FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

 

For the quarterly period ended September 30, 2002

 

OR

 

 

For the transition period from                            to                            .

 

Commission file number 1-13661

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý   No o

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Common Stock, no par value – 6,714,131

Shares issued and outstanding at November 11, 2002

 

 

PART I - FINANCIAL INFORMATION

 

Item 1.		Financial Statements
The following consolidated financial statements of S.Y. Bancorp, Inc. and subsidiaries, Stock Yards Bank & Trust Company and S.Y. Bancorp Capital Trust I, are submitted herewith:
•		Unaudited Consolidated Balance Sheets September 30, 2002 and December 31, 2001
•		Unaudited Consolidated Statements of Income for the three months ended September 30, 2002 and 2001
•		Unaudited Consolidated Statements of Income for the nine months ended September 30, 2002 and 2001
•		Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2002 and 2001
•		Unaudited Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2002
•		Unaudited Consolidated Statements of Comprehensive Income for the three months ended September 30, 2002 and 2001
•		Unaudited Consolidated Statements of Comprehensive Income for the nine months ended September 30, 2002 and 2001
•		Notes to Unaudited Consolidated Financial Statements

 

 

S.Y. BANCORP, INC. AND SUBSIDIARIES

Unaudited Consolidated Balance Sheets

September 30, 2002 and December 31, 2001

(In thousands, except share data)

 

		September 30, 2002			December 31, 2001
Assets
Cash and due from banks		$	29,526		29,803
Federal funds sold		28,298			218
Mortgage loans held for sale		19,512			13,963
Securities available for sale (amortized cost $145,539 in 2002 and $75,563 in 2001)		152,535			76,884
Securities held to maturity (fair value of $10,913 in 2002 and $14,174 in 2001)		10,350			13,878
Loans		795,627			777,441
Less allowance for loan losses		11,530			10,965
Net loans		784,097			766,476
Premises and equipment		21,586			19,421
Accrued interest receivable and other assets		15,487			16,650
Total assets		$	1,061,391		937,293
Liabilities and Stockholders’ Equity
Deposits:
Non-interest bearing		$	136,756		118,165
Interest bearing		752,405			635,386
Total deposits		889,161			753,551
Securities sold under agreements to repurchase and federal funds purchased		53,759			79,031
Other short-term borrowings		3,400			1,880
Accrued interest payable and other liabilities		11,624			10,877
Long-term debt		240			270
Long-term debt - trust preferred securities		20,000			20,000
Total liabilities		978,184			865,609
Stockholders’ equity:
Common stock, no par value; 10,000,000 shares authorized; 6,714,331 and 6,672,294 shares issued and outstanding in 2002 and 2001, respectively		5,872			5,711
Surplus		15,061			14,404
Retained earnings		59,825			50,924
Accumulated other comprehensive income		2,449			645
Total stockholders’ equity		83,207			71,684
Total liabilities and stockholders’ equity		$	1,061,391		937,293

 

See accompanying notes to unaudited consolidated financial statements.

 

2

 

S.Y. BANCORP, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Income

For the three months ended September 30, 2002 and 2001

(In thousands, except share and per share data)

 

		2002			2001
Interest income:
Loans		$	14,376		15,052
Federal funds sold		176			100
Mortgage loans held for sale		145			87
U.S. Treasury and Federal agencies		942			939
Obligations of states and political subdivisions		288			307
Total interest income		15,927			16,485
Interest expense:
Deposits		4,985			6,840
Securities sold under agreements to repurchase and federal funds purchased		208			387
Other short-term borrowings		8			20
Long-term debt		2			6
Long-term debt - trust preferred securities		450			445
Total interest expense		5,653			7,698
Net interest income		10,274			8,787
Provision for loan losses		1,150			900
Net interest income after provision for loan losses		9,124			7,887
Non-interest income:
Investment management and trust services		2,002			1,857
Service charges on deposit accounts		1,908			1,758
Gains on sales of mortgage loans held for sale		1,024			435
Other		940			878
Total non-interest income		5,874			4,928
Non-interest expenses:
Salaries and employee benefits		5,198			4,481
Net occupancy expense		544			501
Furniture and equipment expense		737			637
Other		2,430			2,284
Total non-interest expenses		8,909			7,903
Income before income taxes		6,089			4,912
Income tax expense		2,001			1,380
Net income		$	4,088		3,532
Net income per share:
Basic		$	0.61		0.53
Diluted		$	0.59		0.51
Average common shares:
Basic		6,725,507			6,669,089
Diluted		6,980,512			6,931,036

 

See accompanying notes to unaudited consolidated financial statements.

 

3

 

S.Y. BANCORP, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Income

For the nine months ended September 30, 2002 and 2001

(In thousands, except share and per share data)

 

		2002			2001
Interest income:
Loans		$	42,886		45,008
Federal funds sold		353			631
Mortgage loans held for sale		302			257
U.S. Treasury and Federal agencies		2,744			2,756
Obligations of states and political subdivisions		880			904
Total interest income		47,165			49,556
Interest expense:
Deposits		15,131			21,936
Securities sold under agreements to repurchase and federal funds purchased		690			1,379
Other short-term borrowings		21			54
Long-term debt		7			153
Long-term debt - trust preferred securities		1,350			595
Total interest expense		17,199			24,117
Net interest income		29,966			25,439
Provision for loan losses		3,150			2,775
Net interest income after provision for loan losses		26,816			22,664
Non-interest income:
Investment management and trust services		6,065			5,437
Service charges on deposit accounts		5,439			5,141
Gains on sales of mortgage loans held for sale		1,877			1,279
Other		2,762			2,370
Total non-interest income		16,143			14,227
Non-interest expenses:
Salaries and employee benefits		14,910			13,142
Net occupancy expense		1,538			1,421
Furniture and equipment expense		2,258			1,821
Other		7,172			6,204
Total non-interest expenses		25,878			22,588
Income before income taxes		17,081			14,303
Income tax expense		5,626			4,380
Net income		$	11,455		9,923
Net income per share:
Basic		$	1.71		1.49
Diluted		$	1.64		1.44
Average common shares:
Basic		6,709,461			6,656,921
Diluted		6,970,707			6,893,838

 

See accompanying notes to unaudited consolidated financial statements.

 

4

 

S.Y. BANCORP, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows

For the nine months ended September 30, 2002 and 2001

(In thousands)

 

		2002			2001
Operating activities:
Net income		$	11,455		9,923
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Provision for loan losses		3,150			2,775
Depreciation, amortization and accretion, net		1,589			1,308
Gains on sales of mortgage loans held for sale		(1,877		)	(1,279	)
Origination of mortgage loans held for sale		(103,564		)	(73,576	)
Proceeds from sale of mortgage loans held for sale		99,892			71,569
Loss on the disposal of premises and equipment		91			—
Gain on the sale of other real estate		(4		)	—
Income tax benefit of stock options exercised		327			145
(Increase) decrease in accrued interest receivable and other assets		(531		)	862
Increase in accrued interest payable and other liabilities		672			827
Net cash provided by operating activities		11,200			12,554
Investing activities:
Net (increase) decrease in federal funds sold		(28,080		)	26,498
Purchases of securities available for sale		(87,610		)	(23,753	)
Proceeds from maturities of securities available for sale		14,605			17,967
Proceeds from maturities of securities held to maturity		3,576			2,426
Net increase in loans		(20,350		)	(93,862	)
Purchases of premises and equipment		(3,805		)	(2,966	)
Proceeds from sales of other real estate		347			—
Net cash used by investing activities		(121,317		)	(73,690	)
Financing activities:
Net increase in deposits		135,610			31,832
Net (decrease) increase in securities sold under agreements to repurchase and federal funds purchased		(25,272		)	1,039
Net increase in other short-term borrowings		1,520			1,739
Repayments of long-term debt		(30		)	(1,830	)
Net proceeds from long-term debt - trust preferred securities		—			18,944
Issuance of common stock for options and dividend reinvestment plan		928			491
Common stock repurchases		(437		)	(512	)
Cash dividends paid		(2,479		)	(2,129	)
Net cash provided by financing activities		109,840			49,574
Net decrease in cash and cash equivalents		(277		)	(11,562	)
Cash and cash equivalents at beginning of period		29,803			44,597
Cash and cash equivalents at end of period		$	29,526		33,035
Supplemental cash flow information:
Income tax payments		$	5,550		4,900
Cash paid for interest		$	17,166		24,172

 

See accompanying notes to unaudited consolidated financial statements.

 

5

 

S.Y. BANCORP, INC. AND SUBSIDIARIES

Unaudited Consolidated Statement of Changes in Stockholders’ Equity

For the nine months ended September 30, 2002

(In thousands, except share and per share data)

 

		Common Stock					Surplus			Retained Earnings			Accumulated Other Comprehensive Income
		Number of Shares		Amount												Total
Balance December 31, 2001		6,672,294		$	5,711		$	14,404		$	50,924		$	645		$	71,684
Net income		—		—			—			11,455			—			11,455
Change in other comprehensive income, net of tax		—		—			—			—			1,804			1,804
Shares issued for stock options exercised and employee benefit plans		60,837		202			1,053			—			—			1,255
Cash dividends, $0.38 per share		—		—			—			(2,554		)	—			(2,554		)
Shares repurchased		(18,800	)	(41		)	(396		)	—			—			(437		)
Balance September 30, 2002		6,714,331		$	5,872		$	15,061		$	59,825		$	2,449		$	83,207

 

See accompanying notes to unaudited consolidated financial statements.

 

6

 

S.Y. BANCORP, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Comprehensive Income

For the three months ended September 30, 2002 and 2001

(In thousands)

 

		2002			2001
Net income		$	4,088		3,532
Other comprehensive income, net of tax:
Unrealized holding gains on securities available for sale arising during the period		887			827
Other comprehensive income		887			827
Comprehensive income		$	4,975		4,359

 

See accompanying notes to unaudited consolidated financial statements.

 

7

 

S.Y. BANCORP, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Comprehensive Income

For the nine months ended September 30, 2002 and 2001

(In thousands)

 

		2002			2001
Net income		$	11,455		9,923
Other comprehensive income, net of tax:
Unrealized holding gains on securities available for sale arising during the period		1,804			1,394
Other comprehensive income		1,804			1,394
Comprehensive income		$	13,259		11,317

 

See accompanying notes to unaudited consolidated financial statements.

 

8

 

S.Y. BANCORP, INC. AND SUBSIDIARIES

 

Notes to Unaudited Consolidated Financial Statements

 

(1)           Summary of Significant Accounting Policies

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  The consolidated financial statements of S.Y. Bancorp, Inc. (Bancorp) and its subsidiaries reflect all adjustments (consisting only of adjustments of a normal recurring nature) that are, in the opinion of management, necessary for a fair presentation of financial condition and results of operations for the interim periods.

 

The unaudited consolidated financial statements include the accounts of S.Y. Bancorp, Inc. and its wholly owned subsidiaries, Stock Yards Bank & Trust Company and S.Y. Bancorp Capital Trust I.  All significant intercompany transactions have been eliminated in consolidation.

 

A description of other significant accounting policies is presented in the notes to the Consolidated Financial Statements for the year ended December 31, 2001 included in S.Y. Bancorp, Inc.’s Annual Report on Form 10-K for the year then ended.

 

Interim results for the three and nine month periods ended September 30, 2002 are not necessarily indicative of the results for the entire year.

 

(2)           Allowance for Loan Losses

 

An analysis of the changes in the allowance for loan losses for the nine months ended September 30 follows:

 

(In thousands)		2002			2001
Beginning balance		$	10,965		9,331
Provision for loan losses		3,150			2,775
Loans charged off		(2,703		)	(1,644	)
Recoveries		118			181
Ending balance		$	11,530		10,643

 

(3)           Long-term Debt – Trust Preferred Securities

 

On June 1, 2001, S.Y. Bancorp Capital Trust I (Trust), a Delaware statutory business trust and 100%-owned finance subsidiary of Bancorp, issued $20.0 million of 9.00% Cumulative Trust Preferred Securities (Securities) which will mature on June 30, 2031, but prior redemption is permitted under certain circumstances, such as changes in tax or regulatory capital rules.  The principal asset of the Trust is a $20.0 million subordinated debenture of Bancorp.  The subordinated debenture bears interest at the rate of 9.00% and matures June 30, 2031, subject to prior redemption under certain circumstances.  Bancorp owns all of the common securities of the Trust.

 

The Securities, the assets of the Trust, and the common securities issued by the Trust are redeemable in whole or in part on or after June 30, 2006, or at any time in whole, but not in part, from the date of issuance upon the occurrence of certain events.  The Securities are included in Tier 1 capital for regulatory capital adequacy determination purposes, subject to certain limitations.

 

9

 

The obligations of Bancorp with respect to the issuance of the Securities constitute a full and unconditional guarantee by Bancorp of the Trust’s obligation with respect to the Securities.

 

Subject to certain exceptions and limitations, Bancorp may, from time to time, defer subordinated debenture interest payments, which would result in a deferral of distribution payments on the related Securities and, with certain exceptions, prevent Bancorp from declaring or paying cash distributions on Bancorp’s common stock or debt securities that rank pari passu or junior to the subordinated debenture.

 

(4)           Intangible Assets

 

Bancorp adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Intangible Assets” (“SFAS No. 142”), effective January 1, 2002.  SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually.  Bancorp currently has unamortized goodwill remaining from the acquisition of a bank in southern Indiana in the amount of $682,000.  This goodwill is assigned to the commercial and retail banking segment of Bancorp.  In accordance with SFAS No. 142, the results for the three and nine month periods ended September 30, 2001, have not been restated.  The amount of goodwill amortization included in net income for the three and nine month periods ended September 30, 2001 was $17,000 and $51,000, respectively.  Had goodwill not been amortized during 2001, there would be no effect on earnings per share, basic or diluted.

 

(5)           Net Income Per Share

 

The following table reflects, for the three and nine months periods ended September 30, net income (the numerator) and average shares outstanding (the denominator) for the basic and diluted net income per share computations (in thousands except per share data):

 

		Three Months Ended September 30					Nine Months Ended September 30
		2002			2001		2002		2001
Net income, basic and diluted		$	4,088		3,532		11,455		9,923
Average shares outstanding		6,726			6,669		6,709		6,657
Effect of dilutive securities		255			262		262		237
Average shares outstanding including dilutive securities		6,981			6,931		6,971		6,894
Net income per share, basic		$	0.61		0.53		1.71		1.49
Net income per share, diluted		$	0.59		0.51		1.64		1.44

 

(6)           Segments

 

The Bank’s, and thus Bancorp’s, principal activities include commercial and retail banking, investment management and trust, and mortgage banking.  Commercial and retail banking provides a full range of loans and deposit products to individual consumers and businesses.  Investment management and trust provides wealth management services including brokerage, estate planning and administration, retirement plan management, and custodian or trustee services. Mortgage banking originates residential loans and sells them, servicing released, in the secondary market.

 

10

 

The financial information for each business segment reflects that which is specifically identifiable or allocated based on an internal allocation method.  The measurement of the performance of the business segments is based on the management structure of the Bank and is not necessarily comparable with similar information for any other financial institution.  The information presented is also not necessarily indicative of the segments’ operations, if they were independent entities.

 

Selected financial information by business segment for the three and nine months ended September 30 follows:

 

		Three Months Ended September 30					Nine Months Ended September 30
(In thousands)		2002			2001		2002		2001
Net interest income:
Commercial and retail banking		$	10,083		8,654		29,523		25,088
Investment management and trust		32			13		57		17
Mortgage banking		159			120		386		334
Total		$	10,274		8,787		29,966		25,439
Non-interest income:
Commercial and retail banking		$	2,384		2,288		6,939		6,622
Investment management and trust		2,293			2,070		6,931		5,900
Mortgage banking		1,197			570		2,273		1,705
Total		$	5,874		4,928		16,143		14,227
Net income:
Commercial and retail banking		$	3,115		2,877		9,145		7,980
Investment management and trust		619			534		1,757		1,550
Mortgage banking		354			121		553		393
Total		$	4,088		3,532		11,455		9,923

 

Principally, all of the net assets of Bancorp are involved in the commercial and retail banking segment.

 

11

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

This item discusses the results of operations for S.Y. Bancorp, Inc. (Bancorp), and its subsidiaries, Stock Yards Bank & Trust Company and S.Y. Bancorp Capital Trust I for the three and nine months ended September 30, 2002 and compares that period with the same period of the previous year.  Unless otherwise indicated, all references in this discussion to the “Bank” include Bancorp.  In addition, the discussion describes the significant changes in the financial condition of Bancorp and the Bank that have occurred during the first nine months of 2002 compared to December 31, 2001.  This discussion should be read in conjunction with the unaudited consolidated financial statements and accompanying notes presented in Part I, Item 1 of this report.

 

In preparing the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, Bancorp makes estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.  There can be no assurances that actual results will not differ from those estimates.

 

We have identified the accounting policy related to the allowance for loan losses and the related provision for loan losses as critical to the understanding of Bancorp’s results of operations, since the application of this policy requires significant management assumptions and estimates that could result in materially different amounts to be reported if conditions or underlying circumstances were to change.  The impact and any associated risks related to these policies on our business operations are discussed in the “Provision for Loan Losses” section below.

 

This report contains forward-looking statements under the Private Securities Litigation Reform Act that involve risks and uncertainties.  Although Bancorp believes the assumptions underlying the forward-looking statements contained herein are reasonable, any of these assumptions could be inaccurate.  Factors that could cause actual results to differ from results discussed in forward-looking statements include, but are not limited to: economic conditions both generally and more specifically in the market in which Bancorp and its subsidiaries operate; competition for Bancorp’s customers from other providers of financial services; government legislation and regulation which change from time to time and over which Bancorp has no control; changes in interest rates; material unforeseen changes in liquidity, results of operations, or financial condition of Bancorp’s customers; other risks detailed in Bancorp’s filings with the Securities and Exchange Commission, all of which are difficult to predict and many of which are beyond the control of Bancorp.

 

(a)           Results Of Operations

 

Net income of $4,088,000 for the three months ended September 30, 2002 increased $556,000 or 15.7% from $3,532,000 for the comparable 2001 period.  Basic net income per share was $0.61 for the third quarter of 2002, an increase of 15.1% from the $0.53 for the same period in 2001.  Net income on a diluted basis was $0.59 for the third quarter of 2002 compared to $0.51 for the third quarter of 2001.  This represents a 15.7% increase.  Return on average assets and return on average stockholders’ equity were 1.60% and 19.85%, respectively, for the third quarter of 2002, compared to 1.57% and 20.50%, respectively, for the same period in 2001.

 

12

 

Net income of $11,455,000 for the nine months ended September 30, 2002 increased $1,532,000 or 15.4% from $9,923,000 in the comparable 2001 period.  Basic net income per share was $1.71 for the first nine months of 2002, compared to $1.49, representing an increase of 14.8% from the same period in 2001.  Net income on a diluted basis was $1.64 for the first nine months of 2002 compared to $1.44 for the first nine months of 2001. This represents a 13.9% increase.  Return on average assets and return on average stockholders’ equity were 1.56% and 19.74%, respectively, for the first nine months of 2002, compared to 1.53% and 20.48%, respectively, for the same period in 2001.

 

The following paragraphs provide a more detailed analysis of the significant factors affecting operating results and financial condition.

 

Net Interest Income

 

		Three Months Ended September 30					Nine Months Ended September 30
(Dollars in thousands)		2002			2001		2002		2001
Interest income		$	15,927		16,485		47,165		49,556
Tax equivalent		178			164		498		439
Interest income, tax equivalent basis		16,105			16,649		47,663		49,995
Total interest expense		5,653			7,698		17,199		24,117
Net interest income, tax equivalent basis(1)		$	10,452		8,951		30,464		25,878
Net interest spread(2), annualized		3.86		%	3.53	%	3.92	%	3.53	%
Net interest margin(3), annualized		4.33		%	4.20	%	4.41	%	4.23	%

 

Notes:

 

(1)                                 Net interest income, the most significant component of the Bank’s earnings, is total interest income less total interest expense.  The level of net interest income is determined by the mix and volume of interest earning assets, interest bearing deposits and borrowed funds, and by changes in interest rates.

 

(2)                                 Net interest spread is the difference between the taxable equivalent rate earned on interest earning assets less the rate expensed on interest bearing liabilities.

 

(3)                                 Net interest margin represents net interest income on a taxable equivalent basis as a percentage of average interest earning assets.  Net interest margin is affected by both the interest rate spread and the level of non-interest bearing sources of funds, primarily consisting of demand deposits and stockholders’ equity.

 

Fully taxable equivalent net interest income of $10,452,000 for the three months ended September 30, 2002 increased $1,501,000 or 16.8% from $8,951,000 when compared to the same period last year.  Net interest spread and net interest margin were 3.86% and 4.33%, respectively, for the third quarter of 2002 and 3.53% and 4.20%, respectively, for the third quarter of 2001.

 

Fully taxable equivalent net interest income of $30,464,000 for the nine months ended September 30, 2002 increased $4,586,000 or 17.7% from the same period last year.  Net interest spread and net interest margin were 3.92% and 4.41%, respectively, for the first nine months of 2002 and 3.53% and 4.23%, respectively, for the first nine months of 2001.  For the year to date period, the increase in net interest margin was primarily a result of the rate decline in interest bearing liabilities exceeding the rate decline in interest earning assets.

 

13

 

Looking forward from the third quarter, management expects net interest margin to be 10 to 15 basis points lower by the end of the year assuming a flat interest rate environment from September 30 until the end of the year.  Cuts in key interest rates by the Federal Reserve during the fourth quarter of 2002 could have further negative impact on the Bank’s net interest margin.  The margin peaked in the first quarter of 2002 as higher rate certificates of deposit matured and renewals were at significantly lower rates.  Additionally, average rates on loan balances have declined as higher rate loans mature.  During the third quarter, the Bank moved customer funds in the Investment Management and Trust Department from money market mutual funds to interest-bearing accounts at the Bank as allowed by a change in a Kentucky statute.  This transaction resulted in approximately $47 million in new deposits for the Bank at September 30, 2002.  While this transaction has had a positive impact on net income, it has and will continue to have a negative impact on net interest margin.  The negative impact of this transaction to net interest margin is expected to be approximately 25 basis points through the end of 2002.

 

Average earning assets increased $107,097,000, or 13.1% to $924,612,000 for the first nine months of 2002 compared to the first nine months of 2001, reflecting growth in the loan and investment portfolios.  Average interest bearing liabilities increased $79,493,000 or 11.5% to $773,543,000 for the first nine months of 2002 compared to 2001 primarily due to increases in interest bearing deposits.

 

Managing interest rate risk is fundamental for the financial services industry. The primary objective of interest rate risk management is to neutralize effects of interest rate changes on net income.  By using both on and off-balance sheet financial instruments, Bank management evaluates interest rate sensitivity while attempting to optimize net interest income within the constraints of prudent capital adequacy, liquidity needs, market opportunities and customer requirements.

 

Bancorp uses an earnings simulation model to measure and evaluate the impact of changing interest rates on earnings.  The simulation model is designed to reflect the dynamics of all interest earning assets, interest bearing liabilities and off-balance sheet financial instruments, combining factors affecting rate sensitivity into a one year forecast.  By forecasting management’s estimate of the most likely rate environment and adjusting those rates up and down the model can reveal approximate interest rate risk exposure.  The September 30, 2002 simulation analysis indicates that an increase in interest rates would have a positive effect on net interest income, and a decrease in interest rates would have a negative effect on net interest income.

 

Interest Rate Simulation Sensitivity Analysis

 

		Net Interest Income Change		Net Income Change
Increase 200bp		10.40	%	18.10	%
Increase 100bp		5.11		8.89
Decrease 100bp		(5.48	)	(9.54	)
Decrease 200bp		(8.26	)	(14.39	)

 

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Provision for Loan Losses

 

The allowance for loan losses is based on management’s continuing review of individual credits, recent loss experience, current economic conditions, the risk characteristics of the various categories of loans, and such other factors that, in management’s judgment, deserve current recognition in estimating loan losses.

 

An analysis of the changes in the allowance for loan losses and selected ratios follow:

 

(Dollars in thousands)		Nine Months Ended September 30
		2002			2001
Balance at the beginning of the period		$	10,965		9,331
Provision for loan losses		3,150			2,775
Loan charge-offs, net of recoveries		(2,585		)	(1,463	)
Balance at the end of the period		$	11,530		10,643
Average loans, net of unearned income		$	789,274		706,105
Provision for loan losses to average loans(1)		0.40		%	0.39	%
Net loan charge-offs to average loans(1)		0.33		%	0.21	%
Allowance for loan losses to average loans		1.46		%	1.51	%
Allowance for loan losses to period-end loans		1.45		%	1.41	%

 

(1) Amounts not annualized

 

The increase in net charge-offs for 2002 represents the partial or complete resolution of several troubled credits.  The increase in the provision compared to 2001 was in consideration of charge-offs taken and the inherent risk in the loan portfolio.

 

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Non-interest Income and Expenses

 

The following table sets forth the major components of non-interest income and expenses for the three and nine month periods ended September 30, 2002 and 2001.

 

(In thousands)		Three Months Ended September 30					Nine Months Ended September 30
		2002			2001		2002		2001
Non-interest income:
Investment management and trust services		$	2,002		1,857		6,065		5,437
Service charges on deposit accounts		1,908			1,758		5,439		5,141
Gains on sales of mortgage loans held for sale		1,024			435		1,877		1,279
Other		940			878		2,762		2,370
Total non-interest income		$	5,874		4,928		16,143		14,227
Non-interest expenses:
Salaries and employee benefits		5,198			4,481		14,910		13,142
Net occupancy expense		544			501		1,538		1,421
Furniture and equipment expense		737			637		2,258		1,821
Other		2,430			2,284		7,172		6,204
Total non-interest expenses		$	8,909		7,903		25,878		22,588

 

Non-interest income increased $946,000, or 19.2%, for the third quarter of 2002, compared to the same period in 2001.  Non-interest income increased $1,916,000 or 13.5% for the first nine months of 2002 compared to the same period of 2001.

 

Investment management and trust services income increased $145,000 or 7.8% in the third quarter of 2002, as compared to the same period in 2001.  Investment management and trust services income increased $628,000 or 11.6% in the first nine months of 2002 as compared to the same period in 2001. Trust assets under management at September 30, 2002 were $1.11 billion, down 5.5% from $1.18 billion at December 31, 2001 and up 5.6% from $1.06 billion at September 30, 2001.  Trust assets are expressed in terms of market value.  While total trust assets have been affected by negative equity markets, these decreases have been mitigated somewhat by the addition of new accounts.  The increase in fees has also been helped by fees not tied to assets under management, such as estate fees.

 

Service charges on deposit accounts increased $150,000 or 8.5% in the third quarter of 2002 and $298,000 or 5.8% in the first nine months of 2002 as compared to the same periods in 2001.  Growth in service charges on deposits has slowed compared to prior periods.  An overdraft service was added in 2000 that added significantly to overall fees.  The majority of the Bank’s retail checking customers now have been offered this service and growth going forward will be more moderate.

 

Gains on sales of mortgage loans were $1,024,000 in the third quarter of 2002 and $1,877,000 in the first nine months of 2002 compared to $435,000 and $1,279,000, respectively, in 2001.  The Bank operates a mortgage banking company that originates residential mortgage loans and sells the loans, servicing released, in the secondary market.  As interest rates on mortgage loans reached record lows late in the third quarter, the Bank’s mortgage company produced record loan volume due to the high level of refinancing activity.  Current mortgage loan activity indicates that the fourth quarter will also be a strong quarter for gains on sales of mortgage loans.

 

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Other non-interest income increased $62,000 or 7.1% in the third quarter of 2002 and $392,000 or 16.5% in the first nine months of 2002 compared to 2001.  Numerous factors contributed to this increase, including (year to date) approximately $107,000 from check card income and approximately $430,000 related to brokerage income.  A new group of brokers joined the Bank in mid-2001, and as a result, activity levels have improved significantly.  The increases in non-interest income were offset somewhat by decreases in a variety of accounts, none of which was individually material.

 

Non-interest expenses increased $1,006,000 or 12.7% for the third quarter of 2002 and $3,290,000 or 14.6% year to date 2002 as compared to the same periods in 2001.  Salaries and employee benefits increased $717,000, or 16.0%, for the third quarter of 2002 and $1,768,000 or 13.5% year to date compared to the same periods in 2001.  These increases arose in part from regular salary increases and in part from the continued addition of new personnel to support the Bank’s growth.  The Bank had 363 full time equivalent employees as of September 30, 2002 and 337 full time equivalents as of September 30, 2001.  Net occupancy expense increased $43,000 or 8.6% in the third quarter of 2002 as compared to 2001, while it increased $117,000 or 8.2% on a year to date basis.  Most of the increase can be attributed to maintenance work related to the branch network.  Furniture and equipment expense increased $100,000 for the third quarter of 2002 and $437,000 for the year to date period 2002 compared to 2001.  This increase was primarily due to costs related to the installation of a new phone system and computer upgrades including the purchase of a new mainframe computer.  This new equipment represents a significant investment in the future growth of the Bank.  Other non-interest expenses increased $146,000 or 6.4% in the third quarter of 2002 and $968,000 or 15.6% year to date 2002 as compared to 2001.  These increases can be attributed to several factors.  The biggest contributors (year to date) include an approximate $281,000 increase in marketing and advertising expenses primarily related to a new personal checking product introduced in 2001 and an approximate $232,000 increase to the Bank’s state franchise tax that is primarily based on regulatory capital levels.  There was also an approximate $92,000 increase in expenses related to the Bank’s automated teller machine  (ATM) network.  The remaining increase occurred in a variety of accounts, none of which was individually material.

 

Income Taxes

 

Bancorp had income tax expense of $5,626,000 for the first nine months of 2002, compared to $4,380,000 for the same period in 2001.  The effective rate for each nine month period was 32.9% in 2002 and 30.6% in 2001.  Income tax expense for the third quarter of 2002 was $2,001,000 versus $1,380,000 in 2001.  The respective effective tax rates were 32.9% for the third quarter of 2002 and 28.1% for the third quarter of 2001.  In the third quarter of 2001 Bancorp received a refund of prior years’ income taxes of $182,000.  This refund lowered the effective tax rate by 371 basis points for the third quarter and 127 basis points for the nine month period ended September 30, 2001.

 

(b)           Financial Condition

 

Balance Sheet

 

Total assets increased $124,098,000 from $937,293,000 on December 31, 2001 to $1,061,391,000 on September 30, 2002. Average assets for the first nine months of 2002 were $980,375,000.  Total liabilities increased $112,575,000 from $865,609,000 on December 31, 2001 to $978,184,000 on September 30, 2002.  Average liabilities for the first nine months of 2002 were $899,188,000.

 

Since year end, loans have increased approximately $18,186,000 and securities have increased $72,123,000, while federal fund sold increased $28,080,000.  This growth has been funded primarily through the $135,610,000 increase in deposits and offset somewhat by the $25,272,000 decrease in securities sold under agreements to repurchase and federal funds purchased. 

 

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Non-performing Loans and Assets

 

Non-performing loans, which included non-accrual loans of $3,236,000 and loans past due over 90 days of $1,432,000, totaled $4,668,000 at September 30, 2002.  Non-performing loans were $5,121,000 at December 31, 2001. This represents 0.59% of total loans at September 30, 2002 compared to 0.66% at December 31, 2001.  The decrease in non-performing loans at September 30, 2002 was primarily due to partial or complete resolution of several troubled credits.  Even though progress has been made in improving the level of non-performing loans, management remains cautious regarding future loan quality.  Challenging economic conditions have taken a toll and more borrowers are experiencing financial stress as evidenced by weaker financial results from some of our commercial customers.  The Bank has fully reserved any anticipated loss exposure related to non-performing relationships.

 

Non-performing assets, which include non-performing loans, other real estate and repossessed assets, totaled $5,059,000 at September 30, 2002 and $5,184,000 at December 31, 2001.  This represents 0.48% of total assets at September 30, 2002 compared to 0.55% at December 31, 2001.

 

(c)                                  Liquidity

 

The role of liquidity is to ensure that funds are available to meet depositors’ withdrawal and borrowers’ credit demands while at the same time maximizing profitability.  This is accomplished by balancing changes in demand for funds with changes in the supply of those funds.  Liquidity to meet demand is provided by maturing assets, short-term liquid assets that can be converted to cash, and the ability to attract funds from external sources, principally deposits.  Management believes it has the ability to increase deposits at any time by offering rates slightly higher than the market rate.

 

The Bank has a number of sources of funds to meet its liquidity needs on a daily basis.  The deposit base, consisting of relatively stable consumer and commercial deposits, and large denomination ($100,000 and over) certificates of deposit, is a source of funds.  The majority of these deposits are from long-term customers and are a stable source of funds.  The Bank has no brokered deposits.

 

Other sources of funds available to meet daily needs include the sale of securities under agreements to repurchase and funds made available under a treasury tax and loan note agreement with the federal government.  Also, the Bank is a member of the Federal Home Loan Bank of Cincinnati (FHLB).  As a member of the FHLB, the Bank has access to credit products of the FHLB.  To date, the Bank has not needed to access this source of funds.  Additionally, the Bank has an available line of credit and federal funds purchased lines with correspondent banks totaling $56 million.

 

Bancorp’s liquidity depends primarily on the dividends paid to it as the sole shareholder of the Bank. At September 30, 2002, the Bank may pay up to $33,634,000 in dividends to Bancorp without regulatory approval subject to the ongoing capital requirements of the Bank.  During the year, the Bank paid no dividends to Bancorp.  Bancorp had sufficient cash balances to pay the quarterly dividend to shareholders without funding from the Bank.

 

(d)                                 Capital Resources

 

At September 30, 2002, stockholders’ equity totaled $83,207,000, an increase of $11,523,000 since December 31, 2001.  Accumulated other comprehensive income that for Bancorp consists of net unrealized gains on securities available for sale and a minimum pension liability adjustment, both of which are net of taxes, was $2,449,000 at September 30, 2002 and $645,000 at December 31, 2001.  The change since year end is a reflection of the effect of changing interest rates on the valuation of the Bank’s portfolio of securities available for sale.

 

Bancorp issued $20.0 million of 9.00% Cumulative Trust Preferred Securities in June 2001.  The issue was sold in a public offering.  Bancorp used approximately $13.3 million of the net proceeds

 

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from this offering to reduce indebtedness outstanding under a line of credit with an unaffiliated bank.  The remaining net proceeds will be used for making additional capital contributions to the Bank, for repurchases of common stock, and for general corporate purposes.  The trust preferred securities increased Bancorp’s regulatory capital and allow for the continued growth of its banking franchise.  The ability to treat these trust preferred securities as regulatory capital under Federal Reserve guidelines, coupled with the Federal income tax deductibility of the related expense, provides Bancorp with a cost-effective form of capital.

 

Bank holding companies and their subsidiary banks are required by regulators to meet risk based capital standards.  These standards, or ratios, measure the relationship of capital to a combination of balance sheet and off-balance sheet risks.  The values of both balance sheet and off-balance sheet items are adjusted to reflect credit risks.

 

At September 30, 2002, Bancorp’s tier 1, total risk based capital and leverage ratios were 12.63%, 13.92% and 9.85%, respectively, compared to 11.85%, 13.14%, and 9.69%, respectively, as of December 31, 2001.

 

(e)                                  Recently Issued Accounting Pronouncements

 

In April 2002, the Financial Accounting Standards Board (FASB) issued Statement No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections” (SFAS No. 145), that updates, clarifies and simplifies existing accounting pronouncements.  SFAS No. 145 rescinds SFAS No. 4, “Reporting Gains and Losses from the Extinguishment of Debt.”  SFAS No. 145 also amends SFAS No. 13, “Accounting for Leases”, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for other certain lease modifications that have economic effects that are similar to sale-leaseback transactions.  The provisions of SFAS No. 145 related to SFAS No. 4 and SFAS No. 13 are effective for fiscal years beginning and transactions occurring after May 15, 2002, respectively.  It is anticipated that the financial impact of SFAS No. 145 will not have a material effect on the results of Bancorp or its operations.

 

In July 2002, FASB issued Statement No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (SFAS No. 146), that requires recognition of costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan.  SFAS No. 146 also establishes fair value as the objective for initial measurement of the liability.  The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002.  It is anticipated that the financial impact of SFAS No. 146 will not have a material effect on the results of Bancorp or its operations.

 

In October 2002, FASB issued Statement No. 147, “Acquisitions of Certain Financial Institutions” (SFAS No. 147).  SFAS No. 147 brings all business combinations involving financial institutions, except mutual holding companies, into the scope of FASB Statement No. 141, “Business Combinations” (SFAS No. 141).  SFAS No. 147 requires that all financial institutions that meet the definition of a business, including acquisitions of part of a financial institution that meet the definition of a business, must be accounted for in accordance with SFAS No. 141 and the related intangibles accounted for in accordance with FASB Statement No. 142, “Goodwill and Other Intangible Assets” (SFAS No. 142).  SFAS No. 147 removes such acquisitions from the scope of  FASB Statement No. 72, “Accounting for Certain Acquisitions of Banking or Thrift Institutions” (SFAS 72).  SFAS No. 147 also amends FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” to include in its scope long-term customer-relationship intangible assets of financial institutions.  SFAS No. 147 is generally effective immediately.  It is anticipated that the implementation of SFAS No. 147 will not have a material effect on the results of Bancorp or its operations as Bancorp has fully adopted SFAS No. 141 and SFAS No. 142 related to all of it’s current intangibles.

 

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Item 3.    Quantitative and Qualitative Disclosures about Market Risk

 

Information  required  by  this item  is  include in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

Item 4.    Controls and Procedures

 

Bancorp maintains disclosure controls and procedures designed to ensure that it is able to collect the information it is required to disclose in the reports it files with the Securities and Exchange Commission (SEC), and to process, summarize and disclose this information within the time periods specified in the rules of the SEC.  Based on their evaluation of Bancorp’s disclosure controls and procedures which took place within 90 days prior to the filing date of this report, the Chief Executive and Chief Financial Officers believe that these controls and procedures are effective to ensure that Bancorp is able to collect, process and disclose the information it is required to disclose in the reports it files with the SEC within the required time periods.

 

Bancorp also maintains a system of internal controls designed to provide reasonable assurance that:  transactions are executed in accordance with management’s general or specific authorization; transactions are recorded as necessary (1) to permit preparation of financial statements in conformity with generally accepted accounting principles in the United States of America, and (2) to maintain accountability for assets;  access to assets is permitted only in accordance with management’s general or specific authorization; and the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

Since the date of the most recent evaluation of Bancorp’s disclosure controls and procedures by the Chief Executive and Chief Financial Officers, there have been no significant changes in Bancorp’s internal controls or in other factors that could have significantly affected those controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

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Part II – Other Information

 

Item 4.             Submission of Matters to a Vote of Security Holders

 

None

 

Item 6.             Exhibits and Reports on Form 8-K

 

(a)          Reports on Form 8-K

 

No reports on Form 8-K were filed during the three months ended September 30, 2002.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

	S.Y. BANCORP, INC.
Date:    November 12, 2002		By:	/s/ David H. Brooks
			David H. Brooks, Chairman and Chief Executive Officer
Date:    November 12, 2002		By:	/s/ David P. Heintzman
			David P. Heintzman, President
Date:    November 12, 2002		By:	/s/ Nancy B. Davis
			Nancy B. Davis, Executive Vice President, Treasurer and Chief Financial Officer

 

21

 

CERTIFICATION

 

I, David H. Brooks, Chairman and Chief Executive Officer of S.Y. Bancorp, Inc., certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of S.Y. 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

 

22

 

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/ David H. Brooks
			David H. Brooks, Chairman and Chief Executive Officer

 

23

 

CERTIFICATION

 

I, David P. Heintzman, President of S.Y. Bancorp, Inc., certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of S.Y. 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

 

24

 

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/ David P. Heintzman
			David P. Heintzman, President

 

25

 

CERTIFICATION

 

I, Nancy B. Davis, Executive Vice President, Treasurer and Chief Financial Officer of S.Y. Bancorp, Inc., certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of S.Y. 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

 

26

 

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/ Nancy B. Davis
			Nancy B. Davis, Executive Vice President, Treasurer and Chief Financial Officer

 

27

 

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 this Quarterly report of S.Y. Bancorp, Inc. on Form 10-Q for the period ending September 30, 2002 (the “Report”), we, the undersigned, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of our knowledge and belief:  (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 results of operations of S.Y. Bancorp, Inc. as of and for the periods presented in the Report.

 

 

Date:    November 12, 2002		By:	/s/ David H. Brooks
			David H. Brooks, Chairman and Chief Executive Officer
Date:    November 12, 2002		By:	/s/ David P. Heintzman
			David P. Heintzman, President
Date:    November 12, 2002		By:	/s/ Nancy B. Davis
			Nancy B. Davis, Executive Vice President, Treasurer and Chief Financial Officer

 

28