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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
{ X } Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period Ended September 30, 2002 or
{ } Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition period from___________
To ___________
Commission File Number: 0-23605
CAVALRY BANCORP, INC.
---------------------
(exact name of registrant as specified in its charter)
Tennessee 62-1721072
--------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) I.D. Number)
114 West College Street, Murfreesboro, Tennessee 37130
- ----------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(615) 893-1234
---------------------
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and has been subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock Issued and Outstanding: 6,900,079 as of November 12, 2002.
CAVALRY BANCORP, INC.
Table of Contents
Part I Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 2002 (unaudited)
and December 31, 2001 1
Consolidated Statements of Income (unaudited) for the Three and Nine Months
Ended September 30, 2002 and 2001 2
Consolidated Statements of Comprehensive Income (unaudited) for the
Three and Nine Months Ended September 30, 2002 and 2001 3
Consolidated Statements of Cash Flows (unaudited) for the Nine Months
Ended September 30, 2002 and 2001 4
Notes to Consolidated Financial Statements (unaudited) 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
Item 4. Controls and Procedures 13
Part II Other Information 14
Signatures 15
Section 302 Certifications 16-17
Part I. Financial Information
ITEM 1. FINANCIAL STATEMENTS
CAVALRY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001
(DOLLARS IN THOUSANDS)
ASSETS September 30, 2002 December 31, 2001
- -------------------------------------------------------------------------- -------------------- -------------------
(Unaudited)
Cash and due from banks $ 19,025 $ 23,596
Interest-bearing deposits with other financial institutions 356 393
Federal funds sold 29,589 45,292
-------------------- -------------------
Cash and cash equivalents 48,970 69,281
Investment securities available-for-sale at fair value (amortized cost:
$45,293 and $41,571 at September 30, 2002 and December 31, 2001,
respectively) 45,470 41,808
Investment securities held to maturity - at amortized cost (fair value:
$632 at December 31, 2001) - 637
Federal Home Loan Bank of Cincinnati and
Federal Reserve Bank stock - at cost 3,475 2,159
Loans held for sale, at estimated fair value 7,824 10,423
Loans receivable, net of allowances for loan losses of $4,516 in 2002 and
$4,470 in 2001 298,643 280,239
Accrued interest receivable 1,806 2,139
Office properties and equipment, net 18,026 15,554
Bank owned life insurance 7,791 7,500
Foreclosed assets, net 152 184
Goodwill 1,772 -
Other assets 2,727 2,950
-------------------- -------------------
Total assets $ 436,656 $ 432,874
==================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------
Liabilities:
Deposits:
Interest-bearing $ 326,637 $ 332,688
Non-interest-bearing 53,302 48,302
-------------------- -------------------
Total deposits 379,939 380,990
Advances from Federal Home Loan Bank of Cincinnati 2,957 998
Accrued expenses and other liabilities 4,216 2,080
-------------------- -------------------
Total liabilities 387,112 384,068
-------------------- -------------------
Shareholders' equity:
Preferred stock, no par value
Authorized- 250,000 shares; none issued or outstanding at
September 30, 2002 and December 31, 2001 - -
Common stock, no par value
Authorized- 49,750,000 shares; issued and outstanding
6,900,079 and 7,079,801 at September 30, 2002
and December 31, 2001, respectively 9,644 11,683
Retained earnings 43,089 40,700
Unallocated ESOP Shares (3,298) (3,723)
Accumulated other comprehensive income, net of tax 109 146
-------------------- -------------------
Total shareholders' equity 49,544 48,806
-------------------- -------------------
Total liabilities and shareholders' equity $ 436,656 $ 432,874
==================== ===================
Note: The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but
does not include all of the information and footnotes required by accounting principles generally accepted in the
United States of America for complete financial statements.
See accompanying notes to consolidated financial statements.
1
CAVALRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
------------------- ------------------ ------------------- ------------------
Interest and dividend income:
Loans $ 5,224 $ 5,845 $ 15,754 $ 18,523
Investment securities 340 806 1,286 2,038
Other 174 280 503 1,056
------------------- ------------------ ------------------- ------------------
Total interest and dividend income 5,738 6,931 17,543 21,617
------------------- ------------------ ------------------- ------------------
Interest expense - deposits 1,777 3,168 5,473 10,263
Interest expense - borrowings 12 6 23 25
------------------- ------------------ ------------------- ------------------
Total interest expense 1,789 3,174 5,496 10,288
------------------- ------------------ ------------------- ------------------
Net interest income 3,949 3,757 12,047 11,329
Provision for loan losses 115 82 278 248
------------------- ------------------ ------------------- ------------------
Net interest income after provision
for loan losses 3,834 3,675 11,769 11,081
------------------- ------------------ ------------------- ------------------
Non-interest income:
Servicing income 65 59 190 196
Gain on sale of loans, net 974 571 2,124 1,583
Deposit servicing fees and charges 971 922 2,772 2,748
Trust service fees 280 297 832 882
Commissions and other non banking fees 602 15 1,694 46
Other operating income 239 145 700 441
------------------- ------------------ ------------------- ------------------
Total non-interest income 3,131 2,009 8,312 5,896
------------------- ------------------ ------------------- ------------------
Non-interest expenses:
Salaries and employee benefits 3,186 2,441 8,995 7,272
Occupancy expense 333 246 906 732
Supplies, communications and other
office expenses 322 214 844 674
Federal insurance premiums 15 17 48 48
Advertising expense 101 61 364 266
Equipment and service bureau expense 650 607 1,980 1,780
Other operating expense 585 369 1,475 1,145
------------------- ------------------ ------------------- ------------------
Total non-interest expenses 5,192 3,955 14,612 11,917
------------------- ------------------ ------------------- ------------------
Income before income taxes 1,773 1,729 5,469 5,060
Income tax expense 713 709 2,167 2,130
------------------- ------------------ ------------------- ------------------
Net income $ 1,060 $ 1,020 $ 3,302 $ 2,930
=================== ================== =================== ==================
Basic earnings per share $ 0.17 $ 0.16 $ 0.51 $ 0.45
=================== ================== =================== ==================
Diluted earnings per share $ 0.16 $ 0.16 $ 0.50 $ 0.45
=================== ================== =================== ==================
Weighted average shares outstanding -Basic 6,396,215 6,493,217 6,442,389 6,469,163
=================== ================== =================== ==================
Weighted average shares outstanding -Diluted 6,568,172 6,529,616 6,604,630 6,539,280
=================== ================== =================== ==================
Dividends declared $0.05 per share payable October 11, 2002 for shareholders of
record date September 30, 2002.
See accompanying notes to consolidated financial statements.
2
CAVALRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
------------ ------------ ------------ ------------
Net income $ 1,060 $ 1,020 $3,302 $2,930
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities
available-for-sale 34 180 (37) 291
------------ ------------ ------------- -----------
Comprehensive income $ 1,094 $ 1,200 $3,265 $3,221
============ ============ ============= ===========
See accompanying notes to consolidated financial statements.
3
CAVALRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2002 2001
--------- ---------
Operating activities:
Net cash provided by operating activities $ 10,864 $ 1,907
--------- ---------
Investing activities:
Decrease ( increase) in loans receivable, net (19,043) 673
Principal payments on investment securities 3,042 40
Purchase of investment securities
available for sale (40,889) (62,639)
Purchase of Federal Reserve Stock (1,240) -
Proceeds from maturities of investment securities 34,510 35,630
Purchase of office properties and equipment (3,535) (1,346)
Proceeds from sale of real estate acquired
through foreclosure 340 -
Cash paid in acquisition of Miller & Loughry (1,944) -
--------- ---------
Net cash used in investing activities (28,759) (27,642)
--------- ---------
Financing activities:
Net increase (decrease) in deposits (1,051) 31,215
Retirement of common stock (2,423) -
Proceeds from the exercise of stock options 12 -
Dividends paid (913) (930)
Net increase (decrease) in borrowings 1,959 (566)
--------- ---------
Net cash provided by (used in)
financing activities (2,416) 29,719
--------- ---------
Decrease in cash and cash equivalents (20,311) 3,984
Cash and equivalents, beginning of period 69,281 45,025
--------- ---------
Cash and cash equivalents, end of period $ 48,970 $ 49,009
========= =========
SUPPLEMENT DISCLOSURES OF CASH
FLOW INFORMATION:
Payments during the period for:
Interest $ 5,498 $ 10,380
========= =========
Income taxes $ 2,200 $ 2,205
========= =========
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Increase (decrease) in deferred tax asset related
to unrealized gain (loss) on investments $ 24 $ (181)
========= =========
Net unrealized gain (loss) on investment
securities available for sale $ (61) $ 472
========= =========
Dividends declared and payable $ 317 $ 355
========= =========
See accompanying notes to consolidated financial statements.
4
CAVALRY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Cavalry Bancorp, Inc. (the "Company"), a Tennessee corporation, is the holding
company for Cavalry Banking (the "Bank") which is a state chartered Federal
Reserve member commercial bank. Miller & Loughry Insurance and Services, Inc.
("Miller & Loughry"), an independent insurance agency, is a wholly-owned
subsidiary of the Bank.
The unaudited consolidated financial statements include the accounts of Miller &
Loughry, the Bank and the Company. All material intercompany accounts and
transactions have been eliminated in consolidation.
The accompanying consolidated financial statements of the Company have been
prepared in accordance with Instructions to Form 10-Q. Accordingly, they do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements. However, such information reflects all adjustments (consisting
solely of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim periods.
The results of operations for the three and nine months ended September 30,
2002, are not necessarily indicative of the results to be expected for the year
ending December 31, 2002. The consolidated financial statements and notes
thereto should be read in conjunction with the audited consolidated financial
statements and notes thereto for the year ended December 31, 2001.
2. Acquisitions
On January 4, 2002, Cavalry Banking, a wholly owned subsidiary of Cavalry
Bancorp, Inc., completed the acquisition of 100% of the capital stock issued and
outstanding of Miller & Loughry Insurances and Services, Inc., for a cash
purchase price of approximately $2.0 million.
Due to the insignificant effect on the financial position and results of
operations, no pro-forma data of this acquisition is required or presented.
3. Earnings Per Share
The following schedule reconciles the numerators and denominators of the basic
and diluted earnings per share ("EPS") computations for the three and nine
months ended September 30, 2002 and 2001. Diluted common shares arise from the
potentially dilutive effect of the Company's stock options outstanding.
Three Months Ended Nine Months Ended
-------------------- -------------------
September 30
------------
2002 2001 2002 2001
---- ---- ---- ----
Basic EPS:
Net income $1,060,000 $1,020,000 $3,302,000 $2,930,000
Average common shares outstanding 6,396,215 6,493,217 6,442,389 6,469,163
---------- ---------- ---------- ----------
Earnings per share - basic $ 0.17 $ 0.16 $ 0.51 $ 0.45
========== ========== ========== ==========
Diluted EPS:
Net income $1,060,000 $1,020,000 $3,302,000 $2,930,000
---------- ---------- ---------- ----------
Average common shares outstanding 6,396,215 6,493,217 6,442,389 6,469,163
Dilutive effect of stock options 171,957 36,399 162,241 70,117
---------- ---------- ---------- ----------
Average dilutive shares outstanding 6,568,172 6,529,616 6,604,630 6,539,280
---------- ---------- ---------- ----------
Earnings per share - diluted $ 0.16 $ 0.16 $ 0.50 $ 0.45
========== ========== ========== ==========
5
4. Business Segments
The Company and its subsidiary provide community oriented banking services to
individuals and businesses primarily within Rutherford and Bedford counties in
Middle Tennessee.
The Company's segments are identified by the products and services offered,
principally distinguished as banking, trust, insurance, and mortgage banking
operations. The majority of loans originated for sale are sold with the
servicing rights attached.
Segment information is derived from the internal reporting system utilized by
management with accounting policies and procedures consistent with those
described in Note 1 of the 2001 Annual Report to Shareholders. Segment
performance is evaluated by the Company based on profit or loss before income
taxes. Revenue, expense, and asset levels reflect those which can be
specifically identified and those assigned based on internally developed
allocation methods. These methods have been consistently applied.
Mortgage
For the quarter ended Banking Banking Trust Insurance Eliminations Consolidated
September 30, 2002:
Interest revenue $ 5,738 $ - $ - $ - $ - $ 5,738
Other income-external customers 1,295 65 280 530 (37) 2,133
Interest expense 1,789 - - - - 1,789
Depreciation and amortization 330 52 29 16 - 427
Other significant items:
Provision for loan losses 115 - - - - 115
Gain on sales of assets 24 974 - - - 998
Segment profit 1,740 - 52 83 (102) 1,773
Segment assets 427,664 8,408 395 2,454 (2,265) 436,656
Mortgage
For the quarter ended Banking Banking Trust Consolidated
September 30, 2001:
Interest revenue $ 6,931 $ - $ - $ 6,931
Other income-external customers 1,082 59 297 1,438
Interest expense 3,174 - - 3,174
Depreciation and amortization 246 42 10 298
Other significant items:
Provision for loan losses 82 - - 82
Gain on sale of assets - 571 - 571
Segment profit 1,628 - 101 1,729
Segment assets 409,768 8,710 353 418,831
Mortgage
For the nine months ended Banking Banking Trust Insurance Eliminations Consolidated
September 30, 2002:
Interest revenue $17,543 $ - $ - $ - $ - $17,543
Other income-external customers 3,802 190 832 1,352 (37) 6,139
Interest expense 5,496 - - - - 5,496
Depreciation and amortization 845 143 41 34 - 1,063
Other significant items:
Provision for loan losses 278 - - - - 278
Gain on sales of assets 49 2,124 - - - 2,173
Segment profit (loss) 5,359 (5) 168 168 (221) 5,469
Segment assets 427,664 8,408 395 2,454 (2,265) 436,656
Mortgage
For the nine months ended Banking Banking Trust Consolidated
September 30, 2001:
Interest revenue $ 21,617 $ - $ - $ 21,617
Other income-external customers 3,235 196 882 4,313
Interest expense 10,288 - - 10,288
Depreciation and amortization 706 125 27 858
Other significant items:
Provision for loan losses 248 - - 248
Gain on sale of assets - 1,583 - 1,583
Segment profit (loss) 4,813 (5) 252 5,060
Segment assets 409,768 8,710 353 418,831
6
5. New Accounting Standards Pronouncements
SFAS No. 141, "Business Combinations" issued on June 29, 2001 requires business
combinations entered into after June 30, 2001 to be accounted for using the
purchase method of accounting. Specifically identifiable intangible assets
acquired, other than goodwill, will be amortized over their estimated useful
economic life. This pronouncement had no material effect on the Company's
financial statements.
SFAS No. 142, "Goodwill and Other Intangible Assets", issued on June 29, 2001,
addresses how intangible assets that are acquired individually or with a group
of other assets should be accounted for in financial statements upon their
acquisition. This statement also addresses how goodwill and other intangible
assets should be accounted for after they have been initially recognized in the
financial statements. This statement results in the end to systematic goodwill
and other intangible amortization and requires impairment testing on those
balances at least annually or if circumstances arise that suggest that
impairment may be an issue. SFAS No. 142 was effective for the Company
beginning on January 1, 2002 and is applicable to all goodwill and other
intangible assets regardless of when those assets were initially recognized.
SFAS No. 143, "Accounting for Asset Retirement Obligations," issued in June
2001, addresses financial accounting and reporting for legal obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. SFAS No. 143 is effective for fiscal years beginning
after June 15, 2002. This Statement is not expected to have a material impact
on the Company's financial statements.
SFAS No. 144, "Accounting for the Impairment of Long-Lived Assets," issued in
August 2001, supercedes SFAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" and the accounting and
reporting provisions of APB No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions," for the disposal of
a segment of a business. While SFAS No. 144 retains many of the fundamental
provisions of SFAS No. 121, it establishes a single accounting model for
long-lived assets to be disposed of by sale, and resolves certain implementation
issues not previously addressed by SFAS No. 121. SFAS No. 144 is effective for
fiscal years beginning after December 15, 2001. This Statement did not have a
material impact on the Company's financial statements.
SFAS No. 145, "Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB
Statement No. 13 and Technical Corrections," issued in April 2002, rescinds SFAS
No. 4, Reporting Gains and Losses from Extinguishment of Debt, and SFAS No. 64,
Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. Any gain or
loss on the extinguishment of debt that was classified as an extraordinary item
in prior periods will be reclassified into continuing operations.
SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities," issued in June 2002 requires that a liability for a cost associated
with an exit or disposal activity be recognized when the liability is incurred
compared to current literature, which recognized a liability when the entity
committed to an exit plan. Management believes that this Statement will not
have a material impact on the Company's financial statements.
6. Deferred Compensation and Retirement Plans
The Company has entered into separate deferred compensation arrangements
with the Board of Directors and certain senior officers. The plans call for
amounts payable at retirement, death or disability as defined in the agreements.
The estimated present value of the deferred compensation will be accrued over
the remaining expected term of active employment. The Bank has purchased life
insurance policies that it intends to use to finance this liability.
7
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Private Securities Litigation Reform Act Safe Harbor Statement
This Quarterly Report contains forward-looking statements within the meaning of
the federal securities laws. These statements are not historical facts, rather
statements based on the Company's current expectations regarding its business
strategies and their intended results and its future performance.
Forward-looking statements are preceded by terms such as "expects," "believes,"
"anticipates," "intends," and similar expressions.
Forward-looking statements are not guarantees of future performance. Numerous
risks and uncertainties could cause the Company's actual results, performance,
and achievements to be materially different from those expressed or implied by
the forward-looking statements. Factors that may cause or contribute to these
differences include, without limitation, general economic conditions, including
changes in market interest rates and changes in monetary and fiscal policies of
the federal government; legislative and regulatory changes; and other factors
disclosed periodically in the Company's filings with the Securities and Exchange
Commission.
Because of the risks and uncertainties inherent in forward-looking statements,
readers are cautioned not to place undue reliance on them, whether included in
this report or made elsewhere from time to time by the Company or on its behalf.
The Company assumes no obligation to update any forward-looking statements.
Comparison of Financial Condition at September 30, 2002 and December 31, 2001
Total assets were $436.7 million at September 30, 2002, compared to $432.9
million at December 31, 2001, an increase of $3.8 million or 0.88%. This
increase was primarily a result of an increase in borrowings and retained
earnings. Cash and cash equivalents decreased from $69.3 million at December
31, 2001, to $49.0 million at September 30, 2002. Investment securities
available-for-sale increased from $41.8 million at December 31, 2001, to $45.5
million at September 30, 2002. Loans receivable, net increased $18.4 million
from $280.2 million at December 31, 2001, to $298.6 million at September 30,
2002. Office properties and equipment increased from $15.6 million at December
31, 2001 to $18.0 million at September 30, 2002. This increase was a result of
the purchase of land for a future branch location, completion of the first floor
of the Financial Services Building, and purchase of computers and banking
equipment. The first floor of the Financial Services Building now houses Miller
& Loughry, the Investment, Management and Trust Department, and Cavalry
Investment Services. In the first quarter of 2002, the Company completed the
purchase of Miller & Loughry, an independent insurance agency, for $2.0 million.
The increase in goodwill was a result of the purchase of Miller & Loughry.
Deposit accounts decreased $1.1 million from $381.0 million at December 31,
2001, to $379.9 million at September 30, 2002. Certificates of deposit
increased $7.2 million from $145.6 million at December 31, 2001 to $152.8
million at September 30, 2002. Savings deposits increased $2.4 million from
$13.9 million at December 31, 2001 to $16.3 million at September 30, 2002.
Money market accounts decreased $1.0 million from $91.6 million at December 31,
2001 to $90.6 million at September 30, 2002. NOW accounts declined $14.6
million from $81.6 million at December 31, 2001 to $67.0 million at September
30, 2002. Transaction accounts increased $5.0 million from $48.3 million at
December 31, 2001 to $53.3 million at September 30, 2002. Management feels that
these declines are temporary, and will continue to market deposit relationships.
Shareholders' equity increased by $700,000 from $48.8 million at December 31,
2001, to $49.5 million at September 30, 2002. This increase was a result of net
income of $3.3 million and the release of $797,000 in ESOP shares. These
increases were partially offset by dividends of $913,000, the repurchase and
retirement of $2.4 million in Company common stock, and a decrease in unrealized
gains on available-for-sale securities of $37,000, net of taxes.
Non-performing assets were $394,000 at December 31, 2001 and $412,000 at
September 30, 2002.
8
Comparison of Operating Results for the Three Months Ended September 30, 2002
and September 30, 2001.
Net Income. Net income was $1.1 million for the three months ended September
30, 2002 compared to $1.0 million for the three months ended September 30, 2001.
Return on average assets was constant at 0.99% for the three months ended
September 30, 2002 and 2001. Return on average equity decreased from 8.66% for
the three months ended September 30, 2001, to 8.46% for the same period in 2002.
Earnings per share was $0.16 per diluted share for the three months ended
September 30, 2001 and 2002. This increase was primarily a result of higher net
interest income and higher non-interest income. These increases were partially
offset by higher non-interest expenses and a larger provision for losses on
loans.
Net Interest Income. Net interest income increased $100,000 from $3.8 million
for the three months ended September 30, 2001, to $3.9 million for the same
period in 2002. Interest rate spread increased from 3.42% for the three months
ended September 30, 2001, to 3.88% for the same period in 2002. Net interest
margin increased from 4.01% for the three months ended September 30, 2001, to
4.17% for the same period in 2002. The ratio of average interest-earning assets
to average interest-bearing liabilities decreased from 117.30% for the three
months ended September 30, 2001, to 115.22% for the same period in 2002.
Interest income decreased 17.39% to $5.7 million for the three months ended
September 30, 2002, from $6.9 million for the same period in 2001. Interest on
loans decreased from $5.8 million for the three months ended September 30, 2001,
to $5.2 million for the same period in 2002. Average loans outstanding
increased from $279.4 million for the three months ended September 30, 2001, to
$296.5 million for the same period in 2002. The average yield decreased from
8.30% for the three months ended September 30, 2001, to 6.99% for the same
period in 2002, as a result of declining interest rates. Income on all other
investments consisting of mortgage backed securities, other investments, Federal
Home Loan Bank and Federal Reserve Bank stock, bank deposits and federal funds
decreased from $1.1 million for the three months ended September 30, 2001, to
$514,000 for the same period in 2002. Average investments decreased from $92.7
million for the three months ended September 30, 2001, to $79.1 million for the
same period in 2002. The average yield decreased from 4.64% for the three
months ended September 30, 2001, to 2.58% for the same period in 2002.
Interest expense decreased from $3.2 million for the three months ended
September 30, 2001, to $1.8 million for the same period in 2002. Average
interest-bearing deposits increased from $316.1 million for the three months
ended September 2001, to $324.4 million for the same period in 2002. This
increase was a result of continuing efforts to increase market share of
deposits. The average cost of deposits decreased from 3.98% for the three
months ended September 30, 2001, to 2.17% for the same period in 2002. Average
borrowings increased from $1.0 million at an average cost of 2.34% for the three
months ended September 30, 2001 to $1.6 million at an average cost of 2.91% for
the same period in 2002. The total cost of funds decreased from 3.97% for the
three months ended September 30, 2001, to 2.18% for the same period in 2002.
Average interest-bearing liabilities increased from $317.2 million for the three
months ended September 30, 2001, to $326.0 million for the same period in 2002.
Provision for Loan Losses. Provision for loan losses are charges to earnings to
bring the total allowance for loan losses to a level considered by management as
adequate to provide for estimated loan losses based on management's evaluation
of the collectibility of the loan portfolio, including the nature of the
portfolio, credit concentrations, trends in historical loss experience, specific
impaired loans and economic conditions. Management also considers the level of
problem assets, giving greater weight to the level of classified assets than to
the level of nonperforming assets because classified assets include not only
nonperforming assets but also performing assets that otherwise exhibit, in
management's judgment, potential credit weaknesses.
The provision for loan losses increased from $82,000 for the three months ended
September 30, 2001 to $115,000 for the same period in 2002. Management deemed
the allowance for loan losses adequate at September 30, 2002.
Non-interest Income. Non-interest income increased from $2.0 million for the
three months ended September 30, 2001, to $3.1 million for the same period in
2002. In the mortgage banking segment, net gain on sale of loans increased from
$571,000 for the three months ended September 30, 2001, to $974,000 for the same
period in 2002. The higher gain in 2002 was a result of increased production.
Loan servicing fees increased slightly from $59,000 for the three months ended
September 30, 2001, to $65,000 for the same period in 2002. In the banking
segment, deposit fees and other operating incomes increased from $1.1 million
for the three months ended September 30, 2001, to $1.3 million for the same
period in 2002. This increase was primarily a result of increased volume. In
the trust segment, trust fees decreased from $297,000 for the three months ended
September 30, 2001, to $280,000 for the same period in 2002. This decline was
primarily a result of declining market values of assets under management. The
acquisition of Miller & Loughry contributed commissions and related income
during the three months September 30, 2002.
9
Non-interest Expense. Non-interest expense increased from $4.0 million for the
three months ended September 30, 2001, to $5.2 million for the same period in
2002. Salaries and employee benefits increased from $2.4 million for the three
months ended September 30, 2001 to $3.2 million for the same period in 2002.
This increase was a result of the purchase of Miller & Loughry, increased
commissions, and costs of medical insurance. The increase in occupancy expense
was primarily a result of the opening of the new operations building and
increases in the cost of utilities. The increases in other expenses were
primarily due to increased loan and deposit activity.
Income taxes. The provision for income taxes was $713,000 for the three months
ended September 30, 2002, compared to $709,000 for the same period in 2001.
Comparison of Operating Results for the Nine Months Ended September 30, 2002 and
September 30, 2001.
Net Income. Net income was $3.3 million for the nine months ended September 30,
2002 compared to $2.9 million for the nine months ended September 30, 2001.
Return on average assets increased from 0.99% for the nine months ended
September 30, 2001, to 1.06% for the same period in 2002. Return on average
equity also increased from 8.65% for the nine months ended September 30, 2001,
to 9.01% for the same period in 2002. Earnings per share increased from $0.45
per diluted share for the nine months ended September 30, 2001, to $0.50 per
diluted share for the same period in 2002. This increase was primarily a result
of higher net interest income and higher non-interest income. These increases
were partially offset by higher non-interest expenses and a larger provision for
losses on loans.
Net Interest Income. Net interest income increased $700,000 from $11.3 million
for the nine months ended September 30, 2001, to $12.0 million for the same
period in 2002. Interest rate spread increased from 3.56% for the nine months
ended September 30, 2001, to 4.07% for the same period in 2002. Net interest
margin increased from 4.19% for the nine months ended September 30, 2001, to
4.35% for the same period in 2002. The ratio of average interest-earning assets
to average interest-bearing liabilities decreased from 116.69% for the nine
months ended September 30, 2001, to 114.25% for the same period in 2002.
Interest income decreased 18.98% to $17.5 million for the nine months ended
September 30, 2002, from $21.6 million for the same period in 2001. Interest on
loans decreased from $18.5 million for the nine months ended September 30, 2001,
to $15.8 million for the same period in 2002. Average loans outstanding
increased from $281.8 million for the nine months ended September 30, 2001, to
$291.5 million for the same period in 2002. The average yield decreased from
8.79% for the nine months ended September 30, 2001, to 7.22% for the same period
in 2002, as a result of declining interest rates. Income on all other
investments consisting of mortgage backed securities, other investments, Federal
Home Loan Bank and Federal Reserve Bank stock, bank deposits and federal funds
decreased from $3.1 million for the nine months ended September 30, 2001, to
$1.8 million for the same period in 2002. Average investments decreased from
$79.3 million for the nine months ended September 30, 2001, to $78.7 million for
the same period in 2002. The average yield decreased from 5.24% for the nine
months ended September 30, 2001, to 2.94% for the same period in 2002.
Interest expense decreased from $10.3 million for the nine months ended
September 30, 2001, to $5.5 million for the same period in 2002. Average
interest-bearing deposits increased from $308.3 million for the nine months
ended September 30, 2001, to $322.9 million for the same period in 2002. The
average cost of deposits decreased from 4.45% for the nine months ended
September 30, 2001, to 2.27% for the same period in 2002. Average borrowings
remained constant at $1.2 million. The average cost decreased from 2.80% for
the nine months ended September 30, 2001 to 2.56% for the same period in 2002.
The total cost of funds decreased from 4.44% for the nine months ended September
30, 2001, to 2.27% for the same period in 2002. Average interest-bearing
liabilities increased from $309.5 million for the nine months ended September
30, 2001, to $324.1 million for the same period in 2002.
Provision for Loan Losses. Provision for loan losses are charges to earnings to
bring the total allowance for loan losses to a level considered by management as
adequate to provide for estimated loan losses based on management's evaluation
of the collectibility of the loan portfolio, including the nature of the
portfolio, credit concentrations, trends in historical loss experience, specific
impaired loans and economic conditions. Management also considers the level of
problem assets, giving greater weight to the level of classified assets than to
the level of nonperforming assets because classified assets include not only
nonperforming assets but also performing assets that otherwise exhibit, in
management's judgment, potential credit weaknesses.
10
The provision for loan losses increased from $248,000 for the nine months ended
September 30, 2001 to $278,000 for the same period in 2002. Management deemed
the allowance for loan losses adequate at September 30, 2002.
Non-interest Income. Non-interest income increased from $5.9 million for the
nine months ended September 30, 2001, to $8.3 million for the same period in
2002. In the mortgage banking segment, net gain on sale of loans increased from
$1.6 million for the nine months ended September 30, 2001, to $2.1 million for
the same period in 2002. The higher gain in 2002 was a result of increased
production. Loan servicing fees decreased slightly from $196,000 for the nine
months ended September 30, 2001, to $190,000 for the same period in 2002. In
the banking segment, deposit fees and other operating incomes increased from
$3.2 million for the nine months ended September 30, 2001 to $3.8 million for
the same period in 2002. In the trust segment, trust fees decreased from
$882,000 for the nine months ended September 30, 2001, to $832,000 for the same
period in 2002. The acquisition of Miller & Loughry contributed commissions and
related income during the nine months ended September 30, 2002.
Non-interest Expense. Non-interest expense increased from $11.9 million for the
nine months ended September 30, 2001, to $14.6 million for the same period in
2002. Salaries and employee benefits increased from $7.3 million for the nine
months ended September 30, 2001 to $9.0 million for the same period in 2002.
This increase was a result of the purchase of Miller & Loughry, increased
commissions, and costs of medical insurance. The increase in occupancy expense
was primarily a result of the opening of the new operations building and
increases in the cost of utilities. The increases in other expenses were
primarily due to increased loan and deposit activity.
Income taxes. The provision for income taxes was $2.2 million for the nine
months ended September 30, 2002, compared to $2.1 million for the same period in
2001.
Liquidity and Capital Resources
The Company's primary sources of funds are customer deposits, proceeds from loan
principal and interest payments, sale of loans, maturing securities and Federal
Home Loan Bank (FHLB) of Cincinnati advances. While maturities and scheduled
amortization of loans are a predictable source of funds, deposit flows and
mortgage prepayments are influenced greatly by general interest rates, other
economic conditions, and competition. The Company and the Bank generally
maintain sufficient cash and short-term investments to meet short-term liquidity
needs. At September 30, 2002, cash and cash equivalents totaled $49.0 million
or 11.20% of total assets, and investment securities available-for-sale totaled
$45.5 million. At September 30, 2002, the Bank also maintained, but did not
draw upon, a line of credit with the FHLB of Cincinnati in the amount of $10.0
million.
As of September 30, 2002, the Bank's regulatory capital was in excess of all
applicable regulatory requirements. At September 30, 2002, under the
regulations of the Federal Reserve Board, the Bank's actual leverage, Tier 1
risk-based, and risked-based capital ratios were 9.03%, 12.22% and 13.47%,
respectively, compared to requirements of 3.0%, 4.0% and 8.0%, respectively.
At September 30, 2002, the Bank had loan commitments of approximately $40.7
million. In addition, at September 30, 2002, the unused portion of lines of
credit extended by the Bank was approximately $6.2 million for consumer loans
and $25.0 million for commercial loans. Standby letters of credit and financial
guarantees are conditional commitments issued by the Bank to guarantee the
performance of a customer to a third party. Those guarantees are primarily
issued to support public and private borrowing arrangements, including
commercial paper, bond financing, and similar transactions. Most guarantees
extend from one to two years. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan facilities to
customers. At September 30, 2002, the Bank had $6.7 million of letters of
credit outstanding.
Impact of Inflation and Changing Prices
The consolidated financial statements of the Company and notes thereto,
presented elsewhere herein, have been prepared in accordance with accounting
principles generally accepted in the United States of America, which require the
measurement of financial condition and operating results in terms of historical
dollars without considering the change in relative purchasing power of money
over time due to inflation. The impact of inflation is reflected in the
increased cost of the Company's operations. Unlike most industrial companies,
nearly all the assets and liabilities of the Company are financial. As a
result, interest rates have a greater impact on the Company's performance than
do the effects of general levels of inflation. Interest rates do not
necessarily move in the same direction or to the same extent as the prices of
goods and services.
11
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a financial institution, the Company's primary component of market risk is
interest rate risk. Ultimately, fluctuations in interest rates will impact
liquidity, the level of income and expense recorded on most of the Company's
assets and liabilities, and the market value of interest-earning assets and
interest-bearing liabilities. The Company is not subject to foreign exchange or
commodity price risk. The Company does not own any trading assets.
Interest rate risk is managed by management in accordance with policies approved
by the Bank's Board of Directors. Management formulates strategies based on
appropriate levels of interest rate risk. In determining the appropriate level
of interest rate risk, management considers the impact on earnings and capital
of the current outlook on interest rates, potential changes in interest rates,
regional economy, liquidity, business strategies and other factors. Management
meets regularly to review, among other things, the sensitivity of assets and
liabilities to interest rate changes, the book and market value of assets and
liabilities, unrealized gains and losses, purchase and sales activities,
commitments to originate loans and the maturities of investments. Management
uses an analysis of relationships between interest-earning assets and
interest-bearing liabilities to manage interest rate risk.
The following table presents the Company's repricing gap at September 30, 2002.
The table indicates that at September 30, 2002 the Company was liability
sensitive up to six months and had a negative cumulative GAP for the time
periods up to and including one to three year time horizons.
Six After After
Within Months One to Three Over
Six To One Three to Five Ten
Months Year Years Years Years Total
------ ---- ----- ----- ----- -----
(in thousands)
Interest-earning assets:
Loans receivable, net $ 107,885 $ 42,505 $ 66,717 $66,033 $ 23,327 $306,467
FHLB & FRB stock 3,475 - - - - 3,475
Investment securities available-for-sale 21,820 9,055 7,473 4,272 2,850 45,470
Federal funds sold overnight and other
interest-bearing deposits 29,945 - - - - 29,945
---------- ---------- ---------- -------- ---------- ---------
Total rate sensitive assets $ 163,125 $ 51,560 $ 74,190 $70,305 $ 26,177 $385,357
========== ========== ========== ======== ========== =========
Interest-bearing liabilities:
Deposits:
NOW accounts $ 66,975 $ - $ - $ - $ - $ 66,975
Savings accounts 16,266 - - - - 16,266
Money market accounts 90,582 - - - - 90,582
Certificates of deposit 60,618 49,152 30,434 12,589 20 152,813
Borrowings 27 27 1,109 1,109 685 2,957
---------- ---------- ---------- -------- ---------- ---------
Total rate sensitive liabilities $ 234,468 $ 49,179 $ 31,543 $13,698 $ 705 $329,593
========== ========== ========== ======== ========== =========
Excess (deficiency) of interest sensitive
assets over interest sensitive liabilities ($71,343) $ 2,381 $ 42,647 $56,607 $ 25,472 $ 55,764
Cumulative excess (deficiency) of
interest sensitive assets ($71,343) ($68,962) ($26,315) $30,292 $ 55,764 $ 55,764
Cumulative ratio of interest-earning assets
to interest-bearing liabilities 69.57% 75.69% 91.65% 109.21% 116.92% 116.92%
Interest sensitivity gap to total rate sensitive assets (18.51)% 0.62% 11.07% 14.69% 6.61% 14.47%
Ratio of interest-earning assets to
interest -bearing liabilities 69.57% 104.84% 235.20% 513.25% 3,713.05% 116.92%
Ratio of cumulative gap to total rate sensitive assets (18.51)% (17.90)% (6.83)% 7.86% 14.47% 14.47%
12
The gap analysis provides the basis for more detailed analysis in a simulation
model. Also gap results are popular rate risk indicators. However, to truly
evaluate the impact of rate change on income, simulation is the best technique
because variables are changed for various rate conditions. Each category's
interest change is calculated as rates ramp up and down. In addition the
prepayment speeds and repricing speeds are changed.
Rate Shock is a method for stress testing the Net Interest Margin (NIM) over the
next four quarters under several rate change levels. These levels span four 100
basis point increments up and down from the current interest rates. In order to
simulate activity, maturing balances are replaced with new balances at the new
rate level and repricing balances are adjusted to the new rate shock level. The
interest is recalculated for each level along with the new average yield. NIM
is then calculated and a margin risk profile is developed. This simulation
reveals that the Bank will experience a loss in Net Interest Income if rates
decline in the next year. The magnitude and severity of potential loss for a
100 basis point decline in rates under projected growth conditions would be a
decline of 15 basis points.
Item 4. Controls and Procedures
Within the ninety days prior to the filing of this report, the Company's
management, under the supervision and with the participation of the Company's
Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness
of the design and operation of the Company's disclosure controls and procedures,
as defined in Rule 13a-14 under the Securities Exchange Act of 1934. Based on
that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures were adequate.
There were no significant changes (including corrective actions with regard to
significant deficiencies of material weaknesses) in the Company's internal
controls or in other factors subsequent to the date of the evaluation that could
significantly affect these controls.
13
Part II. Other Information
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities and use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Exhibits
3.1 Charter of the Registrant*
3.2 Bylaws of the Registrant*
10.1 Employment Agreement with Ed C. Loughry, Jr.**
10.2 Employment Agreement with Ronald F. Knight **
10.3 Severance Agreement with Hillard C. Gardner**
10.4 Severance Agreement with Ira B. Lewis **
10.5 Severance Agreement with R. Dale Floyd **
10.6 Severance Agreement with M. Glenn Layne **
10.7 Severance Agreement with Joy B. Jobe**
10.8 Severance Agreement with William S. Jones**
10.9 Severance Agreement with David W. Hopper**
10.10 Cavalry Banking Key Personnel Severance Compensation Plan**
10.11 Cavalry Banking Employee Stock Ownership Plan**
10.12 Management Recognition Plan with William H. Huddleston III ***
10.13 Management Recognition Plan with Gary Brown ***
10.14 Management Recognition Plan with Ed Elam ***
10.15 Management Recognition Plan with Frank E. Crosslin, Jr. ***
10.16 Management Recognition Plan with Tim J. Durham ***
10.17 Management Recognition Plan with James C. Cope ***
10.18 Management Recognition Plan with Terry G. Haynes ***
10.19 Management Recognition Plan with Ed C. Loughry, Jr. ***
10.20 Management Recognition Plan with Ronald F. Knight ***
10.21 Management Recognition Plan with William S. Jones ***
10.22 Management Recognition Plan with Hillard C. Gardner ***
10.23 Management Recognition Plan with R. Dale Floyd ***
10.24 Management Recognition Plan with David W. Hopper ***
10.25 Management Recognition Plan with Joe W. Townsend ***
10.26 Management Recognition Plan with M. Glenn Layne ***
10.27 Management Recognition Plan with Joy B. Jobe ***
10.28 Management Recognition Plan with Ira B. Lewis, Jr. ***
10.29 Management Recognition Plan with Elizabeth L. Green ***
10.30 Management Recognition Plan with James O. Sweeney, III ***
10.31 Director Supplemental Retirement Plan*****
10.32 Executive Supplemental Retirement Plan*****
13 Annual Report to Stockholders****
21 Subsidiaries of the Registrant****
99.1 CEO Certification Pursuant To 18U.S.C. section 1350, As Adopted
Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
99.2 CFO Certification Pursuant To 18U.S.C. section 1350, As Adopted
Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
* Incorporated herein by reference to the Registrant's Registration
Statement on Form S-1, as amended (333-40057).
** Incorporated herein by reference to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1997, as filed with the Securities
and Exchange Commission on March 30, 1998.
*** Incorporated herein by reference to the Registrant's Annual Meeting Proxy
Statement dated March 15, 1999, as filed with the Securities and Exchange
Commission on March 15, 1999.
**** Incorporated herein by reference to the Registrant's Annual Report on Form
10-K for the year ended December 31, 2001, as filed with the Securities
and Exchange Commission on March 27, 2002
***** Incorporated herein by reference to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2002, as filed with the
Securities and Exchange Commission on May 10, 2002
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the quarter ended September 30,
2002.
14
Pursuant to the requirements of section 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
CAVALRY BANCORP, INC.
Date: November 12, 2002 by: /s/ Ed C. Loughry, Jr.
-------------------------
Ed C. Loughry, Jr.
Chairman and
Chief Executive Officer
Date: November 12, 2002 by: /s/ Hillard C. Gardner
----------------------
Hillard C. Gardner
Senior Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
15
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
CERTIFICATIONS FOR QUARTERLY REPORT ON FORM 10-Q
I, Ed C. Loughry, Jr., certify that:
1) I have reviewed this quarterly report on Form 10-Q of
Cavalry Bancorp, Inc.;
2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
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.
Date: November 12, 2002 by: /s/ Ed C. Loughry, Jr.
--------------------------
Ed C. Loughry, Jr.
Chairman of the Board of Directors
and Chief Executive Officer
16
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
CERTIFICATIONS FOR QUARTERLY REPORT ON FORM 10-Q
I, Hillard C. Gardner, certify that:
1) I have reviewed this quarterly report on Form 10-Q of
Cavalry Bancorp, Inc.;
2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
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.
Date: November 12, 2002 by: /s/ Hillard C. Gardner
-------------------------
Hillard C. Gardner
Senior Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
17
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Cavalry Bancorp, Inc., (the
"Company") on Form 10-Q for the period ending September 30, 2002, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I, Ed
C. Loughry, Jr., Chairman of the Board of Directors and Chief Executive Officer
of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to
ss.906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
Date: November 12, 2002 by: /s/ Ed C. Loughry, Jr.
--------------------------
Ed C. Loughry, Jr.
Chairman of the Board of Directors
and Chief Executive Officer
EXHIBIT 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Cavalry Bancorp, Inc., (the
"Company") on Form 10-Q for the period ending September 30, 2002, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Hillard C. Gardner, Senior Vice President and Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.906
of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
Date: November 12, 2002 by: /s/ Hillard C. Gardner
-------------------------
Hillard C. Gardner
Senior Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)