==================================================================================================================================
As indicated in the previous table, deposits decreased $3.8 million or 0.9% during the first three months of 2003.
Public fund deposits
accounted for $48.9 million or 11.9% of total deposits. The bank was able to
attract public funds due to long established relationships and competitive
product pricing. However, it is recognized that public fund deposits are
sensitive to the operating demands of the various public entities and the
changing political landscape. Thus, the Bank could experience material shifts in
these outstanding balances throughout the year.
Bank checks (official
checks) are used to pay operating expenses of the Bank, deposit withdrawals and
loan disbursements. While Bank checks are included in total deposits, they are
not deposits from customers.
Borrowings
Short-term borrowings,
which are comprised of repurchase agreements (repos), treasury tax and loan
retained funds and federal funds purchased, increased $4.3 million or 8.4% to
$55.5 million at March 31, 2003.
Long-term debt with the Federal Home Loan Bank remains at $63 million as of March 31, 2003.
Shareholders' Equity
During the first quarter of
2003, Shareholders’ equity increased by $0.4 million or 1.0%, primarily
from earnings retained after dividend payments. At the March 10, 2003 dividend
payment date, 3,317 shares of treasury stock were reissued under the dividend
reinvestment plan.
Loans
Loans, net of unearned
income, decreased $4.4 million or 1.2% to date during 2003. Commercial loans
increased $1.5 million or 0.8% from strong growth in floating rate and tax free
commercial loans offsetting the pay downs within the fixed rate loan portfolio.
Consumer loans and direct financing leases decreased $4.7 million or 7.3%
primarily because of the sale of the Bank’s $2.7 million credit card
portfolio in February. The demand was also affected by tightening Bank credit
standard policies to improve the overall quality of the consumer portfolio. This
continued reduced demand stemmed from management’s decision last year to
substantially curtail non-profitable indirect dealer lending and stopping retail
direct leasing activities.
The following table reflects the composition of the loan portfolio, excluding loans held as available-for-sale:
March 31, 2003 December 31, 2002
-------------- -----------------
Real estate $ 84,913,748 $ 85,447,703
Commercial 204,520,896 202,974,155
Consumer 53,245,035 56,984,927
Real estate construction 5,921,732 6,797,002
Direct financing leases 5,649,914 6,578,720
- ------------------------------------------------------------------------------------------
Gross loans 354,251,325 358,782,507
Less:
Unearned discount 494,268 620,704
Allowance for loan losses 3,700,951 3,899,753
- ------------------------------------------------------------------------------------------
Net Loans $ 350,056,106 $ 354,262,050
==========================================================================================
The Company has classified
certain residential mortgages, student loans and SBA guaranteed loans of $33.1
million and $28.7 million as available-for-sale (AFS) at March 31, 2003 and
2002, respectively. The fair value of AFS loans at March 31, 2003 and December
31, 2002 was $ 33.7 million and $29.7 million, respectively. Residential
mortgages AFS grew $4.4 million or 16.9%, net of residential mortgages AFS sold
totaling $0.7 million, during 2003. These mortgages were sold to provide
liquidity and begin to address future interest rate risk considerations and
other risks associated with historically low mortgage rates compared with the
long term duration of these types of loans.
Securities
The majority of the
investment portfolio remains in mortgage-backed securities because these types
of securities provide a monthly cash flow, which can be used for reinvestment,
have shorter weighted average lives and historically do not extend to their
stated long term maturity dates and have no imbedded call options.
In light of fluctuations in
the bond market, the current investment strategy utilized was able to produce a
4.20% year-to-date tax equivalent yield on the entire investment portfolio as of
March 31, 2003. The current yield is down 124 basis points from the 5.44% tax
equivalent yield as of December 31, 2002. As would be expected, the continued
repricing of assets during a decline in market interest rates over the last year
caused an overall decrease in the year-to-date yield for 2003.
Pay downs of $12.9 million
from mortgage-backed securities and $7.5 million of called US agency and
municipal bonds totaled $20.4 million of liquidity. Available-for-sale US
Government Agency bonds and mortgage-backed securities of $12.0 million were
sold to improve the yield in the investment portfolio. Investment purchases were
made primarily in mortgage-backed securities and municipal bonds totaling $35.1
million, during 2003.
The investment securities portfolio at March 31, 2003 consists of the following:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------------------- -------------------- --------------------- -----------------------
Securities held-to-maturity:
- ----------------------------
Mortgage-backed securities $ 10,030,430 $ 402,014 $ (273) $ 10,432,717
Government agencies $ - $ - $ - $ -
----------------------- -------------------- --------------------- -----------------------
Total securities held-to-maturity $ 10,030,430 $ 402,014 $ (273) $ 10,432,717
----------------------- -------------------- --------------------- -----------------------
Securities available-for-sale:
- ------------------------------
Agencies $ 21,159,512 $ 122,969 $ 21,783 $ 21,260,698
State and municipal 11,133,137 99,227 47,568 11,184,796
Corporate Bonds 3,989,279 13,840 5,619 3,997,500
Mortgage-backed securities 99,798,920 1,348,604 28,510 101,119,015
----------------------- -------------------- --------------------- -----------------------
Sub total 136,080,848 1,584,641 103,480 137,562,009
Equity securities 4,576,225 75,438 - 4,651,663
----------------------- -------------------- --------------------- -----------------------
Total securities available-for-sale $ 140,657,072 $ 1,660,079 $ 103,480 $ 142,213,672
----------------------- -------------------- --------------------- -----------------------
Total Securities $ 150,687,502 $ 2,062,093 $ 103,207 $ 152,646,388
======================= ==================== ===================== =======================
At March 31, 2003, the contractual maturities of securities held-to-maturity and available-for-sale are listed below. Mortgage backed securities, which are subject to monthly principal reductions, are listed in total. Equity securities have no stated maturity dates and are listed in total.
Amortized Market
Securities held-to-maturity cost value
--------------------------- ---- -----
Mortgage-backed securities $10,030,430 $10,432,717
- ----------------------------------------------------- ----------------------- -----------------------
Total securities held-to maturity $10,030,430 $10,432,717
- ----------------------------------------------------- ----------------------- -----------------------
Securities available-for-sale
-----------------------------
One year or less $1,169,667 $1,171,643
One through five years 10,510,000 10,563,569
Five through ten years 11,541,729 11,660,996
Over ten years 13,060,532 13,046,786
- ----------------------------------------------------- ----------------------- -----------------------
sub total 36,281,928 36,442,994
Mortgage-backed securities 99,798,920 101,119,015
Equity securities 4,576,225 4,651,663
- ----------------------------------------------------- ----------------------- -----------------------
Total securities available-for-sale $140,657,072 $142,213,672
- ----------------------------------------------------- ----------------------- -----------------------
Total securities $150,687,502 $152,646,388
===================================================== ======================= =======================
Bank Owned Life InsuranceDuring February 2003, the
bank purchased $7 million of bank owned life insurance (BOLI) for a
chosen group of employees, namely its officers, where the bank is the owner and
beneficiary of the policies. The bank’s excess liquidity from investment
and loan pay downs funded the BOLI and the earnings from the BOLI are recognized
as other income. The BOLI is profitable from the appreciation of the cash
surrender values of the pool of insurance, and its tax-free advantage to the
bank. This profitability is used to offset a portion of current and future
employee benefit costs. The BOLI is an asset that can be liquidated, if
necessary, with tax costs associated. However, it is the bank’s intention
to hold this pool of insurance because it provides income that enhances the
bank’s capital position.
2. Changes in Results of Operations:
Net Income for the three
months ending March 31, 2003 and 2002 was $887 thousand and $1.1 million,
respectively. Detailed breakdowns of the significant differences reflecting the
overall $191 thousand reduction in earnings are as follows:
2003 2002 Difference
----- ----- ----------
Net interest income $3,831,968 $4,082,542 $(250,574)
Provision for loan losses $ 300,000 $ 460,000 $ 160,000
Deposit service charges and other income $ 810,861 $ 786,152 $ $24,709
Gain/(loss) on sale of assets $ 146,124 $ 186,033 $ (39,909)
Salaries and employee benefits $1,660,629 $1,591,590 $ (69,039)
Premises and equipment $ 697,206 $ 645,002 $ (52,204)
Other expense $ 937,092 $ 907,994 $ (29,098)
Provision for income tax $ 306,726 $ 372,012 $ 65,286
TAX EQUIVALENT YIELD:
- -------------------
Three months ended Year ended Three months ended
March 31,2003 December 31,2002 March 31,2002
--------------------- --------------------- --------------------
Average earning assets:
Loans and leases $389,104 $384,791 $379,265
Investments 149,111 154,000 151,446
Federal funds sold 5,726 11,584 11,799
Interest-bearing deposits 866 919 1,463
--------------------- --------------------- --------------------
Total $544,807 $551,294 $543,973
===================== ===================== ====================
Average Interest Bearing Liabilities:
Other Interest-bearing deposits $96,315 $84,782 $80,101
Certificates of deposit 264,579 286,496 283,426
Other borrowed funds 65,722 64,045 64,115
Repurchase agreements 47,222 45,872 48,826
--------------------- --------------------- --------------------
Total $473,837 $481,195 $476,468
===================== ===================== ====================
Interest Income
Loans and leases $6,167 $26,402 $6,594
Investments 1,545 8,382 2,204
Federal funds sold 19 190 50
Interest-bearing deposits 2 17 6
--------------------- --------------------- --------------------
Total $7,732 $34,991 $8,854
===================== ===================== ====================
Interest Expense
Other Interest-bearing deposits $195 $934 $243
Certificates of deposit 2,555 12,351 3,213
Other borrowed funds 891 3,601 887
Repurchase agreements 164 996 305
--------------------- --------------------- --------------------
Total $3,806 $17,882 $4,648
===================== ===================== ====================
Net Interest Income $3,927 $17,109 $4,206
===================== ===================== ====================
Yield on average earning assets 5.76% 6.35% 6.60%
Cost of average interest-bearing
liabilities 3.26% 3.72% 3.96%
--------------------- --------------------- --------------------
Interest rate spread 2.50% 2.63% 2.64%
===================== ===================== ====================
Net yield on average earning assets 2.92% 3.10% 3.14%
===================== ===================== ====================
The reduction of net
interest income results from total earning asset volume remaining flat with a 84
basis point decrease in yield on earning assets along with only a 70 basis point
reduction in rates of interest-bearing liabilities. The tax equivalent yield on
earning assets was 5.76% and 6.60% for the three months ending March 31, 2003
and 2002, respectively. Cost of interest-bearing liabilities was 3.26% and 3.96%
for the three months ending March 31, 2003 and 2002, respectively. The yields on
earning assets were driven down by declining market rates while the rates on
interest-bearing liabilities also declined to the extent possible. However,
average costs could not be decreased enough in comparison with the decrease of
earning yields because of repricing characteristics within the time deposit
portfolio and long-term borrowings.
The decrease in the
provision for loan losses is a result of a net $100 thousand allowance for loan
loss reduction associated with the sale of the credit card portfolio along with
the decreased provision required during 2003 from management’s analysis of
potential loss within the portfolio as compared to the first three months of
2002.
The increase in fee income
resulted from management’s focus on collections of non-sufficient fund fees
and other fees from deposit services provided. The Bank had invested $7 million
in life insurance policies of which the $23 thousand of earnings from the
increase in cash surrender values are accounted for within other income.
Operating expenses
increased $150 thousand or 4.8% for the period ended March 31, 2003 compared to
the same period of the previous year. As stated within the table above, salaries
and benefit costs increased 4.3%, premises and equipment expenses increased 8.1%
and other expenses increased 2.5% in comparison to the first three months of
2002. Most of the increase in operating costs can be attributed to the opening
of the Eynon office and the major conversion of the Bank’s core processing
system.
The provision for income
taxes differs from the amount of income tax determined from applying the
statutory federal corporate income tax rate to taxable income from continuing
operations primarily because of tax-free income, non-deductible expenses and low
income housing credits. The effective tax rate on pre-tax book income remained
at 25.7% for the three months ending March 31, 2003 and 2002. Income before
provision for income taxes in 2003 decreased $256 thousand over the same period
ended during 2002, which resulted in the $65 thousand reduction in provision for
income tax.
Provision for Loan Losses
The provision is an expense
charged against current earnings for actual or potential losses from
uncollectible loans and leases. Through the provision, the allowance for loan
losses is increased. Loans and leases determined to be uncollectible are
charged-off against the allowance.
The Bank maintains an Asset
Quality Committee which meets monthly to review known and potential problem
loans and leases. The committee is comprised of bank management, credit
administration and collection personnel. The committee reports quarterly to the
Credit Administration Committee of the Board of Directors.
Management continuously
reviews the risks inherent in the loan and lease portfolios. Specific factors
used to evaluate the adequacy of the loan loss provision during this formal
process include:
The Bank does not have
significant concentrations of loans in specific industries or outside the
Northeastern Pennsylvania geographic area.
Allowance for Loan Losses
March 31, 2003 December 31, 2002 March 31, 2002
-------------- ----------------- --------------
Total loans, net of unearned income $386,811,678 $386,877,158 $381,517,241
Allowance for loan losses $3,700,951 $3,899,753 $3,844,643
Percentage to net loans 0.96% 1.01% 1.01%
Provision for loan losses
Year ended $1,664,000
Three months ended $300,000 $460,000
(Charge offs)/recoveries, net
Year ended $(1,506,180)
Three months ended $(498,802) $(357,290)
Over the last five years,
management has analyzed and relied on specific factors in determining the amount
of loan loss provision relative to the adequacy of the allowance for loan
losses. The methodology used by the Bank to analyze the adequacy of the
allowance for loan losses is as follows (loans and leases are collectively
referred to as loans):
The Bank is unaware of any
potential problem loans that have not been reviewed and addressed. Potential
problem loans are those where there is known information that leads the Bank to
believe repayment of principal and/or interest is in jeopardy and the loans are
neither non-accrual nor past due 90 days or more.
Based upon the analysis of
both the loan portfolio and the allowance for loan losses at March 31, 2003,
Management believes that the allowance provides adequate protection against
portfolio loss. However, there could be instances of which the Bank is unaware
that may require additional charge-offs and or increases to the provision.
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk
Interest Rate Sensitivity
The Company is subject to
the interest rate risks inherent in our lending, investing and financing
activities. Fluctuations of interest rates will impact interest income and
interest expense along with affecting market values of all interest-earning and
interest-bearing liabilities, except for those assets or liabilities with a
short term remaining to maturity. Interest rate risk management is an integral
part of the Asset/Liability Management process. The Company has instituted
certain procedures and policy guidelines to manage the interest rate risk
position. Those internal policies enable the Company to react to changes in
market rates to protect net interest income from significant fluctuations. The
primary objective in managing interest rate risk is to minimize the adverse
impact of changes in interest rates on net interest income along with creating
an asset/liability structure that maximizes earnings.
To manage this interest
rate sensitivity position, an asset/liability model called 'cumulative gap
analysis' is used to monitor the difference in the volume of the Company’s
interest sensitive assets and liabilities that mature or reprice within given
periods. A positive gap (asset sensitive) indicates that more assets reprice
during a given period compared to liabilities, while a negative gap (liability
sensitive) has the opposite effect. The Company employs computerized net
interest income simulation modeling to assist in quantifying interest rate risk
exposure. This process measures and quantifies the impact on net interest income
through varying interest rate changes and balance sheet compositions. The use of
this model assists the Asset/Liability Committee (ALCO) to gauge the effects of the interest rate changes on
interest sensitive assets and liabilities in order to determine what impact
these rate changes will have upon the net interest spread.
At March 31, 2003, the
Company maintained a one year cumulative gap of negative $14.3 million or 2.5%
of total assets. The effect of this gap position provided a negative mismatch of
assets and liabilities, which can expose the Bank to interest rate risk during a
period of increasing interest rates. Conversely, in a declining interest rate
environment, net income could be positively affected because more liabilities
than assets will reprice during a one year period.
Interest Sensitivity Gap at March 31, 2003
------------------------------------------------------------------
3 months 3 through 1 through Over
or less 12 months 3 years 3 years Total
------------ --------- ----------- ------- -----
(Dollars in thousands)
Cash and cash equivalents................... $ 465 $ - $ - $ 17,075 $ 17,540
Investment securities....................... 22,662 33,472 55,030 41,080 152,244
Loans....................................... 125,808 85,124 90,395 81,783 383,110
Fixed and other assets...................... - - - 25,522 25,522
--------- -------- --------- --------- --------
Total assets............................. $ 148,935 $118,596 $ 145,425 $ 165,460 $578,416
========= ======== ========= ========= ========
Total cumulative assets.................. $ 148,935 $267,531 $ 412,956 $ 578,416
========= ======== ========= =========
Non interest-bearing transaction deposits... $ - $ 5,726 $ 15,747 $ 35,683 $ 57,156
Interest-bearing transaction deposits....... 2,984 46,554 36,407 10,146 96,091
Time deposits............................... 41,532 129,271 75,362 10,582 256,747
Repurchase Agreements....................... 31,427 8,077 8 - 39,512
Short-term borrowings....................... 15,988 - - - 15,988
Long-term debt.............................. - - 5,000 58,000 63,000
Other liabilities........................... - - - 4,239 4,239
--------- -------- --------- --------- --------
Total liabilities........................ $ 91,931 $189,628 $ 132,524 $118,650 $532,733
========= ======== ========= ======== ========
Total cumulative liabilities............. $ 91,931 $281,559 $ 414,083 $532,733
========= ======== ========= ========
Interest sensitivity gap.................... $ 57,004 $(71,032) $ 12,901 $ 46,810
========= ======== ========= ========
Cumulative gap.............................. $ 57,004 $(14,028) $ (1,127) $ 45,683
========= ======== ========= ========
Cumulative gap to total assets.............. 9.86% -2.43% -0.19% 7.90%
Investments and loans are
included in the earlier of the period in which interest rates were next
scheduled to adjust or the period in which they are due. In addition, loans were
included in the periods in which they are scheduled to be repaid based on
scheduled amortization. For amortizing loans and mortgage-backed securities,
annual prepayment rates are assumed reflecting historical experience as well as
management’s knowledge and experience of its loan products.
The Bank’s demand and
savings accounts were generally subject to immediate withdrawal. However,
management considers a certain amount of such accounts to be core accounts
having significantly longer effective maturities based on the retention
experiences of such deposits in changing interest rate environments. The
effective maturities presented are the recommended maturity distribution limits
for non-maturing deposits based on historical deposit studies.
Certain shortcomings are
inherent in the method of analysis presented in the above table. Although
certain assets and liabilities may have similar maturities or periods of
repricing, they may react in different degrees to changes in market interest
rates. The interest rates on certain types of assets and liabilities may
fluctuate in advance of changes in market interest rates, while interest rates
on other types of assets and liabilities may lag behind changes in market
interest rates. Certain assets, such as adjustable-rate mortgages, have features
which restrict changes in interest rates on a short-term basis and over the life
of the asset. In the event of a change in interest rates, prepayment and early
withdrawal levels may deviate significantly from those assumed in calculating
the table. The ability of many borrowers to service their adjustable-rate debt
may decrease in the event of an interest rate increase.
Liquidity
Liquidity for a bank is the ability to fund customers' needs for borrowings, deposit withdrawals and maturities and
normal operating expenses of the Bank. Current sources of liquidity are:
As detailed in the
statement of cash flows, total cash and cash equivalents had a net $8.7 million
decrease due to purchases of investment securities and funding the $7.0 million
purchase of life insurance policies. Funding new loan growth was offset by
proceeds received from the credit card portfolio sale. The $4.0 million decrease
in demand deposits resulted from Bank checks clearing through internal accounts
to fund operations. The net cash utilized to fund operations throughout the
quarter was funded through the increase of short-term borrowings. The $5.4
million decrease in other interest bearing deposits was offset by a $5.6 million
increase in public fund time deposits greater than $100,000.
Management believes that
the present level of liquidity is strong and adequate for current operations
based upon the short-term liquidity position of $17.5 million in cash and cash
equivalents. A secondary source of liquidity is provided from expected cash flow
from principal reductions in the investment and loan portfolios and the ability
to sell $33.1 million in mortgage loans available for sale at March 31, 2003.
Management monitors asset and liability maturities to match anticipated large
cash flow requirements. These cash flow requirements are reviewed daily with the
use of internally generated reports.
The Bank considers its core
deposit base as the primary source of liquidity. However, the Bank can also
borrow in the Federal Funds market to meet temporary liquidity needs. The Bank
has other sources to obtain liquidity from borrowings with the Federal Reserve
Discount Window and Federal Home Loan Bank advances.
Capital
The Company is subject to
various regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain
mandatory and possible additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Company’s financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Company must meet specific capital guidelines that
involve quantitative measures of the Company’s assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Company’s capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures
established by regulation to ensure capital adequacy require the Company to
maintain minimum amounts and ratios (set forth in the table below as defined in
the regulations) of total and Tier I capital to risk-weighted assets, and of
Tier I capital to average assets. As of March 31, 2003, the Company meets all
capital adequacy requirements to which it is subject.
The Company's capital amounts and ratios at March 31, 2003 are as follows:
To be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
Total Capital
(to Risk Weighted Assets) $48,353,178 12.90% $29,984,406 8.00% $37,480,507 10.00%
Tier 1 Capital
(to Risk Weighted Assets) $44,618,280 11.90% $14,992,203 4.00% $22,488,304 6.00%
Tier 1 Capital
(to Average Assets) $44,618,280 7.71% $23,134,585 4.00% $28,918,231 5.00%
The ratios for the Bank are not materially different from those of the Company.
ITEM 4. Controls and Procedures
The Company maintains a
system of controls and procedures designed to provide reasonable assurance as to
the reliability of the financial statements and other disclosures included in
this report, as well as to safeguard assets from unauthorized use or
disposition. The Company evaluated the effectiveness of the design and operation
of our disclosure controls and procedures under the supervision and with the
participation of management, including our Chief Executive Officer and Chief
Financial Officer, within 90 days prior to the filing date of this report. Based
upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective, except for
the internal control components of risk assessment and monitoring, in timely
alerting them to material information required to be included in our periodic
Securities and Exchange Commission filings. The Company has made significant
changes to our internal controls and other factors that could significantly
affect these controls subsequent to the date of evaluation by the Chief
Executive Officer and Chief Financial Officer, as follows:
The Company’s internal
audit department completed a formal risk assessment and internal audit schedule
for 2003 through 2005. On April 30, 2003, the Company’s Audit Committee
reviewed and approved the risk assessment and internal audit schedule.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
On July 1, 2002, the Bank
was served with a civil complaint that was filed in the Court of Common Pleas of
Lackawanna County, Pennsylvania, on June 28, 2002. Scaccia Construction Company,
the plaintiff, based upon multiple causes of action, demands approximately
$250,000 in connection with certain environmental remediation activities. The
activities were purportedly performed prior to the opening of the Bank’s
new Eynon branch. On July 22, 2002, the Bank filed preliminary objections to the
complaint. The preliminary objections were decided on November 26, 2002, and the
Bank filed its answer and new matter raising various legal defenses. Formal
discovery has commenced and depositions are scheduled through June 2003. The Bank
intends to vigorously defend this action.
The nature of the
Company’s business generates some litigation involving matters arising in
the ordinary course of business. However, in the opinion of the Company after
consulting with legal counsel, no other legal proceedings are pending, which, if
determined adversely to the Company or the Bank, would have a material effect
the Company’s undivided profits or financial condition. No other legal
proceedings are pending other than ordinary routine litigation incident to the
business of the Company and the Bank. In addition, to management’s
knowledge, no governmental authorities have initiated or contemplated any
material legal actions against the Company or the Bank.
| ITEM 2. | Changes in Securities and Use of Proceeds. |
| None. | |
| ITEM 3. | Default Upon Senior Securities. |
| None. | |
| ITEM 4. | Submission of matters to a Vote by Security Holders. |
| None | |
| ITEM 5. | Other Information. |
| None. |
| ITEM 6. | Exhibits and Reports on Form 8-K. |
a) Exhibits
| 3(i) | Amended and Restated Articles of Incorporation of Registrant. Incorporated by reference to Exhibit 3(i) to Registrant's Registration Statement No. 333-90273 on Form S-4, filed with the SEC on November 3, 1999 and as amended on April 6, 2000. |
| 3(ii) | Bylaws of Registrant. Incorporated by reference to Exhibit 3(ii) to Registrant's Registration Statement No. 333-90273 on Form S-4, filed with the SEC on November 3, 1999 and as amended on April 6, 2000. |
| 10.1 | 1998 Independent Directors Stock Option Plan of The Fidelity Deposit and Discount Bank, as assumed by Registrant. Incorporated by reference to Exhibit 10.1 to Registrant’s Registration Statement No. 333-90273 on Form S-4, filed with the SEC on November 3, 1999 and as amended on April 6, 2000. |
| 10.2 | 1998 Stock Incentive Plan of The Fidelity Deposit and Discount Bank, as assumed by Registrant. Incorporated by reference to Exhibit 10.2 of Registrant’s Registration Statement No. 333-90273 on Form S-4, filed with the SEC on November 3, 1999 and as amended on April 6, 2000. |
| 10.3 | Form of Deferred Compensation Plan of The Fidelity Deposit and Discount Bank.Incorporated by reference to Exhibit 10.3 to Registrant’s Registration Statement No.333-45668 on Form S-1, filed with the SEC on September 12, 2000 and as amended on October 11, 2000. |
| 10.4 | Registrant's 2000 Dividend Reinvestment Plan. Incorporated by reference to Exhibit 4 to Registrant's Registration Statement No. 333-45668 on Form S-1, filed with the SEC on September 12, 2000 and as amended by Pre-Effective Amendment No. 1 on October 11, 2000 and by Post-Effective Amendment No. 1 on May 30, 2001. |
| 10.5 | Registrant's 2000 Independent Directors Stock Option Plan. Incorporated by reference to Exhibit 4.3 to Registrant's Registration Statement No. 333-64356 on Form S-8 filed with the SEC on July 2, 2001. |
| 10.6 | Registrant's 2000 Stock Incentive Plan. Incorporated by reference to Exhibit 4.4 to Registrant's Registration Statement No. 333-64356 on Form S-8 filed with the SEC on July 2, 2001. |
| 10.7 | Form of Employment Agreement with Joseph J. Earyes. Incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K filed with the SEC on March 25, 2002. |
| 11 | Statement regarding computation of earnings per share. Included herein in Note 2 “Earnings per Share”, contained within the Notes to Consolidated Financial Statements, and incorporated herein by reference. |
| 99.1 | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. |
| 99.2 | Certification of Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. |
| 99.3 | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. |
b) No Current Report on Form 8-K was filed by the Registrant during the quarter ended March 31, 2003.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DATE: May 15, 2003 /s/ Michael F. Marranca
-----------------------------------
Michael F. Marranca,
Chairman of the Board of Directors and President
DATE: May 15, 2003 /s/ Joseph J. Earyes
-----------------------------------
Joseph J. Earyes,
Executive Vice President and Chief Executive Officer
DATE: May 15, 2003 /s/ Salvatore R. DeFrancesco
-----------------------------------
Salvatore R. DeFrancesco,
Treasurer and Chief Financial Officer
I, Joseph J. Earyes, certify that:
| Date: May 15, 2003 | /s/Joseph J. Earyes |
| Joseph J. Earyes | |
| Executive Vice President and | |
| Chief Executive Officer |
I, Salvatore R. DeFrancesco, certify that:
| Date: May 15, 2003 | /s/Salvatore R. DeFrancesco |
| Salvatore R. DeFrancesco | |
| Treasurer and Chief Financial Officer |
I, Robert P. Farrell, certify that:
| Date: May 15, 2003 | /s/Robert P. Farrell |
| Robert P. Farrell | |
| Principal Accounting Officer |
| Exhibit Index | Page | |
| 3(i) | Amended and Restated Articles of Incorporation of Registrant. Incorporated by reference to Exhibit 3(i) to Registrant's Registration Statement No. 333-90273 on Form S-4, filed with the SEC on November 3, 1999 and as amended on April 6, 2000. | * |
| 3(ii) | Bylaws of Registrant.Incorporated by reference to Exhibit 3 (ii) to Registrant's Registration Statement No. 333-90273 on Form S-4, filed with the SEC on November 3, 1999 and as amended on April 6, 2000. | * |
| 10.1 | 1998 Independent Directors Stock Option Plan of The Fidelity Deposit and Discount Bank, as assumed by Registrant.Incorporated by reference to Exhibit 10.1 to Registrant's Registration Statement No. 333-90273 on Form S-4, filed with the SEC on November 3, 1999 and as amended on April 6, 2000. | * |
| 10.2 | 1998 Stock Incentive Plan of The Fidelity Deposit and Discount Bank, as assumed by Registrant.Incorporated by reference to Exhibit 10.2 of Registrant's Registration Statement No. 333-90273 on Form S-4, filed with the SEC on Nov. 3, 1999 and as amended on April 6, 2000. | * |
| 10.3 | Form of Deferred Compensation Plan of The Fidelity Deposit and Discount Bank.Incorporated by reference to Exhibit 10.3 to Registrant's Registration Statement No. 333-45668 on Form S-1, filed with the SEC on September 12, 2000 and as amended on October 11, 2000. | * |
| 10.4 | Registrant's 2000 Dividend Reinvestment Plan.Incorporated by reference to Exhibit 4 to Registrant's Registration Statement No. 333-45668 on Form S-1, filed with the SEC on September 12, 2000 and as amended by Pre-Effective Amendment No. 1 on October 11, 2000 and by Post-Effective Amendment No. 1 on May 30, 2001. | * |
| 10.5 | Registrant's 2000 Independent Directors Stock Option Plan.Incorporated by reference to Exhibit 4.3 to Registrant's Registration Statement No. 333-64356 on Form S-8 filed with the SEC on July 2, 2001. | * |
| 10.6 | Registrant's 2000 Stock Incentive Plan.Incorporated by reference to Exhibit 4.4 to Registrant's Registration Statement No. 333-64356 on Form S-8 filed with the SEC on July 2, 2001. | * |
| 10.7 | Form of Employment Agreement with Joseph J. Earyes.Incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K filed with the SEC on March 25, 2002. | * |
| 11 | Statement regarding computation of earnings per share. | 8 |
| 99.1 | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. | 28 |
| 99.2 | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. | 29 |
| 99.3 | Certification of Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. | 30 |
* - Incorporated by Reference